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 September 30, 2005
|_| 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 September 30, 2005
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 |_|
ForIndicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes |_| No |X|
As of November 7, 2005, the Company had 75,075,001 shares of its par value
$0.001 common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|
CYBERLUX CORPORATION
Quarterly Report on Form 10-QSB for the
Quarterly Period Ending September 30, 2005
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets:
September 30, 2005 (Unaudited) and December 31, 2004 (Audited) 3
Condensed Statements of Losses:
Three and Nine Months Ended September 30, 2005 and 2004 (Unaudited) 4
Condensed Statements of Cash Flows:
Nine Months Ended September 30, 2005 and 2004 (Unaudited) 5
Notes to Unaudited Condensed Financial Information:
September 30, 2005 6-13
Item 2. Management Discussion and Analysis 14
Item 3. Controls and Procedures 25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
Item 3. Defaults Upon Senior Securities 26
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 27
Item 6. Exhibits 27
Signatures 28
2
CYBERLUX CORPORATION
CONDENSED BALANCE SHEETS
(UNAUDITED)
September 30, 2005 December 31, 2004
Assets
Current assets:
Cash & cash equivalents $ 17,383 $ 415,375
Accounts Receivable, Allowance for Doubtful Accounts is $ -0- 2,454 -
Inventory 443,312 -
Other current assets 63,894 68,404
---------------- ---------------
Total current assets 527,044 483,779
Property, plant and equipment, net of accumulated
depreciation of $ 104,825 and $92,335, respectively 59,813 43,018
Other Assets:
Patents 83,404 30,544
Total Assets $ 670,260 $ 557,341
================ ===============
Liabilities and Deficiency in Stockholders' Equity
Current liabilities:
Accounts payable $ 742,425 $ 176,094
Accrued liabilities 437,008 323,408
Short-term notes payable - shareholders 386,595 399,080
Short-term notes payable 27,500 27,500
---------------- ---------------
Total current liabilities 1,593,528 926,082
Long-term liabilities:
Notes payable 1,154,158 1,355,069
---------------- ---------------
Total long-term liabilities 1,154,158 1,355,069
Deficiency Stockholders' equity:
Preferred stock, $0.001 par value, 200 shares authorized,
Class A, 66.3606 and 151.8606 shares issued and outstanding as
of September 30, 2005 and December 31, 2004 respectively 1 1
Preferred stock, $0.001 par value, 800,000 shares authorized,
Class B, 800,000 and 0 shares issued and outstanding as of
September 30, 2005 and December 31, 2004 respectively 800 800
Common stock, $0.001 par value, 300,000,000 shares authorized,
74,550,001 and 23,770,233 shares issued and outstanding as of
September 30, 2005 and December 31, 2004 respectively 74,550 23,770
Additional paid-in capital 11,494,624 9,099,302
Accumulated deficit (13,647,401) (10,847,683)
---------------- ---------------
Deficiency in stockholders' equity (2,077,425) (1,723,810)
---------------- ---------------
Total liabilities and (deficiency) in stockholders' equity $ 670,260 $ 557,341
================ ===============
The accompanying notes are an integral part of these unaudited
condensed financial statements
3
CYBERLUX CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended For the Nine Months Ended
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
Revenue $ 12,434 $ 2,082 $ 26,202 $ 23,288
Cost of goods sold (75,503) (15,724) (104,989) (32,111)
------------- ------------- ------------- -------------
Gross margin (loss) (63,069) (13,642) (78,787) (8,823)
Operating Expenses:
Marketing and advertising 97,718 21,830 235,389 10,380
Depreciation and amortization 5,892 14,159 19,073 45,811
Research and development 142,537 34,086 262,117 34,086
General and administrative expenses 539,263 533,167 1,347,459 2,461,432
Total operating expenses 785,410 603,242 1,864,038 2,551,709
(Loss) from operations (848,479) (616,884) (1,942,825) (2,560,532)
Other income/(expense)
Other Income - - -
Interest income 49 1 349 63
Interest expense (101,555) (598,741) (270,434) (653,367)
Debt acquisition costs (492,476) (586,807)
Net Loss before provision for income taxes
and preferred dividend (1,442,461) (1,215,624) (2,799,717) (3,213,836)
Income taxes (benefit) - - -
Net loss (1,442,461) (1,215,624) (2,799,717) (3,213,836)
Preferred dividend - Beneficial conversion discount
on convertible preferred - (800,000)
Net loss available to common stockholders $ (1,442,461) $ (1,215,624) $ (2,799,717) $ (4,013,836)
Weighted average number of common shares
outstanding, basic and fully diluted 72,881,110 19,388,317 47,503,678 17,080,605
Net loss per share - Basic and fully diluted $ (0.02) $ (0.06) $ (0.06) $ (0.24)
Preferred dividend $ 24,000 $ 24,000 $ 72,000 $ 48,000
The accompanying notes are an integral part of these unaudited
condensed financial statements
4
Cyberlux Corporation
Condensed Statement of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30, 2005 September 30, 2004
Cash flows provided by (from-used in) operating activities
Net (loss) available to common stockholders $ (2,799,717) $ (4,013,836)
Depreciation and amortization 19,073 45,811
Beneficial conversion discount - preferred stock dividend - 800,000
Amortization of debt discount - beneficial conversion
feature of convertible note (Note D) 219,697 500,000
Amortization of debt discount - value of
warrants attached to convertible note (Note D) 91,937
Shares issued for previously incurred debt 32,691
Shares issued/(cancelled) for factoring deposit (90,000)
Warrants issued to consultants for services 14,160 349,173
Warrants issued in connection with financing 385,333
Preferred shares issued for conversion of accrued
management fees - 723,670
Preferred shares issued for previously incurred debt 76,330
Shares issued for consulting services 126,000 1,367,810
Decrease (increase) in accounts receivable (2,454) (11,862)
Decrease (increase) in inventories (443,312)
(Increase) decrease in prepaid expenses 4,509 (89,101)
(Increase) decrease in other assets (52,860) 63,105
Increase (decrease) in accrued interest 85,139 (49,696)
Increase (decrease) in accrued liabilities 28,461 (69,760)
(Decrease) increase in management fee payable-related party - (723,670)
(Decrease) increase in other accounts payable 566,331 -
Net cash (used in) operating activities (1,849,640) (997,398)
Cash flows provided by (used in) investing activities
Payments for property, plant and equipment (35,867) (19,998)
Cash (used in) investing activities (35,867) (19,998)
Cash flows provide by (used in) financing activities
Payments for (proceeds from) short-term notes payable, net - (255,000)
(Payments for ) proceeds from short-term notes
payable-shareholders (net) (12,485) (92,600)
Proceeds from advance deposits -
(Payments for) Proceeds from convertible long-term notes 1,500,000 500,000
Proceeds from issuance of preferred stock 79,308
Proceeds from subscriptions receivable 276,186
Issuance of common stock 778,247
Net cash provided by (used in) financing activities 1,487,515 1,286,141
----------- ----------
Net increase (decrease) in cash (397,992) 268,745
Cash - beginning 415,375 16,247
Cash - ending $ 17,383 $ 284,992
Supplemental disclosures:
Interest Paid $ 82,470 $ 111,126
Income Taxes Paid -
Non-Cash investing and financing activities:
Shares issued for research and development and consulting 126,000 1,367,810
Shares issued for conversion of debt 420,608 32,691
Warrants issued in connection with financing 373,592 -
Warrants issued to consultants for services 14,160 349,173
Warrants issued detachable with convertible preferred shares 58,915
Shares issued in connection with factoring - (90,000)
Amortization of debt discount - beneficial conversion
feature of convertible note (Note D) 219,697 500,000
Amortization of debt discount - value of
warrants attached to convertible note (Note D) 91,937
Beneficial conversion discount on convertible preferred stock - 800,000
Convertible preferred shares issued for note payable and
accrued interest - 76,330
Convertible preferred shares issued for accrued management fees - 723,670
The accompanying notes are an integral part of these unaudited
condensed financial statements
5
CYBERLUX CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(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 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 nine-month period ended
September 30, 2005, are not necessarily indicative of the results that may be
expected for the year ended December 31, 2005. The unaudited condensed
consolidated financial statements should be read in conjunction with the
consolidated December 31, 2004 financial statements and footnotes thereto
included in the Company's Form 10-KSB for the year ended December 31, 2004.
Business and Basis of Presentation
Cyberlux Corporation (the "Company") is incorporated under the laws of the State
of Nevada. The Company, which has transitioned from a development state
enterprise, develops, manufactures and markets long-term portable lighting
products for commercial and industrial users. While the Company has generated
revenues from its sale of products, the Company has incurred expenses, and
sustained losses. Consequently, its operations are subject to all risks inherent
in the establishment of a new business enterprise. As of September 30, 2005, the
Company has accumulated losses of $13,647,401.
Revenue Recognition
For revenue from product sales, the Company recognizes revenue in accordance
with SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101"). SAB 101 requires that four basic criteria must be met
before revenue can be recognized: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred; (3) the selling price is fixed and
determinable; and (4) collectibility is reasonably assured. Determination of
criteria (3) and (4) are based on management's judgments regarding the fixed
nature of the selling prices of the products delivered and the collectibility of
those amounts. Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same
period the related sales are recorded. The Company defers any revenue for which
the product has not been delivered or is subject to refund until such time that
the Company and the customer jointly determine that the product has been
delivered or no refund will be required.
SAB 104 incorporates Emerging Issues Task Force 00-21 ("EITF 00-21"), MULTIPLE
DELIVERABLE REVENUE ARRANGEMENTS. EITF 00-21 addresses accounting for
arrangements that may involve the delivery or performance of multiple products,
services and/or rights to use assets. The effect of implementing EITF 00-21 on
the Company's consolidated financial position and results of operations was not
significant.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and cash equivalents
For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity date of three months or less
to be cash equivalents.
Property, plant and equipment
Property and equipment are recorded at cost. Minor additions and renewals are
expensed in the year incurred. Major additions and renewals are capitalized and
depreciated over their estimated useful lives. Depreciation is calculated using
the straight-line method over the estimated useful lives
Reclassification
Certain reclassifications have been made to conform prior periods' data to the
current presentation. These reclassifications had no effect on reported losses.
6
CYBERLUX CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(Unaudited)
NOTE A-SUMMARY OF ACCOUNTING POLICIES (Continued)
Impairment of long lived assets
The Company has adopted Statement of Financial Accounting Standards No. 144
(SFAS 144 ). The Statement requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes ill circumstances indicate that the carrying amount
of an asset may not be recoverable. Events relating to recoverability may
include significant unfavorable changes in business conditions, recurring
losses, or a forecasted inability to achieve break-even operating results over
an extended period. The Company evaluates the recoverability of long-lived
assets based upon forecasted undercounted cash flows. Should impairment in value
be indicated, the carrying value of intangible assets will be adjusted, based on
estimates of future discounted cash flows resulting from the use and ultimate
disposition of the asset. SF AS No. 144 also requires assets to be disposed of
be reported at the lower of the carrying amount or the fair value less costs to
sell.
Fair value of financial instruments
Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management as of September 30, 2005and
2004. The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments include
cash and accounts payable. Fair values were assumed to approximate carrying
values for cash and payables because they are short term in nature and their
carrying amounts approximate fair values or they are payable on demand.
Concentrations of Credit Risk
Financial instruments and related items which potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash equivalents and
trade receivables. The Company places its cash and temporary cash investments
with credit quality institutions. At times, such investments may be in excess of
the FDIC insurance limit.
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 armua1 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.
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 nine months ended
September 30,
2005 2004
---- ----
Net loss attributable to common stockholders -as reported $(2,799,717) $(4,013,836)
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) (718,800) --
Net loss -Pro Forma $(3,518,517) $(4,013,836)
Net loss attributable to common stockholders - Pro forma $(3,518,517) $(4,013,836)
Basic (and assuming dilution) loss per share - as reported $ (0.06) $ (0.24)
Basic (and assuming dilution) loss per share - Pro forma $ (0.07) $ (0.24)
7
CYBERLUX CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(Unaudited)
NOTE A-SUMMARY OF ACCOUNTING POLICIES (Continued)
Loss per share
Net loss per share is provided in accordance with Statement of Financial
Accounting Standards No.128 (SF AS #128) Earnings Per Share. Basic loss per
share is computed by dividing losses available to common stockholders by the
weighted average number of common shares outstanding during the period.
Segment reporting
The Company follows Statement of Financial Accounting Standards No.130,
Disclosures About Segments of an Enterprise and Related Information. The Company
operates as a single segment and will evaluate additional segment disclosure
requirements as it expands its operations.
Income taxes
The Company follows Statement of Financial Accounting Standard No.109,
Accounting for Income Taxes (SFAS No.109) for recording the provision for income
taxes. Deferred tax assets and liabilities are computed based upon the
difference between the financial statement and income tax basis of assets and
liabilities using the enacted marginal tax rate applicable when the related
asset or liability is expected to be realized or settled. Deferred income tax
expenses or benefits are based on the changes in the asset or liability during
each period. If available evidence suggests that it is more likely than not that
some portion or all of the deferred tax assets will not be realized, a valuation
allowance is required to reduce the deferred tax assets to the amount that is
more likely than not to be realized. Future changes in such valuation allowance
are included in the provision for deferred income taxes in the period of change.
Deferred income taxes may arise from temporary differences resulting from income
and expense items reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or non-current,
depending on the classification of assets and liabilities to which they relate.
Deferred taxes arising from temporary differences that are not related to an
asset or liability are classified as current or non-current depending on the
periods in which the temporary differences are expected to reverse
Recent pronouncements
In November, 2004, the Financial Accounting Standards Board (FASB) issued SFAS
151, Inventory Costs - an amendment of ARB No. 43, Chapter 4. This statement
amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing", to clarify
the accounting for normal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4,
previously stated that"... under certain circumstances, items such as idle
facility expense, excessive spoilage, double freight, and re-handling costs may
be so abnormal as to require treatment as current period charges. "This
Statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal". In addition,
this Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. This Statement is effective for inventory costs incurred during the
fiscal years beginning after June 15, 2005. Management does not believe the
adoption of this Statement will have any immediate material impact on the
Company. In December, 2004, the FASB issued SFAS No. 152, "Accounting for Real
Estate Time-Sharing Transactions - an amendment of FASB Statements No. 66 and
67" (SFAS 152). The amendments made by Statement 152. This Statement amends FASB
Statement No. 66, Accounting for Sales of Real Estate, to reference the
financial accounting and reporting guidance for real estate time-sharing
transactions that is provided in AICPA Statement of Position (SOP 04-2),
Accounting for Real Estate Time-Sharing Transactions. This Statement also amends
FASB Statement No. 67, Accounting for Costs and Initial Rental Operations of
Real Estate Projects, to state that the guidance for (a) incidental operations
and (b) costs incurred to sell real estate projects does not apply to real
estate time-sharing transactions. The accounting for those operations and costs
is subject to the guidance of SOP 04-2. This Statement id effective for
financial statements for fiscal years beginning after June 15, 2005, with
earlier application encouraged. The Company does not anticipate that the
implementation of this standard will have a material impact on its financial
position, results of operations, or cash flows.
On December 16, 2004, the Financial Accounting Standards Board ("FASB")
published Statement of Financial Accounting Standards No. 123 (Revised, 2004),
Share-Based Payment ("SFAS 123R"). SFAS 123R requires that compensation cost
related to share-based payment transactions be recognized in the financial
statements. Share-based payment transactions within the scope of SFAS 123R
include stock options, restricted stock plans, performance-based awards, stock
appreciation rights, and employee share purchase plans. The provisions of SFAS
123R are effective as of the first interim period that begins after June 15,
2005. Accordingly, the Company will implement the revised standard in the third
quarter of fiscal year, 2005. Currently the Company accounts for its share-based
payment transactions under the provisions of APB25, which does not necessarily
require the recognition of compensation costs in the financial statements.
Management is assessing the implications of this revised standard, which may
materially impact the Company's results of operations in the third quarter of
fiscal year 2005 and thereafter.
8
CYBERLUX CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(Unaudited)
NOTE A-SUMMARY OF ACCOUNTING POLICIES (Continued)
Recent pronouncements (Continued)
On December 16, 2004, the FASB issued Statement of Financial Accounting
Standards No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion
No. 29, Accounting for Nonmonetary Transactions ("SFAS 153"). This Statement
amends APB Opinion 29 to eliminate the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for exchanges
of nonmonetary assets that do not have commercial substance. Under SFAS 153, if
a nonmonetary exchange of similar productive assets meets a commercial-substance
criterion and fair value if determinable, the transaction must be accounted for
at fair value resulting in recognition of any gain or loss. SFAS 153 is
effective for nonmonetary transactions in the fiscal periods that begin after
June 15, 2005. The Company does not anticipate that the implementation of this
standard will have a material impact on its financial position, results of
operations or cash flows.
NOTE B-NOTES PAYABLE AND CONVERTIBLE DEBENTURES
Notes payable at September 30, 2005 and December 31, 2004 are as follows:
2005 2004
10 % convertible note payable, unsecured and due September, 2003; accrued and
unpaid interest due at maturity ; Note holder has the option to convert unpaid
note principal together with accrued and unpaid interest to the Company's common
stock at a rate of $ .50 per share. The company is in violation of the loan
covenants. $2,500 $2,500
10% convertible notes payable, unsecured and due March, 2003; accrued and unpaid
interest due at maturity; Note holder has the option to convert unpaid note
principal together with accrued and unpaid interest to the Company's common
stock at a rate of $ .50 per share. The Company is in violation of the loan
covenants. 25,000 25,000
10% convertible note payable in the original amount of $1,500,000, and due
September, 2006. Interest is payable quarterly during the life of the note. The
note is convertible into the Company's common stock at the lower of a) $0.72; b)
50% of the average of the three lowest intraday trading prices for the common
stock. The full principal amount of the secured convertible notes is due upon a
default under the terms of the secured convertible notes. The note is secured by
substantially all of the Company's assets, including the assets of wholly owned
subsidiaries and intellectual property. As of September 30, 2005 the Note holder
has converted $565,539 of the principal to common stock of the Company. 934,461 1,355,069
10% convertible note payable in the original amount of $1,500,000, and due July
19, 2008. Interest is payable quarterly during the life of the note. The note is
convertible into the Company's common stock at the lower of a) $0.03; b) 50% of
the average of the three lowest intraday trading prices for the common stock.
The full principal amount of the secured convertible notes is due upon a default
under the terms of the secured convertible notes. The note is secured by
substantially all of the Company's assets, including the assets of wholly owned
subsidiaries and intellectual property. 1,500,000 -0-
Unamortized Beneficial Conversion (1,280,303) -0-
--------------------------------
1,181,658 1,382,569
Less: current portion
(27,500) (27,500)
--------------------------------
Total $1,154,158 $1,355,069
9
CYBERLUX CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(Unaudited)
NOTE C -STOCKHOLDER'S EQUITY
Preferred Stock
The Company has authorized 200 shares of Preferred Class A stock, with a par
value of $.001 per share. As of September 30, 2005, the Company has 66.3606
shares of Preferred Class A shares issued and outstanding
The Company has authorized 800,000 shares of Preferred Class B stock, with a
par value of $.001 per share. As of September 30, 2005, the Company has 800,000
shares of Preferred Class B shares issued and outstanding. The Preferred Class B
shares accumulates interest, payable as dividends at the rate of 12% per annum.
For the year ended December 31, 2004 $96,000 in dividends were accumulated. For
the period ended September 30, 2005 an additional $72,000 in dividends were
accumulated. These dividends are not recorded until declared by the Company.
Common Stock
The Company has authorized 300,000,000 shares of common stock, with a par value
of $.001 per share. As of September 30, 2005, the Company has 74,550,001 shares
issued and outstanding.
During the three months ended March 31, 2005, holders converted 38.5 shares of
preferred stock - Class A into 1,925,000 shares of common stock at $.10 per
share.
In January, 2005, the Company issued 1,035,221 shares of its common stock at
$0.0248 per share on conversion of notes payable.
In January, 2005, the Company issued 1,035,221 shares of its common stock at
$0.0135 per share on conversion of notes payable.
In February, 2005, the Company issued 1,035,221 shares of its common stock at
$0.00883 per share on conversion of notes payable.
In March, 2005, the Company issued 1,035,221 shares of its common stock at
$0.01358 per share on conversion of notes payable.
In March, 2005, the Company issued 1,035,221 shares of its common stock at
$0.00983 per share on conversion of notes payable.
During the three months ended June 30, 2005, holders converted 26.5 shares of
preferred stock - Class A into 1,325,000 shares of common stock at $.10 per
share.
In April, 2005, the Company issued 800,000 shares of its common stock at $0.03
per share in exchange for services.
In April, 2005, the Company issued 1,035,221 shares of its common stock at
$0.0118 per share on conversion of notes payable.
In April, 2005, the Company issued 1,035,221 shares of its common stock at
$0.011 per share on conversion of notes payable.
In May, 2005, the Company issued 1,035,221 shares of its common stock at $0.0108
per share on conversion of notes payable.
In May, 2005, the Company issued 1,600,000 shares of its common stock at $0.0105
per share on conversion of notes payable.
In May, 2005, the Company issued 1,100,000 shares of its common stock at $0.0103
per share on conversion of notes payable.
In May, 2005, the Company issued 1,700,000 shares of its common stock at $0.0088
per share on conversion of notes payable.
In May, 2005, the Company issued 1,700,000 shares of its common stock at $0.0085
per share on conversion of notes payable.
In May, 2005, the Company issued 3,400,000 shares of its common stock at $0.0083
per share on conversion of notes payable.
In June, 2005, the Company issued 250,000 shares of its common stock at $0.02
per share in exchange for services.
In June, 2005, the Company issued 6,800,000 shares of its common stock at
$0.0083 per share on conversion of notes payable.
10
CYBERLUX CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(Unaudited)
NOTE C -STOCKHOLDER'S EQUITY (Continued)
In June, 2005, the Company issued 2,400,000 shares of its common stock at
$0.0092 per share on conversion of notes payable.
In June, 2005, the Company issued 7,900,000 shares of its common stock at
$0.0085 per share on conversion of notes payable.
In July, 2005, the Company issued 9,573,000 shares of its common stock at
$0.0085 per share on conversion of notes payable.
In August, 2005, the Company issued 1,000,000 shares of its common stock at
$0.097 per share in exchange for services.
During the three months ended September 30, 2005, holders converted 20.5 shares
of preferred stock - Class A into 1,025,000 shares of common stock at $.10 per
share.
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 September 30,2005.
Warrants Outstanding Warrants Exercisable
--------------------- ---------------------
Weighted Average Weighted Weighted
Number Remaining Contractual Average Number Average
Exercise Prices Outstanding Life (years) Exercise Price Exercisable Price Exercise Price
--------------- ----------- ------------ -------------- ----------------- --------------
$ 0.03 25,000,000 5 $ 0.03 25,000,000 $ 0.03
0.10 91,500 4 $ 0.10 91,500
0.20 1,845,000 3 0.20 1,845,000 0.20
0.25 8,751,564 2 0.25 8,751,564 0.25
0.50 2,600,000 5 0.50 2,600,000 0.50
$ 1.05 8,643,064 2 1.05 8,643,064 1.05
46,931,128 3.61 $ 0.29 46,931,128 $ 0.29
Transactions involving the Company's warrant issuance are summarized as follows:
Number of Shares Weighted Average
Price Per Share
Outstanding at December 31,2004 22,821,128 $ 0.58
Granted 25,400,000 0.03
Exercised -- --
Canceled or expired (1,350,000) (0.25)
Outstanding at September 30, 2005 46,931,128 $0 .29
Warrants granted during the period ended September 30, 2005 include 25,000,000
issued in connection with debt financing. The warrants are exercisable until
five years after the date of issuance at a purchase price of $0.03 per share. In
addition the exercise price is adjusted in the event common stock is issued at a
price below the market, with the exception of any securities issued as of the
date of the warrant.
11
CYBERLUX CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(Unaudited)
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 Weighted
Number Remaining Average Number Average
Exercise Outstanding Contractual life Exercise Exercisable Exercise
Prices ----------- (Years) Price ----------- Price
-------- ---------------- -------- --------
$ 0.2125 2,000,000 4 $ 0.2125 2,000,000 0.2125
$ 0.2125 2,000,000 5 0.2125 2,000,000 0.2125
0.10 12,000,000 6 0.10
0.0295 12,000,000 7.5 0.0295 12,000,000 0.0295
28,000,000 6.4 $ 0.086 16,000,000 $ 0.086
Transactions involving stock options issued to employees are summarized as
follows:
Weighted Average
Number of Shares Price Per Share
Outstanding at December 31, 2004 4,000,000 $0.2125
Granted 24,000,000 $0.065
Exercised -- --
Canceled or expired -- --
Outstanding at September 30, 2005 28,000,000 $0.086
The weighted-average fair value of stock options granted to employees during the
period ended September 30, 2005 and 2004 and the weighted-average significant
assumptions used to determine those fair values, using a Black-Scholes option
pricing model are as follows:
For the Nine Months Ended
September 30
2005 2004
Significant assumptions (weighted-average):
Risk-free interest rate at grant date 2% 1.5%
Expected stock price volatility 255% 149%
Expected dividend payout -- --
Expected option life-years (a) 6 6
(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 SF AS
No.123, the Company's pro forma net loss and net loss per share would have been
$( 3,518,517 ) and $( 0.07 ) for the nine months ended September 30,2005 and
$(4,061,836) and $(0.24) for the nine months ended September 30, 2004,
respectively.
12
CYBERLUX CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(Unaudited)
NOTE E -RELATED PARTY TRANSACTIONS
From time to time, the Company's principal officers have advanced funds to the
Company for working capital purposes in the form of unsecured promissory notes,
accruing interest at 12% per annum. As of September 30, 2005 and December 31,
2004, the balance due to the officers was $ 386,595 and $399,080, respectively.
NOTE F -COMMITMENTS AND CONTINGENCIES
Consulting Agreements
The Company has consulting agreements with outside contractors, certain of whom
are also Company stockholders. The Agreements are generally for a term of 12
months from inception and renewable automatically from year to year unless
either the Company or Consultant terminates such engagement by written notice.
NOTE G- LOSSES PER SHARE
The following table presents the computation of basic and diluted losses per
share:
For the Nine Months Ended September 30,
2005 2004
Net loss available to Common stockholders $(2,799,717) $(4,013,836)
Basic and diluted loss per share (0.06) (0.24)
Weighted average common shares outstanding 47,503,678 17,080,605
NOTE I- GOING CONCERN MATTERS
The accompanying statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. As shown in the accompanying financial statements
for the nine months ended September 30, 2005 and for the period from inception
through December 31,2004, the Company incurred losses from operations of
$(2,799,717) and $(10,847,683), respectively. These factors among others may
indicate that the Company will be unable to continue as a going concern for a
reasonable period of time.
The Company is actively pursuing additional equity financing through discussions
with investment bankers and private investors. There can be no assurance the
Company will be successful in its effort to secure additional equity financing.
If operations and cash flows continue to improve through these efforts,
management believes that the Company can continue to operate. However, no
assurance can be given that management's actions will result in profitable
operations or the resolution of its liquidity problems.
The Company's existence is dependent upon management's ability to develop
profitable operations and resolve it's liquidity problems. Management
anticipates the Company will attain profitable status and improve its liquidity
through the continued developing, marketing and selling of its services and
additional equity investment in the Company. The accompanying financial
statements do not include any adjustments that might result should the Company
be unable to continue as a going concern.
NOTE J-SUBSEQUENT EVENTS
To obtain funding for our ongoing operations, we entered into a Securities
Purchase Agreement with four accredited investors on October 21, 2005 for the
sale of (i) $800,000 in secured convertible notes and (ii) warrants to buy
800,000 shares of our common stock.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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.
Overview
We are in the development stage and our efforts have been principally
devoted to designing, developing 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 solid-state
diodal illumination (TM) that demonstrate added value over traditional lighting
systems. Using proprietary technology, we are creating a family of products for
task and accent lighting, emergency and security lighting, and specialized
lighting systems for military and Homeland Security. Our solid-state lighting
technology offers extended light life and greater cost effectiveness than other
existing forms of illumination. We are expanding our marketing activity into
channels of retail, commercial, institutional and military sales.
With our task and accent lighting, the target markets include kitchen and
bath cabinet manufacturers, designer and installation contractors for the
residential market. In the commercial markets, our task and accent lighting
products and emergency and security lighting products address the 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. For our retail products, our target
customers include the home improvement and consumer goods retailers. For the
military and Homeland Security products, our target markets include all branches
of the military and all government organizations proving homeland security
services such as border control and airport security.
On July 11,2005. we announced the fulfillment of initial orders for the
Aeon product line and the continued expansion of the Aeon sales network that
connects dealers with customers. The Aeon sales network is comprised of dealers
and lighting industry professionals who meet a range of criteria including their
market reach, years in business, annual revenue, customer base and their ability
to effectively represent Aeon products with our solid-state lighting technology.
On July 13, 2005, we unveiled the KEON KeyCap(tm), a new product designed
to provide consumers with a long-lasting, slender sleeve of electronics that
turns a standard key into a practical lighting element. The patented KEON
KeyCap(tm) is the practical lighting solution for every consumer who carries
keys. Each KEON is a sturdy elastic surround that fits standard key heads and
features an electronics package that focuses a bright diodal(tm) beam of light
down the key shaft. When its miniaturized button is depressed, the KEON
KeyCap(tm) directs light precisely into the intended keyhole or other targeted
surfaces.
On July 28, 2005, we announced the formation of a joint venture with Bruni
Industria Mobili SRL that will address the solid-state lighting needs of the
European marketplace. Bruni Industria Mobili SRL, a 51-year-old furniture,
fixture and consumer products manufacturing conglomerate located in Sora, Italy,
is one of the largest manufacturers of furnishing products, including lighting
products and fixtures for the European market. Under the terms of the agreement,
we granted Bruni Industria the European marketing and distribution rights our
products, and will integrate our technology into Bruni Industria products.
14
On July 21, 2005, the North Carolina Technology Association (NCTA) invited
us to serve on NCTA's Defense and Security Steering Committee. NCTA is the
primary voice of the technology industry in North Carolina and is dedicated to
growing and strengthening the technology industry through increasing public
awareness and influencing key public policy issues. Security has become an
increasingly important focus within the nation and North Carolina. With one of
the largest military presences in the country, NCTA is focused on building a
Defense and Security Business Cluster across North Carolina to leverage federal
investment associated with the military presence in North Carolina. With the
Cyberlux headquarters in the heart of North Carolina's Research Triangle Park,
the appointment to NCTA's Defense and Security Steering Committee will give us
the opportunity to participate in planning future homeland security, military
and defense industry initiatives.
On July 25, 2005, we unveiled the RelyOn ultra-bright light with power
plant, a new product designed to provide homeowners and professionals with a
portable, long-lasting work and emergency light. RelyOn is the first product in
the world to use Cree's latest 3-watt solid-state lighting technology, providing
superior performance over conventional lighting products. The patent-pending
RelyOn is a practical lighting solution for every consumer and professional who
needs versatile, long-lasting light. The powerful, water- resistant and portable
lighting system is designed to provide a perpetual and rechargeable light source
during the most extreme conditions, including power grid failures caused by
natural or man-made disasters. Delivering more than 60 hours of light on a
single charge, the RelyOn can be recharged from a wall outlet or a vehicle
charging port. AC and DC power adapters are built into RelyOn. As a power plant,
the RelyOn can recharge mobile phones and other 12-volt DC devices through a
built-in power port.
On August 10, 2005, we introduced the EverOn Multi-Purpose Emergency
Light, the latest solid-state lighting technology that provides more than 60
hours of light using four AA batteries and is 90 percent more energy efficient
than conventional incandescent flashlights. The EverOn is packaged in our
patent-pending and field-proven hand-held elliptical parabolic reflector product
design, providing a practical, portable emergency lighting solution for every
consumer who has experienced the unease and inconvenience of power outages
caused by natural or man-made disasters. Designed originally to provide
homeowners with portable, long- lasting, emergency lighting during the hurricane
season, the new EverOn is a sturdy, virtually indestructible, lighting product
that provides over 60 hours of comfortable room-filling light on the medium
setting and over 30 hours of intensely bright white light on the highest
setting, all in a 7, by 3.5 by 2.4 inch package. 'The EverOn product builds on
the demonstrated success of the original Home Safety Light, which was used for
emergency lighting support during last year's Hurricane Charlie relief effort
and by workers involved in the Thai island Phuket tsunami disaster recovery. The
EverOn contains 6 bright white and 4 amber diodal(tm) lighting elements that
never require replacement. The EverOn has three light settings including a low,
nightlight level; a medium, room-filling light level; and a high, spotlight
level. In recent bench tests by Independent Testing Laboratories, Inc., the
EverOn Multi-Purpose Light was shown to operate for over 60 hours at the medium
setting and over 30 hours at high setting using one set of 4 AA batteries.
On August 16, 2005, we announced that the U.S. Patent Office has awarded
us a patent for our Apparatus and Methods for Providing an Emergency Lighting
Augmentation System. The claims awarded by the U.S. Patent Office address a
lighting system capable of providing long-term solutions for emergency and
interim lighting. Specifically, these claims address the solid-state lighting
elements and associated devices for providing emergency or temporal lighting
mounted adjacent to the existing lighting system; the control circuit in
electronic communication with solid-state lighting system including wireless
communication; the power sensing technology for sensing power disruption in a
main power supply which illuminates the lighting elements upon sensing power
disruption to determining the electrical power state of an environment.
Specifically, the patent addresses an electrochemical lighting system capable of
providing prolonged illumination with the use of light emitting diodes (LEDs) as
the illumination source. The patent embodies lighting devices capable of
providing long-term solutions for interim and emergency lighting via an array of
LEDs, the means for providing electrical energy to the LED array, the capability
of multi-level light intensity consistent with light longevity and power source
relationships including conventional A/C, solar, various electrochemical
assemblies or all other means of electrical energy support. The development of
Cyberlux's ReliaBright Emergency Lighting System (ELS) led to the patent filing.
The ReliaBright ELS is designed to retrofit as an augmentation to existing
lighting systems in commercial buildings, and it can be adapted for a variety of
applications and uses. These claims lead to new opportunities for the
ReliaBright ELS technology in the commercial, military and homeland security
markets. The product includes a control module powered by a constant charge
battery and monitored by a sensor. The sensor differentiates between 'power-off
at the wall switch' and 'power-out in the building's electrical service.' The
system's light intensity is determined by the number of solid-state lighting
elements that are connected in series. Light levels range from 'moonlight' to
'daylight' consistent with the needs of the space in which the ReliaBright ELS
is installed.
15
On September 7, 2005, we introduced the Emergency Response Retail Campaign
to provide the new EverOn Multi-Purpose Emergency Light to retailers and
consumers during the hurricane season. The EverOn product is the latest in
solid-state lighting technology and provides more than 60 hours of light using
four AA batteries and is 90 percent more energy efficient than conventional
lanterns or incandescent flashlights. Under the EverOn Emergency Retail
Campaign, we have readied pre- packaged bulk shippers of the EverOn product for
immediate distribution to retailers and emergency response organizations.
Emergency Management officials in Collier County, Florida relied on the Home
Safety Light, the previous version of the EverOn, as an emergency lighting
source in hurricane shelters and for victims needing medical assistance in the
aftermath of Hurricane Dennis in July 2005. In August 2005, the officials
announced that they have listed the EverOn Emergency Light to be a standard
product in their disaster relief inventory.
On September 15, 2005, we introduced our e-commerce Web site,
www.LuxSel.com, as our on-line retail outlet for consumer solid-state LED
lighting products, including the EverOn, Keon and RelyOn products.
On September 23, 2005, we announced a partnership with Smart Products, Inc
to extend the reach of our retail products in the retail channel. Smart
Products, Inc., a full service retail sales organization, will market, sell and
support our EverOn, Keon and RelyOn LED solid-state lighting products in their
strategic U.S. retail accounts.
On September 28, 2005, we announced a partnership with Duggan & Brown,
Inc.to extend the reach of our retail products in the retail channel. Duggan &
Brown, Inc., a full service retail sales organization, has offices in Abington,
PA for northeastern United States coverage, Barrington, IL for central and
western United States coverage and Naples, FL for southeastern United States
coverage. Under the terms of the agreement, Dugan & Brown will market, sell and
support our EverOn, Keon and RelyOn innovative LED solid-state lighting products
in their strategic U.S. retail, on-air shopping, catalog and direct mail
accounts.
Results of Operations
Nine months ended September 30, 2005 compared to the Nine months ended September
30, 2004
REVENUES
Revenues for the nine months ended September 30, 2005 were $26,202 as
compared to $23,288 for the same period ended September 30, 2004.
OPERATING EXPENSES
Operating expenses for the nine months ended September 30, 2005 were
$1,864,038 as compared to $2,551,709 for the same period ended September 30,
2004. Included in the nine months ended September 30, 2005 are $235,389 in
expenses for market development and literature. This compares to $10,380 for the
nine months ended September 30, 2004.
Three months ended September 30, 2005 compared to the three months ended
September 30, 2004
REVENUES
Revenues for the three months ended September 30, 2005 were $12,434 as
compared to $2,082 for the same period ended September 30, 2004.
16
OPERATING EXPENSES
Operating expenses for the three months ended September 30, 2005 were
$785,410 as compared to $603,242 for the same period ended September 30, 2004.
Included in the three months ended June 30, 2005 are $97,718 in expenses for
market development and literature. This compares to $21,830 for the nine months
ended September 30, 2004.
As a result of limited capital resources and minimal revenues from
operations from its inception, we have relied on the issuance of equity
securities to non-employees in exchange for services. Our management enters into
equity compensation agreements with non-employees if it is in our best interest
under terms and conditions consistent with the requirements of Financial
Accounting Standards No. 123, Accounting for Stock Based Compensation. In order
to conserve our limited operating capital resources, we anticipate continuing to
compensate non-employees for services during the next twelve months. This policy
may have a material effect on our results of operations during the next twelve
months.
Liquidity and Capital Resources
As of September 30, 2005, we had a working capital deficit of $1,066,484.
This compares to a working capital deficit of $442,303 as of December 31, 2004.
As a result of our operating losses for the nine months ended September 30,
2005, we generated a cash flow deficit of $1,849,640 from operating activities.
Cash flows used in investing activities was $35,867 during the quarter. Cash
flows from financing activities provided $1,487,515 from the issuance of
convertible notes payable for the first six months ended September 30, 2005.
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 our operations and development to the level of
capitalization, we believe we have sufficient capital resources to meet
projected cash flow deficits through the next twelve months. However, if
thereafter, we are not successful in generating sufficient liquidity from
operations or in raising sufficient capital resources, on terms acceptable to
us, this could have a material adverse effect on our business, results of
operations, liquidity and financial condition.
Our independent certified public accountant has stated in their report
included in our December 31, 2004, Form 10-KSB, as amended, that we have
incurred operating losses in the last two years, and that we are dependent upon
management's ability to develop profitable operations. These factors among
others may raise substantial doubt about our ability to continue as a going
concern.
To obtain funding for our ongoing operations, we entered into a Securities
Purchase Agreement with four accredited investors on October 21, 2005 for the
sale of (i) $800,000 in secured convertible notes and (ii) warrants to buy
800,000 shares of our common stock.
The proceeds received from the sale of the secured convertible notes will
be used for business development purposes, working capital needs, pre-payment of
interest, payment of consulting and legal fees and purchasing inventory.
17
The secured convertible notes bear interest at 8%, mature three years from
the date of issuance, and are convertible into our common stock, at the
investors' option, at the lower of (i) $0.06 or (ii) 50% of the average of the
three lowest intraday trading prices for the common stock on a principal market
for the 20 trading days before but not including the conversion date. The full
principal amount of the secured convertible notes is due upon default under the
terms of secured convertible notes. The warrants are exercisable until five
years from the date of issuance at a purchase price of $0.10 per share. In
addition, the conversion price of the secured convertible notes and the exercise
price of the warrants will be adjusted in the event that we issue common stock
at a price below the fixed conversion price, below market price, with the
exception of any securities issued in connection with the Securities Purchase
Agreement. The conversion price of the secured convertible notes and the
exercise price of the warrants may be adjusted in certain circumstances such as
if we pay a stock dividend, subdivide or combine outstanding shares of common
stock into a greater or lesser number of shares, or take such other actions as
would otherwise result in dilution of the selling stockholder's position. The
selling stockholders have contractually agreed to restrict their ability to
convert or exercise their warrants and receive shares of our common stock such
that the number of shares of common stock held by them and their affiliates
after such conversion or exercise does not exceed 4.9% of the then issued and
outstanding shares of common stock. In addition, we have granted the investors a
security interest in substantially all of our assets and intellectual property
and registration rights.
Since the conversion price will be less than the market price of the
common stock at the time the secured convertible notes are issued, we anticipate
recognizing a charge relating to the beneficial conversion feature of the
secured convertible notes during the quarter in which they are issued
We will still need additional investments in order to continue operations
to cash flow break even. Additional investments are being sought, but we cannot
guarantee that we will be able to obtain such investments. Financing
transactions may include the issuance of equity or debt securities, obtaining
credit facilities, or other financing mechanisms. However, the trading price of
our common stock and the downturn in the U.S. stock and debt markets could make
it more difficult to obtain financing through the issuance of equity or debt
securities. Even if we are able to raise the funds required, it is possible that
we could incur unexpected costs and expenses, fail to collect significant
amounts owed to us, or experience unexpected cash requirements that would force
us to seek alternative financing. Further, if we issue additional equity or debt
securities, stockholders may experience additional dilution or the new equity
securities may have rights, preferences or privileges senior to those of
existing holders of our common stock. If additional financing is not available
or is not available on acceptable terms, we will have to curtail our operations
again.
Critical Accounting Policies
The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States requires us to make estimates
and judgments that affect our reported assets, liabilities, revenues, and
expenses, and the disclosure of contingent assets and liabilities. We base our
estimates and judgments on historical experience and on various other
assumptions we believe to be reasonable under the circumstances. Future events,
however, may differ markedly from our current expectations and assumptions.
While there are a number of significant accounting policies affecting our
financial statements; we believe the following critical accounting policies
involve the most complex, difficult and subjective estimates and judgments:
o stock-based compensation; and
o revenue recognition.
Stock-Based Compensation
In December 2002, the FASB issued SFAS No. 148 - Accounting for
Stock-Based Compensation - Transition and Disclosure. This statement amends SFAS
No. 123 - Accounting for Stock-Based Compensation, providing alternative methods
of voluntarily transitioning to the fair market value based method of accounting
for stock based employee compensation. FAS 148 also requires disclosure of the
method used to account for stock-based employee compensation and the effect of
the method in both the annual and interim financial statements. The provisions
of this statement related to transition methods are effective for fiscal years
ending after December 15, 2002, while provisions related to disclosure
requirements are effective in financial reports for interim periods beginning
after December 31, 2002.
The Company elected to continue to account for stock-based compensation
plans using the intrinsic value-based method of accounting prescribed by APB No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
Under the provisions of APB No. 25, compensation expense is measured at the
grant date for the difference between the fair value of the stock and the
exercise price.
Revenue Recognition
For revenue from product sales, the Company recognizes revenue in
accordance with SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101"). SAB 101 requires that four basic criteria
must be met before revenue can be recognized: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred; (3) the selling price is fixed
and determinable; and (4) collectibility is reasonably assured. Determination of
criteria (3) and (4) are based on management's judgments regarding the fixed
nature of the selling prices of the products delivered and the collectibility of
those amounts. Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same
period the related sales are recorded. The Company defers any revenue for which
the product has not been delivered or is subject to refund until such time that
the Company and the customer jointly determine that the product has been
delivered or no refund will be required.
18
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 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 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 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 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.
19
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.
Product Research and Development
We anticipate incurring approximately $500,000 in research and development
expenditures in connection with the development of our portable boundary
lighting system, Aeon cabinet lighting and RelyOn Power Light Plant during the
next twelve months.
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.
20
Acquisition or Disposition of Plant and Equipment
We do not anticipate the sale of any significant property, plant or
equipment during the next twelve months. We do not anticipate the acquisition of
any significant property, plant or equipment during the next 12 months.
RISK FACTORS
Much of the information included in this quarterly report includes or is
based upon estimates, projections or other "forward-looking statements". Such
forward-looking statements include any projections or estimates made by us and
our management in connection with our business operations. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions or other future performance
suggested herein.
Such estimates, projections or other "forward-looking statements" involve
various risks and uncertainties as outlined below. We caution the reader that
important factors in some cases have affected and, in the future, could
materially affect actual results and cause actual results to differ materially
from the results expressed in any such estimates, projections or other
"forward-looking statements".
Our common shares are considered speculative. Prospective investors should
consider carefully the risk factors set out below.
We Have a History Of Losses Which May Continue, Which May Negatively Impact Our
Ability to Achieve Our Business Objectives.
We incurred net losses of $6,825,848 for the year ended December 31, 2004
and $2,230,806 for the year ended December 31, 2003. For the nine months ended
September 30, 2005, we incurred a net loss of $2,799,717. As of September 30,
2005, we had an accumulated deficit of $13,647,401. We cannot assure you that we
can achieve or sustain profitability on a quarterly or annual basis in the
future. Our operations are subject to the risks and competition inherent in the
establishment of a business enterprise. There can be no assurance that future
operations will be profitable. Revenues and profits, if any, will depend upon
various factors, including whether we will be able to continue expansion of our
revenue. We may not achieve our business objectives and the failure to achieve
such goals would have an adverse impact on us.
If We Are Unable to Obtain Additional Funding Our Business Operations Will be
Harmed and If We Do Obtain Additional Financing Our Then Existing Shareholders
May Suffer Substantial Dilution.
We will require additional funds to sustain and expand our sales and
marketing activities. We anticipate that we will require up to approximately
$2,000,000 to fund our continued operations for the next twelve months,
depending on revenue from operations. Additional capital will be required to
effectively support the operations and to otherwise implement our overall
business strategy. There can be no assurance that financing will be available in
amounts or on terms acceptable to us, if at all. The inability to obtain
additional capital will restrict our ability to grow and may reduce our ability
to continue to conduct business operations. If we are unable to obtain
additional financing, we will likely be required to curtail our marketing and
development plans and possibly cease our operations. Any additional equity
financing may involve substantial dilution to our then existing shareholders.
Our Independent Auditors Have Expressed Substantial Doubt About Our Ability to
Continue As a Going Concern, Which May Hinder Our Ability to Obtain Future
Financing.
In their report dated March 17, 2005, our independent auditors stated that
our financial statements for the year ended December 31, 2003 were prepared
assuming that we would continue as a going concern. Our ability to continue as a
going concern is an issue raised as a result of losses for the years ended
December 31, 2004 and 2003 in the amounts of $6,825,848 and $2,230,806,
respectively. We continue to experience net operating losses. Our ability to
continue as a going concern is subject to our ability to generate a profit
and/or obtain necessary funding from outside sources, including obtaining
additional funding from the sale of our securities, increasing sales or
obtaining loans and grants from various financial institutions where possible.
Our continued net operating losses increase the difficulty in meeting such goals
and there can be no assurances that such methods will prove successful.
21
If We Are Unable to Retain the Services of Messrs. Evans, Schmidt or Ringo, or
If We Are Unable to Successfully Recruit Qualified Managerial and Sales
Personnel Having Experience in Business, We May Not Be Able to Continue Our
Operations.
Our success depends to a significant extent upon the continued service of
Mr. Donald F. Evans, our Chief Executive Officer, Mr. Mark D. Schmidt, our
President and Mr. John Ringo, our Secretary and Corporate Counsel. Loss of the
services of Messrs. Evans, Schmidt or Ringo could have a material adverse effect
on our growth, revenues, and prospective business. We do not maintain key-man
insurance on the life of Messrs. Evans or Ringo. In addition, in order to
successfully implement and manage our business plan, we will be dependent upon,
among other things, successfully recruiting qualified managerial and sales
personnel having experience in business. Competition for qualified individuals
is intense. There can be no assurance that we will be able to find, attract and
retain existing employees or that we will be able to find, attract and retain
qualified personnel on acceptable terms.
Many Of Our Competitors Are Larger and Have Greater Financial and Other
Resources Than We Do and Those Advantages Could Make It Difficult For Us to
Compete With Them.
The lighting and illumination industry is extremely competitive and
includes several companies that have achieved substantially greater market
shares than we have, and have longer operating histories, have larger customer
bases, and have substantially greater financial, development and marketing
resources than we do. If overall demand for our products should decrease it
could have a materially adverse affect on our operating results.
Our Trademark and Other Intellectual Property Rights May Not be Adequately
Protected Outside the United States, Resulting in Loss of Revenue.
We believe that our trademarks, whether licensed or owned by us, and other
proprietary rights are important to our success and our competitive position. In
the course of our international expansion, we may, however, experience conflict
with various third parties who acquire or claim ownership rights in certain
trademarks. We cannot assure that the actions we have taken to establish and
protect these trademarks and other proprietary rights will be adequate to
prevent imitation of our products by others or to prevent others from seeking to
block sales of our products as a violation of the trademarks and proprietary
rights of others. Also, we cannot assure you that others will not assert rights
in, or ownership of, trademarks and other proprietary rights of ours or that we
will be able to successfully resolve these types of conflicts to our
satisfaction. In addition, the laws of certain foreign countries may not protect
proprietary rights to the same extent, as do the laws of the United States.
Our Principal Stockholders, Officers And Directors Own a Controlling Interest in
Our Voting Stock And Investors Will Not Have Any Voice in Our Management.
We have issued 800,000 shares of Series B Convertible Preferred Stock to
our officers and directors which are convertible into 8 million shares of common
stock and, in the aggregate, have the right to cast 80 million votes in any vote
by our shareholders. Combined with the number of shares of common stock held by
our officers and directors, they have the right to cast approximately 70% of all
votes by our shareholders. As a result, these stockholders, acting together,
will have the ability to control substantially all matters submitted to our
stockholders for approval, including:
o election of our board of directors;
o removal of any of our directors;
o amendment of our certificate of incorporation or bylaws; and
o adoption of measures that could delay or prevent a change in control
or impede a merger, takeover or other business combination involving
us.
As a result of their ownership and positions, our directors and executive
officers collectively are able to influence all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions. In addition, sales of significant amounts of shares held
by our directors and executive officers, or the prospect of these sales, could
adversely affect the market price of our common stock. Management's stock
ownership may discourage a potential acquirer from making a tender offer or
otherwise attempting to obtain control of us, which in turn could reduce our
stock price or prevent our stockholders from realizing a premium over our stock
price.
22
We Have Issued a Large Amount of Stock in Lieu of Cash for Payment of Expenses
and Expect to Continue this Practice in the Future. Such Issuances of Stock Will
Cause Dilution to Our Existing Stockholders.
Due to our limited economic resources, we try to issue stock in lieu of
cash for payment of expenses and services provided for us. In 2004, we issued
6,335,000 shares of common stock in exchange for expenses and services rendered,
and we issued 800,000 shares of series B convertible preferred stock to officers
and directors in exchange for the retirement of debt owed to them. We anticipate
issuing shares of common stock whenever possible in lieu of cash to conserve our
financial position. The number of shares of common stock issued is directly
related to our stock price at the time of issuance. In the event that our stock
price drops, we will be required to issue larger amounts of shares for expenses
and services rendered, if the other party is willing to accept stock at all. The
issuance of shares of common stock will have the effect of diluting the
proportionate equity interest and voting power of holders of our common stock,
including investors in this offering.
If We Fail to Remain Current on Our Reporting Requirements, We Could be Removed
From the OTC Bulletin Board Which Would Limit the Ability of Broker-Dealers to
Sell Our Securities and the Ability of Stockholders to Sell Their Securities in
the Secondary Market.
Companies trading on the OTC Bulletin Board, such as us, must be reporting
issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and
must be current in their reports under Section 13, in order to maintain price
quotation privileges on the OTC Bulletin Board. If we fail to remain current on
our reporting requirements, we could be removed from the OTC Bulletin Board. As
a result, the market liquidity for our securities could be severely adversely
affected by limiting the ability of broker-dealers to sell our securities and
the ability of stockholders to sell their securities in the secondary market.
Our Common Stock is Subject to the "Penny Stock" Rules of the SEC and the
Trading Market in Our Securities is Limited, Which Makes Transactions in Our
Stock Cumbersome and May Reduce the Value of an Investment in Our Stock.
The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes the definition of a "penny stock," for the purposes relevant to us,
as any equity security that has a market price of less than $5.00 per share or
with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require:
o that a broker or dealer approve a person's account for transactions
in penny stocks; and
o the broker or dealer receive from the investor a written agreement
to the transaction, setting forth the identity and quantity of the
penny stock to be purchased.
In order to approve a person's account for transactions in penny stocks, the
broker or dealer must:
o obtain financial information and investment experience objectives of
the person; and
o make a reasonable determination that the transactions in penny
stocks are suitable for that person and the person has sufficient
knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:
o sets forth the basis on which the broker or dealer made the
suitability determination; and
o that the broker or dealer received a signed, written agreement from
the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities
subject to the "penny stock" rules. This may make it more difficult for
investors to dispose of our common stock and cause a decline in the market value
of our stock.
23
Disclosure also has to be made about the risks of investing in penny
stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
24
ITEM 3. CONTROLS AND PROCEDURES
a) Evaluation of Disclosure Controls and Procedures: As of September
30, 2005, our management carried out an evaluation, under the
supervision of our Chief Executive Officer and Chief Financial
Officer of the effectiveness of the design and operation of our
system of disclosure controls and procedures pursuant to the
Securities and Exchange Act, Rule 13a-15(e) and 15d-15(e) under the
Exchange Act). Based on that evaluation, our chief executive officer
and chief financial officer concluded that our disclosure controls
and procedures are effective to provide reasonable assurance that
information we are required to disclose in reports that we file or
submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and
Exchange Commission 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.
b) Changes in internal controls: There were no changes in internal
controls over financial reporting that occurred during the period
covered by this report that have materially affected, or are
reasonably likely to materially effect, our internal control over
financial reporting.
25
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in various lawsuits and legal
proceedings which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may harm our business. Except as
disclosed below, we are currently not aware of any such legal proceedings or
claims that we believe will have, individually or in the aggregate, a material
adverse affect on our business, financial condition or operating results.
CASE NUMBER: 2001 CA 005309 NC Div. C.
On May 17, 2005, Zykronix, Inc., a Colorado corporation, filed a complaint
against us and our President, Mark Schmidt, in the District Court, City and
County of Denver, State of Colorado (Case No. O5CV3704) claiming damages in the
amount of $211,323.75 and costs for breach of contract, unjust enrichment and
fraud by Mark Schmidt. We previously entered into a contract with Zykronix for
them to produce prototypes for several of our new products, which we believe
they never satisfactorily completed.
On June 22, 2005, we filed our Answer and Counterclaim against Zykronix,
claiming damages and costs in the amount of $2,850,000 for breach of contract,
unjust enrichment and negligent misrepresentation. At the same time, Mark
Schmidt filed a Motion to Dismiss since Zykronix failed to adequately plead a
claim for fraud. On August 24, 2005, the Motion to Dismiss was denied. The case
is currently in discovery. We believe that their claims are without merit and we
will vigorously defend these claims.
INDEX NUMBER: 602727/05 - Supreme Court of the State of New York, County
of New York
On July 27, 2005, Alliance Care Services, Inc. d/b/a Alliance Advisors, a
New York corporation, filed a complaint against us in the Supreme Court of the
State of New York, County of New York, claiming damages in the amount of not
less than $500,000 and costs for breach of contract, breach of duty of good
faith and fair dealing and unjust unrichment. We filed our answer on October 4,
2005 denying all claims. This case is currently in discovery. We believe that
their claims are without merit and we intend to vigorously defend these claims.
Statement of Claim - Arbitration Before the National Association of
Securities Dealers, Inc.
On October 21, 2005, Greenfield Capital Partners LLC filed a statement of
claim against us in arbitratoin before the National Association of Securities
Dealers, Inc. Greenfield claims damages and costs in the amount of $107,000 for
breach of contract, fraud, fraudulent concealment and misrepresentation. We
believe that their claims are without merit and we intend to vigorously defend
these claims.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three months ended September 30, 2005, we issued 1,025,000
shares of common stock for the conversion of 20.5 shares of Class A preferred
stock.
In July, 2005, we issued 9,573,000 shares of common stock $0.0085 per
share on conversion of notes payable.
In August, 2005, we issued 1,000,000 shares of our common stock at $0.097
per share in exchange for services rendered.
Item 3. Defaults Upon Senior Securities.
None.
26
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits
4.1 Securities Purchase Agreement, dated as of October 23, 2005, by and among
Cyberlux Corporation, AJW Partners, LLC, AJW Qualified Partners, LLC, AJW
Offshore, Ltd. and New Millennium Capital Partners II, LLC.
4.2 Secured Convertible Note issued to AJW Offshore, Ltd., dated October 23,
2005.
4.3 Secured Convertible Note issued to AJW Qualified Partners, LLC, dated
October 23, 2005.
4.4 Secured Convertible Note issued to AJW Partners, LLC, dated October 23,
2005.
4.5 Secured Convertible Note issued to New Millennium Capital Partners II,
LLC.
4.6 Common Stock Purchase Warrant issued to AJW Offshore, Ltd., dated October
23, 2005.
4.7 Common Stock Purchase Warrant with AJW Qualified Partners, LLC, dated
October 23, 2005.
4.8 Common Stock Purchase Warrant with AJW Partners, LLC, dated October 23,
2005.
4.9 Common Stock Purchase Warrant with New Millennium Capital Partners II,
LLC, dated October 23, 2005.
4.10 Registration Rights Agreement, dated as of October 23, 2005, by and among
Cyberlux Corporation, AJW Partners, LLC, AJW Qualified Partners, LLC, AJW
Offshore, Ltd. and New Millennium Capital Partners II, LLC.
4.11 Security Agreement, dated as of October 23, 2005, by and among Cyberlux
Corporation, AJW Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore,
Ltd. and New Millennium Capital Partners II, LLC.
4.12 Intellectual Property Security Agreement, dated as of October 23, 2005, by
and among Cyberlux Corporation, AJW Partners, LLC, AJW Qualified Partners,
LLC, AJW Offshore, Ltd. and New Millennium Capital Partners II, LLC.
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule
15d-14(a), promulgated under the Securities and Exchange Act of 1934, as
amended
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule
15d 14(a), promulgated under the Securities and Exchange Act of 1934, as
amended
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)
27
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
Date: November 16, 2005 By: /s/ DONALD F. EVANS
------------------------------------
Donald F. Evans
Chief Executive Officer
(Principal Executive Officer) and
Chairman of the Board of Directors
Date: November 16, 2005 By: /s/ DAVID D. DOWNING
------------------------------------
David D. Downing
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
28