U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
TechLite, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Oklahoma 333-68071 73-1522114
-------------- ------------------------ -------------
(state of (Commission File Number) (IRS Employer
incorporation) I.D. Number)
6106 East 32nd Place, Suite 101
Tulsa, OK 74135
918-664-1441
-------------------------------------------------------
(Address and telephone number of registrant's principal
executive offices and principal place of business)
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 twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
As of April 30, 2000, there were 2,454,347 shares of the Registrant's Common
Stock, par value $0.001 per share, outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TECHLITE, INC.
BALANCE SHEETS
As of the three months ended April 30, 2000
and the twelve months ended January 31, 2000
<TABLE>
<CAPTION>
April 30, 200 January 31, 2000
(Unaudited) (Audited)
-------------- ----------------
ASSETS
<S> <C> <C>
Cash $ 121,615 $ 126,189
Accounts receivable 265,112 337,606
Inventory 24,217 189,949
Property & equipment
Equipment 196,874 196,314
Furniture and fixtures 33,637 32,490
Building and land 400,000 400,000
Leasehold improvements 68,494 68,020
Autos and trucks 215,770 216,770
-------------- ---------------
914,775 913,594
Less accumulated depreciation 275,037 250,251
-------------- ---------------
639,738 663,343
-------------- ---------------
Other assets, net 95,706 345,862
-------------- ---------------
Total Assets $ 1,146,388 $ 1,662,949
============== ===============
LIABILITIES
Accounts payable $ 740,422 $ 689,583
Accrued wages 8,078 35,831
Taxes payable 357,063 314,450
Billings in excess of costs and
estimated earnings on
uncompleted contracts 47,593 213,033
Notes payable 2,582,076 2,312,725
Other liabilities 63,585 62,782
-------------- ---------------
Total Liabilities 3,798,817 3,628,404
-------------- ---------------
EQUITY
Preferred stock, $.001 par value;
10,000,000 authorized shares;
none issued - -
Common stock, $.001 par value;
40,000,000 2,455 2,455
authorized shares; 2,454,347
issued and outstanding
Paid-in-capital 1,378,048 1,378,048
Retained earnings(deficit) (4,032,932) (3,345,958)
-------------- ---------------
Total Equity (2,652,429) (1,965,455)
-------------- ---------------
Total Liabilities & Equity $ 1,146,388 $ 1,662,949
============== ===============
</TABLE>
See Notes to Financial Statements
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<PAGE>
TECHLITE, INC.
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 30
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Contract revenues earned $ 551,110 $1,242,217
Cost of revenues earned 520,302 898,008
----------- -----------
Gross profit 30,808 344,209
General & administrative expenses 743,488 481,964
----------- -----------
Income(Loss) from operations (712,680) (137,755)
Other income 25,706 8,909
----------- -----------
Income(Loss) before taxes (686,974) (128,846)
Provision for income taxes 0 0
----------- -----------
Net Income(Loss) $(686,974) $ (128,846)
=========== ===========
Net Income(Loss) per common share (0.28) (0.05)
=========== ===========
</TABLE>
See Notes to Financial Statements
-4-
<PAGE>
TECHLITE, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
April 30, 2000 April 30, 1999
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ (686,974) $ (128,846)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 26,953 27,741
Loss on disposal of fixed asset 2,035
Decrease (increase) in contract
receivables 72,494 (68,772)
Decrease (increase) in inventory 165,732 3,254
Decrease (increase) in other
assets/receivables 249,254 (2,723)
Net increase (decrease) in billings
related to costs and estimated
earnings on uncompleted contracts (165,440) (48,805)
Increase (decrease) in accounts
payable 50,839 160,821
Increase (decrease) in other
accrued liabilities 45,266 54,629
----------------- -----------------
Net cash provided by
operating activities (239,841) (2,701)
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment (4,481) (33,966)
----------------- -----------------
Net cash used in investing
activities (4,481) (33,966)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principle payments on notes payable (407,524) (683,463)
New borrowings 647,272 755,476
Sale of stock - -
----------------- -----------------
Net cash used in financing
activities 239,748 72,013
----------------- -----------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (4,574) 35,346
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 126,189 19,162
----------------- -----------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 121,615 $ 54,508
================= =================
</TABLE>
See Notes to Financial Statements
-5-
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The balance sheet of TechLite, Inc. (the Company), at January 31, 2000 has been
taken from the Company's audited financial statements at that date. The balance
sheet at April 30, 2000, the statement of operations for the three months ended
April 30, 2000 and the three months ended April 30, 1999, and the statement of
cash flows for the three months ended April 30, 2000 and the three months ended
April 30, 1999 have been prepared in conformity with generally accepted
accounting principles and contain such adjustments as management feels are
necessary to present fairly, in all material aspects, the financial position and
results of operations of the Company.
NOTE 1: MERGER ACTIVITY
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
-6-
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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. NOTE
2: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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.
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.
-7-
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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 6. As
changes in tax laws or rates are enacted, deferred tax assets and liabilities
are adjusted through the provision for income taxes.
NOTE 3: COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs, estimated earnings, and billings on uncompleted contracts are summarized
as follows:
<TABLE>
<CAPTION>
April 30, January 31,
2000 2000
--------- -----------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 42,777 $1,314,259
Estimated earnings 17,471 405,623
--------- -----------
60,248 1,719,882
Billings to date 107,841 1,932,915
--------- -----------
$(47,593) $ (213,033)
========= ===========
Included in the accompanying balance sheet
under the following captions:
Billings in excess of costs and
estimated earnings on uncompleted
contracts $ 47,593 $ 213,033
========= ==========
</TABLE>
-8-
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4: NOTES PAYABLE
<TABLE>
<CAPTION>
April 30, January 31,
2000 2000
----------- -----------
<S> <C> <C>
Unsecured notes payable, due on demand, at 10% $ 67,072 $ 67,072
Notes payable to banks, collateralized
by equipment, due in monthly installments plus
interest through September 2002, at 8.25% to 12% 78,657 92,360
Unsecured line of credit, at 14.5% 35,753 38,778
Line of credit, secured by factored accounts
receivable, accounts receivable, contracts
receivable, inventory and fixed assets, due
June and December 2000, at 12% 1,004,212 986,403
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% 250,830 250,830
Note payable, collateralized by contracts
receivable and accounts receivable,
due May 2000, at 9.5% 50,135 50,135
Note payable, unsecured, due February
2001, at 7% 19,000
Note payable, collateralized by
accounts receivable, due in monthly
installments plus interest through
March 2003, at 11% 25,000
Note payable, collateralized by Company
stock options at $1.50 per share, due 200,000
February 2003, at 7.5%
Note payable, collateralized by 8300 shares
of Emerson Electric stock owned by a
Company shareholder, due August 2000, at 8% 395,100 395,100
Notes payable, building and land, due in
monthly installments plus interest through
October 2013, at 9% 379,176 384,509
----------- ----------
2,504,935 2,265,187
Accrued interest 77,141 47,538
----------- ----------
$2,582,076 $2,312,725
=========== ==========
</TABLE>
-9-
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4: NOTES PAYABLE (Continued)
Aggregate annual maturities of debt at April 30, 2000, listed by fiscal
year-end are as follows:
<TABLE>
<S> <C>
January 31, 2001 $1,895,645
January 31, 2002 140,026
January 31, 2003 114,368
January 31, 2004 37,387
January 31, 2005 20,918
Thereafter 296,591
----------
$2,504,935
==========
</TABLE>
NOTE 5: 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>
April 30, January 31,
2000 2000
----------- -----------
<S> <C> <C>
Buildings $ 31,667 $ 26,667
Vehicles 113,527 104,484
Equipment 100,602 92,549
Furniture 14,728 13,749
Leasehold improvements 14,513 12,802
----------- -----------
$ 275,037 $ 250,251
=========== ===========
</TABLE>
NOTE 6: 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:
-10-
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
April 30, January 31,
2000 2000
----------- -----------
<S> <C> <C>
Computed at the statutory rate of 34% $ (233,571) $ (524,889)
Increase in tax resulting from:
Net operating loss carryforward 233,571 524,889
----------- -----------
$ 0 $ 0
=========== ===========
</TABLE>
NOTE 7: OTHER ASSETS
At April 30, 2000 and January 31, 2000, the Company recorded $95,706 and
$345,862, respectively, as other assets. Other assets include costs associated
with internally developed software which is amortized over 4 years, $2,706 and
$3,608, at April 30, 2000 and January 31, 2000, respectively. Other assets also
includes approximately $91,000 as a receivable from a vendor and $1,500 of
prepaid expenses at April 30, 2000 and January 31, 2000. Additionally, other
assets at January 31, 2000 also include $250,000 as a purchase option contract.
This contract expired in February 2000 and the $250,000 was forfeited.
NOTE 8: 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 30, 2000, the new shares of common stock were still unissued.
NOTE 9: BACKLOG
The following schedule summarizes changes in backlog on contracts
during the periods ended April 30, 2000 and January 31, 2000. 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>
April 30, January 31,
2000 2000
---------- -----------
<S> <C> <C>
Backlog, beginning of year $ 403,267 $1,686,995
New contracts during the year 208,241 1,342,022
Contract adjustments
611,508 3,029,017
Less contract revenues earned during the year 551,110 2,625,750
----------- -----------
Backlog, end of year $ 60,398 $ 403,267
=========== ===========
</TABLE>
-11-
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 10: 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 3.
-12-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction with
the financial statements and the accompanying notes thereto and is
qualified in its entirety by the foregoing and by more detailed financial
information appearing elsewhere. See "Item 1. Financial Statements."
Results of Operations - First Quarter of Fiscal Year 2001 Compared to
--------------------------------------------------------------------------
First Quarter of Fiscal Year 2000
---------------------------------
Our revenues of $551,110 for the quarter ended April 30, 2000 (Q1 2001) fell
by $691,107 or 55.6 percent from revenues of $1,242,217 for the quarter ended
April 30, 1999 (Q1 2000). This reduction is due to lack of sales generated from
marketing efforts outside corporate offices' primary geographical area of
business.
Our gross margin for Q1 2001 was $30,808, or 6 percent, compared with gross
margin of $344,209, or 27.7 percent, for Q1 2000. This reduction of gross margin
is attributable to the smaller margin inherent in the contracts worked on the
last quarter of 2000 which extended into the Q1 2001, such contracts being
public bid contracts that generally involve smaller margins and less revenue
than negotiated contracts.
General and administrative expenses for Q1 2001 were $743,488, or 134.9
percent of revenues, compared with general and administrative expenses of
$481,964, or 38.8 percent of revenues, for Q1 2000. This increase was due
primarily to a one-time expense associated with the expiration of a purchase
option valued at $250,000.
We had a net loss of $686,974 for Q1 2001 compared to net loss of $128,846
for Q1 2000.
Outlook
-------
This outlook section contains a number of forward-looking statements, all of
which are based on current expectations. Actual results may vary considerably.
We are optimistic about the future at TechLite. We propose to develop a
national presence through strategic alliances, partnerships, and acquisitions of
companies in our business but located elsewhere in the U.S. This will allow
TechLite and our affiliates to offer a national presence to companies and
corporations that reach beyond the geographical territories of each affiliate
individually. We expect the combined synergies of the companies to boost sales
five to ten times current level without the cost normally associated with market
territory expansion.
Management's Statement on Y2K
-----------------------------
TechLite's information technology system is Y2K compliant based on
communications with our hardware and software providers and in-house testing. We
have no non-information technology systems affecting business operations. We
have no multiple computer systems.
<PAGE>
Third parties with whom we have material relationships have confirmed that
they expect no business interruptions. We expect no cost directly relating to
fixing Y2K issues, such as modifying software and hiring Y2K solution providers.
We estimate no material lost revenues due to Y2K issues, and we are establishing
a contingency plan.
TechLite's future results of operations and the other forward-looking
statements contained herein involve a number of risks and uncertainties. Among
the factors that could cause actual results to differ materially are the
following: inability of the Company to obtain needed additional capital, loss
of personnel - particularly chief execute officer Jim Arvidson - as a result
of accident or for health reasons, and interruptions in the supply of inventory
from manufacturers of the inventory.
Item 6. Exhibits and Reports on Form 10QSB
(a) Exhibits
Exhibit Item
------- ----
27 - Financial Data Schedule.
(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;
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.
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Date: June 20, 2000 TechLite, Inc.
By /s/ J.D. Arvidson
-----------------------------------------
J.D. Arvidson, Chief Executive Officer
