U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
JUNE 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 ______________
COMMISSION FILE NUMBER: 000-28775
LUMINART CORP.
(Exact name of registrant as specified in its charter)
Nevada 87-0413934
(State or jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
3245 Grande Vista Drive, Newbury Park, California 91320
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (805) 480-9899
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) been subject to such filing
requirements for the past 90 days. Yes X No .
As of June 30, 2000, the Registrant had 17,006,167 shares of
common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X .
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2000 3
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS
ENDED JUNE 30, 1999 AND JUNE 30, 2000 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1999
AND JUNE 30, 2000 5
NOTES TO FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 12
ITEM 5. OTHER INFORMATION 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURE 13
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCAL STATEMENTS.
LUMINART CORP.
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
June 30, 2000
Current Assets:
Cash $ 20,317
Accounts Receivable (Net of
Allowance for Bad Debts of $5,732) 94,294
Inventory 804,200
Other Current Assets 7,395
Total Current Assets 922,206
Property & Equipment:
Net Property & Equip 409,625
Organization Costs (Net) 0
Goodwill (Net) 0
Capitalized Software Costs 193,717
Deferred Taxes 82,705
276,422
Total Assets 1,608,253
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable 113,733
Accrued Payroll and related 206,635
Taxes Payable 32,786
Interest Payable 95,900
449,054
Notes Payable 97,500
Shareholders'Equity:
Preferred Stock 685,000
Common Stock 17,006
Additional Paid-In 3,054,118
Accumulated Deficit (2,694,797)
Shareholders' Equity 1,061,328
Total Liabilities & Shareholders' Equity $ 1,608,253
See Accompanying Notes to Unaudited Financial Statements
LUMINART CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
June 30, 1999 June 30, 2000 June 30, 1999 June 30, 2000
Revenue $486,798 $ 129,663 $1,250,999 $ 554,972
Cost of Sales 183,437 27,683 255,005 132,515
Gross Profit 303,361 101,980 995,994 422,456
Operating Expenses:
Depreciation &
Amortization 117,110 54,470 183,763 98,860
Selling, General
& Admin. 135,203 203,363 771,854 459,417
Other Operating
Costs 31,214 0 0 43,381
Total Operating
Costs 283,527 257,833 955,617 901,658
Interest Expense 0 23,975 11,988 37,309
Income Before Income
Taxes 19,834 (179,828) 28,389 (516,511)
Net Income $ 19,834 $(179,828) $ 28,389 $(516,511)
Basic Earnings
Per Share: $nil $(0.01) $nil $(0.03)
Diluted Earnings
Per Share: $nil $(0.01) $nil $(0.03)
Average Shares
Used Basic: 17,006,167 17,006,167 15,542,450 17,006,167
Average Shares
Used Diluted: 18,006,167 19,156,167 16,542,450 19,156,167
Average Market
Price of Stock: $0.22 $0.21 $0.18 $0.31
Ending Market
Price of Stock: $0.26 $0.20 $0.26 $0.20
See Accompanying Notes to Unaudited Financial Statement
LUMINART CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Nine Months
Ended Ended
June 30, 1999 June 30, 2000
Cash Flows From Operating
Activities:
Adjustments:
Net Income from Operations $ 28,389 $(516,511)
Depreciation/Amortization 183,763 98,860
Accounts Receivable (185,133) 50,148
Change in Inventories (241,137) (2,881)
Change in Other Assets (17,101) 8,567
Change in Accounts Payable (35,787) 60,225
Increase in Accrued Liab. 3,995 137,860
Increase in Other Liabilities 10,130 44,985
Interest Payable 11,988 35,962
Total Adjustments (269,282) 433,726
Net Cash Provided
(Used) by Operations 26,247 (82,785)
Cash Flows From Investing
Activities:
Increase in Fixed Assets (269,050) 106,637
Other Assets 34,693 71,493
Net Cash Used in Investing (234,357) 178,130
Cash Flows From Financing
Activities:
Notes Payable Non-Current 159,000 (82,500)
Sales of Common Stock 347,082 0
Net Cash Used in Financing 506,082 (82,500)
Net Increase (Decrease) in Cash 30,832 12,845
Beginning Cash Balance 13,738 7,472
Ending Cash Balance $ 44,570 $ 20,317
See Accompanying Notes to Unaudited Financial Statement
LUMINART CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Luminart Corp. (the "Company") is a technology company which is a
designer, developer, manufacturer, and marketer of proprietary
sign making products for the worldwide marketplace.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reporting amounts
in the consolidated financial statements and accompanying notes.
Actual results could differ from those estimates.
Basis of Presentation
The accompanying unaudited consolidated financial statements are
presented in accordance with the requirements of Form 10-QSB and
Item 310 of Regulation SB. Accordingly, they do not include all
the disclosures normally required by generally accepted
accounting principles. Reference should be made to the Company's
audited financial statements for the year ended September 30,
1999 as contained in a Form 10-SB filed with the U.S. Securities
and Exchange Commission for additional disclosures including a
summary of accounting policies, which have not significantly
changed.
Principles of Consolidation
The consolidated financial statements of the Company include the
accounts of the Company and all its wholly-owned subsidiaries.
All significant intercompany transactions and balances are
eliminated.
Revenue Recognition
Revenue is generally recognized when the Company has completed
substantially all manufacturing and/or sign development to
customer specifications, factory testing has been completed and
the product has been shipped. Additionally, for sign systems
where installation requirements are the responsibility of the
Company and payment terms are related to installation completion,
revenue is generally recognized when the system has been shipped
to the customer's final site for installation.
Inventories
Inventories are valued at the lower of average cost or market.
Inventories consisted of the following at June 30, 2000:
Raw Material $ 686,474
Work in Process 36,722
Finished Goods 81,004
$ 804,200
Property and Equipment
Property and equipment are recorded at cost and depreciated on a
straight-line basis over their estimated useful lives as follows:
Leasehold improvements: 15 years
Manufacturing equipment: 7 years
Computer equipment, office
Furniture and other: 5-7 years
Capitalized Software Development Costs
Certain software development costs are capitalized when incurred.
Capitalization of software development costs begins upon the
establishment of technological feasibility. The establishment of
technological feasibility and the ongoing assessment of
recoverability of capitalized software development costs require
considerable judgment by management with respect to certain
external factors, including, but not limited to, anticipated
future revenues, estimated economic life and changes in software
and hardware technologies. The capitalized software development
costs would be adjusted to fair market value if significant facts
and circumstances altered the Company's original assumptions and
rationale.
Unamortized capitalized software development costs determined to
be in excess of the net realizable value of the product are
expensed immediately.
Amortization of capitalized software costs is provided by the
straight-line method over the remaining estimated economic life
of the product. An original estimated economic life of 15 years
is assigned to capitalized software development of $221,677, net
of accumulated amortization of $27,960 at June 30, 2000.
Income Taxes
The liability method as prescribed by Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes" ("FAS 109"), is used in accounting for income taxes.
At June 30, 2000 income tax expense was zero due to net operating
loss carryforwards available for tax purposes.
Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued
SFAS 128, "Earnings Per Share" ("FAS 128"), which replaces the
presentation of primary and fully diluted earnings per share with
the presentation of basic and diluted earnings per share. Basic
income per share is computed by dividing net income available to
common shareholders by the weighted average common shares
outstanding for the period. Diluted income per share is computed
giving effect to all potentially dilutive common shares.
Potentially dilutive common shares may consist of incremental
shares issuable upon the exercise of stock options adjusted for
the assumed repurchase of the Company's common stock at the
average market price.
The following securities were excluded from the calculation of
diluted earnings per share at June 30, 2000 because they are
considered anti-dilutive under FAS 128:
Unexercised Options granted to company officers during 1997 of
1,000,000 shares of the Company's common stock at $0.25 per
share. These options expired January 15, 2000.
Unexercised Options granted to company officers during 2000 of
2,150,000 shares of the Company's common stock at $0.25 per
share.
NOTE 2 - PROPERTY AND EQUIPMENT
The Company's property and equipment consisted of the following
at June 30, 2000:
Leasehold improvements $ 81,860
Manufacturing equipment 502,862
Computer equipment,
office furniture and other 283,792
868,514
Less: Accumulated depreciation (458,889)
$ 409,625
NOTE 3 - COMMON AND PREFERRED STOCK
Description and Dividends
At June 30, 2000 the Company was authorized to issue 100,000,000
shares of common stock, $0.001 par value. The common stock is a
publicly traded Over the Counter Bulletin Board Stock with the
symbol "LUMP". As of June 30, 2000, 17,006,167 shares of common
stock were issued and outstanding of which 5,868,863 are
restricted and the remaining 11,137,304 are free trading.
At June 30, 2000 the Company was authorized to issue 10,000,000
shares of preferred stock, $0.001 par value. The preferred stock
issued at June 30, 2000 consists of 1,840,000 preferred shares
outstanding for consideration of $685,000 bearing interest at the
rate of seven percent (7%) per annum.
Since inception, the Company has not declared or paid a cash
dividend.
Stock Options
The Company has stock option plans that provide for the issuance
of up to 2,150,000 shares of common stock to directors and
consultants. As of June 30, 2000, no options had been exercised.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Operating Lease Commitments
The Company leases certain facilities which require future rental
payments. These rental arrangements do not impose any financing
restrictions on the Company or contain contingent rental
provisions.
Future minimum rental commitments under operating leases with
noncancelable lease terms in excess of one year were as follows
at June 30, 2000:
2000 $ 56,119
2001 91,635
Thereafter 0
$147,754
Operating lease rental expense was $12,932 for the three month
period ended June 30, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Overview.
The following management's discussion and analysis of financial
condition and results of operations reviews the financial
performance of the Registrant for the three months ended March
31, 2000 and 1999, and should be read in conjunction with the
Registrant's unaudited consolidated financial statements and
notes thereto set forth in this Form 10-QSB. All of the numbers
set forth in the unaudited financial statements of the Registrant
are denominated in U.S. dollars.
Consolidated Results of Operations.
(a) Three Months Ended June 30, 2000 and 1999.
Net sales decreased to $129,663 for the three months ended June
30, 2000 from $486,798 for the three months ended on June 30,
1999, a decrease of $357,135, or 73.36%, primarily due to a
decrease in orders. The Registrant does not have a sales backlog
as, typically, all gel orders are filled within 24 hours of
receipt; work in progress orders are not typically booked as
sales until finished and shipped.
Gross profit decreased to $101,980 for the three months ended
June 30, 2000 from $303,361 for the same period in 1999 and cost
of goods sold decreased as a percentage of sales to 21.35% from
37.68%. The increase in gross profit margin in 2000 as compared
to 1999 is primarily due to increased efficiencies realized by
the company operations and the Registrant is no longer suffering
from the costs associated with the subsidiary companies divested
in 1999. The Registrant fully expects the increase in efficiency
to continue.
Selling, general and administrative expenses increased to
$203,363 for the three months ended June 30, 2000 from $135,203
for the same period in 1999, as a direct result of increased
expenses for outside services of nearly $100,000 over the same
period for 1999. The Registrant fully expects to reduce its
dependence on such outside services.
Interest expense increased to $23,975 for the three months ended
June 30, 2000 from $0 for the same period in 1999, as a result of
the accrual of interest on the preferred stock issued by
Registrant. In 1999 this accrual was done annually instead of
quarterly.
The net loss was $179,828 for the three months ended June 30,
2000, as compared to a net profit of $19,834 for the three months
ended June 30, 1999. This is primarily due to the reduction in
Gross Profit.
(b) Nine Months Ended June 30, 2000 and 1999.
Net sales decreased to $554,972 for the nine months ended June
30, 2000 from $1.250,999 for the nine months ended on June 30,
1999, a decrease of $626,027, or 55.64%, primarily due to a
decrease in orders. The Registrant does not have a sales backlog
as, typically, all gel orders are filled within 24 hours of
receipt; work in progress orders are not typically booked as
sales until finished and shipped.
Gross profit decreased to $422,456 for the nine months ended June
30, 2000 from $995,994 for the same period in 1999 and cost of
goods sold increased as a percentage of sales to 23.88% from
20.39%. The decrease in gross profit margin in 2000 as compared
to 1999 is primarily due to increased advance purchases of
inventories.
Selling, general and administrative expenses decreased to
$459,417 for the nine months ended June 30, 2000 from $771,854
for the same period in 1999, as a direct result of decreased
expenses for outside services and increased efficiencies. The
Registrant fully expects to reduce its dependence on such outside
services.
Interest expense increased to $37,309 for the nine months ended
June 30, 2000 from $11,988 for the same period in 1999, as a
result of the accrual of interest on the preferred stock issued
by Registrant as well as interest on long-term debt.
The net loss was $516,511 for the nine months ended June 30,
2000, as compared to a net profit of $28,389 for the nine months
ended June 30, 1999. This is primarily due to the reduction in
Gross Profit.
Liquidity and Capital Resources.
During the three months ended June 30, 2000 the Registrant
financed its working capital requirements from cash reserves, as
well as operations of the Registrant. The Registrant currently
has no lines of credit.
Currently, the inventory turnover ratio is 0.138, while
receivables turnover is 20.89 days. Inventory turnover is
heavily impacted by dispensing machines on hand, trade show booth
and brochures with a combined value of $420,345. With these
removed, inventory turnover increases to 0.289 months. The
Registrant does have work in progress each day, but does not
account for work in progress as a sale until the work is
completed.
During the three months ended June 30, 2000, the Registrant's
operations used cash of $27,219 as compared with cash provided
during the three months ended June 30, 1999 of $26,247, investing
activities provided cash of $0 versus $0 provided, respectively,
and financing activities used cash of $0 for the three months
ended June 30, 2000, as compared with cash provided of $80,050
for the three months ended June 30, 1999.
Capital Expenditures.
The Registrant did not have any capital expenditure commitments
outstanding at June 30, 2000, although the Registrant anticipates
making capital expenditures in the ordinary course of business
commensurate with an expected increase in the Registrant's
business operations in subsequent periods.
Year 2000 Issue.
The Year 2000 issue arises because many computerized systems
use two digits rather than four to identify a year. Date
sensitive systems may recognize the year 2000 as 1900 or some
other date, resulting in errors when information using the year
2000 date is processed. In addition, similar problems may arise
in some systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 issue
may be experienced after January 1, 2000, and if not addressed,
the impact on operations and financial reporting may range from
minor errors to significant system failure which could affect the
Registrant's ability to conduct normal business operations. This
creates potential risk for all companies, even if their own
computer systems are Year 2000 compliant. It is not possible to
be certain that all aspects of the Year 2000 issue affecting the
Registrant, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
The Registrant currently believes that its systems are Year 2000
compliant in all material respects. Although management is not
aware of any material operational issues or costs associated with
preparing its internal systems for the Year 2000, the Registrant
may experience serious unanticipated negative consequences (such
as significant downtime for one or more of its suppliers) or
material costs caused by undetected errors or defects in the
technology used in its internal systems. Furthermore, the
purchasing patterns of consumers may be affected by Year 2000
issues. The Registrant does not currently have any information
about the Year 2000 status of its potential material suppliers.
The Registrant's Year 2000 plans are based on management's best
estimates.
Forward Looking Statements.
The foregoing Management's Discussion and Analysis contains
"forward looking statements" within the meaning of Rule 175 of
the Securities Act of 1933, as amended, and Rule 3b-6 of the
Securities Act of 1934, as amended, including statements
regarding, among other items, the Registrant's business
strategies, continued growth in the Registrant's markets,
projections, and anticipated trends in the Registrant's business
and the industry in which it operates. The words "believe,"
"expect," "anticipate," "intends," "forecast," "project," and
similar expressions identify forward-looking statements. These
forward-looking statements are based largely on the Registrant's
expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Registrant's
control. The Registrant cautions that these statements are
further qualified by important factors that could cause actual
results to differ materially from those in the forward looking
statements, including, among others, the following: reduced or
lack of increase in demand for the Registrant's products,
competitive pricing pressures, changes in the market price of
ingredients used in the Registrant's products and the level of
expenses incurred in the Registrant's operations. In light of
these risks and uncertainties, there can be no assurance that the
forward-looking information contained herein will in fact
transpire or prove to be accurate. The Registrant disclaims any
intent or obligation to update "forward looking statements."
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Registrant is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Registrant has been threatened.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K. No reports on Form 8-K were filed
during the three month period covered this Form 10-QSB.
(b) Exhibits. Exhibits included or incorporated by
reference herein: See Exhibit Index.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Luminart Corp.
Dated: August 16, 2000 By: /s/ Wm. Michael Reynolds
Wm. Michael Reynolds, President
EXHIBIT INDEX
Number Exhibit Description
2.1 Plan and Agreement of Merger (incorporated by reference to
Exhibit 2.1 of the Form 10-SB filed on January 5, 2000).
2.2 Agreement and Plan of Reorganization (incorporated by
reference to Exhibit 2.2 of the Form 10-SB filed on January 5, 2000).
3.1 Articles of Incorporation(incorporated by reference to
Exhibit 3.1 of the Form 10-SB filed on January 5, 2000).
Articles of Amendment to Articles of Incorporation (incorporated
by reference to Exhibit 3.2 of the Form 10-SB filed on January 5, 2000).
3.3 Certificate of Amendment to Articles of Incorporation
(incorporated by reference to Exhibit 3.3 of the Form 10-SB filed
on January 5, 2000).
3.4 Certificate of Amendment of Amendment to Articles of
Incorporation (incorporated by reference to Exhibit 3.4 of the
Form 10-SB filed on January 5, 2000).
3.5 Certificate of Amendment to Articles of Incorporation
(incorporated by reference to Exhibit 3.5 of the Form 10-SB filed
on January 5, 2000)
3.6 Bylaws (incorporated by reference to Exhibit 3.6 of the Form
10-SB filed on January 5, 2000).
10.1 Toll Processing Agreement between the Registrant and PRC-
DeSoto Canada (incorporated by reference to Exhibit 10.1 of the
Form 10-QSB filed on May 15, 2000).
10.2 Consultation Agreement between the Registrant and Don Docken
(incorporated by reference to Exhibit 10.2 of the Form 10-QSB
filed on May 15, 2000).
10.3 Management Agreement between the Registrant and Wm. Michael
Reynolds (incorporated by reference to Exhibit 10.3 of the Form
10-QSB filed on May 15, 2000).
10.4 Management Agreement between the Registrant and Ronnie Case
(incorporated by reference to Exhibit 10.4 of the Form 10-QSB
filed on May 15, 2000).
21 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21 of the Form 10-SB filed on January 5, 2000).
27 Financial Data Schedule (see below).
99 Patent Abstract (incorporated by reference to Exhibit 99 of
the Form 10-SB filed on January 5, 2000)
