Gross Profit
Our gross
profit was $942 (54.1%) for the three month period ended March 31, 2009,
compared to a gross profit of $1,752 (20.9%) for the comparable three month
period in fiscal 2008. The decrease in our gross profit for the three month
period ended March 31, 2009 was due to fewer sales of our products through the
webstore.
Research and Development Expenses
Research and
development expenses decreased by $18,082 for the three month period ended March
31, 2009, to $15,000 from $33,082 for the comparable three month period in
2008. The decrease was primarily related to shifting our focus to our upcoming
marketing effort in the second quarter 2009.
Selling and Marketing Expenses
Selling and
marketing expenses consist of payroll and related taxes, website maintenance
costs, travel costs and fees paid in connection with promotional activities and
press releases. Selling and marketing expenses increased by $6,115 to $61,932
from $55,817 for the three month period ended March 31, 2009 compared with the
three month period of 2008.
The increase
for the three month period ended March 31, 2009 is primarily related to the
costs associated with a national toy fair during the quarter. The increase is
also attributable to higher material costs to produce our sales and marketing
samples with our new raw materials and samples for the toy fair.
We anticipate
beginning a major sales and marketing effort targeting consumers that use our
Luminescent Products to enhance an existing product, such as a puzzle or a
game, stickers, home decoration, “skins” for electronic products, trading cards
and other sports collectibles. Our sales and marketing costs will increase
significantly as our marketing samples are produced in the second and third
quarters and our sales and marketing effort begins in the second quarter 2009.
We anticipate that the cost of our 2009 sales and marketing effort to be
between $500,000 to $750,000, which includes, but is not limited to, the costs
to produce all of our marketing collateral and samples, travel costs, employee
compensation.
General and Administrative
General and
administrative expenses consisted primarily of the compensation of the
executive officer, other payroll and related taxes and benefits, consultants,
rent and legal and accounting fees. General and administrative expenses
decreased by $14,945 for the three month period ended March 31, 2009, to
$78,730 from $93,675 for the comparable three month period in 2008.
The decrease
for the three month period ended March 31, 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.
General and
administrative costs include consulting fees of $7,551 and $7,469 for the three
month periods ended March 31, 2009 and 2008 respectively, related to a two-year
consulting contract with a significant stockholder, which was executed on
September 11, 2007.
OTHER INCOME (EXPENSE)
Interest Expense
For the three
month periods ended March 31, 2009 and 2008, interest expense was $35,632 and
$41,619, 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.
For the three
month periods ended March 31, 2009 and 2008, we incurred interest of $32,642
and $35,389, respectively, on our Loan Agreement with Ross/Fialkow. We also
incurred interest on cash advances from Mr. Planche of $2,990 and $6,230,
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.
14
LIQUIDITY AND CAPITAL RESOURCES AS OF MARCH
31, 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 March 31,
2009 was $2.9 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. 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.
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 decreased
to $2,629 at March 31, 2009 from $10,271 at December 31, 2008.
Net cash used
for operating activities for the three months ended March 31, 2009 was $50,600.
The primary reason for the cash usage was to fund the loss for the period.
Net cash
provided by financing activities for the three months ended March 31, 2009 was
$42,000. The net cash provided was derived from unsecured cash advances
received from our president of $28,000 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 March 31, 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.
15
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 March 31, 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.
Changes in Internal Control Over Financial Reporting
There were no
changes in the Company’s internal control over financial reporting during
the first 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.
16
PART
II. OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
There are no
material legal proceedings pending to which the Company is a party or to which
any of its properties are subject.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM
5. OTHER INFORMATION
The Company
sold 2,000,000 shares of its 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. The 2,000,000 shares of common stock
were issued and delivered May 1, 2009. The Company intends to use the proceeds
of this sale to satisfy outstanding obligations and build inventory for the up
coming launch of the PlayGlo™ line of products.
On May 7, 2009
the Company paid Ross/Fialkow all accrued and outstanding interest due as of
March 31, 2009 of $65,592, issued and delivered a certificate for 125,000
shares of common stock as obligated under the Amendment and Waiver dated April
10, 2009.
17
ITEM 6. EXHIBITS
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Number
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Description of Exhibit
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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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18
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: May
15, 2009
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By:
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/s/ Patrick
Planche
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Patrick
Planche, President, Chief Executive Officer, Treasurer, Director Chief
Financial Officer, Principal Executive Officer and Principal Financial and
Accounting Officer
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19
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