SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Fenton Graham Marketing, Inc.
(Name of small business issuer in its charter)
Nevada 7380 86-1042805
(State or other (Primary Standard (I.R.S.
jurisdiction Industrial Employer
of Classification Code Identification
incorporation) Number) Number)
____________________________
13215 Verde River Drive, Unit 1
Fountain Hills, AZ 85268
(480) 836-8720
(Address and telephone number of principal executive offices)
____________________________
Ken Greble, President
Fenton Graham Marketing, Inc.
13215 Verde River Drive, Unit 1
Fountain Hills, AZ 85268
(480) 836-8720
(Name, address and telephone number of agent for service)
With copy to:
Chapman & Flanagan, Ltd.
777 N. Rainbow Blvd., Suite 390
Las Vegas, NV 89107
____________________________
Approximate date of proposed sale to the public: As soon as
reasonably practicable after the effective date of this
Registration Statement.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. ___
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering.__
If this Form is a 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 or the earlier
effective registration statement for the same offering. __
If delivery of the prospectus is expected to be made pursuant to
Rule 434, check the following box. __
<Table>
<s> <c> <c> <c> <c>
Title of each Proposed Proposed
class of maximum maximum
securities Amount to offering aggregate Amount of
to be to be price per offering registration
registered registered share (1) price fee
Common Shares, 5,000,000 $0.02 $100,000 $9.20
$0.001 par
value, to be
sold by the
Company
Common Shares, 1,000,000 $0.02 $20,000 $1.84
$0.001 par
value, to be
sold by selling
security holders
Total 6,000,000 $120,000 $11.04
</Table>
(1) Estimated solely for purposes of calculating registration
fee pursuant to Rule 457 under the Securities Act of 1933, as
amended.
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.
Explanatory Note
----------------
This registration statement contains two prospectuses: one
relating to the offering by Fenton Graham of 5,000,000 shares of
its common stock, par value $0.001 per share, for cash and
another prospectus relating to the offering of 1,000,000 shares
of common stock held by selling security holders who may wish to
sell their common stock. The prospectus relating to the selling
security holders is referred to as the selling security holders
prospectus. Following the prospectus are substitute pages of the
selling security holders prospectus, including alternate pages
front outside and back cover pages, an alternative "The Offering"
section of the "Prospectus Summary" and sections entitled "Use of
Proceeds", "Determination of Offering Price", "Selling Security
Holders", and "Plan of Distribution". Each of the alternate
pages for the selling security holder prospectus is labeled
"Alternate Page for Selling Security Holder Prospectus." All
other sections of the prospectus are to be used in the selling
security holder prospectus. In addition, cross-references in the
prospectus will be adjusted in the selling security holder
prospectus to refer to the appropriate sections.
Initial Public Offering Prospectus
Fenton Graham Marketing, Inc.
5,000,000 Shares of Common Stock
We are offering a maximum of 5,000,000 shares of our common stock
for sale at $0.02 per share on a best-efforts basis and without
the assistance of an underwriter. There is no minimum amount of
shares we must sell and no money raised from the sale of our
stock will go into escrow, trust or any other similar
arrangement.
Unless we decide to cease selling efforts at a prior date, we
will close the offering on the earlier of (1) the date all of the
5,000,000 shares are sold, or (2) the sixth month anniversary of
the date of this prospectus.
There is no public market for our common stock.
Concurrent with this offering, we are registering 1,000,000
additional shares of common stock for sale by 18 of our
shareholders. These selling shareholders will offer their stock
at a price of $0.02 per share until our shares are quoted on the
OTC Bulletin Board and thereafter at prevailing market prices, or
at privately negotiated prices.
This investment involves a high degree of risk. You should
purchase these securities only if you can afford a complete loss.
See "Risk Factors" beginning on page 5 to read about factors you
should consider before buying any of these securities.
The shares offered by the Company are subject to prior sale,
acceptance of the subscriptions by the Company and approval of
certain legal matters by counsel to the Company.
Offerees and subscribers are urged to read this prospectus
carefully and thoroughly.
Offering
price
to the Underwriting Proceeds to
public discounts the Company
-------- ------------ -----------
Per share $0.02 $ 0 $0.02
Total maximum $100,000 $ 0 $100,000
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities, or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is ____________, 2002
TABLE OF CONTENTS
Page
Prospectus Summary..................................................... 4
Risk Factors........................................................... 5
1. We are a recently formed company with no revenues............... 5
2. Because we will need to raise additional funds and these
funds may not be available to us, we may need to change our
business plan................................................... 6
3. Our officers and directors engaged in other activities.......... 6
4. Government regulation may affect our ability to gather,
generate or use information for profiles........................ 6
5. Because we are a newly formed company with no employees, our
failure to adequately respond to rapid changes in technology
and the internet could harm our ability to generate revenue..... 7
6. If we are unable to attract and retain sales and client
services personnel, or if we are unable to adequately train
our sales personnel in a timely manner, our business and
future revenue growth could suffer.............................. 7
7. If our ad delivery and tracking technology is not effective,
our relatinships with our advertising clients may be harmed..... 8
8. Our failure to protect our intellectual property could harm
our business and competitive position........................... 8
9. Failure of our technology and computing systems could harm
our relationships with our clients and cause our results of
operations to suffer............................................ 8
10. We may be liable to content available or posted on the web
sites of our publishers......................................... 8
11. Sales of our shares held by the Selling Shareholders in a
concurrent offering may make it difficult for us to sell
shares in the offering.......................................... 9
12. There is no assurance that we will be successful in raising
any needed funds from this self-offering........................ 9
13. There is no minimum purchase requirement........................ 9
14. We have no public market for our stock.......................... 9
2
15. Our shares may be considered a "penny stock".................... 10
Forward-Looking Statements............................................. 10
Use of Proceeds........................................................ 10
Determination of Offering Price........................................ 12
Dilution............................................................... 12
Plan of Distribution................................................... 13
Legal Proceedings...................................................... 14
Directors, Executive Officers, Promoters and Control Persons........... 14
Security Ownership of Certain Beneficial Owners and Management......... 16
Description of Securities.............................................. 16
Interest of Named Experts and Counsel.................................. 17
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities............................................. 17
Organization Within the Last Five Years................................ 17
Description of Business................................................ 18
Management's Plan of Operation......................................... 25
Description of Property................................................ 27
Certain Relationships and Related Transactions......................... 27
Market for Common Equity and Related Stockholder Matters............... 27
Executive Compensation................................................. 28
Financial Statements................................................... 29
Where You Can Find More Information.................................... 37
Experts................................................................ 37
Legal Matters.......................................................... 37
3
PROSPECTUS SUMMARY
The Company
The Company was incorporated in the State of Nevada on October
17, 2001. Our principal executive offices are located 13215 Verde
River Drive, Unit 1, Fountain Hills, Arizona 85268. Our
telephone number is (480) 836-8720.
The Offering
Securities offered by the Company.......... 5,000,000 shares of our common
stock
Offering price per share................... $0.02
Common stock presently outstanding......... 6,000,000
Common stock to be outstanding after
completion of the offering................. 11,000,000
Termination date........................... Upon the earlier of the sixth
month anniversary of the date
of this prospectus or the sale
of all the shares of common
stock that are being offered
How to subscribe........................... Each prospective investor who
desires to purchase shares of
common stock should complete,
date, and execute the
Subscription Agreement, make a
check, bank draft, or money
order payable to "Fenton
Graham Marketing, Inc." in the
amount of $0.02 times the
number of shares subscribed
for, and deliver the completed
Subscription Agreement and
check to the Company at the
following address: 13215 Verde
River Drive, Unit 1, Fountain
Hills, Arizona 85268.
Estimated net proceeds to us.............. $95,000 after estimated
offering costs of $5,000
Use of proceeds........................... Working capital and general
corporate purposes.
Risk factors.............................. The securities offered hereby
involve a high degree of risk
and immediate substantial
dilution from the public
offering price.
4
Selling shareholders offering............. The selling security holders
offering will run concurrently
with the primary offering. We
are simultaneously registering
1,000,000 additional shares of
our common stock to be sold by
18 of our shareholders. These
selling security holders will
offer their stock at a price
of $0.02 per share until our
shares are quoted on the OTC
Bulletin Board and thereafter
at prevailing market prices,
or at privately negotiated
prices.
In this prospectus, reference to "we," "our" and "us" refers to
Fenton Graham Marketing, Inc.
RISK FACTORS
An investment in the securities that are being offered involves a
high degree of risk and should only be made by those who can
afford to lose up to their entire investment. Before purchasing
these securities, you should consider carefully the following
risk factors, in addition to the other information in this
prospectus.
Risks related to our financial condition
1. We are a recently formed company with no revenues and
anticipate losses for the foreseeable future. Our lack of
operating history may prevent us from achieving success and you
may lose your entire investment.
We have no operating history and we have no significant assets or
financial resources. Our business activities have been limited to
raising funds, developing our software and business operations
plan. You should consider our prospects in light of the risks,
uncertainties, expenses and difficulties frequently encountered
by companies in an early stage of development, particularly
companies in new and rapidly evolving markets such as online
advertising.
These risks include our ability to:
- manage our growth effectively;
- anticipate and adapt to the rapid changes in the
Internet;
- continue to develop and upgrade our technology;
- respond to competitive developments in our market; and
- continue to identify, attract, retain and motivate
qualified personnel.
5
If we are unsuccessful in addressing these risks, our revenues
may not grow in accordance with our business model and may fall
short of expectations of market analysts and investors, which
could negatively affect the price of our stock.
2. Because we will need to raise additional funds and these
funds may not be available to us when we need them, we may need
to change our business plan or we will face bankruptcy and cease
operations and our shareholders will lose their entire
investment.
Based on our current projections, we will need to raise funds
after the expiration of one year from the closing of this
offering through the issuance of equity, equity-related or debt
securities in addition to the funds we are raising in this
offering. We will need to raise additional capital sooner than
one year after the closing of this offering if we are unable to
sell the maximum number of shares of common stock being offered
or if we receive the maximum proceeds and our sales are lower
than expected. Additional capital may not be available to us on
favorable terms when required, or at all. If this additional
financing is not available to us, we may need to dramatically
change our business plan, sell or merge our business or face
bankruptcy and cease operations. In addition, our issuance of
equity or equity-related securities will dilute the ownership
interest of existing shareholders and our issuance of debt
securities could increase the risk or perceived risk of our
company. Any of these actions could cause our stock price to
fall. Apart from our requirements for capital in addition to the
anticipated proceeds of this offering, prospective investors
should be aware of the possibility that we will not raise any
funds in this offering and we will not be able to commence
operations.
Risks related to our business
3. Our officers and directors are engaged in other activities
and are limited in the time they can devote to our operations and
we may realize serious harm if any one of them leaves.
Ken Greble and J.P. Schrage, our officers and directors, have
existing responsibilities to provide management and services to
other entities. As a result, Messrs. Greble and Schrage may have
troubles in allocating time, services, and functions between the
other business ventures in which they are involved and our
affairs. Mr. Greble and Mr. Schrage each presently spend
approximately 20% of their business time on business management
services for our company. These factors will most likely cause
delays to conducting operations and raising capital. We face the
additional risk that either Mr. Greble or Mr. Schrage could leave
with little or no prior notice because they are not bound by an
employment agreement. We do not have "key person" life insurance
policies covering either Mr. Greble or Mr. Schrage.
4. Government regulation may affect our ability to gather,
generate or use information for profiles and may hinder our
ability to conduct business.
The legal and regulatory environment governing the Internet and
the use of information about Web users is uncertain and may
change. A number of lawsuits have recently been filed against
certain Internet companies related to online privacy. In
addition, the Federal Trade Commission has begun investigations
6
of, and several attorneys general have instituted legal
proceedings against, certain Internet companies related to online
privacy. United States legislators and various state governments
in the past have introduced a number of bills aimed at regulating
the collection and use of data from Internet users and additional
similar bills are currently being considered. The European Union
has recently adopted a directive addressing data privacy that may
result in limitations on the collection and the use of specific
personal information regarding Internet users. In addition,
Germany and other European Union member countries have imposed
their own laws protecting data that can become personally
identifiable through subsequent processing. Other countries have
enacted, or are considering, limitations on the use of personal
data as well. The effectiveness of our technology could be
impaired by any limitation in the collection of data from
Internet users, and consequently, our business and results of
operations could be harmed.
A number of laws and regulations have been, and in the future may
be, adopted covering issues such as pricing, acceptable content,
taxation and quality of products and services on the Internet.
This legislation could inhibit the growth in the use of the
Internet and decrease the acceptance of the Internet as a
communications and commercial medium. In addition, due to the
global accessibility of the Internet, it is possible that
multiple federal, state or foreign jurisdictions might
inconsistently regulate our activities and our customers. Any of
these developments could limit our ability to do business and to
generate revenue.
5. Because we are a newly formed company with no employees,
our failure to adequately respond to rapid changes in technology
and the internet could harm our ability to generate revenue.
The market for online products and services is subject to rapid
change and characterized by evolving industry standards and
frequent introductions of new technological developments. These
new standards and technological developments could make our
existing or future products or services obsolete. Keeping pace
with the introduction of new standards and technological
developments could result in significant additional costs or
prove to be difficult or impossible for us. Because we currently
have no employees and our officers and directors only devote part-
time to the development of our business, any failure to keep pace
with the introduction of new standards and technological
developments on a cost-effective basis could result in increased
costs and harm our ability to generate revenue.
6. If we are unable to attract and retain sales and client
service personnel, or if we are unable to adequately train our
sales personnel in a timely manner, our business and future
revenue growth could suffer.
Our future success depends on our ability to identify, recruit,
train, integrate and retain qualified sales and marketing,
managerial and technical personnel. We anticipate the need to
hire a significant number of personnel to achieve our growth
objectives. Competition for these personnel is intense. The
inability to attract, integrate and retain the necessary sales,
marketing, technical and administrative personnel could harm our
ability to generate revenue.
7
7. If our ad delivery and tracking technology is not
effective, our relationships with our advertising clients may be
harmed.
If the online advertising market does not develop further, or
develops more slowly than expected, we may not generate enough
advertising revenue to return to profitability. Since we expect
to derive substantially all of our revenue in the foreseeable
future from online advertising, our future success is highly
dependent on the increased use of the Internet as an advertising
medium. Because our WarRoom and Redirector technology is
relatively new, we cannot assure you that the use of our WarRoom
and Redirector services will remain effective in serving,
targeting and tracking advertisements or other marketing and
promotional activities. Our revenue would be adversely affected
if marketers do not perceive that the use of our WarRoom and
Redirector services will improve the effectiveness of their
marketing campaigns.
8. Our failure to protect our intellectual property could harm
our business and competitive position.
Currently our intellectual property is unprotected. Typically,
businesses such as ours protect their intellectual property
through a combination of patent, trademark, trade secret and
copyright laws, confidentiality agreements with their employees
and third parties, and license agreements with consultants,
vendors and clients. We have not taken any steps to file patent
applications for our Redirector and WarRoom technology in the
United States nor have we taken any steps to file applications
for trademarks. Because our intellectual property is
unprotected, unauthorized parties may attempt to copy aspects of
our services or to obtain and use information that we regard as
proprietary. We do not have adequate remedies for any breach of
confidentiality agreements, and our trade secrets may otherwise
become known or independently developed by competitors.
9. Failure of our technology and computing systems could harm
our relationships with our clients and cause our results of
operations to suffer
The continuing and uninterrupted performance of our servers and
networking hardware and software infrastructure is critical to
our business. Even during our development stage, we have
experienced minor systems interruptions, including Internet
disruptions, which we believe may occur periodically in the
future. Any system failure that causes interruptions in our
ability to service our customers, including failures that affect
our ability to deliver advertisements without significant delay
to the viewer, could reduce customer satisfaction and, if
sustained or repeated, could cause our results of operations to
suffer. Further, an increase in the volume of advertising
delivered through our servers could strain the capacity of our
hardware and software, which could lead to slower response times
or system failures. If we do not effectively address any capacity
constraints, customer satisfaction could be harmed and our
business would likely suffer.
10. We may be liable for content available or posted on the web
sites of our publishers.
We may be liable to third parties for content in the advertising
we serve if the music, artwork, text or other content involved
violates the copyright, trademark or other intellectual property
8
rights of such third parties or if the content is defamatory. Any
claims or counterclaims could be time-consuming, result in costly
litigation or divert management's attention.
Risks related to this offering
11. Sales of our shares by the selling security holders in a
concurrent offering may make it difficult for us to sell shares
in the offering.
Upon completion of this offering we will have outstanding
11,000,000 shares of common stock if all the shares offered are
sold. Of these shares, the shares of common stock sold in this
offering and the concurrent selling security holders' offerings
will be freely tradable in the public market without restrictions
or further registrations under the 1933 Act. Thus, concurrent
with the offer and sale of shares of our common stock described
in this Prospectus, our selling security holders may offer
1,000,000 shares of our common stock for sale in a non-
underwritten offering by this Prospectus. Sale of a substantial
number of shares of our common stock in the public market by our
selling security holders concurrently with this offering could
depress the market price of our common stock and could impair our
ability to raise capital by preventing us from selling all of the
shares in the offering.
12. There is no assurance that we will be successful in raising
any needed funds from this self-offering.
The shares are being sold by our officers and directors. No
individual or firm is committed to purchase or take down any of
the shares. There is no assurance that any portion of the shares
will be sold.
13. There is no minimum purchase requirement. Therefore we may
receive little or no funding from this offering. If only a
minimal amount of shares are sold, purchasers will hold shares in
a company that is substantially undercapitalized and controlled
by insiders.
Purchasers should realize that all sales will be final and no
proceeds will be returned to any purchasers regardless of how few
shares are sold and proceeds raised. Should we raise only a
minimal amount through this initial public offering, and since we
will not receive any of the proceeds from the sales by the
selling security holders, we will rely upon our officers and
directors, who are our major shareholders, to cover operating
costs and provide the professional expertise to keep us
operational until such time as we can raise the funds necessary
to proceed with our planned operations.
14. We have no public market for our stock and there is no
assurance one will develop; you may have difficulty liquidating
your investment.
There is no public market for our shares of common stock.
Although we intend to apply for listing on the OTC Bulletin Board
as soon a we meet listing requirements, there is no assurance
that we will be granted a listing. If we are granted a listing,
there is no assurance that a market for our common shares will
develop. If a market develops, there can be no assurance that
the price of our shares in the market will be equal to or greater
than the price per share investors pay in this offering; in fact,
9
the price of our shares in any market that may develop could be
significantly lower. Investors in this offering may have
difficulty liquidating their investment.
15. Our shares may be considered a "penny stock" within the
meaning of Rule 3a-51-1 of the Securities Exchange Act which will
affect your ability to sell your shares; "penny stocks" often
suffer wide fluctuations and have certain disclosure requirements
which make resale in the secondary market difficult.
Our shares will be subject to the Penny Stock Reform Act which
will affect your ability to sell your shares in any secondary
market which may develop. If our shares are not listed on a
nationally approved exchange or the NASDAQ, do not meet the
minimum financing requirements, or have a bid price of at least
$5.00 per share, they will likely be defined as a "penny stock."
Broker-dealer practices in connection with transactions in "penny
stocks" are regulated by the SEC. Rules associated with
transactions in penny stocks include the following:
- the delivery of standardized risk disclosure documents;
- the provision of other information like current bid/offer
quotations, compensation to be provided broker-dealer and
salesperson, monthly accounting for penny stocks held in
the customers account;
- written determination that the penny stock is a suitable
investment for purchaser;
- written agreement to the transaction from purchaser.
These disclosure requirements and the wide fluctuations that
"penny stocks" often experience in the market may make it
difficult for you to sell your shares in any secondary market
which may develop.
FORWARD-LOOKING STATEMENTS
Some information in this prospectus may contain forward-looking
statements. You can identify these statements by their forward-
looking terminology such as "may," "will," "expect,"
"anticipate," "continue," or other similar words. Forward-
looking statements discuss future expectations, contain
projections of results of operations or of financial condition or
state other "forward-looking" information. When considering
forward-looking statements in this prospectus, you should keep in
mind the risk factors and other cautionary statements included in
this prospectus. The risk factors noted in the "Risk Factors"
section and the other factors noted throughout this prospectus,
could cause our actual results to differ materially from those
contained in any forward-looking statement.
USE OF PROCEEDS
If all the shares are sold, the net proceeds to Fenton Graham
from the sale of the shares of common stock offered hereby are
estimated to be approximately $95,000, after deduction of
estimated offering related expenses, consisting of legal and
10
accounting fees, copying, filing fees and postage. Fenton Graham
intends to use these proceeds for the proposed expenses shown in
the table that follows. The following table shows Fenton Graham's
use of proceeds if 25%, 50%, 75% and/or 100% of the shares are
sold. We cannot predict whether or not any shares at all will be
sold in this offering.
<Table>
<s> <c> <c> <c> <c>
25% 50% 75% 100%
---------------------------------------------
- -----------
Gross proceeds $25,000 $50,000 $75,000 $100,000
Offering expenses 5,000 5,000 5,000 5,000
----------------------------------------
$20,000 $45,000 $70,000 $95,000
Business development 1,000 2,000 3,000 4,000
Rent and utilities 4,000 8,000 12,000 16,000
Staff 6,000 12,000 18,000 24,000
Legal and accounting 2,000 3,000 4,000 5,000
Computer hardware 2,000 4,000 6,000 8,000
Software development 2,000 4,000 6,000 8,000
Sales and advertising 2,000 4,000 6,000 8,000
General working capital 1,000 8,000 15,000 22,000
----------------------------------------
$20,000 $45,000 $70,000 $95,000
</Table>
We believe that if we sell at least 25% of the offering we can
begin to put our business plan into effect although this amount
will be insufficient to meet our needs over the next 12 months.
We believe we need to raise maximum proceeds to most effectively
implement our business plan and less than that amount will
require us to limit the amount we spend on bringing our product
to market, salaries, and the purchase of office equipment.
The working capital reserve may be used for general corporate
purposes to operate, manage and proceed with our proposed
operations, including employee wages and salaries, professional
fees, operating expenses, payment of rent, and other
administrative costs. We presently have no commitments or
agreements, and we are not involved in any negotiations, with
respect to hiring of employees.
The amounts set forth in the use of proceeds table merely
indicate the proposed use of proceeds, and actual expenditures
may vary substantially from these estimates depending upon market
and economic conditions once operations are commenced. We may,
in the future, seek additional funds through loans or other
financing arrangements.
Pending expenditures of the proceeds of this offering, we may
make temporary investments in short-term, investment grade,
interest-bearing securities, money market accounts, insured
certificates of deposit and/or in insured banking accounts.
11
We presently do not pay our officers and directors any amount of
salary. In the event we are successful in completing this
offering, we propose to pay any full time employees salaries
competitive in the industry subject to our ability to do so. Our
officers and directors have agreed to act without compensation
until we have generated revenues from operations.
DETERMINATION OF OFFERING PRICE
The offering price of the Shares has been arbitrarily determined
by the Company based upon factors like the Company's capital
needs and the percentage of ownership to be held by investors as
a result of this offering. The offering price does not
necessarily bear any relationship to assets, book value,
earnings history or other historical factors.
DILUTION
As of May 7, 2002, Fenton Graham's net tangible book value was
$74,759, or $0.012 per share of common stock. Net tangible book
value is the aggregate amount of Fenton Graham's tangible assets
less its total liabilities. Net tangible book value per share
represents Fenton Graham's total tangible assets less its total
liabilities, divided by the number of shares of common stock
outstanding. After giving effect to the sale of 5,000,000 shares
at an offering price of $0.02 per share of common stock,
application of the estimated net sale proceeds (after deducting
offering expenses of $5,000), Fenton Graham's net tangible book
value as of the closing of this offering would increase from
$0.012 to $0.015 per share. This represents an immediate increase
in the net tangible book value of $0.003 per share to current
shareholders, and immediate dilution of $0.005 per share to new
investors, as illustrated in the following table:
Public offering price per share of common stock........... $0.02
Net tangible book value per share before offering......... $0.012
Increase per share attributable to new investors.......... $0.003
Net tangible book value per share after offering.......... $0.015
Dilution per share to new investors....................... $0.005
Percentage dilution....................................... 25%
The following assumes the sale of 1,000,000 shares of common
stock. As of May 7, 2002, Fenton Graham's net tangible book value
was $74,759, or $0.012 per share of common stock. Net tangible
book value is the aggregate amount of Fenton Graham's tangible
assets less its total liabilities. Net tangible book value per
share represents Fenton Graham's total tangible assets less its
total liabilities, divided by the number of shares of common
stock outstanding. After giving effect to the sale of 1,000,000
shares at an offering price of $0.02 per share of common stock,
application of the estimated net sale proceeds (after deducting
offering expenses of $5,000), Fenton Graham's net tangible book
value as of the closing of this offering would increase from
$0.012 to $0.013 per share. This represents an immediate increase
in the net tangible book value of $0.001 per share to current
shareholders, and immediate dilution of $0.007 per share to new
investors, as illustrated in the following table:
12
Public offering price per share of common stock.......... $0.02
Net tangible book value per share before offering......... $0.012
Increase per share attributable to new investors.......... $0.001
Net tangible book value per share after offering.......... $0.013
Dilution per share to new investors....................... $0.007
Percentage dilution....................................... 35%
PLAN OF DISTRIBUTION
The shares in this offering will be sold by the efforts of our
President and director, Ken Greble, and our Secretary/Treasurer
and director, J.P. Schrage. They will not receive any commission
from the sale of any shares. They will not register as broker-
dealers pursuant to Section 15 of the Securities and Exchange Act
of 1934 in reliance upon Rule 3a4-1, which sets forth those
conditions under which a person associated with an issuer may
participate in the offering of the issuer's securities and not be
deemed to be a broker-dealer. These conditions included the
following:
1. No selling person is subject to a statutory
disqualification, as that term is defined in Section 3(a)(39) of
the Exchange Act, at the time of participation,
2. No selling person is compensated in connection with his
participation by the payment of commissions or other remuneration
based either directly or indirectly on transactions in
securities,
3. No selling person is, at the time of participation, an
associated person of a broker-dealer, and
4. Each selling person meets the conditions of paragraph (a)(4)(ii)
of Rule 3a4-1 of the Exchange Act, in that the person
(A) primarily performs or is intending primarily to perform at
the end of the offering, substantial duties for or on behalf of
the issuer otherwise than in connection with transactions in
securities, and (B) is not a broker or dealer, or an associated
person of a broker or dealer, within the preceding twelve months,
and (C) does not participate in selling and offering of
securities for any issuer more than once every twelve months
other than in reliance on this rule.
We are offering the shares subject to prior sale and subject to
approval of certain matters by our legal counsel.
This offering will commence on the date of this prospectus. The
offering will terminate on the earlier of the sixth month
anniversary of the date of this prospectus or the sale of all the
shares of common stock that are being offered. In addition, we
may terminate this offering at any time, for any reason; thus not
selling any or all of the shares offered. The offering may be
terminated, for example, because the market price of the common
stock is less than the offering price which would impede our
ability to sell the offered shares. There is no minimum number of
shares that we are required to sell.
13
Procedure of Subscription
If you decide to subscribe for shares in this offering, you will
be required to execute a subscription agreement and tender it,
together with a check or wired funds to us, for acceptance or
rejection. All checks should be made payable to Fenton Graham
Marketing, Inc. A copy of the subscription agreement will
accompany a prospectus or may be obtained from us by persons who
have received a prospectus and requested the subscription
agreement.
We have the right to accept or reject subscriptions in whole or
in part, for any reason or for no reason. All monies from
rejected subscriptions will be returned immediately by us to the
subscriber, without interest or deductions.
Subscriptions for securities will be accepted or rejected
promptly. Once accepted, the funds will be deposited in an
account maintained by the Company and considered property of the
Company once cleared by our bank. Subscription funds will not be
deposited in an escrow account. Certificates for the shares
purchased will be issued and distributed by our transfer agent,
within ten business days after a subscription is accepted and
"good funds" are received in our account. Certificates will be
sent to the address supplied in the investor subscription
agreement by regular mail.
LEGAL PROCEEDINGS
Neither Fenton Graham Marketing, Inc., nor any of its affiliates,
officers or directors is a party to any pending legal proceeding,
and none of our property is the subject of any pending legal
proceeding.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The members of the Board of Directors of the Company serve until
the next annual meeting of the stockholders, or until their
successors have been elected. The officers serve at the pleasure
of the Board of Directors.
There are no agreements for any officer or director to resign at
the request of any other person, and none of the officers or
directors named below are acting on behalf of, or at the
direction of, any other person.
Name and Address Age Position
Ken Greble 41 President/Director
J.P. Schrage 25 Secretary/Treasurer/Director
Currently the executive officers contribute 20 hours per person,
per week to the Company's activities and are not engaged on a
full-time basis.
Information as to the directors and executive officers of the
Company is as follows:
14
Ken Greble
Mr. Greble has been President and a director of Fenton Graham
since its inception. Mr. Greble's business background spans
twenty-two years. He has experiences in technical maintenance,
customer service staff development and task supervision,
financial analysis, vision communications and leadership, budget
development, sales, marketing and promotions on a local market
and national scale. In August 2000, Mr. Greble founded Gray Road
Consulting Group, Inc., a consulting firm, consulting in the
areas of business operations management development and actions,
marketing plan development and implementation, and business
development. From April 1999 until August 2000, Mr. Greble was
the national sales director of Tickerprofiles.com. where he
established the sales and marketing national office operations to
ensure Tickerprofiles maintained contact with its clients and
addressed Website visitors' needs. From August 1997 until March
1999, Mr. Greble was employed by A.M.F. Recreational Centers in
San Antonio, Texas as a Cluster Manager. He was responsible for
the operation of 8 locations with gross annual revenue of $7
million dollars. He was accountable for 230 employees in various
locations, including those in food and beverage operations,
producing $2 million dollars annually, supervised equipment and
facilities maintenance with budgets of $750,000 annually. He also
developed local store sales efforts and ensured adherence to
national product sales programs. From October of 1998 forward,
Mr. Greble took charge of sales training, along with design and
execution of sales and marketing programs which generated over
fourteen million dollars in sales. From January 1995 until July
1997, Mr. Greble was employed by A.M.F. Recreational Centers in
Orlando, Florida as a General Manager. He was responsible for the
overall locations, customer service and retention programs,
seasonal sales/marketing campaigns, new business development
through outside sales efforts, and year-round key account service
for recreation center for a location with over $1 million dollars
in sales revenue annually.
J.P. Schrage
Mr. Schrage has been Secretary/Treasurer and a director of Fenton
Graham since its inception. From January 2000 to present, Mr.
Schrage has been the Director of Administration with Quantum Leap
Media, Inc., an Internet marketing firm. In December 1999, Mr.
Schrage graduated with Honors from the University of Arizona,
with a triple major in Entrepreneurship, Finance, and Marketing.
He completed applicable course work such as Development of New
Venture Plans, Marketing Planning and Operating Decision-Making,
New Venture Development and Industry Analysis, New Venture
Marketing and Finance, Consumer Behavior, International Marketing
Management, Services Retailing, Marketing Research, Investments,
Real Estate Finance and Investments, and Corporate Finance.
During his time at the University, Mr. Schrage honed his
management skills with a variety of employers.
There is no family relationship between the officers and
directors of the Company. The Company's Board of Directors has
not established any committees.
Conflicts of Interest
As described above, Ken Greble and J.P. Schrage are engaged in
other businesses on a part-time basis. As a result, certain
conflicts of interest may arise between Fenton Graham and these
15
officers and directors. Fenton Graham will attempt to resolve
such conflicts of interest in its favor. The officers and
directors of Fenton Graham are accountable to it and its
shareholders as fiduciaries, which requires that such officers
and directors exercise good faith and integrity in handling the
company's affairs. A shareholder may be able to institute legal
action on behalf of Fenton Graham or on behalf of itself and
other similarly situated shareholders to recover damages or for
other relief in cases of the resolution of conflicts is in any
manner prejudicial to Fenton Graham.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth each person known to us, as of May
7, 2002, to be a beneficial owner of five percent (5%) or more of
the Company's outstanding common stock, each officer and director
individually, and all executive officers and directors as a
group. No other class of voting securities is outstanding. Each
person has sole voting and investment power with respect to the
shares shown.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
- ------------------------- -------------------- --------
Ken Greble 2,500,000 Direct 41.6%
c/o Fenton Graham
J.P. Schrage 2,500,000 Direct 41.6%
c/o Fenton Graham
Includes all officers and
directors as a group 5,000,000 83.3%
(2 persons)
DESCRIPTION OF SECURITIES
The authorized capital stock of Fenton Graham consists of
100,000,000 shares of Common Stock, $0.001 par value per share.
Upon completion of this offering, assuming all the shares are
sold, there will be 11,000,000 shares of common stock
outstanding.
Common Stock
Holders of common stock are entitled to one vote for each share
held on all matters submitted to a vote of stockholders,
including the election of directors.
Holders of common stock do not have subscription, redemption or
conversion rights, nor do they have any preemptive rights.
Holders of common stock do not have cumulative voting rights,
which means that the holders of more than half of all voting
rights with respect to common stock can elect all of Fenton
Graham's directors. The Board of Directors is empowered to fill
any vacancies on the Board of Directors created by resignations,
subject to quorum requirements.
Holders of common stock will be entitled to receive such
dividends, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefor, and
16
will be entitled to receive, pro rata, all assets of the Company
available for distribution to such holders upon liquidation.
There are currently 20 shareholders of record of Fenton Graham's
common stock. To date, Fenton Graham has paid no dividends on its
common stock, and intends, for the near future, not to pay
dividends, but, instead, to retain any earnings to finance future
growth. All outstanding shares of common stock are, and the
common stock offered hereby, upon issuance and sale, will be,
fully paid and nonassessable.
INTEREST OF NAMED EXPERTS AND COUNSEL
No named expert or counsel was hired on a contingent basis, will
receive a direct or indirect interest in the small business
issuer, or was a promoter, underwriter, voting trustee, director,
officer or employee of the small business issuer.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of Fenton Graham pursuant to the Nevada
General Corporation Law or the provisions of Fenton Graham's
Articles of Incorporation, as amended, or Bylaws, or otherwise,
Fenton Graham has been advised that in the opinion of the
Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for the indemnification against such
liabilities, other than the payment by Fenton Graham of expenses
incurred or paid by a director, officer or controlling person of
the company in the successful defense of any action, suit or
proceeding, is asserted by such director, officer or controlling
person in connection with the securities being registered, Fenton
Graham will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.
ORGANIZATION WITHIN THE LAST FIVE YEARS
Fenton Graham was founded on October 12, 2001 by Ken Greble and
J.P. Schrage. Mr. Greble and Mr. Schrage received 2,500,000
shares each in consideration of services provided to Fenton
Graham valued at $2,500 each.
17
DESCRIPTION OF BUSINESS
Milestones
Our business plan is to develop a complete Internet marketing
business. We will need to raise at least $100,000 from this
offering in order to implement our plan of operations for the
next 12 months. This minimum amount of capital must be raised in
order for us to properly execute our plan of operations. If we
only raise the $20,000 minimum offering amount, we will need to
raise additional funds through more offerings of our common stock
to achieve the following milestones.
Milestone 1: Establish an Office. We will establish an office
from where we can conduct operations. We anticipate total office
costs to be 24,000 for the next 12 months. This would include an
office, equipment such as computers and telephones, and
utilities.
Milestone 2: Complete Software Development. We will need at
least $8,000 to complete the development of our proprietary
software. A workable version currently exists, but still needs
features added to suit our business. It is anticipated that
following completion of this software, sales to clients could
begin almost immediately.
Milestone 3: Purchase / Lease Hardware. We intend to purchase
and lease hardware to serve and track the traffic we buy. This
will cost at least $8,000 over the next 12 months. This hardware
mainly consists of servers, but would also include any
peripherals.
Milestone 4: Hire Staff. We will engage an administrative person
as well as additional technical people. We expect that we may
hire one administrative person during our first year of business.
We expect that we may engage two to three technical people on a
contract basis to help design software, configure hardware, and
keep our systems up and running. The hiring process would
include running advertisements in the local newspaper and on the
Internet and conducting interviews. It is estimated that to hire
a full time administrative person, as well as have a technical
team available on a contract basis will cost $45,000 per year.
Milestone 5: Develop Marketing Campaign. The next step would be
to develop an advertising campaign, including establishing a list
of prospects based on potential clients identified in the market
survey, and designing and printing sales materials. It is
anticipated that it would take approximately six to eight weeks
to develop the advertising campaign, although, depending on the
availability of resources, we will attempt to develop our
advertising campaign concurrently with establishing an office,
developing software, purchasing hardware, and hiring staff. The
cost of developing the first campaign is estimated at
approximately $4,000.
Milestone 6: Implementation of Advertising Campaign and Sales
Calls. Implementation of the advertising campaign would begin
with sending out e-mails and calling prospective clients.
Immediately following this, we would begin telephone follow ups.
The cost of these first round sales efforts is estimated at
$8,000.
Milestone 7: Achieve Revenues. It is difficult to quantify how
long it will take to convert our efforts into actual sales and
revenues. We hope that clients will begin using our services
18
within days of implementation of our advertising campaign, but it
may take several weeks before people begin to purchase our
services. Moreover, customers may not be willing to pay for the
service at the time they order, and may insist on buying on
account, which would delay receipt of revenues another month or
two. Assuming we have received all necessary approvals to begin
raising funds by July 1, 2002, and assuming an offering period of
approximately one month, in a best case scenario we may receive
our first revenues by year end. However, a more realistic
estimate of first revenues would be March 1, 2003 or later.
We have no current plans, preliminary or otherwise, to merge with
or acquire any other entity.
We are considered to be a development stage company, with no
significant revenue, and are dependent upon the raising of
capital through placement of our common stock. There can be no
assurance that we will be successful in raising the capital we
require to complete each of our milestones through the sale of
our common stock.
Overview
We are a provider of marketing services and we use media
expertise and proprietary software technology to provide
companies with turnkey solutions to close the marketing circle by
helping them build brand, acquire new customers, increase
traffic, drive sales and grow customer relationships.
Since our inception last year, Fenton Graham has provided
innovative technology and marketing solutions that
are designed to go beyond simple banners to produce better
customer conversion rates, resulting in higher prices for our Web
publishers' inventory and more value for marketers. Fenton Graham
has embedded our proprietary WarRoom and Redirector technology
into the inventory of our Web publishers to deliver turnkey
solutions to marketers that include pop-ups, domain redirects,
banner ads, affiliate programs, and other marketing methods.
This creates a compelling marketing solution: the ability to
deliver the right message at the right time to the right person.
An Internet based world is emerging in which the accessibility
and accuracy of information is creating more intelligent
customers and a significantly more competitive business
environment. In this new digital world, marketers and customers
increasingly are interacting over an always connected network
that extends across the Internet through Web sites and email, and
soon to be, across television and the wireless frontier (via cell
phones, pagers, personal digital assistants (PDA's) and other
wireless devices). It is our belief that the reliance upon
traditional distribution channels will lessen as companies begin
to interact on a one-to-one basis with their customers, creating
significant demand for technologies and services that drive
value, attract customers, build lasting relationships with these
customers and ultimately, convert these relationships into
revenue.
Our marketing partnerships begin with brand building and initial
customer acquisitions and continue to evolve as we utilize our
WarRoom and Redirector's tracking and optimization technologies
to adjust campaigns in real time and to work with our clients to
determine the best possible inventory and methods to increase
19
traffic, stimulate transactions and develop one-to-one
relationships. Fenton Graham's flexible technology, Internet
reach, inventory segmentation and marketing expertise provide Web
publishers and marketers with effective, differentiated and
simple solutions to work together to grow their businesses and
embrace the new economy.
Value to Advertisers
Fenton Graham is a full service marketing, technology and media
company. From strategic development and design, to superior
technology, execution, tracking and analysis, we are the complete
source for value-generating marketing programs on the Internet.
Fenton Graham's next-generation marketing solutions were
developed to help businesses build brands, acquire customers,
drive traffic, increase sales and garner customer retention.
Fenton Graham offers marketers technology driven marketing
programs that clients use to build targeted, high-value
relationships with Internet users. Fenton Graham's marketing
programs convert Internet visitors into loyal customers by
optimizing the value of each relationship on a customer by
customer level.
Value to Web Publishers
As a marketing, technology and media company, we offer Web
publishers the ability to add value to their customer
relationships, thereby increasing the value of their inventory to
marketers. And through our sales representation, we will be able
to generate greater revenue on the Internet for these Web
publishers. Fenton Graham delivers Internet users relevant
offers and promotions through targeted campaigns, enhancing
users' experiences and providing them with incentives to come
back to a Web site. Outsourcing a Web publisher's sales efforts
to Fenton Graham will streamline its internal marketing costs
while broadening its site's reach and impact to its customers.
Our fully outsourced marketing sales solutions are designed to
generate greater revenue for Web publishers by increasing the
value of their inventory to marketers and by selling this
inventory through our sales force. As a result, Web publishers
are more free to focus on the core competency of their
businesses.
The Fenton Graham Difference
Reach and Media. Fenton Graham uses its technology and traffic
generating techniques to control over 4 million unique Internet
visitors per month. Through relationships with vendors, we are
able to reach approximately 40% of the Web users in the United
States. This network enables marketers to target and connect with
a number of diverse audiences. In addition, we offer Web
publishers advanced site representation, encompassing the sale of
their advertising inventory and the provision of ad delivery and
related services.
Flexible Technology. Fenton Graham's WarRoom and Redirector
technology was developed to serve and track the sophisticated,
relationship-building marketing programs that are designed to
convert Internet users into loyal, long-term customers for
businesses. This comprehensive technology is intuitive and
flexible. The WarRoom and Redirector tracks campaigns and
provides real-time, customized reports, allowing marketers to
increase the effectiveness of their marketing efforts and Web
publishers to realize the value of their customer base. In
20
essence, our proprietary software provides marketers and Web
publishers a full suite of serving, tracking, management and
measurement tools.
Marketing. Bringing experience and a rich knowledge base, Fenton
Graham's staff offers clients counsel and expertise in developing
an integrated, Internet strategy designed to meet branding,
customer acquisition, and revenue-generating goals. Our marketing
services include assisting marketers in designing contextually
relevant marketing campaigns that attract and retain the Internet
user.
Fenton Graham offers full service sales and marketing solutions
designed to allow marketers and Web publishers to interact in an
environment that maximizes e-mail, Web-based and wireless
inventory, while driving one-to-one, business-to-consumer
communication that stimulates transactions, optimizes campaigns
in real time and fosters the development of loyal relationships
with customers.
Services
Fenton Graham provides fully accountable Internet traffic to any
company that has an Internet presence by using:
Pop-up Windows. Pop-ups can be purchased for relatively low
amounts of money from large networks of web sites. This can
provide quick exposure on large web sites for clients of Fenton
Graham. Pop-ups are low priced and can not be marked up much,
but large profits can still be realized as clients will purchase
campaigns of 500,000 or 1,000,000 or more pop-ups. Pop-ups can
also be deployed when people leave web sites. These are
generally more cost effective while working just as well.
Domain Names. Many domain names generate significant amounts of
traffic from people typing them into their web browsers. This
traffic can be "rented" from the owners of the domain names. As
an example, Fenton Graham Marketing might have an online travel
agent as a client. Fenton Graham would then find the people or
companies that own domain names related to travel such as
vacations.com. If Fenton Graham could successfully "rent" the
traffic from the owner of vacations.com, everyone that types in
vacations.com would essentially be redirected to the travel
agent's site. This is a winning situation for all - the web
surfer gets redirected to a useful site (when otherwise they
might have received a page not found error), the travel agent
gets a possible sale, and Fenton Graham gets paid by the travel
agent for marketing their site.
Banner Advertising. Fenton Graham locates competitively priced
banner inventory from leading publishers. This allows us to
offer our clients a positive ROI while building brand recognition
at the same time.
Banner Exchanges. The goal is to participate in targeted banner
exchanges by capitalizing on our ability to generate online
traffic. We will accumulate banner credits for each of our
clients.
21
Exit Traffic Retention. This capitalizes on the large amount of
"lost" online traffic commonly known as "404 Error Traffic" or
"File Not Found." An estimated 5% of all pages downloaded from
the Internet end up as 404 Errors. This translates into 100
million pages daily. This traffic can be garnered by purchasing
the 404 traffic from web hosting companies.
Search Engine Positioning. Search engine positioning is a
constantly evolving art. Currently, meta tags, keywords, and
content are three of the biggest factors in getting high search
engine rankings. Fenton Graham can apply its knowledge to any
client's web site to make it a top performer on most of the major
search engines.
Paid Directory Listings. This involves paying pay-per-click
search engines, such as overture.com, for rankings. In order to
have a high ranking for a particular key word, you must outbid
others who want to be listed high for that same key word.
E-mail Marketing. Fenton Graham compiles large databases of "opt-
in" subscribers via in-house marketing efforts. We will also
purchase or rent targeted e-mail lists from reputable suppliers
if needed.
Affiliate Programs. Fenton Graham can set up affiliate programs
for each of its clients. This is basically establishing an army
of web sites linking back to our client's web site in return for
a CPA (cost per action) reward. Third party monitoring is
provided by sites such as Commission Junction, BeFree, and
Linkshare.
Software
Fenton Graham has developed two proprietary programs to serve and
track online campaigns:
The Redirector. The Redirector works strictly with domain names
and the traffic they generate. For example, if Fenton Graham
rents the traffic from a domain name, that domain name is pointed
to the Fenton Graham servers. From there, the traffic from the
domain name is funneled through The Redirector to be sent to the
correct Fenton Graham client's Website. Full tracking and
statistics are kept throughout the process.
WarRoom. WarRoom handles all other types of traffic that Fenton
Graham buys and sells. Banner ads, pop-ups, and exit traffic all
go through WarRoom. WarRoom is a powerful program that can be
set up to begin with an inventory of traffic available on a given
day, and disperse the traffic to many different clients in a
targeted manner with full accounting and statistics tracking. In
essence, WarRoom automates the entire process. Humans buy and
sell the traffic and enter what they've bought and sold into
WarRoom, but WarRoom handles the rest. WarRoom will
automatically send the purchased traffic to the correct clients
based on the type of traffic they should receive. WarRoom also
has a log in page for clients and vendors where they can see
their statistics and invoices.
22
Privacy Concerns
We believe that issues relating to the privacy of Internet users
and the use of personal information about these users are
extremely important. In the course of delivering ads to a Web
user, we only collect non-personally identifiable information
about the Web user. We do not collect any personally identifiable
information about the Web user unless the Web user voluntarily
and knowingly provides personally identifiable information.
In implementing any service or program designed to gather
consumer data, we are always mindful of our continuing commitment
to uphold the privacy principles of the Direct Marketing
Association. We actively monitor privacy laws and regulations and
seek to comply with all applicable privacy requirements.
Sales and Marketing
Our staff works strategically with our Web publishers and
marketers to develop comprehensive marketing solutions. We
believe that marketers desire integrated programs that go beyond
the banner to include content integration, contextual
sponsorships, promotions, sweepstakes, e-mail sponsorships,
interstitials, custom content and other highly effective
advertising tools. When fully staffed, our personnel will
possess the marketing, media, creative and advertising skills
required to develop large, sophisticated advertising campaigns.
We will have close relationships with, and detailed knowledge of,
our Web publishers. Consequently, we will be able to work with
marketers in developing comprehensive, next generation marketing
solutions.
Our personnel will use a variety of marketing programs to
generate demand for our products and services, build market
awareness, develop customer leads and establish business
relationships. Our marketing activities include public relations,
print advertisements, online advertisements and direct marketing,
Web advertising seminars, trade shows, special events and ongoing
customer communications programs.
Seasonality and Cyclicality
We believe that our business is subject to seasonal fluctuations.
Marketers generally place fewer advertisements during the first
and third calendar quarters of each year, and direct marketers
generally mail substantially more marketing materials in the
third calendar quarter of each year. In addition, expenditures by
advertisers and direct marketers vary in cycles and tend to
reflect the overall economic conditions, as well as budgeting and
buying patterns. Furthermore, user traffic on the Internet tends
to decrease during the summer months which results in fewer
advertisements to sell and deliver. A decline in the general
economy or in the economic prospects of advertisers and direct
marketers could adversely affect our revenue.
Competition
The market for interactive, Internet-based marketing solutions is
extremely competitive. We believe that our ability to compete
23
depends upon many factors both within and beyond our control,
including the following:
- the timing and market acceptance of new solutions and
enhancements to existing solutions developed either by us
or our competitors;
- the continued and increasing acceptance by marketers of
the Internet as an effective and cost-efficient means of
advertising;
- the ability to adapt to the rapidly changing trends of
the Internet;
- our customer service and support efforts;
- our sales and marketing efforts;
- our ability to adapt and scale our technology as customer
needs change and grow; and
- the ease of use, performance, price and reliability of
solutions developed either by us or our competitors.
As we expand the scope of our Web services, we may face greater
competition from a number of Web sites and other media companies
across a wide range of different Web services, including in
vertical markets where competitors may have advantages in
expertise, brand recognition and other factors. Several companies
offer competitive products or services through Web advertising
networks, including DoubleClick, 24/7 Media and Engage
Technologies. Our business may also encounter competition from
providers of advertising inventory and database management
products and related services, including AdForce, DoubleClick and
Engage Technologies. In addition, we may face potential
competition from a number of large Web publishers and Web search
engine companies, such as America Online, Excite@Home, Infoseek
and Yahoo! We also compete with television, radio, cable and
print for a share of the overall advertising budgets of
marketers.
Intellectual Property
We intend to enter into confidentiality or license agreements
with our employees, consultants and corporate partners in order
to control access to and distribution of our technologies,
documentation and other proprietary information. Despite these
efforts, unauthorized parties may attempt to disclose, obtain or
use our advertising solutions or technologies. Our precautions
may not prevent misappropriation of our advertising solutions or
technologies, particularly in foreign countries where laws or law
enforcement practices may not protect our rights as fully as in
the United States.
Our technology collects and utilizes data derived from user
activity on the Internet. This information is used for targeting
advertising and predicting advertising performance. Although we
believe that we generally have the right to use this information
and to compile it in our database, we cannot assure you that any
24
trade secret, copyright or other protection will be available for
this information. In addition, others may claim rights to this
information. Furthermore, we cannot guarantee that any of our
intellectual property will be viable or valuable in the future
since the validity, enforceability and scope of protection of
intellectual property in Internet related industries is uncertain
and still evolving. In addition, third parties may assert
infringement claims against us. Any claims could subject us to
significant liability for damages and could result in the
invalidation of our intellectual property rights. In addition,
any claims could result in litigation, which would be time-
consuming and expensive to defend, and divert our time and
attention. Even if we prevail, this litigation could cause our
business, results of operations and financial condition to
suffer. Any claims or litigation from third parties may also
result in limitations on our ability to use the intellectual
property subject to these claims or litigation unless we enter
into arrangements with the third parties responsible for these
claims or litigation, which could be unavailable on commercially
reasonable terms. We believe that factors such as the
technological and creative skills of our personnel, new service
offerings, brand recognition and reliable customer service are
more essential to establishing and maintaining our position in
the marketplace, rather than the legal protection of our
technology. We cannot assure you that others will not develop
technologies that are similar or superior to our technology.
Employees
We currently do not have any employees. Fenton Graham founders
work part-time along with 3 contract workers to develop software
and technology. We are not subject to any collective bargaining
agreements and believe that our employee relations are excellent.
Our future success depends in part on our ability to attract,
retain, integrate and motivate highly-skilled employees.
Competition for employees in the industry is moderate.
MANAGEMENT'S PLAN OF OPERATION
Overview
Fenton Graham Marketing, Inc. was recently formed to provide
online marketing services to companies worldwide. We supply
Internet traffic to the Websites of our clients by using our
marketing expertise and unique traffic generation techniques, as
well as by developing relationships with vendors.
As additional funds become available, our objective is to
position ourself as a leading provider of innovative technology
and marketing solutions that are designed to go beyond simple
banners to produce better customer conversion rates, resulting in
higher prices for our Web publishers' inventory and more value
for marketers. However, there is no assurance that we will be
successful in doing so.
Plan of Operations
During the next 12 months, we plan to complete the development of
our proprietary software, purchase or lease hardware, and hire an
initial staff, and begin business. We anticipate requiring
approximately $100,000 to fund our minimum level of operations
during this period. Approximately $12,000 will be used to
complete the development of our software and business, $8,000
25
will be used to purchase or lease hardware, $16,000 will be used
towards office space and related equipment, $8,000 will be used
in advertising, $5,000 is set aside for legal and accounting
assistance, $24,000 to facilitate the hiring of staff, and
$22,000 will be general working capital.
Our current cash is not adequate to satisfy our requirements.
This stock offering is a critical aspect of our plan and it is
intended to provide the funds necessary to develop our prototype
and to establish operations. Without the maximum funds provided
from this offering, our plan could not proceed as contemplated.
The timing and extent of our growth will depend upon our ability
to raise additional funds. To the extent that we are able to sell
all of the shares offered hereby, it will allow us to accelerate
our timetable. If we are only able to sell the a small amount of
the shares offered hereby, then we anticipate that the amount of
time necessary for us to achieve our goals will be greater and we
may not be able to realize our goals before our financial
resources are depleted.
Management believes we will need to raise between $100,000 and
$200,000 over the next 24 months, which include the funds raised
in this offering. The exact amount we will need to raise will be
determined by the then current market conditions, and the status
of cash flow within Fenton Graham. It is anticipated that an
initial injection of $100,000 will be required within the next 12
to 15 months. If we are unsuccessful in raising the maximum
amount in this offering, we will need to raise the additional
amount we need by selling shares of our common stock through one
or more private placements followed by a secondary public
offering if necessary. Should we fail to raise at least $100,000
during the next 12 months from this and other offerings, we will
not be able to fulfill our business plans and you could lose your
entire investment.
Should management decide that raising funds by means of one or
more private placements or a secondary public offering would be
detrimental to Fenton Graham and its shareholders due to adverse
stock market conditions or because our cash flow is limited as a
result of little or no revenues, we will attempt to secure a line
of credit with an established financial institution to assist
with the software development, staffing, marketing and general
working capital purposes.
Costs and Expenses
Currently, we have minimal monthly expenditures. We will use the
funds raised in this offering to complete the development of our
software, hire people as employees and on a contract basis,
market our services and begin business. During the next 12
months, we intend to hire one employee to handle administrative
and marketing tasks and we intend to hire, on a contract basis,
two to three technical consultants to handle our software and
hardware issues.
To date, our business has been in the early stages of development
and has had very limited operations. Accordingly, we have had no
revenues. All incurred expenses have been funded by our private
offering.
26
DESCRIPTION OF PROPERTY
Our principal administrative, sales, marketing, research and
development offices are located at 13215 Verde River Drive, Unit
1, Fountain Hills, Arizona 85268, where we lease 1,485 square
feet under a month-to-month lease at a cost of $1,431 per month.
Our servers are currently housed at Technology Alliance Group in
Scottsdale, Arizona. We lease approximately half of one server
rack in their data center and use about 1.5 Megabits of bandwith.
The datacenter fees are $750 per month. The facility provides us
with a secure area to store and operate our computer systems and
capacity for communications links and Internet connectivity
systems.
Since Fenton Graham is incorporated in Nevada, it is required to
maintain a resident office in that state in which corporate
documents are available. The resident office is located at 777 N.
Rainbow Blvd., Suite 390, Las Vegas, Nevada 89107. No activities
take place in the resident office. All other activities have been
consolidated to the facility described above
We are continually evaluating our facility requirements. We
believe that our existing leased space is more than adequate for
our current operations.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 2001, Ken Greble, President and a director of Fenton
Graham, loaned the Company $1,100, which was used to pay the
costs related to the sales of the Company's common stock in a
private placement. The loan was non-interest bearing and was
repaid from the proceeds of the private placement.
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Market Information
As of the date of this prospectus and for the foreseeable future,
there is no public or private market for our shares. Management
has not undertaken any discussions, preliminary or otherwise,
with any prospective market maker concerning his participation in
the after-market for the our securities and Management does not
intend to initiate any discussions until we have raised enough
capital to conduct our business. There is no assurance that a
trading market will ever develop or, if a market does develop
that it will continue.
Holders
There are currently 20 holders of Fenton Graham's securities.
27
Dividends
We do not have a policy of paying dividends, and it is currently
anticipated that no cash dividends will be paid in order to
retain earnings to finance future growth. Any future decision to
pay cash dividends will be made on the basis of earning,
alternative needs for funds and other conditions existing at the
time.
Shares Eligible for Future Sale
As of the date of this Prospectus, we had an aggregate of
6,000,000 shares of our common stock issued and outstanding, all
of which are "restricted securities," which may be sold only in
compliance with Rule 144 under the Securities Act of 1933, as
amended or exemptions from registration requirements of this act.
Rule 144 provides, in essence, that a person holding restricted
securities for a period of one year after payment therefore may
sell, in brokers' transactions or to market makers, an amount not
exceeding 1% of the outstanding class of securities being sold,
or the average weekly reported volume of trading of the class of
securities being sold over a four-week period, whichever is
greater, during any three-month period. (Persons who are not our
affiliates and who had held their restricted securities for at
least two years are not subject to the volume or transaction
limitations.) The sale of a significant number of these shares in
the public market may adversely affect prevailing market prices
of our securities.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock will be
Executive Registrar and Transfer Agency, Inc., 3118 W. Thomas
Road, Suite 707, Phoenix, Arizona 85017.
EXECUTIVE COMPENSATION
Ken Greble and J.P. Schrage, our officers and directors do not
receive any compensation for their respective services rendered
to the Company, nor have they received any compensation in the
past. They have agreed to act without compensation until
authorized by the Board of Directors, which is not expected to
occur until we have generated revenues from operations. As of
the date of this Prospectus, we have no funds available to pay
directors. Further, neither of our officers and directors are
accruing any compensation.
We have not adopted any retirement, pension, profit sharing,
stock option or insurance programs or other similar programs for
the benefit of our employees.
28
FINANCIAL STATEMENTS
FENTON GRAHAM MARKETING, INC.
(A Development Stage Company)
CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT F-1
BALANCE SHEET F-2
STATEMENT OF OPERATIONS F-3
STATEMENT OF STOCKHOLDER'S EQUITY F-4
STATEMENT OF CASH FLOWS F-5
NOTES TO FINANCIAL STATEMENTS F-6 - F-8
29
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF FENTON GRAHAM MARKETING, INC.:
We have audited the accompanying balance sheet of FENTON GRAHAM
MARKETING, INC. (A Development Stage Company) as of December
31, 2001 and the related statements of operations,
stockholders' equity and cash flows for the period from October
17, 2001 (inception) to December 31, 2001. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of FENTON GRAHAM MARKETING, INC. as of December 31,
2001 and the results of its operations and its cash flows for
the period from October 17, 2001 (inception) to December 31,
2001 in conformity with accounting principles generally
accepted in the United States of America.
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
Certified Public Accountants
New York, New York
January 31, 2002
F-1
30
FENTON GRAHAM MARKETING, INC.
(A Development Stage Company)
BALANCE SHEET
DECEMBER 31, 2001
ASSETS
Cash and cash equivalents $ 38,387
------------
Total assets $ 38,387
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 1,000
Due to officer 1,100
------------
Total current liabilities 2,100
============
Stockholders' Equity
Common Stock, $0.001 par value;
25,000,000 shares authorized,
5,385,000 shares issued and outstanding $ 5,385
Additional paid-in capital 36,915
Deficit accumulated during the development stage (6,013)
------------
Total stockholders' equity 36,287
------------
Total liabilities and stockholders'
equity $ 38,387
============
The accompanying notes are an integral part of these financial
statements.
F-2
31
FENTON GRAHAM MARKETING, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
October 17,
2001
(Inception)
to
December 31,
2001
------------
Revenue $ -
General and administrative expenses 6,013
------------
Loss from operations before provision for income taxes (6,013)
Provision for income taxes -
------------
Net loss $ (6,013)
============
Net loss per share - basic and diluted $ -
============
Weighted average number of common shares outstanding 5,164,267
============
The accompanying notes are an integral part of these financial
statements.
F-3
32
FENTON GRAHAM MARKETING, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
<Table>
<s> <c> <c> <c> <c> <c>
Deficit
Accumulated
Common Stock Additional During the
---------------------- Paid-In Development
Shares Amount Capital Stage Total
--------- ----------- ----------- ----------- --------
Balance, October 17, 2001 - $ - $ - $ - $ -
Issuance of founder share for 5,000,000 5,000 - - 5,000
services - October 17, 2001
Sale of shares for cash at $0.10 385,000 385 38,115 - 38,500
per share - November 28, 2001
through December 31, 2001
Costs incurred for private placement - - (1,200) - (1,200)
Net Loss - - - (6,013) (6,013)
--------- --------- --------- --------- --------
Balance, December 31, 2001 5,385,000 $ 5,385 $ 36,915 $(6,013) $36,287
========= ========= ========= ========= ========
</Table>
The accompanying notes are an integral part of these financial statements.
F-4
33
FENTON GRAHAM MARKETING, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
October 17,
2001
(Inception)
to
December 31,
2001
-------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (6,013)
Adjustments to reconcile net loss to net cash
used in operation activities:
Stock issued for services 5,000
Increase in accounts payable and accrued expenses 1,000
Increase in due to officer 1,100
------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,087
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock - net proceeds 37,300
------------
INCREASE IN CASH AND CASH EQUIVALENTS 38,387
CASH AND CASH EQUIVALENTS - beginning of period -
------------
CASH AND CASH EQUIVALENTS - end of period $ 38,387
============
SUPPLEMENTAL INFORMATION:
During the period October 17, 2001 (inception) to December 31,
2001, the Company paid no cash for interest or income taxes.
NON-CASH FINANCIAL ACTIVITY:
The Company issued 5,000,000 shares of common stock for
services valued at $5,000.
The accompanying notes are an integral part of these financial
statements.
F-5
34
FENTON GRAHAM MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Nature of Operations
--------------------
Fenton Graham Marketing, Inc. (the "Company") is currently
a development-stage company under the provisions of the
Financial Accounting Standards Board ("FASB") Statement of
Financial Accounting Standards ("SFAS") NO. 7. The Company
was incorporated under the laws of the state of Nevada on
October 17, 2001 and has no activity to date.
Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments
purchased with original maturities of three months or less
to be cash equivalents.
Income Taxes
------------
Income taxes are provided for based on the liability
method of accounting pursuant to SFAS No. 109,
"Accounting for Income Taxes". Deferred income taxes, if
any, are recorded to reflect the tax consequences on
future years of differences between the tax bases of
assets and liabilities and their financial reporting
amounts at each year-end.
Earnings Per Share
------------------
The Company calculates earnings per share in
accordance with SFAS No. 128, "Earnings Per Share",
which requires presentation of basic earnings per
share ("BEPS") and diluted earnings per share
("DEPS"). The computation of BEPS is computed by
dividing income available to common stockholders by
the weighted average number of outstanding common
shares during the period. DEPS gives effect to all
dilutive potential common shares outstanding during
the period. The computation of DEPS does not assume
conversion, exercise or contingent exercise of
securities that would have an antidilutive effect on
earnings. As of December 31, 2001, the Company had no
securities that would effect loss per share if they
were to be dilutive.
Comprehensive Income
--------------------
SFAS No. 130, "Reporting Comprehensive Income",
establishes standards for the reporting and display of
comprehensive income and its components in the financial
statements. The Company had no items of other
comprehensive income and therefore has not presented a
statement of comprehensive income.
F-6
35
FENTON GRAHAM MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 2 - INCOME TAXES
The components of the provision for income taxes for the
period from October 17, 2001 (inception) to December 31,
2001 are as follows:
Current Tax Expense
U.S. Federal $ -
State and Local -
-------
Total Current -
-------
Deferred Tax Expense
U.S. Federal -
State and Local -
-------
Total Deferred -
-------
Total Tax Provision (Benefit)
from Continuing Operation $ -
=======
The reconciliation of the effective income tax rate to the
Federal statutory rate is as follows:
Federal Income Tax Rate 34.0%
Effect of Valuation Allowance ( 34.0)%
--------
Effective Income Tax Rate 0.0%
========
At December 31, 2001, the Company had a net carryforward
loss of $1,213. Because of the current uncertainty of
realizing the benefits of the tax carryforward, a
valuation allowance equal to the tax benefits for deferred
taxes has been established. The full realization of the
tax benefit associated with the carryforward depends
predominantly upon the Company's ability to generate
taxable income during the carryforward period.
Deferred tax assets and liabilities reflect the net tax
effect of temporary differences between the carrying
amount of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes.
Significant components of the Company's deferred tax
assets and liabilities as of December 31, 2001 are as
follows:
Deferred Tax Assets
Loss Carryforwards $ 400
Less: Valuation Allowance ( 400)
----------
Net Deferred Tax Assets $ -
==========
Net operating loss carryforwards expire in 2021.
F-7
36
FENTON GRAHAM MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 3 - COMMON STOCK
The Company sold 385,000 shares of common stock at $0.10
per share for gross proceeds of $38,500.
The Company issued 5,000,000 shares of common stock for
services valued at $5,000.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal
property. The officers/directors of the Company provide
office and other services without charge. Such costs are
immaterial to the financial statements and, accordingly,
have not been reflected therein. These individuals are
involved in other business activities and may, in the
future, become involved in other business opportunities.
The Company is obligated to a stockholder in the amount of
$1,100 for funds advanced for working capital. The funds
were used to pay the cost of the sale of common stock
described in Note 3. The advances bear no interest and
is due upon demand.
NOTE 5 - SUBSEQUENT EVENTS
During the month ended December 31, 2001, an additional
295,000 shares of common stock were subscribed at $0.10
per share for a total of $29,500. The shares of common
stock were issued during January 2002. All the
subscription receivables were collected in January 2002.
In the month of January, the Company sold an additional
320,000 shares of common stock at $0.10 per share for
gross proceeds of $32,000.
F-8
37
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form SB-2 with the
Securities and Exchange Commission in connection with this
offering. This prospectus does not contain all of the information
set forth in the registration statement, as permitted by the
Rules and Regulations of the Securities and Exchange Commission.
Whenever reference is made in this prospectus to any contract or
other document of ours, the reference may not be complete and you
should refer to the exhibits that are part of the registration
statement for a copy of the contract or document.
We also file annual, quarterly and current reports and other
information with the Securities and Exchange Commission. You may
read and copy any report or document we file, and the
registration statement, including the exhibits, may be inspected
at the Securities and Exchange Commission's public reference room
located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. Our Securities
and Exchange Commission filings are also available to the public
from the SEC's website at: http://www.sec.gov.
EXPERTS
The audited financial statements of the Company as of December
31, 2001 were audited by Merdinger, Fruchter, Rosen & Corso,
P.C., an independent public accounting firm with offices in New
York, New York and Los Angeles, California. Their report
regarding the Company's financial statements is included in this
prospectus in reliance upon their authority as experts in
accounting, auditing, and giving such reports.
LEGAL MATTERS
The law offices of Chapman & Flanagan, Ltd., Las Vegas, Nevada,
has acted as the Company's legal counsel regarding the validity
of the securities being offered by this prospectus.
38
OUTSIDE BACK COVER PAGE OF PROSPECTUS
Until _____________, 20___, all dealers that effect transactions
in these securities, whether or not participating in the
offering, may be required to deliver a prospectus. This is in
addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold
allotments or subscriptions.
No person is authorized to give any information or to make any
representation other than those contained in this prospectus, and
if given or made, such information or representation must not be
relied upon as having been authorized. This prospectus does
constitute an offer to sell or a solicitation of an offer to buy
any securities other than the shares offered by this prospectus
or an offer to sell or a solicitation of an offer to buy the
shares in any jurisdiction to any person to whom it is unlawful
to make such an offer or solicitation in such jurisdiction.
-------------------------------
Up to 5,000,000 Shares
Fenton Graham Marketing, Inc.
Common Stock
-------------------------------
Prospectus
-------------------------------
Fenton Graham Marketing, Inc.
13215 Verde River Drive, Unit 1
Fountain Hills, AZ 85268
(480) 836-8720
39
[ALTERNATIVE PAGE FOR SELLING SECURITY HOLDER PROSPECTUS]
Prospectus
1,000,000 SHARES OF COMMON STOCK
OF
FENTON GRAHAM MARKETING, INC.
We are registering 1,000,000 shares of our common stock for sale
by certain selling security holders. These shareholders are
referred to throughout this prospectus as "selling security
holders."
These selling shareholders will sell their shares at a price of
$0.02 per share until our shares are quoted on the OTC Bulletin
Board and thereafter at prevailing market prices, or at privately
negotiated prices. We will not receive any of the proceeds from
the sales of shares by the selling security holders.
No public trading market for our common stock exists.
Our common stock being offered by this prospectus involves a high
degree of risk. you should read the "Risk Factors" section
beginning on page 5 before you decide to purchase any common
stock.
Neither the Securities and Exchange Commission nor any state
commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Nor have
they made, nor will they make, any determination as to whether
anyone should buy these securities. Any representation to the
contrary is a criminal offense.
The date of this Prospectus is ________, 2002
40
[ALTERNATE PAGE FOR SELLING SECURITY HOLDER PROSPECTUS]
THE OFFERING
Shares offered by Selling
Security Holders...................... 1,000,000 shares of common stock.
Plan of distribution.................. The offering of our
shares of common stock
are being made by 18
shareholders of Fenton
Graham who may wish to
sell their shares.
These selling
shareholders will offer
their stock at a price
of $0.02 per share until
our shares are quoted on
the OTC Bulletin Board
and thereafter at
prevailing market
prices, or at privately
negotiated prices.
Use of proceeds....................... Fenton Graham will not
receive any proceeds
form the sale of shares
owned by the selling
security holders.
CONCURRENT OFFERING
The registration statement of which this prospectus is a part
also includes a prospectus with respect to the offering by Fenton
Graham for cash of 5,000,000 shares of Fenton Graham common
stock. This distribution may have a material adverse effect on
the market price of the common stock offered by the selling
security holders.
Shares offered by Fenton Graham....... 5,000,000 shares of common stock.
Shares to be sold by Selling
Security Holders...................... 1,000,000 shares of common stock.
Plan of distribution.................. Fenton Graham will offer
and sell 5,000,000
shares for cash at a
price of $0.02 per
share.
Use of proceeds....................... Fenton Graham will
receive the proceeds to
be derived from the sale
of an aggregate
5,000,000 shares of its
common stock.
41
[ALTERNATE PAGE FOR SELLING SECURITY HOLDER PROSPECTUS]
USE OF PROCEEDS
This prospectus is part of a registration statement that permits
the shareholders of Fenton Graham who are identified in this
prospectus to sell their shares of Fenton Graham's common stock
in the open market or in privately negotiated transactions. We
will not receive any of the proceeds from the sale of the shares
by the selling security holders but have agreed to bear all
expenses for registration of the shares under federal securities
laws. All proceeds from the sale of the common stock will be
paid to the selling security holders.
42
[ALTERNATE PAGE FOR SELLING SECURITY HOLDER PROSPECTUS]
DETERMINATION OF OFFERING PRICE
The selling security holders will offer and sell the shares at
$0.02 per share until our shares are qutoed on the OTC Bulletin
Board and thereafter at prevailing market prices or privately
negotiated prices. The price of the offered shares is based on
our management's belief about the value of our business plan.
Our common stock is presently not traded on any market or
securities exchange.
43
[ALTERNATE PAGE FOR SELLING SECURITY HOLDER PROSPECTUS]
SELLING SECURITY HOLDERS
The following table sets forth the name of the selling security
holders, the number of shares of common stock beneficially owned
by each selling security holder as of May 7, 2002, the number of
shares that each may offer, and the number of shares of common
stock beneficially owned by each selling security holder upon
completion of the offering, assuming all of the shares are sold.
<Table>
<s> <c> <c> <c> <c>
Before the Offering After the Offering
------------------------- --------------------------
Shares Percentage Shares Percentage
Name of Selling Beneficially of Common Beneficially of Common
Security Holder Owned Stock Owned Stock
- ------------------ ------------ ---------- ------------ ----------
Risque, LLC (1) 250,000 4.2% 0 -
James Wexler (2) 250,000 4.2% 0 -
Regina Wexler (2) 15,000 * 0 -
Merial H. Schine 15,000 * 0 -
Deborah Wexler 15,000 * 0 -
Tara Romeo (3) 30,000 * 0 -
Daniel Wexler (2)(3) 30,000 * 0 -
Dennis Pannulo (4) 30,000 * 0 -
Sandra Downing (4) 30,000 * 0 -
Dennis Reissig (5) 15,000 * 0 -
Sherri L. Reissig (5) 15,000 * 0 -
Constance J. Fournier (6)(7) 30,000 * 0 -
Francis O. Fournier (6) 30,000 * 0 -
Mark Griggs (7) 250,000 4.2% 0 -
Mary G. Fuoco 15,000 * 0 -
Julie Norrod 15,000 * 0 -
Naomi L. McKee 15,000 * 0 -
Paul DeRosa 40,000 * 0 -
</Table>
- -------------------
* Denotes less than 1% of the issued and outstanding shares of
common stock.
(1) Cinda Hey is the principal of Risque LLC. Neither Ms. Hey
nor Risque LLC is deemed to be an affiliate of Fenton Graham. No
other relationship exists between Ms. Hey, Risque LLC and any of
the selling security holders.
(2) Regina Wexler is the mother of James Wexler and Daniel
Wexler. Both James and Daniel Wexler are adults. Each disclaim
beneficial ownership of each other's shares.
(3) Tara Romero and Daniel Wexler are husband and wife. Tara
Romero directly owns 15,000 shares and Daniel Wexler directly
owns 15,000 shares. Therefore, Ms. Romero and Mr. Wexler are
deemed to beneficially own each other's shares.
44
(4) Sandra Downing and Dennis Pannullo are husband and wife.
Sandra Downing directly owns 15,000 shares and Dennis Pannullo
directly owns 15,000 shares. Therefore, Ms. Downing and Mr.
Pannullo are deemed to beneficially own each other's shares.
(5) Sherri L. Reissig and Dennis Reissig are husband and wife.
Sherri L. Reissig directly owns 15,000 shares and Dennis Reissig
directly owns 15,000 shares. Therefore, Mr. and Mrs. Reissig are
deemed to beneficially own each other's shares.
(6) Constance Fournier and Francis Fournier are husband and
wife. Constance Fournier directly owns 15,000 shares and Francis
Fournier directly owns 15,000 shares. Therefore, Mr. and Mrs.
Fournier are deemed to beneficially own each other's shares.
(7) Constance Fournier is the mother of Mark Griggs. Mark
Griggs is an adult. Each disclaim beneficial ownership of each
other's shares.
45
[ALTERNATE PAGE FOR SELLING SECURITY HOLDER PROSPECTUS]
PLAN OF DISTRIBUTION
We are registering the shares on behalf of the selling security
holders. We will pay all costs, expenses and fees in connection
with the registration of the shares offered by this prospectus.
Brokerage commissions and similar selling expenses, if any,
attributable to the sale of shares will be paid by the selling
security holders.
Sales of shares may be effected by selling security holders from
time to time in one or more types of transactions (which may
include block transactions) on Nasdaq, in the over-the-counter
market, in negotiated transactions, through put or call options
transactions relating to the shares, through short sales of
shares, or a combination of such methods of sale, at market
prices prevailing at the time of sale, or at negotiated prices.
Such transactions may or may not involve brokers or dealers.
The selling security holders have advised us that they have not
entered into any agreements, understandings or arrangements with
any underwriters or brokers-dealers regarding the sale of their
securities. In addition, there is not an underwriter or
coordinating broker acting in connection with the proposed sale
of shares by the selling security holders.
The selling security holders may effect such transactions by
selling shares directly to purchasers or to or through broker-
dealers, which may act as agents or principals. Such broker-
dealers may receive compensation in the form of discounts,
concessions, or commissions from the selling security holders
and/or the purchasers of shares for whom such broker-dealers may
act as agents or to whom they sell as principal, or both. The
compensation paid as to a particular broker-dealer might be in
excess of customary commissions.
The selling security holders and any broker-dealers that act in
connection with the sale of shares might be deemed to be
underwriters within the meaning of Section 2(11) of the
Securities Act. Any commissions received by such broker-dealers
and any profit on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts
or commissions under the Securities Act.
Because selling security holders may be deemed to be underwriters
within the meaning of Section 2(11) of the Securities Act, the
selling security holders will be subject to the prospectus
delivery requirements of the Securities Act. We will make copies
of this prospectus available to the selling stockholders and have
informed them of the need for delivery of copies of this
prospectus to purchasers at or prior to the time of any sale of
the shares of common stock. The selling stockholders may
indemnify any broker-dealer that participates in transactions
involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act of 1933.
Regulation M
We have informed the selling security holders that Regulation M
promulgated under the Securities Exchange Act of 1934 may be
applicable to them with respect to any purchase or sale of our
common stock. In general, Rule 102 under Regulation M prohibits
46
any person connected with a distribution of our common stock from
directly or indirectly bidding for, or purchasing for any account
in which it has a beneficial interest, any of the common stock or
any right to purchase this stock, for a period of one business
day before and after completion of its participation in the
distribution.
During any distribution period, Regulation M prohibits the
selling security holders and any other persons engaged in the
distribution from engaging in any stabilizing bid or purchasing
our common stock except for the purpose of preventing or
retarding a decline in the open market price of the common stock.
None of these persons may effect any stabilizing transaction to
facilitate any offering at the market. As the selling security
holders will be reoffering and reselling our common stock at the
market, Regulation M will prohibit them from effecting any
stabilizing transaction in contravention of Regulation M with
respect to this stock.
47
[ALTERNATIVE PAGE FOR SELLING SECURITY HOLDER PROSPECTUS]
Outside back cover page of prospectus
Until _____________, 20___, all dealers that effect transactions
in these securities, whether or not participating in the
offering, may be required to deliver a prospectus. This is in
addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold
allotments or subscriptions.
No person is authorized to give any information or to make any
representation other than those contained in this prospectus, and
if given or made, such information or representation must not be
relied upon as having been authorized. This prospectus does
constitute an offer to sell or a solicitation of an offer to buy
any securities other than the shares offered by this prospectus
or an offer to sell or a solicitation of an offer to buy the
shares in any jurisdiction to any person to whom it is unlawful
to make such an offer or solicitation in such jurisdiction.
-------------------------------
Up to 1,000,000 Shares
Fenton Graham Marketing, Inc.
Common Stock
-------------------------------
Prospectus
-------------------------------
Fenton Graham Marketing, Inc.
13215 Verde River Drive, Unit 1
Fountain Hills, AZ 85268
(480) 836-8720
48
PART II
Information Not Required in Prospectus
Item 24. Indemnification of Directors and Officers
The Company's Articles of Incorporation and By-laws provide that
the Corporation shall indemnify any Directors, Officer, Employee
or Agent of the Corporation who was or is party or is threatened
to be made a party to any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in
the right of the Corporation, by reason of the fact that he is or
was a Director, Officer, employee or agent of the Corporation or
is or was serving at the request of the Corporation as a
Director, Officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in
good faith and, in the case of conduct in his official capacity
with the Corporation, in a manner he reasonably believed to be in
the best interest of the Corporation, or, in all other cases,
that his conduct was at least not opposed to the Corporation's
best interests. In the case of any criminal proceeding, he must
have had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment,
order settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall not, or itself, determine that the
individual did not meet the standard of conduct set forth in this
paragraph.
Fenton Graham currently maintains no director's and officer's
insurance policy or any liability insurance concerning its
officers and directors.
Item 25. Other Expenses of Issuance and Distribution
The following expenses of the offering, except for the SEC fees,
are estimated, all of which will be paid by the Registrant.
SEC Registration Fee $ 11
Blue Sky Fees and Expenses 0
Legal Fees and Expenses 3,500
Accountants' Fees and Expenses 1,000
Miscellaneous 489
-------
Total $ 5,000
=======
Item 26. Recent Sales of Unregistered Securities
Between December 4, 2001 and January 11, 2002, Fenton Graham
offered and sold a total of 1,000,000 shares of its common stock
for the offering price of $0.10 per share to a total of 18
accredited investors for a total consideration of $100,000 cash.
The issuances were made in reliance upon the exemptions from
registration set forth in Section 4(2) and Regulation D of the
Securities Act relating to sales by an issuer not involving any
public offering. None of the foregoing transactions involved a
distribution or public offering.
49
Item 27. Exhibits
Number Description
------ -----------
3.1* Amended and Restated Articles of Incorporation
3.2* By-laws
4.1* Form of Common Stock Certificate
5.1* Opinion of Chapman & Flanagan, Ltd.
23.1* Consent of Merdinger, Fruchter, Rosen & Corso, P.C.,
Certified Public Accountants
23.2* Consent of Chapman & Flanagan, Ltd. (contained in Exhibit 5.1)
99* Subscription Agreement
* Filed herewith.
Item 28. Undertakings
The undersigned registrant hereby undertakes to:
(a) (1) File, during any period in which it offers or sells
securities, a post-effective amendment to this
registration statement to:
i. include any prospectus required by section 10(a)(3) of the
Securities Act;
ii. reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
notwithstanding the forgoing, any increase or decrease
in volume of securities offered, if the total dollar value
of securities offered would not exceed that which was
registered, and any deviation from the low or high end of
the estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in the
volume and price represent no more than a 20% change in
the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
iii. include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at
that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering.
50
(b) Provide to the underwriter at the closing specified in
the underwriting agreement certificates in such
denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Act") may be
permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such
liabilities, other than the payment by the small business
issuer of expenses incurred or paid by a director, officer
or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding, is
asserted by such director, officer or controlling person in
connection with the securities being registered, the small
business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the
final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
SB-2 and authorized this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorize, in the
City of Fountain Hills, State of Arizona, on May 7, 2002.
FENTON GRAHAM MARKETING, INC.
By: /s/ Ken Greble, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the dates indicated.
Signature Title Date
- ---------------- -------------------------- -----------
/s/ Ken Greble President (Chief Executive May 7, 2002
Officer) and Director
/s/ J.P. Schrage Secretary/Treasurer (Chief May 7, 2002
Financial Officer) and
Director
51
EXHIBIT INDEX
Number Description Page
3.1 Amended and Restated Articles of Incorporation 53
3.2 Bylaws 55
4.1 Form of Common Stock Certificate 66
5.1 Opinion of Chapman & Flanagan, Ltd. 68
23.1 Consent of Merdinger, Fruchter, Rosen & Corso, 69
P.C., Certified Public Accountants
23.2 Consent of Chapman & Flanagan, Ltd. (contained in 68
Exhibit 5.1)
99 Subscription Agreement 70
51