As filed with the Securities and Exchange Commission on August 12, 2010
Registration No. 333-167176
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
cMONEY, Inc.
(Exact name of registrant as specified in its charter)
Nevada
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7379
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75-3260546
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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One Sugar Creek Center Blvd.
Sugar Land, Texas 77478
Telephone: (713) 589-5393
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
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William Watson
One Sugar Creek Center Blvd., 5th Floor
Sugar Land, Texas 77478
Telephone: (713) 589-5393
(Name, address, including zip code, and telephone number, including area code, of agent for service)
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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
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, check the following box.
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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.
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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.
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If this form is a post-effective amendment filed pursuant to Rule 462(d) 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.
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Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):
Large accelerated filer
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, Accelerated filer
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, Non-accelerated filer (do not check if a smaller reporting company)
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, or Smaller reporting company
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CALCULATION OF REGISTRATION FEE
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(3)
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Amount of
Registration Fee(3)
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Common Stock
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217,011,687 shares
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$0.08
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$17,360,935
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$400
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(1) Represents shares of our common stock being registered for resale that have been issued or will be issued to the selling stockholders named in the registration statement. Unless otherwise provided, all of the share numbers and per share prices in the prospectus give effect to a 3 for 1 stock split effective at the close of business July 30, 2010.
(2) Price per share shown is the per share closing price as reported on the OTC Bulletin Board on July 30, 2010.
(3) Estimated solely for the purposes of computing the registration fee in accordance with Rule 457 of the Securities Act of 1933, as amended. Excludes $3,331 previously paid in connection with the registration of 100,625,500 shares paid in connection with the original filing of this form S-1.
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 said Section 8(a), may determine.
PROSPECTUS (Subject to Completion)
Dated August 12, 2010
The information in this prospectus is not complete and may be changed. We 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 we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
CMONEY, Inc.
217,011,687 Shares of Common Stock
This prospectus relates to the resale of up to 217,011,687 shares of the common stock, par value $0.001 per share (the “Common Stock”), of cMoney, Inc., formerly known as Bonfire Productions, Inc. (“cMoney”), by the selling stockholders identified herein. 100,000,000 of these shares are subject to the terms of an Investment Agreement (the “Kodiak Equity Line of Credit”) with Kodiak Capital Group, LLC, a Delaware limited liability company (“Kodiak”), pursuant to which we have the right to “put” to Kodiak (the “Kodiak Put Right”) up to $15 million in shares of our common stock as described under the caption “Our Company – About this Offering”. An additional 100,000,000 of these shares are subject to the terms of a Reverse Equity Financing Agreement (the “AGS Equity Line of Credit”) with AGS Capital Group, LLC (“AGS”), pursuant to which we have the right to “put” to AGS (the “AGS Put Right” and together with the Kodiak Put Right, the “Put Rights”) up to $100 million in shares of our common stock as described under the caption “Our Company – About this Offering”. We refer to the Kodiak Equity Line of Credit and the AGS Equity Line of Credit collectively as the “Equity Lines of Credit.” We have agreed with AGS not to utilize other equity lines except for the Kodiak Equity Line of Credit so long as the AGS Equity Line of Credit is outstanding.
We will not receive any proceeds from the sale of the Common Stock by the selling stockholders. However, we will receive proceeds from the sale of securities pursuant to our exercise of the Put Rights. We will bear all costs associated with this registration.
Kodiak and AGS are “underwriters” within the meaning of the Securities Act in connection with the resale of our common stock under the Kodiak Equity Line of Credit and the AGS Equity Line of Credit, respectively. Kodiak will pay us 85% of the lowest closing bid price of our common stock during the five consecutive trading days immediately following the date of our notice to Kodiak of our election to put shares to Kodiak pursuant to the Kodiak Equity Line of Credit. AGS will pay us between 50% and 95% of the lowest closing bid price of our common stock during the five consecutive trading days immediately following the date of our notice to AGS of our election to put shares to AGS pursuant to the AGS Equity Line of Credit depending on the trading price of our stock at the time of that election.
Our common stock is quoted on the Over-the-Counter Bulletin Board (“OTCBB”) under the symbol “CMEY.PK.” The closing price of our common stock on the OTCBB on July 30, 2010, was $0.08 per share. In July 2010, only 715,200 shares of our common stock were traded on the OTCBB at prices ranging from $0.01 to $0.16. For more information see “Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.”
It is not possible to determine the price to the public in any sale of the shares of Common Stock by the selling stockholders and the selling stockholders reserve the right to accept or reject, in whole or in part, any proposed purchase of shares. Accordingly, the selling stockholders will determine the public offering price, the amount of any applicable underwriting discounts and commissions and the net proceeds at the time of any sale. The selling stockholders will pay any underwriting discounts and commissions.
INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE RISK FACTORS IN THIS PROSPECTUS BEGINNING ON PAGE 7 FOR A DISCUSSION OF INFORMATION THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN OUR SECURITIES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information from that contained in this prospectus. The selling stockholders are offering to sell and seeking offers to buy shares of our common stock only in jurisdictions where 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. This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy the securities in any circumstances under which the offer or solicitation is unlawful. Neither the delivery of this prospectus nor any distribution of securities in accordance with this prospectus shall, under any circumstances, imply that there has been no change in our affairs since the date of this prospectus.
The date of this prospectus is August 12, 2010.
TABLE OF CONTENTS
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F-1
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F-17
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PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should carefully read the entire prospectus, including the section entitled “Risk Factors” and our financial statements and related notes, before you decide whether to invest in our common stock. If you invest in our common stock, you are assuming a high degree of risk. See the section entitled “Risk Factors.” References to “C$ cMoney,” “cMoney,” “our,” “our company,” “us,” or “the Company” refer to cMoney, Inc. formerly known as Bonfire Productions, Inc.
About Us
We were incorporated in Nevada on August 26, 2006, under the name Bonfire Productions, Inc., for the purpose of producing, marketing and selling audio recordings of folk tales, fairy tales and other children’s stories under the brand name “Bonfire Tales.” At the time of the Merger described below, we had no active operations and have discontinued any pursuit of the pre-merger business of Bonfire Productions, Inc.
On April 8, 2010, we entered into a merger agreement with cMoney, Inc., pursuant to which cMoney, Inc., would be merged with and into our wholly-owned subsidiary, C$ cMoney Acquisition, Inc., and immediately thereafter, cMoney, Inc. would be merged with and into Bonfire Productions, Inc. and cease to exist, as previously disclosed in our Current Report on Form 8-K filed on April 8, 2010 (collectively, the “Merger”). No consideration was paid to either company as a result of the Merger. The agreement provided that upon completion of the merger the officers and directors of cMoney, Inc. would become the officers and directors of our company.
On April 21, 2010, Jennifer Pharris, Founder of cMoney, Inc. prior to the Merger, acquired 105,000,000 shares of Bonfire directly from Alexander Kulyashov, thereby obtaining control of our company as previously disclosed in our Current Report on Form 8-K filed on April 27, 2010. In conjunction with the closing of that acquisition, and in accordance with the terms of the merger agreement between cMoney and Bonfire, the officers and directors of our company resigned and Jennifer Pharris was appointed the chief executive officer and director of our company. An additional 86,970,663 shares were acquired by cMoney on the same date from unaffiliated stockholders of Bonfire. A total of $350,000 was paid for such shares, $190,000 by Jennifer Pharris and $160,000 by cMoney. Our new director, Larry Wilson, loaned funds to Ms. Pharris and cMoney for such stock purchases.
On May 6, 2010, we consummated the Merger as previously disclosed in our Current Report on Form 8-K filed on May 12, 2010. The 86,970,663 shares of our common stock previously acquired by cMoney became treasury shares of our company upon the Merger and were subsequently cancelled. Upon completion of the Merger, in satisfaction of prior commitments of cMoney and for no additional consideration to our company, we issued to the PLJMMP Trust, which is controlled and owned by our Founder’s grandmother, 18,000,000 shares of our common stock, 3,225,441 to the TFPMMP Trust, 75,000 shares to John Schiavo, 1,255,722 shares to our new director, Larry Wilson and his wife, 239,787 shares to our new director Melvin Tekell, 209,790 shares to Mr. Tekell’s adult daughters (all share amounts have been adjusted to reflect our proposed three for one stock split).
After the Merger, our business operations consist of those of cMoney, Inc. We amended our articles of incorporation to change our name to cMoney, Inc
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and t
he name change became effective on July 27, 2010.
In connection with the amendment of our articles of incorporation, we will increase the number of shares we are authorized to issue and will split our shares on a three for one basis by paying a dividend of two shares of our common stock for each existing outstanding share of our common stock. Unless otherwise set forth herein, all disclosure in this prospectus assumes that amendment to our articles of incorporation, name change and three for one stock split have been completed.
We have engaged a third party to develop a software application that, once downloaded onto a customer’s mobile phone with text messaging capability, allows that customer to send money to or receive money from other mobile phones and to pay for goods and services, without having to disclose any of their credit card or account information at the time of transfer or payment. The application is currently only in demonstration stage. We expect to launch this product this Fall with a limited beta launch and on a nationwide basis in the first quarter of 2011. We expect to charge transaction fees for the financial transactions initiated using our mobile application product once launched.
Concerns About Our Ability to Continue as a Going Concern
We are a development stage company that will need substantial additional future funding to build our business infrastructure either through the Equity Lines of Credit with AGS and Kodiak or otherwise. We have not generated any revenues to date and do not expect to launch our mobile application product on a limited beta basis this fall and on a full nationwide basis in the first quarter of 2011. As of March 31, 2010, we have accumulated losses of $2,508,427 since inception, current liabilities of $2,626,258, a working capital deficiency of $2,578,427 and expect to incur further losses in the development of our business. Our ability to continue as a going concern is dependent on our ability to close on the sale of capital stock to Kodiak and/or AGS or obtain other outside debt or equity financing and to successfully launch our product on a nationwide basis. As of June 30, 2010, we had cash and cash equivalents on hand of $18,356. At present, our average monthly cash usage is approximately $175,000 excluding legal and accounting fees relating to this registration statement. The salaries and related costs of our executive officers accounts for approximately half of that monthly burn rate. If we are not able to raise additional capital or implement our business plan, we will no longer be able to operate our business. If our common stock price remains at its current low price we will be unable to put enough shares to AGS or Kodiak pursuant to the Equity Lines of Credit to fund all of our cash requirements. Footnote 2 to the Bonfire’s consolidated financial statements for the nine months ended March 31, 2010 expressed substantial doubt about Bonfire’s ability to continue as a going concern.
How We Plan to Generate Revenue
Once we launch our mobile application product, we expect to generate revenue by charging fees on the various mobile financial transactions made possible by our mobile application which is being made operable on the iPhone, Blackberry, Android and Windows mobile platforms. Our secure mobile application facilitates peer to peer, merchant, credit card, interbank and intra bank funds transfers. Each of these activities creates a fee opportunity for us and our affiliated banks and merchants. Although final fee schedules have not yet been finalized, as an example, fees may range from $0.25 to $2 per transaction depending on the amount of the transaction and may be fixed fees or a percentage of the dollar value of the transaction. There are millions of these transactions every month that could be completed using our mobile application. In addition, we will also enable consumers to initiate and receive funds via our mobile application. We expect our transaction fees to be a fraction of the current charges for such transactions using other methods, such as wiring money using Western Union, due to automation efficiencies thus providing considerable price appeal to consumers. In addition, the screens for our mobile application will provide a platform from which we expect to generate additional income from advertising and couponing activities.
Our Relationship with Jennifer Pharris
We are a party to a technology license agreement with Global 1 Enterprises, Inc., or Global 1, under which we are obligated to pay Global 1 $1,500,000 per year for an exclusive and non-transferable license to certain intellectual property, including trademarks and patent applications. Global 1 is owned by our Founder Jennifer Pharris, who does not participate in the management of cMoney. This relationship presents a potential conflict of interest for Ms. Pharris as she benefits directly from the payments to Global 1and is also the largest shareholder in cMoney, Inc. In addition, we are party to an agreement with Global 1 to provide consulting services to us for $41,543 per year over the next five years; such consulting services are not expected to be requested by the company. Related party payments to Ms. Pharris and Global 1 this year through July 30, 2010 were $381,141.
From 2005 through 2009, cMoney received advances of $502,236 from the Pharris Family Trust, a trust owned and managed directly by Mirriam Pharris, grandmother of Jennifer Pharris. The funds obtained via the advances were used by cMoney for research and development costs and legal fees associated with product development. Upon completion of the Merger, the PLJMMP Trust, another trust owned and managed directly by Mirriam Pharris, received 18,000,000 shares of Company Common Stock in consideration for providing such note and Jennifer Pharris assumed the obligation to repay the note.
In May 2010, Larry Wilson loaned cMoney $280,000 which carries an interest rate of 10% per annum and matures on the earlier of March 31, 2011 or the date cMoney closes an equity investment of $5,000,000. $190,000 of this amount was transferred to Ms. Pharris, the sole stockholder of cMoney at that time, and Ms. Pharris assumed the corresponding obligation to repay Mr. Wilson that $190,000. Ms. Pharris used that $190,000 to acquire a controlling interest in Bonfire prior to the merger of cMoney and Bonfire.
The Securities and Exchange Commission (the “SEC”) has initiated a formal civil inquiry into the Company and asked that the Company and related parties provide certain records, documents and information to the SEC. The inquiry is in the early stages, but the SEC has inquired about the relationship between the Company and Dennis Pharris, and any payments made to or for the benefit of Mr. Pharris by the Company. Mr. Pharris is the father of our former Chief Executive Officer and Chairman of the Board, Jennifer Pharris. In addition, the SEC has inquired about the initial transaction pursuant to which Ms. Pharris acquired control of the Company and cMoney, Inc., a Delaware corporation owned by Jennifer Pharris, was acquired by and merged into the Company and sources and uses of funds of the original cMoney, Inc. prior to its merger into the Company. At this stage, the inquiry is very broad. The Company intends to work with the SEC in order to resolve these issues. Ms. Pharris is no longer an officer or director of the Company and Company management intends that Ms. Pharris and her father have no operating control in the Company going forward. The Company does not intend to seek any management services from Global 1 under such agreement.
About This Offering
This prospectus relates to the resale of up to:
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100,000,000 shares of our common stock issuable to Kodiak for investment banking services pursuant to the Kodiak Equity Line of Credit;
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100,000,000 shares of our common stock issuable to AGS for investment banking services pursuant to the AGS Equity Line of Credit;
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4,200,000 shares of our common stock already issued to Kodiak as a commitment fee under the Kodiak Equity Line of Credit;
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7,000,000 shares of our common stock already issued to AGS as a commitment fee under the AGS Equity Line of Credit and an additional 1,000,000 shares we are contractually obligated to issue to AGS after the completion of the pending stock split as an additional commitment fee;
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4,811,687 shares of our common stock already issued to Robert Gandy in compensation of future investment banking services.
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As of July 30, 2010, we had 146,489,538
shares of common stock outstanding after giving effect to the three for one stock split as a result of the share dividend. If we issued the entire 200 million shares of our common stock to Kodiak and AGS, we would have approximately 346,489,538 shares outstanding, an increase of approximately 137%. Neither of the Equity Lines of Credit have a minimum price per share at which we may put shares, so the number of shares we may actually issue under each Equity Line of Credit may be far in excess of 200 million. At July 30, 2010 the closing price per share of our common stock was $0.08. At that price, we would issue in excess of 562 million shares to Kodiak and approximately 3.75 billion shares to AGS. We have no present intention of issuing such a large number of shares at such low prices, but we may still issue a substantial number of shares and significantly dilute our existing stockholders. If the price of our common stock does not increase materially we will not be able to access a significant portion of our Equity Lines of Credit. We expect that the price per share of our common stock will increase if we successfully launch our mobile application and begin successfully operating our business, but we cannot assure you that the price per share of our common stock will increase at all or that we will be able to access our Equity Lines of Credit on terms that generate material cash for us and does not substantially dilute our existing stockholders.
Kodiak Equity Line of Credit
Pursuant to the Kodiak Equity Line of Credit, we have the right to “put” to Kodiak (the “Kodiak Put Right”) up to $15 million in shares of our common stock (i.e., we can compel Kodiak to purchase our common stock at a pre-determined formula). Accordingly, this prospectus relates, in part, to the resale of up to 100 million shares of our common stock by Kodiak.
For the purpose of determining the number of shares of common stock to be offered by this prospectus, we have assumed that we will issue not more than 100 million shares pursuant to the exercise of the Kodiak Put Right, although the number of shares that we will actually issue pursuant to the Kodiak Put Right may be more or less than 100 million, depending on the trading price of our common stock. We currently do not intend to exercise the Kodiak Put Right in a manner which would result in our issuance of more than 100 million shares, but we cannot assure you that we won’t do so if we need the funds and do not have other better financing alternatives. If we were to exercise the Kodiak Put Right in that manner, we would be required to file a subsequent registration statement with the Securities and Exchange Commission, or the SEC, and that registration statement would have to be declared effective prior to the issuance of any additional shares.
The Kodiak Equity Line of Credit provides, in part, that following notice to Kodiak, we may put to Kodiak up to $15 million in shares of our common stock for a purchase price equal to 85% of the lowest closing bid price of our common stock during the five consecutive trading days immediately following the date of our notice to Kodiak of our election to put shares pursuant to the Kodiak Equity Line of Credit. The dollar value that we will be permitted to put will be, at our option, either: (a) up to $5 million or (b) 200% of the average daily volume in the U.S. market of our common stock for the ten (10) trading days prior to the notice of our put, multiplied by the average of the three (3) daily closing bid prices immediately preceding the date of the put notice. Kodiak has indicated that it will resell those shares in the open market, resell our shares to other investors through negotiated transactions, or hold our shares in its portfolio. This prospectus covers the resale of our common stock by Kodiak either in the open market or to other investors through negotiated transactions. Kodiak’s obligations under the Kodiak Equity Line of Credit are not transferrable and this registration statement does not cover sales of our common stock by transferees of Kodiak.
Kodiak will only purchase shares when we meet the following conditions:
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a registration statement has been declared effective and remains effective for the resale of the common stock subject to the Kodiak Equity Line of Credit;
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our common stock has not been suspended from trading for a period of two consecutive trading days and we have not been notified of any pending or threatened proceeding or other action to delist or suspend our common stock;
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we have complied with our obligations under the Kodiak Equity Line of Credit and the attendant Registration Rights Agreement;
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no injunction has been issued and remains in force, and no action has been commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of our common stock;
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the issuance of the shares will not violate any shareholder approval requirements of the market or exchange on which our shares are principally listed; and
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we have not filed a petition in bankruptcy, either voluntarily or involuntarily, and there shall not have been commenced any proceedings under any bankruptcy or insolvency laws.
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The Kodiak Equity Line of Credit will terminate when any of the following events occur:
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Kodiak has purchased an aggregate of $15 million of our common stock;
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thirty-six (36) months after the SEC declares this Registration Statement effective; or
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upon written notice from us to Kodiak.
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In addition, we or Kodiak may terminate the agreement if the other party commits a material breach, or becomes insolvent or enter bankruptcy proceedings.
The Kodiak Equity Line of Credit will be suspended if any of the following were to occur, and would remain suspended until such events were to be rectified:
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our common stock ceases to be registered under the Exchange Act; or
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the trading of our common stock is suspended by the SEC, the NASD, or its principal market for two consecutive trading days.
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As we draw down on the Kodiak Equity Line of Credit, shares of our common stock will likely be sold into the market by Kodiak. The sale of these additional shares could cause our stock price to decline. In turn, if the stock price declines and we issue more puts, more shares will come into the market, which could cause a further drop in the stock price. You should be aware that there is an inverse relationship between the market price of our common stock and the number of shares to be issued under the Kodiak Equity Line of Credit. If our stock price declines, we will be required to issue a greater number of shares under the Kodiak Equity Line of Credit. We have no obligation to utilize the full amount available under the Kodiak Equity Line of Credit.
In consideration of the Equity Line of Credit contained in the Kodiak Equity Line of Credit we will pay to Kodiak a commitment fee equal to 5% of the $15 million facility amount, or $750,000. This amount will be payable one-half as of the closing of the first draw-down under the Equity Line of Credit and the remaining one-half as of the earlier of the second draw-down under the Equity Line of Credit or three months after the date of the Kodiak Equity Line of Credit. Kodiak has recently agreed to take 6,849,666 shares of common stock in lieu of cash for the first half of the $750,000 fee. In addition, we also issued to Kodiak 4.2 million shares of our common stock as a commitment fee. The total discounted price of the shares we will sell under the Kodiak Equity Line of Credit will be in excess of 21%, comprised of the 15% discount off the market price, the 5% cash commitment fee and the 4,200,000 shares of our common stock, which at the June 30, 2010 closing price per share of $0.08 would equal $336,000, or approximately 2.2% of the $15 million Kodiak Equity Line of Credit, after taking into account the effect of the proposed three-for-one stock split on the price of our common stock.
AGS Equity Line of Credit
Pursuant to the AGS Equity Line of Credit, we have the right to “put” to AGS (the “AGS Put Right”) up to $100 million in shares of our common stock (i.e., we can compel AGS to purchase our common stock at a pre-determined formula). Accordingly, this prospectus relates, in part, to the resale of up to 100,000,000 shares of our common stock by AGS.
For the purpose of determining the number of shares of common stock to be offered by this prospectus, we have assumed that we will issue not more than 100 million shares pursuant to the exercise of the AGS Put Right, although the number of shares that we will actually issue pursuant to the AGS Put Right may be more or less than 100 million, depending on the trading price of our common stock. We currently do not intend to exercise the AGS Put Right in a manner which would result in our issuance of more than 100 million shares, but if we were to exercise the AGS Put Right in that manner, we would be required to file a subsequent registration statement with the SEC and that registration statement would have to be declared effective prior to the issuance of any additional shares.
The AGS Equity Line of Credit provides, in part, that following notice to AGS, we may put to AGS up to $100 million in shares of our common stock for a purchase price equal to from 50% to 95% of the lowest closing bid price of our common stock during the five consecutive trading days immediately following the date of our notice to AGS of our election to put shares pursuant to the AGS Equity Line of Credit. That percent discount is: 50% if the price of our common stock is less than $0.11 per share, 25% if the price of our common stock is between $0.11 and $0.19, 85% if the price of our common stock is between $0.20 and $0.74 per share, 10% if the price of our common stock is between $0.75 and $0.99 per share, and 5% the price of our common stock is above $1.00 per share. The maximum dollar value that we will be permitted to put at any one time will be, at our option, either: (a) $100,000 or (b) 250% of the product of the average daily volume in the U.S. market of our common stock for the ten (10) trading days prior to the notice of our put, multiplied by the average of the ten (10) daily closing bid prices immediately preceding the date of the put notice. However, we must withdraw our put if the lowest closing bid price of our common stock during the five consecutive trading days immediately following the date of our notice to AGS of our election to put shares pursuant to the AGS Equity Line of Credit is less than 98% of the average closing price of our common stock for the ten trading days prior to the date of such notice. We cannot put shares to AGS if such put would cause AGS to own in excess of 4.99% of our outstanding shares of common stock.
AGS has indicated that it will resell those shares in the open market, resell our shares to other investors through negotiated transactions, or hold our shares in its portfolio. This prospectus covers the resale of our common stock by AGS either in the open market or to other investors through negotiated transactions. AGS’s obligations under the AGS Equity Line of Credit are not transferrable and this registration statement does not cover sales of our common stock by transferees of AGS.
AGS will only purchase shares when we meet the following conditions:
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a registration statement has been declared effective and remains effective for the resale of the common stock subject to the AGS Equity Line of Credit;
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our common stock has not been suspended from trading;
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we have complied with our obligations under the AGS Equity Line of Credit and the attendant Registration Rights Agreement;
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no injunction has been issued and remains in force, and no action has been commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of our common stock; and
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There shall not exist any fundamental changes to the information set forth in the registration statement which would require us to file a post-effective amendment to the registration statement.
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The AGS Equity Line of Credit will terminate when any of the following events occur:
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AGS has purchased an aggregate of $100 million of our common stock;
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the first day of the month next following twenty-four (24) months after the SEC declares this Registration Statement effective; or
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upon fifteen trading days prior written notice from us to AGS.
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In addition, the AGS Equity Line of Credit will terminate if:
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there shall be a stop order or suspension of the effectiveness of the Registration Statement for an aggregate of fifty (50) trading days during the commitment period; or
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we shall at any time fail materially to comply with the covenants in the agreement and such failure is not cured within thirty days after receipt of written notice from AGS.
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As we draw down on the AGS Equity Line of Credit, shares of our common stock will likely be sold into the market by AGS. The sale of these additional shares could cause our stock price to decline. In turn, if the stock price declines and we issue more puts, more shares will come into the market, which could cause a further drop in the stock price. You should be aware that there is an inverse relationship between the market price of our common stock and the number of shares to be issued under the AGS Equity Line of Credit. If our stock price declines, we will be required to issue a greater number of shares under the AGS Equity Line of Credit. We have no obligation to utilize the full amount available under the AGS Equity Line of Credit.
In addition to our right to put shares of common stock to AGS, we may request that they lend funds to us pursuant to promissory notes with a maturity of two years and an interest rate not exceeding 12%. However, AGS is not obligated to issue us any such promissory notes.
In consideration of the Equity Line of Credit contained in the AGS Equity Line of Credit we have issued to AGS a commitment fee equal to seven million shares of our common stock and are contractually obligated to issue them an additional one million shares, which, based on the July 30, 2010 closing price per share of our common stock of $0.08 taking into account the effect of our three-for-one stock split, would collectively have a value of $560,000. In addition we will issue to AGS a number of our shares of common stock with a value of 1% of the amount of each advance from AGS. These fees are in addition to the 5-50% discount at which we will sell shares to AGS under the AGS Equity Line of Credit.
The Offering
Shares of common stock offered by the selling stockholders:
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Up to 217,011,687 shares of common stock, which would represent approximately 145% of our common stock outstanding as of July 30, 2010 on a pro forma basis assuming the entire 200,000,000 is issued to Kodiak and AGS pursuant to the Put Rights.
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Common stock to be outstanding after the offering:
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Up to 350,675,725 shares of common stock assuming the entire 200,000,000 is issued to Kodiak and AGS pursuant to the Put Rights, which would represent an increase of approximately 148% over the number of shares we have outstanding as of July 8, 2010.
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Use of proceeds:
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We will not receive any proceeds from the sale of the shares by the selling stockholders. However, we will receive proceeds from the Equity Lines of Credit. See “Use of Proceeds.”
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Risk factors:
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You should carefully read and consider the information set forth under the caption “Risk Factors” beginning on page 4 and all other information set forth in this prospectus before investing in our common stock.
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OTC Bulletin Board Symbol:
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CMEY.PK
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RISK
FACT
ORS
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below before deciding to invest in shares of our common stock. Our business, prospects, financial condition or results of operations could be materially adversely affected by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial, and you may lose all or part of your investment. In assessing the risks described below, you should also refer to the other information contained in this prospectus, including our financial statements and the related notes and the information included in the section of this document entitled “Information Regarding Forward-Looking Statements,” before deciding to purchase any shares of our common stock.
We will not be able to continue as a going concern unless we receive substantial outside debt or equity funding.
We have not generated any revenues to date. As of March 31, 2010, cMoney had accumulated losses of $2,508,427 since inception, current liabilities of $2,626,258, a working capital deficiency of $2,578,427 and we expect to incur further losses in the development of our business. Our currently monthly operating expenses total approximately $175,000 per month, approximately 50% of which is salary and related expenses for our executive officers. Our ability to continue as a going concern is dependent, in part, on our ability to close on the sale of capital stock to Kodiak and/or AGS or obtain other significant outside debt or equity funding and to successfully launch our product. We expect to launch our product on a limited beta basis this Fall and on a nationwide basis in the first quarter of 2011, but cannot assure you that that we will launch on that schedule or at all or that our launch will be successful and will lead to a positive cash flow. As at June 30, 2010, we had cash and cash equivalents of $18,356. If we are not able to raise additional capital or implement our business plan, we will no longer be able to operate our business.
We have significant cash requirements in addition to our monthly operating expenses, including:
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the annual payment of $1,500,000 to Global 1, which is owned by our Founder, Jennifer Pharris, related to the license of technology from Global 1;
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Up to $6,900,000 to Robert Gandy (6% of the value of our common stock we put to each of Kodiak and AGS under the Equity Lines of Credit);
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$750,000 to Kodiak Capital Group LLC, in consideration of the Equity Line of Credit contained in the Kodiak Equity Line of Credit (5% of the $15 million facility amount) half of which is being paid in 6,849,666 shares of common stock in lieu of cash.
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$1,000,000 to US Dataworks pursuant to the Technology License Agreement;
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$771,000 to Soprano Design Pty Ltd pursuant to the Technology Sublicense Agreement;
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$90,000 to pay off a promissory note to Larry Wilson which carries an interest rate of 10% per annum and matures on the earlier of March 31, 2011 or the date cMoney closes an equity investment of $5,000,000;
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$540,700 to pay off a promissory note to Larry Wilson which carries an interest rate of 10% per annum and matures on May 13, 2011;
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$220,000 to pay off a promissory note to Larry Wilson which carries an interest rate of 10% per annum and matures in June 2011 unless he earlier converts part or all of the amount due into shares of our common stock at a conversion price of $0.0367 per share (after adjusting for the 3-for-1 split); and
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417,000 shares of our common stock already issued to Robert Gandy in compensation for investment banking services rendered. We are obligated to issue Robert Gandy 4,394, 687 shares of our common stock for investment banking services rendered once we access the Kodiak or AGS Equity lines.
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other contractual obligations referred to under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual obligations.”
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These obligations mean that in excess of $5 million could be paid out of the initial draw downs under the Equity Lines of Credit before we can even begin paying our day-to-day operating expenses. In addition, see “Business—Our Planned Product Launch” for a description of estimated expenses related to our planned product launch.
Our annual $1.5 million payment to Global 1 related to our license of technology from Global 1 was due May 31, 2010 and has not been paid due to a lack of funds but is not in default under that contract, as amended July 27, 2010. Global 1, could terminate that contract because of this breach. Our Founder, Jennifer Pharris, who also owns Global 1, has indicted that she has no present intention to cancel this contract so long as we are making progress towards launching our product and obtaining necessary funding, but we cannot assure you that Global 1 will not cancel that contract if we do not make the required payment soon.
Until such time that we receive additional debt or equity financing, or begin to receive significant revenues from operations, there is a risk that we will not continue to be a going concern and if our financial condition continues we will no longer be able to continue to operate our business. We may continue to incur losses, and we cannot be certain whether we will ever earn a significant amount of revenues or profit, or, if we do, that we will be able to continue earning such revenues or profit. Any of these factors could cause our stock price to decline and result in your losing a portion or all of your investment.
We need to establish a relationship with one or more banks to act as our partners in setting up the accounts with our customers and we will not be able to sell our product if we do not establish such relationship.
Our product requires that our customers visit a bank and upload their driver’s license and credit card numbers onto the bank’s network. If we do not establish relationships with banks to do this for us, our business plan will not work and our business will fail.
We will need to raise additional funds to pursue our growth strategy and to continue our operations, and we may be unable to raise capital when needed.
Even assuming a successful initial funding from Kodiak Capital and a successful product launch, we will need to seek additional equity or debt financing to provide for the capital expenditures required to finance working capital requirements, retain our management team, launch our product and market and support our product until we begin to generate sustainable revenues. We cannot predict the timing or amount of any such capital requirements at this time. There is no assurance that we will be able to satisfy the initial or future conditions to funding required by our Equity Lines of Credit. If financing is not available on satisfactory terms, or at all, we will be unable to sustain our business and to continue as a going concern. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to our common stock.
We do not have an operating history and there is no assurance that we will achieve profitability.
We have no operations or revenues with which to generate profits or liquidity. We have not yet generated any operating revenue to sustain our projected operations and do not plan to launch our product on a nationwide basis to generate revenue until the first quarter of 2011. We do not have an operating history on which investors can evaluate our potential for future success. The revenue and income potential of our business and the market for mobile payments and money transfers through non-traditional products such as ours has not been proven and we may never achieve profitability. Potential investors should evaluate our company in light of the expenses, delays, uncertainties, and complications typically encountered by early-stage businesses in new and rapidly developing markets, many of which will be beyond our control. These risks include:
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lack of sufficient capital,
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unproven business model,
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marketing difficulties,
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uncertain market acceptance of our products and services.
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As a result of our lack of an operating history, our plan for growth, and the competitive nature of the markets in which we may compete, our historical financial data are of limited value in anticipating future revenue, capital requirements and operating expenses.
Our Founder has a potential conflict of interest because she is also the owner of a vendor, Global 1, to which we are obligated to pay $1,541,543 per year.
Our Technology license with Global 1 represents a $1.5 million annual obligation for the intellectual property we are licensing from Global 1. The fact that our Founder is also the sole owner of Global 1 creates a potential conflict of interest for Ms. Pharris. She may be unwilling to deal with the Company the same way she would an arm’s length vendor. The term of this contract continues until the underlying intellectual property expires so we could be obligated to pay Global 1 for a substantial number of years and we do not have a contractual right to cancel the contract if the pending patent applications are not issued or if material claims under those patent applications are denied, so if either of those events were to occur we may be paying $1.5 million per year for little or no value unless we can renegotiate the terms of the contract if those events occur. We are also obligated to may Global 1 $41,543 for consulting services that are being provided by Ms. Pharris under a five year contract executed in April 2009 but the company does not plan to utilize these services.
The products we intend to sell are based on an emerging technology and therefore the potential market for our products remains uncertain.
The mobile payment and money transfer products that are in development and that we intend to sell are based on emerging technology, and our success depends on organizations and customers perceiving benefits and cost savings associated with adopting our solutions. We do not have an operating history, and the solutions we intend to offer have not been adopted by customers, banks or vendors. As such, it is difficult to evaluate our business because the potential market for our products remains uncertain.
Our growth will depend on our ability to develop our brand and any failure to do so could limit our business products, which could have a material adverse effect on our business, financial condition and results of operations and financial condition
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We believe that establishing a strong brand will be critical to achieving widespread acceptance and adoption of our products. Promoting and positioning our brand will depend largely on the success of our marketing efforts, distribution channels and ability to provide high quality service. Establishing a significant brand presence for an emerging technology often requires substantial marketing investment, and many early stage development companies have failed to generate the necessary adoption rates even after such a process. Brand promotion activities may not yield increased revenues, and even if they do, any increased revenues may not offset the expenses we incur in building the C$ cMoney brand. If we are not successful in building the C$ cMoney brand, it could limit our business prospects, which could have a material adverse effect on our business, financial condition and results of operations.
We might not implement successful strategies to initiate and increase adoption of our mobile payment and money transfer products, which would limit our growth and cause our stock price to decline.
Once our product has been fully developed, our future profitability will depend, in part, on our ability to successfully implement our strategy to initiate and increase adoption of our mobile payment and money transfer products. We cannot assure you that there will be marketplace acceptance for our mobile payment and money transfer products or that any such market will remain viable. We expect to invest substantial amounts to:
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Drive consumer and merchant awareness of mobile payment and money transfers;
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Encourage consumers and merchants to sign up for and use our mobile payment and money transfer product;
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Continue to develop state of the art, easy-to-use technology;
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Attract and retain a management team, a sales and marketing team and other necessary employees;
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Increase the number of users who collect and pay through mobile applications; and
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Diversify our customer base.
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Our investment in these programs will affect adversely our short-term profitability. Additionally, we may fail to successfully implement these programs to increase adoption of our mobile payment and money transfer method by customers who pay for the service. This would impact revenues adversely, and cause our business to suffer.
Entities engaged in financial transactions, such as banks, credit card companies, lenders or money transfer companies, are heavily regulated. However, we do not believe that our operations are subject to such regulations. If regulations are changed or we are deemed to be subject to existing regulations, we could be subject to fines or other penalties or we could be forced to change our business practices to comply with such regulations which could impose material costs on our operations.
We facilitate the convenient initiation of financial transactions but use the existing banking and merchant payment mechanisms to complete the transactions. We do not take deposits, charge interest, pay interest, loan money, process credit card transactions, or guarantee the validity of collected funds. We simply provide the method of initiating financial transactions via mobile phones. Based on this functionality within existing banking processes, we believe that we are not subject to the regulatory requirements normally associated with banking, credit card processing, lending or money transfer.
In the future, we might be subjected to:
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state or federal banking regulations;
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state money transmitter regulations and federal money laundering regulations;
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international banking or financial services regulations or laws governing other regulated industries; or
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U.S. and international regulation of Internet transactions.
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If we are found to be in violation of any current or future regulations, we could be:
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exposed to financial liability, including substantial fines which could be imposed on a per transaction basis and disgorgement of our profits;
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forced to change our business practices; or
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forced to cease doing business altogether or with the residents of one or more states or countries.
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We do not own all of the software and other technologies used in our products and services.
Our products include intellectual property owned and licensed to us by third parties. Global 1 Enterprises, Inc., a Nevada corporation, granted to us an exclusive license, in the United States and Australia, to the trademark “C$ cMoney” and three patent applications (the “Global 1 License”) that are critical to our business. However, we do not know whether any of Global 1’s pending patent applications will result in the issuance of patents or whether the examination process will require Global 1 to narrow its claims. Even if patents are issued from our patent applications, which is not certain, they may be contested, circumvented or invalidated in the future. Moreover, the rights granted under the trademark and any issued patents or other intellectual property rights may not provide us with proprietary protection or competitive advantages, and, as with any technology, competitors may be able to develop similar or superior technologies to our own now or in the future. We are obligated to pay Global 1 $1,500,000 per year for the Global 1 License regardless of whether the patent applications are ever ultimately issued as full patents and regardless of how the claims are narrowed prior to issuance.
In addition, US Dataworks, Inc., a Nevada corporation (“US Dataworks”), granted to us a non-exclusive license to use certain payment processing intellectual property. The $1,000,000 payment under that license is past due and could be cancelled if we do not pay US Dataworks soon.
If we are unable to obtain the rights necessary to use or continue to use third-party technology or content in our products and services, the inability to support, maintain and enhance any software could result in increased costs, or in delays or reductions until equivalent software could be developed, identified, licensed and integrated.
We rely on a third party software developer to assist in the development of our products and their or our failure to successfully develop these products could have a material adverse effect on our business, financial condition and results of operations.
We sublicensed the technology we obtained under the Global 1 License to a third party software developer, Soprano Design Pty Ltd, a company organized under the laws of Australia, to assist in the development of our mobile payment and money transfer products. We are relying on their technical expertise to finalize our product. In addition, we owe Soprano $771,000 for the work they have done on our product which is past due and if we do not pay that amount soon, they could terminate our license to that technology. Their or our failure to successfully develop our product or our failure to pay the fees necessary to keep maintain the license to our product could have a material adverse effect on our business, financial condition and results of operations.
We will rely on third parties to process our payment transactions and their failure to process our payment transactions could have a material adverse effect on our business, financial condition and results of operations.
We do not belong to and cannot directly access the credit card associations or the ACH payment network and we have no present intention of becoming able to do so as we merely initiate the transactions using our mobile applications. As a result, we must and will rely on third parties to process our transactions. The failure to obtain processing services on acceptable terms, or the failure to switch to another processor quickly and smoothly if our service with a particular processor were to terminate for any reason, could have a material adverse effect on our business, financial condition and results of operations.
Our failure to manage our product and operational launch and growth will cause a disruption of our operations resulting in the failure to generate revenue.
We currently have no operations and have to build our entire operation, launch and market our product, manage our operations and create management, operational, accounting and information systems. This will place a significant strain on our management and our systems. We will need to establish our financial controls. We will also need to effectively train, motivate, and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.
Our business will depend on the growth and maintenance of the mobile communications industry, and the failure of the mobile communications industry to grow as we expect could have a material adverse effect on our business, financial condition and results of operations.
Our success will depend on the growth and maintenance of the mobile communications industry in the United States and the demand for, and development of, software applications for mobile communication devices. This includes deployment and maintenance of reliable next-generation digital networks with the necessary speed, data capacity and security for providing reliable wireless communications services. Wireless communications infrastructure may be unable to support the demands placed on it if the number of customers continues to increase, or if existing or future customers increase their bandwidth requirements. In addition, viruses, worms and similar break-ins and disruptions from illicit code or unauthorized tampering may harm the performance of wireless communications. If a well-publicized breach of security were to occur, general mobile phone usage could decline, which could reduce the demand for and use of our applications. Wireless communications experience a variety of outages and other delays as a result of infrastructure and equipment failures, and could face outages and delays in the future. These outages and delays could reduce the level of wireless communications usage as well as our ability to distribute our applications successfully.
We are highly dependent on our executive officers and the loss of any of their services could have a material adverse effect on our business, financial condition and results of operations. Further, the failure to attract and retain highly qualified personnel could compromise our ability to effectively manage our business and pursue our growth strategy.
We are highly reliant on the services of our executive officers. The loss of services of any of them could have a material adverse effect on our business, financial condition and results of operations.
Our future success depends upon our ability to attract and retain highly qualified technical, development, sales, service and management personnel. Competition for such personnel is intense, and we may fail to retain our key employees or attract or retain other highly qualified personnel in the future. As a company with no operating history, limited financial resources and no proven track record, we may have difficulty attracting and retaining new individuals. Our inability to attract skilled management personnel and other employees as needed could have a material adverse effect on our business, financial condition and results of operations. Our arrangement with current employees is at will, meaning our employees may voluntarily terminate their employment at any time.
We do not carry any business interruption insurance, products liability insurance or any other commercial insurance policy. As a result, we may incur uninsured losses, increasing the possibility that you would lose your entire investment in our company.
We could be exposed to liabilities or other claims for which we would have no commercial insurance protection. We do not currently maintain any business interruption insurance, products liability insurance, or any other comprehensive commercial insurance policy. As a result, we may incur uninsured liabilities and losses as a result of the conduct of our business. There can be no guarantee that we will be able to obtain additional insurance coverage in the future, and even if we are able to obtain additional coverage, we may not be able to obtain such insurance on commercially reasonable terms or carry sufficient insurance coverage to satisfy potential claims. Should uninsured losses occur, any purchasers of our common stock could lose their entire investment.
If our software contains undetected errors, we could lose the confidence of users, resulting in loss of customers and a reduction of revenue.
Our mobile software applications and products and our website could contain undetected errors or “bugs” that could adversely affect their performance. The occurrence of errors in any of these may cause us to lose market share, damage our reputation and brand name and reduce any future revenues.
Interruption or failure of our information technology and communications systems could impair our ability to effectively provide our products, which could damage our reputation and harm our operating results.
Our ability to provide our products depends on the continuing operation of our information technology and communications systems. Any damage to or failure of our systems could interrupt our service. Service interruptions could reduce our revenues and profits, and damage our brand if our system is perceived to be unreliable. Our systems are vulnerable to damage or interruption as a result of terrorist attacks, war, earthquakes, floods, fires, power loss, telecommunications failures, interruptions in access to our website through the use of “denial of service” or similar attacks, hacking or other attempts to harm our systems, and similar events. Our servers, which we expect to be hosted at third-party internet data centers, are also vulnerable to break-ins, sabotage and vandalism. We do not currently have a disaster recovery plan in place and any disaster recovery plan would not account for all possible scenarios. The occurrence of a natural disaster or a closure of an internet data center by a third-party provider without adequate notice could result in lengthy service interruptions. Interruption or failure of our information technology and communications systems could impair our ability to effectively provide our products and services, which could damage our reputation and harm our operating results.
Our possession and use of personal information presents risks and expenses that could harm our business. Unauthorized disclosure or manipulation of such data, whether through breach of our security or otherwise, could adversely affect our business, financial condition and results of operations.
If our customers use credit cards or other means of payment other than our software application to pay us, our databases, just like those of other merchants, will include their personal data, including credit card information. A party who is able to compromise the security of our facilities, or of the banks or payment processors that store personal information that we will rely on, could misappropriate either our proprietary information or the personal information of our customers, or cause interruptions or malfunctions in our operations. We may be required to expend significant capital and financial resources to protect against such threats or to alleviate problems caused by breaches in security. As techniques used to breach security change frequently, and are generally not recognized until launched against a target, we may not be able to implement security measures in a timely manner or, if and when implemented, these measures could be circumvented. Any breaches that may occur could expose us to increased risk of lawsuits, loss of existing or potential customers, harm to our reputation and increases in our security costs, which could have a material adverse effect on our business, financial condition and results of operations.
Possession and use of personal information in conducting our business will subject us to legislative and regulatory burdens that could require notification of data breach, restrict our use of personal information and hinder our ability to acquire new customers or market to existing customers. We will incur expenses to comply with privacy and security standards and protocols imposed by law, regulation, industry standards or contractual obligations.
Our business could be materially adversely affected if we cannot protect our intellectual property rights or if we infringe on the intellectual property rights of others.
Our ability to compete effectively will depend on our ability and the ability of the third party licensors from whom we license technology to maintain and protect our proprietary rights. Third parties may seek to challenge, invalidate, circumvent or render unenforceable any proprietary rights owned by or licensed to us.
If we or our third party licensors are unable to protect our proprietary rights or if third parties independently develop or gain access to our or similar technologies, our business, revenue and competitive position could be harmed. Litigation may be necessary to:
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enforce our intellectual property rights;
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protect our trade secrets; and
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determine the scope and validity of such intellectual property rights.
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Any such litigation, whether or not successful, could result in substantial costs and diversion of resources and management’s attention from the operation of our business.
We may receive notice of claims of infringement of other parties’ proprietary rights. Such actions could result in litigation and we could incur significant costs and diversion of resources in defending such claims. The party making such claims could secure a judgment awarding substantial damages, as well as injunctive or other equitable relief. Such relief could effectively block our ability to make, use, sell, distribute or market our products and services in such jurisdiction. We may also be required to seek licenses to such intellectual property. We cannot predict, however, whether such licenses would be available or, if available, that such licenses could be obtained on terms that are commercially reasonable and acceptable to us. The failure to obtain the necessary licenses or other rights could delay or preclude the sale, development or distribution of our products and could result in increased costs to us.
We operate in a competitive industry with more horizontally integrated companies. It may be difficult to obtain or sustain our market share in the event of a decline in market conditions.
Our industry is competitive and rapidly changing. Most of our competitors are very large international companies that have a material advantage in their financial, technical and marketing resources. We may be unable to successfully compete against future competitors, which would adversely affect our business, financial condition and results of operations.
We may engage in acquisitions, strategic investments, partnerships, alliances or other ventures that are not successful, or fail to integrate acquired businesses into our operations, which may adversely affect our competitive position and growth prospects.
We may acquire or make strategic investments in complementary businesses, technologies, services or products, or enter into strategic partnerships or alliances with third parties in the future in order to expand our business. We may be unable to identify suitable acquisition, strategic investment or strategic partnership candidates, or if we do identify suitable candidates, we may not complete those transactions on terms commercially favorable to us or at all, which may adversely affect our competitive position and our growth prospects. If we acquire another business, we may face difficulties, including:
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integrating that business’s personnel, products, technologies or services into our operations;
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retaining the key personnel of the acquired business;
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failing to adequately identify or assess liabilities of that business;
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failure of that business to fulfill its contractual obligations;
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failure of that business to achieve the forecasts we used to determine the purchase price; and
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diverting our management’s attention from normal daily operations of our business.
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These difficulties could disrupt our ongoing business and increase our expenses.
If we are not successful in developing and expanding our product offerings to address emerging consumer demands and technological trends, our business, financial condition and results of operations could be materially and adversely affected.
Our ability to implement solutions for our customers incorporating new developments and improvements in technology and to develop product offerings that meet the current and prospective customers’ needs are critical to our success. The markets we serve are highly competitive. Our competitors may develop solutions or services which make our offerings obsolete. Our ability to develop and implement up to date solutions utilizing new technologies which meet evolving customer needs in Internet and mobile application platforms will impact our future revenue growth and earnings. There can be no assurance that we will be able to develop these improvements in a timely manner and the failure to do so could have a material adverse effect on our business, financial condition and results of operations.
We are subject to the reporting requirements of the federal securities laws, which impose additional burdens on us.
We are a public reporting company and accordingly subject to the information and reporting requirements of the Securities Act, the Exchange Act and other federal securities laws, including compliance with the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”). As a public company, these rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.
It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by Sarbanes-Oxley. Our Chief Executive Officer and Board of Director has no experience operating a company whose securities are publicly reported, traded or listed on an exchange, and with SEC rules and requirements, including SEC reporting practices and requirements that are applicable to a publicly reporting or publicly-traded company. We will need to recruit, hire, train and retain additional financial reporting, internal controls and other personnel in order to develop and implement appropriate internal controls and reporting procedures and will likely need to pay outside lawyers, accountants and other consultants to help us with these issues. We currently estimate that we will expend in excess of $100,000 over the next twelve months on these issues and other matters related to being a public company. If we are unable to comply with the internal controls requirements of Sarbanes-Oxley, when applicable, we may not be able to obtain the independent accountant certifications required by Sarbanes-Oxley.
We do not expect to pay any dividends for the foreseeable future.
We do not anticipate paying any dividends to our stockholders for the foreseeable future. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend upon our results of operations, financial conditions, contractual restrictions, restrictions imposed by any credit facilities we may have in the future and other factors our board deems relevant.
Risk Factors Related to Our Securities, the Equity Lines of Credit and this Offering
Our sale of shares to Kodiak and AGS under the Equity Lines of Credit will be for less than the then-prevailing market price of our common stock and may represent a very large volume of shares, which could depress the market for and price of our common stock and existing stockholders could experience substantial dilution upon issuance of common stock pursuant to the Equity Lines of Credit.
We are registering an aggregate of 217,011,687 shares of common stock, which we may issue to Kodiak and AGS under the Equity Lines of Credit. The sale of such shares to Kodiak and AGS could depress the market for and price of our common stock. As of July 30, 2010, there were 146,489,538 shares of our common stock issued and outstanding after giving effect to the three for one stock split, so if we issue the entire 200,000,000 shares of common stock to Kodiak and AGS, that would increase the number of shares outstanding by approximately 145% and the holders of those 217,011,687 shares would collectively own in excess of 59% of our then outstanding common stock.
The common stock to be issued to Kodiak pursuant to the Kodiak Equity Line of Credit will be purchased at a fifteen percent (15%) discount to the lowest closing bid price of the common stock during the five consecutive trading days immediately following the date of our notice to Kodiak of our election to put shares pursuant to the Kodiak Equity Line of Credit. The common stock to be issued to AGS pursuant to the AGS Equity Line of Credit will be purchased at a discount of from five percent (5%) to fifty percent (50%) to the lowest closing bid price of the common stock during the five consecutive trading days immediately following the date of our notice to AGS of our election to put shares pursuant to the AGS Equity Line of Credit.
We cannot put shares to AGS if such put would cause AGS to own in excess of 4.99% of our outstanding shares of common stock. Unless AGS sells some of the shares that it already owns, we will not be able to put any additional shares to AGS under the AGS Equity Line of Credit. In addition, as we put shares to AGS, AGS will have to sell those shares or we will be limited in the number of shares we may put to AGS.
Both Kodiak and AGS have a financial incentive to sell our common stock immediately upon receiving the shares to realize the profit equal to the difference between the discounted price and the market price. In addition, both Kodiak and AGS have a financial incentive to sell the shares we put to them during the pricing period in order to generate the funds to pay for the shares that are being put to them. If Kodiak or AGS sells the shares, the price of our common stock could decrease. If Kodiak or AGS sell the shares we put to them during the pricing period and we do not deliver such shares for any reason, Kodiak or AGS would have to either cancel those sales or otherwise purchase shares in the open market to fulfill those sales. Any such purchases could depress the price of our common stock.
We may not be able to access any or a material amount of the Equity Lines of Credit in a manner that will not substantially dilute our existing stockholders if the price per share of our common stock does not increase.
As of July 30, 2010, we had 146,489,538
shares of common stock outstanding after giving effect to the planned three for one stock split as a result of the planned conversion. If we issued the entire 200 million of shares of our common stock to Kodiak and AGS, that would increase the number of shares outstanding by approximately 137% and the holders of those 217,011,687 shares would collectively own in excess of 59% of our then outstanding common stock. Neither of the Equity Lines of Credit have a minimum price per share at which we may put shares, so the number of shares actually issued to Kodiak and AGS may each be far in excess of 100 million. At July 30, 2010 the closing price per share of our common stock was $0.08. At that price, we would issue in excess of 350 million shares to Kodiak and in excess of 3.75 billion shares to AGS. We have no present intention of issuing such a large number of shares at such low prices, but we may still issue a substantial number of shares and significantly dilute our existing stockholders. If the price of our common stock does not increase materially we will not be able to access a significant portion of our Equity Lines of Credit. We expect that the price per share of our common stock will increase if we successfully launch our mobile application and begin successfully operating our business, but we cannot assure you that the price per share of our common stock will increase at all or that we will be able to access our Equity Lines of Credit on terms that generate material cash for us and does not substantially dilute our existing stockholders.
In addition, under the AGS Equity Line of Credit, we must withdraw our put if the lowest closing bid price of our common stock during the five consecutive trading days immediately following the date of our notice to AGS of our election to put shares pursuant to the AGS Equity Line of Credit is less than 98% of the average closing price of our common stock for the ten trading days prior to the date of such notice. In other words, if our stock price declines by 2% or more during the five trading days after we put shares to AGS, we have to withdraw our put.
Our common stock is thinly traded, so you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.
Our common stock has historically been sporadically or “thinly-traded” on the OTCBB and the Pink Sheets operated by Pink OTC Markets, Inc., meaning that the number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or nonexistent. The closing price of our common stock on the OTCBB on July 30, 2010, was at $0.08 per share. In July 2010, only 715,200 shares of our common stock were traded on the OTCBB at prices ranging from $0.01 to $0.16. This thinly traded situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or nonexistent, as compared to a mature issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. It is possible that a broader or more active public trading market for our common stock will not develop or be sustained, or that current trading levels will continue.
There is currently a limited trading market for our common stock, which may affect prevailing market prices of our stock and limit our stockholders’ ability to sell shares of our stock.
Our common stock is quoted on the OTCBB and the Pink Sheets operated by Pink OTC Markets, Inc. The OTCBB and the Pink Sheets are significantly more limited markets than the New York Stock Exchange or NASDAQ system. The quotation of our shares on these markets does not assure that a meaningful, consistent and liquid trading market currently exists, and in recent years such market has experienced extreme price and volume fluctuations that have particularly affected the market prices of smaller companies. Because of the limited trading volume on the OTCBB and Pink Sheets of our common stock and the penny stock regulations described below, our investors may not be able to sell their shares due to the absence of a trading market.
We may be subject to penny stock regulations and restrictions, which could make it difficult for stockholders to sell their shares of our stock.
SEC regulations generally define “penny stocks” as equity securities that have a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. As of June 30, 2010, the closing price for our common stock was $0.08 per share. If we do not fall within any exemptions from the “penny stock” definition, we will be subject to Rule 15g-9 under the Exchange Act, which regulations are commonly referred to as the “Penny Stock Rules.” The Penny Stock Rules impose additional sales practice requirements on broker-dealers prior to selling penny stocks, which may make it burdensome to conduct transactions in our shares. If our shares are subject to the Penny Stock Rules, it may be difficult to sell shares of our stock, and because it may be difficult to find quotations for shares of our stock, it may be impossible to accurately price an investment in our shares. There can be no assurance that our common stock will qualify for an exemption from the Penny Stock Rules, or that if an exemption currently exists, that we will continue to qualify for such exemption. In any event, we are subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of a penny stock if the SEC determines that such a restriction would be in the public interest.
Stockholders should be aware that, according to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:
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Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
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Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
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“Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;
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Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
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The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.
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The financial industry regulatory authority, or FINRA, sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In addition to the Penny Stock Rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
Rule 144 Related Risk.
The SEC adopted amendments to Rule 144 which became effective on February 15, 2008 that apply to securities acquired both before and after that date. Under these amendments, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding a sale, (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale and (iii) if the sale occurs prior to satisfaction of a one-year holding period, we provide current information at the time of sale.
Persons who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time of, or at any time during the three months preceding a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:
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1% of the total number of securities of the same class then outstanding; or
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the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;
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provided
, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale. Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.
Restrictions on the reliance of Rule 144 by Shell Companies or former Shell Companies.
Historically, the SEC staff has taken the position that Rule 144 is not available for the resale of securities initially issued by certain companies. The SEC has codified and expanded this position in the amendments discussed above by prohibiting the use of Rule 144 for resale of securities issued by any shell companies (other than business combination related shell companies) or any issuer that has been at any time previously a shell company. The SEC has provided an important exception to this prohibition, however, if the following conditions are met:
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The issuer of the securities that was formerly a shell company has ceased to be a shell company;
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The issuer of the securities is subject to the reporting requirements of Section 14 or 15(d) of the Exchange Act;
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The issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and
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At least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company.
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As a result, it is likely that pursuant to Rule 144, stockholders who receive our restricted securities in a business combination will not be able to sell our shares without registration until one year after we have completed our initial business combination.
INFORMATION
REGARDING FORWARD
-LOOKING STATEMENTS
This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” contains certain statements that may be deemed to be forward-looking statements. Unless the context is otherwise, the forward-looking statements included herein address activities, events or developments that we expect or anticipate, will or may occur in the future. Any statements in this prospectus about expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “will continue,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” and similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties, which could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this prospectus. All forward-looking statements concerning our estimated timing of our beta launch and nationwide launch of our product, projected expenses and transaction fees, projected hiring of new employees, the manner in which our product will ultimately work once launched on a nationwide basis, our ability to put shares to AGS or Kodiak under the Equity Lines of Credit economic conditions, rates of growth, rates of income or values as may be included in this document are based on information available to us on the dates noted, and we assume no obligation to update any such forward-looking statements. It is important to note that our actual results may differ materially from those in such forward-looking statements due to fluctuations in interest rates, inflation, government regulations, economic conditions and competitive product and pricing pressures in the geographic and business areas in which we conduct operations, including our plans, objectives, expectations and intentions and other factors discussed elsewhere in this prospectus.
The risk factors referred to in this prospectus could materially and adversely affect our business, financial conditions and results of operations and cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, and you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made and we do not undertake any obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. The risks and uncertainties described below are not the only ones we face. New factors emerge from time to time, and it is not possible for us to predict which will arise. There may be additional risks not presently known to us or that we currently believe are immaterial to our business. 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.
If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, you may lose all or part of your investment.
The industry and market data contained in this prospectus are based either on our management’s own estimates or, where indicated, independent industry publications, reports by governmental agencies or market research firms or other published independent sources and, in each case, are believed by our management to be reasonable estimates. However, industry and market data is subject to change and cannot always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey of market shares. We have not independently verified market and industry data from third-party sources. In addition, consumption patterns and customer preferences can and do change.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock offered by the selling stockholders. However, we will receive proceeds from the sale of our common stock to Kodiak and AGS pursuant to the Equity Lines of Credit. The proceeds from our exercise of the Put Rights pursuant to the Equity Lines of Credit will be used for working capital and general corporate purposes, including:
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the annual payment of $1,500,000 to Global 1, which is owned by our Founder, Jennifer Pharris, related to the license of technology from Global 1;
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Up to $6,900,000 to Robert Gandy (6% of the value of our common stock we put to each of Kodiak and AGS under the Equity Lines of Credit);
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$750,000 to Kodiak Capital Group LLC, in consideration of the Equity Line of Credit contained in the Kodiak Equity Line of Credit (5% of the $15 million facility amount) Half of which has been paid by 6,849,666 shares of common stock in lieu of cash.
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$1,000,000 to US Dataworks pursuant to the Technology License Agreement;
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$771,000 to Soprano Design Pty Ltd pursuant to the Technology Sublicense Agreement;
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$90,000 to pay off a promissory note to Larry Wilson which carries an interest rate of 10% per annum and matures on the earlier of March 31, 2011 or the date cMoney closes an equity investment of $5,000,000;
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$540,700 to pay off a promissory note to Larry Wilson which carries an interest rate of 10% per annum and matures on May 13, 2011;
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$220,000 to pay off a promissory note to Larry Wilson which carries an interest rate of 10% per annum and matures in June 2011 unless he earlier converts part or all of it into shares of our common stock at a conversion price of $0.11 per share; and
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other contractual obligations referred to under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual obligations.”
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SELLING SE
CURI
TY HOLDERS
The following table details the name of each selling stockholder, the number of shares owned by such selling stockholders and the number of shares that may be offered by such selling stockholders for resale under this prospectus. Kodiak and AGS are broker-dealers and underwriters. Kodiak and AGS may each sell up to 100,000,000 shares of our common stock, which are issuable upon the exercise of our Put Rights with Kodiak and AGS, from time to time in one or more offerings under this prospectus. Because Kodiak and AGS may each offer all, some or none of the shares it holds, and because, based upon information provided to us, there are currently no agreements, arrangements, or understandings with respect to the sale of any of the shares, no definitive estimate as to the number of shares that will be held by Kodiak or AGS after the offering can be provided. The following table has been prepared on the assumption that the entire 100,000,000 shares are issues to Kodiak and that all shares offered under this prospectus will be sold to parties unaffiliated with Kodiak. The following table is based on 146,489,538 shares outstanding as of July 30, 2010 after giving effect to the three for one stock split effective July 30,2010.
Name of
selling security holders
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Number of shares owned
before this offering
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Number of shares to be
offered for sale
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Number of shares to be owned after the
offering is
complete(1)
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Percentage owned after the
offering is
complete
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Kodiak Capital Group, LLC(2)
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Up to 104,200,000(3)
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Up to 104,200,000
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AGS Capital Group, LLC(4)
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Up to 108,000,000(5)
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Up to 108,000,000
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Robert Gandy
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4,811,687
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4,811,687
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Total
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217,011,687
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217,011,687
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(1)
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We have assumed that all shares registered for sale under this prospectus will be sold, but there is no obligation on the part of the selling stockholders to sell all of our shares offered by this prospectus.
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(2)
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Pursuant to put right set forth in Kodiak Equity Line of Credit. The natural person with voting and dispositive power for Kodiak Capital Group is Ryan Hodson.
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(3)
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Kodiak currently owns 4,200,000 shares of our common stock prior to our exercise of any Kodiak Put Right.
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(4)
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Pursuant to put right set forth in AGS Equity Line of Credit. The natural person with voting and dispositive power for AGS Capital Group is Allen Silberstein.
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(5)
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AGS currently owns 7,000,000 shares of our common stock prior to our exercise of any AGS Put Right and we are contractually obligated to issue AGS an additional one million shares of common stock.
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We issued Robert Gandy 208,500 shares free trading and 417,000 shares restricted as a retainer fee in lieu of $100,000 cash owed to him for services rendered. We are registering the 417,000 shares for resale as part of our agreement with Robert Gandy. We are also obligated to issue Robert Gandy 4,394,687 free trading shares as compensation for arranging the investment agreement on behalf of the company with Kodiak Capital Group and AGS Capital.
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PLAN OF D
IS
TRIBUTION
This prospectus includes up to 217,011,687 shares of common stock offered by the selling stockholders.
The selling stockholders and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on the OTCBB or the Pink Sheets or any other stock exchange, market or trading facility on which our shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A selling stockholder may use any one or more of the following methods when selling shares:
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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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;
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
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an exchange distribution in accordance with the rules of the applicable exchange;
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privately negotiated transactions;
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settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part; provided, however that both Kodiak and AGS are contractually restricted from entering into short sales, but may sell shares we put to them before they pay for those shares on the closing date of the put;
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broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
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through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
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a combination of any such methods of sale; or
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any other method permitted pursuant to applicable law.
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A selling stockholder or its pledgees, donees, transferees or other successors in interest, may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their own risk. It is possible that the selling stockholders will attempt to sell shares of common stock in block transactions to market makers or other purchasers at a price per share which may be below the then market price. The selling stockholders cannot assure that all or any of the shares offered in this prospectus will be issued to, or sold by, such selling stockholders. Kodiak and AGS are, and Robert Gandy and any brokers, dealers or agents, upon affecting the sale of any of the shares offered in this prospectus, may be deemed to be, “underwriters” as that term is defined under the Securities Act or the Exchange Act, or the rules and regulations under such acts. Any commissions received by underwriters and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.
We are paying all fees and expenses incident to the registration of the shares, including fees and disbursements of counsel to the selling stockholders, but excluding brokerage commissions or underwriter discounts. The selling stockholders, alternatively, may sell all or any part of the shares offered in this prospectus through an underwriter. No selling stockholder has entered into any agreement with a prospective underwriter and there is no assurance that any such agreement will be entered into.
The selling stockholders may pledge their respective shares to their brokers under the margin provisions of customer agreements. If the selling stockholders default on a margin loan, the broker may, from time to time, offer and sell the pledged shares. The selling stockholders and any other persons participating in the sale or distribution of the shares will be subject to applicable provisions of the Exchange Act, and the rules and regulations under such act, including, without limitation, Regulation M. These provisions may restrict certain activities of, and limit the timing of purchases and sales of any of the shares by, the selling stockholders or any other such person. In the event that any selling stockholder is deemed affiliated with purchasers or distribution participants within the meaning of Regulation M, then the selling stockholder will not be permitted to engage in short sales of common stock. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions, subject to specified exceptions or exemptions. In regards to short sales, AGS and Kodiak are contractually restricted from engaging in short sales but may sell shares we put to them before they pay for those shares on the closing date of the put. In addition, if such short sale is deemed to be a stabilizing activity, then the selling stockholder will not be permitted to engage in a short sale of our common stock. All of these limitations may affect the marketability of the shares.
We have agreed to indemnify AGS and Kodiak, or their transferees or assignees, against certain liabilities, including liabilities under the Securities Act, or to contribute to payments AGS or Kodiak or their pledgees, donees, transferees or other successors in interest, may be required to make in respect of such liabilities. If AGS or Kodiak notifies us that it has a material arrangement with a broker-dealer for the resale of the common stock, then we would be required to amend the registration statement of which this prospectus is a part, and file a prospectus supplement to describe the agreements between such selling stockholder and the broker dealer.
We agreed to use our commercially reasonable efforts to keep this prospectus effective until the earlier of the date on which (i) Kodiak and AGS has sold all of the shares of our common stock issued or issuable pursuant to the Equity Lines of Credit or (ii) Kodiak and AGS have no right to acquire any additional shares of our common stock pursuant to the Equity Lines of Credit.
DESCRIPTION OF
SECURITIES
TO BE REGISTERED
Upon completion of the amendment to our articles of incorporation prior to completion of this offering, we will be authorized to issue 500,000,000 shares of Common Stock, $0.001 par value per share, and 10,000,000 shares of undesignated Preferred Stock, $0.001 per share. As of July 30, 2010, there were 146,489,538 shares of Common Stock issued and outstanding and no shares of preferred stock after giving effect to the planned three for one stock split and the planned increase to the number of shares of our authorized common stock and creation of undesignated preferred stock.
Common Stock
Holders of Common Stock are entitled to receive dividends out of legally available assets at such times and in such amounts as our Board of Directors may from time to time determine. Each stockholder is entitled to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders. Holders of our Common Stock representing a majority of the voting power of our capital stock issued and outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders. Our Common Stock does not have cumulative voting rights, and, as such, cumulative voting for the election of directors is not authorized.
Our Common Stock is not subject to conversion or redemption and holders of Common Stock are not entitled to preemptive rights. Upon the liquidation, dissolution or winding up of our company, the remaining assets legally available for distribution to stockholders, after payment of claims or creditors and payment of liquidation preferences, if any, on outstanding shares or any class of securities having preference over the Common Stock, are distributable ratably among the holders of Common Stock and any participating class of securities having preference over the Common Stock outstanding at that time. Each outstanding share of Common Stock is fully paid and nonassessable.
Preferred Stock
Following the amendments to our articles of incorporation, our board of directors will be authorized, subject to limitations imposed by Nevada law, to issue up to a total of 10,000,000 shares of preferred stock in one or more series, without stockholder approval. Our board is authorized to establish from time to time the number of shares to be included in each series of preferred stock, and to fix the rights, preferences and privileges of the shares of each series of preferred stock and any of its qualifications, limitations or restrictions. Our board can also increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series of preferred stock then outstanding, without any further vote or action by the stockholders.
Anti-Takeover Effects of Nevada Law and Our Articles of Incorporation and Bylaws
The provisions of Nevada law and our articles of incorporation and bylaws may have the effect of delaying, deferring or discouraging another party from acquiring control of our company in a coercive manner as described below. These provisions, summarized below, are expected to discourage and prevent coercive takeover practices and inadequate takeover bids. These provisions are designed to
encourage persons seeking to acquire control of our company to first negotiate with our board of directors. They are also intended to provide our management with the flexibility to enhance the likelihood of continuity and stability if our board of directors determines that a takeover is not in our best interests or the best interests of our stockholders. These provisions, however, could have the effect of discouraging attempts to acquire us, which could deprive our stockholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices. We believe that the benefits of these provisions, including increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure our company, outweigh the disadvantages of discouraging takeover proposals, because negotiation of takeover proposals could result in an improvement of their terms.
Nevada Law
Following the closing of this offering, we may become subject to Nevada's laws which govern the "acquisition" of a "controlling interest" of "issuing corporations." These laws will apply to us if we have 200 or more stockholders of record, at least 100 of whom have addresses in Nevada, and we do business in Nevada. These laws provide generally that any person that acquires a "controlling interest" acquires voting rights in the control shares, as defined, only as conferred by the stockholders of the corporation at a special or annual meeting. In the event control shares are accorded full voting rights and the acquiring person has acquired at least a majority of all of the voting power, any stockholder of record who has not voted in favor of authorizing voting rights for the control shares is entitled to demand payment for the fair value of its shares.
A person acquires a "controlling interest" whenever a person acquires shares of a subject corporation that, but for the application of these provisions of the Nevada Revised Statutes, would enable that person to exercise (1) one-fifth or more, but less than one-third, (2) one-third or more, but less than a majority or (3) a majority or more, of all of the voting power of the corporation in the election of directors. Once an acquirer crosses one of these thresholds, shares which it acquired in the transaction taking it over the threshold and within the 90 days immediately preceding the date when the acquiring person acquired or offered to acquire a controlling interest become "control shares."
These laws may have a chilling effect on certain transactions if our articles of incorporation or bylaws are not amended to provide that these provisions do not apply to us or to an acquisition of a controlling interest, or if our disinterested stockholders do not confer voting rights in the control shares.
Articles of Incorporation and Bylaws
Our post-offering articles of incorporation and bylaws will provide for:
•
Staggered Board.
Our articles of incorporation and bylaws contain provisions creating three classes of directors each serving staggered three year terms with the members of one class standing for re-election each year.
•
Election and Removal of Directors.
Our articles of incorporation and our bylaws contain provisions that establish specific procedures for appointing and removing members of the board of directors. Our directors are elected by plurality vote. Vacancies and newly created directorships on our board of directors may be filled only by a majority of the directors then serving on the board and our directors may be removed by our stockholders only for cause.
•
Special Stockholder Meetings.
Under our bylaws, only a majority of the entire number of our directors may call special meetings of stockholders.
•
Requirements for Advance Notification of Stockholder Nominations and Proposals.
Our bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors.
•
Elimination of Stockholder Action by Written Consent.
Our articles of incorporation eliminates the right of stockholders to act by written consent without a meeting.
•
No Cumulative Voting.
Our articles of incorporation and bylaws do not provide for cumulative voting in the election of directors. Cumulative voting allows a minority stockholder to vote a portion or all of its shares for one or more candidates for seats on the board of directors. Without cumulative voting, a minority stockholder will not be able to gain as many seats on our board of directors based on the number of shares of our stock the stockholder holds as the stockholder would be able to gain if cumulative voting were permitted. The absence of cumulative voting makes it more difficult for a minority stockholder to gain a seat on our board of directors to influence our board of director's decision regarding a takeover.
•
Undesignated Preferred Stock.
The authorization of undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of our company.
The provisions described above are intended to promote continuity and stability in the composition of our board of directors and in the policies formulated by the board, and to discourage some types of transactions that may involve an actual or threatened change of control. We expect these provisions would reduce our vulnerability to unsolicited acquisition attempts as well as discourage some tactics that may be used in proxy fights. Such provisions, however, could discourage others from making tender offers for our shares and, as a consequence, may also inhibit increases in the market price of our common stock that could result from actual or rumored takeover attempts. These provisions could also operate to prevent changes in our management.
DESCRIPTION OF
BUSINESS
Introduction
We were incorporated in Nevada on August 26, 2006, under the name Bonfire Productions, Inc., for the purpose of producing, marketing and selling audio recordings of folk tales, fairy tales and other children’s stories under the brand name “Bonfire Tales.” At the time of the Merger described below, we had no active operations and have discontinued any pursuit of the pre-merger business of Bonfire Productions, Inc.
On April 8, 2010, we entered into a merger agreement with cMoney, Inc., pursuant to which cMoney, Inc., would be merged with and into our wholly-owned subsidiary, C$ cMoney Acquisition, Inc., and immediately thereafter, cMoney, Inc. would be merged with and into Bonfire Productions, Inc. and cease to exist, as previously disclosed in our Current Report on Form 8-K filed on April 8, 2010 (collectively, the “Merger”). No consideration was paid to either company as a result of the Merger. The agreement provided that upon completion of the merger the officers and directors of cMoney, Inc. would become the officers and directors of our company.
On April 21, 2010, Jennifer Pharris, Founder of cMoney, Inc. prior to the Merger, acquired 105,000,000 shares of Bonfire directly from Alexander Kulyashov, thereby obtaining control of our company as previously disclosed in our Current Report on Form 8-K filed on April 27, 2010. In conjunction with the closing of that acquisition, and in accordance with the terms of the merger agreement between cMoney and Bonfire, the officers and directors of our company resigned and Jennifer Pharris was appointed the chief executive officer and director of our company. An additional 86,970,663 shares were acquired by cMoney on the same date from unaffiliated stockholders of Bonfire. A total of $350,000 was paid for such shares, $190,000 by Jennifer Pharris and $160,000 by cMoney. Our new director, Robert Wilson, loaned funds to Ms. Pharris and cMoney for such stock purchases.
On May 6, 2010, we consummated the Merger as previously disclosed in our Current Report on Form 8-K filed on May 12, 2010. The 86,970,663 shares of our common stock previously acquired by cMoney became treasury shares of our company upon the Merger, which shares were subsequently cancelled. Upon completion of the Merger, in satisfaction of prior commitments of cMoney and for no additional consideration to our company, we issued to the PLJMMP Trust, which is controlled and owned by our Founder’s grandmother, 18,000,000 shares of our common stock, 3,225,441 to the TFPMMP Trust, 75,000 shares to John Schiavo, 1,255,722 shares to our new director, Larry Wilson and his wife, 239,787 shares to our new director Melvin Tekell, 209,790 shares to Mr. Tekell’s adult daughters (all share amounts have been adjusted to reflect our proposed three for one stock split).
After the Merger, our business operations consist of those of cMoney, Inc. We amended our articles of incorporation to change our name to cMoney, Inc
.
and t
he name change became effective on July 27, 2010.
In connection with the amendment of our articles of incorporation, we increased the number of shares we are authorized to issue and split our shares on a three for one basis by paying a dividend of two shares of our common stock for each existing outstanding share of our common stock. Unless otherwise set forth herein, all disclosure in this prospectus reflects that amendment to our articles of incorporation, name change and three for one stock split as completed July 30, 2010
.
Overview
We have engaged a third party to develop a
software application
that, once downloaded onto a customer’s mobile phone with text messaging capability, allows that customer to send money to or receive money from other mobile phones that have our application and to pay for goods and services, without having to disclose any of their credit card or account information at the time of transfer or payment. A customer initially visits an authorized local bank for a one time upload onto a proprietary network operated by the bank of their driver’s license, personal checking account information and up to thirty (30) credit cards used by the customer. All of this information is stored at the authorized cMoney bank. We do not transfer any of this data across the Internet. Our customer will be asked to establish a four (4) digit “PIN” number and, once established, the current cell phone number plus the C$ ten (10) digit account number makes up the ACCESS number for others to transfer money to the customer’s cell phone.
None of the information resides on the actual cell phone. It is all server generated. If a customer loses his or her cell phone or mobile device, credit card numbers or other information will not be lost, as that information is stored on the bank’s proprietary server.
Once our customer has completed the one-time upload of information at the authorized bank, money can be transferred to that customer’s mobile device by our other customers’ mobile devices. Alternatively, for paying for goods or services, our product uses a Data Matrix 2-D, Code 39 or Code 128 barcode that is sent via the instant text message system to the customer’s mobile device. The barcode is scanned by the merchant for payment for goods and services. A separate pay code is also sent via the instant text message system in case a merchant scanner is not available and for use in making purchases over the internet. Each barcode or pay code is good for only one purchase, which provides greater security than using a credit card. When the merchant scans the bar code or enters the pay code for payment, the customer receives a text message detailing the merchant and amount being charged to the customer’s credit card or bank account for added security. The customer must “accept” the payment using their cell phone or other mobile device for the transaction to be completed. All of this is designed to happen in seconds, so there is no delay for the merchant or customer.
We expect to do a beta launch this product this Fall and a full national launch in the first quarter of 2011, but cannot assure you that we will launch on that schedule or at all. The product is currently only in demonstration stage.
How We Expect to Generate Revenue
We expect to generate revenue by monetizing various mobile financial transactions made possible by our mobile application which is being made operable on the iPhone, Blackberry, Android and Windows mobile platforms. As shown in the charts above, our secure mobile application facilitates peer to peer, merchant, credit card, interbank and intra bank funds transfers. Each of these activities creates a fee opportunity for us and our affiliated banks and merchants. Although final fee schedules have not yet been finalized, as an example, fees may range from $0.25 to $2 per transaction depending on the amount of the transaction and may be fixed fees or a percentage of the dollar value of the transaction. There are millions of these transactions every month that could be completed using our mobile application. In addition, we will also enable consumers to initiate and receive funds via a mobile application. We expect our fees to be a fraction of the current charges due to automation efficiencies thus providing considerable price appeal to consumers.
In a peer to peer money transfer, we would charge either a flat fee or a nominal percentage of the amount of the transferred funds, similar to how Western Union currently extracts a fee for funds transferred. The banks actually make the funds transfer and we receive a fee because the transaction was initiated using our mobile application. We expect to compete in this market based on convenience and price. Our customers will initiate the transaction using our mobile application and the existing banking system does the actual transferring of funds.
For interbank and intrabank funds transfers, we create interchange fee opportunities that both the bank and we can share. We expect that this will be a highly attractive option for banks to recoup interchange fees. Participating banks will have an opportunity to generate additional fee income through the use of our application which we expect will enhance their interest in participation.
We also will facilitate the payment for goods and services at affiliated and non affiliated merchants and charge those merchant a fee for facilitating the transaction similar to the existing processes used by credit card companies. In the case of our mobile application, the consumer’s cellular phone acts as a secure credit card. We expect to participate in the interchange fees collected by banks and in some situations also charge a fee to merchants that choose to enroll with us as preferred merchants in processes that allow them to avoid interchange fees paid to card processors.
We will also provide a bill pay capability to the mobile payment market that is convenient and inexpensive. We expect that we will receive a small flat fee per transaction that is designed to be attractive to the consumer yet provide substantial revenue to us due to the volume of transactions.
In addition to the transaction fees described above, our application screens on the mobile phones offer a platform for us and participating banks to derive additional revenue through advertising and couponing. Coupons can be made available to consumers through participating merchants that offer attractive sale programs and discounts. We expect to derive fees from this process paid by merchants and coupon companies.
Operating Contracts Needed to Launch
In order to launch our product we will have to have contracts in place with banks, retailers, payment processors and an end user agreement with consumers that download our application to their mobile phone. We intend to partner with banks in individual markets to serve the bank customers and support bank marketing to their customers. We also intend to have agreements with retailers for ad placement and direct processing of sales transactions where retailers enroll in our programs as preferred vendors. We also intend to contract with coupon companies to provide coupons with participating merchants for merchandising programs. Lastly, we will likely be required to accept contracts with processors where we do not have access to payment and transaction processing gateways. Until we can put in place contracts with banks and payment processors, we cannot launch our product. We are working vigorously on obtaining these contracts, but we cannot guarantee that such contracts will be obtained or if they are obtained, that they are on favorable terms.
Our Planned Product Launch
Our current focus is to identify and negotiate with potential banks and other financial services companies to serve as our partners and establish the cMoney accounts on behalf of our customers. We will also work with these banks to offer our services to their existing large and actively engaged customers. Through rigorous co-branding and co-marketing initiatives with these banks, we hope to extend our product offerings to a larger audience through efficient and established marketing channels.
Beta Launch Plan
Once we contract with some banks, we intend to begin a regional or beta launch to ensure stability and continuity of the platform while enrolling new customers for the product. Expenses for the beta release with our selected financial services partners will be limited to the hardware and infrastructure required to validate the platform performance, in addition to expenses related to testing co-branding and marketing efforts within the affiliate’s customer base. Marketing expenses for the beta period, which are anticipated to be 90 days, are budgeted in the $150,000 to $300,000 range based on the size and scale of the beta launch test. Hardware and infrastructure for the beta test are budgeted between $300,000 and $700,000 depending on the need for a Network Attached Storage device. We are currently evaluating both lease and financing options to pay for the hardware and other infrastructure expenses. We expect that our current financing commitments from AGS and Kodiak will be adequate to fund this investment.
As we move through the beta roll out of the service, we will evaluate and begin our national launch process and plans. These plans include addressing several additional portions of the consumer value chain for our product and new segments of the market where additional revenue opportunities are available. We anticipate adding value-based features such as couponing and consumer loyalty programs into the Point of Purchase (POP) process as well as other key customer offerings to drive acquisition and retention.
At the end of calendar year 2010, we expect to have approximately 10 full time employees on staff.
National Launch Plan
We anticipate that a national co-marketing launch with a financial institution will allow for an increase in efficiencies across all marketing channels (co-branded with our financial services partners and our own branded initiatives). National co-marketing expense is dependent on the degree we can negotiate participation from our banking partners. Expenses are anticipated to be between $500,000 and $1,000,000 annually.
We currently expect to hard launch the national service with affiliated banks and financial institutions in the first quarter of 2011. At the time of the hard launch, we will be required to add full redundancy to the hardware and infrastructure platform. The budgeted expense for the full redundancy is projected to be $500,000. As with the above hardware and infrastructure expense, we will determine the best financing and leasing options in acquiring the infrastructure equipment.
Specific Marketing efforts nationally will leverage a multi-channel effort of online and mobile media. We intend to reformat our website to be more customer engaging and influence sign-ups/downloads for our services. We intend to optimize our website for Search Engines (also known as SEO) to drive traffic across high value keywords from Google.com, Yahoo.com and Bing.com.
Our initial internal research shows a propensity for use of a cMoney-like product by heavy mobile users, early adopters and those that are unbanked/underbanked. Our efforts in reaching portions of these customer segments will rely on targeted marketing channels. We believe Social Media, such as Facebook, YouTube and Twitter for the US market, are key to cost effectively engaging these users in the introduction and continued evolution of the product. Generating large followings on any of these social media sites should lead to low cost acquisition and retention of customers. Viral video can be utilized through Facebook, however with YouTube reaching a major audience, we anticipate using it to deliver instructional and marketing information to further build and educate consumers on our brand and product.
Direct response marketing channels are important for us to understand the costs and tactics required to drive customer adoption. Online channels provide the richest type of data and ability to modify tactics quickly. We expect to utilize Search Engine Marketing (SEM) tactics around high volume and value keywords across multiple search engines. We will expand our efforts to include “long-tail” keywords that often drive very low cost acquisition, but also have low volume. Often, these will help lower the blended cost of customer acquisition over time. We expect pay per click (PPC) marketing can drive low cost and efficient acquisition to targeted customers who are looking to use the same services offered by the competition. We believe SEM/PPC efforts will increase brand recognition and SEO efforts when campaigns are run across multiple quarters which will further increase efficiencies from those channels.
Additional direct response marketing channels include online display advertising and affiliate advertising. Display advertising utilizes the existing online and mobile ad networks to driver customer acquisitions. Currently we believe costs with these networks can be bought as a cost per thousand (CPM) or as a cost per click (CPC) depending on the ad type, location and network. Display advertising efforts are optimized on reach and click efficiencies as well as acquisition cost. We believe that display advertising increases awareness and efficiencies of SEM and SEO efforts when run during the same period of time. As we establish relationships with these networks and begin to establish relationships directly with the major portals, we expect to create and drive better cost per acquisition quarter on quarter.
Affiliate advertising, known as cost per acquisition (CPA) advertising, will be part of our strategy. With this channel, we can dictate the amount we will pay per customer and control expense. There are many different channels in the affiliate marketing arena. Standard channels such as Commission Junction will play a role, however other high reach CPA channels are available and we will engage and test those channels regularly.
Part of increasing our customer acquisition from these online channels responsibly and cost effectively rely on excellent ad, landing page and path testing. We will engage A/B and when appropriate multi-variate testing to lower our cost per acquisition on a per channel basis. This is dependent on a sophisticated website, mobile and application analytics solution. We have investigated and have these packages ready for deployment in our beta release.
As important as acquiring our customer base is managing the ongoing relationship with our customers to reduce churn for the product. We anticipate utilizing a multi-touch strategy using marketing automation to communicate and monitor our growing customer base. Utilizing automation will reduce overhead and has shown to improve annualized total customer value. We can proactively identify potential high cost, low revenue segments and acquisition channels that can be limited or eliminated while increasing high revenue, low cost, high total customer value customers and acquisition channels.
As we gain more data on customer acquisition and total customer value, we will examine and determine the changes that are necessary to continue to optimally grow the customer base.
By the end of calendar year 2011, we estimate that we have as many as 450 employees based on bank and consumer acceptance of our product. Of those 450 employees, we expect that approximately 400 will be customer care focused working with banks, financial institutions and end users of the platform to remedy service issues.
Competitive Position
Our product is only in the development stage and will compete with credit cards and other established methods of payment once launched. This is a very crowded market dominated by very large competitors with a lot of resources. Customer and vendor adoption of our product will be critical to its success.
Research and Development
For the fiscal year ending in 2009, we spent $1,281,600 on research and the development of our product. Research and development expenses are related to the concept development and subsequent patent applications. Considerable effort was expended over five years to research existing payments systems processes, architecture and technology practices that required travel, paying consultants and discussing concepts with software developers. Once the architecture was conceptualized, the design of the systems required hiring highly skilled software developers to document and test the conceptual architecture. Expenses related to this process are a significant portion of the R&D costs as are legal expenses to write and produce documentation supporting the patent application. Lastly, significant costs were incurred to develop the software to a point where it could be considered commercially functional and ready for the consumer market.
Intellectual Property
On April 3, 2010, as amended, we entered into a Technology License Agreement with Global 1 Enterprises, Inc., a Nevada corporation (“Global 1”), pursuant to which Global 1 granted to us an exclusive, sub-licensable right, license and authority under certain intellectual property, including the C$ cMoney trademarks and three patent applications related to the mobile payment technologies that are the foundation of our product (the “Licensed Intellectual Property”), to develop and to commercialize our product in the United States and Australia. This license expires upon the expiration of the underlying intellectual property, unless earlier terminated due to our breach of the agreement or insolvency. Some of the intellectual property licensed, such as the existing patent applications, will have a fixed expiration date, however, the underlying intellectual property is broadly defined to include items such as trade secrets and knowhow which have no fixed expiration date meaning that the term of the license could be perpetual, or at least for a substantial number of years.
On April 19, 2010, we entered into a Technology Sublicense Agreement with Global 1 and Soprano Design Pty Ltd, an Australian company (“Soprano”), as further amended on May 9, 2010, pursuant to which we granted to Soprano an exclusive, royalty-bearing, sublicense to the Licensed Intellectual Property to develop our product in Australia. This sublicense expires on April 19, 2013, unless earlier terminated due to Soprano’s breach of the agreement or insolvency. We agreed to pay to Soprano, during the term of the sublicense, a royalty payment of forty (40) percent of our gross revenue (as defined in the agreement) from Australia.
On March 27, 2010, we entered into an agreement with US Dataworks, pursuant to which we received in exchange for a onetime payment of $1,000,000, a non-exclusive, non-transferable, perpetual license to use US Dataworks’ Clearingworks 3.X software for the purpose of processing payments using checks, debit cards or credit cards. This payment was due on April 12, 2010 and has not yet been made. US Dataworks will also help us to integrate their systems and provide additional consulting services to us at its prevailing market rates on an as needed basis. US Dataworks also issued to us a warrant to acquire 1,333,333 shares of US Dataworks common stock for $0.45 per share.
Employees
We currently only have six employees.
DESCRIPTION
OF PROPERTY
We currently do not own or lease any real property or facilities. We intend to locate our headquarters in Houston, Texas in facilities that we expect will be provided by US Dataworks pursuant to the agreement described under “Description of Business—Intellectual Property.” The specific terms of the facility arrangements have not yet been negotiated. We believe that these facilities will be adequate for the foreseeable future.
LEGAL P
RO
CEEDINGS
From time to time, we may be subject to various claims and legal actions in the ordinary course of our business; however, we are not currently involved in any legal proceeding the ultimate outcome of which, in our judgment based on information currently available, would have a material adverse impact on our business, financial condition or results of operations, except as follows:
On May 26, 2010 we received a demand letter from the attorney for Larry Krasner relating to a lawsuit filed by Mr. Krasner against us in Harris county, Texas over the termination of his employment agreement with cMoney, Inc. Mr. Krasner claims damages in excess of $700,000, other monetary damages, attorney’s fees and the issuance of 1,950,000 fully vested shares of our common stock. We believe the claims are without merit and intend to vigorously defend against these claims. Even if we are ultimately successful in our defense of these claims, we may incur material legal expenses and other costs in such defense, which may have a material adverse effect on our business, financial position and results of operations.
The lawsuits referenced in footnote 6 to Bonfires’ financial statements for the years ended June 30, 2008 and 2009 included elsewhere in this prospectus have been settled as referenced in footnote 5 to Bonfire’s financial statements for the nine months ended March 31, 2010 included elsewhere in this prospectus.
The Securities and Exchange Commission (the “SEC”) has initiated a formal civil inquiry into the Company and asked that the Company and related parties provide certain records, documents and information to the SEC. The inquiry is in the early stages, but the SEC has inquired about the relationship between the Company and Dennis Pharris, and any payments made to or for the benefit of Mr. Pharris by the Company. Mr. Pharris is the father of our former Chief Executive Officer and Chairman of the Board, Jennifer Pharris. In addition, the SEC has inquired about the initial transaction pursuant to which Ms. Pharris acquired control of the Company and cMoney, Inc., a Delaware corporation owned by Jennifer Pharris, was acquired by and merged into the Company and sources and uses of funds of the original cMoney, Inc. prior to its merger into the Company. At this stage, the inquiry is very broad. The Company intends to work with the SEC in order to resolve these issues. Ms. Pharris is no longer an officer or director of the Company and Company management intends that Ms. Pharris and her father have no operating control in the Company going forward. The Company does not intend to seek any management services from Global 1 under such agreement.
MANAGEMENT’S DIS
CUSS
ION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion relates to our operations after the Merger. For information related to our operations prior to the Merger, see our Annual Report on Form 10-K for the year ended June 30, 2009, our subsequent Quarterly Reports on Form 10-Q and all other reports filed with the Securities and Exchange Commission.
Overview
We were incorporated in Nevada on August 26, 2006, under the name Bonfire Productions, Inc., for the purpose of producing, marketing and selling audio recordings of folk tales, fairy tales and other children’s stories under the brand name “Bonfire Tales.” At the time of the Merger described below, we had no active operations.
On May 6, 2010, we consummated the merger with cMoney, Inc., a Delaware corporation, as previously disclosed in our Current Report on Form 8-K filed on May 12, 2010. After the Merger, our business operations consist of those of cMoney, Inc. Prior to completion of this offering we plan to amend our articles of incorporation to change our name to cMoney, Inc.
Going Concern
We are a development stage company that will need substantial additional future funding to build our business infrastructure either through the Equity Lines of Credit with AGS and Kodiak or otherwise. We have not generated any revenues to date and do not expect to launch our mobile application product on a nationwide basis until the first quarter of 2011. As of March 31, 2010, we have accumulated losses of $2,508,427 since inception, current liabilities of $2,626,258, a working capital deficiency of $2,578,427 and expect to incur further losses in the development of our business. Our ability to continue as a going concern is dependent on our ability to close on the sale of capital stock to Kodiak and/or AGS or obtain other outside debt or equity financing and to successfully launch our product, planned for this Fall. As of June 30, 2010, we had cash and cash equivalents on hand of $18,356. At present, our average monthly cash usage is approximately $175,000, excluding legal and accounting fees relating to this registration statement. The salaries and related costs of our executive officers accounts for approximately half of that monthly burn rate. If we are not able to raise additional capital or implement our business plan, we will no longer be able to operate our business. If our common stock price remains at its current low price we will be unable to put enough shares to AGS or Kodiak pursuant to the Equity Lines of Credit to fund all of our cash requirements.
Plan of Operations
We hope to launch our operations this Fall with a beta launch followed by a national rollout planned for the first quarter of 2011 as described above under “Business”. Our software application is currently in demonstration stage. In order to launch our product we will have to have contracts in place with banks, retailers, payment processors and an end user agreement with consumers that download our application to their mobile phone. We expect that we will increase our full time employees from 5 as of June 30, 2010 to 10 full time employees by the end of calendar year 2010 as we begin to scale up our operations. Beginning in 2011 we project that we could have as many as 450 full time employees if the national launch of our product is successful, however, we cannot guarantee that our launch will be successful. We expect to hire many of these employees and incur significant expenses in advance of our planned Fall beta launch and first quarter 2011 national product launch and expect that it will take some time before our operations generate sufficient cash to cover our expenses as we continue to spend to ramp up our operations and sales and marketing activities in advance of sales.
Capital Resources and Liquidity
As a means for financing operations, we have entered into an Kodiak Equity Line of Credit, pursuant to which we have the right to “put” to Kodiak up to $15 million in shares of our common stock (i.e., we can compel Kodiak to purchase our common stock at a pre-determined formula) and the AGS Equity Line of Credit, pursuant to which we have the right to “put” to AGS up to $100 million in shares of our common stock. For a detailed discussion of the Kodiak Equity Line of Credit, see the sections entitled “Prospectus Summary—About This Offering” and “Risk Factors.” As described in “Risk Factors,” our ability to access these credit lines in a manner that will not substantially dilute our existing stockholders is dependent upon the price of our common stock increasing materially from its July 30, 2010 closing price of $0.08 per share.
Cash Requirements
We are currently spending approximately $175,000 a month on operating expenses excluding the legal an accounting fees associated with this registration statement, about 50% of which is for the salaries of our executive officers. As at June 30, 2010, we had cash and cash equivalents of $18,356. Without outside funding from the Equity Lines of Credit or otherwise, our present cash will run out in a couple of weeks unless we can defer payment on most of our expenses. We will need to raise at least $5 million to cover our contractual expenses before we can start spending to ramp up our operations, and marketing and sales activities and prepare for a launch of our product.
We have no operations or revenues with which to generate profits or liquidity, and we have not yet generated any operating revenue to sustain our projected operations and do not plan to launch a product to generate revenue until this Fall and do not plan for the national launch of our product until the first quarter of 2011. As a result, there is substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent, in part, upon our ability to generate profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from business operations when they come due. We intend to meet our financial needs for operations in the near future by accessing our Equity Lines of Credit; otherwise, we intend to seek additional funds by equity and/or debt financing and/or related party advances. However there is no assurance of additional funding being available.
Our future capital requirements will depend on numerous factors, including the profitability of the product and our ability to control costs. We cannot predict when and if any additional capital contributions may be needed, and we may need to seek one or more substantial new investors. New investors could cause substantial dilution to existing stockholders.
There can be no assurances that we will be successful in raising additional capital via debt and/or equity funding, or that any such transactions, if consummated, will be on terms favorable to us. In the event that additional capital is not obtained from other sources, it may become necessary to alter development plans or otherwise abandon certain ventures.
If we need to raise additional funds in order to fund expansion, develop new or enhanced services or products, respond to competitive pressures or acquire complementary products, businesses or technologies, any additional funds raised through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution and such securities may have rights, preferences or privileges senior to those of ours Common Stock. As described below under “—Contractual Obligations” and above under “Use of Proceeds” we need to raise significant outside funds from Kodiak or AGS or elsewhere to fund existing contractual obligations before we can start funding our ongoing operations and planned product launch.
Contractual Obligations
Prior to 2008, cMoney hired a software development firm to create its product, which is currently in a demonstration stage. On April 1, 2009, cMoney agreed to pay an additional $771,000 for further development work and promised a 3-year exclusive license for the Australian market and 40% of all cMoney revenue from the payment application in Australia, which it granted on April 19, 2010. The $771,000 is included in accounts payable as of December 31, 2009.
On January 10, 2010, cMoney hired Pythagoras Group to try to raise up to $10 million in equity funding and has agreed to pay up to 6% of any proceeds plus up to 3% of total stock outstanding in connection with such equity funding.
On March 31, 2010, cMoney hired a third party for services related to acquiring a public company shell via a reverse merger. Upon closing of the merger with Bonfire Productions, the third party became entitled to receive $52,500 and was issued 25,000 common shares of the merged entity.
On March 27, 2010, cMoney agreed to purchase a software license from and 5-year warrants to purchase 1,333,333 shares at $.45 per share of U.S. Dataworks, Inc. for $1,000,000. This payment was due on April 12, 2010 and has not yet been made.
We owe our new Chairman, Larry Wilson, the following amounts under promissory notes:
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$90,000 under a promissory note which carries an interest rate of 10% per annum and matures on the earlier of March 31, 2011 or the date we close an equity investment of $5,000,000;
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$540,700 under a promissory note which carries an interest rate of 10% per annum and matures on May 13, 2011; and
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$220,000 under a promissory note which carries an interest rate of 10% per annum and matures in June 2011 unless he earlier converts part or all of it into shares of our common stock at a conversion price of $0.11 per share.
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On April 3, 2010, cMoney entered into a technology license agreement with Global 1. Under the agreement, cMoney will pay Global 1 $1,500,000 per year on or before May 31 of each year for an exclusive and non-transferable license to certain intellectual property including trademarks and patent applications. Global 1 is owned by Jennifer Pharris, our Founder. Related party payments to Ms. Pharris and Global 1 made through July 30, 2010 were $381,141.
On April 8, 2009, cMoney agreed to pay Global 1 $41,543 per year for 5 years for consulting services. Ms. Pharris is expected to provide the consulting services on behalf of Global 1. We do not currently plan to utilize these services.
On June 21, 2010 the Company entered into a $1,900,000 purchase contract for a building located in Houston. The building was intended to house the company and provide space for future growth while having close proximity to the Bush International Airport. A $25,000 earnest money deposit was made as the purchase process began. On July 22, 2010 the contract expired and the $25,000 deposit forfeited as financing for the purchase could not be obtained.
On June 29, 2010 Director Larry Wilson provided the company with $220,000 through a one year convertible note. The note is convertible into 2,000,000 shares of common stock at Dr. Wilson’s discretion. The note carries a 10% simple interest rate and matures June 28, 2011.
On July 19, 2010, Mr. Abraham Fisch, Esq. withdrew his disputed payment claim of $339,000 that is included in the cMoney accounts payable balance shown in the balance sheet. Subsequent balance sheets will not include this disputed liability.
Financials
This information should be read in conjunction with our financial statements contained elsewhere in this prospectus. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period.
The following discussion relates to the operations of cMoney through March 31, 2010. Prior to the merger, Bonfire Productions had no active operations and in accordance with the terms of the merger agreement with cMoney was to have less than $25,000 in liabilities upon completion of the merger. See the unaudited combined pro forma balance sheet of Bonfire and cMoney after completion of the merger on page F-15.
As of the date of this prospectus, cMoney has not launched its product or generated revenues. As of March 31, 2010, cMoney had accumulated losses of $2,508,427 since inception, current liabilities of $2,626,258, a working capital deficiency of $2,578,427 and expects to incur further losses in the development of its business. The ability of cMoney to continue as a going concern is dependent on its ability to close on the sale of capital stock to Kodiak Capital and to successfully launch its product, planned for this summer. As of March 31, 2010, we had cash and cash equivalents of $47,831.
The following is a statement of cMoney’s expenses for the years ended December 31, 2008 and December 31, 2009 and the three month periods ended March 31, 2009 and March 31, 2010:
Expenses:
|
|
Year Ended
December 31, 2008
|
|
|
Year Ended
December 31, 2009
|
|
|
Three Months Ended
March 31, 2009
|
|
|
Three Months
Ended
March 31,
2010
|
|
Legal and professional fees
|
|
$
|
375,385
|
|
|
$
|
133,891
|
|
|
$
|
25,000
|
|
|
$
|
45,257
|
|
Research and development
|
|
|
-
|
|
|
|
1,281,600
|
|
|
|
-
|
|
|
|
210,000
|
|
General and administrative expenses
|
|
|
26,493
|
|
|
|
55,168
|
|
|
|
6,868
|
|
|
|
74,783
|
|
|
|
$
|
401,878
|
|
|
$
|
1,470,659
|
|
|
$
|
31,868
|
|
|
$
|
330,040
|
|
The substantial increase in research and development expenses from 2008 to 2009 was for the development of our software. We had to define our architecture, research other software applications and write our software code. The functionality for mobile payments software was developed and documented in 2009. These expenses have continued into 2010 as we ready our product for launch.
Off-Balance Sheet Arrangements
We currently do not have any off-balance sheet arrangements.
MARKET PRICE OF AND DI
VIDEN
DS ON THE
REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Common Stock was quoted on the OTCBB under the symbol “BNFR.OB.” As of July 27, 2010 our stock symbol became “cmey.pk”. Such trading of our common stock is limited and sporadic. The following table reflects the high and low bid information for our Common Stock for each noted fiscal quarter during which our stock was listed. The bid information was obtained from the OTCBB and reflects inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions. Those stock prices are not necessarily indicative in any way of the price at which our stock may trade in the future. The trading in our stock has historically been very limited and sporadic.
Fiscal Year Ended December 31, 2010
|
|
Bid High
|
|
|
Bid Low
|
|
Second Quarter ended June 30, 2010
|
|
|
0.50
|
|
|
|
0.0025
|
|
First Quarter ended March 31, 2010
|
|
|
0.04
|
|
|
|
0.0025
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
Fourth Quarter ended December 31, 2009
|
|
|
0.28
|
|
|
|
0.04
|
|
Third Quarter ended September 30, 2009
|
|
|
0.78
|
|
|
|
0.76
|
|
Second Quarter ended June 30, 2009
|
|
|
0.10
|
|
|
|
0.42
|
|
First Quarter ended March 31, 2009(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
Fourth Quarter ended December 31, 2008(1)
|
|
|
-
|
|
|
|
-
|
|
Third Quarter ended September 30, 2008 (1)
|
|
|
-
|
|
|
|
-
|
|
Second Quarter ended June 30, 2008 (1)
|
|
|
-
|
|
|
|
-
|
|
First Quarter ended March 31, 2008(2)
|
|
|
0.15
|
|
|
|
0.15
|
|
(1) There was no trading in shares of our common stock during these periods.
(2) There was one trade for 90,000 shares of our common stock during this period.
The per share closing price of our common stock on July 30, 2010 was 0.08.
We have never paid any cash dividends on our common stock and we do not expect to do so for the foreseeable future.
CHANGES IN
AND DISAGREEMENTS
WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On May 10, 2010, we filed a Current Report on Form 8-K/A disclosing that we had changed our certifying accountant on May 5, 2010. In connection with the merger of Bonfire Productions, Inc. with cMoney, Inc., MaloneBailey LLP (the “New Accountant”) has been engaged as the independent registered public accounting firm for Bonfire Productions, Inc., replacing Seale and Beers, CPAs (the "Former Accountant"). The effective date of the engagement of the New Accountant and the dismissal of the Former Accountant was May 5, 2010. MaloneBailey LLP was previously the accounting firm for cMoney. This change in certifying accountant was approved by Bonfire’s Board of Directors.
The Former Accountant’s report on the financial statements of Bonfire for the years ended June 30, 2009 and 2008 were not subject to an adverse or qualified opinion or a disclaimer of opinion and were not modified as to uncertainty, audit scope or accounting principles. However, the Former Accountant’s report on the financial statements for the years ended June 30, 2009 and 2008 contained an explanatory paragraph which noted that there was substantial doubt about Bonfire’s ability to continue as a “Going Concern” due to recurring net losses, a working capital deficiency and negative cash flows from operations.
During the two years ended June 30, 2009, and from June 30, 2009 through the date of dismissal there were no reportable events as the term is described in Item 304(a)(1)(v) of Regulation S-K.
From the date Bonfire Productions retained the Former Accountant through the date of dismissal, there were no disagreements with the Former Accountant on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to the satisfaction of the Former Accountant would have caused it to make reference to the subject matter of the disagreements in connection with its reports on these financial statements for those periods.
Bonfire Productions did not consult with the New Accountant regarding the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on Bonfire’s financial statements, and no written or oral advice was provided by the New Accountant that was a factor considered by Bonfire in reaching a decision as to the accounting, auditing or financial reporting issues.
Bonfire requested that the Former Accountant furnish it with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the above statements. The requested letter was attached as Exhibit 16.1 to the Form 8-K/A.
DIRECTORS, EXECUTIVE
OFFICERS, PROMOTERS
AND CONTROL PERSONS
The following table sets forth, as of July 30, 2010, the name and age of the Company’s directors and executive officers. Each of the below named persons will hold the office set forth opposite his or her name until the next annual meeting of shareholders and until such his or her successor has been elected and qualified.
Name
|
|
Age
|
|
Principal Positions With Us
|
|
|
|
|
|
William T. Watson
|
|
52
|
|
Chief Executive Operating Officer
|
Thomas Shaw
|
|
40
|
|
Senior Vice President of Marketing, Chief Marketing Officer
|
David R. Johnson
|
|
61
|
|
Chief Financial Officer
|
Jamal Khawaja
|
|
36
|
|
Chief Technology Officer
|
John Shin
|
|
41
|
|
Chief Investment Officer
|
Adam Boris
|
|
49
|
|
Chief Operating Officer
|
Melvin Tekell
|
|
82
|
|
Director
|
Larry Wilson
|
|
65
|
|
Chairman of the Board
|
Unless otherwise described herein, there is no arrangement or understanding between the directors or any officers of the Company and any other person pursuant to which such director or any officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management shareholders will exercise their voting rights to continue to elect the current directors to the Company’s Board of Directors. There are also no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of the Company’s affairs.
William T. Watson
, 52, has been the Company’s Chief Operating Officer since May 24, 2010 and became the Chief Executive Officer on July 26, 2010. Prior to joining the Company, Mr. Watson served as Executive Vice President and Chief Marketing Officer for Neupara Corporation, a mobile broadband service provider. From 2002 to 2004 he served as President and Chief Operating Officer of International Mobil Communications, a provider of mobile communications services. From 2000 to 2002 he was a Division President of mPower Communications Group, a broadband carrier. From 1992 to 2000 he was a Division President of Arch Wireless, a mobile data broadcaster, and from 1985 to 1991 he was Senior Vice President of Sales, Marketing and Business Development with Harren Communications Group, an operator of cable television, broadcast television/radio properties and advertising representation firms. Mr. Watson received a BA in Business Administration from Western Michigan University. Mr. Watson brings a wealth of operational experience and knowledge of the telecommunications industry to the Company.
Thomas Shaw
, 40, has been the Company’s Senior Vice President of Marketing, Chief Marketing Officer since May 10, 2010. From January 2008 until immediately prior to joining the Company, Mr. Shaw was an independent marketing consultant, providing marketing-related consulting services to clients on best practices and services procurement, and serving as an interim marketing head for several companies. From January 2007 to December 2007, Mr. Shaw was the Senior Vice President of Marketing for H&R Block, Inc.’s Option One Mortgage Corporation, a mortgage services firm, where he was responsible for integrating market strategy and marketing campaigns and for providing developmental support to a national network of 800 sales executives. From 2002 to January 2007, Mr. Shaw was the Vice President of Consumer Direct and B2B Marketing for New Century Financial Corporation, a real estate investment trust that originated mortgage loans in the United States. While at New Financial Corporation, he was responsible for, among other things, marketing strategy, product pricing, lead generation and promoting brand awareness. Mr. Shaw has a B.S.B.A. in Business Development from the University of Delaware and holds several marketing strategy certifications. Specifically, Mr. Shaw serves as the Senior Vice President of Marketing of the Company because of his more than 17 years of experience in the marketing industry and his background in developing marketing strategies for developing businesses.
David R. Johnson
, 61, has been the Chief Financial Officer of the Company since May 10, 2010. From December 2008 until joining the Company, Mr. Johnson was a partner at Catapult CFO Partners, a chief financial officer only consulting firm that provides financial management and similar strategic planning services to medium sized business in the United States and Canada. From 2002 until 2008, Mr. Johnson was a partner at Tatum LLC, a professional services provider of financial leadership in the United States, where he led the initial public offering of a company and served as the interim lead executive and chief financial officer for several companies. Mr. Johnson has been the chief financial officer of NASDAQ-listed companies, Evolving Systems, Inc. and Sodak Gaming, Inc. Mr. Johnson holds a B.A. in Accounting from the University of Washington, a M.B.A. specializing in Finance from the University of California, Berkeley, a M.P.A. specializing in Organization Behavior from the University of Southern California and a PhD (ABD) in Public Finance also from the University of Southern California. Mr. Johnson is also a certified public accountant in the state of Washington. Specifically, he serves as the Chief Financial Officer of the Company because of his more than 20 years of leadership experience in accounting, operations, FP&A, capital raising and strategic planning at publicly traded companies.
Jamal Khawaja
, 36, has been the Chief Technology Officer of the Company since May 10, 2010. From January 2008 until prior to joining the Company, Mr. Khawaja was the Senior Vice President of Engineering and Operations and Global Infrastructure Strategy, at Bank of America, N.A., one of the United States’ largest financial institutions and bank holding companies, where he was responsible for leading a cross-functional team of managers and architects to design a next-generation datacenter for Bank of America and designing technology-based solutions to enable data center operations. From February 2007 to January 2008, Mr. Khawaja was a Vice President of Capacity and Performance Engineering PMO with Lehman Brothers, a former global financial services firm and investment bank, where he was responsible for designing technology based solutions and business services, and a Senior Vice President of Infinitous Global Services, Inc., a provider of operational, network, technology, and risk consulting services, where he was responsible for leading the company’s initial business development. From January 2005 to January 2007, Mr. Khawaja also was an Executive Manager at Accenture, a global consulting firm, where he was the project lead for several projects involving the development and/or restructuring of information technology systems for businesses. Mr. Khawaja holds a B.S. in Management, with a concentration in E-Commerce, from the University of Phoenix, and holds several technology based certifications. Mr. Khawaja serves as the Chief Technology Officer of the Company because of his more than 10 years of experience in establishing comprehensive technical programs, leading all aspects of business-related technology development and ability to conceive and implement complex technical solutions for businesses.
John J. Shin
, 42, has been the Senior Vice President of Corporate Development and Chief Investment Officer of the Company since August 2, 2010. From February 2001 until joining the Company, Mr. Shin was the President and Chief Executive Officer at Morsetone, Inc., a technology and management consulting company, where he was responsible for leading a team of executives and engineers to deploy next-generation mobile infrastructure solutions to enable mobile WiMax and mobile broadcasting services in addition to seeding new technology ventures in the wireless industry. From July, 1999 to February, 2001, Mr. Shin was Vice President and Principal with Edison Venture Fund, a$550 million venture capital fund focused on investing in expansion stage technology companies in the East Coast, where he was responsible for sourcing and investing in technology companies in the software and wireless industries. From July 1998 to July 1999, Mr. Shin was a Vice President of Investment Banking with Legg Mason, where he was involved in over $1 billion in private and public transactions in the media and communications industries. From November 1997 to July 1998, Mr. Shin was an Equity Research Analyst with Montgomery Securities, a premier investment banking company based out of San Francisco, California, covering publicly traded companies in the wireless services industry. Previously, Mr. Shin served in many management roles at Omnipoint Corporation, the first GSM mobile carrier in the United States. Mr. Shin holds a B.S. in Biology and Chemistry from Loyola University of Maryland and a M.B.A. specializing in Finance and Accounting from Vanderbilt University’s Owen Graduate School of Management. Mr. Shin serves as the Senior Vice President of Corporate Development and Chief Investment Officer of the Company due to his more than 23 years of experience in the wireless industry as an investor, executive and notable expert in the areas of wireless services and enabling technologies in conjunction with his global business relationships in Europe and Asia for business expansion.
Adam Boris
has over 20 years of experience in the wireless and consumer electronics industries. Since January 2006 he has operated his own consulting firm supporting worldwide operations of wireless companies entering into new markets. From 2007 to present he also served as Interim Chief Operating Officer for TLeMaz. From March 2003 through September 2005 Mr. Boris was Senior Vice President of Operations at DBS Communications. Prior to that he served as an engineer for Northrop from 1989 to1992, as Lead Engineer for Motorola from 1988 to 1992 and for Ameritech from 1992 to 2000 in such capacities as GM-Technical Planning (1997-2000), Director-Advanced Cellular Technology(1994-1997) and Director-RF Planning(1993-1994). Mr. Boris is experienced in successful launches of new products and services for clients in areas such as wireless data, 3G networks and smart card applications. He has written successful business plans, raised venture capital funding and implemented start up operations.
Mr. Boris holds a BS-Electrical Engineering and an MS-Electrical Engineering both from the University of Illinois, Champaign-Urbana. In addition he holds an MBA from the Kellogg Graduate School of Management at Northwestern University.
Melvin Tekell,
82, became a director in July 2010. Over the last five years, Mr. Tekell has been semi-retired focusing on his ranches and farms. From 1965 to 1980, Mr. Tekell was a part owner and board director for Heart State Bank located in Heart, Texas when the bank was sold. During that time he was also running a grain business in multiple states, which he sold as he began to move into retirement. Prior to his semi-retirement, Mr. Tekell managed agro-chemical facilities, grain storage facilities, farms and ranching operations throughout his career. Mr. Tekell brings a wealth of general business knowledge to our board as well as extensive knowledge of the banking industry.
Larry Wilson
, 65, became Chairman of the Board and Secretary in July 2010. Mr. Wilson has been an owner and operator of a general dentistry practice since 1986. Mr. Wilson has a bachelor of science degree from the University of Houston and a doctor of dental surgery degree from the University of Texas. Mr. Wilson brings a wealth of general business experience to our board of directors.
Employment Agreements
We have substantially similar employment agreements (collectively, the “Employment Agreements”) with each of the following named executive officers: William T. Watson, Thomas Shaw, David R. Johnson and Jamal Khawaja, John Shin and Adam Boris. Each of the Employment Agreements provides the named executive officers with compensation in the form of an annual base salary, a potential bonus, restricted stock, severance pay and excise tax gross-ups, and with benefits, including, without limitation, 401(k) plan participation and health, life and dental insurance.
The Employment Agreements contain change in control provisions which are designed to reduce the distraction of our executive officers that might otherwise arise from the personal uncertainties caused by a change in control and to encourage the executive’s full attention and dedication to the Company. On the date of a change in control, the executive will be entitled to the immediate vesting of any and all restricted stock that executive holds at that time. Under the Employment Agreements, a “Change in Control” is generally determined to have occurred if:
·
|
a tender offer shall be made and consummated for the ownership of more than 50% of the outstanding voting securities of the Company;
|
·
|
the Company shall be merged, consolidated or reorganized with another corporation, partnership or other entity, and as a result of such merger, consolidation or reorganization less than 50% of the outstanding voting securities of the surviving or resulting corporation, partnership or other entity shall be owned in the aggregated by the shareholders of the Company, as determined immediately prior to the consummation of such merger, consolidation or reorganization;
|
·
|
the Company shall sell all or substantially all of its assets to another corporation which is not a wholly-owned subsidiary or affiliate in a single transaction or a series of related transactions; or
|
·
|
a person, within the meaning of Section 3(a)(9) or Section 13d(3) of the Exchange Act, other than any executive benefit plan then maintained by the Company, shall acquire more than 30% of the outstanding voting securities of the Company (whether directly, indirectly, beneficially or of record).
|
The Employment Agreements also provide for certain payments to be made to the executives upon the termination of their respective employment with the Company. In determining the amount of severance to be paid to an executive whose employment with the Company is terminated, there must be a determination as to whether such termination was for “cause” or “good reason.” The Employment Agreements generally define “cause” to include:
·
|
habitual neglect of or deliberate or intentional refusal to perform any of executive’s duties or obligations under his respective Employment Agreement;
|
·
|
fraudulent or criminal activities;
|
·
|
any grossly negligent act or omission;
|
·
|
deliberate breach of Company rules resulting in a material loss or damage to the Company; and
|
·
|
executive fails to fulfill annual performance goals and objectives (which shall be determined by such executive and certain other officers and/or directors of the Company).
|
The Employment Agreements generally define “good reason” to include occurrences such as:
·
|
a material breach of the Employment Agreement by the Company;
|
·
|
the assignment of the executive without his consent to a position, responsibilities or duties of a materially lesser status or degree of responsibility than his position, responsibilities or duties as stated in such executive’s respective Employment Agreement; and
|
·
|
any reduction in the executive’s annual salary without such executive’s consent.
|
If executive’s employment is terminated for “cause” or by reason of death of the executive, the Employment Agreements, subject to certain restrictions, entitle Mssrs. Shaw, Johnson, Khawaja, Shin and Boris to a lump sum payment of three months of their respective annual base salary and Mr. Watson to a lump sum payment of six months at his annual base salary. Upon the termination of executive’s employment by the Company without “cause”, or by the executive with “good reason,” the Employment Agreements, subject to certain restrictions, entitle Mssrs. Watson, Shaw, Johnson, Khawaja, Shin and Boris to a lump sum payment of equal to 6 months of their respective annual base salary. Each of the executives are also entitled to the immediate vesting of any stock options held by such executive at such time.
The table below sets forth the base salary and restricted stock grants provided for each of these executive officers under their employment agreements.
Name
|
Base Salary
|
Number of Shares
of Common Stock Subject to
Restricted Stock Grants
|
William T. Watson,
Chief Operating Officer (1)
|
$275,000
|
950,000
|
David R. Johnson,
Chief Financial Officer (2)
|
$250,000
|
500,000
|
Thomas Shaw,
Senior Vice President of Marketing, Chief Marketing Officer (3)
|
$250,000
|
250,000
|
Jamal Khawaja,
Chief Technology Officer (4)
|
$215,000
|
250,000
|
John Shin (5)
|
$215,000
|
250,000
|
Adam Boris (6)
|
$235,000
|
250,000
|
(1) Under his employment agreement, the Company will grant to Mr. Watson a restricted stock award of 950,000 shares of Common Stock, as soon as possible after adoption of an Equity Incentive Plan, with 50,000 of such restricted shares vesting immediately upon grant. The equity incentive plan has not yet been adopted so these restricted shares have not yet been issued. The remaining shares of Mr. Watson’s restricted stock award vest according to the following schedule: 450,000 shares vest on December 31, 2010, provided that if, at any time prior to December 31, 2010, the price of the Company’s Common Stock closes above $0.20 per share for a period of 30 consecutive trading days, then 25,000 of such shares will immediately vest; and 450,000 shares vest on December 31, 2011, provided that if, at any time prior to December 31, 2011, the price of the Company’s Common Stock closes above $0.35 per share for a period of 30 consecutive trading days, then 25,000 of such shares will immediately vest. All unvested shares will immediately vest on the date of a change in control.
(2) Under his employment agreement, the Company will grant to Mr. Johnson a restricted stock award of 500,000 shares of Common Stock, as soon as possible after adoption of an Equity Incentive Plan, with 50,000 of such restricted shares vesting immediately upon grant. The remaining shares of Mr. Johnson’s restricted stock award vest according to the following schedule: 50,000 shares vest on December 31, 2010, provided that if, at any time prior to December 31, 2010, the price of the Company’s Common Stock closes above $0.20 per share for a period of 30 consecutive trading days, then all 50,000 of such shares will immediately vest; 100,000 shares vest on December 31, 2011, provided that if, at any time prior to December 31, 2011, the price of the Company’s Common Stock closes above $0.35 per share for a period of 30 consecutive trading days, then all 100,000 of such shares will immediately vest; and 100,000 shares vest on each of December 31, 2012, December 31, 2013 and December 31, 2014. All unvested shares will immediately vest on the date of a change in control.
(3) Under his employment agreement, the Company will grant to Mr. Shaw a restricted stock award of 250,000 shares of Common Stock, as soon as possible after adoption of an Equity Incentive Plan, with 50,000 of such restricted shares vesting immediately upon grant. The remaining shares of Mr. Shaw’s restricted stock award vest according to the following schedule: 50,000 shares vest on December 31, 2010, provided that if, at any time prior to December 31, 2010, the price of the Company’s Common Stock closes above $0.20 per share for a period of 30 consecutive trading days, then 25,000 of such shares will immediately vest; and 50,000 shares vest on December 31, 2011, provided that if, at any time prior to December 31, 2011, the price of the Company’s Common Stock closes above $0.35 per share for a period of 30 consecutive trading days, then 25,000 of such shares will immediately vest. All unvested shares will immediately vest on the date of a change in control.
(4) Under his employment agreement, the Company will grant to Mr. Khawaja a restricted stock award of 250,000 shares of Common Stock, as soon as possible after adoption of an Equity Incentive Plan, with 25,000 of such restricted shares vesting immediately upon grant. The remaining shares of Mr. Khawaja’s restricted stock award vest according to the following schedule: 25,000 shares vest on December 31, 2010, provided that if, at any time prior to December 31, 2010, the price of the Company’s Common Stock closes above $0.20 per share for a period of 30 consecutive trading days, then all 25,000 of such shares will immediately vest; and 50,000 shares vest on December 31, 2011, provided that if, at any time prior to December 31, 2011, the price of the Company’s Common Stock closes above $0.35 per share for a period of 30 consecutive trading days, then 25,000 of such shares will immediately vest. All unvested shares will immediately vest on the date of a change in control.
(5) The Company entered into an employment agreement with Mr. Shin on July 23, 2010 and effective as of September 1, 2010, which is substantially similar to the employment agreements the Company has with its other executive officers. The Employment Agreement provides Mr. Shin with compensation in the form of an annual base salary of $215,000, a potential bonus, restricted stock, severance pay and excise tax gross-up, and with benefits, including, without limitation, 401(k) plan participation and health, life and dental insurance.
In addition, under his employment agreement, the Company will grant to Mr. Shin a restricted stock award of 250,000 shares of Common Stock, as soon as possible after adoption of an Equity Incentive Plan, with 50,000 of such restricted shares vesting immediately upon grant. The remaining shares of Mr. Shin’s restricted stock award vest according to the following schedule: 50,000 shares vest on December 31, 2010; 75,000 shares on December 31, 2011; and 75,000 shares on December 31, 2012. Notwithstanding the forgoing, provided that if, at any time prior to December 31, 2010, the price of the Company’s Common Stock closes above $0.20 per share for a period of 30 consecutive trading days, then 75,000 of such shares will immediately vest; and 50,000 shares vest on December 31, 2011, provided that if, at any time prior to December 31, 2011, the price of the Company’s Common Stock closes above $0.35 per share for a period of 30 consecutive trading days, then 25,000 of such shares will immediately vest. All unvested shares will immediately vest on the date of a change in control.
(6) The Company entered into an employment agreement with Mr. Boris on July 26, 2010 and effective as of August 2, 2010, which is substantially similar to the employment agreements the Company has with its other executive officers. The Employment Agreement provides Mr. Boris with compensation in the form of an annual base salary of $235,000, a potential bonus, restricted stock, severance pay and excise tax gross-up, and with benefits, including, without limitation, 401(k) plan participation and health, life and dental insurance.
In addition, under his employment agreement, the Company will grant to Mr. Boris a restricted stock award of 250,000 shares of Common Stock, as soon as possible after adoption of an Equity Incentive Plan, with 50,000 of such restricted shares vesting immediately upon grant. The remaining shares of Mr. Boris’ restricted stock award vest according to the following schedule: 50,000 shares vest on December 31, 2010; 75,000 shares on December 31, 2011; and 75,000 shares on December 31, 2012. Notwithstanding the forgoing, provided that if, at any time prior to December 31, 2010, the price of the Company’s Common Stock closes above $0.20 per share for a period of 30 consecutive trading days, then 75,000 of such shares will immediately vest; and 50,000 shares vest on December 31, 2011, provided that if, at any time prior to December 31, 2011, the price of the Company’s Common Stock closes above $0.35 per share for a period of 30 consecutive trading days, then 25,000 of such shares will immediately vest. All unvested shares will immediately vest on the date of a change in control.
Each of our officers owns all voting and economic rights to the restricted shares referenced above upon issuance, however, until those shares are vested, they remain subject to forfeiture.
Director Compensation
We are not compensating our directors for their service on our board of directors. We may, however, begin compensating members of our Board of Directors at some time in the future as well as reimbursing directors for their reasonable out-of-pocket expenses incurred in connection with attending Board of Directors and Board committee meetings.
EXECUTIVE
COMPENSATION
None of our employees were with us in 2009 and we had no operations in 2009 so there is no executive compensation to report.
SECURITY OWNERSHIP OF CE
RTA
IN BENEFICIAL INFORMATION
The following table sets forth information regarding the beneficial ownership of our Common Stock as of July 8, 2010 by:
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each person who beneficially owns more than 5% of the outstanding shares of our Common Stock;
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each of our executive officers named in the Summary Compensation Table;
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·
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each of our stockholders selling shares in this offering;
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·
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each of our directors; and
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·
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all directors and executive officers as a group.
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Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the shares. Common Stock subject to options or restricted stock units that are currently exercisable or exercisable within 60 days of July 30, 2010 are deemed to be outstanding and beneficially owned by the person holding the options or restricted stock units. These shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person.
Percentage of shares outstanding is based on 146,489,538
shares of common stock outstanding as of July 30, 2010 after giving effect to the planned three for one stock split as a result of the planned conversion. As of such date, we had approximately 15 stockholders of record.
Unless otherwise indicated, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares of common stock, except to the extent authority is shared by spouses under applicable law. Unless otherwise indicated, the address for each listed stockholder is c/o cMoney, Inc. One Sugar Creek Center Blvd., Sugar Land, Texas 77478.
Name of Beneficial Owner
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Number of Shares
Beneficially Owned
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Percentage
of Shares
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Named Executive Officers:
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William T. Watson (1)
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950,000
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*
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David R. Johnson (1)
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500,000
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*
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Thomas Shaw (1)
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250,000
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*
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Jamal Khawaja (1)
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250,000
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*
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John Shin (1)
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250,000
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*
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Adam Boris (1)
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250,000
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*
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Non-Employee Directors:
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Melvin Tekell
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239,787
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*
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Larry Wilson (2)
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7,255,722
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4.9
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5% Stockholders:
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PLJMMP Trust (3)
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18,000,000
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12.6
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%
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Jennifer L. Pharris
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105,000,000
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71.7
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%
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All Directors and Executive Officers as a group (6 people) (1)(2)
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9,455,509
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6.4
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%
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(1) Includes the grants of restricted stock awarded to Mssrs. Watson, Johnson, Shaw and Khawaja described in footnotes (1) through (4) of “Directors, Executive Officers, Promoters and Control Person – Employment Agreements” above, respectively. Each of those officers will own, upon issuance, all economic and voting rights to such shares although they remain subject to a risk of forfeiture until they vest as described above in footnotes (1) through (4) of “Directors, Executive Officers, Promoters and Control Person – Employment Agreements.” These shares are not included in the 146,489,538 listed as outstanding since they have not been issued yet.
(2) Includes 6,000,000 shares that may be obtained upon conversion of a $220,000 promissory note.
(3) Miriam M. Pharris, grandmother of our Founder, Jennifer Pharris, is the grantor, trustee and beneficiary of this revocable trust.
CERTAIN RELATIONSHIPS AND R
ELA
TED PARTY TRANSACTIONS,
AND CORPORATE GOVERNANCE
From 2005 through 2009, cMoney received advances of $502,236 from the Pharris Family Trust, a trust owned and managed directly by Mirriam Pharris, grandmother of Jennifer Pharris, the Company’s Founder. The funds obtained via the advances were used by cMoney for research and development costs and legal fees associated with product development. The advances are evidenced by a note, which carries an interest rate of 4% per annum and matures on May 31, 2010. Upon completion of the Merger, the PLJMMP Trust, another trust owned and managed directly by Mirriam Pharris, received 18,000,000 shares of Company Common Stock in consideration for providing such note. There were $502,236 and $452,343 in advances outstanding as of December 31, 2009 and 2008, respectively. Jennifer Pharris has assumed the obligation to repay this note.
On April 8, 2009, cMoney entered into an agreement with Global 1 Enterprises, Inc., whereby in exchange for $41,543 per year over the next five years, Global 1 Enterprises, Inc. will provide consulting services to C$ cMoney, which are expected to be provided by Ms. Pharris. Global 1 Enterprises, Inc. is owned by Jennifer Pharris, the Company’s Founder. During 2009, cMoney accrued accounts payable of $27,696 related to this agreement. On April 3, 2010, cMoney entered into a technology license agreement with Global 1 Enterprises, Inc. Under the agreement, cMoney will pay Global 1 $1,500,000 per year for an exclusive and non-transferable license to certain intellectual property included trademarks and patents. Global 1 is owned by Jennifer Pharris. Related party payments to Ms. Pharris and Global 1 through July 30, 2010 were $381,141.
In May, 2010, after completion of the Merger. we issued 239,787 shares to Melvin Tekell in satisfaction of contractual obligations of cMoney. Mr. Tekell had paid cMoney $100,000 for the right to obtain these shares. In addition, his two adult daughters each received 104,895 shares in satisfaction of contractual obligations of cMoney. Each daughter had paid cMoney $50,000 for the right to obtain these shares. These daughters do not live with him and Mr. Tekell disclaims any beneficial ownership of his daughter’s shares.
In May, 2010, after completion of the Merger, we issued 1,255,722 shares to Larry Wilson and his wife in satisfaction of contractual obligations of cMoney. Mr. Wilson had paid cMoney
$300,000 for the right to obtain these shares and had loaned cMoney an additional $1,040,700 bearing interest at 10% per annum, of which Jennifer Pharris has assumed $190,000, leaving $850,700 to be paid by us.
The $850,700 is represented by three notes:
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$90,000 which carries an interest rate of 10% per annum and matures on the earlier of March 31, 2011 or the date we close an equity investment of $5,000,000;
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$540,700 which carries an interest rate of 10% per annum and matures on May 13, 2011;
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$220,000 which carries an interest rate of 10% per annum and matures in June 2011 unless he earlier converts part or all of it into shares of our common stock at a conversion price of $0.0367 (post-split) per share.
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Mr. Tekell is the father-in-law of Mr. Wilson.
Bonfire had the following related party transactions prior to the merger reported in its financial statements for the year ended June 30, 2009, none of which are continuing after the merger and all such loans were extinguished prior to the merger. None of these officers or directors are with us post-Merger.
a) The then-President of Bonfire provided consulting services to Bonfire. During the year ended June 30, 2009 consulting services of $0 (June 30, 2008 - $2,066) were charged to operations.
b) At March 31, 2009, Bonfire owed $1,900 to then directors of Bonfire for cash advances provided to Bonfire. The loan was payable on demand. This cash advance was paid in full at June 30, 2009
c) During the period ended September 30, 2008, the former President of Bonfire provided a $7,000 loan to the Company. The loan was payable on demand, unsecured, bore interest at 6.45% per annum, and consisted of $7,000 of principal due on or after July 5, 2009, and $336 of accrued interest payable as at August 29, 2008.
d) On August 29, 2008, the amounts due to the former President of Bonfire were settled and Bonfire recorded a $37,123 gain on the settlement of related party debt.
e) On April 7, 2009, funds were disbursed from escrow for the purchase of approximately 54% control of Bonfire. Three million five hundred thousand (3,500,000) shares were purchased. The shares were purchased pursuant to an Affiliate Stock Purchase Agreement by Tim C. DeHerrera (1,166,667 shares), P. James Voloshin (1,166,667 shares) and Richard A. Luthmann (1,166,666 shares). Control was assumed from Alexander Kulyashov pursuant to the Agreement. As part of the purchase of control, Tim C. DeHerrera consented to act as President, Secretary and Director, P. James Voloshin consented to act as Treasurer and Director, and Richard Luthmann consented to act as Executive Vice President, Chief Legal Officer and Director of the Company. With the transfer of control, an additional $15,632 gain on settlement and related party debt was recorded.
f) On May 18, 2009, Shareholder Mr. Vikram Khanna provided a $5,000 loan to Bonfire. The loan was payable on demand with no fixed term or set duration of repayment.
g) On June 15, 2009, Shareholder Mr. Vikram Khanna provided a $16,250 loan to Bonfire. The loan was payable on demand with no fixed term or set duration of repayment.
(h) During the three month period ended September 30, 2009, Mr. Vikram Khanna and Tim C. DeHerrera each paid an outstanding payable for $2,000 each on behalf of Bonfire. The loan was payable on demand with no fixed term or set duration of repayment.
Except as otherwise described herein, there has not been since January 1, 2007, nor is there currently proposed, any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds the lesser of (i) 1% of our average total assets at year end, or (ii) $120,000, and in which any of our sole director, executive officers, holders of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest. This excludes compensation arrangements with our sole director and executive officers, which are described elsewhere in this prospectus.
Procedures for Related Party Transactions
We will present all possible related party transactions between or among us and any of our officers, directors or holders of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons to the Company’s Board of Directors for consideration and approval. Any such transaction will require approval by a majority of the disinterested directors. Prior to Mr. Wilson and Mr. Tekell joining our Board of Directors, Jennifer Pharris was our only director so there was no such independent review process.
Director Independence
Our Common Stock is quoted on the OTCBB and Pink Sheets operated by Pink OTC Markets Inc., which do not have director independence requirements. Under NASDAQ Rule 4200(a)(15), a director is not considered to be independent if he or she is also an executive officer or employee of the corporation. Messrs. Tekell and Wilson would be considered independent.
WHERE YOU CAN FIND AD
DITI
ONAL INFORMATION
We have filed a registration statement on Form S-1 under the Securities Act, relating to the shares of common stock being offered by this prospectus, and reference is made to such registration statement. This prospectus constitutes the prospectus of cMoney, Inc. filed as part of the registration statement, and it does not contain all information in the registration statement, as certain portions have been omitted in accordance with the rules and regulations of the Securities and Exchange Commission.
In addition we are required to file annual, quarterly, and current reports, or other information with the SEC as provided by the Exchange Act. You may read and copy any reports, statements or other information we file at the SEC’s public reference facility maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room. Our SEC filings are also available to the public through the SEC’s Internet website at http://www.sec.gov.
LEGAL MATTERS
____________________ will pass upon the validity of the issuance of the shares of common stock offered by this prospectus.
EX
P
ERTS
The financial statements appearing in this prospectus and registration statement on Form S-1 for cMoney, Inc., a Delaware corporation, prior to its acquisition by Bonfire Productions, Inc. have been audited by MaloneBailey, LLP, independent public accountants, as set forth in their report thereon appearing elsewhere in this prospectus and in the registration statement on Form S-1, and such report is included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing.
The financial statements appearing in this prospectus and registration statement on Form S-1 for Bonfire Productions, Inc. have been audited by Seale & Beers, CPAs, independent public accountants, as set forth in their report thereon appearing elsewhere in this prospectus and in the registration statement on Form S-1, and such report is included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis or had, or is to receive, in connection with the offering, a substantial interest, directly or indirectly, in the registrant.
TRANSFER AGENT
Our transfer agent is Island Stock Transfer, Inc., St. Petersburg, Florida.