As filed with the Securities and Exchange Commission on April 19, 2011
Registration No. ________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
5to1 Holding Corp.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of incorporation or organization)
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26-3461705
(I.R.S. Employer Identification No.)
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1453 3rd Street
Santa Monica, CA 90401
(Address of principal executive offices) (Zip Code)
2011 Equity Incentive Plan
(Full title of the plans)
James Heckman
1453 3rd Street
Santa Monica, CA 90401
(Name and Address of agent for service)
(800) 521-0770
(Telephone number, including area code, of agent for service)
With a copy to:
Harvey Kesner, Esq.
Sichenzia Ross Friedman Ference LLP
61 Broadway, 32 nd Floor
New York, NY 10006
Phone (212) 930-9700
Fax (212) 930-9725
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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o
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Smaller Reporting Company
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x
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CALCULATION OF REGISTRATION FEE
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Title of Securities
to be Registered
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Amount to be Registered
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Proposed Maximum Offering Price Per Share
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Proposed Maximum Aggregate Offering Price
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Amount of
Registration Fee
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Common Stock, $.0001 par value
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1,568,498 (1)
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$ 1.01 (2)
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$ 1,584,182.99
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$ 183.93
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(1) Represents shares of common stock issuable pursuant to the 2011 Equity Incentive Plan
(2) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(c) of the Securities Act of 1933, as amended, using the last sale price reported on the OTC Bulletin Board on April 15, 2011.
EXPLANATORY NOTE
This Registration Statement is being filed by 5to1 Holding Corp. (the “Company”) in accordance with the requirements of Form S-8 under the Securities Act of 1933, as amended (the “Securities Act”) in order to register 1,568,498 shares of the Company’s common stock, par value $.0001 per share, the amount of shares issuable under the Company’s 2011 Equity Incentive Plan, which agreement is filed as an exhibit to this Registration Statement (the “Plan”).
This Form S-8 includes a reoffer prospectus prepared in accordance with Part I of Form S-3 under the Securities Act. The reoffer prospectus may be used for reoffer and resales of restricted securities (as such term is defined in General Instruction C to Form S-8) acquired pursuant to the Plan.
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan Information.
The Company will provide each recipient of a grant under the Plan (the “Recipients”) with documents that contain information related to the Plan, and other information including, but not limited to, the disclosure required by Item 1 of Form S-8, which information is not required to be and are not being filed as a part of this Registration Statement on Form S-8 (the "Registration Statement") or as prospectuses or prospectus supplements pursuant to Rule 424 under the Securities Act. The foregoing information and the documents incorporated by reference in response to Item 3 of Part II of this Registration Statement, taken together, constitute a prospectus that meets the requirements of Section 10(a) of the Securities Act. A Section 10(a) prospectus will be given to each Recipient who receives common stock covered by this Registration Statement, in accordance with Rule 428(b)(1) under the Securities Act.
Item 2. Registrant Information and Employee Plan Annual Information.
We will provide to each Recipient a written statement advising of the availability of documents incorporated by reference in Item 3 of Part II of this Registration Statement (which documents are incorporated by reference in this Section 10(a) prospectus) and of documents required to be delivered pursuant to Rule 428(b) under the Securities Act without charge and upon written or oral request by contacting:
James Heckman
1453 3rd Street
Santa Monica, CA 90401
REOFFER PROSPECTUS
5to1 Holding Corp.
20,833 Shares of
Common Stock
This reoffer prospectus relates to the sale of up to 20,833 shares of our common stock, $.0001 par value per share that may be offered and resold from time to time by existing selling stockholders identified in this prospectus for their own account issuable pursuant to the Plan. It is anticipated that the selling stockholders will offer common shares for sale from time to time in one or more transactions on the OTC Bulletin Board, or such other stock market or exchange on which our common stock may be listed or quoted, in negotiated transactions or otherwise, at market prices prevailing at the time of the sale or at prices otherwise negotiated (see “Plan of Distribution” starting on page 15 of this prospectus). We will receive no part of the proceeds from sales made under this reoffer prospectus. The selling stockholders will bear all sales commissions and similar expenses. Any other expenses incurred by us in connection with the registration and offering and not borne by the selling stockholders will be borne by us.
The shares of common stock have been issued pursuant to the Plan.
This reoffer prospectus has been prepared for the purposes of registering the common shares under the Securities Act to allow for future sales by selling stockholders on a continuous or delayed basis to the public without restriction.
Investing in our common stock involves risks. See "Risk Factors" beginning on page 6 of this reoffer prospectus. These are speculative securities.
Since our company does not currently meet the registrant requirements for use of Form S-3, the amount of common shares which may be resold by means of this reoffer prospectus by each of the selling stockholders, and any other person with whom he or she is acting in concert for the purpose of selling securities of our company, must not exceed, in any three month period, the amount specified in Rule 144(e) promulgated under the Securities Act.
Our common stock is quoted on the OTC Bulletin Board under the symbol “FTOH” and the last reported sale price of our common stock on April 15, 2011 was $1.01 per share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is April 19, 2011
5TO1 HOLDING CORP.
TABLE OF CONTENTS
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
5to1 Holding Corp. (“we”, “us”, “our” or the “Company”) was incorporated on December 15, 2006 in the state of California under the name Tri-Mark Mfg, Inc. On October 15, 2010, the Company entered into an agreement and plan of merger with FTOH Corp., a Delaware corporation and the Company’s wholly-owned subsidiary in order to change its name to “FTOH Corp.” and to change the state of incorporation of the Company from California to Delaware. As a result of the aforementioned merger, holders of the Company’s common stock as of October 28, 2010 received 8.344159089 shares of common stock as consideration and in exchange for each one share of common stock held.
On November 3, 2010, the Company entered into an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”) with 5to1.com, Inc., a privately-held Delaware corporation (“5to1”), and FTOH Acquisition Corp., the Company’s newly-formed, wholly-owned Delaware subsidiary (“Acquisition Sub”). Upon closing of the transaction contemplated under the Merger Agreement (the “Merger”), Acquisition Sub merged with and into 5to1, and 5to1, as the surviving corporation, became a wholly-owned subsidiary of the Company. On November 3, 2010 we filed with the Secretary of State of the State of Delaware a Certificate of Merger which merged 5to1 with and into Acquisition Sub (the “Certificate of Merger”). The Certificate of Merger also amended the certificate of incorporation of 5to1 substituting the name “5to1, Inc.” as the name of our wholly-owned subsidiary (the surviving corporation) following the Merger.
Upon closing of the Merger, we discontinued our former business and succeeded to the business of 5to1 as our sole line of business. Founded in September 2008, 5to1 is an online advertising platform that enables publishers to maximize advertising revenue without sacrificing control of their inventory, brand, content or audience. 5to1’s business includes aggregating and monetizing previously unsold premium inventory with relevant, high-quality advertisements.
Our principal executive offices are located at 1453 3rd Street, Santa Monica, CA 90401and our telephone number is (800) 521-0770.
Investing in our common stock involves a high degree of risk. Prospective investors should carefully consider the risks described below and other information contained in this prospectus, before purchasing shares of our common stock. There are numerous and varied risks that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition and results of operations may be materially adversely affected. In that case, the trading price of our common stock could decline and investors in our common stock could lose all or part of their investment.
Risks Relating to the Company
Because we have a limited operating history to evaluate our company, the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delay frequently encountered by an early-stage company.
5to1 was formed under the laws of the State of Delaware on September 16, 2008. Since we have a limited operating history it will make it difficult for investors and securities analysts to evaluate our business and prospects. You must consider our prospects in light of the risks, expenses and difficulties we face as an early stage company with a limited operating history. Investors should evaluate an investment in our company in light of the uncertainties encountered by early-stage companies in an intensely competitive industry. There can be no assurance that our efforts will be successful or that we will be able to become profitable and maintain profitability.
If we cannot manage our growth effectively, we may not maintain profitability.
Businesses which grow rapidly often have difficulty managing their growth. If our business continues to grow rapidly and as we anticipate, we will need to expand our management by recruiting and employing experienced executives and key employees capable of providing the necessary support.
We cannot assure you that our management will be able to manage our growth effectively or successfully. Our failure to meet these challenges could cause us to lose money, which will reduce our stock price.
We may need additional financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms or at all.
We have limited funds. Even with the proceeds of our recent financing, we may not be able to execute our current business plan and fund business operations long enough to achieve profitability. Our ultimate success may depend upon our ability to raise additional capital. There can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us.
We may be required to pursue sources of additional capital through various means, including joint venture projects and debt or equity financings. Future financings through equity investments are likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights, the issuance of warrants or other derivative securities, and the issuances of incentive awards under equity employee incentive plans, which may have additional dilutive effects to existing stockholders. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition and results of operations.
Our ability to obtain needed financing may be impaired by such factors as the condition of the economy and capital markets, both generally and specifically in our industry, and the fact that we are not profitable, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.
We are subject to restrictive debt covenants that impose operating and financial restrictions on our operations and could limit our ability to grow our business.
Covenants in our revolving loan agreement with Silicon Valley Bank (“SVB”) impose operating and financial restrictions on us. These restrictions prohibit or limit us from, among other things, (i) liquidating or dissolving, (ii) selling, leasing or assigning any of our material assets, (iii) effecting a change of our Chief Executive Officer or Chief Operating Officer without appointing a replacement reasonably acceptable to SVB, (iv) merging or consolidating, (v) creating, incurring, assuming or being liable for any indebtedness or (vi) creating, incurring, allowing or suffering any lien. These restrictions could limit our ability to obtain future financing, withstand downturns in our business or take advantage of business opportunities.
If we are unable to comply with the covenants in our loan agreement and are unable to obtain waivers of non-compliance from SVB, we will be in default under the loan agreement and may be required to pay substantial fees or penalties.
As a result of the Merger, 5to1 became a subsidiary of ours and since we are subject to the reporting requirements of federal securities laws, this can be expensive and may divert resources from other projects, thus impairing its ability grow.
As a result of the Merger, 5to1 became a subsidiary of ours and, accordingly, is subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other federal securities laws, including compliance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC (including reporting of the Merger) and furnishing audited reports to stockholders will cause our expenses to be higher than they would have been if 5to1 had remained privately held and did not consummate the Merger, increasing the cost in future periods from the historical costs reflected in the financial statements and results of operations for 5to1.
It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We will need to hire additional financial reporting, internal controls and other finance personnel in order to develop and maintain appropriate internal controls and reporting procedures.
If we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results accurately or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common stock.
Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operation and access to capital. We have not performed an in-depth analysis to determine if historical un-discovered failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.
If advertising on the Internet loses its appeal or brand advertising growth online slows, our revenue could decline.
Our business model may not continue to be effective in the future for a number of reasons, including the following: migration of offline brand advertising budgets to online may occur more slowly than expected; companies may prefer other forms of Internet advertising we do not offer, including certain forms of search engine placements and targeting capabilities; publishers may be adverse to using or may stop using altogether third party advertising networks due to various concerns, including protection of audience data and inappropriate or irrelevant advertisements; and, regulatory actions may negatively impact certain business practices that we currently rely on to generate a portion of our revenue and profitability. If the number of companies who purchase online advertising from us does not continue to grow and we are unable to command sufficient advertising pricing, we may experience difficulty in attracting publishers, and our revenue could decline.
If we fail to manage our supply of display advertising impressions (also referred to as “publishing inventory”) effectively, our profit margins could decline and should we fail to acquire additional premium publishing inventory our growth could be impeded.
Our success depends in part on our ability to manage our existing publishing inventory. Our publishers are not required to provide a minimum level of inventory, so we cannot ensure or guarantee a consistent supply of display advertising space to our advertisers. In addition, publishers can change the amount of inventory they make available to us at any time. If a publisher decides not to make publishing inventory from its websites available to us, we may not be able to replace this inventory with that from other publishers with comparable traffic patterns and user demographics quickly enough to fulfill our advertisers’ requests, thus resulting in potentially lost revenues. Because our business model is new, we may not be able to marry our transparency and proprietary “publisher control” value proposition with the industry trend toward automated ad exchanges with real-time auctions.
Additionally, if a third-party data provider stopped offering their data to us, we may not be able to replace this data with another data provider of equal or better effectiveness. Our ability to maintain our existing data partnerships, as well as attract new data partners, will depend on various factors, some of which are beyond our control.
We expect that our advertiser customers’ requirements will become more sophisticated as the Internet continues to mature as an advertising medium. If we fail to manage our existing publisher inventory effectively to meet our advertiser customers’ changing requirements, our revenues could decline. Our growth depends on our ability to expand our premium publisher inventory. To attract new customers, we must maintain access to a critical mass of attractive publisher inventory. We intend to expand our inventory by selectively adding to our network new premium publishers that offer attractive demographics, innovative and quality content and growing web user traffic. Our ability both to retain current as well as to attract new publishers to our network will depend on various factors, some of which are beyond our control. These factors include, but are not limited to: our ability to introduce new and innovative services, our efficiency in managing our existing publisher inventory and our pricing policies. We cannot assure you that the size of our publisher inventory will increase or remain constant in the future.
If we do not retain the services of certain executives and advisors or have difficulty in attracting new hires, our business could be negatively impacted.
The growth of our business and success to date has resulted in large part to a very experienced group of senior executives and advisors with extensive ties to the advertising and media markets. The departure of one or several of these individuals could harm and delay the growth in our sales, distribution and product development efforts.
In addition, delays or difficulties in hiring for key positions could delay our sales and operational efforts. The competitive labor market for sales and technology resources adds additional risk in this area.
Because government regulation of the Internet may subject us to additional operating restrictions and regulations, our business and operating results may be adversely affected.
Companies engaging in online search, commerce and related businesses face uncertainty related to future government regulation of the Internet. Due to the rapid growth and widespread use of the Internet, federal and state governments are enacting and considering various laws and regulations relating to the Internet. Furthermore, the application of existing laws and regulations to Internet companies remains somewhat unclear. Our business and operating results may be negatively affected by new laws, and such existing or new regulations may expose us to substantial compliance costs and liabilities and may impede the growth in use of the Internet. Additionally, our third party data partners may be adversely affected by any new or existing laws.
The application of these statutes and others to the Internet search industry is not entirely settled. Further, several existing and proposed federal laws could have an impact on our business and our third party data partners’ business:
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The Digital Millennium Copyright Act and its related safe harbors, are intended to reduce the liability of online service providers for listing or linking to third-party websites that include materials that infringe copyrights or other rights of others.
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The CAN-SPAM Act of 2003 and certain state laws are intended to regulate interstate commerce by imposing limitations and penalties on the transmission of unsolicited commercial electronic mail via the Internet.
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There have been several bills introduced in the Congress in recent years relating to protecting privacy. As with any change in Presidential administration, especially to one more likely to protect privacy, new legislation in this area may be enacted.
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Adopted and pending consumer protection and privacy legislation, including the FTC Online Behavioral Advertising Principles.
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With respect to the subject matter of each of these laws, courts may apply these laws in unintended and unexpected ways. As a company that provides services over the Internet, we may be subject to an action brought under any of these or future laws governing online services. We may also be subject to costs and liabilities with respect to privacy issues. Several Internet companies have incurred costs and paid penalties for violating their privacy policies. Further, it is anticipated that new legislation may be adopted by federal and state governments with respect to user privacy. Additionally, foreign governments may pass laws which could negatively impact our business or may prosecute us for our products and services based upon existing laws. The restrictions imposed by and cost of complying with, current and possible future laws and regulations related to our business could harm our business and operating results. Further, any such laws that affect our third party data partners could indirectly harm our business and operating results.
If we are subject to legal claims, and/or government enforcement actions and held liable for our or our customers’ failure to comply with federal, state and foreign laws, regulations or policies governing consumer privacy, it could materially harm our business and damage our reputation.
Recent growing public concern regarding privacy and the collection, distribution and use of information about Internet users has led to increased federal, state and foreign scrutiny and legislative and regulatory activity concerning data collection and use practices. The United States Congress currently has pending legislation regarding privacy and data security measures (e.g., S. 495, the “Personal Data Privacy and Security Act of 2007”). Any failure by us to comply with applicable federal, state and foreign laws and the requirements of regulatory authorities may result in, among other things, indemnification liability to our customers and the advertising agencies we work with, administrative enforcement actions and fines, class action lawsuits, cease and desist orders, and civil and criminal liability. Recently, class action lawsuits have been filed alleging violations of privacy laws by Internet service providers. The European Union's directive addressing data privacy limits our ability to collect and use information regarding Internet users. These restrictions may limit our ability to target advertising in most European countries. Our failure to comply with these or other federal, state or foreign laws could result in liability and materially harm our business.
In addition to government activity, privacy advocacy groups and the technology and direct marketing industries are considering various new, additional or different self-regulatory standards. This focus, and any legislation, regulations or standards promulgated, may impact us adversely. Governments, trade associations and industry self-regulatory groups may enact more burdensome laws, regulations and guidelines, including consumer privacy laws, affecting our customers and us. Since many of the proposed laws or regulations are just being developed, and a consensus on privacy and data usage has not been reached, we cannot yet determine the impact these proposed laws or regulations may have on our business. However, if the gathering of profiling information were to be curtailed, Internet advertising would be less effective, which would reduce demand for Internet advertising and harm our business.
Third parties may bring class action lawsuits against us relating to online privacy and data collection. We disclose our information collection and dissemination policies, and we may be subject to claims if we act or are perceived to act inconsistently with these published policies. Any claims or inquiries could be costly and divert management's attention, and the outcome of such claims could harm our reputation and our business.
Our customers are also subject to various federal and state laws concerning the collection and use of information regarding individuals. These laws include the Children's Online Privacy Protection Act, the federal Drivers Privacy Protection Act of 1994, the privacy provisions of the Gramm-Leach-Bliley Act, the federal CAN-SPAM Act of 2003, as well as other laws that govern the collection and use of consumer credit information. We cannot assure you that our customers are currently in compliance, or will remain in compliance, with these laws and their own privacy policies. We may be held liable if our customers use our technologies in a manner that is not in compliance with these laws or their own stated privacy policies.
If we are not able to protect our intellectual property from unauthorized use, it could diminish the value of our products and services, weaken our competitive position and reduce our revenues.
Our success depends in large part on our proprietary publisher-facing interface/gallery, features and technologies. We may be required to spend significant resources to monitor and police our intellectual property rights. If we fail to successfully enforce our intellectual property rights, the value of our products and services could be diminished and our competitive position may suffer.
We rely on a combination of trade secret laws, confidentiality procedures and licensing arrangements to establish and protect our proprietary rights. Third-party software providers could copy or otherwise obtain and use our technologies without authorization or develop similar technologies independently, which may infringe upon our proprietary rights. We may not be able to detect infringement and may lose competitive position in the market before we do so. In addition, competitors may design around our technologies or develop competing technologies. Intellectual property protection may also be unavailable or limited in some foreign countries.
We generally enter into confidentiality or license agreements with our employees, consultants, vendors, customers, and corporate partners, and generally control access to and distribution of our technologies, documentation and other proprietary information. Despite these efforts, unauthorized parties may attempt to disclose, obtain or use our products and services or technologies. Our precautions may not prevent misappropriation of our products, services or technologies, particularly in foreign countries where laws or law enforcement practices may not protect our proprietary rights as fully as in the United States.
If we become involved in lawsuits relating to our intellectual property rights, it could be expensive and time consuming, and an adverse result could result in significant damages and/or force us to make changes to our business.
We rely on trade secrets to protect our intellectual property rights. If we are sued by a third party which alleges we are violating its intellectual property rights or if we sue a third party for violating our rights, intellectual property litigation is very expensive and can divert our limited resources. We may not prevail in any litigation. An adverse determination of any litigation brought by us could materially and adversely affect our future results of operations by either reducing future revenues or increasing future costs. Additionally, an adverse award of money damages could affect our financial condition.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments in the litigation. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the trading price of our common stock.
If we are not able to respond to the rapid technological change characteristic of our industry, our services may not be competitive.
The market for our services is characterized by rapid change in business models and technological infrastructure, and we will need to constantly adapt to changing markets and technologies to provide competitive services. We believe that our future success will depend, in part, upon our ability to develop our services for both our target market and for applications in new markets. We may not, however, be able to successfully do so, and our competitors may develop innovations that render our services uncompetitive.
If our computer systems or technology providers fail to operate or deliver effectively in the future, we may incur significant costs to remedy these failures and may sustain reduced revenues.
Our success depends on the continuing and uninterrupted performance of our computer systems and provision of services from our technology providers. Sustained or repeated system failures that interrupt our ability to provide services to customers, including failures affecting our ability to deliver advertisements quickly and accurately and to monitor performance, would reduce significantly the attractiveness of our solutions to advertisers and publishers. The existence of bugs in our software that prevent correct operation and/or reporting could adversely affect our business. Our business, results of operations and financial condition could also be materially and adversely affected by any systems damage or failure that impacts data integrity or interrupts or delays our operations. Our computer systems are vulnerable to damage from a variety of sources, including telecommunications failures, power outages and malicious or accidental human acts. Any of the above factors could substantially harm our business resulting in increased costs. Moreover, despite network security measures, our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems in part because we cannot control the maintenance and operation of our third-party data centers. Any of these occurrences could cause material interruptions or delays in our business, result in the loss of data, render us unable to provide services to our customers, and expose us to material risk of loss or litigation and liability. If we fail to address these issues in a timely manner, it may materially damage our reputation and business causing our revenues to decline.
Computer viruses could damage our business.
Computer viruses, worms and similar programs may cause our systems to incur delays or other service interruptions and could damage our reputation and ability to provide our services and expose us to legal liability, all of which could have a material adverse effect on our business, results of operations, financial condition and the trading price of our common stock.
Risks Relating to our Organization and Common Stock
We may need to raise additional capital, which may not be available on acceptable terms or at all.
We may be required to raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations. We estimate that based on current plans and assumptions, that our available cash will be sufficient to satisfy our cash requirements under our present operating expectations, without further financing, for at least 12 months. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. The inability to obtain additional capital may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will likely be required to curtail our plans and business. Any additional equity financing may involve substantial dilution to our existing shareholders.
Our operating results may prove unpredictable, and our share price may decrease or fluctuate significantly.
Our operating results may prove unpredictable, and our common stock price may decrease or fluctuate significantly. Our operating results are likely to fluctuate significantly in the future due to a variety of factors, many of which are outside of our control.
Investor Relations Activities, Nominal “Float” and Supply and Demand Factors May Affect the Price of our Stock.
We expect to utilize various techniques such as non-deal road shows and investor relations campaigns in order to create investor awareness for our Company. These campaigns may include personal, video and telephone conferences with investors and prospective investors in which our business practices are described. We may directly provide, or others may provide, compensation to investor relations firms and pay for newsletters, websites, mailings and email campaigns that are produced by third-parties based upon publicly-available information concerning our Company. We will not be responsible for the content of analyst reports and other writings and communications by investor relations firms not authored by us or from publicly available information. We do not intend to review or approve the content of such analysts’ reports or other materials based upon analysts’ own research or methods and as a result the dissemination of inaccurate or misleading information may require us to comment or issue a corrective announcement. Investor relations firms should generally disclose when they are compensated for their efforts, but whether such disclosure is made or complete is not under our control. In addition to public relations costs, we may issue shares of restricted stock, and budget cash compensation to consultants and advisors for these activities, and such amounts may be increased in the future. In addition, investors in our Company may be willing, from time to time, to encourage investor awareness through similar activities, including payment of cash or stock compensation. Investor awareness activities may also be suspended or discontinued which may impact the trading market in our Common Stock.
The SEC, FINRA and the various state Blue Sky commissioners, enforce various statutes and regulations intended to prevent manipulative or deceptive devices in connection with the purchase or sale of any security and carefully scrutinize trading patterns and company news and other communications for false or misleading information, particularly in cases where the hallmarks of improper activities may exist, such as rapid share price increases or decreases. As a small public company with a public market established through a a reverse merger, it is likely our activities, and our shareholders’ activities, will be subjected to enhanced regulatory scrutiny due to regulatory skepticism and potential bias against this manner of becoming publicly traded. These factors, as well as because of the small number of holders who initially own the registered shares of our Common Stock publicly available for resale, and the limited trading markets in which such shares may be offered or sold (which markets have historically been associated by regulatory bodies with improper activities concerning penny-stocks, such as the OTC Bulletin Board (“OTCBB”) or the OTCQB Marketplace (Pink OTC)), may lead to regulatory and investor perceptions that are unfavorable.
During 2010, 5to1 and the Company conducted a private offering (the “Offering”) which, following acquisition by our Company, resulted in 7,075,000 shares of our Common Stock being issued to purchasers in the Offering. Until such time as the shares sold in the Offering are registered or available for resale under Rule 144, there will continue to be a small number and percentage of our shares (8,350,020 or approximately 24% on a fully diluted basis) held by a small number of investors, many of whom acquired such shares in privately negotiated purchase and sale transactions, that will constitute the entire available trading market.
The United States Supreme Court has stated that manipulative action is a “term of art” connoting intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities. Often times, manipulation is associated by regulators and the courts with forces that upset the supply and demand factors that would normally determine trading prices. As described above, a small number and percentage of our outstanding common stock will initially be available for trading, held by a small number of individuals or entities. Accordingly, the supply of our common stock for resale will be extremely limited for an indeterminate amount of time (for example, under Rule 144 promulgated under the Securities Act until six months following the date of this Report if we are not considered a “shell” and prior to such time, our shares issued to 5to1 shareholders may not be able to be sold absent a registration statement under the Securities Act), which could result in higher bids, asks/offers or sales prices than would otherwise exist. Securities regulators have often cited thinly-traded markets, small numbers of holders, and investor awareness campaigns as components of their claims of price manipulation and other violations of law when combined with manipulative trading, such as wash sales, matched orders or other manipulative trading timed to coincide with false or touting press releases. There can be no assurance that our activities or third-parties’ activities, or the small number of potential sellers or small percentage of stock in the “float,” or determinations by purchasers or holders as to when or under what circumstances or at what prices they may be willing to buy or sell stock will not artificially impact (or would be claimed by regulators to have affected) the normal supply and demand factors that determine the price of the stock. Further, this is an evolving area of the law and regulators may adopt new or different interpretations of the foregoing factors which could impact the market for our shares in various respects.
Public company compliance may make it more difficult to attract and retain officers and directors.
The Sarbanes-Oxley Act and rules implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, we expect these rules and regulations to increase our compliance costs in 2010 and beyond and to make certain activities more time consuming and costly. As a public company, we also expect that these rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers, and to maintain insurance at reasonable rates, or at all.
Because we became public by means of a reverse merger, we may not be able to attract the attention of major brokerage firms.
There may be risks associated with us becoming public through a “reverse merger.” Securities 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. No assurance can be given that brokerage firms will, in the future, want to conduct any offerings on behalf of our post-Merger company.
We have not paid cash dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.
We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates.
Due to factors beyond our control, our stock price may be volatile.
Any of the following factors could affect the market price of our common stock:
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Actual or anticipated variations in our quarterly results of operations;
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Our failure to meet financial analysts’ performance expectations;
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Our failure to meet or exceed our own publicly-disclosed forecasts;
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Our failure to achieve and maintain profitability;
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Changes in our industry;
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Competitive pricing pressure;
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Our ability to execute our busess plan;
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Inability to develop, acquire or integrate new or needed technology,
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Short selling activities;
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The loss of major advertisers, publishers or data providers;
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Announcements by us or our competitors of significant contracts, new products, acquisitions, commercial relationships, joint ventures or capital commitments;
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The departure of key personnel;
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Regulatory developments;
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Changes in market valuations of similar companies; or
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The sale of a large amount of common stock by shareholders owning large positions.
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In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs and divert our management’s time and attention, which would otherwise be used to benefit our business.
Our Common Stock is subject to the “Penny Stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
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that a broker or dealer approve a person's account for transactions in penny stocks; and
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the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
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In order to approve a person's account for transactions in penny stocks, the broker or dealer must:
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obtain financial information and investment experience objectives of the person; and
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make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
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The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:
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sets forth the basis on which the broker or dealer made the suitability determination; and
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that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
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Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Delaware law contains anti-takeover provisions that could deter takeover attempts that could be beneficial to our stockholders .
Provisions of Delaware law could make it more difficult for a third-party to acquire us, even if doing so would be beneficial to our stockholders. Section 203 of the Delaware General Corporation Law may make the acquisition of the Company and the removal of incumbent officers and directors more difficult by prohibiting stockholders holding 15% or more of our outstanding voting stock from acquiring the Company, without our board of directors' consent, for at least three years from the date they first hold 15% or more of the voting stock.
Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
If our stockholders sell substantial amounts of our common stock in the public market, including shares issued in our November 2010 financing upon the effectiveness of the registration statement required to be filed, or upon the expiration of any statutory holding period, under Rule 144, or upon expiration of lock-up periods applicable to outstanding shares, or issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. The shares of common stock issued in the Merger to the current and former officers and directors of 5to1 will be subject to a lock-up agreement prohibiting sales of such shares for a period of 12 months following the Merger. Following such date, all of those shares will become freely tradable, subject to securities laws and SEC regulations regarding sales by insiders.
Our certificate of incorporation allows for our board to create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock.
Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the authority to issue preferred stock without further stockholder approval. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our board of directors could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing stockholders.
This prospectus contains forward-looking statements. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar words. These statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. We discuss many of the risks in greater detail under the heading "Risk Factors." Also, these forward-looking statements represent our estimates and assumptions only as of the date of this prospectus. Except as required by law, we assume no obligation to update any forward-looking statements after the date of this prospectus.
This prospectus also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other industry data. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified the statistical and other industry data generated by independent parties and contained in this prospectus and, accordingly, we cannot guarantee their accuracy or completeness. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
This prospectus relates to sale of shares of common stock that may be offered and sold from time to time by the selling stockholders. We will not receive any proceeds from the sale of shares by the selling stockholders.
The selling stockholders named in this prospectus (the "Selling Stockholders") are offering 20,833 shares offered through this prospectus that were granted to the selling stockholders pursuant to the Plan.
The following table provides, as of April 19, 2011, information regarding the beneficial ownership of our common shares held by each of the selling stockholders, including:
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the total number of common shares owned by each selling stockholder prior to this offering;
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the total number of common shares that are to be offered by each selling stockholder;
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3.
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the total number of common shares that will be owned by each selling stockholder upon completion of the offering; and
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4.
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the percentage owned by each selling stockholder, prior to and upon completion of the offering.
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Information with respect to beneficial ownership is based upon information obtained from the selling stockholders. Because the selling stockholders may offer all or part of the common shares, which they own pursuant to the offering contemplated by this reoffer prospectus, and because its offering is not being underwritten on a firm commitment basis, no estimate can be given as to the amount of shares that will be held upon termination of this offering. The common shares currently owned offered by this reoffer prospectus may be offered from time to time by the selling stockholders named below. However, information with respect to "Shares Beneficially Owned Upon Completion of the Offering" assumes the sale of all of the common shares offered by this prospectus and no other purchases or sales of our common shares by the selling stockholders. Except as described below and to our knowledge, the named selling stockholder beneficially owns and has sole voting and investment power over all common shares or rights to these common shares.
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SHARES BENEFICIALLY OWNED
PRIOR TO THIS OFFERING(1)
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NUMBER OF
SHARES BEING
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SHARES BENEFICIALLY OWNED UPON
COMPLETION OF THE OFFERING(1)
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NAME
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NUMBER
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PERCENT(2)
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OFFERED
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NUMBER
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PERCENT(2)
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Michael Mathews
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41,666 (3)
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*
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20,833
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20,833
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*
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TOTAL
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_____________
* less than one percent
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(1)
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The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which the selling stockholder has sole or shared voting power or investment power and also any shares which the selling stockholder has the right to acquire within 60 days.
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(2)
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Based upon 35,970,856 shares of common stock issued and outstanding as of April 19, 2011.
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(3) Represents 20,833 shares issued under the Plan and 20,833 shares under the Plan which will become vested within 60 days. Excludes 229,167 shares issued under the Plan which will not become vested within 60 days.
Since our company does not currently meet the registrant requirements for use of Form S-3, the amount of common shares which may be resold by means of this reoffer prospectus by each of the selling stockholders, and any other person with whom he or she is acting in concert for the purpose of selling securities of our company, must not exceed, in any three month period, the amount specified in Rule 144(e) promulgated under the Securities Act.
Timing of Sales
The selling stockholders may offer and sell the shares covered by this prospectus at various times. The selling stockholders will act independently of our company in making decisions with respect to the timing, manner and size of each sale.
No Known Agreements to Resell the Shares
To our knowledge, no selling stockholder has any agreement or understanding, directly or indirectly, with any person to resell the common shares covered by this prospectus.
Offering Price
The sales price offered by the selling stockholders to the public may be:
1. the market price prevailing at the time of sale;
2. a price related to such prevailing market price; or
3. such other price as the selling stockholders determine from time to time.
Manner of Sale
The common shares may be sold by means of one or more of the following methods:
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a block trade in which the broker-dealer so engaged will attempt to sell the common shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
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Purchases by a broker-dealer as principal and resale by that broker-dealer for its account pursuant to this prospectus;
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ordinary brokerage transactions in which the broker solicits purchasers;
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through options, swaps or derivatives;
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in transactions to cover short sales;
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privately negotiated transactions; or
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7.
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in a combination of any of the above methods.
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The selling stockholders may sell their common shares directly to purchasers or may use brokers, dealers, underwriters or agents to sell their common shares. Brokers or dealers engaged by the selling stockholders may arrange for other brokers or dealers to participate. Brokers or dealers may receive commissions, discounts or concessions from the selling stockholders, or, if any such broker-dealer acts as agent for the purchaser of common shares, from the purchaser in amounts to be negotiated immediately prior to the sale. The compensation received by brokers or dealers may, but is not expected to, exceed that which is customary for the types of transactions involved.
Broker-dealers may agree with a selling stockholder to sell a specified number of common shares at a stipulated price per common share, and, to the extent the broker-dealer is unable to do so acting as agent for a selling stockholder, to purchase as principal any unsold common shares at the price required to fulfill the broker-dealer commitment to the selling stockholder.
Broker-dealers who acquire common shares as principal may thereafter resell the common shares from time to time in transactions, which may involve block transactions and sales to and through other broker-dealers, including transactions of the nature described above, in the over-the-counter market or otherwise at prices and on terms then prevailing at the time of sale, at prices then related to the then-current market price or in negotiated transactions. In connection with resales of the common shares, broker-dealers may pay to or receive from the purchasers of shares commissions as described above.
If our selling stockholders enter into arrangements with brokers or dealers, as described above, we are obligated to file a post-effective amendment to this registration statement disclosing such arrangements, including the names of any broker-dealers acting as underwriters.
The selling stockholders and any broker-dealers or agents that participate with the selling stockholders in the sale of the common shares may be deemed to be "underwriters" within the meaning of the Securities Act. In that event, any commissions received by broker-dealers or agents and any profit on the resale of the common shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.
We will make copies of this prospectus available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act.
Sales Pursuant to Rule 144
Any common shares covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than pursuant to this prospectus.
Accordingly, during such times as a selling stockholder may be deemed to be engaged in a distribution of the common stock, and therefore be considered to be an underwriter, the selling stockholder must comply with applicable law and, among other things:
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may not engage in any stabilization activities in connection with our common stock;
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may not cover short sales by purchasing shares while the distribution is taking place; and
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may not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities other than as permitted under the Exchange Act.
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Penny Stock Rules
The SEC has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) of less than $4.00 per share or an exercise price of less than $4.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "institutional accredited investors." The term "institutional accredited investor" refers generally to those accredited investors who are not natural persons and fall into one of the categories of accredited investor specified in subparagraphs (1), (2), (3), (7) or (8) of Rule 501 of Regulation D promulgated under the Securities Act, including institutions with assets in excess of $5,000,000.
The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form required by the Securities and Exchange Commission, obtain from the customer a signed and dated acknowledgement of receipt of the disclosure document and to wait two business days before effecting the transaction. The risk disclosure document provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account.
The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
State Securities Laws
Under the securities laws of some states, the common shares may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the common shares may not be sold unless the shares have been registered or qualified for sale in the state or an exemption from registration or qualification is available and is complied with.
Expenses of Registration
We are bearing all costs relating to the registration of the common stock. These expenses are estimated to be $5,000, including, but not limited to, legal, accounting, printing and mailing fees. The selling stockholders, however, will pay any commissions or other fees payable to brokers or dealers in connection with any sale of the common stock.
Authorized Capital Stock
We have authorized 200,000,000 shares of capital stock, par value $0.0001 per share, 190,000,000 of which are designated as common stock and 10,000,000 designated as preferred stock.
Capital Stock Issued and Outstanding
We have issued and outstanding securities on a fully diluted basis:
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35,970,856 shares of common stock;
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0 shares of preferred stock
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Warrants to purchase an aggregate of 371,348 shares of our common stock at an exercise price of $1.00 per share; and
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Options to purchase an aggregate of 278,718 shares of common stock at an exercise price of $0.20 per share outstanding.
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Common Stock
The holders of the Common Stock will be entitled to one vote per share. In addition, the holders of the Common Stock will be entitled to receive ratably such dividends, if any, as may be declared by our Board of Directors out of legally available funds; however, the current policy of our Board of Directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of the Common Stock will be entitled to share ratably in all assets that are legally available for distribution. The holders of the Common Stock will have no preemptive, subscription, redemption or conversion rights.
Dividend Policy
We have not previously paid any cash dividends on our Common Stock and do not anticipate or contemplate paying dividends on our Common Stock in the foreseeable future. We currently intend to use all our available funds to develop our business. We can give no assurances that we will ever have excess funds available to pay dividends.
Lock-up Agreements
All our shares of common stock issued in the Merger to the officers and directors of 5to1, as well as to certain stockholders of 5to1, in exchange for their shares of common stock of 5to1, are subject to lock-up agreements with respect to the shares received. These lock-up agreements provide that such persons may not sell or transfer any of their shares for a period of twelve months following the Merger, with the exception of contributions made to non-profit organizations qualified as charitable organizations under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, or in privately negotiated sales to persons who agree, in writing, to be bound to the terms of the lock-up agreements. The lock-up agreements executed by certain members of management contain a leak-out provision related solely to the restricted stock grants issued to members of management under our 2010 Equity Incentive Plan, such that if the Company raises in excess of Ten Million Dollars ($10,000,000) (excluding any amount raised in the November 2010 private placement) within twelve (12) months from the date of the Merger or (ii) the Company’s common stock achieves an average daily trading value (such trading value shall be calculated by multiplying the daily volume by the average bid and ask prices for that day) over any thirty (30) day period within the twelve (12) months from the date hereof equal to or greater than Two Hundred Thousand Dollars ($200,000) or (iii) commencement of trading of the Company’s common stock on NASDAQ, then the lock up restrictions shall terminate.
Future Stock Issuances
The subscription agreement for sale of our shares pursuant to our November 2010 private placement contains provisions which provide that for a period of eighteen (18) months from the final date of closing of the November 2010 private placement, should we issue or sell any shares of common stock or any warrants or other convertible security convertible into our common stock pursuant to which shares of our common stock may be acquired at a price less than $1.00 per share (except for certain issuances such as under a stock option plan, upon conversion or exercise of outstanding securities, or in connection with acquisitions or strategic transactions with a synergistic business), we shall promptly issue additional shares to each investor in the November 2010 private placement in an amount sufficient that the subscription price paid in the November 2010 private placement, when divided by the total number of shares issued will result in an actual price paid by each investor per share equal to such lower price (this is intended to be a “full ratchet” adjustment). For example, if an investor purchases 25,000 shares of common stock for a purchase price of $25,000 (equals $1.00 per share) and then the Company issues additional shares of common stock at $0.50 per share during the Adjustment Period, the Company will issue an additional 25,000 shares of common stock to such investor ($25,000/50,000 shares = $0.50 per share). In addition, in the event of such issuance of securities at a price less than $1.00 per share, the exercise price of the warrants issued in the November 2010 private placement shall be reduced to such lower price.
The validity of the common stock has been passed upon, for us, by Sichenzia Ross Friedman Ference LLP, New York, New York. Certain members of Sichenzia Ross Friedman Ference LLP hold shares of the Company’s common stock.
The financial statements of 5to1 Holding Corp. as of December 31, 2010 and December 31, 2009, have been incorporated by reference herein and in the registration statement in reliance upon the report of Marcum LLP., an independent registered public accounting firm, upon the authority of said firm as an expert in accounting and auditing.
The Securities and Exchange Commission (“SEC”) allows us to incorporate by reference certain of our publicly filed documents into this prospectus, which means that such information is considered part of this prospectus. Information that we file with the SEC subsequent to the date of this prospectus will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made by us with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, until the selling stockholders have sold all of the shares offered hereby or such shares have been deregistered.
The following documents filed by us with the SEC are incorporated herein by reference:
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Reference is made to our Annual Report on Form10-K/A, filed with the SEC on April 19, 2011, which is hereby incorporated by reference. |
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Reference is made to our Annual Report on Form 10-K filed with the SEC on April 15, 2011, which is hereby incorporated by reference. |
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Reference is made to our report on Form 8-K/A filed with the SEC on January 21, 2011, which is hereby incorporated by reference. |
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The description of our common stock in our Registration Statement on Form S-1, filed with the SEC on March 5, 2008, which is hereby incorporated by reference. |
We will provide without charge to each person to whom a copy of this prospectus has been delivered, on written or oral request, a copy of any or all of the documents incorporated by reference in this prospectus, other than exhibits to such documents. Written or oral requests for such copies should be directed to James Heckman at the Company.
As permitted by the Delaware General Corporation Law, we have adopted provisions in our certificate of incorporation and by-laws to be in effect at the closing of this offering that limit or eliminate the personal liability of our directors. Consequently, a director will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for:
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any breach of the director's duty of loyalty to us or our stockholders;
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any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
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any unlawful payments related to dividends or unlawful stock repurchases, redemptions or other distributions; or
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any transaction from which the director derived an improper personal benefit.
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These limitations of liability do not alter director liability under the federal securities laws and do not affect the availability of equitable remedies such as an injunction or rescission.
In addition, our by-laws provide that:
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we will indemnify our directors, officers and, in the discretion of our board of directors, certain employees to the fullest extent permitted by the Delaware General Corporation Law; and
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we will advance expenses, including attorneys' fees, to our directors and, in the discretion of our board of directors, to our officers and certain employees, in connection with legal proceedings, subject to limited exceptions.
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We also maintain general liability insurance that covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers, including liabilities under the Securities Act.
These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder's investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. We believe that these provisions, the indemnification agreements and the insurance are necessary to attract and retain talented and experienced directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
This prospectus is part of a Registration Statement on Form S-8 that we filed with the SEC. Certain information in the Registration Statement has been omitted from this prospectus in accordance with the rules of the SEC. We file annual, quarterly and special reports, proxy statements and other information with the SEC. You can inspect and copy the Registration Statement as well as reports, proxy statements and other information we have filed with the SEC at the public reference room maintained by the SEC at 100 F Street N.E. Washington, D.C. 20549. You can obtain copies from the public reference room of the SEC at 100 F Street N.E. Washington, D.C. 20549, upon payment of certain fees. You can call the SEC at 1-800-732-0330 for further information about the public reference room. We are also required to file electronic versions of these documents with the SEC, which may be accessed through the SEC's World Wide Web site at http://www.sec.gov.
5TO1 HOLDING CORP.
20,833 SHARES OF COMMON STOCK
PROSPECTUS
April 19, 2011
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 3. Incorporation of Documents by Reference.
The Registrant hereby incorporates by reference into this Registration Statement the documents listed below. In addition, all documents subsequently filed pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference into this Registration Statement and to be a part hereof from the date of filing of such documents:
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Reference is made to our Annual Report on Form10-K/A, filed with the SEC on April 19, 2011, which is hereby incorporated by reference. |
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Reference is made to our Annual Report on Form 10-K filed with the SEC on April 15, 2011, which is hereby incorporated by reference. |
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Reference is made to our report on Form 8-K/A filed with the SEC on January 21, 2011, which is hereby incorporated by reference. |
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The description of our common stock in our Registration Statement on Form S-1, filed with the SEC on March 5, 2008, which is hereby incorporated by reference. |
Item 4. Description of Securities.
Authorized Capital Stock
We have authorized 200,000,000 shares of capital stock, par value $0.0001 per share, 190,000,000 of which are designated as common stock and 10,000,000 designated as preferred stock.
Capital Stock Issued and Outstanding
We have issued and outstanding securities on a fully diluted basis:
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35,970,856 shares of common stock;
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0 shares of preferred stock
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Warrants to purchase an aggregate of 371,348 shares of our common stock at an exercise price of $1.00 per share; and
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Options to purchase an aggregate of 278,718 shares of common stock at an exercise price of $0.20 per share outstanding.
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Common Stock
The holders of the Common Stock will be entitled to one vote per share. In addition, the holders of the Common Stock will be entitled to receive ratably such dividends, if any, as may be declared by our Board of Directors out of legally available funds; however, the current policy of our Board of Directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of the Common Stock will be entitled to share ratably in all assets that are legally available for distribution. The holders of the Common Stock will have no preemptive, subscription, redemption or conversion rights.
Dividend Policy
We have not previously paid any cash dividends on our Common Stock and do not anticipate or contemplate paying dividends on our Common Stock in the foreseeable future. We currently intend to use all our available funds to develop our business. We can give no assurances that we will ever have excess funds available to pay dividends.
Lock-up Agreements
All our shares of common stock issued in the Merger to the officers and directors of 5to1, as well as to certain stockholders of 5to1, in exchange for their shares of common stock of 5to1, are subject to lock-up agreements with respect to the shares received. These lock-up agreements provide that such persons may not sell or transfer any of their shares for a period of twelve months following the Merger, with the exception of contributions made to non-profit organizations qualified as charitable organizations under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, or in privately negotiated sales to persons who agree, in writing, to be bound to the terms of the lock-up agreements. The lock-up agreements executed by certain members of management contain a leak-out provision related solely to the restricted stock grants issued to members of management under our 2010 Equity Incentive Plan, such that if the Company raises in excess of Ten Million Dollars ($10,000,000) (excluding any amount raised in the November 2010 private placement) within twelve (12) months from the date of the Merger or (ii) the Company’s common stock achieves an average daily trading value (such trading value shall be calculated by multiplying the daily volume by the average bid and ask prices for that day) over any thirty (30) day period within the twelve (12) months from the date hereof equal to or greater than Two Hundred Thousand Dollars ($200,000) or (iii) commencement of trading of the Company’s common stock on NASDAQ, then the lock up restrictions shall terminate.
Future Stock Issuances
The subscription agreement for sale of our shares pursuant to our November 2010 private placement contains provisions which provide that for a period of eighteen (18) months from the final date of closing of the November 2010 private placement, should we issue or sell any shares of common stock or any warrants or other convertible security convertible into our common stock pursuant to which shares of our common stock may be acquired at a price less than $1.00 per share (except for certain issuances such as under a stock option plan, upon conversion or exercise of outstanding securities, or in connection with acquisitions or strategic transactions with a synergistic business), we shall promptly issue additional shares to each investor in the November 2010 private placement in an amount sufficient that the subscription price paid in the November 2010 private placement, when divided by the total number of shares issued will result in an actual price paid by each investor per share equal to such lower price (this is intended to be a “full ratchet” adjustment). For example, if an investor purchases 25,000 shares of common stock for a purchase price of $25,000 (equals $1.00 per share) and then the Company issues additional shares of common stock at $0.50 per share during the Adjustment Period, the Company will issue an additional 25,000 shares of common stock to such investor ($25,000/50,000 shares = $0.50 per share). In addition, in the event of such issuance of securities at a price less than $1.00 per share, the exercise price of the warrants issued in the November 2010 private placement shall be reduced to such lower price.
Item 5. Interests of Named Experts and Counsel.
No expert or counsel named in this Registration Statement as having prepared or certified any part of this Registration Statement or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis or had, or is to receive, in connection with the offering, a substantial interest, directly or indirectly, in the registrant or any of its parents or subsidiaries. However, certain members of Sichenzia Ross Friedman Ference LLP hold shares of the Company’s common stock.
Item 6. Indemnification of Directors and Officers.
As permitted by the Delaware General Corporation Law, we have adopted provisions in our certificate of incorporation and by-laws to be in effect at the closing of this offering that limit or eliminate the personal liability of our directors. Consequently, a director will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for:
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any breach of the director's duty of loyalty to us or our stockholders;
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any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
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any unlawful payments related to dividends or unlawful stock repurchases, redemptions or other distributions; or
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any transaction from which the director derived an improper personal benefit.
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These limitations of liability do not alter director liability under the federal securities laws and do not affect the availability of equitable remedies such as an injunction or rescission.
In addition, our by-laws provide that:
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we will indemnify our directors, officers and, in the discretion of our board of directors, certain employees to the fullest extent permitted by the Delaware General Corporation Law; and
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we will advance expenses, including attorneys' fees, to our directors and, in the discretion of our board of directors, to our officers and certain employees, in connection with legal proceedings, subject to limited exceptions.
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We also maintain general liability insurance that covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers, including liabilities under the Securities Act.
These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder's investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. We believe that these provisions, the indemnification agreements and the insurance are necessary to attract and retain talented and experienced directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
Item 7. Exemption from Registration Claimed.
Up to 1,568,498 shares of common stock being registered pursuant to this Registration Statement may be issued under the Plan. The securities already issued under the Plan, were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act.
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Exhibit
Number
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Description
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23.2
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Consent of Sichenzia Ross Friedman Ference LLP (included in Exhibit 5.1)
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24.1
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Powers of Attorney (included on signature page)
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Item 9. Undertakings.
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(1)
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The undersigned Registrant hereby undertakes to:
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(a)
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File, during any period in which it offers or sells securities, a post-effective amendment to this Registration Statement to include any additional or changed material information on the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement.
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(b)
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For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement relating to the securities offered therein, and the offering of the securities at the time to be the initial bona fide offering thereof.
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(c)
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To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
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(2)
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The undersigned Registrant hereby undertakes that, for the purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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(3)
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Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Santa Monica, California, on April 19, 2011.
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5TO1 HOLDING CORP.
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By:
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/s/ James Heckman
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James Heckman
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Chief Executive Officer
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POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints James Heckman, his or her true and lawful attorney-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) and additions to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated:
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Signature
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Title
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Date
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/s/ James Heckman
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Chief Executive Officer and Director
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April 19, 2011
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James Heckman
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(Principal Executive Officer)
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/s/ Mitchell Chun
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Chief Financial Officer
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April 19, 2011
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Mitchell Chun
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(Principal Financial Officer and Principal Accounting Officer)
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/s/ Michael Mathews
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Director
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April 19, 2011
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Michael Mathews
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EXHIBIT INDEX
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Exhibit
Number
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Description
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5.1
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Opinion of Sichenzia Ross Friedman Ference LLP
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10.1
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2011 Equity Incentive Plan
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23.1
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Consent of Marcum LLP.
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23.2
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Consent of Sichenzia Ross Friedman Ference LLP (included in Exhibit 5.1)
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24.1
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Powers of Attorney (included on signature page)
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