REGISTRATION NO.
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U.S. 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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HOMELIFE, INC.
(Name of small business issuer in its charter)
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NEVADA 6531 33-0680443
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of incorporation Industrial Classification Identification No.)
or organization) Code Number)
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4100 Newport Place, Suite 730 4100 Newport Place, Suite 730
Newport Beach, CA 92660 Newport Beach, CA 92660
Phone: (949) 660-1919 Phone: (949) 660-1919
Facsimile: (949) 660-1910 Facsimile: (949) 660-1910
(Address and telephone number of (Address of principal place of business)
principal executive office)
Kelly H. Swanson
1200 S. Eastern Avenue
Las Vegas, NV 89104
Phone: (702) 382-0005
Facsimile: (702) 382-9452
(Name, address and telephone number of agent for service)
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COPIES TO:
Lawrence W. Horwitz, Esq.
Horwitz & Beam
Two Venture Plaza, Suite 350
Irvine, CA 92618
Phone: (949) 453-0300
Facsimile: (949) 453-9416
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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 of 1933 (the "Securities Act"), please
check the following box and list the Securities Act registration 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 delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /x/
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES NUMBER OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED SHARES TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
REGISTERED PER SHARE(1) PRICE(1)(2) FEE
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Shares of Common Stock, $.001 par 10,000,000 $.53 $5,300,000 $1,563.50
value ("Common Stock")
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(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(c) based on the average of the high and low prices of the
Common Stock reported on the over the counter/bulletin board within 5
business days prior to the date of filing this Registration Statement.
(2) 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.
HOMELIFE, INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulations S-B
Showing Location in the Prospectus
of Information Required by Items of Form SB-2
Form SB-2 Item Number and Caption Prospectus
1. Forepart of Registration Statement and Outside Front Cover Facing Page of Registration Statement: Outside Front Cover
Page of Prospectus............................................. Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus........ Available Information; Incorporation of Certain Documents by
Reference; Table of Contents
3. Summary Information; Risk Factors.............................. Prospectus Summary; Risk Factors
4. Use of Proceeds................................................ Prospectus Summary; Use of Proceeds
5. Determination of Offering Price................................ Outside Front Cover Page of Prospectus; Plan of Distribution
6. Dilution....................................................... Dilution
7. Selling Security Holders....................................... Not Applicable
8. Plan of Distribution........................................... Plan of Distribution
9. Legal Proceedings.............................................. Litigation
10. Directors, Executive Officers, Promoters and Control Persons... Management; Principal Stockholders
11. Security Ownership of Certain Beneficial Owners and
Management..................................................... Management; Principal Stockholders
12. Description of Securities to be Registered..................... Description of Securities
13. Interests of Named Experts and Counsel......................... Not Applicable
14. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities..................................... Indemnification of Directors and Officers
15. Organization Within Last Five Years............................ Prospectus Summary; Business of the Company
16. Description of Business........................................ Business of the Company
17. Management's Discussion and Analysis of Plan of Operation...... Management's Discussion and Analysis of Financial Condition
and Results of Operations
18. Description of Property........................................ Business of the Company (Properties)
19. Certain Relationships and Related Transactions................. Certain Transactions (Conflicts of Interest)
20. Market for Common Equity and Related Stockholder Matters....... Risk Factors; Description of Securities
21. Executive Compensation......................................... Management (Executive Compensation)
22. Consolidated Financial Statements.............................. Consolidated Financial Statements
23. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure............................ Not Applicable
PROSPECTUS
SUBJECT TO COMPLETION, DATED October 21, 1998
HOMELIFE, INC.
10,000,000 SHARES OF COMMON STOCK
This Prospectus relates to 10,000,000 shares (the "Shares" or
"Securities") of common stock, $.001 par value (the "Common Stock") of
HomeLife, Inc., a Nevada corporation ("the Company"), which may be offered
from time to time on terms to be determined at the time of offering. The
Common Stock may be offered at prices and on terms to be set forth in one or
more supplements to this Prospectus (each a "Prospectus Supplement").
The specific terms of the Shares in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include the initial public offering price. The applicable Prospectus
Supplement will also contain information about any listing on a securities
exchange of the Shares covered by such Prospectus Supplement.
Additionally, 1,134,482 Shares of the 10,000,000 Shares being registered
herein may be used to convert Preferred Shares of the Company ("Preferred
Stock") to Common Stock of the Company pursuant to conversion rights granted
to the holders of Preferred Stock of the Company (the "Preferred
Shareholders"). The Company will not receive any of the proceeds from the
conversion of the Convertible Preferred Stock by the Preferred Shareholders.
All expenses incurred in registering the Convertible Preferred Stock are
being borne by the Company, but all selling and other expenses incurred by
the Preferred Shareholders will be borne by the Preferred Shareholders. See
"Description of Securities -- Preferred Shares."
The Convertible Preferred Stock has been acquired by the Preferred
Shareholders from the Company in private transactions and are "restricted
securities" under the Securities Act of 1933, as amended (the "Act"), prior
to their conversion hereunder. This Prospectus has been prepared in part for
the purpose of registering the Common Stock into which the Convertible
Preferred Stock is convertible to allow for future resales by the Preferred
Shareholders to the public without restriction simultaneously with and upon
the same terms and conditions as the Shares registered hereby subject to
lock-up provisions by the underwriters and agreed to by the Preferred
Shareholders. To the knowledge of the Company, the Preferred Shareholders
have made no arrangement with any brokerage firm for the sale of the
Convertible Preferred Stock.
The Company's Common Stock is currently traded on the over the
counter/bulletin board under the symbol HMLF.
The Securities may be offered directly or through agents designated from
time to time by the Company or to or through underwriters or dealers. If any
agents or underwriters are involved in the sale of any of the Securities,
their names, and any applicable purchase price, fee, commission or discount
arrangement between or among them, will be set forth, or will be calculable
from the information set forth, in any accompanying Prospectus Supplement.
No Securities may be sold by the Company through agents, underwriters or
dealers without delivery of a Prospectus Supplement describing the method and
terms of the offering of such Securities. See "Plan of Distribution."
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 4.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS OCTOBER 21, 1998
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE
CONSOLIDATED FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE SPECIFICALLY REFERENCED, ALL
REFERENCES TO DOLLAR AMOUNTS REFER TO UNITED STATES DOLLARS.
THE COMPANY
Incorporated in 1995, HomeLife, Inc., a Nevada corporation, (the "Company"
or "HomeLife") is a real estate services franchisor and licensor. HomeLife
utilizes both its proprietary "SuperSystem" marketing system and its business
combinations and acquisitions to fuel development as a fast growing real estate
services company.
The Company maintains its corporate office in Newport Beach, California,
and maintains regional offices in Troy, Michigan and Calgary, Alberta, Canada.
HomeLife operates through various subsidiaries and companies servicing its
franchised tradenames. Through its subsidiary, HomeLife Realty Services, Inc.,
the Company, services approximately 50 real estate offices in the State of
California. Through Red Carpet Keim, the Company services approximately 60 real
estate offices in the State of Michigan and through its tradenames, Red Carpet
Real Estate Services, Network Real Estate, and National Real Estate Service,
services approximately 70 real estate offices in various states. In addition
to the above, the Company operates both direct real estate sales and mortgage
lending through its subsidiary, Builders Realty Ltd., in Calgary, Alberta,
Canada and home warranties through its majority-owned subsidiary, Guardian Home
Warranty.
The Company's growth is largely attributable to business combinations
and acquisitions. The Company was initially incorporated in 1995 for the
purpose of combining with Management Dynamics, Inc. a publicly owned New
Jersey corporation. In November 1995, the Company purchased HomeLife Realty
Services, Inc. and HomeLife Realty U.S. Limited Partnership (California) in
exchange for common and preferred shares of the Company. In August, 1996,
HomeLife Realty Services acquired the Michigan based Red Carpet Keim Group of
companies. With this acquisition, the Company acquired approximately 60 real
estate offices, 95% of the outstanding stock of Red Carpet Keim and 80% of
the outstanding stock of Guardian Home Warranty Company all located in the
state of Michigan.
In January 1997, the Company acquired the assets of Salt Lake City based
franchisor and licensor, S&S Acquisition Corp. This acquisition included the
tradenames of Red Carpet Real Estate Services and National Real Estate Service,
adding approximately 58 real estate offices. The Company also acquired the real
estate computer technology of House by Mouse and Virtual Assistant. With this
technology, the Company has been able to enhance Internet communication giving
agents the capability of accessing marketing, advertising and general office
materials and licensed products over the Internet. In July 1997, the Company
acquired the licensing agreements and trademarks of Network Real Estate, Inc.
("Network"), its 12 Northern California offices and its "high-end" luxury
division of "International Estates." This acquisition provides a platform for
growth in Northern California.
In February 1998, the Company acquired Builders Realty Ltd. ("Builders").
Builders is a two office retail real estate and mortgage loan company located in
Calgary, Alberta, Canada. Builders has retained its name and operates as a
wholly owned subsidiary of HomeLife.
The Company's niche in the market is maintained through the development of
its proprietary marketing system. This "SuperSystem" replaces the outdated
marketing methods of cold calling or door knocking to obtain real estate
listings and potential buyers. The elimination of these methods has attracted
two types of franchisees, franchisees new to operating a franchise, and those
who terminated other franchise agreements with competitors to become a
franchisee of the Company.
As of the date hereof, the Company had: 4,823,725 Common shares issued and
outstanding, which does not include 200,000 warrants to purchase Common Shares
and 140,000 options to purchase Common Shares; 10,000 Class A Preferred Shares
issued and outstanding; and, 325 Class AA Preferred Shares issued and
outstanding. Assuming all
1
the Preferred Stock are converted and all shares registered hereunder are
sold, the Company will have 14,823,725 shares of Common Stock outstanding
after the Offering.
For the fiscal year ending May 31, 1998, the Company had gross sales of
$2,001,036. The Company's net income from operations at May 31, 1998 was
$139,931. As of the quarter ending August 31, 1998, the Company had gross sales
of $2,054,992. The Company's net income from operations for the quarter was
$38,471. Continued revenue generation by the Company's franchisees, licensees
and real estate brokerage operations, and the continued successful acquisitions
of franchisors together with the implementation of the Company's marketing plan
are necessary for the Company to continue generating operating revenues.
The Company was incorporated under the laws of the State of Nevada on
October 9, 1995. The address of the Company's principal executive offices is:
4100 Newport Place, Suite 730, Newport Beach, CA 92660. The Company's telephone
number is (949) 660-1919.
THE OFFERING
Securities Offered by
the Company................. A total of 10,000,000 shares of Common Stock of
the Company which may be offered from time to time
on terms to be determined at the time of offering.
The Common Stock may be offered at prices and on
terms to be set forth in one or more supplements
to this Prospectus. Of these, 1,134,482 shares of
Common Stock are being registered herein to permit
current Preferred Shareholders to convert their
Preferred Stock to Common Stock.
Offering Price
Common Stock............. To be determined at the time of the Offering.
Common Stock Outstanding.... 4,823,725 Shares as of the date hereof, not
including 200,000 warrants to purchase Common
Stock and 140,000 options to purchase Common
Stock; 6,298,207 shares if all of the Preferred
Stock is converted to Common Stock. See
"Description of Securities."
OTC/BB Symbol Common Stock.. HMLF
Use of Proceeds............. The Company will not receive any cash proceeds as
a result of this offering.
Risk Factors................ The securities offered hereby involve a high
degree of risk and immediate substantial dilution.
See "Risk Factors."
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SELECTED FINANCIAL DATA
The following table presents selected historical financial data for the
Company derived from the Company's Financial Statements. The historical
financial data are qualified in their entirety by reference to, and should be
read in conjunction with, the Financial Statements and notes thereto of the
Company, which are incorporated by reference into this Prospectus. The
following data should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Financial Statements of the Company and the notes thereto included elsewhere
in this Prospectus.
Three Months Ended Year Ended
August 31 May 31
1998 1997 1998 1997
-------------------------------- ---------------------------------
(unaudited) (audited) (audited) (audited)
STATEMENT OF OPERATIONS DATA:
Gross sales $ 2,054,992 $ 317,981 $ 2,001,036 $ 981,938
Selling, general &
administrative expenses (2,011,569) (339,331) (1,990,286) (1,144,117)
Other --- --- 211,358 251,040
Minority interest in subsidiaries (4,952) --- (9,177) (16,099)
Income tax provision --- $ --- (73,000) $ (16,000)
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Net income $ 38,471 $ 21,350 $ 139,931 $ 56,762
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----------- ----------- ------------ ------------
Net income per share $ .008 $ --- $ .029 $ .014
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August 31, 1998 August 31, 1997 May 31, 1998 May 31, 1997
--------------- --------------- ------------- -------------
(audited) (audited) (audited) (audited)
BALANCE SHEET DATA:
Cash $ 313,788 $ 225,554 $ 223,723 $ 232,403
Cash in Trust 273,028 -- 489,014 --
Other assets 4,264,527 2,775,246 4,281,891 2,767,517
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Total Assets $ 4,851,343 $ 3,000,800 $ 4,994,628 $ 2,999,920
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Total liabilities $ 1,051,546 $ 428,835 $ 1,233,302 $ 436,605
Stock & additional paid in
capital 4,159,805 3,118,725 4,159,805 3,088,725
Accumulated deficit (360,008) (546,760) (398,479) (525,410)
----------- ----------- ------------ ------------
Total liabilities & stockholders
equity $ 4,851,343 $ 3,000,800 $ 4,994,628 $ 2,999,920
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
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RISK FACTORS
AN INVESTMENT IN THE SECURITIES OFFERED IN THIS PROSPECTUS INVOLVES A HIGH
DEGREE OF RISK AND SHOULD ONLY BE MADE BY PERSONS WHO CAN AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CONSIDER
CAREFULLY THE FOLLOWING FACTORS, IN ADDITION TO THE OTHER INFORMATION CONCERNING
THE COMPANY AND ITS BUSINESS CONTAINED IN THIS PROSPECTUS, BEFORE PURCHASING THE
SECURITIES. SECURITIES MAY ONLY BE PURCHASED UPON THE TERMS, PRICE AND OTHER
CONDITIONS OF THE OFFERING ARE SET FORTH IN A PROSPECTUS SUPPLEMENT.
LIMITED OPERATING HISTORY. The Company began operations in 1995 by the
acquisition of the HomeLife Realty Services, Inc. and HomeLife Realty U.S.
Limited Partnership (California). The Company's success is dependent upon the
successful development and marketing of its franchises, the revenues
generated by its franchises and the continued expansion and acquisition of
franchises and franchisors, as to which there is no assurance. Unanticipated
problems, expenses, and delays are frequently encountered in establishing a
new business. These include, but are not limited to, competition, the need to
develop franchise support capabilities and market expertise, market
acceptance, and sales and marketing. The failure of the Company to meet any
of these conditions would have a materially adverse effect upon the Company
and may force the Company to reduce or curtail operations. No assurance can
be given that the Company can or will continue to operate profitably. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "The Company--Marketing" and "--Competition."
FUTURE CAPITAL NEEDS COULD RESULT IN DILUTION TO INVESTORS; ADDITIONAL
FINANCING COULD BE UNAVAILABLE OR HAVE UNFAVORABLE TERMS. The Company's future
capital requirements will depend on many factors, including cash flow from
operations, progress in expanding the number of franchises, the success of
acquisitions and expansions, the real estate market and the Company's ability to
provide services to its franchise base. Although the Company currently has no
specific plans or arrangements for financing and no commitments for future
financing, it may be necessary to raise additional funds through equity or debt
financings. Any equity financings could result in dilution to the Company's
then-existing stockholders. Sources of debt financing may result in higher
interest expense. Any financing, if available, may be on terms unfavorable to
the Company. If adequate funds are not obtained, the Company may be required to
reduce or curtail operations. The Company anticipates that its existing capital
resources will be adequate to satisfy its operating expenses and capital
requirements for at least 12 months. However, such estimates may prove to be
inaccurate. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business of the Company" and Financial Statements.
ECONOMIC CONDITIONS AND THE REAL ESTATE MARKET. As with other
businesses, the Company's results may be adversely affected by unfavorable
local, regional or national economic conditions affecting disposable consumer
income and the ability or willingness of consumers to purchase or sell their
residential properties. There can be no assurance that consumer spending
will not decline in response to economic conditions, thereby adversely
affecting the Company's growth, net sales, and profitability.
COMPETITION. The Company competes with many other established real
estate franchisors. Many of these companies have greater capital, marketing
and other resources than the Company. There can be no assurance that these
or other entities will not develop competitive marketing methods or acquire
franchises in more geographical markets. than the Company. There can be no
assurance that the Company will successfully differentiate itself from its
competitors or that the market will consider the Company's services to be
superior to or more appealing than those of its competitors. Market entry by
any significant competitor may have an adverse effect on the Company's sales
and profitability. See "Business of the Company--Competition."
DIFFICULTY OF PLANNED EXPANSION; MANAGEMENT OF GROWTH. The Company has
expanded its operations rapidly, and it plans to continue to further expand
its level of operations. The Company's operating results will be adversely
affected if net sales do not increase sufficiently to compensate for the
increase in operating expenses caused by this expansion. In addition, the
Company's planned expansion of operations may cause significant strain on the
Company's management, technical, financial, and other resources. To manage
its growth effectively, the Company must continue to improve and expand its
existing resources and management information systems and must attract,
train, and motivate
4
qualified managers, employees and franchisees. There can be no assurance,
however, that the Company will successfully achieve these goals. If the
Company is unable to manage growth effectively, its operating results will be
adversely affected.
DEPENDENCE UPON KEY PERSONNEL. The Company's success depends, to a
significant extent, upon a number of key employees. The loss of services of one
or more of these employees could have a material adverse effect on the business
of the Company. The Company has not entered into employment agreements with its
key officers. Competition for such personnel is intense. There can be no
assurance that the Company will be successful in attracting and retaining such
personnel. The Company has "key person" life insurance on its President, Andrew
Cimerman, only. The Company does not have "key person" life insurance on any
other of its key employees. See "Management."
POTENTIAL CONFLICTS OF INTEREST BETWEEN THE COMPANY AND ITS OFFICERS,
DIRECTORS, AND SHAREHOLDERS. Mr. Andrew Cimerman, President and Director of
the Company, currently operates Realty World America, Inc. Realty World
America, Inc. is a real estate services franchise and licensing company.
While Mr. Cimerman does not believe such operations will present a conflict
of interest, this relationship could result in a conflict of interest for the
Company. Mr. Cimerman also owns and operates Jerome's Magic World, Inc.,
which has a licensing arrangement with the Company. This arrangement
provides the Company with the right to use its characters in its business at
no cost to the Company. In addition to the above, the Company's officers and
directors are or may become, in their individual capacities, officers,
directors, controlling shareholders or partners of other entities engaged in
a variety of businesses which may in the future have various transactions
with the Company. Thus, potential conflicts of interest exist, including
among other things, conflicts with respect to the time, effort, and corporate
opportunities involved in participation with such other business entities and
transactions. Each officer and director of the Company may engage in
business opportunities outside the Company. An officer or director may
continue any business activity in which such officer or director engaged
prior to joining the Company. The officers and directors of the Company are
aware of the fact that they owe a fiduciary duty to the Company not to
withhold any corporate opportunity from the Company which may arise because
of their association with the Company. See "Certain Transactions --
Conflicts of Interest," and "Principal Shareholders."
LACK OF DIVIDENDS. The Company has never paid any cash dividends on its
Common Stock and does not anticipate paying any cash dividends in the future.
The Company has paid dividends to the Class AA Preferred Shareholders in the
amount of $4,550 paid through August 31, 1998. Other than the requirement to
pay the Class AA Preferred Shareholders, the Company currently intends to retain
future earnings, if any, to fund the development and growth of its business.
See "Dividend Policy."
DILUTION. Purchasers of shares of Common Stock in the an Offering of these
shares will experience immediate dilution from the initial public offering
price. The shares being registered hereunder will represent, upon completion of
the offering of all the shares registered hereunder, 67.58% of the total shares
of Common Stock outstanding. See "Dilution."
POSSIBLE VOLATILITY OF SHARE PRICE. The offering price of the Securities
may be determined by negotiations between the Company and the underwriter used
in an offering and may not necessarily be related to the Company's existing
market price, asset value, net worth, or other established criteria of value.
Additionally, potential investors should be aware that the securities of the
Company may have been sold at a substantial discount to the public offering
price.
RISKS RELATING TO LOW-PRICE STOCKS. The Company's Common Stock is
currently traded on the Over-the-Counter Bulletin Board ("OTC/BB"). As a
result, an investor could find it more difficult to dispose of, or to obtain
accurate quotations as to, the market value of the Company's securities as
compared to securities which are traded on the Nasdaq trading market or on an
exchange. In addition, trading in the Securities would be covered by Rules
15g-1 through 15g-100 promulgated under the Securities Exchange Act of 1934
for non-Nasdaq and non-exchange listed securities. Under this rule,
broker-dealers who recommend such securities must satisfy burdensome sales
practice requirements, including a requirement that they make an
individualized written suitability determination for the
5
purchaser and receive the purchaser's written consent prior to the
transaction. The Securities Enforcement and Penny Stock Reform Act of 1990
(the "Reform Act") also requires additional disclosure in connection with any
trades involving a stock defined as a "penny stock" (generally, according to
recent regulations adopted by the Commission, any equity security that has a
market price of less than $5.00 per share, subject to certain exceptions),
including the delivery, prior to any penny stock transaction, of a disclosure
schedule explaining the penny stock market and the risks associated
therewith, the requirement that a broker-dealer must provide the customer
with current bid and offer quotations for the penny stock, the compensation
of the broker-dealer and its salesperson in the transaction, and monthly
account statements showing the market value of each penny stock held in the
customer's account. The regulations governing low-priced or penny stocks
could limit the ability of broker-dealers to sell the Company's securities
and thus the ability of the purchasers of this Offering to sell their
securities in the secondary market.
REQUIREMENTS OF CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION. The
Common Stock to be offered from time to time hereunder must be qualified for
sale or exempt therefrom under applicable state securities laws. There can
be no assurance, however, that the Company will be successful in maintaining
a current registration statement. After a registration statement becomes
effective, it may require updating by the filing of a post-effective
amendment. A post-effective amendment is required: (i) any time after nine
months subsequent to the effective date when any information contained in the
prospectus is over sixteen months old; (ii) when facts or events have
occurred which represent a fundamental change in the information contained in
the registration statement; or (iii) when any material change occurs in the
information relating to the plan of distribution of the securities registered
by such registration statement. The Company anticipates that this
Registration Statement will remain effective for at least nine months
following the date of this Prospectus, assuming a post-effective amendment is
not filed by the Company. The Company will be prevented from issuing shares
of Common Stock until such time as it files a Prospectus Supplement setting
forth the price and other terms of the Offerings.
SAFE HARBOR
This Prospectus contains statements that constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act. Such
statements appear in a number of places in this Prospectus and include
statements regarding the intent, belief, or current expectations of the Company,
its directors, or its executive officers with respect to, among other things:
(i) trends affecting the Company's financial condition or results of operations;
(ii) the Company's business and growth strategies; and (iii) the use of the
proceeds to the Company of this Offering. Prospective investors are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those projected in the forward-looking statements as a
result of various factors. Important factors that could cause such differences
are identified under "Risk Factors" above.
6
DILUTION
Dilution is the difference between the public offering price per share for
the Common Stock offered herein, and the net tangible book value per share of
the Common Stock immediately after its purchase. The Company's net tangible
book value per share is calculated by subtracting the Company's total
liabilities from its total assets less any intangible assets, and then dividing
by the number of shares then outstanding.
Assuming all the Preferred Shares are converted and all shares
registered hereunder are sold, the Company will have 14,823,725 shares
outstanding. The post offering pro forma net tangible book value of the
Company, cannot be determined without determining the net proceeds from the
Offering. However, there is a likelihood that the proceeds raised may
result in dilution to investors in the Offerings of the Shares registered
herein. Net tangible book value per share may increase to the benefit of
present shareholders.
USE OF PROCEEDS
The Company will not immediately receive any cash proceeds as a result of
this Offering. Any proceeds and the use of such proceeds to be raised from time
to time will be the subject of a Prospectus Supplement. However, the Company
anticipates that it will continue to use proceeds from any offering for the
development and training of its real estate brokers, marketing to new realty
offices in an effort to have them become franchisees of the Company, expanding
the services available to the public from the Company, and acquiring other real
estate franchisors.
The allocation of net proceeds which will be set forth in any Prospectus
Supplement will be estimates based upon the Company's plans and upon certain
assumptions regarding the progress of development of its business, the real
estate market, changing competitive conditions, the ongoing evaluation and
determination of the commercial potential of the Company's services and the
Company's ability to enter into agreements to acquire or merge with other
companies. If any of these factors change, the Company may reallocate some
of the net proceeds amongst various categories of use. The Company believes
that current resources will be sufficient to fund working capital and capital
requirements for at least 12 months from the date of this Prospectus.
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock and
does not anticipate paying any cash dividends in the future. The Class AA
Preferred Shares are entitled to receive dividends accruing at the rate of
eight percent per year on each share from the date of issuance through the
date of conversion (the "Coupon Dividends"). These Coupon Dividends are
payable quarterly. Any Coupon Dividend on the Class AA Preferred Shares
which has accrued but which, for any reason whatsoever, has not been declared
or has been declared but has not been timely paid, shall be deemed in arrears
and shall accumulate until paid. The Company has paid $4,550.00 in Coupon
Dividends as of the date of this Prospectus. Other than the requirements of
the Class AA Preferred Shares, the Company currently intends to retain future
earnings, if any, to fund the development and growth of its business.
7
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
August 31, 1998.
August 31, 1998
---------------
(unaudited)
DEBT:
Accounts Payable $146,753
Notes Payable 15,208
Loan payable, stockholder 323,084
Accrued expenses 107,084
Reserve for warranties 50,600
Dividends Payable 9,780
Income Tax Payable 85,177
Trust Liability 273,028
Minority Interest 40,832
----------
Total debt: $1,051,546
----------
----------
STOCKHOLDERS' EQUITY:
Common Stock, $.001 par value
10,000,000 shares authorized
4,823,725 shares issued and
outstanding $4,824
Class A Convertible Preferred Stock,
$100 par value
6% non-cumulative
100,000 shares authorized
10,000 issued and outstanding 1,000,000
Class AA Convertible Preferred Stock,
$500 par value
8% cumulative
2,000 shares authorized
325 issued and outstanding 162,500
Additional paid-in capital 2,992,481
Accumulated deficit (360,008)
----------
Total stockholders' equity: $3,799,797
----------
----------
8
SELECTED FINANCIAL DATA
The following selected financial data is qualified by reference to, and
should be read in conjunction with, the Financial Statements, related Notes
to Financial Statements and Report of Independent Public Accountants, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained elsewhere herein. The following tables summarize
certain selected financial data of the Company for the year ended May 31,
1998 (audited), and the year ended May 31, 1997 (audited) and for the three
months ended August 31, 1998 (unaudited) and August 31, 1997 (audited). The
data has been derived from Financial Statements included elsewhere in this
Prospectus that were audited by Biller, Firth-Smith and Archibald, Certified
Public Accountants. No dividends have been paid on Common Stock for any of
the periods presented.
Three Months Ended Year Ended
August 31 May 31
1998 1997 1998 1997
------------------------------- --------------------------------
(unaudited) (audited) (audited) (audited)
STATEMENT OF OPERATIONS
DATA:
Gross sales $ 2,054,992 $ 317,981 $ 2,001,036 $ 981,938
Selling, General & administrative (2,011,569) (339,331) (1,990,286) (1,144,117)
expenses
Other --- --- 211,358 251,040
Minority interest in subsidiaries (4,952) --- (9,177) (16,099)
Income tax provision --- $ --- (73,000) $ (16,000)
----------- ----------- ------------ ------------
Net income $ 38,471 $ 21,350 $ 139,931 $ 56,762
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Net income per share $ .008 $ --- $ .029 $ .014
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
August 31, 1998 August 31, 1997 May 31, 1998 May 31, 1997
--------------- --------------- ------------ ------------
(audited) (audited) (audited) (audited)
BALANCE SHEET DATA:
Cash $ 313,788 $ 225,554 $ 223,723 $ 232,403
Cash in Trust 273,028 -- 489,014 --
Other assets 4,264,527 2,775,246 4,281,891 2,767,517
----------- ----------- ------------ ------------
Total Assets $ 4,851,343 $3,000,800 $ 4,994,628 $ 2,999,920
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Total liabilities $ 1,051,546 $ 428,835 $ 1,233,302 $ 436,605
Stock & additional paid in 4,159,805 3,118,725 4,159,805 3,088,725
capital
Accumulated deficit (360,008) (546,760) (398,479) (525,410)
----------- ----------- ------------ ------------
Total liabilities & stockholders
equity $ 4,851,343 $3,000,800 $ 4,994,628 $ 2,999,920
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company was incorporated in Nevada on October 9, 1995 to acquire
Management Dynamics, Inc., a publicly owned New Jersey corporation. In
November, 1995, the Company concluded the purchase of HomeLife Reality
Services, Inc. and HomeLife Realty U.S. Limited Partnership (California)
launching its real estate services business.
The Company has experienced significant growth primarily through its
acquisitions of and combinations with various other companies. This includes
the acquisition in August 1996 of the Keim Group of Companies and Guardian
Home Warranty Company (Michigan) adding 60 real estate offices and a home
warranty company in Michigan. In 1997, the Company purchased the assets of
S&S Acquisition Corp. providing the Company with Red Carpet Real Estate
Services and National Real Estate Service adding 58 real estate offices. The
acquisition of the real estate computer technology of House by Mouse and
Virtual Assistant provided the Company with the ability to enhance its
Internet communication services to its franchises. In July 1997, the Company
acquired the licensing agreements, trademarks and franchise offices of
Network Real Estate, Inc. This acquisition provided the Company with an
additional 12 offices in Northern California and access to the "high-end"
luxury division of "International Estates". In February 1998, the Company
acquired Builders Realty Ltd. providing access to the Alberta, Canada market
in both retail real estate and mortgage loans. Management believes the
growth fueled by these acquisitions and combinations will continue to fuel
growth in the remainder of 1998 and in 1999. However, certain key factors
that are necessary in maintaining and exceeding the current growth rates are
as follows:
- Acquiring national recognition by acquiring regional franchises;
- Targeting high achieving-high market share regional brokerage houses;
- Continually updating its marketing techniques; and
- Improving services available to its franchises
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
financial information for the Company:
Three Months Ended Year Ended
August 31 May 31
1998 1997 1998 1997
---------------------------- --------------------------------
(audited) (audited) (audited) (audited)
STATEMENT OF OPERATIONS DATA:
Gross sales $ 2,054,992 $ 317,981 $ 2,001,036 $ 981,938
Selling, general & administrative
expenses (2,011,569) (339,331) (1,990,286) (1,144,117)
Other --- --- 211,358 251,040
Minority interest in subsidiaries (4,952) --- (9,177) (16,099)
Income tax provision --- $ --- (73,000) (16,000)
----------- ---------- ------------ -----------
Net income $ 38,471 $ 21,350 $ 139,931 $ 56,762
----------- ---------- ------------ -----------
----------- ---------- ------------ -----------
Net income per share $ .008 $ --- $ .029 $ .014
----------- ---------- ------------ -----------
----------- ---------- ------------ -----------
10
August 31, 1998 August 31, 1998 May 31, 1998 May 31, 1997
--------------- --------------- ------------ ------------
(audited) (audited) (audited) (audited)
BALANCE SHEET DATA:
Cash $ 313,788 $ 225,554 $ 223,723 $ 232,403
Cash in Trust 273,028 -- 489,014 --
Other assets 4,264,527 2,775,246 4,281,891 2,767,517
--------- ---------- ---------- ---------
Total Assets $4,851,343 $3,000,800 $4,994,628 $2,999,920
--------- ---------- ---------- ---------
--------- ---------- ---------- ---------
Total liabilities $1,051,546 $ 428,835 $1,233,302 $ 436,605
Stock & additional paid in capital 4,159,805 3,118,725 4,159,805 3,088,725
Accumulated deficit (360,008) (546,760) (398,479) (525,410)
--------- ---------- ---------- ---------
Total liabilities & stockholders
equity $4,851,343 $3,000,800 $4,994,628 $2,999,920
--------- ---------- ---------- ---------
--------- ---------- ---------- ---------
THREE MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) AS COMPARED TO THE THREE
MONTHS ENDED AUGUST 31, 1997 (AUDITED).
REVENUES. The Company generated gross sales of $2,054,992 for the three
months ended August 31, 1998 compared to gross sales of $317,981 for the
three months ended August 31, 1997. The significant increase in revenues of
$1,737,011 was primarily the result of Builders.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. General and
administrative expenses for the three months ended August 31, 1998 were
$2,011,569 compared to $339,331 for the three months ended August 31, 1997.
The increase of $1,672,238 for the three months ended August 31, 1998 was
primarily a result of Builders.
INTEREST INCOME. Interest income for the three months ended August 31,
1998 was $10,314 compared to $54 for the three months ended August 31, 1997.
The increase of $10,260 is interest income attributable to Builders.
NET INCOME. Net income for the three months ended August 31, 1998 was
$38,471 compared to a net loss of $21,350 for the three months ended August
31, 1997. The increase in the net income of $59,821 for the three months
ended August 31, 1998 was a result of Builders.
YEAR ENDED MAY 31, 1998 (AUDITED) COMPARED TO THE YEAR ENDED MAY 31,
1997 (AUDITED).
REVENUES. The Company generated gross sales of $2,001,036 for the year
ended May 31, 1998 compared to gross sales of $981,938 for the year ended May
31, 1997. The significant increase in revenues of $1,019,098 was primarily
the result of the acquisition of Builders.
GENERAL, AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the year ended May 31, 1998 were $1,990,286 compared to
$1,144,177 for the year ended May 31, 1997. The increase of $846,109 for the
year ended May 31, 1998 was primarily a result of the acquisition of Builders.
GAIN ON SALE OF INVESTMENTS. Gain on the sale of investments for the
year ended May 31, 1998 was zero compared to $180,000 for the year ended May
31, 1997. In 1997, the Company sold its shareholdings of HOA Property
Management Company for a gain of $180,000.
11
SALE OF FRANCHISES. The income from the sale of franchises for the year
ending May 31, 1998 was $200,000 compared to zero for May 31, 1997. This
difference of $200,000 is due to the sale of a Master Franchise to a German
investment company.
FORGIVENESS OF DEBT. The income from debt forgiveness for the year
ending May 31, 1998 was zero compared to $69,375 for May 31, 1997. This
difference is due to the forgiveness of debt by Keim Group Ltd. shareholders
as a condition of the acquisition of Keim Group Ltd. by the Company.
INTEREST INCOME. Interest income for the year ended May 31, 1998 was
$14,362 compared to $5,645 for the year ended May 31, 1997. The increase of
$8,717 is interest income attributable to Builders.
NET INCOME. Net income for the year ended May 31, 1998 was $139,931
compared to a net income of $56,762 for the year ended May 31, 1997. The
increase in the net income of $83,169 for the year ended May 31, 1998 was a
result of the acquisition of Builders.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has primarily funded its capital
requirements through equity infusions, officer loans and the results of
operations.
The acquisition of franchises has provided the Company with an income
stream and the Company believes that the Shares to be registered herein, and
to be offered from time to time pursuant to the terms of a Prospectus
Supplement, can be utilized as a source of financing goals of the Company.
BUSINESS OF THE COMPANY
GENERAL
Incorporated in 1995, HomeLife, Inc., a Nevada corporation, (the
"Company" or "HomeLife") is a real estate services franchisor. HomeLife
utilizes both its proprietary "SuperSystem" marketing system and its business
combinations and acquisitions to fuel development as a fast growing real
estate services company.
The Company maintains its corporate office in Newport Beach, California,
and maintains regional offices in Troy, Michigan and Calgary, Alberta,
Canada. HomeLife operates through various subsidiaries and companies
servicing its franchised tradenames. Through its subsidiary, HomeLife Realty
Services, Inc., the Company, services approximately 50 real estate offices in
the State of California. Through Red Carpet Keim, the Company services
approximately 60 real estate offices in the State of Michigan and through its
tradenames, Red Carpet Real Estate Services, Network Real Estate and National
Real Estate Service, services approximately 70 real estate offices in various
states. In addition to the above, the Company operates both direct real
estate sales and mortgage lending through its subsidiary, Builders Realty
Ltd. ("Builders"), in Calgary, Alberta, Canada and home warranties through
its majority-owned subsidiary, Guardian Home Warranty.
The Company's growth is largely attributable to business combinations
and acquisitions. The Company was initially incorporated in 1995 for the
purpose of combining with Management Dynamics, Inc. a publicly owned New
Jersey corporation. In November 1995, the Company purchased HomeLife Realty
Services, Inc. and HomeLife Realty U.S. Limited Partnership (California) in
exchange for common and preferred shares of the Company. In August 1996,
HomeLife Realty Services acquired the Michigan based Red Carpet Keim Group of
companies. With this acquisition, the Company acquired approximately 60
franchise offices, 95% of the outstanding stock of Red Carpet Keim, and 80%
of the outstanding stock of Guardian Home Warranty Company all located in the
state of Michigan.
12
In November 1996, the Company incorporated FamilyLife Realty Services,
Inc. in Michigan for the purpose of purchasing the assets of S&S Acquisition
Corp. and to function as a franchisor for the Red Carpet and National Real
Estate Service tradenames which S&S Acquisition Corp owned. FamilyLife
Realty Services, Inc. became a wholly owned subsidiary of the Company.
In January 1997, the FamilyLife Realty Services, Inc. acquired the
assets of Salt Lake City based franchisor, S&S Acquisition Corp. This
acquisition included the tradenames "Red Carpet" and "National Real Estate
Services", and the licensing agreements of Red Carpet Real Estate Services
and National Real Estate Service, adding approximately 58 real estate
offices. The Company also acquired the real estate computer technology of
House by Mouse and Virtual Assistant. With this technology, the Company has
been able to enhance Internet communication giving agents the capability of
accessing marketing, advertising and general office materials and licensed
products over the Internet. In July 1997, acquired the licensing agreements
and trademarks of Network Real Estate, Inc., its 12 Northern California
offices and its "high-end" luxury division of "International Estates," a
Network Real Estate, Inc. trade name. This acquisition provides a platform
for growth in Northern California.
In November 1997, the Company incorporated MaxAmerica Financial
Services, Inc. MaxAmerica Financial Services, Inc. will provide mortgage
financing services to the Company's real estate customers. MaxAmerica
Financial Services will act as a mortgage brokerage while funding and
processing the loans through Mortgage Capital Resource. MaxAmerica Financial
Services, Inc. has a Loan Purchase Agreement with Mortgage Capital Resource
wherein Mortgage Capital Resource agrees to process and fund loans for
MaxAmerica Financial Services, Inc.
In February 1998, the Company acquired Builders. Builders is a two
office retail real estate and mortgage loan company located in Calgary,
Alberta, Canada. Builders has retained its name and operates as a wholly
owned subsidiary of HomeLife, Inc.
In April 1998, the Company incorporated National Sellers Network, Inc.,
as a Nevada corporation, to function as a real estate licensing company for
the National Real Estate Service trade name. National Sellers Network, Inc.
is a wholly owned subsidiary of the Company. Also in April 1998, the Company
incorporated Red Carpet Broker Network, Inc., as a Nevada corporation, to
function as a real estate licensing company for the Red Carpet Real Estate
Services trade name. Red Carpet Real Estate Services, Inc. is also a wholly
owned subsidiary of the Company.
Finally, in August 1998, the Company incorporated HomeLife Properties,
Inc. as a Nevada corporation to function as a buyer and seller of real
property.
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
13
The following is an organizational chart of the Company's subsidiaries:
HomeLife, Inc. (Nevada)
November, 1995
|
|
|
HomeLife Realty Services, Inc. (Delaware)----------|
May 1996 |
|
|----------Red Carpet Keim (Michigan)
| August 1996
|----------Guardian Home Warranty Company(Michigan)
| August 1996
|
FamilyLife Realty Services, Inc. (Michigan)--------|
November 1996 |
|
|----------MaxAmerica Financial Services, Inc.(California)
| October 1997
|----------HomeLife California Realty, Inc.(California)
| October 1997
|
Builders Realty Ltd. (Canada)----------------------|
February 1998 |
|
|----------National Sellers Network, Inc.(Nevada)
| April 1998
|----------Red Carpet Broker Network, Inc.(Nevada)
| April 1998
|
HomeLife Properties, Inc. (Nevada)-----------------|
August 1998
The Company's niche in the market is maintained through the development
of its proprietary marketing system. This community based marketing system,
called the "SuperSystem" replaces the outdated marketing methods of cold
calling and door knocking to obtain real estate listings and potential
buyers. The elimination of these methods has attracted two types of
franchisees, franchisees new to operating a franchise and those who
terminated other franchise agreements with the Company's competitors to
become a franchisee of the Company.
As of the date hereof, the Company had: 4,823,725 Common Shares; 200,000
warrants to purchase Common Stock; 140,000 options to purchase Common Stock,
10,000 Class A Preferred Shares; and, 325 Class AA Preferred Shares issued
and outstanding. Assuming all the Preferred Shares are converted and all
shares registered hereunder are sold, the Company will have 14,823,725 shares
of Common Stock outstanding after the Offering.
As of May 31, 1998, the Company had gross sales of $2,001,036. The
Company's net income from operations at May 31, 1998 was $139,931. As of the
quarter ending August 31, 1998, the Company had a total sale income of
$2,054,992. The Company's net income from operations for the quarter was
$38,471. Continued revenue generations by the Company's franchisees, and the
continued successful acquisitions of franchisors together with the
implementation of the Company's marketing plan are necessary for the Company
to continue generating substantial operating revenues.
14
The Company was incorporated under the laws of the State of Nevada on
October 9, 1995.
OVERVIEW OF THE COMPANY'S MARKETS
Management believes that the real estate market is growing rapidly.
HomeLife's target market includes (a) franchise operations with 5 to 50
offices, (b) realtors who are financially weak and lack a good marketing
system, and (c) realtors without strong name brand recognition.
HomeLife's customer generating, community based marketing system
"SuperSystem" eliminates the outdated marketing methods of cold-calling and
door knocking used by traditional realtors. This combination of marketing
system, computer technology, real estate services and training provides the
Company's agents with thousands of customer leads.
In addition to this proprietary system, the acquisition by the Company
of companies with both recognizable tradenames, such as Red Carpet, and
existing franchise locations has enabled the Company to gain immediate market
recognition. This strategy, in management's view, will increase the
Company's market share.
COMPETITION
The Company faces competition from numerous companies, some of which are
more established, benefit from greater market recognition, have greater
financial and marketing resources, and a broader geographical base than the
Company. The Company's products compete on the basis of certain factors,
including most importantly, the ability to generate leads without
cold-calling and door knocking.
The real estate franchise industry is large and composed of many other
companies. Companies such as Century 21, Prudential, Coldwell Banker, Better
Homes and Gardens, ERA, and RE/Max, provide similar services as the Company,
Such competition may diminish the Company's market share or its ability to
gain entry into certain markets, and may consequently have a material adverse
effect on the Company.
COMPETITIVE ADVANTAGES
Management of the Company believes that the Company has the following
advantages over its competition:
- - A unique lead generating system provided to its franchisees.
- - Lower cost of the Company's products to franchisees and the increased
benefit realized from the placement of its advertising dollars.
- - Consistent use and acquisition of new technology to provide its services to
its franchisees.
EMPLOYEES
As of the date of this Prospectus, the Company employs 16 full-time
employees. The Company hires independent contractors on an "as needed" basis
only. The Company has no collective bargaining agreements with its
employees. The Company believes that its employee relationships are
satisfactory. The Company has approximately 180 franchise offices with an
estimated 2,600 agents. The Company plans on hiring additional staff in the
immediate future and in the long term, as needed, based on its growth rate.
15
PROPERTIES
The Company leases a 2,630 square foot office in Newport Beach,
California. The lease term expires in June, 2001. The Company also is
obligated on leases for its other premises located in Troy, Michigan, which
expires in December, 1998, and for two Builders Realty offices located in
Calgary, Alberta, Canada. The Builders leases expire in October, 2001 and
August, 2002. Annual lease payments exclusive of property taxes and
insurance for all locations through 2002 is $433,494.
The Company owns more than 40 copyrights on unique marketing concepts
which include printed materials for buying and selling property, and point of
sale and sales follow up techniques. Further, the Company has exclusive
rights, granted by Jerome's Magic World, Inc. at no cost to the Company, to
use its exclusively developed animated characters for its real estate service
business. These characters include Jerome the Gnome, Crok 'N Roll, The Waz,
King D Lish and Rock Head.
LITIGATION
The Company is currently involved in three lawsuits.
The first lawsuit entitled National Real Estate Service of Illinois,
Inc. v. HomeLife, Inc., FamilyLife Realty Services, National Real Estate
Service, Realty World America, Inc. and Andrew Cimerman was filed in the
Illinois state court on April 24, 1998 (the "Illinois Action"). In this
action, the plaintiff, National Real Estate Service of Illinois, Inc. alleges
that the defendants breached the master franchise agreement by failing to
provide the services to the franchisees as required therein. In this action,
the plaintiffs request an award of actual damages of $3,000,000 and punitive
damages of $10,000,000.
Prior to the suit being served on the defendants, FamilyLife Realty
Services filed a suit in the United States District Court, Central District
of California, Southern Division, Case No. SACV 98-398 GLT (EEX), entitled
FamilyLife Realty Services, Inc. v. National Real Estate Service of Illinois,
Inc. formerly known as Red Carpet Corporation of Illinois (the "California
Action"). This lawsuit alleges that National Real Estate Service of
Illinois, Inc. breached the master franchise agreement by failing to open and
operate 120 real estate offices in its region resulting in a loss of revenue
to FamilyLife Realty Services of $540,000.00.
The defendants in the Illinois Action transferred the case to the United
States District Court in Illinois and are currently seeking to have the case
transferred to the United States District Court, Central District, Southern
Division. The motion to transfer has been fully briefed and is awaiting a
decision by the Illinois judge. If the case is transferred it is anticipated
that the California Action and the Illinois Action with be consolidated. The
Company intends to vigorously defend the Illinois Action and vigorously
pursue the California Action. The Company adamantly denies the allegations
contained in the Illinois Action. The ultimate resolution of this matter is
not ascertainable at this time. In management's opinion, this matter will
not have a material effect on the financial position of the Company.
The second lawsuit is a trademark infringement action filed by Guardian
Life Insurance Company v. Guardian Home Warranty in Michigan. The Plaintiff
alleges that Guardian Home Warranty is infringing on its rights to use the
name "Guardian." The Company does not believe that the Plaintiff has
exclusive rights to use the "Guardian" name. The Company intends to
vigorously defend this action. The ultimate resolution of this matter is not
ascertainable at this time. In management's opinion, this matter will not
have a material effect on the financial position of the Company.
The final action is entitled Bivans v. Coldwell Banker Prestige Realty,
Inc., et. al and was commenced on April 16, 1998 in Michigan. The plaintiff
alleges discrimination by a franchisee, Coldwell Banker Prestige Realty. The
facts of the case arose prior to the acquisition by the Company of Red Carpet
Keim, and the defendant, Coldwell Banker Prestige Realty, ceased to be a Red
Carpet Keim franchisee prior to the acquisition of Red Carpet Keim by the
Company. The Company believes Red Carpet Keim has been named erroneously,
but has not yet secured a dismissal. The Company has been assured by
plaintiff's counsel that it does not intend to pursue the action against the
Company.
16
However, should the plaintiff pursue remedies against the Company, the
Company plans to secure a dismissal and failing that to defend this action
vigorously. Management does not believe that this action will have a material
impact on the financial position of the Company.
Management of the Company believes that there are no other litigation
matters pending or threatened against the Company.
17
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and officers of the Company as of the date of this
Prospectus are as follows:
NAME AGE POSITION
- ---- --- --------
Andrew Cimerman 50 President and Director
Robert L. Cashman 66 Secretary, Treasurer and Director
Terry A. Lyles, Ph.D. 39 Director
F. Bryson Farrill 70 Director
Gabrielle Jeans 47 Vice President
Charles Goodson 43 Vice President
The number of directors is set at a minimum of 1 and a maximum of 5.
The Board of Directors presently consists of 4 directors. Each of the
Company's directors hold office until their respective successors are elected
at the next annual meeting of shareholders. Vacancies in the Board of
Directors are filled by a majority vote of the remaining directors or by a
shareholder vote called expressly for such purpose.
ANDREW CIMERMAN, 50, PRESIDENT AND DIRECTOR, has held the positions of
Director and President since April 1996. For 7 years prior thereto, he was
the founder and majority shareholder of HomeLife Securities, Inc. and its
wholly owned subsidiary HomeLife Realty Services, Inc. Mr. Cimerman is the
founder, President and majority shareholder of: Simcoe Fox Developments,
Ltd., a private development company located in Toronto, Ontario, Canada;
HomeLife Cimerman Real Estate Ltd., a Toronto based real estate company;
Jerome's Magic World, Inc., the owner of certain animated characters; and,
majority shareholder and President of Realty World America, Inc. Mr.
Cimerman brings over 29 years of real estate service experience to the
Company, and is a strong and committed leader focused on the growth and
success of the Company.
ROBERT L. CASHMAN, 66, SECRETARY, TREASURER AND DIRECTOR, has been with the
Company since its inception in October 1995. Mr. Cashman has acted as the
President and majority owner of The Charleston Group, a business consulting
and investment banking firm since January 1, 1993. Mr. Cashman has acted as
the Chairman of the Orange County, California, Airport Commission, operators
of John Wayne Airport since March 1, 1998. He earned a B.S. degree in
Business Administration from the University of California, Los Angeles.
TERRY A. LYLES, PH.D, 39, DIRECTOR joined the Company as a director in August
1997. Dr. Lyles is a national and international speaker and trainer to
professional athletes, Fortune 500 Companies, schools, universities and
public audiences. Dr. Lyles' program is to reach people around the world
with the message of "balance and excellence." For the past 15 years, Dr.
Lyles has traveled across the United States and around the world conveying
this profound message of "Life Accountability" and "A Better You." Dr.
Lyles' has conducted a weekly radio program "A Better You" since May 1, 1994,
which is currently heard by over 1 million people in 65 nations. Dr. Lyles
holds a Ph.D degree in Psychology from Wayne State University in Detroit,
Michigan.
F. BRYSON FARRILL, 70, DIRECTOR joined the Company as a director in February
1997. Mr. Farrill has been in the securities industry for the past 32 years.
Mr. Farrill has held various senior positions, including that of President
and
18
Chairman of McLeod, Young, Weir International, an investment dealer in
Toronto, Canada. He was also the Chairman of Scotia McLeod (USA) Inc. for
eleven years. Mr. Farrill's broad experience is not only utilized in the
United States and Canada but has served to direct the expansion of McLeod,
Young, Weir Ltd. into Europe and Asia through an extensive network of branch
offices.
GABRIELLE JEANS, 47, VICE PRESIDENT, has been employed by the Company, or its
subsidiary companies since August 1992. She has been employed by the
subsidiary, HomeLife Realty Services, Inc. as Director of Sales and training.
She brings over 22 years of experience in the realty industry to the Company
including the invaluable experience of owning and managing her own real
estate brokerage firm with over 100 agents.
CHARLES GOODSON, 43, VICE PRESIDENT has been employed by the Company, or its
subsidiary companies since March 1992. Mr. Goodson had 15 years of
commercial banking experience prior to joining HomeLife Realty Services. He
is a licensed realtor. Mr. Goodson earned his B.S. degree in Business
Administration from California State University, Northridge.
EXECUTIVE COMPENSATION
The following officers of the Company receive the following annual cash
salaries and other compensation:
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------
Name and Principal Position Year Annual Bonus Awards
Salary ---------------------------
Restricted Securities
Stock Awards Underlying
Options (1)
- --------------------------------------------------------------------------------------------------
Andrew Cimerman, President 1998 $-0- $-0- -0- -0-
- --------------------------------------------------------------------------------------------------
Robert Cashman, Secretary, Treasurer 1998 $-0- $-0- -0- -0-
- --------------------------------------------------------------------------------------------------
Gabrielle Jeans, Vice President 1998 $72,000 $-0- -0- 30,000
- --------------------------------------------------------------------------------------------------
Charles Goodson, Vice President 1998 $72,000 $-0- -0- -0-
- --------------------------------------------------------------------------------------------------
All Officers as a Group (4 persons) 1998 $144,000 $-0- -0- 30,000
- --------------------------------------------------------------------------------------------------
- ---------------------------------
(1) Ms. Jeans has an option to purchase 30,000 shares of the Company's common
stock. These options are fully vested and may be exercised at the price of
$5.00 per share.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The laws of the State of Nevada and the Company's Bylaws provide for
indemnification of the Company's directors for liabilities and expenses that
they may incur in such capacities. In general, directors and officers are
indemnified with respect to actions taken in good faith in a manner
reasonably believed to be in, or not opposed to, the best interests of the
Company, and with respect to any criminal action or proceeding, actions that
the indemnitee had no reasonable cause to believe were unlawful.
The Company has been advised that in the opinion of the Securities and
Exchange Commission, indemnification for liabilities arising under the
Securities Act is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
19
EMPLOYMENT AND RELATED AGREEMENTS
STOCK OPTIONS
While the Company has not enacted a formal stock option plan for its
directors and senior executives, the Company has granted certain directors
and officers options to purchase Common Stock of the Company. Board of
Directors members, Mr. F. Bryson Farrill and Dr. Terry Lyles, were granted
options to purchase 50,000 shares of Common Stock of the Company each. The
exercise price of the option is $3.00 per share. These options are fully
vested and exercisable. Vice President, Gabrielle Jeans, has been granted an
option to purchase 30,000 shares of Common Stock at the exercise price of
$5.00 per share. Ms. Jeans' options are also fully vested and exercisable.
Former director, Edmond Lani, was granted, on July 10, 1996, a three
year option to purchase 10,000 shares of the Company's Common Stock at the
option price of $1.00 per share. Although Mr. Lani is no longer a director
of the Company, his option will not expire according to terms until July 9,
1999.
EMPLOYMENT AGREEMENTS
The Company does not currently have employment agreements with its
employees. The Company does require its franchisees to enter into a
franchise agreement with the Company.
CERTAIN TRANSACTIONS
The President and majority shareholder of the Company, Andrew Cimerman
is the sole shareholder and President of Realty World America, Inc. Realty
World America, Inc. is a real estate services company providing services to
franchises. Mr. Cimerman, concurrently with the operations of the Company,
continues to operate Realty World America, Inc. Any transactions undertaken
by Mr. Cimerman on behalf of Realty World America, Inc. which may constitute
a corporate opportunity are first presented to the Company's board of
directors for approval by a disinterested majority.
Mr. Cimerman is also the sole shareholder of Jerome's Magic World, Inc.
the owner of certain characters licensed to the Company. The license of
these characters to the Company is for an indefinite term and at no cost to
the Company.
CONFLICTS OF INTEREST
Other than as described herein, the Company is not expected to have
significant dealings with affiliates. However, if there are such dealings,
the terms of such transactions will be no less favorable to the Company than
would have been obtained from an unaffiliated third party in similar
transactions. All future transactions with affiliates will be on terms no
less favorable than could be obtained from unaffiliated third parties, and
will be approved by a majority of the disinterested directors.
A director of the Company owes fiduciary duties to the Company which may
conflict with other interests. The Company has not entered into any
noncompete, confidentiality, or similar agreements with its directors. The
fiduciary duties that directors owe to a Company include the duty not to
withhold from the Company, or appropriate, any corporate opportunity which
the Company may be able to exploit, the duty not to use for their personal
benefit or the benefit of any other individual or entity any information not
generally known which they acquire through their association with the
Company, and in short, the duty to deal fairly with the Company. The
Company's current directors intend to submit to the Company any potential
business they become aware of which may constitute a corporate opportunity to
the Company.
20
The Company's officers and directors are or may become, in their
individual capacities, officers, directors, controlling shareholders or
partners of other entities engaged in a variety of businesses which may in
the future have various transactions with the Company. Thus, potential
conflicts of interest exist, including among other things, conflicts with
respect to the time, effort, and corporate opportunities involved in
participation with such other business entities and transactions. Each
officer and director of the Company may engage in business opportunities
outside the Company. An officer or director may continue any business
activity in which such officer or director engaged prior to joining the
Company. As mentioned above, the officers and directors of the Company are
aware of the fact that they owe a fiduciary duty to the Company not to
withhold any corporate opportunity from the Company which may arise because
of their association with the Company. The Company's policy is that all
transactions between the Company and any affiliates be on terms no less
favorable to the Company than could be obtained from unaffiliated third
parties.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock, as of the date hereof (i) each
stockholder known by the Company to be the beneficial owner of more than five
percent of the outstanding Common Stock, (ii) each director of the Company,
(iii) each officer of the Company, and (iv) all directors and officers as a
group. Unless otherwise indicated, the address for each stockholder is 4100
Newport Place, Suite 730, Newport Beach, CA 92660
- ----------------------------------------------------------------------------------------
PERCENTAGE BENEFICIALLY OWNED(1)
----------------------------------------
AFTER THE
CONVERSION OF AFTER THE
NUMBER OF BEFORE PREFERRED MAXIMUM
NAME SHARES OFFERING SHARES ONLY OFFERING(2)
- -------------------------------------------------------------------------------------------
Andrew Cimerman 3,500,000 (3) 51.83% (3) 55.6%(3) 23.61%
- -------------------------------------------------------------------------------------------
Robert L. Cashman 121,250 2.51% 1.93% *
- -------------------------------------------------------------------------------------------
F. Bryson Farrill 50,000(4) 1.04% * *
- -------------------------------------------------------------------------------------------
Terry Lyles, Ph.D 50,000(4) 1.04% * *
- -------------------------------------------------------------------------------------------
Gabrielle Jeans 45,000(4) * * *
- -------------------------------------------------------------------------------------------
Charles Goodson -0- 0% 0% 0%
- -------------------------------------------------------------------------------------------
Brinx Capital, Inc. 250,000 5.18% 3.99% 1.69%
108 Banstock Drive
Willowdale, Ontario, Canada
- -------------------------------------------------------------------------------------------
Cede & Co. 479,428 9.94% 7.61% 3.23%
P.O. Box 222
Bowling Green Station
New York, NY
- -------------------------------------------------------------------------------------------
Ward Enterprises 316,000 6.55% 5.02% 2.13%
384 Sanctuary Court
Henderson, NV
- -------------------------------------------------------------------------------------------
All officers and directors as a 3,766,250 57.35% 59.8% 25.41%
group (6 persons)
- -------------------------------------------------------------------------------------------
*Less than 1%
- -------------
21
(1) Except as otherwise indicated, the Company believes that the beneficial
owners of Common Stock listed below, based on information furnished by such
owners, have sole investment and voting power with respect to such shares,
subject to community property laws where applicable. 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 exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage of the person holding
such options or warrants, but are not deemed outstanding for purposes of
computing the percentage of any other person.
(2) Assumes the sale of all shares which are the subject of this Registration
Statement although the stock will be sold from time to time pursuant to the
terms and prices set forth in a Prospectus supplement.
(3) Mr. Cimerman is the owner of 2,500,000 shares of Common Stock and the owner
of 10,000 shares of convertible Preferred Stock Class A. This Preferred
Stock may be converted into 1,000,000 shares of Common Stock.
(4) Includes options to purchase shares of Common Stock. Mr. Farrill and Dr.
Lyles have been granted options to purchase up to 50,000 shares of Common
Stock each at the exercise price of $3.00 per share. These options are
fully vested. Ms. Jeans has been granted options to purchase up to
30,000 shares of Common Stock of the Company at the exercise price of
$5.00 per share.
PLAN OF DISTRIBUTION
The Shares will be offered and sold from time to time by the Company except
for those shares which are used to convert Preferred Stock of the Preferred
Shareholders. The Company will not receive any of the proceeds from the sale of
the Shares by the Selling Shareholders pursuant to this Prospectus. The Company
will pay all of the expenses of the registration of the Shares, but shall not
pay any commissions, discounts, and fees of underwriters, dealers, or agents.
Preferred Shareholders have the right to convert their shares to Common
Stock of the Company. Further, the Company is obligated to register sufficient
shares of Common Stock into which the Preferred Stock will be converted. There
are currently 10,325 shares of Preferred Stock issued and outstanding which may
be converted to up to 1,134,482 shares of Common Stock. The Preferred
Shareholders are entitled to sell their shares of Common Stock simultaneously
with and on the same terms and conditions imposed upon the Company.
The Preferred Shareholders and any broker-dealers acting in connection with
the sale of the Shares hereunder may be deemed to be "underwriters' within the
meaning of Section 2(11) of the Act, and any commissions received by them and
any profit realized by them on the resale of Shares as principals may be deemed
underwriting compensation under the Act.
Under the Exchange Act and the regulations thereunder, any person engaged
in a distribution of the Shares offered by this Prospectus may not
simultaneously engage in market making activities with respect to the Common
Stock of the Company during the applicable "cooling off" periods prior to the
commencement of such distribution. In addition, and without limiting the
foregoing, the Preferred Shareholders will be subject to applicable provisions
of the Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M, which provisions may limit the timing of purchases and
sales of Common Stock by the Preferred Shareholders.
Preferred Shareholders may also use Rule 144 under the Act to sell the
Shares if they meet the criteria and conform to the requirements of such Rule.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 10,000,000 shares
of Common Stock, $.001 par value, 100,000 shares of convertible Class A
Preferred Stock and 2,000 shares of Class AA Preferred Stock. The Company is
attaching as an exhibit to the Registration Statement Amended and Restated
Articles of Incorporation increasing the number of authorized shares of Common
Stock to 20,000,000. The Company's Transfer Agent is Oxford Transfer &
Registrar, 317 S.W. Alder, Suite 1120, Portland, Oregon, 97204.
The following summary of certain terms of the Company's securities does not
purport to be complete and is subject to, and qualified in its entirety by, the
provisions of the Company's Articles of Incorporation and Bylaws, which
22
are included as exhibits to the Registration Statement of which this
Prospectus is a part, and the provisions of applicable law.
COMMON STOCK
As of the date of this Prospectus, there are 4,823,725 shares of Common
Stock, 200,000 warrants to purchase Common Stock and 140,000 options to
purchase Common Stock issued and outstanding. After the conversion of the
issued and outstanding Preferred Stock there would be 6,271,957 shares of
Common Stock issued and outstanding. After the completion of the Offering of
all shares referred to herein, 14,823,725 shares of Common Stock will be
issued and outstanding. Holders of Common Stock are entitled to one vote for
each share held of record on all matters submitted to a vote of the
stockholders. At all elections of directors of the Company, each holder of
stock possessing voting power is entitled to as many votes as equal to the
number of his or her shares of stock subject to preferences that may be
applicable to any then outstanding Preferred Stock, holders of Common Stock
are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
then outstanding Preferred Stock. Holders of Common Stock have no right to
convert their Common Stock into any other securities. The Common Stock has
no preemptive or other subscription rights. There are no redemption or
sinking fund provisions applicable to the Common Stock. All outstanding
shares of Common Stock are, and the Common Stock to be outstanding upon
completion of this Offering will be, duly authorized, validly issued, fully
paid and nonassessable.
PREFERRED SHARES
CLASS A CONVERTIBLE PREFERRED SHARES
The Company created a series of preferred stock consisting of 100,000
authorized shares, of which 10,000 shares are issued and outstanding, and
designated as the "Class A Preferred Stock," having the voting powers,
preferences, relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth below.
Each share of Class A Preferred Stock has a face value of $100.00 (the "Face
Value").
The holders of shares of Class A Preferred Stock are entitled to receive,
when and as declared by the Board of Directors out of any funds at the time
legally available therefor, dividends accruing at the rate of six per cent (6%)
of the Face Value per year from the date of issuance through the date of
conversion (the "Coupon Dividend'), as well as dividends paid with respect to
each share of Common Stock for each share of Class A Preferred Stock at the same
time and on a parity with dividends paid on each share of Common Stock (the
"Common Dividend") less any Coupon Dividend paid for any such period. Each
share of Class A Preferred Stock ranks on a parity with each other share of
Class A Preferred Stock with respect to dividends. Dividend payments are paid
quarterly. Any Coupon Dividend which has accrued, but which for any reason
whatsoever, (a) has not been declared, or (b) has been declared but has not been
timely paid, shall not be deemed in arrears and shall not accumulate.
In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, subject to the rights of series of Preferred
Stock that may from time to time come into existence, the holders of Class A
Preferred Stock are entitled to receive, pari passu among them, but prior and in
preference to any distribution of any of the assets of the Company to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to the sum of (A) the Face Value of each outstanding share of Class
A Preferred Stock, and (B) an amount equal to declared but unpaid and accrued
dividends on such share.
The Company may redeem the Class A Preferred Stock at a redemption price
equal to the Face Value per share. The holders of the Class A Preferred Stock
shall have the right to convert each share of Class A Preferred Stock to Common
Stock, at the option of the holder thereof, at any time after the date of
issuance of such share. Each Class A Preferred Stock shall be converted to
Common Stock at a price equal to the Face Value.
23
The Company is obligated to register the shares of Common Stock into which
the Preferred Stock is convertible in any subsequent registration statement
filed with the Securities and Exchange Commission, so that holders for such
Common Stock shall be entitled to sell the same, simultaneously with, and upon
the terms and conditions as the securities sold for the account of the Company
pursuant to any such registration statement, subject to such lock-up provisions
as may be proposed by the underwriter and agreed by the holders.
The Class A Preferred Stock has been granted voting rights wherein the
Class A Preferred Stock is entitled to vote on such matters as the Common Stock
may vote, and are entitled to cast 1,000 votes per Class A Preferred Share. No
sinking fund has or will be established to provide for dividends or the
repurchase of the Class A Preferred Stock.
CLASS AA CONVERTIBLE PREFERRED SHARES.
The Company created a series of Preferred Stock consisting of 2,000 shares
and designated as the "Class AA Preferred Stock," having the voting powers,
preferences, relative participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth below.
Each share of Class AA Preferred Stock has a face value of $500.00 (the "Face
Value"). There are currently 325 shares of Class AA Preferred Stock issued and
outstanding.
The holders of shares of Class AA Preferred Stock (collectively, "Holders",
each a "Holder"), are entitled to receive when and as declared by the Board of
Directors out of any funds at the time legally available therefor dividends
accruing at the rate of eight per cent (8.0%) of the Face Value per year from
the date of issuance through the date of conversion (the "Coupon Dividend"), as
well as dividends paid with respect to each share of Common Stock for each share
of Class AA Preferred Stock at the same time and on a parity with dividends
paid on each share of Common Stock (the "Common Dividend") less any Coupon
Dividend paid for any such period. Each share of Class AA Preferred Stock ranks
on a parity with each other share of Class AA Preferred Stock with respect to
dividends. Dividend payments to the holders of shares of Class AA Preferred
Stock are payable quarterly. Any Coupon Dividend on the Class AA Preferred
Stock which has accrued but which, for any reason whatsoever, (a) has not been
declared, or (b) has been declared but has not been timely paid, is deemed in
arrears and shall accumulate until paid.
The Company may, at its option, at any time redeem, any or all shares of
the Class AA Preferred Stock at a redemption price equal to the Face Value per
share; provided, however, that no such redemption is permitted unless all
dividends which have accrued or accumulated on all outstanding shares of the
Class A Preferred Stock have been or are simultaneously declared and paid in
full.
In the event of any liquidation, dissolution or winding up of the Company,
subject to the rights of series of Preferred Stock that may from time to time
come into existence and subject to the rights, preferences and priorities of the
Holders of shares of Class A Preferred Stock, the Holders of Class AA Preferred
Stock are entitled to receive, pari passu among them, but prior and in
preference to any distribution of any of the assets of the Company to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to the sum of (A) the Face Value for each outstanding share of Class
AA Preferred Stock and (B) an amount equal to declared but unpaid and accrued
dividends on such share. If, upon the occurrence of such event the assets and
funds thus distributed among the Holders of the Class AA Preferred Stock shall
be insufficient to permit the payment to such Holders of the full aforesaid
preferential amounts, then the entire assets and funds of the Company, legally
available for distribution, shall be distributed ratably among the Holders of
the Class AA Preferred Stock, in accordance with the priorities set forth.
Subject to the redemption rights, each Class AA Preferred Share is
automatically converted to Common Stock of the Company at the twelve (12) month
anniversary of the date of the issuance of such Class AA Preferred Share (the
"Conversion Date"). The number of shares of Common Stock into which each Class
AA Preferred Share will convert is determined by dividing the Face Value per
share by eighty per cent (80%) of the Market Price of the Common Stock of the
Company. The "Market Price" of the Common Stock of the Company shall equal the
average of the last quote closing bid price as reported by the National
Association of Securities Dealers Automated System (NASDAQ) for the thirty
(30)-day period ending ten (10) days prior to the Conversion Date.
24
The Company is obligated to register the shares of Common Stock into which
the Preferred Shares are convertible, in any subsequent registration statement
filed by the Company with the Securities and Exchange Commission, so that
Holders of such Common Stock is entitled to sell the same simultaneously with
and upon the terms and conditions as the securities sold for the account of the
Company, pursuant to any such registration statement, and subject to such
lock-up provisions as may be proposed by the underwriter and agreed by the
Holders.
WARRANTS
As of the date of this Prospectus, there are 200,000 warrants outstanding.
S&S Acquisition Corp. holds warrants to purchase up to 200,000 shares of Common
Stock of the Company at the price of $6.00 per share. These warrants were
issued by the Company pursuant to the acquisition agreement by and between the
Company and S&S Acquisition Corp. dated January 16, 1997. The term of the
Warrants is three years from the date of issuance.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding
14,823,725 shares of Common Stock. The Shares will be offered from time to time
at the price and terms set forth in the Prospectus Supplement.
Of the Common Stock outstanding prior to this offering, 3,759,616 were
issued and sold by the Company in private transactions in reliance on an
exemption from registration. Accordingly, such shares are "restricted shares"
within the meaning of Rule 144 and cannot be resold without registration, except
in reliance on Rule 144 or another applicable exemption from registration.
1,037,859 of the Common Stock outstanding prior to this offering were issued in
the exchange transaction with Management Dynamics, Inc. following Management
Dynamic's 1 to 4 reverse stock split. These shares are registered and trading
pursuant to that transaction.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated), including any affiliate of the
Company, who beneficially owns "restricted shares" for a period of at least one
year is entitled to sell within any three-month period, shares equal in number
to the greater of (i) 1% of the then outstanding shares of Common Stock, or (ii)
the average weekly trading volume of the Common Stock during the four calendar
weeks preceding the filing of the required notice of sale with the Securities
and Exchange Commission. The seller also must comply with the notice and manner
of sale requirements of Rule 144, and there must be current public information
available about the Company. In addition, any person (or persons whose shares
are aggregated) who is not, at the time of the sale, nor during the preceding
three months, an affiliate of the Company, and who has beneficially owned
restricted shares for at least two years, can sell such shares under Rule 144
without regard to notice, manner of sale, public information or the volume
limitations described above.
UNDERWRITING
The Company has not presently entered into an underwriting agreement. The
terms of any underwriting agreement, and the identification of the underwriter,
shall be the subject of a Prospectus Supplement.
LEGAL ADVISORS
The validity of the securities offered hereby will be passed upon for the
Company by Horwitz & Beam, Irvine, California.
25
EXPERTS
The Financial Statements of the Company included herein and elsewhere in
the registration statement, have been included herein and in the registration
statement in reliance on the report of Biller, Firth-Smith & Archibald,
Certified Public Accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company is not presently subject to the reporting requirements of the
Securities Exchange Act of 1934. The Company has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form SB-2
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the securities offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, omits certain information
contained in the Registration Statement on file with the Commission pursuant to
the Securities Act and the rules and regulations of the Commission thereunder.
The Registration Statement, including the exhibits thereto, may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Copies of such material
may be obtained by mail at prescribed rates from the Public Reference Branch of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 or free of
charge at the Commission's website of www.sec.gov in the EDGAR database.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
26
HomeLife, Inc. & Subsidiaries
Consolidated Balance Sheets
August 31, 1998 May 31, 1998
--------------- ------------
(unaudited)
Assets
------
Cash $ 313,788 223,723
Cash in trust 273,028 489,014
Accounts receivable net 214,411 231,710
Notes receivable net 529,159 911,160
Stock subscription receivable 750,000 750,000
Inventory 119,599 162,737
Prepaid expenses & deposits 79,651 39,256
Investment 375,000 --
Property & equipment net 567,509 554,654
Investment in trademarks & other intellectual assets net 1,629,198 1,632,374
------------------------
Total assets $ 4,851,343 4,994,628
------------------------
------------------------
Liabilities and Stockholders' Equity
------------------------------------
Accounts payable $ 146,753 103,792
Accrued expenses 107,084 124,183
Reserve for warranties 50,600 43,900
Trust liability 273,028 489,014
Dividends payable 9,780 10,980
Advances from stockholder 323,084 323,084
Notes payable 15,208 17,292
Income tax payable 85,177 85,177
Minority interest 40,832 35,880
------------------------
Total liabilities 1,051,546 1,233,302
------------------------
Stockholders' Equity
Common stock - authorized 10,000,000 shares, par value $.001, 4,824 4,797
issued and outstanding 4,823,725 & 4,797,475 shares respectively
Preferred stock - authorized 100,000 shares class A, par value 1,000,000 1,000,000
$100, issued and outstanding 10,000 shares
Preferred stock - authorized 2,000 shares class AA, par value 162,500 162,500
$500, issued and outstanding 325 shares
Additional Paid in Capital 2,992,481 2,992,508
Accumulated Deficit (360,008) (398,479)
------------------------
Total Stockholders' equity 3,799,797 3,761,326
------------------------
Total liabilities & Stockholders' equity $ 4,851,343 4,994,628
------------------------
------------------------
The accompanying notes to consolidated financial statements are an integral
part of this statement
HomeLife, Inc. & Subsidiaries
Consolidated Statements of Income
Three months ended Three months ended
August 31, 1998 August 31, 1997
--------------- ---------------
(unaudited) (unaudited)
Sales
-----
Royalty & franchise fees $ 221,060 252,637
Warranty sales 75,327 58,309
Real estate sales commissions 1,738,351 --
Other income 20,254 7,035
-------------------------------
Total sales 2,054,992 317,981
Cost of Sales
-------------
Cost of sales 1,665,688 62,088
-------------------------------
Gross profit 389,304 255,893
-------------------------------
Expenses
--------
Salaries & fringe benefits 142,783 102,943
Occupancy 53,088 25,672
General & administrative 150,010 148,628
-------------------------------
Total expenses 345,881 277,243
-------------------------------
Net income (loss) before minority interest 43,423 (21,350)
Minority interest 4,952 --
-------------------------------
Net income (loss) before income tax provision 38,471 (21,350)
Income tax provision -- --
-------------------------------
Net income (loss) after income tax provision $ 38,471 (21,350)
-------------------------------
-------------------------------
The accompanying notes to consolidated financial statements are an integral
part of this statement
HomeLife, Inc. & Subsidiaries
Consolidated Statements of Cash Flows
Three months ended Three months ended
August 31, 1998 August 31, 1997
------------------ ------------------
(unaudited) (unaudited)
Cash flows from operating activities
Net Income (loss) $ 38,471 (21,350)
Adjustments to reconcile net income (loss) to net
cash used in operating activities
Depreciation and amortization 15,983 7,022
Gain on sale of investment -- 180,000
Minority interest 4,952 --
Changes in assets & liabilities
Accounts receivable 17,299 197,307
Notes receivables 382,001 (536,500)
Inventory 43,138 (165,179)
Prepaid expenses & deposits (40,395) 28,163
Accounts payable 42,961 (8,972)
Reserve for warranties 6,700 51,200
Income tax payable -- 14,400
-----------------------------------
Net cash used in operating activities 511,110 (253,909)
Cash flows from investing activities
Sale of treasury stock -- 74,500
Investment in Equity Capital (375,000) --
Sale of investment in HOA -- 120,000
Purchase of fixed assets (40,247) (423,897)
Investment in intellectual assets (2,514) (107,109)
-----------------------------------
Net cash used in investing activities (417,761) (336,506)
Cash flows from financing activities
Line of credit -- 4,478
Advances from stockholder -- 25,044
Notes payable (2,084) 39,189
Common stock issuance -- 497,603
Preferred stock issuance -- 30,000
Dividend on preferred stock (1,200) --
-----------------------------------
Net cash provided by financing activities (3,284) 596,314
Net increase (decrease) in cash 90,065 5,899
Cash at beginning of period 223,723 219,655
-----------------------------------
Cash at end of period $ 313,788 225,554
-----------------------------------
-----------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest expense 1,776 456
Tax expense 5,654 12,755
The accompanying notes to consolidated financial statements are an integral
part of this statement
HomeLife, Inc. & Subsidiaries
Notes to Consolidated Financial Statements
1. DESCRIPTION & ORGANIZATION OF BUSINESS
HomeLife, Inc. together with its subsidiaries is a leading provider of
services to the real estate and mortgage loan industries. The Company engages
in the following activities:
FRANCHISING
The Company franchises full service real estate brokerage offices and
provides operational and administrative services to its franchisees under the
names, HomeLife Realty Services, National Real Estate Service, Red Carpet
Real Estate Services, Red Carpet Keim, Network Real Estate and International
Estates.
MORTGAGE FINANCING
The Company is a mortgage financing services provider through its subsidiary,
MaxAmerica Financial Services.
RETAIL REAL ESTATE BROKERAGE SERVICES
The Company owns and operates a full service retail real estate brokerage
through its subsidiary Builders Realty LTD.
HOME WARRANTY
The Company is a provider of home warranty coverage through its subsidiary,
Guardian Home Warranty Company.
RELOCATION
The Company provides relocation services through its Freeway Relocation
Services affiliate
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the parent
corporation, HomeLife, Inc. and its wholly owned subsidiaries, HomeLife
Realty Services, Inc., FamilyLife Realty Services, Inc., MaxAmerica Financial
Services, Inc., HomeLife California Realty, Inc., Red Carpet Broker Network,
Inc., National Sellers Network, Inc., Builders Realty LTD, and majority owned
The Keim Group Ltd and Guardian Home Warranty Company. During the
consolidation, all intercompany transactions and balances were eliminated.
The financial statements of the Company's Canadian subsidiary, Builders
Realty Ltd, were translated into U.S. dollars at period-end exchange rates.
RECOGNITION OF REVENUE
Income from the sale of franchises is recorded on the franchise contract
agreement date. Royalty income stemming from the gross commissions on the
sales of real estate by the franchise offices is recognized at the date of
receipt. This is due to the complexity of attempting to forecast the actual
closing date of the properties. Warranty income is recognized when the
warranty contract is signed by the customer.
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 of assets and liabilities and
disclosures of contingent assets and amounts of revenue and expenses during
the reporting period. Actual results could differ from these estimates.
RESERVE FOR WARRANTIES
Guardian Home Warranty Company, a subsidiary of HomeLife, Inc. accrues a
reserve for warranty claims based on gross premium income.
INVENTORY
Inventory is valued at the lower of cost or market. Inventory consists
entirely of promotional materials.
DEPRECIATION AND AMORTIZATION
Property and equipment are stated at cost. Depreciation is computed using
straight-line over the useful lives of the assets. Amortization of intangible
assets is computed using a useful life between fifteen and forty years.
August 31, May 31,
1998 1998
----------- ----------
3. NOTES RECEIVABLE.
Notes receivable at August 31, 1998 consisted of the following:
Note receivable from HomeLife Securities, Inc., unsecured, non-interest
bearing. Payment in full was extended to December 31, 1998. $ 162,000 162,000
Note receivable from Ward Enterprises sold to Equity Capital Group for stock in
that company. See note 6 to the consolidated financial statements -- 374,500
Note receivable arising from the sale of a franchise agreement. Note is
unsecured and non-interest bearing. The note is discounted at a rate of 6% and
is payable in annual installments due through the year 2003. 155,801 155,801
Note receivable arising from the sale of an existing franchise agreement. The
note is unsecured and bears interest at a rate of 3% per year. The note is
payable on demand after April 13, 1999. 192,499 200,000
Notes receivable from existing franchises for franchise fees. These notes are
unsecured, non-interest bearing and payable in installments over one year. 18,859 18,859
----------- ----------
$ 529,159 911,160
----------- ----------
----------- ----------
4. STOCK SUBSCRIPTION RECEIVABLE
On May 15, 1998, the Company entered into an agreement to sell 300,000 shares
of the Company's common stock in exchange for cash. The exchange is anticipated
to take place prior to year-end. $ 750,000 750,000
----------- ----------
----------- ----------
August 31, May 31,
1998 1998
----------- ----------
5. INVENTORY
Inventory consisted of posters, brochures, video and cassette tapes. $ 119,599 162,737
----------- ----------
----------- ----------
6. INVESTMENT
Effective June 30, 1998, the Company sold the notes receivable from Ward
Enterprises totaling $374,500 to Equity Capital Group, Inc. for 75,000
shares of common stock in that company. The stock is valued at $375,000.
A major stockholder of HomeLife, Inc. is also a stockholder in Equity
Capital Group, Inc. $ 375,000 --
----------- ----------
----------- ----------
7. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
Furniture & fixtures $ 277,902 275,811
Computers and equipment 600,868 582,492
Automobile 19,865 19,865
----------- ----------
898,635 878,168
Less: accumulated depreciation (331,126) (323,514)
----------- ----------
$ 567,509 554,654
----------- ----------
----------- ----------
8. INVESTMENT IN TRADEMARKS AND OTHER INTELLECTUAL ASSETS
Investments in trademarks and other intellectual assets are
summarized as follows:
Goodwill $ 829,172 837,759
Trademarks 670,000 670,000
Franchise rights 150,000 150,000
Organization costs 76,888 74,458
----------- ----------
1,726,060 1,732,217
Less: accumulated amortization (96,862) (99,843)
----------- ----------
$ 1,629,198 1,632,374
----------- ----------
----------- ----------
9. DEPOSITS
As of August 31, 1997, the Company has deposits outstanding
for lease agreements on their premises. $ 9,060 9,060
----------- ----------
----------- ----------
10. NOTES PAYABLE
Note payable, bank, secured by a certificate of deposit with monthly
payments of $1042 plus interest at 9.5% due 1999 future maturities
are as follows: $ 15,208 17,292
----------- ----------
----------- ----------
1998 $ 10,000 10,000
1999 5,208 7,292
----------- ----------
$ 15,208 17,292
----------- ----------
----------- ----------
11. RELATED PARTY TRANSACTIONS
The Company has received a promissory note in the amount of $162,000 U.S.
Dollars from HomeLife Securities, Inc. (a Canadian corporation). HomeLife
Securities, Inc. is 100% owned by a stockholder of HomeLife, Inc. The
promissory note arose from the acquisition of HomeLife Realty U.S.
Partnership from HomeLife Securities, Inc., a 99% owner of the now terminated
partnership. The note was due December 31, 1997 and has been extended for one
year to December 31, 1998.
In order to finance the purchase of the majority owned subsidiaries, The Keim
Group and Guardian Home Warranty Company, a major stockholder advanced
$130,432 to the Company. The advancement is non-interest bearing and due on
demand.
In order to finance the purchase of the Canadian corporation, Builders
Realty, a major stockholder advanced $158,040 USD to the Company. The
advancement is non-interest bearing and due on demand.
12. CONTINGENT LIABILITIES
In the purchase agreements for The Keim Group, Guardian Home Warranty
Company, and Builders Realty, the Company issued stock as part of the
purchase price. The value of the stock issued was set at $5.00 per share
which was substantially over the current market value. The Company agreed
that if the actual market value of the stock did not reach $5.00 per share
within two years, for the stockholders of The Keim Group and Guardian Home
Warranty Company and within one year for the stockholders of Builders Realty,
each stockholder would be issued either additional shares of HomeLife, Inc.
stock or cash to complete the transaction.
The agreement for the stock subscription receivable provides for additional
stock to be issued. The terms are for one year from the date of the
agreement, the stock subscriber has the option to acquire up to 400,000
additional shares of common stock at $3.00 per share.
HOMELIFE, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
WITH
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
MAY 31, 1998 AND 1997
CONTENTS
PAGE
----
Independent auditor's report 1
Financial statements
Consolidated balance sheets 2
Consolidated statements of operations 3
Consolidated statements of stockholder's equity 4
Consolidated statements of cash flows 5-6
Notes to consolidated financial statements 7-13
Independent accountant's report on additional information 14
Supporting schedule of general and administrative expenses 15
[LETTERHEAD]
To the Board of Directors and
Stockholders of HomeLife Inc.
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheet of
HomeLife Inc. and subsidiaries as of May 31, 1998 and 1997, and the
related consolidated statements of income, stockholders equity and
cash flows for the two years ended May 31, 1998, 1997 and five
months and year ended May 31, 1996 in accordance with Statements on
Standards for Accounting and Review Services issued by the American
Institute of Certified Public Accountants. All information included
in these financial statements is the representation of the
management of HomeLife, Inc.
We conducted our audit in accordance with generally accepted
auditing standards. 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 examining on a test basis, 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 financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
HomeLife, Inc and subsidiaries as of May 31, 1998 and 1997 and the
results of its operations and its cash flows for the two years
ended May 31, 1998, 1997 and five months and year ended May 31,
1996 in conformity with generally accepted accounting principles.
/s/ Biller, Frith-Smith & Archibald
Tarzana, California
June 29, 1998
2
HOMELIFE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
May 31,
ASSETS 1998 1997
---- ----
Cash $ 223,723 $ 232,403
Cash in trust 489,014 --
Accounts receivable, trade, less allowance for
doubtful accounts of $25,803 & $6,021 respectively 197,543 90,659
Other receivables 34,167 200,000
Inventory 162,737 165,179
Notes receivable 911,160 536,500
Stock subscription receivable 750,000 --
Prepaid expenses 30,196 10,731
Property and equipment, at cost, net of accumulated
depreciation of $323,514 & $194,143 respectively 554,654 527,273
Investment in trademarks and other intellectual
assets, net of accumulated amortization
of $99,843 & $59,668 respectively 1,632,374 1,228,115
Deposits 9,060 9,060
------------- -------------
$ 4,994,628 2,999,920
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, trade $ 103,792 $ 125,877
Accrued expenses 124,183 41,311
Reserve for warranties 43,900 54,000
Revolving line of credit -- 4,478
Dividends payable 10,980 --
Income tax payable 85,177 14,400
Advances from stockholder 323,084 150,044
Trust liability 489,014 --
Notes payable 17,292 19,792
Minority interest 35,880 26,703
STOCKHOLDERS' EQUITY
Common stock, par value of $.001
Authorized--10,000,000 shares
Issued and outstanding--4,797,475 & 3,920,785
shares respectively 4,797 3,921
Convertible preferred stock 6% non-cumulative:
Authorized--100,000 shares, issued and outstanding--10,000 1,000,000 1,000,000
Convertible preferred stock 8% cumulative:
Authorized--2,000 shares, issued and outstanding--325 162,500 --
Additional paid in capital 2,992,508 2,084,804
Accumulated deficit (398,479) (525,410)
------------- -------------
$ 4,994,628 $ 2,999,920
------------- -------------
------------- -------------
The accompanying independent auditor's report and notes are an integral part of
these financial statements
3
HOMELIFE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FIVE MONTHS
YEAR ENDED YEAR ENDED AND YEAR ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996
------------ ------------ --------------
Gross sales $ 2,001,036 $ 981,938 $ 5,139
General & administrative (1,990,286) (1,144,117) (10,844)
------------ ------------- -----------
Gross profit (loss) $ 10,750 $ (162,179) $ (5,705)
OTHER INCOME (EXPENSES)
Sale of franchises 200,000 -- --
Gain on sale of investments -- 180,000 --
Interest expense (3,004) (3,980) --
Forgiveness of debt -- 69,375 --
Interest income 14,362 5,645 --
------------ ------------- -----------
211,358 251,040 --
------------ ------------- -----------
Consolidated net income
before minority interest $ 222,108 $ 88,861 $ (5,705)
Minority interest in subsidiaries (9,177) (16,099) --
Consolidated income before income
tax provision 212,931 72,762 (5,705)
Income tax provision (73,000) (16,000) --
------------ ------------- -----------
Consolidated net income (loss) $ 139,931 $ 56,762 $ (5,705)
------------ ------------- -----------
------------ ------------- -----------
The accompanying independent auditor's report and notes are an integral part of
these financial statements
4
HOMELIFE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
YEAR ENDED MAY 31, 1998, 1997, AND 1996
Common Stock Preferred Stock-6% Preferred Stock-8% Treasury Stock
Shares Amount Shares Amount Shares Amount Shares Amount
--------- ------ ------ ---------- ------ -------- -------- --------
Balance, May 31, 1995 1,037,859 $1,038 - $ - - $ - 630,500 $(74,500)
Issuance of Common Stock 2,647,926 2,648
Issuance of Preferred Stock 10,000 1,000,000
Net Loss
--------- ------ ------ ---------- --- -------- -------- --------
Balance, May 31, 1996 3,685,785 3,686 10,000 1,000,000 - - 630,500 (74,500)
Issuance of Common Stock 235,000 235
Sale of Treasury stock (630,500) 74,500
Net Income
--------- ------ ------ ---------- --- -------- -------- --------
Balance, May 31, 1997 3,920,785 3,921 10,000 1,000,000 - - - -
Issuance of Common Stock 876,690 876
Issuance of Preferred Stock 325 162,500
Issuance of Preferred
Stock dividend
Net Income
--------- ------ ------ ---------- --- -------- -------- --------
Balance, May 31, 1998 4,797,475 $4,797 10,000 $1,000,000 325 $162,500 - $ -
--------- ------ ------ ---------- --- -------- -------- --------
--------- ------ ------ ---------- --- -------- -------- --------
Additional
Paid-in Accumulated
Capital Deficit
---------- -----------
Balance, May 31, 1995 $ 562,949 $(576,467)
Issuance of Common Stock 837,390
Issuance of Preferred Stock
Net Loss (5,705)
---------- ---------
Balance, May 31, 1996 1,400,339 (582,172)
Issuance of Common Stock 684,465
Sale of Treasury stock
Net Income 56,762
---------- ---------
Balance, May 31, 1997 2,084,804 (525,410)
Issuance of Common Stock 907,704
Issuance of Preferred Stock
Issuance of Preferred
Stock dividend (13,000)
Net Income 139,931
---------- ---------
Balance, May 31, 1998 $2,992,508 $(398,479)
---------- ---------
---------- ---------
The accompanying independent auditor's report and notes are an integral part
of these financial statements
5
HOMELIFE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Five months
Year ended Year ended and year ended
May 31, 1998 May 31, 1997 May 31, 1996
------------ ------------ --------------
Cash flows from operating activities
Net income (loss) $ 139,931 $ 56,762 $ (5,705)
Adjustments to reconcile net loss to net cash used
in operating activities
Depreciation and amortization 68,755 82,286 -
Gain on sale of investment - (180,000) -
Minority interest 9,177 26,703 -
Changes in assets & liabilities
Accounts receivable (106,884) 226,448 -
Notes & other receivables (208,827) (468,810) (92,700)
Inventory 2,442 (35,815) -
Stock subscription receivable (750,000) - -
Prepaid expenses (19,465) (2,571) -
Deposits - 110,940 (120,000)
Accounts payable (22,085) 116,542 (35,000)
Reserve for warranties (10,100) 54,000 -
Income tax payable 70,777 14,400 -
---------- --------- ---------
Net cash used in operating activities (826,279) 885 (253,405)
Cash flows from investing activities
Treasury stock - 74,500 -
Sale of investment - 300,000 -
Purchase of fixed assets (29,336) (189,668) -
Investment in intellectual assets (388,187) (354,882) -
Investment in marketable securities - - (120,000)
---------- --------- ---------
Net cash used in investing activities (417,523) (170,050) (120,000)
Cash flows from financing activites
Proceed from line of credit (4,478) 4,478 -
Proceed from stockholder 155,428 150,044 -
Proceeds from loan payable 15,112 17,792 -
Proceeds from common stock issuance 908,580 101,268 125,610
Proceeds from preferred stock issuance 162,500 - 4,048
Payment of dividend on preferred stock (2,020) - -
---------- --------- ---------
Net cash provided by financing activities 1,235,122 273,582 129,658
Net increase (decrease) in cash (8,680) 104,417 (243,747)
Cash at beginning of period 232,403 127,986 371,733
---------- --------- ---------
Cash at end of period $ 223,723 $ 232,403 $ 127,986
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest expense $ 3,004 $ 3,980 -
Income tax expense $ 5,089 $ 12,810 -
The accompanying independent auditor's report and notes are an integral part
of these financial statements
6
HOMELIFE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NON-CASH INVESTING AND FINANCIAL ACTIVITIES
During fiscal year end May 31, 1996, the Company acquired $1,047,597 in
assets (net of cash) and assumed $51,645 in liabilities of HomeLife U.S.
Partnership in exchange for 10,000 shares of preferred stock at a par value
of $100.
During fiscal year end May 31, 1996, the Company acquired $269,614 in assets
(net of cash) and assumed $22,199 in liabilities of HomeLife Realty Services,
Inc. in exchange for 2,500,000 shares of common stock at a value of $250,000.
During fiscal year end May 31, 1996, the Company issued 112,528 additional
shares of common stock at a par value of $.001 to compensate for the stock
subscription deposits received on November 30, 1995.
During fiscal year end May 31, 1997, the Company acquired $350,000 in fixed
assets from S&S Acquisition Corporation in exchange for 70,000 shares of
common stock.
During fiscal year end May 31, 1997, the Company issued 46,662 shares of
common stock at a value of $233,310 as part of the purchase price for The
Keim Group, LTD. and Guardian Home Warranty Company.
During fiscal year end May 31, 1997, the Company sold its investment of
30,000 shares of HOA Property Management Company stock and its treasury stock
of 630,500 shares, for a note in the amount of $375,000.
During fiscal year end May 31, 1998, the Company issued 160 shares of
preferred stock valued at $80,000 in exchange for the licensing agreements
and trademarks of Network Real Estate, Inc.
During the fiscal year end May 31, 1998, the Company acquired $65,227 in
assets (net of cash) of Builders Realty, LTD. in exchange for 36,000 shares
of common stock at a value of $158,040.
The accompanying independent auditor's report and notes are an integral
part of these financial statements
7
HOMELIFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
HomeLife, Inc. together with its subsidiaries is a leading provider of
services to the real estate and mortgage loan industries. The Company
engages in the following activities:
FRANCHISING
The Company franchises full service real estate brokerage offices and
provides operational and administrative services to its franchisees under
the names, Homelife Reality Services, National Real Estate Service, Red
Carpet Real Estate Services, Red Carpet Keim, Network Real Estate and
International Estates.
MORTGAGE FINANCING
The Company is a mortgage financing services provider through its
subsidiary, MaxAmerica Financial Services.
RETAIL REAL ESTATE BROKERAGE SERVICES
The Company owns and operates a full service retail real estate brokerage
through its subsidiary, Builders Realty LTD.
HOME WARRANTY
The Company is a provider of home warranty coverage through its
subsidiary, Guardian Home Warranty Company.
RELOCATION
The Company provides relocation services through its Freeway Relocation
Services affiliate.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Company was incorporated on October 9, 1995 under the laws of the
state of Nevada. The Company completed a combination under the pooling of
interest method with Management Dynamics, Inc., whose year-end was
December. The surviving corporation, Homelife, Inc., elected to adopt a
May fiscal year-end. On May 30, 1996, the Company acquired 100% of the
stock of HomeLife Realty Services, Inc. and a 99% interest in HomeLife
Realty U.S., L.P.
Effective September 1, 1996, the Company purchased a majority interest in
The Keim Group LTD and Guardian Home Warranty Company. The Company
purchased 95% of the outstanding stock from the stockholders of The Keim
Group LTD and 79.5% of the outstanding stock of Guardian Home Warranty
Company in exchange for cash and HomeLife Inc. common stock.
8
HOMELIFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition, the Company set up a new corporation, FamilyLife Realty
Services, Inc. during the fiscal year end May 31, 1997, as a franchisor
for additional real estate brokerage offices franchised during the year.
FamilyLife Reality Services, Inc. had no activity during the fiscal year
end May 31, 1998.
On January 16, 1997, the Company acquired the assets of S&S Acquisition
Corporation which consisted of existing franchised real estate offices
and trademarks. The transaction was for cash and Homelife, Inc. common
stock and was valued at $400,000.
During the current fiscal year, the Company set up several new
corporations. The new corporations include MaxAmerica Financial Services,
Inc. which will be originating real estate loans, Homelife California
Realty, Inc. which will be a full service real estate operation, Red
Carpet Broker Network and National Sellers Network, Inc., which will be
licensing real estate brokerages.
On July 12, 1997, the Company purchased the existing franchised real
estate offices and trademarks of Network Real Estate for cash and
preferred stock. The total transaction was valued at $100,000.
On February 27, 1998, the Company acquired all the stock of Builders
Realty LTD, a Canadian Corporation, by issuing 36,000 shares of common
stock and cash of $158,040 USD. The total transaction was valued at
$316,080 USD.
PRINCIPLES OF CONSOLIDATION
During the fiscal year May 31, 1998, the Company consolidated its wholly
owned and majority owned subsidiaries under the purchase method of
accounting for business combinations. The consolidated financial
statements include the accounts of the parent corporation, HomeLife, Inc.
and its wholly owned subsidiaries, HomeLife Realty Services, Inc.,
FamilyLife Realty Services, Inc., MaxAmerica Financial Services, Inc.,
HomeLife California Realty, Inc., Red Carpet Broker Network, Inc.,
National Sellers Network, Inc., Builders Realty LTD, and majority owned
The Keim Group LTD and Guardian Home Warranty Company. During the
consolidation, all intercompany transactions and balances were
eliminated. The financial statements of the Company's Canadian
Subsidiary, Builders Realty LTD, were translated into U.S. dollars at
year end exchange rates.
RECOGNITION OF REVENUE
Income from the sale of franchises is recorded on the franchise contract
agreement date. Royalty income stemming from the gross commissions on the
sales of real estate by the franchise offices is recognized at the date
of receipt. This is due to the complexity of attempting to forecast the
actual closing date of the properties. Warranty income is recognized
when the warranty contract is signed by the customer.
9
HOMELIFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 of assets and
liabilities and disclosures of contingent assets and amounts of revenue
and expenses during the reporting period. Actual results could differ
from these estimates.
RESERVE FOR WARRANTIES
Guardian Home Warranty Company, a subsidiary of Homelife, Inc. accrues a
reserve for warranty claims based on gross premium income.
INVENTORY
Inventory is valued at the lower of cost or market. Inventory consists
entirely of promotional materials.
DEPRECIATION AND AMORTIZATION
Property and equipment are stated at cost. Depreciation is computed using
straight-line over the useful lives of the assets. Amortization of
intangible assets is computed using a useful life between fifteen and
forty years.
3. ACCOUNTS RECEIVABLE-OTHER
On August 9, 1995, the Company accepted a quit claim deed on a commercial
building as security on the sale of an area franchise. The purchase price
for the area franchise was $200,000. This transaction was voided during
fiscal year-end 1998 and resulted in a write-off of the $200,000 in
franchise fee income.
During the fiscal year ending May 31, 1998, the Company did carry for
short periods, advances to employees when related to company business in
the amount of $34,167.
4. NOTES RECEIVABLE
May 31,
1998 1997
---- ----
Notes receivable at May 31, 1998
consisted of the following:
Note receivable from Homelife Securities, Inc.
unsecured, non-interest bearing. Payment in full was
extended from December 31, 1997 to June 30, 1998 $ 162,000 $ 162,000
10
HOMELIFE, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. NOTES RECEIVABLE (CONTINUED)
May 31,
1998 1997
---- ----
Notes receivable at May 31, 1998 consisted of the
following:
Note receivable from Ward Enterprises, Inc., unsecured,
non-interest bearing, and payable in $100,000
increments at April 1, 1998, July 1, 1998 and December
31, 1998. These note payments were extended by ninety
days during 1998. 300,000 300,000
Note receivable from Ward Enterprises, Inc., unsecured,
non-interest bearing, and payable on December 31, 1997.
This note was extended to June 30, 1998. 74,500 74,500
Note receivable arising from the sale of a franchise
agreement. Note is unsecured and non-interest bearing.
The note is discounted at a rate of 6% and is payable
in annual installments due through the year 2003. 155,801 -
Note receivable arising from the sale of an existing
franchise agreement. The note is unsecured and bears
interest at a rate of 3% per year. The note is payable
on demand after April 13, 1999. 200,000 -
Notes receivable from existing franchises for franchise
fees. These notes are unsecured, non-interest bearing
and payable in installments over one year. 18,859 -
---------- ----------
$ 911,160 $ 536,500
---------- ----------
---------- ----------
5. STOCK SUBSCRIPTION RECEIVABLE
On May 15, 1998, the Company entered into an agreement
to sell 300,000 shares of the Company's common stock
in exchange for cash of $750,000. The exchange is
anticipated to take place within 90 days from the date of the
agreement.
11
HOMELIFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INVENTORY
May 31,
1998 1997
---- ----
Inventory at May 31, 1998 and 1997, consisted of posters,
brochures, video and cassette tapes. $ 162,737 $ 165,179
---------- ----------
---------- ----------
7. PROPERTY AND EQUIPMENT
Property and equipment are summarized
as follows:
Furniture & fixtures $ 275,811 $ 160,964
Computers and equipment 582,492 540,587
Automobile 19,865 19,865
---------- ----------
878,168 721,416
Less: accumulated depreciation (323,514) (194,143)
---------- ----------
$ 554,654 $ 527,273
---------- ----------
---------- ----------
Depreciation expense totaled $34,632 for the year ended May 31, 1998.
8. INVESTMENT IN TRADEMARKS AND OTHER INTELLECTUAL ASSETS
Investments in trademarks and other intellectual assets are
summarized as follows:
Goodwill $ 837,759 $ 561,510
Trademarks 670,000 570,000
Franchise rights 150,000 150,000
Organization costs 74,458 25,000
---------- ----------
1,732,217 1,306,510
Less: accumulated amortization (99,843) (78,395)
---------- ----------
$1,632,374 $1,228,115
---------- ----------
---------- ----------
Amortization expense totaled $34,123 for the year ended May 31, 1998.
9. DEPOSITS
As of May 31, 1997, the Company has deposits outstanding of $9,060
for the lease agreements on their premises.
12
HOMELIFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. NOTES PAYABLE
May 31,
1998 1997
---------- ----------
Note payable, bank, secured by
a certificate of deposit with
monthly payments of $1042 plus
interest at 9.5% due 1999 $ 17,292 $ 19,792
---------- ----------
---------- ----------
Future maturities of long-term debt are as follows:
Year ending May 31,
-------------------
1998 $ 10,000 $ 12,500
1999 7,292 7,292
---------- ----------
$ 17,292 $ 19,792
---------- ----------
---------- ----------
11. INCOME TAXES
The components of the provision for income taxes for
May 31, 1998 are as follows:
Federal States Total
------- ------ -----
Current $ 61,000 $ 23,000 $ 84,000
Less: Benefit from net operating loss
carry forward 11,000 - 11,000
---------- ---------- ----------
$ 50,000 $ 23,000 $ 73,000
---------- ---------- ----------
---------- ---------- ----------
12. COMMITMENTS
The Company is obligated under long-term, noncapitalized
operating leases for its premises which expire December
31, 1998, June 30, 2001. October 31, 2001 and August
31, 2002. Annual lease payments, exclusive of property taxes
and insurance are summarized as follows:
Year ending May 31,
-------------------
1999 $ 142,182
2000 124,649
2001 125,074
2002 41,589
----------
$ 433,494
----------
----------
13
HOMELIFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. RELATED PARTY TRANSACTIONS
The Company has received a promissory note in the amount of $162,000 U.S
Dollars from Homelife Securities, Inc. (a Canadian corporation). Homelife
Securities, Inc. is 100% owned by a stockholder of Homelife, Inc. The
promissory note arose from the acquisition of Homelife Realty U.S Partnership
from Homelife Securities, Inc., a 99% owner of the now terminated
partnership. The note was due December 31, 1997 and has been extended for one
year to December 31, 1998.
In order to finance the purchase of the majority owned subsidiaries, The Keim
Group LTD, and Guardian Home Warranty Company, a major stockholder advanced
$130,432 to Homelife, Inc. The advance is non-interest bearing and due on
demand.
In order to purchase the Canadian Corporation, Builders Realty, LTD, a major
stockholder advanced $158,040 USD to the Company. The advancement is
non-interest bearing and due on demand.
14. CONTINGENT LIABILITIES
In the purchase agreements for The Keim Group, LTD, Guardian Home Warranty
Company, and Builders Realty, LTD, the Company issued stock as part of the
purchase price. The value of the stock issued was set at $5.00 per share
which was substantially over the current market value. The Company agreed
that if the actual market value of the stock did not reach $5.00 per share
within two years, for the stockholders of The Keim Group LTD and Guardian
Home Warranty Company and within one year for the stockholders of Builders
Realty, LTD, each stockholder would be issued either additional shares of
HomeLife, Inc. stock or cash to complete the transaction.
The agreement for the stock subscription receivable provides for additional
stock to be issued. The terms are for one year from the date of the
agreement, the stock subscriber has the option to acquire up to 400,000
additional shares of common stock at $3.00 per share.
15. SUBSEQUENT EVENTS
Effective June 30, 1998, the Company sold the two notes receivable from Ward
Enterprises totaling $374,500 to Equity Capital Group, Inc. for 75,000 shares
of common stock in that company. The transaction will be valued at $375,000.
A major stockholder of HomeLife, Inc. is also a stockholder in Equity Capital
Group, Inc.
Board of Directors
HomeLife, Inc. and Subsidiaries
INDEPENDENT ACCOUNTANT'S REPORT ON ADDITIONAL INFORMATION
- ---------------------------------------------------------
Our report on our audit of the consolidated financial statements of HomeLife,
Inc. for the years ended May 31, 1998 and 1997 and five months and year ended
May 31, 1996 appears on page one. That audit was made for the purpose of
forming an opinion on the consolidated financial statements taken as a whole.
The supporting schedule of general and administrative expenses is presented
for purposes of additional analysis and is not a required part of the
consolidated financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the consolidated financial statements taken as a whole.
Tarzana, California
June 29, 1998
HOMELIFE, INC. AND SUBSIDIARIES
SUPPORTING SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
Five months
Year ended Year ended and year ended
May 31, 1998 May 31, 1997 May 31, 1996
------------ ------------ ------------
Accounting $ 43,660 $ 54,007 -
Advertising 21,113 34,166 -
Agent fees 2,952 11,863 -
Amortization 34,123 50,195 -
Artwork & Production 3,642 8,366 -
Automobile 18,256 35,693 -
Bad debt - 14,008 -
Realtor Commissions 645,303 - -
Computer 37,038 - -
Consulting - 130,357 -
Conversion 31,580 11,500 -
Depreciation 34,632 32,091 -
Dues & subscriptions 8,695 3,891 -
Employee welfare 21,719 13,857 -
Entertainment and meals 4,079 5,188 -
Equipment rental 3,998 20,223 -
Inspection fees 38,078 29,655 -
Insurance 6,528 7,008 -
Licenses fees & permits 3,909 3,800 5,716
Office 39,572 29,728 128
Outside service 164,075 1,897 -
Payroll taxes 62,895 54,246 -
Postage 16,303 13,745 -
Printing 21,700 24,276 -
Professional fees 4,678 33,639 5,000
Promotion 31,122 8,353 -
Rent 108,559 98,193 -
Repairs & maintenance 6,769 7,980 -
Salaries 404,575 241,573 -
Taxes and licenses 5,089 12,810 -
Telephone 56,913 45,576 -
Training 12,682 17,877 -
Travel 24,224 26,113 -
Utilities 4,019 - -
Warranty claims 67,806 62,243 -
------------ ------------ ------------
$ 1,990,286 $ 1,144,117 $ 10,844
------------ ------------ ------------
------------ ------------ ------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF. THE SHARES REFERRED TO HEREIN SHALL ONLY BE OFFERED UPON THE TERMS,
PRICE, AND CONDITIONS SET FORTH IN A SUPPLEMENT PROSPECTUS FILED FROM TIME TO
TIME.
--------------------------
TABLE OF CONTENTS
PAGE
Prospectus Summary 1
Risk Factors 4
Dilution 7
Use of Proceeds 7
Dividend Policy 7
Capitalization 8
Selected Financial Data 9
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Business of the Company 12
Management 18
Employment and Related Agreements 20
Certain Transactions 20
Principal Stockholders 21
Plan of Distribution 22
Description of Securities 22
Shares Eligible for Future Sale 25
Underwriting 25
Legal Advisors 25
Experts 26
Additional Information 26
Index to Financial Statements F-1
--------------------------
10,000,000 SHARES OF COMMON STOCK
HOMELIFE, INC.
----------
PROSPECTUS
----------
--------------------------
OCTOBER 21, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOMELIFE, INC.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The laws of the State of Nevada and the Company's Bylaws provide for
indemnification of the Company's directors for liabilities and expenses that
they may incur in such capacities. In general, directors and officers are
indemnified with respect to actions taken in good faith in a manner
reasonably believed to be in, or not opposed to, the best interests of the
Company, and with respect to any criminal action or proceeding, actions that
the indemnitee had no reasonable cause to believe were unlawful.
The Company has been advised that in the opinion of the Securities and
Exchange Commission, indemnification for liabilities arising under the
Securities Act is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In October 1995, the Company issued 1,037,859 shares of Common Stock to
Stockholders of Management Dynamics, Inc. as consideration for the
acquisition of Management Dynamics, Inc.
In November 1995, the Company issued 81,692 shares of its Common Stock
to 98 non-U.S. investors in consideration of payment of $326,768. This
transaction was exempt from the registration provisions of the Act by virtue
of Regulation S of the Act, as transactions by an issuer not involving any
public offering and including non-U.S. residents.
In January 1996, the Company issued 44,236 shares of its Common Stock to
38 investors for payment of $176,944. This transaction was exempt from the
registration provisions of the Act by virtue of Section 4(2) of the Act and
Rule 504 of Regulation D, as transactions by an issuer not involving any
public offering.
In May 1996, 2,500,000 shares of Common Stock and 10,000 shares of Class
A Preferred Stock was issued to Andrew Cimerman for the acquisition of
HomeLife Realty Services, Inc. and HomeLife Realty Services, US Limited
Partnership. This transaction was exempt from the registration provisions of
the Act by virtue of Section 4(2) of the Act as transactions by an issuer not
involving any public offering.
Also in May 1996, 21,250 shares of Common Stock were issued for
consideration of $85,000 to The Charleston Group. This transaction was exempt
from registration pursuant to Rule 504 of Regulation D of the Act as
transactions by an issuer not involving any public offering.
In August 1996, 46,662 shares of Common Stock were issued to the
Stockholders of Keim Group Ltd. for the acquisition of Keim Group Ltd. This
transaction was exempt from the registration provisions of the Act by virtue
of Section 4(2) of the Act, as transactions by an issuer not involving a
public offering.
In January 1997, 70,000 shares of Common Stock were issued to S&S
Acquisition Corp. for the acquisition of the assets of S&S Acquisition Corp.
This transaction was exempt from the registration provisions of the Act by
virtue of Section 4(2) of the Act, as transactions by an issuer not involving
a public offering.
In March 1997, the Company issued 13,933 shares of Common Stock for
$24,999 to non-U.S. resident investors pursuant to Regulation S of the Act.
This transaction was exempt from the registration provisions of the Act
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by virtue of Section 4(2) of the Act, as transactions by an issuer not
involving a public offering and Regulation S of the Act as transactions
involving non-U.S. investors.
In June 1996, the Company issued 21,998 shares of Common Stock for
$22,895 to an individual investor and fractional shares to Management
Dynamics' former shareholders pursuant to Rule 504 of Regulation D of the Act
as transactions by an issuer not involving any public offering.
In July 1997, the Company issued 160 shares of Class AA Preferred Stock
for the acquisition of tradenames and licensing agreements of Network Real
Estate, Inc. This transaction was exempt from the registration provisions of
the Act by virtue of Section 4(2) of the Act, as transactions by an issuer
not involving a public offering.
In August 1997, the Company issued 165 shares of Class AA Preferred
Stock for $162,500 to 33 investors in a private offering pursuant to
Regulation D of the Act. This transaction was exempt from the registration
provisions of the Act by virtue of Section 4(2) of the Act, as transactions
by an issuer not involving a public offering.
In September 1997, the Company issued 645,095 shares of Common Stock to
83 investors who invested a total of $829,890 pursuant to Rule 504 of
Regulation D of the Act. This transaction was exempt from the registration
provisions of the Act by virtue of Section 4(2) of the Act, as transactions
by an issuer not involving a public offering.
In February 1998, the Company issued 36,000 shares of Common Stock to
stockholders of Builders Realty Ltd. for the acquisition of Builders Realty
Ltd. This transaction was exempt from the registration provisions of the Act
by virtue of Section 4(2) of the Act, as transactions by an issuer not
involving a public offering.
In May 1998, the Company issued 300,000 shares of Common Stock to
non-U.S. investors pursuant to Regulation S of the Act. These shares are in
an escrow account in Vancouver, British Columbia, Canada pending delivery of
the full consideration of $750,000. This transaction is exempt from
registration provisions by virtue of section 4(2) of the Act, as transactions
by an issuer not involving a public offering.
ITEM 27. EXHIBITS
EXHIBIT
-------
3.1 Articles of Incorporation of HomeLife, Inc., a Nevada corporation,
dated October 9, 1995
3.2 Certificate of Amendment of Articles of Incorporation of HomeLife,
Inc., a Nevada corporation, dated July 2, 1997
3.3 Certificate of Amendment of Articles of Incorporation of HomeLife
Inc., a Nevada corporation, dated September 1, 1998
3.4 Bylaws of HomeLife, Inc., dated October 10, 1995
4.1 Certificate of Designated Class A Preferred Stock
4.2 Certificate of Designated Class AA Preferred Stock
5 Opinion of Horwitz & Beam
10.1 Lease Agreement dated November 1, 1996 for the office located in
Calgary, Alberta, Canada
10.2 Lease Agreement dated September 1, 1997 for the office located in
Airdrie, Alberta, Canada
10.3 Sublease Agreement dated October 1, 1996 for the office located in
Troy, Michigan
10.4 Lease Agreement dated April 12, 1990 for the office located in
Newport Beach, California
10.5 First Addendum to Lease dated April 12, 1990 for the office
located in Newport Beach, California
10.6 Second Addendum to Lease dated July 8, 1993 for the property
located in Newport Beach, California
10.7 Third Addendum to Lease dated July 17, 1996 for the property
located in Newport Beach, California
10.8 Builder's Realty Stock Purchase Agreement dated February 27, 1998
10.9 Agreement for Purchase of Network Real Estate, Inc. Licensing
Agreements and Trademarks dated June 12, 1998
10.10 Stock Purchase Agreement dated July 23, 1998
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10.11 Asset Purchase Agreement dated January 16, 1997
10.12 Option Agreement dated July 10, 1996
10.13 Asset Purchase Agreement dated April 13, 1998
10.14 Loan Purchase Agreement dated July 7, 1998
10.15 Agreement and Plan of Acquisition dated April 15, 1996
10.16 Agreement and Plan of Acquisition dated April 15, 1996
10.17 Agreement with Western Pacific Investment Corp. dated June 10,
1998
24 Consent of Biller, Firth-Smith & Archibald, Certified Public
Accountants
28 Specimen of Common Stock Certificate of HomeLife, Inc.
ITEM 27. UNDERTAKINGS
The undersigned registrant hereby undertakes to:
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the Company pursuant to the foregoing provisions,
or otherwise, the Company has 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. 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
Company 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 Act and will be governed by the final
adjudication of such issue.
(2) File, during any period in which it offers or sells securities, a
post effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of 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; and
(iii) Include any additional or changed material information on the plan of
distribution.
For determining liability under the Securities, 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.
File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
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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 for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Newport Beach, State of California on October 16, 1998.
HOMELIFE, INC.
BY: /s/ ANDREW CIMERMAN
-------------------------------------
ANDREW CIMERMAN, PRESIDENT
POWER OF ATTORNEY
Each person whose signature appears appoints Andrew Cimerman, in the
alternative, as his agents and attorneys-in-fact, with full power of
substitution to execute for him and in his name, in any and all capacities,
all amendments (including post-effective amendments) to this Registration
Statement to which this power of attorney is attached. 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/ Andrew Cimerman President October 16, 1698
- -----------------------------
Andrew Cimerman
/s/ Robert L. Cashman Secretary, Treasurer, Director October 16, 1998
- -----------------------------
Robert L. Cashman
/s/ Terry A. Lyles, Ph.D. Director October 16, 1998
- -----------------------------
Terry A. Lyles, Ph.D.
/s/ F. Bryson Farrill Director October 16, 1998
- -----------------------------
F. Bryson Farrill
/s/ Gabrielle Jeans Vice-President October 16, 1998
- -----------------------------
Gabrielle Jeans
/s/ Charles Goodson Vice-President October 16, 6998
- -----------------------------
Charles Goodson
II-4