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 December 31, 2002
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition Period from _____________ to _____________
Commission file number 000-19949
iRV, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-1153522
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
100-1255 Pender Street West, Vancouver, British Columbia V6E 2V1
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(Address of principal executive offices)
(604) 688-1075
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(Issuer's telephone number)
1000-885 Dunsmuir Street, Vancouver, British Columbia V6C 1N5
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(Former name, former address and former fiscal year, if
changed since last report)
Check whether the registrant filed all documents and reports required to be
filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [X] No [ ]
As of December 31, 2002, the issuer 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 Sheet as of December 31, 2002 and
2001. 3
Consolidated Statement of Operations for the nine months
ended December 31, 2002 and 2001. 4
Consolidated Statement of Cash Flows for the nine months
ended December 31, 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
ITEM 2. CHANGES IN SECURITIES 11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
PART I -- 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 management of the Company the
accompanying statements contain all adjustments necessary to present fairly the
financial position of the Company as of December 31, 2002, and its results of
operations for the nine month periods ended December 31, 2002 and 2001 and its
cash flows for the nine-month periods ended December 31, 2002 and 2001.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.
IRV, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEET
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AS OF DECEMBER 31, 2002 AND DECEMBER 31, 2001
(in thousands, except share data)
December 31 December 31
ASSETS 2002 2001
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(unaudited)
Current assets:
Cash and cash equivalents $ (24) $ --
Prepaid expenses and deposits $ 13 $ --
Accounts Receivable $ 178 $ --
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Total current assets $ 167 $ --
Fixed Assets $ 10 $ --
Other assets:
Investment in restricted stock $ -- $ 7
Investment in subsidiary $ 337 $ --
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Total other assets $ 337 $ 7
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Total Assets $ 514 $ 7
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 293 $ 33
Deposits $ 1 $ --
Other Current Liabilities $ 17 $ 24
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Total current liabilities $ 311 $ 57
Other Liabilities
Notes and accounts payable to officers $ 3 --
Tax Liabilities $ (32) --
Payroll Liabilities $ 34 --
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Total liabilities $ 316 $ 50
Stockholders' Deficit:
Common stock - $.001 par value;
100,000,000 shares authorized;
99,999,903 shares issued and outstanding $ 100 $ 14
Additional paid-in capital $ 533 $ 3,782
Accumulated deficit $ (335) $ (3,846)
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$ (198) $ (50)
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Total liabilities and stockholders' equity $ 514 $ 7
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SEE ACCOMPANYING NOTES
3
IRV, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENT OF OPERATIONS
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FOR THE THREE MONTHS ENDED DECEMBER 31, 2002 AND 2001
(in thousands, except share data)
(Unaudited)
THREE MONTHS ENDED
December 31
2002 2001
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Revenues:
Sales $ 106 $ --
Cost of Sales 60 --
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Gross Profit 46 --
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Operating Expenses:
General and Administrative 82 187
Income (Loss) from Operations (36) (187)
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Net Income (Loss) (36) (187)
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Earnings (loss) per common share -
basic and diluted: $ (0.001) $ (0.02)
Weighted average shares outstanding -
basic and diluted 99,999,903 10,606,201
SEE ACCOMPANYING NOTES.
4
IRV, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENT OF OPERATIONS
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FOR THE NINE MONTHS ENDED DECEMBER 31, 2002 AND 2001
(in thousands, except share data)
(Unaudited)
NINE MONTHS ENDED
December 31
2002 2001
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Revenues:
Sales $ 483 $ --
Cost of Sales 324 --
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Gross Profit 159 --
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Operating Expenses:
General and Administrative 317 251
Income (Loss) from Operations (158) (251)
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Other Income (Expense):
Interest Expense -- (9)
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Income (Loss) from Continuing Operations (158) (260)
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Discontinued Operations -- (21)
Net Income (Loss) (158) (281)
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Earnings (loss) per common share -
basic and diluted: $ (0.002) $ (0.03)
Weighted average shares outstanding -
basic and diluted 99,999,903 9,159,238
SEE ACCOMPANYING NOTES.
5
IRV, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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FOR THE NINE MONTHS ENDED DECEMBER 31, 2002 AND
MARCH 31, 2002
(in thousands)
(Unaudited)
December 31 March 31
2002 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) (158,135) (112,434)
Adjustments to reconcile net income to net cash
used in operating activities:
Amortization 359 330
Prepaid Expenses and Deposits (13,382) (8,515)
Changes in operating assets and liabilities:
Net cash used in operating activities (171,158) (120,619)
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CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities (337,500) (63)
Acquisition of fixed assets (1,865) (2,195)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 141,950 200,625
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Net decrease in cash and cash equivalents 39,356 14,927
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Cash and cash equivalents, beginning 14,927 0
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Cash and cash equivalents, ending (24,429) 14,927
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SEE ACCOMPANYING NOTES.
6
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 nine months ended December 31,
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 17, 2002. Under the terms of the
Plan, the Company formed a new wholly-owned subsidiary, Real Asset Management,
Ltd. ("RAM") and transferred all of the Company'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, the Company's two other subsidiaries, iRV.com, Inc.
and iRV Dealerships, Inc., were both transferred to RAM together with all
pre-existing obligations and liabilities. The Company 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 ten shares of iRV, Inc.
owned by the Company's shareholders as of the record date. Payment of the
spin-off dividend is contingent upon the filing of a registration statement with
the Securities and Exchange Commission and the Commission's declaring that
registration statement effective.
2. 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 showed operations as nil for the three months ended June
30, 2002, as previously reported.
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. RAM has
failed or refused to pay the sum of $1,964.81, which in the view of present
management was a debt owing by the Company before June 25, 2002, and this amount
has been added to the current liabilities of the Company set out in the
Consolidated Balance Sheet as of December 31, 2002, with a corresponding entry
in accounts receivable reflecting the corresponding claim against RAM.
If RAM further 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.
3. GOING CONCERN
The accompanying financial statements have been prepared with the presumption
that the Company will continue as a going concern. However, the Company does not
currently have sufficient working capital to implement its business plan.
Continuation of the Company as a going concern will depend upon the Company
securing additional working capital. To ensure that the Company may continue
operations, Company management is attempting to secure additional working
capital through private placement equity funding and/or debt financing which
will enable the Company to operate through the current fiscal year.
4. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is based on the
estimated useful lives of the assets and is computed using the double declining
method as follows:
Furniture and fixtures 30%
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
On June 25, 2002, the Company effectively discontinued operations in the online
sale of recreational vehicles, which constituted substantially all of the
Company's operations to that date.
Effective upon the acquisition of Scarab Systems, Inc. on July 17, 2002, and the
subsequent change in management, the Company shifted its business into the areas
of marketing, electronic commerce and transaction processing. The Company's
initial business focus since the acquisition of Scarab has been to sell
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
pursuing opportunities related to the convergence of electronic commerce with
technology sectors of the entertainment industry.
The discontinuance of operations in recreational vehicle sales on June 25, 2002,
affects the comparison of operations between 2002 and 2001. In light of the
discontinued operations, the acquisition of Scarab, and management's decision to
shift the Company into unrelated areas of business, management believes that
revenue comparisons with the prior periods are not relevant.
RESULTS OF OPERATIONS - THREE MONTHS ENDED DECEMBER 31, 2002 COMPARED TO THE
THREE MONTHS ENDED DECEMBER 31, 2001
During the three months ended December 31, 2002, the Company had revenue of
$106,383 and incurred a net loss of $36,153. Expenses for this Period were
related primarily to cost of sales, salaries, management and consulting fees as
well as for general and administrative expenses incurred.
RESULTS OF OPERATIONS - NINE MONTHS ENDED DECEMBER 31, 2002 COMPARED TO NINE
MONTHS ENDED DECEMBER 31, 2001
During the nine months ended December 31, 2002, the Company had revenue of
$483,098 and incurred a net loss of $158,135. Expenses for this Period
were related primarily to cost of sales, salaries, management and consulting
fees as well as for general and administrative expenses incurred.
INCOME TAX
The company did not record any income tax expense for the Period as it has a
history of net losses and does not expect to report net income for the year.
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.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2002, the Company had a cash deficit of $24,429, and had trade
accounts payable in the amount of $292,826. The Company does not have any bank
line of credit.
The Company has not been able to generate cash flow from operations in amounts
required to meet its capital needs. During the Period, it relied upon outside
sources of debt and equity financing adequate to fund its operations. The
Company is currently seeking debt and equity financing. There is no guarantee
that the Company will be successful in obtaining such financing.
During the Period, the Company was unable to retain sales staff sufficient to
sell its financial transaction processing services, or its payment systems.
Furthermore, the events of September 11, 2001, and subsequent regulatory
changes, have had a substantial impact on the processing of financial
transactions and electronic payment systems. As a result, during the Period the
Company did not earn any revenue from the licenses respectively granted by
Merchant Wired Global, and Prima Benefits Corporation.
8
On September 12, 2002, the Company executed a letter of intent with a games
designer based in Las Vegas, Nevada. The letter of intent set out that the
Company was to acquire certain intellectual properties related to the
convergence of electronic commerce with technology sectors of the entertainment
industry. By mutual agreement, the parties to the letter of intent determined
that it was not in their best interests to pursue the contemplated acquisition.
The letter of intent was allowed to lapse without penalty or residual obligation
on either party.
The Company had engaged the games designer to consult with respect to
prospective opportunities in the entertainment industry. This engagement expired
on November 1, 2002, and was not renewed.
Effective November 1, 2002, the Company relocated its offices to new premises,
which is expected to save the Company $5,000 per month in operating expenses.
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
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.
9
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 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
ITEM Title
Ex-99.1 Certification by Chief Executive Officer pursuant to 18 U.S.C.
Section 1350
Ex-99.2 Certification by Chief Financial Officer pursuant to 18 U.S.C.
Section 1350
ITEMS 1, 2, 3, 4 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
IRV, Inc.
(Registrant)
Date: February 13, 2002 /s/ Thomas E. Mills
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Thomas E. Mills
President
Date: February 13, 2002 /s/ John Allen
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John Allen
Chief Financial Officer
10