UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED: SEPTEMBER 30, 2002
COMMISSION FILE NUMBER:000-27087
LITEGLOW INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
UTAH 65-05164035
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2301 N.W. 33rd Court, Unit 112, Pompano Beach, Florida 33069
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(Address, including zip code, of principal executive offices)
(954) 971-4569
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all documents
and reports required to be filed by Sections 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filings for the past 90 days. YES [X] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of September 30, 2002, the number of the Company's shares of par value
$.001 common stock outstanding was 3,780,082.
LITEGLOW INDUSTRIES, INC.
FORM 10-QSB
SEPTEMBER 30, 2002
INDEX
Part I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Balance Sheets .................................................. 3
Statements of Operation.......................................... 4
Statements of Cash Flow.......................................... 5
Notes to Financial Statements.................................... 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 7-9
PART II - OTHER INFORMATION...................................... 10
SIGNATURES....................................................... 11
CERTIFICATIONS................................................... 12-14
2
LITEGLOW INDUSTRIES, INC.
BALANCE SHEET
SEPTEMBER 30, 2002
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 299,785
Accounts receivable, net 2,075,983
Loan to shareholder 32,419
Inventory, net 1,781,608
Prepaid expenses 110,913
Other current assets 19,193
-------------
Total current assets 4,319,901
Property and equipment less accumulated
depreciation 345,835
Goodwill, net 175,660
Deferred loan costs 6,667
Deposits 51,354
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$ 4,899,417
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 26,756
Current maturities of capital leases 25,351
Line of credit 1,784,383
Loans payable shareholder 68,262
Accounts payable and accrued expenses 1,364,673
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Total current liabilities 3,269,425
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Long term debt less current maturities 8,444
Long term capital lease obligations
less current maturities 43,298
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51,742
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Stockholders' equity (deficit):
Preferred stock par value $.001
issued and authorized 1,000,000 1,000
Common stock, $.001 par value;
authorized 10,000,000 shares
3,780,082 shares issued and
outstanding 3,780
Additional paid-in capital 3,356,542
Retained deficit (1,783,072)
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Total stockholders' equity 1,578,250
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$ 4,899,417
=============
The accompanying notes are an integral part of these financial statements
3
LITEGLOW INDUSTRIES, INC.
STATEMENT OF OPERATIONS
(unaudited)
Nine Months Nine Months Three Months Three Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
------------- ------------- ------------- -------------
Sales $ 9,540,447 $ 4,042,047 $ 2,980,577 $ 1,888,325
Cost of sales 5,238,486 1,883,738 1,659,666 960,106
------------- ------------- ------------- -------------
Gross profit 4,301,961 2,158,309 1,320,911 928,219
Selling, general and
administrative expenses 2,878,130 1,875,346 873,240 677,694
------------- ------------- ------------- -------------
Income from operations 1,423,831 282,963 447,671 250,525
------------- ------------- ------------- -------------
Other income (expenses):
Interest expense (131,656) (102,258) (43,102) (31,947)
Lawsuit settlement 2,000 132,606 2,000
Gain (loss) on disposal
of assets (40,000) 5,167 - 7,087
------------- ------------- ------------- -------------
Total other income
(expenses) (169,656) 35,515 (41,102) (24,860)
------------- ------------- ------------- -------------
Income before income taxes 1,254,175 318,478 406,569 225,665
Income tax expense (benefit) - - - -
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Net income $ 1,254,175 $ 318,478 $ 406,569 $ 225,665
============= ============= ============= =============
Net loss per common share:
Basic:
Net income per common
share .32 .07 .11 .05
Diluted:
Net income per common
share .14 .03 .05 .02
Weighted average shares
outstanding basic 3,889,423 4,273,287 3,780,082 4,273,287
============= ============= ============= =============
Weighted average shares
outstanding diluted 8,889,423 9,273,287 8,780,082 9,273,287
============= ============= ============= =============
The accompanying notes are an integral part of these financial statements
4
LITEGLOW INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
(unaudited)
Nine Months Nine Months
Ended Ended
September 30, September 30,
2002 2001
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Cash flows from operating activities:
Net income $ 1,254,175 $ 318,478
Adjustments to reconcile net income to net:
Cash provided by (used for) operating activities
Depreciation and amortization 58,409 62,598
Non cash compensation - 100
Loss (gain) on disposal of equipment 40,000 (5,167)
Settlement of debt - (85,000)
Changes in assets and liabilities:
Accounts receivable (823,450) (339,484)
Inventory (708,078) 61,212
Prepaid expenses (32,672) (17,331)
Other current assets (19,193) -
Deposits and other assets (5,973) -
Deferred loan costs 5,333 (21,500)
Accounts payable and accrued expenses 523,657 (584,194)
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Net cash provided from (used for) operations 292,208 (610,288)
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Net cash used in investing activities:
Proceeds from sale of equipment - 50,260
Purchase of equipment (132,594) (19,018)
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Net cash used for investing activities (132,594) 31,242
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Cash flows from (used in) financing activities:
Repayments of stockholder loans (87,507) (63,139)
Purchase and retirement of treasury stock (24,250) -
Proceeds from line of credit 333,221 727,349
Payments of long term debt and leases (83,305) (61,402)
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Net cash provided by financing activities 138,159 602,808
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Net increase in cash and cash equivalents 297,773 23,762
Cash and cash equivalents, beginning of period 2,012 17,393
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Cash and cash equivalents, end of period $ 299,785 $ 41,155
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Supplemental disclosure:
Interest paid $ 131,656 $ 102,258
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Assets acquired with debt $ 40,000 $ 47,857
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The accompanying notes are an integral part of these financial statements
5
LITEGLOW INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE 1: FINANCIAL STATEMENTS
The Company
The accompanying financial statements represent those of Liteglow
Industries, Inc. (the "Company"). The Company was incorporated
April 25, 1984, in the State of Utah. The Company primarily
engages in the business of designing, manufacturing and marketing
a diverse line of automotive aftermarket accessory and specialty
products. The Company initially focused its efforts on developing
a line of 12-volt automotive accessories designed to enhance
vehicle appearance, including neon license plate frames and neon
under-car lighting kits.
Significant Accounting Policies
The accounting policies followed by the Company are set forth in
Note 1 to the Company's financial statements included in its
Annual Report on Form 10-KSB for the fiscal year ended December
31, 2001.
The balance sheet as of September 30, 2002, the statements of
operation and cash flows for the three and nine months ended
September 30, 2002, and 2001 have been prepared by the Company,
without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and
cash flows at September 30, 2002, and for all periods presented,
have been made.
Certain information and footnote disclosures normally included in
the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It
is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto as of
December 31, 2001.
NOTE 2: NET INCOME PER SHARE
Net income per share is computed by dividing net income by the
average number of common shares outstanding, increased by common
stock equivalents determined using the treasury stock method.
6
LITEGLOW INDUSTRIES, INC.
FORM 10-QSB
SEPTEMBER 30, 2002
PART I - FINANCIAL INFORMATION
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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The following discussion and analysis should be read in
conjunction with the Financial Statements appearing elsewhere in
this Report. It includes an analysis of the three and nine
months ended September 30, 2002, and 2001, respectively.
Forward-Looking Statements
- --------------------------
Except for the historical statements and discussions contained
herein, statements contained in this report constitute "forward-
looking statements" as defined in the Securities Act of 1933 and
the Securities Exchange Act of 1934, as amended. These forward-
looking statements rely on a number of assumptions concerning
future events, and are subject to a number of risks and
uncertainties and other factors, many of which are outside the
control of the Company, that could cause actual results to differ
materially from such statements.
Readers are cautioned not to put undue reliance on such forward-
looking statements, each of which speaks only as of the date
hereof. Factors and uncertainties that could affect the outcome
of such forward-looking statements include, among others, market
and industry conditions, increased competition, changes in
governmental regulations, general economic conditions, pricing
pressures, and the Company's ability to continue its growth and
expand successfully into new markets and services. The Company
disclaims any intention or obligation to update publicly or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
7
LITEGLOW INDUSTRIES, INC.
FORM 10-QSB
SEPTEMBER 30, 2002
Results of Operations
Three and Nine Months Ended September 30, 2002 and 2001
Net sales for the quarter ended September 30, 2002 were
$2,980,577 compared to net sales of $1,888,325 for the quarter
ended September 30, 2001. The increase in sales of $1,092,252
was primarily the result of the sales to three major retailers
noted below. For these same periods, cost of sales was $1,659,666
compared to $960,106 for 2002 and 2001, respectively. The gross
profit for the quarter ended September 30, 2002 and 2001 was
$1,320,911 and $928,219, respectively. The Company's selling,
general and administrative expenses increased to $873,240 from
$677,694, respectively. The increase in selling, general and
administrative expenses is primarily a result of expansion of
facilities, hiring of additional personnel and increased trade
show promotions. The Company had income from operations of
$447,671 compared to $250,525 for the quarter ended September 30,
2002 and 2001 respectively.
Net sales for the nine months ended September 30, 2002 were
$9,540,447 compared to net sales of $4,042,047 for the nine
months ended September 30, 2001. The increase in sales of
$5,498,400 was primarily the result of increased sales totaling
approximately $3.3 million to three major retailers. The
remaining increase is a result of increased sales to new and
existing customers. For these same periods, costs of sales were
$5,238,486 compared to $1,883,738 for 2002 and 2001,
respectively. The gross profit for the nine months ended
September 30, 2002 and 2001 was $4,301,961 and $2,158,309,
respectively. The Company's selling, general and administrative
expenses increased to $2,878,130 from $1,875,346 for the nine
months ended September 30, 2002 and 2001, respectively. The
increase in selling, general and administrative expenses is
primarily a result of expansion of facilities, hiring of
additional personnel and increase in trade show promotions. The
Company had income from operations of $1,423,831 for the nine
months ended September 30, 2002 compared to $282,963 for the nine
months ended September 30, 2001.
The Company increased its inventory during the first nine months
of 2002 by $708,078 compared to a decrease of $61,211 for the
same period of 2001. The Company is making efforts to better
anticipate inventory needs.
No income tax expense or benefit is recorded in the nine months,
and three months ended September 30, 2002 and 2001 as the Company
will utilize its net operating loss carryforward to offset the
current tax expense.
Liquidity and Capital Resources
Total current assets increased to $4,319,901 at September 30,
2002 compared to $1,592,781 at September 30, 2001 primarily as a
result of increasing its accounts receivable and inventory
levels. The Company's total assets increased to $4,899,417 at
September 30, 2002 compared to $2,034,833 at September 30, 2001
primarily as a result of increasing its current assets described
above and due to the purchase of fixed assets.
8
LITEGLOW INDUSTRIES, INC.
FORM 10-QSB
SEPTEMBER 30, 2002
Liquidity and Capital Resources (continued)
The Company's accounts payable and accrued expenses increased to
$1,364,673 at September 30, 2002 compared to $381,508 at
September 30, 2001, however loans payable to shareholders
decreased to $68,262 at September 30, 2002 compared to $137,775
at September 30, 2001 primarily due to the Company's increased
purchasing due to higher sales volume and improved cash flow
enabling the Company to rely less on shareholder loans. The
Company's total current liabilities increased to $3,269,425 at
September 30, 2002 from $1,683,487 at September 30, 2001
primarily due to the increased sales volume, which increased the
amounts carried in trade payables and other short-term
borrowings.
The Company's net cash provided by operations was $292,208 for
the nine months ended September 30, 2002 compared to net cash
used by operations of ($610,288) for the nine months ended
September 30, 2001.
The Company believes that its current available cash position,
coupled with its line of credit will be sufficient to meet its
cash needs.
9
LITEGLOW INDUSTRIES, INC.
FORM 10-Q
SEPTEMBER 30, 2002
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
-----------------
The Company is a party to the following legal proceeding.
In July 2002, the Company filed suit in the Circuit Court in and
for Seminole County, Florida against Keith Kowatch, Judith Kowatch
and JDT Services Group, Inc. d/b/a/ Streetgear and/or Boulevard
Neon (the "Defendants") alleging that the Kowatches breached the
non-competition provisions of their respective employment
agreements with the Company. The litigation stemmed from the
Company's purchase of the assets of KJK Marketing, Inc. in
October, 1997. In September 2002, the Defendants stipulated to
the entry of a final judgment (inclusive of attorneys fees and
costs), injunction extending the non-compete term, and settlement
of remaining issues in favor of the Company.
Item 2 - Changes in Securities
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None
Item 3 - Defaults upon Senior securities
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None
Item 4 - Submission of Matters to Vote of Security Holders
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None
Item 5 - Other information
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None
Item 6 - Exhibits and reports on Form 8-K
--------------------------------
(a) 99.1 Certification Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (Spencer Krumholz)
99.2 Certification Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (Michael Krumholz)
b) There were no reports filed on Form 8-K during the quarter
ended September 30, 2002.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LITEGLOW INDUSTRIES, INC.
Registrant
Date: October 31, 2002 /s/ Spencer Krumholz
-------------------------------------
Spencer Krumholz,
Chief Executive Officer
11
CERTIFICATIONS
I, Spencer Krumholz, certify that:
1. I have received this quarterly report on Form 10-QSB of Liteglow
Industries, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report; and
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operation and cash flows of Liteglow Industries, Inc. as of, and for,
the periods presented in this quarterly report.
Date: October 31, 2002
/s/ Spencer Krumholz
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Spencer Krumholz, Chief Executive Officer
I, Michael Krumholz, certify that:
1. I have received this quarterly report on Form 10-QSB of Liteglow
Industries, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report; and
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operation and cash flows of Liteglow Industries, Inc. as of, and for,
the periods presented in this quarterly report.
Date: October 31, 2002
/s/ Michael Krumholz,
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Michael Krumholz, President
12