SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _____ to ______
Commission file number 5-43156
IRV, INC.
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(Exact Name of Registrant as Specified in its Charter)
Colorado 84-1153522
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(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification number
1000-885 Dunsmuir Street, Vancouver, British Columbia V6C 1N5
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(Address of Principal Offices) (Zip Code)
Registrant's telephone number, including area code: (604) 689-8770
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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 last 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 [ ]
As of August 14, 2002, the Registrant had 99,999,903 shares of its Common Stock
outstanding.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
INDEX
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE
Consolidated Balance Sheets as of June 30, 2002 and
March 31, 2002 3
Consolidated Statements of Operations for the three months
ended June 30, 2002 and 2001 4
Consolidated Statement of Cash Flows for the three months
ended June 30, 2002 and 2001 5
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview 8
Results of Operations 8
Liquidity and Capital Resources 9
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 10
ITEM 2. CHANGES IN SECURITIES 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
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared by IRV,
Inc. (the Company) without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to such
SEC rules and regulations. In the opinion of the Company the accompanying
statements contain all adjustments necessary to present fairly the financial
position of the Company as of June 30, 2002, and its results of operations for
the three-month periods ended June 30, 2002 and 2001 and its cash flows for the
three-month periods ended June 30, 2002 and 2001. The Company's balance sheet as
of March 31, 2002 included herein has been derived from the Company's audited
financial statements as of that date included in the Company's annual report on
Form 10-KSB. The results for these interim periods are not necessarily
indicative of the results for the entire year. The accompanying financial
statements should be read in conjunction with the financial statements and the
notes thereto filed as a part of the Company's annual report on Form 10-KSB.
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IRV, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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AS OF JUNE, 30, 2002 AND MARCH 31, 2002
(IN THOUSANDS, EXCEPT SHARE DATA)
June 30 March 31,
ASSETS 2002 2002
-------- --------
(unaudited)
Current assets:
Cash and cash equivalents $ -- $ --
Total current assets -- --
-------- --------
Other assets: -- --
-------- --------
Total Assets $ -- $ --
-------- --------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Bank Overdraft $ -- $ 3
Accounts payable -- 61
Accounts payable to affiliates -- 26
Accrued liabilities -- --
-------- --------
Total current liabilities -- 90
Commitments and contingencies -- --
Redeemable preferred stock, $.01 par value, nil shares outstanding
Stockholders' deficit:
Common stock - $.001 par value; 100,000,000 shares
authorized; 14,147,903 shares issued and outstanding 14 14
Additional paid-in capital 3,919 3,784
Accumulated deficit (3,933) (3,888)
-------- --------
-- (90)
-------- --------
Total liabilities and stockholders' deficit $ -- $ --
-------- --------
SEE ACCOMPANYING NOTES
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IRV, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
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FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)
THREE MONTHS ENDED
June 30
2002 2001
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Revenues:
Operating Expenses:
Income from Continuing Operations -- --
Income from Discontinued Operations (45,591) (31,399)
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Net loss $ (45,591) $ (31,399)
============= =============
Earnings (loss) per common share - basic and diluted: $ 0.00 $ 0.01
Weighted average shares outstanding - basic and diluted 14,147,903 8,435,756
SEE ACCOMPANYING NOTES.
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IRV, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)
THREE MONTHS ENDED
June 30
2002 2001
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) (45,591) (31,399)
Adjustments to reconcile net income to net cash
used in operating activities:
Discontinued Operations 45,591 31,399
Changes in operating assets and liabilities:
Net cash used in operating activities -- --
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities -- --
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash used in financing activities -- --
-------- --------
Net decrease in cash and cash equivalents -- --
-------- --------
Cash and cash equivalents, beginning -- --
-------- --------
Cash and cash equivalents, ending -- --
======== ========
SEE ACCOMPANYING NOTES.
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IRV, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED STATEMENTS
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1. ORGANIZATION and SIGNIFICANT ACCOUNTING POLICIES
The Consolidated Financial Statements for the three months ended June 30, 2002
and 2001 have been prepared in accordance with the accounting policies described
in the Company's annual report on Form 10-KSB. The preparation of financial
statements requires the Company's management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Management believes the statements include all adjustments of a normal recurring
nature necessary to present fairly the results of operations for the interim
periods.
On March 25, 2002, the Company entered into an Agreement and Plan of
Reorganization (the "Plan") with Scarab Systems, Inc. ("Scarab") and certain
shareholders of Scarab, which closed on July 16, 2002. Under the terms of the
Plan, the Company formed a new wholly-owned subsidiary, Real Asset Management,
Ltd. ("RAM") and transferred all of iRV's assets to it. RAM has guaranteed the
then outstanding liabilities of the Company and agreed to indemnify the Company
for such liabilities.
As part of that strategy, iRV's two other subsidiaries, iRV.com, Inc. and iRV
Dealerships, Inc., were both transferred to RAM together with all pre-existing
obligations and liabilities. iRV then declared a dividend of all of its shares
of RAM. The record date for the spin-off distribution of its interest in RAM was
June 25, 2002. When paid, the spin-off dividend will result in the distribution
of one share of RAM for every 10 shares of iRV, Inc. owned by iRV's shareholders
as of the record date. Payment of the spin-off dividend is contingent upon the
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filing of a registration statement with the Securities and Exchange Commission
and the Commission's declaring that registration statement effective. The
Company expects the registration of the spin-off to be completed within three to
five months of the date of this report.
2. ACQUISITION OF SCARAB SYSTEMS
Under the terms of the Plan, on closing, the Company acquired all issued and
outstanding shares of Scarab by issuing ten common shares of the capital stock
of the Company for each issued and outstanding share in the capital stock of
Scarab. Also under the terms of the Plan, the existing directors and officers of
the Company resigned and appointed persons nominated by Scarab in their stead.
Scarab successfully raised $235,000 of the $400,000 private placement which was
a condition to closing. The Company waived the condition in respect of the
remainder of the private placement.
The Company hereby incorporates by reference in this statement the Pro Forma
Financial Information relating to the acquisition of Scarab Systems, Inc.
contained in Item 7 of the amended Form 8-K filed by the Company on August 8,
2002.
3. DISCONTINUED OPERATIONS
On June 25, 2002, the Company transferred all its assets to RAM and the Company
discontinued operations. The Company's consolidated statements of operations and
cash flows accordingly show operations as nil for the three months ended June
30, 2002 and 2001.
On June 25, 2002, the Company had outstanding debts and liabilities of $135,000.
RAM guaranteed the payment of these outstanding debts and liabilities, and
further agreed to indemnify the Company for such debts and liabilities. The
current liabilities of the Company set out in the Consolidated Balance Sheet as
of June 30, 2002, have been reduced to nil to reflect the guarantee and
indemnity by RAM. If RAM breaches its guarantee and indemnity, then the subject
debts and liabilities would again be current liabilities of the Company, and the
Company would have a corresponding claim against RAM.
4. EARNINGS PER SHARE
Basic income or loss per share (Basic EPS) represents the net income or loss
available to common stockholders divided by the weighted average number of
common shares outstanding during the period. Diluted income or loss per share
(Diluted EPS) reflects the potential dilution that could occur if derivative
instruments to issue common stock (e.g. options, warrants, or convertible debt)
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were exercised or converted into common stock. After conversion or exercise,
such instruments would share in the income or loss of the entity.
The Company's operating history of losses has resulted in an average market
price per common share that is lower than the conversion or exercise prices on
the existing convertible preferred stock, stock options, stock warrants, and
convertible promissory notes. Under these conditions, we assume that these
derivative instruments will not be exercised or converted.
Convertible preferred stock, stock options, stock warrants and convertible
promissory notes are not considered in the calculation for the three months
ended June 30, 2002 and 2001, as the impact of the potential common shares would
be anti-dilutive. Therefore, Diluted EPS equals Basic EPS for those periods.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company operated in the recreational vehicle industry. As of June 25, 2002,
the Company sold all its assets to RAM and ceased all operations. RAM, in turn,
guaranteed all existing debts and liabilities of the Company as of June 25,
2002, and agreed to indemnify the Company for any such debts and liabilities.
On July 16, 2002, the Company acquired Scarab. Scarab provides marketing and
financial services with applications in electronic commerce and transaction
processing in addition to distributing specific technology services. Services
include rechargeable stored value payment and money transfer systems that can be
used for both electronic commerce and point of sale purchases. The Company is
also exploring opportunities related to the convergence of electronic commerce
with technology sectors of the entertainment industry. Any future activity is
contingent upon obtaining the necessary financing. The Company is actively
pursuing debt financing in this regard.
RESULTS OF OPERATIONS
The Company discontinued operations with respect to RV sales on June 25, 2002.
Operations resumed under new management effective upon the acquisition of Scarab
on July 16, 2002.
INCOME TAX
As a result of its previous operations, the Company had a net operating loss
carryover (NOL). Due to such operations being discontinued, a change of
ownership and business plan, and certain limitations and restrictions imposed
under the Tax Reform Act of 1986, the NOL will not be available to offset future
taxable income, if any.
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LIQUIDITY AND CAPITAL RESOURCES
As previously disclosed, the Company has not been able to generate cash flow
from operations in amounts required to meet its capital needs. It has
historically relied upon outside sources of debt and equity financing adequate
to fund its operations.
Effective June 25, 2002, the Company sold all its assets to RAM in exchange for
one share of RAM for every 10 shares of iRV, Inc. owned by iRV's shareholders as
of the date of sale.
On July 16, 2002, the Company acquired all the issued and outstanding shares of
Scarab. As of the date of the acquisition, Scarab had completed a private
placement of $235,000. Scarab does not have any operations and does not earn
revenue.
On August 7, 2002, the Company was granted a license by Merchant Wired Global to
be the sole independent distributor of products and services relating to
electronic payment processing for Internet merchants and financial institutions.
On August 13, 2002, the Company acquired all the issued and outstanding shares
of MarketEdgeDirect ("MED"), a British Columbia company providing a wide range
of marketing products and services. MED realized a net operating profit of
$40,586.71, on gross sales $1,104,648.08 for its fiscal year ended November 30,
2001.
The Company is currently seeking debt and equity financing. There is no
guarantee that the Company will be successful in obtaining such financing.
Other than the foregoing, Management knows of no trends, demands or
uncertainties that are reasonably likely to have an impact on the Company's
liquidity or capital resources.
FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, certain of the matters
discussed in this report are "forward looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. The forward-looking statements
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those reflected in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
competitive pressures, changes in regulatory environment, a general slowdown in
the economy, and other factors which may be disclosed throughout this Form
10-QSB or in the Company's Annual Report on Form 10-KSB. Any forecasts and
projections in this report are "forward-looking statements" and are based on
management's current expectations of the Company's near-term results, based on
current information available pertaining to the Company, including the
aforementioned risk factors; actual results could differ materially. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect only management's opinions. The Company does not have an obligation to
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revise these forward-looking statements to reflect subsequent events or
circumstances. Readers should refer to and carefully review the information
contained in future documents filed with the Securities and Exchange Commission.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 (SFAS 141), BUSINESS COMBINATIONS. SFAS
141 applies to all business combinations initiated after June 30, 2001. The SFAS
141 applies to all business combinations accounted for using the purchase method
for which the date of acquisition is July 1, 2001, or later. The adoption of
SFAS 141 will not have an impact on the Company's financial statements.
In June, 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142 (SFAS 142), GOODWILL AND OTHER INTANGIBLE
ASSETS. The provisions of SFAS 142 are required to be applied starting with
fiscal years beginning after December 15, 2001 with earlier application
permitted for entities with fiscal years beginning after March 15, 2001 provided
that the first interim financial statements have not been previously issued. The
Statement is required to be applied at the beginning of the entity's fiscal year
and to be applied to all goodwill and other intangible assets recognized in its
financial statements to that date. The adoption of SFAS 142 will not have an
impact on the Company's financial statements.
In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143 (SFAS 143), ASSET RETIREMENT OBLIGATIONS.
SFAS 143 establishes accounting standards for recognition and measurement of a
liability for the costs of assets retirement obligations. Under SFAS 143, the
costs of retiring an asset will be recorded as a liability when the retirement
obligation arises, and will be amortized to expense over the life of the asset.
The adoption of SFAS 143 will not have an impact on the Company's financial
statements.
In October, 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144 (SFAS 144), ACCOUNTING FOR THE IMPAIRMENT
OR DISPOSAL OF LONG-LIVED ASSETS. SFAS 144 supersedes SFAS 121, ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF, and
APB Opinion 30, REPORTING THE RESULTS OF OPERATIONS - REPORTING THE EFFECTS OF
DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY
OCCURRING EVENTS AND TRANSACTIONS, for segments of a business to be disposed of.
SFAS 144 is effective for fiscal years beginning after December 15, 2001. The
adoption of SFAS 144 will not have an impact on the Company's financial
statements.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None, except as previously disclosed.
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ITEM 2(a). CHANGES IN SECURITIES
None, except as previously disclosed.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None, except as previously disclosed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None, except as previously disclosed.
ITEM 5. OTHER INFORMATION
None, except as previously disclosed.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company hereby incorporates by reference in this statement
the Audited Financial Statements, Pro Forma Financial
Information and Exhibits contained in Item 7 of the amended
Form 8-K filed by the Company on August 8, 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Quarterly Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
IRV, INC.
Date: August 14, 2002 By: /s/ Thomas E. Mills
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Thomas E. Mills
President & CEO
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