As Filed with the Securities and Exchange Commission on August 14, 2002
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED JUNE 30, 2002
COMMISSION FILE NO. 0-27121
-----------------------
ILIVE, INC.
(Name of Small Business Issuer in Its Charter)
NEVADA 95-4783826
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2102 BUSINESS CENTER DRIVE
IRVINE, CALIFORNIA 92612
(Address of Principal Executive Offices)
(949) 660-0099
(Issuer's Telephone Number)
(949) 756-0856
(Issuer's Facsimile Number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock at the latest practicable date.
As of August 12, 2002, the registrant had 6,143,885 shares of common stock,
$.001 par value, issued and outstanding.
Transitional small business disclosure format (check one): Yes No X
--- ---
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PART I
ITEM 1. FINANCIAL STATEMENTS
2
iLIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
JUNE 30,
2002
------------
ASSETS
CURRENT ASSETS
Cash $ 39,598
Accounts receivable 46,496
Prepaid expenses 206,000
------------
Total current assets 292,094
EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF $67,089 95,608
WEB CONTENT 786,500
BEAUTY PAGEANT RIGHTS 100,150
OTHER 45,188
------------
$ 1,319,540
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable $ 100,000
Notes payable - stockholder 197,204
Accounts payable 105,501
Accrued interest, including $267,869 to related party 298,136
Accrued payroll 47,464
------------
Total current liabilities 748,305
CONVERTIBLE DEBT 355,000
------------
Total liabilities 1,103,305
------------
COMMITMENTS AND CONTINGENCIES --
STOCKHOLDERS' EQUITY
Common stock, $.001 par value; 10,000,000 shares
authorized, 4,339,565 shares issued and outstanding 4,340
Additional paid-in capital 7,319,290
Unamortized beneficial conversion feature of convertible debt (70,890)
Accumulated deficit (7,036,505)
------------
Total stockholders' equity 216,235
------------
$ 1,319,540
============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
iLIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------------- -----------------------------
2002 2001 2002 2001
------------- ------------- ------------- -------------
Revenues $ 8,070 $ 48,000 $ 10,070 $ 48,000
Costs and expenses
Cost of sales 1,752 4,950 2,377 4,950
Website development and hosting 92,500 26,545 673,000 146,799
General and administrative 312,282 42,215 980,444 250,382
Interest 14,324 10,000 25,145 34,962
Interest - related party 5,975 59,420 12,229 69,372
------------- ------------- ------------- -------------
NET LOSS $ (418,763) $ (95,130) $ (1,683,125) $ (458,465)
============= ============= ============= =============
BASIC AND DILUTED LOSS PER SHARE
Net loss $ (0.11) $ (0.04) $ (0.51) $ (0.21)
============= ============= ============= =============
BASIC AND DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING 3,754,454 2,208,260 3,318,662 2,170,000
============= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
iLIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR SIX MONTHS ENDED JUNE 30,
---------------------------
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,683,125) $ (458,465)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 43,291 11,309
Beneficial conversion feature of convertible debt 17,860 42,420
Issuance of shares for services 1,474,000 --
Change in assets and liabilities:
Accounts receivable 17,908 (48,000)
Prepaids and other assets (264,250) (5,092)
Accrued interest 15,606 19,952
Accrued interest - related party 12,229 41,545
Accrued payroll 10,000 25,000
Accounts payable 43,628 (17,171)
Other accrued expenses -- (12,555)
------------ ------------
Net cash used by operating activities (312,853) (401,057)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (28,799) (9,801)
------------ ------------
Net cash used by investing activities (28,799) (9,801)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible debt 355,000 --
Advances from stockholder -- 275,858
Repurchase and retirement of common stock -- (25,000)
Issuance of common stock for cash 26,250 160,000
------------ ------------
Net cash provided by financing activities 381,250 410,858
------------ ------------
Net increase in cash 39,598 --
CASH, BEGINNING OF PERIOD -- --
------------ ------------
CASH, END OF PERIOD $ 39,598 $ --
============ ============
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Conversion of debt to equity $ -- $ 761,250
============ ============
Issuance of shares for web content $ 786,500 $ --
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
iLIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2002
1. BASIS OF PRESENTATION
- ---------------------------
The accompanying condensed consolidated financial statements include the
accounts of iLive, Inc., ("iLive"), its wholly owned subsidiaries, Society
of Economic Assurance, Inc. ("SEA") and Asia Pacific Co., LTD ("Asia
Pacific") and Asia Pacific's majority owned subsidiary, 246 LLC,
(collectively, the "Company") through September 30, 2001. All material
intercompany transactions and accounts have been eliminated in
consolidation.
iLive (formerly Powerhouse International Corporation) was incorporated in
1987 in Nevada, became inactive in 1996, and had no assets or liabilities
at August 31, 1999. On September 7, 1999, iLive sold 10,000,000 shares of
common stock for $500,000 cash and on September 30, 1999, it acquired Asia
Pacific for 690,000 of its common shares valued at $74,609. This
acquisition was accounted for as a purchase; accordingly, the results of
operations of Asia Pacific are included in the accompanying consolidated
financial statements since the date of acquisition through its sale on
September 30, 2001.
Asia Pacific, incorporated in October 1995 in Niue (a foreign country),
acquired a controlling 64% interest in 246 LLC, a limited liability
company organized in March 1996, to construct and operate a full-service
restaurant, bar and membership club in Beverly Hills, California. The
restaurant, known as Chasen's, commenced operations in April 1997. In July
2000, operations of the restaurant were discontinued and all restaurant
assets were abandoned. On September 30, 2001, Asia Pacific was sold for
$10,000.
On February 17, 2000 the Company acquired 100% of the outstanding shares
of Society of Economic Assurance, Inc. ("SEA"), a Nevada public shell by
issuing 200,000 shares of its common stock. The Company elected to have
SEA become the successor issuer, pursuant to Rule 12g-3(a) of the general
Rules and Regulations of the Securities and Exchange Commission for
reporting purposes under the Securities Exchange Act of 1934. For
accounting purposes, the SEA acquisition was treated as a
recapitalization. From its inception, SEA has been inactive, has operated
no business, and held no assets or liabilities.
Management is focused on the delivery and distribution of streaming video
content on an on-demand and pay-per-view basis. The Company develops its
own content and assists others to develop a distribution channel for their
content on the iLive Network. The Company offers video-on-demand,
electronic shopping, physical VHS and DVD distribution and
business-to-business content creation and distribution. The Company
currently generates virtually all of its revenue from its business
services division where they help other bring their content online by
providing editing and encoding solutions. Moving forward the Company looks
to generate additional revenue from pay-per-view content and the Company's
recent commitment to enter into the ISP market.
6
iLIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2002
2. INTERIM PERIODS
- ---------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions of Form 10-QSB and do not
include all of the information required by generally accepted accounting
principles for complete financial statements. In the opinion of the
Company's management, all necessary adjustments (consisting of normal
recurring adjustments) for a fair presentation have been included.
Operating results for the six months ended June 30, 2002, are not
necessarily indicative of results for any future period. These statements
should be read in conjunction with the consolidated financial statements
and notes thereto for the year ended December 31, 2001 included in the
Company's Form 10-KSB.
3. NOTES PAYABLE
- -------------------
On October 1, 2000 the Company issued a convertible note of up to
$1,500,000. Pursuant to the terms of the note, the Company is required to
repay the principal amount of $1,500,000 with 12% interest on or before
July 31, 2002. The note is convertible at any time given 15 days notice at
the holder's election into a maximum of 600,000 shares of the Company's
common stock at $2.50 per share. As of June 30, 2002 the Company has
borrowed $958,454 of which $761,250 was converted to common stock during
the year ended December 31, 2001.
On January 10, 2002 the Company issued a convertible note up to $300,000
and a warrant to purchase an additional 10,000 shares of its common stock.
Pursuant to the terms of the note, the Company is required to repay the
principal amount of $300,000 with 8% interest. The note may not be paid,
in whole or in part, before January 10, 2004. The note is convertible into
common stock, at the selling stockholder's option, a the lower of (i)
$1.30 or (ii) 80% of the average of the three lowest closing prices for
the common stock for the 30 trading days before but not including the
conversion date. The warrants are exercisable until January 10, 2005 at a
purchase price of the lower of (i) $1.52 or (ii) 120% of the average of
the three lowest closing prices for the 10 trading days before but not
including the exercise date. The Company reported a beneficial conversion
feature of $75,000, which is reflected in additional paid in capital.
Amortization of $9,348 was reflected as interest expense for the quarter
ended June 30, 2002.
On June 19, 2002 the Company issued a convertible note up to $55,000 and a
warrant to purchase an additional 45,000 shares of its common stock.
Pursuant to the terms of the note, the Company is required to repay the
principal amount of $55,000 with 8% simple interest. The note and any
unpaid interest are due June 19, 2004. The note is convertible into common
7
iLIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2002
3. NOTES PAYABLE (CONTINUED)
- -------------------------------
stock, at the selling stockholder's option, a the lower of (i) $1.30 or
(ii) 80% of the average of the three lowest closing prices for the common
stock for the 30 trading days before but not including the conversion
date. The warrants are exercisable until June 19, 2005 at a purchase price
of $1.35. The Company reported a beneficial conversion feature of $13,750,
which is reflected in additional paid in capital. Amortization of $191 was
reflected as interest expense for the quarter ended June 30, 2002.
4. STOCKHOLDERS' EQUITY
- --------------------------
The Company effected a ten-for-one reverse stock split in May 2002. All
references in the financial statements and notes to number of shares and
per share amounts have been restated to reflect this stock split.
The Company issued common shares as follows:
Q-1
---
275,000 shares valued at $605,000 ($2.20 per share) in exchange for web
content.
215,000 shares valued $279,500 ($1.30 per share) in exchange for
consulting services included in website development and hosting expense.
85,000 shares valued $161,500 ($1.90 per share) in exchange for corporate
video services included in general and administrative expense.
130,000 shares valued $247,000 ($1.90 per share) in exchange for investor
relations services included in general and administrative expense.
130,000 shares valued at $247,000 ($1.90 per share) in exchange for
consulting services of which $123,500 is included in website development
and hosting expense and $123,500 is included in prepaid expenses.
125,000 shares valued at $275,000 ($2.20 per share) in exchange for
encoding services of which $192,500 is included in website development and
hosting and $82,500 in included in prepaid expenses.
Q-2
---
165,000 shares valued at $181,500 ($1.10 per share) in exchange for web
content.
8
iLIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2002
4. STOCKHOLDERS' EQUITY (CONTINUED)
- --------------------------------------
Q-2 CONTINUED
-------------
25,000 shares valued at $25,000 ($1.00 per share) in exchange for web
consulting services included in website development and hosting expense.
5,000 shares valued at $4,000 ($0.80 per share) in exchange for investor
relations services included in general and administrative expense.
13,750 shares valued at $13,750 ($1.00 per share) in exchange for cash.
170,000 shares valued at $51,000 ($0.30 per share) in exchange for
consulting services included in general and administrative expense.
110,000 shares valued at $99,000 ($0.90 per share) in exchange for
consulting services included in general and administrative expense.
50,000 shares valued at $5,000 ($0.10 per share) in exchange for cash.
170,000 shares valued at $42,500 ($0.25 per share) in exchange for
consulting services included in general and administrative expense.
170,000 shares valued at $42,500 ($0.25 per share) in exchange for
encoding services included in website development and hosting expense.
15,000 shares valued at $1,500 ($0.10 per share) in exchange for cash.
40,000 shares valued at $6,000 ($0.15 per share) in exchange for cash.
5. DISCONTINUED OPERATIONS
- -----------------------------
On September 30, 2001 the Company sold Asia Pacific to an unrelated party
for $10,000, resulting in a gain on the disposal of $1,893,083. At
September 30, 2001, Asia Pacific had zero assets and the following
liabilities:
Notes payable $ 376,623
Accounts payable 731,792
Accrued interest 136,399
Accrued payroll and related taxes 375,816
Other accrued expenses 262,453
------------
$ 1,883,083
============
9
iLIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2002
6. LEGAL PROCEEDINGS
- -----------------------
The Company from time to time may be involved in various claims, lawsuits,
disputes with third parties, actions involving allegations of
discrimination, or breach of contract actions incidental to the operations
of its business. The Company is currently involved in two such instances.
Jerry Nieto v. iLive, Inc., et al.
----------------------------------
On September 21, 2001, a lawsuit was filed in the Superior Court of the
State of California for the County of Orange, against the Company entitled
JERRY NIETO v. iLIVE, INC., ET AL. The complaint alleges various claims
seeking payment of past due wages in the amount of $9,000, 750,000 shares
of the Company's common stock, and penalties and attorney fees. The
Company denies these claims and is vigorously defending the action.
Al Moshiri v. iLive Inc., et al.
--------------------------------
On July 20, 2001, a lawsuit was filed in the Superior Court of the State
of California for the County of Los Angeles, against the Company entitled
AL MOSHIRI v. iLIVE, INC., ET. AL. The complaint alleges various claims
seeking payment of alleged finder's fees and damages in the amount of
$500,000 and seeks punitive damages of $5,000,000. The Company denies
these claims and is vigorously defending the action.
7. WEB CONTENT
- -----------------
During the three months ended March 31, 2002, the Company purchase
$605,000 of Internet Content through the issuance of 275,000 shares of its
common stock, which was valued at $2.20 per share. During the three months
ended June 30, 2002, the Company purchased $181,500 of Internet Content
through the issuance of 165,000 shares of its common stock, which was
valued at $1.10 per share. The Internet Content purchased includes reality
based programming, comedy, and distance learning applications. This
content will be streamed over the Internet on a pay-per-view basis. The
content was accounted for at cost (considered to be the fair value of the
shares issued) and will be amortized in the same ratio as current
pay-per-view revenues bear to anticipated total pay-per-view gross
revenues.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Some of the information in this 10Q contain forward-looking statements
that involve substantial risks and uncertainties. You can identify these
statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue," or similar words. You should
read statements that contain these words carefully because they:
-- discuss our future expectations;
-- contain projections of our future results of operations or of
our financial condition; and
-- state other "forward-looking" information.
We believe it is important to communicate our expectations. However,
there may be events in the future that we are not able to accurately predict or
over which we have no control. The risk factors listed in this section, as well
as any cautionary language in this prospectus, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. You should
be aware that the occurrence of the events described in these risk factors could
have an adverse effect on our business, results of operations and financial
condition.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
2001.
Revenues: Revenues totaled $8,070 for the quarter ended June 30, 2002
as compared to $48,000 for the quarter ended June 30, 2001. As a percentage
revenue decreased 594% during the quarter ended June 30, 2002. The Company's
revenue for the quarter ended June 30, 2002 consisted almost entirely of
Business Services as it accounted for $8,000 of the revenue, compared to the
Company generating $48,000 of business services revenue for the quarter ended
June 30, 2001. The decrease in revenue is attributed to management's focus on
the long-term marketing of its pay-per-view content and less emphasis on
business services. The decrease in revenue as a result had a direct effect on
our earning per share as Basic loss per share totaled $(0.11) for the quarter
ended June 30, 2002 as opposed to $(0.04) net loss for the quarter ended June
30, 2001.
Cost of Sales: Cost of Sales totaled $1,752 for the quarter ended June
30, 2002 as compared to $4,950 for the quarter ended June 30, 2001. The decrease
in the cost of sales ( a decrease of 283%) was due to the company refocusing its
efforts on consumer pay-per-view sales for the quarter ended June 30, 2002 as
opposed to being primarily focused on Business Services for the quarter ended
June 30, 2001. As a percentage of total revenue, cost of sales was 22% for the
quarter ended June 30, 2002 resulting in gross margins of 78%.
General and Administrative Expenses: General and Administrative
expenses totaled $312,282 (3869% of revenues) for the quarter ended June 30,
2002 and $42,215 in General and Administrative expenses (88% of revenues) for
the quarter ended June 30, 2001. The increase in general and administrative
expenses was due to the costs related to locating and researching Internet
Service provider acquisition candidates as well as increased costs associated
with content acquisition. Of the $312,282 of General and Administrative Expenses
incurred in the quarter ended June 30, 2002, $196,500 of the expenses were paid
for with the Company's common stock.
SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2001.
Revenues totaled $10,070 for the six months ended June 30, 2002 as
compared to $48,000 for the six months ended June 30, 2001. As a percentage
revenue decreased 477% during the six months ended June 30, 2002. The Company's
revenue for the six months ended June 30, 2002 consisted almost entirely of
Business Services as it accounted for $10,000 of the revenue, compared to the
Company generating $48,000 of business services revenue for the six months ended
June 30, 2001. the decrease in revenue is attributed to management's focus on
the long-term marketing of its pay-per-view content and less emphasis on
business services. The decrease in revenue as a result had a direct effect on
our earnings per share as Basic loss per share totaled $(.51) for the six months
ended June 30, 2002 as opposed to $(.21) net loss for the quarter ended June 30,
2001. The ten for one reverse stock split also had a direct effect on earnings
per share as the total number of shares outstanding was reduced by a multiple of
10.
11
Cost of Sales totaled $2,377 for the six months ended June 30, 2002 as
compared to $4,950 for the six months ended June 30, 2001. The decrease in cost
of sales ( a decrease of 208%) was due to the Company refocusing its efforts on
consumer pay-per-view sales for the six months ended June 30, 2002 as opposed to
being primarily focuses on Business Services for the six months ended June 30,
2001. A percentage of total revenue, cost of sales was 24% for the six months
ended June 30, 2002 resulting in gross margins of 76%. The cost of sales will
vary significantly from project to project but we aim to consistently challenge
and keep the cost of sales to a minimum.
General and Administrative expenses totaled $980,444 (9736% of
revenues) for the six months ended June 30, 2002 and $250,382 in General and
Administrative expenses (522% of revenues) for the six months ended June 30,
2001. The increase in General and Administrative expenses was due to the costs
related to locating and researching Internet Service provider acquisition
candidates as well as increased costs associated with content acquisition. Of
the $980,444 of General and Administrative expenses incurred for the six months
ended June 30, 2002 $605,000 of the expenses were paid for with the Company's
common stock.
LIQUIDITY AND CAPITAL RESOURCES
On June 19, 2002 the Company issued a convertible note up to $55,000
and a warrant to purchase an additional 45,000 shares of its common stock. For
the quarter ended June 30, 2002 the Company also raised $26,250 through the sale
of 118,750 shares to accredited investors through a Private Placement Offering.
In 1999, we entered into a $1,500,000 convertible line of credit
arrangement with Street capital Inc., an entity that is controlled by our
President, Mr. Henricks and CEO, Mr. Aimers, bearing interest at 12% and due on
or before March 7, 2001. The note was convertible at the holder's election into
common stock at $0.25 per share, was fully utilized, and was converted into
6,000,000 shares in 2000. In 2000, we entered into a new $1,500,000 convertible
line of credit at 12% interest with all principal and interest due on or before
June 7, 2002. On June 6, 2002 the note was extended to a due date of July 31,
2002. The note is convertible at the holder's election into a maximum of
6,000,000 shares of common stock at $0.25 per share. At June 30, 2002, we had
borrowed a total of $958,454 on this line of credit and the holder had converted
$761,250 of the debt into 3,045,000 common shares.
For the quarter ended June 30, 2002, our only material cash flow came
from our business to business sales as well as the Convertible note and Private
Placement of shares. For the coming fiscal year we look to see increased cash
flow from business services as well as content pay-per-view. We believe that we
will also gain additional revenue not seen in previous quarters as we begin to
enter the ISP market.
On April 23, 2002, we issued to Academy Entertainment 165,000 shares
valued at $181,500 ($1.10 per share) in exchange for web content.
On May 1, 2002, we issued to Mark Moline 25,000 shares valued at
$25,000 ($1.00 per share) in exchange for web consulting services included
in website development and hosting expense.
On May 2, 2002, we issued to Vision Publishing 5,000 shares valued at
$4,000 ($0.80 per share) in exchange for investor relations services
included in general and administrative expenses.
On May 14 2002, we issued to John Otto 7,500 shares valued at $7,500
($1.00 per share) in exchange for cash.
On May 16, 2002, we issued to Mark Moline 110,000 shares valued at
$99,000 ($0.90 per share) in exchange for consulting services for
advertising/graphics included in general and administrative expense.
On May, 17, 2002, we issued David Mallery 6,250 shares valued at $6,250
($1.00 per share) in exchange for cash.
On June 6, 2002, we issued to Robert Lambdin 50,000 shares valued at
$5,000 ($0.10 per share) in exchange for cash.
12
On, June 7,2002 we issued to Kent Broussard 170,000 shares valued at
$42,500 ($0.25 per share) in exchange for consulting services for content
acquisition included in general and administrative expense.
On June 7, 2002, we issued to Gennady Levtchenko 170,000 shares valued
at $42,500 ($0.25 per share) in exchange for encoding services included in
website development and hosting expense.
On June 13 2002, we issued to Todd Hanas 170,000 shares valued at
$51,000 ($0.30 per share) in exchange for consulting services for foreign
content acquisition included in general and administrative expense.
On June 17, 2002, we issued John Otto 15,000 shares valued at $1,500
($0.10 per share) in exchange for cash.
On June 24, 2002, we issued Donald Sandell 40,000 shares valued at
$6,000 ($0.15 per share) in exchange for cash.
We do not have existing capital resources or credit lines available
that are sufficient to fund our operations and capital requirements as presently
planned over the next twelve months. We are actively pursuing additional funds
through the issuance of either debt or equity instruments. We may also pursue a
working capital line of credit to be secured by our assets. However, such funds
may not be available on favorable terms or at all.
13
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time may be involved in various claims, lawsuits, disputes
with third parties, actions involving allegations of discrimination, or breach
of contract actions incidental to the operations of its business. We are
currently involved in two such instances.
JERRY NIETO v. iLIVE, INC., ET AL.
On September 21, 2001, a lawsuit was filed in the Superior Court of the
State of California for the County of Orange, against us entitled Jerry Nieto v.
iLive, Inc., et al. The complaint alleges various claims seeking payment of past
due wages in the amount of $9,000, 750,000 shares of our common stock, and
penalties and attorney fees. Mr. Nieto was contracted to develop a functional
website for us and was paid in excess of $250,000 to perform this task. We
believe that Mr. Nieto breached his contract by not delivering a functional
website and withheld a final payment. We deny all of Mr. Nieto's claims and are
vigorously defending the action.
AL MOSHIRI v. iLIVE INC., ET AL.
On July 20, 2001, a lawsuit was filed in the Superior Court of the
State of California for the County of Los Angeles, against us entitled Al
Moshiri v. iLive, Inc., et. al. The complaint alleges various claims seeking
payment of alleged finder's fees and damages in the amount of $500,000 and seeks
punitive damages of $5,000,000. Mr. Moshiri alleges to have raised iLive
millions of dollars in financing and seeks payment of a commission for such
funding. We deny these claims and are vigorously defending the action.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The securities described below represent our securities sold by us for
the period ending June 30, 2002 that were not registered under the Securities
Act of 1933, as amended, all of which were issued by us pursuant to exemptions
under the Securities Act. Underwriters were involved in none of these
transactions.
PRIVATE PLACEMENTS OF COMMON STOCK AND WARRANTS FOR CASH
On May 14 2002, we issued to John Otto 7,500 shares valued at $7,500
($1.00 per share) in exchange for cash.
On May, 17, 2002, we issued David Mallery 6,250 shares valued at $6,250
($1.00 per share) in exchange for cash.
On June 6, 2002, we issued to Robert Lambdin 50,000 shares valued at
$5,000 ($0.10 per share) in exchange for cash.
On June 17, 2002, we issued John Otto 15,000 shares valued at $1,500
($0.10 per share) in exchange for cash.
On June 24, 2002, we issued Donald Sandell 40,000 shares valued at
$6,000 ($0.15 per share) in exchange for cash.
SALES OF DEBT AND WARRANTS FOR CASH
On June 19, 2002, we issued to Laurus Master Fund, Ltd. a $55,000
principal amount convertible note, with 8% simple interest and a warrant to
purchase an additional 45,000 shares of our common stock. The note and any
unpaid interest are due June 19, 2004. The note is convertible into common
stock, at the holder's option, at the lower of (i) $1.30 or (ii) 80% of the
average of the three lowest closing prices for the common stock in the 30
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trading days before but not including the conversion date. The warrants are
exercisable until June 19, 2005 at a purchase price of $1.35.
OPTION GRANTS
None.
ISSUANCES OF STOCK FOR SERVICES OR IN SATISFACTION OF OBLIGATIONS
On April 23, 2002, we issued to Academy Entertainment 165,000 shares
valued at $181,500 ($1.10 per share) in exchange for web content.
On May 1, 2002, we issued to Mark Moline 25,000 shares valued at
$25,000 ($1.00 per share) in exchange for web consulting services included
in website development and hosting expense.
On May 2, 2002, we issued to Vision Publishing 5,000 shares valued at
$4,000 ($0.80 per share) in exchange for investor relations services
included in general and administrative expenses .
On June 13 2002, we issued to Todd Hanas 170,000 shares valued at
$51,000 ($0.30 per share) in exchange for consulting services for foreign
content acquisition included in general and administrative expense.
On May 15 2002, we issued to Mark Moline 110,000 shares valued at
$99,000 ($0.90 per share) in exchange for consulting services for
advertising/graphics included in general and administrative expense.
On June 7, 2002 we issued to Kent Broussard 170,000 shares valued at
$42,500 ($0.25 per share) in exchange for consulting services for content
acquisition included in general and administrative expense.
On June 7, 2002, we issued to Gennady Levtchenko 170,000 shares valued
at $42,500 ($0.25 per share) in exchange for encoding services included in
website development and hosting expense.
All of the above offerings and sales were deemed to be exempt under
Regulation D and Section 4(2) of the Securities Act. No advertising or general
solicitation was employed in offering the securities. The offerings and sales
were made to a limited number of persons, all of whom were accredited investors,
business associates of iLive or executive officers of iLive, and transfer was
restricted by iLive in accordance with the requirements of the Securities Act of
1933. In addition to representations by the above-referenced persons, we have
made independent determinations that all of the above-referenced persons were
accredited or sophisticated investors, and that they were capable of analyzing
the merits and risks of their investment, and that they understood the
speculative nature of their investment. Furthermore, all of the above-referenced
persons were provided with access to our Securities and Exchange Commission
filings.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON 8-K:
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(A) EXHIBITS:
Exhibit Number Description
- -------------- -----------
99.1 Certification of the Chief Executive Officer of iLive, Inc.
Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of the Chief Financial Officer of iLive, Inc.
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
A current report on Form 8-K was filed with the Securities and Exchange
Commission on June 20, 2002.
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SIGNATURES
In accordance with the requirements of the Exchange Act of 1933, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ILIVE, INC., a Nevada Corporation
Date: August 14, 2002 By: /s/ Albert Aimers
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ALBERT AIMERS, Chairman & Chief Executive Officer
Date: August 14, 2002 By: /s/ Scott Henricks
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SCOTT HENRICKS, President & Chief Financial Officer
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