SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. 2)
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Registrant
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Preliminary
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Confidential,
For Use of the Commission Only (as permitted by Rule
14a—6(e)(2))
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Definitive
proxy statement
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Definitive
additional materials
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Soliciting
material under Rule 14a-12
FortuNet,
Inc.
(Name
of Registrant as Specified in Its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of
Filing Fee (Check the appropriate box):
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computed on table below per Exchange Act Rules 14a-6(i)(1) and
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(1) Title
of each class of securities to which transaction applies:
(2) Aggregate
number of securities to which transactions applies:
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(3)
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Exchange Act Rule 0-11 (set forth
the
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amount
on which the filing fee is calculated and state how it was
determined):
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(5) Total
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Fee paid
previously with preliminary materials:
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box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration
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(1) Amount
previously paid:
(2) Form,
Schedule or Registration Statement No.:
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Party:
(4) Date
Filed:
FORTUNET,
INC.
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON MAY 13, 2008
TIME
9:00
a.m., Pacific Daylight Time, on May 13, 2008
LOCATION
FortuNet,
Inc.
2950 South
Highland Drive
Las Vegas,
Nevada 89109
PROPOSALS
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1.
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To
elect five (5) directors to serve until the 2009 annual meeting of
stockholders and until their successors are elected and
qualified.
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2.
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To
ratify the appointment of Schechter Dokken Kanter Andrews & Selcer
Ltd. as the independent registered public accounting firm for FortuNet,
Inc. for the fiscal year ending December 31,
2008.
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3.
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To
consider such other business as may properly come before the annual
meeting and any adjournment or postponement
thereof.
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These
items of business are more fully described in the proxy statement which is
attached and made a part hereof.
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RECORD
DATE
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You are
entitled to vote at the 2008 Annual Meeting of Stockholders (the “Annual
Meeting”) and any adjournment or postponement thereof if you were a
stockholder at the close of business on March 14,
2008.
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VOTING
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YOUR VOTE IS
IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL
MEETING, YOU ARE URGED TO VOTE PROMPTLY TO ENSURE YOUR
PRESENCE
AND THE PRESENCE OF A QUORUM AT
THE ANNUAL MEETING
.
You may
vote your shares by using the Internet or the
telephone. Instructions for using these services are set forth
on the enclosed proxy card. You may also vote your shares by
marking, signing, dating and returning the proxy card in the enclosed
postage-prepaid envelope. If you send in your proxy card and
then decide to attend the Annual Meeting to vote your shares in person,
you may still do so. Your proxy is revocable in accordance with
the procedures set forth in the proxy
statement.
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INTERNET
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Important Notice Regarding the
Availability of Proxy Materials for the Stockholder
Meeting
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AVAILABILITY
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to
be held on May 13, 2008. The proxy statement is available at
www.proxyvote.com.
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By Order of
the Board of Directors,
/s/ Yuri
Itkis
Yuri
Itkis
Chief
Executive Officer
FORTUNET,
INC.
2950
South Highland Drive
Las
Vegas, Nevada 89109
(702)
796-9090
______________________________
PROXY
STATEMENT
______________________________
GENERAL
INFORMATION
Why
am I receiving these proxy materials?
The Board of
Directors (the “Board”) of FortuNet, Inc., a Nevada corporation (the “Company”),
is furnishing these proxy materials to you in connection with the Company’s 2008
annual meeting of stockholders (the “Annual Meeting”). The Annual
Meeting will be held at the offices of the Company, 2950 South Highland Drive,
Las Vegas, Nevada 89109, on May 13, 2008 at 9:00 a.m., Pacific Daylight
Time. You are invited to attend the Annual Meeting and are entitled
and requested to vote on the proposals outlined in this proxy statement (“Proxy
Statement”).
What
proposals will be voted on at the Annual Meeting?
There are
three proposals scheduled to be voted on at the Annual Meeting:
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1.
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To
elect directors to serve until the 2009 annual meeting of stockholders and
until their successors are elected and
qualified.
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2
.
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To
ratify the appointment of Schechter Dokken Kanter Andrews & Selcer
Ltd. as the Company’s independent registered public accounting firm
(hereinafter referred to as “independent auditors”) for the fiscal year
ending December 31, 2008.
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3
.
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To
consider such other business as may properly come before the Annual
Meeting and any adjournment or postponement
thereof.
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As to any
other business which may properly come before the Annual Meeting, the persons
named on the enclosed proxy card will vote according to their best
judgment. The Company does not know now of any other matters to be
presented or acted upon at the Annual Meeting.
What
are the recommendations of the Company’s Board of Directors?
The Board
recommends that you vote “FOR” the election of the directors nominated for
election herein and “FOR” the ratification of the appointment of Schechter
Dokken Kanter Andrews & Selcer Ltd. as the Company’s independent auditors
for the fiscal year ending December 31, 2008.
What
is the record date and what does it mean?
The record
date for the Annual Meeting is March 14, 2008. The record date
is established by the Board of Directors as permitted by Nevada
law. Holders of shares of the Company’s common stock at the close of
business on the record date are entitled to receive notice of the Annual Meeting
and to vote at the Annual Meeting and any adjournments or postponements
thereof.
What
shares can I vote?
Each
stockholder of the Company’s common stock, par value $0.001 per share (“Common
Stock”), is entitled to one vote for each share of Common Stock owned as of the
record date. Holders of Common Stock are referred to herein as
“Stockholders.”
At the record
date, 11,344,612 shares of Common Stock were issued and
outstanding.
What
constitutes a quorum?
The presence
at the Annual Meeting, in person or by proxy, of the holders of a majority of
the shares of Common Stock outstanding and entitled to vote on the record date
will constitute a quorum permitting the Annual Meeting to conduct its
business.
How
are abstentions and broker non-votes treated?
Under Nevada
law, an abstaining vote and a broker non-vote are counted as present and are,
therefore, included for purposes of determining whether a quorum of shares is
present at the Annual Meeting.
A broker
non-vote occurs when a nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have the
discretionary voting instructions with respect to that item and has not received
instructions from the beneficial owner. Under the rules that govern
brokers who are voting with respect to shares held by them as nominee, brokers
have the discretion to vote such shares only on routine
matters. Routine matters include, among others, the election of
directors and ratification of auditors.
Under Nevada
law and the Company’s bylaws, directors must be elected by a plurality of the
votes cast at the election. Abstentions and broker non-votes are not
included in the tabulation of the voting results for the election of directors
and, therefore, do not have any effect on Proposal 1.
Under Nevada
law and the Company’s bylaws, each matter other than the election of directors
is determined by the vote of the holders of a majority of the voting power
present or represented by proxy. For these matters, abstentions are
treated as shares present or represented by proxy, so abstentions have the same
effect as negative votes. For these matters, broker non-votes are not
deemed to be present or represented by proxy and, therefore, do not have any
effect on the outcome of these matters.
What
is the voting requirement to approve each of the proposals?
Proposal 1
. The five (5)
candidates receiving the greatest number of affirmative votes of the shares of
Common Stock present in person, or represented by proxy, and entitled to vote at
the Annual Meeting will be elected, provided a quorum is present and
voting. Abstentions and broker non-votes will not be counted toward a
nominee’s total.
Proposal 2
. Ratification
of the appointment of Schechter Dokken Kanter Andrews & Selcer Ltd. as the
Company’s independent registered public accounting firm will require the
affirmative vote of a majority of the shares of Common Stock present in person,
or represented by proxy, and entitled to vote at the Annual
Meeting. Abstentions and broker non-votes will not be counted as
having been voted on Proposal 2.
All shares of
Common Stock represented by valid proxies will be voted in accordance with the
instructions contained therein. In the absence of instructions,
proxies from holders of Common Stock will be voted FOR Proposals 1 and
2.
How
do I vote my shares?
You can
either attend the Annual Meeting and vote in person or give a proxy to be voted
at the Annual Meeting by mailing the enclosed proxy card.
If your
shares are registered in the name of a brokerage firm, you may be eligible to
vote your shares electronically over the Internet. A large number of
brokerage firms are participating in the Broadridge Financial Solutions, Inc.
(“Broadridge”) online program, which provides eligible Stockholders who receive
a paper copy of this Proxy Statement the opportunity to vote via the
Internet. If your brokerage firm is participating in Broadridge’s
program, your proxy card will provide instructions for voting
online. If your proxy card does not reference Internet information,
please complete and return the proxy card in the postage-paid envelope
provided.
Who
will tabulate the votes?
An automated
system administered by Broadridge will tabulate votes cast by proxy at the
Annual Meeting and a representative of the Company will tabulate votes cast in
person at the Annual Meeting.
Is
my vote confidential?
Proxy
instructions, ballots and voting tabulations that identify individual
Stockholders are handled in a manner that protects your voting privacy. Your
vote will not be disclosed either within the Company or to third parties, except
(i) as necessary to meet applicable legal requirements, or (ii) to allow for the
tabulation and/or certification of the vote.
Can
I change my vote after submitting my proxy?
You may
revoke your proxy at any time before the final vote at the Annual
Meeting. You may do so by one of the following three
ways:
·
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submitting
another proxy card bearing a later
date;
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·
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sending
a written notice of revocation to the Company’s corporate Secretary at
2950 South Highland Drive, Las Vegas, Nevada 89109;
or
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·
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attending
AND voting in person at the Annual
Meeting.
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Who
is paying for this proxy solicitation?
This proxy
solicitation is being made by the Company. This Proxy Statement and
the accompanying proxy were first sent by mail to the Stockholders on or about
April 4, 2008. The Company will bear the cost of soliciting proxies,
including preparation, assembly, printing and mailing of the Proxy
Statement. In addition, the Company will reimburse brokerage firms
and other persons representing beneficial owners of shares for their expenses in
forwarding solicitation materials to such beneficial owners. Proxies
may be solicited by certain of the Company’s directors, officers and regular
employees, without additional compensation, either personally, by telephone,
facsimile, or telegram.
How
can I find out the voting results?
The Company
will announce the preliminary results at the Annual Meeting and publish the
final results in the Company’s Quarterly Report on Form 10-Q for the second
quarter of fiscal 2008.
How
can I avoid having duplicate copies of the proxy statements sent to my
household?
Some brokers
and other nominee record holders may be participating in the practice of
“householding” proxy statements and annual reports, which results in cost
savings for the Company. The practice of “householding” means that
only one copy of the proxy statement and annual report will be sent to multiple
Stockholders in a Stockholder’s household. The Company will promptly
deliver a separate copy of either document to any Stockholder who contacts the
Company’s corporate Secretary at 2950 South Highland Drive, Las Vegas, Nevada
89109 requesting such copies. The “householding” election appears on the Proxy
Card accompanying this Proxy Statement. If a Stockholder is receiving multiple
copies of the proxy statement and annual report at the Stockholder’s household
and would like to receive a single copy of those documents for a Stockholder’s
household in the future, that Stockholder should indicate “YES” when voting his
or her proxy. The Stockholders’ affirmative or implied consent will
be perpetual unless the Stockholder withholds or revokes it. If the
Stockholder wishes to continue to receive separate proxy statements and annual
reports for each account in the Stockholder’s household, the Stockholder must
withhold his or her consent to the Company’s “householding” program by so
indicating when voting the proxy.
Please note that if a Company
Stockholder does not respond, the Stockholder will be deemed to have consented
and “householding” will begin 60 days after the mailing of this
document.
Each
Stockholder may revoke his or her consent to “householding” at any time by
contacting Broadridge, either by calling toll-free (800) 542-1061, or by writing
to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York
11717. If a Stockholder revokes his or her consent to participate in
the “householding” program, or if a Stockholder submits a written or oral
request to the Company to the attention of the Corporate Secretary, 2950 South
Highland Drive, Las Vegas, Nevada 89109, each stockholder at the Stockholder’s
address will receive individual copies of the Company’s disclosure documents
within 30 days of receipt of the Stockholder’s revocation or
request.
When
are stockholder proposals due for next year’s annual meeting?
Requirements for Stockholder
Proposals to be Brought Before an Annual Meeting.
For
stockholder proposals to be considered properly brought before an annual meeting
by a stockholder, the stockholder must have given timely notice therefor in
writing to the Secretary of the Company. To be timely for the
Company’s 2009 Annual Meeting of Stockholders, a stockholder’s notice must be
delivered to or mailed and received at the principal executive offices of the
Company between January 14, 2009 and February 13, 2009. A
stockholder’s notice to the Secretary must set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting, (ii) the name
and record address of the stockholder proposing such business and the beneficial
owner, if any, on whose behalf the proposal is made, (iii) the text of the
proposal or business (including the text of any resolutions proposed for
consideration) and the reasons for conducting such business at the annual
meeting, (iv) the class and number of shares of the Company which are
beneficially owned by the stockholder and the beneficial owner, if any, on whose
behalf the proposal is made, (v) any material interest in such business of the
stockholder or the beneficial owner, if any, on whose behalf the proposal is
made; (vi) any other information that is required to be provided by the
stockholder pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the “Exchange Act”) in such stockholder’s capacity as a
proponent of a stockholder proposal; (vii) a representation that the stockholder
is a holder of record of stock of the Company entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to propose such
business; and (viii) a representation whether the stockholder or beneficial
owner, if any, intends or is part of a group which intends (A) to deliver a
proxy statement and/or form of proxy to holders of at least the percentage of
the Company’s outstanding capital stock required to approve or adopt the
proposal or (B) otherwise to solicit proxies from stockholders in support of
such proposal.
Requirements for Stockholder
Proposals to be Considered for Inclusion in the Company’s Proxy Materials.
Stockholder proposals submitted pursuant to Rule 14a-8 under the Exchange
Act and intended to be presented at the Company’s 2009 Annual Meeting of
Stockholders must be received by the Company not later than December 6, 2008 in
order to be considered for inclusion in the Company’s proxy materials for that
meeting.
PROPOSAL
1
ELECTION
OF DIRECTORS
The Board is
currently comprised of five directors, each of whose terms expire at the Annual
Meeting. Currently, the Board is composed of the following five
members:
Yuri Itkis
Boris Itkis
Merle Berman
Darrel Johnson
Harlan W. Goodson
The
Nominating and Corporate Governance Committee of the Board has recommended, and
the Board has nominated, Yuri Itkis, Boris Itkis, Merle Berman, Darrel Johnson
and Harlan W. Goodson for re-election as directors of the Company, each to serve
a term expiring at the 2009 annual meeting of stockholders and until a qualified
successor is elected or until the director’s earlier resignation or
removal. Each of the nominees has consented, if elected, to serve
until his or her term expires. If each of these nominees is elected,
the Board will be comprised of five directors with one vacancy that can be
filled by a majority of the directors then in office. The Board has
no reason to believe that any of the nominees will not serve if elected, but if
any one of them should become unavailable to serve as a director, and if the
Board designates a substitute nominee, the persons named as proxies will vote
for the substitute nominee designated by the Board.
Director-Nominees
Yuri
Itkis
Age
66
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Mr. Itkis
is a co-founder of the Company and has been the Chief Executive Officer
and Chairman of the Board since 1989. He has also previously served as the
Treasurer and Secretary of the Company. For nearly 20 years prior to
founding the Company, Mr. Itkis was a Senior Scientist working on
NASA’s and foreign research institutions’ projects. He also taught
undergraduate and graduate courses in several United States and foreign
colleges and he is an author of numerous technical books, articles and
patents. From 1994 through 1998, Mr. Itkis served as a director of
Interactive Flight Technologies, Inc., a maker of in-flight gaming and
entertainment systems. Mr. Itkis is also the co-founder, a director
and the president, secretary and treasurer of the Company’s wholly-owned
subsidiary, Millennium Games, Inc. Mr. Itkis holds a Candidate of
Science degree (equivalent of a Ph.D.) in electrical engineering from the
Moscow Institute of Control Problems and master of science degree in
administrative sciences from Johns Hopkins University. Yuri Itkis is the
father of Boris Itkis.
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Boris
Itkis
Age
39
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Mr. Itkis
is a co-founder of the Company and has served as its Director of
Engineering since 1989 and as Chief Technical Officer since 2004. He was
appointed to the Board in January 2006 and as Vice President of
Engineering, Secretary and Treasurer in February 2006. He is also the
inventor or co-inventor of several issued and pending patents in the
Company’s portfolio. From 1994 through 1998, he served as a director of
Interactive Flight Technologies, Inc., a maker of in-flight gaming and
entertainment systems. Mr. Itkis is also a director of
Millennium Games, Inc., manufacturer, distributor and lessor of electronic
bingo and related equipment toys. Mr. Itkis holds a bachelor of
science degree in electrical engineering from the University of
California, Los Angeles. Boris Itkis is the son of Yuri
Itkis.
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Merle
Berman
Age
61
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Ms. Berman
joined the Board in 2006. She is also a member of our Audit Committee and
our Nominating and Corporate Governance Committee and serves as
chairperson of our Compensation Committee. Ms. Berman is a three-term
Nevada legislator, where she served from 1996 to 2001. As a member of the
Nevada Assembly, Ms. Berman served on the Legislative Activities,
Judiciary, Infrastructure, Elections, Procedures, and Ethics, Health and
Human Services, Commerce and Labor, and Government Affairs Committees.
Since 2001, Ms. Berman has been a private real estate investor and a
member of the Nevada Ethics Commission. Ms. Berman holds a bachelor’s
degree from Pennsylvania State University.
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Harlan
W. Goodson
Age
61
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Mr. Goodson
joined the Board in 2006. He also serves as chairman of our Nominating and
Corporate Governance Committee. Mr. Goodson is a sole practitioner of
law. Previously, he was a partner in the law firm of Franchetti
& Goodson. Prior to that, he was Senior Counsel at the
Sacramento, California office of Holland & Knight LLP from 2003 to
2006. Mr. Goodson practices in the area of gaming law and Indian
gaming regulation. Prior to joining Holland & Knight, Mr. Goodson
was the Director of California’s Division of Gambling Control from
January 1999 to July 2003. Mr. Goodson is listed in the
2000 edition of Who’s Who in American Law, and in 2002, he received the
International Masters of Gaming Law inaugural Regulator of the Year award.
Mr. Goodson is also listed in America’s Best Lawyers in the practice of
gaming law. Mr. Goodson received his undergraduate degree from
Golden Gate University and his law degree from the John F. Kennedy School
of Law. He is a member of the California
Bar.
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Darrel
Johnson
Age
58
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Since
2006, Mr. Johnson has been the chief financial executive of Pat Clark
Enterprises, a holding company whose assets include a beverage
distributorship, an automobile dealership, a motorcycle dealership and a
custom hauler and trailer dealership. From 1997 to 2006, Mr.
Johnson was the chief financial officer of Desert Meats & Provisions,
a wholesale meat distributor. From 1991 to 1997, Mr. Johnson
was president of Morevest Arizona, Inc., a chain of retail camera shops
and photo developing shops in Arizona, Nevada and New
Mexico. Prior to that, Mr. Johnson was the general manager of a
rental car franchise; chief financial officer of a holding company whose
assets included auto dealerships, rental car agencies, aircraft
operations, real estate and restaurants; controller of a manufacturing
firm; and an auditor with a certified public accounting
firm. If elected, it is expected that Mr. Johnson would be
appointed as chairman of our Audit Committee. Mr. Johnson holds
a bachelor’s degree in accounting from Texas Tech University and has been
a certified public accountant since
1973.
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THE
BOARD RECOMMENDS A VOTE “FOR” THE ELECTION
TO
THE BOARD OF EACH OF THE NOMINEES NAMED ABOVE
BOARD
AND CORPORATE GOVERNANCE MATTERS
Board
Committees and Meetings
Directors are
elected by the stockholders and hold office until the next annual meeting
following their election and until their successors are duly elected and
qualified. Actions by the Board must be approved by a majority of directors. In
the event of a tie vote of the directors, our Chairman of the Board will cast an
additional tie-breaking vote. Vacancies on the Board and newly created
directorships resulting from any increase in the authorized number of directors
will be filled by a majority of the directors then in office, even if less than
a quorum, or by the sole remaining director.
During fiscal
2007, the Board held six meetings. Each director attended at least
75% of the total number of the meetings of the Board, with the exception of Mr.
Johnson, who attended 75% of the meetings of the Board held following his
election. The Board has three committees: Audit Committee, Compensation
Committee, and Nominating and Corporate Governance Committee. Each director on
the Compensation Committee attended at least 75% of the meetings of the
committee with the exception of Mr. Goodson, who attended all of the meetings of
the Compensation Committee after being appointed thereto. Each
director of the Audit Committee attended 75% of the meetings of the committee
with the exception of Messrs. Goodson and Johnson, who attended all of the
meetings of the Audit Committee subsequent to their appointment
thereto. From time to time, the Board may establish other committees
to facilitate the management of our business and operations. The
members of the committees during fiscal 2007 are identified in the following
table:
Director
|
Audit
|
Compensation
|
Nominating
and Corporate Governance
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Yuri
Itkis
|
|
|
|
Boris
Itkis
|
|
|
|
Merle
Berman
|
X
|
Chair
|
X
|
Darrel
Johnson
|
Chair
|
|
|
Harlan
W. Goodson
|
X
|
X
|
Chair
|
Assuming that
all of the nominees identified herein are elected and a sixth director is not
elected at the Annual Meeting, it is expected that the members of the committees
following the Annual Meeting will be as follows:
Director
|
Audit
|
Compensation
|
Nominating
and Corporate Governance
|
Yuri
Itkis
|
|
|
|
Boris
Itkis
|
|
|
|
Merle
Berman
|
X
|
Chair
|
X
|
Darrel
Johnson
|
Chair
|
|
|
Harlan
W. Goodson
|
X
|
X
|
Chair
|
Annual
Meeting of Stockholders
The Company
encourages, but does not require, its Board members to attend the annual
stockholders meeting.
Committees
of the Board of Directors
The Audit
Committee met four times in fiscal 2007. The Audit Committee
currently consists of three members, Ms. Berman and Messrs. Goodson and Johnson,
each of whom are independent. Mr. Johnson is currently the chairman
of the Audit Committee. All of the members of the Audit Committee are
able to read and understand fundamental financial statements. Our
Board of Directors has determined that Mr. Johnson is an “audit committee
financial expert” as defined by Item 407(d)(5) of Regulation S-K as a
result of his education and prior employment experience as described
above.
Our Audit
Committee assists the Board in its oversight of the integrity of our financial
statements and oversees the qualifications, independence and performance of our
independent auditor. The Audit Committee has the sole direct responsibility for
the selection, appointment, evaluation and retention of our independent auditor
and for overseeing its work. All audit services and non-audit services to be
provided to us by our independent auditor must be approved in advance by our
Audit Committee. The Board has adopted a written charter for the Audit
Committee, which is available on our web site, www.fortunet.com.
The
Compensation Committee met four times in fiscal 2007. The
Compensation Committee consists of two members, Ms. Berman and Mr. Goodson, each
of whom are independent. Ms. Berman is the chairperson of the
Compensation Committee. The Compensation Committee reviews and makes
recommendations to the Board regarding the compensation and benefits of our
directors, executive officers, and senior management as well as the Compensation
Committee administers the 2005 Stock Incentive Plan and establishes and
administers other compensation and employee benefit policies. The Compensation
Committee reviews and approves the corporate goals and objectives relevant to
the compensation of the President and the other officers of the Company for the
upcoming year, evaluates individual current year performance in light of the
established goals and recommends to the Board of Directors the annual
compensation of the President and other executive officers, including salary and
bonus targets, for the upcoming year. The Compensation Committee
reviews the evaluation process and compensation structure for other members of
senior management and provides oversight regarding management’s decisions
concerning the performance and compensation of such senior management
personnel. The Compensation Committee may receive and review reports
from the Company regarding the status of director compensation in relation to
other U.S. corporations or similar size and a peer industry survey group and
make recommendations to the Board of Directors regarding changes in director
compensation. The Compensation Committee has the authority to retain,
at the Company’s expense, a compensation consulting firm to assist in the
evaluation of director or executive compensation and any legal and other advisor
that it deems necessary. The Compensation Committee may delegate any
of its responsibilities to one or more subcommittees, each of which will be
comprised of two or more members. The Board has adopted a written
charter for the Compensation Committee, which is available on our web site,
www.fortunet.com.
The
Nominating and Corporate Governance Committee met two times in fiscal
2007. The Nominating and Corporate Governance Committee consists of
two members, Ms. Berman and Mr. Goodson, each of whom are independent. Mr.
Goodson is the chairman of our Nominating and Corporate Governance Committee.
Our Nominating and Corporate Governance Committee is responsible for
identifying, evaluating, recruiting and recommending to the Board nominees for
election to the Board by the stockholders, including annual evaluations relating
to the renomination of incumbents and proposed nominees to fill vacancies that
occur between stockholders’ meetings. In addition, the Nominating and Corporate
Governance Committee reviews and makes recommendations to the Board regarding
corporate governance matters, policies and practices. Our Board has adopted a
written charter for the Nominating and Corporate Governance Committee, which is
available on our web site, www.fortunet.com.
As provided
in its charter, the Nominating and Corporate Governance Committee will give
consideration to candidates recommended by the Stockholders of the
Company. Pursuant to the bylaws of the Company, Stockholders wishing
to recommend candidates for consideration by the Nominating and Corporate
Governance Committee may do so by writing to the Secretary of the Company at
2950 South Highland Drive, Las Vegas, Nevada 89109 providing (i) as to each
person whom the stockholder proposes to nominate, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Exchange Act, including, without
limitation, such person’s written consent to be named in the proxy statement as
a nominee and to serve as a director if elected as well as (A) such person’s
name, age, business address and residence address, (B) his or her principal
occupation or employment, (C) the class and number of shares of the Company that
are beneficially owned by such person, and (D) a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nominations are
to be made by the stockholder; and (ii) as to such stockholder (A) the name and
address, as they appear on the Company’s books, of such stockholder and the
beneficial owner, if any, on whose behalf the nomination is made, and (B) the
class and number of shares of the Company which are beneficially owned by such
stockholder and/or the beneficial owner, if any, on whose behalf the nomination
is made, and any material interest of such stockholder or owner, not less than
90 days nor more than 120 days in advance of the first anniversary of the
preceding year’s annual meeting of stockholders to assure time for meaningful
consideration by the Nominating and Corporate Governance Committee. There are no
differences in the manner in which the Nominating and Corporate Governance
Committee evaluates nominees for director based on whether the nominee is
recommended by a stockholder. Although the Nominating and Corporate
Governance Committee has the authority to retain third parties to identify or
assist in identifying or evaluating potential nominees, it has not done
so.
In reviewing
potential candidates for the Board, the Nominating and Corporate Governance
Committee considers the background and reputation of potential nominees in terms
of character, person and professional integrity, business and financial
experience and acumen, how they would complement the other members of the Board
in providing a diversity of expertise and experience, their availability to
devote sufficient time to Board duties and any other criteria established by the
Board. In considering whether to recommend a director for
re-election, the Nominating and Corporate Governance Committee will consider the
individual’s past attendance at meetings and participation in and contributions
to the activities of the Board and its committees. The Nominating and
Corporate Governance Committee will also consider the effect of any change in a
director’s principal occupation or business association from that held when he
or she became a member of the Board and the appropriateness of continued
membership under the circumstances. The Nominating and Corporate
Governance Committee will ensure that members of the Board’s committees are
comprised of independent directors that meet the independence standards
established by the Board. A detailed description of the criteria used
by the Nominating and Corporate Governance Committee in evaluating potential
candidates may be found in the charter of the Nominating and Corporate
Governance Committee which is posted on our web site is
www.fortunet.com.
Director
Independence
Under
independence standards established by the Board, a director does not qualify as
independent unless the Board affirmatively determines that the director is
independent of the Company. A director will not be considered
independent if he or she (i) accepts, directly or indirectly, any consulting,
advisory or other compensatory fee from the Company or any of its subsidiaries
other than in his or her capacity as a member of the Board or any committee
thereof, (ii) has participated in the preparation of the financial statements of
the Company or any of its subsidiaries at any time during the three years
preceding his or her appointment to the Board of any committee thereof, (iii) is
an affiliate of the Company or any of its subsidiaries, (iv) has a material
relationship with the Company or any of its subsidiaries (either directly or as
a partner, stockholder or officer of an organization that has a relationship
with the Company or a subsidiary and determined not merely from the standpoint
of the director but also from that of any person or organization with which the
director is affiliated) that may interfere with the exercise of his or her
independence from management and the Company, or (v) does not meet any other
independence requirement under the rules promulgated by the Nasdaq Global Market
under its listing standards that require a majority of the Company’s directors
to be independent.
The Board has
affirmatively determined that each of Ms. Berman and Messrs. Johnson and Goodson
satisfy the independence standards and qualify as independent
directors.
Executive
Sessions
Our
independent directors meet in executive session with no management directors or
employees present at least three (3) times last year. Mr.
Goodson presides over these executive sessions as the presiding
director.
Access
to Corporate Governance Policies
Stockholders
may access the Company’s committee charters, the code of ethics and corporate
governance guidelines at Company’s web site at
www.fortunet.com. Copies of the Company’s committee charters,
corporate governance guidelines and code of ethics will be provided to any
stockholder upon written request to the Secretary of the Company at 2950 South
Highland Drive, Las Vegas, Nevada 89109.
Communication
between Interested Parties and Directors
Stockholders
and other interested parties may communicate with individual directors
(including the Presiding Director), the members of a committee of the Board, the
independent directors as a group or the Board as a whole by addressing the
communication to the named director, the committee, the independent directors as
a group or the Board as a whole c/o the Secretary of the Company, 2950 South
Highland Drive, Las Vegas, Nevada 89109 or via electronic mail to
secretary@fortunet.com. The Secretary of the Company will forward all
correspondence to the named director, committee, independent directors as a
group or the Board as a whole, except for spam, junk mail, mass mailings,
product complaints or inquiries, job inquiries, surveys, business solicitations
or advertisements, or patently offensive or otherwise inappropriate material.
The Secretary of the Company may forward certain correspondence, such as
product-related inquiries, elsewhere within the Company for review and possible
response.
Director
Compensation
During 2007,
all independent directors received an annual fee of $5,000, payable in quarterly
installments in arrears. In addition, each independent director
received an additional fee of $1,000 for each meeting of the Board that such
director attended; $500 for each meeting of the Audit Committee, Compensation
Committee or Nominating and Corporate Governance Committee that such director
attended as a non-chairperson committee member and each meeting of independent
directors in executive session with no management directors or employees present
that such director attended; and $750 for each meeting of the Audit Committee,
Compensation Committee or Nominating and Corporate Governance Committee that
such director attended as a chairperson. In addition, each
independent director was awarded 2,000 restricted shares of the Company’s Common
Stock under the Company’s 2005 Stock Incentive Plan for Independent
Directors. The chairperson of the Audit Committee as awarded an
additional 2,000 restricted shares of the Company’s Common Stock under the
Company’s 2005 Stock Incentive Plan for Independent Directors. All
such restricted shares vested in four equal installments at the end of each
fiscal quarter.
During 2008,
all independent directors will receive an annual fee of $5,000, payable in
quarterly installments in arrears. In addition, each independent director will
receive an additional fee of $1,000 for each meeting of the Board that such
director attends; $500 for each meeting of the Audit Committee, Compensation
Committee or Nominating and Corporate Governance Committee that such director
attends as a non-chairperson committee member and each meeting of independent
directors in executive session with no management directors or employees present
that such director attends; and $750 for each meeting of the Audit Committee,
Compensation Committee or Nominating and Corporate Governance Committee that
such director attends as a chairperson. In addition, each independent
director will be awarded 3,000 restricted shares of the Company’s Common Stock
under the Company’s 2005 Stock Incentive Plan for Independent
Directors. The chairperson of the Audit Committee will be awarded an
additional 3,000 restricted shares of the Company’s Common Stock under the
Company’s 2005 Stock Incentive Plan for Independent Directors. All
such restricted shares shall vest in four equal installments at the end of each
fiscal quarter.
Relationships
Among Directors or Executive Officers
Yuri Itkis is
the father of Boris Itkis. During fiscal year 2007, Yuri Itkis’ wife
was an employee of the Company. As of February 2008, the Company’s
corporate controller is the wife of director and chief technology officer Boris
Itkis.
Code
of Ethics
The Company
has adopted a Code of Ethics for its directors, officers and other employees,
including our principal executive officer, principal financial officer and
principal accounting officer. The Company will post on its website
any amendments to, or waivers from, any provision of its Code of
Ethics. A copy of the Code of Ethics is available on the Company’s
web site, www.fortunet.com.
TRANSACTIONS WITH RELATED
PERSONS
For their
service as members of the Board during 2007, each of Ms. Berman and Messrs.
Johnson and Goodson were paid cash in the amount of $5,000, payable in quarterly
installments in arrears. In addition, each of Ms. Berman and Messrs. Johnson and
Goodson received an additional fee of $1,000 for each meeting of the Board that
they attended; $500 for each meeting of the Audit Committee, Compensation
Committee or Nominating and Corporate Governance Committee that they attended as
a non-chairperson committee member and each meeting of independent directors in
executive session with no management directors or employees present that each
attended; and $750 for each meeting of the Audit Committee, Compensation
Committee or Nominating and Corporate Governance Committee that each director
attended as a chairperson. Additionally, Ms. Berman and
Messrs. Johnson and Goods were granted awards of 2,000 restricted shares of the
Company’s Common Stock pursuant to the Company’s 2005 Stock Incentive Plan for
Independent Directors, all of which shares have fully vested. For his
service as Chairman of the Audit Committee during 2007, Mr. Johnson was granted
an additional award of 2,000 restricted shares of the Company’s Common Stock
pursuant to the Company’s 2005 Stock Incentive Plan for Independent Directors,
all of which shares have fully vested. For her service as a member of
the Audit Committee during 2007, Ms. Berman was granted additional awards
of 2,000 restricted shares of the Company’s Common Stock pursuant to the
Company’s 2005 Stock Incentive Plan for Independent Directors, all of the shares
have fully vested.
Corporate
governance guidelines adopted by the Board provide that any transaction that is
required to be reported under Item 404(a) of Regulation S-K promulgated by the
Securities and Exchange Commission must be reviewed, approved or ratified by the
Audit Committee, the Nominating and Corporate Governance Committee or another
committee consisting entirely of independent directors under applicable Nasdaq
rules. The types of transactions covered by this policy include but
are not limited to (i) the purchase, sale or lease of assets to or from a
related person, (ii) the purchase or sale of products or services to or from a
related person, or (iii) the lending or borrowing of funds from or to a related
person. Approval of transactions with related persons shall be at the
discretion of the reviewing body, but the reviewing body shall consider (A) the
consequences to the Company of consummating or not consummating the transaction,
(B) the extent to which the Company has a reasonable opportunity to obtain the
same or a substantially similar benefit of the transaction from a person or
entity other than the related person, and (C) the extent to which the terms and
conditions of such transaction are more or less favorable to the Company and its
stockholders than the terms and conditions upon which the Company could
reasonably be expected to negotiate with a person or entity other than the
related person. Further, our code of ethics requires our directors,
officers and employees to raise with our chief compliance officer any material
transaction or relationship that could reasonably be expected to give rise to a
personal conflicts of interest. Our corporate governance guidelines
also prohibit the Company’s making of any personal loans to directors, executive
officers or their immediate family members.
Executive
Officers
The following
sets forth certain information regarding the Company’s executive
officers:
|
|
|
Yuri
Itkis
|
66
|
Chairman
of the Board, Chief Executive Officer
|
Boris
Itkis
|
39
|
Vice
President of Engineering, Secretary, Treasurer and Chief Technical
Officer
|
Jack B.
Coronel
|
42
|
Chief
Marketing Officer and Director of Compliance and Strategic
Development
|
Kevin
A. Karo
|
39
|
Chief
Financial Officer
|
Yuri
Itkis
.
Mr. Itkis is a co-founder of the Company and has been the Chief
Executive Officer and Chairman of the Board since 1989. He has also previously
served as the Treasurer and Secretary of the Company. For nearly 20 years
prior to founding the Company, Mr. Itkis was a Senior Scientist working on
NASA’s and foreign research institutions’ projects. He also taught undergraduate
and graduate courses in several United States and foreign colleges and he is an
author of numerous technical books, articles and patents. From 1994 through
1998, Mr. Itkis served as a director of Interactive Flight Technologies,
Inc., a maker of in-flight gaming and entertainment systems. Mr. Itkis is
also the co-founder, a director and the president, secretary and treasurer of
the Company’s wholly-owned subsidiary, Millennium Games, Inc. Mr. Itkis
holds a Candidate of Science degree (equivalent of a Ph.D.) in electrical
engineering from the Moscow Institute of Control Problems and master of science
degree in administrative sciences from Johns Hopkins University. Yuri Itkis is
the father of Boris Itkis.
Boris
Itkis
.
Mr. Itkis is a co-founder of the Company and has served as its
Director of Engineering since 1989 and as Chief Technical Officer since 2004. He
was appointed to the Board in January 2006 and as Vice President of Engineering,
Secretary and Treasurer in February 2006. He is also the inventor or co-inventor
of several issued and pending patents in the Company’s portfolio. From 1994
through 1998, he served as a director of Interactive Flight Technologies, Inc.
Mr. Itkis is also a director of Millennium Games, Inc. Mr. Itkis holds a
bachelor of science degree in electrical engineering from the University of
California, Los Angeles. Boris Itkis is the son of Yuri
Itkis.
Jack B.
Coronel
.
Mr. Coronel has been the Director of Compliance and Strategic
Development since joining the Company in 2002 and was appointed as Chief
Marketing Officer in 2005. Concurrent with his employment with the Company,
Mr. Coronel also serves as Chief Executive Officer and a director of Las
Vegas Card, Inc., a credit card marketing company. Prior to that, he
was a founder of Consumer Rewards International and that company’s chief
executive officer from 1996 until 2000. In that role, Mr. Coronel was
involved in the development of the Visa Las Vegas and Palm Springs Desert
Resorts credit card reward programs. Mr. Coronel received his undergraduate
degree,
cum laude
, from
Claremont McKenna College and a law degree from Southwestern University School
of Law.
Kevin A.
Karo.
Mr.
Karo has served as the Company’s Director of Finance since October 2007 and has
served as the Company’s Chief Financial Officer since January
2008. Prior to joining the Company, Mr. Karo served as the Chief
Financial Officer of Ocean Logistics, a warehousing and trucking company, from
April 2007 to September 2007. From June 2006 to February 2007, Mr.
Karo served as the Vice President of Finance for Rhodes Homes, a home builder in
Las Vegas. From June 2005 to June 2006, Mr. Karo was a Senior Manager
with PricewaterhouseCoopers. From April 2004 to June 2005, Mr. Karo
was Vice President and Controller for Colony Resorts LVH Acquisitions, LLC,
which owns and operates the Las Vegas Hilton. From 1996 to April
2004, Mr. Karo held various positions as an accountant with Coopers &
Lybrand and PricewaterhouseCoopers. Mr. Karo received his Bachelor of
Science degree in accounting from the University of Southern California and is a
Certified Public Accountant.
PROPOSAL
2
RATIFICATION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Schechter
Dokken Kanter Andrews & Selcer Ltd. has served as the Company’s independent
registered public accounting firm since 2000 and has been appointed by the Board
to continue as the Company’s independent registered public accounting firm for
the Company’s fiscal year ending December 31, 2008. Although the
Company is not required to seek stockholder approval of its selection of
independent registered public accounting firm, the Board believes it to be sound
corporate governance to do so. If the appointment is not ratified,
the Board will investigate the reasons for stockholder rejection and will
reconsider its selection of its independent registered public accounting
firm. Even if the appointment is ratified, the Audit Committee, in
its discretion, may direct the appointment of a different independent registered
public accounting firm at any time during the fiscal year if the Audit Committee
determines that such a change would be in the Company’s and its stockholders’
best interests.
A
representative of Schechter Dokken Kanter Andrews & Selcer Ltd. is expected
to be present at the Annual Meeting. The representative will have an
opportunity to make a statement if he or she desires to do so, although we do
not expect him or her to do so. The representative is expected to be
available to respond to appropriate questions.
Audit
and Non-Audit Fees
The following
table presents fees for professional audit services rendered by Schechter Dokken
Kanter Andrews & Selcer Ltd. for the audit of the Company’s annual financial
statements for the years ended December 31, 2007 and December 31, 2006 and
fees billed for other services rendered by Schechter Dokken Kanter Andrews &
Selcer Ltd. during those periods.
|
|
Year
Ended
December
31, 2007
|
|
|
Year
Ended
December
31, 2006
|
|
Audit Fees
(1)
|
|
$
|
168,419
|
|
|
$
|
157,987
|
|
Audit-Related
Fees
|
|
|
—
|
|
|
|
—
|
|
Tax Fees
(2)
|
|
$
|
29,500
|
|
|
|
31,687
|
|
All
Other Fees
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
197,919
|
|
|
$
|
189,674
|
|
(1)
|
Audit
Fees include professional services rendered in connection with the audit
of the Company’s annual financial statements, reviews of financial
statements included in the Company’s Quarterly Reports on Form 10-Q
services provided in connection with other statutory and regulatory
filings. The fees in fiscal 2006 included fees for services
related to our initial public offering and assistance with other
regulatory filings.
|
(2)
|
Tax
Fees include professional services in connection with the preparation of
federal and state income tax
returns.
|
In making its
recommendation to ratify the appointment of Schechter Dokken Kanter Andrews
& Selcer Ltd. as the Company’s independent registered public accounting firm
for the fiscal year ending December 31, 2008, the Audit Committee has considered
whether services other than audit and audit-related services provided by
Schechter Dokken Kanter Andrews & Selcer Ltd. are compatible with
maintaining the independence of Schechter Dokken Kanter Andrews & Selcer
Ltd. The Audit Committee has reviewed the non-audit services provided
by Schechter Dokken Kanter Andrews & Selcer Ltd. and determined that the
provision of these services during fiscal 2007 is compatible with maintaining
Schechter Dokken Kanter Andrews & Selcer Ltd’s independence.
Audit
Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Registered Public Accounting Firm
The Audit
Committee pre-approves all audit and permissible non-audit services provided by
its independent registered public accounting firm. These services may
include audit services, audit-related services, tax services and other
services. The Audit Committee has adopted a policy for the
pre-approval of services provided by its independent registered public
accounting firm. Under the policy, the independent registered public
accounting firm will not be engaged to perform any non-audit service prohibited
by law or regulation or to provide any non-audit service unless it is
affirmatively determined that performing such service is compatible with
maintaining the independent registered public accounting firm’s
independence. The Audit Committee may delegate its pre-approval
authority to any member of the Audit Committee, and the decisions of any such
member to whom pre-approval authority is delegated must be presented to the full
Audit Committee at its next scheduled meeting.
THE
BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT
OF
SCHECHTER
DOKKEN KANTER ANDREWS & SELCER LTD. AS THE COMPANY’S
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
FOR
THE YEAR ENDING DECEMBER 31, 2008
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following
table sets forth certain information known to the Company with respect to the
beneficial ownership as of March 14, 2008, by (i) all persons who are
beneficial owners of five percent (5%) or more of the Company’s Common Stock,
(ii) each director and nominee, (iii) the Named Executive Officers (as
defined in the “Executive Compensation” section below), and (iv) all
current directors and executive officers as a group.
As of March
14, 2008, 11,344,612 shares of the Company’s Common Stock were issued and
outstanding. The amounts and percentages of Common Stock beneficially
owned are reported on the basis of regulations of the Securities and Exchange
Commission (“SEC”) governing the determination of beneficial ownership of
securities. Under the SEC rules, a person is deemed to be a
“beneficial owner” of a security if that person has or shares “voting power,”
which includes the power to vote or to direct the voting of such security, or
“investment power,” which includes the power to dispose of or to direct the
disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which that person has a right to acquire
beneficial ownership within 60 days. Under these rules, more than one
person may be deemed a beneficial owner of securities as to which such person
has no economic interest. Unless otherwise noted, the address of each
beneficial owner listed in the table is c/o FortuNet, Inc., 2950 Highland Drive,
Las Vegas, Nevada 89109.
|
|
Number
of Shares
Beneficially
Owned
|
|
|
|
|
|
|
|
|
Directors
and Named Executive Officers
|
|
|
|
|
|
|
Yuri
Itkis (1)
|
|
|
8,266,500
|
|
|
|
72.9
|
%
|
Boris
Itkis (2)
|
|
|
83,500
|
|
|
|
*
|
|
Merle
Berman (3)
|
|
|
7,250
|
|
|
|
*
|
|
Harlan
W. Goodson (4)
|
|
|
6,000
|
|
|
|
*
|
|
Darrel
Johnson (5)
|
|
|
8,667
|
|
|
|
*
|
|
Jack B.
Coronel
|
|
|
50,000
|
|
|
|
*
|
|
Directors
and executive officers as a group (8 persons) (6)
|
|
|
8,426,729
|
|
|
|
74.3
|
%
|
Persons
owning more than 5% of the Company’s common stock
|
|
|
|
|
|
|
|
|
Yuri
Itkis (1)
|
|
|
8,266,500
|
|
|
|
72.9
|
%
|
|
|
|
|
|
|
|
|
|
* Less than
1%
(1)
|
Includes
8,266,500 shares held in the name of the Yuri Itkis Gaming Trust of 1993,
of which Yuri Itkis is the sole trustee and
beneficiary.
|
(2)
|
Boris
Itkis is the son of Yuri Itkis.
|
(3)
|
Includes
3,000 shares of common stock that vest in four equal quarterly
installments on March 31, June 30, September 30 and December 31,
2008. Includes 1,000 shares held by Ms. Berman as trustee of
the Merle Berman 2003 Family Trust. As trustee, Ms. Berman has
the power to vote and dispose of the shares and therefore may be deemed to
be the beneficial owner of the shares. Ms. Berman disclaims
beneficial ownership of the shares except to the extent of her pecuniary
interest in the shares.
|
(4)
|
Includes
3,000 shares of common stock that vest in four equal quarterly
installments on March 31, June 30, September 30 and December 31,
2008.
|
(5)
|
Includes
6,000 shares of common stock that vest in four equal quarterly
installments on March 31, June 30, September 30 and December 31,
2008.
|
(6)
|
See
notes 1 through 5.
|
EXECUTIVE COMPENSATION
Summary
Compensation Table for 2006 and 2007
The following
table sets forth certain information concerning compensation of each person that
served as the principal executive officer of the Company during the fiscal years
ended December 31, 2006 and December 31, 2007, two other most highly
compensated executive officers of the Company during the fiscal years ended
December 31, 2006 and December 31, 2007, and an individual who would have
been one of the two most highly compensated executive officers during the fiscal
year ended December 31, 2007 but for the fact that the individual was not an
executive officer of the Company as of December 31, 2007 (collectively, the
“Named Executive Officers”):
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
All
Other Compensation
($)
|
Total
($)
|
Yuri
Itkis
Chief
Executive Officer
|
2007
2006
|
$ 182,784
$ 169,402
|
—
—
|
—
—
|
$ (1)
9,393
$ (1)
9,474
|
$192,177
$178,876
|
Boris
Itkis
Chief
Technical Officer
|
2007
2006
|
$ 120,000
$ 111,923
|
—
—
|
—
—
|
—
—
|
$120,000
$111,923
|
Jack B.
Coronel
Chief
Marketing Officer
|
2007
2006
|
$ 164,867
$ 131,923
|
—
$113,300
|
—
$500,004
(2)
|
—
|
$164,867
$745,227
|
(1)
|
This
amount consists of: (i) $7,000, the aggregate cost to Fortunet for Mr.
Itkis’ use of an automobile owned by the Company and (ii) the Company’s
payment of $2,474 and $2,393, respectively, to insure the Company owned
automobile used by Mr. Itkis throughout fiscal years ending December 31,
2006 and December 31, 2007.
|
(2)
|
Represents
the aggregate fair value of the grant of 55,556 shares of restricted stock
on January 30, 2006 computed with reference to our initial public offering
price of $9.00 per share.
|
Employment
Agreements
As our Chief
Executive Officer, Yuri Itkis is employed pursuant to an unwritten employment
arrangement pursuant to which he is an employee at will, and either he or the
Company may terminate his employment at any time. At the commencement
of 2008, Yuri Itkis’ annual salary was $200,000.
As our Chief
Technical Officer, Boris Itkis is employed pursuant to an unwritten employment
arrangement pursuant to which he is an employee at will, and either he or the
Company may terminate his employment at any time. At the commencement
of 2008, Boris Itkis’ annual salary was $120,000.
As our former
Chief Financial Officer, Mr. Jacques was employed pursuant to the terms of a
written employment agreement, dated as of January 10, 2005, as amended on July
6, 2006. At the commencement of 2007, Mr. Jacques’ annual salary was
$80,500; effective on April 1, 2007, his annual salary was increased to
$125,000. Mr. Jacques also received other employee benefits
pursuant to our employee benefit policies. His employment agreement contained a
noncompetition provision that, with certain exceptions, prohibited
Mr. Jacques from owning interests in or providing services to other
companies engaged in the development, manufacture, sale or distribution of bingo
or lottery products or related services for a period of two years following
termination of his employment with FortuNet. The employment agreement provided
that the agreement was terminable immediately by Mr. Jacques or by
us.
As our Chief
Financial Officer, Mr. Karo is employed pursuant to the terms of a written
employment agreement, dated as of October 15, 2007, as amended on
December 3, 2007. At the commencement of Mr. Karo’s employment
with the Company in October of 2007, Mr. Karo’s annual salary was approximately
$140,000. Effective on January 5, 2008, Mr. Karo’s annual salary was
increased to approximately $150,000 . Mr. Karo also receives other employee
benefits pursuant to our employee benefit policies. His employment agreement
contains a noncompetition provision that, with certain exceptions, prohibits
Mr. Karo from owning interests in or providing services to other companies
engaged in the development, manufacture, sale or distribution of bingo or
lottery products or related services for a period of two years following
termination of his employment with FortuNet. The employment agreement may be
terminated immediately by Mr. Karo or the Company.
As our Chief
Marketing Officer, Mr. Coronel is employed pursuant to the terms of a written
employment agreement, dated as of September 9, 2002, as amended on September 9,
2002, July 6, 2006 and May 1, 2007. At the commencement of 2008,
Mr. Coronel’s annual salary was $145,000. Mr. Coronel also
receives other employee benefits pursuant to our employee benefit policies.
Under his employment agreement, Mr. Coronel is not required to devote his
full business time to our operations and is permitted to pursue other business
opportunities that are not competitive with our business. Mr. Coronel is
required to disclose his other business interests to us, but we are not entitled
to any financial interest in such opportunities. Currently, Mr. Coronel
devotes his full time to the Company. His employment agreement contains a
noncompetition provision that, with certain exceptions, prohibits him from
owning or providing services to other companies engaged in the development,
manufacture, sale or distribution of bingo or lottery products or related
services for a period of two years following termination of his employment with
the Company. The noncompetition covenant will immediately terminate, however,
upon a change of control in which Yuri Itkis ceases to own, directly or
indirectly, more than 50% of the issued and outstanding common stock of the
Company. The employment agreement may be terminated immediately by
Mr. Coronel or the Company.
Outstanding
Equity Awards at December 31, 2007
As of the end
of the fiscal year ended December 31, 2007, there were not outstanding any
unexercised options, stock that had not vested or equity incentive plan awards
for any Named Executive Officer.
Director
Compensation in 2007
The following
table sets forth certain information concerning the compensation of our
directors for the fiscal year ended December 31, 2007:
Name
|
Fees
Earned or Paid in Cash
($)
|
Stock
Awards
($)
|
Total
($)
|
Yuri
Itkis
|
—
|
—
|
—
|
Boris
Itkis
|
—
|
—
|
—
|
Merle
Berman
|
$
16,000
|
$19,175
(1)
|
$
46,695
|
Darrel
Johnson
|
$
10,000
|
$24,160
(2)
|
$
40,680
|
Harlan
W. Goodson
|
$
15,000
|
$19,175
(3)
|
$
45,695
|
(1)
|
Represents
the aggregate fair value of the grant of 2,500 shares of restricted stock
on March 6, 2007 computed in accordance with FAS
123R.
|
(2)
|
Represents
the aggregate fair value of the grant of 2,667 shares of restricted stock
on May 3, 2007 computed in accordance with FAS
123R.
|
(3)
|
Represents
the aggregate fair value of the grant of 2,500 shares of restricted stock
on March 6, 2007 computed in accordance with FAS
123R.
|
All
independent directors received an annual fee of $5,000, payable in quarterly
installments in arrears. In addition, each independent director
received an additional fee of $1,000 for each meeting of the Board that such
director attended; $500 for each meeting of the Audit Committee, Compensation
Committee or Nominating and Corporate Governance Committee that such director
attended as a non-chairperson committee member and each meeting of independent
directors in executive session with no management directors or employees present
that such director attended; and $750 for each meeting of the Audit Committee,
Compensation Committee or Nominating and Corporate Governance Committee that
such director attended as a chairperson. In addition, each
independent director was awarded 2,000 restricted shares of the Company’s Common
Stock under the Company’s 2005 Stock Incentive Plan for Independent
Directors. The chairperson of the Audit Committee as awarded an
additional 2,000 restricted shares of the Company’s Common Stock under the
Company’s 2005 Stock Incentive Plan for Independent Directors. All
such restricted shares vested in four equal installments at the end of each
fiscal quarter.
Compensation
Committee Interlocks and Insider Participation
Ms. Berman
and Mr. Goodman served as members of the Compensation Committee during 2007. No
interlocking relationship exists between any member of the Board of Directors or
Compensation Committee and any member of the board of directors or compensation
committee of any other companies, nor has such interlocking relationship existed
in the past.
REPORT OF THE AUDIT
COMMITTEE
The
information contained in the following report shall not be deemed to be
“soliciting material” or to be “filed” with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or the 1934
Securities Exchange Act, as amended, except to the extent that the Company
specifically incorporates it by reference in such filing.
The Audit
Committee of the Board of Directors consists of Ms. Berman and Mr.
Johnson. Mr. Johnson serves as Chairman of the
Committee. The Board of Directors has determined that each member of
the Audit Committee meets the experience requirements of the rules and
regulations of the Nasdaq Global Market and the Securities and Exchange
Commission, as currently applicable to the Company. The Board of
Directors has also determined that Ms. Berman and Mr. Johnson meet the
independence requirements of the rules and regulations of the Nasdaq Global
Market and the Securities and Exchange Commission, as currently applicable to
the Company.
The Audit
Committee operates under a written charter approved by the Board of
Directors. A copy of the charter is available on our web site,
www.fortunet.com.
The Audit
Committee provides assistance to the Board of Directors in fulfilling its
oversight responsibility to the stockholders, potential stockholders, investment
community and others relating to the integrity of the Company’s financial
statements and its financial reporting process, the Company’s compliance with
legal and regulatory requirements, the independent auditors’ qualifications,
independence and performance and the performance of the Company’s internal audit
function.
As part of
that oversight process, the Audit Committee regularly meets with management, the
CFO, and the outside auditors. In 2007 the Audit Committee met five times,
including quarterly closed sessions with the auditors in which management was
not present. The Audit Committee routinely reviews the Company’s financial
statements and annually reviews the auditors report on matters required by SAS
61, management’s representation letters to the auditors, and has consulted with
advisors regarding the Sarbanes-Oxley Act and the ongoing development of
internal controls. The Audit Committee additionally reviews all Board and
Committee meeting minutes, legal proceedings, compliance issues and the
Company’s Code of Ethics.
The primary
responsibility of the Audit Committee is to oversee the accounting and financial
reporting processes of the Company and the audits and reviews of the financial
statements of the Company and to report to the Board of Directors with respect
thereto. The Audit Committee annually recommends to the Board of
Directors the appointment of an independent registered public accounting firm to
audit the consolidated financial statements and internal controls over financial
reporting of the Company and meets with such personnel of the Company to review
the scope and the results of the annual audits, the amount of audit fees, the
Company’s internal controls over financial reporting, the Company’s consolidated
financial statements in the Company’s Annual Report on Form 10-K and other
related matters.
The Audit
Committee has reviewed and discussed with management the consolidated financial
statements for fiscal year 2007 audited by Schechter Dokken Kanter Andrews &
Selcer Ltd., the Company’s independent registered public accounting firm, and
management’s assessment of internal controls over financial reporting. The Audit
Committee has discussed with Schechter Dokken Kanter Andrews & Selcer Ltd.
various matters related to the financial statements, including those matters
required to be discussed by SAS 61. The Audit Committee has also received the
written disclosures and the letter from Schechter Dokken Kanter Andrews &
Selcer Ltd. required by Independence Standards Board Standard No. 1, and has
discussed with Schechter Dokken Kanter Andrews & Selcer Ltd. its
independence. Based upon such review and discussions, the Audit Committee
recommended to the Board of Directors that the audited consolidated financial
statements be included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2007 for filing with the Securities and Exchange
Commission.
The Audit
Committee and the Board of Directors also have recommended, subject to
stockholder ratification, the selection of Schechter Dokken Kanter Andrews &
Selcer Ltd. as our independent registered public accounting firm for the year
ending December 31, 2008.
Members of
the Audit Committee
Merle
Berman
Darrel
Johnson
Harlan W.
Goodson
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires the Company’s
directors, executive officers and any persons who directly or indirectly hold
more than 10 percent of the Company’s Common Stock (“Reporting Persons”) to file
reports of ownership and changes in ownership with the SEC. Reporting
Persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms they file.
Based solely
on its review of the copies of such forms received and written representations
from certain Reporting Persons that no such forms were required, the Company
believes that during fiscal 2007 all Reporting Persons complied with the
applicable filing requirements on a timely basis.
OTHER
MATTERS
The Company
knows of no other matters that will be presented for consideration at the Annual
Meeting. If any other matters properly come before the Annual
Meeting, it is intended that proxies in the enclosed form will be voted in
respect thereof in accordance with the judgments of the persons voting the
proxies.
ANNUAL
REPORT ON FORM 10-K AND ANNUAL REPORT TO STOCKHOLDERS
UPON
WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY, 2950 SOUTH HIGHLAND DRIVE, LAS
VEGAS, NEVADA 89109, THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON
SOLICITED A COPY OF THE FISCAL 2007 REPORT, INCLUDING FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES FILED THEREWITH.
By Order of
the Board of Directors,
/s/ Yuri
Itkis
Chairman of
the Board and
Chief
Executive Officer
April 4,
2008
Las Vegas,
Nevada
C/O
CONTINENTAL STOCK TRANSFER
17
BATTERY PLACE
8TH
FLOOR
NEW
YORK, NY 10004
|
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the
postage-paid
envelope
we have provided or return it to FortuNet, Inc., c/o
Broadridge,
51
Mercedes Way, Edgewood, NY 11717.
|
BROADRIDGE
FINANCIAL
SOLUTIONS, INC.
ATTENTION:
TEST PRINT
51 MERCEDES WAY
EDGEWOOD,
NY
11717
|
123,456,789,012.00000
|
|
--> 0000 0000
0000
|
TO VOTE MARK BLOCKS BELOW IN BLUE OR BLACK INK AS
FOLLOWS:
FORTU1
KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND
DATED.
FORTUNET, INC.
Vote on Proposals
Proposal
1.
To
elect the following directors of the Board of Directors to serve until the
2009 annual meeting of stockholders or until their successors have been
duly elected and qualified:
01)
Yuri
Itkis
04) Darrel Johnson
02)
Boris
Itkis
05)
Harlan W. Goodson
03)
Merle Berman
|
|
For
Withhold For
All
All
All Except
o
o
o
|
|
To
withhold authority to vote for any individual
nominee(s), mark “For All
Except” and write the
number(s) of the nominee(s) on the line
below.
|
Proposal 2.
To
ratify the appointment of Schechter Dokken Kanter Andrews & Selcer
Ltd. as the Company’s independent registered public accounting firm for
the fiscal year ending December 31, 2008.
In
their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
Please
date and sign exactly as your name(s) is (are) shown on the share
certificate(s) to which the Proxy applies. When shares are held as
joint-tenants, both should sign. When signing as an executor,
administrator, trustee, guardian, attorney-in-fact or other fiduciary,
please give full title as such. When signing as a corporation, please sign
in full corporate name by President or other authorized officer. When
signing as a partnership, please sign in partnership name by an authorized
person.
|
|
For
Against Abstain
|
|
BROADRIDGE
FINANCIAL SOLUTIONS,
INC.
ATTENTION:
TEST PRINT
51 MERCEDES WAY
EDGEWOOD,
NY
11717
|
|
|
|
|
|
|
|
|
|
Signature
[PLEASE SIGN WITHIN BOX]
|
|
Date
|
P57615
|
Signature
(Joint Owners)
|
|
Date
|
|
123,456,789,012
|
|
|
|
|
|
|
|
|
34969Q100
|
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24
|
FORTUNET,
INC.
2950
South Highland Drive, Las Vegas, Nevada 89109
This
Proxy is Solicited on Behalf of the Board of Directors of
FortuNet,
Inc.
for
the Annual Meeting of Stockholders to be held May 13, 2008
The
undersigned holder of Common Stock, par value $.001, of FortuNet, Inc. (the
“Company”) hereby appoints Yuri Itkis and Kevin A. Karo, or either of them,
proxies for the undersigned, each with full power of substitution, to represent
and to vote as specified in this Proxy all Common Stock of the Company that the
undersigned stockholder would be entitled to vote if personally present at the
2008 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on May 13,
2008 at 9:00 a.m., Pacific Daylight Time, at 2950 South Highland Drive, Las
Vegas, Nevada 89109, and at any adjournments or postponements thereof. The
undersigned stockholder hereby revokes any proxy or proxies heretofore executed
for such matters.
This
proxy, when properly executed, will be voted in the manner as directed herein by
the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1 AND PROPOSAL 2 AND IN THE DISCRETION OF THE PROXIES AS TO ANY
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING. The undersigned
stockholder may revoke this proxy at any time before it is voted by delivering
to the Corporate Secretary of the Company either a written revocation of the
proxy or a duly executed proxy bearing a later date, or by appearing at the
Annual Meeting and voting in person.
THE BOARD OF
DIRECTORS RECOMMENDS A VOTE
“FOR”
PROPOSAL 1 REGARDING THE ELECTION OF THE DIRECTOR NOMINEES AND
“FOR”
PROPOSAL 2 REGARDING THE RATIFICATION OF
SCHECHTER DOKKEN KANTER ANDREWS & SELCER LTD. AS THE COMPANY’S INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31,
2008.
PLEASE
MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED RETURN
ENVELOPE. If you receive more than one proxy card, please sign and return ALL
cards in the enclosed envelope.