Filed
pursuant to Rule 424(b)(3)
Registration
No. 333-132990
MCF
CORPORATION
914,778
Shares of Common Stock
6,914,894
Shares of Common Stock Issuable Upon Conversion of Convertible
Debentures
2,437,500
Shares of Common Stock Issuable Upon Exercise of Warrants
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The
selling stockholders or their successors may sell, from time to time, in one
or
more offerings:
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914,778
shares of common stock currently held by them; and
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6,914,894
shares of common stock issuable upon exercise of convertible debentures
currently held by them. Of these shares, 5,319,149 are currently
issuable
upon conversion of the debenture, and an additional 1,595,745 shares
are
issuable only upon the occurrence of certain events, such as if the
issuance by us of additional shares of common stock at a price of
less
than $1.41 per share.
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2,437,500
shares of common stock issuable upon exercise of warrants currently
held
by them. Of these shares, 1,875,000 are currently issuable upon exercise
of warrants, and an additional 562,500 shares are issuable only upon
the
occurrence of certain events, such as if the issuance by us of additional
shares of common stock at a price of less than $1.41 per
share.
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The
registration statement of which this prospectus forms a part relates to the
registration for the account of selling stockholders of shares of common stock,
shares of common stock issuable upon conversion of convertible debentures and
shares of common stock issuable upon the exercise of warrants currently held
by
them. The shares being offered hereby are being registered to permit public
secondary trading and the selling stockholders may offer all or part of the
shares for resale from time to time pursuant to contractual arrangements whereby
we agreed to register the shares of the selling stockholders. However, the
selling stockholders are under no obligation to sell all or any portion of
such
shares nor are the selling stockholders obligated to sell any shares immediately
under this prospectus. As the price per share and timing of any sales hereunder
are at the discretion of the selling stockholders, it is not possible to say
at
this time what the selling price of the shares of our common stock to be offered
under this registration statement will be.
We
will not receive proceeds from the sale of shares by our stockholders or the
resale of our stockholders' shares that are issued when our convertible
debentures are converted or our warrants are exercised. However, we will receive
proceeds from the exercise of our warrants, if and when they are exercised,
unless they are exercised pursuant to a provision in the warrants which allows
for a "cashless exercise" for a smaller number of shares if at any time after
March 7, 2007 the registration statement of which this prospectus forms a part
is not effective and there is no other effective registration statement which
registers the shares issuable on exercise of such warrants.
___________________
Please
see the risk factors beginning on page 2 to read about certain factors you
should consider before buying shares of our common stock.
___________________
Our
common stock is listed on the American Stock Exchange and the Archipelago
Exchange under the symbol MEM. The reported last sale price on the American
Stock Exchange on May 1, 2006 was $1.24
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Our
principal executive office is located at 600 California Street, 9th
Floor,
San Francisco, California 94108 and our telephone number is
(415) 248-5600.
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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.
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The
date of this prospectus is May 4,
2006
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INSIDE
FRONT COVER
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements. All statements
regarding
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our
financial performance and operating
results,
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our
business strategy, and
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are
forward-looking statements. In some cases you can identify forward-looking
statements by terminology, such as “may,” “will,” “would,” “should,” “could,”
“expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,”
“potential” or “continue,” the negative of such terms, or other comparable
terminology. These statements are only predictions. Known and unknown risks,
uncertainties and other factors could cause actual results to differ materially
from those contemplated by the statements. In evaluating these statements,
you
should specifically consider various factors, including the risks described
in
the “Risk Factors” section and elsewhere in this prospectus. These factors may
cause our actual results t o differ materially from any forward-looking
statements.
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Because
this is a summary, it does not contain all information that may be important
to
you. You should read this entire prospectus, including the information
incorporated by reference and the financial data and related notes, before
making an investment decision. When used in this prospectus, the terms “we,”
“our” and “us” refer to MCF and not to the selling stockholders.
MCF
Corporation
MCF
Corporation is a financial services holding company that provides investment
research, capital markets services, corporate and venture services, investment
banking, asset management and wealth management through its operating
subsidiaries, Merriman Curhan Ford & Co., MCF Asset Management, LLC and
MCF Wealth Management, LLC. We are focused on providing a full range of
specialized and integrated services to institutional investors and corporate
clients. Merriman Curhan Ford & Co. is registered with the Securities
and Exchange Commission as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. and the Securities Investors
Protection Corporation.
Merriman
Curhan Ford & Co. is a securities broker-dealer and investment bank
focused on fast growing companies and institutional investors. Our mission
is to
become a leader in the researching, advising, financing and trading of fast
growing companies under $2 billion in market capitalization. We provide
investment research, brokerage and trading services primarily to institutions,
as well as advisory and investment banking services to corporate clients. By
the
end of the 1990's, many of the investment banks that previously served this
niche were acquired by large commercial banks and subsequently refocused to
serve larger clients and larger transactions. We are gaining market share by
originating differentiated research for our institutional investor clients
and
providing specialized services for our fast-growing corporate
clients.
The
Offering
The
shares being offered for resale by the selling stockholders consist of shares
of
common stock currently owned by them and common stock issuable upon conversion
of their convertible debentures and exercise of their warrants.
Of
the 10,267,172 shares of common stock being registered, 6,914,894 are issuable
upon the conversion of a convertible debenture issued to Midsummer Investment
Ltd., a Bermuda private investment partnership, or Midsummer Investment, in
a
private transaction which closed on March 7, 2006. Of these shares, 5,319,149
are currently issuable upon conversion of the debenture, and an additional
1,595,745 shares are issuable only upon the occurrence of certain events, such
as the issuance by us of additional shares of common stock at a price of less
than $1.41 per share. An additional 2,437,500 of the shares of common stock
being registered are issuable upon exercise of warrants issued to Midsummer
Investment in connection with that transaction. These warrants carry an exercise
price of $1.41 per share and expire if not exercised by March 7, 2012. Of these
shares, 1,875,000 are currently issuable upon exercise of warrants, and an
additional 562,500 shares are issuable only upon the occurrence of certain
events, such as the issuance by us of additional shares of common stock at
a
price of less than $1.41 per share.
Also
included in the 10,267,172 shares of common stock being registered are 555,195
shares issuable to the Madelyn Mallory Revocable Trust u/a/d June 14, 2001
in
connection with our acquisition of Catalyst Financial Planning & Investment
Management, Inc., a California corporation, or Catalyst, on February 28, 2005
in
a private transaction. The release of these shares from escrow is contingent
on
the achievement of certain performance milestones and the satisfaction of other
contractual obligations.
Also
included in the 10,267,172 shares of common stock being registered are 359,583
shares issued to Ascend Services Ltd., an exempted company incorporated in
the
Cayman Islands with limited liability, or Ascend, in a private transaction
on
May 4, 2005 in connection with a stock purchase agreement we entered into with
Ascend. These shares, and the registration rights associated with them, were
acquired by San Francisco Equity Partners, a Delaware limited liability
partnership, in a private sale on June 7, 2005.
The
registration statement of which this prospectus forms a part relates to the
registration for the account of selling stockholders, of shares of common stock
and shares of common stock issuable upon conversion of convertible debentures
and exercise of warrants currently held by them. The shares being offered hereby
are being registered to permit public secondary trading and the selling
stockholders may offer all or part of the shares for resale from time to time
pursuant to contractual arrangements whereby we agreed to register the shares
of
the selling stockholders. However, the selling stockholders are under no
obligation to sell all or any portion of such shares nor are the selling
stockholders obligated to sell any shares immediately under this
prospectus.
The
mailing address of our principal executive offices is 600 California Street,
9th
Floor, San Francisco, California 94108. Our telephone number is (415) 248-5600
and our web site address is www.merrimanco.com. Information contained on our
web
site is not part of this prospectus.
Investing
in our securities involves a high degree of risk. In addition to the other
information contained in this annual report, including reports we incorporate
by
reference, you should consider the following factors before investing in our
securities.
It
is difficult to evaluate our business and prospects because we have a limited
operating history.
We
began actively engaging in providing securities brokerage and investment banking
services in January 2002. This was an entirely new business for us, and was
a complete break with our previous business, the bandwidth brokerage business.
Accordingly, we have a limited operating history on which to base an evaluation
of our business and prospects. Our prospects must be considered in light of
the
risks, expenses and difficulties frequently encountered by fast growing
companies in their early stage of development. We cannot assure you that we
will
be successful in addressing these risks and our failure to do so could have
a
material adverse effect on our business and results of operations.
We
may not be able to maintain a positive cash flow and
profitability.
Our
ability to maintain a positive cash flow and profitability depends on our
ability to generate and maintain greater revenue while incurring reasonable
expenses. This, in turn, depends, among other things, on the development of
our
securities brokerage and investment banking business, and we may be unable
to
maintain profitability if we fail to do any of the following:
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establish,
maintain and increase our client base;
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manage
the quality of our services;
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compete
effectively with existing and potential competitors;
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further
develop our business activities;
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manage
expanding operations; and
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attract
and retain qualified personnel.
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We
cannot be certain that we will be able to sustain or increase a positive cash
flow and profitability on a quarterly or annual basis in the future. Our
inability to maintain profitability or positive cash flow could result in
disappointing financial results, impede implementation of our growth strategy
or
cause the market price of our common stock to decrease. Accordingly, we cannot
assure you that we will be able to generate the cash flow and profits necessary
to sustain our business expectations, which makes our ability to successfully
implement our business plan uncertain.
Because
we are a developing company, the factors upon which we are able to base our
estimates as to the gross revenue and the number of participating clients that
will be required for us to maintain a positive cash flow and any additional
financing that may be needed for this purpose are unpredictable. For these
and
other reasons, we cannot assure you that we will not require higher gross
revenue, and an increased number of clients, securities brokerage and investment
banking transactions, and/or more time in order for us to complete the
development of our business that we believe we need to be able to cover our
operating expenses, or obtain the funds necessary to finance this development.
It is more likely than not that our estimates will prove to be inaccurate
because actual events more often than not differ from anticipated events.
Furthermore, in the event that financing is needed in addition to the amount
that is required for this development, we cannot assure you that such financing
will be available on acceptable terms, if at all.
The
markets for securities brokerage and investment banking services are highly
competitive. If we are not able to compete successfully against current and
future competitors, our business and results of operations will be adversely
affected.
We
are engaged in the highly competitive financial services and investment
industries. We compete with large Wall Street securities firms, securities
subsidiaries of major commercial bank holding companies, U.S. subsidiaries
of
large foreign institutions, major regional firms, smaller niche players, and
those offering competitive services via the Internet. Many competitors have
greater personnel and financial resources than we do. Larger competitors are
able to advertise their products and services on a national or regional basis
and may have a greater number and variety of distribution outlets for their
products, including retail distribution. Discount and Internet brokerage firms
market their services through aggressive pricing and promotional efforts. In
addition, some competitors have much more extensive investment banking
activities than we do and therefore, may possess a relative advantage with
regard to access to deal flow and capital.
Increased
pressure created by any current or future competitors, or by our competitors
collectively, could materially and adversely affect our business and results
of
operations. Increased competition may result in reduced revenue and loss of
market share. Further, as a strategic response to changes in the competitive
environment, we may from time to time make certain pricing, service or marketing
decisions or acquisitions that also could materially and adversely affect our
business and results of operations. We cannot assure you that we will be able
to
compete successfully against current and future competitors. In addition, new
technologies and the expansion of existing technologies may increase the
competitive pressures on us.
We
may experience reduced revenue due to declining market volume, securities prices
and liquidity, which can also cause counterparties to fail to
perform.
Our
revenue may decrease in the event of a decline in the market volume of
securities transactions, prices or liquidity. Declines in the volume of
securities transactions and in market liquidity generally result in lower
revenue from trading activities and commissions. Lower price levels of
securities may also result in a reduction in our revenue from corporate finance
fees, as well as losses from declines in the market value of securities held
by
us in trading. Sudden sharp declines in market values of securities can result
in illiquid markets and the failure of counterparties to perform their
obligations, as well as increases in claims and litigation, including
arbitration claims from customers. In such markets, we may incur reduced revenue
or losses in our principal trading, market-making, investment banking, and
advisory services activities.
We
may experience significant losses if the value of our marketable security
positions deteriorates.
We
conduct securities trading, market-making and investment activities for our
own
account, which subjects our capital to significant risks. These risks include
market, credit, counterparty and liquidity risks, which could result in losses
for us. These activities often involve the purchase, sale or short sale of
securities as principal in markets that may be characterized as relatively
illiquid or that may be particularly susceptible to rapid fluctuations in
liquidity and price. Trading losses resulting from such trading could have
a
material adverse effect on our business and results of operations.
We
may experience significant fluctuations in our quarterly operating results
due
to the nature of our business and therefore may fail to meet profitability
expectations.
Our
revenue and operating results may fluctuate from quarter to quarter and from
year to year due to a combination of factors, including:
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the
level of institutional brokerage transactions and the level of commissions
we receive from those transactions;
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the
valuations of our principal investments;
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the
number of capital markets transactions completed by our clients,
and the
level of fees we receive from those transactions; and
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variations
in expenditures for personnel, consulting and legal expenses, and
expenses
of establishing new business units, including marketing and technology
expenses.
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We
record revenue from a capital markets advisory transaction only when we have
rendered the services, the client is contractually obligated to pay and
collection is probable; generally, most of the fee is earned only upon the
closing of a transaction. Accordingly, the timing of our recognition of revenue
from a significant transaction can materially affect our quarterly operating
results.
We
have registered one of our subsidiaries as a securities broker-dealer and,
as
such, are subject to substantial regulations. If we fail to comply with these
regulations, our business will be adversely affected.
Because
we have registered Merriman Curhan Ford & Co. with the Securities and
Exchange Commission, or SEC, and the National Association of Securities
Dealers, Inc., or NASD, as a securities broker-dealer, we are subject to
extensive regulation under federal and state laws, as well as self-regulatory
organizations. The principal purpose of regulation and discipline of
broker-dealers is the protection of customers and the securities markets rather
than protection of creditors and stockholders of broker-dealers. The Securities
and Exchange Commission is the federal agency charged with administration of
the
federal securities laws. Much of the regulation of broker-dealers, however,
has
been delegated to self-regulatory organizations, such as the NASD and national
securities exchanges. The NASD is our primary self-regulatory organization.
These self-regulatory organizations adopt rules, which are subject to SEC
approval, that govern the industry and conduct periodic examinations of member
broker-dealers. Broker-dealers are also subject to regulation by state
securities commissions in the states in which they are registered. The
regulations to which broker-dealers are subject cover all aspects of the
securities business, including net capital requirements, sales methods, trading
practices among broker-dealers, capital structure of securities firms, record
keeping and the conduct of directors, officers and employees. The SEC and the
self-regulatory bodies may conduct administrative proceedings, which can result
in censure, fine, suspension or expulsion of a broker-dealer, its officers
or
employees. If we fail to comply with these rules and regulations, our
business may be materially and adversely affected.
The
regulatory environment in which we operate is also subject to change. Our
business may be adversely affected as a result of new or revised legislation
or
regulations imposed by the SEC, other United States or foreign governmental
regulatory authorities or the NASD. We also may be adversely affected by changes
in the interpretation or enforcement of existing laws and rules by these
governmental authorities and the NASD.
Our
business may suffer if we lose the services of our executive officers or
operating personnel.
We
depend on the continued services and performance of D. Jonathan Merriman, our
Chairman and Chief Executive Officer, for our future success. We currently
have
an employment agreement with Mr. Merriman, which ends on January 1,
2007, but can be terminated by either party on 60 days' notice. The agreement
contains provisions that obligate us to make certain payments to
Mr. Merriman and substantially reduce vesting periods of options granted to
him if we should terminate him without cause or certain events resulting in
a
change of control of our Board were to occur.
In
addition to Mr. Merriman, we are currently managed by a small number of key
management and operating personnel. Our future success depends, in part, on
the
continued service of our key executive, management and technical personnel,
and
our ability to attract highly skilled employees. Our business could be harmed
if
any key officer or employee were unable or unwilling to continue in his or
her
current position. From time to time we have experienced, and we expect to
continue to experience, difficulty in hiring and retaining highly skilled
employees. Competition for employees in our industry is significant. If we
are
unable to retain our key employees or attract, integrate or retain other highly
qualified employees in the future, such failure may have a material adverse
effect on our business and results of operations.
Our
business is dependent on the services of skilled professionals, and may suffer
if we can not recruit or retain such skilled
professionals.
During
2005, one sales professional accounted for 12% of our revenue. We have a number
of revenue producers employed by our securities brokerage and investment banking
subsidiary. We do not have employment contracts with these employees. The loss
of one or more of these employees could adversely affect our business and
results of operations.
Our
compensation structure may negatively impact our financial condition if we
are
not able to effectively manage our expenses and cash
flows.
We
are able to recruit and retain investment banking, research and sales and
trading professionals, in part because our business model provides that we
pay
our revenue producing employees a percentage of their earned revenue.
Compensation and benefits is our largest expenditure and this variable
compensation component represents a significant proportion of this expense.
Compensation for our employees is derived as a percentage of our revenue
regardless of our profitability. Therefore, we may continue to pay individual
revenue producers a significant amount of cash compensation as the overall
business experiences negative cash flows and/or net losses. We may not be able
to recruit or retain revenue producing employees if we modify or eliminate
the
variable compensation component from our business model.
We
may be dependent on a limited number of customers for a significant portion
of
our revenue.
During
2005, no single customer accounted for more than 10% of our revenue. However,
we
have been dependent on one customer, or on a small number of customers, for
a
large percentage of our revenue at some times in the past and we cannot assure
you that we will not become so dependent again in the future. If we do become
dependent on a single customer or small group of customers, the loss of one
or
more large customers could materially adversely affect our business and results
of operations.
We
may suffer losses through our investments in securities purchased in secondary
market transactions or private placements.
Occasionally,
our company, its officers and/or employees may make principal investments in
securities through secondary market transactions or through direct investment
in
companies through private placements. In many cases, employees and officers
with
investment discretion on behalf of our company decide whether to invest in
our
company's account or their personal account. It is possible that gains from
investing will accrue to these individuals because investments were made in
their personal accounts, and our company will not realize gains because it
did
not make an investment. Conversely, it is possible that losses from investing
will accrue to our company, while these individuals do not experience losses
in
their personal accounts because the individuals did not make investments in
their personal accounts.
We
may be unable to successfully integrate acquired businesses into our existing
business and operations.
On
February 28, 2005, we acquired Catalyst Financial Planning &
Investment Management, Inc., a registered investment advisor with over $100
million in assets under management at the time of acquisition. We may experience
difficulty integrating the operations of Catalyst into our existing business
and
operations including our accounting, finance, compensation, information systems.
We may not be able to retain the services of Catalyst employees. These factors
could result in higher than anticipated costs associated with the Catalyst
acquisition. Additionally, they may cause revenue from the Catalyst acquisition
to be lower than forecast. If costs are higher or revenue lower than we expect,
our business and results of operations could be materially adversely affected.
Although we have no specific plans to do so at this time, we may buy one or
more
other businesses in the future. If we are unable to successfully integrate
such
businesses into our existing business and operations in the future, our business
and results of operations could be materially adversely affected
We
may be unable to effectively manage rapid growth that we may experience, which
could place a continuous strain on our resources and, accordingly, adversely
affect our business.
We
plan to expand our operations. Our growth, if it occurs, will impose significant
demands on our management, financial, technical and other resources. We must
adapt to changing business conditions and improve existing systems or implement
new systems for our financial and management controls, reporting systems and
procedures and expand, train and manage a growing employee base in order to
manage our future growth. We may not be able to implement improvements to our
internal reporting systems in an efficient and timely manner and may discover
deficiencies in existing systems and controls. We believe that future growth
will require implementation of new and enhanced communications and information
systems and training of our personnel to operate such systems. Furthermore,
we
may acquire existing companies or enter into strategic alliances with third
parties, in order to achieve rapid growth. For us to succeed, we must make
our
existing business and systems work effectively with those of any strategic
partners without undue expense, management distraction or other disruptions
to
our business. We may be unable to implement our business plan if we fail to
manage any of the above growth challenges successfully. Our financial results
may suffer and we could be materially and adversely affected if that
occurs.
Our
business and operations would suffer in the event of system
failures.
Our
success, in particular our ability to successfully facilitate securities
brokerage transactions and provide high-quality customer service, largely
depends on the efficient and uninterrupted operation of our computer and
communications systems. Our systems and operations are vulnerable to damage
or
interruption from fire, flood, power loss, telecommunication failures,
break-ins, earthquake and similar events. Despite the implementation of network
security measures, redundant network systems and a disaster recovery plan,
our
servers are vulnerable to computer viruses, physical or electronic break-ins
and
similar disruptions, which could lead to interruptions, delays, loss of data
or
the inability to accept and fulfill customer orders. Additionally, computer
viruses may cause our systems to incur delays or other service interruptions,
which may cause us to incur additional operating expenses to correct problems
we
may experience. Any of the foregoing problems could materially adversely affect
our business or future results of operations.
We
are highly dependent on proprietary and third-party systems; therefore, system
failures could significantly disrupt our business.
Our
business is highly dependent on communications and information systems,
including systems provided by our clearing brokers. Any failure or interruption
of our systems, the systems of our clearing broker or third party trading
systems could cause delays or other problems in our securities trading
activities, which could have a material adverse effect on our operating
results.
In
addition, our clearing brokers provide our principal disaster recovery system.
We cannot assure you that we or our clearing brokers will not suffer any systems
failure or interruption, including one caused by an earthquake, fire, other
natural disaster, power or telecommunications failure, act of God, act of war
or
otherwise, or that our or our clearing brokers' back-up procedures and
capabilities in the event of any such failure or interruption will be
adequate.
Our
common stock price may be volatile, which could adversely affect the value
of
your shares.
The
market price of our common stock has in the past been, and may in the future
continue to be, volatile. A variety of events may cause the market price of
our
common stock to fluctuate significantly, including:
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variations
in quarterly operating results;
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our
announcements of significant contracts, milestones,
acquisitions;
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our
relationships with other companies;
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our
ability to obtain needed capital commitments;
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additions
or departures of key personnel;
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sales
of common stock, conversion of securities convertible into common
stock,
exercise of options and warrants to purchase common stock or termination
of stock transfer restrictions;
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general
economic conditions, including conditions in the securities brokerage
and
investment banking markets;
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changes
in financial estimates by securities analysts; and
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fluctuation
in stock market price and volume.
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Many
of these factors are beyond our control. Any one of the factors noted herein
could have an adverse effect on the value of our common stock.
In
addition, the stock market in recent years has experienced significant price
and
volume fluctuations that have particularly affected the market prices of equity
securities of many companies and that often have been unrelated to the operating
performance of such companies. These market fluctuations have adversely impacted
the price of our common stock in the past and may do so in the
future.
Our
risk management policies and procedures may leave us exposed to unidentified
or
unanticipated risk.
Our
risk management strategies and techniques may not be fully effective in
mitigating our risk exposure in all market environments or against all types
of
risk.
We
are exposed to the risk that third parties that owe us money, securities or
other assets will not perform their obligations. These parties may default
on
their obligations to us due to bankruptcy, lack of liquidity, operational
failure, breach of contract or other reasons. We are also subject to the risk
that our rights against third parties may not be enforceable in all
circumstances. As a clearing member firm, we finance our customer positions
and
could be held responsible for the defaults or misconduct of our customers.
Although we regularly review credit exposures to specific clients and
counterparties and to specific industries and regions that we believe may
present credit concerns, default risk may arise from events or circumstances
that are difficult to detect or foresee. In addition, concerns about, or a
default by, one institution could lead to significant liquidity problems, losses
or defaults by other institutions, which in turn could adversely affect us.
If
any of the variety of instruments, processes and strategies we utilize to manage
our exposure to various types of risk are not effective, we may incur
losses.
We
could be sued in a securities class action lawsuit.
In
the past, following periods of volatility in the market price of a company's
securities, securities class action litigation often has been instituted against
that company. Such litigation is expensive and diverts management's attention
and resources. We can not assure you that we will not be subject to such
litigation. If we are subject to such litigation, even if we ultimately prevail,
our business and financial condition may be adversely affected.
Your
ability to sell your shares may be restricted because there is a limited trading
market for our common stock.
Although
our common stock is currently traded on the American Stock Exchange, an active
trading market in our stock has been limited. Accordingly, you may not be able
to sell your shares when you want or at the price you want.
Anti-takeover
provisions of the Delaware General Corporation Law could discourage a merger
or
other type of corporate reorganization or a change in control even if it
could be favorable to the interests of
our stockholders.
The
Delaware General Corporation Law contains provisions that may enable our
management to retain control and resist our takeover. These provisions generally
prevent us from engaging in a broad range of business combinations with an
owner
of 15% or more of our outstanding voting stock for a period of three years
from
the date that such person acquires his or her stock. Accordingly, these
provisions could discourage or make more difficult a change in control or a
merger or other type of corporate reorganization even if it could be favorable
to the interests of our stockholders.
Because
our Board of Directors can issue common stock without stockholder approval,
you
could experience substantial dilution.
Our
Board of Directors has the authority to issue up to 300,000,000 shares of common
stock and to issue options and warrants to purchase shares of our common stock
without stockholder approval in certain circumstances. Future issuance of
additional shares of our common stock could be at values substantially below
the
price at which you may purchase our stock and, therefore, could represent
substantial dilution. In addition, our Board of Directors could issue large
blocks of our common stock to fend off unwanted tender offers or hostile
takeovers without further stockholder approval.
Our
ability to issue additional preferred stock may adversely affect your rights
as
a common stockholder and could be used as an anti take-over
device.
Our
Articles of Incorporation authorize our Board of Directors to issue up to an
additional 27,450,000 shares of preferred stock, without approval from our
stockholders. If you hold our common stock, this means that our Board of
Directors has the right, without your approval as a common stockholder, to
fix
the relative rights and preferences of the preferred stock. This would affect
your rights as a common stockholder regarding, among other things, dividends
and
liquidation. We could also use the preferred stock to deter or delay a change
in
control of our company that may be opposed by our management even if the
transaction might be favorable to you as a common stockholder.
Our
officers and directors exercise significant control over our affairs, which
could result in their taking actions of which other stockholders do not
approve.
Our
executive officers and directors, and entities affiliated with them, currently
control approximately 23% of our outstanding common stock including exercise
of
their options and warrants. These stockholders, if they act together, will
be
able to exercise substantial influence over all matters requiring approval
by
our stockholders, including the election of directors and approval of
significant corporate transactions. This concentration of ownership may also
have the effect of delaying or preventing a change in control of us and might
affect the market price of our common stock.
Any
exercise of outstanding stock options and warrants will dilute then-existing
stockholders' percentage of ownership of our common
stock.
We
have a significant number of outstanding stock options and warrants. During
2005, shares issuable upon the exercise of these options and warrants, at prices
ranging currently from approximately $0.05 to $1.24 per share, represent
approximately 15% of
our total outstanding stock on a fully diluted basis using the treasury stock
method.
The
exercise of the outstanding options and warrants would dilute the then-existing
stockholders' percentage ownership of our common stock. Any sales resulting
from
the exercise of options and warrants in the public market could adversely affect
prevailing market prices for our common stock. Moreover, our ability to obtain
additional equity capital could be adversely affected since the holders of
outstanding options and warrants may exercise them at a time when we would
also
wish to enter the market to obtain capital on terms more favorable than those
provided by such options and warrants. We lack control over the timing of any
exercise or the number of shares issued or sold if exercises occur.
We
will not receive proceeds from the sale of shares by our stockholders or the
resale of our stockholders' shares that are issued when our convertible
debentures are converted or our warrants are exercised. However, we will receive
proceeds from the exercise of our warrants, if and when they are exercised,
unless they are exercised pursuant to a provision in the warrants which allows
for a "cashless exercise" for a smaller number of shares if at any time after
March 7, 2007 the registration statement of which this prospectus forms a part
is not effective and there is no other effective registration statement which
registers the shares issuable on exercise of such warrants.
We
intend to use any proceeds we receive from warrant exercises for general
corporate purposes.
The
registration statement, of which this prospectus forms a part, relates to the
registration for the account of selling stockholders of an aggregate of
10,267,172 shares of common stock. The following table sets forth the names
of
the selling stockholders, the number of shares of common stock beneficially
owned by them as of May 1, 2006, the number of shares of common stock being
offered by them, the number of shares of common stock each selling stockholder
will beneficially own if the stockholder sells all of the shares being
registered and the selling stockholder's percentage ownership of our common
stock if all the shares in the offering are sold. The shares being offered
hereby are being registered to permit public secondary trading and the selling
stockholders may offer all or part of the shares for resale from time to time.
However, the selling stockholders are under no obligation to sell all or any
portion of such shares, nor are the selling stockholders obligated to sell
any
shares immediately, under this prospectus. All information with respect to
share
ownership has been furnished by the selling stockholders. Because the selling
stockholders may sell all or part of their shares, no estimates can be given
as
to the number of shares of common stock that will be held by the selling
stockholders upon termination of any offering made hereby.
The
shares being offered for resale by the selling stockholders consist of shares
of
common stock currently owned by them and common stock issuable upon conversion
of their convertible debentures and exercise of their warrants.
Of
the 10,267,172 shares of common stock being registered, 6,914,894 are issuable
upon the conversion of a convertible debenture issued to Midsummer Investment,
in a private transaction which closed on March 7, 2006. Of these shares,
5,319,149 are currently issuable upon conversion of the debenture, and an
additional 1,595,745 shares are issuable only upon the occurrence of certain
events, such as if the issuance by us of additional shares of common stock
at a
price of less than $1.41 per share. An additional 2,437,500 of the shares of
common stock being registered are issuable upon exercise of warrants issued
to
Midsummer Investment in connection with that transaction. These warrants carry
an exercise price of $1.41 per share and expire if not exercised by March 7,
2012. Of these shares, 1,875,000 are currently issuable upon exercise of
warrants, and an additional 562,500 shares are issuable only upon the occurrence
of certain events, such as if the issuance by us of additional shares of common
stock at a price of less than $1.41 per share.
Also
included in the 10,267,172 shares of common stock being registered are 555,195
shares issuable to the Madelyn Mallory Revocable Trust u/a/d June 14, 2001
in
connection with our acquisition of Catalyst on February 28, 2005 in a private
transaction. The release of these shares from escrow is contingent on the
achievement of certain performance milestones and the satisfaction of other
contractual obligations.
Also
included in the 10,267,172 shares of common stock being registered are 359,583
shares issued to Ascend Services Ltd., an exempted company incorporated in
the
Cayman Islands with limited liability in a private transaction on May 4, 2005
in
connection with a stock purchase agreement we entered into with Ascend. These
shares, and the registration rights associated with them, were acquired by
San
Francisco Equity Partners, a Delaware limited liability partnership, in a
private sale on June 7, 2005.
We
believe, based on information supplied by the selling stockholders, that except
as may otherwise be indicated in the notes to the table below, each of them
has
sole voting and investment power with respect to the shares of common stock
owned by them and issuable upon exercise of the warrants.
To
our knowledge, none of the selling stockholders has had any position with,
held
any office of, or had any other material relationship with us, except (i) Ms.
Mallory is currently a member of the Board of Directors of our subsidiary,
MCF
Wealth Management, LLC.; and (ii) the managing member of San Francisco Equity
Partners, Scott Potter, is currently a member of our Board of Directors, though
he disclaims beneficial ownership of the shares subject to this
registration.
We
have determined beneficial ownership in accordance with the rules of the
Securities and Exchange Commission, which generally includes voting or
investment power with respect to securities and also includes common stock
issuable upon conversion of notes and preferred stock and exercise of warrants
and options that are convertible and/or exercisable within 60 days of the date
hereof. Percentage calculations are based upon 73,299,581 shares of our common
stock outstanding as of May 1, 2006.
|
Name
of Selling
Stockholder
|
|
Common
Stock
Owned
Prior to Offering (1)
|
|
Percent
of Stock
Owned
Prior
to
Offering (1)
|
|
Common
Stock
Offered
(1)
|
|
Common
Stock
Owned
After
Offering
(1)(2)
|
|
Percent
of Common
Stock
Owned After
Offering
(1)(2)
|
|
|
Midsummer
Investment Ltd.
|
|
|
0
|
|
|
0
|
%
|
|
9,352,394(3
|
)
|
|
9,352,394(3
|
)
|
|
12.8
|
%
|
|
Madelyn
Mallory Revocable Trust u/a/d
June
14, 2001
|
|
|
12,500
|
|
|
*
|
|
|
555,195
|
|
|
567,695
|
|
|
*
|
|
|
San
Francisco Equity Partners
|
|
|
6,000,001
|
|
|
8.2
|
%
|
|
359,583
|
|
|
6,359,584
|
|
|
8.7
|
%
|
|
Total
(4)
|
|
|
6,012,501
|
|
|
8.2
|
%
|
|
10,267,172
|
|
|
16,279,673
|
|
|
22.2
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| * |
|
Less
than 1% |
|
(1)
|
|
This
information is based on information provided to us by the selling
stockholder.
|
|
(2)
|
|
Assumes
the sale of all shares offered in this
prospectus.
|
|
(3)
|
|
Includes
6,914,894 shares of common stock issuable to Midsummer Investment
Ltd.
upon conversion of convertible debentures and 2,437,500 shares of
common
stock issuable to Midsummer Investment Ltd. upon exercise of warrants
that
are exercisable within 60 days of the date of this prospectus. Midsummer
Capital, LLC is the investment manager to Midsummer Investment Ltd.
By
virtue of such relationship, Midsummer Capital, LLC may be deemed
to have
dispositive power over the shares owned by Midsummer Investment Ltd.
Midsummer Capital, LLC disclaims beneficial ownership of such shares.
Mr.
Michel Amsalem and Mr. Scott Kaufman have delegated authority from
the
members of Midsummer Capital, LLC with respect to the shares of common
stock owned by Midsummer Investment Ltd. Messrs. Amsalem and Kaufman
may
be deemed to share dispositive power over the shares of our common
stock
owned by Midsummer Investment Ltd. Messrs. Amsalem and Kaufman disclaim
beneficial ownership of such shares of our common stock and neither
person
has any legal right to maintain such delegated
authority.
|
|
(5)
|
|
Includes
shares of our common stock held by the selling stockholders, as well
as
common stock issuable upon conversion of convertible debentures and
exercise of warrants that are convertible or exercisable within 60
days of
the date hereof.
|
The
selling stockholders may sell shares of our common stock offered by this
prospectus from time to time to purchasers directly by them in one or more
transactions at a fixed price, which may be changed, or at varying prices
determined at the time of sale or at negotiated prices. Such prices will be
determined by the holders of such securities or by agreement between such
holders and underwriters or dealers who may receive fees or commissions in
connection with such sales.
Each
of the selling stockholders may, from time to time, offer shares of our common
stock beneficially owned by him or her through underwriters, dealers or agents,
who may receive compensation in the form of underwriting discounts, commissions
or concessions from the selling stockholder and the purchasers of the shares
for
whom they may act as agent. Each of the selling stockholders will be responsible
for payment of any commissions, concessions and discounts of underwriters,
dealers or agents. The aggregate proceeds to the selling stockholders from
the
sale of the shares of our common stock offered by them will be the purchase
price of such shares less discounts and commissions, if any. Each of the selling
stockholders reserves the right to accept and, together with his or her agents,
from time to time to reject, in whole or in part, any proposed purchase of
shares to be made directly or through agents. Alternatively, the selling
stockholders may sell all or a portion of the shares of our common stock
beneficially owned by them and offered from time to time on any exchange on
which the securities are listed on terms to be determined at the times of such
sales. The selling stockholders may also make private sales directly or through
a broker or brokers.
From
time to time, the selling stockholders may transfer, pledge, donate or assign
shares of our common stock to lenders or others. The number of shares
beneficially owned by a selling stockholder who transfers, pledges, donates
or
assigns shares of our common stock will decrease as and when he or she takes
such actions. The plan of distribution for shares sold under this prospectus
will otherwise remain unchanged, except that the transferees, pledgees, donees
or other successors will be selling stockholders under this prospectus and
may
sell their shares in the same manner as the selling stockholders.
A
selling stockholder may enter into hedging transactions with broker-dealers,
and
the broker-dealers may engage in short sales of the shares of our common stock
in the course of hedging the positions they assume with such selling
stockholder, including in connection with the distribution of the shares of
our
common stock by such broker-dealers. The selling stockholders may also enter
into options or other transactions with broker-dealers that involve the delivery
of the shares of our common stock to the broker-dealers, who may then resell
or
otherwise transfer such shares. The selling stockholders may also loan or pledge
the shares to a broker-dealer and the broker-dealer may sell the shares as
loaned or upon a default may sell or otherwise transfer the pledged
shares.
The
selling stockholders and any underwriters, dealers or agents that participate
in
the distribution of the shares of our common stock offered by this prospectus
may be deemed to be underwriters within the meaning of the Securities Act,
and
any discounts, commissions or concessions received by them and any provided
pursuant to the sale of shares by them might be deemed to be underwriting
discounts and commissions under the Securities Act of 1933 (the “Securities
Act”).
In
addition, any securities covered by this prospectus, which qualify for sale
pursuant to Rule 144 or Rule 144A of the Securities Act, may be sold under
Rule
144 or Rule 144A rather than pursuant to this prospectus. We cannot assure
you
that any selling stockholder will sell any or all of the shares of our common
stock described in this prospectus, and any selling stockholder may transfer,
devise or gift such securities by other means not described in this
prospectus.
If
necessary, we will set forth the specific shares of our common stock to be
sold
in this prospectus, the names of the selling stockholders, the respective
purchase prices and public offering prices, the name of any agent, dealer or
underwriter, and any applicable commissions or discounts with respect to a
particular offer in an accompanying prospectus supplement or, if appropriate,
a
post-effective amendment to the registration statement of which this prospectus
is a part.
We
will pay substantially all of the expenses incurred by the selling stockholders
and us incident to the offering and sale of the shares of our common stock
pursuant to this prospectus.
Under
the Exchange Act of 1934 (the “Exchange Act”) and the regulations thereunder,
any person engaged in the distribution of shares of common stock, or securities
convertible into common stock, offered by this prospectus may not simultaneously
engage in market-making activities with respect to the common stock during
the
applicable “cooling off” period prior to the commencement of this distribution.
In addition, and without limiting the foregoing, the selling stockholders will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation Regulation M promulgated
under the Exchange Act, in connection with transactions in the shares, which
provisions may limit the timing of purchases and sales of shares of common
stock
by the selling stockholders.
Sales
of any shares of common stock by the selling stockholders may depress the price
of the Company's common stock.
The
following section does not purport to be complete and is qualified in all
respects by reference to the detailed provisions of our certificate of
incorporation and by-laws, as amended, incorporated herein by reference to
copies of which have been filed with the Securities and Exchange
Commission.
Capital
Stock
Our
authorized capital stock consists of 300 million shares of common stock, $0.0001
par value per share, and 60 million shares of preferred stock, $0.0001 par
value
per share.
Common
Stock
Under
our certificate of incorporation, our Board of Directors is authorized, subject
to limitations prescribed by law and certain rules of the American Stock
Exchange, without further stockholder approval, from time to time to issue
up to
an aggregate of 300 million shares of common stock. There
were 73,299,581shares issued and outstanding as of May 1, 2006. Holders of
our common stock are entitled to:
|
|
·
|
|
share
in all dividends that our Board of Directors, in its discretion,
declares
from legally available funds; and
|
|
|
·
|
|
participate
pro rata in all assets subject to the prior rights of creditors and
holders of any preferred stock, in the event of our liquidation,
dissolution or winding up.
|
Holders
of our common stock have no cumulative voting rights and no conversion,
preemptive or other subscription rights, and there are no redemption provisions
applicable to our common stock.
We
have reserved an aggregate of 32,600,000 shares of our common stock for issuance
to directors, officers and other key employees pursuant to six stock option
plans and one employee stock purchase plan. As of December 31, 2005, we have
issued options to purchase 23,270,046 shares of our common stock under these
plans of which options to purchase 18,745,626 shares of our common stock are
currently exercisable. The exercise prices of these options range from $0.05
per
share to $7.00 per share.
In
addition, we have warrants that are exercisable for an aggregate of 4,644,616
shares of our common stock, which includes warrants to purchase 1,875,000 issued
to Midsummer Investment, Ltd.
Preferred
Stock
Our
Board of Directors has the authority, without further stockholder approval,
to
issue up to an aggregate of 60 million shares of preferred stock in one or
more
series. Each series may have different rights, preferences and designations
and
qualifications, limitations and restrictions. There are currently no shares
of
preferred stock issued and outstanding.
Our
amended certificate of incorporation authorizes our Board of Directors, without
any vote or action by the holders of our common stock, to issue preferred stock
from time to time in one or more series. Our Board of Directors is authorized
to
determine the number of shares and to fix the:
|
|
·
|
|
designations,
|
|
|
|
|
|
|
|
·
|
|
preferences,
and
|
| |
|
|
|
|
|
·
|
|
relative,
participating, optional or other special
rights
|
of
any series of preferred stock. Depending on the terms established by our Board
of Directors, any or all series of preferred stock could have preference over
the common stock with respect to dividends and other distributions and upon
our
liquidation as well as other matters.
Transfer
Agent and Registrar
The
transfer agent and registrar for our common stock is OTC Stock Transfer, Inc.,
Salt Lake City, Utah.
The
validity of the securities offered by this prospectus will be passed upon for
us
by Fish & Richardson P.C., Redwood City, California.
The
consolidated financial statements of MCF Corporation appearing in MCF
Corporation's Annual Report (Form 10-K) for the year ended December 31, 2005,
and MCF Corporation's management's assessment of the effectiveness of internal
control over financial reporting as of December 31, 2005 included therein,
have
been audited by Ernst & Young LLP, independent registered public accounting
firm, as set forth in their reports thereon, included therein, and incorporated
herein by reference. Such consolidated financial statements and management's
assessment are incorporated herein by reference in reliance upon such reports
given on the authority of such firm as experts in accounting and
auditing.
Information
with respect to the registrant which is called for in Item 11 of Form S-1 has
been incorporated by reference to documents previously filed with the Securities
and Exchange Commission. See “Incorporation of Certain Information by Reference”
below.
Issuance
of Convertible Debenture and Stock Warrants
On
March 7, 2006, we completed a $7.5 million private placement of a variable
rate
secured convertible debenture. The issue was placed with Midsummer Investment,
Ltd. We invested the proceeds in one of our proprietary funds managed by MCF
Asset Management, LLC. Interest on the debenture will be based on the annual
investment performance of the funds.
The
debenture is convertible into our common stock at a conversion price of $1.41
per share. Midsummer Investment may elect to convert the debenture into our
common stock at the conversion price at any time following the closing date.
The
maturity date of the notes is December 31, 2010. Stock warrants to purchase
1,875,000 shares of common stock at $1.41 per share were also issued to the
investor. The stock warrants have a six year term.
The
following unaudited pro forma condensed consolidated statement of financial
condition as of December 31, 2005 is based upon our historical consolidated
statement of financial condition. It is prepared as if the $7.5 million private
placement transaction and the related investment in one of our proprietary
funds
managed by MCF Asset Management, LLC had taken place on December 31, 2005.
As
permitted by the rules and regulations of the SEC, the unaudited pro forma
statement of financial condition information is presented on a condensed basis.
We did not include pro forma Consolidated Statement of Operations because the
related interest expense on the debenture will be based on the annual investment
performance of the funds which cannot be estimated at this time. Because
interest expense is based on the future annual investment performance of the
funds, the amount of such interest could be as low as a deminimus
amount to one that could be significant to our overall interest expense.
Unaudited
Pro Forma Condensed Consolidated Statement of Financial
Condition
As
of December 31, 2005
|
|
|
|
|
Pro
Forma
|
|
Pro
Forma
|
|
|
|
|
Historical
|
|
Adjustments
|
|
Adjusted
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
11,138,923
|
|
$
|
7,500,000(a
|
)
|
$
|
18,638,923
|
|
|
Securities
owned:
|
|
|
|
|
|
|
|
|
|
|
|
Marketable,
at fair value
|
|
|
8,627,543
|
|
|
—
|
|
|
8,627,543
|
|
|
Not
readily marketable, at estimated fair value
|
|
|
1,065,743
|
|
|
|
|
|
1,065,743
|
|
|
Restricted
cash
|
|
|
627,606
|
|
|
|
|
|
627,606
|
|
|
Due
from clearing broker
|
|
|
973,138
|
|
|
|
|
|
973,138
|
|
|
Accounts
receivable, net
|
|
|
2,073,195
|
|
|
|
|
|
2,073,195
|
|
|
Equipment
and fixtures, net
|
|
|
1,378,235
|
|
|
|
|
|
1,378,235
|
|
|
Prepaid
expenses and other assets
|
|
|
1,810,030
|
|
|
150,000(b
|
)
|
|
1,960,030
|
|
|
Total
assets
|
|
$
|
27,694,413
|
|
$
|
7,650,000
|
|
$
|
35,344,413
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
901,138
|
|
$
|
150,000(b
|
)
|
$
|
1,051,138
|
|
|
Commissions
and bonus payable
|
|
|
4,735,892
|
|
|
|
|
|
4,735,892
|
|
|
Accrued
expenses
|
|
|
2,201,499
|
|
|
|
|
|
2,201,499
|
|
|
Due
to clearing and other brokers
|
|
|
118,798
|
|
|
|
|
|
118,798
|
|
|
Securities
sold, not yet purchased
|
|
|
41,579
|
|
|
|
|
|
41,579
|
|
|
Capital
lease obligation
|
|
|
883,993
|
|
|
|
|
|
883,993
|
|
|
Convertible
notes payable, net
|
|
|
176,741
|
|
|
6,255,376(c
|
)
|
|
6,432,117
|
|
|
Notes
payable
|
|
|
231,772
|
|
|
|
|
|
231,772
|
|
|
Total
liabilities
|
|
|
9,291,412
|
|
|
6,405,376
|
|
|
15,696,788
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.0001 par value; 300,000,000 shares authorized; 71,467,118
and
68,648,627 shares issued and outstanding as of December 31, 2005 and
2004, respectively
|
|
|
7,147
|
|
|
|
|
|
7,147
|
|
|
Additional
paid-in capital
|
|
|
111,725,167
|
|
|
1,244,624(d
|
)
|
|
112,969,791
|
|
|
Deferred
compensation
|
|
|
(3,146,839
|
)
|
|
|
|
|
(3,146,839
|
|
|
Accumulated
deficit
|
|
|
(90,182,474
|
)
|
|
|
|
|
(90,182,474
|
)
|
|
Total
stockholders' equity
|
|
|
18,403,001
|
|
|
1,244,624
|
|
|
19,647,625
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
27,694,413
|
|
$
|
7,650,000
|
|
|
35,344,413
|
|
Notes
to Unaudited Pro Forma Condensed Consolidated Statement of Financial
Condition
|
(a)
|
The
proceeds from the $7.5 million convertible debenture were initially
invested in cash in one of our proprietary funds managed by MCF Asset
Management, LLC.
|
|
|
|
|
(b)
|
Estimated
debt issuance costs, which included legal, accounting and printing
costs
related to the private placement transaction and the preparation
of this
registration statement.
|
|
|
|
|
(c)
|
The
$7.5 million convertible debenture was recorded net of discounts
resulting
from the relative fair value of the stock warrants totaling $1,244,624.
The discount will be amortized over the five-year term on a straight-line
basis. The amortization of the discount will be recorded as additional
interest expense.
|
|
|
|
|
(d)
|
The
increase in additional paid-in capital represents the discount resulting
from the relative fair value of the stock warrants totaling $1,244,624,
partially offset by the debt issuance
costs.
|
Note
Receivable from Ascend Services Ltd.
In
May 2005, we entered into a stock purchase agreement with Ascend Services Ltd.,
or Ascend. We issued 1,078,749 shares of our common stock and Ascend issued
to
an unsecured promissory note payable to us in the amount of $1.5 million. The
shares were initially held in escrow. Upon Ascend achieving specified milestones
related to its credit standing, the 1,078,749 shares of common stock would
be
released from escrow in three installments of 359,583 shares each and provided
to Ascend. Upon satisfaction of the conditions specified in the escrow agreement
and simultaneous with the release of the related stock certificates, the related
amount of the promissory note became effective and started accruing interest.
The promissory note accrues interest at 10% per annum and matured on
February 28, 2006.
Ascend
attempted to raise capital financing in order to enter the reinsurance business.
In May 2005, we released the first installment of 359,583 shares of common
stock to Ascend while the related promissory note with a face value of $500,000
became effective. In December 2005, we learned that Ascend had not been
able to execute on their business plan and will not have the financial resources
to repay the $500,000 note receivable at maturity. As a result, we recorded
a
charge to other operating expense in 2005 to write-off the $500,000 note
receivable balance. In February 2006, Ascend defaulted on the repayment of
the
note receivable. The remaining 719,166 shares of common stock were returned
to
us from escrow on February 28, 2006.
In
April 2006, we entered into a settlement agreement with Ascend Holdings Ltd.,
Ascend Services Ltd., and other parties with debt obligations from the Ascend
group of companies. A private equity firm acquired all of the assets of the
Ascend group of companies and as a term of that acquisition satisfied the legacy
debt obligations of the Ascend group of companies, including our $500,000 note
receivable. As a result, we reversed the $500,000 charge to write-off the note
receivable balance in April 2006 upon the receipt of $500,000.
The
Securities and Exchange Commission allows us to incorporate by reference the
information we file with it, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus. We
incorporate by reference the documents listed below.
|
(a)
|
|
Annual
Report on Form 10-K for our fiscal year ended December 31, 2005 filed
February 16, 2006;
|
|
(b)
|
|
Current
Report on Form 8-K filed on February 16, 2006 relating to the release
of
earnings for the quarter ended December 31,
2005;
|
|
(c)
|
|
Current
Report on Form 8-K filed on March 8, 2006 relating to the issuance
of $7.5
million of convertible debentures convertible into common stock and
the
issuance of warrants to purchase 1,875,000 shares common stock to
Midsummer Investment Ltd.;
|
|
|
|
|
|
(d)
|
|
The
Registrant's Notice of Annual Meeting and Proxy Statement filed on
March
30, 2006; and
|
|
(e)
|
|
The
Registrant's Registration Statement on Form 8-A12B filed with the
SEC on
April 17, 2000 as amended by the Registrant's Registration Statement
on
Form 8-A12B/A filed with the SEC on July 7, 2000, pursuant to Section
12
of the Securities Exchange Act of 1934, as amended (the “1934 Act”), in
which are described the terms, rights and provisions applicable to
the
Registrant's Common Stock.
|
A
copy of these filings will be provided at no cost to each person to whom a
prospectus is delivered, upon request by writing or orally to Christopher
Aguilar, general counsel, at the following address: MCF Corporation, 600
California Street, 9th
Floor, San Francisco, California 94108, telephone number (415) 248-5634. These
filings may also be accessed on our web site, the address of which is
www.merrimanco.com.
You
should rely only on the information incorporated by reference or provided in
this prospectus or any supplement. We have not authorized anyone else to provide
you with different information. You should not assume that the information
in
this prospectus or any supplement is accurate as of any date other than the
date
on the front of those documents.
for
Securities Act Liabilities
Delaware
General Corporation Law Section 145 provides for indemnification of directors
and officers in terms sufficiently broad to permit such indemnification, under
certain circumstances, for liabilities, including reimbursement for expenses
incurred, arising under the Securities Act. In addition, Delaware law provides
that a corporation may purchase and maintain insurance on behalf of an officer
or director against liability incurred by the officer or director as an officer
or director.
Our
Certificate of Incorporation and Amended Bylaws require that we indemnify our
directors and officers to the fullest extent allowed under Delaware law. Our
Amended Bylaws also provide that we may purchase and maintain insurance on
behalf of our officers and directors against any liability asserted against
them
as officers and directors. Currently, we carry directors and officers liability
insurance, which may insure against officer or director liability arising under
the Securities Act.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers, and controlling persons, or otherwise,
we
have been advised that in the opinion of the Commission this indemnification
is
against public policy as expressed in the Securities Act and the Exchange Act
and is, therefore, unenforceable.
We
have filed a registration statement on Form S-1 under the Securities Act with
the Securities and Exchange Commission with respect to the shares offered
hereby. This prospectus is filed as a part of the registration statement. It
does not contain all of the information included in the registration statement
and exhibits and we refer you to such omitted information. Statements made
in
this registration statement are summaries of the terms of these referenced
contracts, agreements or documents and are not necessarily complete. We refer
you to each exhibit for a more complete description of the matters involved
and
these statements shall be deemed qualified in their entirety by this
reference.
In
addition, we file annual, quarterly, and special reports, proxy statements,
and
other information with the Securities and Exchange Commission.
You
may read and copy our registration statement on Form S-1, the exhibits thereto,
any reports, statements and other information we file at the Securities and
Exchange Commission's public reference room at 100 F Street, N.E., Washington,
D.C. 20549. You may obtain information on the operation of the Public Reference
Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. Our
filings with Securities and Exchange Commission are also available on the
Securities and Exchange Commission's Internet site, which is
http://www.sec.gov.
|
No
dealer, salesman or any other person is authorized to give any information
or to represent anything not contained in this prospectus. You must
not
rely on any unauthorized information or representations. This prospectus
is an offer to sell these securities and it is not a solicitation
of an
offer to buy these securities in any state where the offer or sale
is not
permitted. The information contained in this Prospectus is current
only as
of this date.
|
|
7,829,672
SHARES OFFERED BY
SELLING
STOCKHOLDERS,
73,299,581 SHARES
CURRENTLY
OUTSTANDING
AND
2,437,500
SHARES ISSUABLE
UPON
EXERCISE OF WARRANTS
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|
|
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|
|
|
|
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MCF
CORPORATION
|
| |
|
|
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|
|
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PROSPECTUS
|
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|
|
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MAY 4,
2006
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