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, 2004
[ ] 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, 2004
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.)
4625 Creekstone Drive
Suite 100
Research Triangle Park
Durham, NC 27703
(Address of Principal Executive Offices)
(919) 474-9000
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, 2004, the Company had 11,944,905 shares of its par value $0.001
common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
i
CYBERLUX CORPORATION
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS................................................
Condensed Balance Sheets.................................................3
Condensed Statement of Losses............................................3
Condensed Statements of Cash Flows.......................................3
Condensed Statement of Deficiency in Stockholders'
Equity.................................................................3
Notes to Condensed Financial Statements.................................3-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS...............................3
General Overview.........................................................3
Results of Operations....................................................4
Revenues.................................................................5
Costs and Expenses.......................................................5
Liquidity and Capital Resources..........................................5
Product Research and Development.........................................5
Acquisition of Plant and Equipment and Other Assets......................7
Number of Employees......................................................7
Trends, Risks and Uncertainties..........................................7
Cautionary Factors that May Affect Future Results........................8
ITEM 3. CONTROLS AND PROCEDURES.............................................8
Evaluation of Disclosure controls and Procedures.........................8
Changes in internal controls.............................................8
PART II - OTHER INFORMATION.................................................9
Item 1. Legal Proceedings................................................9
Item 2. Changes in Securities and Use of Proceeds........................9
Item 3. Defaults Upon Senior Securities.................................10
Item 4. Submission of Matters to a Vote of Security Holders.............10
Item 5. Other Information...............................................10
Item 6. Exhibits and Reports on From 8-K................................10
INDEX TO EXHIBITS.......................................................11
SIGNATURES..............................................................11
CERTIFICATIONS..........................................................12
CERTIFICATIONS..........................................................13
EXHIBIT 99.1............................................................14
EXHIBIT 99.2............................................................15
ii
Item 1. Financial Information
CYBERLUX CORPORATION
INDEX TO FINANCIAL INFORMATION
PAGE NO
Condensed Balance Sheets at March 31, 2004 and December 31, 2003 F-3
Condensed Statement of Losses for the three months ended of March 31, 2004 and 2003 and the period from May
17, 2000 ( date of inception ) through March 31, 2004 F-4
Condensed Statement of (Deficiency) in Stockholders' Equity for the Period May 17, 2000 (Date of Inception)
through March 31, 2004 F-5 to F-7
Condensed Statement of Cash flows for the three months ended March 31, 2004 and March 31, 2003 and the period
from May 17, 2000 ( date of inception ) through March 31, 2004 F-8 to F-9
Notes to Unaudited Condensed Financial statements F-10 to F-14
CYBERLUX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
(UNAUDITED)
Unaudited Audited
March 31 ,2004 December 31 ,2003
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 19,233 $ 16,247
Accounts receivable 9,816 --
Total current assets 29,049 16,247
Property, plant and equipment, net of accumulated depreciation of
$ 62,941 and $ 44,649 respectively 55,727 68,845
----------- -----------
Other assets- deposits -- 236,000
----------- -----------
Total Assets $ 84,776 $ 321,092
=========== ===========
LIABILITIES AND (DEFICIENCY) IN STOCKHOLDERS' EQUITY
Current liabilities:
Accued interest $ 51,716 $ 104,976
Other accrued liabilities 207,206 296,388
Management fees payable - related party 311,838 996,508
Advance deposits 32,403 --
Short term notes payable - shareholders 122,845 207,845
Short term notes payable 120,000 320,000
----------- -----------
Total current liabilities 846,008 1,925,717
----------- -----------
Long Term liabilities - warrants payable - convertible preferred 347,610 347,610
(Deficiency) in Stockholders' Equity:
Convertible preferred stock 800,001 1
Common stock 11,945 8,049
Additional paid-in capital 2,820,756 2,337,736
Subscription receivable -- (276,186)
Deficit accumulated during development stage (4,741,544) (4,021,835)
----------- -----------
(Deficiency) in stockholders' equity (1,108,842) (1,952,235)
----------- -----------
Total liabilities and (Deficiency) in Stockholders' Equity $ 84,776 $ 321,092
See accompanying notes to the unaudited condensed financial information.
F-3
CYBERLUX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Period May 17, 2000
For the Three Months Ended (date of inception) Through
March 31, 2004 March 31, 2003 March 31, 2004
-------------- -------------- ---------------------------
Revenue $ 9,968 $ -- $ 83,354
Cost of goods sold 8,395 -- 167,224
----------- ----------- -----------
Gross profit (loss) 1,573 -- (83,870)
----------- ----------- -----------
Operating Expenses
Depreciation and amortization 18,291 5,125 344,189
General and administrative expenses 268,798 203,933 2,861,370
----------- ----------- -----------
Total Operating Expenses 287,089 209,058 3,205,559
----------- ----------- -----------
(Loss) from Operations (285,516) (209,058) (3,289,429)
Other Income (expense) 15,000 -- 15,000
Interest Income (49,193) -- (330,866)
Interest Expense -- (20,917) --
Income Taxes -- -- --
----------- ----------- -----------
Net Loss Before Preferred Dividend (319,709) (229,975) (3,605,295)
Preferred dividend - beneficial conversion
discount on convertible preferred
400,000 -- 1,136,250
Net Loss $ (719,709) $ (229,975) $(4,741,545)
=========== =========== ===========
Weighted average number of common shares
outstanding - basic and fully diluted 11,907,762 6,736,322 n/a
Net (loss) per share - basic & fully diluted $(0.06) $(0.03) n/a
See accompanying notes to the unaudited condensed financial information.
F-4
CYBERLUX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY FOR THE
PERIOD MAY 17, 2000 (DATE OF INCEPTION) THROUGH MARCH 31, 2004
(UNAUDITED)
STOCK
COMMON STOCK PREFERRED STOCK ADDITIONAL SUBSCRIPTION
RECEIVABLE
PAID IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
Common shares issued in May,
2000 to founders in exchange
for cash at $0.01 per share 1,640,000 $1,640 - - $560 -
Common shares issued in May,
2000 in exchange for
research and development
services valued at $.09 pers
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 in for cash
in connection with private
placement $.15 per share 640,171 640 - - 95,386 -
Common shares issued in
November , 2000 in exchange
for services valued @$.15
per share 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 , 2000 in exchange
for convertible debt at
$.15 per share 698,782 699 - - 104,118 -
Stock options issued in May,
2001 valued @ $.15 per
option in exchange for
services - - - - 52,500 -
Warrant issued in May 2001,
valued at $015 per warrant
in exhange for placement of
debt - - - - 75,000 -
Common shares issued in
September 2001 in excercise
for warrant at $.15 per
share 3,000 3 - - 447 -
Common shares issued in
September 2001 for cash in
connection with excercise of
warrant at $.10 per share 133,000 133 - - 13,167 -
Common shares issued in
November 2001 for cash in
connection with excercise of
warrant at $.0001 per share 500,000 500 - - - -
Common shares issued in Nov
, 01 in on excercise of
options at $.0001 per share 350,000 350 - - - -
DEFECIENCY TOTAL IN
ACCUMALATED SHAREHOLDERS
EQUITY
DURING
DEVELOPMENT
STAGE
2004
Common shares issued in May,
2000 to founders in exchange
for cash at $0.01 per share - $2,200
Common shares issued in May,
2000 in exchange for
research and development
services valued at $.09 pers
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 in for cash
in connection with private
placement $.15 per share - 96,026
Common shares issued in
November , 2000 in exchange
for services valued @$.15
per share issued for
consulting services - 18,419
Net loss (454,651) (454,651)
-------- --------
BALANCE, DECEMBER 31, 2000 (454,651) (176,668)
Common shares issued in
January , 2000 in exchange
for convertible debt at
$.15 per share - 104,817
Stock options issued in May,
2001 valued @ $.15 per
option in exchange for
services - 52,500
Warrant issued in May 2001,
valued at $015 per warrant
in exhange for placement of
debt - 75,000
Common shares issued in
September 2001 in excercise
for warrant at $.15 per
share - 450
Common shares issued in
September 2001 for cash in
connection with excercise of
warrant at $.10 per share - 13,300
Common shares issued in
November 2001 for cash in
connection with excercise of
warrant at $.0001 per share - 500
Common shares issued in Nov
, 01 in on excercise of
options at $.0001 per share - 350
See accompanying notes to the unaudited condensed financial information.
F-4
CYBERLUX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY FOR THE
PERIOD MAY 17, 2000 (DATE OF INCEPTION) THROUGH MARCH 31, 2004
(UNAUDITED)
STOCK
COMMON STOCK PREFERRED STOCK ADDITIONAL SUBSCRIPTION
RECEIVABLE
PAID IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
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 17 - - 8,825
Net loss - - - - - -
--------- --------- --------- --------- --------- ---------
BALANCE AT 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 - - 49,928 -
Common shares issued in
November, 2002 in exchange
for services valued at $.25
per share 150,000 150 - - 37,350 -
Common shares issued in
December, 2002 as rights
offerings at $0.25 per share 256,000 256 - - 63,744 -
Subscription receivable for
10,000 shares issued - - - - - (2,500)
- -
Net loss - - - -
--------- --------- --------- --------- --------- ---------
BALANCE AT DECEMBER 31, 2002 6,628,396 6,628 - - 745,593 (2,500)
Common shares issued in
March , 2003 in connection
with excercise of options at
$.0001 per share 250,000 250 - - - -
Funds received for stock
subscription - - - - - 2,500
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 issued in
March , 2003 in exchange for
services valued at $0.75 per
share 13,333 14 - - 9,987 -
DEFECIENCY TOTAL IN
ACCUMALATED SHAREHOLDERS
EQUITY
DURING
DEVELOPMENT
STAGE
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 8,842
Net loss (636,274) (636,274)
--------- ---------
BALANCE AT DECEMBER 31, 2001 (1,090,925) $(490,202)
Common shares issued in May,
2002 in exchange for
services valued at $.70 per
share - 49,998
Common shares issued in
November, 2002 in exchange
for services valued at $.25
per share - 37,500
Common shares issued in
December, 2002 as rights
offerings at $0.25 per share - 64,000
Subscription receivable for
10,000 shares issued - (2,500)
Net loss - (700,104) (700,104)
--------- ---------
BALANCE AT DECEMBER 31, 2002 (1,791,029) (1,041,308)
Common shares issued in
March , 2003 in connection
with excercise of options at
$.0001 per share - 250
Funds received for stock
subscription - 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 issued in
March , 2003 in exchange for
services valued at $0.75 per
share - 10,001
See accompanying notes to the unaudited condensed financial information.
F-5
CYBERLUX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY FOR THE
PERIOD MAY 17, 2000 (DATE OF INCEPTION) THROUGH MARCH 31, 2004
COMMON STOCK PREFERED STOCK ADDITIONAL STOCK
SUBSCRIPTION
SHARES AMOUNT SHARES AMOUNT PAID IN CAPITAL RECEIVABLE
Robrady Design Note was
converted into 196,120
shares @.25 per share
196,120 196 - - 48,833 -
Common Shares issued to
Mark Schmidt for services
in June 2003. The 200,000
shares wer issued at $0.25
per share 200,000 200 - - 49,800 -
Common shares issued to
Capital Funding Solutions
September 2003, 450,000
shares were issued at
$0.20 per share. Shares
secure a sales factoring
agreement
450,000 450 - 89,550 -
-
Common shares issued in
November 2003 for
consulting services valued
at $0.50 per share
11,292 11 - - 5,634 -
Convertible Preferred
Shares issued in December
2003 valued at $5,000 per
share, Class A - - 155 1 774,999 (276,186)
Warrants on convertible
preferred shares - - - - (347,610) -
Beneficial converion
discount on convertible
preferred shares - - - - 736,250 -
Net (Loss) - - - - - -
--------- --------- --------- --------- --------- ---------
BALANCE AT DECEMBER 31,
2003 8,049,141 8,049 155 1 2,337,736 (276,186)
Issuance of convertible
preferred shares Class B
in January 2004 for
accrued management fees at
$1 per share - - 800,000 800,000 - -
Proceeds from
subscriptions Receivable - - - - - 276,186
Common Shares issued in
January, 2004 in exchange
for services at $0.10 per
share 260,000 260 - - 25,740 -
Common Shares issued in
January 2004 in ex-change
for services at $0.001
per share 225,000 225 - - - -
Common Shares issued in
January 2004 in ex-change
for services valued at
$0.01 per share 2,100,000 2,100 - - 18,900 -
DEFICIENCY TOTAL IN
ACCUMULATED SHAREHOLDERS
EQUITY
DURING DEVELOPEMENT
STAGE - 2004
Robrady Design Note was
converted into 196,120
shares @.25 per share
- 49,029
Common Shares issued to
Mark Schmidt for services
in June 2003. The 200,000
shares wer issued at $0.25
per share - 50,000
Common shares issued to
Capital Funding Solutions
September 2003, 450,000
shares were issued at
$0.20 per share. Shares
secure a sales factoring
agreement
- 90,000
Common shares issued in
November 2003 for
consulting services valued
at $0.50 per share
- 5,645
Convertible Preferred
Shares issued in December
2003 valued at $5,000 per
share, Class A - 498,814
Warrants on convertible
preferred shares - (347,610)
Beneficial converion
discount on convertible
preferred shares - 736,250
Net (Loss) (2,230,806) (2,230,806)
---------- -----------
BALANCE AT DECEMBER 31,
2003 (4,021,835) (1,952,235)
Issuance of convertible
preferred shares Class B
in January 2004 for
accrued management fees at
$1 per share - 800,000
Proceeds from
subscriptions Receivable - 276,186
Common Shares issued in
January, 2004 in exchange
for services at $0.10 per
share - 26,000
Common Shares issued in
January 2004 in ex-change
for services at $0.001
per share - 225
Common Shares issued in
January 2004 in ex-change
for services valued at
$0.01 per share - 21,000
See accompanying notes to the unaudited condensed financial information.
F-6
CYBERLUX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY FOR THE
PERIOD MAY 17, 2000 (DATE OF INCEPTION) THROUGH MARCH 31, 2004
COMMON STOCK PREFERED STOCK ADDITIONAL STOCK DEFICIENCY TOTAL IN
SUBSCRIPTION
SHARES AMOUNT SHARES AMOUNT PAID IN CAPITAL RECEIVABLE
Shares issued for note payable at
$0.25 in January 2004 110,764 111 - - 27,580 -
Shares issued for consulting
services at $0.01 per share 1,200,000 1,200 - - 10,800 -
Beneficial conversion discount-
preferred stock dividend with
respect to convertible preferred
shares - - - - 400,000 -
Net loss - - - - - -
BALANCE AT MARCH 31, 2004 11,944,905 $ 11,945 800,155 $800,001 $2,820,756 $ -
ACCUMILATED
DURING SHAREHOLDERS
DEVELOPEMENT
STAGE - 2004 EQUTIY
Shares issued for note payable at
$0.25 in January 2004 - 27,691
Shares issued for consulting
services at $0.01 per share - 12,000
Beneficial conversion discount-
preferred stock dividend with
respect to convertible preferred
shares - 400,000
Net loss (719,709) (719,709)
BALANCE AT MARCH 31, 2004 $(4,741,544) $ (1,108,842)
See accompanying notes to the unaudited condensed financial information.
F-7
For the Three Months Ended For the Period May 17,
2000 (date of inception)
Through March 31, 2004
2004 2003
---- ----
CASH FLOW FROM OPERATING ACTIVITIES:
Net (loss) $ (719,709) $ (229,971) $(4,741,544)
Depreciation and amortization 18,291 5,124 344,190
Strock options issued for consulting services -- 10,000 107,504
Shares issued for previosuly incurred debt 27,692 -- 76,721
Loan extension write off -- -- 25,000
Preferred shares issued for conversion of accrued
management fees 723,670 -- 723,670
Beneficial conversion discount -- preferred stock
dividend 400,000 -- 1,136,250
Preferred shares issued for previously incurred debt 76,330 -- 76,330
Accrued expenses relating to escrow deposits -- -- 23,813
Shares issued for consulting services 47,225 -- 220,375
Shares issued for research and development -- -- 68,753
Shares issued for factoring agreement -- -- 90,000
Increase in accounts receivable (9,816) -- (9,816)
Decrease in deposits 236,000 -- --
Increase (decrease) in accrued interest (53,260) 5,638 51,716
(Decrease) increase in mfee payable--
related party (684,670) 121,500 311,838
Increase in other accrued liabilities (89,182) 46,962 207,206
Net cash used in operating activities (27,429) (40,747) (1,287,994)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (5,174) -- (118,668)
Net cash provided (used in) investing activities (5,174) -- (118,668)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments for) short-term notes payable (200,000) -- 267,455
(Payments for)proceeds from short-term notes payable -
shareholders - net (85,000) 29,500 122,845
Proceeds from advance deposits 32,403 -- 32,403
Proceeds from issuance of preferred stock -- -- 475,000
Proceeds from issuance of common stock 288,186 2,750 528,192
NET CASH PROVIDED BY FINANCING ACTIVITIES 35,589 32,250 1,425,895
Net increase in cash 2,986 (8,497) 19,233
Cash - beginning 16,247 26,086 --
Cash - ending $ 19,233 $ 17,589 $ 19,233
Supplemental disclosures:
Cash paid for Interest expenses $ 66,314 $ 9,427 $ 117,214
Cash paid for income taxes -- -- --
See accompanying notes to the unaudited condensed financial information.
F-8
CYBERLUX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
Non Cash investing and financing activities:
Shares issued for research and development and consulting 47,225 10,000 153,478
Shares issued for conversion of debt 27,692 -- 338,384
Warrants issued in connection with financing -- -- 75,000
Warrants issued detachable with convertible preferred shares -- -- 347,610
Beneficial conversion discount on convertible preferred shares 400,000 -- 1,136,250
Options issued in connection with services -- -- 52,500
Shares issued in connection with services -- -- 204,083
Shares issued in connection with factoring -- -- 90,000
Shares issued in connection with loan -- -- 225,000
Convertible preferred shares issued for note payable and accrued interest 76,330 -- 76,330
Convertible preferred shares issued for accrued management fees 723,670 -- 723,670
See accompanying notes to the unaudited condensed financial information
F-9
CYBERLUX CYBERLUX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2004
(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, 2004, are not necessarily indicative of the results that may be expected for
the year ended December 31, 2004. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated December 31, 2003
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 the 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 2004, the
Company has accumulated losses of $4,741,544.
Stock Based Compensation
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement
amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide
alternative methods of transition for a voluntary charge to the fair value based
method of accounting for stock-based employee compensation. In addition, this
statement amends the disclosure requirements of SFAS No. 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 Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in APB
Opinion No. 25 and related interpretations. Accordingly, compensation expense
for stock options is measured as the excess, if any, of the fair market value of
the Company's stock at the date of the grant over the exercise price of the
related option. The Company has adopted the annual disclosure provisions of SFAS
No. 148 in its financial reports for the year ended December 31, 2002 and
subsequent years.
F-10
CYBERLUX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Had compensation costs for the Company's stock options been determined based on
the fair value at the grant dates for the awards, the Company's net loss and
losses per share would have been as follows (transactions involving stock
options issued to employees and Black-Scholes model assumptions are presented in
Note D):
For the three months ended
March 31,
2004 2003
Net loss - as reported $(719,709) $(229,975)
Add: Total stock based employee
compensation expense as reported
under intrinsic value method
(APB. No. 25) -- --
Deduct: Total stock based employee
compensation expense as reported
under fair value based method (SFAS No 123) -- --
Net loss - Pro Forma $(719,709) $(229,975)
Net loss attributable to common
stockholders - Pro forma $(719,709) $(229,975)
Basic (and assuming dilution) loss
per share - as reported $ (.06) $ (.03)
Basic (and assuming dilution) loss per share - proforma
$ (.06) $ (.03)
RECENT ACCOUNTING PRONOUNCEMENTS
In April 2003, the FASB issued Statement No.149, "Amendment of Statement of 133
on Derivative Instruments and Hedging Activities ", which amends Statement 133,
Accounting for Derivative Instruments and Hedging Activities. The adoption of
this statement did not have a material impact on the Company's financial
position.
In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. The
adoption of this statement did not have a material impact on the Company's
financial position.
In December 2003, the FASB issued SFAS No. 132 (revised), EMPLOYERS' DISCLOSURES
ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS - AN AMENDMENT OF FASB
STATEMENTS NO. 87, 88 AND 106. This statement retains the disclosure
requirements contained in FASB statement no. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits, which it replaces. It requires
additional disclosures to those in the original statement 132 about the assets,
obligations, cash flows, and net periodic benefit cost of defined benefit
pension plans and other defined benefit postretirement plans. The required
information should be provided separately for pension plans and for other
postretirement benefit plans. The revision applies for the first fiscal or
annual interim period ending after December 15, 2003 for domestic pension plans
and June 15, 2004 for foreign pension plans and requires certain new disclosures
related to such plans. The adoption of this statement will not have a material
impact on the Company's results of operations or financial positions.
F-11
CYBERLUX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
NOTE B - COMMON STOCK
In January, 2004 , the Company issued 260,000 shares of its common stock in
exchange for services totaling $26,000. The stock issued was valued at
approximately $.10 per share, which represents the fair value of the stock
issued, which did not differ materially from the value of the services rendered.
In January, 2004 , the Company issued 225,000 shares of its common stock in
exchange for services totaling $225. The stock issued was valued at
approximately $.001 per share, which represents the fair value of the stock
issued, which did not differ materially from the value of the services rendered.
In January, 2004 , the Company issued 2,100,000 shares of its common stock in
exchange for services totaling $21,000. The stock issued was valued at
approximately $.01 per share, which represents the fair value of the stock
issued, which did not differ materially from the value of the services rendered.
In January, 2004, the holder of a $27,691 note payable exchanged the unpaid
principal together with accrued interest for 110,764 shares at $0.25 per share
of the Company's common stock.
In January, 2004, the Company issued 1,200,000 shares of its common stock for
cash at $0.01 per share for $12,000.
In January, 2004, the Company collected the balance of its subscriptions
receivable of $276,186.
NOTE C - PREFERRED STOCK
In January, 2004 , the Company issued 800,000 shares of its preferred stock B in
lieu of certain accrued management services fee payable and notes payable
including interest payable thereon totaling $8,00,000 to officers of the company
The stock issued was valued at approximately $1.00 per share, which represents
the fair value of the stock. The Company recorded beneficial conversion discount
of $400,000 - preferred dividend relating to the issuance of convertible
preferred stock.
NOTE D - STOCK OPTIONS
Class A Warrants
The following table summarizes the changes in warrants outstanding and the
related prices for the shares of the Company's common stock issued to
shareholders at March 31, 2004.
Warrants Outstanding Warrants Exercisable
Weighted Average Remaining Weighed Average Weighted Average
Number Outstanding Contractual Life (Years) Exercise Price Number Exercise Price
----------- ------------ -------------- --------------
Exercise Prices Exercisable
$ 0.25 7,750,000 5 $ 0.25 7,750,000 $ 0.25
--------- ---------
7,750,000 5 $ 0.25 7,750,000 $ 0.25
=== ========= = ====== ==== ========= ======
F-12
CYBERLUX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
NOTE D - STOCK OPTIONS (CONTINUED)
Class B Warrants
The following table summarizes the changes in warrants outstanding and the
related prices for the shares of the Company's common stock issued to
shareholders at March 31, 2004.
Warrants Outstanding Warrants Exercisable
Weighted Average Remaining Weighed Average Weighted Average
Number Outstanding Contractual Life (Years) Exercise Price Number Exercise Price
----------- ------------ -------------- --------------
Exercise Prices Exercisable
$ 1.05 7,750,000 3 $ 1.05 7,750,000 $ 1.05
--------- ---------
7,750,000 3 $ 1.05 7,750,000 $ 1.05
=== ========= ======= =============== =======
Transactions involving the Company's warrant issuance are summarized as follows:
Number of Shares Weighted Average
Price Per Share
Outstanding at December 31, 2003 $15,500,000 $ 0.54
Granted -- --
Exercised -- --
Canceled or expired -- --
----------- ---------
Outstanding at March 31, 2004 $15,500,000 $ .54
=========== =========
Employee Stock Options
The following table summarizes the changes in options outstanding and the
related prices for the shares of the Company's common stock issued to employees
of the Company under a non-qualified employee stock option plan.
Options Outstanding Options Exercisable
Weighted Average Weighted Average Weighted
Number Outstanding Remaining Contractual Exercise Price Number Average
----------- --------------
Exercise Prices Life (Years) Exercisable Exercise Price
--------------- ------------ ----------- --------------
$0.2125 2,000,000 6.00 $ 0.2125 2,000,000 $0.2125
--------- ---- ------- --------- -------
$0.2125 2,000,000 6.00 $ 0.2125 2,000,000 $0.2125
--------- ---- ------- --------- -------
Transactions involving stock options issued to employees are summarized as
follows:
Number of Shares Weighted Average
Price Per Share
Outstanding at December 31, 2003 $ 2,000,000 $ 0.2125
Granted -- --
Exercised -- --
Canceled or expired -- --
----------- -----------
Outstanding at March 31, 2004 $ 2,000,000 $ 0.2125
----------- -----------
F-13
CYBERLUX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
NOTE D - STOCK OPTIONS (CONTINUED)
Employee Stock Options (continued)
The weighted-average fair value of stock options granted to employees during the
period ended March 31, 2004 and 2003 and the weighted-average significant
assumptions used to determine those fair values, using a Black-Scholes option
pricing model are as follows:
2003 2002
---- ----
Significant assumptions (weighted-average):
Risk-free interest rate at grant date n/a n/a
Expected stock price volatility n/a n/a
Expected dividend payout - -
Expected option life-years (a) n/a n/a
(a)The expected option life is based on contractual expiration dates.
If the Company recognized compensation cost for the stock options and warrants
for the non-qualified employee stock option plan in accordance with SFAS No.
123, the Company's pro forma net loss and net loss per share would have been
$(719,709) and $(0.06) for the period ended March 31, 2004 and $(229,975) and
$(0.03) for the period ended March 31, 2003, respectively.
F-14
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.
We are developing and marketing new product applications of diodal
illumination(TM) that demonstrate added value over traditional lighting systems.
Using proprietary technology, we are creating a family of products for emergency
and security lighting offer extended light life and greater cost effectiveness
than other existing forms of illumination. We are expanding our marketing
activity into channels of retail, commercial and institutional sales.
Our target markets include long-term interim lighting needs in hotels,
hospitals, nursing homes, airports, shopping centers and multiple family
complexes; long-term evacuation solutions for theaters, office and public
buildings; reduced maintenance cost solutions for property managers as applied
to walkway, corridor or landscape lighting; and certain sensitive applications
for the military.
Shortly after the power outage blackout that occurred from the Midwest to
Northeastern United States and parts of Canada in August 2003, we were invited
to propose an emergency lighting redundancy system for the City of Cleveland,
Ohio where the power outage darkened most of the City's buildings. We reviewed
existing systems and demonstrated our Emergency Lighting Augmentation System
(ELAS (TM) ) over a three month period beginning in December 2003. In March
2004, we were awarded a Non-Competitive Bid Contract by the City to begin
implementation of the Elas product in Cleveland's Public Utilities Building. The
nature and purpose of ELAS is its ability to provide up to 40 hours of light in
bathrooms, stairwells, elevators, corridors, equipment rooms and interior
offices from its custom constant charge battery pack and expandable lighting
element configuration. The system retrofits into existing fluorescent fixtures
where its patented sensor differentiates between power off at a wall switch and
a power outage in the building's electrical system. We view the Cleveland
implementation as a beta site that underwrites a marketing campaign to other
major cities in North America and Europe.
Our common stock began trading on the Over-the-Counter Bulletin Board under the
symbol ,,CYBL.OB" on July 13, 2003. The table below sets forth by quarter the
sales information for our common stock as reported on the Over-the-Counter
Bulletin Board in our past fiscal year. This information reflects inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions.
SALE PRICES
-----------------------------
HIGH LOW
2002:
First Quarter N/A N/A
Second Quarter N/A N/A
Third Quarter N/A N/A
Fourth Quarter N/A N/A
2003:
First Quarter N/A N/A
Second Quarter N/A N/A
Third quarter 1.05 0.10
Fourth quarter 0.55 0.12
2004
First Quarter 0.53 0.19
On May 18, 2004, the closing price of our common stock on the Over-the-Counter
Bulletin Board was $0.40 per share. We urge you to obtain current market
quotations for shares of our common stock.
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
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 operating revenues from operations of $83,354 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
COSTS AND EXPENSES
From our inception through March 31, 2004, we have generated revenues of $83,354
from operations. We have incurred losses of $4,741,545 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, 2004, we had a working capital deficit of $816,959. As a result
of our operating losses from our inception through March 31, 2004, we generated
a cash flow deficit of $1,287,994 from operating activities. Cash flows used in
investing activities was $118,668 during the period May 17, 2000 (date of
Company's inception) through March 31, 2004. We met our cash requirements during
this period through the private placement of $475,000of preferred stock,
$528,192through the issuance of common stock, and $ 155,248from the issuance of
notes payable to Company officers and shareholders and advances.
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.
By adjusting its operations and development to the level of capitalization ,
management believes it has suffucient 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, 2003 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.
Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 141, "Business Combinations"
(SFAS No. 141), and Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" (SFAS No. 142). The FASB also issued
Statement of Financial Accounting Standards No. 143, "Accounting for Obligations
Associated with the Retirement of Long-Lived Assets" (SFAS No. 143), and
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS No. 144) in August and
October 2001, respectively.
SFAS No. 141 requires the purchase method of accounting for business
combinations initiated after June 30, 2001 and eliminates the
pooling-of-interest method. The adoption of SFAS No. 141 had no material impact
on the Company's consolidated financial statements.
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 will be recorded as a cumulative effect of a change in
accounting principle no later than the end of fiscal year 2002. The adoption of
SFAS No. 142 had no material impact on the Company's 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
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 plans to adopt SFAS No. 143 effective
January 1, 2003.
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 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 provisions
of this Statement are effective for exit or disposal activities that are
initiated after December 31, 2002, with early application encouraged. The
Company does not expect the adoption to have a material impact to the Company's
financial position or results of operations.
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 on the Company's financial position or
results of operations as the Company has not elected to change to the fair value
based method of accounting for stock-based employee compensation.
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 Company does not expect the
adoption to have a material impact to the Company's financial position or
results of operations.
On March 31, 2004, the Financial Accounting Standards Board (FASB) issued a
proposed Statement, Share-Based Payment, an amendment of FASB Statements No. 123
and 95, that would require companies to account for stock-based compensation to
employees using a fair value method as of the grant date. The proposed statement
addresses the accounting for transactions in which a company receives employee
services in exchange for equity instruments such as stock options, or
liabilities that are based on the fair value of the company's equity instruments
or that may be settled through the issuance of such equity instruments, which
includes the accounting for employee stock purchase plans. This proposed
statement would eliminate a company's ability to account for share-based awards
to employees using APB Opinion 25, Accounting for Stock Issued to Employees but
would not change the accounting for transactions in which a company issues
equity instruments for services to non-employees or the accounting for employee
stock ownership plans. The proposed statement, if adopted, would be effective
for awards that are granted, modified, or settled in fiscal years after December
15, 2004. The Company is in the process of assessing the potential impact of
this proposed statement to the financial statements.
PRODUCT RESEARCH AND DEVELOPMENT
We anticipate performing further research and development for our exiting
products during the next twelve months. Those activities include the ReliaBright
Emergency Lighting Augmentation System, ReliaBright Solo, Bright Owl Home Safety
Light, Bright Owl Mini, Night Owl Power Outage Adapter and VersaBright Area
Light 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. We do not own any real
property. Our corporate headquarters are located at 4625 Creekstone Drive, Suite
100, Research Triangle Park, Durham, NC 27703. We lease 2,405 square feet of
office space from a non affiliated landlord. The lease expires on December 31,
2008. The monthly rent is presently $3,457.
NUMBER OF EMPLOYEES
From our inception through the period ended March 31, 2004, we have relied on
the services of outside consultants for services and have five (5) 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, 2003, 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
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. Managment necessarily applied its judgement 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
officer concluded that our disclosure controls and procedures were effective as
of the evaluation date.
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 December 31, 2003 for a description of current legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On January 2, 2004, Jonathon Mader converted a $2,500 promissory note, plus
interest, dated August 18, 2003, into 10,364 shares of our Common Stock at $0.25
per share. This issuance was a private transaction pursuant to Section 4(2) of
the Securities Act.
On January 2, 2004, Advanced Alloys converted a $2,500 promissory note, plus
interest, dated October 16, 2003, into 10,205 shares of our Common Stock at
$0.25 per share. This issuance was a private transaction pursuant to Section
4(2) of the Securities Act.
On January 2, 2004, Mary Rooks converted a $2,500 promissory note, plus
interest, dated October 20, 2003, into 10,195 shares of our Common Stock at
$0.25 per share. This issuance was a private transaction pursuant to Section
4(2) of the Securities Act.
On January 27,2004, we issued 700,000 shares of its Common Stock at $0.01 per
share to Titan Entertainment Group pursuant to a consulting services agreement
in which Titan Entertainment Group would create strategic business relationships
for us. This issuance was a private transaction pursuant to Section 4(2) of the
Securities Act.
On January 27, 2004, we issued 600,000 shares of its Common Stock at $0.01 per
share to Michael J. Stern pursuant to a consulting services agreement in which
Michael J. Stern would create strategic business relationships for us. This
issuance was a private transaction pursuant to Section 4(2) of the Securities
Act.
On January 27, 2004, we issued 600,000 shares of its Common Stock at $0.01 per
share to KBK Ventures, Inc. pursuant to a consulting services agreement in which
KBK Ventures would create strategic business relationships for us. This issuance
was a private transaction pursuant to Section 4(2) of the Securities Act.
On January 27, 2004, we issued 800,000 shares of its Common Stock at $0.01 per
share to 3CD Consulting, LLC pursuant to a consulting services agreement in
which 3CD Consulting would create strategic business relationships for us. This
issuance was a private transaction pursuant to Section 4(2) of the Securities
Act.
On January 27, 2004, we issued 600,000 shares of its Common Stock at $0.01 per
share to Ronald E. Gee pursuant to a consulting services agreement in which
Ronald E. Gee would create strategic business relationships us. This issuance
was a private transaction pursuant to Section 4(2) of the Securities Act.
On January 27, 2004, we issued 155 shares of Series A Preferred Stock (with a
stated value of $5,000 per share and a conversion price of $0.10 per share) and
warrants to purchase an aggregate of 15,500,000 of our common stock. This
private placement was exempt from registration pursuant to Section 4(2) of the
Securities Act.
On January 27, 2004, we issued 40,000 shares of its Common Stock at $0.001 per
share to Donald F. Huffman in consideration of services on our behalf. This
issuance was a private transaction pursuant to Section 4(2) of the Securities
Act.
On January 27, 2004, we issued 10,000 shares of its Common Stock at $0.001 per
share to Robert Rubin in consideration of services on our behalf. This issuance
was a private transaction pursuant to Section 4(2) of the Securities Act.
On January 27, 2004, Brian Scott converted a $20,000 promissory note dated April
1, 2003 in the amount of $20,000 into 80,000 shares of the our Common Stock at
$0.25 per share. This issuance was a private transaction pursuant to Section
4(2) of the Securities Act.
On February 19, 2004, as approved by our Board of Directors, we filed a
Certificate of Designation with the Nevada Secretary of State creating a Series
B Convertible Preferred Stock, par value $0.001 which ranks pari passu with our
Series A Convertible Preferred Stock. The Series B Convertible Preferred Stock
will be issued to our officers in exchange for $800,000 in accrued management
fees and other liabilities.
On April 29, 2004, we filed an Amendment to the Certificate of Designation with
the Nevada Secretary of State to the Series B Convertible Preferred Stock, par
value $0.001 to change the conversion price to common stock from$0.20 per share
to $0.10 per share and to change the purchase price for First Refusal Shares
from an amount equal to the liquidation amount to an average market price of
shares of common stock over a 10 day period from the date of the Notice of
Conversion.
On May 14, 2004, 800,000 shares of Series B Convertible Preferred stock were
issued to our officers in exchange for $800,000 in accrued management fees and
other liabilities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FROM 8-K
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
---------- -----------
3.1 Certificate of Designation of the Relative Rights and
Preferences of the Series B Convertible Preferred Stock of the
Registrant, dated as of February 19, 2004 (Filed herewith)
3.2 Amended Certificate of Designation of the Relative Rights and
Preferences fo the Series B Convertible Preferred Stock of the
Registrant, dated as of April 29, 2004 (filed herewith)
10.1 Office Lease between Highwoods Realty Limited Partnership and
Cyberlux Corporation dated January 20, 2004 (filed herewith)
99.1 Certification of Donald F. Evans (Filed herewith)
99.2 Certification of David D. Downing (Filed herewith)
Reports on Form 8-K
On January 8, 2004, we announced the completion of a $775,000 equity financing
transaction as of December 31, 2003.
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 20, 2004
/s/ Donald F. Evans
CEO and Chairman of the Board
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 20, 2004
/s/ Donald F. Evans
-------------------------------------
Donald F. Evans
Chairman and Chief Executive Officer
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);
c) 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
d) 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 20, 2004
/s/ David D. Downing
--------------------------------------
David D. Downing
Treasurer and Chief Financial Officer