U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 2000
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 333-48675
TECHLITE, INC.
----------------------------------------------
(Name of small business issuer in its charter)
Oklahoma 73-1522114
- ------------------------ --------------------------
(state of incorporation) (IRS Employer I.D. Number)
6106 East 32nd Place, Suite 101
Tulsa, OK 74135
-------------------------------------
(Address principal executive offices)
Issuer's telephone number: 918-664-1441
Securities registered under Section 12(b) of the Exchange Act:
Title of each class: None.
Name of each exchange on which registered: None.
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value
------------------------------
(Title of class)
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[ ] No[X]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
<PAGE>
State issuer's revenues for its most recent fiscal year: $2,625,750.
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days: $1,646,771 computed by
reference to the $1.06 average of the bid and asked price of the Company's
Common Stock on May 15, 2000.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 2,454,347 shares of Common
Stock, $0.001 par value.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders; (3) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act").
The list documents should be clearly described for identification purposes
(e.g., annual report to security holders for fiscal year ended December 24,
1990). None.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
2
<PAGE>
TABLE OF CONTENTS
Page
----
Item 1. Description of Business ........................................... 5
Business Development .............................................. 5
Description of TechLite's Business ................................ 5
The Light Fixture Retrofitting Industry ........................... 5
The Market ........................................................ 6
Environmental Considerations ...................................... 6
Saving Money ...................................................... 6
Other Benefits .................................................... 7
Current Trends .................................................... 8
Sales Methods ..................................................... 9
Production Costs .................................................. 10
Competition ....................................................... 10
Government Approval of Principal Products ......................... 10
Government Regulations ............................................ 10
Dependence on Major Customers and Suppliers ....................... 11
Seasonality ....................................................... 11
Research and Development .......................................... 11
Environmental Controls ............................................ 11
Year 2000 Computer Problem ........................................ 11
Number of Employees ............................................... 11
Venue of Sales .................................................... 11
Patents, Copyrights and Intellectual Property ..................... 12
Item 2. Properties ........................................................ 12
Facilities ........................................................ 12
Item 3. Legal Proceedings ................................................. 12
Item 4. Submission of Matters to a Vote of Security Holders ............... 12
Item 5. Market for Common Equity and Related Stockholder Matters .......... 13
Item 6. Management's Discussion and Analysis .............................. 13
Results of Operations ............................................. 13
Sales ............................................................. 14
Gross Margin ...................................................... 14
Selling, General and Administrative Expenses ...................... 14
Net Income (Loss) Before Taxes .................................... 14
Balance Sheet Items ............................................... 14
Liquidity and Capital Resources ................................... 15
Item 7. Financial Statements .............................................. 15
3
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure .......................................... 16
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act ................. 16
Item 10. Executive Compensation .......................................... 17
Item 11. Security Ownership of Certain Beneficial Owners and Management .. 18
Item 12. Certain Relationships and Related Transactions .................. 19
Parents of the Company ............................................ 19
Item 13. Exhibits and Reports on Form 8-K ................................ 19
Signatures ........................................................ 21
4
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS DEVELOPMENT
TechLite, Inc. was incorporated in Oklahoma on June 3, 1997, for the
purpose of merging with TechLite Applied Sciences, Inc. of Tulsa, Oklahoma. On
October 21, 1999 we merged with TechLite Applied Sciences. The historical
financial statements of TechLite are those of TechLite Applied Sciences, Inc.,
which was incorporated in Oklahoma on November 9, 1992.
TechLite, through its predecessor in interest, has been engaged since
1993 in the business of retrofitting existing lighting fixtures in buildings
used for commercial, education, manufacturing, institutional and health care
purposes. It installs highly efficient reflectors, improved electronic ballasts,
and energy-efficient fluorescent lamps that make possible a 60 percent or
greater reduction in electricity consumption. It does this while maintaining or
improving existing light levels.
We have our headquarters in Tulsa, Oklahoma, and branch offices in
Dallas, Texas. Our fiscal year ends January 31. We have operated at a loss from
inception through the fiscal year that ended January 31, 2000.
DESCRIPTION OF TECHLITE'S BUSINESS
The Light Fixture Retrofitting Industry.
- ---------------------------------------
In 1992 the Congress enacted the National Energy Policy Act. This law
mandated that many inefficient lighting products, such as the commonly used
40-watt, T-12 fluorescent lamp, be eliminated and replaced with new technology.
Also affected by this legislation are electric motors, other lamps, luminaries,
distribution transformers and electromagnetic fields research.
Also, in 1992 the Environmental Protection Agency (the "EPA") initiated
its "Green Lights" or "Energy Star" program. This is a voluntary
pollution-reduction program that assists electricity users by providing them
with the most current information about energy-efficient lighting technologies
and how upgrades or retrofitting can be financed.
These two government initiatives - the National Energy Policy Act of
1992 and the EPA's Energy Star program - provided the impetus for the
development of three significant energy-efficient products:
o energy-efficient fluorescent lamps,
o improved electronic ballasts, and
o highly efficient reflectors.
The retrofitting of existing fixtures with these three improvements
makes possible (1) up to a 60 percent or greater reduction in power consumption
while (2) maintaining or even improving current light levels. The business of
TechLite is selling and installing these and related
5
<PAGE>
products. This involves designing or adapting the reflectors for each lighting
fixture in a customer's building. Frequently, electricity savings pay for the
cost of retrofitting in one to three years.
The Market.
- ----------
There are more than 2.5 billion light fixtures in the nation that would
benefit from an energy-efficient lighting retrofit. We estimate that more than 1
billion of these retrofittable units are in the central U.S. States, where
TechLite has targeted its business plan.
The estimated one billion fixtures for the central U.S. States that are
retrofittable provide a total available market of approximately $50 billion.
TechLite's five-year business plan projects that it will have sales aggregating
$239 million, which is less than 0.5 percent of the market in this area.
Environmental Considerations.
- ----------------------------
Generating electricity involves burning fossil fuels - coal, oil, or
natural gas - or running a nuclear reactor or a hydroelectric plant. The mining
and transportation of fossil fuels can result in various types of pollution.
Burning fossil fuels emits air pollutants from smokestacks, including carbon
dioxide, sulfur dioxide, and nitrogen oxides. Today the EPA is increasingly
focusing on pollution prevention. If the nation uses less electricity to deliver
an energy service - such as lighting - the power plants that produce the
electricity burn less fuel and thus generate less pollution.
Lighting accounts for 20 to 25 percent of all electricity sold in the
U.S. Lighting for industry, stores, offices and warehouses represents 80 to 90
percent of total lighting electricity use. Every kilowatt hour of lighting
electricity not used prevents emissions of 1.5 pounds of carbon dioxide, 5.8
grams of sulfur dioxide, and 2.5 grams of nitrogen oxides. If energy efficient
lighting were used where profitable, the nation's demand for electricity would
be cut by more than 10 percent. This would result in annual reductions of 2.2
million metric tons of carbon dioxide -the equivalent of taking 44 million cars
off the road; 1.3 million metric tons of sulfur dioxide; and 600,000 metric tons
of nitrogen oxides. These reductions represent twelve percent of U.S.
utility emissions.
Saving Money.
- ------------
The EPA's Energy Star upgrade program focuses on achieving energy
savings under circumstances that save money for the electricity user. Businesses
that have made the investment in retrofit lighting - because of the development
of highly efficient reflectors, improved electronic ballasts, and
energy-efficient fluorescent lamps - have cut their electric bills by up to 60
percent or more and have experienced an average return on their retrofit
investment of 35 percent or more.
The new electronic ballast is ten to fifteen percent more efficient than
the standard magnetic ballast now in widespread use. Newly developed compact
fluorescent lamps convert most of their electricity
6
<PAGE>
into light - not heat. They are four times more efficient than standard
incandescent lights. They can last nine to fifteen times longer. New lighting
systems that include the smaller diameter "T-8" fluorescent lamps that replace
the old 40-watt T-12 "cool white" fluorescent lamps can increase lumens per watt
to over 100, as opposed to the current standard of 60. By substituting these new
systems, offices improve their lighting quality while reducing energy costs.
Occupancy sensors keep lights on when motion is detected and turn lights
off when motion is not detected. They ensure that lights are in use only when
needed.
Of a special importance is the development of lighting enhancement
reflectors for fluorescent light fixtures. Utilizing a mirror-like permanent
specular coating on a metal substrate and ray-tracing software, reflector
manufacturers can bend the mirrored strips into intricate shapes to achieve
desired photometric results. TechLite makes use of these lighting enhancement
reflectors. This requires a fixture-by- fixture retrofitting by TechLite but,
together with the other energy- efficient improvements noted above, it enables
TechLite to provide the ultimate energy-efficient and cost saving retrofitting
services available anywhere.
Consider, for example, a convenience store, operating 24 hours a day,
seven days a week. It usually pays the highest commercial rates, because of the
relatively small space occupied. Retrofitting the lights of this business can be
most cost-effective. It can generate a return on investment of over 120 percent
with a nine- to eleven-month payback.
Lighting is one of the largest hidden costs of a total electric bill for
large office buildings - approximately 40 percent. With an energy efficient
lighting retrofit, this cost can be reduced up to 60 percent or more. Further,
if better light is provided at less than one-half the cost, this makes buildings
more competitive in today's lease market. This also provides an increase in
property value. Reducing lighting costs in a facility by $100,000 annually would
increase the property value by one million dollars with a CAP rate of 10
percent.
Other Benefits.
- --------------
The new electronic ballasts operate at a higher frequency, 20,000 cycles
per second, as opposed to the magnetic predecessors which operate at 60 cycles
per second. The fluorescent lighting system the electronic ballasts operate can
convert power to light more efficiently than systems run by standard magnetic
ballasts. The higher cycle rate eliminates flicker and hum while using less
energy.
The electronic ballasts prompted the development of the new,
smaller-diameter, fluorescent tube, called the T-8. This new tube takes
advantage of the characteristics of the new electronic ballast and incorporates
the use of tri-phosphor coatings for enhanced color rendition.
------------------------
Because the new electronic ballasts operate 50 degrees cooler, and
because the new T-8 lamps operate 20 degrees cooler with only half as
7
<PAGE>
many needed, air-conditioning costs in a building may be reduced by 20 percent
------------------------------------------------------------------
and replacement parts by 50 percent.
- -----------------------------------
The development of mini-fluorescent compact lamps allows replacement of
many sizes of incandescent lamps. Power reductions may be as high as 80 percent.
With lower prices and minimal installation costs, these units have become the
most cost-effective of all retrofits. For example, 100-watt incandescent lamps
can be replaced with 22- to 28-watt fluorescent compacts without any light loss.
Ballast life for these mini-fluorescent compacts is expected to be 50,000 hours,
and lamp life is expected to be 10,000 hours.
Current Trends.
- --------------
Many electric light retrofit companies do no more in retrofitting than
replacing four old lamps with two new lamps. The most advanced energy-efficient
retrofit lighting companies, such as TechLite, are concerned with total systems
engineering. These companies sell the concept of re-engineering a building's
lighting system to meet the lighting requirements of the tasks performed in the
buildings and to use whichever retrofit is most cost-effective.
TechLite uses the latest ballasts. They provide a range of ballast
factors (wattages) and proportionate light levels for two T-8 lamps of 49, 54,
58, 62, 71 and 84 watts. Thus, there is immense flexibility for the systems
integrators to achieve desired light levels.
TechLite's systems engineers literally custom-design the retrofit for
each fixture, dependent on its task. The five to fifteen percent savings
advantage over a single-type retrofit more than compensates for added costs, if
any. Lamps are now available in several intensity levels and at least six color
temperatures ratings.
Another technical product recently improved to the point of viability is
the motion sensor. Early problems with the sensors have been corrected, and the
inability to accurately predict savings from these sensors has been overcome.
The manufacturers of lighting enhancement reflectors continue to improve
their products. Single lamp reflectors for two-foot by four-foot fixtures have
added even more low-end versatility. Three-, four-, or six-lamp high-intensity
reflectors are now designed for ceilings in excess of 25 feet. These reflectors
have dispelled the myth that those heights were the exclusive territory of 400-
to 1,600-watt metal halide lamps. These improvements and a growing population of
other products, while further enhancing system efficiency, have also increased
design complexity. This makes the market more and more the domain of the systems
engineers.
The business of designing and installing energy efficient lighting
retrofits has become very sophisticated. It demands operatives of a higher level
in both engineering and business. It is no longer sufficient to send
inexperienced salesmen door to door with brochures and big promises; the leaders
in today's industry are sending in teams of highly trained lighting
professionals. TechLite utilizes sophisticated
8
<PAGE>
lighting demonstration units to perform presentations. Its engineers identify
and measure extensive lists of data for a computerized design process.
In 1997, the competitive climate began to change with the emergence of
"energy service companies," called "ESCOs". Several states took steps toward the
deregulation of the electricity supply companies - the electrical utility
companies. One response of the utility companies has often been their creation
of ESCO subsidiaries. These act as general contractors that seek energy supply
contracts. Sometimes the ESCOs negotiate contracts to replace a building's
heating, air conditioning and ventilation systems, to replace the electronic
controls that govern such systems, and to retrofit the lighting fixtures. One
feature of the contracts is to require the purchase of the electricity from the
ESCO's parent company. The lighting retrofitting is generally subcontracted out
to companies such as TechLite. Financing for the package is generally provided
by the ESCOs. TechLite has no strategic alliances with any ESCOs at present but
is seeking them. Such alliances could prove to be critical in getting business
in the future.
Sales Methods.
- -------------
TechLite's corporate office makes available to each sales office a
demonstration machine that is used as a sales device. Within a single portable
unit, there is a television set with VCR for showing Energy Star and TechLite
videos, a rotating watt meter, a light level indicator, a laser pointer for
demonstration of reflectivity, an audio amplifier for demonstration of hum
characteristics, and two two-by-four recessed troffers mounted on a motorized
mast so that fixtures can be raised to a normal position at ceiling height. The
demonstration machine vividly demonstrates the improvement in lighting obtained
from a retrofit as well as the substantial reduction in electricity usage.
Sales procedures employed today typically commence with a walk- through
by an experienced sales engineer to determine if a building is a good prospect.
Then, a demonstration using the demonstration machine is scheduled. After the
demonstration, depending upon the size of the building, the types of fixtures
observed, the hours of usage and the rates for electricity demonstrated by the
building's electricity bills, an estimate of available savings is made. The
potential customer is asked, based upon these savings, if it wishes to proceed
with a comprehensive feasibility and engineering study.
If the answer is positive, then TechLite and the potential customer
enter into a memorandum of understanding that offers the customer several
options. If the feasibility study shows that all the project goals cannot be
met, or if funding repayable from savings is not available, there is no charge
for the study. If the feasibility study shows that all of the listed goals can
be met, funding is available, and the customer decides not to proceed with the
lighting upgrade, the customer reimburses TechLite a predetermined amount for
the feasibility study and engineering work done up to that point. Should the
customer agree that the project should move forward, there is no added cost for
the initial feasibility study. Using data from the engineering study, the
systems engineer can determine (1) the best retrofit solution for the
9
<PAGE>
over-lit areas and the under-lit areas and (2) which solution is most
cost-effective.
In October 1997 we commenced a sales effort in Brazil that resulted in
its retrofitting, for demonstration purposes, the eighteenth floor of the
central post office building in Brazilia and a portion of a large discount store
for a French commercial concern, Carrefour Comercio E Industria LT
("Carrefour"). Following the demonstrations, we made proposals in July 1998 to
each of the Brazil postal system and Carrefour to retrofit a single building for
each and, in the case of Carrefour, 50 stores for Carrefour. Each of the Brazil
postal system and Carrefour later advised us that no contract would be
considered at that time, due to the unstable Brazilian currency and its
devaluation.
Production Costs.
- ----------------
The cost of materials - lamps, ballasts, reflectors and motion sensors -
should account for approximately 59 percent of a project's costs. Installation
and supervisory labor should account for an additional fifteen percent of a
project's costs. Our selling, general and administrative expenses are geared to
sales of $25 million a year - a level we have yet to achieve. We estimate that
selling, general and administrative expenses will decrease to approximately ten
percent of contract revenue as the volume increases.
Competition.
- -----------
Numerous companies throughout the U.S. are engaged in the business of
retrofitting light fixtures. Many of these are small businesses that operate
only locally. Even so, they can have personal and political contacts that make
them quite competitive with TechLite. Few of these competitors offer
custom-designed reflectors that add so much to a retrofit; they merely replace
existing fluorescent lamps and ballasts with the new, improved models. TechLite
obtains its retrofit contracts in most instances when it can demonstrate what it
offers in contrast to what a competitor offers. Competition in the future,
however, could arise from strategic alliances between TechLite's competitors and
the emerging "energy supply companies" -"ESCOs".
Government Approval of Principal Products.
- -----------------------------------------
No government approval is required in the U.S. for TechLite's products.
It buys from others the fluorescent lamps, ballasts, and reflectors it installs
in its retrofitting business.
Government Regulations.
- ----------------------
TechLite, as an electrical contractor, is subject to regulation as such.
State, county or city statutes and ordinances usually require that it have a
qualified and licensed electrician present and supervising each retrofit job.
Further, all installations of electrical fixtures are
10
<PAGE>
subject to compliance with electrical codes in force in virtually all
jurisdictions in the U.S.
Dependence on Major Customers and Suppliers.
- -------------------------------------------
TechLite has been dependent, and expects to continue to be dependent,
upon single customers for ten percent or more of its consolidated revenues.
However, such customers would not be expected to be repeat customers once the
work for such customers is completed. It has had and anticipates significant
backlogs, but additional staff is taken on to meet all contract needs.
It depends upon American Illuminetics, Inc. of Carlsbad, California for
the lighting-enhancement reflectors TechLite prefers to use in the retrofitting
of light fixtures. TechLite believes that all foreseeable demand for reflectors
can be met. Other suppliers of reflectors are available. For lamps, TechLite
depends upon Phillips Lighting Co. of Somerset, New Jersey; Osram Sylvania, Inc.
of Danvers, Massachusetts; and GE Lighting of Cleveland, Ohio. For ballasts, it
depends upon Advance Transformer Co. of Rosemont, Illinois; Magnetek Lighting
Products Group of Nashville, Tennessee; and Motorola Lighting, Inc. of Buffalo
Grove, Illinois.
Seasonality.
- -----------
There is no seasonal aspect to TechLite's business.
Research and Development.
- ------------------------
TechLite conducts no research and development.
Environmental Controls.
- ----------------------
TechLite is subject to no environmental controls or restrictions that
require the outlay of capital or the obtaining of a permit in order to engage in
business operations.
Year 2000 Computer Problem.
- --------------------------
TechLite has determined that it does not face material costs, problems
or uncertainties about the year 2000 computer problem. This problem affects many
companies and organizations and stems from the fact that many existing computer
programs use only two digits to identify a year in the date field and do not
consider the impact of the year 2000. TechLite presently uses off-the-shelf and
easily replaceable software programs and has determined that all software is
year 2000 compliant.
Number of Employees.
- -------------------
On January 31, 2000, TechLite employed 30 persons full time, no persons
part time, and had four persons under contract as sales associates who receive
commissions on new business they bring to the company.
11
<PAGE>
Venue of Sales.
- --------------
None of TechLite's sales are attributable to exports. It is making a
concerted effort, however, to obtain business in Brazil. Should it obtain a
significant contract to retrofit the lighting fixtures in one or more post
office buildings in Brazil, TechLite believes it will be able to obtain
Export-Import Bank guarantees for up to 85 percent of the cost of materials
exported to Brazil. TechLite has not yet identified the source of any additional
financing it might require to complete a significant contract with the Brazil
postal system. Any contract it might obtain from Carrefour, the French-owned
chain store company, would require Carrefour's periodic payments in amounts
calculated to cover all of TechLite's costs in advance of its payment of these
costs.
Patents, Copyrights and Intellectual Property.
- ---------------------------------------------
TechLite has no patents, copyrights or intellectual property but does
have common law copyright protection for an energy audit software program.
ITEM 2. PROPERTIES
TechLite owns a 13,000 square-foot office building located at 6106 East
32nd Place, Tulsa, Oklahoma 74135.
FACILITIES
TechLite occupies approximately 5,500 square feet of its 13,000
square-foot office building in Tulsa, Oklahoma. It leases, on short-term leases,
warehouse space and additional office space as follows:
<TABLE>
<CAPTION>
Use of
Leased Square Monthly
Premises City Feet Rent Term
--------- --------- ----- ------ ----------
<S> <C> <C> <C> <C> <C>
Warehouse Tulsa, OK 4,200 $1,275 06-09-2000
</TABLE>
The above space is deemed adequate for TechLite's foreseeable needs. As branches
are opened in additional cities, facilities will be leased on short-term leases
for the branch operations.
ITEM 3. LEGAL PROCEEDINGS
On September 9, 1999, TechLite was sued in the District Court of Tulsa
County, Oklahoma, Power Savers, Inc. v. TechLite Applied Sciences, Inc., Docket
No. CJ-994303, in a dispute involving the correct amount of net profit to be
paid to an agent of TechLite with regard to a contract between TechLite and a
Tulsa County school district. TechLite has already paid the agent an amount in
excess of $200,000 and believes it is not further liable to the plaintiff.
Nevertheless, TechLite has placed $125,000 into escrow for settlement purposes.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
12
<PAGE>
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
TechLite's Common Stock presently trades on the OTC Bulletin Board, having been
added to the OTC Bulletin Board in April 2000. The high and low bid and asked
prices, as reported by the OTC Bulletin Board, are as follows for the few weeks
in the second quarter of 2000 that the stock has traded. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
High Low
---- ---
2000:
2nd Qtr. 1.25 0.75
Holders. Based on information provided by our transfer agent, the Company had
- -------
638 shareholders of record of its common stock on May 15, 2000.
Dividends. TechLite has paid no cash dividends since its inception, and it is
- ---------
unlikely that any cash dividend will be paid in the foreseeable future. There
are no restrictions that would or are likely to limit the ability of the company
to pay dividends on its Common Stock, but it has no plans to pay dividends in
the foreseeable future and intends to use earnings for the expansion of its
business. The declaration in the future of any cash or stock dividends will be
at the discretion of the Board depending upon the earnings, capital requirements
and financial position of the company, general economic conditions and other
pertinent factors. There are no dividend restrictions held by any creditor or
other agreement to which the company is a party.
Recent Sales of Unregistered Securities. Subsequent to the effectiveness
---------------------------------------
of the merger on October 21, 1999 between the company and TechLite Applied
Sciences, Inc., the company sold 336,633 shares of Common Stock to investors in
an offering exempt from registration pursuant to the provisions of Regulation D,
Rule 506. No underwriter or broker-dealer was used. The shares were all sold for
services rendered during the period November 1999 through January 2000. Each of
the purchasers was personally known to the company and its directors prior to
the offer made by the Company to sell such securities.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis should be read in conjunction
with the financial statements and the accompanying notes thereto. It is
qualified in its entirety by the foregoing and by more detailed financial
information appearing elsewhere. See "Item 7 - Financial Statements."
Results of operations.
---------------------
The following table presents, as a percentage of sales, certain selected
financial data for each of the two years in the period ended January 31, 2000
and January 31, 1999:
13
<PAGE>
<TABLE>
<CAPTION>
Year ended January 31 2000 1999
--------------------------------------------------------------------
<S> <C> <C>
Sales 100% 100%
Cost of sales 83% 71%
--- ---
Gross margin 17% 29%
Selling, general and
administrative expenses 79% 32%
Net income (loss) before taxes (59)% (2)%
</TABLE>
Sales.
-----
Sales of $2,625,750 for fiscal year 2000 (FY 2000) decreased by
$2,021,108, or 43 percent from sales of $4,646,858 for fiscal year 1999. The
decrease was due to the concentration by TechLite of its sales and
administrative personnel during FY 2000 to entering the Florida market through
the acquisition of a Florida company already established in the lighting
maintenance and retrofit business, primarily with school districts in Florida.
The effort was not successful, although TechLite is continuing its efforts and
believes it will be successful in this respect during FY 2001.
Gross margin.
------------
Gross margin decreased to $455,058, or 17 percent of sales in FY 2000
from $1,358,654, or 29 percent of sales, in fiscal 1999. The decrease was due
primarily to increased costs in contract management and oversight.
Selling, general and administrative expenses.
--------------------------------------------
Selling, general and administrative expenses increased from $1,472,865
in fiscal 1999 to $2,065,936 in FY 2000, an increase of $593,071 or 40 percent.
This increase is attributable to our expenses of developing a presence in the
Florida market.
Net income (loss) before taxes.
------------------------------
A net loss before taxes of $105,444 in fiscal 1999 increased to a net
loss of $1,543,791 in FY 2000. This increase in loss was attributable primarily
to our unproductive efforts in Florida - efforts that diverted both sales
personnel and administrative personnel from other opportunities, thereby
reducing income and increasing costs.
Balance sheet items.
-------------------
Significant changes in several balance sheet items occurred from fiscal
1999 to fiscal 2000, in particular the following:
o A cash position of $19,162 at the end of fiscal 1999 increased to
----
a cash position of $126,189 at the end of fiscal year 2000,
o contracts receivable of $831,822 at the end of fiscal 1999
---------------------
decreased to $264,534 at the end of fiscal year 2000,
14
<PAGE>
o inventory of $41,185 at the end of fiscal year 1999 increased to
---------
$189,949 at the end of fiscal year 2000,
o payroll and sales tax payable of $97,110 at the end of fiscal
-------------------------------
1999 increased to $314,450 at the end of fiscal year 2000,
o the backlog of business decreased from $1,686,995 at January 31,
-------------------
1999 to $403,267 at January 31, 2000,
o notes payable of $1,341,011 at the end of fiscal 1999 increased
-------------
by 72% to $2,312,725 at the end of fiscal 2000, and
o the retained deficit increased from $1,802,167 at the end of
----------------
fiscal 1999 to $3,345,958 at the end of fiscal year 2000.
Liquidity and Capital Resources.
-------------------------------
TechLite had negative cash flow from operations of $756,335 in fiscal
2000. The principal components of this negative cash flow were a net loss from
operations of $1,543,791, a decrease of $494,216 in contract receivables, an
increase in inventory of $148,764, an increase in accounts payable of $309,040,
an increase of $253,304 in accrued liabilities and a decrease of $116,696 in
billings related to costs and estimated earnings on uncompleted contracts. This
drain on liquidity and capital resources was covered by net borrowings of
$946,566.
ITEM 7. FINANCIAL STATEMENTS
15
<PAGE>
Independent Accountants' Report
Board of Directors
TechLite, Inc.
Tulsa, Oklahoma
We have audited the accompanying balance sheets of TECHLITE, INC. as of January
31, 2000 and 1999, and the related statements of income, statements of changes
in stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
The financial statements as of January 31, 1999, and for the year then ended
have been restated to reflect the pooling of interest between TECHLITE, INC. and
TECHLITE APPLIED SCIENCES, INC. as described in Note 1 to the financial
statements. We did not audit the January 31, 1999 financial statements of
TECHLITE, INC., which reflected total assets of $245 as of January 31, 1999, and
no revenue or expense for the year then ended. Those statements were audited by
other auditors whose report has been furnished to us, and our opinion, insofar
as it relates to the amounts included for TECHLITE, INC. as of January 31, 1999,
and for the year then ended, is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TECHLITE, INC. as of January
31, 2000 and 1999, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/Causon & Westhoff
Tulsa, Oklahoma
April 25, 2000
F-1
<PAGE>
TECHLITE, INC.
BALANCE SHEETS
JANUARY 31, 2000 AND 1999
ASSETS
------
<TABLE>
<CAPTION>
2000 1999
----- ----
<S> <C> <C>
CASH $ 126,189 $ 19,407
ACCOUNTS RECEIVABLE
Contract receivables 264,534 821,229
Other receivables 73,072 10,593
INVENTORY, At Cost 189,949 41,185
PROPERTY AND EQUIPMENT, At Cost
Equipment 196,314 162,058
Furniture and fixtures 32,490 24,045
Building and land 400,000 400,000
Leasehold improvements 68,020 52,252
Autos and trucks 216,770 191,790
--------- ---------
913,594 830,145
Less accumulated depreciation 250,251 148,665
--------- ---------
663,343 681,480
--------- ---------
OTHER ASSETS 345,862 7,240
--------- ---------
Total Assets $1,662,949 $1,581,134
========= =========
</TABLE>
See Notes to Financial Statements
F-2
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
2000 1999
----- ----
LIABILITIES
<S> <C> <C>
Accounts payable $ 689,583 $ 380,543
Accrued wages 35,831 29,132
Payroll and sales tax payable 314,450 97,110
Billings in excess of costs and estimated
earnings on uncompleted contracts 213,033 96,337
Notes payable and accrued interest 2,312,725 1,341,011
Other liabilities 62,782 58,665
--------- ---------
Total Liabilities 3,628,404 2,002,798
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value;
10,000,000 authorized shares;
none issued
Common stock, $ .001 par value;
40,000,000 authorized shares;
2,454,347 issued and
outstanding in 2000 and 1999 2,455 2,455
Additional paid-in capital 1,378,048 1,378,048
Retained earnings(deficit) (3,345,958) (1,802,167)
--------- ---------
Total Stockholders' Equity (1,965,455) (421,664)
--------- ---------
Total Liabilities & Stockholders'
Equity $1,662,949 $1,581,134
========= =========
</TABLE>
See Notes to Financial Statements
F-3
<PAGE>
TECHLITE, INC.
STATEMENTS OF INCOME
YEARS ENDED JANUARY 31, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CONTRACT REVENUES EARNED $ 2,625,750 $ 4,646,858
COST OF REVENUES EARNED 2,170,692 3,288,204
--------- ---------
GROSS PROFIT 455,058 1,358,654
GENERAL AND ADMINISTRATIVE
EXPENSES 2,065,936 1,472,865
--------- ---------
INCOME(LOSS) FROM OPERATIONS (1,610,878 (114,211)
OTHER INCOME 67,087 8,767
INCOME(LOSS) BEFORE TAXES (1,543,791) (105,444)
--------- ----------
PROVISION FOR INCOME TAXES
0 0
--------- ----------
NET INCOME(LOSS) $(1,543,791) $ (105,444)
========= ==========
NET INCOME(LOSS) PER SHARE $ (.63) $ (.04)
========= ==========
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
TECHLITE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 2000 AND 1999
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
<S> <C> <C> <C> <C>
BALANCE, JANUARY 31, 1998 $2,449 $1,264,197 $(1,696,723) $(430,077)
NET INCOME(LOSS) (105,444) (105,444)
SALE OF STOCK
6 113,851 113,857
----- --------- --------- ---------
BALANCE, JANUARY 31, 1999 2,455 1,378,048 (1,802,167) (421,664)
NET INCOME(LOSS) (1,543,791) (1,543,791)
SALE OF STOCK
----- --------- --------- ---------
BALANCE, JANUARY 31, 2000 $2,455 $1,378,048 $(3,345,958) $(1,965,455)
===== ========= ========= =========
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
TECHLITE, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 2000 AND 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
<TABLE>
<CAPTION>
2000 1999
----- ----
<S> <C> <C>
Net income (loss) $ (1,543,791) $ (105,444)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 105,218 68,269
Decrease (increase) in contract receivables 494,216 (404,420)
Decrease (increase) in inventory (148,764) 5,193
Decrease (increase) in other (342,254) (10,522)
assets/receivables
Net increase (decrease) in billings related
to costs and estimated earnings on
uncompleted contracts 116,696 (233,737)
Increase (decrease) in accounts payable 309,040 58,304
Increase (decrease) in other accrued 253,304 (92,114)
liabilities
--------- ---------
Net cash used in operating
activities (756,335) (714,471)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment (83,449) (561,640)
--------- ---------
Net cash used in investing
activities (83,449) (561,640)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principle payments on notes payable (3,752,634) (394,815)
New borrowings 4,699,200 1,576,231
Sale of stock 113,857
--------- ---------
Net cash provided by
financing activities 946,566 1,295,273
--------- ---------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 106,782 19,162
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 19,407 245
--------- ---------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 126,189 $ 19,407
========= =========
</TABLE>
See Notes to Financial Statements
F-6
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 1: MERGER ACTIVITY
TechLite, Inc. (the Company) was organized in accordance with the
General Corporation Act of the State of Oklahoma on June 3, 1997, for the
purpose of merging with TechLite Applied Sciences, Inc. (Applied Sciences), an
Oklahoma corporation. The Company had no business operations or significant
capital and had no intention of engaging in any active business until it merged
with Applied Sciences.
Applied Sciences is an operating company in the business of retrofitting
lighting fixtures to obtain reductions in electricity consumption. The Company
will be the surviving corporation, but Applied Sciences will elect all directors
and officers of the merged entity. The Company effected the merger on October
21, 1999 with Applied Sciences pursuant to approving votes of the shareholders
of both corporations. The merger was a tax-free reorganization accounted for as
a pooling of interests.
NOTE 2: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
- --------------------
The Company is organized as an Oklahoma corporation located in Tulsa,
Oklahoma. The Company is an energy efficient lighting specialist primarily
engaged in performing retrofits of lighting systems in commercial, educational
and healthcare facilities. The work is performed primarily under fixed-price
contracts which were obtained either through negotiations or a bidding process.
The length of the contracts varies, typically between 1 and 18 months. Due to
the nature of the construction industry, once work is completed on a contract,
new contracts must be identified and obtained. The ultimate success in obtaining
new contracts from year to year is subject to the inherent uncertainties of the
bidding and negotiation process associated with the construction industry.
Revenue Recognition
- -------------------
Revenues from fixed-price construction contracts are recognized on the
percentage-of-completion method, measured by the percentage of costs incurred to
date to estimated total costs for each contract. This method is used because the
Company considers expended costs to be the best available measure of progress on
these contracts. Because of the inherent uncertainties in estimating costs, it
is at least reasonably possible that the estimates used will change within the
near term.
F-7
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 2: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Cost Recognition
- ----------------
Contract costs include all direct material, labor, and equipment costs
and those indirect costs related to contract performance such as indirect labor,
supplies, and tool costs. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Changes in
job performance, job conditions, estimated profitability, including those
arising from contract penalty provisions, and final contract settlements may
result in revisions to costs and income and are recognized in the period in
which the revenues are determined.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Depreciation
- ------------
Furniture and equipment are depreciated using the straight-line method
over the estimated useful life of each asset, which is generally from five to
seven years.
Income Taxes
- ------------
Provisions for income taxes are based on taxes payable or refundable for
the current year and deferred taxes on temporary differences between the amount
of taxable income and pretax financial income and between the tax bases of
assets and liabilities and their reported amounts in the financial statements.
Deferred tax assets and liabilities are included in the financial statements at
currently enacted income tax rates applicable to the period in which the
deferred tax assets and liabilities are expected to be realized or settled as
prescribed in FASB Statement No. 109, Accounting for Income Taxes. A valuation
allowance is established to reduce deferred tax assets if it is more likely than
not that a deferred tax asset will not be realized, as explained in Note 7. As
changes in tax laws or rates are enacted, deferred tax assets and liabilities
are adjusted through the provision for income taxes.
F-8
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 3: CONTRACT RECEIVABLES
Contract receivables consist of:
<TABLE>
<CAPTION>
2000 1999
---- ----
Billed
<S> <C> <C>
Completed contracts $ 0 $ 135,516
Contracts in progress 264,534 685,713
------- -------
$ 264,534 $ 821,229
======= =======
</TABLE>
NOTE 4: COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs, estimated earnings, and billings on uncompleted contracts are summarized
as follows:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Costs incurred on uncompleted contracts $1,314,259 $3,066,461
Estimated earnings 405,623 1,237,926
--------- ---------
1,719,882 4,304,387
Billings to date 1,932,915 4,400,724
--------- ---------
$ (213,033) $ (96,337)
========= =========
Included in the accompanying balance sheet
under the following captions:
Billings in excess of costs and estimated
earnings on uncompleted contracts $ 213,033 $ 96,337
========= =========
</TABLE>
F-9
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 5: NOTES PAYABLE
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Unsecured notes payable, due on demand, at 10% $ 67,072 $ 76,262
Notes payable to banks, collateralized by
equipment, due in monthly installments plus
interest through
September 2002, at 8.25% to 12% 92,360 121,682
Unsecured line of credit, at 14.5% 38,778 49,500
Line of credit, secured by factored accounts
receivable, accounts receivable,
contracts receivable, inventory and
fixed assets, due 986,403 673,463
June and December 2000, at 12%
Note payable, collateralized by 750,692 shares
of Company stock owned by two officers
and additional real estate owned
by one officer, due May 2000, at 9% 250,830
Note payable, collateralized by contracts
receivable and accounts receivable,
due May 2000, at 9.5% 50,135
Note payable, collateralized by 8300 shares
of Emerson Electric stock owned by
a Company shareholder, due August 2000,
at 8% 395,100
Notes payable, building and land, due in
monthly installments plus interest
through October 2013, at 9% 384,509 397,713
--------- ---------
2,265,187 1,318,620
Accrued interest 47,538 22,391
--------- ---------
$2,312,725 $1,341,011
========= =========
</TABLE>
Aggregate annual maturities of debt at January 31, 2000, are:
<TABLE>
<S> <C> <C>
2001 $1,843,834
2002 46,175
2003 38,570
2004 19,099
2005 20,918
Thereafter 296,591
---------
$2,265,187
=========
</TABLE>
F-10
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 6: PROPERTY AND EQUIPMENT
Property and equipment consist of buildings, vehicles, equipment,
furniture and leasehold improvements. The vehicles and equipment are depreciated
over five years, furniture is depreciated over seven years, leasehold
improvements are depreciated over ten years and buildings are depreciated over
25 years. Accumulated depreciation is summarized as follows:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Buildings $ 26,667 $ 6,667
Vehicles 104,484 64,199
Equipment 92,549 61,756
Furniture 13,749 9,641
Leasehold improvements 12,802 6,402
-------- --------
$ 250,251 $ 148,665
======== ========
</TABLE>
NOTE 7: INCOME TAXES AND DEFERRED INCOME TAXES
Based on the Company's significant net operating losses it appears it is
more likely than not that the deferred tax asset created by the net operating
losses may not be realized. Therefore, a 100% allowance has been applied to the
net deferred tax asset.
There is no provision for income taxes included in these financial
statements. The net operating losses will be carried forward.
A reconciliation of the income tax expense (refund) at the statutory rate to
income tax expense at the Company's effective tax rate is shown below:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Computed at the statutory rate of 34% $(524,889) $ (35,851)
Increase in tax resulting from:
Net operating loss carryforward 524,889 35,851
------- -------
$ 0 $ 0
======= =======
</TABLE>
F-11
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 8: OTHER ASSETS
At January 31, 2000 and 1999, the Company recorded $345,862 and $7,240,
respectively, as other assets. Other assets include costs associated with
internally developed software which is amortized over 4 years, $3,608 and
$7,240, at January 31, 2000 and 1999, respectively. Additionally, other assets
at January 31, 2000 also include $90,688 as receivable from a vendor, $1,566 of
prepaid expenses and $250,000 as a purchase option contract. See Note 12 for
subsequent information related to the purchase option contract.
NOTE 9: BACKLOG
The following schedule summarizes changes in backlog on contracts during
the years ended January 31, 2000 and 1999. Backlog represents the amount of
revenue the Company expects to realize from work to be performed on uncompleted
contracts in progress at year end and from contractual agreements on which work
has not yet begun.
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Backlog, beginning of year $1,686,995 $ 594,980
New contracts during the year 1,342,022 2,638,292
Contract adjustments 3,100,581
--------- ---------
3,029,017 6,333,853
Less contract revenues earned during the year 2,625,750 4,646,858
--------- ---------
Backlog, end of year $ 403,267 $1,686,995
========= =========
</TABLE>
The Company entered into additional contracts with estimated revenues of
approximately $222,000 between February 1, 2000 and April 25, 2000.
NOTE 10: ADDITIONAL SHARES OF COMMON STOCK
As of January 31, 2000, the company agreed to issue 336,633 new shares
of common stock to various individuals for services rendered during the fiscal
year ended January 31, 2000. The value of the services rendered was $16,831.65.
As of April 25, 2000, the new shares of common stock were still unissued.
F-12
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 11: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerability due to certain concentrations.
Those matters include the following:
Estimates of revenue on uncompleted construction contracts are explained
in Note 2, under Revenue Recognition and are described in detail in Note 4.
The Company had one significant retrofit contract, Tulsa Public Schools
for the years ended January 31, 2000 and 1999. The percentage of total revenue
derived from Tulsa Public Schools was approximately 57% and 84% for the years
ended January 31, 2000 and 1999, respectively. The Tulsa Public Schools contract
was completed April 2000.
NOTE 12: SUBSEQUENT EVENTS
At January 31, 2000, the Company's financial statements reflected an
other asset of $250,000 as discussed in Note 8. This asset represents the
purchase of an option contract for the acquisition of A&K Service Corporation,
Inc. The option was valid at January 31, 2000. However, in February 2000 the
option expired without being exercised and the $250,000 was forfeited by the
Company. This amount will be reflected as general and administrative expense
associated with acquisition activities during February 2000.
F-13
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On October 22, 1999 the Company's principal independent accountant,
Hogan & Slovacek of Oklahoma City, Oklahoma, resigned. Its reports on the
Company's financial statements from inception onward contained no adverse
opinions or disclaimers or opinions and were not modified as to uncertainty,
audit scope or accounting principles. There were no disagreements with Hogan &
Slovacek, whether or not resolved, on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to Hogan & Slovacek's satisfaction, would have caused it
to make reference to the subject matter of the disagreements in connection with
its reports.
On October 22, 1999 the Company engaged new principal independent
accountants, Causon & Westhoff, Certified Public Accountants, P.C., of Tulsa,
Oklahoma, to audit the Company's financial statements.
The change in the Company's certifying accountants was made solely in
connection with the change of the Company's principal place of business from
Oklahoma City, Oklahoma to Tulsa, Oklahoma. The engagement of the new accounting
firm was made by the officers of the Company without the prior approval of the
board of directors or any committee of the board of directors, but a majority of
the directors advised the officers that the engagement would be approved at the
next board meeting, and it was so approved.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Set forth below are the names, and terms of office of each of the
directors, executive officers and significant employees of the Company and a
description of the business experience of each.
<TABLE>
<CAPTION>
Office Held Term of
Person Office Since Office
------ ------ ----------- -------
<S> <C> <C> <C>
J. D. Arvidson, 61 Chief Executive Officer, President 1992 2000
and Director
C. O. Sage, 67 Executive Vice President, Chief 1992 2000
Operating Officer, and Director
General Gerald Hahn,
USAF (Ret.), 62 Chairman of the Board of 1997 2000
Directors
Carol E. Sage, 63 Secretary 1994 2000
Mark D. Galvin, 46 Vice President 1993 2000
Lee Arehart, 65 Sales Director, Tulsa Office 1997 2000
</TABLE>
J. D. "Jim" Arvidson. Mr. Arvidson has 33 years of experience in
--------------------
construction contracting and management. He was engaged for 23 years in
16
<PAGE>
the design and construction of grain silos, forage silos and mechanical
conveyance systems. He was then involved in the construction of commercial
buildings, which construction involved interior lighting design. Mr. Arvidson
was the principal founder of TechLite Applied Sciences and was its chief
executive officer since its founding in 1992 until it merged with TechLite in
1999.
C. O. Sage. Mr. Sage has more than 25 years' experience in various
-----------
agriculture-related businesses, one being the building and management of a
35,000-head cattle feeding business. He served for almost ten years as Assistant
to the State Treasurer of Oklahoma in charge of the operations of the State
Treasurer's office. Mr. Sage was one of the founders of TechLite Applied
Sciences and was employed by it in his present capacity since it was founded in
1992 until it merged with TechLite in 1999.
General Gerald Hahn. General Hahn retired from the U.S. Air Force in
---------------------
1994 after a 32-year career, during which he developed expertise in the area of
logistics and financial management. From 1994 until the present, he has been
employed as president of Hahn Consulting and acts as an independent consultant
to the management of companies.
Carol E. Sage. Ms. Sage's early professional experience was as the
-------------
office manager for W-W Feeders, a cattle feeding business. Then, she managed for
ten years the audit department of the Office of the State Treasurer of Oklahoma.
Prior to joining the company, she served as a legal secretary from 1988 until
1994 in the law firm of Paula Sage, attorney. In 1994 she joined TechLite
Applied Sciences as its Secretary and as a bookkeeper. She is the spouse of C.
O. Sage, a director, executive vice president, and chief operating officer.
Mark D. Galvin. Mr. Galvin received a Master of Business Administration
--------------
degree from Oklahoma State University in 1994. He is the co-developer of the
company's software which automated the presentation materials of its lighting
survey functions. He served as the project manager for the Oral Roberts
University and Edmond, Oklahoma public schools lighting projects, which were
completed ahead of schedule and below budget.
Lee Arehart. Prior to joining TechLite Applied Sciences in 1993, Mr.
-----------
Arehart was the owner of businesses involved in retail management, recreational
facility management, and franchise operations.
ITEM 10. EXECUTIVE COMPENSATION
The directors of TechLite receive no compensation for their services as
directors. The officers of TechLite received from it an aggregate of $324,370 of
compensation in the last fiscal year for their services in all capacities.
Mr. Arvidson, the chief executive officer of TechLite, receives a draw
of $7,917 a month against commission income equal to 23 percent of the gross
profits from retrofitting contracts sold by Mr. Arvidson.
17
<PAGE>
Employment Contracts.
--------------------
TechLite has no employment contracts with any employees.
Stock Options.
-------------
TechLite has adopted a stock option plan, the major provisions of which
Plan are as follows:
Options granted under the plan may be "employee incentive stock options"
as defined under Section 422 of the Internal Revenue Code or non-qualified stock
options, as determined by the option committee of the board of directors at the
time of grant of an option. The plan enables the option committee of the board
of directors to grant up to 500,000 stock options to employees and consultants
from time to time. The option committee has granted no options.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows information as of May 15, 2000 with respect to
each beneficial owner of more than 5% of each class of voting stock of the
Company and to each of the officers and directors of the Company individually
and as a group:
<TABLE>
<CAPTION>
TechLite No. of Shares % of Class
- -------- ------------- ----------
<S> <C> <C>
J.D. Arvidson 578,400 23.6
9316 North 147th East Avenue
Owasso, OK 74136
C.O. Sage 247,292(1) 10.1
7902 South 70th East Place
Tulsa, OK 74133
Gen. Gerald Hahn 1,000 (2)
3744 South Niagara Way
Denver, CO 80237-1248
Carol E. Sage 247,292(1) 10.1
7902 West 70th East Place
Tulsa, OK 74133
Mark D. Galvin 74,097 3.0
5412 Harvard
Bartlesville, OK 74006
Rex D. Frates 148,056 6.0
2626 East 28th Street
Tulsa, OK 74114
Officers and Directors as a 900,789 36.7
group (5 persons)
- -------------------------
</TABLE>
18
<PAGE>
(1) These shares are held in joint tenancy with right of survivorship by
C.O. Sage and Carol E. Sage, husband and wife, who own 222,292 shares in
the aggregate.
(2) Less than one percent.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Subsequent to the merger on October 21, 1999 between TechLite, Inc. and
TechLite Applied Sciences, Inc., J.D. Arvidson, president and a director of the
company, and C.O. Sage, executive vice president, chief operating officer and a
director of the company, jointly guaranteed the repayment of a bank loan of
$250,000 made to the company. Mr. Arvidson pledged, to the repayment of the
loan, 528,000 shares of common stock of the company, and C.O. Sage pledged
222,292 shares of common stock of the company. As consideration for their
guarantees, the company granted 50,000 shares of common stock to J.D. Arvidson
and 25,000 shares of common stock to C.O. Sage.
During fiscal year 2000 Mr. Sage also loaned $99,529 to the company.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed, by incorporation by reference, as part
of this Form 10-KSB:
Exhibit Item
------- ----
2 - Agreement of merger of October 16, 1998, between
TechLite, Inc. and TechLite Applied Sciences, Inc.*
3.1 - Articles of Incorporation of TechLite, Inc.*
3.2 - Bylaws of TechLite, Inc.*
10.1 - 1998 stock Option Plan adopted by TechLite, Inc.*
27 - Financial Data Schedule.
* Previously filed with Form S-4, Commission File No. 333-
68137; incorporated herein.
(b) Reports on Form 8-K
A Form 8-K, Current Report, dated November 8, 1999, reporting events
beginning October 21, 1999, was filed November 12, 1999.
Items reported:
Item 2: Acquisition or Disposition of Assets - reporting a
merger with TechLite Applied Sciences, Inc. that became effective on
October 21, 1999;
19
<PAGE>
Item 4: Change in Registrant's Certifying Accountant - reporting
a change in the registrant's certifying accountant on October 22, 1999;
and
Item 7. Financial Statements and Exhibits - including (a) July
31, 1999 financial statements of the business acquired and (b) pro forma
financial information reflecting the registrant's merger on October 21,
1999, with TechLite Applied Sciences, Inc.
20
<PAGE>
SIGNATURES
In accordance with Section 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TECHLITE, INC.
Date: May 16, 2000 By /s/ J.D. Arvidson
----------------------------------
J.D. Arvidson, Chief Executive
Officer
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date: May 16, 2000 By /s/ C.O. Sage
----------------------------------
C.O. Sage, Chief Operating Officer
and Director
Date: May 16, 2000 By /s/ J.D. Arvidson
----------------------------------
J.D. Arvidson, Chief Executive
Officer and Director
Date: May 16, 2000 By /s/ Gerald Hahn
----------------------------------
Gerald Hahn, Director
Date: May 16, 2000 By /s/ Mark D. Galvin
----------------------------------
Mark D. Galvin, Vice President
Date: May 16, 2000 By /s/ Carol E. Sage
----------------------------------
Carol E. Sage, Secretary
21
<PAGE>
TechLite, Inc.
EXHIBIT INDEX (FORM 10-KSB JANUARY 31, 2000)
Exhibit Item
------- ----
2 - Agreement of Merger of October 16, 1998,
between TechLite, Inc. and TechLite Applied
Sciences, Inc.*
3.1 - Articles of Incorporation of TechLite, Inc.*
3.2 - Bylaws of TechLite, Inc.*
10.1 - 1998 Stock Option Plan adopted by TechLite,
Inc.*
27 - Financial Data Schedule.
* Previously filed with Form S-4, Commission File No. 333-68137;
incorporated herein.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-2000
<PERIOD-END> JAN-31-2000
<CASH> 126,189
<SECURITIES> 0
<RECEIVABLES> 337,606
<ALLOWANCES> 0
<INVENTORY> 189,949
<CURRENT-ASSETS> 463,795
<PP&E> 919,594
<DEPRECIATION> 250,251
<TOTAL-ASSETS> 1,662,949
<CURRENT-LIABILITIES> 3,243,895
<BONDS> 384,509
0
0
<COMMON> 1,380,503
<OTHER-SE> (3,345,958)
<TOTAL-LIABILITY-AND-EQUITY> 1,662,949
<SALES> 2,625,750
<TOTAL-REVENUES> 2,692,837
<CGS> 2,170,692
<TOTAL-COSTS> 2,170,692
<OTHER-EXPENSES> 2,065,936
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,543,791)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,543,791)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,543,791)
<EPS-BASIC> (0.63)
<EPS-DILUTED> (0.63)
</TABLE>
