UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

Form 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-50892

 

LYFE COMMUNICATIONS INC .

(Exact name of registrant as specified in its charter)

Utah		87-0638511 27-1606216
(State or other jurisdiction of  incorporation or organization)		(I.R.S. Employer Identification No.)

P.O Box 961026 South Jordan, Utah		84095
(Correspondence Address)		(Zip Code)

Registrant's telephone number:     (801) 478-2452

Securities registered pursuant to Section 12(b) of the Act:

None

 

Securities registered pursuant to Section 12(g) of the Act:

Common Stock ($0.001par value)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act .   Yes  o     No X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  o     No X

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X    No o

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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Not applicable.

Yes  o     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

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

Large accelerated filer   o	Accelerated filer   o
Non-accelerated filer   o	Smaller reporting company  X

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes  o     No X

The aggregate market value of the voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2012) was approximately $6.2 million.

The number of shares of Common Stock, $0.001 par value, outstanding on April 15, 2013 was 113,383,393 shares.

DOCUMENTS INCORPORATED BY REFERENCE: None.

  

  

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LYFE COMMUNICATIONS INC.

FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2012

Index to Report

PART I		Page
Item 1.	Business	5
Item 1A.	Risk Factors	13
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	19
Item 3.	Legal Proceedings	19
Item 4.	Mine Safety Disclosure	21
PART II
Item 5.	Market for Registrant’s Common equity and Related Stockholder	22
	Matters and Issuer Purchases of Equity Securities
Item 6.	Selected Financial Data	23
Item 7.	Management’s Discussion and Analysis of Financial Condition and	24
	Results of Operations
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 8.	Financial Statements and Supplementary Data	29
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	55
Item 9A.	Control and Procedures	55
Item 9B.	Other Information	56
PART III
Item 10.	Directors, Executive Officers, Promoters and Corporate Governance	57
Item 11.	Executive Compensation	59
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	60
Item 13.	Certain Relationships and Related Transactions, and Director	61
	Independence
Item 14	Principal Accounting Fees and Services	62
PART IV
Item 15.	Exhibits, Financial Statement Schedules	63

  

  

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FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements”.  All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words.  These forward-looking statements present our estimates and assumptions only as of the date of this report.  Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made.  Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.  You should, however, consult further disclosures we make in future filings of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Although we believe the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements.  Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.  The factors impacting these risks and uncertainties include, but are not limited to:

·

our current lack of working capital;

·

inability to raise additional financing;

·

the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require our management to make estimates about matters that are inherently uncertain;

·

deterioration in general or regional economic conditions;

·

adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;

·

inability to efficiently manage our operations;

·

inability to achieve future sales levels or other operating results; and

·

the unavailability of funds for capital expenditures.

For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see “Item 1A. Risk Factors” in this document.

Throughout this Annual Report references to “we”, “our”, “us”, “Lyfe”, “Lyfe Communications”, “Connected Lyfe”, “the Company”, and similar terms refer to LYFE Communications, Inc.

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PART I

ITEM 1.  BUSINESS

General Business Development

Our business focus is on delivering the next generation of television, entertainment and communication.  We are developing, deploying and operating the networked platform for the communications and entertainment services for delivery to consumers through multiple delivery mediums, such as smart phones, televisions, and portable electronic devices at any location with Internet connectivity.  As technology and consumer connectivity expands, we believe, the consumer is no longer satisfied with the traditional entertainment choices or the TV experience.  We believe, consumers want more choices and freedom and no longer want to be tethered to their TV alone for the viewing options.  We believe the consumer wants the mobility the Internet and new devices such as smart phones provide them.  We believe our technology helps bridge the gap between the past static television viewing to an interactive television experience as well as provide the mobility the consumer wants and expects.  By leveraging our proprietary IP (“Internet Protocol”) technologies, we can provide, we believe, an innovative and compelling media and communication services to consumers and businesses who increasingly want access to their television, Internet and voice services on their terms – from any device, at home, in the office, or on the go.

Business of LYFE Communications

LYFE Communications, Inc. is developing a technology base for next generation entertainment and communications. Through the wholly owned subsidiary Connected Lyfe, Inc., its primary customer acquisition, operations and services division, LYFE Communications is truly integrating television, ultra high-speed Internet and enhanced voice services for delivery via Internet using IP (Internet Protocol).

The Company’s technology innovations take traditional digital television delivery and convert it to an adaptive IP-based service. The result is dramatically lower cost of operation, new interactive capabilities and delivery to any device, in any location, at any time.

As of December 31, 2012, LYFE Communications provides high-speed data and voice services to consumers in six cities and will deploy next generation television services, with voice and data access, into each of these markets, offering the most innovative and compelling media and communications services to residential customers.  Beyond these markets, LYFE Communications will deploy its innovative platform through acquisitions, partnerships, and technology licensing to major existing service providers.

Our technologies are the foundation for many exciting, customer-valued IP services for a rapidly growing market segment that lives “always on and connected,” accessing all the people, information and entertainment in their lives, on their terms – any time, any place, on any device.

The Emergence of Lifestyle Media

Consumers are increasingly calling the shots in a converged media world. They use portable music devices to make their own music playlists. Personal video recorders allow them to customize television line-ups. Satellite radios pump commercial-free music into their cars. These consumers pull stock-market updates, text messages, wallpaper, ringtones, and video into their mobile phones. They come together in online communities, generate their own content, mix it, and share it on a growing number of social networks. No longer a captive, mass media audience, today’s media consumer is unique, demanding, and engaged.

Broadband or high-speed Internet access and the Internet Protocol (IP) are the technology enablers that have made this new breed of consumer possible. Broadband and IP will be the foundation through which consumers organize their productive, leisure, and social time. The rules are radically changing for all value chain participants now that video content is no longer bound to a specific access network or device.

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A new approach that helps consumers maximize their limited time and attention to create a rich, personalized, and social media environment is needed. PricewaterhouseCoopers calls this approach Life-style Media; it is the combination of a personalized media experience with a social context for participation. It bridges the world of unlimited professional and user-created video content with the world of limited consumer time and attention. It explicitly recognizes that consumers increasingly access a two-way communication infrastructure.

To realize this vision of Lifestyle Media, two fundamental components are needed: new content distribution models that put consumers in control and more accurate and scalable data about what they are watching, doing, and creating. The combination of these two crucial elements will create a media marketplace, a platform that connects media providers and media seekers through an organizational and technical infrastructure. It will enable Lifestyle Media to flourish by allowing content owners, advertisers, and consumers to discover, select, configure, distribute, and exchange professionally produced and user-generated video content.

 

Overview of the Industry and Direction/Challenges

Media businesses have seen the rise and fall of new revenue models and new media empires on a pace and scale uncommon in other industries.  The business changes with each new advancement in telecommunications capability and adoption.  As with previous evolutions driven by cable network distribution, digitization or satellite transmission power, the next set of changes are foreseeable and actionable. As of December 31, 2012, improvements in physical network infrastructure, technological innovation, and content rights have, for the first time, all progressed to the levels necessary for the next generation in consumer tele-visual experience.

 

Television and the Internet

Physical network infrastructure development has been the most obvious and forceful influence on the media business in the last 35 years.  The deployment of cable networks changed the television business, creating an entirely new scale of television programming and adding subscription revenue sources.  This closed network generation of network development had a powerful affect on the television industry.  Pundits have forecasted for over a decade that today’s generation of open network build out will have an even greater affect on the media industries.  While that affect has been seen in the music industry, it is only now possible to see and capitalize on how these forces will impact television and other video industries.  As evidenced by nascent IPTV deployments at major Telcos and minor ones, the fiber networks of today’s Internet are finally large enough to carry television signals with equivalent or better quality than traditional cable infrastructure. With quality issues overcome, the door is open to the interactivity and new content types that define a next generation television services.

Challenges:  Traditional Web/Internet Video and Television

Routers and fiber aren’t the only technologies needed to make video signals survive in an Internet world. The second, and less known issue is the shared nature of the open network.  Simply because a DSL connection is in place does not mean that a connection will continuously deliver ESPN in HD, even if that connection is fast enough.   The Internet is a shared resource.  Email, web browsing, file sharing, and a host of other applications are all competing for the same bandwidth over the same data lines.  To solve this problem, traditional IPTV systems carefully control network resources, which is expensive and problematic. Under this model, the distribution of IPTV services is limited to geographies with the right population density, higher ARPU (Average Revenue Per User) potential, and more easily shared network costs.  In the past few years, advancements in application control have demonstrated that it’s possible to provide quality of service without expensive network controls.  These advances have created significant opportunities to distribute next generation television services much more broadly.

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The Cornerstone of the LYFE Communication’s Television Opportunity

The ability to watch last night’s episode from any channel is such an obvious and direct user desire; but it has eluded service providers for years.  While copyright law leaves open a viewer’s right to record anything, it specifically precludes the service provider from recording and redistributing without an additional negotiated right.  These are challenging legal problems.  The programming available on television comes from a host of sources, each with its own contracts and cleared rights.  Foreseeing the power of an open Internet to affect their businesses, content owners have taken huge strides to normalize rights and publish some shows on sites like Hulu, Fox.com, and ABC.com.  They have also signaled that much more content can be made available, if the underlying diversity of cleared rights can be managed and honored, and if the advertisements carried within the content can be managed, counted, and replaced as necessary. For industry outsiders, its not always obvious that it’s not just inefficient to air a commercial for a weekend store sale the following week, it may breach contractual rights as the rights to air that ad may have expired.  These are the critical issues that make the media industry tick.  With control of VoD or network DVRs, television networks can relinquish the rights they have and work to inform us of the rights they do not have.  This opening of rights has not been available before now, and it opens the door for video browsing and episode search necessary to provide next generation television services.

By integrating a new type of consumer interaction, quality of service for individual media

streams over the Internet, meta data driven media operations, and multiple communications services with traditional media, LYFE is building the platform for the next generation of communications and entertainment services.  The sharable experience, special interest content, and integrated communications with media create a unique service with natural revenue extensions and partner marketing power.

Sustainable Competitive Advantages Business Plan

Next generation television services are now possible because of the evolution of network, technology and content rights.  In past 5 years, there has been tremendous hype over the bundling of services: the Voice, Data, and TV triple play.  Unfortunately, a triple play is not a next generation of anything.  It is a billing advancement only.  We have seen the cable operators learn to provide the same voice services that the telcos had provided and we have seen the telcos learn to provide the exact same television service that the cable operators had provided.  And we’ve had billing innovation: we get all three services for one price. That’s good, but now its time to advance the services themselves.  Interactive, shared user experiences with hobbies and interests specific to the viewers are now possible.  Some simple examples of next generation capabilities:     

·

Shared viewing is when you take an aerobics class with your best friend without leaving your house.  Shared is when you catch the bowl games with your college buddies in Allentown.  Shared is when your kids play a marathon game of video RISK against their cousins in Albuquerque.

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Media operations today are appliance based, massively inefficient, and rigidly inflexible.  This makes the cost of assembly and distribution high, limiting the types of content that can be profitable.  Meta data based operations running on general purpose hardware can replace the traditional methods with orders of magnitude cost savings and liberating new flexibility to create new media types.

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Television EPG navigation is linear, list based, and robotic.  Hypertext Markup Language, the language of the Web, is used everyday to create nonlinear, intuitive, hyper link navigation that can be used to integrate Triple play Voice and Web services into a coherent user experience.  You could see your contacts on your computer or TV, click dial, and pick your home handset or talk through your TV with or without video conferencing.

  

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Cable and Satellite - Internet Television - High Performance IP Networks and LYFE Communications

The history of television has always been driven by infrastructure. Service providers are the ones that make the decisions on who the television reaches. This puts a limit on what type of television different users get. In the mid 1970’s we started to see a change in television with the introduction of cable and satellite distribution. This created more channels for the viewers other than the three major networks, ABC, NBC and CBS.  Open networks increase that content supply infinitely.  LYFE Communications will be able to reach those users and also be able to provide service to areas that are currently under-served by television service providers. Community fiber networks are able to reach hundreds of thousands of homes in various states.  Taxpayers have paid for this fiber and yet are still limited to basic television.

In addition, over 32.5% of Americans currently live in apartment complexes.  They do not have full access to television services. Because of the structure of the building, new network development can be capital intensive. This leaves the housing co-operatives free to decide whether they prefer that residents be linked to a signal provider individually or whether they want to own and operate their local cable TV network in common.  Private Cable Operators (PCOs) must now upgrade their systems, which many of them do not want to do or can’t due to the associated costs.  Many are now looking for 3rd party distributors to provide the services that the MPEG 2 cable TV did not provide.

There are many vertical markets in which LYFE Communications would be a better solution to get more television services.  The university market is hard to reach because the hardware that is needed is expensive and users only want to pay for a nine-month period.  The LYFE Communications service can be run on a PC or a laptop, which college students have. Our services also benefit those in the military.  The military currently has many fragmented deals with private sector operators to provide multi channel television but once again since LYFE Communications can be run on a PC or a laptop, those in the military would be able to have access to television shows that they did not previously have.

LYFE Communication’s open network distribution offers a greater reach to areas that have been under-served by television services delivering quality video to more consumers.  The opportunity:

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Extended TV services to PCs and mobile devices  

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Digital TV to currently underserved areas

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Integrated Voice, TV, and Data for interactivity

Target Customers

Connected Families of All Types

LYFE Communications is reaching the large wave of consumers whose lives and whose family’s lives are fundamentally shaped by the reality that at school, work, and especially at home, they are always "connected."  As the web has delivered empowering new social and rich searchable experiences, rigid digital TV service offerings have provided very limited control, personalization, or flexibility. We believe families of all demographic profiles, in all phases of their lives and lifestyles are ready and even expect access to all the Television channels from any device, from any network, at any time.  Consumers do not want to have separate boxes with separate services.  They want to view, share, and interact with the movies, shows, and events they love.

Students

Teenage through college youth have both the appetite and readiness to view more television when it is accessible from the devices that are mainstays in their lives, such as: iPod's, Smartphones, Mac's and PC's, and even a television. They want to "tweet," “text,” or "Facebook."  If they can ichat and share a website with a friend, why can't they watch a favorite Primetime episode with friends wherever they are? Live linear channels of TV networks that are always on will continue into the next decade, but the new

expectation of a channel and its brand of programming will expand "Everywhere" lead by services like LYFE Communications.

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Uniquely Truly Viewer Driven

Every participant in the Television industry claims to focus on consumers needs, but the reality of the traditional TV industry is that consumer desires are subjugated to the battles between Programmers and Operators. For weeks and months at a time consumers lose access to favorite programming due to the high stakes negotiations between Cable Networks and Satellite or cable Systems. After years of providing convenient web access to extensive TV shows online, Cable leaders now tout new closed services but provide only a fraction of the programming.

The traditional IPTV and cable infrastructure is rigid.  Without innovation, the only battle to be had, which can affect profitability, is over rights.  Customers are an afterthought.  LYFE Communication’s meta-data driven operations changes the battle.  Meta–data is information about media and by working with the information instead of the media directly, the system has the flexibility to provide new services with new revenues and innovative customer interface tools.  

LYFE Communications has no dependency on expensive legacy digital transmission systems and set top devices.  We have developed the technology to provide TV truly on the terms of consumers to affordable devices and also harness the devices consumers already have.

Technology Transforming TV Delivery and Consumption

When networks were first developed, the simplest solutions were typically brought to market.  Similar to the development of rail road networks being the simple and efficient transportation network before a national highway system became viable, Circuit Switched networks were a simple and efficient way to solve original data networking problems.  Telephone networks were one of the first circuit switched networks.  To make a phone call, operators would patch network segments together to ultimately create a circuit between the originating caller and the callee.  

This eventually became an automated process utilizing transistors to create the temporary circuit between the callers, but the fact remained that a single, physical, unbroken pathway of metal was established between the individual parties that wanted to make the call.  Television networks have similar origins, and still operate this way.  When watching a live event on cable, you have an uninterrupted connection between the output of the camera and the back of your TV.  Packet based networks eliminate this one-one mapping, splitting the data into small routable packets and allow network routers to determine the best path take to deliver the data packets.  This packet-based infrastructure is what makes the Internet so flexible and adaptable. It is a general purpose, open network.

Packet switched networks offer remarkable financial advantages, but come with substantial technology hurdles, which have made television distribution impossible until now.  LYFE Communications is developing a multi-faceted approach to dealing with the issues that present themselves in packet switched networks. The solution is to regulate the data flow at key points in the network itself.  Our services can make informed decisions as to how best to get the data to the user.  By using several techniques we can ensure that we are getting the maximum amount of data through to the user   while correcting minor transmission issues.

Lowest Operating Cost in Subscription Television

The television content stream has been delivered to your television in almost the same way for the past 60 years.  The picture has improved and there are more channels to select, but the process behind the scenes has not evolved.  Content is sourced from national, international or local sources.  National media control rooms mix the content frame by frame for a steady stream of viewing images.  They mix together network

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ads and national commercials along with a single show and send the channel to the next step.  This next step can be a regional or local affiliate who then has to sell local commercials, tear the images apart and add in the local content.  They insert local commercials and local tags, further “handling” the content.  This manual process is done frame by frame around the clock to create the traditional television product we have known for years.  

Fast-forward to the LYFE Communications way:   Our software renders television in a new way.  It selects your custom content on the fly from many different streams.  It can source your viewing experience real time frame by frame from thousands of different locations and creators.  Your television, PC or wireless device will change the way you watch television.

 

Competition and Industry Movement

The video / television industry is currently under pressure from Internet technologies to make significant change to how they do business.  These technologies exert pressure by enabling the average viewer to watch high-definition programs streamed via the Internet from anywhere to their laptop or portable device or to their home in the family living room.  The resistance from the incumbents to keep things as they are restricts competition.  One thing that we have learned from Internet technologies is that the benefits to the consumer will ultimately drive change and in this case increase the ability of companies to compete.

 

Distribution-MDU/PCO Strategy

LYFE Communications expects to significantly increase their subscriber base in 2013.  The Company is currently under contract to provide its Data and Telephony services to 28 MDU properties spanning 6 cities in 2 states.  These properties present a total market opportunity of over 12,000 units.  These contracts can be characterized in one of two ways: bulk, or subscription.  A “bulk” contract allows LYFE to provide services to each and every tenant at the complex.  We currently have 3 bulk contracts with a total customer base of 600. The remaining 25 contracts are “subscription”, meaning we have either an exclusive or non-exclusive marketing contract and/or Right of Entry (ROE) at the property.  Our average penetration rate at the subscription properties is 10%, which represents a tremendous growth opportunity for the Company.  Further, all of these contracts provide the Company with the opportunity to extend more services in the future.  The Company is currently negotiating with some of the countries largest REIT’s and property management groups to provide services to the properties they own and manage.    

LYFE Communications Distribution and Marketing Plan

Traditionally, TV, phone, and Internet service providers have relied on mass marketing and advertising campaigns to reach out and acquire customers.  This has typically been accomplished using a mix of media such as TV, radio, and print.  Although these are effective ways to create buzz, and inform consumers about your company, this type of marketing makes it very difficult to exactly reach our target customer, and, measure the sales team’s effectiveness.  Also, it is not cost effective, especially for a relatively young company.  For these reasons and many others, LYFE Communications uses a more direct and personal method to reach and acquire our customers.  Our sales team contacts each and every prospective customer directly. This highly effective method of sales ensures the customer receives the products and services they need resulting in a “stickier” customer for the Company.

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts, including Duration

We are implementing standard web technologies for interactivity and integrating video sources across our network and into the consumer televisions, personal computers and other authenticated devices.  Our approach demands a meta-data driven operation to reduce back end costs and expands the possible services and features on the network.

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We are developing several proprietary technologies that address network management and video distribution over IP networks. We recently filed for a patent on our adaptive multi-cast streaming technology and we have filed for a provisional patent on our real time adaptive stream switching technology.  We expect to file more patents in 2013.  These applications will address the distribution of common video across some types of legacy IP networks, specific methods for the integrated use of meta data in operations to reduce costs and extend functionality, the development of multi-tiered control systems to manage heterogeneous IP networks, and methods for video frame storage that reduce cost, increase reliability, and reduce latency. We have not filed any applications but are hoping to file in the near term.  Where required, we will obtain franchise cable rights.

Need for any Government Approval of our Principal Products or Services.

Except as set forth herein, we know of no required governmental or regulatory approval of our principal products or services in our current markets.  As we expand our service area, we will be subject to various governmental regulations on the federal, state and local levels related to cable television and phone services.

Effect of Existing or Probable Governmental Regulations on our Business

Federal, state and local governments extensively regulate the cable industry and the telephone services industry and are beginning to regulate certain aspects of the Internet services industry. There are numerous proceedings pending before the Federal Communications Commission (the “FCC”), state PUCs and state and federal courts that may materially affect the way we do business. For example, Congress, the FCC and some states are considering various regulations and legislation pertaining to “network neutrality,” digital carriage obligations, digital set top box requirements, program access rights, digital telephone services and changes to the pricing at which we interconnect exchange traffic with other telephone companies, any of which may materially affect our business operations and costs. With respect to VoIP services, the FCC is considering whether it should impose additional VoIP E911 obligations on interconnected VoIP providers, including a proposed requirement that interconnected VoIP providers automatically determine the physical location of their customer rather than allowing customers to manually register their location. Also, the FCC continues to evaluate alternative methods for assessing USF charges. We cannot predict what actions the FCC or state regulators may take in the future, nor can we determine the potential financial impact of those possible actions.

We also expect that new legislative enactments, court actions and regulatory proceedings will continue to clarify and in some cases change the rights and obligations of cable operators, telecommunications companies and other entities under federal, state, and local laws, possibly in ways that we have not foreseen. Congress and state legislatures consider new legislative requirements potentially affecting our businesses virtually every year and new proceedings before the FCC, state PUCs and state and federal courts are initiated on a regular basis that may also have an impact on the way that we do business.

Actions by local authorities may also affect our business. Local franchise authorities grant franchises or other agreements that permit us to operate our cable and OVS systems, and we have to renew or renegotiate these agreements from time to time. Local franchise authorities often demand concessions or other commitments as a condition to renewal or transfer, and such concessions or other commitments could be costly to us in the future. In addition, we could be materially disadvantaged if we remain subject to legal constraints that do not apply equally to our competitors, such as where local telephone companies that enter our markets to provide video programming services are not subject to the local franchising requirements and other requirements that apply to us. For example, the FCC has adopted rules and several states have enacted legislation to ease the franchising process and enable statewide franchising for new entrants. While reduced franchising limitations could also benefit us if we were to expand our systems, the chief beneficiaries of these rules are the larger, well-funded traditional companies such as cable players Dish, DirecTV, Comcast, Time Warner and others, like Telco’s such as AT&T and Verizon.

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Federal Regulation

In February 1996, Congress passed the Telecommunications Act of 1996, which substantially amended the Federal Communications Act of 1934, as amended (the “Communications Act”). This legislation has altered and will continue to alter federal, state and local laws and regulations affecting the communications industry, including certain of these services that we will provide. On November 29, 1999, Congress enacted the Satellite Home Viewer Improvement Act of 1999 (“SHVIA”), which amended the Satellite Home Viewer Act. SHVIA permits direct broadcast Satellite (“DBS”) operators to transmit local television signals into local markets. In other important statutory amendments of significance to satellite carriers and television broadcasters, the law generally seeks to place satellite operators on an equal footing with cable television operators in regards to the availability of television broadcast programming. SHVIA amends the Copyright Act and the Communications Act in order to clarify the terms and conditions under which a DBS operator may retransmit local and distant broadcast television stations to subscribers. The law was intended to promote the ability of satellite services to compete with cable television systems and to resolve disputes that had arisen between broadcasters and satellite carriers regarding the delivery of broadcast television station programming to satellite service subscribers. As a result of SHVIA, television stations are generally entitled to seek carriage on any DBS operator’s system providing local service in their respective markets. SHVIA creates a statutory copyright license applicable to the retransmission of broadcast television stations to DBS subscribers located in their markets. Although there is no royalty payment obligation associated with this license, eligibility for the license is conditioned on the satellite carrier’s compliance with the applicable Communications Act provisions and FCC rules governing the retransmission of such “local” broadcast television stations to satellite service subscribers. Noncompliance with the Communications Act and/or FCC requirements could subject a satellite carrier to liability for copyright infringement. SHVIA was essentially extended and re-enacted by the Satellite Home Viewer Extension and Reauthorization Act (“SHVERA”) signed in December of 2004.

 

On October 31, 2007, the FCC banned the use of exclusivity clauses by franchised cable companies for the provision of video services to MDU properties. The FCC noted that 30% of Americans live in MDU properties and that competition has been stymied due to these exclusivity clauses. The FCC maintains that prohibiting exclusivity will increase choice and competition for consumers residing in MDUs. Currently this order only applies to cable companies subject to Section 628 of the Communications Act, which does not include DBS and private cable operators (“PCOs”) that do not cross public rights-of-way, such as the Company. Although exempt from this order, the FCC did reserve judgment on exclusivity clauses used by DBS companies and PCOs until further discussion and comment can be taken and evaluated.  If the order covers us, it will result in more competition.

 

We will have to comply with all regulations and have to budget such costs into our serves offering. Although this will increase our costs, we believe we can make up such costs in other areas of our operations. However, we will be at a disadvantage in complying with regulations given our relative size compared to our competitors.

 

State and Local Cable System Regulation

Where necessary, we will obtain the necessary franchise requirements for providing television services. Through our agreements with UTOPIA, we are a franchise cable provider on its networks.  Additionally, we may be required to comply with state and local property tax, environmental laws and local zoning laws, we do not anticipate that compliance with these laws will have any material adverse impact on our business.

State Mandatory Access Laws

A number of states have enacted mandatory access laws that generally require, in exchange for just compensation, the owners of rental apartments (and, in some instances, the owners of condominiums) to allow the local franchise cable television operator to have access to the property to install its equipment and provide cable service to residents of the MDU. Such state mandatory access laws effectively eliminate the

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ability of the property owner to enter into an exclusive right of entry with a provider of cable or other broadcast services. In addition, some states have anti-compensation statutes forbidding an owner of an MDU from accepting compensation from whomever the owner permits to provide cable or other broadcast services to the property. These statutes have been and are being challenged on constitutional grounds in various states. These state access laws may provide both benefits and detriments to our business plan should we expand significantly in any of these states. There can be no assurance that future state or federal laws or regulations will not restrict our ability to offer access payments, limit MDU owners’ ability to receive access payments or prohibit MDU owners from entering into exclusive agreements, any of which could have a material adverse effect on our business.

 

Regulation of High-Speed Internet

Information or Internet service providers (“ISPs”), including Internet access providers, are largely unregulated by the FCC or state public utility commissions at this time (apart from federal, state and local laws and regulations applicable to business in general). However, there can be no assurance that this business will not become subject to regulatory restraints. Also, although the FCC has rejected proposals to impose additional costs and regulations on ISPs to the extent they use local exchange telephone network facilities, such change may affect demand for Internet related services. No assurance can be given that changes in current or future regulations adopted by the FCC or state regulators or other legislative or judicial initiatives relating to Internet services would not have a material adverse effect on our business.

Employees

As of the date of this Current Report, we have 10 full-time and/or part-time employees and/or contractors working for the Company.  None of them are represented by a labor union or subject to a collective bargaining agreement.  We consider our relations with our staff members and contractors to be good.

 

Reports to Security Holders

 

We file reports with the Securities and Exchange Commission, or SEC, including annual reports, quarterly reports and other information we are required to file pursuant to US federal securities laws.  You may read and copy materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information from the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, which is http://www.sec.gov.

ITEM 1A. RISK FACTORS

An investment in our common stock involves a high degree of risk, and should not be made by anyone who cannot afford to lose their entire investment.  You should consider carefully the risks set forth in this section, together with the other information contained in this prospectus, before making a decision to invest in our common stock.  Our business, operating results and financial condition could be seriously harmed and you could lose your entire investment if any of the following risks were to occur.

Risks Related to Our Business

We are a start-up company with limited operating history, limited revenue and have to rely on our ability to raise capital to fund operations and there can be no assurance we will ever reach profitability or be able to continue to raise capital to fund operations.

LYFE Communications commenced limited operations in April of 2010, therefore, we have limited operating history on which to make an investment decision. Accordingly, LYFE Communications has a limited operating history and the business strategy may not be successful. Failure to implement the business strategy could materially adversely affect our business, financial condition and results of operations.

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Through December 31, 2012, LYFE Communication’s business has not shown a profit in operations and has generated modest revenues.  There can be no assurance we will achieve or attain profitability or be able to raise sufficient capital to stay in business. If we cannot achieve operating profitability or raise capital, we may not be able to meet our working capital requirements, which could have a material adverse effect on our business operating results and financial condition resulting in the loss of an investors’ entire investment in us.

We may be adversely affected by regulatory and litigation developments.

We are exposed to the risk that federal or state legislation may negatively impact our operations.  Changes in federal or state wage requirements, employee rights, health care, social welfare or entitlement programs such as health insurance, paid leave programs, or other changes in workplace regulation could increase our cost of doing business or otherwise adversely affect our operations.  Additionally, we are regularly involved in various litigation matters, including class action and patent infringement claims, which arise in the ordinary course of our business.  Litigation or regulatory developments could adversely affect our business operations and financial performance.

We need substantial additional capital to grow and fund our present and planned business and business strategy.

Our current and planned operations contemplate additional funding to execute on operating and growth strategies.  Failure to meet these funding milestones may have a significant adverse effect on our growth and anticipated revenues and we may have to curtail our business strategy.  If we receive less funding than planned, we will have to revise our business model and reduce proposed expansion.  Without significant funding, we will not be able to execute on our business operations and may be forced to cease operations. At this time, there can be no assurance we will be able to obtain the funding we need and even if we obtain such funding that it will be on terms and conditions favorable to us and our existing shareholders.  Without funding we will not be able to proceed with planned operations or meet existing obligations.

Our auditor’s “Going Concern” qualification in our financial statements might create additional doubt about our ability to stay in business, which could result in a total loss on investment by our shareholders.

Our accompanying financial statements have been prepared assuming that we will continue as a “going concern.” As discussed in Note 3 to the LYFE Communications Inc’s December 31, 2012 financial statements, we have limited revenues, have incurred a loss from operations and have negative operating cash flows since inception. These issues raise substantial doubt about our ability to continue as a “going concern.” Our ability to stay in business will, in part, depend on our ability to raise additional funding.  Our financial statements do not include any adjustment that might result from the outcome of this uncertainty.

Our internal systems and operations are untested and may not be adequate and could adversely affect our ability to continue our planned business.

Our internal systems and operations are new and unproven at scale.  Subscriber growth could place unanticipated strain on our systems used to efficiently manage and operate our planned services.  This could have a material adverse effect upon our business, results of operations and financial condition and could force us to halt our planned operations or continued expansion of those planned operations, causing us to lose any opportunity to gain significant anticipated market share in our industry. Our ability to compete effectively as a provider of IPTV, Broadband Internet Access and VOIP services and to manage future growth will require us to continue to improve our operational systems, our organization and our financial and management controls, reporting systems and procedures. We may fail to make these improvements effectively. Additionally, our efforts to make these improvements may divert the focus of our personnel and we may not be able to effectively continue our planned operations, which may materially and adversely affect our business, results of operations and financial condition.   

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Our inability to attract and maintain key personnel required to implement our business strategy could adversely affect our ability to continue our current and planned business resulting in slower growth.

We are trying to grow our effort to provide services and we are still hiring key positions and integrating personnel at all levels into a cohesive team.  If executives or other new hires integrate poorly, perform badly, or do not have the anticipated experience or skill sets required, our current and planned business endeavors could be harmed.  Planned personnel, management practices and controls may also prove to be inadequate to provide services, acquire customers and partners and operate the business, and any gaps or failures may have a material adverse affect on our business, financial condition and results of operations.

Increased competition may have an adverse effect on our ability to continue our current and planned business operations and result in our going out of business and may have a material adverse affect on our business, financial condition and results of operations.

We may see increased competition in our markets.  We do not have an exclusive relationship with our network partners and other providers may attempt to provide similar services over the same infrastructure. Furthermore, alternative network providers with closed systems through which we cannot provide services may enter the markets in which we sell services.  The competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements and devote greater resources to develop, promote and sell their products or services. In addition, increased competition could result in reduced subscriber fees, reduced margins and loss of market share, any of which could harm our business.    We cannot guarantee that we can compete successfully against current or future competitors, many of which have substantially more capital, existing brand recognition, resources and access to additional financing. All these competitive pressures may result in increased marketing costs, or loss of market share or otherwise may materially and adversely affect our business, results of operations and financial condition.

Our inability to patent, protect and update our technology may result in our inability to effectively compete in our selected industry.

We use technology advancements of our own and from suppliers to provide a more advanced service with more efficient economics.  Technology advancement is very fast paced in digital media and can lead to changing standards and new modes of providing services.  The advancement of other technology not available to or usable within our operations could make our current or future products or services obsolete or non-competitive.  Keeping pace with the introduction of new standards and technological developments could result in additional costs or prove difficult or impossible. The failure to keep pace with these changes and to continue to enhance and improve the responsiveness, functionality and features of our services could harm our ability to attract and retain users.

Our pursuit of technology or process patents may prove to be fruitless.  While our management has experience in these areas and intends to pursue patent applications around our technologies and business processes, we cannot guarantee that other patents have not already superseded those which we intend to pursue.  We have applied the knowledge and insight from our management teams’ industry experience and relationships to research the platform and technology directions of other industry participants and are unaware of other providers of the specific capabilities of LYFE Communications’ technology development; however, patents filed with the U. S. Patent Office during the past are not publicly available, and patent applications that cover our concepts could have already been filed by others which may materially and adversely affect our business, results of operations and financial condition..

Our operating results could be impaired if we become subject to burdensome government regulation and legal uncertainties, all of which would increase our cash requirements which may materially and adversely affect our business, results of operations and financial condition.

We are not currently subject to direct regulation by any domestic or foreign governmental agency, other than regulations applicable to businesses generally.  However, due to the increasing popularity and use of

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the Internet, it is possible that a number of laws and regulations may be adopted with respect to the Internet, relating to:

·

user privacy;

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pricing;

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content;

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copyrights;

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distribution; and

·

characteristics and quality of products and services.

The adoption of any additional laws or regulations may decrease the expansion of the Internet.  A decline in the growth of the Internet could decrease demand for our products and services and increase our cost of doing business.  Moreover, the applicability of existing laws to the Internet is uncertain with regard to many issues, including property ownership, export of specialized technology, sales tax, libel and personal privacy. Our business, financial condition and results of operations could be seriously impaired by any new legislation or regulation.  The application of laws and regulations from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the Internet and other online services which may materially and adversely affect our business, results of operations and financial condition.

The secure transmission over the Internet from our services to customers and back is important to customers trust in our ability to deliver services and if we should experience a breach in our security, we could lose customers or incur potential liability.

The secure transmission of confidential information over public networks is critical to electronic commerce and communications.  Anyone who can circumvent our security measures could misappropriate confidential information or cause interruptions in our operations.  We may have to spend large amounts of money and other resources to protect against potential security breaches or to alleviate problems caused by any breach. These costs may not be able to pass along to customers making our operations less profitable.  Additionally, we could be liable for breaches of security resulting in customers’ information being obtained in such breaches which could subject us to potential liability which may materially and adversely affect our business, results of operations and financial condition.

We rely on providers of content to provide rights for the distribution of their content to our customers which could be withdrawn, or prices for providing content could become cost prohibitive.

We do not own the video content that we provide to our customers.  We pay the content providers a fee for the rights to provide their content to subscribers.  The providers of the content may withdraw their rights, revoke rights, refuse rights, or increase the cost of their content rights, which may materially and adversely affect our business, results of operations and financial condition.

Planned acquisitions come with various risks, along with dilution to our shareholders, which could negatively affect our stock prices and may materially and adversely affect our business, results of operations and financial condition.

Acquisitions, mergers and joint ventures entered into by us may have an adverse effect on our business. We expect to engage in acquisitions, mergers or joint ventures as part of our long-term business strategy. These transactions involve significant challenges and risks including that the transaction does not advance our business strategy, that we don't realize a satisfactory return on our investment, or that we experience difficulty in the integration of new assets, employees, business systems, and technology, or diversion of management's attention from our other businesses. These events may materially and adversely affect our business, results of operations and financial condition.

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The current and future state of the economy may materially and adversely affect our business, results of operations and financial condition.

Our business may be adversely affected by changes in domestic economic conditions, including inflation, changes in consumer preferences, changes in consumer spending rates, personal bankruptcy and the ability to collect our customer accounts. Changes in economic conditions may adversely affect the demand for our products and make it more difficult to collect customer accounts, thereby negatively affecting our business, operating results and financial condition. The recent disruptions in credit and other financial markets and deterioration of national and global economic conditions could, among other things, impair the financial condition of some of our customers and suppliers, thereby increasing customer bad debts or non-performance by suppliers.   If we experience bad debts or slow paying customers in significant quantities, our cash flow will be limited and our ability to pay our own obligations will questionable.  As a small business these issues will affect us more than our larger competitors putting financial strain on our business and threatening our survival particularly since we have limited capital to rely on to overcome cash flow issues of slow paying customers.  If our customers are unable to pay or pay slowly it may materially and adversely affect our business, results of operations and financial condition.

Present members of management currently do not own a majority of our outstanding voting securities and cannot elect all directors who in turn elect all officers, without the votes of other shareholders.

Messrs. Bryson, Daw and Smith, who comprise all of the members of our current directors collectively own 44% of our outstanding voting securities and accordingly, do not have effective control of the company. Votes of other shareholders will have an effect when we are managed by our Board of Directors and operated through our officers, all of whom are elected by shareholders.

Future stock issuances could severely dilute our current shareholders’ interests.

Our Board of Directors has the authority to issue up to 200,000,000 authorized shares of our common stock or stock options to acquire such common stock; or up to 10,000,000 shares of preferred stock with rights, privileges and preferences designated by the Board of Directors. The future issuance of common stock or preferred stock may result in dilution in the percentage of our common stock held by our existing stockholders. Also, any stock we sell in the future may be valued on an arbitrary basis by us and the issuance of shares of common stock or preferred stock for future services, acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our existing stockholders .

We do not expect to pay dividends in the near future.

We do not expect to declare or pay any dividends on our common stock in the foreseeable future. The declaration and payment in the future of any cash or stock dividends on the common stock will be at the discretion of our Board of Directors and will depend upon a variety of factors, including our ability to service our outstanding indebtedness, if any, and to pay dividends on securities ranking senior to the common stock, our future earnings, if any, capital requirements, financial condition and such other factors as our Board of Directors may consider to be relevant from time to time. Our earnings, if any, are expected to be retained for use in expanding our business.

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Risks Related to Our Common Stock

Our common stock is classified as a “penny stock” under SEC Rules and Regulations, which means there is a very limited trading market for our shares.

Our common stock is deemed to be “penny stock” as that term is defined in Rule 3a51-1 of the SEC. Penny stocks are stocks (i) with a price of less than five dollars per share; (ii) that are not traded on a “recognized” national exchange; (iii) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ-listed stocks must still meet requirement (i) above); or (iv) in issuers with net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years); or $5,000,000 (if in continuous operation for less than three years); or with average revenues of less than $6,000,000 for the last three years.  

Section 15(g) of the Exchange Act and Rule 15g-2 of the SEC require broker dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account.   Potential investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be “penny stock.”

Moreover, Rule 15g-9 of the SEC requires broker dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor.  This procedure requires the broker dealer to (i) obtain from the investor information concerning his, her or its financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor, and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives.  Compliance with these requirements may make it more difficult for investors in our common stock to resell their shares to third parties or to otherwise dispose of such shares.

Due to the substantial instability in our common stock price, you may not be able to sell your shares at a profit or at all, and as a result, any investment in our shares could be totally lost.

The public market for our common stock is very limited. As with the market for many other small companies, any market price for our shares is likely to continue to be very volatile.  Our common stock has very limited volume and as a “penny stock,” many brokers will not trade in our stock limiting our stocks’ liquidity.  As such it may be difficult to sell shares of our common stock.

Our common stock has a limited trading history, and it will be difficult to determine any market trends or prices for our shares and additional shares that become available under Rule 144 could cause the price of our stock to decrease.

Our common stock currently is quoted on the OTC Bulletin Board, under the symbol “LYFE.”  However, with little trading history, a trading market that does not represent an “established trading market,” volatility in the bid and asked prices and the fact that our common stock is very thinly traded, you could lose all or a substantial portion of your funds if you make an investment in us.   Additionally as more shares become available for resale, it is likely there will be negative pressures on our stock price. The sale or potential sale of shares of our common stock that may become publicly tradable under Rule 144 in the future may have a severe adverse impact on any market that develops for our common stock, and you may lose your entire investment or be unable to resell any shares in us that you purchase.

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Item 1B.  Unresolved Staff Comments

Not required under Regulation S-K for smaller reporting companies.

ITEM 2.  PROPERTIES

We currently do not have a corporate office.  Due to a lack of funding the Company was unable to continue paying on the lease.  Additionally management determined to save on the cost of offices as management of operations can be performed by employees and contractors remotely.  The Company maintains correspondence through the post office box of P.O Box 961026 South Jordan, Utah 84095.

ITEM 3.  LEGAL PROCEEDINGS

Vendors and Former Employees

On December 13, 2010 Love Communications LLC filed a complaint against the Company in the Third Judicial Court of Salt Lake County in the amount of $43,672 for unpaid invoices.  The Company disputed the complaint and engaged in settlement proceedings with Love Communications.  On March 27, 2012 the dispute was settled for $36,000 and paid in full.

On June 15, 2011 the Company received a default judgment from the State of Michigan Judicial Court in conjunction with the default on lease payments to a landlord in conjunction with a lease agreement.  The judgment was for $191,160 which was recorded as a liability.  The Company entered into a settlement with the landlord for $75,000 on November 15, 2011.  As of December 31, 2011 $20,000 in payment was made on the liability and $2,088 of interest was accrued on the outstanding $55,000.  During 2012 $20,000 in payments were made on the liability and $1,842 of interest was recorded.  Additionally during 2012, the Company wrote off $23,930 of principal and accrued interest that was still being accrued for after the November 15, 2011 settlement.  As a result the total liability balance as of December 31, 2012 is $15,000. As of April 2013 the Company has paid $70,000 of the original settlement resulting in a balance of $5,000 still owing to satisfy the liability.

On October 12, 2011 a former employee residing in Michigan filed a complaint with the Michigan Department of Licensing and Regulatory Affairs against the Company for unpaid payroll in the amount of $10,000.  On March 19, 2012 the claim was settled and paid in full by the Company.  

On January 20, 2012 a former employee residing in Utah filed a complaint with the State of Utah Labor Commission against the Company for unpaid payroll in the amount of $1,725.  On December 6, 2012, the claim was settled and paid in full by the Company.

Internal Revenue Service

On July 19, 2011, the Company was notified by the Internal Revenue Service of intent to lien in the amount of $258,668 for unpaid taxes.  Since that time the Company has made payments to the IRS in the amount of $178,464 to reduce the tax liability, and the Company has had $25,302 in liability abated by the IRS.  On August 21, 2012 the Company paid the remaining balance owed to the IRS.  On September 12, 2012, the Company received a “Certificate of Release of Federal Tax Lien” and has no outstanding liability for this matter as of December 31, 2012.

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Siegfried and Jensen

On September 26, 2012, the Company received a “Summons & Complaint” from Ned P. Siegfried and Mitchell R. Jensen in conjunction with an outstanding $50,000 “Convertible Promissory Note.”  Under the complaint Siegfried and Jensen are asking for $68,000, interest to date and attorney fees.  The $50,000 Convertible Promissory Note was signed on October 1, 2010 and had a conversion price of $.70. Throughout the duration of the note, the Company has tried several times to reach out to Siegfried & Jensen to settle this debt.  The Company has even offered reduced conversion prices, none of which were satisfactory to Siegfried & Jensen.  On October 23, 2012, the Company filed an “Answer to Complaint”, in the Third Judicial District Court in the State of Utah.  As of April 2013, the complaint is in legal proceedings.

UTOPIA

On March 2, 2011, the Company received from UTOPIA a notice of termination in conjunction with the agreement between Connected Lyfe and UTOPIA entitled Non-Exclusive Network Access and Use Agreement.  According to the notice, Connected Lyfe had until May 2, 2011 to transition its customers to another service provider on the UTOPIA network or cure the breach by working out an arrangement with UTOPIA that is acceptable.  The notice of termination is due to non-payment of network access fees.

On March 3, 2011, the Company received a “notice of exercise of video system reversionary rights” from UTOPIA. Currently, there is a dispute between UTOPIA and Connected Lyfe as to who has not performed under the existing contract.  As stated in the notice, UTOPIA had been working with Connected Lyfe on a resolution.  

On September 28, 2012, the Company received a “notice of transfer of customers” from UTOPIA to transfer the existing customer base to another provider on their network.  

On October 2, 2012, the Company received a “Summons & Complaint” from UTOPIA in conjunction with their claim that the Company failed to comply with both the “Network Access Agreement” and the “Video Systems Agreement”.  Under the complaint UTOPIA is asking for $495,000 in relief from Connected Lyfe Inc.

 

On October 10, 2012, the Company signed an agreement with Veracity Networks to transfer those customers remaining on the UTOPIA network.  

On November 2, 2012, the Company filed its official answer and subsequent counter complaint to the Utopia allegations.  The Company alleges in its answer and counter claim to the court that Utopia failed to deliver the Video Head End as per the “Video Systems Agreement” which was executed on June 21, 2010, and seeks reimbursement of $375,000.  Further, the Company alleges in its answer and counter claim that Utopia has consistently overbilled for services, and prevented the Company from managing its customer accounts on the Utopia network, resulting in $240,000 of damages.  Further, the Company is also claiming the full value of its customers that were transferred as a result of Utopias actions in October 2012. The Company is seeking $1,900,000 in damages. Finally, the company is claiming substantial additional consequential and punitive damages. These actions came after years of failed negotiations between the Company and Utopia. The Company decided it was in the best interest of its shareholders to take decisive action in a court of law against Utopia in order to recover any losses that Utopia has caused the company to incur and believes that they will be successful in this pursuit.  

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