As filed with the Securities and Exchange
Commission on January 25, 2005 Registration No. 333-_______
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
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SEALIFE CORPORATION
(Name of Small Business Issuer in its Charter)
DELAWARE 3999 34-1444240
(State or Jurisdiction of (Primary Standard Industrial (I.R.S Employer
Incorporation Classification Code Number) Identification No.)
or Organization)
5601 WEST SLAUSON
CULVER CITY, CA 90293
(310)338-9757
(Address and Telephone Number of Principal Executive Offices)
5601 WEST SLAUSON
CULVER CITY, CA 90293
(Address of Principal Place of Business or intended Place of Business)
ROBERT MCCASLIN, CHIEF EXECUTIVE OFFICER
SEALIFE CORPORATION
5601 WEST SLAUSON
CULVER CITY, CA 90293
(310)338-9757
Copy to:
V. JOSEPH STUBBS, ESQ.
STUBBS ALDERTON & MARKILES, LLP
15821 VENTURA BOULEVARD, SUITE 525
ENCINO, CALIFORNIA 91436
(818) 444-4500
(Name, Address and Telephone Number of Agent for Service)
Approximate date of proposed sale to the public: From time to time after the
effective date of this Registration Statement.
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
===============================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OFFERING AGGREGATE AMOUNT OF
OF SECURITIES AMOUNT TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) FEE
- -------------------------- ------------ ---------- ----------- -----------
Common Stock, par value
$.0001 per share....... 5,000,000(3) $ 0.31 $ 1,550,000 $ 182.44
- -------------------------- ------------ ---------- ----------- -----------
Common stock, par value
$.0001 per share....... 1,600,000(4) $ 0.31 $ 496,000 $ 58.38
- -------------------------- ------------ ---------- ----------- -----------
TOTAL................. $ 2,046,000 $ 240.81
================================================================================
(1) In the event of a stock split, stock dividend, or other similar
transaction involving the Registrant's common stock, in order to
prevent dilution, the number of shares registered shall automatically
be increased to cover the additional shares in accordance with Rule
416(a) under the Securities Act.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, using the
average of the high and low price as reported on the Over-the-Counter
Bulletin Board on January 18, 2005.
(3) The securities being registered may at various times be issued by the
Registrant at indeterminate prices, with the price per share to be not
less than $1.00 or the equivalent thereof in one or more currencies.
(4) Represents shares underlying consulting agreements, 986,500 of which
were issued upon execution of such agreements.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE TIME 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.
Subject to Completion, Dated January 25, 2005
SEALIFE CORPORATION
6,600,000 Shares
Common Stock
----------
This prospectus relates, in part, to the offer and sale from time to
time of up to 1,600,000 shares of our common stock that are held by, or may be
held by, the shareholders named in the "Selling Shareholders" section of this
prospectus. The prices at which the Selling Shareholders may sell the shares in
this offering will be determined by the prevailing market price for the shares
or in negotiated transactions. We will not receive any of the proceeds from the
sale of the shares. We will bear all expenses of registration incurred in
connection with this offering. The Selling Shareholders whose shares are being
registered will bear all selling and other expenses.
This prospectus also relates to up to 5,000,000 shares of our common
stock which we may sell from time to time in one or more offerings. We will
provide specific terms of these sales in supplements to this prospectus. You
should read this prospectus and each supplement carefully before you invest.
This prospectus may not be used by us to offer and sell securities unless
accompanied by a prospectus supplement. The offer and sale by us of the
securities described in this prospectus and any prospectus supplement is not
related to the offer and sale by the Selling Shareholders of their shares of our
common stock.
Our common stock is quoted on the Over-The-Counter Bulletin Board under
the symbol "SLIF." On January 18, 2005, the last reported sales price of the
common stock on the Over-The-Counter Bulletin Board was $0.31 per share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.
----------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
NEITHER WE NOR THE SELLING SHAREHOLDERS MAY SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
----------------
The date of this prospectus is ___________
TABLE OF CONTENTS
PAGE PAGE
---- ----
Prospectus Summary............ 3 Executive Compensation............ 31
Risk Factors.................. 7 Principal and Selling Shareholders 35
Forward-looking Statements.... 16 Related Party Transactions........ 37
Use of Proceeds............... 17 Description of Capital Stock...... 38
Market for Common Equity and Plan of Distribution.............. 41
Related Stockholder Matters 17 Legal Matters..................... 44
Business...................... 18 Experts........................... 44
Management's Discussion and Where You Can Find
Analysis of Financial More Information............... 44
Condition and Results of Index to Consolidated Financial
Operations................. 24 Statements..................... F-1
Management.................... 29
ABOUT THIS PROSPECTUS
This prospectus is part of a Registration Statement on Form SB-2 that
we filed with the Securities and Exchange Commission utilizing a "shelf"
registration process. Under this shelf process, we may sell up to 5,000,000
shares of common stock from time to time in one or more offerings, and the
Selling Shareholders (as defined in this prospectus) may sell up to 1,600,000
million shares of common stock from time to time. This prospectus provides you
with a general description of the securities that may be offered. Each time we
sell any securities under this prospectus, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with additional information described below under
the heading "Where You Can Find More Information."
You should rely only on the information contained in this prospectus or
any supplement. We have not authorized anyone to provide information that is
different from that contained in this prospectus. The information contained in
this prospectus is accurate only as of the date of this prospectus, regardless
of the time of delivery of this prospectus or of any sale our common stock.
2
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED IN GREATER
DETAIL ELSEWHERE IN THIS PROSPECTUS. THIS SUMMARY DOES NOT CONTAIN ALL THE
INFORMATION YOU SHOULD CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU SHOULD
READ THE ENTIRE PROSPECTUS CAREFULLY BEFORE MAKING AN INVESTMENT DECISION,
INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS AND THE
RELATED NOTES. REFERENCES IN THIS PROSPECTUS TO "SEALIFE CORPORATION,"
"SEALIFE," "WE," "OUR" AND "US" REFER TO SEALIFE CORPORATION AND OUR
CONSOLIDATED SUBSIDIARIES.
OVERVIEW
We develop, market and supply eco-friendly products that can solve
complex environmental problems with simple natural solutions. Our products
utilize "probiotic" technologies (the positive use of microorganisms) to help
clean environmental damage that occurs in the marine, agricultural and
remediation markets. We have just recently emerged from our status as a
development company and begun distribution of our marine product, SeaLife
1000(TM) and our agricultural products, NuLagoon(TM) and Soil ResQ(TM).
In anticipation of our intended growth and the introduction of additional
products to the market in the near future, we have implemented a corporate
structure whereby each market is served by a separately operated subsidiary or
division. Our marine products business is operated by our indirect wholly-owned
subsidiary, SeaLife Marine Products, Inc. Our agricultural products business is
operated by our indirect wholly-owned subsidiary, ProTerra Technologies, Inc.
Our remediation product business is operated as a division. We also plan on
establishing a research and development division that will focus on the testing
and development of existing and new products for each of our subsidiaries and
divisions provided sufficient capital can be obtained to fund such a division.
OUR HISTORY
INCORPORATION
We were formed as a Delaware corporation in 1984 under the name Fraser
Realty Group. We operated as a real estate investment trust until 1990, when our
then current management was unable to secure additional financing or find other
means of obtaining needed cash to permit us to meet our obligations. As a
result, we ceased operations and remained inactive until December 2002.
ACQUISITION OF NEVADA CORPORATION
On December 17, 2002, pursuant to an Exchange Agreement dated June 30,
2002, we acquired all of the issued and outstanding shares of SeaLife Corp., a
Nevada Corporation ("SeaLife Nevada"), in exchange for a substantial majority of
the shares of our common stock (the "Acquisition"). Our then current
stockholders retained their 274,554 shares of common stock which were issued and
outstanding prior to the consummation of the Acquisition. Concurrent with the
Acquisition, we changed our name from Integrated Enterprises, Inc. (which was
our name at the time) to SeaLife Corporation, our then current directors and
officers resigned, and the directors and officers of SeaLife Nevada became our
directors and officers. Also concurrent with the Acquisition, we effected a
15-to-1 reverse stock split.
The Acquisition resulted in our change of control, with the
stockholders of SeaLife Nevada acquiring a substantial majority of our common
stock immediately following the closing of the Acquisition. Therefore, the
Acquisition was accounted for as a reverse merger, pursuant to which the
accounting basis of SeaLife Nevada continued unchanged subsequent to the closing
of the Acquisition. Accordingly, the pre-Acquisition financial statements of
SeaLife Nevada now represent our historical financial statements.
Sealife Nevada was organized in April of 2002 to acquire, develop and
market certain proprietary products invented by Gael Himmah, our Chief
Consulting Scientist. At the time of the Acquisition, SeaLife Nevada owned all
of the outstanding stock of Division G, Inc., a Nevada corporation ("Division
G"), SeaLife Marine Products, Inc., a California corporation ("SeaLife Marine"),
and Proterra Technologies, Inc., a California corporation ("Proterra").
3
As a result of the Acquisition, we became the parent and sole shareholder of
SeaLife Nevada, and through SeaLife Nevada, the indirect parent and sole
shareholder of Division G, SeaLife Marine and Proterra.
CHANGE IN FISCAL YEAR
On August 27, 2004, we changed our fiscal year end from May 31 to
December 31, as reported on our Current Report on Form 8-K filed with the
Securities and Exchange Commission on August 30, 2004.
OVERVIEW OF FINANCIAL CONDITION AND GOING CONCERN
Our consolidated financial statements have been prepared assuming that
we will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
carrying amounts of assets and liabilities presented in the consolidated
financial statements do not purport to represent the realizable or settlement
values. We incurred a net loss of $1,807,055 and $687,359 during our fiscal
years ended May 31, 2004 and May 31, 2003, respectively. We had a stockholders'
deficiency of $3,109,197 and $2,509,140 at September 30, 2004 and May 31, 2004,
respectively. In addition, we are still emerging from our development stage and
will require additional capital to fund our business plan. We continue to
develop our products and engage in marketing activities, and are actively
seeking distribution channels, but have not generated significant revenues from
our planned principal operations. These factors create substantial doubt about
our ability to continue as a going concern.
Our independent certified public accountants, in their independent
auditors' report on the consolidated financial statements as of and for the year
ended May 31, 2004, have expressed substantial doubt about our ability to
continue as a going concern.
During our fiscal year ending December 31, 2005, we intend to raise
capital through the issuance of debt or equity securities, including pursuant to
this prospectus and any applicable prospectus supplement, to fund the
development of our planned business operations. There can be no assurances that
we will be able to obtain sufficient funds to allow us to continue our
operations through 2005.
To the extent that we are unable to successfully raise the capital
necessary to fund our future cash requirements on a timely basis and under
acceptable terms and conditions, we will not have sufficient cash resources to
maintain operations, and may have to curtail operations and consider a formal or
informal restructuring or reorganization.
ABOUT US
The address of our principal executive office is 5601 West Slauson,
Culver City, California 90293, and our telephone number is (310)338-9757.
4
THE OFFERING
This offering relates, in part, to the sale of our common stock by
certain persons who are, or are beneficially deemed to be, our stockholders.
Brokers Unlimited, Inc. ("BUI"), and certain of its principals, intend to sell
up to 1,386,500 shares of our common stock, 786,500 of which were received from
us pursuant to the terms of our consulting agreement with BUI, and up to 613,500
of which may be issued in the future pursuant to such agreement. Michael Sahl,
also a Selling Shareholder, intends to sell up to 200,000 of shares of our
common stock which were received from us pursuant to the terms of our consulting
agreement with Mr. Sahl.
We entered into a consulting agreement, effective November 22, 2004,
with BUI (the "BUI Agreement") to provide certain sales and marketing services
for our products. The BUI Agreement obligates us to issue to BUI and certain of
its principals, shares of our common stock as consideration for BUI's services.
Pursuant to the Agreement we have:
o Filed this registration statement with respect to all shares
of our common stock issued to BUI pursuant to the BUI
Agreement, including those shares that may be issued from time
to time to BUI or certain of its principals pursuant to the
terms thereof, which shares BUI, certain of its principals, or
their assignees may offer to resell to the public using this
prospectus.
o Issued 786,500 shares of our common stock to BUI and certain
of its principals for past services rendered pursuant to the
terms thereof; and
o Agreed to issue to BUI and certain of its principals, on the
last day of each month during the 7-month term of the BUI
Agreement, that number of shares of our common stock having an
aggregate value, calculated as the volume weighted average
trading price per share of our common stock, as quoted on the
Over-the-Counter Bulletin Board, for the twenty (20)
consecutive trading days immediately preceding the date of
issuance of such shares, of $14,375.00, as consideration for
ongoing services to us.
We entered into a consulting agreement, effective November 22, 2004,
with Michael Sahl (the "Sahl Agreement"). The Sahl Agreement obligates us to
issue shares of our common stock to Mr. Sahl as consideration for his services.
Pursuant to the Agreement we have:
o Filed this registration statement with respect to all shares
of our common stock issued to Mr. Sahl pursuant to the Sahl
Agreement, which shares Mr. Sahl or his assignees may offer to
resell to the public using this prospectus; and
o Agreed to issue 200,000 shares of our common stock to Mr. Sahl
in exchange for his commitment to render services pursuant to
the terms of the Sahl Agreement.
This offering also relates to the offer and sale by us of up to
5,000,000 shares of common stock from time to time at a price not less than
$1.00 per share.
Common stock offered by Selling
Shareholders................. Up to 1,600,000 shares
Common stock offered by us...... Up to 5,000,000 shares
Offering Price at which common
stock may be offered
by the Selling Shareholders.. Market Price
Offering Price at which common
stock may be offered
by us from time to time...... Market Price, but in no event less
than $1.00 per share
5
Common stock outstanding
before this offering......... 17,249,947 shares
Common stock to be outstanding
after this offering.......... Up to 23,849,947 shares
Use of proceeds................. We will not receive any of the proceeds from
the sale of shares of our common stock by
the Selling Shareholders. Proceeds from the
sale of common stock by us will be used for
general working capital and other purposes
as we may set forth from time to time in any
prospectus supplement. See "Use of
Proceeds."
OTC Bulletin Board symbol....... SLIF
Risk Factors.................... See "Risk Factors" beginning on page 4 for a
discussion of factors that you should
consider carefully before deciding to
purchase our common stock.
In the table above, the number of shares to be outstanding after this
offering is based on 17,249,947 shares outstanding as of January 11, 2005.
6
RISK FACTORS
Investing in our common stock involves a high degree of risk. You
should carefully consider the following risk factors and all other information
contained in this prospectus before purchasing our common stock. The risks and
uncertainties described below are not the only ones facing us. Additional risks
and uncertainties that we are unaware of, or that we currently deem immaterial,
also may become important factors that affect us. If any of the following risks
occur, our business, financial condition or results of operations could be
materially and adversely affected. In that case, the trading price of our common
stock could decline, and you may lose some or all of your investment.
RISK RELATED TO OUR BUSINESS
OUR AUDITORS HAVE A GOING CONCERN QUALIFICATION IN THEIR OPINION CONTAINED IN
OUR AUDITED CONSOLIDATED FINANCIAL STATEMENTS WHICH RAISES SUBSTANTIAL DOUBT
ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
As a result of our substantial historical operating losses, limited
revenues and working capital and our capital needs, our auditors have added a
going concern qualification (explanatory paragraph) in their report contained in
our audited consolidated financial statements for the year ended May 31, 2004
which raises substantial doubt about our ability to continue as a going concern.
While we have relied principally in the past on external financing and the
payment of equity as direct compensation for services to provide liquidity and
capital resources for our operations, we can provide no assurances that cash
generated from operations together with cash received in the future from
external financing, including pursuant to this prospectus and an applicable
prospectus supplement, if any, will be sufficient to enable us to continue as a
going concern.
Additionally, we can provide no assurances that service providers, such
as our lawyers, and other consultants, previously willing to accept our common
stock as direct compensation for their services will continue to find that form
of compensation acceptable. If these service providers refuse to accept our
equity as compensation, and we are unable to generate adequate cash to sustain
operations or to obtain enough cash from future financing, including pursuant to
this prospectus and an applicable prospectus supplement, we will not be able to
continue as a going concern.
WE HAVE INCURRED SUBSTANTIAL LOSSES FROM INCEPTION WHILE REALIZING LIMITED
REVENUES AND WE MAY NEVER GENERATE SUBSTANTIAL REVENUES OR BE PROFITABLE IN THE
FUTURE.
For each fiscal year since our acquisition of SeaLife Nevada in 2002,
we have generated net losses and we have accumulated losses totaling
approximately $3,109,197 as of September 30, 2004. We have only recently emerged
from our development stage operations and have historically generated limited
revenues. We can provide no assurances that our operations will generate
substantial revenues or be profitable in the future. We have just recently
introduced some of our products into the marketplace and have shipped small
quantities to our distributors.
WE WILL NEED TO RAISE ADDITIONAL CAPITAL AND IT MAY NOT BE AVAILABLE TO US ON
FAVORABLE TERMS OR AT ALL; INABILITY TO OBTAIN ANY NEEDED ADDITIONAL CAPITAL ON
FAVORABLE TERMS COULD ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
We estimate that we may need to raise up to $5 million of additional
capital over the next 12 to 15 months to support our operations, meet
competitive pressures and/or respond to unanticipated requirements during and
beyond that period. While there are no definitive arrangements with respect to
sources of additional financing, management is optimistic that these funds can
be raised through public and/or private offerings of our common stock, including
pursuant to this prospectus and an applicable prospectus supplement.
While we have set forth a minimum sale price pursuant to which we will
sell our common stock, or other equity securities, pursuant to this prospectus
and an applicable prospectus supplement, we cannot assure you that additional
financing will be completed on other commercially reasonable terms, if at all.
The inability to obtain additional financing, when needed or on favorable terms,
including pursuant to this prospectus and an applicable prospectus supplement,
could materially adversely affect our business, results of operations and
financial condition and could cause us to curtail or cease operations.
7
OUR FUTURE REVENUES ARE UNPREDICTABLE AND OUR QUARTERLY OPERATING RESULTS MAY
FLUCTUATE SIGNIFICANTLY.
We have a very limited operating history, and have very little revenue
to date. We cannot forecast with any degree of certainty whether any of our
products or services will ever generate meaningful revenue or the amount of
revenue to be generated by any of our products or services. In addition, we
cannot predict the consistency of our quarterly operating results. Factors which
may cause our operating results to fluctuate significantly from quarter to
quarter include:
o our ability to attract new and repeat customers;
o our ability to keep current with the evolving requirements of
our target market;
o our ability to protect our proprietary technology;
o the ability of our competitors to offer new or enhanced
products or services;
o our ability to sell products during different parts of the
calendar year where the use of our products by consumers is
less likely; and
o unanticipated delays or cost increases with respect to
research and development.
Because of these and other factors, we believe comparisons of our
results of operations for our fiscal years ending May 31, 2003 and May 31, 2004,
and the four month periods ending September 30, 2003 and September 30, 2004, are
not good indicators of our future performance. If our operating results fall
below the expectations of securities analysts and investors in some future
periods, then our stock price may decline.
WE EXPECT OUR BUSINESS TO BE SEASONAL WHICH MEANS THAT WE ANTICIPATE HAVING LESS
REVENUE DURING CERTAIN PORTIONS OF THE YEAR.
The practical application of our products, both in the case of SeaLife
Marine paint products and Proterra agriculture products, requires warmer weather
conditions with little to no precipitation. As a result, management expects our
business to be seasonal, with sales and earnings being relatively higher during
the outdoor season (such as the spring and summer seasons) and lower during the
indoor season (such as the fall and winter seasons). Accordingly, we may show
lower revenues during portions of the year which could correspondingly adversely
affect the price of our common stock.
OUR SUCCESS DEPENDS IN PART ON OUR SUCCESSFUL DEVELOPMENT AND SALE OF PRODUCTS
CURRENTLY IN THE RESEARCH AND DEVELOPMENT STAGE.
Many of our product candidates are still in the research and
development stage. The successful development of new products is uncertain and
subject to a number of significant risks. Potential products that appear to be
promising at early states of development may not reach the market for a number
of reasons, including but not limited to, the cost and time of development.
Potential products may be found to be ineffective or cause harmful side effects,
fail to receive necessary regulatory approvals, be difficult to manufacture on a
large scale or be uneconomical or fail to achieve market acceptance.
Additionally, our proprietary products may not be commercially available for a
number of years, if at all.
There can be no assurance that any of our products in development will
be successfully developed or that we will achieve significant revenues from such
products even if they are successfully developed. Our success is dependent upon
our ability to develop and market our products on a timely basis. There can be
no assurance that we will be successful in developing or marketing such
products, or taking advantage of the perceived demand for such products. In
addition, there can be no assurance that products or technologies developed by
others will not render our products or technologies non-competitive or obsolete.
WE WILL RELY IN PART ON INTERNATIONAL SALES, WHICH ARE SUBJECT TO ADDITIONAL
RISKS.
International sales may account for a significant portion of our
revenues. International sales can be subject to many inherent risks that are
difficult or impossible for us to predict or control, including:
o unexpected changes in regulatory requirements and tariffs;
8
o difficulties and costs associated with staffing and managing
foreign operations, including foreign distributor
relationships;
o longer accounts receivable collection cycles in certain
foreign countries; adverse economic or political changes;
o unexpected changes in regulatory requirements;
o more limited protection for intellectual property in some
countries;
o changes in our international distribution network and direct
sales force;
o potential trade restrictions, exchange controls and import and
export licensing requirements;
o problems in collecting accounts receivable; and
o potentially adverse tax consequences of overlapping tax
structure.
FAILURE TO ADEQUATELY EXPAND TO ADDRESS EXPANDING MARKET OPPORTUNITIES COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF OPERATIONS.
We anticipate that a significant expansion of operations will be
required to address potential market opportunities. There can be no assurances
that we will expand our operations in a timely or sufficiently large manner to
capitalize on these market opportunities. The anticipated substantial growth is
expected to place a significant strain on our managerial, operational and
financial resources and systems. While management believes it must implement,
improve and effectively use our operational, management, research and
development, marketing, financial and employee training systems to manage
anticipated substantial growth, there can be no assurances that these practices
will be successful.
WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, AND
MAY BE EXPOSED TO INFRINGEMENT CLAIMS FROM THIRD PARTIES.
The technologies upon which our products are based are protected only
by laws governing the protection of trade secrets. Our success will depend in
part on our ability to preserve our trade secrets and to operate without
infringing on the proprietary rights of third parties. There can be no assurance
that others will not independently develop similar technologies, duplicate our
technologies or design around our technologies.
We do not believe that any of our technology infringes on the patent
rights of third parties. However, there can be no assurance that certain aspects
of our technology will not be challenged by the holders of patents or that we
will not be required to license or otherwise acquire from third parties the
right to use additional technology. The failure to overcome such challenges or
obtain such licenses or rights on acceptable terms could have a material adverse
affect on us, our business, results of operations and financial condition.
The processes and know-how of importance to our technology are
dependent upon the skills, knowledge and experience of our technical personnel,
consultants and advisors and such skills, knowledge and experience are not
patentable. To help protect our rights, we require employees, significant
consultants and advisors with access to confidential information to enter into
confidentiality and proprietary rights agreements. There can be no assurance,
however, that these agreements will provide adequate protection for our trade
secrets, know-how or proprietary information in the event of any unauthorized
use or disclosure.
WE MAY BECOME INVOLVED IN INTELLECTUAL PROPERTY LITIGATION, THE DEFENSE OF WHICH
COULD ADVERSELY IMPACT OUR BUSINESS OPERATIONS.
We may, from time to time, become involved in litigation regarding
intellectual property rights. From time to time, we may receive notices from
third parties of potential infringement and claims of potential infringement.
Defending these claims could be costly and time consuming and would divert the
attention of management and key personnel from other business issues. The
complexity of the technology involved and the uncertainty of intellectual
property litigation increases these risks. Claims of intellectual property
infringement also might require us to enter into costly royalty or license
agreements. However, we may be unable to obtain royalty or license agreements on
terms acceptable to us, or at all.
9
In addition, third parties may attempt to appropriate the confidential
information and proprietary technologies and processes used in our business,
which we may be unable to prevent and which would harm our business and
prospects.
WE FACE TECHNICAL RISKS ASSOCIATED WITH COMMERCIALIZING OUR TECHNOLOGY WHICH
COULD HAVE A MATERIAL ADVERSE IMPACT ON OUR BUSINESS RESULTS AND OPERATIONS.
A key to our future success is the ability to produce our products at
lower costs than our competitors. Although we are currently utilizing
proprietary technology to produce such products at lower costs, our method for
producing such products on a commercial basis has only recently begun. Further,
although results from recent independent tests and our early production results
have been encouraging, the ability of our technology to commercially produce
such products at consistent levels is still being evaluated. There can be no
assurance that we will continue to produce such products at lower costs than our
competitors, nor that our technology will allow us to commercially produce such
products at consistent levels.
WE MAY BE UNABLE TO COMPETE EFFECTIVELY WITH COMPETITORS OF PERCEIVED COMPETING
TECHNOLOGIES OR DIRECT COMPETITORS THAT MAY ENTER OUR MARKET WITH NEW
TECHNOLOGIES.
The market for our products and services is relatively new. Our ability
to increase revenues and generate profitability is directly related to our
ability to maintain a competitive advantage because of our U.S. Environmental
Protection Agency regulatory registration of our leading product, SeaLife
1000(TM). However, we face potential direct competition from companies that may
enter this market with new competing technologies and with greater financial,
marketing and distribution resources than us. These greater resources could
permit our competitors to introduce new products and implement extensive
advertising and promotional programs, with which we may not be able to compete.
As a result, we can provide no assurances that we will be able to compete
effectively in the future.
OUR PRODUCTS MAY BE SUBJECT TO TECHNOLOGICAL OBSOLESCENCE.
Considerable research is underway by competitors and potential future
competitors into the causes of and solutions for marine, agricultural and other
environmental pollution. Discovery of new technologies could replace or result
in lower than anticipated demand for our products, which would materially
adversely effect our operations and could cause us to curtail or cease
operations.
IF WE BECOME INVOLVED IN LITIGATION ARISING FROM THE FACT THAT OUR PRODUCTS ARE
FOUND TO ADVERSELY AFFECT THE ENVIRONMENT, OR IF WE ARE REQUIRED TO PARTICIPATE
IN ANY ENVIRONMENTAL REMEDIATION PROCESSES, THE COSTS OF SUCH ACTIVITIES MAY BE
SIGNIFICANT AND COULD MATERIALLY AND ADVERSELY HARM OUR BUSINESS.
As a chemical manufacturer, certain of our products are regulated by
the U. S. Environmental Protection Agency and the individual states, cities and
localities where marketed. While we believe that our products do not harm the
environment, and while our products currently comply with the environmental
regulations to which they are subject, in the event any of our products do cause
adverse affects to the environment, we may be involved in litigation and other
claims raised by private parties, specialized environmental interest groups and
governmental regulatory agencies. Additionally, we may be required to remediate
any areas that are harmed by our products. If we are required to pay any third
party or regulatory agency as a result of such claims, or if we are required to
participate in any such remediation processes, the costs of such activities
could materially and adversely harm our business.
OUR INABILITY TO ACCESS, OR A CHANGE IN THE PRICES OF, RAW MATERIALS COULD
MATERIALLY ADVERSELY IMPACT OUR RESULTS OF OPERATIONS.
We purchase certain raw materials such as Cuprous Oxide and other
biocides, pesticides or toxins, under short- and long-term supply contracts. The
purchase prices are generally determined based on prevailing market conditions.
If there is a shortage in these raw materials, or if our suppliers otherwise
increase the costs of such materials, this could materially adversely impact our
results of operations.
WE HAVE LIMITED HUMAN RESOURCES.
10
Our growth to date has placed, and our anticipated further expansion of
our operations will continue to place, a significant strain on our management,
systems and resources. We will need to continue to develop and improve our
financial and management controls and our reporting systems and procedures. We
cannot assure you that we will be able to efficiently or effectively manage the
growth of our operations, and any failure to do so may limit our future growth
and materially and adversely affect our business, financial condition and
results of operations.
OUR FUTURE SUCCESS DEPENDS, IN PART, ON OUR KEY PERSONNEL, CONSULTANTS AND
PRINCIPAL MANAGEMENT'S CONTINUED PARTICIPATION.
Our ability to successfully develop our products, manage growth and
maintain our competitive position will depend, in large part, on our ability to
attract and retain highly qualified management and technologists. We are
dependent upon our Chief Executive Officer and Chief Financial Officer,
President of SeaLife Marine, and Gael Himmah, an independent contractor that
acts as our Chief Consulting Scientist, and other members of our management and
consulting team. We do not maintain Key Man life insurance on any of these
employees or consultants. Competition for such personnel is significant, and
there can be no assurance that we will be able to continue to attract and retain
such personnel. Our consultants may be affiliated or employed by others and some
may have consulting or other advisory arrangements with other entities that may
conflict or compete with their obligations to us. We address such potential
conflicts by requiring that our consultants and independent contractors execute
confidentiality agreements upon commencement of relationships with us, by
closely monitoring the work of such persons and by requiring material transfer
and assignment agreements wherever possible and appropriate.
Gael Himmah, the individual responsible for the development of most of
the technology that forms the basis of our products is currently party to a
consulting agreement with us. If Mr. Himmah terminates his relationship with us,
or otherwise is unable to provide services to us, it may have a material
negative affect on our ability to continue development of our current and new
product lines. We do not carry any Key Man life insurance on Mr. Himmah and do
not have any plans to do so in the near future.
WE ARE HIGHLY DEPENDENT ON OUTSIDE CONSULTANTS.
If our consultants or collaborative partners, including, in particular,
our Chief Consulting Scientist, Gael Himmah, do not perform, we may be unable to
develop and bring to market new products as anticipated, or to further develop
and commercialize existing products.
We may in the future enter into consulting arrangements with third
parties to develop products. These arrangements may not produce successful
products. If we fail to establish these arrangements, the number of products
from which we could receive future revenues will be limited.
Our dependence on consulting arrangements with third parties subjects
us to a number of risks. These arrangements may not be on terms favorable to us.
We cannot absolutely control the amount and timing of resources our consultants
may devote to our products, and these third parties may choose to pursue
alternative products. These third parties also may not perform their obligations
as expected. Business combinations, significant changes in their business
strategy, or their access to financial resources may adversely affect a
consultant's or partner's willingness or ability to complete its obligations
under the arrangement. Moreover, we could become involved in disputes with our
consultants or partners, which could lead to delays or termination of the
arrangements and time-consuming and expensive litigation or arbitration.
WE DO NOT HAVE A SEPARATE STANDING AUDIT COMMITTEE, COMPENSATION COMMITTEE OR
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE, THE ACTIONS OF WHICH ARE
UNDERTAKEN BY THE BOARD OF DIRECTORS AS A WHOLE, AND NO DIRECTOR IS AN "AUDIT
COMMITTEE FINANCIAL EXPERT" AS DEFINED BY THE RULES AND REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION.
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Our Board of Directors consists of two members, our Chief Executive
Officer and Chief Financial Officer, and our Vice President. The Board of
Directors as a whole performs the functions of an Audit Committee, Compensation
Committee and Nominating and Corporate Governance Committee. Neither of the
directors is considered "independent" under Rule 4200(a)(15) of the National
Association of Securities Dealers listing standards, and neither qualifies as an
audit committee financial expert as defined in Item 401 of Regulation S-B.
Accordingly, we will not be able to list our common stock with a nationally
recognized exchange or over the counter quotation system until we recruit
independent directors to the Board and restructure our Board to comply with
various requirements currently in place by those self-regulating organizations,
and as a result, it may be difficult for you to sell our common stock.
THE REQUIREMENTS OF THE SARBANES-OXLEY ACT, INCLUDING SECTION 404, ARE
BURDENSOME, AND OUR FAILURE TO COMPLY WITH THEM COULD HAVE A MATERIAL ADVERSE
AFFECT ON OUR BUSINESS AND STOCK PRICE.
Except with respect to the adoption of our Code of Ethics and our
compliance with certain requirements specifically applicable to our Annual
Report on Form 10-K and our other periodic reports, our management has not
commenced any specific procedures to comply with the requirements of the
Sarbanes Oxley Act of 2002, including specifically, the process necessary to
implement the requirements of Section 404 of the Sarbanes-Oxley Act of 2002,
which requires our management to assess the effectiveness of our internal
controls over financial reporting and include an assertion in our annual report
as to the effectiveness of our controls. Beginning with our Annual Report on
Form 10-K for the year ended December 31, 2005, unless otherwise amended by the
Securities and Exchange Commission, our independent registered accounting firm
will be required to attest to whether our assessment of the effectiveness of our
internal control over financial reporting is fairly stated in all material
respects and separately report on whether it believes we maintained, in all
material respects, effective internal controls over financial reporting as of
December 31, 2005. Because of our management's lack of resources, and our
limited operations, we have not commenced the process of preparing the system
and process documentation, performing an evaluation of our internal controls
required for our management to make this assessment and for the auditors to
provide their attestation report, and accordingly, have not begun testing of the
effectiveness of these internal controls. We expect that this process will
require significant amounts of management time and resources, as well as higher
expenses in the form of higher audit and review fees, higher legal fees and
higher internal costs to document, test and potentially remediate internal
controls. Accordingly, with respect to Section 404 in particular, there exists a
significant risk that we will not be able to meet all the requirements of
Section 404 by the end of fiscal year 2005, when we are required to report on
our internal controls and provide our auditor's opinion thereon. Additionally,
even in the event we attempt to comply with Section 404, in the course of
evaluation and testing, management may identify deficiencies that will need to
be addressed and remediated, which could potentially have a material adverse
effect on our stock price and could result in significant additional
expenditures.
RISKS RELATED TO OUR INDUSTRY
OUR INDUSTRY IS VERY COMPETITIVE, AND WE MAY BE UNABLE TO CONTINUE TO COMPETE
EFFECTIVELY IN THIS INDUSTRY IN THE FUTURE.
We are engaged in an industry that is highly competitive. We compete
with many other suppliers and new competitors continue to enter the markets.
Many of our competitors, both in the United States and elsewhere, are major
chemical companies, and many of them have substantially greater capital
resources, marketing experience, research and development staffs, and facilities
than we do. Any of these companies could succeed in developing products that are
more effective than the products that we have or may develop and may also be
more successful than us in producing and marketing their products. We expect
this competition to continue and intensify in the future. Competition in our
markets is primarily driven by:
o product performance, features and liability;
o price;
o timing of product introductions;
o ability to develop, maintain and protect proprietary products
and technologies;
o sales and distribution capabilities;
o technical support and service;
o brand loyalty;
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o applications support; and
o breadth of product line.
If a competitor develops superior technology or cost-effective
alternatives to our products, our business, financial condition and results of
operations could be materially adversely affected.
WE ARE SUBJECT TO A WIDE VARIETY OF LOCAL, STATE AND FEDERAL RULES AND
REGULATIONS, WHICH COULD RESULT IN UNINTENTIONAL VIOLATIONS OF SUCH LAWS. ALSO,
CHANGES IN SUCH LAWS COULD RESULT IN LOSS OF REVENUES.
As a chemical manufacturer, we are subject to a wide variety of local,
state and federal rules and regulations. While we believe that our operations
are in compliance with all applicable rules and regulations, we can provide no
assurances that from time to time unintentional violations of such rules and
regulations will not occur. Certain of our products are regulated by the U. S.
Environmental Protection Agency and the individual states where marketed.
Government regulation results in added costs for compliance activities and
increases the risk of losing revenues should regulations change. Also, from time
to time we must expend resources to comply with newly adopted regulations, as
well as changes in existing regulations. If we fail to comply with these
regulations, we could be subject to disciplinary actions or administrative
enforcement actions. These actions could result in penalties, including fines.
RISKS RELATED TO THIS OFFERING
WE HAVE A LIMITED TRADING VOLUME AND SHARES ELIGIBLE FOR FUTURE SALE BY OUR
CURRENT STOCKHOLDERS MAY ADVERSELY AFFECT OUR STOCK PRICE.
To date, we have had a very limited trading volume in our common stock.
As long as this condition continues, the sale of a significant number of shares
of common stock at any particular time could be difficult to achieve at the
market prices prevailing immediately before such shares are offered. In
addition, sales of substantial amounts of common stock, including shares issued
upon the exercise of outstanding options and warrants, under Rule 144 or
otherwise could adversely affect the prevailing market price of our common stock
and could impair our ability to raise capital at that time through the sale of
our securities. As a result of our limited cash, a number of our employees and
consultants have elected to accept a portion of their compensation in shares of
our common stock and a portion of these shares have been registered for resale
to the public.
Additionally, sales of our common stock in the public market following
this offering could lower the market price of our common stock. Sales may also
make it more difficult for us to sell equity securities or equity-related
securities in the future pursuant to this prospectus and an applicable
prospectus supplement at a time and price that our management deems acceptable
or at all. As of January 11, 2005, we had 17,249,947 shares of common stock
outstanding. We are currently registering up to 1,600,000 shares of common stock
for resale by the Selling Shareholders, and up to 5,000,000 shares of common
stock for sale by us pursuant to this prospectus and an applicable prospectus
supplement.
OUR COMMON STOCK PRICE IS HIGHLY VOLATILE.
The market price of our common stock is likely to be highly volatile as
the stock market in general, and the market for technology companies in
particular, has been highly volatile.
Factors that could cause such volatility in our common stock may
include, among other things:
o actual or anticipated fluctuations in our quarterly operating
results;
o announcements of technological innovations;
o changes in financial estimates by securities analysts;
o conditions or trends in our industry; and
o changes in the market valuations of other comparable
companies.
13
ENTERING INTO EQUITY FINANCINGS COULD RESULT IN DILUTION TO EXISTING
SHAREHOLDERS.
If we sell shares pursuant to this prospectus and an applicable
prospectus supplement, or in a private placement offering, any such equity
financing could result in dilution to the existing shareholders as a direct
result of our issuance of additional shares of our capital stock.
THE SALE OF OUR COMMON STOCK ON THE OVER-THE-COUNTER BULLETIN BOARD AND THE
POTENTIAL DESIGNATION OF OUR COMMON STOCK AS A "PENNY STOCK" COULD IMPACT THE
TRADING MARKET FOR OUR COMMON STOCK.
Our securities, as traded on the Over-the-Counter Bulletin Board, will
be subject to Securities and Exchange Commission rules that impose special sales
practice requirements upon broker-dealers who sell such securities to persons
other than established customers or accredited investors. For purposes of the
rule, the phrase "accredited investors" means, in general terms, institutions
with assets in excess of $5,000,000, or individuals having a net worth in excess
of $1,000,000 or having an annual income that exceeds $200,000 (or that, when
combined with a spouse's income, exceeds $300,000). For transactions covered by
the rule, the broker-dealer must make a special suitability determination for
the purchaser and receive the purchaser's written agreement to the transaction
prior to the sale. Consequently, the rule may affect the ability of
broker-dealers to sell our securities and also may affect the ability of
purchasers to sell their securities in any market that might develop therefor.
In addition, the Securities and Exchange Commission has adopted a
number of rules to regulate "penny stock." Such rules include Rules 3a51-1,
15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities
and Exchange Act of 1934, as amended. Because our securities may constitute
"penny stock" within the meaning of the rules, the rules would apply to us and
to our securities. The rules may further affect the ability of owners of our
common stock to sell our securities in any market that might develop for them.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, resulting in investor losses.
Our management is aware of the abuses that have occurred historically in the
penny stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our securities.
THE SELLING SHAREHOLDERS INTEND TO SELL THEIR SHARES OF COMMON STOCK IN THE
OPEN MARKET, WHICH SALES MAY CAUSE OUR STOCK PRICE TO DECLINE.
The Selling Shareholders intend to sell in the public market up to
1,600,000 shares of common stock being registered in this offering. That means
that up to 6,600,000 shares of common stock may be sold pursuant to this
prospectus, and in the case of any shares we sell directly, pursuant to an
applicable prospectus supplement. Such sales may cause our stock price to
decline. Our officers and directors will continue to be subject to the
provisions of various insider trading and Rule 144 regulations.
WE DO NOT FORESEE PAYING DIVIDENDS IN THE NEAR FUTURE.
We have not paid dividends on our common stock and do not anticipate
paying such dividends in the foreseeable future.
OUR ISSUANCE OF FURTHER STOCK MAY RESULT IN THE LOSS OF CONTROL BY PRESENT
MANAGEMENT AND SHAREHOLDERS.
In addition to any shares we may issue pursuant to this prospectus and
an applicable prospectus supplement, we may issue further shares in
consideration for cash, assets or services out of our authorized but unissued
common stock that could, upon issuance, represent a majority of our voting power
and equity. The result
14
of such an issuance would be that those new shareholders and management would
control us, and unknown persons could replace our management at that time. Such
an occurrence would result in a greatly reduced percentage of ownership of us by
our current shareholders.
OFFICERS AND DIRECTORS OWN A SIGNIFICANT PORTION OF OUR COMMON STOCK, WHICH
COULD LIMIT OUR SHAREHOLDERS' ABILITY TO INFLUENCE THE OUTCOME OF KEY
TRANSACTIONS.
As of January 1, 2005, our officers and directors and their affiliates
owned approximately 30.8% of our outstanding voting shares. As a result, our
officers and directors are able to exert considerable influence over the outcome
of any matters submitted to a vote of the holders of our common stock, including
the election of our Board of Directors. The voting power of these shareholders
could also discourage others from seeking to acquire control of us through the
purchase of our common stock, which might depress the price of our common stock.
15
FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," contains "forward-looking statements" that include
information relating to future events, future financial performance, strategies,
expectations, competitive environment, regulation and availability of resources.
These forward-looking statements include, without limitation, statements
regarding: proposed new services; our expectations concerning litigation,
regulatory developments or other matters; statements concerning projections,
predictions, expectations, estimates or forecasts for our business, financial
and operating results and future economic performance; statements of
management's goals and objectives; and other similar expressions concerning
matters that are not historical facts. Words such as "may," "will," "should,"
"could," "would," "predicts," "potential," "continue," "expects," "anticipates,"
"future," "intends," "plans," "believes" and "estimates," and similar
expressions, as well as statements in future tense, identify forward-looking
statements.
Forward-looking statements should not be read as a guarantee of future
performance or results, and will not necessarily be accurate indications of the
times at, or by which, that performance or those results will be achieved.
Forward-looking statements are based on information available at the time they
are made and/or management's good faith belief as of that time with respect to
future events, and are subject to risks and uncertainties that could cause
actual performance or results to differ materially from those expressed in or
suggested by the forward-looking statements. Important factors that could cause
these differences include, but are not limited to:
o the worldwide demand for our products;
o the price of our products;
o the costs to develop and produce our products;
o the ability to obtain new governmental approvals;
o industry competition;
o our ability to continue to execute our growth strategies;
o general economic conditions;
o and other factors discussed under the headings "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business."
Forward-looking statements speak only as of the date they are made. You
should not put undue reliance on any forward-looking statements. We assume no
obligation to update forward-looking statements to reflect actual results,
changes in assumptions or changes in other factors affecting forward-looking
information, except to the extent required by applicable securities laws. If we
do update one or more forward-looking statements, no inference should be drawn
that we will make additional updates with respect to those or other
forward-looking statements.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of shares to be offered
by the Selling Shareholders. The proceeds from the sale of each Selling
Shareholder's common stock will belong to that Selling Shareholder.
Unless otherwise indicated in the applicable prospectus supplement, we
anticipate that any net proceeds from the sale of the securities that we may
offer under this prospectus and any accompanying prospectus supplement will be
used for general corporate purposes. General corporate purposes may include
acquisitions, investments, repayment of debt, capital expenditures, repurchase
of our capital stock and any other purposes that we may specify in any
prospectus supplement. We may invest the net proceeds temporarily until we use
them for their stated purpose.
DILUTION
Sales of the shares of our common stock will not result in any
change to the net tangible book value per share before and after the
distribution of shares by the Selling Shareholders. There will be no change in
the net tangible book value per share attributable to cash payments made by
purchasers of the shares being offered by the Selling Shareholders. Prospective
investors in the shares held by the Selling Shareholders should be aware,
however, that the price of shares being offered by the Selling Shareholders may
not bear any rational relationship to our net tangible book value per share.
MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
COMMON STOCK
Our common stock is quoted on the Over-The-Counter Bulletin Board under
the symbol "SLIF." Prior to the third quarter of our fiscal year ended May 31,
2003 ("Fiscal 2002"), there was no established trading market for our common
stock. The following table sets forth, for the periods indicated, the high and
low bid information for the common stock, as determined from sporadic quotations
on the Over-the-Counter Bulletin Board, as well as the total number of shares of
common stock traded during the periods indicated. The following quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions.
HIGH LOW
---- ---
YEAR ENDED MAY 31, 2003
First Quarter ................................. $ 0.75 $ 0.60
Second Quarter ................................ 1.20 0.15
Third Quarter ................................. 4.80 0.30
Fourth Quarter ................................ 1.24 0.15
YEAR ENDED MAY 31, 2004
First Quarter ................................. $ 0.48 $ 0.15
Second Quarter ................................ 0.63 0.19
Third Quarter ................................. 1.75 0.45
Fourth Quarter ................................ 1.40 0.60
FOUR MONTHS ENDED SEPTEMBER 30, 2004 ............... $ 1.01 $ 0.31
* We effected a 1:15 reverse stock split on December 28, 2003. All stock prices
provided in this table have been adjusted to reflect such reverse stock split.
On January 18, 2005, the closing sales price of our common stock as
reported on the Over-The-Counter Bulletin Board was $.31 per share. As of
January 11, 2005, there were 112 record holders of our common stock.
DIVIDENDS
We have never paid dividends on our common stock. We intend to retain
any future earnings for use in our business.
17
BUSINESS
OVERVIEW
Our vision is to develop, market and supply eco-friendly products that
can solve complex environmental problems with simple natural solutions,
establishing the environmentally safe choice as the right choice in specific
markets.
Our goal is to establish ourselves as the global leader in "probiotic"
technologies. Probiotic technologies refer to technologies and products that
work in "partnership with nature" without harming the environment in its
targeted markets. We believe that worldwide demand for development of products
that are not only safe for the environment but will also help clean the
environmental damage caused by decades of use and disposal of deadly toxins and
the overuse of pesticides and fertilizers, is growing, and will continue to
grow. We believe that a large percentage of the products in use today can and
will be replaced by effective, environmentally safe equivalents.
We have developed a line of products utilizing such "probiotic"
technologies for the marine, agricultural and remediation markets. We have just
recently emerged from our develop stage have begun substantial sales and
marketing efforts to launch our marine product, SeaLife 1000(TM) and our
agricultural products, NuLagoon(TM) and Soil ResQ(TM). In anticipation of its
intended growth and the introduction of additional products to the market in the
near future, we have implemented a corporate structure whereby each market is
served by a separately operated subsidiary or division. Our marine products
business is operated by our indirect wholly-owned subsidiary, SeaLife Marine.
Our agricultural products business is operated by our indirect wholly-owned
subsidiary, ProTerra. Our remediation product business is operated as one of our
divisions. We also plan on establishing a research and development division that
will focus on the testing and development of existing and new products for each
of our subsidiaries and divisions provided sufficient capital can be obtained to
fund such division. We have structured our operations in this manner to
accommodate a range of products for specific markets that have been and will be
developed by us.
SEALIFE MARINE PRODUCTS, INC.
Antifouling paints are used to coat the bottoms of ships to prevent
fouling. Fouling, such as barnacles, tubeworms, slime and algae, significantly
reduces the speed and performance of any vessel, resulting in increased fuel
consumption, extended dry-docking and higher maintenance costs. Traditional
anti-fouling paints work by releasing toxic chemicals (biocides) contained in
the paint into the water, killing fouling organisms in order to prevent them
from attaching to any treated surface In response to the pollution and poisoning
of marine life in oceans and waterways, the International Maritime Organization
(IMO), a United Nations agency responsible for improving maritime safety and
preventing pollutions from ships, adopted an assembly resolution that called on
the Marine Environment Protection Committee (MEPC), to develop an instrument,
legally binding through out the world, to address the harmful effects of
anti-fouling systems used on ships. As of January 1, 2003, it is illegal to
apply or re-apply to any maritime vessel, any anti-fouling paint containing the
most commonly used anti-fouling agent, tributyl tin (TBT).
SeaLife Marine was formed as a subsidiary of SeaLife Nevada in January,
2002, and has developed a line of environmentally safe, anti-foul,
anti-corrosive coatings for the commercial maritime industry, the military, and
the recreational boat owner, which coatings comply with the international
prohibition on the use of TBT. SeaLife Marine's products have been specifically
engineered not to leach any biocides, pesticides or other toxins into the marine
environment and to be fully compliant with international law.
SEALIFE 1000(TM) ANTI-FOULING MARINE PAINT PRODUCTS
SeaLife 1000(TM) is SeaLife Marine's premier antifouling marine paint
product, and the only product currently in production and for sale by SeaLife
Marine. SeaLife 1000(TM) can be applied to hulls on any sized vessel, and any
other surface providing antifouling, anti-corrosive protection in both fresh and
salt water. SeaLife 1000(TM) may be applied to steel, aluminum, fiberglass and
wood. Sealife Marine has also developed and is currently testing SeaLife 1000
XP(TM) and SeaLife 1000 Out-Drive(TM), which are specifically designed to meet
the needs of commercial and recreational users, respectively. SeaLife 1000
XP(TM) is a commercial grade of SeaLife 1000(TM) with enhanced features. SeaLife
1000 OutDrive(TM) is specifically designed to reduce corrosion of outdrive units
on recreational
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boats. Marine outdrive damage caused by corrosion can amount to several hundred
dollars per year. SeaLife 1000 OutDrive(TM) can be applied to any outdrive thus
reducing the serious effects of corrosion.
When SeaLife 1000(TM) comes in contact with water, reactive hydrolysis
of its proprietary ingredients begins, which microscopically expands and
smoothes the SeaLife coating over the ship's underwater hull surfaces. This
results in an undersea hull surface that becomes more uniformly smooth than when
it was painted. Field tests using SeaLife 1000(TM) have demonstrated that hulls
and other submerged surfaces treated with SeaLife 1000(TM) coatings provide
long-term resistance to algae, fungus, shell growth and rust without harming
marine life. Management believes that SeaLife's marine coating technology has
significant advantages over competing products. SeaLife 1000(TM) has been
approved for sale by the United States Environmental Protection Agency (USEPA),
the California Environmental Protection Agency (CAEPA), the Washington State
Department of Agriculture (WADOA) and the Florida State Department of
Agriculture and Consumer Services (FDACS).
TESTING
There are in progress or completed, in excess of 60 worldwide tests
involving SeaLife1000(TM) antifoul paint. These tests include use of SeaLife
1000(TM) on: cruise ships, ferryboats, navel vessels, outboard motors, yachts,
recreational boats and aqua farming nets. Management has been satisfied with the
results of the testing, which support the internal tests conducted by SeaLife
Marine over the last few years. We expect to continue our testing efforts as
customers experience changes in the environment and in regulations affecting
environmental products, and as we expand our product offerings.
THE MARKET FOR ANTIFOUL PAINT
The magnitude of world maritime usage of anti-foul paints is estimated
to exceed $8 billion in annual sales. The toll that marine growth can take on a
vessel's performance is considerable. A barely visible 10 micro/meter (1%)
increase in average hull roughness for a single ship, such as a bulk carrier,
can equate to as much as 1,700 tons of additional fuel use over the course of
one year due to fouling and subsequent frictional surface resistance. Since fuel
costs can amount to as much as 50% of the total operating costs for such ships,
increasing fuel costs could increase the cost of operating such ships as much as
$2 million per year, depending on the size of the ship.
It is estimated that annual consumption of fuel by the world's fleet of
ships totals approximately $18 billion. A fouled hull can increase fuel
consumption by as much as 50%, making an effective anti-foul coating paramount
to the owners and operators of any ship. Removing this growth is also a
punishing procedure, as the fouling is bonded with a virtually unbreakable grip.
Dry-docking for the purpose of cleaning and re-coating a hull with fresh
anti-foul paint is costly because of the expenses associated with maintenance
and the loss of business due to inactivity.
SeaLife Marine's potential customers include individual pleasure boat
owners, shipping lines and cruise lines, commercial fishermen and their nets,
boat and ship manufacturers, boat and ship maintenance facilities, shipping
ports, marinas, and offshore drilling platforms. The United States military,
including the Coast Guard and the United States Navy are part of our anticipated
market, as are the hundreds of marine product distributors worldwide.
COMPETITION
The marine coatings market is highly competitive, with the world's
major paint manufacturers seeking to develop environmentally compatible products
in order to meet the stringent requirements mandated by the IMO. Marine coating
companies, such as Akzo-Nobel N.V. (owner of International Paints), Ciba
Specialty Chemicals AG, Clariant AG, The Dow Chemical Company, and DuPont
Corporation, among others, are well-established, have extensive research and
development facilities, are well capitalized and command the majority of the
multi-billion dollar chemical manufacturing industry. In addition, a number of
these companies were early pioneers of chemical and coating products and enjoy
significant brand recognition and market share.
Several smaller coating-and bio-tech companies, as well as researchers
at universities around the world, are also in the process of developing
environmentally safe marine coatings, using a variety of methods and
ingredients.
19
GOVERNMENT REGULATION
Antifouling marine paints are subject to both Federal and State
environmental and safety regulations in the United States, and similar
regulation in other countries. As stated above, SeaLife 1000(TM) has been
approved by the USEPA, CAEPA, WADOA and FDACS. The approval by where we intend
to apply for approval in the near future. We have applied for, but not yet
received, approval to sell SeaLife 1000(TM) in Canada and Sweden. Additional
approvals will generally be required to sell SeaLife 1000(TM) in other foreign
jurisdictions.
MANUFACTURING & DISTRIBUTION
SeaLife Marine outsources its manufacturing in order to maintain a low
manufacturing overhead. At this time, SeaLife Marine uses only one manufacturer
as its sole source. As demand increases, SeaLife Marine intends to outsource its
manufacturing to a variety of independent manufacturing facilities in the Untied
States. The manufacturing process for our paint does not require significant
retooling. Therefore, if necessary, suppliers could be replaced without a
significant disruption in production.
We began shipping SeaLife 1000(TM) in June, 2004. We have engaged
Brokers Unlimited Incorporated ("BUI") as our exclusive worldwide sales and
marketing agent. BUI has only recently begun to actively market SeaLife 1000(TM)
throughout the United States, and in California, New York and Louisiana, in
particular.
PATENTS
Neither we nor SeaLife Marine has patented the manufacturing formula
for its paints. When a patent is filed it requires the disclosure of all
processes and formulas required to manufacture the product. Due to the
difficulty of a competitor "reverse engineering" the SeaLife Marine formulas and
the problems inherent with the ease of patent formula duplication by potential
competitors worldwide if the formula is disclosed, SeaLife Marine has elected to
keep the formulas for its marine paint confidential as a trade secret. As a
result, no patents have been filed for the our marine paint products.
PROTERRA TECHNOLOGIES, INC.
ProTerra has developed a line of products to meet the growing demand to
find simple, environmentally responsible, solutions to the growing problems
associated with the agriculture marketplace, a global market. Damaged soils, the
result of the overuse of fertilizers and pesticides, and the growing concern of
farmers to protect themselves from increasing scrutiny and government
regulation, provide an active and growing market for environmentally safe soil
conditioners and waste treatment systems.
NULAGOON(TM)
The ProTerra product NuLagoon(TM) is fully developed and in production.
NuLagoon(TM) is a treatment system that can be applied to the surface of any
waste lagoon as an alternative to dredging. NuLagoon(TM) combines many strains
of microbes, some only recently discovered, with advanced agricultural science
utilizing proprietary media culture and micro nutrients. The microbes break down
the waste materials in lagoons by digesting the waste into water and carbon
dioxide. Mechanical dredging is expensive and labor intensive, and involves
noxious odors prevalent throughout the lagoon evaporation and dredging cycles.
NuLagoon(TM) additives work 24 hours a day to keep lagoons liquefied, deodorized
and free from heavy sludge layers. The treatment system reduces manure sludge
buildup, reduces odors, reduces nitrate leaching into groundwater, significantly
reduces flies and insects around lagoons, works quickly, and is a fraction of
the cost of mechanical dredging.
ProTerra has shipped its first NuLagoon(TM) order, valued at $50,000,
and sales representatives are currently working on developing additional sales
opportunities.
SOIL RESQ(TM)
Currently under development for the agricultural market, Soil ResQ(TM)
is an environmentally safe soil conditioner, designed to improve poor soil
conditions, buffer toxic salts, maintain a well-balanced soil structure, and
promote
20
vigorous plant growth. The product is being developed to work with conventional
fertilizers, optimizing the fertilizer benefit for large scale applications to
agricultural and park properties.
Soil ResQ(TM) has been tested extensively and the results have been
promising. Testing on county golf courses located in Sacramento, California has
demonstrated that Soil ResQ(TM) has repaired soil, returning grass damaged by
chemical intrusion and brown areas to full health. The same tests indicated a
substantial reduction in water requirements. Other tests conducted in India, on
banana crops, have resulted in measurable yield increases. Tests conducted in
Japan have also yielded positive results. ProTerra is currently waiting for
approval to begin exporting to Japan. Tests are currently being conducted in the
United Kingdom with a major organic farm and Soil ResQ(TM) has received
Department for Environment, Food and Rural Affairs ("DEFRA") approval,
indicating that it is a safe product to import into the United Kingdom. Tests of
Soil ResQ(TM) have also been conducted in Colombia, South America, Walnut Creek
and Sacramento, California.
OTHER PRODUCTS
ProTerra has a number of additional developed products that it intends
to produce and market beginning in 2005. These products are being developed to
restore and rebuild heavily damaged soils resulting from salt intrusion,
compacted soil, poor crop rotation (NUSOIL(TM)), and assist plants in increasing
their ability to uptake nutrients from soil - producing stronger, healthier
plants (Plan ResQ(TM)).
THE MARKET FOR PROTERRA PRODUCTS
The eventual market for ProTerra's products is the global agricultural
market. Currently, we are focusing on marketing our products for agricultural
use in the United States, particularly in California and Texas.
COMPETITION
Several companies currently produce microbe-based products which are
claimed to function similarly to NuLagoon(TM), however no single manufacturer
has emerged as a leader in the market.
We are not aware of any product currently on the market similar or
equivalent to SoilResQ(TM).
GOVERNMENT REGULATION
ProTerra products, and its competitors' equivalents are generally not
subject to Federal or State environmental or safety regulation because the
products do not contain any significant concentration of regulated materials.
MANUFACTURING AND DISTRIBUTION
ProTerra currently outsources its manufacturing. As demand increases,
ProTerra intends to outsource its manufacturing to a variety of independent
manufacturing facilities in the United States. The manufacturing process does
not require significant retooling. Therefore, if necessary, suppliers could be
replaced without significant disruption in production. ProTerra intends to
market and sell its products through distributors.
PATENTS
Neither we, nor ProTerra, has patented the manufacturing formula for
its products. When a patent is filed it requires the disclosure of all processes
and formulas required to manufacture the product. Due to the difficulty of a
competitor "reverse engineering" the ProTerra product formulas and the problems
inherent with the ease of patent formula duplication by potential competitors
worldwide if the formula is disclosed, ProTerra has elected to keep the
21
formulas for its products as confidential trade secrets. As a result, no patents
have been filed for our ProTerra products.
SEALIFE CORPORATION REMEDIATION DIVISION
SOIL REMEDIATION
Soil Remediation is the process of cleaning soil that has been
contaminated with potentially dangerous toxins. The Remediation Division, with
its line of soil remediation products, intends to focus on large scale
commercial and municipal customers. Although the remediation products can be
used on a small scale, we intend to develop associations with companies already
established in the highly regulated remediation business. The US Government,
through the "Brownfields Act" has set aside billions of dollars to assist in the
cleaning and remediation of soil contaminated with gas, diesel, and solvents
that have been discharged into the soil, maliciously or accidentally, over
decades by companies in the United States. Gas stations with leaky storage tanks
have been the primary cause for soil contamination from coast to coast.
SOILDTOX(TM)
Toxins such as, Diesel fuel, MTBE, Gasoline, etc. can be removed from
soil using SoilDtox(TM) bioremediation technology. The product is under
development as a new bio-remediation process to remediate soil contaminated with
high concentrations of environmentally damaging hydrocarbons, commonly found
beneath industrial sites such as gas stations, airports and oil fields.
SoilDtox(TM) relies on a proprietary blend of microbial's that function as an
active agent to actually digest the contamination locked deep in the soil. Among
the many benefits of using microbial agents to clean contaminated soils is that
no toxic residue is left behind. The by-products of this natural process are
water and carbon dioxide, which are absorbed by plants and trees to produce
oxygen.
SoilDtox(TM) is a dry blend of live, synergistic, naturally-occurring
microbes which digest both short and long chain hydrocarbons and other organic
pollutants including mineral oils, gasoline, diesel, jet fuel, kerosene,
non-synthetic cutting oils, sludge, coal tar, aromatics, acetone, methyl
acetate, dichloromethane, dichloroethane, ethylacetate, hexane, butylacetate,
ethylbenzene, heptane, benzene, naphthalene, anthracene, ethylene, toluene,
xylene, phenol, crude oil and refined petroleum products.
SoilDtox(TM) will begin testing in 2005 in association with an
established remediation company.
GOVERNMENT REGULATION
Soil detoxification is heavily regulated. Products are regulated for
their effectiveness at cleaning the soil and their individual formulations. The
USEPA, State regulatory authorities and the respective city where the clean up
site is proposed often oversee contaminated sites. Testing for the effectiveness
of a remediation product by the USEPA, State regulatory authorities and the
respective city where the clean up site is proposed is a slow tedious process.
However, once a product is approved it can be used at any location. None of the
ingredients used in SoilDtox(TM) are currently regulated by the USEPA and we do
not expect that any of these ingredients will be regulated in the future.
PATENTS
We have not patented the manufacturing formula for SoilDtox(TM). Due to
the difficulty of a competitor "reverse engineering" the SoilDtox(TM) formula
and the problems inherent with the ease of patent formula duplication by
potential competitors worldwide if the formula is disclosed, we have elected to
keep the formulas for SoilDtox(TM) as confidential trade secrets. As a result,
no patents have been filed for those products.
OTHER PRODUCTS
The Remediation Division has a number of additional products in
development that it intends to produce and market beginning in 2005. These
products are being developed to break down grease into components that can be
properly disposed of in the sewer system (GreaseBeast(TM)), assist in cleaning
and detoxifying sewer toxins
22
(MuniMix(TM)), and permanently deodorize the most difficult odors
(OdorMeister(TM)).
SEALIFE CORPORATION - DEVELOPMENT STAGE DIVISION
Research and Development is the life blood of any technology driven
company. The Development Stage Division will likely be formed in early 2005 and
will function as our research and development group provided sufficient capital
is available. Working in association with specialists and scientists around the
world, the Development Stage Division will allow us to remain current in all of
our product development and to help assure that we remain the leader in this new
technology niche.
Environmental products often require a myriad of testing and regulatory
approvals for each city, county, state and country in which they are sold.
Testing of a product may require over one year to prove its viability. Although
all of our products have been tested during their development phase, many still
require additional testing to verify application protocols and respective
government approvals. In addition to product development, the Development Stage
Division will be charged with preparing our products for market introduction.
EMPLOYEES
As of January 1, 2005, we had only three employees, each of whom are
officers of Sealife Corporation, or its indirect wholly-owned subsidiary,
Sealife Marine.
23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS AND RELATED NOTES, AS WELL AS THE SECTION ENTITLED "RISK
FACTORS," THAT APPEAR ELSEWHERE IN THIS PROSPECTUS.
INCORPORATION
We were formed as a Delaware corporation in 1984 under the name Fraser
Realty Group. We operated as a real estate investment trust until 1990, when our
then current management was unable to secure additional financing or find other
means of obtaining needed cash to permit us to meet our obligations. As a
result, we ceased operations and remained inactive until December 2002.
ACQUISITION OF NEVADA CORPORATION
On December 17, 2002, pursuant to an Exchange Agreement dated June 30,
2002, we acquired all of the issued and outstanding shares of SeaLife Corp., a
Nevada Corporation ("SeaLife Nevada"), in exchange for a substantial majority of
the shares of our common stock (the "Acquisition"). Our then current
stockholders retained their 274,554 shares of common stock which were issued and
outstanding prior to the consummation of the Acquisition. Concurrent with the
Acquisition, we changed our name from Integrated Enterprises, Inc. (which was
our name at the time) to SeaLife Corporation, our then current directors and
officers resigned, and the directors and officers of SeaLife Nevada became our
directors and officers. Also concurrent with the Acquisition, we effected a
15-to-1 reverse stock split.
The Acquisition resulted in our change of control, with the
stockholders of SeaLife Nevada acquiring a substantial majority of our common
stock immediately following the closing of the Acquisition. Therefore, the
Acquisition was accounted for as a reverse merger, pursuant to which the
accounting basis of SeaLife Nevada continued unchanged subsequent to the closing
of the Acquisition. Accordingly, the pre-Acquisition financial statements of
SeaLife Nevada now represent our historical financial statements.
Sealife Nevada was organized in April of 2002 to acquire, develop and
market certain proprietary products invented by Gael Himmah, our Chief
Consulting Scientist. At the time of the Acquisition, SeaLife Nevada owned all
of the outstanding stock of Division G, Inc., a Nevada corporation ("Division
G"), SeaLife Marine Products, Inc., a California corporation ("SeaLife Marine"),
and Proterra Technologies, Inc., a California corporation ("Proterra"). As a
result of the Acquisition, we became the parent and sole shareholder of SeaLife
Nevada, and through SeaLife Nevada, the indirect parent and sole shareholder of
Division G, SeaLife Marine and Proterra.
CHANGE IN FISCAL YEAR
On August 27, 2004, we changed our fiscal year end from May 31 to
December 31, as reported on our Current Report on 8-K filed August 30, 2004.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial conditions and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with generally accepted accounting principles in the
United States. The preparation of financial statements requires management to
make estimates and judgments that affect the reported amounts of assets and
liabilities, revenues and expenses and disclosures on the date of the financial
statements. On an on-going basis, we evaluate our estimates, including, but not
limited to, those related to revenue recognition. We use authoritative
pronouncements, historical experience and other assumptions as the basis for
making judgments. Actual results could differ from those estimates.
We believe the following accounting policies affect some of our more
significant estimates and judgments used in preparation of our consolidated
financial statements:
24
REVENUE RECOGNITION. Sales are recognized when the delivery of products
has occurred or services have been rendered and collectibility is reasonably
assured.
NET SALES. Net sales represent products at gross sales price, less
estimated returns and allowances for which provisions are made at the time of
sale and less certain other discounts, rebates, allowances and sales incentives
that are accounted for as a reduction from gross sales.
INVENTORY RESERVE. We provide an inventory reserve for estimated
obsolescence or unmarketable inventory equal to the difference between the cost
of inventory and the estimated market value based upon assumptions about future
demand and market conditions. If actual market conditions are less favorable
than those projected by management, additional inventory write-downs would be
required.
INTANGIBLE ASSETS. We have significant intangible assets. The
determination of related estimated useful lives and whether or not these assets
are impaired involves significant judgments. Changes in strategy or market
conditions could significantly impact these judgments and require adjustments to
recorded asset balances.
ALLOWANCES FOR DOUBTFUL ACCOUNTS. We maintain allowances for doubtful
accounts, notes receivable, sales returns and discounts for estimated losses
resulting from known customer exposures, including product returns and inability
to make payments. We also consider collateral values and other factors in
evaluating collectability of notes receivable. Actual results may differ
resulting in adjustment of the respective allowance(s).
DEFERRED TAX ASSETS. We currently have deferred tax assets resulting
from certain loss carry forwards and other temporary differences between
financial and income tax reporting. These deferred tax assets are subject to
periodic recoverability assessments. The realization of these deferred tax
assets is primarily dependent on future operating results. To the extent we are
uncertain whether future operations will generate sufficient profit to utilize
the loss carry forwards, valuation allowances are established.
MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis should be read in conjunction
with our consolidated financial statements and accompanying notes.
RESULTS OF OPERATIONS
We incurred a net loss of $600,058 for the four months ended September
30, 2004 as compared to a net loss of $35,174 for the four months ended
September 30, 2003. Our net loss increased primarily due to investments in
marketing, legal expenses, consulting fees and executive compensation of
$650,908. We incurred a net loss of $1,807,055 for the twelve months ended May
31, 2004 as compared to a net loss of $687,359 for the year ended May 31, 2003.
This loss represents a loss from operations of $1,807,055 and $687,359 for the
periods ended May 31, 2004 and 2003, respectively. Our net loss increased
primarily due to a marked increase of approximately $611,357 in general and
administrative expenses, as described below.
We had revenues of $27,416 for the year ended May 31, 2004 and revenues
of $38,402 for the same period ending in 2003. We had revenues of $106,842 for
the four months ended September 30, 2004 and revenues of $2,674 for the same
period ending in 2003. Our sales in the four month period ended September 30,
2004 represent the first significant results in the marketplace for SeaLife
Marine and Proterra products. Our sales revenue was generated from two
customers. One customer purchased $45,942 of Proterra products, accounting for
43% of our sales revenue. The other customer purchased $60,900 of SeaLife Marine
products accounting for 57% of our sales revenue. Because we are now
transitioning from a development stage company to a marketing and distribution
company, sales are expected to become more significant over the next 12 months.
However, the rate of this increase will depend on our marketing efforts and our
ability to raise additional capital to support continued operations.
Gross profit for the four months ended September 30, 2004 was $50,751.
The gross profit margin was 47.5%. The cost of goods for SeaLife Marine products
includes the paint cost, freight and California pesticide tax. For Proterra
products, the cost of goods includes the material and freight costs. We did not
have any sales for the comparable period ending September 30, 2003. Gross profit
dollars for the year ending May 31, 2004 is a loss of
25
$97,970 versus a loss of $38,022 for the year ending May 31, 2003. The gross
margin percentage is a negative 357% versus a negative 99% for the respective
years. Our negative gross margin percentage can be attributed to our
significantly increasing operating expenses incurred in the respective years. We
have continued to expand our product tests throughout the world and products are
being shipped at no cost to test sites. In addition, shares valued at $400,000
were issued to secure the rights to products developed and to be developed by
Gael Himmah and the annual depreciation of these products over a ten-year period
is included in the cost of sales.
Total operating expenses consist of general administrative, sales and
marketing expenses. For the four months ended September 30, 2004, total
operating expenses were $650,808. For the four months ended September 30, 2003,
total operating expenses were $37,174. This represents a 1751% increase over the
same period in the prior year. For the twelve months ended May 31, 2004, total
operating expenses were $1,709,085. For the year ended May 31, 2003, total
operating expenses were $649,359. This represents a 263% increase over the same
period in the prior year.
The major increase in general and administrative expenses for both
periods covered is due to compensation paid for legal services, marketing and
sales executives, business consulting, research and development, industrial
relations consulting and our officers' wages. The majority of our expenses are
recorded as paid-in capital, because the large majority of our administrative
expenses were paid in the form of restricted stock, not cash.
LIQUIDITY AND CAPITAL RESOURCES
As of May 31, 2004, we had cash and cash equivalents of $34,056 as
compared to cash and cash equivalents of $558 as of May 31, 2003. At May 31,
2004, we had a working capital excess (total current liabilities less than total
current assets) of $116,910 as compared to a working capital deficiency (total
current liabilities in excess of current assets) of ($180,355) as of May 31,
2003. Net cash from financing activities was $256,676 for twelve months ended
May 31, 2004, as compared to $242,893 for the year ended May 31, 2003. The
principal use of cash for the year ended May 31, 2004 was to fund the net loss
from operations for the period. We raised a total of $256,676 as follows: the
issuance of common stock, net of stock issuance costs $129,239, and a $130,000
loan from private lenders during the twelve months ended May 31, 2004. This was
used to fund the net loss from operations. At September 30, 2004, we had cash
and cash equivalents of $24,658 as compared to cash and cash equivalents of
$34,056 as of September 30, 2003. At September 30, 2004 we had a working capital
deficiency of $315,020 as compared to a working capital excess of $116,910 as of
September 30, 2003. Net cash from financing activities was $32,466 for the four
months ended September 30, 2004, as compared to $37,173 for the four months
ended September 30, 2003. The principal use of cash for the four months ended
September 30, 2004 was to fund the net loss from operations for the period. We
raised a total of $32,466 as follows: issuance of common stock, net of stock
issuance costs of $12,466 and a loan from a shareholder of $20,000 during the
four months ended September 30, 2004. This was used to fund our net loss from
operations.
On the balance sheet, paid in capital increased from $1,493,067, for
the year ending May 31, 2003 to $3,855,368, for the twelve months ending May 31,
2004. This paid in capital was used to fund services from our consultants,
attorneys and executives. These services will continue to be funded by paid in
capital until we reach a sales level that can fund continued operations.
We currently have little cash reserves and may be unable to pay current
liabilities. We cannot continue in our current form without obtaining additional
financing. If operating revenues from product sales are not sufficient to fund
our operations, no assurance can be given that alternative sources of funding
could be obtained on acceptable terms, or at all. In addition, we have
historically compensated our executive officers, consultants and service
providers with our common stock. No assurance can be given that these persons
and entities will continue to accept our common stock as compensation. These
conditions raise substantial doubt about our ability to continue as a going
concern.
We continue to seek external sources of funding, including but not
limited to, incurring debt, the sale of assets or stock, and/or other strategic
transactions sufficient to provide short-term funding, and potentially achieve
our long-term strategic objectives. In addition, upon the effectiveness of the
registration statement of which this
26
prospectus is a part, we intend to sell our common stock, or other equity
securities pursuant to this prospectus and any applicable prospectus supplement,
in an attempt at furthering our long term objectives.
If we do not receive sufficient financing we may incur material harm to
our business, operations or financial conditions. We are currently speaking with
potential investors, however, no assurance can be given that any investment will
be consummated or any alternative sources of funding can be obtained on
acceptable terms, or at all. These conditions, combined with our historical
operating losses and our deficits in stockholders' equity and working capital,
raise substantial doubt about our ability to continue as a going concern.
OFF-BALANCE SHEET ARRANGEMENTS
At September 30, 2004 and 2003 and May 31, 2004, we did not have any
relationships with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or special purpose entities,
which would have been established for the purpose of facilitating off-balance
sheet arrangements or other contractually narrow or limited purposes. As such,
we are not exposed to any financing, liquidity, market or credit risk that could
arise if we had engaged in such relationships.
CONTRACTUAL OBLIGATIONS
In connection with our purchase of the Technologies (as defined in Note
2 to our consolidated financial statements), on June 30, 2003 we entered into a
ten-year note for $1,220,309. The note is to be repaid based on our sales, i.e.
at 5% of the first $3,000,000 of sales, and at 2.5% on sales in excess of that
amount, until paid in full. The note payment is to be paid monthly and the note
bears interest at the rate of 7% per annum. The note may be converted at the
option of the holder into our common stock at a conversion price, which is
equivalent to 80% of the market price, based on the average bid price for 30
days immediately preceding the date of conversion. On January 2, 2003 the
holder, Mr. Himmah, our Chief Consulting Scientist, converted $1,000,000 of the
note for 1,000,000 shares of our common stock. The balance of the note at
September 30, 2004 and May 31, 2004 was $309,683.
At September 30, 2004 there remained $8,633 past due on the note. The
note has certain default provisions and stated period of time to correct the
default. Mr. Himmah has not formally notified us of default.
On June 14, 2003 we borrowed $14,500 from an individual. The note is
due June 14, 2008, unsecured, and does not call for any payments until maturity.
The interest rate is 7.5% per annum. The balance of the note at September 30,
2004 and May 31, 2004 was $14,500.
Because of the repayment schedule of the June 30, 2003 note and our
inability to accurately forecast future sales, maturities on long-term debt
cannot be determined.
GOING CONCERN
Our independent auditor has expressed substantial doubt as to our
ability to continue as a going concern, in its report for the year ended May 31,
2004, based on significant operating losses that we incurred and the fact that
we do not have adequate working capital to finance our day-to-day operations.
We currently plan to raise additional capital through the public or
private placement of its common stock, including pursuant to this prospectus and
an applicable prospectus supplement, and/or private placement of debt or
convertible debentures in order to meet our ongoing cash needs. However, the
additional funding we require may not be available on acceptable terms or at all
and, if obtained, could result in significant dilution. Management also hopes to
begin to generate commercial orders for its SeaLife 1000 marine paint product
which would generate additional cash flow.
If we cannot obtain adequate funding or achieve revenues from the sale
of its products, we could be required to significantly curtail or even shutdown
our operations.
27
IMPAIRMENT OF GOODWILL
We have adopted SFAS No. 142 for all goodwill and other intangible
assets recognized in our statement of financial position as of May 31, 2004.
This standard changes the accounting for goodwill from an amortization method to
an impairment-only approach and introduces a new model for determining
impairment changes. We began amortizing our technologies in the fourth quarter
of the fiscal year ending May 31, 2004. The technologies are being amortized
over 15 years. This is Management's best estimate of the technology's life at
this time.
RECENT ACCOUNTING PRONOUNCEMENTS
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies under what circumstances a contract with initial investments meets the
characteristics of a derivative and when a derivative contains a financing
component. SFAS No. 149 is effective for contracts entered into or modified
after June 30, 2003. The adoption of SFAS No. 149 did not have a significant
effect on our financial statement presentation or disclosures.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". SFAS
No. 150 establishes standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with
characteristics of both liabilities and equity. SFAS No. 150 requires that an
issuer classify a financial instrument that is within its scope as a liability
(or an asset in some circumstances) because that financial instrument embodies
an obligation of the issuer. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003 and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. SFAS No.
150 is to be implemented by reporting the cumulative effect of a change in
accounting principle for financial instruments created before the issuance date
of SFAS No. 150 and still existing at the beginning of the interim period of
adoption. Restatement is not permitted. The adoption of SFAS No. 150 did not
have a significant effect on our financial statement presentation or
disclosures.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 elaborates on the
existing disclosure requirements for most guarantees, including loan guarantees
such as standby letters of credit. It also clarifies that at the time a company
issues a guarantee, the company must recognize an initial liability for the fair
market value of the obligations it assumes under that guarantee and must
disclose that information in its interim and annual financial statements. The
initial recognition and measurement provisions of FIN 45 apply on a prospective
basis to guarantees issued or modified after December 31, 2002. We implemented
the disclosure provisions of FIN 45 in its December 31, 2002 consolidated
financial statements and the measurement and recording provisions of FIN 45
effective January 1, 2003. The implementation of the provisions of FIN 45 did
not have a significant effect on our consolidated financial statement
presentation or disclosures.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN 46"), which clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements",
relating to consolidation of certain entities. In December 2003, the FASB issued
a revised version of FIN 46 ("FIN 46R") that replaced the original FIN 46. FIN
46R requires identification of a company's participation in variable interest
entities ("VIEs"), which are defined as entities with a level of invested equity
that is not sufficient to fund future activities to permit it to operate on a
standalone basis. For entities identified as a VIE, FIN 46R sets forth a model
to evaluate potential consolidation based on an assessment of which party to the
VIE (if any) bears a majority of the exposure to its expected losses, or stands
to gain from a majority of its expected returns. FIN 46R also sets forth certain
disclosures regarding interests in VIEs that are deemed significant, even if
consolidation is not required. We are not currently participating in, or
invested in any VIEs, as defined in FIN 46R. The implementation of the
provisions of FIN 46R in 2003 did not have any effect on our consolidated
financial statement presentation or disclosures.
28
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the name, age and position of each of
our executive officers and directors as of December 15, 2004.
NAME AGE POSITION HELD
- --------------- --- --------------------------------------------
Robert McCaslin 52 President, Chief Financial Officer, Director
J.P. Heyes 71 Vice-President, Secretary, Director
Barre Rorabaugh 63 President, Sealife Marine Products, Inc.(1)
(1) Sealife Marine Products, Inc. is our wholly-owned subsidiary.
ROBERT A. MCCASLIN
Mr. McCaslin owned, operated and served as a Director and President of
the privately held electronics manufacturing company REMCorp from 1996 through
2000. REMCorp was originally acquired to develop and manufacture several of Mr.
McCaslin's inventions. During 2001 Mr. McCaslin acted as a distributor for
products invented by Gael Himmah and was engaged in the testing of such products
internationally. In early 2002, Mr. McCaslin formed SeaLife Nevada for the
purpose of acquiring rights to certain products invented by Mr. Himmah and
served as President and a director of that Company until it was acquired by
Sealife Corporation in December of 2002, at which point Mr. McCaslin became
President and a director of SeaLife Corporation.
J. P. HEYES
Ms. Heyes served as a Senior Vice President at REMCorp from 1995-2000.
Among Ms. Heyes's primary responsibilities were negotiating manufacturing
contracts, business finance and developing a direct TV sales marketing program
for the company's products. Ms. Heyes was also responsible for contract
negotiations as well as implementing production and supervising off shore
manufacturing. During 2001 Ms. Heyes worked with Mr. McCaslin and acted as a
distributor for products invented by Gael Himmah and was engaged in the testing
of such products internationally. In early 2002, Ms. Heyes assisted Mr. McCaslin
in forming SeaLife Nevada for the purpose of acquiring rights to certain
products invented by Mr. Himmah and served as Secretary and a director of that
Company until it was acquired by Sealife Corporation in December of 2002, at
which point Ms. Heyes became Vice-President, Secretary and a director of SeaLife
Corporation.
BARRE RORABAUGH
Mr. Rorabaugh has served as President of SeaLife Marine Products, Inc.,
our indirect wholly-owned subsidiary, since June 2004. From April 1997 to
January 2001, Mr. Rorabaugh was Senior Vice President of Princeton Graphics
Systems, a computer monitor manufacturer and marketer. From November 2001 to
January 2003, Mr. Rorabaugh served as Chief Operating Officer and Chief
Financial Officer of International Medical Research, a nutritional supplement
company. Most recently, from February 2003 to May 2004, Mr. Rorabaugh served as
Chief Executive Officer and Vice-President, Finance of Neurosmith, a toy
company. Mr. Rorabaugh served as a director of Everest & Jennings from 1989 to
1993. Mr. Rorabaugh also served as a director of ProHealth, a nutritional
supplement company from 1999-2003 and Southwest Windpower, a manufacturer of
micro wind generators from 1999 to 2003.
29
SIGNIFICANT EMPLOYEES/CONSULTANTS
Gael C. Himmah is our Chief Consulting Scientist pursuant to a
Consulting Agreement dated June 30, 2002, as amended. Dr. Himmah founded Ecosys
International ("Ecosys") in 1984. We originally acquired most of our technology
from Ecosys. Ecosys is a worldwide environmental technologies resource company.
Ecosys formulates and markets highly innovative bio-tech products that provide
environmentally compatible pollution solutions, biodegrading ("cleaning")
contaminants such as gasoline, oil, diesel, toxic wastes, animal wastes,
municipal wastewater, pesticides, chemicals, etc. Ecosys also markets innovative
agricultural products formulated to increase crop production while requiring
significantly less water, fertilizers and pesticides. Ecosys products clean
toxic chemicals from soils, oceans, rivers and lakes. Ecosys markets products
extensively throughout the United States, Europe & Asia utilizing local
distributors and service companies. Ecosys conducts ongoing research and
development into environmentally enhancing bio-remediation products. Ecosys
products are federally and internationally registered and meet the guidelines of
the EPA and the USDA. Dr. Himmah received a B.S. in Bioscience from the
University of California Berkley and an honorary Ph.D. in Bioscience from upper
Iowa University in Fayette, Iowa.
BOARD COMPOSITION AND COMMITTEES
Our board of directors currently consists of two members. Each director
was elected either at a meeting of shareholders or by written consent of the
shareholders and serves until our next annual meeting or until his or her
successor is duly elected and qualified.
Our board does not have an audit committee, compensation committee, or
nominating and corporate governance committee. The functions customarily
delegated to these committees are performed by our full board of directors. We
intend to establish each of these committees following the expansion of our
board to include at least three directors who are independent directors under
the applicable rules of the SEC and NASDAQ.
DIRECTOR COMPENSATION
Our directors do not receive cash compensation for their services as
directors, but are reimbursed for their reasonable expenses incurred on our
behalf or in attending meetings.
30
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning all compensation
paid for services to us by our Executive Officers in all capacities for each of
our fiscal years ended May 31, 2003 and May 31, 2004, and for the seven-month
period ended December 31, 2004. No other executive officer received total annual
salary and bonus in excess of $100,000 during these periods.
7-MONTH
FISCAL PERIOD
YEAR ENDED ANNUAL COMPENSATION
NAME AND ENDED DECEMBER ---------------------------
PRINCIPAL POSITION MAY 31 31 SALARY(1) BONUS OTHER
- ------------------ ------ -------- ----------- ----- -----
Robert McCaslin ................ 2003 -- 0 0 0
Chief Executive Officer & 2004 -- $226,000(2) 0 0
Chief Financial Officer -- 2004 $116,667(3) 0 0
J.P. Heyes ..................... 2003 -- 0 0 0
Vice President & 2004 -- $226,000(2) 0 0
Secretary -- 2004 $ 58,334(3) 0 0
Barre Rorabaugh (3) ............ 2003 -- -- -- --
President of subsidiary, 2004 -- -- -- --
Sealife Marine Products, Inc. -- 2004 $119,312(4) 0 0
*Columns in the Summary Compensation Table that were not relevant to the
compensation paid to the named executive officers have been omitted.
(1) Each of Mr. McCaslin and Ms. Heyes elected to receive $40,000 of their
respective salaries for a portion of our fiscal year ending May 31, 2004,
in our common stock, which was issued to each executive officer at a price
of $0.30 per share upon the filing of a Registration Statement on Form S-8
by us on October 17, 2003.
Each of Mr. McCaslin and Ms. Heyes also deferred, at their election,
payment of $32,250 due under their respective Employment Agreements for our
fiscal year ending May 31, 2004, which Employment Agreements are described
under the heading "Employment Contracts and Change of Control Agreements"
below.
(2) Comprised of shares valued at $40,000 as described in Note (1) above,
shares valued at $60,000 as described below, shares valued at $93,750 as
described below, and $32,250 of deferred compensation as described in Note
(1).
Each of Mr. McCaslin and Ms. Heyes was issued 300,000 shares of our common
stock on January 10, 2004, in payment of our debt to them for accrued
salaries for Oct 1, 2003 through Dec 31, 2003, which were each valued at
$60,000. The shares were issued to the executive officers at $0.20 per
share, a 33% discount on the $0.56 closing price of the shares on the
Over-the-Counter Bulletin Board on November 19, 2003, the date the officers
agreed to accept our common shares in lieu of cash compensation. The
closing price of the shares on the Over-the-Counter Bulletin Board on
January 9, 2004 was $0.56 per share.
Each of Mr. McCaslin and Ms. Heyes was issued 206,044 shares of our common
stock on March 26, 2004 in payment of our debt to them for accrued salaries
under their Employment Agreements, which were valued at approximately
$93,750. The shares were issued to Mr. McCaslin and Ms. Heyes at $0.455 per
share. The closing price of the shares on the Over-the-Counter Bulletin
Board on March 26, 2004 was $0.97 per share.
31
(3) Comprised solely of deferred compensation due under Employment Agreements
with Mr. McCaslin and Ms. Heyes.
(4) Mr. Rorabaugh began his employment with us in June 2004. Mr. Rorabaugh's
salary consists of shares of our common stock valued at $119,312 issued
pursuant to the terms of our Employment Agreement with Mr. Rorabaugh.
OPTION GRANTS
We did not grant options to purchase common stock during our fiscal
years ending May 31, 2002 and May 31, 2003, or during the seven-month period
ending September 30, 2004.
2004 STOCK AWARD PLAN
Our 2004 Stock Award Plan was adopted and became effective in November,
2004. A total of 400,000 shares of common stock have been reserved for issuance
upon exercise of awards granted under the 2004 Stock Award Plan. Any shares of
common stock subject to an award, which for any reason expires or terminates
unexercised, are again available for issuance under the 2004 Stock Award Plan.
As of January 18, 2004, no awards had been granted under our 2004 Stock Award
Plan.
Our 2004 Stock Award Plan will terminate after 10 years from the date
on which our board approved the plan, unless it is terminated earlier by our
board. The plan authorizes the award of common stock and derivative securities
(which may include stock bonuses).
Our 2004 Stock Award Plan is administered by our full board of
directors. Following the expansion of our board of directors, we intend to form
a compensation committee, all of the members of which will be independent
directors under applicable federal securities laws and outside directors as
defined under applicable federal tax laws. Following its formation, the
compensation committee will have the authority to construe and interpret the
plan, grant awards and make all other determinations necessary or advisable for
the administration of the plan.
Our 2004 Stock Award Plan provides for the grant of both incentive
stock options that qualify under Section 422 of the Internal Revenue Code and
nonqualified stock options. Incentive stock options may be granted only to
employees of ours or any parent or subsidiary of ours. All awards other than
incentive stock options may be granted to our employees, officers, directors,
consultants, independent contractors and advisors of ours or any parent or
subsidiary of ours, provided the consultants, independent contractors and
advisors render services not in connection with the offer and sale of securities
in a capital-raising transaction. The exercise price of incentive stock options
must be at least equal to the fair market value of our common stock on the date
of grant. The exercise price of incentive stock options granted to 10%
shareholders must be at least equal to 110% of that value. The exercise price of
nonqualified stock options will be determined by our compensation committee when
the options are granted.
Awards granted under our 2004 Stock Award Plan may not be transferred
in any manner other than by will or by the laws of descent and distribution or
as determined by our compensation committee.
The purchase price for restricted stock will be determined by our
compensation committee at the time of grant. Stock bonuses may be issued for
past services or may be awarded upon the completion of services or performance
goals.
If we are subject to a change in control transaction, all outstanding
awards may be assumed or replaced with a substitute grant by the successor
company, if any. If the outstanding awards are not assumed by a successor
company, if any, then all remaining unexercised options shall become vested and
fully exercisable.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL AGREEMENTS
Each of the named executive officers is party to an employment
agreement with Sealife Corporation or its wholly-owned subsidiary, Sealife
Marine Products, Inc.
32
ROBERT MCCASLIN
In January, 2004, we entered into an employment agreement with Mr.
McCaslin as President and Chief Executive Officer, and entered into an amendment
to such employment agreement in June, 2004. Under his employment agreement, Mr.
McCaslin is entitled to an initial salary of $200,000 per year, and may be
awarded an annual bonus, in the sole discretion of Sealife. Mr. McCaslin's
compensation is reviewed annually by our Board at the beginning of each fiscal
year. The term of Mr. McCaslin's employment is six years, however, under
California law, we and Mr. McCaslin may terminate Mr. McCaslin's employment
agreement at any time for any legal reason. Upon termination for reasons other
than cause, Mr. McCaslin may be entitled to severance payments of up to eighteen
(18) months of base salary if Mr. McCaslin is terminated as a result of a
permanent disability, and severance payments of up to six (6) months if Mr.
McCaslin is terminated for failure to fulfill job functions.
J.P. HEYES
In January, 2004, we entered into an employment agreement with Ms.
Heyes as Vice President, and entered into an amendment to such employment
agreement in June, 2004. Under her employment agreement, Ms. Heyes is entitled
to a salary of $100,000 per year, and may be awarded an annual bonus, in the
sole discretion of Sealife. Ms. Heyes's compensation is reviewed annually by our
Board at the beginning of each fiscal year. The term of Ms. Heyes' employment is
five years, however, under California law, we and Ms. Heyes may terminate Ms.
Heyes's employment agreement at any time for any legal reason. Upon termination
for reasons other than cause, Ms. Heyes may be entitled to severance payments of
up to eighteen (18) months of base salary if Ms. Heyes is terminated as a result
of a permanent disability, and severance payments of up to six (6) months if Ms.
Heyes is terminated for failure to fulfill job functions.
BARRE RORABAUGH
In June, 2004 our wholly-owned subsidiary, Sealife Marine Products,
Inc., entered into an employment agreement with Mr. Rorabaugh as President.
Under his employment agreement, Mr. Rorabaugh is entitled to a salary of One
Hundred Fifty Thousand Dollars per year, subject to adjustment, upward but not
downward, by the Board on an annual basis at the beginning of each fiscal year.
Mr. Rorabaugh's base salary is payable in cash and shares of our common stock,
which shares are issued to the Executive without restriction pursuant to a Form
S-8 Registration Statement. Mr. Rorabaugh is also entitled to a performance
bonus determined in accordance with a management incentive plan to be agreed
upon between Mr. Rorabaugh and our Board of Directors on an annual basis. Mr.
Rorabaugh's employment agreement terminates on December 31, 2008, however, under
California law, we and Mr. Rorabaugh may terminate Mr. Rorabaugh's employment
agreement at any time for any reason.
TERMINATION AND SEVERANCE PROVISIONS
If Mr. Rorabaugh is terminated "without cause," i.e. for any reason
other than (i) death, (ii) permanent disability, (iii) any act or omission
knowingly undertaken or omitted by Mr. Rorabaugh with the intent of causing
damage to us, our properties, assets or business or our shareholders, officers,
directors or employees; (iv) any act of Mr. Rorabaugh involving a material
personal profit to Mr. Rorabaugh involving our properties, assets or funds or
any of our subsidiaries, including, without limitation, any fraud,
misappropriation or embezzlement; (v) Mr. Rorabaugh's consistent failure to
perform his normal duties or any obligation under any provision of this
Agreement, in either case, as directed by the Board and following written notice
by the Board and a reasonable opportunity to cure by him; (vi) conviction of, or
pleading nolo contendere to, (A) any crime or offense involving monies or other
property of ours; (B) any felony offense; or (C) any crime of moral turpitude;
or (vii) the chronic or habitual use or consumption of drugs or alcoholic
beverages, then we must continue to pay Mr. Rorabaugh's then-current base salary
(A) for a period of two (2) months if the effective date of such termination
occurs prior to the three (3)-month anniversary of the effective date of the
agreement; (B) for a period of four (4) months if the effective date of such
termination occurs between the three (3)-month and the six (6)-month
anniversaries of the effective date of the agreement; (C) for a period of six
(6) months if the effective date of such termination occurs between the six
(6)-month and the twelve (12)-month anniversary of the effective date of the
agreement; and (D) for a period of twelve (12) months if the effective date of
such termination occurs after the twelve (12)-month anniversary of the effective
date of the agreement; and Mr. Rorabaugh shall retain only those incentive
options that have vested prior to the effective date of such termination.
Notwithstanding the
33
foregoing, in the event that Mr. Rorabaugh's employment is terminated "without
cause" within one (1) year following the Effective Date, the severance payment
described above will be paid (i) one-half in the form of our common stock having
a value at the time of issuance, based on the average trading price of our
common stock, as quoted on the Over The Counter Bulletin Board, for the twenty
(20) consecutive trading days immediately preceding the date of issuance of such
shares of our common stock, of not less than one-half of the dollar amount of
the applicable severance payment to be issued to Mr. Rorabaugh without
restriction pursuant to a Form S-8 Registration Statement, and (ii) one-half in
the form of our common stock having a value at the time of issuance, based on
the average trading price of our common stock, as quoted on the Over-The-Counter
Bulletin Board, for the twenty (20) consecutive trading days immediately
preceding the date of issuance of such shares of common stock, of not less than
one-half of the dollar amount of the applicable severance payment the resale of
which is subject to the restrictions under Rule 144 promulgated under the
Securities Act of 1933, as amended. We are not obligated to pay Mr. Rorabaugh
any amounts following his termination without cause from and after any time that
Mr. Rorabaugh accepts an employment or consulting position with any person or
entity that is determined by the Board, in the exercise of its reasonable
discretion, to be our competitor.
GAEL HIMMAH, CHIEF CONSULTING SCIENTIST
We entered into a Consulting Agreement with Gael Himmah, our Chief
Consulting Scientist, doing business as Aspen Laboratories, Ecosys International
and Sealife Marine Coatings, on January 1, 2003, and amended the agreement in
August, 2004. Pursuant to the consulting agreement Mr. Himmah is to be paid
$12,500 per month in exchange for providing consulting services to us associated
with development, testing, and marketing of our products. In lieu of cash, Mr.
Himmah has consistently elected to be paid in our common stock. The consulting
agreement terminates January 1, 2008, unless earlier terminated.
As of January 1, 2005, we were $12,500 in arrears in payments owed to
Mr. Himmah under the Consulting Agreement, and an additional $120,000 is claimed
by Mr. Himmah as due and owing for services rendered prior to 2003.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our Articles of Incorporation are silent as to indemnification of our
officers and directors. However, Our bylaws require Sealife Corporation to
indemnify its directors and officers to the fullest extent not prohibited by the
Delaware General Corporation Law; provided, however, that we may modify the
extent of such indemnification by individual contracts with our directors and
officers; and, provided further, that we are not required to indemnify any
director or officer in connection with any proceeding (or party thereof)
initiated by such person unless (i) such indemnification is expressly required
to be made by law, (ii) the proceeding was authorized by the Board of Directors
of the corporation, or (iii) such indemnification is provided by us, in our
discretion, pursuant to the powers vested in us under the Delaware General
Corporation Law.
A shareholder's investment may be adversely affected to the extent we
pay the costs of settlement and damage awards against directors and officers as
required by these indemnification provisions. At present, there is no pending
litigation or proceeding involving any of our directors, officers or employees
regarding which indemnification by us is sought, nor are we aware of any
threatened litigation that may result in claims for indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling us pursuant
to the foregoing provisions, we have been informed that, in the opinion of the
SEC, this indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
34
PRINCIPAL AND SELLING SHAREHOLDERS
The following table presents information regarding the beneficial
ownership of our common stock as of January 15, 2004 and as adjusted to reflect
the sale of the common stock in this offering by:
o each of the executive officers listed in the summary
compensation table;
o each of our directors;
o all of our directors and executive officers as a group;
o each shareholder known by us to be the beneficial owner of
more than 5% of our common stock; and
o each of the Selling Shareholders.
Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting or investment power with respect to
securities. Unless otherwise indicated below, to our knowledge, the persons and
entities named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property laws
where applicable. Shares of our common stock that may be acquired upon exercise
of warrants that are currently exercisable or exercisable within 60 days of
January 15, 2004 are deemed to be outstanding and to be beneficially owned by
the person holding the options for the purpose of computing the percentage
ownership of that person but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person.
The information presented in this table is based on 17,249,947 shares
of our common stock outstanding on January 11, 2005. Unless otherwise indicated,
the address of each of the individuals and entities named below is c/o Sealife
Corporation, 54601 W. Slauson, Culver City, CA 90293.
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING AFTER OFFERING
----------------------- NUMBER OF ------------------------
PERCENTAGE SHARES PERCENTAGE
OF SHARES BEING OF SHARES
NAME OF BENEFICIAL OWNER NUMBER OUTSTANDING OFFERED NUMBER OUTSTANDING
- ----------------------------------- --------- ----------- --------- --------- -----------
EXECUTIVE OFFICERS AND DIRECTORS:
Robert McCaslin ................... 3,722,500 21.5% 0 3,722,500 21.5%
J.P. Heyes ........................ 1,595,044 9.2% 0 1,595,044 9.2%
Barre Rorabaugh ................... 615 * 0 615 *
All 3 directors and executive
officers as a group ............ 5,318,159 30.8% 0 5,318,159 30.8%
5% SHAREHOLDERS:
Gael Himmah ....................... 1,542,356 8.9% 0 1,542,356 8.9%
SELLING SHAREHOLDERS:
James M. Barron (1) ............... 235,000 1.4% 225,000 10,000 *
Stephen P. Barron (2) ............. 225,000 1.4% 225,000 0 *
Joseph P. Regoli (3) .............. 1,003,301 5.6% 225,000 63,301 *
35
Michael Sahl (4) .................. 816,000 4.6% 200,000 616,000 *
Brokers Unlimited, Inc.(5) ........ 725,000 4% 725,000 0 *
All Selling Shareholders as a group 2,279,301 12.4% 1,600,000 689,301 3.9%
TOTAL: ............................ 9,139,816 49.6% 1,600,000 7,539,816 43.7%
<FN>
* Less than 1%
(1) 165 Camille Court, Alamo, California 94507. Includes 10,000 shares of
common stock held by the James A. Barron IRA over which Mr. Barron has
voting and investment power
(2) 403 Sprucewood Ct., Pleasant Hill, CA 94523.
(3) 1821 Glenhaven Ave., Walnut Creek, California 94595. Consists of (i)
242,587 common shares, (ii) 35,714 shares which may be issued upon
exercise of warrants, and (iii) 725,000 shares of common stock held, or
which may be issued to Brokers Unlimited, Inc. over which Mr. Regoli
has voting and investment power.
(4) P.O. Box 435, Point Arena, California 95468. Consists of (i) 416,000
shares of common stock; and (ii) 400,000 shares of common stock which
may be issued upon exercise of warrants.
(5) 1521 Locust St., Walnut Creek, CA 94596. Consists of (i) 111,500 shares
of common stock; and (ii) 613,500 shares of common stock which we may
issue to the Selling Shareholder pursuant to the terms of that certain
Consulting Agreement between us and the Selling Shareholder effective
November 23, 2004. Mr. Joseph Regoli exercises voting and investment
authority over the shares held by this Selling Shareholder.
</FN>
36
RELATED PARTY TRANSACTIONS
Other than the employment arrangements described above in "Executive
Compensation" and the transactions described below, since April 4, 2002
(inception) there has not been, nor is there currently proposed, any transaction
or series of similar transactions to which we were or will be a party:
o in which the amount involved exceeds $60,000; and
o in which any director, executive officer, Selling Shareholder
named in this prospectus, other shareholder of more than 5% of
our common stock or any member of their immediate family had
or will have a direct or indirect material interest.
TRANSACTIONS WITH OFFICERS AND DIRECTORS
On September 17, 2003 we entered into an agreement with Gael Himmah to
purchase all proprietary rights and interest in four products and processes
developed by him. The purchase price was $400,000 and was paid with 400,000
shares of our common stock.
In connection with purchase of certain technologies from Division G,
Inc. on June 30, 2002, we issued a ten-year note for $1,220,309 to Gael Himmah.
The note is to be paid based on our sales, i.e. at 5% of the first $3,000,000 of
sales, and at 2.5% on the sales in excess of that amount, until paid in full. In
addition to payment based on our sales, the note required monthly payments and
the note bears interest at the rate of 7% per annum. The note may be converted
at the option of the holder into our common stock at a conversion price, which
is equivalent to 80% of the market price, based on the average bid price for the
30 days immediately preceding the date of conversion. On January 2, 2003, Mr.
Himmah converted $1,000,000 of the note for 1,000,000 shares of SeaLife
Corporation common stock. The balance of the note at May 31, 2004 and 2003
including accrued interest was $303,816 and $283,334 respectively.
TRANSACTIONS WITH SELLING SHAREHOLDERS
On November 23, 2004, we and our wholly-owned subsidiary Sealife Marine
Products, Inc. ("SeaLife Marine"), entered into a consulting agreement (the
"Consulting Agreement") with Brokers Unlimited, Inc. ("BUI") pursuant to which
BUI will provide product testing services, advertise and market our products and
participate in the government approval process for our products in Europe.
Pursuant to the Consulting Agreement, BUI, and certain of its equity owners,
Joseph Regoli, Stephen Barron and James Barron, were issued an aggregate of
786,500 shares of common stock of the Company in connection with various
services previously performed on our behalf and SeaLife Marine, including
testing of SeaLife Marine products related to required government approvals,
trade show management, and the development of a European distribution network,
and in exchange for the future services to be provided pursuant to the
Consulting Agreement, BUI will be issued additional shares of our common stock
having an aggregate value of $115,000, which shares will be issuable in monthly
installments over the eight month term of the Consulting Agreement.
We and BUI are currently also parties to that certain Sales Force
Agreement dated as of January 21, 2004, pursuant to which BUI functions as
SeaLife Marine's worldwide sales agent.
In October 2003, we issued 200,000 shares of our common stock and
warrants to purchase 400,000 shares of our common stock for an aggregate
purchase price of $50,000 to Michael Sahl pursuant to the terms of a
subscription agreement. Warrants to purchase 200,000 shares of our common stock
were exercisable for $0.75 per share and warrants to purchase an additional
200,000 shares of our common stock were exercisable for $1.25 per share. All of
the warrants expired on November 23, 2004.
In January 2004 we issued 17,857 shares of our common stock and
warrants to purchase 35,714 shares of our common stock for an aggregate purchase
price of $50,000 to Mr. Regoli. Warrants to purchase 17,857 shares of our common
stack exercisable for $0.75 per share and warrants to purchase an additional
17,857 shares of our common stock were exercisable for $1.25 per share. All of
the warrants expired on January 3, 2005.
37
DESCRIPTION OF CAPITAL STOCK
As of January 18, 2004, our authorized capital stock consisted of:
o 100,000,000 shares of common stock, par value $0.0001 per
share; and
o 10,000,000 shares of preferred stock, par value $0.0001 per
share.
As of January 11, 2005, there were outstanding:
o 17,249,947 shares of common stock held by approximately 112
shareholders of record;
DESCRIPTION OF THE COMMON STOCK WE MAY OFFER
The following description of our common stock, together with the
additional information included in any applicable prospectus supplements,
summarizes the material terms and provisions of our common stock but is not
complete. For the complete terms of our common stock, please refer to our
certificate of incorporation, as amended, and bylaws that are incorporated by
reference into the registration statement which includes this prospectus.
We will describe in a prospectus supplement the specific terms of any
common stock we may offer pursuant to this prospectus. If indicated in a
prospectus supplement, the terms of such common stock may differ from the terms
described below.
COMMON STOCK
DIVIDEND RIGHTS
Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of our common stock
are entitled to receive dividends out of funds legally available at the times
and in the amounts that our board may determine.
VOTING RIGHTS
Each holder of common stock is entitled to one vote for each share of
common stock held on all matters submitted to a vote of shareholders. Cumulative
voting for the election of directors is not provided for in our articles of
incorporation, which means that the holders of a majority of the voting shares
voted can elect all of the directors then standing for election.
NO PREEMPTIVE OR SIMILAR RIGHTS
Holders of our common stock do not have preemptive rights, and our
common stock is not convertible or redeemable.
RIGHT TO RECEIVE LIQUIDATION DISTRIBUTIONS
Upon our dissolution, liquidation or winding-up, the assets legally
available for distribution to our shareholders are distributable ratably among
the holders of our common stock, subject to the preferential rights and payment
of liquidation preferences, if any, on any outstanding shares of convertible
preferred stock.
38
PREFERRED STOCK
AUTHORIZED BUT UNDESIGNATED PREFERRED STOCK
We are authorized, subject to limitations prescribed by Delaware law,
to issue preferred stock in one or more series, to establish from time to time
the number of shares to be included in each series, to fix the designation,
powers, preferences and rights of the shares of each series and any of its
qualifications, limitations or restrictions. Our board can also increase or
decrease the number of shares of any series, but not below the number of shares
of that series then outstanding. No shares of preferred stock are currently
outstanding. Our board may authorize the issuance of preferred stock with voting
or conversion rights that could adversely affect the voting power or other
rights of the holders of the common stock. The issuance of preferred stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, have the effect of delaying,
deferring or preventing a change in control of Sealife Corporation and may
adversely affect the market price of our common stock and the voting and other
rights of the holders of common stock. We have no current plan to issue any
shares of preferred stock.
ANTI-TAKEOVER PROVISIONS
Certain provisions of our certificate of incorporation and Delaware law
may have the effect of delaying, deferring or discouraging another person from
acquiring control of Sealife.
CHARTER AND BYLAW PROVISIONS
Our certificate of incorporation, as amended, allows our Board to issue
10,000,000 shares of Preferred Stock, in one or more series and with such rights
and preferences including voting rights, without further shareholder approval.
In the event that the Board designates additional series of preferred stock with
rights and preferences, including super-majority voting rights, and issues such
preferred stock, the preferred stock could make our acquisition by means of a
tender offer, a proxy contest or otherwise, more difficult, and could also make
the removal of incumbent officers and directors more difficult. As a result,
these provisions may have an Anti-Takeover effect. The preferred stock
authorized in our certificate of incorporation, as amended, may inhibit changes
of control that are not approved by our Board. These provisions could limit the
price that future investors might be willing to pay in the future for our common
stock. This could have the effect of delaying, deferring or preventing a Change
in Control of the Company. The issuance of preferred stock could also
effectively limit or dilute the voting power of our shareholders. Accordingly,
such provisions of our certificate of incorporation, as amended, may discourage
or prevent an acquisition or disposition of our business that could otherwise be
in the best interest of our shareholders.
In addition, our certificate of incorporation, as amended, requires
that shareholder action be taken at an annual or special meeting of
shareholders, and prohibits shareholder action by written consent. This
provision may have an Anti-Takeover effect by preventing even majority
shareholders from taking action other than at an annual or special meeting of
shareholders at which the proposal is submitted to shareholders in accordance
with the advance notice provisions of our bylaws.
DELAWARE LAW
In addition to the provisions of its bylaws, we are subject to the
provisions of Section 203 of the Delaware General Corporation Law. In general,
the statute prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless
- prior to that date, the board of directors of the corporation
approved either the business combination or the transaction
that resulted in the stockholder becoming an interested
stockholder;
- upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding for purposes of
39
determining the number of shares outstanding those shares
owned by persons who are directors and also officers and by
excluding employee stock plans in which employee participants
do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender
or exchange offer; or
- on or subsequent to that date, the business combination is
approved by the board of directors of the corporation and
authorized at an annual or special meeting of stockholders,
and not by written consent, by the affirmative vote of at
least 66 2 / 3 % of the outstanding voting stock that is not
owned by the interested stockholder.
Section 203 defines "business combination" to include the following:
- any merger or consolidation involving the corporation and the
interested stockholder;
- any sale, transfer, pledge or other disposition of 10% or more
of the assets of the corporation involving the interested
stockholder.
- subject to certain exceptions, any transaction that results in
the issuance or transfer by the corporation of any stock of
the corporation to the interested stockholder;
- any transaction involving the corporation that has the effect
of increasing the proportionate share of the stock of any
class or series of the corporation beneficially owned by the
interested stockholder; or
- the receipt by the interested stockholder of the benefit of
any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation.
In general, Section 203 defines an interested stockholder as any entity
or person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by any of these entities or persons.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is U.S. Stock
Transfer Corporation.
LISTING
Our common stock is quoted on the Over-The-Counter Bulletin Board under
the trading symbol "SLIF."
40
PLAN OF DISTRIBUTION
SELLING SHAREHOLDERS
We are registering the shares of common stock, in part, on behalf of
the Selling Shareholders. Sales of shares may be made by Selling Shareholders,
including their respective donees, transferees, pledgees or other
successors-in-interest directly to purchasers or to or through underwriters,
broker-dealers or through agents. Sales may be made from time to time on the OTC
Bulletin Board or any exchange upon which our shares may trade in the future, in
the over-the-counter market or otherwise, at market prices prevailing at the
time of sale, at prices related to market prices, or at negotiated or fixed
prices. The shares may be sold by one or more of, or a combination of, the
following:
o a block trade in which the broker-dealer so engaged will
attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the
transaction (including crosses in which the same broker acts
as agent for both sides of the transaction);
o purchases by a broker-dealer as principal and resale by such
broker-dealer, including resales for its account, pursuant to
this prospectus;
o ordinary brokerage transactions and transactions in which the
broker solicits purchases;
o through options, swaps or derivatives;
o in privately negotiated transactions;
o in making short sales or in transactions to cover short sales;
o put or call option transactions relating to the shares; and
o any other method permitted under applicable law.
The Selling Shareholders may effect these transactions by selling
shares directly to purchasers or to or through broker-dealers, which may act as
agents or principals. These broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the Selling Shareholders and/or
the purchasers of shares for whom such broker-dealers may act as agents or to
whom they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The Selling
Shareholders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their securities.
The Selling Shareholders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with those
transactions, the broker-dealers or other financial institutions may engage in
short sales of the shares or of securities convertible into or exchangeable for
the shares in the course of hedging positions they assume with the Selling
Shareholders. The Selling Shareholders may also enter into options or other
transactions with broker-dealers or other financial institutions which require
the delivery of shares offered by this prospectus to those broker-dealers or
other financial institutions. The broker-dealer or other financial institution
may then resell the shares pursuant to this prospectus (as amended or
supplemented, if required by applicable law, to reflect those transactions).
The Selling Shareholders and any broker-dealers that act in connection
with the sale of shares may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act of 1933, and any commissions received by
broker-dealers or any profit on the resale of the shares sold by them while
acting as principals may be deemed to be underwriting discounts or commissions
under the Securities Act. The Selling Shareholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the shares against liabilities, including liabilities arising under the
Securities Act. We have agreed to indemnify each of the Selling Shareholders and
each selling security holder has agreed, severally and not jointly, to
41
indemnify us against some liabilities in connection with the offering of the
shares, including liabilities arising under the Securities Act.
The Selling Shareholders will be subject to the prospectus delivery
requirements of the Securities Act. We have informed the Selling Shareholders
that the anti-manipulative provisions of Regulation M promulgated under the
Securities Exchange Act of 1934 may apply to their sales in the market.
Selling Shareholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of Rule 144.
Upon being notified by a selling security holder that a material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, we will file a supplement to
this prospectus, if required pursuant to Rule 424(b) under the Securities Act,
disclosing:
o the name of each such selling security holder and of the
participating broker-dealer(s);
o the number of shares involved;
o the initial price at which the shares were sold;
o the commissions paid or discounts or concessions allowed to
the broker-dealer(s), where applicable;
o that such broker-dealer(s) did not conduct any investigation
to verify the information set out or incorporated by reference
in this prospectus; and
o other facts material to the transactions.
In addition, if required under applicable law or the rules or
regulations of the Commission, we will file a supplement to this prospectus when
a selling security holder notifies us that a donee or pledgee intends to sell
more than 500 shares of common stock.
We are paying all expenses and fees in connection with the registration
of the shares held by the Selling Shareholders. The Selling Shareholders will
bear all brokerage or underwriting discounts or commissions paid to
broker-dealers in connection with the sale of their shares.
The market price of our common stock, for purposes of calculating the
purchase price under the BUI Agreement is the volume weighted average trading
price per share (or "VWAP") of our common stock, as quoted on the
Over-the-Counter Bulletin Board, for the twenty (20) consecutive trading days
immediately preceding the date of issuance of such shares.
The table below sets forth the number of shares and the percentages of
our common stock that BUI would be issued going forward in exchange for services
valued at a total of $115,000, pursuant to the terms of the BUI Agreement if the
value of the stock, according to the formula contained in the BUI Agreement,
increased or decreased as shown in the table:
Percentage Increase or Percentage of
Decrease in January 13 Assumed Shares of Outstanding
Closing Price VWAP Common Stock Common Stock
- --------------------- --------------- ------------ ------------
+25% $0.39 294,872 1.7%
+50% $0.46 250,000 1.4%
+75% $0.54 212,963 1.2%
-25% $0.23 500,000 2.8%
-50% $0.16 718,750 4.0%
-75% $0.08 1,277,778 6.9%
42
SEALIFE CORPORATION SALES
We may sell the common stock registered hereby:
o through one or more underwriters or dealers,
o directly to purchasers, whether or not through agents, or
o through a combination of any of these methods of sale.
We may distribute the common stock from time to time in one or more
transactions at a fixed price or prices, which may be changed from time to time,
except that in no event will the common stock be issued at a price less than
$1.00 per share.
We will describe the method of distribution of the common stock in the
applicable prospectus supplement.
Underwriters, dealers or agents may receive compensation in the form of
discounts, concessions or commissions from us or our purchasers (as their agents
in connection with the sale of securities). These underwriters, dealers or
agents may be considered to be underwriters under the Securities Act of 1933. As
a result, discounts, commissions, or profits on resale received by the
underwriters, dealers or agents may be treated as underwriting discounts and
commissions. Each prospectus supplement will identify any such underwriter,
dealer or agent, and describe any compensation received by them from us. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Underwriters, dealers and agents may be entitled, under agreements
entered into with us, to indemnification by us against certain civil
liabilities, including liabilities under the Securities Act of 1933, or to
contribution with respect to payments made by the underwriters, dealers or
agents, under agreements between us and the underwriters, dealers and agents.
We may grant underwriters who participate in the distribution of
securities an option to purchase additional securities to cover over-allotments,
if any, in connection with the distribution. Underwriters or agents and their
associates may be customers of, engage in transactions with, or perform services
for us in the ordinary course of business.
In connection with the offering of the common stock, certain
underwriters and selling group members and their respective affiliates, may
engage in transactions that stabilize, maintain or otherwise affect the market
price of the applicable securities. These transactions may include stabilization
transactions effected in accordance with Rule 104 of Regulation M promulgated by
the SEC pursuant to which these persons may bid for or purchase securities for
the purpose of stabilizing their market price.
The underwriters in an offering of securities may also create a "short
position" for their account by selling more securities in connection with the
offering than they are committed to purchase from us. In that case, the
underwriters could cover all or a portion of the short position by either
purchasing securities in the open market following completion of the offering of
these securities or by exercising any over-allotment option granted to them by
us. In addition, any managing underwriter may impose "penalty bids" under
contractual arrangements with other underwriters, which means that they can
reclaim from an underwriter (or any selling group member participating in the
offering) for the account of the other underwriters, the selling concession for
the securities that are distributed in the offering but subsequently purchased
for the account of the underwriters in the open market. Any of the transactions
described in this paragraph or comparable transactions that are described in any
accompanying prospectus supplement may result in the maintenance of the price of
the securities at a level above that which might otherwise prevail in the open
market. None of the transactions described in this paragraph or in an
accompanying prospectus supplement are required to be taken by any underwriters
and, if they are undertaken, may be discontinued at any time.
Our common stock is listed on the Over-the-Counter Bulletin Board under
the symbol "SLIF." Any shares of common stock sold pursuant to a prospectus
supplement will be listed on Over-the-Counter Bulletin Board, subject to
official notice of issuance.
43
LEGAL MATTERS
Stubbs Alderton & Markiles, LLP, Encino, California, will pass upon the
validity of the common stock to be offered by this prospectus for us.
EXPERTS
The consolidated financial statements of Sealife Corporation as of May
31, 2004 and for the four month period ended September 30, 2004, included in
this prospectus have been so included in reliance on the report of
Pollard-Kelley Auditing Services, Inc., independent registered accountants,
given on the authority of said firm as experts in auditing and accounting.
Stubbs Alderton & Markiles, LLP will pass on the validity of the shares
of common stock offered hereby.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our bylaws include indemnification provisions under which we have
agreed to indemnify our directors and officers from and against certain claims
arising from or related to future acts or omissions as our directors or
officers. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. Statements made in this prospectus regarding the
contents of any contract or other document are summaries of the material terms
of the contract or document. With respect to each contract or document filed as
an exhibit to the registration statement, reference is made to the corresponding
exhibit. For further information pertaining to us and the common stock offered
by this prospectus, reference is made to the registration statement, including
the exhibits and schedules thereto, copies of which may be inspected without
charge at the public reference facilities of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of all or any portion of the registration
statement may be obtained from the SEC at prescribed rates. Information on the
public reference facilities may be obtained by calling the SEC at
1-800-SEC-0330. In addition, the SEC maintains a web site that contains reports,
proxy and information statements and other information that is filed through the
SEC's EDGAR System. The web site can be accessed at HTTP://WWW.SEC.GOV.
44
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
AUDITED FINANCIAL STATEMENTS:
Report of Independent Registered Public Accounting Firm..................F-2
Consolidated Balance Sheet at May 31, 2004 and May 31, 2003..............F-3
Consolidated Statement of Operations for the
year ended May 31, 2004, and the period from April 4, 2002
(inception) through May 31, 2004......................................F-4
Condensed Consolidated Statement of Changes in Stockholders'
Deficiency for the year ended May 31, 2004, and the period
from April 4, 2002 (inception) through May 31, 2004...................F-5
Consolidated Statement of Cash Flows for the
year ended May 31, 2004, and the period from April 4, 2002
(inception) through May 31, 2004......................................F-6
Notes to the Consolidated Financial Statements...........................F-7
UNAUDITED FINANCIAL STATEMENTS:
Consolidated Balance Sheet at September 30, 2004 and
May 31, 2004..........................................................F-14
Consolidated Statement of Income for the one month ended
June 30, 2004 and 2003, three months ended September 30, 2004
and 2003, and the four months ended September 30, 2004 and 2003.......F-15
Consolidated Changes in Stockholders' Equity for the period
ended September 30, 2004..............................................F-18
Consolidated Statement of Cash Flows for the four months ended
September 30, 2004 and September 30, 2003.............................F-19
Notes to the Consolidated Financial Statements...........................F-20
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Sealife Corporation and Subsidiaries
We have audited the accompanying balance sheets of Sealife Corporation and
Subsidiaries (a Development Stage Company) as of May 31, 2004 and 2003, and the
related statements of income, changes in stockholders' equity, and cash flows
for each of the two years in the period ended May 31, 2004. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conduct our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 audits provide a
reasonable basis for our opinion.
The Company has not generated significant revenues or profits to date. This
factor among others may indicate the Company will be unable to continue as a
going concern. The Company's continuation as a going concern depends upon its
ability to generate sufficient cash flow to conduct its operations and its
ability to obtain additional sources of capital and financing. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company at May 31, 2004 and
2003, and the results of its operations and it cash flows for each of the two
years in the period ended May 31, 2004, in conformity with U.S. generally
accepted accounting standards.
Pollard-Kelley Auditing Services, Inc.
Fairlawn, Ohio
August 28, 2004
F-2
SEALIFE CORPORATION
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2004
(audited)
SEALIFE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
May 31, 2004 and 2003
May 31, May 31,
2004 2003
----------- -----------
ASSETS
Current Assets
Cash ...................................... 34,056 558
Inventory ................................. 6,000 6,000
Prepaid expenses .......................... 403,332 --
----------- -----------
Total Current Assets ................... 443,388 6,558
Other Assets
Technology ................................ 1,735,309 1,335,309
Less: accumulated amortization ............ (189,512) (81,602)
----------- -----------
1,545,797 1,253,707
----------- -----------
Total Assets ........................... $ 1,989,185 $ 1,260,265
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable ............................. $ 130,000 $ --
Accounts payable .......................... 54,531 121,300
Accounts payable - shareholders ........... 61,130 63,693
Accrued wages ............................. 64,560 --
Accrued interest .......................... 4,584 --
Accrued payroll taxes ..................... 8,382 --
Current portion of long-term debt ......... 3,291 1,920
----------- -----------
Total Current Liabilities ............ 326,478 186,913
Long-Term Debt
Notes payable ............................. 315,025 281,414
Stockholders' Equity
Common stock .............................. 1,454 956
Additional paid in capital ................ 3,855,368 1,493,067
Retained deficit .......................... (2,509,140) (702,085)
----------- -----------
1,347,682 791,938
----------- -----------
Total Liabilities and Stockholders'
Equity ............................. $ 1,989,185 $ 1,260,265
=========== ===========
See accompanying notes and accountant's report.
F-3
SEALIFE CORPORATION
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS- (CONTINUED)
MAY 31, 2004
(audited)
SEALIFE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF INCOME
For the Years Ended June 30, 2004 and 2004 and for the
Period from April 4, 2002 (Date of Inception) Through May 31, 2004
(Since Inception)
MAY 31, MAY 31, SINCE
2004 2003 INCEPTION
----------- ----------- -----------
Sales .......................... $ 27,416 $ 38,402 $ 65,818
Cost of sales .................. 125,386 76,424 201,810
----------- ----------- -----------
Gross Profit ........... (97,970) (38,022) (135,992)
Sales and marketing ............ 26,712 58,618 85,330
General and administrative ..... 1,682,373 590,719 2,287,818
----------- ----------- -----------
1,709,085 649,337 2,373,148
----------- ----------- -----------
Net Loss ....................... $(1,807,055) $ (687,359) $(2,509,140)
=========== =========== ===========
See accompanying notes and accountant's report.
F-4
SEALIFE CORPORATION
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 2004
(audited)
SEALIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CHANGES OF STOCKHOLDERS' EQUITY
For the Period from April 4, 2002 (Date of Inception) to May 31, 2004
ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance at Inception . -- $ -- -- $ -- $ -- $ -- $ --
Stock for services -- -- 125,000 1,250 -- -- 1,250
Contributed capital -- -- 2,125,000 21,250 43,750 -- 65,000
Sale of stock ..... -- -- 81,500 815 80,685 -- 81,500
Net loss for the
period ......... -- -- -- -- -- (14,726) (14,726)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance at
June 30, 2003 ...... -- -- 2,331,500 23,315 124,435 (14,726) 133,024
Stock for services . -- -- 6,500 7 6,493 -- 6,500
Sale of stock ...... -- -- 179,200 179 179,021 -- 179,200
SeaLife merger/par
value change .... 2,000,000 200 4,109,646 (22,838) 17,089,260 (17,066,617) 5
Recapitalization ... -- -- -- -- (17,066,617) 17,066,617 --
Cancel of preferred (1,840,000) (184) -- -- 184 -- --
Conversion of
preferred ....... (160,000) (16) 1,600,000 160 (144) -- --
Stock for debt ..... -- -- 1,000,000 100 999,900 -- 1,000,000
Stock for services . -- -- 331,960 33 160,535 -- 160,568
Net loss for the
period .......... -- -- -- -- -- (687,359) (687,359)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance May 31, 2003 . -- -- 9,558,806 956 1,493,067 (702,085) 791,938
Stock for services . -- -- 4,261,088 426 1,833,134 -- 1,833,560
Stock for Technology -- -- 400,000 40 399,960 -- 400,000
Sale of stock ...... -- -- 316,261 32 129,207 -- 129,239
Net loss for the
period .......... -- -- -- -- -- (1,807,055) (1,807,055)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance May 31, 2004 . -- $ -- 14,536,155 $ 1,454 $ 3,855,368 $ (2,509,140) $ 1,347,682
============ ============ ============ ============ ============ ============ ============
See accompanying notes and accountant's report.
F-5
SEALIFE CORPORATION
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 2004
(audited)
SEALIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended June 30, 2004 and 2004 and for the
Period from April 4, 2002 (Date of Inception) Through May 31, 2004
(Since Inception)
May 31, May 31, Since
2004 2003 Inception
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss .................................... $(1,807,055) $ (687,359) $(2,509,140)
Adjustments to reconcile net loss to net
cash provided used in operating activities
Amortization ........................... 107,910 81,602 189,512
Stock for services expenses ............ 1,474,228 167,068 1,642,546
Changes in Current Assets and liabilities:
(Increase) in Inventories .............. -- (6,000) (6,000)
(Increase) in Prepaid expenses ......... (44,000) -- (44,000)
(Decrease) Increase in Accounts payables (66,769) 120,856 54,531
Increase in Accrued wages .............. 64,560 -- 64,560
Increase in Accrued interest ........... 39,566 63,025 102,591
Increase in Accrued payroll taxes ..... 8,382 63,025 8,382
----------- ----------- -----------
NET CASH (USED) BY
OPERATING ACTIVITIES .............. (223,178) (197,783) (497,018)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Technologies .................... -- -- (1,335,309)
----------- ----------- -----------
NET CASH (USED) BY
INVESTING ACTIVITIES .............. -- -- (1,335,309)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of Common stock ........................ 129,239 179,200 454,939
Increase in Notes payable ................... 130,000 130,000
Increase in Long-term debt .................. -- -- 1,220,309
(Decrease) Increase in Accounts payable SH .. (2,563) 63,693 61,130
----------- ----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES .............. 256,676 242,893 1,866,378
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH .................. 33,498 45,110 34,051
CASH AT BEGINNING OF PERIOD ...................... 558 18,468 --
CASH OBTAINED IN MERGER .......................... -- 5 5
----------- ----------- -----------
CASH AT END OF PERIOD ............................ $ 34,056 $ 63,583 $ 34,056
=========== =========== ===========
See accompanying notes and accountant's report.
F-6
SEALIFE CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2004
(audited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History:
SeaLife Corp., a Nevada corporation ("SeaLife Nevada"), was incorporated on
January 21, 2002. On February 4, 2002, SeaLife Nevada formed a wholly owned
subsidiary, SeaLife Marine Products, Inc., a California corporation. The
subsidiary was formed to concentrate on the marine product applications of the
Technologies owned.
On June 30, 2002, SeaLife Nevada entered into an agreement with the three
shareholders' of Division G, Inc. to exchange 100% of the stock of Division G,
Inc. for 2,100,000 million shares of SeaLife Nevada's common stock. The
agreement was to be effective July 1, 2002. At the time of acquisition, Division
G, Inc. assets consisted of ownership of all rights in perpetuity to
GreaseBeast(TM), a grease treatment and cleaner, Soil ResQ(TM), a soil
conditioning product, OilEx(TM), a soil detoxification and rebuilding product,
and MuniMix(TM) a sewer clean-up and detoxification product. All products were
in the early stages of development. Division G, Inc. had no liabilities at the
time of acquisition and remains dormant to this day.
On July 31, 2002, SeaLife Nevada formed a wholly owned subsidiary, Proterra
Technologies, Inc., a California corporation. The subsidiary was formed to
concentrate on agricultural product applications.
On December 20, 2002, SeaLife Nevada was acquired by SeaLife Corporation, a
Delaware corporation (formerly Integrated Enterprises, Inc.), a public reporting
corporation (the "Company"). The Company was a shell at the time of the
acquisition and therefore the acquisition was treated as a reverse merger
whereby the acquired company is treated as the acquiring company for accounting
purposes. At the same time as the merger, the Company affected a 15 to 1 reverse
stock split.
A corporate history of the Company is as follows:
Sealife Corporation, formerly Integrated Enterprises, Inc., formerly Vast
Technologies Holding Company, Inc., formerly Fraser Realty Group, Inc., is the
successor to Fraser Mortgage Investments (the Trust), an unincorporated
association in the form of a business trust organized in Ohio under the
Declaration of Trust dated May 7, 1969. At a special meeting of the shareholders
of the Trust held on August 28, 1984 a plan of reorganization was approved
pursuant to which:
F-7
SEALIFE CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 2004
(audited)
1. All of the assets of the Trust were sold to FRG;
2. FRG assumed all of the Trust's liabilities and obligations;
3. Each issued and outstanding share of the Trust was converted
into one share of FRG common stock; and
4. The Trust was terminated.
The purpose of the proposed reorganization was to convert the Trust to a
business organization taxable as an ordinary corporation, instead of a real
estate investment trust, under Federal income tax laws. Unless the context
otherwise requires, the term FRG includes its predecessor, the Trust.
FRG invested in real estate and mortgage loans. FRG was organized as a real
estate trust, primarily for the purpose of making passive investments in real
estate and passing through the income realized from such investments to its
shareholders. From its inception, FRG financed its real estate investment
operations principally through sale of common stock, and short-term debt
financing, including both bank borrowings and the issuance of commercial paper.
FRG saw its real estate investments evolve from principally short-term
construction loans to a mix of variable and fixed-rate mortgage loans of which a
significant portion consists of mortgage positions on improved and unimproved
land held by investors for development purposes. Accordingly, FRG's investments
in mortgage loans represent long-term assets with the realization dates
dependent upon the equity holder's ability to complete development projects or
obtain refinancing from other sources. At the same time, bank notes payable and
commercial paper outstanding were all short-term borrowings renewable at the
option of the note holders. FRG relied on these short-term borrowings, the
intermittent repayment of loans and the refinancing or sale of portfolio
investments in order to meet its current obligations. During fiscal 1989, cash
provided from these sources was wholly inadequate to provide working capital to
fund operations. Management was unable to secure additional financing or find
other means of obtaining needed cash in fiscal 1990 to permit FRG to meet its
current obligations. Accordingly, management determined that there was no reason
to continue operating and, thus, incurring further losses. FRG has been inactive
since 1990 and has not conducted any business since that time.
On August 4, 1998, the Chairman of the Board and President and with first
receiving the consent, approval and authorization of FRG's Board of Directors,
filed with the Secretary of State of Delaware for renewal, revival and
restoration of the Company's Certificate of Incorporation.
On October 27, 1999 the Company entered into an Acquisition Merger agreement
with a private company, Motorsports USA, Inc. The Company also effected a name
change at that time to Motorsports USA, Inc. With this transaction certain
assets became the property of the Company. However, the custody and control of
such assets were not perfected and the management of the private company
evidenced tentative compliance with SEC reporting requirements. This condition
was considered intolerable to the Company's Board of Directors and accordingly
on August 1, 2000 the transaction was rescinded. The Company also changed its
name on June 1, 2000 to Vast Technologies Holding Company. Accordingly the
enclosed financial statements were prepared as if the merger with Motorsports
USA, Inc. had not taken place.
On June 11, 2001 the Company changed its name to Integrated Enterprises, Inc.,
issued 12,000,000 shares of common stock for services and reverse split its
common Shares, one new common share for each ten old common shares with a par
value of $ 0.0001 per share.
On December 17, 2002, the Company acquired all of the issued and outstanding
shares of SeaLife Nevada in exchange for a substantial majority of the common
stock of the Company.
Basis of Consolidation:
The accompanying consolidated financial statements include the accounts of the
Company, SeaLife Nevada, a wholly-owned subsidiary of the Company, and SeaLife
Marine Products, Inc., Proterra Technologies, Inc. and
F-8
SEALIFE CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 2004
(audited)
Division G, Inc., SeaLife Nevada's three wholly-owned subsidiaries. All
significant inter-company accounts and transactions, if any, have been
eliminated in consolidation.
Cash and Cash Equivalents:
For the purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities to be cash equivalents.
Income Taxes:
The Company accounts for income taxes under a method which requires a company to
recognize deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in a company's financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statements carrying amounts and tax basis of assets and liabilities using
enacted tax rates. The Company presently prepares its tax return on the cash
basis and its financial statements on the accrual basis. No deferred tax assets
or liabilities have been recognized at this time, since the Company has shown
losses for both tax and financial reporting. The Company's net operating loss
carryforward at May 31, 2004 is approximately $2,250,000.
Amortization:
The Company provides for amortization of the technologies purchased, utilizing
the straight-line method to apportion costs over a 15 year estimated life.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Development Stage:
The Company is classified as a development stage entity since it devotes most of
its activities to establishing business and its principal activities have not
yet commenced.
F-9
SEALIFE CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 2004
(audited)
NOTE 2 - TECHNOLOGIES
SeaLife Marine entered into an asset purchase agreement to acquire certain
technologies from a third party developer on June 30, 2002. The purchase price
was $1,335,309. Under this purchase agreement the Company acquired the
following:
1- Patent application rights for EPA registration number 70214-1
and all modifications, enhancements and improvements thereon.
2- All rights in perpetuity in and to SeaLife 1000, SeaLife 2000
(now known as SeaLife 1000 OutDrive(TM)), and SeaLife 3000
(now known as SeaLife 1000 XP(TM)), present and future marine
coating and all modifications, variations, enhancements and
improvements thereon.
3- Full power to enforce its ownership interests.
SeaLife 1000 is a solvent based, anti-fouling coating for underwater use. It
provides a unique anti-shell, anti-algae, anti-fungus and anti-rust coating,
with competitive results.
SeaLife 1000 OutDrive(TM) is a solvent-based, anti-fouling coating for submerged
marine use. This product is in the early stages of development.
SeaLife 1000 XP(TM) is a water based coating with an advanced anti-rust
additives for the above water application. This product is in the early stages
of development.
The purchased technologies are being amortized on the straight-line basis over a
15-year life. It is management's opinion that 15 years represents a reasonable
estimate of product life at this time.
On September 17, 2003 the Company entered into an agreement with Gael Himmah to
purchase all proprietary rights and interests in four products and processes
developed by him. Two of the products are for the agriculture market and the
other two appeal to a broader market and are for soil recovery. The purchase
price was $400,000 and was paid with 400,000 shares of the Company's common
stock. These proprietary rights and interests are being amortized on a
straight-line basis over a 15-year life. It is management's opinion that 15
years represents a reasonable estimate of the product life at this time.
Amortization expense for the periods is as follows:
Ended:
MAY 31, 2004 MAY 31, 2003 INCEPTION
------------ ------------ ---------
AMORTIZATION $107,910 $81,602 $189,512
All of the technologies acquired by the Company are referred to herein as the
"Technologies."
Future amortization expense for the next five years is as follows:
2005 $115,688
2006 $115,688
2007 $115,688
2008 $115,688
2009 $115,688
F-10
SEALIFE CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 2004
(audited)
NOTE 3 - NOTES PAYABLE
Current Notes Payable:
On January 9, 2004, the Company, in connection with a consulting contract,
entered into a $30,000 note with an individual. The note is due January 8, 2005,
is unsecured, and does not call for any payments until maturity. The interest
rate is 7% per annum. The balance of the note at May 31, 2004 and 2003 was
$30,000 and $0 respectively.
On January 9, 2004, the Company, in connection with a consulting contract,
entered into a $100,000 note with an individual. The note is due January 8,
2005, is unsecured, and does not call for any payments until maturity. The
interest rate is 7% per annum. The balance of the note at May 31, 2004 and 2003
was $100,000 and $0 respectively.
Long - Term Debt - Notes Payable:
In connection with purchase of the Technologies from Division G, Inc. on June
30, 2003, the Company entered into a ten-year note for $1,220,309. The note is
to be paid based on the Company's sales, i.e. at 5% of the first $3,000,000 of
sales, and at 2.5% on the sales in excess of that amount, until paid in full.
The note payment is to be paid monthly and the note bears interest at the rate
of 7% per annum. The note may be converted at the option of the holder to the
common stock of the company at a conversion price, which is equivalent to 80% of
the market price, based on the average bid price for the last 30 days. On
January 2, 2003, the holder converted $1,000,000 of the note for 1,000,000
shares of SeaLife Corporation common stock. The balance of the note at May 31,
2004 and 2003 including accrued interest was $303,816 and $283,334 respectively.
At May 31, 2004, there remained $3,291 past due on the note. The note has
certain default provisions and stated period of times to correct the default.
The note holder has not formally notified the Company of default.
On June 14, 2003, the Company borrowed $14,500 from an individual. The note is
due June 14, 2008, is unsecured, and does not call for any payments until
maturity. The interest rate is 7.5% per annum. The balance of the note at May
31, 2004 and 2003 was $14,500 and $0 respectively.
Because of the repayment schedule of the note and an inability to accurately
forecast future sales, maturities on long-term debt annually can not be
computed.
NOTE 4 - COMMON STOCK
The Company has 100,000,000 shares of $.0001 par value common stock authorized.
At May 31, 2004 and 2003, the Company had 14,536,155 and 9,558,806 shares
outstanding respectively.
During the year ended May 31, 2004, the Company issued 4,661,088 shares of
common stock for services and proprietary rights. The shares issued and value
assigned for these shares are as follows:
SERVICE SHARES VALUE
------------------------------------ ---------- ----------
Business Consulting ................ 1,664,000 $ 963,120
Legal Services ..................... 385,000 205,000
Officer Salaries ................... 1,612,088 365,440
Proprietary Rights ................. 400,000 400,000
Product Consulting ................. 300,000 300,000
---------- ----------
Total Stock for Services ........... 4,661,088 $2,233,560
========== ==========
F-11
SEALIFE CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 2004
(audited)
NOTE 5 - PREFERRED STOCK
The public shell had 2,000,000 shares of convertible preferred stock outstanding
at the date of merger. These had conversion rights of 10 shares of common for
each share of preferred. In an agreement signed June 24, 2003 the owners of
these shares agreed to cancel 1,840,000 shares of preferred stock. The remaining
160,000 shares were converted to 1,600,000 shares of common stock of which
300,000 shares were conveyed to the original shareholders of the Company on the
date prior to the merger.
NOTE 6 - CONSULTING AGREEMENT
On June 30, 2002 SeaLife Marine Products, Inc. entered into a consulting
agreement with the developer of the Technologies for his advice in the use and
improvement of the acquired Technologies. This agreement was assigned to the
Company and revised on January 1, 2003. The consultant is to provide all
necessary support in complying with government regulations, in solving specific
marketing and environmental problems, in product improvement, in developing
operational protocols, in advising and support on the operation of the Company's
business and to assist in the purchase or manufacture of the Company's products.
The agreement calls for the consultant to receive $10,000 per month from
September 1, 2002 to April 15, 2003, and $12,000 per month thereafter until
September 1, 2007. During the year the consultant agreed to convert $100,000 of
this payable into 100,000 shares of the Company's common stock. These amounts
were settled for stock under an agreement dated September 17, 2003 (see Note 8).
In addition during the quarter ended November 30, 2003 the Company entered into
an additional agreement with this consultant to provide services through
December 31, 2003 for an additional 300,000 shares of the Company's common
stock. At May 31, 2004, the Company owed the consultant $35,000 under this
agreement.
The Company entered into four separate business-consulting agreements in March
of 2004. These agreements are for one year, ending in March 2005. The
compensation to be paid pursuant to the agreements is 800,000 shares of the
Company's common stock valued at $440,000. $359,332 was recorded as Prepaid
expense in connection with these agreements at May 31, 2004.
NOTE 7 - GOING CONCERN
The Company has not generated significant revenues or profits to date. This
factor among others may indicate the Company will be unable to continue as a
going concern. The Company's continuation as a going concern depends upon its
ability to generate sufficient cash flow to conduct its operations and its
ability to obtain additional sources of capital and financing. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
NOTE 8 - RELATED PARTIES
At May 31, 2004 and 2003, the Company owed two major shareholders $61,130 and
$63,693 respectively for monies advanced the Company. The amounts due are
non-interest bearing and have no priority in liquidation.
The Company owed its two officers $64,560 for wages at May 31, 2004.
F-12
SEALIFE CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 2004
(audited)
NOTE 8 - RELATED PARTIES - CONTINUED
On January 1, 2004 the Company entered into a 5-year employment contract with
the President of the Company. The agreement defines the duties and
responsibilities of the position, provides an annual compensation of $300,000 a
year, with certain vacation and sick days. The Company is required to maintain
an office and certain death benefits during the term of the contract.
On January 1, 2004 the Company entered into a 4-year employment contract with
the Vice President of the Company. The agreement defines the duties and
responsibilities of the position, provides an annual compensation of $300,000,
with annual reviews and the participation in an incentive program when adopted.
The Company also owed a consultant and the developer of the Technologies $35,000
on the consulting agreements, $3,291 past due on the loan agreement and
$303,816, the balance of the loan at May 31, 2004.
During the year ended May 31, 2004, the Company issued 1,612,088 shares to its
two officers for compensation.
During the year ended May 31, 2004 the Company issued 300,000 shares to the
consultant and developer of the Technologies for product consulting and 400,000
shares for proprietary rights to four products and processes.
NOTE 9 - SECURITIES AND EXCHANGE COMMISSION INVESTIGATION
On August 4, 2003 the Company was advised that it is the subject of a Securities
and Exchange Commission investigation. The Company is uncertain of the nature of
the investigation, and no charges have been levied by the Commission against the
Company to date. The Company was advised on January 23, 2004 that the SEC Staff
intends to recommend that the SEC file enforcement proceedings against the
Company and its Chief Executive Officer for alleged violations of sections 5 and
17(a) of the Securities Act of 1933 and Sections 10(b), 13(d)1 and 16(a) of the
Securities Exchange Act of 1934, and Rules 10b-5, 13d-1 and 16a-3 thereunder.
The ultimate disposition of this matter is unknown at this date.
F-13
SEALIFE CORPORATION
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2004
(unaudited)
SEALIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
September 30, 2004 and May 31, 2004
September 30, May 31,
2004 2004
----------- -----------
ASSETS
Current Assets
Cash ............................................ $ 24,658 $ 34,056
Inventory ....................................... 13,174 6,000
Accounts receivable ............................. 60,342
Prepaid expenses ................................ 291,347 403,332
----------- -----------
Total Current Assets ....................... 389,521 443,388
Other Assets
Technology ...................................... 1,735,309 1,735,309
Less: accumulated amortization .................. (228,076) (189,512)
----------- -----------
1,507,233 1,545,797
----------- -----------
Total Assets ............................... $ 1,896,754 $ 1,989,185
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable ................................... $ 130,000 $ 130,000
Accounts payable ................................ 60,144 54,531
Accounts payable - shareholders ................. 81,130 61,130
Accrued wages ................................... 233,132 64,560
Accrued interest ................................ 15,042 4,584
Accrued payroll taxes ........................... 8,382 8,382
Current portion of long-term debt ............... 8,633 3,291
----------- -----------
Total Current Liabilities .................. 536,463 326,478
Long-Term Debt
Notes payable ................................... 309,683 315,025
----------- -----------
Total Liabilities .......................... 846,146 641,503
Stockholders' Equity
Common stock .................................... 1,509 1,454
Additional paid in capital ...................... 4,158,296 3,855,368
Retained deficit ................................ (3,109,197) (2,509,140)
----------- -----------
1,050,608 1,347,682
----------- -----------
Total Liabilities and Stockholders' Equity . $ 1,896,754 $ 1,989,185
=========== ===========
Unaudited - see accompanying notes.
F-14
SEALIFE CORPORATION
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2004
(unaudited)
SEALIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (unaudited)
For the one month ended June 30, 2004 and 2003
June 30, June 30,
2004 2003
-------- --------
Sales ...................................... $ -- $ 300
Cost of sales .............................. -- --
-------- --------
Gross Profit ................ -- 300
Sales and marketing ........................ 427 18
General and administrative ................. 94,368 11,123
-------- --------
94,795 11,141
-------- --------
Net Loss ................................... $(94,795) $(10,841)
======== ========
Unaudited - see accompanying notes and accountant's report.
F-15
SEALIFE CORPORATION
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2004
(unaudited)
SEALIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (unaudited)
For the three months ended September 30, 2004 and 2003
Three months ended
September 30,
----------------------------
2004 2003
--------- ---------
Sales .................................... $ 106,842 $ 2,374
Cost of sales ............................ 56,091 80
--------- ---------
Gross Profit ................ 50,751 2,294
Sales and marketing ...................... 7,837 6,562
General and administrative ............... 548,177 20,065
--------- ---------
556,014 26,627
Net Loss ................................. $(505,263) $ (24,333)
========= =========
Unaudited - see accompanying notes and accountant's report.
F-16
SEALIFE CORPORATION
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2004
(unaudited)
SEALIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (unaudited)
For the four months ended September 30, 2004 and 2003
Four Months Ended
September 30,
----------------------------
2004 2003
--------- ---------
Sales .................................... $ 106,842 $ 2,674
Cost of sales ............................ 56,091 80
--------- ---------
Gross Profit ................ 50,751 2,594
Sales and marketing ...................... 8,263 6,580
General and administrative ............... 642,545 31,188
--------- ---------
650,808 37,768
Net Loss ................................. $(600,057) $ (35,174)
========= =========
Unaudited - see accompanying notes and accountant's report.
F-17
SEALIFE CORPORATION
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2004
(unaudited)
SEALIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CHANGES OF STOCKHOLDERS' EQUITY
For the Period Ended September 30, 2004
ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance May 31, 2004 ....... -- $ -- 14,536,155 $ 1,454 $ 3,855,368 $(2,509,140) $ 1,347,682
Stock for services .... -- -- 397,914 40 290,477 -- 290,517
Sale of stock ......... -- -- 14,577 15 12,451 -- 12,466
Net loss for the period -- -- -- -- -- (600,057) (600,057)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance September 30, 2004 . -- $ -- 14,948,646 $ 1,509 $ 4,158,296 $(3,109,197) $ 1,050,608
=========== =========== =========== =========== =========== =========== ===========
See accompanying notes and accountant's report.
F-18
SEALIFE CORPORATION
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2004
(unaudited)
SEALIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
For the four months ended September 30, 2004 and 2003
September 30,
----------------------
2004 2003
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ........................................ $(600,057) $ (35,174)
Adjustments to reconcile net loss to net
cash provided used in operating activities
Amortization ............................... 185,231 --
Stock for services expenses ................ 255,835 --
Changes in Current Assets and liabilities:
(Increase) in Accounts Receivable .......... (60,342) --
(Increase) in Inventories .................. (7,174) --
Increase in Accounts payable ............... 5,613 1,077
Increase in Accrued wages .................. 168,572 --
Increase in Accrued interest ............... 10,458 --
--------- ---------
NET CASH (USED) BY
OPERATING ACTIVITIES .................. (41,864) (34,097)
CASH FLOWS FROM FINANCING ACTIVITIES
Investor proceeds ............................... 12,466 40,000
Increase in Notes payable ....................... -- 1,028
Increase (Decrease) in Accounts payable
Shareholders ................................ 20,000 (3,855)
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES .................. 32,466 37,173
--------- ---------
NET INCREASE (DECREASE) IN CASH ...................... (9,398) 3,076
CASH AT BEGINNING OF PERIOD .......................... 34,056 558
--------- ---------
CASH AT END OF PERIOD ................................ $ 24,658 $ 3,634
========= =========
See accompanying notes and accountant's report.
F-19
SEALIFE CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History:
SeaLife Corp., a Nevada corporation ("SeaLife Nevada"), was incorporated on
January 21, 2002. On February 4, 2002, SeaLife Nevada formed a wholly owned
subsidiary, SeaLife Marine Products, Inc., a California corporation. The
subsidiary was formed to concentrate on the marine product applications of the
Technologies owned.
On June 30, 2002, SeaLife Nevada entered into an agreement with the three
shareholders' of Division G, Inc. to exchange 100% of the stock of Division G,
Inc. for 2,100,000 million shares of SeaLife Nevada's common stock. The
agreement was to be effective July 1, 2002. At the time of acquisition, Division
G, Inc. assets consisted of ownership of all rights in perpetuity to
GreaseBeast(TM), a grease treatment and cleaner, Soil ResQ(TM), a soil
conditioning product, OilEx(TM), a soil detoxification and rebuilding product,
and MuniMix(TM) a sewer clean-up and detoxification product. All products were
in the early stages of development. Division G, Inc. had no liabilities at the
time of acquisition and remains dormant to this day.
On July 31, 2002, SeaLife Nevada formed a wholly owned subsidiary, Proterra
Technologies, Inc., a California corporation. The subsidiary was formed to
concentrate on agricultural product applications.
On December 20, 2002, SeaLife Nevada was acquired by SeaLife Corporation, a
Delaware corporation (formerly Integrated Enterprises, Inc.), a public reporting
corporation (the "Company"). The Company was a shell at the time of the
acquisition and therefore the acquisition was treated as a reverse merger
whereby the acquired company is treated as the acquiring company for accounting
purposes. At the same time as the merger, the Company affected a 15 to 1 reverse
stock split.
A corporate history of the Company is as follows:
Sealife Corporation, formerly Integrated Enterprises, Inc., formerly Vast
Technologies Holding Company, Inc., formerly Fraser Realty Group, Inc., is the
successor to Fraser Mortgage Investments (the Trust), an unincorporated
association in the form of a business trust organized in Ohio under the
Declaration of Trust dated May 7, 1969. At a special meeting of the shareholders
of the Trust held on August 28, 1984 a plan of reorganization was approved
pursuant to which:
All of the assets of the Trust were sold to FRG;
FRG assumed all of the Trust's liabilities and obligations;
Each issued and outstanding share of the Trust was converted into one share of
FRG common stock; and The Trust was terminated.
The purpose of the proposed reorganization was to convert the Trust to a
business organization taxable as an ordinary corporation, instead of a real
estate investment trust, under Federal income tax laws. Unless the context
otherwise requires, the term FRG includes its predecessor, the Trust.
FRG invested in real estate and mortgage loans. FRG was organized as a real
estate trust, primarily for the purpose of making passive investments in real
estate and passing through the income realized from such investments to its
shareholders. From its inception, FRG financed its real estate investment
operations principally through sale of common stock, and short-term debt
financing, including both bank borrowings and the issuance of commercial paper.
FRG saw its real estate investments evolve from principally short-term
construction loans to a mix of variable and fixed-rate mortgage loans of which a
significant portion consists of mortgage positions on improved and
F-20
SEALIFE CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2004
(unaudited)
unimproved land held by investors for development purposes. Accordingly, FRG's
investments in mortgage loans represent long-term assets with the realization
dates dependent upon the equity holder's ability to complete development
projects or obtain refinancing from other sources. At the same time, bank notes
payable and commercial paper outstanding were all short-term borrowings
renewable at the option of the note holders. FRG relied on these short-term
borrowings, the intermittent repayment of loans and the refinancing or sale of
portfolio investments in order to meet its current obligations. During fiscal
1989, cash provided from these sources was wholly inadequate to provide working
capital to fund operations. Management was unable to secure additional financing
or find other means of obtaining needed cash in fiscal 1990 to permit FRG to
meet its current obligations. Accordingly, management determined that there was
no reason to continue operating and, thus, incurring further losses. FRG has
been inactive since 1990 and has not conducted any business since that time.
On August 4, 1998, the Chairman of the Board and President and with first
receiving the consent, approval and authorization of FRG's Board of Directors,
filed with the Secretary of State of Delaware for renewal, revival and
restoration of the Company's Certificate of Incorporation.
On October 27, 1999 the Company entered into an Acquisition Merger agreement
with a private company, Motorsports USA, Inc. The Company also effected a name
change at that time to Motorsports USA, Inc. With this transaction certain
assets became the property of the Company. However, the custody and control of
such assets were not perfected and the management of the private company
evidenced tentative compliance with SEC reporting requirements. This condition
was considered intolerable to the Company's Board of Directors and accordingly
on August 1, 2000 the transaction was rescinded. The Company also changed its
name on June 1, 2000 to Vast Technologies Holding Company. Accordingly the
enclosed financial statements were prepared as if the merger with Motorsports
USA, Inc. had not taken place.
On June 11, 2001 the Company changed its name to Integrated Enterprises, Inc.,
issued 12,000,000 shares of common stock for services and reverse split its
common Shares, one new common share for each ten old common shares with a par
value of $ 0.0001 per share.
On December 17, 2002, the Company acquired all of the issued and outstanding
shares of SeaLife Nevada in exchange for a substantial majority of the common
stock of the Company.
Basis of Consolidation:
The accompanying consolidated financial statements include the accounts of the
Company, SeaLife Nevada, a wholly-owned subsidiary of the Company, and SeaLife
Marine Products, Inc., Proterra Technologies, Inc. and Division G, Inc., SeaLife
Nevada's three wholly-owned subsidiaries. All significant inter-company accounts
and transactions, if any, have been eliminated in consolidation.
Cash and Cash Equivalents:
For the purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities to be cash equivalents.
Income Taxes:
The Company accounts for income taxes under a method which requires a company to
recognize deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in a company's financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statements carrying amounts and tax basis of assets and liabilities using
enacted tax rates. The Company presently prepares its tax return on the cash
basis and its financial statements on the accrual basis. No deferred tax assets
or liabilities have been recognized at this time, since the Company has shown
losses
F-21
SEALIFE CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2004
(unaudited)
for both tax and financial reporting. The Company's net operating loss
carryforward at September 30, 2004 is approximately $2,675,000.
Amortization:
The Company provides for amortization of the technologies purchased, utilizing
the straight-line method to apportion costs over a 15 year estimated life.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Development Stage:
Until June 1, 2004, Sealife Corporation and Subsidiaries were development stage
companies as defined under Statements of Financial Accounting Standards No. 7
NOTE 2 - TECHNOLOGIES
SeaLife Marine entered into an asset purchase agreement to acquire certain
technologies from a third party developer on June 30, 2002. The purchase price
was $1,335,309. Under this purchase agreement the Company acquired the
following:
Patent application rights for EPA registration number 70214-1 and all
modifications, enhancements and improvements thereon. All rights in perpetuity
in and to SeaLife 1000, SeaLife 2000 (now known as SeaLife 1000 OutDrive(TM)),
and SeaLife 3000 (now known as SeaLife 1000 XP(TM)), present and future marine
coating and all modifications, variations, enhancements and improvements
thereon. Full power to enforce its ownership interests.
SeaLife 1000 is a solvent based, anti-fouling coating for underwater use. It
provides a unique anti-shell, anti-algae, anti-fungus and anti-rust coating,
with competitive results.
SeaLife 1000 OutDrive(TM) is a solvent-based, anti-fouling coating for submerged
marine use. This product is in the early stages of development.
SeaLife 1000 XP(TM) is a water based coating with an advanced anti-rust
additives for the above water application. This product is in the early stages
of development.
The purchased technologies are being amortized on the straight-line basis over a
15-year life. It is management's opinion that 15 years represents a reasonable
estimate of product life at this time.
On September 17, 2003 the Company entered into an agreement with Gael Himmah to
purchase all proprietary rights and interests in four products and processes
developed by him. Two of the products are for the agriculture market and the
other two appeal to a broader market and are for soil recovery. The purchase
price was $400,000 and was paid with 400,000 shares of the Company's common
stock. These proprietary rights and interests are being amortized on a
straight-line basis over a 15-year life. It is management's opinion that 15
years represents a reasonable estimate of the product life at this time.
F-22
SEALIFE CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2004
(unaudited)
Amortization expense for the periods is as follows:
Period Ended:
September 30, 2004 September 30, 2000
Amortization...... $ 38,564 $ -0-
Future amortization expense for the next five years is as follows:
$115,688
$115,688
$115,688
$115,688
$115,688
All of the technologies acquired by the Company are referred to herein as the
"Technologies."
NOTE 3 - NOTES PAYABLE
Current Notes Payable:
On January 9, 2004, the Company, in connection with a consulting contract,
entered into a $30,000 note with an individual. The note is due January 8, 2005,
is unsecured, and does not call for any payments until maturity. The interest
rate is 7% per annum. The balance of the note at May 31, 2004 and 2003 was
$30,000 and $0 respectively.
On January 9, 2004, the Company, in connection with a consulting contract,
entered into a $100,000 note with an individual. The note is due January 8,
2005, is unsecured, and does not call for any payments until maturity. The
interest rate is 7% per annum. The balance of the note at May 31, 2004 and 2003
was $100,000 and $0 respectively.
Long-Term Debt - Notes Payable:
In connection with the purchase of the Technologies on June 30, 2003 the Company
entered into a ten-year note for $1,220,309. The note is to be repaid based on
the Company's sales, i.e. at 5% of the first $3,000,000 of sales, and at 2.5% on
the sales in excess of that amount, until paid in full. The note payment is to
be paid monthly and the note bears interest at the rate of 7% per annum. The
note may be converted at the option of the holder to the common stock of the
company at a conversion price, which is equivalent to 80% of the market price,
based on the average bid price for the last 30 days. On January 2, 2003 the
holder converted $1,000,000 of the note for 1,000,000 shares of SeaLife
Corporation stock. The balance of the note at September 30, 2004 and May 31,
2004 was $309,683.
At September 30, 2004 there remained $8,633 past due on the note. The note has
certain default provisions and stated period of times to correct the default.
The note holder has not formally notified the Company of default.
On June 14, 2003 the Company borrowed $14,500 from an individual. The note is
due June 14, 2008, unsecured, and does not call for any payments until maturity.
The interest rate is 7.5% per annum. The balance of the note at September 30,
2004 and May 31, 2004 was $14,500.
Because of the repayment schedule of the June 30, 2003 note and an inability to
accurately forecast future sales, maturities on long-term debt annually cannot
be computed.
F-23
SEALIFE CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2004
(unaudited)
NOTE 4 - COMMON STOCK
The Company has 100,000,000 shares of $.0001 par value common stock authorized.
At September 30, 2004 and May 31, 2004 the Company had 14,948,646 and 14,536,155
shares outstanding respectively.
During the four-month period ended September 30, 2004 the Company issued 397,914
shares of common stock for services. The shares issued and value assigned for
these shares are as follows:
Service Shares Value
-------------------------------------- ------- --------
Legal Services ....................... 149,404 $109,065
Officer Salaries ..................... 107,688 78,652
Product Consulting ................... 140,822 102,800
Total Stock for Services ............. 397,914 $290,517
NOTE 5- PREFERRED STOCK
The public shell had 2,000,000 shares of convertible preferred stock outstanding
at the date of merger. These had conversion rights of 10 shares of common for
each share of preferred stock. In an agreement signed June 24, 2003 the owners
of these shares agreed to cancel 1,840,000 shares of preferred stock. The
remaining 160,000 shares were converted to 1,600,000 shares of common stock of
which 300,000 shares were conveyed to the original shareholders of the Company
on the date prior to the merger.
NOTE 6 - CONSULTING AGREEMENTS
On June 30, 2002 SeaLife Marine Products, Inc. entered into a consulting
agreement with the developer of the Technologies for his advice in the use and
improvement of the acquired Technologies. This agreement was assigned to the
Company and revised on January 1, 2003. The consultant is to provide all
necessary support in complying with government regulations, in solving specific
marketing and environmental problems, in product improvement, in developing
operational protocols, in advising and support on the operation of the Company's
business and to assist in the purchase or manufacture of the Company's products.
The agreement calls for the consultant to receive $10,000 per month from
September 1, 2002 to April 15, 2004, and $12,000 per month thereafter until
September 1, 2007. During the year the consultant agreed to convert $100,000 of
this payable into 100,000 shares of the Company's common stock. These amounts
were settled for stock under an agreement dated September 17, 2003 (see Note 8).
In addition, during the quarter ended November 30, 2003 the Company entered into
an additional agreement with this consultant to provide services through
December 31, 2003 for an additional 300,000 shares of the Company's common
stock. At September 30, 2004, the Company owed the consultant $103,750 under
this agreement.
The Company entered into four separate business-consulting agreements in March
of 2004. These agreements are for one year, ending in March 2005. The
compensation to be paid pursuant to the agreements is 800,000 shares of the
Company's common stock valued at $440,000. $359,332 was recorded as Prepaid
expense in connection with these agreements at May 31, 2004.
F-24
SEALIFE CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 2004
(unaudited)
NOTE 7 - GOING CONCERN
The Company has not generated significant revenues or profits to date. This
factor among others may indicate the Company will be unable to continue as a
going concern. The Company's continuation as a going concern depends upon its
ability to generate sufficient cash flow to conduct its operations and its
ability to obtain additional sources of capital and financing. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
NOTE 8 - RELATED PARTIES
At September 30, 2004 and 2003 the Company owed two major shareholders $81,130
and $61,130 respectively for monies advanced the Company. The amounts due are
non-interest bearing and have no priority in liquidation.
The Company owed two of its officers $164,560 and $64,560 for wages at September
30, 2004 and May 31, 2004, respectively.
On January 1, 2004 the Company entered into a 5-year employment contract with
the President of the Company. The agreement defines the duties and
responsibilities of the position, provides an annual compensation of $300,000 a
year, with certain vacation and sick days. The Company is required to maintain
an office and certain death benefits during the term of the contract. On October
29, 2004 the contract was amended to provide for annual compensation of $200,000
per year.
On January 1, 2004 the Company entered into a 4-year employment contract with
the Vice-President of the Company. The agreement defines the duties and
responsibilities of the position, provides an annual compensation of $300,000,
with annual reviews and the participation in an incentive program when adopted.
On October 29, 2004 the contract was amended to provide for annual compensation
of $100,000 per year.
The Company also owes the consultant and the developer of the Technologies
$103,750 on the consulting agreements, $8,633 past due on the loan agreement and
$309,683, the balance of the loan at September 30, 2004. During the four-month
period ended September 30, 2004 the Company issued 140,822 shares to the
consultant for product consulting.
During the period ended September 30, 2004 the Company issued 107,688 shares to
an officer for compensation.
NOTE 9 - SECURITIES AND EXCHANGE COMMISSION INVESTIGATION
On August 4, 2003 the Company was advised that it is the subject of a Securities
and Exchange Commission investigation. The Company is uncertain of the nature of
the investigation, and no charges have been levied by the Commission against the
Company to date. The Company was advised on January 23, 2004 that the SEC Staff
intends to recommend that the SEC file enforcement proceedings against the
Company and its Chief Executive Officer for alleged violations of sections 5 and
17(a) of the Securities Act of 1933 and Sections 10(b), 13(d)1 and 16(a) of the
Securities Exchange Act of 1934, and Rules 10b-5, 13d-1 and 16a-3 thereunder.
The Company has received no additional communication regarding this matter since
that time. The ultimate disposition of this matter is unknown at this date.
F-25
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our bylaws authorize us to indemnify, and our Certificate of
Incorporation includes an indemnification provision under which we have agreed
to indemnify, to the fullest extent not prohibited by the Delaware General
Corporation Law, our directors and officers from and against certain claims
arising from or related to future acts or omissions as one of our directors or
officers. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table itemizes the expenses incurred by the Registrant in
connection with the offering. All the amounts shown are estimates except the
Securities and Exchange Commission registration fee.
AMOUNT
-------
Registration fee - Securities and Exchange Commission ............ $ 241
Legal fees and expenses .......................................... $15,000
Accounting fees and expenses ..................................... $ 2,000
Miscellaneous expenses ........................................... $ 1,000
-------
Total ....................................................... $18,241
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In November, 2004, we issued to Brokers Unlimited, Inc., and four of
its principals, 786,500 shares of our common stock pursuant to the terms of a
consulting agreement, and as payment for services previously rendered. In
addition, pursuant to the terms of the consulting agreement, we agreed to issue
to Brokers Unlimited, Inc., shares having an aggregate value of $115,000 on a
monthly basis for the seven-month term of the agreement. The issuance and sales
of these securities is exempt from the registration and prospectus delivery
requirements of the Securities Act pursuant to Section 4(2) of the Securities
Act as transactions not involving any public offering.
Also in November 2004, we issued to two unrelated individuals, an
aggregate of 138,000 shares of our common stock at $0.36 per share, for a total
investment of $49,680. The investors in these transactions represented to us
that each was an "accredited investor" within the meaning of Rule 501 of
Regulation D under the Securities Act of 1933, and that each was receiving the
securities for investment and not in connection with a distribution thereof. The
issuance and sales of these securities was exempt from the registration and
prospectus delivery requirements of the Securities Act pursuant to Section 4(2)
of the Securities Act as transactions not involving any public offering.
Also in November 2004, we issued 200,000 shares of our common stock to
Michael Sahl as compensation for services to be provided to us from November 30,
2004 through October 31, 2005. The issuance and sales of these securities was
exempt from the registration and prospectus delivery requirements of the
Securities Act pursuant to Section 4(2) of the Securities Act as transactions
not involving any public offering.
In October 2004, we issued 120,000 shares of our common stock to Robert
Lee as compensation for consulting services. The issuance and sale of these
securities was exempt from the registration and prospectus delivery requirements
of the Securities Act pursuant to Section 4(2) of the Securities Act as
transactions not involving any public offering.
In July 2004, we issued 150,000 shares of our common stock to Lionel
Gosselin as compensation for business consulting services pursuant to the terms
of a consulting agreement dated May 1, 2004. The issuance and
II-1
sale of these securities was exempt from the registration and prospectus
delivery requirements of the Securities Act pursuant to Section 4(2) of the
Securities Act as transactions not involving any public offering.
From January through June 2004 we issued 95,006 shares of our common
stock and warrants to purchase 95,006 shares of our common stock for an
aggregate purchase price of $74,464 to eight individual investors. The warrants
are exercisable for common stock at prices between $1.00 per share and $1.75 per
share. The investors in these transactions represented to us that each was an
"accredited investor" within the meaning of Rule 501 of Regulation D under the
Securities Act of 1933, and that each was receiving the securities for
investment and not in connection with a distribution thereof. The issuance and
sale of these securities was exempt from the registration and prospectus
delivery requirements of the Securities Act pursuant to Section 4(2) of the
Securities Act as transactions not involving any public offering.
Also in June 2004, we issued an aggregate of 140,000 shares of our
common stock to two consultants. These shares were issued as compensation to the
consultants for services rendered. The issuance and sale of these securities was
exempt from the registration and prospectus delivery requirements of the
Securities Act pursuant to Section 4(2) of the Securities Act as transactions
not involving any public offering.
On March 26, 2004, each of our Chief Executive Officer and Chief
Financial Officer, and our Vice President and Secretary, was issued 206,044
shares of Company common stock in payment of the Company's debt to them for
accrued salaries under their Employment Agreements, which were valued at
approximately $93,750. The issuance and sales of these securities was exempt
from the registration and prospectus delivery requirements of the Securities Act
pursuant to Section 4(2) of the Securities Act as transactions not involving any
public offering.
Also in March 2004, we issued 200,000 shares of our common stock to
Lionel Gosselin as compensation for business consulting services provided from
May 2003 through April 2004 pursuant to the terms of a consulting agreement
dated May 1, 2003. The issuance and sales of these securities was exempt from
the registration and prospectus delivery requirements of the Securities Act
pursuant to Section 4(2) of the Securities Act as transactions not involving any
public offering.
From January through March 2004, we issued an aggregate of 574,000
shares of our common stock to three of our consultants. These shares were issued
as compensation to the consultants for services rendered. The issuance and sale
of these securities was exempt from the registration and prospectus delivery
requirements of the Securities Act pursuant to Section 4(2) of the Securities
Act as transactions not involving any public offering.
In January 2004 we issued 17,857 shares of our common stock and
warrants to purchase 35,714 shares of our common stock for an aggregate purchase
price of $9,484 to a single investor. The warrants are exercisable for common
stock at a price of $0.75 per share and 17,857 of such warrants are exercisable
for common stock at a price of $1.25 per share. The investor in this transaction
represented to us that he was an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act of 1933, and that such
investor was receiving the securities for investment and not in connection with
a distribution thereof. The issuance and sale of these securities was exempt
from the registration and prospectus delivery requirements of the Securities Act
pursuant to Section 4(2) of the Securities Act as transactions not involving any
public offering.
In November 2003, each of our Chief Executive Officer and Chief
Financial Officer, and our Vice President and Secretary, was issued 300,000
shares of our common stock in payment of our debt to them for accrued salaries
for October 1, 2003 through December 31, 2003, which were each valued at
$60,000. The shares were issued to the executive officers at $0.20 per share, a
33% discount on the $0.56 closing price of the shares on the Over-the-Counter
Bulletin Board on November 19, 2003, the date the officers agreed to accept
Company common shares in lieu of cash compensation. The issuance and sales of
these securities was exempt from the registration and prospectus delivery
requirements of the Securities Act pursuant to Section 4(2) of the Securities
Act as transactions not involving any public offering.
Also in November 2003, we issued 200,000 shares of our common stock and
warrants to purchase 400,000 shares of our common stock for an aggregate
purchase price of $50,000 to a single investor. Warrants to purchase
II-2
200,000 shares of our common stock were exercisable at $0.75 per share and
warrants to purchase an additional 200,000 shares of our common stock were
excercisable at $1.25 per share. The investor in this transaction represented to
us that he was an "accredited investor" within the meaning of Rule 501 of
Regulation D under the Securities Act of 1933, and that such investor was
receiving the securities for investment and not in connection with a
distribution thereof. The issuance and sale of these securities was exempt from
the registration and prospectus delivery requirements of the Securities Act
pursuant to Section 4(2) of the Securities Act as transactions not involving any
public offering.
In August 2003 we entered into a purchase agreement with Gael Himmah
pursuant to which Mr. Himmah assigned all of his rights in the technology used
by us in our business in exchange for 400,000 shares of our common stock. The
issuance and sale of these securities was exempt from the registration and
prospectus delivery requirements of the Securities Act pursuant to Section 4(2)
of the Securities Act as transactions not involving any public offering.
Also in August 2003, we issued 200,000 shares of our common stock to
Lionel Gosselin as compensation for business consulting services through August
2003 pursuant to the terms of a consulting agreement dated May 31, 2003. The
issuance and sale of these securities was exempt from the registration and
prospectus delivery requirements of the Securities Act pursuant to Section 4(2)
of the Securities Act as transactions not involving any public offering.
Also August 2003 we issued 60,000 shares of our common stock and
warrants to purchase 60,000 shares of our common stock for an aggregate purchase
price of $15,000 to a single investor. The warrants are exercisable at $2.00 per
share. The investor in this transaction represented to us that he was an
"accredited investor" within the meaning of Rule 501 of Regulation D under the
Securities Act of 1933, and that such investor was receiving the securities for
investment and not in connection with a distribution thereof. The issuance and
sale of these securities was exempt from the registration and prospectus
delivery requirements of the Securities Act pursuant to Section 4(2) of the
Securities Act as transactions not involving any public offering.
In August and September 2003 we issued 152,097 shares of our common
stock and warrants to purchase 152,097 shares of our common stock for an
aggregate purchase price of $29,274. Each warrant is exercisable at $1.00 per
share. The investor in this transaction represented to us that he was an
"accredited investor" within the meaning of Rule 501 of Regulation D under the
Securities Act of 1933, and that such investor was receiving the securities for
investment and not in connection with a distribution thereof. The issuance and
sale of these securities was exempt from the registration and prospectus
delivery requirements of the Securities Act pursuant to Section 4(2) of the
Securities Act as transactions not involving any public offering.
On July 17, 2003, we issued 300,000 shares of our common stock upon
conversion of 160,000 shares of Preferred Stock originally issued prior to the
execution of the Exchange Agreement to Andrew Yurcho and Harrison Beal, and
entities controlled by them (the "Former Shareholders"). The conversion of the
shares was accomplished pursuant to the terms of a Settlement Agreement between
us and the former shareholders dated July 17, 2003. The issuance and sales of
these securities was exempt from the registration and prospectus delivery
requirements of the Securities Act pursuant to Section 4(2) of the Securities
Act as transactions not involving any public offering.
Also in July 2003, we issued 100,000 shares of our common stock to
Lionel Gosselin as compensation for business consulting services to be rendered
pursuant to his consulting agreement with us dated May 1, 2003. The issuance and
sale of these securities was exempt from the registration and prospectus
delivery requirements of the Securities Act pursuant to Section 4(2) of the
Securities Act as transactions not involving any public offering.
Also in May 2003 we issued 15,500 shares of our common stock to Dane
Larsen as compensation for services provided to us. The issuance and sale of
these securities was exempt from the registration and prospectus delivery
requirements of the Securities Act pursuant to Section 4(2) of the Securities
Act as transactions not involving any public offering.
Also in May 2003 we issued 3,000 shares of our common stock and
warrants to purchase 3,000 shares of our common stock to an individual for an
aggregate purchase price of $3,000. The warrants are exercisable at $4.00 per
share. The investor in this transaction represented to us that he was an
"accredited investor" within the meaning
II-3
of Rule 501 of Regulation D under the Securities Act of 1933, and that such
investor was receiving the securities for investment and not in connection with
a distribution thereof. The issuance and sale of these securities was exempt
from the registration and prospectus delivery requirements of the Securities Act
pursuant to Section 4(2) of the Securities Act as transactions not involving any
public offering.
In February 2003 we issued 25,000 shares of our common stock and
warrants to purchase 25,000 shares of our common stock to an individual investor
for an aggregate purchase price of $25,000. The warrants are exercisable at
$4.00 per share. The investor in this transaction represented to us that he was
an "accredited investor" within the meaning of Rule 501 of Regulation D under
the Securities Act of 1933, and that such investor was receiving the securities
for investment and not in connection with a distribution thereof. The issuance
and sale of these securities was exempt from the registration and prospectus
delivery requirements of the Securities Act pursuant to Section 4(2) of the
Securities Act as transactions not involving any public offering.
In December 2002, we issued 2,524,200 post reverse-split shares of
common stock to the shareholders of Sealife Corp., pursuant to that certain
Exchange Agreement, dated December 20, 2002. These shares were issued in
exchange for all of the issued and outstanding shares of common stock of Sealife
Corp. The issuance and sale of these securities was exempt from the registration
and prospectus delivery requirements of the Securities Act pursuant to Section
4(2) of the Securities Act as a transaction not involving any public offering.
II-4
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith:
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------
3.1 Restated Certificate of Incorporation of SeaLife Corporation (1)
3.2 Bylaws of SeaLife Corporation (1)
5.1 Opinion of Stubbs, Alderton & Markiles, LLP
10.1 Consulting Agreement with Gael Himmah (1)
10.2 Employment Agreement between Sealife Corporation and Robert
McCaslin, dated January 1, 2004.
10.3 Amendment to Employment Agreement with Robert McCaslin, dated
October 29, 2004.
10.4 Employment Agreement between Sealife Corporation and J.P. Heyes,
dated January 1, 2004.
10.5 Amendment to Employment Agreement with J.P. Heyes, dated October
29, 2004.
10.6 Employment Agreement between Sealife Marine and Barre Rorabaugh,
dated June 15, 2004. (2)
10.7 Sales Force Agreement, by and between Sealife Marine Products,
Inc. and Brokers Unlimited Inc., dated January 21, 2004 (3)
10.8 Consulting Agreement between Brokers Unlimited, Inc. and Sealife
Corporation, effective as of November 22, 2004.
10.9 Consulting Agreement between Michael Sahl and Sealife
Corporation, effective as of November 30, 2004.
10.10 Amendment No. 1 to Consulting Agreement with Michael Sahl,
effective as of January 20, 2005.
10.11 2004 Stock Award Plan (2)
21.1 Subsidiaries of the Company (4)
23.1 Consent of Stubbs, Alderton & Markiles, LLP (included in Exhibit
5.1)
23.2 Consent of Pollard-Kelley Auditing Services, Inc.
24.1 Power of Attorney (see Signature Page)
(1) Filed as an Exhibit to our Annual Report on Form 10-KSB for the period
ended May 31, 2003, dated September 19, 2004.
(2) Filed as an Exhibit to our Registration Statement on Form S-8 filed August
6, 2004, as amended on November 16, 2004.
(3) Filed as an Exhibit to our Current Report on Form 8-K, filed March 15,
2004.
(4) Filed as an Exhibit to our Annual Report on Form 10-KSB for the period
ended May 31, 2004, dated September 14, 2004.
II-5
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
consolidated financial statements or notes thereto.
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes to:
(1) 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 notwithstanding the forgoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospects filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in the volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.
(iii) Include any additional or changed material information
on the plan of distribution;
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time as the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
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 small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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 Los
Angeles, State of California, on January 24, 2005.
SEALIFE CORPORATION
By: /S/ ROBERT MCCASLIN
--------------------------------------------
ROBERT MCCASLIN
PRESIDENT, CHIEF EXECUTIVE OFFICER, CHIEF
FINANCIAL OFFICER, AND PRINCIPAL ACCOUNTING
OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Robert McCaslin his or her true and
lawful attorney-in-fact and agent with full power of substitution, for him or
her and in his name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering covered
by the Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his substitute or substitutes, may lawfully
do or cause to be done or by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
NAME TITLE DATE
---- ----- ----
/s/ Robert McCaslin President, Chief Executive January 24, 2005
- ---------------------- Officer, Chief Financial
Robert McCaslin Officer and Director
(Principal Executive Officer
and Principal Financial
Officer)
/s/ J.P. Heyes Vice President, Director January 24, 2005
- ----------------------
J.P. Heyes
II-7
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------
3.1 Restated Certificate of Incorporation of SeaLife Corporation (1)
3.2 Bylaws of SeaLife Corporation (1)
5.1 Opinion of Stubbs, Alderton & Markiles, LLP
10.1 Consulting Agreement with Gael Himmah (1)
10.2 Employment Agreement between Sealife Corporation and Robert
McCaslin, dated January 1, 2004.
10.3 Amendment to Employment Agreement with Robert McCaslin, dated
October 29, 2004.
10.4 Employment Agreement between Sealife Corporation and J.P. Heyes,
dated January 1, 2004.
10.5 Amendment to Employment Agreement with J.P. Heyes, dated October
29, 2004.
10.6 Employment Agreement between Sealife Marine and Barre Rorabaugh,
dated June 15, 2004. (2)
10.7 Sales Force Agreement, by and between Sealife Marine Products,
Inc. and Brokers Unlimited Inc., dated January 21, 2004 (3)
10.8 Consulting Agreement between Brokers Unlimited, Inc. and Sealife
Corporation, effective as of November 22, 2004.
10.9 Consulting Agreement between Michael Sahl and Sealife
Corporation, effective as of November 30, 2004.
10.10 Amendment No. 1 to Consulting Agreement with Michael Sahl,
effective as of January 20, 2005.
10.11 2004 Stock Award Plan (2)
21.1 Subsidiaries of the Company (4)
23.1 Consent of Stubbs, Alderton & Markiles, LLP (included in Exhibit
5.1)
23.2 Consent of Pollard-Kelley Auditing Services, Inc.
24.1 Power of Attorney (see Signature Page)
(1) Filed as an Exhibit to our Annual Report on Form 10-KSB for the period
ended May 31, 2003, dated September 19, 2004.
(2) Filed as an Exhibit to our Registration Statement on Form S-8 filed August
6, 2004, as amended on November 16, 2004.
(3) Filed as an Exhibit to our Current Report on Form 8-K, filed March 15,
2004.
(4) Filed as an Exhibit to our Annual Report on Form 10-KSB for the period
ended May 31, 2004, dated September 14, 2004.
EX-1