UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2001
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to _________
Commission File No. 0-28549
ILIVE, INC.
(Name of Small Business Issuer in Its Charter)
NEVADA 95-4783826
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
3960 WILSHIRE BLVD., SUITE 406
LOS ANGELES, CALIFORNIA 90010
(Address of Principal Executive Offices) (Zip Code)
(213) 252-1090
(Issuer's Telephone Number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
(None)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $0.001
(Title of Class)
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 [ ]
Indicate the number of shares outstanding of each of the issuer's class of
common stock as of the latest practicable date:
Title of each class of Common Stock Outstanding as March 31, 2001
- ----------------------------------- -----------------------------
Common Stock, $0.001 par value 21,313,147
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
Page 1
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets at March 31, 2001 (Unaudited).
Condensed Consolidated Statements of Operations (Unaudited) for the three
months ended March 31, 2001.
Condensed Consolidated Statements of Cash Flows (Unaudited) for the three
months ended March 31, 2001.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
at March 31, 2001.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ILIVE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(Unaudited)
MARCH 31,
2001
------------
ASSETS
CURRENT ASSETS $ -
EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF $22,843 85,290
BEAUTY PAGEANT RIGHTS 100,150
OTHER 1,500
------------
$ 186,940
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable $ 490,123
Accounts payable 860,875
Accrued interest 178,382
Accrued interest - related party 216,485
Accrued payroll and related taxes 390,816
Other accrued expenses 315,684
------------
Total current liabilities 2,452,365
------------
NOTE PAYABLE - STOCKHOLDER 737,484
------------
COMMITMENTS AND CONTINGENCIES -
STOCKHOLDERS' DEFICIT
Common stock, $.001 par value; 100,000,000 shares
authorized, 21,313,147 shares issued and outstanding 21,313
Additional paid-in capital 4,091,147
Accumulated deficit (7,115,369)
------------
Total stockholders' deficit (3,002,909)
------------
$ 186,940
============
The accompanying notes are an integral part of these financial statements
Page 3
ILIVE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
THREE MONTHS MARCH 31,
--------------------------
2001 2000
------------ ------------
REVENUES $ - $ -
COSTS AND EXPENSES
Website development and hosting 120,254 118,842
General and administrative 202,758 167,482
Depreciation expense 5,409 532
Interest 24,962
Interest - related party 9,952 38,100
------------ ------------
LOSS FROM CONTINUING OPERATIONS (363,335) (324,956)
------------ ------------
LOSS FROM DISCONTINUED OPERATIONS (NO TAX EFFECT) - (399,231)
------------ ------------
NET LOSS $ (363,335) $ (724,187)
============ ============
BASIC AND DILUTED LOSS PER SHARE
Loss from continuing operations $ (0.02) $ (0.02)
============ ============
Loss from discontinued operations $ - $ (0.03)
============ ============
Net loss $ (0.02) $ (0.05)
============ ============
BASIC AND DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING 21,313,147 15,147,488
============ ============
The accompanying notes are an integral part of these financial statements
Page 4
ILIVE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
THREE MONTHS MARCH 31,
----------------------
2001 2000
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(363,335) $(724,187)
Adjustments to reconcile net loss to net cash
used by operating activities:
Loss from discontinued operations - 399,231
Depreciation 5,409 532
Change in assets and liabilities:
Beauty pageant rights - (25,000)
Other assets (1,500) -
Accrued interest 9,952 (4,900)
Accrued interest - related party 24,545 (13,249)
Accrued payroll 15,000 (21,365)
Accounts payable 37,684 (119,521)
Other accrued expenses (12,555) (21,524)
---------- ----------
Net cash used by operating activities (284,800) (529,983)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Repayments from stockholder - 21,416
---------- ----------
Net cash provided by investing activities - 21,416
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt - 584,457
Advances from stockholder 124,800 -
Issuance of common stock 160,000 25,000
---------- ----------
Net cash provided by financing activities 284,800 609,457
---------- ----------
Cash used by discontinued operations - (103,647)
---------- ----------
Net decrease in cash - (2,757)
CASH, BEGINNING OF PERIOD - 26,034
---------- ----------
CASH, END OF PERIOD $ - $ 23,277
========== ==========
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Acquisition of license for common stock $ - $ 75,150
========== ==========
CASH PAID FOR
Interest $ - $ -
========== ==========
Income taxes $ - $ -
========== ==========
The accompanying notes are an integral part of these financial statements
Page 5
ILIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2001
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"). 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.
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 April 2000, management closed
Chasen's to the public and began operating the restaurant for private parties
only. In July 2000, operations of the restaurant were permanently discontinued.
The Company wrote off all its restaurant operating assets (which consisted
primarily of furniture, fixtures and restaurant equipment), and inventory as of
June 30, 2000. The restaurant had revenues of $684,352 for the three month
period ended March 31, 2000.
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 become SEA's
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 plans to focus the Company as an online entertainment media entity
producing branded shows, music and other sponsored entertainment. All content
will be viewed in a combination of free, pay per view, and subscription
programming. Each show will also utilize the Internet to facilitate the
purchasing of merchandise through e-commerce. The Company's first event was the
Miss Beverly Hills Beauty Pageant, held on
Page 6
ILIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2001
1. BASIS OF PRESENTATION (CONTINUED)
October 15, 2000. Future pageants and other similar entertainment events should
generate revenues, not only from ticket sales, but also from corporate
sponsorship, merchandise sales and pay-per-view internet broadcasting.
Additionally, the Company has recently begun providing online video production
services to business customers.
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 three months ended March 31,
2001, 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, 2000 included in
the Company's Form 10-KSB.
Page 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Cautionary Statements:
This Quarterly Report on Form 10-QSB contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. The Company intends that such
forward-looking statements be subject to the safe harbors created by such
statutes. The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. Accordingly, to
the extent that this Quarterly Report contains forward-looking statements
regarding the financial condition, operating results, business prospects or any
other aspect of the Company, please be advised that the Company's actual
financial condition, operating results and business performance may differ
materially from that projected or estimated by the Company in forward-looking
statements. The differences may be caused by a variety of factors, including
but not limited to adverse economic conditions, intense competition, including
intensification of price competition and entry of new competitors and products,
adverse federal, state and local government regulation, inadequate capital,
unexpected costs and operating deficits, increases in general and administrative
costs, lower sales and revenues than forecast, loss of customers, customer
returns of products sold to them by the Company, termination of contracts, loss
of supplies, technological obsolescence of the Company's products, technical
problems with the Company's products, price increases for supplies, inability to
raise prices, failure to obtain new customers, litigation and administrative
proceedings involving the Company, the possible acquisition of new businesses
that result in operating losses or that do not perform as anticipated, resulting
in unanticipated losses, the possible fluctuation and volatility of the
Company's operating results, financial condition and stock price, inability of
the Company to continue as a going concern, losses incurred in litigating and
settling cases, adverse publicity and news coverage, inability to carry out
marketing and sales plans, loss or retirement of key executives, changes in
interest rates, inflationary factors and other specific risks that may be
alluded to in this Quarterly Report or in other reports issued by the Company.
In addition, the business and operations of the Company are subject to
substantial risks that increase the uncertainty inherent in the forward-looking
statements. The inclusion of forward-looking statements in this Quarterly
Report should not be regarded as a representation by the Company or any other
person that the objectives or plans of the Company will be achieved.
COMPANY OVERVIEW
iLive, Inc. ("iLive" or the "Company") is a broadband entertainment and
streaming media company. iLive assists companies in the development of online
entertainment and content. In addition, the Company produces online pay-per-view
content for its own customers. Currently, iLive produces in excess of 250
episodes viewable on the Internet. In doing so, the Company has developed
expertise in online editing and encoding. iLive's experience also provides it
with the ability to help companies develop video coverage of their products and
services on the Internet. iLive has a crew of trained professionals that are
able to go out on location to shoot and produce video content. The content is
then brought back to the Company's office in Los Angeles where it is digitally
edited then encoded and posted on the Internet for viewing.
iLive is currently developing a business to consumer model that focuses on
online entertainment. iLive produces a wide array of shows from Celebrity Homes,
Behind the Scenes episodes, and How to Instructional videos. The Company will
also assist others with compelling content not offered for free elsewhere in
distributing their content via the iLive pay-per-view model.
Page 8
The Company's prior three month period ended March 31, 2000 is not indicative of
the Company's current business plan and operations. During the three month
period ended March 31, 2000 as well as the year ended December 31, 1999, the
Company was building its infrastructure and had no revenues. In September 1999,
the Company acquired Asia Pacific, as previously discussed in the Company's
prior filings. Asia Pacific's principal asset consisted of a 64% interest in 246
LLC dba Chasen's Restaurant. The Company had intended to utilize Chasen's as a
forum for its Internet related entertainment operations.
Results of Operations For the Quarter Ended March 31, 2001.
However, losses from the Company's Chasen's restaurant operations exceeded the
Company's expectation. Due to Chasen's negative cash flow and increased net
loss, Management decided to discontinue any further investment into 246 LLC
and to either reorganize or divest its restaurant operations. The Company has
decided to focus its efforts on the development of its Internet operations.
In the first quarter ended March 31, 2001, Management attempted to acquire all
of the assets of Web Theatre, Inc. and Web Pay Per View.com, Inc. in order to
supplement its plan of generating content for broadcast over the Internet. The
Web Theatre was a 2000 seat venue located in Phoenix, Arizona. The asset
purchase of The Web Theatre Inc. and Web Pay Per View.com, Inc. were completed
on January 25, 2001. Subsequently, however, on March 30, 2001, all three parties
mutually agreed to rescind the transaction. After a review of alternative
brick-and-mortar entertainment venues, the Company has decided not to attempt to
acquire such venues at the time. Instead the Company is focused on further
developing its business-to-business services as well as its business-to-consumer
content.
In furtherance of developing content for the Company's pay-per-view services,
the Company acquired the rights to the Miss Beverly Hills Beauty Pageant in
fiscal 2000 as previously discussed in the Company's prior filings. The
Company's first Miss Beverly Hills Beauty Pageant was held October 15, 2000 at
the Beverly Hills Hotel which generated only nominal revenue totaling $3,624
primarily from ticket sales and contestant entrance fees. Total costs for
hosting the event totaled $81,681 which consisted of advertising costs, venue
rental fees, and prize costs. Management believes that being a first year event,
that the results are not indicative of future pageants and as the event grows,
the Company will be able to derive additional revenue from corporate
sponsorship, merchandise sales, and pay-per-view internet broadcasting. However,
no assurances can be made as to the result of such future pageants.
The Company's business-to-business services involves the production and filming
of content for other business and assisting such business in developing a
multimedia web presence. On the business-to-consumer side, iLive looks to
continue to build its library of content and market its programs using a
peer-to-peer program paying commissions to affiliates who refer clients to the
Company's pay-per-view content.
The Company's website is currently undergoing modifications bringing with it the
added functionality of its newly developed peer to peer marketing program and
the addition of pay-per-view content. The Company anticipates that these new
additions will be implemented by the end of the third quarter this year.
Liquidity & Capital Resources
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 March 7, 2002. The note is
convertible, at anytime given 15 day's notice at the holder's election, into a
maximum of 6,000,000 shares of the Company's Common Stock at $0.25 per share.
As of March 31, 2001 has borrowed $702,684 against the Note. As a result of the
Company's debt financings, the Company incurred interest charges totaling
$746,012 for the year ended December 31, 2000. Of the $746,012, $611,600 of the
interest expense is due to the difference in the fair market value of the
Company's common stock and the conversion price of the Note.
Page 9
The Company intends to obtain additional financing through the sale of its
Common Stock and through a Private Placement of its restricted Common
Stock, including warrants to purchase additional shares of the Company's
Common Stock. However, there can be no assurances that the Company will be
able to complete the Private Offering. Failure to complete the Private Offering
may have a material adverse effect on the Company's plan of operations.
Additionally, a slower than expected rate of acceptance of the Company's Web
site, or lower than expected revenues generated from the Company's Web site,
would materially adversely affect the Company's liquidity. The Company may need
additional capital sooner than anticipated. The Company has no commitments for
additional financing, and there can be no assurances that any such additional
financing would be available in a timely manner or, if available, would be on
terms acceptable to the Company. Furthermore, any additional equity financing
could be dilutive to our then-existing shareholders and any debt financing could
involve restrictive covenants with respect to future capital raising activities
and other financial and operational matters.
Capital Expenditures
The Company's anticipated capital expenditures for the year ending December 31,
2001 are expected to consist of development costs for the Company's Web site.
The Company expects to expend approximately $100,000 toward ongoing development
of its Web site. The Company also expects to expend approximately $200,000 on
the development of content. Additionally, the Company expects to spend $100,000
on additional computer equipment and $150,000 on marketing. The Company
currently does not have sufficient working capital to fund its anticipated
capital expenditures and will need to raise additional funds either though
additional equity or debt financings. There can be no assurances that any such
additional financing would be available in a timely manner or, if available,
would be on terms acceptable to the Company. Failure to raise additional funds
for the Company's planned capital expenditures will have a material adverse
effect on the Company's plan of operations.
The Company's audited financial statements for the year ended December 31, 2000
have been prepared on the basis of a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company had not yet generated significant revenues from Web site
operations and, at December 31, 2000, had accumulated a deficit from its
operating activities. Continuation of the Company as a going concern is
dependent upon, among other things, obtaining additional capital, meeting other
obligations under various agreements and achieving satisfactory levels of
profitable operations. These factors raise substantial doubt about the Company's
ability to continue as a going concern.
Page 10
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company may from time to time be involved in various claims, lawsuits,
disputes with third parties, actions involving allegations of discrimination, or
breach of contract actions incidental to the operation of its business. The
Company is not currently involved in any such litigation which it believes could
have a materially adverse effect on its financial condition or results of
operations.
ITEM 2 - CHANGES IN SECURITIES
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
(A) EXHIBITS
None
(B) REPORTS ON FORM 8-K
On March 6, 2000, the Company filed a Current Report on Form 8-K dated February
29, 2000 reporting its acquisition of Society of Economic Assurance, a Nevada
corporation.
On May 5, 2001, the Company filed a Current Report on Form 8-K dated April 25,
2001 reporting the recession of its acquisition of The Web Theatre, Inc., an
Arizona corporation and WebPayPerView.com, Inc., an Arizona corporation.
Page 11
SIGNATURES
In accordance with 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.
ILIVE, INC.
By /s/ Scott Hendricks
----------------------------------
Scott Hendricks
President, CEO & CFO
Dated: May 21, 2001
Page 12