U.S. SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10QSB
(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, 2003
[_] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from ____________ to ______________
For the Period Ended March 31, 2003
Commission file number 000-33415
CYBERLUX CORPORATION
(Name of Small Business Issuer in Its Charter)
Nevada 91-2048178
(State of Incorporation) (IRS Employer Identification No.)
50 Orange Road
PO Box 2010
Pinehurst, NC 28374
(Address of Principal Executive Offices)
(910) 235-0036
Issuer's Telephone Number
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
---------- -----------
As of March 31, 2003 the Company had 7,191,729 shares of its par value $0.001
common tock issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
===============================================================================
1
CYBERLUX CORPORATION
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Index iii
Condensed Balance Sheets: F-3
March 31, 2003 and December 31, 2002
Condensed Statements of Losses: F-4
Three Months Ended March 31, 2003 and 2002 and the Period from May 17, 2000
(Date of Inception) to March 31, 2003
F-5
Condensed Statements of Cash Flows :
Three Months Ended March 31, 2003 and 2002 and the Period from May 17, 2000
(Date of Inception) to March 31, 2003
Condensed Consolidated Statement of Deficiency in Stockholder's Equity : F-6
For the period May 17, 2000 (Date of Inception) to March 31, 2003
Notes to Condensed Financial Statements: 1
March 31, 2003
Item 2. Management's Discussion and Analysis or Plan of Operations 4
Item3. Controls and Procedures 6
PART II. OTHER INFORMATION 7
Item 1. Legal Proceedings 7
Item 2. Changes in Securities 7
Item 3. Defaults Upon Senior Securities 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 5. Other Information 7
Item 6. Exhibits and Reports on Form 8-K 7
===============================================================================
ii
ITEM 1. FINANCIAL STATEMENTS
CYBERLUX CORPORATION
INDEX TO FINANCIAL INFORMATION
PAGE NO
Condensed Balance sheets at March 31, 2003 and December 31, 2002 F-3
Condensed Statement of Losses for the three months ended of March 31, 2003 and 2002 and the
period from May 17, 2000 ( date of inception ) through March 31, 2003 F-4
Condensed Statement of Deficiency in Stockholders' Equity for the Period May 17, 2000 ( Date of
Inception ) through March 31, 2003 F-5
Condensed Statement of Cash flows for the three months ended March 31, 2003 and March 31, 2002 and the F-6
period from May 17, 2000 ( date of inception ) through March 31, 2003
Notes to Unaudited Condensed Financial statements F-7 to F-9
iii
CYBERLUX CORPORATION
(a Development Stage Company)
(unaudited)
Condensed Balance Sheets
March 31, December 31
2003 2002
(Unaudited) (audited)
ASSETS
Current assets:
Cash and equivalents $ 17,589 $ 26,086
Prepaid design services 20,000 20,000
Total current assets 37,589 46,086
Fixed assets, net of accumulated depreciation of $28,174 74,319 79,443
and $ 23,050 respectively
Other assets
Prepaid expenses 225,000 0
Deposits 8,614 8,614
233,614 8,614
-------------------------
$ 345,522 $ 134,143
=========================
LIABILITIES AND DEFICIENCIES
IN STOCKHOLDERS' EQUITY
Current liabilities:
Accrued interest $ 50,065 $ 44,427
Other accrued liabilities 142,932 95,971
Management fees payable - related party 668,008 546,508
Short-term notes payable - shareholders 153,045 123,545
Short-term notes payable 365,000 365,000
Total current liabilities 1,379,050 1,175,451
Deficiency in Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares
authorized, no shares issued and outstanding
Common stock, $0.001 par value, 20,000,000 shares
authorized, 7,191,729 and 6,628,396 outstanding as of
March 31, 2003 and December 31, 2002 respectively 7,192 6,628
Additional paid-in capital 980,280 745,593
Subscription receivable 0 (2,500)
(Deficit) (2,021,000) (1,791,029)
Deficiency in stockholder's equity (1,033,528) (1,041,308)
--------------------------
$ 345,522 $ 134,143
==========================
See accompanying notes to unaudited condensed financial statements
F-3
CYBERLUX CORPORATION
(a Development Stage Company)
(unaudited)
Condensed Statements of Losses
For The Three For the Three For the period
Months Ended Months Ended May 17, 2002 to
March 31,2003 March 31, 2002 March 31, 2003
Revenue $ - $ - $ -
Expenses:
General and administrative expenses 209,054 120,137 1,856,458
-----------------------------------------
Total expenses 209,054 120,137 1,856,458
-----------------------------------------
Other (expense):
Interest income 0 0 40
Interest expense (20,917) (11,228) (164,582)
-----------------------------------------
Net (loss) $ (229,971) $ (131,365) $(2,021,000)
=========================================
Weighted average number of
common shares outstanding - basic and fully diluted 6,736,322 6,152,396 6,736,322
-----------------------------------------
Net (loss) per share - basic & fully diluted $ (0.03) $ (0.02) $ (0.30)
=========================================
See accompanying notes to unaudited condensed financial statements
F-4
CYBERLUX CORPORATION
(a Development Stage Company)
Condensed Statement of Cash Flows
(Unaudited)
For the Period
For The Three For the Three May 17, 2002
Months Ended Months Ended (inception) to
March 31,2003 March 31, 2002 March 31, 2003
Cash flows from operating activities
Net (loss) $ (229,971) $ (131,365) $ (2,021,000)
Depreciation and Amortization 5,124 22,780 103,174
Write off extension of loan expense 25,000
Stock options issued for consulting services 107,504
Shares issued for consulting services 10,000 97,498
Shares issued in connection with loan commitment 225,000 225,000
Shares issued for research and development 68,753
(Increase) in deposits 0 (1,795) (8,614)
(Increase) decrease in other assets, net (225,000) 5,449 (196,815)
Increase (Decrease) in accrued interest 5,638 (393) 50,067
Increase in management fee payable-related party 121,500 58,001 668,008
Increase in other accrued liabilities 46,962 (1,300) 142,934
Net cash (used) by operating activities (40,747) (48,623) (738,491)
Cash flows from investing activities
Purchase of fixed assets 0 (58,528) (102,494)
Net cash provided (used in) by investing activities 0 (58,528) (102,494)
Cash flows from financing activities
Proceeds from short-term notes payable net 0 75,000 80,000
Proceeds from notes payable net 432,455
Proceeds from short-term notes payable-shareholders 29,500 6,300 153,045
Capital contributed by shareholders 0 16,000
Receipts from subscription receivable 2,500 2,500
Issuance of common stock 250 174,576
Net cash provided by financing activities 32,250 81,300 858,576
Net increase in cash (8,497) (25,851) 17,591
Cash - beginning 26,086 30,601 0
Cash - ending $ 17,589 $ 4,750 $ 17,589
Supplemental disclosures:
Interest paid 9,427 11,621 60,104
Income taxes paid 0 0 0
Non-cash investing and financing activities:
Shares issued for research and development and consulting 0 0 106,253
Shares issued for conversion of debt 0 0 220,641
Warrants issued in connection with financing 0 0 75,000
Options issued in connection with services 0 52,500
Shares issued in connection with loan commitment 225,000 0 225,000
Shares issued in connection with services 10,000 0 115,002
See accompanying notes to unaudited condensed financial statements
F-5
CYBERLUX CORPORATION
( A Development Stage Company)
CONDENSED STATEMENT OF DEFICIENCY IN STOCKHOLDERS' EQUITY FOR THE
PERIOD MAY 17, 2000 (DATE OF INCEPTION) THROUGH MARCH 31, 2003
(Unaudited)
Additional Paid
Common Stock in Capital
Shares Amount
----------- ------------ --------------
Common shares issued in May, 2000 in exchange for research and
development services valued at $.09 per share 750,000 $ 750 $ 68,003
Common shares issued in May, 2000 in exchange for services valued
@ $. 05 per share 875,000 875 35,710
Common shares issued in July, 2000 in exchange for convertible debt
at $ .15 per share 288,000 288 39,712
Capital contributed by principal shareholders - - 16,000
Common shares issued in November , 2000 for cash in connection with
private placement at $. 15 per share 640,171 640 95,386
Common shares issued in November, 20000 in exchange for services
valued @ $. 15 per share hares issued for consulting services 122,795 123 18,296
Net (loss) - - -
----------- ------------ --------------
Balance, December 31, 2000 4,315,966 $ 4,316 $ 273,667
Common shares issued in January , 2001 in exchange for convertible debt
at $ .15 per share 698,782 699 104,118
Stock options issued in May, 2001, valued at $. 15 per option, in
exchange for services 52,500
Warrant issued in May 2001, valued at $. 15 per warrant, in exchange
for placement of debt - - 75,000
Common shares issued in September , 2001 for cash in connection with
exercise of warrant at $.15 per share 3,000 3 447
Common shares issued in September , 2001 for cash in connection with
exercise of warrant at $.10 per share 133,000 133 13,167
Common shares issued in November , 2001 for cash in connection with
exercise of warrant at $.0001 per share 500,000 500 -
Common shares issued in November , 2001 for cash in connection with
exercise of options at $.0001 per share 350,000 350 -
Common shares issued in December , 2001 in exchange for convertible
debt at $ .50 per share 133,961 134 66,847
Common shares issued in December , 2001 in exchange for debt at
$ .50 per share 17,687 18 8,825
Net (loss) - - -
----------- ------------ --------------
Balance, December 31, 2001 6,152,396 $ 6,152 $ 594,571
Common shares issued in May, 2002 in exchange for services valued at
$. 70 per share 70,000 70 48,930
Common shares issued in Nov, 2002 in exchange for services valued at
$0.25 per share 150,000 150 37,350
Common shares issued in Dec. 2002 as rights offering at $0.25 per share 256,000 256 63,744
Subscription Receivable for 10,000 shares issued
Net loss - - -
----------- ------------ --------------
Balance at December 31, 2002 6,628,396 $ 6,628 $ 745,593
Common shares issued in March, 2003 for cash in connection with
exercise of options at $0.001 per share 250,000 250
Funds received for stock subscription
Common Shares issued to Cornell Capital Partners in March, 2003 in
connection with Loan Commitment valued at $0.75 per share 300,000 300 224,700
Common shares issues in March, 2003 in exchange for services valued
at $0.75 per share 13,333 14 9,987
Net Loss - - -
----------- ------------ --------------
Balance, March 31, 2003 7,191,729 $ 7,192 $ 980,280
Deficiency
Accumulated During
Stock Development Stage Total In
Subscription Stockholder's Equity
Receivable Total in Stockholders' Equity
Common shares issued in May, 2000 in exchange for research and
development services valued at $.09 per share $ 68,753
Common shares issued in May, 2000 in exchange for services valued
@ $. 05 per share 36,585
Common shares issued in July, 2000 in exchange for convertible debt
at $ .15 per share 40,000
Capital contributed by principal shareholders 16,000
Common shares issued in November , 2000 for cash in connection with
private placement at $. 15 per share 96,026
Common shares issued in November, 20000 in exchange for services
valued @ $. 15 per share hares issued for consulting services 18,419
Net (loss) - (454,651) (454,651)
--------- ------------- ------------------
Balance, December 31, 2000 - $ (454,651.00) $ (176,668.00)
Common shares issued in January , 2001 in exchange for convertible debt
at $ .15 per share - 104,817
Stock options issued in May, 2001, valued at $. 15 per option, in
exchange for services - 52,500
Warrant issued in May 2001, valued at $. 15 per warrant, in exchange
for placement of debt - 75,000
Common shares issued in September , 2001 for cash in connection with
exercise of warrant at $.15 per share - 450
Common shares issued in September , 2001 for cash in connection with
exercise of warrant at $.10 per share - 13,300
Common shares issued in November , 2001 for cash in connection with
exercise of warrant at $.0001 per share - 500
Common shares issued in November , 2001 for cash in connection with
exercise of options at $.0001 per share - 350
Common shares issued in December , 2001 in exchange for convertible
debt at $ .50 per share - 66,981
Common shares issued in December , 2001 in exchange for debt at
$ .50 per share - 8,843
Net (loss) - (636,274) (636,274)
--------- ------------- ------------------
Balance, December 31, 2001 - $ (1,090,925) $ (490,202)
Common shares issued in May, 2002 in exchange for services valued at
$. 70 per share - 49,000
Common shares issued in Nov, 2002 in exchange for services valued at
$0.25 per share 37,500
Common shares issued in Dec. 2002 as rights offering at $0.25 per share 64,000
Subscription Receivable for 10,000 shares issued (2,500) (2,500)
Net loss - (700,104) (700,104)
--------- ------------- ------------------
Balance at December 31, 2002 $ (2,500) $ (1,791,029) $ (1,041,308)
Common shares issued in March, 2003 for cash in connection with
exercise of options at $0.001 per share 250
Funds received for stock subscription 2,500 2,500
Common Shares issued to Cornell Capital Partners in March, 2003 in
connection with Loan Commitment valued at $0.75 per share 225,000
Common shares issues in March, 2003 in exchange for services valued
at $0.75 per share 10,001
Net Loss - (229,971) (229,971)
--------- ------------- ------------------
Balance, March 31, 2003 $ - $ (2,021,000.00) $ (1,033,528.00)
F-6
See accompanying notes to unaudited condensed financial statements
CYBERLUX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED MARCH 31, 2003 FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
GENERAL
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Accordingly, the results from operations for the three-month period ended March
31, 2003, are not necessarily indicative of the results that may be expected for
the year ended December 31, 2003. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated December 31, 2002
financial statements and footnotes thereto included in the Company's SEC Form
10-KSB.
BUSINESS AND BASIS OF PRESENTATION
Cyberlux Corporation (the "Company " ) is in the development stage and its
effort have been principally devoted to seeking profitable business
opportunities. To date Company has incurred expenses, and has sustained losses.
Consequently, its operations are subject to all risks inherent in the
establishment of a new business enterprise. For the period from inception
through March 31 2003, the Company has accumulated losses of $2,021,000.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2002, the Company adopted SFAS No. 142. Under the new
rules, the Company will no longer amortize goodwill and other intangible assets
with indefinite lives, but such assets will be subject to periodic testing for
impairment. On an annual basis, and when there is reason to suspect that their
values have been diminished or impaired, these assets must be tested for
impairment, and write-downs to be included in results from operations may be
necessary. SFAS No. 142 also requires the Company to complete a transitional
goodwill impairment test six months from the date of adoption. Any goodwill
impairment loss recognized as a result of the transitional goodwill impairment
test is recorded as a cumulative effect of a change in accounting principle. The
adoption of SFAS No 142 had no material impact on the Company's condensed
consolidated financial statements.
SFAS No. 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS No. 143 is
effective in fiscal years beginning after June 15, 2002, with early adoption
1
permitted. The Company expects that the provisions of SFAS No. 143 will not have
a material impact on its consolidated results of operations and financial
position upon adoption. The Company adopted SFAS No. 143 effective January 1,
2003. The adoption of SFAS No. 143 had no material impact on Company's condensed
consolidated financial statements.
SFAS No. 144 establishes a single accounting model for the impairment or
disposal of long-lived assets, including discontinued operations. SFAS No. 144
superseded Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS No. 121), and APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions". The Company adopted
SFAS No. 144 effective January 1, 2002. The adoption of SFAS No. 144 had no
material impact on Company's condensed consolidated financial statements
In April 2002, the FASB issued Statement No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This Statement rescinds FASB Statement No. 4, "Reporting Gains and
Losses from Extinguishment of Debt", and an amendment of that Statement, FASB
Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements" and FASB Statement No. 44, "Accounting for Intangible Assets of
Motor Carriers". This Statement amends FASB Statement No. 13, "Accounting for
Leases", to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that a similar to sale-leaseback
transactions. The Company does not expect the adoption to have a material impact
to the Company's financial position or results of operations.
In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This Statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The Company
adopted SFAS No. 146 effective January 1, 2003. The adoption of SFAS No. 146 had
no material impact on Company's condensed consolidated financial statements.
In October 2002, the FASB issued Statement No. 147, "Acquisitions of Certain
Financial Institutions-an amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9", which removes acquisitions of financial institutions from
the scope of both Statement 72 and Interpretation 9 and requires that those
transactions be accounted for in accordance with Statements No. 141, Business
Combinations, and No. 142, Goodwill and Other Intangible Assets. In addition,
this Statement amends SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, to include in
its scope long-term customer relationship intangible assets of financial
institutions such as depositor- and borrower-relationship intangible assets and
credit cardholder intangible assets. The requirements relating to acquisitions
of financial institutions are effective for acquisitions for which the date of
acquisition is on or after October 1, 2002. The provisions related to accounting
for the impairment or disposal of certain long-term customer-relationship
intangible assets are effective on October 1, 2002. The adoption of this
Statement did not have a material impact to the Company's financial position or
results of operations as the Company has not engaged in either of these
activities.
In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure", which amends FASB Statement No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The transition guidance and annual disclosure provisions of Statement
148 are effective for fiscal years ending after December 15, 2002, with earlier
application permitted in certain circumstances. The interim disclosure
provisions are effective for financial reports containing financial statements
for interim periods beginning after December 15, 2002. The adoption of this
Statement did not have a material impact to the Company's financial position or
2
results of operations as the Company has not engaged in either of these
activities.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." Interpretation 46 changes the criteria by which one
company includes another entity in its consolidated financial statements.
Previously, the criteria were based on control through voting interest.
Interpretation 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity. The
consolidation requirements of Interpretation 46 apply immediately to variable
interest entities created after January 31, 2003. The consolidation requirements
apply to older entities in the first fiscal year or interim period beginning
after June 15, 2003. Certain of the disclosure requirements apply in all
financial statements issued after January 31, 2003, regardless of when the
variable interest entity was established. The adoption of this Statement did not
have a material impact to the Company's financial position or results of
operations as the Company has not engaged in either of these activities.
3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion contains forward-looking statements that are subject to
significant risks and uncertainties about us, our current and planned products,
our current and proposed marketing and sales, and our projected results of
operations. There are several important factors that could cause actual results
to differ materially from historical results and percentages and results
anticipated by the forward-looking statements. The Company has sought to
identify the most significant risks to its business, but cannot predict whether
or to what extent any of such risks may be realized nor can there be any
assurance that the Company has identified all possible risks that might arise.
Investors should carefully consider all of such risks before making an
investment decision with respect to the Company's stock. The following
discussion and analysis should be read in conjunction with the financial
statements of the Company and notes thereto. This discussion should not be
construed to imply that the results discussed herein will necessarily continue
into the future, or that any conclusion reached herein will necessarily be
indicative of actual operating results in the future. Such discussion represents
only the best present assessment from our Management.
GENERAL OVERVIEW
The Company is in the development stage and its efforts have been principally
devoted to designing, developing manufacturing and marketing advanced lighting
systems that utilize white (and other) light emitting diodes as illumination
elements.
On March 15, 2002, we signed an agreement with Cornell Partners, LP for a
$10,000,000 Equity Line of Credit investment. Cornell Capital is a domestic
hedge fund, which makes investments in small to mid sized publicly traded
companies. Under the Equity Line Agreement, we have the right, but not the
obligation to require Cornell Capital to purchase shares of common stock up to a
maximum amount over a 24 month period.
In March 2003, we made application to the National Association of Securities
Dealers, Inc. for listing on the Over the Counter Bulletin Board and to obtain a
trading symbol. The application is pending.
On March 9, 2003, we signed an agreement with Howard, Merrell & Partners ("HMP")
an Interpublic Company, located in Raleigh, North Carolina. Under the one year
agreement, HMP will provide consumer research, advertising and other marketing
support for us.
RESULTS OF OPERATIONS
The Company is in the development stage and is seeking to develop, manufacture
and market advanced lighting systems that utilize white (and other) light
emitting diodes as illumination elements. The risks specifically discussed are
not the only factors that could affect future performance and results. In
addition the discussion in this quarterly report concerning our business our
operations and us contain forward-looking statements. Such forward-looking
statements are necessarily speculative and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements. We do not have a
policy of updating or revising forward- looking statements and thus it should
not be assumed that silence by our Management over time means that actual events
or results are occurring as estimated in the forward-looking statements herein.
As a result of limited capital resources and no revenues from operations from
its inception, the Company has relied on the issuance of equity securities to
non-employees in exchange for services. The Company's management enters into
equity compensation agreements with non-employees if it is in the best interest
of the Company under terms and conditions consistent with the requirements of
4
Financial Accounting Standards No. 123, Accounting for Stock Based Compensation.
In order conserve its limited operating capital resources, the Company
anticipates continuing to compensate non-employees for services during the next
twelve months. This policy may have a material effect on the Company's results
of operations during the next twelve months.
REVENUES
We have generated no operating revenues from operations from our inception. We
believe we will begin earning revenues from operations in our second year of
actual operation as the Company transitions from a development stage company to
that of an active growth and acquisition stage company. On July 19, 2002, we
developed a web site (www.cyberlux.com) which gives us the ability to offer our
products over the internet.
COSTS AND EXPENSES
From our inception through March 31, 2003, we have not generated any revenues
from operations. We have incurred losses of $ 2,021,000 during this period.
These expenses were associated principally with equity-based compensation to
employees and consultants, product development costs and professional services.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2003, we had a working capital deficit of $1,341,461 . As a
result of our operating losses from our inception through March 31, 2003, we
generated a cash flow deficit of $738,491 from operating activities. Cash flows
used in investing activities was $ 102,494 during the period May 17, 2000 (date
of Company's inception) through March 31, 2003. We met our cash requirements
during this period through the private placement of $ 177,076 of common stock, $
512,455 from the issuance of notes (net of repayments and costs), $153,045 from
the issuance of notes payable to Company officers and shareholders (net of
repayments ), and $16,000 capital contributed by the Company's principal
shareholders.
While we have raised capital to meet our working capital and financing needs in
the past, additional financing is required in order to meet our current and
projected cash flow deficits from operations and development. We have a
financing commitment in the form of an equity line of credit from Cornell
Capital to provide the necessary working capital.
By adjusting its operations and development to the level of capitalization ,
management believes it has sufficient capital resources to meet projected cash
flow deficits through the next twelve months . However, if thereafter, we are
not successful in generating sufficient liquidity from operations or in raising
sufficient capital resources, on terms acceptable to us, this could have a
material adverse effect on our business, results of operations , liquidity and
financial condition.
The Company's independent certified public accountant has stated in his report
included in the Company's December 31, 2002 Form 10-KSB, as amended, that the
Company has incurred operating losses in the last two years, and that the
Company is dependent upon management's ability to develop profitable operations.
These factors among others may raise substantial doubt about the Company's
ability to continue as a going concern.
PRODUCT RESEARCH AND DEVELOPMENT
We anticipate performing further research and development for our exiting
products during the next twelve months. Those activities include a Landscape
Illumination System and OEM Task Lights which are designed for use by helmet
manufacturers that produce specialty headgear for the military, police/fire &
safety; mining industry; and ski/cycle safety firms.
5
These projected expenditures are dependent upon our generating revenues and
obtaining sources of financing in excess of our existing capital resources.
There is no guarantee that we will be successful in raising the funds required
or generating revenues sufficient to fund the projected costs of research and
development during the next twelve months.
ACQUISITION OF PLANT AND EQUIPMENT AND OTHER ASSETS
We do not anticipate the sale of any material property , plant or equipment
during the next 12 months. We do not anticipate the acquisition of any material
property, plant or equipment during the next 12 months.
NUMBER OF EMPLOYEES
From our inception through the period ended September 30, 2002, we have relied
on the services of outside consultants for services and have four (4) employees.
In order for us to attract and retain quality personnel, we anticipate we will
have to offer competitive salaries to future employees. We anticipate that it
may become desirable to add additional full and or part time employees to
discharge certain critical functions during the next 12 months. This projected
increase in personnel is dependent upon our ability to generate revenues and
obtain sources of financing. There is no guarantee that we will be successful in
raising the funds required or generating revenues sufficient to fund the
projected increase in the number of employees. As we continue to expand, we will
incur additional cost for personnel.
TRENDS, RISKS AND UNCERTAINTIES
We have sought to identify what we believe to be the most significant risks to
our business, but we cannot predict whether, or to what extent, any of such
risks may be realized nor can we guarantee that we have identified all possible
risks that might arise. Investors should carefully consider all of such risk
factors before making an investment decision with respect to our Common Stock.
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
Our annual report on December 31, 2002 Form 10-KSB, as amended, includes a
detailed list of cautionary factors that may affect future results. Management
believes that there have been no material changes to those factors listed,
however other factors besides those listed could adversely affect us. That
annual report can be accessed on EDGAR.
ITEM 3. CONTROLS AND PROCEDURES
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Exchange act reports is recorded,
processed , summarized and reported within the time periods specified in the
SEC's rules and forms and that such information is accumulated and communicated
to our management, including our chief executive officer and chief financial
officer, as appropriate , to allow timely decisions regarding required
disclosure. Management necessarily applied its judgment in assessing the costs
and benefits of such controls and procedures , which , by their nature, can
provide only reasonable assurance regarding management's control objectives.
We have carried out an evaluation, under the supervision and with the
participation of our management, including our chief executive officer and chief
financial officer of the effectiveness of the design and operation of our
disclosure controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report ( the Evaluation date )
Based upon that evaluation , the chief executive officer and chief financial
6
officer concluded that our disclosure controls and procedures were effective as
of the evaluation date.
(B) CHANGES IN INTERNAL CONTROLS
There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the
evaluation date.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
See Item 3: Legal Proceedings in our annual report on Form 10-KSB for the year
ended 12/31/02 for a description of current legal proceedings. There have been
no material changes width respect to legal proceedings since that report was
filed.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Pursuant to an Equity Line of Credit Agreement dated March 15, 2003, we issued
Cornell Capital Partners, LP, 300,000 shares of our common stock as a commitment
fee and on the date, pursuant to a Placement Agent Agreement, Westrock Advisors,
Inc. were issued 13,333 shares of our common stock as a placement agent fee. We
relied on Section 4(2) of the Securities Act of 1933, as amended and Rule 506
promulgated thereunder in the issuance of our common stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On March 8, 2003, we filed an Information Statement pursuant to Section 14(c )
of the Securities Exchange Act of 1934, which is a Notice of Action taken by
written consent of Majority Shareholders. In that action, our Board of Directors
passed a resolution that our articles of incorporation be amended to increase
the authorized number of shares of common stock, $0.001 par value per share,
from 20,000,000 to 100,000,000. It was approved by written consent of 52.4% of
our shareholders.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FROM 8-K
(a) Exhibits
7
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
3.1A * Certification of Amendment of Articles of Incorporation
filed April 3, 2003-05-12
10.5 * Equity Line of Credit Agreement between the Cyberlux
and Cornell Capital Partners, LP dated March 15, 2003.
10.6 * Placement Agreement between Cyberlux and Westrock Advisors, Inc.
10.7 * Registration Rights Agreement between Cyberlux
Corporation and Cornell Capital Partners, LP
10.8 * Escrow Agreement between Cyberlux Corporation,
Cornell Capital Partners, LP, Butler Gonzales, LLP and
Wachovia Bank, N.A.
10.9 Howard Merrell & Partners Engagement Letter (Filed herewith)
99.1 Certification of Donald F. Evans (Filed herewith)
99.2 Certification of David D. Downing (Filed herewith)
* Incorporated by reference to the Company's Registration Statement filed on
Form SB-2 filed April 2002.
(b) Reports on Form 8-K None
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Cyberlux Corporation
(Registrant)
Date: May 22, 2003
/s/ Donald F. Evans
- --------------------
Donald F. Evans
President and Chairman of the Board
===============================================================================
8
CERTIFICATIONS
I, Donald F. Evans, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Cyberlux
Corporation.
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 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;
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 operations, and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14 for the registrant and
have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions);
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize, and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions, with regard to significant
deficiencies and material weaknesses.
Date: May 22, 2003
/s/ Donald F. Evans
------------------------------
Donald F. Evans
President and Chief Executive Officer
9
CERTIFICATIONS
I, David D. Downing, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Cyberlux
Corporation.
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 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;
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 operations, and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14 for the registrant and
have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions);
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize, and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions, with regard to significant
deficiencies and material weaknesses.
Date: May 22, 2003
/s/ David D. Downing
------------------------------
David D. Downing
Treasurer and Chief Financial Officer
10