AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 23,
2010
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
MERRIMAN
CURHAN FORD GROUP, INC.
(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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11-2936371
(I.R.S.
Employer Identification Number)
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600
California Street, 9th Floor
San
Francisco, California 94108
(415)
248-5600
(Address,
including zip code, and telephone number, including area code,
of
registrant’s principal executive offices)
D.
Jonathan Merriman,
Chairman
of the Board and Chief Executive Officer
600
California Street, 9th Floor
San
Francisco, CA 94108
(Address,
including zip code, and telephone number, including area code, of agent for
service)
Copies
to:
Armando
Castro, Esq.
Reed
Smith LLP
1510
Page Mill Road, Suite 110
Palo
Alto, California 94304
(650)
352-0500
Approximate date of commencement of
proposed sale to the public: From time to time after the effective date
of this registration statement, as determined by the selling
stockholders.
If the
only securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following
box: ¨
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, as
amended, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. x
If this
Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. ¨
If this
Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act,
check the following box. ¨
Indicate
by check mark whether the registrant is an large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer”, “non-accelerated filer”
and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
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Large
accelerated filer ¨
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Accelerated
filer ¨
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Non-accelerated
filer ¨
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Smaller
reporting company x
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(Do
not check if a smaller reporting
company)
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CALCULATION
OF REGISTRATION FEE
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Title of each class
of securities to be
registered
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Amount to be
registered (1)
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Proposed
maximum offering
price per share (2)
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Proposed
maximum
aggregate offering
price (2)
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Amount of
registration fee
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Common
Stock, $0.0001 par value
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50,938,246 |
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$ |
0.87 |
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$ |
44,316,274.02 |
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$ |
3,159.75 |
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(1)
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Pursuant
to Rule 416 under the Securities Act of 1933, as amended (the “Securities
Act”), the shares being registered hereunder include such indeterminate
number of shares of the Registrant’s Common Stock as may be issuable with
respect to the shares being registered hereunder to prevent dilution by
reason of any stock dividend, stock split, recapitalization or other
similar transaction.
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(2)
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Estimated
solely for the purpose of calculating the amount of the registration fee
pursuant to Rule 457 (c) of the Securities Act. The
proposed maximum offering price per share and proposed maximum aggregate
offering price are based upon the average of the high ($0.90) and low
($0.84) sales prices of the Registrant’s Common Stock on February 22,
2010, as reported on the NASDAQ. The Registrant is not selling
any shares of Common Stock in this offering and therefore will not receive
any proceeds from this offering.
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The Registrant
hereby amends this Registration Statement on such date or dates as may be
necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to Section 8(a), may
determine.
The
information in this preliminary prospectus is not complete and may be
changed. The selling stockholders may not sell these securities until
the registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities,
and the selling stockholders are not soliciting offers to buy these securities,
in any state where the offer or sale of these securities is not
permitted
SUBJECT
TO COMPLETION, DATED FEBRUARY 23, 2010
PROSPECTUS
50,938,246
SHARES
MERRIMAN
CURHAN FORD GROUP, INC.
COMMON
STOCK
This
prospectus relates to the offering of up to 50,938,246 shares of our issued and
outstanding Common Stock by the selling stockholders identified in this
prospectus. The selling stockholders may, from time to time, sell,
transfer, or otherwise dispose of any or all of their shares of Common Stock and
at fixed, prevailing market, negotiated, or other prices as described in this
prospectus.
The
selling stockholders have advised the Company that they have not engaged any
person as an underwriter or selling agent for any of such shares, but they may
in the future elect to do so, and they will be responsible for paying such a
person or persons customary compensation for so acting. The selling
stockholders and any broker executing sell orders on behalf of any selling
stockholder may be deemed to be "underwriters" within the meaning of the
Securities Act, in which event commissions received by any such broker may be
deemed to be underwriting commissions under the Securities Act.
We are
not offering any shares of our Common Stock for sale under this prospectus, and
we will not receive any of the proceeds from the sale or other disposition of
the shares of our Common Stock by the selling stockholders.
Our
Common Stock is quoted on the NASDAQ under the symbol “MERR.” On February 22,
2010, the last reported sales price of our Common Stock, as reported on the
NASDAQ, was $0.84 per share.
INVESTING
IN OUR COMMON STOCK INVOLVES RISKS. SEE THE SECTION ENTITLED “RISK
FACTORS” BEGINNING ON PAGE 4 OF THIS PROSPECTUS. YOU ALSO SHOULD
CONSIDER THE RISK FACTORS DESCRIBED IN THE DOCUMENTS INCORPORATED BY REFERENCE
INTO THIS PROSPECTUS.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The
date of this prospectus is February __, 2010.
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Page
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About This
Prospectus
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1
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Prospectus Summary
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2
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Risk Factors
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4
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Cautionary Statement Concerning Forward-Looking
Information
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16
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Use of Proceeds
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16
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Selling Stockholders
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16
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Plan of Distribution
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18
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Experts
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20
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Legal Matters
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20
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Where You Can Find More
Information
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21
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Incorporation of Certain Documents by
Reference
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21
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ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement on Form S-3 that we filed with
the Securities and Exchange Commission (the “SEC”) using a “shelf” registration
or continuous offering process. Under this shelf process, certain selling
stockholders may from time to time sell the shares of Common Stock described in
this prospectus in one or more offerings.
You
should read this prospectus and the information and documents incorporated by
reference carefully. Such documents contain important information you should
consider when making your investment decision. See “Where You Can Find More
Information” and “Incorporation of Certain Documents by Reference” in this
prospectus.
You
should rely only on the information provided in this prospectus or documents
incorporated by reference into this prospectus. We have not, and the selling
stockholders have not, authorized anyone to provide you with different
information. The selling stockholders are offering to sell and seeking offers to
buy shares of our Common Stock only in jurisdictions in which offers and sales
are permitted. The information contained in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our Common Stock. You should not assume
that the information contained in this prospectus is accurate as of any date
other than the date on the front cover of this prospectus, or that the
information contained in any document incorporated by reference is accurate as
of any date other than the date of the document incorporated by reference,
regardless of the time of delivery of this prospectus or any sale of a
security.
In
this prospectus, we refer to Merriman Curhan Ford
Group, Inc. as “we,” “us,” “our,” the “Company” or “MCF.” Reference to “selling
stockholders” refers to those stockholders listed herein under “Selling
Stockholders,” who may sell shares from time to time as described in this
prospectus.
PROSPECTUS
SUMMARY
The
following is only a summary and therefore does not contain all of the
information you should consider before investing in our securities. We urge you
to read this entire prospectus, including the matters discussed under “Risk
Factors” in this prospectus and the more detailed consolidated financial
statements, notes to the consolidated financial statements and other information
incorporated by reference from our other filings with the Securities and
Exchange Commission.
Our
Company
We are a
financial services holding company that provides equity research, capital
markets services, corporate and venture services, and investment banking through
our primary operating subsidiary, Merriman Curhan Ford & Co. In
2009, we sold the operating assets of Panel Intelligence, LLC, which had been
our subsidiary dedicated to primary research, and discontinued operations of MCF
Asset Management, our subsidiary which managed investment products.
Merriman
Curhan Ford & Co. is an investment bank and securities broker-dealer focused
on fast-growing companies and institutional investors. Our mission is to become
a leader in the researching, advising, financing, trading and investing
in fast-growing companies under $1 billion in market capitalization. We
provide equity research, brokerage and trading services primarily to
institutions, as well as investment banking and advisory services to corporate
clients. We are attempting to gain market share by originating differentiated
research for our institutional investor clients and providing specialized and
integrated services for our fast-growing corporate clients.
In
January 2009, we entered into an agreement to sell the assets of Institutional
Cash Distributors (“ICD”), a division of Merriman Curhan Ford & Co., to a
group of investors who are also its employees in order to raise
capital. ICD is a broker of money market funds serving the short-term
investing needs of corporate finance departments at companies throughout the
United States and Europe. Completion of the sale is subject to
regulatory review and approval. When the sale is completed, we will
no longer include the results of its operations and its financial condition in
our financial statements.
Also in
January 2009, we sold the assets of our subsidiary Panel Intelligence, LLC
(“Panel”) which provides custom and published primary research to industry
clients and investment professionals through online panel discussions,
quantitative surveys and an extensive research library. We decided to
sell Panel to reduce our costs and to refocus on our core investment banking and
broker-dealer services.
We have
substantially liquidated MCF Asset Management, LLC, another subsidiary, which
manages absolute return investment products for institutional and high-net worth
clients. We no longer have, for all practical purposes, a subsidiary
dedicated to asset management. At December 31, 2009, we held an
immaterial amount of illiquid assets and were in the process of distributing
these to investors.
We are
headquartered in San Francisco, California with additional offices in New York,
NY. As of December 31, 2009, we had 94 employees, including employees of ICD,
which assets we are in the process of selling. Merriman Curhan Ford & Co. is
registered with the Securities and Exchange Commission as a broker-dealer and is
a member of Financial Industry Regulatory Authority (“FINRA”) and the Securities
Investors Protection Corporation (“SIPC”).
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.
Our website address is www.merrimanco.com. Information on our website is not
incorporated by reference into this prospectus and does not constitute part of
this prospectus.
Series
D Preferred Stock Financing
On
September 8, 2009, the Company issued 23,720,916 shares of Series D Convertible
Preferred Stock with a purchase price of $0.43 per share along with 5-year
warrants to purchase 23,720,916 shares of the Company’s Common Stock with an
exercise price of $0.65 per share. The investor group consisted of 56
individuals and entities including certain officers, directors and employees of
the Company, as well as outside investors. All or portions of the
principal and accrued interest of the following notes issued by the Company: (i)
an aggregate of $625,000 Convertible Notes issued on the May 29, 2009 and June
1, 2009 (“Convertible Notes”); (ii) $300,000 Unsecured Promissory Note issued on
the June 30, 2009 (“Unsecured Promissory Note) and (iii) $500,000 Bridge Note
issued on the July 31, 2009 (“Bridge Note”) were converted into the Series D
Convertible Preferred Stock shares. None of these debt instruments
remain outstanding after September 8, 2009. The warrants issued in
conjunction with the May 29 Convertible Notes and with the July 31 Bridge Note
remain outstanding.
The
Series D Convertible Preferred Stock was issued in a private placement exempt
from registration requirements pursuant to Regulation D of the Securities Act of
1933, as amended. Each share of Series D Convertible Preferred Stock
is convertible into one share of Common Stock of the Company. The
Series D Convertible Preferred Stock carries a dividend rate of 6% per annum,
payable in cash monthly.
In
connection with the Purchase Agreement, Merriman Curhan Ford Group, Inc., also
agreed to enter into a Investors’ Rights Agreement with the
investors. Under the terms of the Investors’ Rights Agreement, if a
registration statement relating to the shares covered by this prospectus is not
declared effective by the SEC within the time periods specified in the
Investors’ Rights Agreement or, after having been declared effective, is not
available (with certain limited exceptions in each case), then Merriman Curhan
Ford Group, Inc., is required to pay the investors, pro-rata, in proportion to
the number of shares of Series D Preferred Stock purchased by such Investor
pursuant to the Purchase Agreement, five year warrants to purchase 150,000
shares of the Company’s Common Stock at $0.65 per share, on terms identical to
those issued to the Investors under the Purchase Agreement (the “Registration
Warrants”), as liquidated damages and not as a penalty, subject to an overall
limit of liquidated damages in the aggregate of 900,000 Registration
Warrants. The liquidated damages pursuant to the terms hereof shall
apply on a daily pro-rata basis for any portion of a month prior to securing an
effective Registration Statement. The foregoing shall in no way limit
any equitable remedies available to Investors for failure to secure an effective
Registration Statement by the Registration Penalty Date. Investors
shall also be able to pursue monetary damages for failure to secure an effective
Registration Statement by the Registration Penalty Date but only if such failure
is due to the willful or deliberate action or inaction of the Company in breach
of the covenants contained herein. Except as provided for in the
preceding sentence, each Investor agrees that the liquidated damages provided
for in this section shall be its sole remedy for the failure to secure an
effective Registration Statement for any Registrable Securities on a timely
basis.
The
Offering
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Common
Stock offered by us:
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No
shares
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Common
Stock offered by the selling stockholders:
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50,938,246
shares
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Common
Stock outstanding after the offering:
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12,747,670
shares (1)
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NASDAQ
symbol:
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MERR
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Use
of Proceeds:
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We will not receive
any of the proceeds from
the sale of the shares by the selling
stockholders
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Risk
Factors:
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See
“Risk Factors” beginning on page 4 and other information included in
this prospectus for a discussion of factors you should consider before
investing in shares of our Common
Stock
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(1)
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The
number of shares shown to be outstanding is based on the number of shares
of our Common Stock outstanding as of February 22, 2010, and does not
include shares issuable upon conversion of outstanding Preferred Stock or
reserved for issuance upon the exercise of options granted or available
under our equity compensation plan.
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RISK
FACTORS
An
investment in our Common Stock involves a high degree of risk. Before investing
in our Common Stock, you should consider carefully the specific risks detailed
in this “Risk Factors” section and any applicable prospectus supplement,
together with all of the other information contained in this prospectus and any
prospectus supplement. If any of these risks occur, our business,
results of operations and financial condition could be harmed, the price of our
Common Stock could decline, and you may lose all or part of your
investment.
RISKS
RELATED TO OUR BUSINESS
We
may not be able to maintain a positive cash flow and profitability.
Our
ability to generate 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
investment banking and securities brokerage business, and we may be unable to
maintain profitability if we fail to do any of the following:
establish,
maintain and increase our client base;
manage
the quality of our services;
compete
effectively with existing and potential competitors;
further
develop our business activities;
attract
and retain qualified personnel;
limit
operating costs;
settle
pending litigation; and
maintaining
adequate working capital.
We cannot
be certain that we will be able to generate a positive cash flow and
profitability on a quarterly or annual basis in the future. Our inability to
generate 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
We have
had a number of structural changes to our operations as we divest certain
non-core business lines to focus our service and product
offerings. Additionally, there have been a number of significant
challenges faced by the securities and financial industries in the past 18
months. As a result of our structural changes and the uncertainty of
the current economic environment, 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 generate a positive cash flow 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. 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.
There
are substantial legal proceedings against us involving claims for significant
damages.
The
actions of a former customer, William Del Biaggio III, and a former employee,
Scott Cacchione, have given rise to many legal actions against us as described
in the Company’s Report on Form 10-Q for the quarter ended September 30,
2009. We selected the lawsuits we believe were of the most
threatening in nature and, as of September 8, 2009, settled them in conjunction
with our strategic transaction of that date. There are other lawsuits
related to these actions of our former employee which we have elected not to
settle. If we are found to be liable for the claims asserted in any
or all of these legal actions, our cash position may suffer. Even if we
ultimately prevail in all of these lawsuits, we may incur significant legal fees
and diversion of management’s time and attention from our core businesses, and
our business and financial condition may be adversely affected. We believe we
have meritorious defenses against these claims, but there is no assurance of any
favorable outcome.
Our
exposure to legal liability is significant, and damages that we may be required
to pay and the reputation harm that could result from legal action against us
could materially adversely affect our businesses.
Unrelated
to the actions of Del Biaggio and Cacchione, we face significant legal risks in
our businesses and, in recent years, the volume of claims and amount of damages
sought in litigation and regulatory proceedings against financial institutions
have been increasing. These risks include potential liability under securities
or other laws for materially false or misleading statements made in connection
with securities offerings and other transactions, potential liability for
“fairness opinions” and other advice we provide to participants in strategic
transactions and disputes over the terms and conditions of complex trading
arrangements. We are also subject to claims arising from disputes with employees
for alleged discrimination or harassment, among other things. These risks often
may be difficult to assess or quantify and their existence and magnitude often
remain unknown for substantial periods of time.
Our role
as advisor to our clients on important underwriting or mergers and acquisitions
transactions involves complex analysis and the exercise of professional
judgment, including rendering “fairness opinions” in connection with mergers and
other transactions. Therefore, our activities may subject us to the risk of
significant legal liabilities to our clients and third parties, including
stockholders of our clients who could bring securities class actions against us.
Our investment banking engagements typically include broad indemnities from our
clients and provisions to limit our exposure to legal claims relating to our
services, but these provisions may not protect us or may not be enforceable in
all cases.
For
example, an indemnity from a client that subsequently is placed into bankruptcy
is likely to be of little value to us in limiting our exposure to claims
relating to that client. As a result, we may incur significant legal and other
expenses in defending against litigation and may be required to pay substantial
damages for settlements and adverse judgments. Substantial legal liability or
significant regulatory action against us could have a material adverse effect on
our results of operations or cause significant reputation harm to us, which
could seriously harm our business and prospects.
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.
We
may not be able to continue operating our business as a going
concern
The
Company incurred significant losses in 2008. Even if we are successful in
executing our plans, we will not be capable of sustaining losses such as those
incurred in 2008. The Company’s ability to meet its going concern obligations is
highly dependent on market and economic conditions. We also recorded net losses
in certain quarters within other past fiscal years and have incurred losses in
2009. If operating conditions worsen in 2010 or if the Company receives
adverse judgments in its pending litigations, we may not have the resources to
meet our financial obligations as a going concern. If the Company is not able to
continue in business as a going concern, the entire investment of our common
stockholders may be at risk, and there can be no assurance that any proceeds
stockholders would receive in liquidation would be equal to their investment in
the Company, or even that stockholders would receive any proceeds in
consideration of their common stock.
Limitations
on our access to capital and our ability to comply with net capital requirements
could impair ability to conduct our business
Liquidity,
or ready access to funds, is essential to financial services firms. Failures of
financial institutions have often been attributable in large part to
insufficient liquidity. Liquidity is of importance to our trading business and
perceived liquidity issues may affect our clients and counterparties’
willingness to engage in brokerage transactions with us. Our liquidity could be
impaired due to circumstances that we may be unable to control, such as a
general market disruption or an operational problem that affects our trading
clients, third parties or us. Further, our ability to sell assets may be
impaired if other market participants are seeking to sell similar assets at the
same time.
Merriman
Curhan Ford & Co., our broker-dealer subsidiary, is subject to the net
capital requirements of the SEC and various self-regulatory organizations of
which it is a member. These requirements typically specify the minimum level of
net capital a broker-dealer must maintain and also mandate that a significant
part of its assets be kept in relatively liquid form. Any failure to comply with
these net capital requirements could impair our ability to conduct our core
business as a brokerage firm. Furthermore, Merriman Curhan Ford & Co. is
subject to laws that authorize regulatory bodies to block or reduce the flow of
funds from it to Merriman Curhan Ford Group, Inc. As a holding Company, Merriman
Curhan Ford Group, Inc. depends on distributions and other payments from its
subsidiaries to fund all payments on its obligations. As a result, regulatory
actions could impede access to funds that Merriman Curhan Ford Group, Inc. needs
to make payments on obligations, including debt obligations.
Our
financial results may fluctuate substantially from period to period, which may
impair our stock price.
We have
experienced, and expect to experience in the future, significant periodic
variations in our revenue and results of operations. These variations may be
attributed in part to the fact that our investment banking revenue is typically
earned upon the successful completion of a transaction, the timing of which is
uncertain and beyond our control. In most cases we receive little or no payment
for investment banking engagements that do not result in the successful
completion of a transaction. As a result, our business is highly dependent on
market conditions as well as the decisions and actions of our clients and
interested third parties. For example, a client’s acquisition transaction may be
delayed or terminated because of a failure to agree upon final terms with the
counterparty, failure to obtain necessary regulatory consents or board or
stockholder approvals, failure to secure necessary financing, adverse market
conditions or unexpected financial or other problems in the client’s or
counterparty’s business. If the parties fail to complete a transaction on which
we are advising or an offering in which we are participating, we will earn
little or no revenue from the transaction. This risk may be intensified by our
focus on growth companies in the cleantech, consumer/internet/media, health care
and tech/telecom sectors, as the market for securities of these companies has
experienced significant variations in the number and size of equity offerings.
Recently, there have been very few initial public offerings. More companies
initiating the process of an initial public offering are simultaneously
exploring merger and acquisition opportunities. If we are not engaged as a
strategic advisor in any such dual-tracked process, our investment banking
revenue would be adversely affected in the event that an initial public offering
is not consummated.
As a
result, we are unlikely to achieve steady and predictable earnings on a
quarterly basis, which could in turn adversely affect our stock
price.
Our
ability to retain our professionals and recruit additional professionals is
critical to the success of our business, and our failure to do so may materially
adversely affect our reputation, business and results of
operations.
Our
ability to obtain and successfully execute our business depends upon the
personal reputation, judgment, business generation capabilities and project
execution skills of our senior professionals, particularly D. Jonathan Merriman,
our Chief Executive Officer, and the other members of our Executive Committee.
Our senior professionals’ personal reputations and relationships with our
clients are a critical element in obtaining and executing client engagements. We
face intense competition for qualified employees from other companies in the
investment banking industry as well as from businesses outside the investment
banking industry, such as investment advisory firms, hedge funds, private equity
funds and venture capital funds. From time to time, we have experienced losses
of investment banking, brokerage, research and other professionals and losses of
our key personnel may occur in the future. The departure or other loss of Mr.
Merriman, other member of our Executive Committee or any other senior
professional who manages substantial client relationships and possesses
substantial experience and expertise, could impair our ability to secure or
successfully complete engagements, protect our market share or retain assets
under management, each of which, in turn, could materially adversely affect our
business and results of operations.
If any of
our professionals were to join an existing competitor or form a competing
company, some of our clients could choose to leave. The compensation plans and
other incentive plans we have entered into with certain of our professionals may
not prove effective in preventing them from resigning to join our competitors.
If we are unable to retain our professionals or recruit additional
professionals, our reputation, business, results of operations and financial
condition may be materially adversely affected.
Our
compensation structure may negatively impact our financial condition if we are
not able to effectively manage our expenses and cash flows.
Historically
the industry has been able to attract and retain investment banking, research
and sales and trading professionals, in part because the business models have
provided for lucrative compensation packages. Compensation and benefits is our
largest expenditure and the variable compensation component or bonus has
represented a significant proportion of this expense. The Company’s bonus
compensation is discretionary. For 2009, the potential pool was determined by a
number of components including revenue production, key operating milestones and
profitability. There is a potential that we could pay individuals for revenue
production despite the business having negative cash flows and/or net losses in
order to ensure retention of key employees.
Pricing
and other competitive pressures may impair the revenue and profitability of our
brokerage business.
We derive
a significant portion of our revenue from our brokerage business. Along with
other brokerage firms, we have experienced intense price competition in this
business in recent years. Recent developments in the brokerage industry,
including decimalization and the growth of electronic communications networks,
or ECNs, have reduced commission rates and profitability in the brokerage
industry. We expect this trend toward alternative trading systems to continue.
We believe we may experience competitive pressures in these and other areas as
some of our competitors seek to obtain market share by competing on the basis of
price. In addition, we face pressure from larger competitors, which may be
better able to offer a broader range of complementary products and services to
brokerage clients in order to win their trading business. As we are committed to
maintaining our comprehensive research coverage in our target sectors to support
our brokerage business, we may be required to make substantial investments in
our research capabilities. If we are unable to compete effectively with our
competitors in these areas, brokerage revenue may decline and our business,
financial condition and results of operations may be adversely
affected.
We
may experience significant losses if the value of our marketable security
positions deteriorates.
We
conduct active and aggressive 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. 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.
Difficult
market conditions could adversely affect our business in many ways.
Difficult
market and economic conditions and geopolitical uncertainties have in the past
adversely affected and may in the future adversely affect our business and
profitability in many ways. Weakness in equity markets and diminished trading
volume of securities could adversely impact our brokerage business, from which
we have historically generated more than half of our revenue. Industry-wide
declines in the size and number of underwritings and mergers and acquisitions
also would likely have an adverse effect on our revenue. In addition, reductions
in the trading prices for equity securities also tend to reduce the deal value
of investment banking transactions, such as underwriting and mergers and
acquisitions transactions, which in turn may reduce the fees we earn from these
transactions. As we may be unable to reduce expenses correspondingly, our
profits and profit margins may decline.
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
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 face strong competition from
larger firms.
The
brokerage, investment banking and asset management industries are intensely
competitive. We compete on the basis of a number of factors, including client
relationships, reputation, the abilities and past performance of our
professionals, market focus and the relative quality and price of our services
and products. We have experienced intense price competition with respect to our
brokerage business, including large block trades, spreads and trading
commissions. Pricing and other competitive pressures in investment banking,
including the trends toward multiple book runners, co-managers and multiple
financial advisors handling transactions, have continued and could adversely
affect our revenue, even during periods where the volume and number of
investment banking transactions are increasing. We believe we may
experience competitive pressures in these and other areas in the future as some
of our competitors seek to obtain market share by competing on the basis of
price..
We are a
relatively small investment bank with approximately 94 employees as of December
31, 2009 and revenue less than $40 million in 2008. Many of our competitors in
the brokerage and investment banking industries have a broader range of products
and services, greater financial and marketing resources, larger customer bases,
greater name recognition, more senior professionals to serve their clients’
needs, greater global reach and more established relationships with clients than
we have. These larger and better capitalized competitors may be better able to
respond to changes in the brokerage and investment banking, to compete for
skilled professionals, to finance acquisitions, to fund internal growth and to
compete for market share generally.
The scale
of our competitors has increased in recent years as a result of substantial
consolidation among companies in the brokerage and investment banking
industries. In addition, a number of large commercial banks, insurance companies
and other broad-based financial services firms have established or acquired
underwriting or financial advisory practices and broker-dealers or have merged
with other financial institutions. These firms have the ability to offer a wider
range of products than we do, which may enhance their competitive position. They
also have the ability to support investment banking with commercial banking,
insurance and other financial services in an effort to gain market share, which
has resulted, and could further result, in pricing pressure in our businesses.
In particular, the ability to provide financing has become an important
advantage for some of our larger competitors and, because we do not provide such
financing, we may be unable to compete as effectively for clients in a
significant part of the brokerage and investment banking market.
If we are
unable to compete effectively with our competitors, our business, financial
condition and results of operations will be adversely affected.
We
have incurred losses in the recent past and may incur losses in the
future.
We have
incurred losses in the recent past and may incur losses in the future. We
incurred losses in 2009. We recorded net losses of $30.27 million for the
year ended December 31, 2008 and $8.22 million for the year ended December 31,
2006. We also recorded net losses in certain quarters within other past fiscal
years. We may incur losses in any of our future periods. If we are unable to
finance future losses, those losses may have a significant effect on our
liquidity as well as our ability to operate.
In
addition, we may incur significant expenses in connection with initiating new
business activities or in connection with any expansion of our underwriting,
brokerage or other businesses. We may also engage in strategic acquisitions and
investments for which we may incur significant expenses. Accordingly, we will
need to increase our revenue at a rate greater than our expenses to achieve and
maintain profitability. If our revenues do not increase sufficiently, or even if
our revenue increase but we are unable to manage our expenses, we will not
achieve and maintain profitability in future periods.
Capital
markets and strategic advisory engagements are singular in nature and do not
generally provide for subsequent engagements.
Our
investment banking clients generally retain us on a short-term,
engagement-by-engagement basis in connection with specific capital markets or
mergers and acquisitions transactions, rather than on a recurring basis under
long-term contracts. As these transactions are typically singular in nature and
our engagements with these clients may not recur, we must seek out new
engagements when our current engagements are successfully completed or are
terminated. As a result, high activity levels in any period are not necessarily
indicative of continued high levels of activity in any subsequent period. If we
are unable to generate a substantial number of new engagements and generate fees
from those successful completion of transactions, our business and results of
operations would likely be adversely affected.
A
significant portion of our brokerage revenue is generated from a relatively
small number of institutional clients.
A
significant portion of our brokerage revenue is generated from a relatively
small number of institutional clients. For example, in 2009 we generated 14% of
our brokerage revenue, or approximately 12% of our total revenue, from our ten
largest brokerage clients. Similarly, in 2008 we generated 37% of our brokerage
revenue, or approximately 25% of our total revenue, from our ten largest
brokerage clients. If any of our key clients departs or reduces its business
with us and we fail to attract new clients that are capable of generating
significant trading volumes, our business and results of operations will be
adversely affected.
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. Also, risk management
policies and procedures that we utilize with respect to investing our own funds
or committing our capital with respect to investment banking or trading
activities activities may not protect us or mitigate our risks from those
activities. 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.
Our operations and infrastructure may
malfunction or fail.
Our
businesses are highly dependent on our ability to process, on a daily basis, a
large number of increasingly complex transactions across diverse markets. Our
financial, accounting or other data processing systems may fail to operate
properly or become disabled as a result of events that are wholly or partially
beyond our control, including a disruption of electrical or communications
services or our inability to occupy one or more of our buildings. The inability
of our systems to accommodate an increasing volume of transactions could also
constrain our ability to expand our businesses. If any of these systems do not
operate properly or are disabled or if there are other shortcomings or failures
in our internal processes, people or systems, we could suffer an impairment to
our liquidity, financial loss, a disruption of our businesses, liability to
clients, regulatory intervention or reputation damage.
We also
face the risk of operational failure of any of our clearing agents, the
exchanges, clearing houses or other financial intermediaries we use to
facilitate our securities transactions. Any such failure or termination could
adversely affect our ability to effect transactions and to manage our exposure
to risk.
In
addition, our ability to conduct business may be adversely impacted by a
disruption in the infrastructure that supports our businesses and the
communities in which located. This may include a disruption involving
electrical, communications, transportation or other services used by us or third
parties with which we conduct business, whether due to fire, other natural
disaster, power or communications failure, act of terrorism or war or otherwise.
Nearly all of our employees in our primary locations, including San Francisco
and New York, work in close proximity to each other. If a disruption occurs in
one location and our employees in that location are unable to communicate with
or travel to other locations, our ability to service and interact with our
clients may suffer and we may not be able to implement successfully contingency
plans that depend on communication or travel. Insurance policies to mitigate
these risks may not be available or may be more expensive than the perceived
benefit. Further, any insurance that we may purchase to mitigate certain of
these risks may not cover our loss.
Our
operations also rely on the secure processing, storage and transmission of
confidential and other information in our computer systems and networks. Our
computer systems, software and networks may be vulnerable to unauthorized
access, computer viruses or other malicious code and other events that could
have a security impact. If one or more of such events occur, this potentially
could jeopardize our or our clients’ or counterparties’ confidential and other
information processed by, stored in, and transmitted through our computer
systems and networks, or otherwise cause interruptions or malfunctions in our,
our clients’, our counterparties’ or third parties’ operations. We may be
required to expend significant additional resources to modify our protective
measures or to investigate and remediate vulnerabilities or other exposures, and
we may be subject to litigation and financial losses that are either not insured
against or not fully covered through any insurance maintained by
us.
Strategic
investments or acquisitions and joint ventures may result in additional risks
and uncertainties in our business.
We may
grow our business through both internal expansion and through strategic
investments, acquisitions or joint ventures. To the extent we make strategic
investments or acquisitions or enter into joint ventures, we face numerous risks
and uncertainties combining or integrating businesses, including integrating
relationships with customers, business partners and internal data processing
systems. In the case of joint ventures, we are subject to additional risks and
uncertainties in that we may be dependent upon, and subject to liability, losses
or reputation damage relating to systems, controls and personnel that are not
under our control. In addition, conflicts or disagreements between us and our
joint venture partners may negatively impact our businesses.
Future
acquisitions or joint ventures by us could entail a number of risks, including
problems with the effective integration of operations, the inability to maintain
key pre-acquisition business relationships and integrate new relationships, the
inability to retain key employees, increased operating costs, exposure to
unanticipated liabilities, risks of misconduct by employees not subject to our
control, difficulties in realizing projected efficiencies, synergies and cost
savings, and exposure to new or unknown liabilities.
Any
future growth of our business may require significant resources and/or result in
significant unanticipated losses, costs or liabilities. In addition, expansions,
acquisitions or joint ventures may require significant managerial attention,
which may be diverted from our other operations.
Evaluation
of our prospects may be more difficult in light of our limited operating
history.
As a
result of the volatile economic conditions faced by the securities and financial
industries and the restructuring of our business lines, there have been a number
of changes to our operations. Given these changes, we can no longer
rely upon prior operating history to evaluate our business and
prospects. Additionally, we are subject to the risks and
uncertainties that face a Company in the process of restructuring its business
in the midst of uncertain economic environment. Some of these risks and
uncertainties relate to our ability to attract and retain clients on a
cost-effective basis, expand and enhance our service offerings, raise additional
capital and respond to competitive market conditions. We may not be able to
address these risks adequately, and our failure to do so may adversely affect
our business and the value of an investment in our Common Stock.
RISKS
RELATED TO OUR INDUSTRY
Risks
associated with volatility and losses in the financial markets.
The U.S.
financial markets in 2008 and early 2009 suffered unprecedented volatility and
losses. Several mortgage-related financial institutions and certain
large investment banks were not able to continue their businesses. In
the event that the securities and financial industries face similar or greater
volatility there can be no assurance that we will be able to continue our
operations.
Employee
misconduct could harm us and is difficult to detect and deter.
In
addition to our experience with our former employee Scott Cacchione, there have
been a number of highly publicized cases involving fraud or other misconduct by
employees in the financial services industry in recent years, and we run the
risk that employee misconduct could occur at our Company. For example,
misconduct by employees could involve the improper use or disclosure of
confidential information, which could result in regulatory sanctions and serious
reputation or financial harm to us. It is not always possible to deter employee
misconduct and the precautions we take to detect and prevent this activity may
not be effective in all cases, and we may suffer significant reputation harm for
any misconduct by our employees.
Risks associated with regulatory
impact on capital markets.
Highly
publicized financial scandals in recent years have led to investor concerns over
the integrity of the U.S. financial markets, and have prompted Congress, the
SEC, the NYSE and FINRA to significantly expand corporate governance and public
disclosure requirements. To the extent that private companies, in order to avoid
becoming subject to these new requirements, decide to forgo initial public
offerings, our equity underwriting business may be adversely affected. In
addition, provisions of the Sarbanes-Oxley Act of 2002 and the corporate
governance rules imposed by self-regulatory organizations have diverted many
companies’ attention away from capital market transactions, including securities
offerings and acquisition and disposition transactions. In particular, companies
that are or are planning to register their securities with the SEC or to become
subject to the reporting requirements of the Securities Exchange Act of 1934 are
incurring significant expenses in complying with the SEC and accounting
standards relating to internal control over financial reporting, and companies
that disclose material weaknesses in such controls under the new standards may
have greater difficulty accessing the capital markets. These factors, in
addition to adopted or proposed accounting and disclosure changes, may have an
adverse effect on the business.
Financial
services firms have been subject to increased scrutiny over the last several
years, increasing the risk of financial liability and reputational harm
resulting from adverse regulatory actions.
Firms in
the financial services industry have been operating in a difficult regulatory
environment. The industry has experienced increased scrutiny from a variety of
regulators, including the SEC, the NYSE, FINRA and state attorneys general.
Penalties and fines sought by regulatory authorities have increased
substantially over the last several years. This regulatory and enforcement
environment has created uncertainty with respect to a number of transactions
that had historically been entered into by financial services firms and that
were generally believed to be permissible and appropriate. We may be adversely
affected by changes in the interpretation or enforcement of existing laws and
rules by these governmental authorities and self-regulatory organizations. We
also 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 self-regulatory organizations that supervise the
financial markets. Among other things, we could be fined, prohibited from
engaging in some of our business activities or subject to limitations or
conditions on our business activities. Substantial legal liability or
significant regulatory action against us could have material adverse financial
effects or cause significant reputation harm to us, which could seriously harm
our business prospects.
In
addition, financial services firms are subject to numerous conflicts of
interests or perceived conflicts. The SEC and other federal and state regulators
have increased their scrutiny of potential conflicts of interest. We have
adopted various policies, controls and procedures to address or limit actual or
perceived conflicts and regularly seek to review and update our policies,
controls and procedures. However, appropriately dealing with conflicts of
interest is complex and difficult and our reputation could be damaged if we
fail, or appear to fail, to deal appropriately with conflicts of interest. Our
policies and procedures to address or limit actual or perceived conflicts may
also result in increased costs, additional operational personnel and increased
regulatory risk. Failure to adhere to these policies and procedures may result
in regulatory sanctions or client litigation. For example, the research areas of
investment banks have been and remain the subject of heightened regulatory
scrutiny which has led to increased restrictions on the interaction between
equity research analysts and investment banking personnel at securities
firms.
Financial
service companies have experienced a number of highly publicized regulatory
inquiries concerning market timing, late trading and other activities that focus
on the mutual fund industry. These inquiries have resulted in increased scrutiny
within the industry and new rules and regulations for mutual funds, investment
advisers and broker-dealers.
Our
exposure to legal liability is significant, and damages that we may be required
to pay and the reputational harm that could result from legal action against us
could materially adversely affect our businesses.
We face
significant legal risks in our businesses and, in recent years, the volume of
claims and amount of damages sought in litigation and regulatory proceedings
against financial institutions have been increasing. These risks include
potential liability under securities or other laws for materially false or
misleading statements made in connection with securities offerings and other
transactions, potential liability for “fairness opinions” and other advice we
provide to participants in strategic transactions and disputes over the terms
and conditions of complex trading arrangements. We are also subject to claims
arising from disputes with employees for alleged discrimination or harassment,
among other things. These risks often may be difficult to assess or quantify and
their existence and magnitude often remain unknown for substantial periods of
time.
Our role
as advisor to our clients on important underwriting or mergers and acquisitions
transactions involves complex analysis and the exercise of professional
judgment, including rendering “fairness opinions” in connection with mergers and
other transactions. Therefore, our activities may subject us to the risk of
significant legal liabilities to our clients and aggrieved third parties,
including stockholders of our clients who could bring securities class actions
against us. Our investment banking engagements typically include broad
indemnities from our clients and provisions to limit our exposure to legal
claims relating to our services, but these provisions may not protect us or may
not be enforceable in all cases.
For
example, an indemnity from a client that subsequently is placed into bankruptcy
is likely to be of little value to us in limiting our exposure to claims
relating to that client. As a result, we may incur significant legal and other
expenses in defending against litigation and may be required to pay substantial
damages for settlements and adverse judgments. Substantial legal liability or
significant regulatory action against us could have a material adverse effect on
our results of operations or cause significant reputational harm to us, which
could seriously harm our business and prospects.
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.
RISKS
RELATED TO OWNING OUR STOCK
We
have issued Series D Convertible Preferred Stock with rights, preferences and
privileges that are senior to those of our Common Stock. The exercise
of some or all of these Series D Convertible Preferred Stock rights may have a
detrimental effect on the rights of the holders of the Common
Stock.
On
September 8, 2009, we closed a private placement Preferred Stock financing
transaction. We sold 23,720,916 shares of our Series D Convertible
Preferred Stock at $0.43 per share and warrants to purchase 23,720,916 shares of
Common Stock at $0.65 per share to an investor group that includes certain of
our officers and directors in addition to outside investors. In
connection with this transaction, the Company converted the principal and
accrued interest of certain notes, issued by the Company between May 2009 and
July 2009, into Series D Convertible Preferred Stock. The aggregate
principal amount from these cancelled notes was $1,425,000.
The
warrants originally contained a full ratchet antidilution provision, which, in
accordance with Generally Accepted Accounting Principals, required us to record
a non-cash warrant liability of approximately $26 million. As a
result, we reported a stockholders’ deficit (negative stockholders’
equity). This, in turn, caused us to fall outside the NASDAQ Listing
Rules that require that we have a minimum of $2,000,000 of stockholders’
equity.
We have
since remedied the noncompliance with the NASDAQ listing rules by amending the
warrants to remove the full ratchet antidilution provision and thus remove the
resulting stockholders’ deficit. In consideration for such amendment,
the Company has agreed to pay the holders of the warrants $0.005 per warrant
share in cash, which is anticipated to be paid on August 15, 2010. We
believe we are now in full compliance with the NASDAQ minimum shareholders’
equity requirements.
The
Series D Convertible Preferred Stock has a number of rights, preferences and
privileges that are superior to those of the Common Stock. Holders of
the Series D Convertible Preferred Stock are entitled to a 6% annual dividend,
payable monthly in arrears. As of September 30, 2009, the Company
recorded cash dividends payable of $39,000. The Company cannot pay
any dividends on the Common Stock until all accrued dividends on the Series D
Convertible Preferred Stock are first paid.
The
holders of Series D Convertible Preferred Stock are entitled to a “liquidation
preference payment” of $0.43 per share of Series D Convertible Preferred Stock
plus all accrued but unpaid dividends on such shares prior and in preference to
any payment to holders of the Common Stock upon a merger, acquisition, sale of
substantially all the assets, or certain other liquidation events of the
Company. Any proceeds after payment of the “liquidation preference
payment” shall be paid pro rata to the holders of the Series D Convertible
Preferred Stock and Common Stock on an as converted to Common Stock
basis. As such, holders of Common Stock might receive nothing in
liquidation, or receive much less than they would if there was no Series D
Convertible Preferred Stock outstanding.
The
Series D Convertible Preferred Stock have antidilution protection, including
full ratchet antidilution protection for certain new issuances of Company Stock,
as specified in the Certificate of Designation of Series D Convertible Preferred
Stock incorporated herein by reference. If such antidilution
protection is triggered, the holders of Common Stock may have their ownership in
the Company diluted.
The
holders of the Series D Convertible Preferred Stock also has substantial voting
power over the Company. Such holders are entitled to elect four of
the nine members of our Board of Directors. Additionally, they have
certain “protective provisions,” as set forth in the Certificate of Designation,
requiring us to obtain their approval before we can carry out certain
actions. The holders of Series D Convertible Preferred Stock may gain
additional voting power if they exercise the warrants or if they acquire shares
of our Common Stock in the market.
The
interests of the holders of the Series D Convertible Preferred Stock might not
be aligned with those of the holders of Common Stock, which could result in the
Company being sold or liquidated in a transaction in which the holders of Common
Stock receive little or nothing.
In
connection with the private placement transaction, we entered into an Investors’
Rights Agreement with the investors. Under the terms of the
Investors’ Rights Agreement, if a registration statement relating to the Common
Stock shares underlying the Series D Convertible Preferred Stock and warrants is
not declared effective by the SEC within the time periods specified in the
Investors’ Rights Agreement or, after having been declared effective, is not
available (with certain limited exceptions in each case), then we are required
to pay the investors, pro-rata, in proportion to the number of shares of Series
D Convertible Preferred Stock purchased by such investor in the transaction,
five year warrants to purchase 150,000 shares of the Company’s Common Stock at
$0.65 per share, on terms identical to those issued to the investors under the
financing transaction (the “Registration Warrants”), as liquidated damages and
not as a penalty, subject to an overall limit of liquidated damages in the
aggregate of 900,000 Registration Warrants. The liquidated damages
pursuant to the terms hereof shall apply on a daily pro-rata basis for any
portion of a month prior to securing an effective registration
statement. The foregoing shall in no way limit any equitable remedies
available to investors for failure to secure an effective registration statement
by the time specified in the Investors’ Rights Agreement. Investors
shall also be able to pursue monetary damages for failure to secure an effective
registration statement by the agreed upon time but only if such failure is due
to the willful or deliberate action or inaction of the Company in breach of the
covenants contained herein.
Your
ownership percentage may be diluted by warrants issued in connection with our
convertible notes financing.
The
investors of the convertible notes issued on May 29, 2009 and June 1, 2009
received warrants to purchase an aggregate of 937,500 shares of the Common Stock
of the Company at $0.50 per share. The investor and guarantors of the
Note issued on July 31, 2009 received warrants to purchase an aggregate of
2,326,000 shares of the Common Stock of the Company at $0.65 per
share. While the convertible notes and the note are no longer
outstanding, the warrants issued in conjunction with them are, and exercise of
these warrants would dilute the ownership percentage of existing stockholders in
the Company.
A
significant percentage of our outstanding Common Stock is owned or controlled by
our senior professionals and other employees and their interests may differ from
those of other stockholders.
Our
executive officers and directors, and entities affiliated with them, control
approximately 44% of our outstanding Common Stock including exercise of
their options, and Series D Preferred stock and associated 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.
Provisions of our organizational
documents may discourage an acquisition of us.
Our
Certificate of Incorporation authorizes our Board of Directors to issue up to an
additional 37,450,000 shares of Preferred Stock, without approval from our
stockholders. Of these, 30,150,000 have already been authorized by our Board of
Directors and may be issued by management. The balance would require
authorization by our Board.
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.
In
addition, 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.
The
market price of our Common Stock may decline.
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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announcements
of significant contracts, milestones,
acquisitions;
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relationships
with other companies;
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ability
to obtain needed capital
commitments;
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additions
or departures of key personnel;
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sales
of common and Preferred 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;
|
|
|
§
|
changes
in financial estimates by securities analysts;
and
|
|
|
§
|
fluctuation
in stock market price and trading
volume.
|
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. Declines in the price
of our stock may adversely affect our ability to recruit and retain key
employees, including our senior professionals.
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.
Your interest in our firm may be
diluted due to issuance of additional shares of Common
Stock.
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.
We have a
significant number of outstanding stock options and warrants. During 2009,
shares issuable upon the exercise of these options and warrants, at prices
ranging currently from approximately $0.50 to $49.00 per share, represent
approximately 9% 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.
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 Nasdaq Stock Market, 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.
We do not expect to pay any cash
dividends in the foreseeable future.
We intend
to retain any future earnings to fund the operation and expansion of our
business and, therefore, we do not anticipate paying cash dividends in the
foreseeable future. Accordingly, our stockholders must rely on sales of their
shares of Common Stock after price appreciation, which may never occur, as the
only way to realize any future gains on an investment in our Common Stock.
Investors seeking cash dividends should not purchase our Common
Stock.
If
our CEO leaves the Company, additional warrants will be issued which may further
dilute the ownership percentage of the holders of the Company's Common
Stock
If D.
Jonathan Merriman ceases to serve as Chief Executive Officer of the Company
prior to August 27, 2012, the Company agreed in connection with the issuance of
the Series D Convertible Preferred Stock to issue additional warrants (the
“Merriman Warrants”) to the holders of the Series D Preferred Stock to purchase
shares of the Company’s Common Stock. The Merriman Warrants would be
exercisable for a total of 23,720,916 shares of Common Stock, with an exercise
price of $0.65 per share and a term of five years. Exercise of the
Merriman Warrants would dilute the ownership percentage of existing holders of
Common Stock. If Mr. Merriman dies, is terminated without “Cause” or
resigns with “Good Reason,” these warrants will not be
issuable. “Cause” and “Good Reason” are defined in the Investors
Rights Agreement entered into in connection with the issuance of the Series D
Preferred Stock, which was filed as Exhibit 10.48 to the Company’s Amended
Current Report on Form 8-K/A on September 2, 2009.
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
Information
in and incorporated by reference into this prospectus contains “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995 and the safe harbor provided by Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of
the Securities Act. These forward-looking statements often can be,
but are not always, identified by the use of words such as “assume,” “expect,”
“intend,” “plan,” “project,” “believe,” “estimate,” “predict,” “anticipate,”
“may,” “might,” “should,” “could,” “goal,” “potential” and similar
expressions. Such forward-looking statements, including, without
limitation, those relating to the future business prospects, revenues and income
of Merriman Curhan Ford Group. Inc., wherever they occur, are necessarily
estimates reflecting the best judgment of our senior management on the date on
which they were made, or if no date is stated, as of the date of this
prospectus. Forward-looking statements are subject to risks,
uncertainties and assumptions, including those described in the section entitled
“Risk Factors” and elsewhere in the documents incorporated by reference into
this prospectus, including our Annual Report on Form 10-K for the fiscal year
ended December 31, 2008 and our subsequent SEC filings.
Because
actual results or outcomes could differ materially from those expressed in any
forward-looking statements made by us or on our behalf, you should not place
undue reliance on any such forward-looking statements. New factors
emerge from time to time, and it is not possible for us to predict which factors
will arise. In addition, we cannot assess the impact of each factor
on our business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any
forward-looking statements.
We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or any other
reason. All subsequent forward-looking statements attributable to us
or any person acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to herein. In light
of these risks, uncertainties and assumptions, the forward-looking events
discussed in this prospectus may not occur.
USE
OF PROCEEDS
The net
proceeds from any disposition of the shares covered hereby will be received by
the selling stockholders or their transferees. We will not receive any of the
proceeds from any such sale of the Common Stock offered by this
prospectus.
SELLING
STOCKHOLDERS
We have
prepared this prospectus to allow the selling stockholders or their donees,
pledgees, transferees or other successors in interest to sell, from time to
time, up to 50,938,246 shares of our Common Stock which they acquired pursuant
to a Purchase Agreement dated September 8, 2009 The table below presents
information regarding the selling stockholders and the shares of our Common
Stock that they may offer and sell from time to time under this prospectus.
Beneficial ownership is determined under Section 13(d) of the Exchange Act
and generally includes voting or investment power with respect to securities and
including any securities that grant the selling stockholder the right to acquire
Common Stock within 60 days of February 23, 2010.
|
|
|
Number Of
Shares
Beneficially
|
|
|
Amount Of Shares Of
Common Stock Being
|
|
|
Shares Beneficially Owned
After Offering
|
|
|
Name Of Selling Stockholders (1)
|
|
Offering (2)
|
|
|
Offered Pursuant To
This Prospectus (3)
|
|
|
Number
(3)
|
|
|
Percentage
(4)
|
|
|
Alan
Auerbach
|
|
|
930,232 |
|
|
|
930,232 |
|
|
|
- |
|
|
|
* |
|
|
Alan
Budd Zuckerman
|
|
|
116,278 |
|
|
|
116,278 |
|
|
|
- |
|
|
|
* |
|
|
ALB
Private Investments LLC
|
|
|
600,000 |
|
|
|
600,000 |
|
|
|
- |
|
|
|
* |
|
|
Almond
Ventures LLC
|
|
|
2,000,000 |
|
|
|
2,000,000 |
|
|
|
- |
|
|
|
* |
|
|
Andrew
Arno( 5)
|
|
|
2,790,696 |
|
|
|
2,790,696 |
|
|
|
- |
|
|
|
* |
|
|
Anthony
Low-Beer
|
|
|
940,000 |
|
|
|
940,000 |
|
|
|
- |
|
|
|
* |
|
|
Athena
Sofios Marks
|
|
|
465,116 |
|
|
|
465,116 |
|
|
|
- |
|
|
|
* |
|
|
Brock
Ganeles
|
|
|
847,674 |
|
|
|
847,674 |
|
|
|
- |
|
|
|
* |
|
|
Cynthia
A. Kohn
|
|
|
300,000 |
|
|
|
300,000 |
|
|
|
- |
|
|
|
* |
|
|
D.
Jonathan Merriman Trust, UAD 10/17/04
|
|
|
1,414,771 |
|
|
|
830,814 |
|
|
|
583,957 |
|
|
|
* |
|
|
Dean
Barr
|
|
|
540,116 |
|
|
|
540,116 |
|
|
|
- |
|
|
|
* |
|
|
Delaware
Charter GTY Trust Theodore K. Davis IRA
|
|
|
116,278 |
|
|
|
116,278 |
|
|
|
- |
|
|
|
* |
|
|
Douglas
Bergeron
|
|
|
3,725,959 |
|
|
|
3,720,930 |
|
|
|
5,029 |
|
|
|
* |
|
|
Edwin
P. Baldry
|
|
|
150,000 |
|
|
|
150,000 |
|
|
|
- |
|
|
|
* |
|
|
Emanuel
Neuman
|
|
|
46,510 |
|
|
|
46,510 |
|
|
|
- |
|
|
|
* |
|
|
Eric
Wold
|
|
|
232,558 |
|
|
|
232,558 |
|
|
|
- |
|
|
|
* |
|
|
First
Bank & Trust as Custodian of Ronald L. Chez IRA
|
|
|
18,009,353 |
|
|
|
17,676,732 |
|
|
|
332,621 |
|
|
|
* |
|
|
Francis
A. Mlynarczyk, Jr.
|
|
|
200,000 |
|
|
|
200,000 |
|
|
|
- |
|
|
|
* |
|
|
Grand
Slam Capital Master Fund LTD
|
|
|
2,326,000 |
|
|
|
2,326,000 |
|
|
|
- |
|
|
|
* |
|
|
Helen
R. Esposito
|
|
|
200,000 |
|
|
|
200,000 |
|
|
|
- |
|
|
|
* |
|
|
Henry
Tang
|
|
|
46,510 |
|
|
|
46,510 |
|
|
|
- |
|
|
|
* |
|
|
Intergroup
Corporation
|
|
|
697,674 |
|
|
|
697,674 |
|
|
|
- |
|
|
|
* |
|
|
IRA
FBO Peter Victor Coleman, Pershing LLC as Custodian
|
|
|
760,814 |
|
|
|
755,814 |
|
|
|
5,000 |
|
|
|
* |
|
|
JBA
Investments LLC (5)
|
|
|
290,696 |
|
|
|
290,696 |
|
|
|
- |
|
|
|
* |
|
|
Jeffrey
C. Jellison
|
|
|
615,116 |
|
|
|
615,116 |
|
|
|
- |
|
|
|
* |
|
|
Jeffrey
M. Soinski
|
|
|
256,736 |
|
|
|
232,558 |
|
|
|
24,178 |
|
|
|
* |
|
|
John
Chambers
|
|
|
386,336 |
|
|
|
386,336 |
|
|
|
- |
|
|
|
* |
|
|
John
M. Thompson
|
|
|
313,775 |
|
|
|
232,558 |
|
|
|
81,217 |
|
|
|
* |
|
|
John
Peter Gutfreund
|
|
|
465,116 |
|
|
|
465,116 |
|
|
|
- |
|
|
|
* |
|
|
John
V. Winfield
|
|
|
697,674 |
|
|
|
697,674 |
|
|
|
- |
|
|
|
* |
|
|
Kaushal
Shah
|
|
|
23,254 |
|
|
|
23,254 |
|
|
|
- |
|
|
|
* |
|
|
Kenneth
R. Werner
|
|
|
116,278 |
|
|
|
116,278 |
|
|
|
- |
|
|
|
* |
|
|
Kevin
McCormack
|
|
|
100,000 |
|
|
|
100,000 |
|
|
|
- |
|
|
|
* |
|
|
Leigh
A. Simons
|
|
|
116,278 |
|
|
|
116,278 |
|
|
|
- |
|
|
|
* |
|
|
Maida
Chicon
|
|
|
100,000 |
|
|
|
100,000 |
|
|
|
- |
|
|
|
* |
|
|
Marilyn
J. Chez Irrev Trust FBO Elizabeth Macknin
|
|
|
232,558 |
|
|
|
232,558 |
|
|
|
- |
|
|
|
* |
|
|
Marilyn
J. Chez Irrev Trust FBO Eric Jason Chez
|
|
|
232,558 |
|
|
|
232,558 |
|
|
|
- |
|
|
|
* |
|
|
Mark
Green (8)
|
|
|
1,162,790 |
|
|
|
1,162,790 |
|
|
|
- |
|
|
|
* |
|
|
Mechele
Plotkin Flaum
|
|
|
100,000 |
|
|
|
100,000 |
|
|
|
- |
|
|
|
* |
|
|
Michael
E. Marrus (6)
|
|
|
1,860,464 |
|
|
|
1,860,464 |
|
|
|
- |
|
|
|
* |
|
|
Michael
Margolis
|
|
|
116,278 |
|
|
|
116,278 |
|
|
|
- |
|
|
|
* |
|
|
MJA
Investments LLC (5)
|
|
|
290,696 |
|
|
|
290,696 |
|
|
|
- |
|
|
|
* |
|
|
MLPF&S
Cust FBO William Febbo
|
|
|
579,067 |
|
|
|
232,558 |
|
|
|
346,509 |
|
|
|
* |
|
|
Phylis
M. Esposito
|
|
|
700,000 |
|
|
|
700,000 |
|
|
|
- |
|
|
|
* |
|
|
Portsmouth
Square, Inc
|
|
|
697,674 |
|
|
|
697,674 |
|
|
|
- |
|
|
|
* |
|
|
Robert
E. Ford
|
|
|
116,278 |
|
|
|
116,278 |
|
|
|
- |
|
|
|
* |
|
|
Sander
A. Flaum
|
|
|
300,000 |
|
|
|
300,000 |
|
|
|
- |
|
|
|
* |
|
|
Santa
Fe Financial
|
|
|
465,116 |
|
|
|
465,116 |
|
|
|
- |
|
|
|
* |
|
|
Schmal
Family Trust
|
|
|
289,193 |
|
|
|
232,558 |
|
|
|
56,635 |
|
|
|
* |
|
|
Spencer
B. Grimes
|
|
|
116,278 |
|
|
|
116,278 |
|
|
|
- |
|
|
|
* |
|
|
Steven
R. Becker
|
|
|
372,092 |
|
|
|
372,092 |
|
|
|
- |
|
|
|
* |
|
|
The
Thunen Family Trust, Dated 10/4/05
|
|
|
832,558 |
|
|
|
832,558 |
|
|
|
- |
|
|
|
* |
|
|
Thomas
I. Unterberg (7)
|
|
|
1,627,906 |
|
|
|
1,627,906 |
|
|
|
- |
|
|
|
* |
|
|
Thomas
P. Newton
|
|
|
500,744 |
|
|
|
500,744 |
|
|
|
- |
|
|
|
* |
|
|
Tsunami
Partners, LP
|
|
|
300,000 |
|
|
|
300,000 |
|
|
|
- |
|
|
|
* |
|
|
UBS
Custodian FBO Andy Arno IRA(5)
|
|
|
418,604 |
|
|
|
418,604 |
|
|
|
- |
|
|
|
* |
|
|
Others
|
|
|
124,740 |
|
|
|
124,740 |
|
|
|
- |
|
|
|
* |
|
|
*
|
Represents beneficial ownership
of less than 1%
|
|
(1)
|
Unless
otherwise noted, this table is based on information supplied to us by the
selling stockholders and certain records of the
Company.
|
|
(2)
|
The
share numbers in this column assumes the full conversion of all the Series
D Preferred Stock into Common Stock and the issuance of shares of Common
Stock pursuant to the exercise of outstanding
warrants.
|
|
(3)
|
We
do not know when or in what amounts a selling stockholder may offer shares
for sale. The selling stockholders might not sell any or all of
the shares offered by this prospectus. Because the selling
stockholders may offer all or some of the shares pursuant to this offering
and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the shares, we cannot
estimate the number of the shares that will be held by the selling
stockholders after completion of the offering. However, for
purposes of this table, we have assumed that, after completion of the
offering, none of the shares covered by this prospectus will be held by
the selling stockholders.
|
|
(4)
|
The
percentage calculation after the offering is based on 12,747,670 shares of
Common Stock Outstanding and assumes (i) the conversion of 23,720,916
shares of Series D Preferred Stock into Common Stock and (ii) the issuance
of 27,217,330 shares of Common Stock pursuant to the exercise of
outstanding warrants.
|
|
(5)
|
As
of the date hereof, Mr. Arno beneficially owns 3,790,696 shares of Common
Stock of the Issuer, issuable upon conversion of 1,895,346 shares of
Series D Convertible Preferred Stock and exercise of warrants to purchase
1,895,346 shares of Common Stock. This aggregate amount
beneficially owned by Mr. Arno includes (i) 145,348 shares of Series D
Convertible Preferred Stock and warrants to purchase 145,348 shares of
Common Stock held by each of MJA Investments LLC and JBA Investments LLC
and (ii) 209,302 shares of Series D Convertible Preferred Stock and
exercise of warrants to purchase 209,302 shares of Common Stock held by an
individual retirement account for the benefit of Mr. Arno. Mr. Arno’s
beneficial ownership constitutes approximately 5.83% of the Common Stock
outstanding. Mr. Arno serves as investment advisor to each of
MJA Investments LLC and LBA Investments LLC and disclaims all beneficial
ownership of the securities held by each of those
entities.
|
|
(6)
|
As
of the date hereof, Mr. Marrus beneficially owns 1,860,464 shares of
Common Stock of the Issuer, issuable upon conversion of 930,232 shares of
Series D Convertible Preferred Stock and exercise of warrants to purchase
930,232 shares of Common Stock. Mr. Marrus’ beneficial
ownership constitutes 2.86% of the Common Stock
outstanding.
|
|
(7)
|
As
of the date hereof, Mr. Unterberg beneficially owns 1,627,906 shares of
Common Stock of the Issuer, issuable upon conversion of 813,953 shares of
Series D Convertible Preferred Stock and exercise of warrants to purchase
813,953 shares of Common Stock. Mr. Unterberg’s beneficial
ownership constitutes 2.50% of the Common Stock
outstanding.
|
|
(8)
|
As
of the date hereof, Mr. Green beneficially owns 1,162,790 shares of Common
Stock of the Issuer, issuable upon conversion of 581,395 shares of Series
D Convertible Preferred Stock and exercise of warrants to purchase 581,395
shares of Common Stock. Mr. Green’s beneficial ownership
constitutes 1.79% of the Common Stock
outstanding.
|
PLAN
OF DISTRIBUTION
The
selling stockholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling shares of Common Stock or
interests in shares of Common Stock received after the date of this prospectus
from a selling stockholder as a gift, pledge, partnership distribution or other
transfer, may, from time to time, sell, transfer or otherwise dispose of any or
all of their shares of Common Stock or interests in shares of Common Stock on
any stock exchange, market or trading facility on which the shares are traded or
in private transactions. These dispositions may be at fixed prices,
at prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or at
negotiated prices.
The
selling stockholders may use any one or more of the following methods when
disposing of shares or interests therein:
- ordinary brokerage transactions and
transactions in which the broker-dealer solicits purchasers;
- block trades in which the
broker-dealer will attempt to sell the shares as agent, but may position and
resell a portion of the block as principal to facilitate the
transaction;
- purchases by a broker-dealer as
principal and resale by the broker-dealer for its account;
- an exchange distribution in
accordance with the rules of the applicable exchange;
- privately negotiated
transactions;
- short sales effected after the date
the registration statement of which this Prospectus is a part is declared
effective by the SEC;
- through the writing or settlement of
options or other hedging transactions, whether through an options exchange or
otherwise;
- broker-dealers may agree with the
selling stockholders to sell a specified number of such shares at a stipulated
price per share; and
- a combination of any such methods of
sale.
The
selling stockholders may, from time to time, pledge or grant a security interest
in some or all of the shares of Common Stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of Common Stock, from time to time, under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus. The selling
stockholders also may transfer the shares of Common Stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this
prospectus.
In
connection with the sale of our Common Stock or interests therein, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the Common
Stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our Common Stock short and deliver these
securities to close out their short positions, or loan or pledge the Common
Stock to broker-dealers that in turn may sell these securities. The
selling stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
aggregate proceeds to the selling stockholders from the sale of the Common Stock
offered by them will be the purchase price of the Common Stock less discounts or
commissions, if any. Each of the selling stockholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of Common Stock to be made directly or
through agents. We will not receive any of the proceeds from this
offering.
The
selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act of 1933,
provided that they meet the criteria and conform to the requirements of that
rule.
The
selling stockholders and any underwriters, broker-dealers or agents that
participate in the sale of the Common Stock or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities
Act. Any discounts, commissions, concessions or profit they earn on
any resale of the shares may be underwriting discounts and commissions under the
Securities Act. Selling stockholders who are "underwriters" within
the meaning of Section 2(11) of the Securities Act will be subject to the
prospectus delivery requirements of the Securities Act.
To the
extent required, the shares of our Common Stock to be sold, the names of the
selling stockholders, the respective purchase prices and public offering prices,
the names of any agents, dealer or underwriter, any applicable commissions or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this
prospectus.
In order
to comply with the securities laws of some states, if applicable, the Common
Stock may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the Common Stock may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
We have
advised the selling stockholders that the anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of shares in the market and to the
activities of the selling stockholders and their affiliates. In
addition, to the extent applicable we will make copies of this prospectus (as it
may be supplemented or amended from time to time) available to the selling
stockholders for the purpose of satisfying the prospectus delivery requirements
of the Securities Act. The selling stockholders may indemnify any
broker-dealer that participates in transactions involving the sale of the shares
against certain liabilities, including liabilities arising under the Securities
Act.
We have
agreed to indemnify the selling stockholders against liabilities, including
liabilities under the Securities Act and state securities laws, relating to the
registration of the shares offered by this prospectus.
We have
agreed with the selling stockholders to keep the registration statement of which
this prospectus constitutes a part effective until the earlier of (1) such time
as all of the shares covered by this prospectus have been disposed of pursuant
to and in accordance with the registration statement or (2) the date on which
the shares may be sold without restriction pursuant to Rule 144 of the
Securities Act.
EXPERTS
The
consolidated financial statements of Merriman Curhan Ford Group, Inc. appearing
in Merriman Curhan Ford Group, Inc.'s Annual Report (Form 10-K/A) for the
year ended December 31, 2008, and the effectiveness of Merriman Curhan Ford
Group, Inc.'s internal control over financial reporting as of December 31, 2008
have been audited by Ernst & Young LLP, independent registered public
accounting firm, as set forth in their reports thereon (which contains an
explanatory paragraph describing conditions that raise substantial doubt about
the Company's ability to continue as a going concern as described in Note 3 to
the consolidated financial statements), included therein, and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such reports given on the authority of such
firm as experts in accounting and auditing.
LEGAL
MATTERS
The
validity of our Common Stock offered hereby will be passed upon for us by Reed
Smith LLP, Palo Alto, California.
WHERE
YOU CAN FIND MORE INFORMATION
We
electronically file annual, quarterly and special reports, proxy and information
statements and other information with the SEC. The public may read
and copy any materials we file with the SEC at the SEC’s Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC. The address of that
site is http://www.sec.gov. Our website address is
www.merrimanco.com. Information contained in, or accessible through,
our website is not a part of this prospectus.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC
allows us to “incorporate by reference” the information we file with them, 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, and information that we file later
with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below
and any filings that we will make with the SEC (other than current reports
furnished under Item 2.02 or Item 7.01 of Form 8-K and exhibits filed on such
form that are related to such items) under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the initial filing date of the registration
statement of which this prospectus forms a part and prior to the termination of
this offering:
|
|
·
|
Our
Annual Report on Form 10-K for the fiscal year ended December 31, 2008
filed with the SEC on March 31, 2009 and amended on April 30,
2009;
|
|
|
·
|
Our
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009
filed with the SEC on May 15, 2009;
|
|
|
·
|
Our
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2009
filed with the SEC on August 11,
2009;
|
|
|
·
|
Our
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
2009 filed with the SEC on November 16,
2009;
|
|
|
·
|
Our
Current Reports on Form 8-K filed with the SEC on November 25, 2009,
December 2, 2009, December 17, 2009, December 12, 2009, and January 5,
2010; and
|
|
|
·
|
The
description of our Common Stock included in our registration statement on
Form 8-A filed with the SEC on April 4 28,
2000.
|
We will
provide without charge and upon written or oral request, to each person,
including any beneficial owner, to whom a prospectus is delivered, a copy of any
or all of the documents incorporated by reference, including exhibits to these
documents. You should direct any requests for documents
to:
Chief
Financial Officer
Merriman
Curhan Ford Group, Inc.
600
California Street, 9th Floor
San
Francisco, CA 94108
(415)
248-5600
PART
II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution
The
following table lists the costs and expenses payable by the registrant in
connection with the sale of the Common Stock covered by this prospectus other
than any sales commissions or discounts, which expenses will be paid by the
selling stockholders. All amounts shown are estimates except for the
SEC registration fee.
|
SEC
registration fee
|
|
$ |
3,159.75 |
|
|
Legal
fees and expenses
|
|
|
50,000 |
|
|
Accounting
fees and expenses
|
|
|
7,500 |
|
|
Miscellaneous
fees and expenses
|
|
|
5,000 |
|
|
Total
|
|
$ |
65,659.75 |
|
Item
15. Indemnification of Directors and Officers
Section
145(a) of the General Corporation Law of the State of Delaware (“Delaware
Corporation Law”) provides, in general, that a corporation shall have the power
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), because the person is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of any
other enterprise. Such indemnity may be against expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding, if
the person acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the corporation and if, with
respect to any criminal action or proceeding, the person did not have reasonable
cause to believe the person’s conduct was unlawful.
Section
145(b) of the Delaware Corporation Law provides, in general, that a corporation
shall have the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor
because the person is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of any other enterprise, against any
expenses (including attorneys’ fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such action or suit if
the person acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section
145(g) of the Delaware Corporation Law provides, in general, that a corporation
shall have the power to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation or is or
was serving at the request of the corporation as a director, officer, employee
or agent of any. other enterprise, against
any liability asserted against the person in any such capacity, or arising out
of the person’s status as such, regardless of whether the corporation would have
the power to indemnify the person against such liability under the provisions of
the law. Merriman Curhan Ford Group, Inc. has obtained liability insurance for
the benefit of its directors and officers.
The
restated certificate of incorporation of Merriman Curhan Ford Group, Inc.
provides that, to the fullest extent that the Delaware Corporation Law as from
time to time in effect permits the limitation or elimination of the liability of
directors, no director of Merriman Curhan Ford Group, Inc. shall be personally
liable to Merriman Curhan Ford Group, Inc. or its stockholders for monetary
damages for breach of fiduciary duty as a director.
In
addition, Merriman Curhan Ford Group, Inc. has entered into indemnification
agreements with each of its executive officers and directors containing
provisions that may require Merriman Curhan Ford Group, Inc., among other
things, to indemnify those officers and directors against liabilities that may
arise by reason of their status or service as officers or directors. The
agreements also provide for Merriman Curhan Ford Group, Inc. to advance to the
officers and directors expenses that they expect to incur as a result of any
proceeding against them as to which they could be indemnified. Merriman Curhan
Ford Group, Inc. also intends to execute such agreements with its future
directors and executive officers.
These
indemnification provisions may be sufficiently broad to permit indemnification
of Merriman Curhan Ford Group, Inc.’s officers, directors and other corporate
agents for liabilities (including reimbursement of expenses incurred) arising
under the Securities Act of 1933, as amended.
The
foregoing is only a general summary of certain aspects of Delaware Corporation
Law and Merriman Curhan Ford Group, Inc.’s restated certificate of incorporation
dealing with indemnification of directors and officers, and does not purport to
be complete. It is qualified in its entirety by reference to the detailed
provisions of Section 145 of the Delaware Corporation Law and Merriman Curhan
Ford Group, Inc.’s restated certificate of incorporation.
Item
16. Exhibits
|
Number
|
|
Exhibit
|
|
3.1
|
|
Certificate
of Designation filed with the Secretary of State of Delaware on August 27,
2009 (incorporated by reference to Exhibit 99.1 of our Current Report on
Form 8-K/A filed September 9, 2009)
|
|
4.1
|
|
Series
D Preferred Stock Purchase Agreement by and among the Company and the
Investors named therein dated August 27, 2009 providing for the sale and
issuance of Series D Preferred Stock (incorporated by reference to Exhibit
99.1 of our Current Report on Form 8-K/A filed September 9,
2009)
|
|
4.2
|
|
Investors
Rights Agreement by and among the Company and the Investors named therein
dated August 27, 2009 (incorporated by reference to Exhibit 99.1 of our
Current Report on Form 8-K/A filed September 9, 2009)
|
|
4.3
|
|
Form
of Warrants issued to purchasers of Series D Preferred Stock (incorporated
by reference to Exhibit 99.1 of our Current Report on Form 8-K/A filed
September 9, 2009)
|
|
5.1
|
|
Opinion
of Reed Smith LLP
|
|
23.1
|
|
Consent
of Ernst & Young LLP, Independent Registered Public Accounting
Firm
|
|
23.2
|
|
Consent
of Reed Smith LLP (included in their opinion filed as Exhibit
5.1)
|
|
24.1
|
|
Power
of Attorney (included in signature page
hereto)
|
Item
17. Undertakings
|
(a)
|
The
undersigned registrant hereby
undertakes:
|
|
|
(1)
|
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
|
|
(i)
|
To
include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
|
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in
the maximum aggregate offering price set forth in the “Calculation of
Registration Fee” table in the effective registration
statement.
|
|
|
(iii)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement.
|
Provided, however, that
paragraphs (a)(1)(i), (a)(1)(ii), and (a)(1)(iii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the Commission by
the registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement, or is contained in a form of prospectus filed pursuant to Rule 424(b)
that is part of the registration statement.
|
|
(2)
|
That,
for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment 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.
|
|
|
(3)
|
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.
|
|
|
(5)
|
That,
for purposes of determining liability under the Securities Act of 1933 to
any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after
effectiveness. Provided, however, that
no statement made in a registration statement or prospectus that is part
of the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a
time of contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that
was part of the registration statement or made in any such document
immediately prior to such date of first
use
|
(b) The
undersigned registrant hereby undertakes that, for 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 Securities
Exchange Act of 1934, as amended 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.
(c) 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 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.
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-3 and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of San Francisco, State of California, on the 23 day of February,
2010.
|
|
MERRIMAN
CURHAN FORD GROUP, INC.
|
| |
|
|
|
By:
|
/s/
D. Jonathan Merriman
|
|
|
D.
Jonathan Merriman
|
|
|
Chief
Executive
Officer
|
POWER
OF ATTORNEY
KNOW ALL
BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints D. Jonathan Merriman and Peter V. Coleman, and each
of them, as his true and lawful attorney-in-fact and agent, each with the full
power of substitution and resubstitution, for him and in his name, place or
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement (including any and all post-effective amendments), and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act of 1933, and all
post-effective amendments thereto, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their or his or
substitutes, may lawfully do or cause to be done by virtue
hereof. This Power of Attorney may be signed in several
counterparts.
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 dates
indicated.
|
Signature
|
|
Title(s)
|
|
Date
|
|
|
|
|
|
|
|
/s/
D. Jonathan Merriman
|
|
Chief
Executive Officer
|
|
February
23, 2010
|
|
D.
Jonathan Merriman
|
|
(Principal Executive
Officer)
|
|
|
|
|
|
|
|
|
|
/s/
Peter V. Coleman
|
|
Chief
Financial Officer
|
|
February
23, 2010
|
|
Peter
V. Coleman
|
|
(Principal Financial and
Accounting
|
|
|
|
|
|
Officer)
|
|
|
|
|
|
|
|
|
|
/s/
John M. Thompson
|
|
Chairman
of the Board
|
|
February
23, 2010
|
|
John
M. Thompson
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Ronald L. Chez
|
|
Director
|
|
February
23, 2010
|
|
Ronald
L. Chez
|
|
|
|
|
|
|
|
|
|
|
|
/s/
William J. Febbo
|
|
Director
|
|
February
23, 2010
|
|
William
J. Febbo
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Andrew Arno
|
|
Director
|
|
February
23, 2010
|
|
Andrew
Arno
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Dennis G. Schmal
|
|
Director
|
|
February
23, 2010
|
|
Dennis
G. Schmal
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Jeffrey M. Soinski
|
|
Director
|
|
February
23, 2010
|
|
Jeffrey
M. Soinski
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Douglas G. Bergeron
|
|
Director
|
|
February
23, 2010
|
|
Douglas
G. Bergeron
|
|
|
|
|
EXHIBIT
INDEX
|
Number
|
|
Exhibit
|
|
3.1
|
|
Certificate
of Designation filed with the Secretary of State of Delaware on August 27,
2009 (incorporated by reference to Exhibit 99.1 of our Current Report on
Form 8-K/A filed September 9, 2009)
|
|
4.1
|
|
Series
D Preferred Stock Purchase Agreement by and among the Company and the
Investors named therein dated August 27, 2009 providing for the sale and
issuance of Series D Preferred Stock (incorporated by reference to Exhibit
99.1 of our Current Report on Form 8-K/A filed September 9,
2009)
|
|
4.2
|
|
Investors
Rights Agreement by and among the Company and the Investors named therein
dated August 27, 2009 (incorporated by reference to Exhibit 99.1 of our
Current Report on Form 8-K/A filed September 9, 2009)
|
|
4.3
|
|
Form
of Warrants issued to purchasers of Series D Preferred Stock (incorporated
by reference to Exhibit 99.1 of our Current Report on Form 8-K/A filed
September 9, 2009)
|
|
5.1
|
|
Opinion
of Reed Smith LLP
|
|
23.1
|
|
Consent
of Ernst & Young LLP, Independent Registered Public Accounting
Firm
|
|
23.2
|
|
Consent
of Reed Smith LLP (included in their opinion filed as Exhibit
5.1)
|
|
24.1
|
|
Power
of Attorney (included in signature page
hereto)
|