Item
2.01 Completion Of
Acquisition Or Disposition Of Assets.
The
information set forth in Item 1.01 is hereby incorporated by
reference.
The
Merger
The
information set forth in Item 1.01 is hereby incorporated by
reference.
Changes
Resulting from the Merger
As
a
result of the Merger Eastern Services Holdings, Inc. ceased being a shell
company as that term is defined in Rule 12b-2 of the Securities Exchange
Act of
1934.
Eastern
Service Holdings, Inc. was
incorporated under the laws of the State of Delaware on
November 5, 2004. Eastern Service
Holdings, Inc. commenced operations for the purposes of evaluating, structuring
and completing a merger with Eastern Services Group, Inc. and, on November
9,
2004, Eastern Service Holdings, Inc. obtained all of the outstanding stock
of
Eastern Services Group, Inc. Eastern Services Group, Inc., was established
in
the State of Nevada in February 1998 and provides state and local tax
consultation and analysis to casinos in the Las Vegas metropolitan area
with a
focus on assessing tax liability on real and personal property and review
of
sales and use tax. On December 21, 2007, all of the issued and
outstanding shares of common stock of Eastern Services Group, Inc. were
sold to
Richard S. Carrigan in exchange for approximately $105,000 in accrued salary.
Following the sale, Eastern Services Holdings, Inc has no debts, liabilities
or
obligations relating to Eastern Services Group, Inc.
In
conjunction with the closing of the Merger, the Surviving Corporation changed
its name to Fund.com and succeeded to the business of Fund.com as our sole
line
of business. We will also seek to obtain a new ticker symbol for
quotation on the OTC Bulletin Board.
Description
Of Business
Unless
the context requires otherwise, “we”, “our”, “us” and similar expressions refer
to Fund.com, Inc. prior to the closing of the Merger on January 15, 2008,
and to
Eastern Services Holdings, Inc. (now know as Fund.com, Inc.) as successor
to the
business of Fund.com, Inc., following the closing of the Merger on January
15,
2008.
We
were
organized under the laws of the State of Delaware on September 20, 2007 under
the name Meade Technologies Inc., and are a development stage company that
intends to operate an internet-based investment fund marketplace and online
community. On January 8, 2008 we changed our name to Fund.com Inc. Our executive
offices are located at 455 Broadway, 4th
Floor,
New York, New York 10012. Our telephone number is (212) 625-3591. Our
web address is: www.fund.com. The
contents of our website are not part of this current report and should not
be
relied upon with respect thereto.
Our
main
web presence, www.fund.com,
will provide consumers with free information about investment funds including
original, aggregated and community selected articles about the fund industry,
statistics on fund performance and other fund-specific detail. Our objective
is
to establish www.fund.com
as a source of information for individual investors regarding investment
funds,
including mutual funds, hedge funds, money market funds, exchange traded
funds,
closed-end funds, commodity funds and other types of pooled investment
vehicles. We intend to operate www.fund.com
as an online vertical marketplace and search directory for fund information.
We
anticipate that www.fund.com
will derive revenue from online advertising, lead generation and referral
fees. We also intend, through our wholly-owned subsidiary Fund.com
Managed Products Inc. (formerly known as Meade Managed Products Inc.), to
research and develop intellectual property in the form of fund investment
indexes and related index-linked investment products and to license this
intellectual property to third parties in consideration for recurring license
fees paid to us based on a fixed percentage of assets managed by such third
party using our index-linked investment products. Through another of our
wholly-owned subsidiary, Fund.com Capital Inc. (formerly know as Meade Capital
Inc.), we intend to structure and invest in index-linked investment products,
generally referred to as structured products.
We
believe that our target market, individuals with, or considering, an investment
in an investment fund, is a multi-trillion dollar industry. As
reported by the Investment Company Institute (“ICI”) in its 2007 Investment
Company Factbook, the United States mutual fund industry was a 10.6 trillion
dollar industry in 2006, accounting for 48 percent of the 21.8 trillion dollars
in mutual fund assets worldwide. We believe that hundreds of billions
of dollars flow annually into funds of all kinds. We also believe other large
financial services industries like banking, mortgages and credit cards are
successfully served by online companies like Bankrate.com, Lendingtree.com
and
Creditcards.com, respectively; however, we believe that the fund industry
lacks
similar vertically focused distribution providers. We believe that third
party
distribution of funds have largely been undertaken by financial advisors
with
traditional marketing channels, including in-person client meetings with
brokers. We believe that existing sales channels can be successfully augmented
by www.fund.com.
In
response to consumer demand for detailed and easy to find information on
specific topics, the internet has seen an increase in the popularity of vertical
online marketplaces. The intention of a vertical marketplace is to provide
consumers with the capability to research, compare and learn more about products
and services in specific vertical industry sectors. Vertical marketplaces
can
deliver comprehensiveness, relevancy and efficiency in the form of in depth
content for a specific niche to consumers and targeted, higher quality leads
and
advertising opportunities to advertisers. We consider www.fund.com
a vertical marketplace. By focusing on funds with www.fund.com
we believe we will have an advantage over general financial information
websites, in that we will be able to go deeper and present more structured
information on the fund industry for our visitors than most general financial
websites can. We believe that fund companies will gain exposure through www.fund.com
to would-be fund buyers who are much closer in time to a purchase decision
than
someone searching for fund information through a search engine or a site
focused
more on stocks than funds.
We
believe that several factors will make www.fund.com
a successful vertical marketplace:
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·
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Aggregation
of all fund related
content;
|
|
·
|
Presentation
of unbiased information,
thus allowing a user to
trust
that our marketplace is
working for them, not for advertisers;
and
|
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·
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Relevant
and in-depth content.
|
We
intend
to principally service the finance segment of the business information industry.
We believe there is an increased demand for financial information arising
from
increasing complexity of investment instruments and that consumers will
increasingly rely on the internet as the principal source of information
that
they use to access this information. The number of individual investors in
the
United States investing in funds is growing at a significant rate. In 2006,
the
United States individual investor market consisted of approximately 55 million
United States households, according to the ICI, up from just 4.6 million
United
States households in 1980. We also believe ongoing growth in the number of
investors and in the financial services industry as a whole, both in the
United
States and elsewhere, will continue to support demand for economic and financial
information and that the preferred medium for finding this information will
be
the internet.
We
intend
to make the financial information we provide to our visitors accessible to
investors first by paring back the amount of information available to investors,
and focusing in on a specific segment of the investment industry, namely
funds,
and second by presenting this fund specific information to consumers in an
approachable, easy to navigate manner.
Our
Fund.com
Technologies Inc.(formerly Meade Online Technologies Inc.)
Products
We
divide
the market for our fund information products and services into two segments:
individual investors, and financial advisors and institutions, such as banks,
insurance companies, mutual fund companies and brokerage firms.
It
is our
intention to build, as quickly as possible, a large community of investors
or
potential investors and to provide them with a forum where they will find
information and data that they have collectively deemed relevant to financial
investment decision making. We feel that charging for content will impair
our
ability to build this community; therefore at this time, we intend that the
majority of our website content will be free.
We
intend
to derive a portion of our revenue from subscription sales. Certain items,
like
analyst reports, will be made available for purchase, at a profit to us,
to
those members of the www.fund.com
community willing to subscribe to this data. However, we believe a significant
portion of revenue will be derived from advertising and lead generation.
These
revenues are expected to be closely correlated to the number of unique visitors
to our website.
We
believe that many of these investors seek out third-party sources of information
to validate the advice they receive. We also believe that it is in the best
interests of financial professionals that investors become better educated
on
their investment decisions, as a better informed investor will optimize a
financial planner’s ability to structure a risk aligned portfolio for its
customer. For this reason, we believe that www.fund.com
can be positioned as a resource to which financial advisors and even fund
companies can refer their clients to become better educated on fund investments,
in effect making our customer - the financial advisor - also a source of
visitors to our website.
We
also believe that investors are
looking for independent sources for investment information for advice
verification. While the demand for investment information and advice has
increased, we believe that there is often a gap between the demand and
the level
of trust investors have in the information they are provided. Our site,
www.fund.com,
will be a community site populated by
visitors whose primary agenda is to share financial information for the
purpose
of making sounder collective investment decisions. Where an investor may
question the motivations of a financial advisor, an analyst or even a
journalist, we believe an investor is less likely to question information
that
has been vetted and ranked by the www.fund.com
investor peer
community.
Financial
Advisors
and Institutions
We
expect
to derive a significant portion of our revenue from lead generation and
advertising sales, primarily from companies within the financial services
industry. Given the nature and intended manner of presentation of our content,
namely, always current finance related information and community based
information analysis, we anticipate our audience will present an attractive
demographic for advertisers. We believe the typical visitor to our site will
be:
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·
|
highly
inclined to make an investment, most likely in a fund;
and
|
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·
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a
frequent return visitor, given that the information on our site
is
constantly being updated by our user
community.
|
We
will
derive revenue from fees generated when lead forms filled in by www.fund.com
visitors are submitted to funds or financial advisors.
We
will
also offer a variety of advertising options that may be purchased individually
or in packages, such as “run-of-site” banner advertisements that run throughout
our web site, priced CPM (cost per thousand impressions); premium positioning
advertising featuring targeted advertisements; CPC (cost per click) search
advertisements; sponsorships, which will run in a fixed area of our web site
for
a set duration; and advertising on email bulletins and other newsletters
delivered to our community. We may also launch a contextual advertising program
whereby advertisements from our inventory of advertisers would be served
on
www.fund.com
affiliated websites like accreditedinvestor.com.
We
believe that there is a significant and growing pool of financial advisors
and
fund companies that we can draw from for advertising and lead revenue. As
of
year-end 2006, there were, according to ICI, 15,638 investment companies
in the
United States: 8,726 mutual funds (including funds that invest in other funds),
5,907 unit investment trusts, 646 closed-end funds, and 359 exchange traded
funds.
Fund.com
Managed Products, Inc.
Our
wholly-owned subsidiary, Fund.com Managed Products, Inc., a Delaware
corporation, will specialize in developing asset management products. We
intend
for the products specifically to include the identification, construction
and
publishing of investment indices. The indices are intended to be designed
to
provide investors and the investment community with additional benchmarks
for
measuring absolute and relative investment performance. Indices can assist
investors in better understanding the performance of their own investment
portfolio as against the indices and, therefore, may be helpful information
tools.
Fund.com
Managed Products, Inc. intends to evaluate demand from its user community
for
such products and will seek to develop products where our management determines
demand will result in adequate fee income.
Fund.com
Capital Inc.
Fund.com
Capital Inc., a Delaware corporation,
is a wholly-owned
subsidiary of Fund.com Managed Products, Inc. We intend for Fund.com Capital
Inc. to make active (non-passive) investments on our behalf, including
in other
financial institutions and fund management companies and in strategic products
offered or managed by either in certain instances. As described below under
“Material Agreements or Arrangements” Fund.com Capital Inc has deposited $20.0
million of its seed funding in a 36 month CD issued by an affiliated offshore
bank.
Online
Advertising Revenue.
Driving visitors to www.fund.com
will be critical to our success. We believe our sales and marketing efforts
will
be responsible for generating a significant portion of new visits to our
site.
Additionally, we believe www.fund.com
will have other competitive advantages in the generation of website traffic,
including two key low cost means of generating traffic to www.fund.com,
namely:
|
1.
|
its
affiliation and cross-branding
relationship with EQUITIES Magazine (a company affiliated with
our largest
shareholder in terms of votes), an established financial media
company;
and
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2.
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the
URL www.fund.com
is a domain name that is broad, easy to remember and highly
marketable.
|
Database
Lead Generation. We
intend to market financial information products to potential customers
identified in proprietary databases, including databases owned by EQUITIES
Magazine. It is our intention that we will be paid a fixed fee by
lead partners such as fund companies, financial planners and other financial
service information providers when one of our referrals opens an account
with
one of these lead partners. Our success will be dependent on the quality
of the
databases we market to and the appeal of the information-based products we
are
selling.
Content
Licensing. Through our wholly-owned subsidiary Fund.com
Managed Products Inc., we intend to research and develop intellectual property
in the form of fund investment indexes and related index-linked investment
products and to license this intellectual property to third parties in
consideration for recurring license fees paid to us based on a fixed percentage
of assets managed by such third party using our index-linked investment
products. We currently have intellectual property associated with one index
from
which we will generate licensing income. We intend to develop other content
and
other licensing agreements.
Advisory
Fees. We
are in discussions with and intend to enter into consulting agreements to
provide advisory services to third party investment product
providers. We intend that these third party providers will also enter
into a license agreement for our indexes. We anticipate that
these
consulting agreements will provide for Fund.com Managed Products, Inc. to
assist
in establishing investment products that use our content as an investment
benchmark. Although we will not be the issuer of these investment
products, we anticipate generating fees from both our consulting services
and
from third party indexes that are the subject of our licensing
agreements.
Structured
Products.
We
have established
Fund.com Capital Inc. to make active (non-passive) investments on our behalf,
including in other financial institutions and fund management companies,
and in
strategic products offered or managed by either in certain
instances. On November 9, 2007, Fund.com Capital entered into a
$20,000,000 certificate of deposit with an Antigua bank, the Global Bank
of
Commerce, which is an affiliate of one of our significant stockholders
(GBC
Wealth Management Limited). Initially the deposit is credited with
earned interest at 5% per annum for a term of three years. We have
begun negotiations with the bank to change the term of the deposit to one
year
and to modify the interest rate from a fixed rate to a variable rate of
return. We expect that the bank will determine the variable interest
rate based on an index published by EQUITIES Magazine (which is owned by
a
significant stockholder), and that, on that basis, Fund.com Capital would
receive a monthly credit (or have a monthly debit) to its term deposit
in an
amount equal to the increase or decrease in the published index. The term
deposit would not be debited for decreases in the index for cumulative
amounts
that would result in the term deposit account being an amount less than
the
initial deposit amount. Subject to receipt of any necessary approvals
(including the approval of Global Bank of Commerce, which approval could
be
withheld in its sole discretion), we may seek to use all or a portion of
this
$20,000,000 to fund one or more control investments.
Marketing,
Content and Distribution
We
plan
to pursue a variety of sales and marketing initiatives to increase traffic
to
www.fund.com,
license our content, expose our brands and build our customer databases.
We
intend that these initiatives will include promoting our services using online
and email marketing, establishing content syndication and subscription
distribution relationships with leading companies with whom we have had
discussions, including with EQUITIES Magazine, and engaging in an ongoing
public
awareness campaign.
Marketing
costs will be comprised of
expenses associated with expanding brand awareness of our products and
services
to consumers and will include key word campaigns on internet search engines,
print and internet advertising, marketing and promotion
costs.
Online
publishing costs will be expenses directly associated with the creation of
online publishing revenue. These costs will include contractual revenue sharing
obligations resulting from our distribution arrangements (distribution
payments), editorial costs, market analysis and research costs, and allocated
overhead. Distribution payments will be made to web site operators
for visitors directed to our online network; these costs will increase
proportionately with gains in traffic to our online network. Editorial costs
will relate to writers and editors who create original content for our online
publications.
Material
Agreements or Arrangements
Under
an
Asset Purchase Agreement dated October 1, 2007, we acquired from FST Limited
the
domain name “www.fund.com” and associated intellectual property, for a total
cost of $9,999,950.
On
November 9, 2007, Fund.com Capital
entered into a $20,000,000 certificate of deposit with an Antigua
bank, the Global Bank of Commerce, which is an affiliate of one of
our significant stockholders (GBC Wealth Management
Limited). Initially the deposit is credited with earned interest at
5% per annum for a term of three years. We have begun negotiations
with the bank to change the term of the deposit to one year and to modify
the
interest rate from a fixed rate to a variable rate of return. We
expect that the bank will determine the variable interest rate based on
an index
published by EQUITIES Magazine (which is owned by our largest stockholder),
and
that, on that basis, Fund.com Capital would receive a monthly credit
(or have a monthly debit) to its term deposit in an amount equal to the
increase
or decrease in the published index. The term deposit would not be debited
for
decreases in the index for cumulative amounts that would result in the
term
deposit account being an amount less than the initial deposit amount. Subject
to
receipt of any necessary approvals (including the approval of Global Bank
of
Commerce, which approval could be withheld in its sole discretion), we
may seek
to use all or a portion of this $20,000,000 to fund one or more control
investments.
Competitive
Business Conditions and Competitive Position
We
anticipate that we will be in competition with both traditional and online
companies engaged in the creation and distribution of business, investment,
investment ratings content and index licensing.
We
have
several direct on-line competitors with long operating histories and well
established brands such as Thestreet.com, The Wall Street Journal Online
(www.wsj.com), Forbes.com, SmartMoney.com, MarketWatch.com, The Motley Fool
and
CNBC.com, as well as financial portals such as Yahoo! Finance and Google
Finance. Our investment index competitors include Morningstar, Dow Jones,
Standard & Poor’s, The Financial Times and MSCI Barra, a public company
majority owned by Morgan Stanley.
Many
of
our competitors are established and have far greater financial resources,
more
experience and larger staffs than do we. Additionally, many have
proven operating histories, which we lack. We expect to face strong
competition from both well-established companies and small independent
companies. Significant competitive factors in our market include: the
quality, originality, timeliness, insightfulness and trustworthiness of our
content, our ability to introduce products and services that keep pace with
new
investing trends, the ease of use of services developed and the effectiveness
of
our sales and marketing efforts.
Employees;
Corporate Headquarters
We
currently have four employees in the following capacities; Acting Chief
Executive Officer, Chief Marketing Officer, Chief Financial Officer and
Executive Vice President. As of February 1, 2008, Raymond Lang will serve
as our Chief Executive Officer. We consider our relations
with our employees to be good. We have never had a work stoppage, and
none of our employees is represented by collective bargaining
agreements. We believe that our future success will depend in part on
our ability to attract, integrate, retain and motivate highly qualified
personnel and upon the continued service of our senior management and key
technical personnel. None of our key personnel is bound by employment
agreements that prohibit them from ending their employment at any
time. Competition for qualified personnel in our industry and
geographical location is intense. We cannot assure you that we will
be successful in attracting, integrating, retaining and motivating a sufficient
number of qualified employees to conduct our business in the
future.
Our
corporate headquarters are located at 455 Broadway, 4th floor, New York,
NY,
10012. We currently occupy this space on a month-to-month basis, at
no cost. The space is provided by an affiliate of the Company and is
sufficient to maintain our operations for three months.
We
will
rely on a combination of trademark, copyright and trade secret and laws in
the
United States and abroad as well as contractual provisions to protect our
proprietary technology. We currently have trademarks registered in the United
States for our website accreditedinvestor.com and intend to file for a trademark
for our name combined with the eventual www.fund.com logo. We will rely on
contractual provisions and copyright laws to protect source and the content
of
our websites.
We
are an
information services company and online advertising business. The growth
and
development of the market for internet commerce and communications has prompted
both federal and state laws and regulations concerning the collection and
use of
personally identifiable information (including consumer credit and financial
information under the Gramm-Leach-Bliley Act), consumer protection, the content
of online publications, the taxation of online transactions and the transmission
of unsolicited commercial email, popularly known as “spam.” More laws and
regulations are under consideration by various governments, agencies and
industry self-regulatory groups. We believe that our practices are in compliance
with applicable laws.
Our
activities may include, among other things, the offering of stand-alone services
providing fund recommendations and analysis to subscribers, in contrast to
providing such information as part of a larger online financial publication
of
more general and regular circulation. As a result, we may in the future be
required to register with the Securities and Exchange Commission as an
investment advisor under the Investment Advisers Act of 1940. Investment
advisors are subject to Securities and Exchange Commission regulations covering
all aspects of the operation of their business, including, among
others:
· conduct
of directors, officers and employees, and
· supervision
of advisory activities.
Risks
Relating to Our
Business and Industry
We
are still in an
early stage of development and have earned limited
revenue
to date.
We
are a development-stage
company. We
have earned limited revenues
to date and have supported our
operations primarily through private equity investment. Our operations are
subject to all of the risks inherent in the establishment of a new business
enterprise. Our likelihood of success must be considered in light of the
problems, expenses and delays frequently encountered in connection with a
new
business and the development of new products and new
technology.
We
have a limited
operating history, which limits the information available to you to evaluate
our
business, and have a history of operating losses and uncertain future
profitability.
On
January 15, 2008, we completed the Merger. We expect that cash on hand will
permit us to fund our current operations for the next three months. Unexpected
increases in negative cash flow from operations or the failure to generate
revenues would cause us to require additional external financing before that
time. Under those circumstances, if we are unable to secure additional external
financing on a timely basis, we will not have sufficient cash to fund our
working capital and capital expenditure requirements and we will be forced
to
cease operations. In such event, the shares of our common stock may cease
to
have any value. There is limited operating and financial information
to evaluate our historical performance and our future prospects. We face
the
risks and difficulties of a
development-stage company including the uncertainties of market acceptance,
competition, cost increases and delays in achieving business objectives.
We
cannot assure you that we will succeed in addressing any or all of these
risks
or that our efforts will generate significant revenue or achieve future
profitability. Our failure to do so would have an adverse effect on our
business, financial condition and operating results.
We
will require substantial additional financing.
We
will need to raise
substantial additional capital to fund operations and grow our business.
Our
existing capital and future revenues are not expected to be sufficient
to
support the expenses of our operations. We believe that our cash on
hand will be sufficient to meet our projected operating and capital requirements
for at least three months. We require significant capital in order to
accomplish our short-term goals. We have no current arrangements with
respect to these additional sources of financing. We may not be able
to obtain additional financing on favorable terms or at all. If we
are unable to raise additional funds when needed, we may be unable to continue
operating, fund our development and expansion, pursue more aggressive marketing
programs, successfully promote our brand name, develop or enhance our products
and services, take advantage of business opportunities or respond to competitive
pressures, any of which could have a material adverse effect on our business
and
the price of our stock.
Potential
Conflicts Of Interest
From
time to time, we have entered into
transactions with persons and entities deemed to be our affiliates, including
entering into an agreement pertaining to a certificate of deposit with
Global
Bank of Commerce Limited, the parent of one of our shareholders (GBC Wealth
Management Limited). In addition, we expect to enter into one ore more
licensing
or marketing agreements with Equities Media Acquisition Corp., one of our
shareholders, or its affiliates. We believe that the terms of these transactions
were more favorable to us than could have been obtained from unaffiliated
parties. There can be no assurance, however, that future conflicts of interest
will not arise with respect thereto, or that if conflicts do arise,
they will be resolved in a manner favorable to us.
The
interests of our
controlling shareholders could conflict with those of our other shareholders
resulting in the approval of corporate actions that are not in your
interests.
Our
executive officers and principal
shareholders, collectively own or control approximately 35% of our Class
A
Common Stock (and
approximately 94% of our voting
power). In addition, Equities Media Acquisition Corp Inc., as holder of
all of
our outstanding Class B common stock, controls approximately 60% of our
voting
power and accordingly has voting control over our
Company. Class B holders therefore have significant influence over
management and affairs and over all matters requiring stockholder approval,
including the election of directors and significant corporate transactions,
such
as a merger or other sale of our company or its assets, for the foreseeable
future. The Class B Common shareholder is able to control the outcome of
shareholder votes, including votes concerning: amendments to our certificate
of
incorporation and by-laws; the approval of significant corporate transactions
like a merger or sale of our assets; and control the election of our board
of
directors. This controlling influence could have the effect of delaying
or
preventing a change in control, even if our other shareholders believe
it is in
their best interest.
Risks
Related To The
Investment Company Act Of 1940.
We
do not
believe that we are an investment company within the meaning of the Investment
Company Act of 1940 (the “1940 Act”). If we are deemed to be an
investment company under the 1940 Act because of our investment securities
holdings, we must register as an investment company under the 1940 Act. The
1940
Act and the rules thereunder contain detailed parameters for the organization
and operation of investment companies. Among other things, the
1940 Act and the rules thereunder limit or prohibit transactions with
affiliates, impose limitations on the issuance of debt and equity securities,
generally prohibit the issuance of options and impose certain governance
requirements. We intend to conduct our operations so that we will not be
deemed
to be an investment company under the 1940 Act. If anything were to happen
which would cause us to be deemed to be an investment company under the 1940
Act, requirements imposed by the 1940 Act, including limitations on our capital
structure, ability to transact business with affiliates and ability to
compensate key employees, could make it impractical for us to continue our
business as currently conducted and materially adversely affect our business,
financial condition and results of operations. In addition, we may be required
to limit the amount of investments that we make as a principal or otherwise
conduct our business in a manner that does not subject us to the registration
and other requirements of the 1940 Act.
Substantially
all of
our assets are invested in an account with Global Bank of Commerce
Limited.
Substantially
all of our capital ($20.0
million has been invested in a three year non-cancellable certificate of
deposit
with Global Bank of Commerce Limited),
the
parent of one of our significant
shareholders (GBC Wealth Management Limited). As a result, we have
only limited liquidity for the foreseeable future, and will need to raise
substantial additional capital to pursue our business.
Global
Bank of Commerce Limited is an
unrated bank located in Antigua.
Accordingly, we have substantial
credit risk and exposure arising from this holding and concentration of
assets
in one institution. Our financial condition is largely dependent on Global
Bank
of Commerce performing its obligations under the CD. We believe that
our $20.0 million deposit represents a significant portion of Global Bank
of
Commerce’s total deposits and net worth. This deposit does not have
the benefit of any governmental or third party insurance. Global Bank
of Commerce is not subject to the types of capital requirements and other
regulations that apply to U.S. financial
institutions. Accordingly, there can be no assurance that Global Bank
of Commerce has or will have the financial wherewithal to repay the CD
on a
timely basis, or all.
If
Global Bank of
Commerce were to go bankrupt or become insolvent, or otherwise fail to
perform
its obligations under the CD, our assets, financial condition, results
of
operations and cash flow would severely suffer as a result. Moreover,
Global Bank of Commerce Limited is located in Antigua and, as a result,
it may
be difficult or impossible for us to bring an action against Global Bank
of
Commerce Limited in the United States in the event that we believe that
Global
Bank of Commerce defaults on its obligations to us. If Global Bank of Commerce
defaults on the CD, we in any event may have no practical remedy. Our inability
to enforce or obtain a remedy under our agreement with Global Bank of Commerce
would severely
damage our
assets, financial condition and viability.
We
may issue shares
of preferred stock that could defer a change of control or dilute the interests
of our common shareholders and our charter documents could defer a takeover
effort, which could inhibit your ability to receive an acquisition premium
for
your shares or your ability to sell your shares of common stock.
Our
certificate of incorporation permits our board of directors to issue up to
10,000,000 shares of preferred stock without shareholder approval. All shares
of
the preferred stock remain available for issuance. Shares of our preferred
stock, if issued, could contain dividend, liquidation, conversion, voting
or
other rights which could adversely affect the rights of our common shareholders
and which could also be utilized, under some circumstances, as a method of
discouraging, delaying or preventing a change in control. Provisions of our
certificate of incorporation, by-laws and Delaware law could make it more
difficult for a third party to acquire us, even if many of our shareholders
believe it is in their best interest. These provisions may decrease your
ability
to sell your shares of our common stock.
We
depend on the
services of our executive officers, and a loss of any of these individuals
may
harm our business.
Our
performance is substantially
dependent upon the performance of our executive officers and, to a lesser
extent, certain other employees. The familiarity of these key employees
to their
respective industries makes these employees especially critical to our
success.
The loss of the services of any of our executive officers or key employees
may
harm our business and the cost to replace such individuals may put a strain
on
our limited resources.
Our
future is
entirely dependent on the successful development of the Company’s technology,
products and services.
We
are in
the initial stages of the development of www.fund.com
and there is no assurance that when development is finished www.fund.com
will perform as expected. Our ability to continue operations will
depend on the success of our development and integration of supplemental
leading
edge technology, and there is no assurance that the development and integration
will be successful.
The
market acceptance
of a new investment content provider is uncertain.
Even
if
we are successful in the development of our technology, our success will
depend
upon the acceptance of our product by the general
public. Insufficient market acceptance of our product would have a
material adverse effect on our business, financial condition and results
of
operations. We anticipate a significant portion of our revenue to come from
selling leads to mutual funds and investment brokers. Funds and brokers may
not
want to pay for these leads.
We
will need to
expand our skilled personnel at all levels in a labor market that is extremely
tight and retain those personnel that we do hire.
We
will
be required to hire and retain skilled employees at all levels of our operations
in a market where such qualified employees are in high demand and are subject
to
receiving competing offers. The inability to hire needed employees on
a timely basis and/or the inability to retain those that we do hire could
have a
material adverse effect on our ability to meet the schedule of our strategic
plan.
We
will need to
successfully manage our growth, which we expect to be significant for the
foreseeable future.
We
plan on growing at a rapid pace,
which will require, in part, the constant addition of new personnel in
all areas
of our operations. Even if we are successful in finding and hiring
the appropriate personnel, there will be a significant strain placed on
our
managerial, operational, reporting and financial resources. We have
taken preliminary steps to put in place the necessary legal, accounting,
human
resource management and other relationships and tools to enable us to deal
with
this growth more efficiently. However, there is no assurance that we
will be able to successfully manage this rapid growth.
We
must reach
agreements with third parties to supply us with the hardware, software and
infrastructure necessary to provide our services, and the loss of access
to this
hardware, software or infrastructure or any decline or obsolescence in
functionality could cause our customers’ businesses to suffer, which, in turn,
could decrease our revenues and increase our costs.
We
have
certain contemplated strategic vendor relationships that will be critical
to our
strategy. We cannot assure you that these relationships can be
obtained or maintained on terms favorable to us or at all. Our
success depends substantially on
obtaining relationships
with strategic partners, such as search engine technology developers, community
polling software providers and outsourced software programmers. If we
are unable to obtain or maintain our relationship with strategic partners,
our
business, prospects, financial condition and results of operations will be
materially adversely affected.
We
may be impacted by
general economic conditions, which would negatively affect our
business.
The
investment industry is susceptible to negative trends in the national and/or
regional economies. The success of our business depends, in part, on
a number of factors related to spending patterns in the overall economy and
in
particular by average investors. Recent economic reports indicate
that the rate of growth of the United States economy is slowing and that
people
are either nervous about investing their money or are concerned that they
may
not have funds available in the future to sustain an investment
portfolio. These trends could have an adverse impact on our ability
to grow or achieve financial profitability.
The
rates we charge
for our services may decline over time, which would reduce our revenues and
adversely affect our profitability.
As
our
business model gains acceptance and attracts the attention of competitors,
we
may experience pressure to decrease the fees for our services, which could
adversely affect our revenues and gross margin. If we are unable to
sell our services at acceptable prices, or if we fail to offer additional
services with sufficient profit margins, our revenue growth will slow and
our
business and financial results will suffer.
The
market for web
investment content is competitive.
Our
proposed products and services will compete with products and services offered
by numerous other entities. Because we currently have no patented
technology that would bar competitors from our market, and other barriers
to
entry in our market are relatively low, new competitors could enter our market
at any time in the future.
We
believe that our primary competitors include:
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web
sites offering investment information together with other related
services, such as wsj.com, forbes.com, smartmoney.com, marketwatch.com,
thestreet.com, cnbc.com, fool.com and
Morningstar.com;
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general
purpose consumer web sites such as Google and Yahoo! that also
offer
financial investment content on their sites;
and
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traditional
print media such as newspapers and
magazines.
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Many
of
our existing and potential competitors have longer operating histories in
the
internet market, greater name recognition, larger consumer bases and
significantly greater financial, technical and marketing resources than we
do. Some of our competitors may also be able to provide customers
with additional benefits at lower overall costs in an effort to increase
market
share. We cannot be sure that we will be able to match cost
reductions by our competitors. Our competitors and other companies may form
strategic relationships with each other to compete with us. These
relationships may take the form of strategic investments, joint-marketing
agreements, licenses or other contractual arrangements, which arrangements
may
increase our competitors’ ability to address customer needs with their product
and service offerings. We believe that there is likely to be
consolidation in our markets, which could lead to increased price competition
and other forms of competition that could cause our business to
suffer.
If
we are unable to
develop our web services and content, our business will suffer.
To
remain
competitive we must continue to enhance and improve the ease of use,
responsiveness, functionality and features of our web site. These
efforts may require us to develop internally or to license increasingly complex
technologies. In addition, many companies are continually introducing
new internet-related products, services and technologies, which will require
us
to update or modify our technology. Developing and integrating new
products, services or technologies into our web site could be expensive and
time
consuming. Any new features, functions or services may not achieve
market acceptance or enhance our brand loyalty. We have not completed
development and testing of certain of our proposed web site
features. If we fail to develop and introduce or acquire these
features or other new features, functions or services effectively and on
a
timely basis, we may not continue to attract new users and may be unable
to
retain our existing users. Furthermore, we may not succeed in
incorporating new internet technologies, or in order to do so, we may incur
substantial expenses.
Any
factors that
limit the amount advertisers are willing to spend on advertising on our web
sites could have a material adverse effect on our business.
We
expect
to derive significant revenue in the foreseeable future through the sale
of
advertising space and hyperlinks on our web site. Any factors that limit
the
amount advertisers are willing to spend on advertising on our web site could
have a material adverse effect on our business. These factors may
include:
●
a lack of
standards for measuring web site traffic or effectiveness of web site
advertising;
●
a
lack of
established pricing models for internet advertising;
●the
failure of traditional media advertisers to adopt internet
advertising;
●the
introduction of alternative advertising sources; and
●a
lack of
significant growth in web site traffic.
Continuing
to demonstrate the
effectiveness of advertising on our web site is critical to our ability
to
generate advertising revenue. Currently, there are no widely accepted standards
to measure the effectiveness of internet advertising, and we cannot be
certain
that such standards will develop sufficiently to support our growth through
internet advertising. A number of different pricing models are used to
sell
advertising on the internet. Pricing models are typically either CPM-based
(cost
per thousand impressions) or performance-based. We utilize the CPM-based
model,
which is based upon the number of advertisement impressions, and the
performance-based, or cost-per-click (“CPC”), model, which generates revenue
based on each individual click on a particular advertisement. We cannot
predict
which pricing model, if any, will emerge as the industry standard. Therefore,
it
is difficult for us to project our future advertising rates and revenues.
For
instance, banner advertising, which we anticipate to be one of our primary
sources of online revenue, may not be an effective advertising method in
the
future. If we are unable to adapt to new forms of internet advertising
and
pricing models, our business could be adversely affected.
If
we fail to detect
click-through fraud or unscrupulous advertisers, we could lose the confidence
of
our advertisers, thereby causing our business to suffer.
We
are
exposed to the risk of fraudulent clicks on our ads by persons seeking to
increase the advertising fees paid to us. Clickthrough fraud occurs when
a
person clicks on an ad displayed on our web site in order to generate revenue
to
us and to increase the cost for the advertiser. If we were unable to detect
this
fraudulent activity and find new evidence of past fraudulent clicks, we may
have
to issue refunds retroactively of amounts previously paid to us. In addition,
if
fraudulent clicks are not detected, the affected advertisers may experience
a
reduced return on their investment in our advertising programs because the
fraudulent clicks would not lead to potential revenue for the
advertisers.
We
are also exposed to the risk that
advertisers who advertise on our website will advertise interest rates
on a
variety of financial products that they do not intend to honor. Such “bait and
switch” activity encourages consumers to contact fraudulent advertisers over
legitimate advertisers because the fraudulent advertisers claim to offer
a
better interest rate.
Both
“bait and switch” and click-through fraud would negatively affect our
profitability, and could hurt our reputation and our brand. This could lead
advertisers to become dissatisfied with our advertising programs, which could
lead to loss of advertisers and revenue.
We
face government
regulation and legal uncertainties, which could increase our costs or limit
our
business opportunities.
The
growth and development of the market for internet commerce and communications
has prompted both federal and state laws and regulations concerning the
collection and use of personally identifiable information (including consumer
credit and financial information under the Gramm-Leach-Bliley Act), consumer
protection, the content of online publications, the taxation of online
transactions and the transmission of unsolicited commercial email, popularly
known as “spam.” More laws and regulations are under consideration by various
governments, agencies and industry self-regulatory groups. Although our
compliance with applicable federal and state laws, regulations and industry
guidelines has not had a material adverse effect on us, new laws and regulations
may be introduced and modifications to existing laws may be enacted that
require
us to make changes to our business practices. Although we believe that our
practices are in compliance with applicable laws, regulations and policies,
if
we were required to defend our practices against investigations of state
or
federal agencies or if our practices were deemed to be violative of applicable
laws, regulations or policies, we could be penalized and our activities
enjoined. Any of the foregoing could increase the cost of conducting online
activities, decrease demand for our services, and lessen our ability to
effectively market our services, or otherwise materially adversely affect
our
business, financial condition and results of operations.
Our
activities may include, among other things, the offering of stand-alone services
providing fund recommendations and analysis to subscribers, in contrast to
providing such information as part of a larger online financial publication
of
more general and regular circulation. As a result, we may in the future be
required to register with the Securities and Exchange Commission as an
investment advisor under the Investment Advisers Act of 1940. The securities
industry in the United States is subject to extensive regulation under both
federal and state laws. A failure to comply with regulations applicable to
securities industry participants could materially and adversely affect our
business, results of operations and financial condition. Investment advisors
are
subject to Securities and Exchange Commission regulations covering all aspects
of the operation of their business, including, among others:
· conduct
of directors, officers and employees, and
· supervision
of advisory activities.
Violations
of the regulations governing the actions of investment advisors may result
in
the imposition of censures or fines, the issuance of cease-and-desist orders,
and the suspension or expulsion of us, our officers, or our employees from
the
securities business. Our ability to comply with all applicable securities
laws
and rules is largely dependent on our establishment and maintenance of
appropriate compliance systems (including proper supervisory procedures and
books and records requirements), as well as our ability to attract and retain
qualified compliance personnel. Because we operate in an industry subject
to
extensive regulation, new regulation, changes in existing regulation, or
changes
in the interpretation or enforcement of existing laws and rules could have
a
material adverse effect on our business, results of operations and financial
condition.
Our
assets will include intellectual property (such as domain
names). Under accounting rules, we will be required to value these
assets on an annual basis. It is possible that the value of the
assets may be impaired.
We
may not be able to
protect the web site address that is important to our business.
Our
web
site address, or domain name, is important to our business. The
regulation of domain names is subject to change. Some proposed changes include
the creation of additional top-level domains in addition to the current
top-level domains, such as “.com,” “.net” and “.org.” It is also
possible that the requirements for holding a domain name could
change. Therefore, we may not be able to obtain or maintain relevant
domain names for all of the areas of our business. It may also be
difficult for us to prevent third parties from acquiring domain names that
are
similar to ours, that infringe our trademarks or that otherwise decrease
the
value of our intellectual property.
Government
regulations and legal uncertainties could affect the growth of the
internet.
A
number
of legislative and regulatory proposals under consideration by federal, state,
local and foreign governmental organizations may lead to laws or regulations
concerning various aspects of the internet, including online content, user
privacy, access charges, liability for third-party activities and
jurisdiction. Additionally, it is uncertain as to how existing laws
will be applied to the internet. The adoption of new laws or the
application of existing laws may decrease the growth in the use of the internet,
which could in turn decrease the usage and demand for our services or increase
our cost of doing business.
Some
local telephone carriers have asserted that the increasing popularity and
use of
the internet have burdened the existing telecommunications infrastructure,
and
that many areas with high internet use have begun to experience interruptions
in
telephone service. These carriers have petitioned the Federal
Communications Commission to impose access fees on internet service providers
and online service providers. If access fees are imposed, the costs
of communicating on the internet could increase substantially, potentially
slowing the increasing use of the internet. This could in turn
decrease demand for our services or increase our cost of doing
business.
Taxation
of internet
transactions could slow the use of the internet.
The
tax
treatment of the internet and electronic commerce is currently
unsettled. A number of proposals have been made at the federal, state
and local level and by various foreign governments to impose taxes on the
sale
of goods and services and other internet activities. The internet Tax
Information Act places a three-year moratorium on new state and local taxes
on
internet commerce. However, future laws may impose taxes or other
regulations on internet commerce, which could substantially impair the growth
of
electronic commerce.
We
depend on
continued improvements to our computer network and the infrastructure of
the
internet.
Any
failure of our computer systems that causes interruption or slower response
time
of our website or services could result in a smaller number of users of our
website. If sustained or repeated, these performance issues could
reduce the attractiveness of our website to consumers and our products and
services to investment professionals and internet
advertisers. Increases in the volume of our website traffic could
also strain the capacity of our existing computer systems, which could lead
to
slower response times or system failures. This would cause the number
of search inquiries, other revenue producing offerings and our informational
offerings to decline, any of which could hurt our revenue growth and our
brand
loyalty. We may need to incur additional costs to upgrade our
computer systems in order to accommodate increased demand if our systems
cannot
handle current or higher volumes of traffic.
The
recent growth in internet traffic has caused frequent periods of decreased
performance. Our ability to increase the speed with which we provide
services to consumers and to increase the scope of these services is limited
by
and dependent upon the speed and reliability of the
internet. Consequently, the emergence and growth of the market for
our services is dependent on the performance of and future improvements to
the
internet.
Our
internal network
infrastructure could be disrupted.
Our
operations will depend upon our ability to maintain and protect our computer
systems. Our systems, when they are operational will be vulnerable to
damage from break-ins, unauthorized access, vandalism, fire, earthquakes,
power
loss, telecommunications failures and similar events.
Experienced
computer programmers, or hackers, may attempt to penetrate our network security
from time to time. A hacker who penetrates our network security could
misappropriate proprietary information or cause interruptions in our
services. We might be required to expend significant capital and
resources to protect against, or to alleviate, problems caused by
hackers. We also may not have a timely remedy against a hacker who is
able to penetrate our network security. In addition to purposeful
security breaches, the inadvertent transmission of computer viruses could
expose
us to litigation or to a material risk of loss.
We
could face
liability for information on our website and for products and services sold
over
the internet.
We
will
provide third-party content on our website. We could be exposed to
liability with respect to this third-party information. Persons might
assert, among other things, that, by directly or indirectly providing links
to
websites operated by third parties, we should be liable for copyright or
trademark infringement or other wrongful actions by the third parties operating
those websites. They could also assert that our third party
information contains errors or omissions, and consumers could seek damages
for
losses incurred if they rely upon incorrect information.
We
may
enter into agreements with other companies under which we share with these
other
companies’ revenues resulting from the purchase of services through direct links
to or from our web site. These arrangements may expose us to
additional legal risks and uncertainties, including local, state, federal
and
foreign government regulation and potential liabilities to consumers of these
services, even if we do not provide the services ourselves. We cannot
assure you that any indemnification provided to us in our agreements with
these
parties, if available, will be adequate. Even if these claims do not
result in liability to us, we could incur significant costs in investigating
and
defending against these claims. Our general liability insurance may
not cover all potential claims to which we are exposed and may not be adequate
to indemnify us for all liability that may be imposed.
Acquisitions
that we
may undertake will involve a number of inherent risks, any of which could
cause
us not to realize the benefits anticipated to result.
Our
strategy includes expanding our
assets and operations through combinations or
acquisitions. Integrating newly-acquired businesses is expensive and
time consuming. Combinations and acquisitions involve inherent risks,
such as:
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uncertainties
in assessing the
value, strengths and potential profitability of, and identifying
the
extent of all weaknesses, risks, contingent and other liabilities
of,
acquisition or other transaction
candidates;
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the
potential of key management
and employees of an acquired
business;
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the
ability to achieve identified
operating and financial synergies anticipated to result from a
combination
or acquisition;
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problems
that could arise from the
integration of the acquired business or assets;
and
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unanticipated
changes in business,
industry or general economic conditions that affect the assumptions
underlying the combination or
acquisition.
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Any
one or more of these factors could
cause us not to realize the benefits anticipated to result from any combination
or acquisition or could result in unexpected liabilities.
Risks Related to Our Common Stock
Because
we became
public through a reverse merger, we may not be able to attract the attention
of
major brokerage firms.
Additional
risks are associated with us becoming public through a reverse merger. For
example, security analysts of major brokerage firms may not provide coverage
of
us since there is no incentive to brokerage firms to recommend the purchase
of
our common stock. We cannot assure you that brokerage firms will want to
conduct
any public offerings on our behalf in the future.
Our
common stock may
be considered a “penny stock” and may be difficult to sell.
The
Securities and Exchange Commission has adopted regulations which generally
define “penny stock” to be an equity security that has a market or exercise
price of less than $5.00 per share, subject to specific exemptions. The market
price of our common stock may be below $5.00 per share and therefore may
be
designated as a “penny stock” according to Securities and Exchange Commission
rules. This designation requires any broker or dealer selling these securities
to disclose certain information concerning the transaction, obtain a written
agreement from the purchaser and determine that the purchaser is reasonably
suitable to purchase the securities. These rules may restrict the ability
of
brokers or dealers to sell our common stock and may affect the ability of
our
stockholders to sell their shares. In addition, since our common stock is
quoted
on the OTC Bulletin Board, our stockholders may find it difficult to obtain
accurate quotations of our common stock and may find few buyers to purchase
the
stock or a lack of market makers to support the stock price.
We
may engage in
additional financing that could lead to dilution of existing
stockholders.
We
have
relied on equity financing to carry on our business to date, which has consisted
primarily of development, the negotiation of strategic alliances and marketing
activities. Any future financings by us may result in substantial dilution
of
the holdings of existing stockholders and could have a negative impact on
the
market price of our common stock. Furthermore, we cannot assure you that
such
future financings will be possible.
We
do not anticipate
paying additional dividends in the foreseeable future; you should not buy
our
stock if you expect dividends.
We
currently intend to retain our future earnings to support operations and
to
finance expansion and, therefore, we do not anticipate paying any additional
cash dividends on our common stock in the foreseeable future.
Management’s
Discussion and Analysis or Plan Of Operations.
Management’s
Discussion and Analysis or Plan of Operation contains various forward-looking
statements which consist of any statement other than a recitation of historical
fact and can be identified by the use of forward-looking terminology such
as
“may,” “expect,” “anticipate,” “estimate,” “continue” or the negative thereof or
other variations thereon or comparable terminology. The reader is cautioned
that
all forward-looking statements are speculative, and there are certain risks
and
uncertainties that could cause actual events or results to differ from those
referred to in such forward-looking statements.
We
caution that these statements are further qualified by important factors
that
could cause actual results to differ materially from those contained in the
forward-looking statements, that these forward-looking statements are
necessarily speculative, and there are certain risks and uncertainties that
could cause actual events or results to differ materially from those referred
to
in such forward-looking statements.
Management’s
Discussion And Analysis Or Plan of Operations
In
the
quarter ending December 31, 2007, we completed the sale of equity securities
totaling aggregate gross proceeds of $30,700,000. The proceeds were used
to
execute the initial phase of our business plan, which included the acquisition
of certain intellectual property consisting primarily of our domain names
and
also funding our wholly-owned subsidiary, Fund.com Capital Inc.
We
capitalized Fund.com Capital Inc.
with $20,000,000 from proceeds generated from our equity
placements. On
November 9, 2007, Fund.com Capital entered into a $20,000,000 certificate
of
deposit with an Antigua bank, the Global Bank of Commerce, which is
an affiliate of one of our significant stockholders (GBC Wealth Management
Limited). Initially the deposit is credited with earned interest at
5% per annum for a term of three years. We have begun negotiations
with the bank to change the term of the deposit to one year and to modify
the
interest rate from a fixed rate to a variable rate of return. We
expect that the bank will determine the variable interest rate based on
an index
published by EQUITIES Magazine (which is owned by our largest stockholder),
and
that, on that basis, Fund.com Capital would receive a monthly credit
(or have a monthly debit) to its term deposit in an amount equal to the
increase
or decrease in the published index. The term deposit would not be debited
for
decreases in the index for cumulative amounts that would result in the
term
deposit account being an amount less than the initial deposit amount. Subject
to
receipt of any necessary approvals (including the approval of Global Bank
of
Commerce, which approval could be withheld in its sole discretion), we
may seek
to use all or a portion of this $20,000,000 to fund one or more control
investments.
We
believe that by investing in a
structured product that is benchmarked to an index published by EQUITIES
Magazine, we are able to gather actual statistical and investment
data. We believe that this data is useful in further developing our
business plan and that actual results are highly preferable to pro forma
results
or ‘back-tested’ results, which are commonly discounted by the investment
community, and we believe that the investment will serve to develop an
auditable
track record. This track record may assist Fund.com Capital Inc. in
the future should Fund.com Capital Inc. seek to develop a registered investment
product available for sale to third parties. No decision has been
taken to develop such a product or to register same with the Securities
and
Exchange Commission.
Our
plan of operations will also consist
of licensing our content to third parties. We intend for our content
to include proprietary indexes that we intend to publish, as well as service
marks and trademarks associated therewith. Third party product
providers, like banks and asset management companies, license a range of
indexes
from our competitors, such as the Russell 2000 from the Frank Russell Companies
or the S&P 500 from Standard and Poors/McGraw Hill. We plan
similar business arrangements to license our indexes in return for the
payment
of licensing fees. We intend that the license fees will be charged
based on a percentage of assets benchmarked to our
indexes. Therefore, we believe our success in generating license fees
will be substantially dependent in structuring the index-linked products
and the
successful sale of those products to investors. We
believe that this represents long
term recurring license income to us should our licensee be successful in
marketing its index-linked bonds. This is an arrangement that we
believe is consistent with our intended plan of operations.
In
addition to our index publishing
business, our plan of operation is to invest in the further development
of our
websites. This will include certain capital expenditures for
technology, content and database management, including certain online
advertising systems and affiliate marketing systems that management believes
will assist in executing our customer acquisition business plan. Our
websites are anticipated to evolve over time as we introduce new content
and
features and generally seek to improve the customer experience and to improve
the lead generating efficiency of the websites, consistent with our business
plan. In addition to databases created from parties registering at
our websites, we also intend to expand our access to targeted databases
of
investors that may be interested in our services or our advertising clients’
services. This is anticipated to include certain joint ventures
currently in negotiations and certain database acquisitions. We currently
anticipate a website with the full planned feature set accessible at
www.fund.com
will launch by March 2008. Prior to
March 2008 we will be negotiating lead and advertising arrangements with
potential customers and content and sponsorship deals with potential
www.fund.com
spokespeople and content contributors.
We anticipate that it will cost approximately $500,000 to build www.fund.com
and that pre-launch marketing costs
will be approximately $250,000.
We
intend
to operate our online network and supporting systems on servers at a secure
third-party co-location facility in the New York City area. This third-party
facility will be manned, and our infrastructure and network connectivity
monitored continuously, on a 24 hour a day, 365 day a year basis. This facility
will be powered continuously from multiple sources, including uninterruptible
power supplies and emergency power generators. The vast majority of the
information presented on www.fund.com,
including backend databases that serve and store information, will be stored
in
and delivered from server farms. We intend to have our network operational
by
March 2008. We anticipate it will cost approximately $200,000 in equipment
and
set-up fees to bring this infrastructure on-line and that reoccurring operation
costs for this network including datacenter rent, bandwidth fees and maintenance
fees will be approximately $20,000 per month. We intend to hire one network
engineer to oversee the set-up and operation of www.fund.com. Through
our subsidiary Fund.com Capital Inc., we are generating revenue in the form
of
interest from our term deposit.
Our
operating and capital requirements in connection with operations have been
and
will continue to be significant. Based on our current plans, we anticipate
that
revenues earned from lead generation will be the primary source of funds
for
operating activities. In addition to existing cash and cash equivalents,
we may
rely on bank borrowing, if available, or sales of securities to meet the
basic
capital and liquidity needs for the next 12 months. Additional capital may
be
sought to fund the development of www.fund.com
and marketing efforts, which may also include bank borrowing, or a private
placement of securities. However, we have no agreements for funding at this
time
and there can be no assurance that funding will be available if we require
it.
Upon
our inception we issued an
aggregate of 18,700,000 (not giving effect to the 9-for-1 dividend on the
Surviving Corporation’s Class A Common Stock and Class B Common Stock) shares of
our common stock, par value $0.0001 per share, to seven investors, three
of whom
were co-founders of the Company. The shares were valued at $0.0001
per share. These shares were issued pursuant to the exemption
provided by Section 4(2) of the Securities Act of 1933 for transactions
by an
issuer not involving a public offering. In November 2007, we issued
an aggregate of 10,350,000 (not giving effect to the 9-for-1 dividend on
the
Surviving Corporation’s Class A Common Stock and Class B Common Stock) shares of
our common stock to eight accredited investors in a private
placement. The shares were valued at $2.00 per share and received
gross proceeds of $20,700,000. On November 5, 2007, we sold 5,000,000
(not giving effect to the 9-for-1 dividend on the Surviving Corporation’s Class
A Common Stock and Class B Common Stock) shares of our common stock and
2,500,000 (not giving effect to the 9-for-1 dividend on the Surviving
Corporation’s Class A Common Stock and Class B Common Stock) shares of our
Series A Preferred Stock to an accredited investor and received gross proceeds
of $10,000,000. Substantially all of the proceeds of the Series A
Preferred Stock transaction were used to acquire the domain name www.fund.com.
Prior
to
the Merger and not giving
effect to the 9-for-1 dividend on the Surviving Corporation’s Class A Common
Stock and Class B Common Stock, Fund.com had authorized a total 110,000,000
shares, of which 105,000,000 were authorized as common stock and 5,000,000
shares were authorized as Preferred Stock and 2,500,000 shares of
the
Preferred Stock were designated as Series A Preferred
Stock. Following the Merger, we had authorized
a total
of 120,000,000 shares of common
stock, par value $0.001 per
share, of which 100,000,000 shares were authorized as Class A Common
Stock, 10,000,000 shares were authorized as Class B Common Stock and 10,000,000
shares were authorized as Preferred Stock. Following the Merger
43,612,335 shares of Class A Common Stock were outstanding, 6,387,665 shares
of
Class B Common Stock were outstanding and no shares of Preferred Stock were
outstanding.
We
anticipate that our cash requirements
for the next 12 months for expenses related to infrastructure and business
development should be approximately $1,500,000. We believe proceeds
from prior private placements will be sufficient to meet presently anticipated
working capital and capital expenditure requirements over the next three
months. To the extent that we do not generate sufficient revenues we
will reduce our expenses and/or seek additional financing. As of
January 15, 2008 there were no commitments for long-term capital
expenditures.
Off-Balance
Sheet Arrangements.
We
have
no off-balance sheet arrangements that have or are reasonably likely to have
a
current or future effect on our financial conditions, changes in financial
condition, revenue or expenses, results of operations, liquidity, capital
expenditures or capital resources.
Description
Of Property.
Our
corporate headquarters are located at 455 Broadway, 4th floor, New York,
NY,
10012. We currently sublet office facilities occupied by a company
founded by our co-founders on a month-to-month basis, at no cost. The space
is sufficient to maintain our operations for three months. Following such
time
we intend to lease rental space.
Security
Ownership of Certain Beneficial Owners and Management.
As
of
January 15, 2008, there were 43,612,335 shares of our Class A Common Stock
and
6,387,665 shares of our Class B Common Stock issued and outstanding. The
following table sets forth, as of the close of business on January 15, 2008,
the
name of any person (including any “group”) who is known to us to be the
beneficial owner of more than five percent of any class of our voting
securities. Unless otherwise indicated, the address for each
person is 455 Broadway, 4th Floor, New York, New York 10012.
|
|
|
|
|
|
Daniel
Klaus
|
5,429,515
|
12.45%
|
0
|
0
|
5.05%
|
|
|
|
|
|
|
|
|
Lucas
Mann
|
5,429,515
|
12.45%
|
0
|
0
|
5.05%
|
|
|
|
|
|
|
|
|
MKL
Consulting (2)
|
4,343,612
|
9.96%
|
0
|
0
|
4.04%
|
|
|
|
|
|
|
|
|
GBC
Wealth Management Limited
(3)
|
2,555,066
|
5.86%
|
0
|
0
|
2.38%
|
|
|
|
|
|
|
|
|
Hettinger
Media Ltd. (4)
|
2,555,066
|
5.86%
|
0
|
0
|
2.38%
|
|
|
|
|
|
|
|
|
Stanwich
Absolute Return Ltd.
(5)
|
2,555,066
|
5.86%
|
0
|
0
|
2.38%
|
|
|
|
|
|
|
|
|
Mulsanne
Enterprises Limited
(6)
|
2,250,000
|
5.7%
|
0
|
0
|
2.33%
|
|
|
|
|
|
|
|
|
Equities
Media Acquisition Corp
Inc. (7)
|
0
|
0
|
6,387,665
|
100%
|
59.43%
|
|
(1)
|
Percentage total
voting power
represents voting power with respect to all shares of our Class
A Common
Stock and Class B Common Stock, as a single class. Each holder
of Class B
Common Stock is entitled to 10 votes per share of Class B Common
Stock and
each holder of Class A Common Stock is entitled to one vote per
share of
Class A Common Stock on all matters submitted to our stockholders
for a
vote. The Class A Common Stock and Class B Common Stock vote
together as a
single class on all matters submitted to a vote of our stockholders,
except as may otherwise be required by law. The Class B Common
Stock is
convertible at any time by the holder into shares of Class A
common stock
on a share-for-share basis.
|
| |
|
|
(2)
|
The
name of the party who has the
power to vote and share power to dispose of the shares held by
MKL
Consulting Ltd. is Darren Rennick, our Executive Vice President
and
Director. He disclaims beneficial ownership of the securities
held by such entity, except to the extent of his pecuniary interest
therein. The address of MKL Consulting Ltd. is c/o AIT Management
Services
Ltd., PO Box
1348, St.
John’s, Antigua.
|
| |
|
|
(3)
|
The
name of the party
whohas the
share
power to vote and share
power to dispose of the shares held by GBC Wealth Management
Limited
is Brian
Stuart
Young. He
disclaims beneficial
ownership of the
securities held by such entity, except to the extent of his pecuniary
interest therein. The address of GBC Wealth Management Limited
is #4 Woods
Centre, P.O. Box
W1803, St.
John's, Antigua.
|
| |
|
|
(4)
|
The
name of the party who has the
power to vote and share power to dispose
of the shares held by
Hettinger Media
Ltd.
is Meghann
McEnroe. She
disclaims beneficial
ownership of the
securities held by such entity, except
to the extent of her
pecuniary interest
therein. The address of Hettinger Media Ltd. is 9061 Keith
Avenue, West
Hollywood, CA 90069.
|
| |
|
|
(5)
|
The
name of the party who has the
power to vote and share power to dispose
of the shares held by
Stanwich Absolute
Return Ltd. is
Norman Houston.
He
disclaims beneficial
ownership of the securities held by such entity, except to the
extent of
his pecuniary interest therein. The address of Stanwich Absolute
Return
Ltd. is 15 Plantation
Drive, Vero
Beach, FL 32966.
|
| |
|
|
(6)
|
The
name of the party who has the
power to vote and share power to dispose
of the shares held by
Mulsanne Enterprises
Limited is
Ymer
Shahini. He
disclaims beneficial
ownership of the
securities held by such entity, except to the extent of his pecuniary
interest therein. The address of Mulsanne Enterprises Limited
is Ansbacher
House, 2nd Floor, P.O. Box N-4244, East & Shirley Street, North,
Nassau,
Bahamas.
|
| |
|
|
(7)
|
The
name of the
party who has the power to vote and share power t o dispose of the
shares held by
Equities Media
Acquisition Corp Inc. is Arne
van Roon. He
disclaims beneficial
ownership of the
securities held by such entity, except to the extent of his pecuniary
interest therein. The address Equities Media Acquisition Corp
Inc. is
World Trade Centre Lugano-Agno Switzerland.
|
The
following table sets forth, as of January 15, 2008, as to each class of equity
securities of us and our subsidiaries, information with respect to shares
of
ours beneficially owned by our directors, named executive officers and directors
and executive officers as a group.
|
Title
of Class
|
Name
of Beneficial Owner
|
Amount
and Nature of Beneficial
Ownership
|
Percent
of Class
|
|
Class
A Common Stock, par value $0.001 per share
|
Daniel
Klaus (1)
|
5,429,515
|
12.45%
|
| |
|
|
|
|
Class
A Common Stock, par value $0.001 per share
|
Lucas
Mann
(2)
|
5,429,515
|
12.45%
|
| |
|
|
|
|
Class
A Common Stock, par value $0.001 per share
|
MKL
Consulting (3)
|
4,343,612
|
9.96%
|
| (1) |
Acting
Chief
Executive Officer and Director. |
| (2) |
Chief
Marketing
Officer and Director. |
| (2) |
Darren
Rennick,
Executive Vice President and Director is the beneficial owner
of all of
the shares of MKL Consulting Ltd. an Antigua, International Business
Corporation.
|
Directors,
Executive Officers, Promoters and Control Persons.
The
names, age and position of all of our directors and executive officers and
all
persons nominated or chosen to become such, as of January 15, 2008, are as
follows:
|
Name
|
Age
|
Position
|
|
Daniel
Klaus
|
34
|
Acting
Chief Executive Officer, Director and Co-Founder
|
| |
|
|
|
Michael
Hlavsa
|
54
|
Chief
Financial Officer and Director
|
| |
|
|
|
Lucas
Mann
|
28
|
Chief
Marketing Officer, Director and Co-Founder
|
| |
|
|
|
Raymond
Lang
|
48
|
|
| |
|
|
|
Darren
Rennick
|
39
|
Executive
Vice President, Director and
Co-Founder
|
Daniel
Klaus – Acting Chief Executive Officer, Director and Co-Founder
Mr.
Klaus has served as our Chief
Executive Officer and as our Director since October 2007. Mr. Klaus
is an entrepreneur and investor in new media companies, including Internet-based
media companies. From April 2006 to the present Mr. Klaus has served as
Chief
Executive Officer of the online media company Music Nation, Inc. a company
he
co-founded and has lead through three rounds of institutional debt and
equity
financings. Mr. Klaus has served on the board of directors of Music Nation
since
July 2006. From June 2006 to January 2006 Mr. Klaus served as
Managing Director of SoundBank, a special opportunities fund. While at
Soundbank
and since 2001, Mr. Klaus has been the Chief Executive Officer and Founder
of Fabric Group, LLC a media advisory firm with such clients as Goldman
Sachs,
Cheyne Capital, Bertelsmann, Yahoo! Inc., Music Match and Sony Pictures.
Prior
to 2001, Mr. Klaus launched BrandFarm, an on-line incubator. In 2007, Mr.
Klaus
was named a top 100 Internet executives in New Yorkby
Silicon Alley, a leading Internet
publication affiliated with Music Nation.
Darren
M. Rennick – Executive Vice
President, Director and Co-Founder; President Fund.com Technologies
Inc.
Mr.
Rennick has served as our Director since September 2007 and from September
2007
to January 2008 served as our President. Mr. Rennick served as chief
executive officer of Prolexic Technologies Inc., an industry leading internet
security company, from March 2004 to February 2007 and has acted as a consultant
to it since February 2007. From October 1999 to November 2001, Mr.
Rennick served as a director, president and co-founder of IQ-Ludorum plc,
a
software company that developed gaming technology. From February 2002 to
December 2006 served as managing director of Digital Gaming Solutions another
gaming technology company. Mr. Rennick holds a BA from the University
of Toronto and an MBA from the University of Western Ontario.
Michael
Hlavsa – Chief Financial Officer and Director
Mr.
Hlavsa has served as our Chief Financial Officer and as our Director since
November 2007. Mr. Hlavsa is both a Certified Public Accountant and a
Certified Internal Auditor. From its inception in March 2007 to the
present, Mr. Hlavsa has served as Chief Financial Officer and a Director
of Asia
Special Situation Acquisition Corp., a blank check company. From
October 2004 to the present, Mr. Hlavsa has been the principal owner of
Signature Gaming Management LLC, a consulting firm specializing in advising
emerging companies engaged in gaming operations.
Mr.
Hlavsa is presently serving as the Interim Chief Financial Officer of the
Kiowa
Casino Operating Authority, a Native American entity, responsible for the
financial aspects of the casino and for leading the restructuring of $80
million
in debt. From February 2005 to August 2005 Mr. Hlavsa served as chief
executive officer for Titan Cruise Lines, a casino business which operated
a
2,000 passenger ship and high speed shuttles. From July 2001 to October 2004,
Mr. Hlavsa was the Chief Executive Officer of SunCruz Casinos, the largest
day
cruise gaming company in the United States. From 1997 to 2000, Mr. Hlavsa
was
Managing Partner at Casino Princesa in Miami, Florida where he was responsible
for the development and operation of a large mega-yacht gaming vessel. From
1993
to 1997, he served as Chief Financial Officer and also Vice President, Midwest
Region, for Lady Luck Gaming Corporation, a publicly traded company. From
1991
to 1993, Mr. Hlavsa was the Vice President of Finance and Administration
for the
Sands Hotel and Casino in Las Vegas, Nevada. His first 12 years of gaming
experience was in Atlantic City, New Jersey in various audit and finance
positions with well-established gaming companies such as Caesars, Tropicana
and
Trump Plaza. He received a bachelor of science degree from Canisius College
in
Buffalo, New York in 1975.
Lucas
Mann – Chief Marketing Officer, Director and Co-Founder
Mr.
Mann has served as our Chief
Marketing Officer and as our Director since October 2007. Mr. Mann has
most
recently served as Chief Marketing Officer and Co-Founder of online media
company, Music Nation, from May 2006 to present. Previously, from 2004
to 2006
Mr. Mann served as president of Clique Inc./Sparkart LLC, a Silicon Valley-based
new media company. While at Clique, Inc., Mr. Mann focused on monetizing
intellectual property via the creation of brand extensions such as websites,
fanclubs, merchandise and new technologies for entertainment companies
like
Universal Music Group and Warner Music Group. Additionally, Mr. Mann founded
Mann Media Partners, a Los Angeles-based consultancy firm, developed new
entertainment product distribution strategies and offered brand and design
consulting for clients including Warner Bros. Records, EMI, and Major League
Baseball atheletes, among others. During 2002 and 2003 Mr. Mann split
time between Warner Bros. Records, developing and executing marketing plans
for
some of the worlds best knows musical acts, and his own management company,
handling all aspects of the career of several successful
artists.
From
April 2005 to January 2008, Mr. Lang served as Chief Operating Officer and
Chief
Compliance Officer of Clear Asset Management, an independent asset management
firm specializing in proprietary index and ETF construction. From August
2001 to
January 2005 Mr. Lang served as Managing Director at BNY Capital Markets
Inc. as
an investment banker. From March 1995 to June 2000 Mr. Lang served as
Managing Director at Fortis and its predecessor MeesPierson specializing
in
structured equity finance. Prior to these positions, Mr. Lang acted as SVP
and
Head of Equity Structured Finance at a Japanese investment firm and Corporate
Counsel at Credit Suisse First Boston where he worked for ten years. Mr.
Lang
has been a member of the New York bar since 1996. Mr. Lang holds a BA
from Fordham University and a JD from New York Law School.
Executive
Compensation.
The
table
below summarizes the compensation earned for services rendered by the
individuals noted to us in all capacities, for the years indicated:
Name
and Principal
Position
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
Klaus, Acting Chief
Executive Officer and Director
|
2007
|
|
$
|
25,000
|
|
|
|
|
|
$
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lucas
Mann, Chief Marketing
Officer and Director
|
2007
|
|
$
|
25,000
|
|
|
|
|
|
$
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Darren
Rennick, Executive Vice
President and Director
|
2007
|
|
$
|
62,500
|
|
|
|
|
|
$
|
62,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Hlavsa, Chief Financial
Officer (1)
|
2007
|
|
|
|
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
(4)
|
|
|
|
|
|
|
(1)
|
Mr.
Hlavsa received no
compensation in 2007. He will begin to receive
salary effective February 1, 2008.
|
|
(2)
|
Mr.
Hlavsa received a stock option
grant to purchase 138,024 shares of our common stock with an
exercise
price of $2.30 per share, pursuant to the 2007 Stock Incentive
Plan,
December 27, 2007. These options will, but have not yet been,
valued pursuant to FAS 123R.
|
|
(3)
|
Mr.
Lang received no compensation
in 2007. He will begin to receive salary effective February 1,
2008.
|
|
(4)
|
Mr.
Lang received a stock option
grant to purchase 1,938,087 shares of our common stock with an
exercise
price of $2.30 per share, pursuant to the 2007 Stock Incentive
Plan,
December 27, 2007. These options will, but have not yet been,
valued pursuant to FAS
123R.
|
None
of
our directors receive an annual fee for services nor do we pay fees to directors
for their attendance at meetings; however, we may adopt a policy of making
such
payments in the future. We will reimburse out-of-pocket expenses incurred
by
directors in attending board and committee meetings.
We
entered into employment agreements with Raymond Lang, who will become our
Chief
Executive Officer effective February 1, 2008, and Michael Hlavsa, our
Chief Financial Officer. We have no other employment agreements with
our executive officers.
Mr.
Lang.
On December 20, 2007
we
entered into an employment agreement with Raymond Lang. Pursuant to
the agreement, beginning February 1, 2008, Mr. Lang will serve as our Chief
Executive Officer. Unless terminated earlier, the term of the
agreement is scheduled to expire on February 1, 2011. Mr. Lang will
receive a salary of no less than $250,000 per annum and will be eligible
to
participate in any bonus or incentive compensation plans that we establish
for
senior executives. We will pay the premium for health care coverage for
him and
his dependents. He received a stock option grant to purchase
1,938,087 shares of our common stock with an exercise price of $2.30 per
share.
In the event his employment is terminated by us without “Cause” or he resigns
with “Good Reason” as these terms are defined in the employment agreement, we
will be obligated to pay to him (i) his base salary though the date of
termination, (ii) any bonus earned in the previous year but not yet paid,
(iii)
any accrued vacation through the date of termination, (iv) pro rata bonus
for
the year of termination, calculated and payable after year-end, and (v)
a
lump-sum amount equal to 9 months’ base salary.
Mr.
Hlavsa. On October 30,
2007
we entered into an at-will employment agreement with Mr.
Hlavsa. Under the agreement, Mr. Hlavsa was scheduled
to commence
employment November
15,
2007; however, he will
now
commence employment February 1, 2008. Mr. Hlavsa will receive
an
annual base salary of $120,000 per annum. In addition, Mr. Hlavsa is
eligible for a performance bonus of up to $120,000 subject to the achievement
of
reasonable performance metrics, as determined by the Board. He
received a stock option grant to purchase 138,024 shares of our common
stock
with an exercise price of $2.30.
On
December 27, 2007, our Board of
Directors approved the Fund.com, Inc. 2007 Stock Incentive Plan for the
issuance
of up to 5,814,261 shares of our common stock. The plan was approved
by our stockholders on December 27, 2007. We intend to make all
of our equity-based awards on a going-forward basis under the stock incentive
plan. The purpose of our stock incentive plan is to attract, retain and
motivate
officers and other key employees and to provide these persons with incentives
and rewards for superior performance and contribution.
The
plan
is administered by the Board of Directors, however the board may delegate
any or
all of its administrative functions to one or more committees. The board
may
select plan participants and authorize grants. The award agreements
issued under the stock incentive plan list the exercise price, the conditions
and restrictions that must be satisfied for an individual to vest in an award
and the term of the award. The terms of the award agreements may
differ from participant to participant, and the board has discretion to
accelerate vesting in the event of a change in control or other
events.
The
board may amend, suspend, or
terminate the 2007 Stock Incentive Plan at any time and for any reason.
If not
terminated earlier, the plan will automatically terminate on December 27,
2017.
Certain
Relationships and Related Transactions, and Director Independence.
Transactions
With Related Persons, Promoters and Certain Control Persons.
Under
a Subscription Agreement dated
September 30, 2007 between the Company and Equities Media Acquisition Corp
we
issued 5,000,000 (not giving effect to the 9-for-1 dividend on the Surviving
Corporation’s Class A Common Stock and Class B Common Stock) common shares and
2,500,000 (not giving effect to the 9-for-1 dividend on the Surviving
Corporation’s Class A Common Stock and Class B Common Stock) Series A Preferred
Shares to Equities Media Acquisition Corp Inc. and received gross proceeds
of
$10,000,000. Pursuant to this transaction Equities Media Acquisition
Corp Inc. has voting control over our company. The proceeds from this
transaction were principally used to acquire the “www.fund.com” domain
name.
On
November 9, 2007, our wholly-owned
subsidiary Fund.com Capital Inc., placed $20,000,000 into a fixed deposit
with
the Global Bank of Commerce Limited, the parent of one of our shareholders
(GBC
Wealth Management Limited) at an interest rate of 5.00% per annum for a
term of
three years. We intend to change the terms of the deposit to bear
interest at a variable rate, among other things. The Global Bank of
Commerce Limited may swap the certificate of deposit at any time with an
annuity
policy issued to the Global Bank of Commerce Limited by an unrelated third
party.
We
currently use office space of an
affiliate of two of our Directors, one of whom is our acting CEO, at no
cost to
us.
We
intend to enter into licensing and
consulting agreements with EQUITIES Magazine (an affiliate of significant
shareholder Equities Media Acquisition Corp Inc.) pursuant to which we
will
license an index published by EQUITIES Magazine and pursuant to which the
variable interest rate of our CD will be
determined.
We
have
no independent directors.
Description
of Securities.
As
of
January 15, 2008, we had authorized a total of 120,000,000 shares of par
value
$0.001 stock, of which 100,000,000 shares were authorized as Class A Common
Stock, 10,000,000 shares were authorized as Class B Common Stock and 10,000,000
shares were authorized as Preferred Stock, with 43,612,335 shares of Class
A
Common Stock, and 6,387,665 shares of Class B Common Stock and no shares
of
Preferred Stock issued and outstanding.
We
have
two classes of authorized common stock, Class A Common Stock and
Class B Common Stock. The rights of the holders of Class A Common
Stock and Class B Common Stock are identical, except with respect to voting
and conversion. Each share of Class A Common Stock is entitled to one vote
per share. Each share of Class B Common Stock is entitled to ten votes per
share and is convertible at any time into one share of Class A Common
stock. There is no cumulative voting with respect to the election of directors,
with the result that the holders of more than 50% of the shares voted for
the
election of directors (taking into account the ten votes per share of the
Class
B Common Stock holders) can elect all of the directors. The holders of common
stock are entitled to receive dividends when, as and if declared by the board
of
directors out of funds legally available therefor. In the event of our
liquidation, dissolution or winding up, the holders of common stock are entitled
to share ratably in all assets remaining available for distribution to them
after payment of liabilities and after provision has been made for each class
of
stock, if any, having preference over the common stock. Holders of shares
of
common stock, as such, have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to common stock.
All
of the outstanding shares of common stock are, and the shares of common stock
offered hereby, will be duly authorized, validly issued, fully paid and
nonassessable
Holders
of our Class A Common Stock are entitled to one vote for each share held
of
record on all matters to be voted on by shareholders.
The
holders of our Class B Common Stock have the right to ten (10) votes (the
“Voting Ratio”) for each share of Class B Common Stock and vote as a class with
the holders of our Class A Common Stock, except as otherwise required by
Delaware law.
The
holders of our Class B Common Stock
have the right to convert each share of Class B Common Stock into one share
of
Class A Common Stock (adjusted to reflect subsequent stock splits, combinations,
stock dividends and recapitalizations). Upon the sale or transfer of
any share of Class B Common Stock each such share of Class B Common Stock
shall
automatically be converted, effective as of the date of such sale or transfer,
into one share of Class A Common Stock (adjusted to reflect
subsequent stock
splits, combinations, stock dividends and recapitalizations). The Company shall
reserve and keep
available out of its authorized but unissued shares of Class A Common Stock,
solely for the purpose of effecting the conversion of the shares of Class
B
Common Stock, such number of shares of Class A Common Stock as shall be
sufficient to effect the conversion of all outstanding shares of Class
B Common
Stock.
We
are
authorized to issue up to 10,000,000 shares of preferred stock with such
designation, rights and preferences as may be determined from time to time
by
our board of directors. Accordingly, our board of directors is empowered,
without shareholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights that could adversely affect
the
voting power or other rights of the holders of our common stock. In the event
of
issuance, the preferred stock could be utilized, under certain circumstances,
as
a method of discouraging, delaying or preventing a change in
control.
As
of
January 15, 2008 no shares of our authorized preferred stock are
outstanding.
As
of
January 15, 2008, we had no outstanding warrants to acquire common
shares.
Market
Price of and Dividends on the Registrant’s Common Equity and Other Shareholder
Matters.
Our
common stock trades in the
over-the-counter market and is quoted on the OTC Bulletin Board under the
trading symbol ESVH. We will obtain a new ticker symbol for quotation on
the OTC
Bulletin Board to reflect the name Fund.com Inc.
On
January 4, 2008, Eastern Services
Holdings, Inc. declared a 900% dividend on its Common Stock, par value
$0.001,
or nine shares for each share of Common Stock, to all holders of record
on
January 15, 2008.
None
of our shares can currently be sold
pursuant to Rule 144 under the Securities Act of 1933. We have not
agreed to register any of our shares under the Securities Act of 1933 for
sale
by security holders.
As
of January 15, 2008, there were
approximately twenty-one (21) holders of record of our Class A Common Stock
and
one (1) holder of record of our Class B Common Stock.
On
December 27, 2007, the board of
directors approved the Fund.com, Inc. 2007 Stock Incentive Plan for the
issuance
of up to 5,814,261 shares of our common stock. Our stockholders
approved the plan on December 27, 2007. The following table sets
forth information under which shares of our equity securities are authorized
for
issuance:
|
|
Number
of securities to be issued
upon exercise of outstanding options, warrants and
rights.
(a)
|
Weighted average
exercise price
of
outstanding
options,
warrants
and
rights.
(b)
|
Number
of securities remaining
available
for
future issuance under
equity
compensation
plans
(excluding
securities
reflected in column
(a)).
(c)
|
|
Equity
compensation plans approved
by security holders……
|
1,800,063
(1)
|
$2.30
|
4,014,198
|
|
|
|
|
|
|
Equity
compensation plans not
approved by security holders…….
|
0
|
0
|
0
|
|
|
|
|
|
|
Total…………………
|
1,800,063
|
$2.30
|
4,014,198
|
(1) Represents
those grants made to Mr.
Hlavsa and Mr. Lang pursuant to the 2007 Stock Incentive
Plan.
Legal
Proceedings.
We
are
not a party to any pending legal proceedings. Our property
is not the subject of a pending legal proceeding.
Changes
in and Disagreements With Accountants.
Our
principal independent accountant has not resigned or been
dismissed.
Recent
Sales of Unregistered Securities.
Upon
our
inception we issued an aggregate of 18,700,000 (not giving effect to the
9-for-1
dividend on the Surviving Corporation’s Class A Common Stock and Class B Common
Stock) shares of our common stock, par value $0.0001 per share, to seven
investors, three of whom were co-founders of the Company. The shares
were valued at $0.0001 per share. These shares were issued pursuant
to the exemption provided by Section 4(2) of the Securities Act of 1933 for
transactions by an issuer not involving a public offering. The shares
contain a legend restricting their transferability absent registration or
applicable exemption.
On
November 5, 2007, we issued an aggregate of 5,000,000 (not giving effect
to the
9-for-1 dividend on the Surviving Corporation’s Class A Common Stock and Class B
Common Stock) shares of our common stock and 2,500,000 (not giving effect
to the
9-for-1 dividend on the Surviving Corporation’s Class A Common Stock and Class B
Common Stock) of our Series A Preferred Stock to an accredited investor for
gross proceeds of $10,000,000. These shares were issued pursuant to
the exemption provided by Section 4(2) of the Securities Act of 1933 for
transactions by an issuer not involving a public offering. The
securities contain a legend restricting their transferability absent
registration or applicable exemption. The sale was arranged directly
between us and the investor and no sales commission was paid in connection
with
the private placement.
In
November 2007, we issued an aggregate
of 10,350,000 (not giving effect to the 9-for-1 dividend on the Surviving
Corporation’s Class A Common Stock and Class B Common Stock) shares of our
common stock to eight accredited investors. The shares were valued at
$2.00 per share and resulted in gross proceeds to us of
$20,700,000. These shares were issued pursuant to the exemption
provided by Section 4(2) of the Securities Act of 1933 for transactions
by an
issuer not involving a public offering. The securities contain a
legend restricting their transferability absent registration or applicable
exemption. The sale was arranged directly between us and the investor
and no sales commission was paid in connection with the private
placement. The agreements related to the issuance of these shares
grant the investors certain “demand” and “piggyback” registration
rights. Under the terms of the “demand” registration rights we must
register the shares of common stock held by such investor upon
demand. Under the terms of the “piggyback” registration rights, if we
propose to register our common stock under the Securities Act (other
than a
registration relating solely to employee benefit plans or a business
combination
transaction or requiring information not substantially similar to the
information required in connection with a registration of our common
stock), we
must give notice to each holder of the proposed registration and use
our best efforts to include in such registration such holders registrable
securities (as defined in the registration rights agreement) if requested.
These
registration rights terminate if the shares of common stock are eligible
to be
sold under Rule 144(k) under the Securities Act.
Prior
to the merger and not giving
effect to the 9-for-1 dividend on the Surviving Corporation’s Class A Common
Stock and Class B Common Stock, Fund.com had authorized a total 110,000,000
shares, of which 105,000,000 were authorized as common stock and 5,000,000
shares were authorized as Preferred Stock, 2,500,000 shares of the Preferred
Stock were designated as Series A Preferred Stock. Following the
merger, we had authorized a total of 120,000,000 shares of par value $0.001
stock, of which 100,000,000 shares were authorized as Class A Common Stock,
10,000,000 shares were authorized as Class B Common Stock and 10,000,000
shares
were authorized as Preferred Stock. Following the Merger 43,612,335 shares
of
Class A Common Stock were outstanding, 6,387,665 shares of Class B Common
Stock
were outstanding and no shares of Preferred Stock were
outstanding.
On
January 15, 2008, we issued an
aggregate of 50,000,000 shares of our common stock, par value $0.001 per
share,
to the existing stockholders of Fund.com and
Eastern Services Holdings
Inc.in connection with the Merger. These shares were issued
pursuant to the exemption provided by Section 4(2) of the Securities Act
of 1933
for transactions by an issuer not involving a public
offering.
Indemnification
of Directors and Officers.
We
are a
corporation organized under the laws of the State of Delaware. Section 102(b)(7)
of the Delaware General Corporation Law (the “DGCL”) permits a corporation to
provide in its certificate of incorporation that a director of the corporation
shall not be personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability for any breach of the director's duty of loyalty to the corporation
or
its stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, for unlawful payments
of
dividends or unlawful stock repurchases, redemptions or other distributions,
or
for any transaction from which the director derived an improper personal
benefit.
Section
145 of the DGCL provides that a corporation has the power to indemnify a
director, officer, employee or agent of the corporation and certain other
persons serving at the request of the corporation in related capacities against
amounts paid and expenses incurred in connection with an action or proceeding
to
which he is or is threatened to be made a party by reason of such position,
if
such person shall have acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the corporation,
and,
in any criminal proceeding, if such person had no reasonable cause to believe
his conduct was unlawful; provided that, in the case of actions brought by
or in
the right of the corporation, no indemnification shall be made with respect
to
any matter as to which such person shall have been adjudged to be liable
to the
corporation unless and only to the extent that the adjudicating court determines
that such indemnification is proper under the circumstances.
As
permitted by Section 145 of the DGCL, Article VIII of our Certificate of
Incorporation provides:
The
Corporation shall, to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law, as the same may be amended and supplemented
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said
law
permitted the Corporation to provide prior to such amendment), indemnify
any and
all persons whom it shall have power to indemnify under said Section from
and
against any all of the expenses and liabilities or other matters referred
to in
or covered by said Section. Such indemnification shall be mandatory and not
discretionary. Without limiting the generality or the effect of the
foregoing, the Corporation may enter into one or more agreements with any
person
that provide for indemnification greater than or different from that provided
in
this Article VIII and the Corporation may purchase and maintain insurance
on
behalf of any director or officer to the extent provided by Section 145 of
the
General Corporation Law of the State of Delaware. Any amendment or
repeal of this Article VIII shall not adversely affect any right or protection
existing hereunder immediately prior to such amendment or repeal.
The
Corporation shall, to the fullest extent permitted by the Delaware General
Corporation Law, advance all costs and expenses (including, without limitation,
attorneys’ fees and expenses) incurred by any director or officer within 15 days
of the presentation of same to the Corporation, with respect to any one or
more
actions, suits or proceedings, whether civil, criminal, administrative or
investigative, by reason of the fact that the person is or was a director,
officer, employee or agent of the Corporation or serves or served at the
request
of the Corporation as a director, officer, partner, trustee, agent or employee
of another corporation, partnership, joint venture, trust, limited liability
company or other enterprise, so long as the Corporation receives from the
director or officer an unsecured undertaking to repay such expenses if it
is
ultimately determined that such director or officer is not entitled to be
indemnified by the Corporation under the Delaware General Corporation Law.
Such
obligation to advance costs and expenses shall be mandatory, and not
discretionary, and shall include, without limitation, costs and expenses
incurred in asserting affirmative defenses, counterclaims and
crossclaims. Such undertaking to repay may, if first requested in
writing by the applicable director or officer, be on behalf of (rather than
by)
such director or officer, provided that in such case
the Corporation shall have the right to approve the party making such
undertaking.
The
indemnification and advancement of expenses provided for herein shall not
be
deemed to be exclusive of any other rights to which those indemnified or
entitled to advancement of expenses may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to
action
in his or her official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to
be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Our
Certificate of Incorporation also limits the personal liability of directors
for
monetary damages in certain instances and eliminates director liability for
monetary damages arising from any breach of a directors’ duty of
care.
We
intend
to maintain insurance on behalf of any person who is or was a director, officer,
employee or agent, or is or was serving at our request as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or
other enterprise against any liability asserted against him and incurred
by him
in such capacity, or arising out of his status as such, whether or not we
would
have the power to indemnify him against such liability under the provisions
of
our Certificate of Incorporation.
Item
3.02 Unregistered Sale Of
Equity Securities
On
January 15, 2008, we issued an aggregate of 43,612,335 shares of our
Class A Common Stock, par value $0.001 per share, to the existing stockholders
of Fund.com, and 6,387,665 shares of our Class B Common Stock, par value
$0.001
per share to Equities Media Acquisition Corp Inc., in connection with the
merger. These shares were issued pursuant to the exemption provided by Section
4(2) of the Securities Act of 1933 for transactions by an issuer not involving
a
public offering.
Item
5.01 Changes In Control Of
Registrant
The
information set forth in Items 1.01 and 2.01 is hereby incorporated by
reference.
Item
5.02 Departure Of
Directors Or Certain Officers; Election Of Directors; Appointment Of Certain
Officers; Compensatory Arrangements of Certain Officers.
The
information set forth in Item 2.01 is hereby incorporated by
reference.
Item
5.06 Change In Shell
Company Status.
The
information set forth in Items 1.01
and 2.01 is hereby incorporated by reference. As a result of the
completion of the Merger described in Items 1.01 and 2.01, we ceased being
a
“shell company”, as defined in Rule 12b-2 under the Securities Exchange Act of
1934, as amended.
Item
9.01 Financial Statements
and Exhibits.
(a) Financial
Statements of Business
Acquired.
(b) Pro
Forma Financial
Information.
On
January 15, 2008, we completed the Merger with Eastern Services Holdings,
Inc.
The unaudited pro forma condensed combined financial data incorporated herein
by
reference to Exhibit 99.2 to this Current Report on Form 8-K is derived from
the
historical consolidated financial statements of Eastern Services Holdings,
Inc.,
which are included in this report, and our historical financial
statements.
The
unaudited pro forma condensed combined balance sheet information is presented
on
an adjusted basis as if the above business combinations had occurred on
September 30, 2007.
The
unaudited pro forma condensed combined statement of operations for the twelve
months ended September 30, 2007 combines the historical audited consolidated
statement of operations for Eastern Services Holdings, Inc. with our historical
statement of operations for the nine months ended September 30, 2007. Eastern
Services Holdings, Inc.’s fiscal year end was December 31, 2006 and,
consequently, its historical statement of operations is derived from the
quarterly statements for the twelve months ended December 31, 2006. The
unaudited pro forma condensed combined statements of operations give effect
to
the merger as if it had occurred on September 30,2007.
The
unaudited pro forma condensed combined statement of operations for the three
months ended September 30, 2007 combines the historical unaudited consolidated
statement of operations for Eastern Services Holdings, Inc. and us for the
three
months then ended.
The
Merger has been accounted for as a reverse acquisition and, as explained
in the
notes to the unaudited proforma condensed statements, we are considered the
accounting acquirer.
The
pro
forma adjustments are based on currently available information and upon
assumptions that our management believes are reasonable under the
circumstances.
You
should read the pro forma statements incorporated herein by reference to
Exhibit
99.2 to this Current Report on Form 8-K in conjunction with
“Management’s Discussion and Analysis or Plan of Operations” in Item 2.01 of
this Current Report on Form 8-K, and the financial statements and related
notes
of us incorporated herein by reference to Exhibits 99.1 to this Current Report
on Form 8-K.
The
unaudited pro forma condensed combined financial statements are provided
for
illustrative purposes only. They do not purport to represent what the results
of
operations and financial position of the combined entities would have been
had
the business combinations actually occurred as of the dates indicated, and
they
do not purport to project or predict the future results of operations or
financial position of the combined entities.
(c) Shell
Company
Transactions.
See
paragraphs (a) and (b) above.
|
Exhibit
No.
|
Description
|
|
2.1
|
|
|
3.1
|
Amended
and Restated Certificate
of Incorporation of Eastern Services Holdings,
Inc.
|
|
3.2
|
|
|
4.1
|
Form
of Common Stock Subscription Agreement
|
|
4.2
|
Subscription
Agreement, dated as of November 12, 2007, between Meade Technologies
Inc.
and Equities Media Acquisition Corp Inc.
|
|
10.1
|
Fund.com,
Inc. 2007 Stock Incentive Plan
|
|
10.2
|
Employment
Agreement, dated as of December 20, 2007, between Meade Technologies
Inc.
and Raymond Lang
|
|
10.3
|
Employment
Agreement, dated as of October 30, 2007, between Meade Technologies
Inc.
and Michael Hlavsa
|
|
10.4
|
Certificate
of Deposit Agreement, dated as of November 9, 2007 between Meade
Capital
Inc. and Global Bank of Commerce Limited
|
|
21
|
|
|
99.1
|
Financial
statements of Fund.com, Inc. for the fiscal year ended September
30,
2007
|
|
99.2
|
Pro
forma combined financial data derived from the historical consolidated
financial statements of Fund.com and Eastern Services Holdings,
Inc.
|
|
99.3
|
Press
Release
|
SIGNATURES
Pursuant
to
the requirements of the Securities Exchange Act of 1934, the registrant has
duly
caused this report to be signed on its behalf by the undersigned hereunto
duly
authorized.
| |
EASTERN
SERVICES HOLDINGS,
INC. |
| |
|
| Date: January
17, 2008 |
By: /s/
Daniel
Klaus |
| |
Name:
Daniel
Klaus |
| |
Title:
Acting
Chief Executive Officer |
EXHIBIT
INDEX
|
Exhibit
No.
|
Description
|
|
2.1
|
|
|
3.1
|
Amended
and Restated Certificate
of Incorporation of Eastern Services Holdings,
Inc.
|
|
3.2
|
|
|
4.1
|
Form
of Common Stock Subscription Agreement
|
|
4.2
|
Subscription
Agreement, dated as of November 12, 2007, between Meade Technologies
Inc.
and Equities Media Acquisition Corp Inc.
|
|
10.1
|
Fund.com,
Inc. 2007 Stock Incentive Plan
|
|
10.2
|
Employment
Agreement, dated as of December 20, 2007, between Meade Technologies
Inc.
and Raymond Lang
|
|
10.3
|
Employment
Agreement, dated as of October 30, 2007, between Meade Technologies
Inc.
and Michael Hlavsa
|
|
10.4
|
Certificate
of Deposit Agreement, dated as of November 9, 2007 between Meade
Capital
Inc. and Global Bank of Commerce Limited
|
|
21
|
|
|
99.1
|
Financial
statements of Fund.com, Inc. for the fiscal year ended September
30,
2007
|
|
99.2
|
Pro
forma combined financial data derived from the historical consolidated
financial statements of Fund.com and Eastern Services Holdings,
Inc.
|
|
99.3
|
Press
Release
|
31
