As filed with the Securities and Exchange Commission on January 25, 2002
An Exhibit List can be found on page II-3.
Registration No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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iLIVE, INC.
(Name of small business issuer in its charter)
NEVADA 6770 95-4783826
(State or other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Classification Identification No.)
Organization) Code Number)
2102 BUSINESS CENTER DRIVE
IRVINE, CALIFORNIA 92612
(949) 660-0099
(Address and telephone number of principal executive offices and principal
place of business)
SCOTT HENRICKS, PRESIDENT
iLIVE, INC.
2102 BUSINESS CENTER DRIVE
IRVINE, CALIFORNIA 92612
(949) 660-0099
(Name, address and telephone number of agent for service)
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Copies to:
Gregory Sichenzia, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas, 21st Flr.
New York, New York 10018
(212) 930-9700
(212) 930-9725 (fax)
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
=================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED SECURITY(1) PRICE FEE
- ----------------------------------------- --------------- ------------------ ------------------ -------------
Shares of common stock, $.001 par value 8,130,769(2) $.33 $2,683,153.85 $641.27
Total $641.27
========================================= =============== ================== ================== =============
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) and Rule 457(g) under the Securities Act of
1933, using the average of the high and low price as reported on the
Over-The-Counter Bulletin Board on January 16, 2002.
(2) Represents 300% of the shares issuable upon conversion of our 8%
convertible debentures and 100,000 shares issuable upon the exercise of
outstanding warrants issued on January 11, 2002.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED JANUARY __, 2002
The information in this prospectus is not complete and may be changed.
iLive, Inc.
8,130,769 SHARES OF
COMMON STOCK
This prospectus relates to the resale by the selling stockholder of
8,130,769 shares of our common stock, based on current market prices. The
selling stockholder may sell common stock from time to time in the principal
market on which the stock is traded at the prevailing market price or in
negotiated transactions. The selling stockholder is deemed an underwriter of the
shares of common stock, which they are offering.
We will pay the expenses of registering these shares.
Our common stock is registered under Section 12(g) of the Securities
Exchange Act of 1934 and is listed on the Over-The-Counter Bulletin Board under
the symbol "LIVE." The last reported sales price per share of our common stock
as reported by the Over-The-Counter Bulletin Board on January 16, 2002, was
$.33.
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INVESTING IN THESE SECURITIES INVOLVES SIGNIFICANT RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE _.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this prospectus is January __, 2002.
- --------------------------------------------------------------------------------
The information in this prospectus is not complete and may be changed. This
prospectus is included in the registration statement that was filed by One Voice
Technologies, Inc., with the Securities and Exchange Commission. The Selling
Stockholders may not sell these securities until the registration statement
becomes effective. This prospectus is not an offer to sell these securities and
is not soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED IN THIS
PROSPECTUS. THIS SUMMARY DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD
CONSIDER BEFORE INVESTING IN THE SECURITIES. BEFORE MAKING AN INVESTMENT
DECISION, YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE "RISK
FACTORS" SECTION, THE FINANCIAL STATEMENTS AND THE NOTES TO THE FINANCIAL
STATEMENTS.
iLIVE, INC.
We are a developer of online entertainment focused on the delivery and
distribution of streaming video content on an on-demand and pay-per-view basis.
We develop our own content and assist others develop a distribution channel for
their content on the iLive Network. We offer video-on-demand, electronic
shopping, physical VHS and DVD distribution and business-to-business content
creation and distribution.
We have produced in excess of 250 episodes viewable on the Internet. We
have developed expertise in online editing and encoding. In addition, we have
the ability to help companies develop video coverage of their products and
services on the Internet. iLive has a crew of trained professionals that are
able to go out on location to shoot and produce video content. The content is
then brought back to our offices where it is digitally edited then encoded and
posted on the Internet for viewing.
We are currently developing a business-to-consumer model that focuses
on the distribution of content online. Our consumers will enjoy television
programming with the ability to watch what they want when they want. So whether
its learning how to cook, be a DJ or watching an old episode of the Beverly
Hillbillies, iLive is bringing consumers a truly unique experience through video
on demand over the Internet. Our web site is www.iLive.com.
Our offices are located at 2102 Business Center Drive, Irvine,
California 92612 and our telephone number is 949-660-0099.
The Offering
Common stock offered by selling stockholders
(includes 300% of the shares underlying convertible notes and warrants)... Up to 8,130,769 shares, based on current
market prices and assuming full conversion
of the convertible note, with interest for
two years. This number represents 18.85%
of our current outstanding stock
Common stock to be outstanding after the offering Up to 43,130,769 shares
Use of proceeds........................................................... We will not receive any proceeds from the
sale of the common stock.
Over-The-Counter Bulletin Board .......................................... LIVE
The above information is based on 35,000,000 shares of common stock
outstanding as of January 11, 2002 and assumes the subsequent conversion of our
issued convertible note, with interest, and exercise of warrants by our selling
stockholder, and excludes:
o 6,000,000 shares of common stock issuable upon conversion of
outstanding convertible notes.
2
RISK FACTORS
THIS INVESTMENT HAS A HIGH DEGREE OF RISK. BEFORE YOU INVEST YOU SHOULD
CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER
INFORMATION IN THIS PROSPECTUS. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR,
OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION COULD BE HARMED AND THE
VALUE OF OUR STOCK COULD GO DOWN. THIS MEANS YOU COULD LOSE ALL OR A PART OF
YOUR INVESTMENT.
RISKS RELATED TO OUR BUSINESS:
WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT WHICH MAY CONTINUE IN THE
FUTURE AND WHICH MAY ADVERSELY IMPACT OUR BUSINESS AND OUR STOCKHOLDERS.
We incurred significant net operating losses in each of the years
ended December 31, 2000 and 1999. We realized a net loss of $3,098,805 for the
twelve months ended December 31, 2000, as compared to incurring a net loss of
$2,507,128 for the twelve months ended December 31, 1999. Our accumulated
deficit through December 31, 2000 was $6,752,034, and as of that date we had a
total stockholders' deficit of $2,799,574. For the nine months ended September
30, 2001 we realized a net loss of $433,072 from continuing operations. As of
that date we had an accumulated deficit of $5,254,433 and a stockholders'
deficit of $363,303. We may continue to incur losses and may never achieve or
sustain profitability. An extended period of losses and negative cash flow may
prevent us from operating and expanding our business, especially our
Internet-based business.
WE NEED AND MAY BE UNABLE TO OBTAIN ADDITIONAL FUNDING ON SATISFACTORY TERMS,
WHICH COULD DILUTE OUR STOCKHOLDERS OR IMPOSE BURDENSOME FINANCIAL RESTRICTIONS
ON OUR BUSINESS.
Historically, we have relied upon cash from financing activities and
revenues generated from operations to fund all of the cash requirements of our
activities. We have not been able to generate any significant cash from our
operating activities in the past and cannot assure you that we will be able to
do so in the future. We require new financing in addition to our line of credit
with Street Capital, Inc. Deteriorating global economic conditions and the
effects of ongoing military actions against terrorists may cause prolonged
declines in investor confidence in and accessibility to capital markets. Future
financing may not be available on a timely basis, in sufficient amounts or on
terms acceptable to us. This financing may also dilute existing stockholders'
equity. Any debt financing or other financing of securities senior to common
stock will likely include financial and other covenants that will restrict our
flexibility. At a minimum, we expect these covenants to include restrictions on
our ability to pay dividends on our common stock. Any failure to comply with
these covenants would have a material adverse effect on our business, prospects,
financial condition and results of operations because we could lose our existing
sources of funding and impair our ability to secure new sources of funding.
OUR BUSINESS MODEL IS UNPROVEN AND MAY NOT BE SUSTAINED, WHICH COULD ADVERSELY
IMPACT OUR BUSINESS AND STOCKHOLDERS.
Our business model, including our distributor program, is predicated
on the demand for pay-for-view streaming video content over the Internet. The
market for broadband content delivered over the Internet is currently developing
and evolving. Accordingly, we are unable to predict the demand for our services
and are therefore unable to predict whether our business model may be sustained.
If we are unable to generate significant revenues under our current business
model, our business, prospects, financial condition and results of operations
could be adversely affected.
OUR FAILURE TO MANAGE GROWTH EFFECTIVELY COULD IMPAIR OUR BUSINESS.
Our business strategy envisions a period of rapid growth that may
put a strain on our administrative and operational resources. Our ability to
effectively manage growth will require us to continue to expand the capabilities
of our operational and management systems and to attract, train, manage and
retain qualified engineers, technicians, salespersons and other personnel. There
can be no assurance that we will be able to do so, particularly if our losses
continue and we are unable to obtain sufficient financing. If we are unable to
successfully manage our growth, our business, prospects, financial condition and
results of operations could be adversely affected.
3
BECAUSE WE BELIEVE THAT PROPRIETARY RIGHTS ARE MATERIAL TO OUR SUCCESS,
MISAPPROPRIATION OF THESE RIGHTS OR CLAIMS OF INFRINGEMENT OR LEGAL ACTIONS
RELATED TO INTELLECTUAL PROPERTY COULD ADVERSELY IMPACT OUR FINANCIAL CONDITION.
We currently rely on a combination of contractual rights,
copyrights, trademarks and trade secrets to protect our proprietary technology
and intellectual property rights. We do not hold any patents. There can be no
assurance that our means of protecting our proprietary rights will be adequate
or that our competitors will not independently develop comparable or superior
technologies or obtain unauthorized access to our proprietary technologies.
We own, license or have otherwise obtained the right to use
technologies incorporated into our web sites. We may receive infringement claims
from third parties relating to our technologies. In those cases, we intend to
investigate the validity of the claims and, if we believe the claims have merit,
to respond through licensing or other appropriate actions. To the extent claims
relate to technology that we have licensed from third parties for incorporation
into our web sites, we would forward those claims to the appropriate third
party. If we were unable to license or otherwise provide any necessary
technology on a cost-effective basis, we could be prohibited from using that
technology, incur substantial costs in redesigning our web sites that
incorporate that technology, or incur substantial costs defending any legal
action taken against us, all of which could have a material adverse effect on
our business, prospects, financial condition, results of operations and cash
flows.
We hold the Internet domain name www.ilive.com. Under current domain
name registration practices, no one else can obtain an identical domain name,
but someone might obtain a similar name, or the identical name with a different
suffix, such as ".org", or with a country designation. The regulation of domain
names in the United States and in foreign countries is subject to change, and we
could be unable to prevent third-parties from acquiring domain names that
infringe or otherwise decrease the value of our domain names.
IF COMMUNICATIONS TO OUR PRIMARY SERVERS ARE INTERRUPTED, OUR OPERATIONS COULD
BE NEGATIVELY IMPACTED.
Our short films, classic television and other entertainment
offerings and our web site, iLive.com, are hosted on servers owned and operated
by Reliable Hosting in a tier 1 facility located in Lake Tahoe, California.
Although offsite backup servers are maintained by our host, all of our primary
servers are vulnerable to interruption by damage from fire, flood, power loss,
telecommunications failure, break-ins, terrorist attacks and other events beyond
our control. We have, from time to time, experienced periodic systems
interruptions and anticipate that these interruptions will occur in the future.
We do not maintain business interruption insurance. If we experience significant
system disruptions, our business, results of operations and financial condition
would be materially and adversely affected because we would be unable to deliver
our Internet-related products and services during the disruption and may
therefore lose existing and potential customers.
WE OPERATE WITHIN A HIGHLY COMPETITIVE MARKET.
The market for delivery of entertainment content over the Internet
is extremely competitive and can be significantly affected by many factors,
including low barriers to entry, changes in local, regional or national economic
conditions, changes in consumer preferences, brand name recognition and
marketing and the development of new and competing technologies. We expect that
existing businesses that compete with us and which have greater financial
resources than us will be able to undertake more extensive marketing campaigns
and adopt more aggressive advertising sales policies than us, thereby generating
more traffic to their web sites. These competitive pressures could have a
material adverse effect on our business, prospects, financial condition and
results of operations.
THERE ARE RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS MADE BY US AND ACTUAL
RESULTS MAY DIFFER.
Some of the information in this Form SB-2 contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue," or similar words. You should
read statements that contain these words carefully because they:
4
-- discuss our future expectations;
-- contain projections of our future results of operations or of
our financial condition; and
-- state other "forward-looking" information.
We believe it is important to communicate our expectations. However,
there may be events in the future that we are not able to accurately predict or
over which we have no control. The risk factors listed in this section, as well
as any cautionary language in this prospectus, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. You should
be aware that the occurrence of the events described in these risk factors could
have an adverse effect on our business, results of operations and financial
condition.
RISKS RELATING TO OUR CURRENT FINANCING AGREEMENT:
THERE ARE A LARGE NUMBER OF SHARES UNDERLYING OUR CONVERTIBLE NOTE, AND WARRANTS
THAT MAY BE AVAILABLE FOR FUTURE SALE AND THE SALE OF THESE SHARES MAY DEPRESS
THE MARKET PRICE OF OUR COMMON STOCK.
As of January 25, 2002, we had 35,000,000 shares of common stock issued
and outstanding and convertible promissory notes outstanding that may be
converted into an estimated 8,130,769 shares of common stock at current market
prices, and outstanding options and warrants to purchase 100,000 shares of
common stock. In addition, the number of shares of common stock issuable upon
conversion of the outstanding convertible note may increase if the market price
of our stock declines. All of the shares, including all of the shares issuable
upon conversion of the note and upon exercise of our warrants, may be sold
without restriction. The sale of these shares may adversely affect the market
price of our common stock.
THE CONTINUOUSLY ADJUSTABLE CONVERSION PRICE FEATURE OF OUR CONVERTIBLE NOTES
COULD REQUIRE US TO ISSUE A SUBSTANTIALLY GREATER NUMBER OF SHARES, WHICH WILL
CAUSE DILUTION TO OUR EXISTING STOCKHOLDERS.
Our obligation to issue shares upon conversion of our convertible
securities is essentially limitless.
The following is an example of the amount shares of our common stock
that is issuable, upon conversion of our convertible notes, based on market
prices 25%, 50% and 75% below the conversion price.
With Number of Shares Percentage of
% Below Market Price Per Share Discount of 20% Issuable Outstanding Stock
- -------------- --------------- --------------- ---------------- -----------------
25% $.0975 $.078 4,461,538 11.31%
50% $.065 $.052 6,692,308 16.52%
75% $.0325 $.026 13,384,615 27.66%
As illustrated, the number of shares of common stock issuable upon conversion of
our convertible notes will increase if the market price of our stock declines,
which will cause dilution to our existing stockholders.
THE ISSUANCE OF SHARES UPON CONVERSION OF THE CONVERTIBLE NOTE AND EXERCISE OF
OUTSTANDING WARRANTS MAY CAUSE IMMEDIATE AND SUBSTANTIAL DILUTION TO OUR
EXISTING STOCKHOLDERS.
The issuance of shares upon conversion of the convertible note and
exercise of warrants may result in substantial dilution to the interests of
other stockholders since the selling stockholder may ultimately convert and sell
the full amount issuable on conversion. Although the selling stockholder may not
convert their convertible note and/or exercise their warrants if such conversion
or exercise would cause them to own more than 4.99% of our outstanding common
stock, this restriction does not prevent the selling stockholder from converting
and/or exercising some of their holdings and then converting the rest of their
holdings. In this way, the selling stockholder could sell more than this limit
while never holding more than this limit. There is no upper limit on the number
of shares that may be issued which will have the effect of further diluting the
proportionate equity interest and voting power of holders of our common stock
and may result in a change of control of iLive.
5
THE CONTINUOUSLY ADJUSTABLE CONVERSION PRICE FEATURE OF OUR CONVERTIBLE NOTES
MAY ENCOURAGE THE INVESTORS TO MAKE SHORT SALES OF OUR COMMON STOCK, WHICH COULD
HAVE A DEPRESSIVE EFFECT ON THE PRICE OF OUR COMMON STOCK.
The convertible notes are convertible into shares of our common stock
at a 20% discount to the trading price of the common stock either prior to the
issuance of the notes or prior to the conversion, whichever is lower. The
significant downward pressure on the price of the common stock as the selling
stockholder converts and sells material amounts of our common stock could
encourage short sales by the selling stockholder or others. This could place
further downward pressure on the price of the common stock. The selling
stockholder could sell common stock into the market in anticipation of covering
the short sale by converting their securities, which would cause the further
downward pressure on the stock price.
THE INTEREST PAYABLE ON OUR CONVERTIBLE NOTES IS ALSO CONVERTIBLE INTO SHARES OF
OUR COMMON STOCK.
To date, we have outstanding an aggregate of $300,000 principal amount
8% convertible notes. The convertible notes are due and payable, with 8%
interest, in January 2004 unless sooner converted into shares of our common
stock. In addition, any event of default as described in the convertible notes
could require the early repayment of the convertible notes, including a premium
of 30% of the outstanding principal balance of the note at the time of the
default. We anticipate that the full amount of the convertible notes, together
with accrued interest, will be converted into shares of our common stock, in
accordance with the terms of the convertible notes. If we are required to repay
the convertible notes, we would be required to use our limited working capital
and raise additional funds. If we were unable to repay the notes when required,
the note holders could foreclose on the collateral and commence legal action
against us to recover the amounts due which ultimately could require the
disposition of some or all of our assets. Any such action would require us to
curtail or cease operations.
RISKS RELATING TO OUR COMMON STOCK:
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE.
The trading price of our common stock has been and is likely to
continue to be highly volatile. For example, during the 52-week period ended
January 14, 2002, the price of our common stock ranged from $1.0625 to $.07 per
share. Our stock price could be subject to wide fluctuations in response to
factors such as:
-- actual or anticipated variations in quarterly operating
results;
-- announcements of technological innovations, new products or
services by us or our competitors;
-- changes in financial estimates or recommendations by
securities analysts;
-- the addition or loss of strategic relationships or
relationships with our key customers;
-- conditions or trends in the Internet and online commerce
markets, including the provision of related speech-activated
services;
-- changes in the market valuations of other Internet, online
service or software companies;
-- announcements by us or our competitors of significant
acquisitions, strategic partnerships, joint ventures or
capital commitments;
-- legal, regulatory or political developments;
-- additions or departures of key personnel;
-- sales of our common stock by insiders or stockholders; and
-- general market conditions.
The historical volatility of our stock price may make it more difficult
for you to resell shares when you want at prices you find attractive. Sharp
increases in our stock price could have a negative impact on our financial
condition.
In addition, the stock market in general, and the Over-The-Counter
Bulletin Board and the market for Internet and technology companies in
particular, have experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of these
companies. These broad market and industry factors may reduce our stock price,
regardless of our operating performance.
6
OUR COMMON STOCK IS SUBJECT TO "PENNY STOCK" RULES.
The Securities and Exchange Commission (the "Commission") has adopted
Rule 15g-9 which establishes the definition of a "penny stock," for the purposes
relevant to us, as any equity security that has a market price of less than
$5.00 per share or with an exercise price of less than $5.00 per share, subject
to certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require: (i) that a broker or dealer approve a person's
account for transactions in penny stocks; and (ii) the broker or dealer receive
from the investor a written agreement to the transaction, setting forth the
identity and quantity of the penny stock to be purchased. In order to approve a
person's account for transactions in penny stocks, the broker or dealer must (i)
obtain financial information and investment experience objectives of the person;
and (ii) make a reasonable determination that the transactions in penny stocks
are suitable for that person and the person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks. The broker or dealer must also deliver, prior to
any transaction in a penny stock, a disclosure schedule prepared by the
Commission relating to the penny stock market, which, in highlight form, (i)
sets forth the basis on which the broker or dealer made the suitability
determination; and (ii) that the broker or dealer received a signed, written
agreement from the investor prior to the transaction. Disclosure also has to be
made about the risks of investing in penny stocks in both public offerings and
in secondary trading and about the commissions payable to both the broker-dealer
and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks
7
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be
offered and sold from time to time by the selling stockholder of our company.
There will be no proceeds to our company from the sale of shares of common stock
in this offering. We may realize up to $15,200 upon the exercise of warrants,
which will be used for general corporate purposes.
8
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock began trading on the Over-The-Counter Bulletin Board
under the symbol "LIVE" on October 26, 1999. Prior to October 26, 1999, our
common stock was quoted under the symbol "PHIC."
The following table sets forth the high and low bid prices for shares
of the our common stock for the periods noted, as reported by the National Daily
Quotation Service and the Over-The-Counter Bulletin Board. Quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
Low High
1999
First Quarter .02 .02
Second Quarter .02 .02
Third Quarter 2.75 .625
Fourth Quarter 2.25 1.38
2000
First Quarter 4.25 1.19
Second Quarter 1.75 .41
Third Quarter 1.94 .34
Fourth Quarter 1.25 1.38
2001
First Quarter 1.0625 .25
Second Quarter .75 .20
Third Quarter .58 .15
Fourth Quarter .41 .07
As of January 25, 2002, our common stock was held by 206 stockholders
of record. We believe that the number of beneficial owners is substantially
greater than the number of record holders because a significant portion of our
outstanding common stock is held of record in broker "street names" for the
benefit of individual investors. The transfer agent of our common stock is
Florida Atlantic Stock Transfer. Their phone number is 954-726-4954.
9
DIVIDEND POLICY
Our board of directors determines any payment of dividends. We do not
expect to authorize the payment of cash dividends in the foreseeable future. Any
future decision with respect to dividends will depend on future earnings,
operations, capital requirements and availability, restrictions in future
financing agreements, and other business and financial considerations.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR PLAN OF OPERATION SHOULD
BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND THE RELATED NOTES. THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF
1934 WHICH ARE BASED UPON CURRENT EXPECTATIONS THAT INVOLVE RISKS AND
UNCERTAINTIES, SUCH AS OUR PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. OUR
ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS," "BUSINESS" AND
ELSEWHERE IN THIS PROSPECTUS. SEE "RISK FACTORS."
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER
20, 2000.
Revenues: Revenues totaled $93,000 for the three months ended September
30, 2001 as compared to no revenue for the three months ended September 30,
2000. During the period ended September 30, 2001, we continued to develop our
business services which consists of film editing and encoding solutions.
Earnings per share totaled $0.08 for the three months ended September 30, 2001
based on 22,590,729 shares outstanding as opposed to $(0.03) net loss for the
three months ended September 30, 2000. The large increase in earnings per share
for this quarter was primarily due to a one-time gain of $1,930,673 resulting
from the disposal of its subsidiary, Asia Pacific, Inc.
Cost of Sales: Cost of Sales totaled $10,829 for the three months ended
September 30, 2001. We did not generate revenue for the three months ended
September 30, 2000 and therefore did not incur any cost of sales. As a
percentage of total revenue, cost of sales was 11.6% for the period ended
September 30, 2001 resulting in gross margins of 88.4%. The cost of sales will
vary significantly from project to project but we aim to consistently challenge
and keep the cost of sales to a minimum.
General and Administrative Expenses: General and Administrative
expenses totaled $32,042 (34.5% of revenues) and $270,412 for the three month
periods ended September 30 2001 and September 30, 2000 respectively. The large
decrease in general and administrative expenses was due to the downsizing of
operations as we continue to refine our focus on our plan of operations.
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2000.
Revenues: Revenues totaled $141,000 for the nine months ended September
30, 2001 as compared to no revenue for the nine months ended September 30, 2000.
During the period ended September 30, 2001, we continued to develop our business
services which consists of film editing and encoding solutions. Earnings per
share totaled $0.07 for the nine months ended September 30, 2001 based on
22,590,729 shares outstanding as opposed to $(0.14) net loss for the nine months
ended September 30, 2000. The large increase in earnings per share for this
quarter was primarily due to a one-time gain of $1,930,673 resulting from the
disposal of its subsidiary, Asia Pacific, Inc.
Cost of Sales: Cost of sales totaled $15,779 for the nine months ended
September 30, 2001. We did not generate revenue for the nine months ended
September 30, 2000 and therefore did not incur a cost of sales. As a percentage
of total revenue, cost of sales was 11.2% for the period ended September 30,
2001 resulting in gross margins of 88.8% gross margins. The cost of sales will
vary significantly from project to project but we aim to consistently challenge
and keep the cost of sales to a minimum.
General and Administrative Expenses: General and Administrative
expenses totaled $271,115 and $923,190 for the nine month periods ended
September 30, 2001 and September 30, 2000 respectively. The large decrease in
general and administrative expenses was due to the downsizing of operations as
we continue to refine our focus on our plan of operations.
11
FISCAL YEAR ENDED DECEMBER 30, 2000 COMPARED TO THE FISCAL YEAR ENDED DECEMBER
30, 1999.
Our results of operations for 1999 was not indicative of our business
plan and strategy. During 1999, we discontinued operation of our restaurant
operations known as Chasen's. As a result of the discontinuation of our
restaurant operations, we incurred a one-time charge $914,904. During the fiscal
year ended December 31, 2000, we focused our attention on the development of our
Web site and the production of content for our site. In furtherance of this, we
acquired the rights to the Miss Beverly Hills Beauty Pageant.
Our first Miss Beverly Hills Beauty Pageant was held October 15, 2000
at the Beverly Hills Hotel which generated only nominal revenue totaling $3,624
primarily from ticket sales and contestant entrance fees. Total costs for
hosting the event totaled $81,681 which consisted of advertising costs, venue
rental fees, and prize costs. Management believes that being a first year event,
that the results are not indicative of future pageants and as the event grows,
we will be able to derive additional revenue from corporate sponsorship,
merchandise sales, and pay-per-view internet broadcasting. However, no
assurances can be made as to the result of such future pageants.
PLAN OF OPERATIONS FOR OUR WEB SITE iLIVE.COM.
Our goal for our Internet operations is to seamlessly integrate
streaming media content and e-commerce in the context of a global branded
network. Our web site, as anticipated, was launched in the third quarter. As of
December 31, 2000, we had not yet realized any material revenues from our web
site operations.
LIQUIDITY AND CAPITAL RESOURCES
On October 1, 2000, we issued a convertible note of up to $1,500,000.
Pursuant to the terms of the note, we are required to repay the principal amount
of $1,500,000 with 12% interest on or before March 7, 2002. The note is
convertible at any time given 15 days notice at the holder's election into a
maximum of 6,000,000 shares of our common stock at $0.25 per share. As of
September 30, 2001, we have borrowed $935,155, of which $761,250 was converted
to common stock during the quarter ended June 30, 2001.
We expended $9,000 in the three months ended September 30, 2001 on the
development and hosting of our website.
In the period ended September 30, 2001, we disposed of Asia Pacifc Co.,
Ltd. through the sale of 100% of the Asia Pacific shares held by us to Fig Tree
Capital in exchange for $10,000. Asia Pacific is the owner of approximately 69%
operating interest in Chasen's restaurant (our discontinued restaurant
operations). As previously discussed in prior reports, in July 2000, management
discontinued funding of Chasen's restaurant. We had previously written off all
our restaurant operating assets (which consisted primarily of furniture,
fixtures, restaurant equipment and inventory) as of June 30, 2000. Selling our
ownership in Asia Pacific resulted in a one time gain of $1,930,673 which is
recorded as a discontinued operation. The divesture of Asia Pacific will have no
adverse effect to our ongoing operations.
We maintain a cash balance that we believe will sustain operations into
2002. We continue to explore all possibilities in securing financing sufficient
to cover operating expenses until such time the company reaches profitability.
The losses through the quarter ended September 30, 2001 were due to minimal
revenue and our operating expenses, with the majority of expenses in the areas
of: salaries, legal fees, consulting fees, as well as amortization expense
relating to software development, debt issue costs and licensing costs. We face
considerable risk in completing each of our business plan steps, including, but
not limited to: a lack of funding or available credit to continue development
and undertake product rollout; potential cost overruns; a lack of interest in
its solutions in the market on the part of wireless carriers or other customers;
potential reduction in wireless carriers which could lead to significant delays
in consummating revenue bearing contracts; and/or a shortfall of funding due to
an inability to raise capital in the securities market. Since further funding is
required, and if none is received, we would be forced to rely on our existing
cash in the bank or secure short-term loans. This may hinder our ability to
complete our product development until such time as necessary funds could be
raised. In such a restricted cash flow scenario, we would delay all cash
intensive activities including certain product development and strategic
initiatives described above.
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SUBSEQUENT EVENTS
In January 2002, we entered into a securities purchase agreement with
the Laurus Master Fund, Ltd. for the issuance of a $300,000 principal amount of
8% convertible note and 100,000 common stock purchase warrants in reliance on
Section 4(2) of the Act and Rule 506. Each warrant entitles the holder to
purchase one share of common stock at an exercise price of $.152. The commission
for the transaction was $30,000.
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BUSINESS
OVERVIEW
We are a developer of online entertainment focused on the delivery and
distribution of streaming video content on an on-demand and pay-per-view basis.
We develop our own content and assist others develop a distribution channel for
their content on the iLive Network. We offer video-on-demand, electronic
shopping, physical VHS and DVD distribution and business-to-business content
creation and distribution.
We have produced in excess of 250 episodes viewable on the Internet. We
have developed expertise in online editing and encoding. In addition, we have
the ability to help companies develop video coverage of their products and
services on the Internet. iLive has a crew of trained professionals that are
able to go out on location to shoot and produce video content. The content is
then brought back to our offices where it is digitally edited then encoded and
posted on the Internet for viewing.
We are currently developing a business-to-consumer model that focuses
on the distribution of content online. Our consumers will enjoy television
programming with the ability to watch what they want when they want. So whether
its learning how to cook, be a DJ or watching an old episode of the Beverly
Hillbillies, iLive is bringing consumers a truly unique experience through video
on demand over the Internet. Our web site is www.iLive.com.
Our offices are located at 2102 Business Center Drive, Irvine,
California 92612 and our telephone number is 949-660-0099.
OUR HISTORY
We were originally incorporated under the laws of the State of Nevada
in April 1987 as Sandalwood Corporation. In 1988, Sandalwood sold its existing
operations and became inactive. In November 1994, Sandalwood acquired Spaceplex
One, Inc., a New York corporation and changed its name to Spaceplex Amusement
Centers International, Ltd. Spaceplex, through its subsidiaries, engaged in the
business of operating family amusement centers. In April 1996, Spaceplex filed
for Chapter 11 bankruptcy proceedings. As a result of those proceedings,
Spaceplex satisfied all outstanding debts and claims utilizing all of its
remaining assets and discontinued all obligations. Spaceplex was discharged from
bankruptcy in April 1996. In May 1996, we changed our name to Air Energy, Inc.,
and in December 1997, we changed our name to Powerhouse International, Inc. From
May 1996 until October 1999, we were inactive. On September 30, 1999, we
acquired all of the outstanding common stock of Asia Pacific Co, Ltd., a Nuie
corporation in exchange for 690,000 shares of our common stock.
Asia-Pacific's principal asset consists of a 64% ownership interest in
246 LLC, a California limited liability corporation d.b.a Chasen's, a restaurant
located in Beverly Hills, California. On October 21, 1999, we changed our name
to iLive, Inc. to better reflect our current business plan.
OUR BUSINESS
Through our website, iLive.com, we are designed to capitalize on the
growing video on demand market on the Internet. On iLive.com, consumers will
enjoy television programming with the ability to watch what they want when they
want to watch it. So whether its learning how to cook with a chef from Italy,
Kung Fu lessons from a master in Japan, or golf instruction from a PGA
professional, iLive is bringing consumers their choice of content by through
video on demand on the Internet.
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By creating our own distribution network, we hope to help large content
providers, such as MGM, Viacom, Sony and Universal avoid the kinds of disruption
caused by services like Napster, the former free music swapping Internet
service. Although the record companies finally succeeded in getting the courts
to shut down Napster, millions of songs had been shared for free and billions of
dollars in revenue had been lost. The film industry is already seeing the
beginnings of similar losses, as second generation "Napsters" allow movie
swapping. The film industry is also desperately seeking a viable revenue streams
from content distribution on the Internet. Of the movies produced by major
studios and released in the United States each year, relatively few are
profitable for the studios based on box office tickets alone.
OUR SOLUTION
1. We offer video on demand, electronic shopping, physical distribution
of VHS and DVD, and business-to-business content creation and distribution
services. The marriage between the personal computers and cable worlds, as well
as the personal computer and television, will allow us to create a full service
interactive programming network.
2. Another factor that makes iLive truly unique is that it doesn't have
to worry whether the machine used to consume such broadband content is a PC, a
TV or a combination of both. Nor do we need to care if people get the
information from a cable modem or a set top box. Leaving iLive free to
concentrate on content; how it's packaged and how to make it easy to sell.
OUR BUSINESS MODEL
We strive to be the leader in satisfying consumer demand for unique
content both on and offline. We are also looking to adopt revenue sharing
agreements with major motion picture studios similar to the agreements currently
used by video rental companies. These agreements along with own content
production and distribution will allow for the continuous flow of new content
and revenue.
Our business model focuses on the development of three divisions:
Online Streaming Distribution, Physical VHS and DVD Distribution, and Business
Services.
ONLINE STREAMING
Our online streaming division continues to focus on building a quality
library of unique content as well as developing a proprietary peer-to-peer
distribution platform for sharing content. In building our library of content,
we will always strive to possess new and entertaining episodes by both producing
our own shows and syndicating content from other producers. The revenue sharing
agreements that the large studios currently have with video rental houses offers
producers a percentage of the income. We will look to keep production costs low
while still delivering a quality end product to the consumer. Traditional
programming budgets for television generally run in excess of $500,000 per half
hour show. These shows have short shelf lives, allowing the networks only a
short time to recoup their investment. Fortunately, for television, the
30-second commercials have provided networks with enough revenue to easily
achieve profitability. With wide scale broadband acceptance still growing, the
Internet needs to be cost sensitive and creative in reaching profitability. Our
route to profitability starts with production costs, which average $3,000 to
$5,000 per show.
We aim to make a profit on every show we make, these low entry costs
will allow even shows with limited success a realistic chance at making money.
Secondly, we are looking closely at the staying power of our content. The
philosophy is that the longer a show is running the more likely it is to be
profitable. We therefore look to make our shows as timeless as possible. As
such, we have opted away from early pioneers of covering red carpet events, and
showing movie trailers, and have instead looked to produce timeless shows like
cooking lessons, and focus on topics like relationships, and celebrity homes.
Content that will be as interesting five years from now as it is today.
PHYSICAL DISTRIBUTION
Broadband saturation is now reaching the point where a sustainable
business model may be built, while the industry is just now coming into its peak
growth rate. We have chosen to tap the already established revenue stream of VHS
and DVD sales to provide the existing users with product that are not yet able
to accept streamed media. This builds both our customer base and revenues, which
sustain our position as the broadband industry grows under it.
15
We will partner with physical stores and virtual, Internet, stores to
retail VHS and DVD videos. These videos will feature shows that are already
available online on a pay-per-view basis and so this added revenue stream costs
us very little. Management anticipates robust sales from the videos as they
target very specific market niches, which can be exploited by using retail
outlets that cater directly to these niches. A good example of this is our
Mixology series. Market research shows that the DJ Industry is worth $131
million a year, with a host of online and physical stores catering directly to
these individuals. We will wholesale our videos to these stores and earn between
$5 and $10 per video. Additionally, we will retail our videos directly on our
website, realizing between $10 and $15.
In addition, we will explore the possibility of acquiring video
duplication companies. The advantages of such a move are two fold. Firstly, this
will allow us to earn greater margins on each VHS or DVD sold because we would
produce our products "in-house." Secondly, the duplicator would put us in touch
with many business that are producing content which will enable us to cross sell
web based distribution, film and encode.
BUSINESS SERVICES
Nearly half of the U.S. adult population has now made a purchase
online, taking e-commerce from a dot.com novelty to the mainstream, according to
a survey by Nielsen NetRatings and Harris Interactive. More than $3.5 billion
was spent online in March 2001, a 35.6% increase from $2.6 Billion in April
2000. With e-commerce being such an important part of retailing, businesses are
now rethinking their Internet strategy. A prime example of the new thinking is
BMW films. BMW created 6-8 minute short Internet films that provide the elusive
mix of entertainment and product showcasing that brands ranging from Nike to
Nivea have desired for years. This prompted BMW to record its best May and June
ever in terms of car sales, exceeding the 40,000-vehicle mark - despite a
cooling economy.
With iLive producing more than 250 episodes for the Internet, we have a
certain expertise in filming, online editing and encoding. Our professional
crews are able to go out to shoot and produce video content "on location." The
content is then quickly edited and digitally encoded for viewing over the
Internet. The economics of the Internet combined with this ease of distribution
has undoubtedly made this the marketing of choice for many companies wanting to
promote themselves globally. We also offer the unique ability to take existing
content and push it through our distribution channels. This gives companies the
chance to develop a revenue stream from Internet viewing, something that many
companies have yet to discover.
THE MARKETPLACE
The Internet gets redefined almost daily. According to Forward Concepts
there are approximately 500 million worldwide Internet users. We believe that
streaming video is the future of Internet programming. Its future on the
Internet lies with the expansion of broadband connectivity. Internet television
will grow as broadband and high-speed Internet connectivity grows. The current
market size of Internet television, which is approximately 10 million
households, is a larger addressable market than many "regular television"
markets. Yet, Internet television usage has still only penetrated less than 2%
of the worldwide Internet market, and you have the emergence of an exploding
opportunity.
Dataquest estimates that the potential market for video-on-demand is $9
Billion, or $1 Billion more than the entire market for video rentals in 1998.
EMPLOYEES
At January 16, 2002, we employed 3 full-time employees and 4
consultant/part-time employees. None of these employees is subject to a
collective bargaining agreement, and there is no union representation within our
company. We maintain various employee benefit plans and believe our employee
relations are good.
FACILITIES
Our principal executive office address is 2102 Business Center Drive,
Irvine, California 92612. We lease our facilities month to month. Our rent
expense was $121,759 for the year ended December 31, 2000.
16
LEGAL PROCEEDINGS
From time to time may be involved in various claims, lawsuits, disputes
with third parties, actions involving allegations of discrimination, or breach
of contract actions incidental to the operations of its business. We are
currently involved in two such instances.
JERRY NIETO V. iLIVE, INC., ET AL.
On September 21, 2001, a lawsuit was filed in the Superior Court of the
State of California for the County of Orange, against us entitled Jerry Nieto v.
iLive, Inc., et al. The complaint alleges various claims seeking payment of past
due wages in the amount of $9,000, 750,000 shares of our common stock, and
penalties and attorney fees. We deny these claims and are vigorously defending
the action.
AL MOSHIRI V. iLIVE INC., ET AL.
On July 20, 2001, a lawsuit was filed in the Superior Court of the
State of California for the County of Los Angeles, against us entitled Al
Moshiri v. iLive, Inc., et. al. The complaint alleges various claims seeking
payment of alleged finder's fees and damages in the amount of $500,000 and seeks
punitive damages of $5,000,000. We deny these claims and are vigorously
defending the action.
17
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
NAME AGE POSITION
Scott Henricks 30 President, CFO, Secretary and Director
Albert Aimers 39 Chief Executive Officer and Director
Directors serve until the next annual meeting and until their
successors are elected and qualified. Officers are appointed to serve for one
year until the meeting of the board of directors following the annual meeting of
stockholders and until their successors have been elected and qualified,
although Scott Henricks has an employment agreement. There are no family
relationships between any of our directors or officers.
SCOTT HENRICKS is currently our President, Secretary, Director and was
one of the founders. From 1996 to 1999, Mr. Henricks owned Wall Street, Inc. an
Investment Banking company. His company focused on helping build strategic
relationships, and business development for emerging companies.
ALBERT AIMERS is currently our Chief Executive Officer and Director.
Mr. Aimers was Chairman of our board in 1999. Since 1998, Mr. Aimers has been an
employee and shareholder of Street Capital, Inc., a firm engaged in merchant
banking. From 1997 to 1998, Mr. Aimers was a partner in Strategic Equity Corp.,
a firm engaged in merchant banking.
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EXECUTIVE COMPENSATION
The following tables set forth certain information regarding our CEO
and each of our most highly-compensated executive officers whose total annual
salary and bonus for the fiscal year ending December 31, 2000, 1999 and 1998
exceeded $100,000:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Other
Annual Restricted Options LTIP
Name & Principal Salary Bonus Compen- Stock SARs Payouts All Other
Position Year ($) ($) sation ($) awards (#)(1) ($) Compensation
- --------------------- --------- ------------ ----------- ------------ -------------- ----------- ------------ --------------
Scott Hendricks, 2000 $60,000* 0 0 0 0 0 0
President 1999 0 0 0 0 0 0 0
1998 0 0 0 0 0 0 0
* Includes $20,000 in accrued but unpaid salary.
EMPLOYMENT AGREEMENT
On April 1, 2000, we entered into an oral, at-will, employment
agreement with Scott Henricks, our President and Chairman, whereby we will pay
Mr. Henricks an annual salary of $60,000 beginning in May 2000. The agreement
also requires us to provide health benefits to Mr. Henricks and his family and
to allow Mr. Henricks the opportunity to participate in our retirement, stock
option and bonus plans as they may be established.
OPTIONS
For our fiscal year ending December 31, 2000, we did not issue options
to our executive officers and they did not exercise any options.
COMPENSATION OF DIRECTORS
We do not compensate our directors.
19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 1, 2000, we issued a convertible note of up to $1,500,000 to
Street Capital, Inc, an entity in which Mr. Henricks is the President and
Director and Mr. Aimers is a principal . Pursuant to the terms of the note, we
are required to repay the principal amount of $1,500,000 with 12% interest on or
before March 7, 2002. The note is convertible, at anytime given 15 day's notice
at the holder's election, into a maximum of 6,000,000 shares of our common stock
at $0.25 per share.
20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock as of January 16, 2002 (i) by each person who is
known by us to beneficially own more than 5% of our common stock; (ii) by each
of our officers and directors; and (iii) by all of our officers and directors as
a group. Each person's address is c/o iLive, Inc., 2102 Business Center Drive,
Irvine, California 92612.
Shares Beneficially Owned(1)
----------------------------
Name and Address of Beneficial Owner Number Percent
- ------------------------------------------------------------------------ ------------------ -------------
Scott Henricks, President and Chairman (2) 1,000,000 2.9%
Albert Aimers, Chief Executive Officer (3) 6,500,000 18.57%
Street Capital (4) 8,500,000 24.29%
Total securities held by officers and directors as a group (2 people): 7,500,000(7) 21.43%
(1) Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock subject
to options or warrants currently exercisable or convertible, or exercisable
or convertible within 60 days of January 16, 2002 are deemed outstanding
for computing the percentage of the person holding such option or warrant
but are not deemed outstanding for computing the percentage of any other
person. Percentages are based on a total of 35,000,000 shares of common
stock outstanding on January 16, 2002, and the shares issuable upon the
exercise of options and warrants exercisable on or within 60 days of
January 16, 2002, as described below.
(2) Includes 1,000,000 shares owned indirectly through Street Capital.
(3) Includes 6,500,000 shares owned indirectly through Street Capital.
(4) Mr. Henricks and Mr. Aimers are principals of Street Capital.
21
DESCRIPTION OF SECURITIES
THE FOLLOWING DESCRIPTION OF OUR CAPITAL STOCK IS A SUMMARY AND IS
QUALIFIED IN ITS ENTIRETY BY THE PROVISIONS OF OUR ARTICLES OF INCORPORATION,
WITH AMENDMENTS, ALL OF WHICH HAVE BEEN FILED AS EXHIBITS TO OUR REGISTRATION
STATEMENT OF WHICH THIS PROSPECTUS IS A PART.
Our Amended Articles of Incorporation authorize the issuance of 100,000,000
shares of common stock, $.001 par value per share. Holders of shares of common
stock are entitled to one vote for each share on all matters to be voted on by
the stockholders. Holders of common stock have cumulative voting rights. Holders
of shares of common stock are entitled to share ratably in dividends, if any, as
may be declared, from time to time by the Board of Directors in its discretion,
from funds legally available therefor. In the event of a liquidation,
dissolution, or winding up of the Company, the holders of shares of common stock
are entitled to share pro rata all assets remaining after payment in full of all
liabilities. Holders of common stock have no preemptive or other subscription
rights, and there are no conversion rights or redemption or sinking fund
provisions with respect to such shares..
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Under the Nevada General Corporation Law and our Articles of
Incorporation, as amended, and our Bylaws, our directors will have no personal
liability to us or our stockholders for monetary damages incurred as the result
of the breach or alleged breach by a director of his "duty of care." This
provision does not apply to the directors' (i) acts or omissions that involve
intentional misconduct or a knowing and culpable violation of law, (ii) acts or
omissions that a director believes to be contrary to the best interests of the
corporation or its stockholders or that involve the absence of good faith on the
part of the director, (iii) approval of any transaction from which a director
derives an improper personal benefit, (iv) acts or omissions that show a
reckless disregard for the director's duty to the corporation or its
stockholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a director's duties, of a risk
of serious injury to the corporation or its stockholders, (v) acts or omissions
that constituted an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the corporation or its stockholders, or
(vi) approval of an unlawful dividend, distribution, stock repurchase or
redemption. This provision would generally absolve directors of personal
liability for negligence in the performance of duties, including gross
negligence.
The effect of this provision in our Articles of Incorporation and
Bylaws is to eliminate the rights of our Company and our stockholders (through
stockholder's derivative suits on behalf of our Company) to recover monetary
damages against a director for breach of his fiduciary duty of care as a
director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described in clauses (i) through (vi) above.
This provision does not limit nor eliminate the rights of our Company or any
stockholder to seek non-monetary relief such as an injunction or rescission in
the event of a breach of a director's duty of care. In addition, our Bylaws
provide that if the Nevada General Corporation Law is amended to authorize the
future elimination or limitation of the liability of a director, then the
liability of the directors will be eliminated or limited to the fullest extent
permitted by the law, as amended. The Nevada General Corporation Law grants
corporations the right to indemnify their directors, officers, employees and
agents in accordance with applicable law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act" or "Securities Act") may be permitted to directors,
officers or persons controlling our Company pursuant to the foregoing
provisions, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
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PLAN OF DISTRIBUTION
The selling stockholder and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholder may use any one or more of the
following methods when selling shares:
-- ordinary brokerage transactions and transactions in which the
broker-dealer solicits the purchaser;
-- block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
-- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
-- an exchange distribution in accordance with the rules of the
applicable exchange;
-- privately-negotiated transactions;
-- short sales;
-- broker-dealers may agree with the selling stockholder to sell a
specified number of such shares at a stipulated price per share;
-- a combination of any such methods of sale; and
-- any other method permitted pursuant to applicable law.
The selling stockholder may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling stockholder may pledge their shares to their brokers under
the margin provisions of customer agreements. If a selling stockholder defaults
on a margin loan, the broker may, from time to time, offer and sell the pledged
shares.
The selling stockholder may also engage in short sales against the box,
puts and calls and other transactions in our securities or derivatives of our
securities and may sell or deliver shares in connection with these trades. The
selling stockholder may pledge their shares of common stock to their brokers
under the margin provisions of customer agreements. If a selling stockholder
defaults on a margin loan, the broker may, from time to time, offer and sell the
pledged shares.
Broker-dealers engaged by the selling stockholder may arrange for other
broker-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholder (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholder do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholder shall be deemed to be an "underwriter" within
the meaning of the Securities Act in connection with such sales. In such event,
any commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
selling stockholder, but excluding brokerage commissions or underwriter
discounts. We and the selling stockholder have agreed to indemnify each other
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
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PENNY STOCK
The Securities and Exchange Commission (the "Commission") has adopted
Rule 15g-9 which establishes the definition of a "penny stock," for the purposes
relevant to us, as any equity security that has a market price of less than
$5.00 per share or with an exercise price of less than $5.00 per share, subject
to certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require: (i) that a broker or dealer approve a person's
account for transactions in penny stocks; and (ii) the broker or dealer receive
from the investor a written agreement to the transaction, setting forth the
identity and quantity of the penny stock to be purchased. In order to approve a
person's account for transactions in penny stocks, the broker or dealer must (i)
obtain financial information and investment experience objectives of the person;
and (ii) make a reasonable determination that the transactions in penny stocks
are suitable for that person and the person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks. The broker or dealer must also deliver, prior to
any transaction in a penny stock, a disclosure schedule prepared by the
Commission relating to the penny stock market, which, in highlight form, (i)
sets forth the basis on which the broker or dealer made the suitability
determination; and (ii) that the broker or dealer received a signed, written
agreement from the investor prior to the transaction. Disclosure also has to be
made about the risks of investing in penny stocks in both public offerings and
in secondary trading and about the commissions payable to both the broker-dealer
and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks.
24
SELLING STOCKHOLDER
The table below sets forth information concerning the resale of the
shares of common stock by the selling stockholders. We will not receive any
proceeds from the resale of the common stock by the selling stockholders. We
will receive proceeds from the exercise of the warrants. Assuming all the shares
registered below are sold by the selling stockholders, none of the selling
stockholders will continue to own any shares of our common stock.
The following table also sets forth the name of each person who is
offering the resale of shares of common stock by this prospectus, the number of
shares of common stock beneficially owned by each person, the number of shares
of common stock that may be sold in this offering and the number of shares of
common stock each person will own after the offering, assuming they sell all of
the shares offered.
Total
Total Shares Percentage
of Common Stock of Common Shares of Beneficial Percentage
Issuable Upon Stock, Common Stock Beneficial Percentage of Ownership of Common
Conversion of Assuming Included in Ownership Common Stock After the Stock Owned
Name Notes and/or Full Prospectus Before the Owned Before Offering After Offering
Warrants(2) Conversion(2) (1) Offering Offering (3) (3)
- --------------------- ----------------- -------------- -------------- ------------ --------------- ----------- ---------------
Laurus Master Fund, 2,776,923 7.35% Up to 1,838,228 4.99% 0 0
Fund, Ltd. (2) 8,130,769
shares of
common stock
- --------------------- ----------------- -------------- -------------- ------------ --------------- ----------- ---------------
- --------------------- ----------------- -------------- -------------- ------------ --------------- ----------- ---------------
The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholder has sole or shared voting power or investment power and
also any shares, which the selling stockholder has the right to acquire within
60 days. The actual number of shares of common stock issuable upon the
conversion of the convertible preferred stock is subject to adjustment depending
on, among other factors, the future market price of the common stock, and could
be materially less or more than the number estimated in the table.
(1) Includes 300% of the shares issuable upon conversion of the
convertible notes, based on current market prices. Because the
number of shares of common stock issuable upon conversion of the
convertible note is dependent in part upon the market price of the
common stock prior to a conversion, the actual number of shares of
common stock that will be issued upon conversion will fluctuate
daily and cannot be determined at this time. However the selling
stockholder has contractually agreed to restrict its ability to
convert or exercise its warrants and receive shares of our common
stock such that the number of shares of common stock held by it
and its affiliates after such conversion or exercise does not
exceed 4.99% of the then issued and outstanding shares of common
stock.
(2) Includes 100,000 shares underlying warrants that are currently
exercisable at an exercise price of $0.152 per share. In
accordance with rule 13d-3 under the securities exchange act of
1934, Laurus Capital Management, L.L.C. may be deemed a control
person of the shares owned by such entity. David Grin and Eugene
Grin are the principals of Laurus Capital Management, L.L.C.
(3) Includes 250,000 shares underlying warrants that are currently
exercisable at an exercise price of $0.96 per share. Michael
Finkelstein, an unaffiliated third party, has investment power
over the shares owned by such entity.
(3) Assumes that all securities registered will be sold.
25
FINANCING TERMS OF CONVERTIBLE NOTE
To obtain funding for our ongoing operations, we entered into a
Securities Purchase Agreement with the selling stockholder on January 10, 2002
for the sale of (i) a $300,000 convertible note and (ii) a warrants to buy
100,000 shares of our common stock.
The notes bear interest at 8%, mature on January 10, 2004, and are
convertible into our common stock, at the selling stockholders' option, at the
lower of (i) $0.13 or (ii) 80% of the average of the three lowest closing prices
for our common stock for the 30 trading days before but not including the
conversion date.. The note may not be paid, in whole or in part, before January
10, 2004 without the consent of the holder. The full principal amount of the
convertible notes are due upon default under the terms of convertible notes. The
warrants are exercisable until January 10, 2005 at a purchase price of the lower
of (i) $0.152 or (ii) 120% of the average of the three lowest closing prices for
the 10 trading days before but not including the exercise date.
The conversion price of the notes and the exercise price of the
warrants may be adjusted in certain circumstances such as if we pay a stock
dividend, subdivide or combine outstanding shares of common stock into a greater
or lesser number of shares, or take such other actions as would otherwise result
in dilution of the selling stockholder's position.
The selling stockholder has contractually agreed to restrict its
ability to convert or exercise its warrants and receive shares of our common
stock such that the number of shares of common stock held by it and its
affiliates after such conversion or exercise does not exceed 4.99% of the then
issued and outstanding shares of common stock.
A complete copy of the Securities Purchase Agreement and related
documents was filed with the SEC as exhibits to our Form SB-2 relating to this
prospectus.
SAMPLE CONVERSION CALCULATION
The number of shares of common stock issuable upon conversion of a note
is determined by dividing that portion of the principal of the note to be
converted and interest, if any, by the conversion price. For example, assuming
conversion of $300,000 of notes on January 16, 2002, a conversion price of $0.13
per share, and the payment of accrued interest in the approximate amount of
$2,152 in additional shares rather than in cash, the number of shares issuable
upon conversion would be:
$300,000 + $2,152 = 2,324,246 shares
-----------------
$0.13
26
LEGAL MATTERS
The validity of the shares of common stock being offered hereby will be
passed upon for us by Sichenzia Ross Friedman Ference LLP, New York, New York.
EXPERTS
Our financial statements at December 31, 1999 and 2000 appearing in
this prospectus and registration statement have been audited by Cacciamatta
Accounting Corporation, independent auditors, as set forth on their report
thereon appearing elsewhere in this prospectus, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
AVAILABLE INFORMATION
We have filed a registration statement on Form SB-2 under the
Securities Act of 1933, as amended, relating to the shares of common stock being
offered by this prospectus, and reference is made to such registration
statement. This prospectus constitutes the prospectus of iLive, Inc., filed as
part of the registration statement, and it does not contain all information in
the registration statement, as certain portions have been omitted in accordance
with the rules and regulations of the Securities and Exchange Commission
("SEC").
We are subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") which requires us to file reports,
proxy statements and other information with the Securities and Exchange
Commission. Such reports, proxy statements and other information may be
inspected at public reference facilities of the SEC at Judiciary Plaza, 450
Fifth Street N.W., Washington D.C. 20549; Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and 5670 Wilshire
Boulevard, Los Angeles, California 90036. Copies of such material can be
obtained from the Public Reference Section of the SEC at Judiciary Plaza, 450
Fifth Street N.W., Washington, D.C. 20549 at prescribed rates. Because we file
documents electronically with the SEC, you may also obtain this information by
visiting the SEC's Internet website at http://www.sec.gov.
We furnish our stockholders with annual reports containing audited
financial statements.
27
INDEX TO FINANCIAL STATEMENTS
iLIVE, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1999 and 2000
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1
FINANCIAL STATEMENTS
BALANCE SHEET F-2
STATEMENTS OF OPERATIONS F-3
STATEMENT OF STOCKHOLDERS' EQUITY F-4
STATEMENTS OF CASH FLOWS F-5
NOTES TO FINANCIAL STATEMENTS F-7 to F-11
INTERIM (UNAUDITED) FINANCIAL STATEMENTS
September 30, 2001
FINANCIAL STATEMENTS
BALANCE SHEET F-12
STATEMENTS OF OPERATIONS F-13
STATEMENTS OF CASH FLOWS F-14
NOTES TO FINANCIAL STATEMENTS F-15 to F-17
28
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
iLive, Inc.
We have audited the accompanying consolidated balance sheet of iLive, Inc. and
Subsidiaries (the "Company") as of December 31, 2000, and the related
consolidated statements of operations, stockholders' deficit and cash flows for
each of the years in the two-year period ended December 31, 2000. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes, on a test
basis, examination of evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of iLive, Inc. and
Subsidiaries as of December 31, 2000, and the results of their operations and
their cash flows for each of the years in the two-year period ended December 31,
2000 in conformity with accounting principles generally accepted in the United
States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Notes 2 and 8
to the consolidated financial statements, the Company's operations were
discontinued in July 2000 and its liabilities exceed its assets by $2,800,000 at
December 31, 2000. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans regarding those
matters are also described in Note 8. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ CACCIAMATTA ACCOUNTANCY CORPORATION
Irvine, California
April 2, 2001
F-1
iLIVE, INC. AN SUBSIDIARIES
Consolidated Balance Sheet
DECEMBER 31,
2000
-------------
ASSETS
CURRENT ASSETS $ -
EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF $17,434 90,699
BEAUTY PAGEANT RIGHTS 100,150
-------------
$ 190,849
=============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable $ 490,123
Accounts payable 823,191
Accrued interest 360,370
Accrued payroll and related taxes 375,816
Other accrued expenses 328,239
-------------
Total current liabilities 2,377,739
-------------
NOTE PAYABLE - STOCKHOLDER 612,684
-------------
COMMITMENTS AND CONTINGENCIES -
STOCKHOLDERS' DEFICIT:
Common stock, $.001 par value; 100,000,000 shares
authorized, 21,313,147 shares issued and outstanding 21,313
Additional paid-in capital 3,931,147
Accumulated deficit (6,752,034)
-------------
Total stockholders' deficit (2,799,574)
-------------
$ 190,849
=============
The accompanying notes are an integral part of these financial statements
F-2
iLIVE, INC. AN SUBSIDIARIES
Consolidated Statement of Operations
YEAR ENDED DECEMBER 31,
--------------------------
2000 1999
----------- ------------
NET SALES $ 3,624 $ -
COSTS AND EXPENSES:
Cost of sales 81,681 -
Website development and hosting 206,665 203,630
General and administrative 1,138,234 298,797
Depreciation expense 14,933 2,500
Interest 746,012 14,668
----------- ------------
2,187,525 519,595
----------- ------------
Loss from continuing operations (2,183,901) (519,595)
DISCONTINUED OPERATIONS:
Loss from operations (no tax effect) (487,302) (1,987,533)
Loss on disposal (no tax effect) (427,602) -
----------- ------------
Loss from discontinued operations (914,904) (1,987,533)
----------- ------------
NET LOSS $(3,098,805) $(2,507,128)
=========== ============
BASIC AND DILUTED LOSS PER SHARE:
Loss from continuing operations $ (0.13) $ (0.06)
=========== ============
Loss from discontinued operations $ (0.05) $ (0.25)
=========== ============
Net loss $ (0.18) $ (0.31)
=========== ============
BASIC AND DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING 16,769,814 8,093,008
=========== ============
The accompanying notes are an integral part of these financial statements
F-3
iLIVE, INC. AN SUBSIDIARIES
Consolidated Statement of Stockholder's Deficit
Years Ended December 31, 2000 and 1999
COMMON STOCK
------------------------------------- TOTAL
NUMBER OF AMOUNT ADDITIONAL ACCUMULATED STOCKHOLDERS'
SHARES PER SHARE TOTAL PAID-IN CAPITAL DEFICIT DEFICIT
----------- --------- ----------- --------------- ----------- -----------
BALANCE, DECEMBER 31, 1998 4,363,147 $ 4,363 $ 1,141,738 $(1,146,101) $ -
Common stock issued for cash 10,000,000 0.05 10,000 490,000 - 500,000
Acquisition of Asia Pacific Co., LTD 690,000 0.11 690 73,919 - 74,609
Net loss - - - - (2,507,128) (2,507,128)
----------- --------- ----------- --------------- ----------- ------------
BALANCE, DECEMBER 31, 1999 15,053,147 - 15,053 1,705,657 (3,653,229) (1,932,519)
Debt conversion 6,000,000 0.25 6,000 1,494,000 - 1,500,000
Common stock issued for cash 15,000 1.67 15 24,985 - 25,000
Common stock isssued in exchange for license 45,000 1.67 45 75,105 - 75,150
Common stock isssued to acquire business 200,000 - 200 (200) - -
Contributed capital - salary - - - 20,000 - 20,000
Intrinsic value of beneficial conversion feature - - - 611,600 - 611,600
Net loss - - - - (3,098,805) (3,098,805)
----------- --------- ----------- --------------- ----------- -----------
BALANCE, DECEMBER 31, 2000 21,313,147 - $ 21,313 $ 3,931,147 $(6,752,034) $(2,799,574)
The accompanying notes are an integral part of these financial statements
F-4
iLIVE, INC. AN SUBSIDIARIES
Consolidated Statement of Cash Flows
YEAR ENDED DECEMBER 31,
-------------------------
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,098,805) $(2,507,128)
Adjustments to reconcile net loss to net cash
used by operating activities:
Loss from discontinued operations 914,904 1,987,533
Depreciation 14,933 2,500
Contributed capital - salary 20,000 -
Intrinsic value of beneficial conversion feature 611,600 -
Change in assets and liabilities:
Miss Beverly Hills License (25,000) -
Accrued interest 129,217 14,668
Accounts payable 116,305 55,351
Accrued expenses 45,001 4,464
----------- -----------
Net cash used by operating activities (1,271,845) (442,612)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Asia Pacific Co., LTD - 75,180
(Advances to) repayments from stockholder 85,641 (85,641)
Purchase of equipment (66,932) (41,200)
----------- -----------
Net cash provided (used) by investing activities 18,709 (51,661)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 113,500 -
Advances from stockholder 1,425,954 685,952
Issuance of common stock 25,000 500,000
----------- -----------
Net cash provided by financing activities 1,564,454 1,185,952
----------- -----------
Cash used by discontinued operations (311,318) (691,679)
----------- -----------
Net increase in cash - -
CASH, BEGINNING OF PERIOD - -
----------- -----------
CASH, END OF PERIOD $ - $ -
=========== ===========
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Acquistion of Asia Pacific Co., LTD for 690,000 shares
of common stock valued at $74,609:
Fair value of assets acquired, including $75,180 cash $ - $ 2,084,559
=========== ===========
Fair value of liabilities assumed $ - $(1,934,770)
=========== ===========
Common stock issued $ - $ (74,609)
=========== ===========
Acquisition of license for common stock $ 75,150 $ -
=========== ===========
Conversion of debt to common stock $ 1,500,000 $ -
=========== ===========
Cash paid for:
Interest $ - $ 25,712
Income taxes $ 800 $ 800
The accompanying notes are an integral part of these financial statements
F-5
iLIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
iLive, Inc., ("iLive"), its wholly owned subsidiaries, Society of Economic
Assurance, Inc. ("SEA") and Asia Pacific Co., LTD ("Asia Pacific") and Asia
Pacific's majority owned subsidiary, 246 LLC, (collectively, the "Company"). All
material intercompany transactions and accounts have been eliminated in
consolidation.
iLive (formerly Powerhouse International Corporation) was incorporated in 1987
in Nevada, became inactive in 1996, and had no assets or liabilities at August
31, 1999. On September 7, 1999, iLive sold 10,000,000 shares of common stock for
$500,000 cash and on September 30, 1999, it acquired Asia Pacific for 690,000 of
its common shares valued at $74,609. This acquisition was accounted for as a
purchase; accordingly, the results of operations of Asia Pacific are included in
the accompanying consolidated financial statements since the date of
acquisition.
Asia Pacific, incorporated in October 1995 in Niue (a foreign country), acquired
a controlling 64% interest in 246 LLC, a limited liability company organized in
March 1996, to construct and operate a full-service restaurant, bar and
membership club in Beverly Hills, California. The restaurant, known as Chasen's,
commenced operations in April 1997. In July 2000, operations of the restaurant
were discontinued and all restaurant assets were abandoned.
On February 17, 2000 the Company acquired 100% of the outstanding shares of
Society of Economic Assurance, Inc. ("SEA"), a Nevada corporation by issuing
200,000 shares of its common stock. The Company elected successor issuer status
pursuant to Rule 12g-3(a) of the general Rules and Regulations of the Securities
and Exchange Commission for reporting purposes under the Securities Exchange Act
of 1934. For accounting purposes, the SEA acquisition was treated as a
recapitalization.
Management plans to focus the Company as an online entertainment media entity
producing branded shows, music and other sponsored entertainment. All content
will be viewed in a combination of free, pay per view, and subscription
programming. Each show will also utilize the Internet to facilitate the
purchasing of merchandise through e-commerce. The Company's first event was the
Miss Beverly Hills Beauty Pageant, held October 15, 2000. Future pageants and
other similar entertainment events should generate revenues, not only from
ticket sales, but also from corporate sponsorship, merchandise sales and
pay-per-view internet broadcasting.
F-6
iLIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and equivalents
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposit and all highly liquid debt instruments with
original maturities of three months or less.
Long lived assets
Equipment is stated at cost, less accumulated depreciation. Depreciation is
provided over the assets' estimated useful lives of 3-5 years using the straight
line method.
Beauty pageant rights are stated at cost and include the names Miss Beverly
Hills, Miss Teen Beverly Hills, Mrs. Beverly Hills, and Mr. Beverly Hills, among
others. These rights have no expiration date.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable.
Impairment is necessary when the undiscounted cash flows estimated to be
generated by the asset are less than the carrying amount of the asset. No
restaurant assets existed at December 31, 2000. Impairment of restaurant assets
of $1,603,622 in 1999 is included in loss from discontinued operations in the
consolidated statements of operations.
Revenue recognition
Revenues are recognized when the events are held.
Advertising and promotional costs
Costs of advertising and promotion are expensed as incurred. Such costs were
$16,471 in 2000 and $14,810 in 1999.
Income taxes
Deferred taxes are accounted for using an asset and liability approach, whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
F-7
iLIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Minority interests
Minority interests representing the 36% of 246 LLC not owned by the Company were
allocated losses only up to their initial capital contributions as these
investors have no obligation to provide additional capital.
Basic and diluted net loss per share
Basic EPS is calculated using income available to common stockholders divided by
the weighted average of common shares outstanding during the year. Diluted EPS
is similar to Basic EPS except that the weighted average of common shares
outstanding is increased to include the number of additional common shares that
would have been outstanding if the dilutive potential common shares, such as
options, had been issued. The treasury stock method is used to calculate
dilutive shares which reduces the gross number of dilutive shares by the number
of shares purchasable from the proceeds of the options assumed to be exercised.
The effect of the potentially dilutive convertible debt (6,000,000 shares) is
not included in the computation of diluted loss per share, since to do so would
have been anti-dilutive. Therefore, basic and diluted net loss per share are the
same.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Fair value of financial instruments
The fair value of financial instruments, consisting primarily of notes payable,
is based on interest rates available to the Company and comparison to quoted
prices and approximates carrying values.
F-8
iLIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
2. DISCONTINUED OPERATIONS
In April 2000, management closed the restaurant to the public and began
operating it for private parties only. In July 2000, operations of the
restaurant were permanently discontinued and all restaurant assets were
abandoned.
Revenues and loss from discontinued operations included in the Consolidated
Statements of Operations are as follows:
2000 1999
------------ -------------
Revenues $ 701,000 $ 826,614
Loss $ (914,904) $ (1,987,533)
Management has entered into preliminary negotiations for the sale of Asia
Pacific, whose assets and liabilities at December 31, 2000 are as follows:
Assets $ -
============
Liabilities:
Notes payable $ 376,623
Accounts payable 651,535
Accrued interest 216,485
Accrued payroll and related taxes 375,816
Other accrued expenses 278,775
------------
$ 1,899,234
============
3. NOTES PAYABLE
Notes payable consist of unsecured demand notes with interest at 10%.
4. NOTE PAYABLE - STOCKHOLDER
Note payable - stockholder consists of a $1,500,000 convertible note payable
with principal and 12% interest due on or before March 7, 2002. The note is
convertible at the holder's election into a maximum of 6,000,000 shares of
common stock at $0.25 per share. Accrued interest on these notes totaled
$143,885 at December 31, 2000. In addition, the $611,600 intrinsic value of the
beneficial conversion feature is included in interest expense and additional
paid-in capital in the accompanying financial statements.
F-9
iLIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
5. INCOME TAXES
The Company recognizes deferred tax assets and liabilities for temporary
differences between the financial reporting and tax bases of its assets and
liabilities. Deferred tax assets are reduced by a valuation allowance when
deemed appropriate.
The income tax benefits of $995,000 in 2000 and $321,000 in 1999 have been
offset by valuation allowances of equal amounts.
At December 31, 2000 the Company has federal net operating loss carryforwards of
$4,812,000 that can be utilized to offset future taxable income. These
carryforwards expire beginning 2018 through 2020.
As of December 31, 2000, no federal or state income tax returns have ever been
filed for Asia Pacific. Management does not expect any unpaid tax liability to
be material.
6. COMMON STOCK
On September 7, 1999, the Company sold 10,000,000 shares of common stock for
$500,000 cash and on September 30, 1999, it acquired Asia Pacific for 690,000 of
its common shares valued at $74,609.
On September 7, 1999, the Company issued a 12% Convertible Debenture (the
"Debenture") to a stockholder at $1,500,000 face value maturing on March 7,
2001. The Debenture is immediately convertible into the Company's common stock
at $0.25. During September 2000, the Debenture was converted into 6,000,000
shares of the Company's common stock.
In February 2000, the Company initiated a private offering of up to $500,000 of
the Company's common. stock In May, 2000 the Company sold 15,000 shares at $1.67
in connection with its offering.
On February 17, 2000 the Company acquired 100% of the outstanding shares of
Society of Economic Assurance, Inc. ("SEA"), a Nevada public shell by issuing
200,000 shares of its common stock. For accounting purposes, the SEA acquisition
was treated as a recapitalization.
On February 22, 2000, the Company acquired the exclusive rights to the Miss
Beverly Hills, Miss Teen Beverly Hills , Mrs. Beverly Hills and Mr. Beverly
Hills beauty pageants The Company recorded the rights at the fair value of the
asset received which totaled $100,150. In exchange for the rights, the Company
paid cash of $25,000 and issued 45,000 shares of its common stock at $1.67.
F-10
iLIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
7. COMMITMENTS AND CONTINGENCIES
Lease obligations
The Company leases office space for $2,000 per month under a month to month
operating lease from a stockholder of the Company.
8. GOING CONCERN
At December 31, 2000, the Company has current obligations of approximately $2.4
million. In order to proceed with its 2001 business plan, the Company
anticipates additional capital and marketing expenditures to total $550,000
consisting of the following: $100,000 toward ongoing Web site development,
$200,000 for Web site content, $100,000 for computer equipment, and $150,000 for
marketing. While the Company has the ability to borrow additional amounts on the
note payable from stockholder, it will still need to raise additional funds
either through additional debt or equity financings. However, there can be no
assurances that the Company will be able to complete the private offering.
Failure to raise additional funds will have a material adverse effect on the
Company's plan of operations.
9. SUBSEQUENT EVENT
On January 25, 2001 the Company completed the acquisitions of Web Theatre, Inc,
and Web Pay Per View.com, Inc. The Web Theatre is a 2000 seat venue in Phoenix,
Arizona. Pursuant to terms of the purchase agreements the Company agreed to
issue 7,756,091 shares of its common stock and Warrants to purchase up to a
maximum of 7,756,091 shares at an exercise price of $1.00. In exchange for the
issuance of its common stock, the Company acquired certain assets and
liabilities of Web Theatre and Web Pay Per View. On March 30, 2001, all parties
mutually agreed to rescind the transaction.
F-11
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
iLIVE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(Unaudited)
SEPTEMBER 30,
2001
---------------
ASSETS
CURRENT ASSETS
Accounts receivable $ 143,400
Other 7,754
---------------
TOTAL CURRENT ASSETS 151,154
EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF $35,216 94,151
BEAUTY PAGEANT RIGHTS 100,150
OTHER 6,050
---------------
$ 351,505
===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable $ 113,500
Note payable - stockholder 212,508
Accounts payable 127,816
Accrued interest 8,512
Accrued interest - stockholder 206,138
Accrued payroll and related taxes 30,864
Other accrued expenses 15,470
---------------
Total current liabilities 714,808
---------------
COMMITMENTS AND CONTINGENCIES -
STOCKHOLDERS' DEFICIT
Common stock, $.001 par value; 100,000,000 shares
authorized, 24,343,147 shares issued and outstanding 24,343
Additional paid-in capital 4,866,787
Accumulated deficit (5,254,433)
---------------
Total stockholders' deficit (363,303)
---------------
$ 351,505
===============
The accompanying notes are an integral part of these financial statements.
F-12
iLIVE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 2000 2001 2000
----------- ------------ ------------ ------------
REVENUES $ 93,000 $ - $ 141,000 $ -
COSTS AND EXPENSES
Cost of revenues 10,829 - 15,779 -
Website development and hosting 9,000 38,807 155,799 199,386
General and administrative 32,042 270,412 271,115 923,190
Depreciation 6,468 6,000 17,777 22,250
Interest 2,837 32,597 37,799 101,001
Interest - related party 6,431 56,245 75,803 133,408
----------- ------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS 25,393 (404,061) (433,072) (1,379,235)
----------- ------------ ------------ ------------
DISCONTINUED OPERATIONS:
Gain (loss) on disposal (no tax effect) 1,930,673 1,930,673 (267,320)
Loss from discontinued
operations (no tax effect) - (7,809) - (487,302)
----------- ------------ ------------ ------------
INCOME (LOSS) FROM
DISCONTINUED OPERATIONS 1,930,673 (7,809) 1,930,673 (754,622)
----------- ------------ ------------ ------------
NET INCOME (LOSS) $ 1,956,066 $ (411,870) $ 1,497,601 $(2,133,857)
=========== ============ ============ ============
BASIC AND DILUTED LOSS PER SHARE
Income (loss) from continuing operations $ 0.00 $ (0.03) $ (0.02) $ (0.09)
=========== ============ ============ ============
Loss from discontinued operations $ 0.08 $ (0.00) $ 0.09 $ (0.05)
=========== ============ ============ ============
Net income (loss) $ 0.08 $ (0.03) $ 0.07 $ (0.14)
=========== ============ ============ ============
BASIC AND DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING 24,343,147 15,544,812 22,590,729 15,129,507
=========== ============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-13
iLIVE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
FOR NINE MONTHS ENDED SEPTEMBER 30,
2001 2000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,497,601 $(2,133,857)
Adjustments to reconcile net loss to net cash
used by operating activities:
(Gain) loss from discontinued operations (1,930,673) 267,320
Embedded interest 42,420 -
Depreciation 17,777 22,250
Repayment of advances through performance of
services - 20,000
Change in assets and liabilities:
Accounts receivable (143,400) -
Other assets (13,804) 43,351
Accrued interest 8,512 101,001
Accrued interest - related party 93,692 133,408
Accrued payroll 30,864 -
Accounts payable (74,704) 99,483
Other accrued expenses (3,130) 129,217
------------ ------------
Net cash used by operating activities (474,845) (1,317,827)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (21,229) (105,723)
Repayments from stockholder - 416
------------ ------------
Net cash provided by investing activities (21,229) (105,307)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt - 814,048
Advances from stockholder 361,074 490,599
Repurchase and retirement of common stock (25,000) -
Issuance of common stock 160,000 25,000
------------ ------------
Net cash provided by financing activities 496,074 1,329,647
------------ ------------
Cash provided by discontinued operations - 67,453
------------ ------------
Net decrease in cash - (26,034)
CASH, BEGINNING OF PERIOD - 26,034
------------ ------------
CASH, END OF PERIOD $ - $ -
============ ============
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Acquisition of license for common stock $ - $ 75,150
============ ============
Conversion of debt to equity $ 761,250 $ 1,500,000
============ ============
CASH PAID FOR
Interest $ - $ -
============ ============
Income taxes $ - $ -
============ ============
The accompanying notes are an integral part of these financial statements.
F-14
iLIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2001
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of iLive, Inc., ("iLive"), its wholly owned subsidiaries, Society of
Economic Assurance, Inc. ("SEA") and Asia Pacific Co., LTD ("Asia Pacific") and
Asia Pacific's majority owned subsidiary, 246 LLC, (collectively, the
"Company"). All material intercompany transactions and accounts have been
eliminated in consolidation.
iLive (formerly Powerhouse International Corporation) was incorporated in 1987
in Nevada, became inactive in 1996, and had no assets or liabilities at August
31, 1999. On September 7, 1999, iLive sold 10,000,000 shares of common stock for
$500,000 cash and on September 30, 1999, it acquired Asia Pacific for 690,000 of
its common shares valued at $74,609. This acquisition was accounted for as a
purchase; accordingly, the results of operations of Asia Pacific are included in
the accompanying consolidated financial statements since the date of
acquisition.
Asia Pacific, incorporated in October 1995 in Niue (a foreign country), acquired
a controlling 64% interest in 246 LLC, a limited liability company organized in
March 1996, to construct and operate a full-service restaurant, bar and
membership club in Beverly Hills, California. The restaurant, known as Chasen's,
commenced operations in April 1997. In April 2000, management closed Chasen's to
the public and began operating the restaurant for private parties only. In July
2000, operations of the restaurant were permanently discontinued. The Company
wrote off all its restaurant operating assets (which consisted primarily of
furniture, fixtures and restaurant equipment), and inventory as of June 30,
2000. The restaurant had revenues of $684,352 for the three-month period ended
March 31, 2000.
On February 17, 2000 the Company acquired 100% of the outstanding shares of
Society of Economic Assurance, Inc. ("SEA"), a Nevada, corporation in exchange
for 200,000 shares of iLive common stock. The Company elected successor issuer
status pursuant to Rule 12g-3(a) of the general Rules and Regulations of the
Securities and Exchange Commission for reporting purposes under the Securities
Exchange Act of 1934. For accounting purposes, the SEA acquisition was treated
as a recapitalization.
Management plans to focus the Company as an online entertainment media entity
producing branded shows, music and other sponsored entertainment. All content
will be viewed in a combination of free, pay per view, and subscription
programming. Each show will also utilize the Internet to facilitate the
purchasing of merchandise through e-commerce. The Company's first event was the
Miss Beverly Hills Beauty Pageant, held
F-15
iLIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2001
1. BASIS OF PRESENTATION (CONTINUED)
October 15, 2000. Future pageants and other similar entertainment events should
generate revenues, not only from ticket sales, but also from corporate
sponsorship, merchandise sales and pay-per-view internet broadcasting.
2. INTERIM PERIODS
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions of Form 10-QSB and do not include all of the
information required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company's management, all necessary
adjustments (consisting of normal recurring adjustments) for a fair presentation
have been included. Operating results for the three and nine months ended
September 30, 2001, are not necessarily indicative of results for any future
period. These statements should be read in conjunction with the consolidated
financial statements and notes thereto for the year ended December 31, 2000
included in the Company's Form 10-KSB.
3. NOTE PAYABLE - STOCKHOLDER
On October 1, 2000 the Company issued a convertible note of up to $1,500,000.
Pursuant to the terms of the note, the Company is required to repay the
principal amount of $1,500,000 with 12% interest on or before March 7, 2002. The
note is convertible at any time given 15 days notice at the holder's election
into a maximum of 6,000,000 shares of the Company's common stock at $0.25 per
share. As of September 30, 2001 the Company has borrowed $935,155, of which
$761,250 was converted to common stock during the quarter ended June 30, 2001.
4. GAIN ON DISPOSAL OF SUBSIDIARY
In the period ended September 30, 2001 the company disposed of Asia Pacifc Co.,
Ltd. through the sale of 100% of the Asia Pacific shares held by the Company to
Fig Tree Capital in exchange for $10,000. Asia Pacific is the owner of
approximately 69% operating interest in Chasen's restaurant (the Company's
discontinued restaurant operations). In July 2000, management discontinued
funding of Chasen's restaurant. The Company had previously written off all its
restaurant operating assets (which consisted primarily of furniture, fixtures,
restaurant equipment and inventory) as of June 30, 2000.
F-16
iLIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2001
4. GAIN ON DISPOSAL OF SUBSIDIARY (CONTINUED)
The sale of Asia Pacific resulted in a gain of $1,930,673, which is recorded as
a gain on disposal of discontinued operations. The selling of Asia Pacific will
have no adverse effect to the ongoing operations of the Company.
5. LEGAL PROCEEDINGS
The Company from time to time may be involved in various claims, lawsuits,
disputes with third parties, actions involving allegations of discrimination, or
breach of contract actions incidental to the operations of its business. The
Company is currently involved in two such instances.
Jerry Nieto v. iLive, Inc., et al.
On September 21, 2001, a lawsuit was filed in the Superior Court of the State of
California for the County of Orange, against the Company entitled Jerry Nieto v.
iLive, Inc., et al. The complaint alleges various claims seeking payment of past
due wages in the amount of $9,000, 750,000 shares of the Company's common stock,
and penalties and attorney fees. The Company denies these claims and is
vigorously defending the action.
Al Moshiri v. iLive Inc., et al.
On July 20, 2001, a lawsuit was filed in the Superior Court of the State of
California for the County of Los Angeles, against the Company entitled Al
Moshiri v. iLive, Inc., et. al. The complaint alleges various claims seeking
payment of alleged finder's fees and damages in the amount of $500,000 and seeks
punitive damages of $5,000,000. The Company denies these claims and is
vigorously defending the action.
F-17
======================================== =======================================
You should rely only on the information
contained in this prospectus. We have
not authorized anyone to provide you with
information different from the information
contained in this prospectus. This document
may only be used where it is legal to sell
the securities. The information in this document
may only be accurate on the date of this document.
UP TO 8,130,769 SHARES
OF OUR
OF COMMON STOCK
TABLE OF CONTENTS
Page
----
Prospectus Summary 2
Risk Factors 3
Use Of Proceeds 8 iLIVE, INC.
Market For Common Equity And Related
Stockholder Matters 9 2102 Business Center Drive
Management's Discussion And Analysis Irvine, California 92612
Or Plan Of Operation 14 (949) 660-0099
Business 14
Management 17
Certain Relationships And Related
Transactions 20
Security Ownership Of Certain
Beneficial Owners And Management 21
Description Of Securities 22
Plan Of Distribution 23
Selling Stockholders
Legal Matters 26
Experts 27
Available Information 27
Index To Financial Statements 28
___________________
PROSPECTUS
___________________
January __, 2002
======================================== =======================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the Nevada General Corporation Law and our Articles of
Incorporation, as amended, and our Bylaws, our directors will have no personal
liability to us or our stockholders for monetary damages incurred as the result
of the breach or alleged breach by a director of his "duty of care." This
provision does not apply to the directors' (i) acts or omissions that involve
intentional misconduct or a knowing and culpable violation of law, (ii) acts or
omissions that a director believes to be contrary to the best interests of the
corporation or its stockholders or that involve the absence of good faith on the
part of the director, (iii) approval of any transaction from which a director
derives an improper personal benefit, (iv) acts or omissions that show a
reckless disregard for the director's duty to the corporation or its
stockholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a director's duties, of a risk
of serious injury to the corporation or its stockholders, (v) acts or omissions
that constituted an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the corporation or its stockholders, or
(vi) approval of an unlawful dividend, distribution, stock repurchase or
redemption. This provision would generally absolve directors of personal
liability for negligence in the performance of duties, including gross
negligence.
The effect of this provision in our Articles of Incorporation and
Bylaws is to eliminate the rights of our Company and our stockholders (through
stockholder's derivative suits on behalf of our Company) to recover monetary
damages against a director for breach of his fiduciary duty of care as a
director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described in clauses (i) through (vi) above.
This provision does not limit nor eliminate the rights of our Company or any
stockholder to seek non-monetary relief such as an injunction or rescission in
the event of a breach of a director's duty of care. In addition, our Bylaws
provide that if the Nevada General Corporation Law is amended to authorize the
future elimination or limitation of the liability of a director, then the
liability of the directors will be eliminated or limited to the fullest extent
permitted by the law, as amended. The Nevada General Corporation Law grants
corporations the right to indemnify their directors, officers, employees and
agents in accordance with applicable law.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemization of all estimated
expenses, all of which we will pay, in connection with the issuance and
distribution of the securities being registered:
NATURE OF EXPENSE AMOUNT
----------------- ------
SEC Registration fee $ 641.27
Accounting fees and expenses 5,000.00*
Legal fees and expenses 8,000.00*
Printing and related expenses 3,000.00*
-----------
TOTAL $16,641.27*
===========
* Estimated.
II-1
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On September 7, 1999, the Company issued 8,500,000 shares of its
"restricted" Common Stock to Street Capital, Inc., an "accredited" corporation,
at a price of $0.05 per share, resulting in net proceeds to the Company of
approximately $425,000. Scott Hendricks, the Company's President & CEO, is also
the President and sole director of Street Capital, Inc. Albert Aimers, the
Company's Chairman of the Board is a majority shareholder of Street Capital,
Inc. The issuance was an isolated transaction not involving a public offering
pursuant to Section 4(2) of the Securities Act of 1933.
On September 7, 1999, the Company issued 1,500,000 shares of its
"restricted" Common Stock to Marcia Allen (the Company's former President, CEO,
and a director), an "accredited" individual, at a price of $0.05 per share,
resulting in net proceeds of the Company of $75,000. The issuance was an
isolated transaction not involving a public offering pursuant to Section 4(2) of
the Securities Act of 1933. On September 30, 1999 the Company issued 690,000
shares of its "restricted" Common Stock in exchange for all of the outstanding
common stock of Asia Pacific. The issuance was an isolated transaction not
involving a public offering pursuant to Section 4(2) of the Securities Act of
1933.
On February 22, 2000, the Company issued an aggregate of 45,000 shares
of its "restricted" Common Stock to four accredited individuals in exchange for
the exclusive rights to the Miss Beverly Hills, Miss Teen Beverly Hills, Mrs.
Beverly Hills, and Mr. Beverly Hills beauty pageants. The issuance was an
isolated transaction not involving a public offering pursuant to Section 4(2) of
the Securities Act of 1933. On February 29, 2000, the Company entered into a
Stock Exchange Agreement with the shareholders of Society of Economic Assurance,
Inc., a Nevada corporation ("SEA") to acquire 100,000 shares (100%) of SEA, in
exchange for 200,000 shares of its restricted common stock. The issuance was an
isolated transaction not involving a public offering pursuant to section 4(2) of
the Securities Act of 1933.
In February 2000, the Company initiated a private offering of up to
$5,000,000 worth of the Company's "restricted" Common Stock including warrants
to purchase additional shares of the Company's Common Stock (a "Unit"). As of
May 15, 2000, the Company has sold 5,000 Units shares resulting in net proceeds
of $25,000. The issuance were offered without general solicitation or
advertising to unrelated accredited investors under Rule 506 of Regulation D and
Section 4(2) of the Securities Act of 1933.
On September 30, 2000, the Company issued 6,000,000 common shares of
its "restricted" common stock upon conversion by Street Capital of the Company's
previously issued $1,500,000 note. The issuance was an isolated transaction
involving a public offering pursuant to Section 4 (2) of the Securities Act of
1933.
On January 9, 2001 The Company sold an aggregate of 1,000,000 shares of
its "restricted" common stock and warrants to purchase up to 1,000,000 shares of
its "restricted" common stock in two "accredited" investors, resulting in net
proceeds of $250,000. The issuance was an isolated transaction involving a
public offering pursuant to Section 4 (2) of the Securities Act of 1933.
Subsequently, however, the Company and the two investors agreed to rescind the
sale of the Company's common stock.
On January 25, 2001, pursuant to an Agreement for the Purchase and Sale
of Assets, agreed to issue to Web Theatre, Inc., an Arizona corporation,
3,448,320 shares of its "restricted" Common Stock and Warrants to purchases up
to 3,448,320 shares of the Company's "restricted" common stock at an exercise
price of $1.00 per share, in exchange for all of the assets of Web Theatre. On
March 25, 2001, however, the Company and Web Theatre agreed to rescind the
agreement.
On January 25, 2001, the "Company", pursuant to an Agreement for the
Purchase and Sale of Assets, agreed to issue to Webpayperview, Inc., an Arizona
corporation, 4,307,771 shares of its "restricted" Common Stock and Warrants to
purchases up to 4,307,771 shares of the Company's "restricted" common stock at
an exercise price of $1.00 per share, in exchange for all of the assets of
Webpayperview. On March 25, 2001, however, the Company and Webpayperview agreed
to rescind the agreement.
II-2
On October 1, 2001 the Company issued 100,000 shares of its
"restricted" (as that term is defined by the Securities Act of 1933) common
stock and options to purchase up to 150,000 shares of common stock at $0.25 per
share, to an unaffiliated entity in exchange for services rendered in the
development of its website. The issuance was an isolated transaction involving a
public offering pursuant to Section 4 (2) of the Securities Act of 1933.
In January 2002, we entered into a securities purchase agreement with
the Laurus Master Fund, Ltd. for the issuance of a $300,000 principal amount of
8% convertible note and an aggregate of 100,000 common stock purchase warrants
in reliance on Section 4(2) of the Act and Rule 506
Except as expressly set forth above, the individuals and entities to
whom we issued securities as indicated in this section of the registration
statement are unaffiliated with us.
ITEM 27. EXHIBITS.
The following exhibits are included as part of this Form SB-2.
References to "the Company" in this Exhibit List mean iLive, Inc., a Nevada
corporation.
Exhibit No. Description
----------- -----------
ARTICLES OF INCORPORATION AND BYLAWS
3.1 Restated Articles of Incorporation (filed as an exhibit to
iLive's Form 10KSB filed on April 16, 2001 and incorporated by
reference herein)
3.2 Bylaws (filed as an exhibit to iLive's Form 10KSB filed on
April 16, 2001 and incorporated by reference herein)
INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS
4.1 Street Capital Convertible Note (filed as an exhibit to
iLive's Form 10KSB filed on May 26, 2000 and incorporated by
reference herein)
4.2 $300,000 8% Convertible Note issued to the Laurus Master Fund,
Ltd.
4.3 Common Stock Purchase Warrant issued to the Laurus Master
Fund, Ltd.
4.4 Securities Purchase Agreement.
OPINION REGARDING LEGALITY
5.1 Sichenzia Ross Friedman Ference LLP Opinion and Consent (filed
herewith).
CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of independent auditors (filed herewith).
23.2 Consent of legal counsel (see Exhibit 5).
II-3
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes to:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of the
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) under the Securities Act if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement, and
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) For purposes of determining any liability under the Securities Act,
treat the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this registration statement as of the time
it was declared effective.
(5) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-4
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorizes this registration
statement to be signed on its behalf by the undersigned, in the City of Irvine,
State of California, on January 25, 2002.
iLIVE, INC.
By: /s/ Scott Henricks
--------------------------
Scott Henricks, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
SIGNATURE TITLE DATE
/s/ Scott Henricks President, Secretary, Chief Financial January 25, 2002
- ------------------------- Officer and Director
/s/ Albert Aimers Chief Executive Officer and Director January 25, 2002
- -------------------------
II-5