UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
TO
TENDER
OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
FORTUNET,
INC.
(Name of Subject Company (Issuer))
THE YURI ITKIS GAMING TRUST OF 1993
YI ACQUISITION CORP.
YURI ITKIS
(Name of Filing Persons (Offeror))
Common Stock, par value $0.001 per share
(Title of Class of Securities)
34969Q100
(CUSIP Number of Class of Securities)
Yuri Itkis
2950 S. Highland Drive, Suite C
Las Vegas, NV 89109
(702) 796-9090
(Name, address, and telephone numbers of persons authorized to receive
notices
and communications on behalf of filing persons)
Copies to:
Michael J. Bonner
Eric T. Blum
Greenberg Traurig, LLP
3773 Howard Hughes Parkway
Suite 400 North
Las Vegas, Nevada 89169
Phone: (702) 792-3773
Fax: (702) 792-9002
|
|
Brian H. Blaney
Greenberg Traurig, LLP
2375 East Camelback Road
Suite 700
Phoenix, Arizona 85016
Phone: (602) 445-8000
Fax: (602) 445-8603
|
Calculation
of Filing Fee:
Transaction
Valuations(1)
|
|
Amount
of
Filing Fee(2)
|
$6,271,900
|
|
$447
|
(1)
The
transaction valuation is estimated solely for purposes of calculating the
filing fee. The calculation assumes the purchase of all outstanding shares of Common
Stock of FortuNet, Inc. (FortuNet), par value $0.001 per share (the Shares),
not beneficially owned by The Yuri Itkis Gaming Trust of 1993 (the Gaming
Trust) at a purchase price of $225 per Share, net to the seller in cash.
According to FortuNets Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2009, as of November 11, 2009, there were
11,054,011 Shares outstanding, of which 8,266,500 are held by the Gaming
Trust. Accordingly, this calculation
assumes the purchase of 2,787,511 Shares.
(2)
The
amount of the filing fee is calculated in accordance with Rule 0-11 of the
Securities Exchange Act of 1934, as amended, and Fee Rate Advisory #4 for
Fiscal Year 2010, issued December 17, 2009. The fee equals $71.30 per one
million dollars of transaction value.
x
Check the box if any part of the fee is
offset as provided by Rule 0-1 1(a)(2) and identify the filing with
which the offsetting fee was previously paid. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of its
filing.
Amount Previously Paid: $447
Form or Registration No.: Schedule TO-T
Filing Party:
The Yuri Itkis Gaming Trust of 1993, YI Acquisition Corp. and Yuri Itkis
Date Filed: January 15,
2010
o
Check the box if the filing relates solely
to preliminary communications made before the commencement of a tender offer.
Check the appropriate
boxes below to designate any transactions to which the statement relates:
x
third party tender offer subject to Rule 14d-1.
o
issuer tender offer
subject to Rule 13e-4.
x
going-private transaction subject to Rule 13e-3.
o
amendment to Schedule
13D under Rule 13d-2.
Check the following box
if the filing is a final amendment reporting the results of the tender
offer:
o
This Amendment No. 1 amends and supplements the
Tender Offer Statement and Rule 13e-3 Transaction Statement filed under
cover of Schedule TO on January 15, 2010 (as amended and supplemented, the
Schedule TO) by The Yuri Itkis Gaming Trust of 1993 (the Gaming Trust), YI
Acquisition Corp. and Yuri Itkis. The Schedule TO relates to the offer by the
Gaming Trust to purchase all outstanding shares of Common Stock, par value
$0.001 per share (the Shares), of FortuNet, Inc. (FortuNet), not owned
by the Gaming Trust, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated January 15, 2010 (the Offer to Purchase),
and in the related Letter of Transmittal (which, together with any amendments
or supplements thereto, collectively constitute the Offer).
The items of this Schedule TO set forth below are
hereby further amended and supplemented as follows:
Items 1 through 9, 11 and 13.
(1) The
third sentence in the second paragraph of the section captioned Special
Factors 2. Purpose of the Offer; The Trusts Plan for FortuNet After the
Offer and the Merger on page 9 of the Offer to Purchase is hereby amended
and restated as follows:
However, the Trust does not presently intend to seek
to retain any directors following the Merger other than Yuri Itkis and Boris
Itkis.
(2) The
first sentence in the first paragraph of the section captioned Special Factors
3. The Position of The Trust Regarding the Fairness of the Offer and the
Merger on page 10 of the Offer to Purchase is hereby amended and restated
as follows:
The rules of the SEC require the Trust, YI
Acquisition Corp. and Yuri Itkis (collectively referred to as the Trust in
this section unless the context otherwise requires) to express their belief as
to the fairness of the Offer and the Merger to FortuNets stockholders who are
not affiliated with the Trust.
(3) The
section captioned Summary beginning on page 1 of the Offer to Purchase is
hereby amended to include the following:
The Position of the Trust,
YI Acquisition Corp. and Yuri Itkis Regarding the Fairness of the Offer and the
Merger
(See Special Factors Section 3. The
Position of the Trust Regarding the Fairness of the Offer and the Merger)
·
The Trust believes that the Offer and Merger
are financially and procedurally fair to FortuNet stockholders who participate
in the Offer or determine to remain as stockholders of FortuNet.
(4) The
title of the section captioned Special Factors 3. The Position of The Trust
Regarding the Fairness of the Offer and the Merger on page 10 of the
Offer to Purchase is hereby amended and restated as follows:
3. The Position of the Trust, YI Acquisition
Corp. and Yuri Itkis Regarding the Fairness of the Offer and the Merger
(5) The
third sentence in the third paragraph of the section captioned Special Factors
7. Effects of the Offer and the Merger on page 15 of the Offer to
Purchase is hereby amended and restated as follows:
Because the Trust (and indirectly Yuri Itkis) owned
75% of the outstanding Shares throughout the quarter ended September 30,
2009, the Trusts and Yuri Itkiss interest in FortuNets net book value and
net loss was approximately $11,882,063 and $551,140, respectively.
(6) Following
the final bullet point on page 13 of the Offer to Purchase, under the
section captioned Special Factors 3. The Position of The Trust Regarding the
Fairness of the Offer and the Merger, the following is added:
2
·
The Trust, YI Acquisition and Yuri Itkis did
not seek or obtain a fairness opinion in connection with the Offer.
(7) Following
the second bullet point on page 11 of the Offer to Purchase, under the
section captioned Special Factors 3. The Position of The Trust Regarding the
Fairness of the Offer and the Merger, the following is added:
·
Mr. Itkis and the Trust selected the
price/earnings valuation method to value FortuNet based upon the experience and
advice of Union Gaming. On January 4,
2010, Union Gaming advised Mr. Itkis and the Trust that the price/earnings
methodology is the most commonly used valuation method for conventional gaming
supply companies, such as FortuNet, and not Discounted Cash Flow or Enterprise
Value to EBITDA. On January 4, and January 7,
2009, Union Gaming also communicated to Duff & Phelps that it believes
the price/earnings valuation method is the preferred valuation method for
conventional gaming supply companies.
·
Using the price/earnings valuation method,
Union Gaming estimated that the value of FortuNet to unaffiliated stockholders,
on a per share basis, was between $1.70 and $1.90 per share after adding back
public company compliance costs and making further upward adjustments for
available cash-on-hand and auction rate securities held by FortuNet at face
value, and reducing the same by certain capital expenditures. In addition, based on feedback from Union
Gamings discussions with Duff & Phelps, Union Gaming suggested that a
premium be added to the estimated fair value, which resulted in an offer price
of $2.25 per share. Union Gaming
calculated FortuNets price-to-earnings ratio based on 2010 projected net
income of approximately $1.6 million as disclosed to Union Gaming by Duff &
Phelps on January 4, 2010. As part of
the price/earnings valuation method, Union Gaming compared the average earnings
multiple of an assembled peer group to FortuNets 2010 budgeted net income.
(8) Following
the first bullet point on page 11 of the Offer to Purchase, under the
section captioned Special Factors 3. The Position of The Trust Regarding the
Fairness of the Offer and the Merger, the following is added:
·
The Trust sought the advice of an independent
financial advisor, Union Gaming, that has significant experience in the gaming
industry in general and gaming equipment manufacturers in particular. Union Gaming was introduced to Yuri Itkis by
the Trusts legal counsel and was ultimately chosen as the financial advisor to
the Trust based upon Union Gamings background and experience. Not other advisors were contacted.
(9) The
eighth paragraph on page 7 through the seventh full paragraph on page 9
of the Offer to Purchase under the section captioned Special Factors 1.
Background is hereby amended and restated as follows:
On Friday, November 20, 2009 after the market
close, Mr. Itkis informally contacted each of the board members and
FortuNets counsel by telephone to inform them of the Trusts intention to make
a tender offer and to issue a press release regarding its intention with
respect to the proposed tender offer. On
the same day, the Trusts counsel contacted FortuNets counsel to inform them of
the Trusts intention to commence a tender offer and to issue a press release.
On Saturday, November 21, 2009, attorneys with
Greenberg Traurig, the Trusts counsel, discussed with attorneys with Morrison &
Foerster, FortuNets counsel, via telephone the Trusts intention to issue a
press release on Monday, November 23, 2009 before the opening of the stock
market announcing the Trusts intention to make a tender offer. At that time,
the Trusts counsel provided to FortuNets counsel via e-mail a draft of the
press release.
On Sunday, November 22, 2009, the board held a
brief telephonic meeting at which Mr. Itkis formally informed the board of
the Trusts intention to make a tender offer to acquire all of the outstanding
shares of FortuNets common stock that it did not own for $1.70 per share.
There were no outside attorneys on that call. Following the telephonic meeting,
Mr. Itkis, Mr. Itkis counsel and FortuNets counsel had a telephonic
discussion regarding Mr. Itkis intention to make a tender offer and
confirmed the Trusts intention to release the press release the next day prior
to market open. The Trust agreed to transmit the press release to the board via
FortuNets counsel after its release. FortuNets counsel advised the Trust that
the board of FortuNet would most likely appoint a special committee of
independent directors and begin a search for a financial advisor to consider
the Trusts stated intention.
3
On Monday, November 23, 2009, the Trust issued a press
release announcing its intention to launch a tender offer for all of the
outstanding Shares not owned by the Trust for $1.70 per share in cash, to be
irrevocably conditioned upon the tender of a sufficient number of shares of
FortuNets common stock to cause the Trust to own 90% of the outstanding shares
of common stock, and its further intention, assuming the successful completion
of the tender offer, to effect a short form cash merger at the same price per
share paid in the tender offer in order to acquire any remaining shares.
As reported in the Schedule 14d-9 filed by FortuNet,
the FortuNet board of directors held a special meeting on November 23, 2009
with representatives of FortuNets counsel present to discuss the proposed
tender offer. Mr. Itkis confirmed the
board of directors understanding of the terms of conditions of the proposed
tender offer as described in the Trusts November 23 press release. Yuri Itkis then left the meeting. Boris Itkis also left the meeting, in order
to avoid any appearance of conflict that might arise from his family
relationship with Yuri Itkis, although Boris did not participate in any way in
making the tender offer.
On Monday, November 23, 2009, FortuNet issued a press
release acknowledging the announcement of the Trusts intention to launch a
tender offer.
On Tuesday, December 8, 2009, as part of due diligence
interviews conducted with management of FortuNet, Mr. Itkis was interviewed by
Duff & Phelps, the financial advisor engaged by the special committee. The special committee asked Mr. Itkis about
FortuNets history, current and planned future operations, financial condition
and other matters.
On Tuesday, December 15, 2009, FortuNets counsel
contacted the Trusts counsel to request that Mr. Itkis meet with Duff &
Phelps again on December 17 to discuss additional questions related to Duff &
Phelpss information gathering.
On Wednesday, December 16, 2009, FortuNet received a
written staff determination from The Nasdaq Stock Market Listing Qualifications
Department that FortuNet had not regained compliance in accordance with
Marketplace Rule 5810(c)(3)(D). FortuNet was advised that trading of the Shares
would be suspended at the opening of business on December 28, 2009, and a Form 25-NSE
would be filed with the Securities and Exchange Commission removing FortuNets
securities from listing on The Nasdaq Stock Market unless FortuNet requested a
hearing to appeal the staff determination. Subsequently, on January 7, 2010,
FortuNet filed, and Nasdaq approved, FortuNets transfer application to
transfer its Shares listing from the Nasdaq Global Market to the Nasdaq
Capital Market. The listing of the Shares was transferred to the Nasdaq Capital
Market at the opening of business on January 11, 2010.
On Thursday, December 17, 2009, Duff & Phelps
conducted an additional interview with Mr. Itkis via telephone during which
call Mr. Itkis indicated that the Trust had added a premium over the closing
price of FortuNets shares on November 20, 2009, the last trading day prior to
the Trusts issuance of its press release, but otherwise had not used any
particular valuation models or relied on a financial advisor to determine the
proposed $1.70 tender offer price, and that the Trust had no present intention
of selling its interest in FortuNet or entertaining offers for its interest in
FortuNet. Duff & Phelps informed Mr.
Itkis that the special committee had several telephonic meetings scheduled for
the remainder of December and intended to meet again in person with Mr. Itkis
the first week of January 2010.
On Monday, December 21, 2009, FortuNets counsel
advised the Trusts counsel via telephone of the progress being made by Duff &
Phelps in its fact gathering and confirmed that the special committee intended
to continue to meet regularly via telephone throughout the remainder of December
and in person the first week of January and that the special committee intended
to hold a future meeting with Mr. Itkis.
On Tuesday, December 29, 2009, Mr. Itkis met with
special committee member Darrel Johnson, and together they called Duff &
Phelps to discuss various elements of Duff & Phelps fact gathering and
analysis. During the telephone conversation, Mr. Johnson and the Duff &
Phelps representatives made Mr. Itkis aware that the preliminary analysis of
the special committee was that the $1.70 per share price communicated in the
Trusts
4
November 23, 2009 press
release was below the valuation range that the special committee felt it would
be able to support, and suggested to Mr. Itkis that the Trust increase the
purchase price to $2.53 per share.
Subsequently, on December 29, 2009, Mr. Itkis informed Duff & Phelps
that he thought that $2.53 per share was excessive. Without any of the participants making any
commitments to communicate further, the conversations concluded.
On Wednesday, December 30, 2009, Mr. Itkis and the
Trusts counsel contacted Union Gaming Analytics, LLC regarding engaging Union
Gaming to provide advice to the Trust and the Trusts counsel. Subsequently, Mr. Itkis called Duff &
Phelps to inform them that a financial advisor to the Trust may be contacting
them.
On Monday, January 4, 2010, Mr. Itkis and the Trusts
counsel met with Union Gaming. Union Gaming was engaged by the Trusts counsel
on behalf of the Trust. Union Gaming interviewed Mr. Itkis and advised Mr. Itkis
and the Trust that the price/earnings methodology, rather than discounted cash flow
or enterprise value to EBITDA, is the most commonly used valuation method for
conventional gaming supply companies such as FortuNet. Later, Union Gaming, without Mr. Itkis or the
Trusts counsel present, contacted Duff & Phelps via telephone and
discussed FortuNet and Duff & Phelps approaches to valuation and the potential
applicability of a control premium.
Union Gaming shared with Duff & Phelps the valuation methodology
that the Union Gaming representatives thought appropriate for FortuNet, and the
Duff & Phelps representatives gave differing views. No per share prices for purposes of the Offer
were discussed during this conversation.
The conversations concluded.
On Tuesday, January 5, 2010, FortuNets counsel and
the Trusts counsel discussed via telephone the status of the discussions
between Duff & Phelps and Union Gaming. They discussed their differing
views about the applicability of a control premium in transactions similar to
the potential Offer and Merger. During
these telephone conversations, FortuNets counsel encouraged the Trust to
include procedural protections for FortuNet stockholders in the Offer,
including a non-waivable majority of the minority condition and voluntary
dissenters rights under the NRS. The Trusts counsel informed FortuNets
counsel that the Trust intended to include such procedural protections in the
offer.
On Thursday, January 7, 2010, Union Gaming had
additional conversations with Duff & Phelps via telephone regarding their
differing views of the valuation of FortuNet.
During this telephone conversation, Union Gaming again communicated to
Duff & Phelps that Union Gaming believed that the widely accepted gaming
supplier valuation methodology in the industry is the price/earnings valuation
method. Applying a composite average of
gaming supplier company earnings multiples to FortuNets 2010 budgeted net
income, adding back public company compliance costs and then making further
upward adjustments for available cash on hand, auction rate investment
securities held by FortuNet, and reducing the same by certain capital
expenditures, Union Gaming advised Duff & Phelps that Union Gaming believed
the fair valuation of FortuNet to unaffiliated stockholders, on a per share
basis, was between $1.70 per share and $1.90 per share, before the effect of
any premium. Duff & Phelps advised
Union Gaming that it felt the fair value range was higher. The telephone conversation ended.
Between January 7, 2010 and January 10, 2010, Union
Gaming, the Trusts counsel and Mr. Itkis discussed the results of Union Gamings
telephone calls with Duff & Phelps and FortuNets counsels telephone
conversations with the Trusts counsel. These discussions were oral, conducted
over the telephone, and did not involve any formal presentation or delivery of
a written or oral opinion by Union Gaming.
Union Gaming suggested that the Trust consider adding a premium to the
estimated fair value. Following these
discussions, as Trustee to the Trust, Mr. Itkis decided to authorize an offer
at the Offer Price.
On Friday, January 8, 2010, the Trusts counsel
informed FortuNets counsel, without making any commitments, that if Mr. Itkis
elected to proceed with the tender offer, it could be commenced as early as the
following week. FortuNets counsel acknowledged that the special committee was
prepared to meet and appropriately respond to the tender offer, as required by
the securities laws, once commenced.
On Thursday, January 14, 2010 after the market close,
the Trusts counsel contacted FortuNets counsel by telephone to informally
communicate the Trusts intention to commence the tender offer the following
day.
(10) The
table on page 24 of the Offer to Purchase, under the section captioned Certain
Information Concerning FortuNet is hereby amended and restated as follows:
5
|
|
For the Three
Months Ended
September 30
|
|
For the
Years Ended
December 31
|
|
|
|
2009
|
|
2008
|
|
2008
|
|
2007
|
|
Income Statement Data (thousands of dollars)
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
$
|
3,946.9
|
|
$
|
3,922.4
|
|
$
|
16,019.2
|
|
$
|
16,488.6
|
|
Total
operating costs and expenses
|
|
2,667.4
|
|
2,727.1
|
|
10,699.0
|
|
10,087.3
|
|
Operating
(loss) income
|
|
(1,200.3
|
)
|
662.0
|
|
2,770.5
|
|
3,944.7
|
|
Net
(loss) income
|
|
(734.9
|
)
|
611.6
|
|
2,877.5
|
|
3,947.5
|
|
Balance Sheet Data (thousands of dollars)
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
8,002.8
|
|
$
|
24,158.3
|
|
$
|
30,932.5
|
|
$
|
7,751.5
|
|
Non-current
assets
|
|
8,454.4
|
|
20,258.2
|
|
13,525.1
|
|
34,163.6
|
|
Current
liabilities
|
|
614.4
|
|
1,036.6
|
|
1,132.7
|
|
1,129.6
|
|
Non-current
liabilities
|
|
0
|
|
0
|
|
0
|
|
0
|
|
Total
stockholders equity
|
|
15,842.8
|
|
43,379.8
|
|
43,249.9
|
|
40,785.5
|
|
Cash
dividends declared per common share
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
Average
shares of common stock outstandingbasic (in thousands)
|
|
11,048.0
|
|
11,351.3
|
|
11,352.0
|
|
11,345.8
|
|
Ratio
of Earnings to Fixed Charges
|
|
(17.46
|
)
|
11.96
|
|
20.39
|
|
47.35
|
|
(11)
The amended
complaint attached hereto as Exhibit (a)(5)(ii) was filed on January 19,
2010.
(12) Following
the first paragraph of the section captioned Special Factors 2. Purpose of the Offer; The Trusts Plans for
FortuNet After the Offer and the Merger on page 9 of the Offer to Purchase,
the following is added:
The determination to undertake the Offer and the
Merger in November 2009, as opposed to another time in FortuNets history
as a public company, was driven by (i) the
deterioration of the general economic conditions in the United States and the
global financial markets, which has sharply effected the operating results of
many gaming and gaming related businesses, including FortuNet; (ii) FortuNets
withdraw of its application with the Nevada Gaming Control Board for the
approval of FortuNets mobile gaming system for traditional casino games, such
as poker, keno and slots, which withdraw resulted in a write off of
approximately $1.6 million of capitalized software development costs; (iii) the
sharp decline in worldwide equity markets, which in the opinion of the Trust
limits FortuNets access to the public equity markets as a means of financing
growth or operations on acceptable terms, or at all, for the foreseeable
future; and (iv) the continuing significant costs of remaining
public. By deferring the launch of the
Offer until January 15, 2010, the Trust allowed a reasonable period of
time for FortuNets board to appoint a special committee of independent directors
and for the special committee to retain advisors and conduct its analysis of
the Offer. Accordingly, FortuNets unaffiliated stockholders will receive the
benefit of the analysis performed by the special committee in a time frame that
allows for careful research and deliberation.
Item 10.
Financial Statements.
(a)
Financial
statements for the offeror are not material because the consideration offered
consists solely of cash, the Offer is not subject to any financing condition
and the Offer is for all outstanding securities of the subject class.
(b)
Pro forma
financial information is not material to the Offer.
Item 12.
Exhibits.
(a)(5)(ii)
|
Amended
Class Action Complaint of Asher Jungreis and Constantine Giviskes,
individually and on behalf of all others similarly situated, against Yuri
Itkis, individually and as trustee of the Yuri Itkis Gaming Trust of 1993,
Case No. A-09-605118B, filed in the Eighth Judicial District Court in
Clark County in the State of Nevada on January 19, 2010
|
6
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Date: January 29, 2010
|
The Yuri Itkis Gaming Trust of
1993
|
|
|
|
|
|
|
|
By:
|
/s/ Yuri Itkis
|
|
|
Name:
|
Yuri Itkis
|
|
|
Title:
|
Trustee
|
|
|
|
|
|
|
|
|
|
YI Acquisition Corp.
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Yuri Itkis
|
|
|
Name:
|
Yuri Itkis
|
|
|
Title:
|
President
|
|
|
|
|
|
|
|
|
|
Yuri Itkis
, an individual
|
|
|
|
|
|
|
|
|
|
|
/s/ Yuri Itkis
|
|
|
Name:
|
Yuri Itkis
|
7
EXHIBIT
INDEX
Exhibit
|
|
Description
|
(a)(5)(ii)
|
|
Amended
Class Action Complaint of Asher Jungreis and Constantine Giviskes,
individually and on behalf of all others similarly situated, against Yuri
Itkis, individually and as trustee of the Yuri Itkis Gaming Trust of 1993,
Case No. A-09-605118B, filed in the Eighth Judicial District Court in
Clark County in the State of Nevada on January 19, 2010
|
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