Purpose of the Reverse Split

 

The primary purpose for effecting the reverse split is to comply with the terms of the proposed Merger as described above.

 

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However, even in the event that the Merger does not occur, the Board believes that the reverse split is in the best interests of Charmed and its shareholders, as it will provide additional flexibility for any future merger, exchange or acquisition.  A reverse stock split may also have a favorable effect on the trading price of our common stock on the OTC Bulletin Board.

 

In evaluating whether or not to authorize the reverse split, in addition to the considerations described above, the Board of Directors also took into account various negative factors associated with a reverse stock split. These factors include:

 

	•	the negative perception of reverse stock splits held by some investors, analysts and other stock market participants;
	•	the fact that the stock price of some companies that have effected reverse stock splits has subsequently declined back to pre-reverse stock split levels;
	•	the adverse effect on liquidity that might be caused by a reduced number of shares outstanding; and
	•	the costs associated with implementing a reverse stock split.

 

Shareholders should recognize that if a reverse stock split is effected, they will own a fewer number of shares than they currently own (a number equal to the number of shares owned immediately prior to the reverse stock split divided by two). The reverse stock split may not increase the per share price of our common stock in proportion to the reduction in the number of shares of our common stock outstanding or result in a permanent increase in the per share price (which depends on many factors, including our performance, prospects and other factors that may be unrelated to the number of shares outstanding).

 

If the per share price of our common stock declines following the reverse split, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of a reverse stock split. Furthermore, the liquidity of our common stock could be adversely affected by the reduced number of shares that would be outstanding after the reverse stock split. In addition, the reverse stock split will likely increase the number of shareholders who own odd lots (less than 100 shares). Shareholders who hold odd lots typically will experience an increase in the cost of selling their shares, as well as possible greater difficulty in effecting such sales.

 

The Board of Directors considered all of the foregoing factors, and determined that the reverse stock split is in the best interest of Charmed and its shareholders.

 

Principal Effects of the Reverse Split

 

General

Our common stock is currently registered under the Exchange Act, and we are subject to the periodic reporting and other requirements of the Exchange Act. The reverse stock split will not affect the registration of our common stock under the Exchange Act.

 

Number of Shares of Common Stock and Corporate Matters

When implemented, the reverse split will have the following effects on the number of shares of common stock:

 

	•		each two shares of our common stock owned by a shareholder immediately prior to the reverse stock split would become one share of common stock after the reverse stock split;
	•		the number of shares of our common stock issued and outstanding would be reduced from 6,690,000 shares to 3,345,000 shares; and
	•		the number of authorized shares of our common stock would remain at 100 million shares.

 

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After effectuating the reverse split, we will have approximately 96,655,000 shares of authorized but unissued shares of common stock. The authorized and unissued and unreserved shares would be available from time to time for corporate purposes including issuances upon the closing of the Merger, raising additional capital by means of sales of stock or securities convertible into common stock, acquisitions of companies or assets, or other strategic transactions. If we issue additional shares, the ownership interests of holders of our common stock may be diluted.

 

The reverse stock split will affect all of our common shareholders uniformly and will not change the proportionate equity interests of our common shareholders, nor will the respective voting rights and other rights of shareholders be altered.

 

Fractional Shares

If the reverse stock split results in some shareholders receiving fractional shares, fractional shares will be issued. Charmed will not make any cash payments in lieu of the issuance of fractional shares.

 

Effect on Shares Held in Street Name

We intend to treat shareholders holding our common stock in "street name," through a bank, broker, or other nominee, in the same manner as registered shareholders whose shares are registered in their names when effecting the reverse stock split. Banks, brokers, or other nominees will be instructed to effect the reverse stock split for their beneficial holders holding our common stock in "street name." However, these banks, brokers, or other nominees may have different procedures than registered shareholders for processing the reverse stock split. If you hold your shares with a bank, broker or other nominee, and if you have any questions in this regard, we encourage you to contact your nominee.

 

Effect on Registered "Book-Entry" Shareholders

Our registered shareholders may hold some or all of their shares electronically in book-entry form. These shareholders will not have share certificates evidencing their ownership of our common stock. They are, however, provided with a statement reflecting the number of shares registered in their accounts.

 

	•	If you hold registered shares in a book-entry form, you do not need to take any action to receive your post-reverse stock split shares.
	•	If you are entitled to post-reverse stock split shares, a transaction statement will automatically be sent to your address of record indicating the number of shares you hold.

Effect on Registered Certificated Shares

Some registered shareholders hold all their shares in certificate form or a combination of certificate and book-entry form. If any of your shares are held in certificate form, you will receive a transmittal letter from our transfer agent as soon as practicable after the effective date of the reverse stock split. The letter of transmittal will contain instructions on how to surrender your certificate(s) representing your pre-reverse stock split shares to the transfer agent. Upon receipt of your share certificate, you will be issued the appropriate number of shares electronically in book-entry form. No new shares in book-entry form will be issued to you until you surrender your outstanding certificate(s), together with the properly completed and executed letter of transmittal, to the transfer agent. At any time after receipt of your statement reflecting the number of shares registered in your book-entry account, you may request a share certificate representing your ownership interest.

 

Accounting Matters

The reverse stock split will not affect the par value of Charmed's common stock.  As a result, the stated capital attributable to Charmed's common stock on Charmed's balance sheet will be reduced proportionately based on the reverse stock split ratio, and the additional paid-in capital account will be credited with the amount by which the stated capital is reduced. Prior periods' per share net income or loss and net book value amounts will be restated because there will be fewer shares of our common stock outstanding.

 

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Potential Anti-Takeover Effect

The proportion of unissued authorized shares to issued shares could, under certain circumstances, have an anti-takeover effect. For example, the issuance of a large block of common stock could dilute the stock ownership of a person seeking to effect a change in the composition of the Board of Directors or contemplating a tender offer or other transaction for the combination of Charmed with another company. However, the reverse stock split proposal is not being proposed in response to any effort of which we are aware to accumulate shares of common stock or obtain control of Charmed, other than the proposed Merger.

 

Procedure for Effecting Exchange of Stock Certificates

 

Charmed's transfer agent, Securities Transfer Corporation, will act as exchange agent for purposes of implementing the exchange of stock certificates or updating ownership amounts, the latter for those "book entry" shareholders, and is referred to as the "exchange agent." As soon as practicable after the effective time of the reverse split, a letter of transmittal will be sent to shareholders of record as of December 5, 2008 for purposes of surrendering to the exchange agent certificates representing pre-reverse stock split shares in exchange for certificates representing post-reverse stock split shares in accordance with the procedures set forth in the letter of transmittal. No new certificates will be issued to a shareholder until such shareholder has surrendered such shareholder's outstanding certificate(s), together with the properly completed and executed letter of transmittal, to the exchange agent. From and after the effective time, any certificates formerly representing pre-reverse stock split shares which are submitted for transfer, whether pursuant to a sale, other disposition or otherwise, will be exchanged for certificates representing post-reverse stock split shares. SHAREHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO. For shareholders who hold registered shares in a book-entry form, at the effective time, the transfer agent will update your ownership amounts on our books and a transaction statement will automatically be sent to your address of record indicating the number of shares you hold. No action need be taken to receive your post-reverse stock split shares.

 

No Appraisal Rights

 

Under the laws of Nevada, shareholders will not be entitled to exercise appraisal rights in connection with the reverse stock split.

 

United States Federal Income Tax Consequences

 

IN ACCORDANCE WITH 31 C.F.R. § 10.35(B)(5), THE DISCUSSION OF THE TAX ASPECTS PROVIDED HEREIN HAS NOT BEEN PREPARED, AND MAY NOT BE RELIED UPON BY ANY PERSON, FOR PROTECTION AGAINST ANY FEDERAL TAX PENALTY. EACH SHAREHOLDER SHOULD SEEK ADVICE BASED ON THE PROSPECTIVE SHAREHOLDER'S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

 

The following is a summary of the material United States federal income tax consequences of the reverse stock split applicable to beneficial holders of shares of Charmed common stock. This summary addresses only such shareholders who hold their pre-reverse stock split shares as capital assets and will hold the post-reverse stock split shares as capital assets. This discussion does not address all United States federal income tax considerations that may be relevant to particular Charmed shareholders in light of their individual circumstances or to shareholders that are subject to special rules, such as financial institutions, tax-exempt organizations, insurance companies, dealers in securities, and foreign shareholders. The following summary is based upon the provisions of the Internal Revenue Code of 1986, as amended, applicable Treasury Regulations thereunder, judicial decisions and current administrative rulings, as of the date hereof, all of which are subject to change, possibly on a retroactive basis. Tax consequences under state, local, foreign, and other laws are not addressed herein. Each shareholder should consult its tax advisor as to the particular facts and circumstances which may be unique to such shareholder and also as to any estate, gift, state, local or foreign tax considerations arising out of the reverse stock split. Charmed has not and will not seek a ruling from the Internal Revenue Service regarding the United States federal income tax consequences of the reverse split. Therefore, the income tax consequences discussed below are not binding on the Internal Revenue Service and there can be no assurance that such income tax consequences, if challenged, would be sustained.

 

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Subject to the statements made above, the United States federal income tax consequences of the reverse stock split may be summarized as follows:

 

	•		The reverse stock split would qualify as a tax-free recapitalization under the Internal Revenue Code. Accordingly, a shareholder will not recognize any gain or loss for United States federal income tax purposes as a result of the receipt of the post-reverse stock split common stock pursuant to the reverse stock split.
	•		The shares of post-reverse stock split common stock in the hands of a shareholder will have an aggregate basis for computing gain or loss on a subsequent disposition equal to the aggregate basis of the shares of pre-reverse split common stock held by the shareholder immediately prior to the reverse stock split.
	•		A shareholder's holding period for the post-reverse stock split common stock will include the holding period of the pre-reverse split common stock exchanged.

Vote Required

 

NRS 78.2055 provides that any decrease in the number of issued and outstanding shares of stock without a corresponding decrease in the number of authorized shares of stock shall first be adopted by the resolution of the Board of Directors and then be subject to the approval of shareholders entitled to vote on any such amendment. Under Charmed's Articles of Incorporation and Bylaws now in effect, an affirmative vote by shareholders holding shares entitling them to exercise at least a majority of the voting power is sufficient to approve the reverse stock split. NRS 78.320 provides that, unless otherwise provided in Charmed's Articles of Incorporation or the Bylaws, any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if, before or after the action, a written consent thereto is signed by shareholders holding the voting power required to take such action at a meeting.  Charmed's Articles of Incorporation and Bylaws permit the taking of action by written consent.  In order to eliminate the costs and management time involved in holding a special meeting and in order to effect the reverse stock split described herein as early as possible in order to accomplish the purposes described above, Charmed's Board of Directors voted to utilize the written consent of the holders of a majority of Charmed's voting stock.  NRS 78.320 provides that in no instance where action is authorized by written consent need a meeting of shareholders be called or notice given.

 

Pursuant to NRS 78.2055 and Charmed's current Articles and Bylaws, the affirmative vote of the holders of a majority of Charmed's outstanding voting stock is sufficient to approve the reverse stock split as described above, which vote has been obtained by written consent of the Consenting Shareholders.

 

Effective Date

 

Under applicable federal securities laws, the reverse split cannot be effective until at least 20 calendar days after this information statement/prospectus is distributed to Charmed's shareholders.

 

Costs

 

Charmed will pay all costs associated with the distribution of this information statement/prospectus, including the costs of printing and mailing.  Charmed will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending this information statement/prospectus to the beneficial owners of Charmed's common stock.  

 

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Record Date

 

The close of business on November 21, 2008 has been fixed as the record date for the determination of shareholders entitled to receive this information statement/prospectus.

 

Outstanding Shares and Voting Rights

 

On November 21, 2008 (the "Record Date"), Charmed had 6,690,000 shares of common stock, $0.00001 par value, outstanding.  Holders of these shares would have been entitled to vote if a meeting was required to be held.  Each share of Charmed's common stock is entitled to one vote.  The outstanding shares of common stock at the close of business on the Record Date were held by approximately 55 shareholders of record.

 

Material Terms of the Common Stock

 

The authorized Common Stock of Charmed consists of 100,000,000 shares, par value $0.00001.  The holders of shares of Common Stock are entitled to one vote for each share held of record on each matter submitted to shareholders.  Shares of Common Stock do not have cumulative voting rights for the election of directors.  The holders of shares of Common Stock are entitled to receive such dividends as the Board of Directors may from time to time declare out of funds legally available for the payment of dividends, although Charmed does not intend to declare any dividends for the foreseeable future.  The holders of shares of Common Stock do not have any preemptive rights to subscribe for or purchase any stock or other securities of Charmed and have no rights to convert their Common Stock into any other securities.  On liquidation, holders of shares of Common Stock are entitled to receive pro rata all of the assets of Charmed available for distribution to shareholders.

 

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ACTION BY WRITTEN CONSENT IN LIEU OF SPECIAL MEETING OF THE CHARMED SHAREHOLDERS

 

We are not asking you for a proxy and you are requested not to send us a proxy.

 

Items of Business

 

In lieu of a special meeting, Charmed shareholders holding a majority of Charmed's common stock considered and voted upon the proposals to approve and adopt the Articles of Amendment to change Charmed's name to "Iveda Corporation" and to approve the reverse stock split using a written consent.

 

 

Recommendation of the Charmed Board of Directors

 

After careful consideration, the Charmed Board of Directors unanimously determined that the Merger, name change and reverse stock split are each advisable, and are fair to and in the best interests of Charmed and its shareholders and unanimously approved the Merger Agreement, name change and reverse stock split.  The Charmed Board of Directors recommended that Charmed shareholders vote "FOR" the proposals to approve and adopt the Articles of Amendment to change Charmed's name to "Iveda Corporation" and to approve the reverse stock split using a written consent.  No approval of the Charmed shareholders was needed to approve the Merger, which was approved both for Charmed and the Merger Sub by the Charmed Board of Directors.

 

 

Method of Voting; Record Date; Stock Entitled to Receive Notice

 

No vote of the Charmed shareholders is being sought at a meeting.  Approval of the name change and the reverse stock split was obtained by written consent in lieu of holding a special meeting.  Only shareholders of record of Charmed at the close of business on November 21, 2008, the record date for the Charmed consent in lieu of special meeting, are entitled to receive notice of the consent in lieu of special meeting.  On the record date, approximately 6,690,000 shares of Charmed common stock were issued and outstanding.

 

 

Required Vote

 

See pages 40 and 44 above for the vote required to approve the name change and reverse split.

 

 

Share Ownership of Charmed Directors and Executive Officers

 

At the close of business on the record date for the Charmed written consent in lieu of special meeting, directors and executive officers of Charmed and their affiliates beneficially owned and were entitled to vote 74.74% of the 6,690,000 shares of Charmed common stock outstanding on that date.

 

 

Contact for Questions

 

Any Charmed shareholder who has a question about the Merger should contact:

 

Charmed Homes Inc.

60 Mt. Kidd Point SE

Calgary, Alberta  T2Z 3C5

Canada

Attention:  Ian Quinn, CEO

(403) 831-2202

 

Any Charmed shareholder who needs additional copies of this information statement/prospectus should contact Ian Quinn as described above.

 

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CONSENT IN LIEU OF SPECIAL MEETING OF IVEDA SHAREHOLDERS

 

We are not asking you for a proxy and you are requested not to send us a proxy.

 

Items of Business

 

In lieu of a special meeting, Iveda shareholders holding a majority of Iveda's common stock considered and voted upon the proposal to approve and adopt the Merger Agreement and approve the Merger using a written consent.

 

 

Recommendation of the Iveda Board of Directors

 

After careful consideration, the Iveda Board of Directors unanimously determined that the Merger is advisable, and is fair to and in the best interests of Iveda and its shareholders and unanimously approved the Merger Agreement.  The Iveda Board of Directors recommended that Iveda shareholders vote "FOR" the proposals to approve and adopt the Merger Agreement and approve the Merger.

 

 

Method of Voting; Record Date; Stock Entitled to Receive Notice

 

No vote of the Iveda shareholders at a meeting is being sought.  Approval of the Merger agreement and the Merger was obtained by written consent in lieu of holding a special meeting.

 

Only shareholders of record of Iveda at the close of business on January 8, 2009, the record date for the Iveda consent in lieu of special meeting, are entitled to receive notice of the consent in lieu of special meeting.  On the record date, approximately 8,774,304 shares of Iveda common stock were issued and outstanding.

 

 

Required Vote

 

Approval and adoption of the Merger Agreement and approval of the Merger required the execution of a written consent by the holders of a majority of the shares of Iveda common stock outstanding on the record date.

 

 

Share Ownership of Iveda Directors and Executive Officers

 

At the close of business on the record date for the Iveda written consent in lieu of special meeting, directors and executive officers of Iveda and their affiliates beneficially owned and were entitled to vote 63.9% of the 8,774,304 shares of Iveda common stock outstanding on that date.

 

 

Contact for Questions

 

Any Iveda shareholder who has a question about the Merger should contact:

 

Iveda Solutions

1201 South Alma School Road, Suite 4450

Mesa, AZ  85201

Attention:  Bob Brilon, Chief Financial Officer

(480) 307-8700

 

Any Iveda shareholder who needs additional copies of this information statement/prospectus should contact Luz Berg at (480) 307-8700 or send an e-mail to lberg@ivedasolutions.com.

 

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INFORMATION ABOUT CHARMED

 

 

Note -

 

All references in this "Information About Charmed" section of this information statement/prospectus to the terms "we", "our", "us", "Charmed" and the "Company" refer to Charmed Homes Inc.

 

 

Description of Business

 

Charmed previously engaged in the construction and marketing of custom homes in the Calgary area in Alberta, Canada.  During 2008, Charmed completed construction of its first such home and sold this home.  Due to downturns in the housing market in Calgary and a lack of available funding, Charmed decided to cease operations following the sale of this single home.

 

Charmed was organized under Nevada law in 2006, its executive offices are located at 60 Mt. Kidd Point SE, Calgary, Alberta, Canada T2Z 3C5 and its telephone number is (403) 831-2202.  Charmed has no operations and no employees as of the date of this information statement/prospectus.

 

 

Description of Property

 

Our office is located at 60 Mt Kidd Point S.E., Calgary, Alberta, Canada T2Z 3C5, where we use space owned by our President, Ian Quinn, under an informal oral agreement with Mr. Quinn. Our phone number is (403) 831-2202.

 

 

Legal Proceedings

 

We are not presently a party to any litigation.

 

 

Market Price of and Dividends on the Registrant's Common Equity and Related Shareholder Matters

 

See page 18 for this information.

 

 

Securities Authorized For Issuance Under Equity Compensation Plans

 

We do not have any equity compensation plans and accordingly we have no securities authorized for issuance thereunder.

 

 

Selected Financial Information

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 

 

Supplementary Financial Information

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

This section, which is based on the Management's Discussion and Analysis section contained in our most recent annual report on Form 10-K for the fiscal year ended January 31, 2009 and our most recent quarterly report on Form 10-Q for the fiscal quarter ended April 30, 2009, includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of the quarterly and annual report, as applicable. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

 

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We are a development-stage corporation and at this point we have realized a nominal profit on our first project.

 

Our auditors have issued a going concern opinion. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not purchased any contracts and only generated nominal revenues from the first development. We must raise cash from operations. Our only other source for cash at this time is investments by others in our company. We must raise cash to continue our operations. Even with the money we raised from our public offering in 2007, we do not know how long the money will last.  Operations began after we raised the money from our public offering.

 

To meet our needs for cash in the past, we have raised money through the 2007 public offering.  We cannot guarantee that we will be able to stay in business now that operations have commenced. Further, if we are unable to attract enough clients to utilize our services, we may quickly use up the proceeds from the minimum amount of money from our public offering and will need to find alternative sources, like a second public offering, a private placement of securities, or loans from our officers or others in order for us to maintain our operations. At the present time, we have not made any arrangements to raise additional cash.

 

If we need additional cash and cannot raise it, we will either have to suspend operations until we do raise the cash, or cease operations entirely. We have used all of the cash raised from our public offering.   As we need more money, we will have to revert to obtaining additional money as described in this paragraph. Other than as described in this paragraph, we have no other financing plans.

 

Operations to Date

 

With the success of our offering in 2007, we were able to begin our operations.  We established our office and acquired the equipment we needed to begin.  We did not hire any employees up to this point and our officers and directors are handling the administrative duties.

 

We located a suitable piece of land in order to start our first project.  The lot was acquired in the community of Lake Chaparral.

 

Once the land was located, we chose a home plan which best suited the property.  The blueprints were drawn up, specifications outlined and decisions on materials made.

 

Initial financing through the bank was avoided by obtaining an interest free loan of $25,000 from our President Ian Quinn.  The plot plan and blueprint were submitted to the developer of the subdivision and approvals were received.

 

The process of tendering out for construction was avoided by working with Shane Homes, who had all the suppliers and trades people in place.  Construction of the home was completed at the end of December, approximately three months earlier than expected.

 

The home was listed as soon as it was completed as it was decided that with the slowing in the market it would be best to market the home once it was showing its best.

 

The home is now sold, but with the significantly slower market in Calgary and area, it took much longer than expected to sell and we did not realize the profit we had anticipated. The sale of the home occurred on June 3, 2008.

 

Due to the state of the Calgary housing market, there is a tremendous amount of new home inventory available and house prices are dropping significantly. Therefore we have discontinued our operations in home building and have suspended operations.

 

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Future Operations

 

Because of the change in the economy, we believed that it was in the best interests of our shareholders to change our business course, and thus we entered into the Merger Agreement described elsewhere in this information statement/prospectus.

 

SUMMARY COMPENSATION TABLE
Name and Principal Position (a)	Year (b)		(Salary) (c)			Bonus (d)	Stock Awards (e)		Option or Warrant Awards  (f)			Non-Equity Incentive Plan Compen- sation (g)	Change in Pension Value and Nonqualified  Deferred Compensation Earnings (h)	All Other Compen- sation (i)		Total (j)
David Ly	2008		$	108,600					$	0						$	108,600
CEO and President	2007		$	70,000					$	0						$	70,000
Bob Brilon	2008		$	0					$	82,000	(1)					$	82,000
CFO	2007		$	0					$	0						$	0
Luz Berg	2008		$	104,434					$	174,542	(1)					$	278,976
Senior VP of Operations & Marketing	2007		$	60,000					$	21,630	(1)					$	81,630
Ray Palomaa	2008		$	48,558					$	41,000	(1)					$	89,558
Director of Sales	2007		$	0					$	0						$	0
Michael Religioso	2008		$	61,384					$	0						$	61,384
Director of Online Services & Technology	2007		$	47,000					$	0						$	47,000

(1)	The fair value of each option and warrant granted is estimated on the date of grant using the Black-Scholes option-pricing model with weighted-average assumptions used for options and warrants granted.

 

Compensation of Directors

 

Directors have not historically received any compensation for their service on the Board, except for new members who will receive stock options. Directors may also receive compensation for other services provided to the Company.

 

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Indemnification of Directors and Officers

 

The Company's Articles of Incorporation provide to directors and officers indemnification to the full extent provided by law, and provide that, to the extent permitted by Washington law, a director will not be personally liable for monetary damages to the Company or its shareholders for breach of his or her fiduciary duty as a director, except for liability for certain actions that may not be limited under Washington law.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

 

 

Securities Ownership of Certain Beneficial Owners and Management

 

The following table sets forth certain information regarding the beneficial ownership of the Iveda's common stock as of July 31, 2009 for (a) each person known by Iveda to be a beneficial owner of five percent or more of the outstanding common stock of the Company, (b) each executive officer, director and nominee for director of the Company, and (c) all directors and executive officers of Iveda as a group.  Iveda, as of July 31, 2009, had 9,036,800 shares of common stock outstanding, options to purchase 1,195,229 shares of common stock outstanding, and warrants to purchase 559,278 shares of common stock outstanding.

 

Name	Position		Shares of Common Stock				Options or Warrants to Purchase Common Stock				Percentage Prior to the Merger (1)				Percentage After the Merger (2)
David Ly (3)	CEO, Director, President			3,913,998				0				36.27	%			33.64	%
Luz Berg (3)	Senior VP, Secretary			0				922,183				8.55	%			7.93	%
Bob Brilon (3)	CFO			0				200,000				1.85	%			1.72	%
Ray Palomaa (3)	Director of Sales			0				100,000				0.93	%			0.86	%
Michael Religioso (3)	Director of Online Services & Technology			200,000				256,140				4.23	%			3.92	%
Greg Omi (3)	Director			903,859				0				8.38	%			7.77	%
Jody Bisson (3)	Director			0				50,000				0.46	%			0.43	%
All directors and officers as a group				5,017,857				1,528,323				60.66	%			56.26	%

 

(1)	Assumes all of the outstanding options and warrants to purchase shares of common stock are exercised.

 

(2)

Based on ownership of Charmed following the Merger and that all of the outstanding options and warrants to purchase shares of common stock are exercised, no additional Iveda securities are issued after July 31, 2009, and the 2.5 million shares of Charmed common stock to be sold to Iveda prior to the Merger are cancelled.

 

(3)	The address for each of these individuals is c/o IntelaSight, Inc., 1201 S. Alma School Road, Suite 4450, Mesa, AZ 85210.

 

Certain Relationships and Related Transactions

 

The Company has provided surveillance services since 2005 (on terms no more or less favorable than those provided to the Company’s other customers) to entities owned by Ross Farnsworth, either through a family partnership or through his majority owned limited liability company, and subsequently Ross Farnsworth became a shareholder of the Company in 2006.  Mr. Farnsworth's holdings are less than 5% of the Company but the revenue for years ending 2008 and 2007 was $40,466 and $35,672, respectively, and there was a trade accounts receivable balance of $3,021 and $2,105 at December 31, 2008 and 2007.

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COMPARISON OF SHAREHOLDER RIGHTS

 

The rights of Iveda shareholders are governed by the Washington Business Corporation Act, the current Iveda articles of incorporation, and the current Iveda bylaws.  Upon completion of the Merger, former Iveda shareholders will receive shares of Charmed common stock in exchange for their shares of Iveda common stock.

 

In addition, holders of Iveda options and warrants to purchase Iveda common stock will receive options or warrants (as applicable) to purchase Charmed common stock in exchange for the cancellation of their Iveda options or warrants upon completion of the Merger.  The material terms of the new options and warrants will be identical to the material terms of the Iveda options and warrants (including the current expiration dates of the options and warrants), except that the warrants will be for the purchase of Charmed common stock rather than Iveda common stock.

 

The rights of Charmed shareholders are governed by Nevada law, the current Charmed articles of incorporation, and the current Charmed bylaws.  The following discussion summarizes the material differences between the current rights of holders of Iveda common stock and holders of Charmed common stock.  Additionally, the following discussion summarizes relevant provisions of Washington law, Nevada law, the Iveda articles of incorporation and bylaws, and the Charmed articles of incorporation and bylaws.

 

The following is not intended to be a complete statement of the rights of holders of Charmed common stock under applicable Nevada law, the Charmed articles of incorporation and the Charmed bylaws, or a comprehensive comparison with the rights of holders of Iveda common stock under applicable Washington law, the Iveda articles of incorporation and the Iveda bylaws, or a complete description of the specific provisions referred to in this information statement/prospectus.  Copies of the governing corporate instruments of Iveda and Charmed will be sent to shareholders of Iveda upon request.

 

 

Authorized Capital Stock

 

Charmed. Nevada law requires that a corporation's articles of incorporation set forth the total number of shares of all classes of capital stock that the corporation has authority to issue and a statement of the designations and the powers, preferences and rights and qualifications, limitations and restrictions of those shares.  The Charmed articles of incorporation provides that Charmed has the authority to issue 200 million shares of capital stock, all of which are currently divided into two classes as follows:

 

·

100 million shares of common stock, par value of $0.00001 per share; and

 

·

100 million shares of preferred stock, also with a par value of $0.00001 per share.

 

Nevada law permits a corporation's articles of incorporation to allow its Board of Directors to issue, without shareholder approval, series of preferred or preference stock and to designate their rights, preferences, privileges and restrictions.  The Charmed articles of incorporation grants this power to the Charmed Board of Directors with respect to the Charmed undesignated preferred stock.

 

The rights, preferences, privileges and restrictions of Charmed common stock are summarized in "Terms of Charmed Common Stock" and the rights, preferences, privileges and restrictions of Charmed preferred stock are summarized in "Terms of Charmed Preferred Stock."

 

Iveda.  Washington law similarly requires that a corporation's articles of incorporation prescribe the classes of shares and the number of shares of each class that the corporation is authorized to issue.  The Iveda articles of incorporation provide that Iveda has authority to issue 50 million of capital stock, divided into two classes as follows:

 

·

40 million shares of common stock, par value $0.001 per share.

 

·

10 million shares of preferred stock, par value $0.001 per share.

 

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Washington law permits a corporation's articles of incorporation to allow its Board of Directors to issue, without shareholder approval, series of preferred or preference stock and to designate their rights, preferences, privileges and restrictions.  The Iveda articles of incorporation grants this power to the Iveda Board of Directors with respect to the Iveda undesignated preferred stock.

 

The rights, preferences, privileges and restrictions of Iveda common stock are summarized in "Terms of Iveda Common Stock" and the rights, preferences, privileges and restrictions of Iveda preferred stock are summarized in "Terms of Iveda Preferred Stock."

 

Terms of Charmed Common Stock

 

Dividends.  Subject to the declaration and payment of dividends upon any Charmed preferred stock at the time outstanding, to the extent of any preference to which that preferred stock is entitled, and after the provision for any sinking or purchase fund or funds for any series of any preferred stock has been complied with, the Charmed Board of Directors, in its sole discretion, may declare and pay dividends on the common stock, payable in cash or other consideration, out of funds legally available.

 

Charmed has not paid any cash dividends on its common stock and does not plan to pay any cash dividends on its common stock for the foreseeable future.

 

Liquidation, Subdivision, or Combination.  In the event of any liquidation, dissolution or winding up of Charmed or upon the distribution of its assets, all assets and funds remaining after payment in full of Charmed debts and liabilities, and after the payment to holders of any then outstanding preferred stock of the full preferential amounts to which they were entitled, would be divided and distributed among holders of the common stock.

 

Terms of Iveda Common Stock

 

Dividends.  Subject to the declaration and payment of dividends upon any Iveda preferred stock at the time outstanding, to the extent of any preference to which that preferred stock is entitled, and after the provision for any sinking or purchase fund or funds for any series of any preferred stock has been complied with, the Iveda Board of Directors, in its sole discretion, may declare and pay dividends on the common stock, payable in cash or other consideration, out of funds legally available.

 

Iveda has not paid any cash dividends on its common stock and does not plan to pay any cash dividends on its common stock for the foreseeable future.

 

Liquidation, Subdivision, or Combination.  In the event of any liquidation, dissolution or winding up of Iveda or upon the distribution of its assets, all assets and funds remaining after payment in full of Iveda debts and liabilities, and after the payment to holders of any then outstanding preferred stock of the full preferential amounts to which they were entitled, would be divided and distributed among holders of the common stock.

 

Terms of Charmed Preferred Stock

 

While Charmed has authorized shares of preferred stock, no shares of preferred stock have been issued.

 

Terms of Iveda Preferred Stock

 

While Iveda has authorized shares of preferred stock, no shares of preferred stock are outstanding as of the date of this information statement/prospectus.

 

Voting Groups

 

Charmed.  Nevada law has no provision for voting groups.

 

Iveda.  Under Washington law, the Iveda shareholders are entitled to vote in voting groups under certain circumstances.  A voting group consists of all the shares of one or more classes or series that, under the Iveda articles of incorporation or under Washington law, are entitled to vote and be counted together collectively on a matter at a meeting of shareholders.  Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Unless the articles of incorporation provide otherwise, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter.  The Iveda articles of incorporation state that a majority of the outstanding shares entitled to vote constitute a quorum at a meeting of shareholders.  If multiple voting groups are entitled to vote on a matter, favorable action on the matter is taken only when it is voted upon by each voting group.

 

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Although the Iveda articles of incorporation do not provide for voting by voting groups, should Iveda create any new class or series of stock or should shares of preferred stock be outstanding in the future, then each class or series of Iveda stock would be entitled to vote separately as a voting group under Washington law in connection with some amendments to the Iveda articles of incorporation, increases to the number and classes of authorized shares, sales of substantially all of the corporation's assets and other significant business transactions, the election of directors, and dissolution. See "Amendments to the Articles of Incorporation."

 

Cumulative Voting

 

Charmed.  Under Nevada law, in an election of directors under cumulative voting, each share of stock normally having one vote is entitled to a number of votes equal to the number of directors to be elected.  A shareholder may then cast all of these votes for a single candidate or may allocate them among as many candidates as the shareholder may choose.  Without cumulative voting, holders of a majority of the shares present at an annual meeting or any special meeting held to elect directors would have the power to elect all the directors to be elected at that meeting, and no person could be elected without the support of holders of a majority of the shares voting at that meeting.  Under Nevada law, cumulative voting in the election of directors is not mandatory but is a permitted option if provided for in the articles of incorporation.  The Charmed articles of incorporation do not provide for cumulative voting in the election of directors.

 

Iveda.  Under Washington law, if cumulative voting is not desired in the election of directors, a statement to that effect must be made in the articles of incorporation.  If the statement is not made, cumulative voting will be mandatory in the election of directors, subject to the cumulative voting procedures set forth under Washington law.  However, the Iveda articles of incorporation expressly state that cumulative voting is not allowed in the election of directors.

 

 

Voting Rights Generally

 

Charmed.  Nevada law states that, unless a corporation's articles of incorporation or bylaws specify otherwise:

 

o	each share of its capital stock is entitled to one vote;

 

o	a majority of voting power of the shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at a shareholders meeting; and

 

o	in all matters other than the election of directors, the affirmative vote of the majority of the voting power of shares, present in person or represented by proxy at the meeting and entitled to vote on the subject matter, shall be the act of the shareholders.

 

Holders of the common stock are entitled to one vote per share on all matters to be voted on by Charmed's shareholders.  Charmed's bylaws provide that a majority of the outstanding shares of the corporation entitled to vote constitute a quorum at a meeting of the shareholders.

 

Iveda.  Generally, under Washington law, each outstanding share, regardless of class, is entitled to one vote, and each fractional share is entitled to a corresponding fractional vote, on each matter voted on at a shareholders' meeting.  One exception is that shares owned by a second corporation that is under the corporation's control may not vote.  Unless otherwise provided for by law or in the articles of incorporation, a majority of the votes entitled to be cast on a matter by the voting group constitutes a quorum of that voting group for action on that matter.  The Iveda articles of incorporation provide that a majority of the outstanding shares of the corporation entitled to vote constitutes a quorum at a meeting of shareholders.

 

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Amendments to the Articles of Incorporation

 

Charmed.  Nevada law allows amendment of a corporation's articles of incorporation if its Board of Directors adopts a resolution setting forth the amendment proposed, declaring its advisability, and the shareholders thereafter approve the proposed amendment.  The proposed amendment generally must be approved by a majority of the outstanding shares entitled to vote.  Holders of the outstanding shares of a class are entitled to vote as a separate class upon a proposed amendment if the amendment would increase or decrease the aggregate number of authorized shares of that class, increase or decrease the par value of the shares of that class or alter or change the powers, preferences or special rights of the shares of that class so as to affect them adversely.  If any proposed amendment would alter or change the powers, preferences or special rights of one or more series of any class so as to affect them adversely, but not affect the entire class, then only the shares of the series so affected by the amendment will be considered a separate class for the purposes of a vote on the amendment.  Under Nevada law, a corporation's articles of incorporation also may require the vote of a greater number or proportion than is required by Nevada law.

 

The Charmed articles of incorporation do not contain provisions requiring a vote greater than that specified in Nevada law to amend the Charmed articles of incorporation.

 

Iveda.  Under Washington law, an amendment to the Iveda articles of incorporation, with exceptions for routine amendments, must be proposed by the Iveda Board of Directors and must then be approved by the vote of two-thirds of shareholders entitled to vote on the amendment.  The articles of incorporation may require a lesser vote, and Iveda's articles only require a simple majority, as permitted by Washington law.  Under Washington law, if shareholder voting is required, holders of shares of a class or series are entitled to vote as a separate voting group on any amendment of the Iveda articles of incorporation that would:

 

·

increase the aggregate number of authorized shares of the class or series;

 

·

effect an exchange or reclassification of all or part of the shares of the class or series into shares of another class or series;

 

·

change the rights, preferences, or limitations, of all or part of the shares of the class or series;

 

·

change the shares of all or part of the class or series into a different number of shares of the same class or series;

 

·

create a new class or series of shares having rights or preferences with respect to distributions or dissolution that are prior, superior or substantially equal to the shares of the class;

 

·

increase the rights, preferences, or number of authorized shares of any class or series that, after giving effect to the amendment, have rights or preferences with respect to distributions or to dissolutions that are prior, superior, or substantially equal to the shares of the class or series;

 

·

limit or deny an existing preemptive right of all or part of the shares of the class or series;

 

·

cancel or otherwise adversely affect rights to distributions or dividends that have accumulated but have not yet been declared on all or part of the shares of the class; or

 

·

effect a redemption or cancellation of all or part of the shares of the class or series in exchange for cash or other consideration other than shares of the corporation.

 

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The Iveda articles of incorporation reserve the corporation's right to amend or repeal any provision contained in the articles of incorporation as permitted by law.

 

Amendments to Bylaws

 

Charmed.  The Charmed bylaws authorize the Charmed Board of Directors to alter, amend or repeal the Charmed bylaws, without any action on the part of the shareholders, by an affirmative vote of a majority of the whole board, and also permit the shareholders to alter, amend or repeal the Charmed bylaws by an affirmative vote of holders of a majority of the voting stock at a meeting at which the bylaw change was contained in the notice of meeting.

 

Iveda.  Under Washington law, a Board of Directors may amend or repeal the corporation's bylaws, or adopt new bylaws, unless the articles of incorporation or the Washington Business Corporation Act reserve this power exclusively to the shareholders, or unless the shareholders, in amending or repealing a particular bylaw, provided expressly that the Board of Directors may not amend or repeal that bylaw.  A bylaw that fixes a greater quorum or voting requirement for the Board of Directors, if originally adopted by shareholders and unless it provides otherwise, may only be amended or repealed by shareholders.  Shareholders may amend or repeal the corporation's bylaws, or adopt new bylaws, even though the bylaws may also be amended or repealed, or new bylaws may also be adopted, by its Board of Directors.

 

The Iveda articles of incorporation reserve the board of director's and shareholders' concurrent power to adopt, amend, or repeal bylaws.  The Iveda bylaws state that for shareholders to adopt, alter, amend or repeal bylaws requires an affirmative vote by a majority of the outstanding voting shares.

 

Vote Required for Merger and Other Transactions

 

Charmed.  Under Nevada law, an agreement of merger or a sale, lease or exchange of all or substantially all of Charmed's assets must be approved by the Charmed Board of Directors and then adopted by holders of a majority of the voting power of the outstanding shares of stock entitled to vote thereon.  The articles of incorporation of a Nevada corporation may provide for a greater vote, however, the Charmed articles of incorporation do not contain any such provision.

 

Iveda.  Under Washington law, except for some specific situations, a plan of merger or share exchange or a transaction involving the sale, lease, exchange or other disposition of all or substantially all of a corporation's property, other than in the usual and regular course of business, must be adopted by the Board of Directors and then approved by each voting group entitled to vote separately on the plan, share exchange or transaction by holders of two-thirds of all the votes entitled to be cast on the plan, share exchange or transaction by that voting group, unless the corporation's articles of incorporation provide for a lesser number of shares needed for approval.  The Iveda articles of incorporation require only a simple majority of the voting stock to approve a plan of merger or exchange or a transaction involving the sale, lease, exchange or other disposition of all or substantially all of a corporation's property, other than in the usual and regular course of business.

 

Directors

 

Charmed.  Under Nevada law, unless a corporation's articles of incorporation specifies the number of directors, the number may be fixed by its bylaws.  If the articles of incorporation specify the number of directors, the number of directors can only be changed by amending the articles of incorporation.

 

The Charmed articles of incorporation do not set a fixed number of directors.  The Charmed bylaws state that the number of directors shall be between one and thirteen.

 

Iveda.  Under Washington law, the number of members of the Board of Directors is fixed by the corporation's articles of incorporation or bylaws.  The Iveda bylaws provide that the Iveda Board of Directors will consist of between one and five members, with the number to be set by resolution of the Board.  No reduction in the authorized number of directors shall have the effect of removing any director before that director's term of office expires.

 

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Classification of Board of Directors

 

Charmed.  A classified Board of Directors is one with respect to which a designated number of directors, but not necessarily all, are elected on a rotating basis each year.  Under Nevada law, classification of a Board of Directors is permitted but not required; therefore, the directors may be divided into as many as three classes with staggered terms of office, with only one class of directors standing for election each year.  Charmed does not have a classified Board.

 

Iveda.  Under Washington law, classification of a Board of Directors is permitted but not required; therefore, the directors may be divided into as many as three classes, as equal as possible in number, with staggered terms of office, with only one class of directors standing for election each year.  Iveda does not have a classified Board.

 

Election of Board of Directors

 

Charmed. Nevada law requires that a corporation's directors be elected by a plurality of the votes of the shares present in person or represented by proxy at a meeting and entitled to vote on the election of directors.  Under Nevada law, shareholders of a corporation cannot elect directors by cumulative voting unless the corporation's articles of incorporation so provide.  The Charmed articles of incorporation do not provide for cumulative voting.  See "Voting Rights Generally."

 

Iveda.  Under Washington law, unless a corporation's articles of incorporation provide otherwise, all shareholders are entitled to cumulate their votes in an election of directors, and the candidates receiving the plurality of votes cast in favor of their election are elected to the Board of Directors.  However, Iveda's articles of incorporation explicitly provide that the Iveda shareholders are not entitled to cumulative voting.  See "Voting Rights Generally."

 

Removal of Directors

 

Charmed.  Nevada law authorizes removal of a director by a vote of at least two-thirds of the voting stock, unless the articles of incorporation provide for a greater percentage.  Charmed's articles do not provide for a greater percentage.

 

Iveda.  Under Section 23B.08.080 of Washington law, the shareholders may remove one or more directors with or without cause unless the articles of incorporation provide that the directors may be removed only for cause.  If cumulative voting is authorized and less than the entire board is to be removed, no director may be removed if the number of votes sufficient to elect the director is voted against removal.  If a director is elected by a series of preferred shares, only the holders of that series may participate in the vote to remove the director.

 

Under the Iveda bylaws, any or all of the members of the Iveda Board of Directors may be removed by the shareholders of the corporation at any time, with or without cause, if the number of votes case in favor of removing the director (or the entire Board) exceeds the number of votes cast against removal.  However, if a particular director was elected by a voting group, only that voting group may participate in the removal vote.

 

Under Section 23B.08.090 of Washington law, a director may also be removed by the superior court of the county in Washington in which Iveda's principal or registered office is located, in a proceeding commenced either by Iveda or by the Iveda shareholders holding at least ten percent of the outstanding shares of any class, if the court finds that the director engaged in fraudulent or dishonest conduct with respect to the corporation and that removal is in its best interests.

 

Newly Created Directorships and Vacancies

 

Charmed.  Under Nevada law and the Charmed bylaws, vacancies for any reason and newly created directorships resulting from any increase in the number of directors, may be filled by a majority of the directors then in office, although less than a quorum.  Unless displaced sooner, a director chosen in this manner will hold office until the next annual election and until his or her successor is duly elected and qualified.  The Charmed bylaws also give the Board the ability to fill any empty seats on the Board of Directors even if the empty seats have never been occupied.

 

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Iveda.  Under Washington law, vacancies in the Iveda Board of Directors may be filled by shareholder vote or the remaining board members, unless the articles of incorporation hold otherwise.  If a vacant office was held by a director elected by holders of a series of preferred shares or other voting group, only the members of that voting group are entitled to vote to fill the vacancy.  Directors so chosen hold office for a term expiring at the annual meeting of shareholders, or until their successors are duly elected.

 

Limitation of Director's Liability

 

Charmed.  Nevada law provides that a director is not individually liable to the corporation or its shareholders or creditors for any damages as a result of any act or failure to act in such director's capacity as a director unless it is proven that:

 

·

the director's act or failure to act constituted a breach of the director's fiduciary duty as a director; and

 

·

the director's breach of those duties involved intentional misconduct, fraud or a knowing violation of law.

 

The Charmed articles of incorporation provide that, to the extent permitted by Nevada law, a Charmed director will not be personally liable for monetary damages to the corporation or its shareholders for breach of his or her fiduciary duty as a director, except for liability under the above-listed exception.

 

Iveda.  The Iveda articles of incorporation eliminate the liability of Iveda directors to Iveda or its shareholders for monetary damages for conduct as a director to the fullest extent permissible under the Washington Business Corporation Act.

 

According to Section 23B.08.320 of the Act, a director's liability cannot be eliminated or limited for:

 

·

acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

 

·

acts of the directors as specified in Section 23B.08.310 of Washington law which section relates to unlawful distributions to shareholders; or

 

·

any transaction from which the director will personally receive an improper personal benefit.

 

 

Indemnification of Directors and Officers

 

Charmed.  Nevada law does not permit a corporation to indemnify directors against judgments in actions brought by or in the right of the corporation in which the director was adjudged liable to the corporation and extends this limitation to indemnification of officers.  However, Nevada law does permit indemnification for reasonable expenses in these situations if the indemnification is ordered by a court.

 

Under Nevada law, directors and officers as well as other individuals may be indemnified against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation as a derivative action) if they acted in a manner they reasonably believed to be in, or not opposed to, the best interest of the corporation, and, with respect to any criminal action or proceeding, if they had no reasonable cause to believe their conduct was unlawful.  In addition, Nevada law permits the corporation to advance expenses upon a written undertaking for their repayment if the person receiving the advance is not ultimately entitled to indemnification.  Nevada law specifies that the statutory provisions are not exclusive of other rights to indemnification or advancement of expenses that may be provided by bylaws, agreements, votes of shareholders or disinterested directors, or otherwise.

 

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The Charmed articles of incorporation provide to directors and officers indemnification to the full extent provided by law; therefore, Charmed directors and officers will have all the protections available to directors and officers of Nevada corporations.  The articles of incorporation also provide that the corporation may enter into specific agreements with individual officers or directors for greater or different indemnification.