Zealous Trading Group, Inc. - Indicate by check mark whether the...

Zealous Trading Group, Inc. - Recent Material Event

Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o

Non-accelerated filer o	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The aggregate market value of the voting common equity held by non-affiliates as of August 31, 2007, based on the closing sales price of the Common Stock as quoted on the Over-the-Counter Bulletin Board was $2,749,887. For purposes of this computation, all officers, directors, and 5 percent beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed an admission that such directors, officers, or 5 percent beneficial owners are, in fact, affiliates of the registrant.

The number of shares of registrant’s common stock outstanding, as of June 2, 2008 was 318,470,587.

ZEALOUS TRADING GROUP, INC.

Annual Report on Form 10-K for the

Period Ended on February 29, 2008

Part I	Page

Item 1. Description of Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

Part II	Page

Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements	F-1

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Part III	Page

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions

Item 14. Principal Accountant Fees and Services

Part IV	Page

Item 15. Exhibits and Financial Statement Schedules

Signatures

Unless otherwise indicated or the context otherwise requires, the terms “Company,” “we,” “us” and “our” herein refer to Zealous Trading Group, Inc. and its subsidiaries, after giving effect to the Agreement and Plan of Merger among the Zealous Trading Group, Inc. its wholly-owned subsidiary, ASNI II, Inc. and Zealous Holdings, Inc. which closed on May 9, 2008. As a result of the merger closing after the Company’s fiscal year end, the audited financials included herein, and related disclosures, reflect the Company at February 29, 2008 and do not include Zealous Holdings.

PART I

ITEM 1. Description of Business

Overview

We were originally incorporated under the laws of the state of Nevada on September 25, 1978 as Casino Consultants, Inc. Prior to September 1992, we had no operations. On September 15, 1992, we entered into an Agreement and Plan of Reorganization with Ad Show Network, Inc., a Nevada corporation, whereby we acquired the assets of Ad Show Network, Inc., subject to liabilities, for shares of our common stock. On September 15, 1992, we changed our name to A.S. Network, Inc. On October 14, 1992, we changed our name to Ad Show Network, Inc. On August 17, 1995, we changed our name to Atlantic Syndication Network, Inc. On July 16, 2007, we entered into an Agreement and Plan of Merger with our wholly-owned subsidiary, ASNI II, INC., a Delaware corporation and Zealous Holdings, which was subsequently amended on February 15, 2008 and April 30, 2008. Pursuant to the Agreement and Plan of Merger, which closed on May 9, 2008, Zealous Holdings merged with and into ASNI-II, with ASNI-II as the surviving corporation of the merger, As a result of the merger, the business of Zealous Holdings became the business of ASNI-II, , and through which our operations are conducted. Additionally, on October 5, 2007, we changed our name from Atlantic Syndication Network, Inc. to Zealous Trading Group, Inc.

ASNI-II carries out its business through its operating subsidiaries, Zealous Asset Management, LLC, or ZAM and Zealous Capital Markets LLC, or ZCM. ZCM wholly-owns and operates Zealous ATS LLC, or ZATS, which is the principal focus of the Company going forward. ZATS plans to be a marketplace to offer an integrated electronic platform for the trading of alternative assets globally. The ZATS marketplace is a global community of trading counterparties in our targeted products and services providing an infrastructure in which to optimize and support investment and trading strategies for participants.

Our principal executive offices are located at located at 1800 Century Park East, Suite 200, Los Angeles, California 90067, and our telephone number is (310) 895-7778.

ASNI-II Inc. Business and History

ASNI-II is a Delaware corporation formed in July 2007 and our wholly owned subsidiary.. ASNI-II carries out its business through its operating subsidiaries, Zealous Asset Management LLC, a California registered investment advisory firm, or ZAM, and Zealous Capital Markets LLC, an FINRA/SIPC (as defined hereinafter) registered broker-dealer, or ZCM. ZAM began operations in 1998 and up until December 31, 2007, provided investment management services to private investment funds and managed accounts. ZCM, formed in June of 2005, focuses on and provides brokerage and boutique investment banking services to individuals and institutions as well as manages and operates Zealous ATS, LLC, or ZATS, formed in September of 2007, which plans to be a global electronic marketplace used to support and execute trades for buyers and sellers of restricted and illiquid securities . ZATS is wholly-owned by ZCM.

The following is a description of ASNI-II’s business:

OVERVIEW

ASNI-II, Inc.

ASNI-II is a Los Angeles, California-based financial services holding company that provides, through its wholly-owned operating subsidiaries, a broad range of securities, brokerage and trading, merchant and investment banking related services primarily to institutional clients and accredited individual investors, as well as an alternative trading system for illiquid and restricted securities.

Zealous Asset Management LLC

Zealous Asset Management LLC, a Delaware limited liability company, is an investment adviser registered in the State of California that was responsible up until December 31, 2007, for providing asset management and advisory services to private investment funds and managed accounts for individual clients and institutional clients. The advisory services included, among others, providing advice regarding asset allocation and the selection of investments.

ZAM also provided advisory services on a discretionary basis to the following private investment funds: Zealous Partners, LLC, a Delaware limited liability company; and Ault Glazer Capital Partners, LLC (fka Ault Glazer Bodnar Acquisition Fund, LLC), a Delaware limited liability company, which commenced operations in July 2005. The funds operated as pooled investment vehicles intended to provide diversification, management expertise and other advantages to clients. ZAM may, in the future, provide investment advisory services to other pooled investment vehicles that may be similar to, or different from, the Funds.

ZAM’s investors in the funds may have included any of the following: individuals, banks and thrift institutions; investment companies; private businesses; private and governmental retirement, pension and profit-sharing plans; trusts; estates; endowments, foundations, “Taft Hartley” Plans, charitable organizations and corporations as well as other business entities.

ZAM is currently registered as an investment adviser under the laws of the State of California, and may register as an investment adviser with the SEC in the future pursuant to Section 203 of the Investment Advisers Act of 1940, as amended.

Zealous Capital Markets, LLC

Zealous Capital Markets, LLC, a broker-dealer registered with the Financial Industry Regulatory Authority, Inc., or FINRA and Securities Investor Protection Corporation, or SIPC, operates the Zealous ATS electronic trading platform that provides specialized trading and settlement services for buyers and sellers of restricted, illiquid securities and alternative assets. The business of ZCM is that of a $100,000 broker/dealer operating pursuant to SEC Rule 15c3-1 (a)(2)(i). The firm's business activities are limited pursuant to its Membership Agreement dated October 6, 2005 with FINRA Los Angeles District Office, which is available upon request.

ZCM operates as a fully-disclosed introducing broker-dealer, and therefore relies on its clearing firm, Wedbush Morgan Securities, Inc., or Wedbush, to provide the back office support and transaction processing services necessary to effect transactions on all principal national and international securities exchanges. Wedbush also acts as custodian for client accounts, and will generally clear (on the basis of payment against delivery) the securities transactions which are effected through ZCM.

ZCM is currently licensed to conduct brokerage activities in the following states – AL, AZ, CA, CO, CT, DE, FL, GA, MA, MN, MO, NV, NJ, NY, OK, TN, TX, UT, WA. ZCM expects to become registered in other states as its business activities warrant.

Zealous ATS, LLC

ZCM wholly-owns and operates Zealous ATS, LLC, (alternative trading system), or ZATS, which plans to be a global electronic marketplace used to support and execute trades for buyers and sellers of restricted and illiquid securities. ZATS plans to be a marketplace to offer an integrated electronic platform for the trading of alternative assets globally. The ZATS marketplace is a global community of trading counterparties in our targeted products and services providing an infrastructure in which to optimize and support investment and trading strategies for participants.

ZATS has been tested and used successfully for over 18 months with a major New York Stock Exchange financial institution, trading a single stock under Rule 144a. Now, ZATS has been rolled out to a limited number of users, providing them the ability to trade restricted stock and illiquid securities of over 1,100 public and private company securities on a negotiated basis. The next generation of ZATS, now under development, will offer an integrated electronic platform for the trading of alternative assets globally. The ZATS marketplace will be a global community of trading counterparties. The intention is to provide an infrastructure on which to optimize the investment and trading strategies for participants.

ZCM provides customer support to ZATS member base through its sales, trading, back office and settlement specialists who are assigned to service specific member groups and facilitate transactions and order flow. Participants will include:

	·	Hedge funds, RIA's, mutual funds, pension funds;
	·	Venture capital, private equity and real estate funds;

	·	Investment banking boutiques, domestic and foreign broker dealers;
	·	Family offices, and bank trust departments;

	·	Corporate insiders;
	·	Domestic and foreign public and private issuers;

	·	Alternative market data providers;
	·	Independent research providers;

	·	Investor relations and PR firms; and
	·	Specialty Media and data providers.

PRODUCTS AND SERVICES AND INDUSTRY

Our sole focus is currently on the ZATS trading platform – which it offers primarily to accredited private clients, broker dealers, hedge funds, family offices, mutual funds, corporations, and other accredited financial intermediaries. The ZATS marketplace will be a global community of trading counterparties in our targeted products and services providing an infrastructure in which to optimize and support investment and trading strategies for participants.

The products and services to be provided by ZATS are as follows:

	·	Secondary trading of restricted stock, warrants, and convertible debt of public and private companies;
	·	PIPE and other Private Placement issuance;

	·	Alternative Public Offerings;
	·	Private and non-traded REITS;

	·	Secondary LP interests of VC, PE, LBO, and RE partnerships;
	·	New Private Fund Offerings;
	·	Private Company Trading portals;
	·	Emerging and frontier markets debt and equity securities; and

Structured equity and debt products.

Private Investment in Public Equity (PIPE)

Underwriters, issuers and investors of the $50-$75 billion annual market for private placements and PIPE issuances can use ZATS electronic platform to list transactions or view available offerings. ZATS will be useful for corporate issuers looking to raise capital or investment banks looking to list transactions. ZATS will allow greater access to a wide array of both institutional and accredited individual investors in a cost effective and efficient format.

ZATS provides all aspects of deal issuance serving all participants by addressing the entire capital-raising process, from origination to final settlement and simplifying the transaction process. All documentation including PPM’s, subscription documents, executive summaries and management presentations are full service electronic document delivery. ZATS also offers issuers the ability to use our “Virtual Road Show” format, allowing for video presentations online reducing the expensive and time consuming need of traveling nationwide as with traditional road shows.

For PIPE investors, ZATS lists PIPE offerings in one central location giving the investor access to diverse and extensive deal flow across many industries and market capitalizations, all electronically and seamlessly.

ZATS also plays a key role for companies who have just completed reverse mergers as these companies typically seek financing in a PIPE structure after their mergers are complete and they are public. ZATS will offer these companies a platform in which to list their PIPE offerings, including emerging growth companies from outside the U. S. including, China, India, and other emerging market economies.

Restricted Securities

ZATS provides holders of restricted stock, illiquid warrants and convertible debt of public companies whom are either limited or not able to sell in the public markets because of legal or contractual restrictions, the ability to offer their securities for sale on its private electronic trading platform to a diverse group of accredited members in private transactions. ZATS uses resale exemptions to execute the majority of restricted stock transactions allowing a holder of restricted securities to rely on the exemption to sell amounts beyond the rule 144 limitations.

Using our centralized trading platform, ZATS offers buyers and sellers of restricted securities a cost effective marketplace and platform to transact and settle with institutional and accredited individual investors.

Rule 144a Securities – “Global AXess”

The growth of the Rule 144a private placement market for equities has been dramatic over the past five years due to many companies reluctance to list publicly on U.S. exchanges because of costly Sarbanes Oxley compliance issues. Rule 144a issuance has grown from $70 billion in 2002 to over $221 billion in 2006.

To meet this need there have been several proprietary electronic trading platforms recently launched dedicated to the issuance of Rule 144a equity securities such as Nasdaq’s Portal, Goldman Sachs GS TRuE, Bear Stearns Best Market, and OPUS-5 created by a group of investment banks. Only Qualified Institutional Buyers or QIB’s (institutions with a minimum of $100million in discretionary assets) are eligible to purchase these securities.

To address the demand of these participants, ZATS has created a portal for Rule 144a securities within its platform for issuers, underwriters and investors called “Global AXess”. Global AXess will work as a neutral marketplace for participants who want to issue and resell these securities in the secondary market and access a diverse group of ZATS QIB members. Having access to a more centralized marketplace offers Rule 144a investors improved liquidity, transparency and price discovery as many of the current platforms are either closed or limited access systems.

Global AXess will allow newly formed Rule 144a trading platforms to route orders through our system by providing them the ability to list secondary offerings anonymously as an alternative source of liquidity and accessing ZATS QIB members. ZATS also welcomes foreign issuers looking to raise capital using Rule 144a to list their transaction on our electronic marketplace.

Thinly Traded Registered Stock

Holders of concentrated positions of thinly traded non NMS (National Market System) registered stock (OTCBB and Pink Sheet quoted) that trade less than 50,000 shares a day can list their securities for sale on ZATS in block transactions to its qualified accredited members privately and gain the needed liquidity that may have been difficult or impossible to access publicly and bypass listing their securities in a standard public offer and potentially depressing the price.

Buyers of these securities can purchase stock in large blocks at discounts from where the securities trade publicly and complete previously hard to fill positions or just take advantage of attractive arbitrage opportunities without bidding prices up, all electronically and anonymously bypassing the traditional method of directly contacting holders or Wall Street block trading desks and suffering information leakage.

Private Equity – Domestic and Emerging Growth Countries

Private companies who are planning on becoming public within 12 months can utilize ZATS to raise capital in preparation for their public offering in what we call an alternative public offering or “APO” (a contemporaneous reverse merger transaction with a private placement equity capital raise).

ZATS provides private companies an organized efficient method by which to raise capital, and allow investors a secondary market in which to access liquidity if needed. Many companies who complete a reverse merger will immediately want to raise capital via a PIPE offering on ZATS, making a ZATS private listing an easy transition to a funding as a public company.

This market will also provide ZATS with many potential restricted stock offerings as both insiders and officers of the recently pubic companies will be holding large blocks of restricted stock in which they may seek liquidity. ZATS will offer this platform to growth companies from the emerging growth economies specifically in the BRIC countries (Brazil, Russia, India and China).

IPL (Initial Private Listing)

For private companies who have no intention of becoming public they can apply to use ZATS platform for an IPL (initial private listing) providing issuers and shareholders many of the same services as their public counterparts (allowed within the SEC legal constraints), including secondary liquidity and trading capability through a private trading board for the company and its shareholders, along with an issuer portal and electronic settlement and transfer services.

By staying private but allowing secondary liquidity a company has greater independence, easier access to capital for long term growth, eliminates many of the costs of being public and avoids Sarbanes-Oxley, allowing greater privacy, and reduced legal and regulatory risk.

Emerging Markets

The case for investment in global emerging markets is strong, based on a number of factors:

	·	Continued growth in the mobility of capital;
	·	Demographic trends encouraging stronger growth in emerging markets;

	·	Improvement in corporate governance and emphasis on profit growth;
	·	The tendency of outsourcing from corporations in developed economies; and

Diversification and portfolio risk management benefits.

Investors looking for opportunities in other parts of the world can access ZATS emerging markets listings that are offered by our broker dealer members who specialize in these niche markets and have the right combination of regional experience and market intelligence. Emerging economies in regions of Asia, Latin America, and Eastern Europe have registered some of the highest rates of growth in the world and the inevitable rise in earning capacity is being accompanied by an absolute fall in risk levels providing investors with superior risk adjusted returns.

Private Partnership Offerings and Secondary LP Interests

Alternative funds looking to raise capital can use ZATS marketplace and syndicate their offering to ZATS accredited investor member base. ZATS funds market will include, hedge funds, real estate funds, venture capital and private equity funds. Private funds typically face some of the same challenges as issuers seeking capital. ZATS will create a “New Fund Offerings” page for private funds seeking capital targeting fund investors and marketing specialists who raise capital for private funds, including third party marketers, broker dealers, pension funds, FOF’s, endowments, and family offices.

One of the challenges that investors in private partnerships face is the inherent lack of liquidity of the structure. Whether it’s a private equity fund, real estate fund, or venture capital fund, secondary liquidity and valuing fractional interests is not commonly available. ZATS provides a secondary market for fractional fund interests providing limited partners and potential buyers of these interests the ability to transact at attractive prices in the secondary market through ZATS.

Structured Equity and Debt Products

The market for OTC traded and issued structured equity and debt products for both small domestic and foreign issuers is extremely fragmented and no centralized marketplace exists where buyers and sellers can trade these instruments. Securities offered on ZATS include short term collateralized bridge loans, debt with attached warrants, equity backed loans with aged rule 144 stock, convertible debt, equity linked notes, and capital guaranteed structures. Using ZATS platform issuers can access our diverse investor base and put out their proposed debt or equity structure for competitive bidding and receive timely financing at more favorable terms that the current standard process.

COMPETITION

ZATS

ZATS has several competitors, including:

	·	Restricted Stock Partners, which operates it own proprietary network of more than 400 institutional and accredited investors representing over $200 billion in assets available for investment;
	·	UnifiedMarket, which operates as an electronic portal that facilitates Indications of Interest {IOI} postings by Issuer Members of Preliminary Term Sheets for private placements of securities. UnifiedMarket does not broker—or even know about—trades. It is an information exchange open to the general public, but with a firewall that allows only qualified investors to search for deals in restricted securities; and

Nasdaq Portal and the Nasdaq Alliance, which is an electronic trading platform for rule 144a securities which partners with companies such as Goldman Sachs, Bear Stearns, JPM, Merrill Lynch, and others to facilitate rule 144a transactions. Rule 144a transactions can only be marketed to QIB’s (Institutional Qualified Buyers) who have commingled assets of $100mm.

ZCM

In recent years there has been substantial convergence among companies in the financial services and investment industries. A large number of corporate entities, including, commercial banks, insurance companies and other broad-based financial services companies have established or acquired broker-dealers and asset management firms to compliment their existing lines of business. ZCM competes for asset management, sales and trading, investment banking and capital markets business directly with large Wall Street securities firms, securities subsidiaries of major commercial bank holding companies, U.S. securities subsidiaries of large U.S. and foreign institutions, and major regional securities firms. In its asset management business, ZCM competes with the same firms and with, venture capital firms, commercial banks and smaller niche players.

ZAM

The competition within the hedge fund industry is very intense, and the success of any fund depends upon not only past returns but the amount of assets under management, in which the hedge fund bases its fees and performance incentives. The amount of money managed depends on the funds contacts within the 3rd party marketing community as they are professionals who raise the capital for the funds.

REGULATION OF THE FINANCIAL SERVICES INDUSTRY

We are subject to regulation by several federal agencies, including the Securities Exchange Commission, or the SEC and FINRA as well as state regulators. The SEC is the federal agency that is primarily responsible for the regulation of broker-dealers and investment advisers doing business in the United States. Much of the regulation of broker-dealers has been delegated to self-regulatory organizations, or SROs, principally FINRA (and its subsidiaries FINRA Regulation, Inc. and the NASDAQ), and the national securities exchanges. These organizations (which are subject to oversight by the SEC) govern the industry, monitor daily activity, conduct periodic examinations of member broker-dealers, and regulate, among other things, the scope of business, investment activities, capital levels, reserves against deposits, collateral requirements, transactions with insiders and certain affiliates, the establishment of branches, mergers, acquisitions, consolidations, the issuance of equity and debt, and the payment of dividends.

Broker-dealers, alternative trading systems and investment advisers are subject to regulation covering virtually all aspects of their businesses. These regulatory authorities have adopted rules that govern the securities industry and, as a normal part of their procedures, conduct periodic examinations of the securities brokerage and asset management operations. Additional legislation, changes in rules promulgated by the SEC, FINRA, foreign regulatory agencies, or any self-regulatory organization, or changes in the interpretation or enforcement of existing laws and rules, may directly affect our mode of operation and profitability. In the United States, brokerage firms and certain investment advisers also are subject to regulation by state securities commissions in the states in which they conduct business. These regulatory authorities, including state securities commissions, may conduct administrative proceedings which can result in censure, fine, suspension or expulsion of a broker-dealer or investment adviser, its officers or employees.

Regulation of Subsidiaries

Broker-Dealer Subsidiary

As a result of federal and state registration and SRO memberships, ZCM is subject to overlapping schemes of regulation which cover all aspects of its securities businesses. Such regulations cover matters including capital requirements, uses and safe-keeping of clients’ funds, conduct of directors, officers and employees, record-keeping and reporting requirements, supervisory and organizational procedures intended to assure compliance with securities laws and to prevent improper trading on material nonpublic information, employee-related matters, including qualification and licensing of supervisory and sales personnel, limitations on extensions of credit in securities transactions, clearance and settlement procedures, requirements for the registration, underwriting, sale and distribution of securities, and rules of the SROs designed to promote high standards of commercial honor and just and equitable principles of trade. A particular focus of the applicable regulations concerns the relationship between broker-dealers and their customers. As a result, many aspects of the broker-dealer customer relationship are subject to regulation including, in some instances, suitability determinations as to certain customer transactions, limitations on the amounts that may be charged to customers, timing of proprietary trading in relation to customers’ trades and disclosures to customers.

As a broker-dealer registered with the SEC and as a member firm of FINRA, ZCM is subject to the net capital requirements of the SEC and FINRA. These capital requirements specify minimum levels of capital, computed in accordance with regulatory requirements that the firm is required to maintain and also limits the amount of leverage that the firm is able to obtain in its respective business.

Net capital is essentially defined as net worth (assets minus liabilities, as determined under generally accepted accounting principles), plus qualifying subordinated borrowings, less the value of all of a broker-dealer’s assets that are not readily convertible into cash (such as furniture, prepaid expenses and unsecured receivables), and further reduced by certain percentages (commonly called haircuts) of the market value of a broker-dealer’s positions in securities and other financial instruments. The amount of net capital in excess of the regulatory minimum is referred to as excess net capital.

Compliance with regulatory net capital requirements could limit those operations that require the intensive use of capital, such as underwriting and trading activities, and also could restrict our ability to withdraw capital from our broker-dealer, which in turn could limit our ability to pay dividends, repay debt and redeem or repurchase shares of our outstanding capital stock.

A failure of a U.S. broker-dealer to maintain its minimum required net capital would require it to cease executing customer transactions until it came back into compliance, and could cause it to lose its FINRA membership, its registration with the SEC or require its liquidation. Further, the decline in a broker-dealer’s net capital below certain early warning levels, even though above minimum net capital requirements, could cause material adverse consequences to the broker-dealer and to us.

In the event of non-compliance by us with an applicable regulation, governmental regulators and one or more of the SROs may institute administrative or judicial proceedings that may result in censure, fine, civil penalties (including treble damages in the case of insider trading violations), the issuance of cease-and-desist orders, the deregistration or suspension of the non-compliant broker-dealer, the suspension or disqualification of officers or employees or other adverse consequences. The imposition of any such penalties or orders on us or our personnel could have a material adverse effect on our operating results and financial condition.

Zealous ATS, LLC – Alternative Trading System

The SEC regulations that govern ZATS business are very specific and ZATS’ business process and electronic platform conforms to those regulations. These include:

	·	Restricted transaction settlement documents
	·	ZATS password protected platform the prevents general solicitation

	·	ZATS client base which is restricted to accredited investors
	·	The negotiated nature of ZATS transaction process

ZATS is operated by Zealous Capital Markets, a broker dealer

ZATS is currently a private trading platform regulated in the context of FINRA jurisdiction of the broker/dealer, ZCM. In the future, ZATS broad market adoption of the ZATS trading platform may lead to ZATS being regulated as an alternative trading system in which case it would fall under Regulation Alternative Trading System (Regulation ATS).

Similarly, ZATS is regulated in the context of respective state jurisdictions of the broker/dealer, ZCM. In the future, ZATS may be regulated as an alternative trading system under respective state laws as applicable.

Asset Management Subsidiary

ZAM is currently registered as an investment adviser with the State of California. The firm may register as an investment adviser with the SEC in the near future upon qualification for such registration. As an investment adviser registered in the State of California, ZAM is currently subject to the rules and regulations of that state. Additionally, if ZAM becomes registered with the SEC, it will be subject to the requirements of the Investment Advisers Act of 1940 and the SEC’s regulations thereunder. In general, the regulatory requirements relating to advisors are generally, among other things, limitations on the ability of investment advisers to charge performance-based or non-refundable fees to clients, record-keeping and reporting requirements, disclosure requirements, limitations on principal transactions between an adviser or its affiliates and advisory clients, as well as general anti-fraud prohibitions. The state securities law requirements applicable to registered investment advisers are in certain cases more comprehensive than those imposed under the federal securities laws.

In connection with ZAM’s activities, the private investment vehicles that ZAM managed, principally relied on exemptions from registration under the federal securities laws (e.g. Investment Company Act of 1940 and Investment Advisers Act of 1940), and under certain state securities laws and the laws of various foreign countries. Failure to comply with the initial and continuing requirements of any such exemptions could have a material adverse effect on the manner in which ZAM and these vehicles carried on their activities, including penalties similar to those listed above for broker-dealers, up until December 31, 2007

EMPLOYEES

We had 16 full time employees as of June 1, 2008. We consider our relations with our employees to be good.

Item 1A. Risk Factors

You should carefully consider the following risk factors and all other information contained herein in evaluating our business and prospects. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties, other than those we describe below, that are not presently known to us or that we currently believe are immaterial, may also impair our business operations. If any of the following risks occur, our business and financial results could be harmed. You should refer to the other information contained in document, including our consolidated financial statements and the related notes.

Risks Relating to Our Business:

We Have a History Of Losses Which May Continue, Which May Negatively Impact Our Ability to Achieve Our Business Objectives.

We incurred net losses of $70,700,971 and $449,179 for the years ended February 29, 2008 and February 28, 2007, respectively. We cannot assure you that we can achieve or sustain profitability on a quarterly or annual basis in the future. Our operations are subject to the risks and competition inherent in the establishment of a business enterprise. There can be no assurance that future operations will be profitable. Revenues and profits will depend upon various factors, including whether we will be able to increase revenue. As a result of continuing losses, we may exhaust all of our resources prior to completing the development of our products. Additionally, as we continue to incur losses, our accumulated deficit will continue to increase, which might make it harder for us to obtain financing in the future. We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on us, which could result in reducing or terminating our operations.

If We Are Unable to Obtain Additional Funding Our Business Operations Will be Harmed and If We Do Obtain Additional Financing Our Then Existing Shareholders May Suffer Substantial Dilution.

We will require additional funds to develop our ZATS trading platform. We anticipate that we will require approximately $2 million to fund our anticipated operations for the next twelve months, depending on revenue from operations. Additional capital will be required to effectively support the operations and to otherwise implement our overall business strategy. Even if we do receive additional financing, it may not be sufficient to sustain or expand our research and development operations or continue our business operations.

There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will likely be required to curtail our research and development plans. Any additional equity financing may involve substantial dilution to our then existing shareholders.

Our Independent Registered Public Accounting Firm Has Expressed Substantial Doubt About Our Ability to Continue as a Going Concern, Which May Hinder Our Ability to Obtain Future Financing.

In their report dated June 6, 2008, our independent registered public accounting firm stated that our financial statements for the year ended February 29, 2008 were prepared assuming that we would continue as a going concern. Our ability to continue as a going concern is an issue raised due to our stock holders’ deficiency of $71,270,092 as on February 29, 2008 and a net loss of $70,700,971 for the year ended February 29, 2008. We continue to experience net operating losses. Our ability to continue as a going concern is subject to our ability to generate a profit and/or obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities, generating sales or obtaining loans and grants from various financial institutions where possible. Our continued net operating losses increase the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.

Many of Our Competitors are Larger and Have Greater Financial and Other Resources than We do and Those Advantages Could Make it Difficult for Us to Compete With Them

The general market for our products and services is extremely competitive and includes several companies which have achieved substantially greater market shares than we have, and have longer operating histories, have larger customer bases, have substantially greater financial, development and marketing resources than we do. If overall demand for our products should decrease it could have a materially adverse affect on our operating results.

Insufficient Systems Capacity or Systems Failures could Harm our Business.

Our business depends on the performance and reliability of the computer and communications systems supporting it. Notwithstanding our current capacity, heavy use of our computer systems during peak trading times or at times of unusual market volatility could cause our systems to operate slowly or even to fail for periods of time. If our systems cannot be expanded successfully to handle increased demand, or otherwise fail to perform, we could experience disruptions in service, slower response times, and delays in introducing new products and services.

Our trading activities may be impacted by system failures of other trading systems, as a result of which we may be required to suspend trading activity in particular stocks or cancel previously executed trades under certain circumstances. These consequences could result in lower trading volumes, financial losses, decreased customer service and satisfaction, litigation, customer claims or regulatory sanctions.

Our systems and operations also are vulnerable to damage or interruption from human error, natural disasters, power loss, sabotage or terrorism, computer viruses, intentional acts of vandalism, and similar events. Any system failure that causes an interruption in service or decreases the responsiveness of our service could impair our reputation, damage our brand name and negatively impact our revenues. We also rely on a number of third parties for systems support. Any interruption in these third-party services or deterioration in the performance of these services could also be disruptive to our business and have a material adverse effect on our business, financial condition and operating results. We cannot predict the likelihood that services provided by third parties may be interrupted.

Our Inability to Protect our Intellectual Property Rights could Adversely Affect our Business.

To protect our intellectual property rights, we rely on a combination of trademark laws, copyright laws, patent laws, trade secret protection, confidentiality agreements and other contractual arrangements with our affiliates, customers, strategic investors and others. The protective steps we have taken may be inadequate to deter misappropriation of our proprietary information. We may be unable to detect the unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Failure to protect our intellectual property adequately could harm our brand and affect our ability to compete effectively. Further, defending our intellectual property rights could result in the expenditure of significant financial and managerial resources, which could adversely affect our business, financial condition and operating results.