UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
| x | Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended August 31, 2007 |
| o | Transition Report Under Section 13 or 15(d) of the Securities Exchange Act; For the transition period from _________ to __________ |
Commission File Number #000-1024048
HOMELIFE, INC.
(Exact name of small business issuer as specified in its charter)
Nevada | 33-0680443 |
| ---------------------------- | ------------------------------------ |
| (State or other jurisdiction of | (I.R.S. Employee |
| incorporation or organization) | Identification No.) |
| 1503 South Coast Drive, Suite 204, Costa Mesa, CA | 92626 |
| ---------------------------------------------------------------- | --------------- |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code:
(714) 241-3030
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
The issuer had 12,371,886 common shares outstanding as of August 31, 2007
Transitional Small Business Disclosure Format (check one):
Yes o No x
HOMELIFE, INC.
INDEX
| | | PAGE NO. |
| | | ------------ |
| | | |
PART I - FINANCIAL INFORMATION | |
| | | |
| Item 1. Financial Statements | 1. |
| | | |
| Consolidated Balance Sheet at August 31, 2007 (Unaudited) | 1. |
| | | |
| | Consolidated Statements of Operations for the three months ended | |
| | August 31, 2007 and 2006 (Unaudited) | 3. |
| | | |
| Consolidated Statements of Cash Flows for the three months ended | |
| | August 31, 2007 and 2006 (Unaudited) | 4. |
| | | |
| | Notes to Consolidated Financial Statements | 5. |
| | | |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation. | 6. |
| | | |
| Item 3. Controls and Procedures. | 8. |
| | | |
PART II - OTHER INFORMATION | 8. |
| | | |
| Item 1. Legal Proceedings. | 8. |
| | | |
| Item 2. Changes in Securities and Use of Proceeds. | 8. |
| | | |
| Item 3. Defaults Upon Senior Securities. | 8. |
| | | |
| Item 4. Submission of Matters to a Vote of Security Holders. | 9. |
| | | |
| Item 5. Other Information. | 9. |
| | | |
| Item 6. Exhibits and Reports on Form 8-K. | |
| (a) | Exhibits | 9. |
| (b) | Reports on Form 8-K | 9. |
| | | |
| Signatures. | 10 |
| | | |
PART I - FINANCIAL INFORMATION
HOMELIFE, INC.
Consolidated Balance Sheet
At August 31, 2007
(unaudited)
ASSETS | | | |
| Current Assets | | | | |
| Cash | | $ | 5,922 | |
| Marketable securities, at fair value | | | 900 | |
| Accounts receivable, net | | | 23,089 | |
| Prepaid expenses and deposits | | | 15,525 | |
| Total Current Assets | | | 45,436 | |
| | | | | |
| Property and Equipment, net | | | 72 | |
| | | | | |
| | | | | |
| Goodwill | | | 100,000 | |
| | | | | |
| | | | | |
| Total Assets | | $ | 145,508 | |
HOMELIFE, INC.
Consolidated Balance Sheet (Continued)
At August 31, 2007
(unaudited)
LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | |
| Current Liabilities | | | | |
| | | | | |
| Bank indebtedness | | $ | 96,501 | |
| Accounts payable | | | 230,287 | |
| Reserve for warranty | | | 33,578 | |
| Deferred revenue | | | 19,606 | |
| Total Current Liabilities | | | 379,972 | |
| | | | | |
| Other Liabilities | | | | |
| | | | | |
| Due to Stockholder | | | 441,606 | |
| | | | | |
| Total Liabilities | | | 821,578 | |
| | | | | |
| Minority Interest | | | 20,843 | |
| | | | | |
| Stockholders’ Deficit | | | | |
| | | | | |
| Capital Stock | | | 1,037,372 | |
| | | | | |
| Additional Paid in Capital | | | 3,731,741 | |
| | | | | |
| Accumulated Other Comprehensive Loss | | | (1,747 | ) |
| | | | | |
| Accumulated Deficit | | | (5,464,279 | ) |
| | | | | |
| Total Stockholders’ Deficit | | | (696,913 | ) |
| | | | | |
| Total Liabilities and Stockholders’ Deficit | | $ | 145,508 | |
HOMELIFE, INC.
Consolidated Statements of Operations
Three months ended August 31, 2007 and 2006
(unaudited)
| | | 2007 | | 2006 | |
REVENUE | | | | | | | |
| | | | | | | | |
| Royalty and franchise fees | | $ | 93,300 | | $ | 91,585 | |
| Warranty fees | | | 13,361 | | | 23,066 | |
| Other income | | | 8,464 | | | 3,269 | |
| | | | | | | | |
| Total Revenue | | | 115,125 | | | 117,920 | |
| | | | | | | | |
DIRECT COSTS | | | 4,475 | | | 9,155 | |
| | | | | | | | |
GROSS PROFIT | | | 110,650 | | | 108,765 | |
| | | | | | | | |
EXPENSES | | | | | | | |
| | | | | | | | |
| Salaries and fringe benefits | | | 51,360 | | | 42,866 | |
| General and administrative | | | 135,112 | | | 55,690 | |
| Occupancy | | | 11,919 | | | 12,244 | |
| Financial | | | 11,477 | | | 5,188 | |
| Depreciation | | | - | | | 1,865 | |
| Amortization | | | 1,000 | | | 12,963 | |
| | | | | | | | |
| Total Expenses | | | 210,868 | | | 130,816 | |
| | | | | | | | |
| | | | | | | | |
NET LOSS | | | (100,218 | ) | | (22,051 | ) |
| | | | | | | | |
BASIC AND FULLY DILUTED LOSS | | | | | | | |
| | $ | (0.01 | ) | $ | (0.00 | ) |
| | | | | | | | |
WEIGHTED-AVERAGE NUMBER OF | | | | | | | |
COMMON SHARES | | | 12,371,886 | | | 12,371,886 | |
HOMELIFE, INC.
Consolidated Statements of Cash Flows
Three months ended August 31, 2007 and 2006
(unaudited)
| | | 2007 | | 2006 | |
| | | | | | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | |
| Net loss | | $ | (100,218 | ) | $ | (22,051 | ) |
| Adjustments to reconcile net loss to net cash from operating activities | | | | | | | |
| Depreciation | | | - | | | 1,865 | |
| Amortization | | | 1,000 | | | 12,963 | |
| Changes in assets and liabilities | | | | | | | |
| Accounts receivable | | | (680 | ) | | (5,086 | ) |
| Accounts payable | | | 11,075 | | | 22,098 | |
| Reserve for warranty | | | (3,923 | ) | | (2,063 | ) |
| Deferred revenue | | | (3,701 | ) | | (4,380 | ) |
| | | | | | | | |
| Net Cash Flows from Operating Activities | | | (96,447 | ) | | 3,346 | |
| | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | - | | | - | |
| | | | | | | | |
| | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | |
| Advances from lines of credit, net | | | 4,452 | | | 12,853 | |
| Due to stockholder | | | 77,245 | | | 8,886 | |
| Repayments on note payable | | | (764 | ) | | (1,164 | ) |
| Net Cash Flows from Financing Activities | | | 80,933 | | | 20,575 | |
| | | | | | | | |
| | | | | | | | |
| NET CHANGE IN CASH | | | (15,514 | ) | | 23,921 | |
| Cash, beginning of period | | | 21,436 | | | 53,376 | |
| | | | | | | | |
| CASH, END OF PERIOD | | $ | 5,922 | | $ | 77,297 | |
| | | | | | | | |
| | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH | | | | | | | |
| FLOW INFORMATION | | | | | | | |
| Interest paid | | $ | 2,250 | | $ | 1,174 | |
| | | | | | | | |
| | | | | | | | |
| Income taxes paid | | $ | - | | $ | - | |
HOMELIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. MANAGEMENT’S PLAN AND FUTURE OPERATIONS
At August 31, 2007, adverse principal conditions and events are prevalent that require necessary action by management to enable the Company to return to profitability and to reverse these adverse conditions and events. These conditions and events include recurring operating losses, working capital deficiencies, and adverse key financial ratios. Management’s plans to mitigate these adverse conditions and events include:
| | - | attempting to raise additional funding through private and public offering, |
| | - | investigating and pursuing potential mergers/acquisitions, |
| | - | the core business of franchising nationwide |
| | - | making efforts to reduce unnecessary operating expenses on a monthly basis |
The accompanying consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary in the event that the Company is unable to continue as a going concern.
Note 2. BASIS OF CONSOLIDATED FINANCIAL STATEMENTS PRESENTATION
| | The condensed consolidated financial statements of HomeLife, Inc. and Subsidiaries (the “Company”) included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in conjunction with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and the notes thereto included in the Company’s Form 10-KSB Annual Report, and other reports filed with the SEC. |
| | The accompanying unaudited interim consolidated financial statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period of or for the fiscal year taken as a whole. Certain financial information that is not required for interim financial reporting purposes has been omitted. |
Certain amounts in the prior year consolidated financial statements have been reclassified to conform with the current year presentation. The reclassifications made to the prior year have no impact on the net income (loss), or overall presentation of the consolidated financial statements.
Note 3. COMMITMENTS AND CONTINGENCIES
The Company is currently a plaintiff in a lawsuit. Legal fees have been paid by a majority shareholder of the company and have been properly reflected in the financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The Company has experienced growth primarily through its acquisitions of and combinations with various other companies. This includes the acquisition in August 1996 of the Keim Group of Companies and MaxAmerica Home Warranty Company (Michigan) adding 60 real estate offices and a home warranty company in Michigan. In 1997, the Company purchased certain assets of S & S Acquisition Corp. providing the Company with Red Carpet Real Estate Services and National Real Estate Services adding 58 real estate offices. The acquisition of the real estate computer technology of House by Mouse and Virtual Assistant provided the Company with the ability to enhance its Internet communication services to its franchises. In July 1997, the Company acquired the licensing agreements, trademarks and franchise offices of Network Real Estate, Inc. This acquisition provided the Company with an additional 12 offices in Northern California and access to the “high-end” luxury division of “International Estates”. In February 1998, the Company acquired Builders Realty (Calgary) Ltd. providing access to the Alberta, Canada market in both retail real estate and mortgage loans. Certain assets of Builders Realty (Calgary) were sold during fiscal year 2002. On September 15, 1998, the Company purchased the stock of the investment banking firm of Aspen, Benson and May, LLC for common stock.
From time to time, the Company has entered into strategic alliances with various companies in order to explore the cross-marketing of their services to customers of the Company or its franchises. To date, these strategic alliances have not included any funding agreements or other liabilities on the part of the Company.
The following is management’s discussion and analysis of HomeLife’s financial condition and results of operations. Detailed information is contained in the financial statements included with this document. This section contains forward-looking statements that involve risks and uncertainties, such as statements of the Company’s plans, objectives, expectations and intentions. The cautionary statements made in this document should be read as being applicable to all related forward-looking statements wherever they appear in this document.
Three Months Ended August 31, 2007 (unaudited) compared to the Three Months Ended August 31, 2006 (unaudited).
Revenues. The Company generated gross sales of $115,125 for the quarter ended August 31, 2007 compared to gross sales of $117,920 for the quarter ended August 31, 2006. Revenue by business segment is shown below:
| | | August 31, 2007 | | August 31, 2006 | |
| | Amount | | % | | Amount | | % | |
| Royalty & franchise fees | | $ | 93,300 | | | 81 | | $ | 91,585 | | | 78 | |
| Home warranty sales | | | 13,361 | | | 12 | | | 23,066 | | | 20 | |
| Other | | | 8,464 | | | 7 | | | 3,269 | | | 2 | |
| TOTAL | | $ | 115,125 | | | 100 | | $ | 117,920 | | | 100 | |
Royalty fees & franchise fees were slightly higher in the current quarter compared to the same period in the prior year. Home warranty fees were lower in the current quarter compared to the prior year due to fewer contracts written and a lower per contract average than in the prior year.
Direct Costs. Direct costs on total revenue in the current quarter are lower than the first quarter last year due to lower warranty fees and related warranty claims in the current quarter.
Salaries and fringe benefits. Salaries and fringe benefits increased from $42,866 for the three months ended August 31, 2006 to $51,360 for the three months ended August 31, 2007. This increase is a result of one replaced employee in Michigan during the current year.
General and administrative. General and administrative costs are higher in the first quarter compared to prior year due to legal fees related to the existing lawsuit as well as higher marketing & promotion and office expense.
Occupancy. Occupancy costs were comparable for the similar periods.
Financial. Financial costs were higher for the quarter ended August 31, 2007 due to the accrued interest on the higher average outstanding amount due to shareholder.
Depreciation. There was no depreciation of fixed assets during the current quarter ended August 31, 2007 as the assets became fully depreciated in the prior year.
Amortization. Amortization of intangibles was lower in the first quarter as the intangibles have become fully amortized.
Liquidity and capital resources. The Company has lines of credit with two banks with available credit of $95,000 and a term loan of $25,000. The capital requirements of the Company are for operating expenses and to service and the use of its lines of credit. The Company has recorded significant operating losses in the prior two years. These losses are primarily due to increased direct costs and operating expenses. The Company does not have any derivative instruments or hedging activities, therefore, the Company believes that SFAS No. 133 will have no material impact on the Company’s financial statements or notes thereto.
The Company has experienced recurring operating losses and has a working capital deficiency of $334,536 as of August 31, 2007. Management has initiated changes in operational procedures, reduced staff and expenses and focused its efforts on its core business. Management believes that, despite the losses incurred and the deterioration in stockholders’ equity, it has developed a plan, which, if successfully implemented, can improve the operating results and financial condition of the Company. Furthermore, the Company continues its attempt to raise additional financing through private and public offerings.
Application of Critical Accounting Policies. The Company’s financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Critical accounting policies for the Company include revenue recognition, goodwill and accounting for income taxes.
The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements”. The Company recognizes revenue when it is realized or realizable and earned. Income from the sale of franchises is recognized over a 5-year period. Master franchise agreement fees are recognized over 10 years. Royalty income stemming from the gross commissions on the sales of real estate by the franchise offices is recognized at the date of receipt; this is due to the complexity of attempting to forecast the actual closing date of the properties. Warranty income is recognized over the term of the contract which is usually 12 months; anticipated obligations which represent incurred but not reported losses (IBNR) under these warranties have been recorded as reserve for warranty and are based on past loss experience. Real estate brokerage income is recognized at the close of escrow. Loan fees are recognized as income when the loan is closed and funded at the close of escrow. Revenue received or receivable, from the sale of franchises, master franchises and warranties, which is not recognized as income is recorded on the balance sheet as deferred revenue.
The Company accounts for income tax under the provisions of Statement of Financial Accounting Standards No. 109, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred income taxes are provided using the liability method. Under the liability method, deferred income taxes are recognized for all significant temporary differences between the tax and financial statement bases of assets and liabilities. In addition, the Company is required to record all deferred tax assets, including future tax benefits of capital losses carried forward, and to record a “valuation allowance” for any deferred tax assets where it is more likely than not that the asset will not be realized.
Item 3. Controls and Procedures
Based on the evaluation of the Company's disclosure controls and procedures by Andrew Cimerman, the Company's Chief Executive Officer and Marie M. May, the Company’s Chief Financial Officer, as of a date within 45 days of the filing date of this quarterly report, such officers have concluded that the Company's disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time period specified by the Securities and Exchange Commission's rules and forms.
There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On November 29, 2006, Homelife filed in Federal Court against MIT Holding, Inc. for breach of contract and is seeking $2 Million in damages.
On March 22, 2007, both parties agreed to terminate the agreement with the payment of $27,500 from MIT Holding, Inc. to Homelife.
The company is involved in a lawsuit with a company named HomeLife Communities for illegally using the HomeLife name. HomeLife Communities has agreed to change its name but has not yet done so. HomeLife Inc. is suing for royalties.
At the time of filing, there is no determinable outcome of the lawsuit. Legal fees have been paid by a majority shareholder of the company and have been properly reflected in the financial statements.
Item 2. Changes in Securities and use of proceeds.
None.
Item 3. Defaults upon senior securities.
None.
Item 4. Submission of matters to a vote of security holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
| | 31 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | 32 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
(b) Reports on Form 8-K:
Entry into a Material Definitive Agreement, Financial Statements and Exhibits - filed September 15, 2006
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HOMELIFE, INC.
Registrant
| By: | /s/ Andrew Cimerman | | Date: | October 18, 2007 |
| | Chief Executive Officer, President, Director | | | |
| | | | | |
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ Andrew Cimerman | | Date: | October 18, 2007 |
| | Chief Executive Officer, President, Director | | | |
