BRTE Brightec Inc (CE)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2010

or

 

Commission File Number: 033-55254-27

BRIGHTEC, INC.
(Name of small business issuer in its charter)
Nevada		87-0438637
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)
8C Pleasant Street South, First Floor, South Natick, MA 01760-5622
(Address of principal executive offices, Zip code)
(508) 647-9710
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value
(Title of class)

Indicate by check mark whether the registrant (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.

x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

o Yes o No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes x No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer o
Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Number of shares outstanding as of May 19 2010
Common stock, $0.001 par value		146,467,837

INDEX

 

				Page Number
Note Regarding Forward Looking Statements				3
Part I.	Financial Information
	Item 1.	Financial Statements		4
		Condensed Consolidated Balance Sheets at March 31, 2010 (Unaudited) and December 31, 2009		4
		Condensed Consolidated Statements of Operations and Accumulated Deficit and Comprehensive Loss for the Three Month Periods Ended March 31, 2010 and 2009 (Unaudited)		5
		Consolidated Statements of Cash Flows for the Three Month Periods Ended March 31, 2010 and 2009 (Unaudited)		6
		Notes to Condensed Consolidated Financial Statements (Unaudited)		7-10
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11-15
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		15
	Item 4T.	Controls and Procedures		15
Part II.	Other Information
	Item 1.	Legal Proceedings		16
	Item 2.	Unregistered Sales of Equity and Use of Proceeds		16
	Item 3.	Defaults upon Senior Securities		16
	Item 4.	Removed and Reserved		16
	Item 5.	Other Information		16
	Item 6.	Exhibits		17
Signatures				18

Note Regarding Forward Looking Statements:

This Form 10-Q and other reports filed by Brightec, Inc. (the “Company”) from time to time with the U.S. Securities and Exchange Commission (the “SEC”), as well as the Company’s press releases, contain or may contain forward-looking statements.  The information provided is based upon beliefs of, and information currently available to, the Company’s management, as well as estimates and assumptions made by the Company’s management.  Statements that are not statements of historical fact may be deemed to be forward-looking statements.  Forward-looking statements can be identified by the use of forward-looking terminology such as “believes,” “may,” “should,” “anticipates,” “estimates,” “expects,” “future,” “intends,” “hopes,” “plans,” or the negative thereof.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause actual results of the Company to vary materially from historical results or from any future results expressed or implied in such forward-looking statements.

Any statements contained in this Form 10-Q that do not describe historical facts, including, without limitation, statements concerning expected revenues, earnings, product introductions and general market conditions, may constitute forward-looking statements.  Any such forward-looking statements contained herein are based on current expectations, but are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations.  The factors that could cause actual future results to differ materially from current expectations include, but are not limited to, the following: the Company’s ability to raise the financing required to support the Company’s operations; the Company’s ability to establish its intended operations; fluctuations in demand for the Company’s products and services; the Company’s ability to manage its growth; the Company’s ability to develop, market and introduce new and enhanced products on a timely basis; the Company’s ability to attract customers; and the ability of the Company to compete successfully in the future.  Any forward-looking statements should be considered in light of those factors.

The Company files periodic reports with the SEC, as well as current reports on Form 8-K, proxy or information statements and other reports required of publicly held reporting companies.  The public may read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C.  20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC also maintains an Internet site that contains the reports, proxy and information statements, and other information that the Company files electronically with the SEC, which is available on the Internet at www.sec.gov . Further information about the Company and its subsidiary may be found at www.brightec.com .

 

 

 

		March 31, 2010				December 31, 2009
		(Unaudited)
ASSETS
Current assets
Cash		$	21,760			$	1,314
Accounts receivable, net			3,695				2,696
Inventory			349,175				346,366
Prepaid expenses			3,222				4,298
TOTAL CURRENT ASSETS			377,852				354,674
Office and photographic equipment			28,320				28,320
Less: accumulated depreciation			(26,692	)			(26,291	)
			1,628				2,029
Deposit			3,033				3,033
			3,033				3,033
TOTAL ASSETS		$	382,513			$	359,736
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Line of credit		$	664,000			$	664,000
Accounts payable			222,022				321,372
Accrued interest (including related party interest of $58,719 and $55,870, respectively)			75,319				55,870
Accrued compensation			656,700				617,500
Accrued liabilities			86,920				56,575
Advances due to related party			1,954,548				1,749,798
TOTAL CURRENT LIABILITIES			3,659,509				3,465,115
Stockholders’ deficit
Preferred stock, $.001 par value - shares authorized 5,000,000; shares issued and outstanding 0			-				-
Common stock, $.001 par value - shares authorized 245,000,000; shares issued and outstanding 146,467,837			146,468				146,468
Additional paid-in capital			12,783,890				12,783,890
Accumulated deficit			(16,402,263	)			(16,231,544	)
Accumulated other comprehensive income			194,909				195,807
TOTAL STOCKHOLDERS’ DEFICIT			(3,276,996	)			(3,105,379	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	382,513			$	359,736

 

 

 

		For the Three Months Ended
		March 31, 2010				March 31, 2009
		(Unaudited)				(Unaudited)
Cash flows from operating activities
Net loss		$	(170,719	)		$	(190,808	)
Adjustments to reconcile net loss to net cash used for operating activities:
Amortization of deferred stock based compensation			—				7,740
Accrued interest on advances from related party			2,849				2,990
Depreciation and amortization expense			401				376
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable			(999	)			(188	)
Inventory			(2,809	)			2,521
Prepaid expenses			1,076				3,614
Increase (decrease) in:
Accounts payable			(99,350	)			18,738
Accrued liabilities			86,145				104,461
Net cash used in operating activities			(183,406	)			(50,556	)
Cash flows from financing activities
Advances received from related party			204,750				28,000
Advances from line of credit			—				14,000
Net cash provided by financing activities			204,750				42,000
Effects of changes in foreign exchange rates			(898	)			914
Net increase (decrease) in cash			20,446				(7,642	)
Cash at beginning of period			1,314				10,271
Cash at end of period		$	21,760			$	2,629

See NOTE 11 for supplemental cash flow information.

 

 

 

 

NOTE 1 – BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

Brightec, Inc. (“Brightec” or the “Company”) develops and markets luminescent films incorporating luminescent or phosphorescent pigments (the “Luminescent Products”). These pigments absorb and reemit visible light producing a “glow” which accounts for the common terminology “glow in the dark.” The Luminescent Product are sold primarily as a printable luminescent film designed to add luminescence to existing or new products. The Company uses third parties for manufacturing, and markets and sells graphic quality printable luminescent films. These films are based on the Company’s proprietary and patented technology, which enables prints to be of photographic quality by day and luminescent under low light or night conditions. The Company expects that its Luminescent Products will be available for sale in a number of versions appropriate for commonly used commercial and personal printing technology, including offset printing, laser or inkjet printing, plus a variety of “print on demand” digital technologies. The Company offers its products in sheets and rolls.

During 2009, the Company decided used its own products to develop a new line of products aimed at the retail market.  The products consist of children’s puzzles and stickers.  The Company believes these products provide an opportunity to enhance revenue growth.

NOTE 2 – INTERIM FINANCIAL STATMENTS

 

The accompanying unaudited condensed consolidated financial statements at March 31, 2010 and for the three month period then ended includes the accounts of the Company and its wholly-owned subsidiary, Brightec S.A. (the “Subsidiary”), a Swiss corporation.  All inter-company transactions and balances have been eliminated in consolidation. In our opinion, these unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2009, and include all adjustments, necessary to make the financial statements not misleading. Certain footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted in accordance with rules of the Securities and Exchange Commission for interim reporting. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2009.

NOTE 3 – LIQUIDITY, MANAGEMENT PLANS AND GOING CONCERN

 

The Company had a working capital deficit of approximately $3.28 million and an accumulated deficit of approximately $16.4 million at March 31, 2010 and has incurred recurring losses since inception.  The ability of the Company to continue to operate as a going concern is primarily dependent upon the ability of the Company to raise the necessary financing, to effectively produce and market Brightec’s products at competitive prices, to establish profitable operations and to generate positive operating cash flows.  If the Company fails to raise funds, or the Company is unable to generate operating profits and positive cash flows, there are no assurances that the Company will be able to continue as a going concern and it may be unable to recover the carrying value of its assets.

In 2006, the Company entered into a $750,000 Loan and Security Agreement (the “Loan Agreement”) with Ross/Fialkow Capital Partners, LLP, Trustee of the Brightec Capital Trust (“Ross/Fialkow”). As of March 31, 2010, the loan principal was $664,000 and the remaining funds available under the Loan Agreement were $86,000. See NOTE 8 – LINE OF CREDIT .

Mr. Planche, the Company’s chairman, president and chief executive officer has been funding the Company’s cash requirements as needed through unsecured cash advances.  For the period January 1, 2010 through March 31, 2010, Mr. Planche made unsecured cash advances of $204,750. From April 1, 2010 to May 19, 2010, Mr. Planche had made additional loans to the Company in the amount of $17,500. See NOTE 7 – RELATED PARTY TRANSACTIONS .

Management believes that it will continue to be successful in generating the necessary financing to fund the Company’s operations throughout the 2010 calendar year; however, unless alternative sources of funding are identified, the Company will be totally dependent on Mr. Planche to finance its operations.  Due to the recent turmoil in the global economy, it is uncertain that funds will be available when we require them and there is no guarantee that Mr. Planche will continue such financing.

NOTE 4 – EARNINGS (LOSS) PER SHARE

 

The Company computes earnings or loss per share in accordance with ASC 260, basic earnings per share, is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding.  Diluted earnings per share reflect the potential dilution that could occur if securities or other agreements to issue common stock were exercised or converted into common stock, only in the periods in which the effect is dilutive.  The following securities have been excluded from the calculation of net loss per share, as their effect would be anti-dilutive:

		For the Three Months
		Ended March 31,
		2010				2009
		(Unaudited)				(Unaudited)
Warrants (weighted average)			6,320,832				6,320,832
Convertible debt (weighted average)			5,533,333				5,736,111
Stock options (weighted average)			20,500,000				20,500,000

NOTE 5 – INVENTORIES

 

Inventories are stated at the lower of cost (first-in, first-out) or market value and consist of the following at March 31, 2010 and December 31, 2009, respectively:

		March 31, 2010				December 31, 2009
		(Unaudited)
Raw materials and work in process		$	154,497			$	153,405
Finished goods			194,678				192,961
		$	349,175			$	346,366

 

NOTE 6 – INCOME TAXES

 

The Company has not calculated the tax benefits of its net operating losses as of March 31, 2010 and December 31, 2009 since it does not have the required information. The Company has not filed its U.S. federal and state corporate tax returns for years ended December 31, 2009, 2008, 2007, 2005, 2004, 2003, 2002 and 2000. The tax returns filed for 2006 and 2001 (if permitted) will need to be amended.  Due to the uncertainty over the Company’s ability to utilize these operating losses, any deferred tax assets, when determined, would be fully offset by a valuation allowance.

 

NOTE 7 – RELATED PARTY TRANSACTIONS

Advances due to related party

At December 31, 2009, the Company owed Mr. Planche $1,749,798 in connection with unsecured cash advances made by him to the Company.  During the three month period ended March 31, 2010, Mr. Planche made advances to the Company of $204,750.  During the three month period ended March 31, 2010, the Company did not pay any of the outstanding advances.  At March 31, 2010, the Company owes Mr. Planche $1,954,548. From April 1, 2010 to May 19, 2010, Mr. Planche had made additional loans to the Company in the amount of $17,500.

Consulting agreement

On September 11, 2007, the Company issued 2,000,000 shares of common stock, valued at $60,000, as consideration for a two-year consulting contract with a significant stockholder.  These shares were issued at $0.03 per share, the closing price of the Company’s common stock on the aforementioned date.  For the three month periods ended March 31, 2010 and 2009, the Company recognized non-cash consulting expense of $0 and $7,551, respectively, related to the consulting agreement.  At March 31, 2010 and December 31, 2009, the Company owed $0 to this stockholder.

NOTE 8 – LINE OF CREDIT

 

The Company has a Loan Agreement with Ross/Fialkow in the amount of $750,000.  The principal amount of the loan plus accrued but unpaid interest, if any, is convertible at any time prior to payment at the election of Ross/Fialkow, into the Company’s common stock at the rate of $0.12 per share.  Such shares carry piggy-back registration rights.  All of the assets of the Company have been pledged, including the assets of the Company’s subsidiary.

The Company and Ross/Fialkow signed an Amendment and Waiver Agreement effective March 31, 2010, the significant terms of which are as follows:

 

1.	Maturity date : December 31, 2010
2.	Waiver of default : Ross/Fialkow waived the Company existing payment defaults and agreed to extend the grace period for curing such payment defaults until June 30, 2010.  All defaults were cured as of March 31, 2010.

At both March 31, 2010 and December 31, 2009, the outstanding balance on the line of credit was $664,000.  Interest expense was $16,600 and $32,642 for the three month periods ended March 31, 2010 and 2009, respectively.

NOTE 9 – RECENT ACCOUNTING PRONOUNCEMENTS

In January 2010, the Financial Accounting Standards Board issued amended standards that require additional fair value disclosures. These amended standards require disclosures about inputs and valuation techniques used to measure fair value as well as disclosures about significant transfers, beginning in the first quarter of 2010. Additionally, these amended standards require presentation of disaggregated activity within the reconciliation for fair value measurements using significant unobservable inputs (Level 3), beginning in the first quarter of 2011. We do not expect these new standards to significantly impact our consolidated financial statements.

In January 2010, the Company adopted the new provisions of ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures about Fair Value Measurements (“ASU No. 2010-06”). ASU No. 2010-06 provides revised guidance on improving disclosures about valuation techniques and inputs to fair value measurements. We do not expect these new standards to significantly impact our consolidated financial statements

In February 2010, the FASB issued an amendment to accounting standards related to subsequent events. The amendment exempts Securities and Exchange Commission registrants from the requirement to disclose the date through which it has evaluated subsequent events for either original or restated financial statements. The standard is effective February 2010. The Company adopted this standard in February 2010. The adoption did not impact the Company’s consolidated financial position or results of operations, other than additional reporting requirements.

The Company does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying financial statements.

 

NOTE 10 – FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The Company’s financial instruments, consisting of cash, accounts payable and accrued expenses and debt obligations are carried at, or approximate, fair value because of their short-term nature or because they carry market rates of interest.

NOTE 11 – SUPPLEMENTAL CASH FLOW INFORMATION

		For the Three Months Ended
		March 31, 2010				March 31, 2009
		(Unaudited)				(Unaudited)
Supplemental disclosure of cash flow information
Cash paid during the period for interest		$	27			$	—