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 July 31, 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)
Commission File No. 333-68071
State of Incorporation: Oklahoma
IRS Employer I.D. Number: 73-1522114
6106 East 32nd Place, Suite 101
Tulsa, Oklahoma 74135
918-664-1441
-------------------------------------------------------
(Address and telephone number of registrant's principal
executive offices and principal place of business)
Indicate by check mark whether any 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 July 31, 2000, there were 3,224,311 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
2
TECHLITE, INC.
BALANCE SHEETS
As of the six months ended
July 31, 2000 and the twelve months ended January 31, 2000
<TABLE>
<CAPTION>
July 31, 2000 January 31, 2000
(Unaudited) (Audited)
------------- ----------------
ASSETS
<S> <C> <C>
Cash $ 142,271 $ 126,189
Accounts receivable 275,096 337,606
Inventory 6,000 189,949
Property & equipment
Equipment 197,607 196,314
Furniture and fixtures 33,637 32,490
Building and land 400,000 400,000
Leasehold improvements 70,494 68,020
Autos and trucks 209,370 216,770
----------- ------------
911,108 913,594
Less accumulated depreciation 294,879 250,251
----------- ------------
616,229 663,343
----------- ------------
Other assets, net 101,804 345,862
----------- ------------
Total Assets $ 1,141,400 $ 1,662,949
=========== ============
LIABILITIES
Accounts payable $ 673,235 $ 689,583
Accrued wages 50,123 35,831
Taxes payable 397,428 314,450
Billings in excess of costs and estimated
earnings on uncompleted contracts 38,400 213,033
Notes payable 2,372,235 2,312,725
Other liabilities 70,592 62,782
----------- ------------
Total Liabilities 3,602,013 3,628,404
----------- ------------
EQUITY
Preferred stock, $.001 par value;
10,000,000 authorized shares;
none issued - -
Common stock, $.001 par value;
40,000,000 authorized shares;
3,224,311 and 2,454,347 3,224 2,455
Paid-in-capital 2,051,421 1,378,048
Retained earnings(deficit) (4,515,258) (3,345,958)
---------- ------------
Total Equity (2,460,613) (1,965,455)
---------- ------------
Total Liabilities & Equity $ 1,141,400 $ 1,662,949
=========== ============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE>
TECHLITE, INC.
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31 July 31
------------------- ----------------------
2000 1999 2000 1999
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Contract revenues earned 111,544 534,347 662,654 1,776,564
Cost of revenues earned 81,733 396,904 602,035 1,294,912
-------- -------- ---------- ----------
Gross profit 29,811 137,443 60,619 481,652
General & administrative expenses 528,563 550,195 1,272,051 1,032,159
-------- -------- ---------- ----------
Income(Loss) from operations (498,752) (412,752) (1,211,432) (550,507)
Other income 16,426 7,262 42,132 16,171
-------- -------- ---------- ----------
Income(Loss) before taxes (482,326) (405,490) (1,169,300) (534,336)
Provision for income taxes 0 0 0 0
-------- -------- ---------- ----------
Net Income(Loss) (482,326) (405,490) (1,169,300) (534,336)
======== ======== ========== ==========
Net Income (Loss) per common share (0.15) (0.18) (0.36) (0.24)
======== ======== ========== ==========
</TABLE>
See Notes to Financial Statements
-4-
<PAGE>
TECHLITE, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31 July 31
----------------------------- ------------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net income (loss) (482,326) (405,490) (1,169,300) (534,336)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 25,549 26,000 52,502 53,741
Loss (gain) on disposal of fixed asset (207) - 1,828 -
Decrease (increase) in contract receivables (9,984) (253,032) 62,510 (321,804)
Decrease (increase) in inventory 18,217 183,949 3,254
Decrease (increase) in other assets/receivables (6,098) (25) 243,156 (2,748)
Net increase (decrease) in billings related to
costs and estimated earnings on
uncompleted contracts (9,193) (31,588) (174,633) (80,393)
Increase (decrease) in accounts payable (67,187) 347,376 (16,348) 508,197
Increase (decrease) in common stock 89,143 - 89,143 -
Increase (decrease) in other accrued liabilities 107,315 49,176 152,581 103,805
--------- -------- ---------- ---------
Net cash provided by operating activities (334,771) (267,583) (574,612) (270,284)
--------- -------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of equipment 900 - 900 -
Acquisition of equipment (2,733) (43,399) (7,214) (77,365)
-------- -------- ---------- ---------
Net cash used in investing activities (1,833) (43,399) (6,314) (77,365)
-------- -------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principle payments on notes payable (693,532) (179,893) (1,101,056) (863,356)
New borrowings 750,792 460,715 1,398,064 1,216,191
Sale of stock
300,000 - 300,000 -
-------- -------- ---------- ---------
Net cash used in financing activities 357,260 280,822 597,008 352,835
-------- -------- ---------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 20,656 (30,160) 16,082 5,186
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 121,615 54,508 126,189 19,162
-------- -------- ---------- ---------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD 142,271 24,348 142,271 24,348
======== ======== ========== =========
</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 July 31, 2000; the statement of operations for the three months ended
July 31, 2000 and 1999, and the six months ended July 31, 2000 and 1999; the
statement of cash flows for the three months ended July 31, 2000 and 1999, and
the six months ended July 31, 2000 and 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 respects, 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 bidding process.
The length of the contracts vary, 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.
-6-
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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.
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.
-7-
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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>
July 31, January 31,
2000 2000
-------- -----------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 35,061 $ 1,314,259
Estimated earnings 9,188 405,623
--------- -----------
44,249 1,719,882
Billings to date 82,649 1,932,915
--------- -----------
$ (38,400) $ (213,033)
========== ===========
Included in the accompanying balance sheet
under the following captions;
Billings in excess of costs and estimated
earnings on uncompleted contracts $ 38,400 $ 213,033
========= ===========
</TABLE>
-8-
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4: NOTES PAYABLE
<TABLE>
<CAPTION>
July 31, 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% 70,456 92,360
Unsecured line of credit, at 14.5% 33,634 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% 1,007,080 986,403
Note payable, collateralized by 750,692 shares
of Company stock owned by two officers and
additional real estate owned by one officer,
due August 2000, at 9% 250,830 250,830
Note payable, collateralized by contracts
receivable and accounts receivable, due
August 2000, at 9.5% 50,135 50,135
Note payable, collateralized by accounts
receivable, due in monthly installments plus
interest through March 2003, at 11% 23,345
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% 379,583 384,509
--------- ---------
2,277,235 2,265,187
Accrued interest 95,000 47,538
--------- ---------
$2,372,235 $2,312,725
========= =========
</TABLE>
-9-
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4: NOTES PAYABLE (Continued)
Aggregate annual maturities of debt at July 31, 2000, listed by fiscal year-end
are as follows:
<TABLE>
<S> <C>
January 31, 2001 $1,836,539
January 31, 2002 54,359
January 31, 2003 47,701
January 31, 2004 20,721
January 31, 2005 20,918
Thereafter 296,997
----------
$2,277,235
==========
</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>
July 31, January 31,
2000 2000
-------- -----------
<S> <C> <C>
Buildings $ 36,667 $ 26,667
Vehicles 117,435 104,484
Equipment 108,788 92,549
Furniture 15,706 13,749
Leasehold improvements 16,283 12,802
--------- ---------
$ 294,879 $ 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.
-10-
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6: INCOME TAXES AND DEFERRED INCOME TAXES (Continued)
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>
July 31, January 31,
2000 2000
-------- -----------
<S> <C> <C>
Computed at the statutory rate of 34% $ (397,562) $ (524,889)
Increase in tax resulting from:
Net operating loss carryforward 397,562 524,889
--------- ---------
$ 0 $ 0
========= =========
</TABLE>
NOTE 7: OTHER ASSETS
At July 31, 2000 and January 31, 2000, the Company recorded $101,804 and
$345,862, respectively, as other assets. Other assets include costs associated
with internally developed software which is amortized over 4 years, $1,754 and
$3,608, at July 31, 2000 and January 31, 2000, respectively. Other assets also
includes approximately $100,000 and $91,000, respectively, as a receivable from
a vendor at July 31, 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: 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.
-11-
<PAGE>
TECHLITE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9: BACKLOG
The following schedule summarizes changes in backlog on contracts
during the periods ended July 31, 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>
July 31, January 31,
2000 2000
-------- -----------
<S> <C> <C>
Backlog, beginning of year $ 403,267 $1,686,995
New contracts during the period 639,213 1,342,022
Contract adjustments --------- ---------
1,042,480 3,029,017
Less contract revenues earned during the period 662,654 2,625,750
--------- ---------
Backlog, end of period $ 379,826 $ 403,267
========= =========
</TABLE>
NOTE 10: PENDING ACQUISITION
TechLite, Inc. has entered into an agreement to purchase all of the capital
stock of Sun & Sun Industries of Huntington Beach, California for cash and
shares of TechLite, Inc. common stock. Sun & Sun Industries provides design and
installation of energy-efficient and EPA-compliant lighting systems for ESCO's
(Energy Service Companies) and Power Utility customers in the commercial,
retail, education, hospital, municipal and federal markets. As of July 31, 2000,
the execution of the purchase agreement is pending, due to additional financial
information needed from Sun & Sun Industries.
-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 - Second Quarter of Fiscal Year 2001 Compared to
------------------------------------------------------------------------
Second Quarter of Fiscal Year 2000
-----------------------------------
Our revenues of $111,544 for the quarter ended July 31, 2000 (Q2 2001)
fell by $422,803 or 79.1 percent from revenues of $534,347 for the quarter ended
July 31, 1999 (Q2 2000). This reduction in sales is attributed to our having
devoted considerable marketing efforts outside our primary geographical area of
business.
Our gross margin for Q2 2001 was $29,811, or 26.7 percent, compared with
gross margin of $137,443, or 25.7 percent, for Q2 2000. This increase in gross
margin is attributable to first quarter projects closed out in the second
quarter.
General and administrative expenses for Q2 2001 were $528,563,
compared with general and administrative expenses of $550,195 for Q2 2000.
We had a net loss of $482,326 for Q2 2001 compared to a net loss of
$405,490 for Q2 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. Efforts are underway to
develop a national presence through strategic alliances, partnerships, or the
roll up of companies with structures and marketing philosophies that complement
those of TechLite. This should provide TechLite and its affiliates a national
presence through which they can effectively serve customers beyond the
geographic reach of each individual affiliate.
TechLite, Inc. has entered into an agreement to purchase all of the
capital stock of Sun & Sun Industries of Hunting Beach, California for cash and
shares of TechLite, Inc. common stock. Both companies provide design and
installation of energy-efficient and EPA-compliant lighting systems for ESCO
(Energy Service Company) and Power Utility customers in the commercial, retail,
education, hospital, municipal and federal markets. Combined synergies of the
companies are expected to boost sales five to ten times current levels without
the cost normally associated with market territory expansion.
-13-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On September 7, 2000, in Civil Action CJ 2000 C4310 filed in the
District Court of Tulsa County, Oklahoma, entitled Kriz-Davis Company vs.
Techlite, Inc., et al, TechLite was sued on an open account for the purchase of
goods and services in the alleged amount of $51,561. This amount plus attorney
fees and court costs are sought in the action. TechLite will admit the
liability.
Item 5. Other Information
On July 13, 2000, TechLite entered into an Agreement and Plan of Merger
with Sun and Sun Industries, Inc., of Huntington Beach, California and the
shareholders of Sun and Sun Industries, Inc. Pursuant to the agreement, Sun and
Sun Industries shall merge with a to-be-formed, wholly-owned subsidiary of
TechLite with such subsidiary to be the surviving corporation of the merger. The
merger shall occur one week after Sun and Sun Industries obtains an audit of its
last two years of operations.
TechLite is required to contribute $1,200,000 in cash and 600,000 shares
of TechLite common stock to its subsidiary at the time of its formation. When
the merger occurs, the outstanding shares of Sun and Sun Industries shall
convert into the 600,000 shares of TechLite common stock held by the subsidiary,
and the $1,200,000 in cash shall be distributed to creditors of Sun and Sun
Industries. The shareholders of Sun and Sun Industries shall also be entitled to
receive $3 million in cash or in TechLite common stock over the three-year
period after the effective date of the merger as follows:
o $250,000 worth of TechLite common stock one year after the
merger, the "worth" of the stock being equal to the higher of
$0.50 a share or the 50-day moving average price of the stock;
provided that TechLite can elect to contribute up to fifty
percent of such $250,000 in cash,
o $750,000 worth of TechLite common stock two years after the
merger, the "worth" of the stock being equal to the higher of
$0.50 a share or the 50-day moving average price of the stock;
provided that TechLite can elect to contribute up to fifty
percent of such $750,000 in cash, and
o $2,000,000 worth of TechLite common stock three years after
the merger, the "worth" of the stock being equal to the higher
of $0.50 a share or the 50-day moving average price of the
stock; provided that TechLite can elect to contribute up to
fifty percent of such $2,000,000 in cash.
Should the 50-day moving average price of TechLite's common stock be less than
$0.50 a share on any of the three anniversaries of the merger, the shareholders
of Sun and Sun Industries can require that up to fifty percent of the dollar
obligation due that day be paid in cash rather than in stock.
-14-
<PAGE>
The shareholders of Sun and Sun Industries are given certain rights over
the three-year period after the merger with regard to representation on the
board of directors of TechLite, to the election of officers of TechLite and to
participation in any stock options that may be granted by TechLite.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Item
------- ----
10 Agreement and Plan of Merger of July 13, 2000, among
TechLite, Inc., Sun and Sun Industries, Inc. and the
shareholders of Sun and Sun Industries, Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: September 13, 2000 TECHLITE, INC.
By/s/ J.D. Arvidson
----------------------------------
J.D. Arvidson
Chief Executive Officer
-15-
<PAGE>
TechLite, Inc.
Commission File No. 333-68071
Exhibits to Form 10-QSB for the quarterly period ended July 31, 2000
Exhibit Description
------- -----------
10 Agreement and Plan of Merger of July 13, 2000, among TechLite,
Inc., Sun and Sun Industries, Inc., and the shareholders of Sun
and Sun Industries, Inc.
27 Financial Data Schedule
