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 September 30, 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. 0-27121
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)
2102 Business Center Drive
Irvine, California 92612
(Address of Principal Executive Offices) (Zip Code)
(949) 660-0099
(Issuer's Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
(None)
3960 Wilshire Blvd., Suite 406
Los Angeles, California 90010
(Former name, former address and former fiscal year,
if changed since last report)
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 October 31, 2001
Common Stock, $0.001 par value 24,343,147
Transitional Small Business Disclosure Format (check one):
Yes ___ No __X__
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets at September 30, 2001 (Unaudited).
Condensed Consolidated Statements of Operations (Unaudited) for the three months
and nine months ended September 30, 2001 and 2000.
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months
ended September 30, 2001 and 2000.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited) at
September 30, 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.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
iLIVE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(Unaudited)
SEPTEMBER 30,
2001
---------------
ASSETS
CURRENT ASSETS
Accounts receivable $ 143,400
Other 7,754
---------------
TOTAL CURRENT ASSETS 151,154
EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF $35,216 94,151
BEAUTY PAGEANT RIGHTS 100,150
OTHER 6,050
---------------
$ 351,505
===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable $ 113,500
Note payable - stockholder 212,508
Accounts payable 127,816
Accrued interest 8,512
Accrued interest - stockholder 206,138
Accrued payroll and related taxes 30,864
Other accrued expenses 15,470
---------------
Total current liabilities 714,808
---------------
COMMITMENTS AND CONTINGENCIES -
STOCKHOLDERS' DEFICIT
Common stock, $.001 par value; 100,000,000 shares
authorized, 24,343,147 shares issued and outstanding 24,343
Additional paid-in capital 4,866,787
Accumulated deficit (5,254,433)
---------------
Total stockholders' deficit (363,303)
---------------
$ 351,505
===============
The accompanying notes are an integral part of these financial statements.
iLIVE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 2000 2001 2000
----------- ------------ ------------ ------------
REVENUES $ 93,000 $ - $ 141,000 $ -
COSTS AND EXPENSES
Cost of revenues 10,829 - 15,779 -
Website development and hosting 9,000 38,807 155,799 199,386
General and administrative 32,042 270,412 271,115 923,190
Depreciation 6,468 6,000 17,777 22,250
Interest 2,837 32,597 37,799 101,001
Interest - related party 6,431 56,245 75,803 133,408
----------- ------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS 25,393 (404,061) (433,072) (1,379,235)
----------- ------------ ------------ ------------
DISCONTINUED OPERATIONS:
Gain (loss) on disposal (no tax effect) 1,930,673 1,930,673 (267,320)
Loss from discontinued
operations (no tax effect) - (7,809) - (487,302)
----------- ------------ ------------ ------------
INCOME (LOSS) FROM
DISCONTINUED OPERATIONS 1,930,673 (7,809) 1,930,673 (754,622)
----------- ------------ ------------ ------------
NET INCOME (LOSS) $ 1,956,066 $ (411,870) $ 1,497,601 $(2,133,857)
=========== ============ ============ ============
BASIC AND DILUTED LOSS PER SHARE
Income (loss) from continuing operations $ 0.00 $ (0.03) $ (0.02) $ (0.09)
=========== ============ ============ ============
Loss from discontinued operations $ 0.08 $ (0.00) $ 0.09 $ (0.05)
=========== ============ ============ ============
Net income (loss) $ 0.08 $ (0.03) $ 0.07 $ (0.14)
=========== ============ ============ ============
BASIC AND DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING 24,343,147 15,544,812 22,590,729 15,129,507
=========== ============ ============ ============
The accompanying notes are an integral part of these financial statements.
iLIVE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
FOR NINE MONTHS ENDED SEPTEMBER 30,
2001 2000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,497,601 $(2,133,857)
Adjustments to reconcile net loss to net cash
used by operating activities:
(Gain) loss from discontinued operations (1,930,673) 267,320
Embedded interest 42,420 -
Depreciation 17,777 22,250
Repayment of advances through performance of
services - 20,000
Change in assets and liabilities:
Accounts receivable (143,400) -
Other assets (13,804) 43,351
Accrued interest 8,512 101,001
Accrued interest - related party 93,692 133,408
Accrued payroll 30,864 -
Accounts payable (74,704) 99,483
Other accrued expenses (3,130) 129,217
------------ ------------
Net cash used by operating activities (474,845) (1,317,827)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (21,229) (105,723)
Repayments from stockholder - 416
------------ ------------
Net cash provided by investing activities (21,229) (105,307)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt - 814,048
Advances from stockholder 361,074 490,599
Repurchase and retirement of common stock (25,000) -
Issuance of common stock 160,000 25,000
------------ ------------
Net cash provided by financing activities 496,074 1,329,647
------------ ------------
Cash provided by discontinued operations - 67,453
------------ ------------
Net decrease in cash - (26,034)
CASH, BEGINNING OF PERIOD - 26,034
------------ ------------
CASH, END OF PERIOD $ - $ -
============ ============
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Acquisition of license for common stock $ - $ 75,150
============ ============
Conversion of debt to equity $ 761,250 $ 1,500,000
============ ============
CASH PAID FOR
Interest $ - $ -
============ ============
Income taxes $ - $ -
============ ============
The accompanying notes are an integral part of these financial statements.
ILIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 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, corporation in exchange
for 200,000 shares of iLive common stock. The Company elected successor issuer
status 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.
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
ILIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 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.
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 and nine months ended
September 30, 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.
3. NOTE PAYABLE - STOCKHOLDER
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 any time given 15 days 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 September 30, 2001 the Company has borrowed $935,155, of
which $761,250 was converted to common stock during the quarter ended June 30,
2001.
4. GAIN ON DISPOSAL OF SUBSIDIARY
In the period ended September 30, 2001 the company disposed of Asia Pacifc Co.,
Ltd. through the sale of 100% of the Asia Pacific shares held by the Company to
Fig Tree Capital in exchange for $10,000. Asia Pacific is the owner of
approximately 69% operating interest in Chasen's restaurant (the Company's
discontinued restaurant operations). In July 2000, management discontinued
funding of Chasen's restaurant. The Company had previously written off all its
restaurant operating assets (which consisted primarily of furniture, fixtures,
restaurant equipment and inventory) as of June 30, 2000.
ILIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2001
4. GAIN ON DISPOSAL OF SUBSIDIARY (CONTINUED)
The sale of Asia Pacific resulted in a gain of $1,930,673, which is recorded as
a gain on disposal of discontinued operations. The selling of Asia Pacific will
have no adverse effect to the ongoing operations of the Company.
5. 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.
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 developer of an online entertainment
destination focused on the delivery and distribution of streaming video content
on an on-demand, pay-per-view basis. iLive not only develops its own content
but also help others develop a distribution channel for their content on the
iLive Network. iLive offers video-on-demand, electronic shopping, physical VHS
and DVD distribution and business-to-business content creation and distribution.
Currently, iLive has produced 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 offices 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 the
distribution of content online. iLive consumers will enjoy television
programming with the ability to watch what they want when they want to watch it.
So whether its learing how to cook, be a DJ or watching an old episode of the
Beverly Hillbillies, iLive is bringing consumers a truly unique experience
through video on demand over the Internet.
Results of Operations for the Company - Three Months ended September 30, 2001
Compared to Three Months ended September 20, 2000.
Revenues: Revenues totaled $93,000 for the three months ended September 30,
2001 as compared to no revenue for the three months ended September 30, 2000.
During the period ended September 30, 2001 the Company continued to develop its
business services which consists of film editing and encoding solutions.
Earnings per share totaled $0.08 for the three months ended September 30, 2001
based on 24,343,147 shares outstanding as opposed to $(0.03) net loss for the
three months ended September 30, 2000. The large increase in earnings per share
for this quarter was primarily due to a one-time gain of $1,930,673 resulting
from the disposal of its subsidiary, Asia Pacific, Inc.
Cost of Sales: Cost of Sales totaled $10,829 for the three months ended
September 30, 2001. The Company did not generate revenue for the three months
ended September 30, 2000 and therefore did not incur any Cost of Sales. As a
percentage of total revenue, Cost of Sales was 11.6% for the period ended
September 30, 2001 resulting in gross margins of 88.4%. The Cost of Sales will
vary significantly from project to project but the Company aims to consistently
challenge and keep the Cost of Sales to a minimum.
General and Administrative Expenses: General and Administrative expenses totaled
$32,042 (34.5% of revenues) and $270,412 for the three month periods ended
September 30 2001 and September 30, 2000 respectively. The large decrease in
G&A was due to the downsizing of operations as the Company continues to refine
its focus of its plan of operations.
Results of Operations for the Company - Nine Months ended September 30, 2001
Compared to Nine Months ended September 30, 2000.
Revenues: Revenues totaled $141,000 for the nine months ended September 30,
2001 as compared to no revenue for the nine months ended September 30, 2000.
During the period ended September 30, 2001 the Company continued to develop its
business services which consists of film editing and encoding solutions.
Earnings per share totaled $0.07 for the nine months ended September 30, 2001
based on 24,343,147 shares outstanding as opposed to $(0.14) net loss for the
nine months ended September 30, 2000. The large increase in earnings per share
for this quarter was primarily due to a one-time gain of $1,930,673 resulting
from the disposal of its subsidiary, Asia Pacific, Inc.
Cost of Sales: Cost of Sales totaled $15,779 for the nine months ended
September 30, 2001. The Company did not generate revenue for the nine months
ended September 30, 2000 and therefore did not incur a Cost of Sales. As a
percentage of total revenue, Cost of Sales was 11.2% for the period ended
September 30, 2001 resulting in gross margins of 88.8% gross margins. The Cost
of Sales will vary significantly from project to project but the Company aims to
consistently challenge and keep the Cost of Sales to a minimum.
General and Administrative Expenses: General and Administrative expenses
totaled $271,115 and $923,190 for the nine month periods ended September 30,
2001 and September 30, 2000 respectively. The large decrease in G&A was due to
the downsizing of operations as the Company continues to refine its focus of its
plan of operations.
Liquidity and 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 any time given
15 days 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 September 30, 2001 the
Company has borrowed $935,155, of which $761,250 was converted to common stock
during the quarter ended June 30, 2001.
Capital Expenditures: The Company expended $9,000 in the three months ended
September 30, 2001 on the development and hosting of the Company's website.
DISCONTINUED OPERATIONS
Gain on disposal of subsidiary.
In the period ended September 30, 2001 the company disposed of Asia Pacifc Co.,
Ltd. through the sale of 100% of the Asia Pacific shares held by the Company to
Fig Tree Capital in exchange for $10,000. Asia Pacific is the owner of
approximately 69% operating interest in Chasen's restaurant (the Company's
discontinued restaurant operations). As previously discussed in prior reports,
in July 2000, management discontinued funding of Chasen's restaurant. The
Company had previously written off all its restaurant operating assets (which
consisted primarily of furniture, fixtures, restaurant equipment and inventory)
as of June 30, 2000.
Selling its ownership in Asia Pacific resulted in a one time gain of $1,930,673
which is recorded as a discontinued operation. The divesture of Asia Pacific
will have no adverse effect to the ongoing operations of the Company.
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.
Currently, the Company is involved in the following actions which may have a
material impact on the Company's operations.
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.
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.
ITEM 2 - CHANGES IN SECURITIES
On October 1, 2001 the Company issued 100,000 shares of its "restricted" (as
that term is defined by the Securities Act of 1933) common stock and options to
purchase up to 150,000 shares of common stock at $0.25 per share, to an
unaffiliated entity in exchange for services rendered in the development of its
website. The issuance was an isolated transaction involving a public offering
pursuant to Section 4 (2) of the Securities Act of 1933.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the security holders for a vote during the period
covered by this report
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
2.1 Reorganization and Stock Purchase Agreement
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the period covered by this report.
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 Henricks
----------------------------------
Scott Henricks
President, CEO, & CFO
Dated: November 14, 2001