Business Context and Reporting Period
This Form 8-K Current Report, dated May 26, 2006, details a material definitive agreement and the simultaneous completion of an asset acquisition by Marchex, Inc. (the "Registrant") and its wholly-owned subsidiary, MDNH, Inc. The target of the acquisition is Open List, Inc., a local vertical search engine provider offering search and contextual marketing services.
Key Financial Metrics and Transaction Structure
The aggregate consideration for the acquisition of Open List's assets is structured as follows:
- Cash Consideration: $6,000,000.
- Equity Consideration: Approximately 286,254 shares of Marchex Class B common stock, valued at $5,000,000 based on the average closing market price over the ten trading days prior to closing.
- Restricted Equity Consideration: Approximately 114,502 shares of Marchex Class B common stock, valued at $2,000,000 based on the same pricing methodology. These shares are subject to a 30-month vesting period and forfeiture conditions.
- Total Valuation: Approximately $13,000,000 in cash and stock.
At closing, Marchex deposited $600,000 in cash and 40,076 shares of Class B common stock into escrow for a 12-month period to secure indemnification obligations.
Material Changes and Transaction Details
The primary material change reported is the expansion of Marchex's business portfolio through the acquisition of Open List. The transaction was executed via an Asset Purchase Agreement. The issuance of the Class B common stock was made in reliance on the Section 4(2) exemption from registration under the Securities Act of 1933, as it did not involve a public offering. No underwriters were involved.
Outlook, Risks, and Contingencies
Regulatory Filings: Marchex has agreed to use reasonable best efforts to file a registration statement with the SEC for the resale of the issued equity shares within 30 days of closing.
Financial Statements: The filing does not include immediate financial statements of the acquired business or pro forma financial information. Per Item 9.01, these documents will be filed via amendment within 71 calendar days if required.
Risks and Contingencies: The agreement includes customary representations and warranties. Open List and its stockholders are required to indemnify Marchex for certain liabilities, subject to limitations. The Restricted Equity Consideration is contingent upon vesting and may be forfeited upon the occurrence of certain events.
Investor Verification Checklist
- Verify the exact number of shares issued and the specific closing market price used for valuation in the full Asset Purchase Agreement (Exhibit 2.1).
- Monitor the upcoming filing of financial statements for Open List and pro forma financial information, expected within 71 days if required.
- Review the specific vesting conditions and forfeiture events applicable to the 114,502 shares of Restricted Equity Consideration.
- Confirm the status of the SEC registration statement for the resale of the issued shares, due within 30 days of closing.