UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
|X| Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended November 30, 2005
|_| Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act; For the transition period from _________ to __________
Commission File Number #000-1024048
HOMELIFE, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 33-0680443
- ------------------------------ ---------------------------------
(State or other jurisdiction of (I.R.S. Employer incorporation or
organization) Identification No.)
1503 South Coast Drive, Suite 204, Costa Mesa, CA 92626
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(714) 241-3030
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|
The issuer had 12,371,886 common shares outstanding as of November
30, 2005
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|
HOMELIFE, INC.
INDEX
PAGE NO.
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PART I - FINANCIAL INFORMATION 1.
Item 1. Financial Statements 1.
Consolidated Balance Sheet at November 30, 2005 (Unaudited) 1.
Consolidated Statements of Operations for the three months ended 3.
November 30, 2005 and 2004 (Unaudited)
Consolidated Statements of Operations for the six months ended 4.
November 30, 2005 and 2004 (Unaudited)
Consolidated Statements of Cash Flows for the six months ended 5.
November 30, 2005 and 2004 (Unaudited)
Notes to Consolidated Financial Statements 6.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation. 7.
Item 3. Controls and Procedures. 10.
PART II - OTHER INFORMATION 10.
Item 1. Legal Proceedings. 10.
Item 2. Changes in Securities and Use of Proceeds. 11.
Item 3. Defaults Upon Senior Securities. 11.
Item 4. Submission of Matters to a Vote of Security Holders. 11.
Item 5. Other Information. 11.
Item 6. Exhibits and Reports on Form 8-K. 11.
(a) Exhibits
(b) Reports on Form 8-K
Signatures. 12.
PART I - FINANCIAL INFORMATION
HOMELIFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
At November 30, 2005
(unaudited)
ASSETS
Current Assets
Cash $ 87,003
Marketable securities, at fair value 900
Accounts receivable, net 1,986
Prepaid expenses and deposits 35,286
--------
Total Current Assets 125,175
Property and Equipment, net 34,458
Other Assets
Goodwill 225,943
Other Intangible Assets, net 68,911
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Total Assets $454,487
========
1
HOMELIFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheet (Continued)
At November 30, 2005
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Lines of credit $ 60,833
Accounts payable 183,997
Reserve for warranty 51,953
Note payable 4,576
Deferred revenue 42,645
-----------
Total Current Liabilities 344,004
Other Liabilities
Note Payable 15,886
Due to Stockholder 143,957
-----------
Total Liabilities 503,847
Minority Interest 20,843
Stockholders' Deficit
Capital Stock 1,037,372
Additional Paid in Capital 3,731,741
Accumulated Other Comprehensive Income 4,715
Accumulated Deficit (4,844,031)
-----------
Total Stockholders' Deficit (70,203)
Total Liabilities and Stockholders' Deficit $ 454,487
===========
2
HOMELIFE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three months ended November 30, 2005 and 2004
(unaudited)
2005 2004
------------ ------------
REVENUE
Royalty and franchise fees $ 94,650 $ 100,819
Warranty fees 32,781 27,534
Brokerage Income 18,551 --
Other income 3,330 3,159
------------ ------------
Total Revenue 149,312 131,512
DIRECT COSTS 33,946 13,850
------------ ------------
115,366 117,662
------------ ------------
EXPENSES
Salaries and fringe benefits 52,346 44,251
General and administrative 64,008 82,259
Occupancy 11,625 12,987
Financial 3,483 1,216
Depreciation 15,000 15,900
Amortization 12,963 12,963
------------ ------------
Total Expenses 159,425 169,576
------------ ------------
NET LOSS (44,059) (51,914)
BASIC AND FULLY DILUTED LOSS $ (0.00) $ (0.00)
PER COMMON SHARE
============ ============
WEIGHTED-AVERAGE NUMBER OF 12,371,886 12,371,886
COMMON SHARES
3
HOMELIFE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Six months ended November 30, 2005 and 2004
(unaudited)
2005 2004
------------ ------------
REVENUE
Royalty and franchise fees $ 244,952 $ 218,778
Warranty fees 63,252 61,714
Brokerage Income 37,551 8,355
Other income 15,109 6,208
------------ ------------
Total Revenue 360,864 295,055
DIRECT COSTS 97,535 43,707
------------ ------------
263,329 251,348
------------ ------------
EXPENSES
Salaries and fringe benefits 114,741 100,303
General and administrative 156,830 122,520
Occupancy 23,091 27,884
Financial 7,794 2,316
Depreciation 30,000 31,801
Amortization 25,926 25,926
------------ ------------
Total Expenses 358,382 310,750
------------ ------------
NET LOSS (95,053) (59,402)
BASIC AND FULLY DILUTED LOSS $ (0.01) $ (0.00)
PER COMMON SHARE
============ ============
WEIGHTED-AVERAGE NUMBER OF 12,371,886 12,371,886
4
HOMELIFE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six months ended November 30, 2005 and 2004
(unaudited)
2005 2004
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (95,053) $ (59,402)
Adjustments to reconcile net loss to net cash from operating
activities
Depreciation 30,000 31,801
Amortization 25,926 25,926
Changes in assets and liabilities
Accounts receivable 12,360 (425)
Prepaid expenses and deposits (251) (509)
Accounts payable 23,293 (41,348)
Due to stockholder 14,973 7,589
Net Cash Flows from Operating Activities 11,248 (36,368)
CASH FLOWS FROM INVESTING ACTIVITIES -- --
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from (repayments on) lines of credit, net 2,545 3,667
Proceeds from note payable -- 25,000
Repayments on note payable (2,150) (670)
Net Cash Flows from Financing Activities 395 27,997
NET CHANGE IN CASH 11,643 (8,371)
Cash, beginning of period 75,360 112,974
CASH, END OF PERIOD $ 87,003 $ 104,603
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Interest paid $ 2,495 $ 2,035
Income taxes paid $ -- $ --
NON-CASH INVESTING AND FINANCING ACTIVITIES
Payment of litigation settlement by stockholder -- $ 85,000
========= =========
5
HOMELIFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. MANAGEMENT'S PLAN AND FUTURE OPERATIONS
At November 30, 2005, adverse principal conditions and events are
prevalent that require necessary action by management to enable the
company to return to profitability and to reverse these adverse conditions
and events. These conditions and events include recurring operating
losses, working capital deficiencies, and adverse key financial ratios.
Management's plans to mitigate these adverse conditions and events
include:
a.) During the prior fiscal year, the company settled certain
lawsuits regarding the former Calgary operations and the current Michigan
operations which will further reduce legal fees and management
involvement.
b)The company is currently focusing on:
- attempting to raise additional funding through private and
public offering,
- investigating and pursuing potential mergers/acquisitions,
- the core business of franchising nationwide
- the company is making efforts to reduce unnecessary operating
expenses on a monthly basis
The accompanying consolidated financial statements do not include any
adjustments to the recoverability and classification of recorded asset
amounts and classification of liabilities that might be necessary in the
event that the Company is unable to continue as a going concern.
Note 2. BASIS OF CONSOLIDATED FINANCIAL STATEMENTS PRESENTATION
The condensed consolidated financial statements of HomeLife, Inc. and
Subsidiaries (the "Company") included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Certain information and
footnote disclosures normally included in consolidated financial
statements prepared in conjunction with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. These condensed
consolidated financial statements should be read in conjunction with the
annual audited consolidated financial statements and the notes thereto
included in the Company's Form 10-KSB Annual Report, and other reports
filed with the SEC.
The accompanying unaudited interim consolidated financial statements
reflect all adjustments of a normal and recurring nature which are, in the
opinion of management, necessary to present fairly the financial position,
results of operations and cash flows of the Company for the interim
periods presented. The results of operations for these periods are not
necessarily comparable to, or indicative of, results of any other interim
period of or for the fiscal year taken as a whole. Certain financial
information that is not required for interim financial reporting purposes
has been omitted.
Reclassifications
Certain amounts in the prior consolidated financial statements have been
reclassified to conform with the current year presentation. The
reclassifications made to the prior year have no impact on the net income
(loss), or overall presentation of the consolidated financial statements.
6
Note 3. LETTER OF INTENT
The Board of Directors of Homelife, Inc. had signed a letter of intent
dated August 4, 2005 with R Capital Partners, Inc. for the sale of
majority control of Homelife, Inc. and the subsequent acquisition by
Homelife of 100% of the issued and outstanding shares owned by
shareholders of Price Oil, Inc
This agreement was terminated mutually by both parties on October 31,
2005.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The Company has experienced growth primarily through its acquisitions of
and combinations with various other companies. This includes the acquisition in
August 1996 of the Keim Group of Companies and MaxAmerica Home Warranty Company
(Michigan) adding 60 real estate offices and a home warranty company in
Michigan. In 1997, the company purchased certain assets of S & S Acquisition
Corp. providing the company with Red Carpet Real Estate Services and National
Real Estate Services adding 58 real estate offices. The acquisition of the real
estate computer technology of House by Mouse and Virtual Assistant provided the
Company with the ability to enhance its Internet communication services to its
franchises. In July 1997, the Company acquired the licensing agreements,
trademarks and franchise offices of Network Real Estate, Inc. This acquisition
provided the Company with an additional 12 offices in Northern California and
access to the "high-end" luxury division of "International Estates". In February
1998, the Company acquired Builders Realty (Calgary) Ltd. providing access to
the Alberta, Canada market in both retail real estate and mortgage loans.
Certain assets of Builders Realty (Calgary) were sold during fiscal year 2002.
On September 15, 1998, the Company purchased the stock of the investment banking
firm of Aspen, Benson and May, LLC for common stock.
From time to time, the Company has entered into strategic alliances with
various companies in order to explore the cross-marketing of their services to
customers of the Company or its franchises. To date, these strategic alliances
have not included any funding agreements or other liabilities on the part of the
Company.
The following is management's discussion and analysis of HomeLife's
financial condition and results of operations. Detailed information is contained
in the financial statements included with this document. This section contains
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions. The
cautionary statements made in this document should be read as being applicable
to all related forward-looking statements wherever they appear in this document.
Three Months Ended November 30, 2005 (unaudited) compared to the Three Months
Ended November 30, 2004 (unaudited).
Revenues. The Company generated gross sales of $149,312 for the quarter
ended November 30, 2005 compared to gross sales of $131,512 for the quarter
ended November 30, 2004. Revenue by business segment is shown below:
November 30, 2005 November 30, 2004
Amount % Amount %
---------- ---------- ---------- ----------
Royalty & franchise fees $ 94,650 64 $ 100,819 77
Home warranty sales 32,781 22 27,534 21
Brokerage income 18,551 12 -- --
Other 3,330 2 3,159 2
---------- ---------- ---------- ----------
TOTAL $ 149,312 100 $ 131,512 100
========== ========== ========== ==========
7
Royalty fees & franchise fees were lower in the current quarter due to lower
royalty fees in California. Home warranty fees were higher in current quarter
compared to the prior year due to more contracts written. Brokerage income is
higher in the current period due to the closing of real estate brokerage
transactions from the California office. Other income is comparable to the
second quarter of the prior fiscal year.
Direct Costs. Direct costs in the current quarter have increased over the
same period in the prior year due to the addition of commissioned sales
managers. The Company is paying a commission on franchise and brokerage sales
which had not happened in previous years.
Salaries and fringe benefits. Salaries and fringe benefits increased from
$44,251 for the three months ended November 30, 2004 to $52,346 for the three
months ended November 30, 2005. This increase is a net result of a two employees
hired in the Michigan office during the last quarter of the prior year.
General and administrative. General and administrative costs decreased
$18,251 from the quarter ended November 30, 2004. The decrease was primarily due
to less professional fees and promotional expense during the current quarter.
Occupancy. Occupancy costs were lower for the current quarter compared to
the prior year quarter as a result of the California corporate office move.
Financial. Financial costs were higher for the quarter ended November 30,
2005 due to the accrued interest on the amount due to shareholder.
Depreciation. Depreciation of fixed assets was comparable for both
periods.
Amortization. Amortization of intangibles was comparable for both periods.
Six Months Ended November 30, 2005 (unaudited) compared to the Six Months Ended
November 30, 2004 (unaudited).
Revenues. The Company generated gross sales of $360,864 for the six months
ended November 30, 2005 compared to gross sales of $295,055 for the six months
ended November 30, 2004. Revenue by business segment is shown below:
November 30, 2005 November 30, 2004
Amount % Amount %
---------- ---------- ---------- ----------
Royalty & franchise fees $ 244,952 68 $ 218,778 74
Home warranty sales 63,252 18 61,714 21
Brokerage income 37,551 10 8,355 3
Other 15,109 4 6,208 2
---------- ---------- ---------- ----------
TOTAL $ 360,864 100 $ 295,055 100
========== ========== ========== ==========
The company showed a growth in revenue of $65,809 or 22% over the six months
ended November 30, 2004. Royalty fees & franchise fees were higher in the
current first half of the year due to new franchises obtained in California.
Home warranty fees were slightly higher in current six months compared to the
prior year due to more contracts written. Brokerage income is higher in the
current period as a result of more real estate brokerage transactions from the
California office. Other income is higher in the current year due to more
relocation fees from the Michigan operations than in the prior year.
Direct Costs. Direct costs as a percentage of revenue were 27% and 15% for
the six months ended November 30, 2005 and 2004, respectively. This increase in
direct costs results from the addition of commissioned sales managers. The
Company is paying a commission on franchise and brokerage sales which had not
happened in previous years.
8
Salaries and fringe benefits. Salaries and fringe benefits increased by
$14,438 or 14% over the same period in the prior year. This increase is a net
result of two employees hired in the Michigan office during the last quarter of
the prior year.
General and administrative. General and administrative costs increased
$34,310 from the period ended November 30, 2004. The increase was primarily due
to increased printing, convention and office expenditures in the first quarter
of the current year. Additionally, professional fees were higher in the current
first quarter than in the prior year.
Occupancy. Occupancy costs were lower for the first half of the year
compared to the prior year as a result of the California corporate office move.
Financial. Financial costs were higher for the six months ended November
30, 2005 due to the accrued interest on the amount due to shareholder.
Depreciation. Depreciation of fixed assets was comparable for both
periods.
Amortization. Amortization of intangibles was comparable for both periods.
Liquidity and capital resources. The Company has lines of credit with two banks
with available credit of $95,000 and a term loan of $25,000. The capital
requirements of the Company are for operating expenses and to service and use of
its lines of credit. The Company has recorded operating losses in the prior two
years. These losses are primarily due to amortization and depreciation and legal
fees incurred in defense of litigation actions. The company does not have any
derivative instruments or hedging activities, therefore, the company believes
that SFAS No. 133 will have no material impact on the company's financial
statements or notes thereto.
The company has experienced recurring operating losses and has a working capital
deficiency of $218,829 as of November 30, 2005. Management has initiated changes
in operational procedures, reduced staff and expenses and focused its efforts on
its core business. Management believes that, despite the losses incurred and the
deterioration in stockholders' equity, it has developed a plan, which, if
successfully implemented, can improve the operating results and financial
condition of the company. Furthermore, the company continues its attempt to
raise additional financings through private and public offerings.
Application of Critical Accounting Policies. The Company's financial statements
and accompanying notes are prepared in accordance with generally accepted
accounting principles in the United States. Preparing financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenue, and expenses. These estimates and
assumptions are affected by management's application of accounting policies.
Critical accounting policies for HomeLife include revenue recognition, goodwill
and accounting for income taxes.
HomeLife recognizes revenue in accordance with Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements". The Company recognizes
revenue when it is realized or realizable and earned. Income from the sale of
franchises is recognized over a 5-year period. Master franchise agreement fees
are recognized over 10 years. Royalty income stemming from the gross commissions
on the sales of real estate by the franchise offices is recognized at the date
of receipt; this is due to the complexity of attempting to forecast the actual
closing date of the properties. Warranty income is recognized over the term of
the contract which is usually 12 months; anticipated obligations which represent
incurred but not reported losses (IBNR) under these warranties have been
recorded as reserve for warranty and are based on past loss experience. Real
estate brokerage income is recognized at the close of escrow. Loan fees are
recognized as income when the loan is closed and funded at the close of escrow.
Revenue received or receivable, from the sale of franchises, master franchises
and warranties, which is not recognized as income is recorded on the balance
sheet as deferred revenue.
9
The company accounts for income tax under the provisions of Statement of
Financial Accounting Standards No. 109, which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been included in the consolidated financial statements or tax returns.
Deferred income taxes are provided using the liability method. Under the
liability method, deferred income taxes are recognized for all significant
temporary differences between the tax and financial statement bases of assets
and liabilities. In addition, the company is required to record all deferred tax
assets, including future tax benefits of capital losses carried forward, and to
record a "valuation allowance" for any deferred tax assets where it is more
likely than not that the asset will not be realized.
Item 3. Controls and Procedures
Based on the evaluation of the Company's disclosure controls and procedures by
Andrew Cimerman, the Company's Chief Executive Officer and Marie M. May, the
Company's Chief Financial Officer, as of a date within 45 days of the filing
date of this quarterly report, such officers have concluded that the Company's
disclosure controls and procedures are effective in ensuring that information
required to be disclosed by the Company in the reports that it files or submits
under the Securities and Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported, within the time period specified by the
Securities and Exchange Commission's rules and forms.
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The company was involved in a lawsuit with the sellers of Builders Realty
(Calgary) Ltd. to reduce the purchase price paid for Builders Realty
(Calgary) Ltd. The sellers of Builders Realty (Calgary) Ltd. had filed a
counter lawsuit for breach of contract.
In connection with the above lawsuit, the company filed a claim against
the solicitors who were responsible for setting up the original
transaction between the company and the sellers of Builders Realty
(Calgary) Ltd.
In addition to the above lawsuits, the sellers of Builders Realty
(Calgary) Ltd., through another business entity, filed a lawsuit against
Builders Realty (Calgary) Ltd. for unpaid rents and commissions and
damages incurred at rental offices.
On July 31, 2003, several realtors formerly employed by Builders Realty
(Calgary) Ltd. filed a lawsuit against the company seeking payment of
unpaid commissions. The Company is holding these commissions in a trust
fund as required by a court order.
On July 19, 2004, all of the above mentioned lawsuits were settled at no
additional expense to the Company.
The company was involved in a lawsuit with a franchisee of Red Carpet
Keim, a wholly-owned subsidiary of the company. A claim in the amount of
$124,800 was filed on September 13, 2002 as a result of the deterioration
in value of the individual's stock value of HomeLife, Inc. Additionally,
the company has filed a counter claim against the franchisee for
non-payment of royalty and franchise fees.
This lawsuit was settled on August 20, 2004 in the amount of $85,000. This
amount was paid by the majority shareholder and has properly been
reflected in the financial statements.
10
Item 2. Changes in Securities and use of proceeds.
None.
Item 3. Defaults upon senior securities.
None.
Item 4. Submission of matters to a vote of security holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
31 Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K:
None.
11
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") the Registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
HOMELIFE, INC.
Registrant
By: /s/ Andrew Cimerman Date: January 17, 2006
-------------------------------------------- ------------------
Chief Executive Officer, President, Director
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ Andrew Cimerman Date: January 17, 2006
-------------------------------------------- ------------------
Chief Executive Officer, President, Director
12