UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED: SEPTEMBER 30, 1999
COMMISSION FILE NUMBER: 0-27087
LITEGLOW INDUSTRIES, INC.
(Name of Small Business Issuer in its Charter)
UTAH 65-05164035
- ------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer Identification
Incorporation or Organization) Number)
2301 N.W. 33rd Court, Unit 104, Pompano Beach, Florida 33069
(Address, including zip code, of principal executive offices)
(954) 971-4569
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed by Sections 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) has been subject to such
filings for the past 90 days. YES |X| NO |_|
As of December 1, 1999, the number of the Company's shares of par value $.001
common stock outstanding was 3,931,087.
<PAGE>
LITEGLOW INDUSTRIES, INC. AND SUBSIDIARY
FORM 10-QSB
SEPTEMBER 30, 1999
INDEX
Page No.
Part I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets ......................................... 3-4
Consolidated Statements of Operations ............................... 5
Consolidated Statements of Cash Flows................................ 6
Notes to Consolidated Financial Statements .......................... 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations .............................. 8-10
Part II - OTHER INFORMATION ............................................... 11
SIGNATURE ................................................................. 12
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<PAGE>
LITEGLOW INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31,1998
UNAUDITED
ASSETS
September 30, December 31,
1999 1998
---- (Note)
------
Current assets:
Cash $ 91,798 $ 68,296
Accounts receivable, net 560,323 245,964
Inventory 648,884 457,634
Prepaid Expenses 135,378 64,611
----------- -----------
Total current assets 1,436,383 836,505
----------- -----------
Property and equipment:
Property and equipment, at cost 350,096 277,398
Less accumulated depreciation (86,054) (49,153)
----------- -----------
Property and equipment, net 264,042 228,245
----------- -----------
Other Assets:
Goodwill, net 200,997 209,097
Advances to stockholder 15,863 58,355
Deposits 23,013 14,904
----------- -----------
Total other assets 239,873 282,356
----------- -----------
Total assets $ 1,940,298 $ 1,347,106
=========== ===========
Note: The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes to consolidated financial statements.
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<PAGE>
LITEGLOW INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31,1998
UNAUDITED
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- (Note)
------
<S> <C> <C>
Current liabilities
Line-of-credit $ 400,000 $ 380,000
Accounts payable 169,345 134,663
Accrued liabilities 52,124 142,684
Accrued loss on disposal of subsidiary 20,532 105,088
Current maturities of note payable 23,000 19,215
Current maturities of capital leases 20,000 12,974
----------- -----------
Total current liabilities 685,001 794,624
----------- -----------
Long-term liabilities (exclusive of current maturities):
Note payable 144,540 140,716
Capital leases payable 33,828 26,216
----------- -----------
Total long-term liabilities 178,368 166,932
----------- -----------
Total liabilities 863,369 961,556
----------- -----------
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, $.001 par value, authorized
1,000,000 shares;
issued and outstanding - 1,000,000 1,000 1,000
Common stock, $.001 par value; authorized,
10,000,000 shares; Issued and outstanding-
September 30, 1999, -3,931,087 and
December 31, 1998, - 2,381,087 shares 3,931 2,377
Additional paid-in capital 3,420,213 3,146,768
Accumulated deficit (2,348,215) (2,764,595)
----------- -----------
Total stockholders' equity 1,076,929 385,550
----------- -----------
Total liabilities and stockholders' equity $ 1,940,298 $ 1,347,106
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes to consolidated financial statements.
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<PAGE>
LITEGLOW INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Nine months Nine months Three months Three months
Ended Sept.30 Ended Sept.30 Ended Sept.30 Ended Sept 30
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 3,547,435 $ 2,158,412 $ 1,212,667 $ 802,459
Cost of sales 1,566,219 1,099,822 509,371 394,921
----------- ----------- ----------- -----------
Gross profit 1,981,216 1,058,590 703,296 407,538
Selling, general and administrative
expenses 1,524,873 1,593,993 594,695 595,350
----------- ----------- ----------- -----------
Income (loss) from operations 456,343 (535,403) 108,601 (187,812)
Other income (expenses):
Interest expense (39,964) (30,715) (18,162) (11,308)
----------- ----------- ----------- -----------
Total other (expenses) (39,964) (30,715) (18,162) (11,308)
----------- ----------- ----------- -----------
Income (loss) from operations
before income taxes 416,379 (566,118) 90,439 (199,120)
----------- ----------- ----------- -----------
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net income (loss) $ 416,379 $ (566,118) $ 90,439 $ (199,120)
=========== =========== =========== ===========
Net income (loss) per share-basic $ 0.10 $ (0.38) $ 0.02 $ (0.20)
=========== =========== =========== ===========
Net income (loss) per share diluted $ 0.05 $ (0.38) $ 0.01 $ (0.20)
=========== =========== =========== ===========
Weighted average common shares
outstanding 3,645,556 1,508,352 3,645,556 1,017,824
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
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<PAGE>
LITEGLOW INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
UNAUDITED
<TABLE>
<CAPTION>
September 30, September 30,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 416,379 $ (566,118)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation and amortization 45,000 8,122
Changes in operating assets and liabilities
(Increase) decrease in:
Accounts receivable (314,359) (81,731)
Inventory (191,250) (252.516)
Prepaid expenses (70,767) (129,022)
Deposits (8109) 4,482
(Decrease) Increase in:
Accounts payable 34,682 (167,713)
Accrued liabilities (175,116) 24,477
----------- -----------
Net cash used by operating activities (263,540) (1,160,019)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (72,698) (108,805)
----------- -----------
Net cash used by investing activities (72,698) (108,805)
----------- -----------
Cash flows from financing activities:
Repayment from (loan to) shareholder, net 42,492 (76,107)
Borrowings on line-of-credit 20,000 --
Repayments on line-of-credit -- (30,472)
Net increase in notes payable 7,610 27,964
Net increase (repayment) of capital leases 14,638 (3,180)
Issuance of common stock 1,554 --
Recision of common stock previously issued -- (127,800)
Increase in additional paid-in capital 273,446 1,537,559
----------- -----------
Net cash provided by financing activities 359,740 1,327,964
----------- -----------
Net increase in cash 23,502 59,140
Cash at beginning of period 68,296 48,248
----------- -----------
Cash at end of period $ 91,798 $ 107,388
=========== ===========
Supplementary Disclosure of Cash Flow Information:
Interest paid $ 39,964 $ 30,715
=========== ===========
Income taxes paid $ -- $ --
=========== ===========
</TABLE>
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<PAGE>
LITEGLOW INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
UNAUDITED
Note 1: BASIS OF PRESENTATION
The unaudited consolidated financial statements include the accounts of
Liteglow Industries, Inc. and its wholly-owned subsidiary, Liteglow Acquisition
Corp. (collectively "the Company"). All necessary adjustments to the financial
statements have been made, and significant inter-company accounts and
transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements, which are
for interim periods, do not include all disclosures provided in the annual
consolidated financial statements. These unaudited consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and the footnotes thereto contained in the independent auditors'
report for the year ended December 31, 1998 of Liteglow Industries, Inc. dated
May 21, 1999.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of the financial statements. The
results for interim periods are not necessarily indicative of results to be
expected for the complete fiscal year.
Note 2: NET INCOME PER SHARE
Per share data was computed by dividing net income by the weighted average
number of shares outstanding during the period. The difference between basic and
diluted earnings per share is the result of 1,000,000 preferred shares
converting into 5,000,000 common shares.
Note 3: STOCKHOLDERS' EQUITY
Common Stock Issued for Cash
The Company issued 1,550,000 shares of common stock through a Regulation D
offering during the first quarter of 1999. The total amount obtained from the
issuance of these common shares was $275,000.
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<PAGE>
LITEGLOW INDUSTRIES, INC. AND SUBSIDIARY
FORM 10-Q
SEPTEMBER 30, 1999
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table summarizes the results of operations, stated as a
percentage of sales, for the nine months ended September 30, 1999 and 1998 and
for the three months ended September 30, 1999 and 1998.
Nine Months Three Months
----------- ------------
1999 1998 1999 1998
----- ----- ----- -----
Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 44 % 51 % 42 % 49 %
----- ----- ----- -----
Gross Profit 56 % 49 % 58 % 51 %
Selling, General and
Administrative Expenses 43 % 74 % 49 % 74 %
----- ----- ----- -----
Income (loss) from Operations 13 % (25) % 9 % (23) %
Interest Expense (1) % (1) % (1) % (1) %
----- ----- ----- -----
Net Income (loss) 12 % (26) % 8 % (24) %
===== ===== ===== =====
Sales of $3,547,435 for the nine months ended September 30, 1999, were
$1,389,023 or 64% more than comparable 1998 sales of $2,158,412. For the three
months ended September 30, 1999 sales were $1,212,667, or 51% more than the
comparable 1998 sales of $802,459.
The Company attributes this increase to several factors, a significant one
of which was its ability to recapture old customers. During the last six months
of 1998, the Company had received defective equipment from certain suppliers.
While these products were returnable, the Company lost sales as a result.
However, as a result of improved inventory control, more efficient sales and
distribution efforts, and the availability of more diverse and superior
products, the Company has not only recaptured many of its old customers but has
been able to attract new ones.
Gross profit for the nine months ended September 30, 1999 was $1,918,216
or 56% of revenues, compared to $1,058,590 or 49% of revenues for the comparable
period in 1998. Gross profit for the three months ended September 30, 1999 was
$703,296 or 58% of revenues, compared to $407,538 or 51% of revenues for the
comparable period in 1998. The Company's gross profit margin improved by 7% of
sales in the first nine months of 1999 compared to the same period in 1998,
reflecting lower product costs.
Selling, general and administrative ("SG&A") expenses for the nine months
ended September 30, 1999 and 1998 were $1,524,873 or 43% of revenues and
$1,593,993 or 74% of revenues, respectively. For the three months ended
September 30, 1999 and 1998, the SG&A expenses were $594,695 or 49% of revenues
and $595,350 or 74% of revenues respectively. SG&A expenses for the nine months
ended September 30, 1999 decreased by $69,120. This was largely due to a
reduction in advertising, convention, trade shows and travel expenses.
Interest expenses for the nine months ended September 30, 1999, and 1998
were $39,964 and $30,715, respectively. For the three months ended September 30,
1999, and 1998 interest expenses were $18,162 and $11,308, respectively. The
increased expense is related to the increase in long term debt due to the
purchase of a truck, computers, software and other equipment.
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<PAGE>
Net income was $416,379 for the nine months ended September 30, 1999,
compared to a loss of $(566,118) for the comparable period in 1998. For the
three months ended September 30, 1999, and 1998, the net income was $90,439 and
a loss of $(199,120) respectively. The reason for the increase was an increase
in sales, an increase in profit margins and a reduction in selling expenses.
There is no income tax to pay on current year profits due to prior year losses
carried forward.
The company's basic earnings per share for the nine months end September
30, 1999 was $0.10 compared to a loss of $(0.38) per share for the comparable
period in 1998. Basic earnings per share for the three months ended September
30, 1999 and 1998 were $0.02 and $(0.20) respectively. The diluted earning per
share for the nine months ended September 30, 1999 and 1998 were $0.05 and
$(0.38) respectively. Diluted earnings per share for the three months ended
September 30, 1999 and 1998 were $0.01 and $(0.20), respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $751,382 at September 30, 1999,
compared to working capital of $41,881 at December 31, 1998 and $893,821 at
September 30, 1998. Working capital increased from the December 31, 1998 balance
due to an increase in accounts receivables, inventory and a decrease in accrued
liabilities.
The Company's cash position at September 30, 1999 was $91,798, compared to
$68,296 at December 31, 1998, and $107,388 at September 30, 1998. The accounts
receivable balance at September 30, 1999 was $560,323 compared to $245,964 at
December 31, 1998, an increase of $314,539. The accounts payable, accrued
liabilities, and accrued loss on disposal of subsidiary balance was $242,001 at
September 30, 1999, a decrease of 37% from $382,435 at December 31, 1998. The
growth in the accounts receivable balance was due to an increase in sales and
longer terms given to chain stores. The decrease in the accounts payable and
accrued liabilities is primarily due to the payment in 1999 of the accrued
liabilities.
Many of the Company's customers are large retail chains. Typically, these
retailers do not pay their vendors for at least 30 days following receipt of the
merchandise. The problem is exacerbated because when the Company orders products
from its suppliers, it must typically pay approximately 30 days in advance
before the products actually arrive and are available for distribution and
resale.
As a result, while sales are increasing, the Company is facing a liquidity
problem. The Company has drawn down completely on its existing line of credit.
Although the Company will attempt to increase this line, no assurance can be
given that it will be able to do so. As a result, the Company may be required to
seek additional capital through equity or other forms of debt financing.
Stockholders' equity was $1,076,929 at September 30, 1999, compared to
$385,550 at December 31, 1998. The increase in stockholders' equity was a result
of the net income that was generated by the Company during the nine-month period
along with the $275,00 received from the issuance of 1,550,00 shares of common
stock during the first quarter of 1999. The Company had net cash used in
operations of $263,540 for the nine months ended September 30, 1999 compared to
net cash used in operations of $1,160,019 for the comparable period in 1998. The
net reduction in cash used in operations for the nine months ended September 30,
1999, was primarily due to the increase in net income for the nine month period
combined with the increase in the accounts receivable balance. Net cash provided
by financing activities was $359,740 for the nine months ended September 30,
1999, compared to $1,327,964 for the comparable period in 1998. The significant
source of funds provided by financing activities during 1998 was the sale of
stock.
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<PAGE>
YEAR 2000 READINESS
Based on a review of Year 2000 issues, the Company believes that the
impact will not be material to the company's business operations or financial
condition. The company is also assessing how it could be affected by the failure
of third parties (e.g. vendors and customers) to mitigate their own Year 2000
issues. The costs to ensure that the company is Year 2000 compliant will not
have a significant impact on the Company.
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<PAGE>
LITEGLOW INDUSTRIES, INC. AND SUBSIDIARY
FORM 10-Q
SEPTEMBER 30, 1999
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
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) There are no exhibits to be filed.
b) There were no reports filed on Form 8-K during the quarter ended
September 30, 1999.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LITEGLOW INDUSTRIES, INC.
-------------------------
Registrant
Date: December 1, 1999 /s/ Spencer Krumholtz
Spencer Krumholtz, Chief Executive Officer
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