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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 
 
FORM 10-Q
 
(Mark One)
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the quarterly period ended September 30, 2004
 
 
OR
 
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the transition period from ________________ to ________________.
 
Commission File Number 000-25977
 
 
L Q CORPORATION, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
77-0421089
 
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
888 Seventh Ave., 17th Floor, New York, NY
 
10019
 
(Address of principal executive offices)
 
(Zip Code)
 
 
 
(212) 974-5730
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) had been subject to such filing requirements for the past 90 days.    Yes      No  
 
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes      No  
 
As of November 9, 2004, there were 3,027,273 shares of registrant’s Common Stock outstanding.
 
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L Q CORPORATION, INC.
 
INDEX
PART I. FINANCIAL INFORMATION
1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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ITEM 1.    FINANCIAL STATEMENTS
 
L Q CORPORATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands; unaudited)
 
 
 
September 30
2004
 
December 31,
2003
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
6,525
 
$
9,077
 
Accounts receivable, net
 
 
 
 
 
28
 
Other current assets
 
 
160
 
 
164
 
 
 
 
 
Total current assets
 
$
6,685
 
$
9,269
 
 
 
 
 
Liabilities and stockholders’ equity
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
Accrued liabilities
 
$
90
 
$
1,935
 
 
 
 
 
Total current liabilities
 
 
90
 
 
1,935
 
 
 
 
 
Stockholders’ equity:
 
 
 
 
 
 
 
Common stock, $0.001 par value; 30,000,000 shares authorized; 3,027,273 and 3,243,979 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively
 
 
23
 
 
23
 
Additional paid-in capital
 
 
146,053
 
 
146,053
 
Accumulated other comprehensive loss (net)
 
 
(79
)
 
(79
)
Accumulated deficit
 
 
(139,335
)
 
(138,663
)
Treasury Stock 216,706 shares at cost
 
 
(67
)
 
 
 
 
 
 
 
Total stockholders’ equity
 
 
6,595
 
 
7,334
 
 
 
 
 
Total liabilities and stockholders’ equity
 
$
6,685
 
$
9,269
 
 
 
 
 
 
See accompanying notes to condensed consolidated financial statements.
 
1
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L Q CORPORATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts; unaudited)
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
 
 
 
 
 
2004
 
2003
 
2004
 
2003
 
 
 
 
 
 
 
Net revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
License
 
$
—  
 
$
—  
 
$
—  
 
$
4
 
Services
 
 
—  
 
 
—  
 
 
—  
 
 
39
 
 
 
 
 
 
 
Total net revenues
 
 
—  
 
 
—  
 
 
—  
 
 
43
 
 
 
 
 
 
 
Cost of net revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
License
 
 
—  
 
 
—  
 
 
—  
 
 
5
 
Services
 
 
—  
 
 
—  
 
 
—  
 
 
2
 
Non-cash cost of revenue
 
 
—  
 
 
—  
 
 
—  
 
 
—  
 
 
 
 
 
 
 
Total cost of net revenues
 
 
—  
 
 
—  
 
 
—  
 
 
7
 
 
 
 
 
 
 
Gross profit (loss)
 
 
—  
 
 
—  
 
 
—  
 
 
36
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales and marketing
 
 
—  
 
 
6
 
 
—  
 
 
277
 
Research and development
 
 
—  
 
 
—  
 
 
—  
 
 
165
 
General and administrative
 
 
225
 
 
472
 
 
792
 
 
4,730
 
Restructuring
 
 
—  
 
 
—  
 
 
—  
 
 
4,411
 
 
 
 
 
 
 
Total operating expenses
 
 
225
 
 
478
 
 
792
 
 
9,583
 
 
 
 
 
 
 
Loss from operations
 
 
(225
)
 
(478
)
 
(792
)
 
(9,547
)
Other income (expense), net
 
 
40
 
 
52
 
 
120
 
 
180
 
Gain on sale of digital music fulfillment business
 
 
—  
 
 
—  
 
 
—  
 
 
2,868
 
 
 
 
 
 
 
Net loss
 
$
(185
)
$
(426
)
$
(672
)
$
(6,499
)
 
 
 
 
 
 
Net loss per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic and diluted
 
$
(0.06
)
$
(0.13
)
$
(0.21
)
$
(2.00
)
 
 
 
 
 
 
Weighted average shares
 
 
3,027
 
 
3,243
 
 
3,154
 
 
3,242
 
 
 
 
 
 
 
 
See accompanying notes to condensed consolidated financial statements.
 
2
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L Q CORPORATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands; unaudited)
 
 
 
Nine Months Ended
September 30,
 
 
 
 
 
 
2004
 
2003
 
 
 
 
 
Cash flows from operating activities:
 
 
 
 
 
 
 
Net loss
 
$
(672
)
$
(6,499
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
 
 
 
 
 
228
 
Gain on sale of digital music fulfillment business
 
 
 
 
 
(2868
)
Changes in assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
 
 
28
 
 
35
 
Other current assets
 
 
4
 
 
1,054
 
Accounts payable
 
 
 
 
 
(1,006
)
Accrued liabilities
 
 
(1,845
)
 
(1,805
)
Deferred revenue
 
 
 
 
 
(39
)
 
 
 
 
Net cash used in operating activities