Stock Patrol Says Livestar 'Sequel' Has a Familiar Ending: It Pays, Again
Jun 14, 2004 (financialwire.net via COMTEX) -- (FinancialWire) Stock Patrol
(http://www.stockpatrol.com) is questioning recent announcements and
transactions by Livestar Entertainment Group (OTCBB: LSTA), especially related
to its on-again, off-again acquisition of a Toronto nightclub called "The
Sequel."
Stock Patrol partners with the Investor Resource Center at Investrend
Information (http://www.investrendinformation.com)
"When we first wrote about Livestar Entertainment Group, Inc. in September
2003, the Company was trumpeting plans to acquire control of a Toronto, Canada
nightclub called "The Sequel." See Livestar Entertainment Group, Inc.,
Part I - And Now The Sequel and Livestar Entertainment Group, Inc., Part II -
This Sequel Has A Surprise Ending," said the noted investor watchdog
website.
The article continues:
"Actually, it was not altogether clear whether Livestar would be acquiring
The Sequel, or vice- versa, but either way, a generous payday was in store for
the The Sequel's owner, Terrence Lall.
"Then, on October 19, 2003, Livestar announced that the deal had closed; the
Company had acquired The Sequel in exchange for consideration that included
$35,000 and one million preferred shares of Livestar stock issued to Lall or his
nominees. Those preferred shares were convertible into a total of 40 million
shares of Livestar common stock. Lall received an additional 19 million shares
of common stock as a consultant to Livestar.
"Just what had the Company acquired? Livestar described The Sequel as
profitable ' but produced no financial reports for the nightclub. And although
Livestar promised that audited financial information for The Sequel would soon
be forthcoming, it never appeared.
"Investors can stop waiting for those audited statements to arrive. On June
4, 2004, Livestar filed a Form 8-K revealing that it had been unable to obtain
audited financial information for The Sequel. Rather than cancel the
transaction, however, Livestar restructured the arrangement, entering into a
five year lease to operate the nightclub.
"Although The Sequel, and its owners, failed to deliver the required
financial information, it has been Livestar which continues to bear the greatest
cost. Livestar has not indicated whether Lall and his associates will be
returning the preferred shares and cash they received as part of the original
purchase deal ' which would seem appropriate since the sale has been cancelled.
The lease agreement did not address that issue, but it did provide for Livestar
to pay monthly rent of $5,000 for The Sequel, and a security deposit of $11,000
' rather audacious requirements considering the previous $35,000 payment.
"So Livestar gets to pay for The Sequel ' again.
"It is not as though Livestar has a bundle of cash on hand. As of March 31,
2004, the Company had approximately $39,000 in the bank ' but liabilities of
more than $2 million including over $1.55 million in payables and almost
$500,000 in advances.
"Over $900,000 of those obligations were owed to Livestar directors or
companies controlled by Livestar directors. The Company's liabilities also
included almost $200,000 that had been advanced for "working capital"
for The Sequel ' making the Company's new agreement to pay $5,000 in monthly
rent even more puzzling.
"And Livestar's revenues have been modest. The Company reported revenues of
$58,100 for the quarter ended March 31, 2004, all of which were generated from
ticket sales for three live events (although the Company did not enumerate the
costs associated with those ticket sales. Assuming ticket prices ranging from
$20 to $50 (the prices indicated in the Company's press releases) the reported
revenues suggest that those concerts generated only modest attendance.
"The Company conceded as much in a May 24th press release that the Company
"sold over a few thousand tickets to live events so far this year and the
resulting revenue is reflected in our 10QSB report for the quarterly period
ending March 31, 2004." The sale of a few thousand tickets to three concerts
hardly connotes resounding success.
"Livestar may not have found a way to generate much cash, but it knows how
to create more stock. On May 28, 2004, the Company filed a Preliminary Proxy
Statement asking shareholders to increase the authorized shares of common stock
from 1 billion to 10 billion shares. Shareholders also were asked to approve the
issuance of 185 million shares of common stock under Employee Stock Incentive
Plans for the years 2003 and 2004. A final Proxy Statement seeking these actions
has now been filed.
"Specifically, the Company asked its shareholders to approve a September 5,
2003 issuance of 30 Million shares under the Employee Stock Incentive Plan for
the Year 2003; an October 15, 2003 issuance of 55 million shares under the
Employee Stock Incentive Plan for the Year 2003 No. 2; and a January 29, 2004
issuance of 100 million shares for the Employee Stock Incentive Plan for the
Year 2003.
"The request for shareholder approval seems somewhat belated since the
Company has already registered these shares on a series of Forms S-8.
"The Company filed another Form S-8 on May 7, 2004, registering 250 million
shares for its Employee Stock Incentive Plan For the Year 2004 No. 3. The May
28th Proxy Statement did not seek shareholder approval for this issuance. While
the May 7th Form S-8 did not say who would be receiving the shares, a Form 4
filed by the Company's President and CEO Ray Hawkins on June 1, 2004 indicated
that on May 27th he received options to purchase 60 million shares of Livestar
common stock at .0017 per share.
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