The decrease
for the three month period ended June 30, 2009 is primarily related to a
reduction of accounting and legal and a decrease in payroll and payroll related
costs due to higher allocations to selling and marketing partially offset by
increases in rent, health care.
The decrease
for the six month period ended June 30, 2009 is primarily related to a
reduction of accounting and legal costs and a decrease in payroll and payroll related
costs due to higher allocations to selling and marketing partially offset by
increase in rent and health care costs.
General and
administrative costs included consulting fees of $7,469 and $15,135 for the
three and six month periods ended June 30, 2009, related to a two-year
consulting contract with a significant stockholder, commencing on September 11,
2007. The consulting contract fees, with this stockholder for the prior year’s
comparable time periods of 2008 were $7,469 and $14,938, respectively.
OTHER INCOME (EXPENSE)
Interest Expense
For the three and six month periods ended June 30, 2009
and 2008, interest expense was $19,696, $55,328, $40,662 and $82,281,
respectively. Interest expense is dependent on the outstanding balance of our
line of credit and the outstanding balance of unsecured cash advances we
received from Mr. Planche, our president. The interest rate charged by
Ross/Fialkow on the outstanding balances under the line of credit was reduced
from 20% to 10% effective April 1, 2009. The interest rate charged by Mr.
Planche is the Internal Revenue Service short term “Applicable Federal Rate.”
For the three
and six month periods ended June 30, 2009 and 2008, we incurred interest of
$16,327, $48,970, $35,389, and $70,778, respectively, on our Loan Agreement
with Ross/Fialkow. We also incurred interest on unsecured cash advances from
our president of $3,313, $5,266, $6,303 and $11,496, respectively. For the six
months ended June 30, 2009, we incurred other miscellaneous interest costs of
$56.
For the three
and six month periods ended June 30, 2009 and 2008, interest expense decreased by
$20,966 and $26,953, respectively. Of this decrease in interest, $19,062 and
$21,808 is attributed to the reduction in the interest rate on the outstanding
balance of our line of credit, and $1,953 and $5,193 is attributable to the
decrease in the interest rate on the outstanding balance of unsecured cash
advances we received from Mr. Planche. The remaining change is attributable to
a net change in miscellaneous interest income expense of $49 and $48,
respectively.
Income Taxes
We have not calculated the tax benefits of our net
operating losses, since we do not have the required information. Due to the
uncertainty over our ability to utilize these operating losses, any deferred
tax assets, when determined, would be fully offset by a valuation allowance. The
Company paid $456 along with its extension for a state tax return.
LIQUIDITY AND CAPITAL RESOURCES AS OF JUNE
30, 2009
Since
inception, our operations have not generated sufficient cash flow to satisfy
our capital needs. We have financed our operations primarily through the
private sale of shares of our common stock, warrants to purchase shares of our
common stock and debt securities. Our net working capital deficit at June 30,
2009 was $2.8 million compared to a deficit of $2.7 million as of December 31,
2008.
The current financing for our
operations is derived primarily from unsecured, interest bearing cash advances
from Mr. Planche. While we believe that he will be able to continue funding our
operations, there is no guarantee that he will have the ability to continue to
do so. Mr. Planche has not committed to provide any additional cash advances to
the Company. In light of the recent economic turmoil in the global credit
markets, Mr. Planche may not be able to fund our operations on a timely basis
to enable us to take advantage of various economic opportunities. We do have
the ability to borrow $86,000 under our Loan Agreement with Ross/Fialkow (see
NOTE 8 - LINE OF CREDIT
in the notes to our
condensed consolidated financial statements included in this Form 10-Q);
however, it is inadequate based on our current and future funding requirements.
15
Due to the
recent turmoil in the global economy, it is uncertain that the necessary funds
will be available when we require them. We feel that we may benefit from, and
take advantage of, the recent economic uncertainty. As it becomes more
difficult for companies to stay in business, we believe they will need to find
more creative and unique ways to differentiate themselves from their
competition. We believe those companies will be more open to our products as
they try to maintain their market share.
In addition,
our current sales and marketing efforts will require substantial funding beyond
our current operating requirements. We currently intend to attempt raising
capital from various sources, however, we feel that we will be unable to
attract the necessary debt and/or equity financing unless our current sales and
marketing efforts are successful and until additional commercial and retail
sales can be generated to demonstrate that there is a market for our
Luminescent Products beyond our current limited successes.
As previously
discussed, we estimate that it will require $500,000 to $750,000 in additional
funding, to be used for various purposes, to make this sales and marketing
effort successful. An ability to raise capital to fund this effort, or fund it
timely, may influence how successful our sales and marketing effort is and
consequently, affect our ability to attract future debt and/or equity financing
for future operations.
Cash increased
to $87,441 at June 30, 2009 from $10,271 at December 31, 2008.
Net cash used
for operating activities for the six months ended June 30, 2009 was $270,757.
The primary reason for the cash usage was to fund the loss for the period.
Net cash
provided by financing activities for the six months ended June 30, 2009 was
$350,000. The net cash provided was derived from a sale of 2,000,000 shares of
common stock valued at $0.15 per share for $300,000 to ARAGONE S.A. of Geneva,
Switzerland in connection with a private placement on April 27, 2009, unsecured
cash advances received from our president of $36,000 and advances from our line
of credit of $14,000.
Credit Availability
We have a $750,000 Loan Agreement with Ross/Fialkow,
as described in
NOTE 8 – LINE OF CREDIT
of our condensed consolidated financial statements. We have borrowed $664,000
of the $750,000 available under this loan agreement. As of June 30, 2009, the
outstanding balance under the line of credit was $664,000.
Effects of Inflation
We believe that our financial results have not been
significantly impacted by inflation and price changes. We have experienced only
minimally modest increases in the cost of transporting our inventory to and
between our manufacturing vendors and our warehouse and the costs of shipping
our Luminescent Products to purchasers, as our vendors have added fuel
surcharges to our normal shipping costs.
Subsequent Event
The Company received a Notice of
Federal Tax Lien dated August 6, 2009. The IRS is claiming the Company owes payroll taxes
for the second and third quarters of 2006 as well as interest and penalties totaling
approximately $53,000. The lien attaches to all assets currently owned and to all property
the Company may acquire in the future. An administrative assessment of payroll liability
was determined as a result of the Company not filing required quarterly payroll reports.
The Company’s calculations indicate that no payroll tax liability was due during
these two periods.
The Company believes that it does not
owe the delinquent taxes, penalties and interest and plans on contesting the lien. The
Company has replied to all correspondence, filed all outstanding quarterly reports and all
other requested documentation with the IRS. Our latest reply on July 13, 2009 is currently
under review at the IRS. We believe that upon review, this matter will be resolved without
an assessment of liability or interest. It is our understanding that the administrative
review process of our case will take 4 to 5 months from the date of submission. The
Company did not accrue the amounts due under the lien as of and for the six and three
months ended June 30, 2009.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
As a “smaller
reporting company” defined by Item 10 of Regulation S-K, we are not required to
provide this information.
ITEM 4T. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Based on an
evaluation under the supervision and with the participation of the Company’s
management, the Company’s principal executive officer and principal
financial officer (one individual) have concluded that the Company’s
disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (“Exchange Act”) were
effective as of June 30, 2009 to ensure that information required to be
disclosed by the Company in reports that it files or submits under the Exchange
Act is (i) recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission rules and forms and
(ii) accumulated and communicated to the Company’s management, including
its principal executive officer and principal financial officer (one
individual), as appropriate to allow timely decisions regarding required
disclosure.
16
Changes in Internal Control Over Financial Reporting
There were no
changes in the Company’s internal control over financial reporting during
the second quarter of 2009, which were identified in connection with
management’s evaluation required by paragraph (d) of Rules 13a-15 and
15d-15 under the Exchange Act, that have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial
reporting.
17
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PART II.
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OTHER INFORMATION
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ITEM 1.
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LEGAL PROCEEDINGS
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There are no
material legal proceedings pending to which the Company is a party or to
which any of its properties are subject.
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ITEM 2.
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UNREGISTERED SALES OF EQUITY SECURITIES AND
USE OF PROCEEDS
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None.
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ITEM 3.
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DEFAULTS UPON SENIOR SECURITIES
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None.
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ITEM 4.
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SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
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None.
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ITEM 5.
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OTHER INFORMATION
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The Company received a Notice of
Federal Tax Lien dated August 6, 2009. The IRS is claiming the Company owes payroll taxes
for the second and third quarters of 2006 as well as interest and penalties totaling
approximately $53,000. The lien attaches to all assets currently owned and to all property
the Company may acquire in the future. An administrative assessment of payroll liability
was determined as a result of the Company not filing required quarterly payroll reports.
The Company’s calculations indicate that no payroll tax liability was due during
these two periods.
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The Company believes that it does not
owe the delinquent taxes, penalties and interest and plans on contesting the lien. The
Company has replied to all correspondence, filed all outstanding quarterly reports and all
other requested documentation with the IRS. Our latest reply on July 13, 2009 is currently
under review at the IRS. We believe that upon review, this matter will be resolved without
an assessment of liability or interest. It is our understanding that the administrative
review process of our case will take 4 to 5 months from the date of submission. The
Company did not accrue the amounts due under the lien as of and for the six and three
months ended June 30, 2009.
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18
ITEM 6. EXHIBITS
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Number
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Description of Exhibit
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10.30
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Standard
Form Commercial Lease dated September 12, 2008 between Brightec, Inc. and William
Dolan on behalf of Pleasant Street Realty Trusts I & II
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31
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Certification
of Chief Executive Officer and Chief Financial Officer, pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
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E-1
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32
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Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (filed herewith).
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E-2
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19
SIGNATURE
Pursuant to
the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
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BRIGHTEC, INC.
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Date: August
14, 2009
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By:
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/s/ Patrick
Planche
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Patrick
Planche, President, Chief Executive
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Officer,
Treasurer, Director Chief Financial Officer, Principal Executive
Officer and Principal Financial and Accounting Officer
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20
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