UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM 10-QSB
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934.
For the quarterly period ended June 30, 2001.
( ) Transition report pursuant to Section 13 or 15(d) of the Exchange Act
for the transition period from _________________ to ____________ .
Commission File Number: 333-72097
LIFELONG.COM, INC.
(Exact name of registrant as specified in charter)
Colorado 98-0223498
(State of or other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)
2055 Peel St., Suite 825, Montreal, Canada H3A 1V4
(Address of Principle Executive Offices)
(888) 725-3433
(Registrant's telephone number)
Check whether the registrant: (1) has filed all reports required to be filed by
Section 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 ( )
Indicate the number of shares outstanding of each of the issuer's classes of
stock as of August 14, 2001.
20,734,000 Common Shares
Transitional Small Business Disclosure Format:
YES ( ) NO (X)
1
LIFELONG.COM, INC.
INDEX TO FORM 10-QSB
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (unaudited)
Balance Sheets as of June 30, 2001 and December 31, 2000 3
Statements of Operations for the three and six months ended 4
June 30, 2001 and 2000, and the period November 24, 1999
(date of incorporation) to June 30, 2001
Statements of Cash Flows for the three and six months ended 5
June 30, 2001 and 2000, and the period November 24, 1999
(date of incorporation) to June 30, 2001
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations (including cautionary statement)
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Securities Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
2
LIFELONG.COM, INC.
(A Development Stage Enterprise)
BALANCE SHEETS AS OF
ASSETS
June 30,
2001 December 31,
(Unaudited) 2000
CURRENT ASSETS :
Cash and cash equivalents $ 55 $ 16,585
Accounts receivable - -
Employee advances 15,912 -
Affiliate receivable 23,055 7,529
Total current assets 39,022 24,114
COMPUTER EQUIPMENT (net of accumulated
depreciation of $8,159 and $4,500) 26,362 30,021
OTHER 6,414 7,605
TOTAL $ 71,798 $ 61,740
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 228,974 $ 215,377
Accrued payroll and benefits 244,858 101,607
Stockholder advances 65,000 65,000
Due to affiliate - -
Accrued and other liabilities 69,878 15,279
Total current liabilities 608,710 397,263
CONVERTIBLE DEBT 401,220 401,220
Total liabilities 1,009,930 798,483
STOCKHOLDERS' DEFICIT:
Preferred stock - $0.001 par value;
50,000,000 shares authorized; 0 shares
issued and outstanding - -
Common stock - $0.001 par value;
50,000,000 common shares authorized;
20,734,000 shares issued and outstanding 20,734 20,734
Additional paid-in capital 14,291,936 14,291,936
Deficit accumulated during the
development stage (15,250,802) (15,049,413)
Total Stockholders' Deficit (938,132) (736,743)
TOTAL $ 71,798 $ 61,740
============= =============
SEE NOTES TO FINANCIAL STATEMENTS.
3
LIFELONG.COM, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
(Unaudited)
For the Period
November 24,
Six Months Six Months Three Months Three Months 1999 (date of
Ended Ended Ended June Ended June incorporation)
June 30, 2001 June 30, 2000 30, 2001 30, 2000 to June 30, 2001
REVENUES - Programming &
Instructional design $ 81,435 $ - $ 78,151 $ - $ 81,435
OPERATING EXPENSES:
Stock-based expenses:
Employee compensation and benefits - 7,096,882 - - 7,105,585
Professional and consulting fees - 2,332,200 - - 4,839,315
Product development - 16,534 - 16,534 37,950
Selling and marketing - - - - 13,800
Loss from impairment of goodwill - 1,378,000 - - 1,912,670
Other employee compensation and benefits 188,627 224,217 50,176 145,932 831,974
Other product development 11,129 109,933 4,036 99,933 254,466
Other professional and consulting fees 25,503 22,534 23,520 15,034 93,842
Other selling and marketing - 42,000 - 42,000 47,433
Travel and entertainment - 16,406 - 16,406 26,038
Other 57,565 9,327 33,705 10,558 169,164
Total operating expenses 282,824 11,248,033 111,437 346,397 15,332,237
NET LOSS $ 201,389 $ 11,248,033 $ 33,286 $ 346,397 $ 15,250,802
========== ============= ========== =========== =============
NET LOSS PER SHARE:
Basic and Diluted $ (0.01) $ (0.57) $ (0.00) $ (0.02)
========== ============= ========== ===========
Weighted Average Number of Common
Shares Outstanding 20,734,000 19,663,700 20,734,000 19,692,600
========== ========== ========== ==========
SEE NOTES TO FINANCIAL STATEMENTS.
4
LIFELONG.COM, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Period
For the For the For the For the November 24,
Six Months Six Months Three Months Three Months 1999 (date of
Ended Ended Ended June Ended June incorporation)
June 30, 2001 June 30, 2000 30, 2001 30, 2000 to June 30, 2001
Cash Flows From Operating Activities:
Net loss $ (201,389) $(11,248,033) $(33,286) $ (346,397) $(15,250,802)
Adjustment to reconcile net loss to
net cash used by operating activities:
Depreciation 3,659 - 1,840 - 8,159
Loss form impairment of goodwill
(net of liabilities assumed) - 1,376,405 - - 1,890,670
Stock based compensation - 9,445,616 - 16,534 11,996,650
Decrease (increase) in other assets 1,191 (6,326) 1,191 (6,236) (6,414)
(Increase) decrease in accounts receivable (30,036) (6,549) (19,801) 208,074 (38,967)
Increase in accounts payable and
other liabilities 206,664 70,896 50,071 65,396 540,329
Net Cash Provided (Used) by Operating
Activities (19,911) (367,991) 15 (62,719) (860,375)
Cash Flows From Investing Activities -
Purchases of computer equipment - (26,395) - (11,892) (34,521)
Cash Flows From Financing Activities:
Proceeds from issuance of convertible
debentures - 396,387 - 76,612 401,220
Proceeds from issuance of common stock - - - - 425,350
Advances from stockholders 3,381 - - - 68,381
Cash Provided by Financing Activities 3,381 396,387 - 76,612 894,951
Net (decrease) increase In Cash and
Cash Equivalents (16,530) 2,001 15 2,001 55
Cash and Cash Equivalents at Beginning
of Period 16,585 - 40 - -
Cash and Cash Equivalents at End of Period $ 55 $ 2,001 $ 55 $ 2,001 $ 55
============ ============= ========= ============ =============
Supplemental disclosure of cash flow
information:
Cash Paid For:
Interest $ - $ - $ - $ - $ -
============ ============= ========= ============ =============
Income Taxes $ - $ - $ - $ - $ -
============ ============= ========= ============ =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES -
During the period November 24, 1999 (date of incorporation) to June 30, 2001, the
Company issued 2,734,000 shares of its common stock in connection with two
business combinations.
SEE NOTES TO FINANCIAL STATEMENTS.
5
LIFELONG.COM, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - FORMATION AND OPERATIONS OF THE COMPANY
Lifelong.com, Inc. (initially incorporated under the laws of the state of
Delaware on February 16, 2000), merged on September 7, 2000 with Providence
Capital II, Inc. ("we", "us", "our") incorporated under the laws of the State of
Colorado on November 24, 1999. We are considered to be in the development stage
as defined in Financial Accounting Standards Board Statement No. 7, and intend
to deliver highly interactive, computer-based learning programs for corporate
training and educational purposes over the Internet. Our planned principal
operations have not commenced; therefore most of the accounting policies and
procedures have not yet been established.
For financial statement purposes, the merger has been treated as a reverse
acquisition with us being treated as the acquiree; as such Providence was
considered to be the surviving legal entity and succeeded to the name of
Lifelong.com, Inc.
The transaction was accounted for as a purchase. Accordingly, and because
Providence had no operations and/or assets as of the merger date, the entire
purchase price of approximately $535,000 (consisting of 734,000 of our shares
common stock and liabilities assumed of approximately $22,000) was reflected as
goodwill as of the merger date. Subsequently, the goodwill was determined to be
impaired and as such the entire amount has been included in the loss from
impairment of goodwill in the accompanying statement of operations.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements. The
reported amounts of revenues and expenses during the reporting period may be
affected by the estimates and assumptions management is required to make. Actual
results could differ from those estimates.
BASIS OF PRESENTATION
Our accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America for interim financial information and the instructions to Form 10-QSB
and Rule 10-1 of Regulation S-X of the Securities and Exchange Commission (the
"SEC"). Accordingly, these consolidated financial statements do not include all
of the footnotes required by generally accepted accounting principles. In our
opinion, all adjustments (consisting of normal and recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the six months ended June 30, 2001 are not necessarily indicative of
the results that may be expected for the year ended December 31, 2001. The
accompanying consolidated financial statements and the notes thereto should be
read in conjunction with our audited consolidated financial statements as of and
for the year ended December 31, 2000 contained in our Form 10-KSB.
NOTE B - GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As of June 30, 2001, we had a
stockholders' deficit of approximately $938,132 and a net working capital
deficiency of approximately $970,908. In addition, we anticipate that we will
incur net operating losses for the foreseeable future, and require a significant
amount of capital to commence our planned principal operations and proceed with
our business plan. Accordingly, our ability to continue as a going concern is
dependent upon our ability to secure an adequate amount of capital to finance
our planned principal operations and implement our business plan. Our plans
include continued sales of our common stock and the issuance of debt, however
6
there is no assurance that we will be successful in their efforts to raise the
amount of capital necessary to proceed with our business plan. These factors,
among others, may indicate that the we will be unable to continue as a going
concern for a reasonable period of time.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the we be unable to
continue as a going concern.
NOTE C - CONVERTIBLE DEBENTURES
Convertible debentures bear interest at a fixed rate of 10% per annum and
entitle their holders to convert such debentures to the our common stock at a
conversion price of $1.00 per share at any time between January 1, 2001 and
their maturity date of October 31, 2001.
NOTE D - OTHER RELATED PARTY TRANSACTIONS
We periodically borrow funds from various stockholders and other related
parties. At June 30, 2001, such advances outstanding were $68,381. The advances
are unsecured, non-interest bearing and due on demand.
We utilize a Canadian bank account owned by Lifelong Software Canada, Inc. (an
entity owned by two of the our founding stockholders) for the collection and
disbursement of Canadian funds. As of June 30, 2001, the balance due to this
account was approximately $23,000, which amount has been recorded as a due from
affiliate.
7
Item 2.
Management's Discussion and Analysis of Financial Condition or Plan of Operation.
Overview
The following discussion and analysis should be read in conjunction with the
balance sheet as of June 30, 2001 and the financial statements for the period
ended June 30, 2001 included with this Form 10-QSB.
Information related to our predecessor entity, Providence Capital II, Inc.
("Providence"), has been omitted as it was formed in 1999 for the purpose of
acquiring a private company desiring to become public. For financial statement
purposes, the merger has been treated as a reverse acquisition with LifeLong.Com
("Lifelong") being treated as the acquiree.
Readers are referred to the cautionary statement, which addresses
forward-looking statements made by us.
Lifelong is considered to be in the development stage as defined in Financial
Accounting Standards Board Statement No. 7, and we are currently in the process
of creating strategic relationships and acquiring complementary operating
companies within the e-learning industry that have proven management and
state-of-the-art technologies.
Results of Operations>
Although we have been in existence for 14 months, management's efforts to
develop our business have only recently resulted in generation of revenues.
During the three months ended June 30, 2001, we generated revenues of $78,151
with expenses of $123,149 for a net loss of $33,286. Cumulatively we have
incurred a net loss of $15,217,513 of which $13,891,820 were from non-cash
charges. These expenses are primarily related to our initial development and
implementation of our business plan.
To date, management's efforts have focused on developing sales and sales channel
relationships and promoting and conducting research and development to
demonstrate the feasibility and efficacy of our products.
Future Periods
Management expects that personnel costs will increase substantially in 2001 and
future years as we expand our development efforts. Most of our other operating
expenses, however, are expected to grow with time and expansion. We will
increase rent, insurance and utilities because of our new facility in Montreal,
Canada.
There are several revenue producing projects that are in the final stages of
negotiation but no additional expenditures will be incurred until there are
signed sales contracts.
Liquidity and Capital Resources
Since we have only begun operations in 2001, we have depended upon sales of our
common stock, issuance of convertible debentures and borrowings from certain
stockholders to finance our working capital requirements.
During the period from inception to June 30, 2001, we raised gross proceeds of
$425,350 from the sale of equity securities and $401,220 from the issuance of
convertible debentures to investors and friends and family of our management. We
used all of those proceeds to finance the cost of our operations to date as well
as the development of certain technologies. In addition, we have borrowed
$65,000 from shareholders that are non-interest bearing and payable on demand.
No additional monies were raised between January 1 and June 30, 2001.
Operating activities from January1 to June 30, 2001 created a net use of cash of
$19,911.
We intend to raise an additional three million dollars over the next year to
continue software development, expand our web site, hire additional personnel,
sales and marketing, licensing content, purchase equipment and general working
capital.
8
Capital Expenditures
Management intends to make significant capital expenditures in the coming year.
Our minimum needs are approximately $250,000, which we believe can be leased,
but we intend to raise capital to acquire $1,000,000 of additional facilities.
If we are unable to raise the capital needed to acquire the equipment, we will
greatly curtail planned operations. No assurance can be given that we will raise
the needed capital.
Staffing
We plan to increase our work force. Currently, we have six full-time employees.
Our plan is to add eight research scientists to develop our products. Upon
development of these products, our marketing plan does not call for building a
sales force to sell to end-users but instead to partner with market segment
leaders with existing sales forces. We will train these sales forces to sell our
products and to provide technical assistance through quarterly service to the
systems. We also intend to add additional help in the accounting, administrative
and investor relations areas. Management expects to add at least twenty
employees in 2001. The cost of these additional employees is expected to be in
excess of $1,250,000 in 2001.
CAUTIONARY STATEMENT
This Form 10-QSB, press releases and certain information provided periodically
in writing or orally by our officer or agents contain statements which
constitute forward-looking statements within the meaning of Section 27A of the
Securities Act, as amended and Section 21E of the Securities Exchange Act of
1934. The words expect, anticipate, believe, goal, plan, intend, estimate and
similar expressions and variations thereof if used are intended to specifically
identify forward-looking statements. Those statements may appear in a number of
places in this Form 10-QSB and in other places, particularly, Management's
Discussion and Analysis of Financial Condition and Results of Operations, and
include statements regarding the intent, belief or current expectations of our
directors or officers with respect to, among other things: (i) our liquidity and
capital resources; (ii) our financing opportunities and plans and (iii) our
future performance and operating results. Investors and prospective investors
are cautioned that any such forward-looking statements are not guarantees of
future performance and involve risks and uncertainties, and that actual results
may differ materially from those projected in the forward-looking statements as
a result of various factors. The factors that might cause such differences
include, among others, the following: (i) any material inability to successfully
identify, consummate and integrate a potential business combination at
reasonable and anticipated costs; (ii) any material inability to successfully
internally develop our products; (iii) any adverse effect or limitations caused
by Governmental regulations; (iv) any adverse effect on our continued positive
cash flow and abilities to obtain acceptable financing in connection with our
growth plans; (v) any increased competition in business; (vi) any inability to
successfully conduct our business in new markets; and (vii) other risks
including those identified in our filings with the Securities and Exchange
Commission. We undertake no obligation to publicly update or revise the forward
looking statements made in this Form 10-QSB to reflect events or circumstances
after the date of this Form 10-QSB or to reflect the occurrence of unanticipated
events.
9
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Securities Holders
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
NONE
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIGNATURE TITLE DATE
/s/ Francis A. Gariepy Director, Chief Accounting Officer August 20, 2001
