SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended March 31, 2001.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition Period From __________ to __________.
COMMISSION FILE NUMBER: 2-97360-A
---------
LIGHT MANAGEMENT GROUP, INC.
----------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
NEVADA 59-2091510
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3060 Mainway, Suite 301, Burlington, Ontario L7M 1A3
----------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(800) 465-9216
--------------
(Issuer's Telephone Number, Including Area Code)
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 X NO
On May 11, 2001, the number of shares outstanding of the issuer's Common
Stock, $0.0001 par value (the only class of voting stock), was 22,441,382.
Table of Contents
PART I - FINANCIAL INFORMATION...............................................1
ITEM 1. FINANCIAL STATEMENTS.......................................1
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OR PLAN OF
OPERATION..................................................2
PART II - OTHER INFORMATION..................................................4
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...........................4
INDEX TO EXHIBITS............................................................5
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Light Management Group, Inc., a
Nevada corporation, and its subsidiaries and predecessors unless otherwise
indicated. Consolidated, unaudited, condensed interim financial statements
including a balance sheet for the Company as of March 31, 2001, statement of
operations, statement of shareholders equity and statement of cash flows for the
interim period up to the date of such balance sheet and the comparable period of
the preceding year are attached hereto and begin on page F-1 and are
incorporated herein by this reference.
1
LIGHT MANAGEMENT GROUP, INC
CONSOLIDATED BALANCE SHEET
MARCH 31, 2001
ASSETS
CURRENT ASSETS:
Cash $ 42,944
Accounts receivable (net of allowance of $2,000) 479,636
Inventory 911,722
Prepaid expenses and other current assets 300,558
---------
TOTAL CURRENT ASSETS 1,734,860
PROPERTY AND EQUIPMENT - net of accumulated depreciation 267,970
GOODWILL - net 2,431,747
PATENTS - net 777,228
---------
TOTAL ASSETS $ 5,211,805
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 349,003
Accrued expenses 290,883
Note payable - bank 28,371
Loans payable - officers 91,880
Due to related parties 53,935
---------
TOTAL CURRENT LIABILITIES 814,072
Note payable - bank (net of current portion) 78,765
---------
TOTAL LIABILITIES 892,837
---------
STOCKHOLDERS' EQUITY
Preferred Stock - $.0001 par value, 10,000,000 authorized
shares, 2,766,798 shares issued and outstanding 277
Common stock - $.0001 par value, 100,000,000
authorized shares, 22,441,382 shares issued and outstanding 2,244
Additional paid in capital 18,040,605
Deferred compensation (684,596)
Accumulated deficit (12,977,658)
Accumulated other comprehensive loss (61,904)
---------
TOTAL STOCKHOLDERS' EQUITY 4,318,968
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,211,805
=========
See notes to consolidated financial statements
F-1
LIGHT MANAGEMENT GROUP, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Three Months Ended
--------------------------
March 31, March 31,
2001 2000
(Restated)
----------- ----------
SALES $ 427,797 $ 298,931
COST OF SALES 224,622 47,409
----------- ----------
GROSS PROFIT 203,175 251,522
----------- ----------
EXPENSES
Selling, general and administrative expenses 638,676 1,857,412
Litigation expenses - 425,362
Depreciation and amortization 127,588 62,362
----------- ----------
TOTAL OPERATING EXPENSES 766,264 2,345,136
----------- ----------
LOSS FROM OPERATIONS (563,089) (2,093,614)
INTEREST EXPENSE 7,354 4,950
----------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (570,443) (2,098,564)
EXTRAORDINARY ITEM - loss on cancellation of debt (765,000) -
----------- ----------
NET LOSS (1,335,443) (2,098,564)
PREFERRED STOCK DIVIDEND (55,336) -
----------- ----------
NET LOSS APPLICABLE TO COMMON STOCK $(1,390,779)$(2,098,564)
=========== ==========
NET LOSS PER SHARE - BASIC AND DILUTED
Loss before extraordinary item $ (0.03) $ (0.12)
Extraordinary item (0.04) -
----------- ----------
NET LOSS PER SHARE (0.07) (0.12)
=========== ==========
Weighted Average Shares Used in Computation -
Basic and diluted 21,204,667 17,810,551
=========== ===========
NET LOSS $(1,335,443) $(2,098,564)
OTHER COMPREHENSIVE LOSS, NET OF TAX
Foreign currency translation adjustment (22,611) -
----------- -----------
COMPREHENSIVE LOSS $(1,358,054) $(2,098,564)
=========== ===========
See notes to consolidated financial statements
F-2
LIGHT MANAGEMENT GROUP, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Three Months Ended
--------------------------
March 31, March 31,
2001 2000
(Restated)
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,335,443) $(2,098,564)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 127,588 62,362
Extraordinary item - loss on cancellation of debt 765,000 -
Stock issued for salaries - 184,100
Stock issued for legal services - 114,750
Stock issued for consulting services - 745,050
Acquisition of research and development with stock - 630,000
Changes in assets and liabilities (net of effect
of acquisitions):
Decrease (Increase) in accounts receivable 206,097 (157,913)
Decrease (Increase) in inventory 62,786 (454,358)
(Increase) in prepaid and other current assets (109,532) (11,419)
Decrease in deferred compensation 36,478 -
Increase (Decrease) in accounts payable 112,025 (122,327)
Increase in accrued expenses 100,661 72,366
------------ -----------
NET CASH USED IN OPERATING ACTIVITIES (34,340) (1,035,953)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (23,365) (187,621)
Purchase of patent - (338,284)
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES (23,365) (525,905)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayment of) Proceeds from note payable - bank (13,555) 114,542
Proceeds from (Repayment of) loans payable - officers 36,357 (75,539)
Net increase in related party loan - 1,906,222
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 22,802 1,945,225
------------ -----------
EFFECT OF EXCHANGE ON CASH 22,611 -
NET (DECREASE) INCREASE IN CASH (12,292) 383,367
CASH - Beginning of year 55,236 -
------------ -----------
CASH - End of period $ 42,944 $ 383,367
============ ===========
SUPPLEMENTAL INFORMATION OF CASH FLOW INFORMATION:
Cash paid for interest $ 7,354 4,950
============ ===========
Cash paid for taxes $ - -
============ ===========
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Related party debt converted to preferred stock $3,200,000 $ -
============ ===========
Related party debt converted to common stock $1,600,000 $ -
============ ===========
Shares issued for acquisition of Exclusive
Advertising, Inc. $ - $2,500,000
============ ===========
See notes to consolidated financial statements
F-3
LIGHT MANAGEMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
Three Months Ended March 31, 2001
(Unaudited)
1. BASIS OF PRESENTATION
---------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-QSB.
Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements. 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 for all periods
presented have been made. The results of operations for the three month
period ended March 31, 2001, are not necessarily indicative of the
operating results that may be expected for the year ending December 31,
2001. These financial statements should be read in conjunction with the
Company's December 31, 2000 Form 10- KSB, financial statements and
accompanying notes thereto.
2. GOING CONCERN
-------------
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has had recurring
losses, which raises substantial doubt about the Company's ability to
continue as a going concern. Management's plans with respect to these
matters include raising additional working capital through equity or debt
financing and ultimately achieving profitable operations. The accompanying
financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern.
3. STOCKHOLDERS' EQUITY
--------------------
During the three months ended March 31, 2001, the following equity
transactions occurred:
In March, 2001, the Company settled $3,200,000 of its loans payable to
a company in which the Company's principal shareholder and Chief
Executive Officer is also a shareholder by issuing 2,766,798 shares of
Series A cumulative Preferred Stock convertible into common stock on a
one-for-one basis. In addition, the Company settled $1,600,000 of its
loans payable to such company by issuing 1,855,072 shares of common
stock valued at $2,365,000. As a result, the Company recorded an
extraordinary loss on extinguishment of debt of $765,000.
F-4
4. MARCH 2000 RESTATEMENT
----------------------
The financial statements for the three months ended March 31, 2000 have
been restated to reflect adjustments noted by the Company during the
preparation of its year ending December 31, 2000 financial statements. The
restatement is principally related to the issuance of shares of the
Company's common stock for services, and the reversal of sales revenue.
The effect on the previously reported results was to decrease sales by
$298,000, increase total expenses by $1,280,000 and increase net loss by
$1,578,000. Basic and diluted loss per share increased by ($0.09) to
($0.12).
F-5
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OR PLAN OF OPERATION
Forward-looking information
This quarterly report contains forward-looking statements. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. These statements relate to future
events or to our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially. There are a number of factors that could cause the Company's
actual results to differ materially from those indicated by such forward-looking
statements.
Although the Company believes that the expectations reflected in the
forward-looking statements are reasonable, the Company cannot guarantee future
results, levels of activity, performance or achievements. Moreover, the Company
does not assume responsibility for the accuracy and completeness of such
statements. The Company is under no duty to update any of the forward- looking
statements after the date of this report to conform such statements to actual
results.
General
The Company specializes in the development of new applications of optical and
light technologies. These technologies use sound waves to focus and direct
lasers. For example, one of the Company's proprietary laser projection systems,
called the RGB Laser Projection System, produces graphic images in moving three
dimensional designs that are utilized to market products on large-scale
billboards. This laser system possesses software features which allow images to
be manipulated into almost any position, size, or scale in 256 colors. This
acousto- optic laser projection system works by a raster imaging process and
allows for images to be projected in three dimensional appearance, and to be
active and moving across the full screen size.
We have experienced solid growth in the scope of our operations, our technology
and our revenues since we became focused in the non-diode laser and
acousto-optic industry in May 1999. Much of our growth has been effected through
mergers and acquisitions, as our operations are now conducted through five
subsidiaries, three of which were acquired externally. We expect to continue to
grow internally, as our technological products become more well known and are
sold in increasing quantities, and externally, as we seek to effect other
acquisitions.
Results of Operations
As further discussed in note 4 to the unaudited financial statements attached
hereto, the financial statements for the three months ended March 31, 2000, have
been restated to reflect adjustments noted by the Company during the preparation
of its financial statements for the year ended December 31, 2000.
2
Quarter Ended March 31, 2001 Compared To Quarter Ended March 31, 2000
The following discussion sets forth certain financial information regarding our
operations. Our financial statements, and the following discussion on results of
operations, set forth financial information for the three months ended March 31,
2001 and the three months ended March 31, 2000.
The Company had sales revenues of $427,797 for its quarter ended March 31, 2001
as compared to $298,931 for the quarter ended March 31, 2000. This increase in
revenues is the result of revenue generated from operations of Exclusive
Advertising, which was acquired in March 2000.
The operating expenses incurred by the Company for its quarter ended March 31,
2001 were $766,264 compared to $2,345,136 for the quarter ended March 31, 2000.
This decrease is largely due to a decrease in selling, general and
administrative expenses from $1,857,412 to $638,676, which resulted from a
reduction in the amount of services rendered from independent professionals and
consultants. The decrease in expenses resulted in a decrease in the net loss for
the quarter year ended March 31, 2001 of $1,335,443, which also included an
extraordinary loss from the extinguishment of debt of $765,000, as compared to a
loss of $2,098,564 for the quarter ended March 31, 2000.
Current Liquidity and Capital Resources
We have relied upon our principal shareholder and chief executive officer for
our capital requirements and liquidity. The Company has had recurring losses,
which raises substantial doubt about the Company's ability to continue as a
going concern. Management's plans with respect to these matters include raising
additional working capital through equity or debt financing and ultimately
achieving profitable operations. The accompanying financial statements do not
include any adjustments that might be necessary should the Company be unable to
continue as a going concern.
Conversion Of Related Party Debt
In March 2001, the Company settled $4,800,000 of debt to a company in which the
Company's principal shareholder and Chief Executive Officer is also a
shareholder. Of this amount, a loan payable of $3,200,000 was settled by the
Company's issuance of 2,766,798 shares of Series A Preferred Stock. Each share
of preferred stock has voting rights equal to 2.5 shares of the Company's common
stock, shall not be redeemable or convertible by the Company, and shall entitle
the holder to receive a cumulative annual dividend of $0.08 per share. The
preferred stock shall be convertible into common stock at any time by the holder
on a one-for-one basis. The remaining $1,600,000 in debt was settled in exchange
for 1,855,072 shares of the Company's common stock valued at $2,365,000. As a
result, the Company recorded an extraordinary loss on extinguishment of debt of
$765,000.
This conversion of related party debt materially decreased the Company's total
liabilities. As of March 31, 2001, total liabilities were $892,837, as compared
to $3,692,076 as of December 31, 2000, and $3,047,119 as of March 31, 2000.
3
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter for which this report is
filed.
The following exhibits are attached hereto. Exhibits marked with an asterisk
have been filed previously with the Commission and are incorporated herein by
reference.
3.1 * Articles of Incorporation
3.2 * Bylaws.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this Quarterly Report on
Form 10-QSB to be executed on its behalf by the undersigned, hereunto duly
authorized.
LIGHT MANAGEMENT GROUP, INC.
/s/ Donald Iwacha
President
Dated: May 23, 2001
4
INDEX TO EXHIBITS
Exhibits marked with an asterisk have been filed previously with the
Commission and are incorporated herein by reference.
EXHIBIT PAGE
NO. NO. DESCRIPTION
- - --- --- -----------
3.1 * Articles of Incorporation
3.2 * Bylaws
5