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 February 28, 2006
|_| 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
- ------------------------------------------------- ----------
(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 |_|
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes |_| No |X|
The issuer had 12,371,886 common shares outstanding as of February 28,
2006
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 February 28, 2006 (Unaudited) 1.
Consolidated Statements of Operations for the three months
ended February 28, 2006 and 2005 (Unaudited) 3.
Consolidated Statements of Operations for the nine months ended
February 28, 2006 and 2005 (Unaudited) 4.
Consolidated Statements of Cash Flows for the nine months ended
February 28, 2006 and 2005 (Unaudited) 5.
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. 10.
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 February 28, 2006
(unaudited)
ASSETS
Current Assets
Cash $ 82,876
Marketable securities, at fair value 900
Accounts receivable, net 6,875
Prepaid expenses and deposits 35,395
------------
Total Current Assets 126,046
Property and Equipment, net 19,458
Other Assets
Goodwill 225,943
Other Intangible Assets, net 55,948
------------
Total Assets $ 427,395
============
1
HOMELIFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheet (Continued)
At February 28, 2006
(unaudited)
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Lines of credit $ 59,384
Accounts payable 184,904
Reserve for warranty 41,953
Note payable 4,576
Deferred revenue 52,847
------------
Total Current Liabilities 343,664
Other Liabilities
Note Payable 14,770
Due to Stockholder 162,132
------------
Total Liabilities 520,566
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 (4,887,842)
------------
Total Stockholders' Deficit (114,014)
------------
Total Liabilities and Stockholders' Deficit $ 427,395
============
2
HOMELIFE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three months ended February 28, 2006 and 2005
(unaudited)
2006 2005
------------ ------------
REVENUE
Royalty and franchise fees $ 105,265 $ 130,283
Warranty fees 5,396 21,441
Brokerage Income 16,050 --
Other income 1,386 3,902
------------ ------------
Total Revenue 128,097 155,626
DIRECT COSTS 21,069 25,811
------------ ------------
107,028 129,815
------------ ------------
EXPENSES
Salaries and fringe benefits 44,696 53,857
General and administrative 59,752 74,543
Occupancy 11,925 10,295
Financial 6,503 3,332
Depreciation 15,000 15,900
Amortization 12,963 12,963
------------ ------------
Total Expenses 150,839 170,890
------------ ------------
NET LOSS (43,811) (41,075)
BASIC AND FULLY DILUTED LOSS
PER COMMON SHARE $ (0.00) $ (0.00)
============ ============
WEIGHTED-AVERAGE NUMBER OF
COMMON SHARES 12,371,886 12,371,886
3
HOMELIFE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Nine months ended February 28, 2006 and 2005
(unaudited)
2006 2005
------------ ------------
REVENUE
Royalty and franchise fees $ 350,217 $ 349,061
Warranty fees 68,648 83,155
Brokerage Income 53,601 8,355
Other income 16,495 10,110
------------ ------------
Total Revenue 488,961 450,681
DIRECT COSTS 118,604 69,518
------------ ------------
370,357 381,163
------------ ------------
EXPENSES
Salaries and fringe benefits 159,437 154,160
General and administrative 216,582 197,064
Occupancy 35,016 38,179
Financial 14,297 5,648
Depreciation 45,000 47,700
Amortization 38,889 38,889
------------ ------------
Total Expenses 509,221 481,640
------------ ------------
NET LOSS (138,864) (100,477)
============ ============
BASIC AND FULLY DILUTED LOSS
PER COMMON SHARE $ (0.01) $ (0.01)
============ ============
WEIGHTED-AVERAGE NUMBER OF
COMMON SHARES 12,371,886 12,371,886
4
HOMELIFE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine months ended February 28, 2006 and 2005
(unaudited)
2006 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (138,864) $ (100,477)
Adjustments to reconcile net loss to net
cash from operating activities
Depreciation 45,000 47,701
Amortization 38,889 38,889
Changes in assets and liabilities
Accounts receivable 7,471 (2,693)
Prepaid expenses and deposits (360) (635)
Accounts payable 24,200 (45,138)
Reserve for warranty (10,000) --
Deferred revenue 10,202 --
Due to stockholder 33,148 12,589
------------ ------------
Net Cash Flows from Operating Activities 9,686 (49,764)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES -- --
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from lines of credit, net 748 2,014
Proceeds from note payable -- 25,000
Repayments on note payable (2,918) (1,708)
------------ ------------
Net Cash Flows from Financing Activities (2,170) 25,306
NET CHANGE IN CASH 7,516 (24,458)
Cash, beginning of period 75,360 112,974
------------ ------------
CASH, END OF PERIOD $ 82,876 $ 88,516
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Interest paid $ 3,872 $ 3,058
============ ============
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 February 28, 2006, 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:
o attempting to raise additional funding through private and public
offering,
o investigating and pursuing potential mergers/acquisitions,
o the core business of franchising nationwide
o 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 year 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 February 28, 2006 (unaudited) compared to the Three Months
Ended February 28, 2005 (unaudited).
Revenues. The Company generated gross sales of $128,097 for the quarter
ended February 28, 2006 compared to gross sales of $155,626 for the quarter
ended February 28, 2005. Revenue by business segment is shown below:
February 28, 2006 February 28, 2005
Amount % Amount %
-------- -------- -------- --------
Royalty & franchise fees $105,265 82 $130,283 84
Home warranty sales 5,396 4 21,441 14
Brokerage income 16,050 13 -- --
Other 1,386 1 3,902 2
-------- -------- -------- --------
TOTAL $128,097 100 $155,626 100
======== ======== ======== ========
7
Royalty fees & franchise fees were lower in the current quarter due to lower
royalty fees in California & Michigan. Home warranty fees were lower in the
current quarter compared to the prior year due to fewer contracts written and
the slow down of the real estate market in Michigan. Brokerage income is higher
in the current period due to the closing of real estate brokerage transactions
through the California office. Other income is comparable to the third quarter
of the prior fiscal year.
Direct Costs. Direct costs on total revenue in the current quarter are
comparable the same period in the prior year.
Salaries and fringe benefits. Salaries and fringe benefits decreased from
$53,857 for the three months ended February 28, 2005 to $39,696 for the three
months ended February 28, 2006. This decrease is a net result of two employees
that left the company during the current fiscal year and have not been replaced.
General and administrative. General and administrative costs decreased
$9,801 from the quarter ended February 28, 2005. The decrease was primarily due
to less professional fees and office expense during the current quarter.
Occupancy. Occupancy costs were comparable for the similar periods.
Financial. Financial costs were higher for the quarter ended February 28,
2006 due to the accrued interest on the higher average outstanding amount due to
shareholder.
Depreciation. Depreciation of fixed assets was comparable for both
periods.
Amortization. Amortization of intangibles was comparable for both periods.
Nine Months Ended February 28, 2006 (unaudited) compared to the Nine Months
Ended February 28, 2005 (unaudited).
Revenues. The Company generated gross sales of $488,961 for the nine
months ended February 28, 2006 compared to gross sales of $450,681 for the nine
months ended February 28, 2005. Revenue by business segment is shown below:
February 28, 2006 February 28, 2005
Amount % Amount %
-------- -------- -------- --------
Royalty & franchise fees $350,217 72 $349,061 78
Home warranty sales 68,648 14 83,155 18
Brokerage income 53,601 11 8,355 2
Other 16,495 3 10,110 2
-------- -------- -------- --------
TOTAL $488,961 100 $450,681 100
======== ======== ======== ========
The company showed a growth in revenue of $38,280 or 8% over the nine months
ended February 28, 2005. Royalty fees & franchise fees were comparable during
this period. Home warranty fees were lower in the current nine months compared
to the prior year due to fewer contracts written. Brokerage income is higher in
the current period as a result of more real estate brokerage transactions
through 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 24% and 15% for
the nine months ended February 28, 2006 and 2005, 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 is comparable
for the two periods.
General and administrative. General and administrative costs increased
$19,518 from the period ended February 28, 2006. The increase was primarily due
to increased promotion and advertising expenses in the current year.
Additionally, professional fees were higher in the current year first quarter
than in the prior year.
Occupancy. Occupancy costs were lower for the nine months of the year
compared to the prior year as a result of the California corporate office move.
Financial. Financial costs were higher for the nine months ended February
28, 2006 due to the accrued interest on the higher average outstanding 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 $217,618 as of February 28, 2006. 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 of America. 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 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 a 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.
Item 2. Changes in Securities and use of proceeds.
None.
10
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: April 19, 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: April 19, 2006
-------------------------------------------- --------------
Chief Executive Officer, President, Director
12