Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2013
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition from __________ to __________.
Commission File Number: 0-54036
CIRALIGHT GLOBAL, INC.
(Exact name of registrant as specified in its charter)
Nevada 26-4549003
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
670 E. Parkridge Ave, Suite 112, Corona, CA 92879
(Address of principal executive offices) (Zip code)
(877) 520-5005
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
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 (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, 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 [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of November 13, 2013 there were
15,610,141 outstanding shares of the Registrant's Common Stock, $0.001 par
value.
Report on Form 10-Q
For the Quarter Ended September 30, 2013
INDEX
Page
----
Part I - Financial Information
Item 1. Financial Statements 3
Condensed Balance Sheets as of September 30, 2013 (Unaudited)
and December 31, 2012 3
Condensed Statements of Operations for the three and nine months
ended September 30, 2013 and 2012 (Unaudited) 4
Condensed Statements of Cash Flows for the nine months ended
September 30, 2013, and 2012 (Unaudited) 5
Notes to Condensed Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
Item 4. Controls and Procedures 21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 1A. Risk Factors 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 22
Item 4. Mine Safety Disclosures 22
Item 5. Other Information 22
Item 6. Exhibits 22
SIGNATURES 25
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CIRALIGHT GLOBAL, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2013 2012
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 4,207 $ 81,060
Restricted cash 7,636 7,636
Accounts receivable, net of allowance of $9,056 and $23,425, respectively 96,493 244,325
Inventory 158,051 128,543
Prepaid expenses and other current assets 118,770 30,590
------------ ------------
Total current assets 385,157 492,154
------------ ------------
Property and equipment, net 6,208 8,748
Intangible assets, net 80,646 67,426
------------ ------------
Total assets $ 472,011 $ 568,328
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 251,852 $ 235,586
Line of credit - related party 623,684 530,000
Accrued expenses - related parties 97,587 30,877
Deferred revenue 80,492 94,278
Other payables 103,311 230,290
Notes payable - related parties 80,850 33,000
------------ ------------
Total current liabilities 1,237,776 1,154,031
------------ ------------
Stockholders' equity (deficit)
Preferred stock - $.001 par value; 10,000,000 shares authorized,
1,000,000 Redeemable Series A Preferred shares issued and outstanding 1,000 1,000
Common stock - $.001 par value; 50,000,000 shares authorized,
15,610,141 and 15,066,569 shares issued and outstanding, respectively 15,610 15,066
Additional paid-in capital 3,630,263 3,284,821
Accumulated deficit (4,412,638) (3,886,590)
------------ ------------
Total stockholders' equity (deficit) (765,765) (585,703)
------------ ------------
Total liabilities and stockholders' equity (deficit) $ 472,011 $ 568,328
============ ============
The accompanying notes are an integral part of these
condensed financial statements
3
CIRALIGHT GLOBAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Quarter Ended For the Nine Months Ended
September 30, September 30,
----------------------------- ------------------------------
2013 2012 2013 2012
------------ ------------ ------------ ------------
Sales $ 290,998 $ 105,715 $ 688,251 $ 500,849
Cost of goods sold 227,103 67,905 510,442 441,163
------------ ------------ ------------ ------------
Gross profit 63,895 37,810 177,809 59,686
------------ ------------ ------------ ------------
Operating expenses
Research and development expenses -- 38,255 5,199 52,824
Selling and marketing expenses 2,609 24,377 56,565 122,875
General and administrative expenses 164,422 249,008 617,384 706,997
------------ ------------ ------------ ------------
Total operating expenses 167,031 311,640 679,148 882,696
------------ ------------ ------------ ------------
Loss from operations (103,136) (273,830) (501,339) (823,010)
------------ ------------ ------------ ------------
Other expense
Interest expense, net (9,440) (7,038) (24,709) (28,538)
------------ ------------ ------------ ------------
Total other expense (9,440) (7,038) (24,709) (28,538)
------------ ------------ ------------ ------------
Net loss $ (112,576) $ (280,868) $ (526,048) $ (851,548)
============ ============ ============ ============
Basic loss per share $ (0.01) $ (0.02) $ (0.03) $ (0.06)
============ ============ ============ ============
Weighted average shares
used in per share calculation 15,608,141 14,824,204 15,514,388 14,489,388
============ ============ ============ ============
The accompanying notes are an integral part of these
condensed financial statements
4
CIRALIGHT GLOBAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
September 30,
-------------------------------
2013 2012
---------- ----------
Cash flows from operating activities:
Net Loss $ (526,048) $ (851,548)
Adjustments to reconcile net loss to net
cash used in operating activities:
Options issued for services 75,256 77,720
Options issued for financing costs -- 11,480
Depreciation and amortization 7,790 4,750
Contribution of rent from a related party -- 1,500
Bad debt expense 2,577 23,200
Changes in operating assets and liabilities
(Increase) decrease in inventory (29,508) (4,368)
(Increase) decrease in accounts receivable 145,255 52,435
(Increase) decrease in prepayments and other current assets (30,896) (68,257)
(Increase) decrease in notes receivable - employee advances 125 --
Increase (decrease) in accrued expenses - related party 32,671 16,120
Increase (decrease) in accounts payable 16,266 39,715
Increase (decrease) in other payables 60,565 103,075
Increase (decrease) in deferred revenue (13,786) 77,014
---------- ----------
Net cash used in operating activities (259,733) (517,164)
---------- ----------
Cash flow used in investing activities
Patent development costs (18,470) (21,710)
---------- ----------
Net cash used in investing activities (18,470) (21,710)
---------- ----------
Cash flows from financing activities:
Cash from sale of common stock 8,500 300,000
Payments of commission on sales of common stock -- (10,000)
Proceeds from related party notes payable 202,850 220,000
Payments towards related party note payable (10,000) (50,000)
---------- ----------
Net cash provided by financing activities 201,350 460,000
---------- ----------
Net decrease in cash (76,853) (78,874)
Cash, beginning of period 81,060 97,443
---------- ----------
Cash, end of period $ 4,207 $ 18,569
========== ==========
Supplemental cash flow information:
Interest paid $ -- $ --
Income taxes paid $ -- $ --
Non-cash investing and financing activities
Common stock issued for acquisition of intangible assets $ -- $ 22,422
Common stock issued for accrued liabilities $ 137,499 $ 115,616
Debt and liabilities settled with common stock $ 67,322 $ --
The accompanying notes are an integral part of these
condensed financial statements
5
CIRALIGHT GLOBAL, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
September 30, 2013
(Unaudited)
1. Background:
Ciralight Global, Inc. (the "Company") was incorporated in the State of Nevada
on February 26, 2009. The Company is in the business of designing, developing,
and distributing proprietary advanced day lighting systems for traditional
non-residential markets that benefit from natural lighting.
In April 2009, we entered into an Exchange of Stock for Assets Agreement with
Mr. George Adams, Sr. ("Adams Agreement") to acquire certain assets including,
but not limited to, a U.S. patent, patent applications pending in Canada,
Europe, Mexico and the United States, artwork, trademarks, equipment, furniture,
databases, technical drawings, promotional materials, trade names and inventory
parts and marketing rights related to the SunTracker One(TM) and SunTracker
Two(TM) daylighting products previously owned and distributed by Ciralight,
Inc., a Utah corporation, such assets having been foreclosed on by Mr. Adams,
who was the secured creditor of Ciralight, Inc. Ciralight, Inc. is a predecessor
to the Company, although we have no affiliation, contractual or otherwise, with
Ciralight, Inc. or any of its employees, officers or directors.
Ciralight, Inc., the company whose assets were foreclosed on by Mr. Adams, was
also in the business of designing, developing, and distributing proprietary
advanced day lighting systems for traditional non-residential markets that
benefit from natural lighting. Ciralight, Inc. ceased operations on March 14,
2009, following the foreclosure by Mr. Adams. Since the acquisition of the
assets was through a foreclosure, the former company and its officers remain
liable for the Ciralight Inc.'s debts and the Company has no financial
responsibility for those debts. None of the employees or management of Ciralight
Inc. are involved in the Company. The business operations of our Company are
located in Irvine, California and the Company operates with four employees, the
Chief Executive Officer, the a Controller, a marketing/promotions manager and an
executive assistant.
In April 2009, we acquired all of the above described assets from Mr. Adams,
except for the U.S. patent and the patent applications pending in Canada,
Europe, Mexico and the United States, in exchange for 3,200,000 shares of our
common stock and 1,000,000 shares of our Series A Preferred Stock. On December
15, 2009, we acquired the U.S. patent and patent applications pending in Canada,
Europe, Mexico and the United States from Mr. Adams in exchange for the issuance
by us of an additional 400,000 shares of our common stock and a convertible
promissory note in the amount of $250,000. The note is convertible into shares
of our common stock at a conversion rate of one share per $.25 of outstanding
principal and interest. As a result of this transaction, Mr. Adams is our
largest shareholder.
6
CIRALIGHT GLOBAL, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
September 30, 2013
(Unaudited)
2. Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles in the United States of
America ("GAAP") for interim financial information and in conformity with the
instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, these
unaudited condensed financial statements do not include all of the information
and footnotes required by GAAP for complete financial statements and, therefore,
should be read in conjunction with the financial statements and related notes
contained in the Company's most recent Annual Report on Form 10-K filed with the
Securities and Exchange Commission ("SEC").
The unaudited condensed financial statements included in this document have been
prepared on the same basis as the annual condensed financial statements and in
management's opinion, reflect all adjustments, including normal recurring
adjustments, necessary to present fairly the Company's financial position,
results of operations and cash flows for the interim periods presented. In the
opinion of management, the disclosures included in these financial statements
are adequate to make the information presented not misleading.
The results of operations for the nine month period ended September 30, 2013 are
not necessarily indicative of the results that the Company will have for any
subsequent quarter or full fiscal year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
significantly from those estimates.
Reclassifications
Certain reclassifications have been made to prior period amounts to conform to
the current period presentations.
3. Liquidity and Operations:
The Company had a net loss of $526,048 for the nine months ended September 30,
2013. As of September 30, 2013, the Company had cash of $4,207 and restricted
cash of $7,636. In addition, the Company had accounts receivable of $96,493,
inventory on hand at a cost valuation of $158,051, and accounts payable of
$251,852.
The Company has experienced losses primarily attributable to administrative
costs, sales costs, marketing and other costs associated with the strategic plan
7
CIRALIGHT GLOBAL, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
September 30, 2013
(Unaudited)
to develop as a world class supplier of sustainable lighting technologies. Cash
flows from operations have not been sufficient to meet our obligations.
Therefore, we have had to raise funds through several financing transactions. At
least until we reach breakeven volume in sales and develop and/or acquire the
capability to manufacture and sell our products profitably, we will need to
continue to rely on cash from external financing sources. Our operations during
the quarter ended September 30, 2013 and the year ended December 31, 2012 were
financed by product sales contracts, common stock issuances, shareholder
advances, as well as from working capital reserves. In addition, on March 23,
2012, the company entered into a revolving line of credit with the Adams family,
a related party, in the amount of up to $500,000. The line of credit is for a
period of six months at an interest rate of prime plus 2%. In the event that the
loan balance is not fully repaid at the end of the six month term, then the
outstanding balance plus accrued interest may be convertible to common stock at
the option of the Creditors at the rate of $0.10 per share. The due date on the
line of credit was extended indefinitely by the Adams with the understanding
that they could call the note due anytime thereafter at their option. In
addition they have advanced amounts in excess of the initial limit of $500,000.
In addition the company was approved in 2012 by the XM Bank (by the Dept. Of
Commerce) to insure and finance transactions for international Distributors and
Dealers. This provides up to $270,000 in financing. Under this XM Bank program,
the company will receive 90% of an international sale at the time the order
ships thus improving the company's cash flow. The international Distributor and
Dealer than have 90 days, instead of 21 days to pay back the XM Bank which is a
good incentive for our Distributors and Dealers to sell more product. When the
Distributor or Dealer pays back XM Bank, the balance of the order is remitted to
the Company. In addition, The company will continue to obtain working capital by
accessing capital markets. In May 2013 the Company signed an agreement with BCC
Valuation Advisors, an investment Banking Company to raise up to $5,000,000 for
Ciralight Global, Inc. BCC Capital has presented the company to a number of
Venture Capital Companies and potential strategic partners. BCC continues to
work with a number of candidates with varying levels of interest and believes it
has a serious investor in consideration for a seven figure investment. The
Company put out a call to the existing shareholders to advance their pro-rata
share of a $300,000 bridge loan was distributed on June 14th. This was done as a
one year loan with interest at 6% per year, convertible to stock between months
six and twelve at $0.35/share. In addition, with the Jobs Act implementation,
the company is contracting with Crowdfunder.com to raise equity funds in an
amount of $500,000 to $1,500,000, and Kickstarter to fund specific new products.
Management believes that with the increased level of sales, the call to the
shareholders, the working capital funding to be provided by BCC, crowdfunder,
kickstarter and the XM Bank financing the company will have sufficient liquidity
to carry on operations for the next twelve months. However, there can be no
assurance that management will be able to fully deliver on its business plans.
8
CIRALIGHT GLOBAL, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
September 30, 2013
(Unaudited)
4. Related Party Transactions
On March 23, 2012, the company entered into a revolving line of credit with the
Adams family, a related party, in the amount of up to $500,000. The line of
credit is for a period of six months at an interest rate of prime plus 2%. In
the event that the loan balance is not fully repaid at the end of the six month
term, then the outstanding balance plus accrued interest may be convertible to
common stock at the option of the creditors at the rate of $0.10 per share. The
principle balance owed as of September 30, 2013 was $623,684. As of September
30, 2013 the Related party line of credit due to George and Terry Adams was
$203,684 and $420,000, respectively. These proceeds have been used for short
term working capital purposes. Interest payable of $35,503 has been recorded as
of September 30, 2013, making a total amount due of $659,187.
In addition, the company issued a note to Fred Feck for $33,000 on June 30, 2012
in exchange for rent for the warehouse occupied by the company. Fred Feck is a
board member and Secretary of the company. As of September 30, 2013 the accrued
interest on Mr. Feck's note is $2,175.
On June 14, 2013 the company offered its existing shareholders an opportunity to
participate in a convertible bridge loan based on their pro-rata shareholder
ownership percentage. The bridge loan is for a period of one year with interest
at six percent per annum and convertible to stock at the rate of $.35 per share.
As of September 30, 2013 the amount of $47,850 was loaned by shareholders,
pursuant to this agreement.
The total related party accrued interest of $38,327 is included in the accrued
expenses, related parties amount on the Company's financial statements.
Accrued Expenses - Related Party - As of September 30, 2013, the Company had
Accrued Expenses consisting of the following:
Accrued Expenses - Related Party
Royalty fees - Related Party $59,260
Accrued Interest - Related Parties 38,327
-------
Total Accrued Expenses - Related Parties $97,587
=======
Royalty Fees Payable - The Adams Agreement described in Note 1 above, granted
Mr. Adams a royalty fee of $20.00 for each SunTracker One(TM) and SunTracker
Two(TM) unit or any future units that are based on the patent rights we acquired
from him. The maximum royalty fees payable under the Adams Agreement is
$2,000,000 based on the sale of 100,000 units. At September 30, 2013 accrued
royalties in the amount of $59,260, related to our sale of 2,963 units.
9
CIRALIGHT GLOBAL, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
September 30, 2013
(Unaudited)
The Company previously leased warehouse space from one of our directors,
Frederick Feck. As of May 31, 2013 the warehouse operation was outsourced to
Cargo House in Carson California.
In January 2010, we entered into a nonexclusive distributorship agreement with
Chaparral Green Energy Solutions, LLC, an entity in which our securities
attorney, David E. Wise, Esq., owns a 50% equity interest. This non-exclusive
dealer agreement with the Company is to sell products in Texas and is on the
same terms, conditions and pricing as other dealer agreements. Thus, Mr. Wise's
company will not receive any beneficial or special treatment over our other
dealers or distributors. The terms and conditions of the dealer agreement with
Chaparral Green Energy Solutions, LLC are the same as for the other dealer and
distributorship agreements. Therefore, the agreement with Chaparral Green Energy
Solutions, LLC does not contain preferential or more favorable terms or
conditions than agreements with our other dealers or distributors.
During the nine months ending September 30, 2013 there were 249,998 shares
issued to the Board of Directors for their services and to Smokey Robinson, a
Board member for his services related to Marketing and Public Relations. Through
April 30, 2013, each of the six Board Members received 50,000 common stock
shares with the shares accrued monthly and issuable quarterly. In addition,
through April 30, 2013, Smokey Robinson received 50,000 shares for his marketing
and public relation services. These are also accrued monthly and issuable
quarterly.
On September 27, 2013 the Board approved Board Compensation for the period of
May 1, 2013 through April 30, 2014. The Board approved granting each board
member with options to buy 75,000 common stock shares at the rate of $.2975. The
Options vested as of May 1, 2013 and extend for a period of 5 years.
5. Stockholders' Equity:
Common stock:
During the three month period ended March 31, 2013, a total of 402,624 shares of
common stock were issued. In January 2013, 33,334 shares of common stock were
issued to Directors Eisenberg, Katz, Brain and Adams each, for a total of
133,336 shares for services rendered, at $.55 per share. In addition, George
Adams converted $67,322 of his line of credit at the rate of $.25/share for a
total of 269,288 shares of common stock.
During the three month period ended June 30, 2013, a total of 14,286 shares of
common stock were issued. These shares were purchased by a shareholder at the
rate of $.35 per share.
During the three month period ended September 30, 2013, a total of 126,662
shares of common stock were issued. Of the shares issued, 10,000 shares were
10
CIRALIGHT GLOBAL, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
September 30, 2013
(Unaudited)
purchased by a shareholder at the rate of $.35 per share and 116,662 shares were
issued to directors for their services.
6. Stock Options and Warrants:
The following table summarizes the activity of stock options for the nine months
ended September 30, 2013:
Number of Shares Weighted Average
Outstanding Exercise Price
----------- --------------
Balance, December 31, 2012 1,352,900 $ .464
Options vested 550,000 $ .330
Options Exercised -- --
Options forfeited or expired -- --
---------
Balance, September 30, 2013 1,902,900 $ .425
=========
The weighted average fair values of options vested during the quarter ended
September 30, 2013 was $.24 per option. The value recorded for the options
vested during the nine months ended September 30, 2013 was $75,256.
The following table summarizes the activity of warrants for the nine months
ended September 30, 2013:
Number of Warrants Weighted Average
Outstanding Exercise Price
----------- --------------
Balance, December 31, 2012 400,000 $ .50
Warrants granted -- --
Warrants Exercised -- --
Warrants forfeited or expired -- --
---------
Balance, September 30, 2013 400,000 $ .50
=========
During the nine months ended September 30, 2013, the company granted no stock
purchase warrants.
7. Commitments and Contingencies:
Operating Leases -- The Company has not entered into any long term leases. The
Company previously leased approximately 3,500 square feet of warehouse space in
Corona, California, on a verbal month to month basis from one of our Directors,
Frederick Feck. Commencing June 1, 2013, the Company outsourced the warehouse
operations to Cargo House in Carson, California.
11
CIRALIGHT GLOBAL, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
September 30, 2013
(Unaudited)
Prepaid Inventory - Ciralight has agreements with several inventory component
suppliers generally provide that between 50% and 60% of the purchase order price
is due upon the placement of an order, with the remaining balance due upon
completion and shipment of the order, normally within 30 days. Purchase order
prepaid deposits are included in the balance sheet as Prepaid expenses and other
current assets. As of September 30, 2013, purchase order prepaid deposits
totaled $28,718 with several of our major suppliers.
8. Legal Matters:
We have no legal matters pending against us. On August 15, 2011 we filed a
collection action against Nature's Lighting for their failure to pay for product
purchased from us. The amount owed to us was $39,000 plus legal fees and costs.
On January 30, 2012 we were successful in obtaining a default judgment and now
are proceeding to collect the balance owed to us. In the first quarter of 2013,
this legal matter was resolved with a settlement agreement that provides
Ciralight with the sum of $23,000 paid over 10 months. Through September 30,
2013, the Company has received payments totaling $20,000 pursuant to the
settlement.
Ciralight Global, Inc. has potential litigation against Suntron Corporation for
alleged issues related to work done during production in 2011 and 2012.
Ciralight has notified Suntron regarding our damages and losses and hopes to
reach a settlement. Ciralight has notified Suntron that our damages exceed the
balance owed to them and therefore do not consider that we owe them any money.
Our potential damages include our payment for faulty product, for reimbursement
of engineering fees to investigate the problems, rework costs, recall costs,
lost sales and damage to our reputation.
9. Subsequent Events:
The Company has performed an evaluation of subsequent events pursuant to ASC 855
and has determined that there have not been any material subsequent events.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY FORWARD - LOOKING STATEMENT
The following discussion should be read in conjunction with our financial
statements and related notes.
Certain matters discussed herein may contain forward-looking statements that are
subject to risks and uncertainties. Such risks and uncertainties include, but
are not limited to, the following:
* the volatile and competitive nature of our industry,
* the uncertainties surrounding the rapidly evolving markets in which we
compete,
* the uncertainties surrounding technological change of the industry,
* our dependence on its intellectual property rights,
* the success of marketing efforts by third parties,
* the changing demands of customers and
* the arrangements with present and future customers and third parties.
Should one or more of these risks or uncertainties materialize or should any of
the underlying assumptions prove incorrect, actual results of current and future
operations may vary materially from those anticipated.
THE FOLLOWING DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION OF CIRALIGHT GLOBAL, INC., FOR THE THREE MONTH PERIOD ENDED SEPTEMBER
30, 2013 (UNAUDITED) SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS, AND THE NOTES TO THOSE FINANCIAL STATEMENTS THAT ARE INCLUDED IN
ITEM 1 ELSEWHERE IN THIS FILING. REFERENCES TO "WE," "OUR," OR "US" IN THIS
SECTION REFERS TO THE COMPANY AND ITS SUBSIDIARIES. OUR DISCUSSION INCLUDES
FORWARD-LOOKING STATEMENTS BASED UPON CURRENT EXPECTATIONS THAT INVOLVE RISKS
AND UNCERTAINTIES, SUCH AS OUR PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS.
ACTUAL RESULTS AND THE TIMING OF EVENTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF A NUMBER OF
FACTORS, INCLUDING THOSE SET FORTH UNDER THE RISK FACTORS, FORWARD-LOOKING
STATEMENTS AND BUSINESS SECTIONS IN THIS PROSPECTUS. WE USE WORDS SUCH AS
"ANTICIPATE," "ESTIMATE," "PLAN," "PROJECT," "CONTINUING," "ONGOING," "EXPECT,"
"BELIEVE," "INTEND," "MAY," "WILL," "SHOULD," "COULD," AND SIMILAR EXPRESSIONS
TO IDENTIFY FORWARD-LOOKING STATEMENTS.
13
OVERVIEW
We are a manufacturer and wholesaler of "advanced skylights" for use in
warehouses, schools, retail stores, airports, military installations and
residential buildings. We renamed our products as of January 1st, 2011. Our
products are no longer referred to as SunTrackerOne, SunTrackerTwo, and
SunTrackerThree. Instead, our 4'x4' SunTracker is now called the SunTracker 400,
(with an option of a single or triple mirror), and our 4'x8' SunTracker is now
called the SunTracker 800. When our smaller model for homes and classrooms is
released, it will be called the SunTracker 200. These new model names are
simple, intuitive, and reinforce the brand name and image.
We were incorporated in the state of Nevada on February 26, 2009, under the name
"Ciralight West, Inc." On March 13, 2009, we changed our name to "Ciralight
Global, Inc." In April 2009, we entered into an Exchange of Stock for Assets
Agreement with Mr. George Adams, Sr. to acquire certain assets including, but
not limited to, a United States patent, patent applications pending in Canada,
Europe, Mexico and the United States, artwork, trademarks, equipment, furniture,
databases, technical drawings, promotional materials, trade names and inventory
parts and marketing rights related to the Suntracker One(TM) and Suntracker
Two(TM) daylighting products previously owned and distributed by Ciralight,
Inc., a Utah corporation, such assets having been foreclosed on by Mr. Adams,
who was the secured creditor of Ciralight, Inc. We did not acquire any equity
securities, debts, liabilities or financial obligations of Ciralight, Inc., the
Prior Company. Ciralight, Inc. is a predecessor to Ciralight Global, Inc.,
although we have no affiliation, contractual or otherwise, with Ciralight, Inc.
or any of its employees, officers or directors. Ciralight, Inc. ceased
operations on January 27, 2009.
In April 2009, we acquired all of the above described assets from Mr. Adams,
except for the United States patent and the patent applications pending in
Canada, Europe, Mexico and the United States, in exchange for 3,200,000 shares
of our common stock and 1,000,000 shares of our Series A Preferred Stock. In
December 2009, we acquired the United States patent and the patent applications
pending in Canada, Europe, Mexico and the United States from Mr. Adams in
exchange for the issuance by us of an additional 400,000 shares of our common
stock and a convertible promissory note in the amount of $250,000. The
promissory note we issued to Mr. Adams is convertible into shares of our common
stock at a conversion rate of one share per $.25 of outstanding principal and
interest. As a result of this transaction, Mr. Adams is our largest shareholder
and has voting control over us.
As described in the above paragraphs, Ciralight, Inc. is a predecessor to
Ciralight Global, Inc., since the major portion of the business and assets of
Ciralight, Inc. were acquired by Ciralight Global, Inc. in a series of related
successions in each of which the acquiring person or entity acquired the major
portion of the business and assets of Ciralight, Inc.
14
RISKS, UNCERTAINTIES AND TRENDS RELATING TO THE COMPANY AND INDUSTRY
The industrial lighting industry is intensely competitive. We have numerous
competitors in the United States and elsewhere. Several of these competitors
have already successfully marketed and commercialized products that compete with
our products. Our success is dependent up our ability to effectively and
profitably produce, market and sell our products. Our business strategy and
success is dependent on the skills and knowledge of our management team and
consultants. The marketability and profitability of our products is subject to
unknown economic conditions, which could significantly impact our business,
financial condition, the marketability of our products and our profitability. We
are vulnerable to the current economic crisis which may negatively affect our
profitability. Our success depends, in part, on the quality of our products.
Our SunTracker(TM) products provide natural daylighting that is a key component
in many current construction and existing structures. SunTrackers(TM) are
maintenance free, powered by the sun and completely self-contained. We are
currently marketing our SunTracker(TM) products to warehouse owners, roofing
companies, shopping centers, schools and military installations in the United
States. We are working on establishing sales in Canada, Mexico and overseas. The
market for advanced skylights is growing year over year due to pressures on
building owners, tenants, schools and government agencies to reduce energy
consumption and expense. The "green" movement, carbon footprint ideology and
other environmental initiatives should provide increased growth in our market
segment.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our management's discussion and analysis of our financial condition and results
of operations are based on our condensed financial statements, which have been
prepared in accordance with generally accepted accounting principles in the
United States of America ("GAAP") for interim financial information and in
conformity with the instructions to Form 10-Q and Article 8-03 of Regulation
S-X. Accordingly, these unaudited condensed financial statements do not include
all of the information and footnotes required by GAAP for complete financial
statements and, therefore, should be read in conjunction with the financial
statements and related notes contained in the Company's most recent Annual
Report on Form 10-K filed with the Securities and Exchange Commission ("SEC").
The unaudited condensed financial statements included in this document have been
prepared on the same basis as the annual condensed financial statements and in
management's opinion, reflect all adjustments, including normal recurring
adjustments, necessary to present fairly the Company's financial position,
results of operations and cash flows for the interim periods presented. In the
15
opinion of management, the disclosures included in these financial statements
are adequate to make the information presented not misleading.
The results of operations for the nine month period ended September 30, 2013 is
not necessarily indicative of the results that the Company will have for any
subsequent quarter or full fiscal year.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2013 COMPARED
TO THREE MONTHS ENDED SEPTEMBER 30, 2012
NET SALES. Net sales increased from $105,715 for the three months ended
September 30, 2012 to $290,998 for the three months ended September 30, 2013.
This increase was due to the resolution of the prior year manufacturer delay
that impacted our sales.
COST OF SALES. Cost of sales increased from $67,905 for the three months ended
September 30, 2012 to $227,103 for the three months ended September 30, 2013.
This was due to an increase in sales.
GROSS PROFIT. Gross profit decreased from $37,810 for the three months ended
September 30, 2012 to $63,895 for the three months ended September 30, 2013.
This increase was due to an increase in sales.
OPERATING EXPENSES. Our operating expenses consist of research and development
expenses, selling and marketing expenses and general and administrative
expenses. Total operating expenses decreased from $311,640 for the three months
ended September 30, 2013 to $167,031 for the three months ended September 30,
2013. This decrease was due to changes in business operations such as
outsourcing the warehouse functions, reduction in R&D expenditures and
streamlining staffing personnel.
General and administrative expenses decreased from $249,008 for the three months
ended September 30, 2012 to $164,422 for the three months ended September 30,
2013. This decrease was due to changes in business operations such as
outsourcing the warehouse function and streamlining our staffing.
Selling and marketing expenses decreased from $24,377 for the three months ended
September 30, 2012 to $2,609 for the three months ended September 30, 2013. This
decrease was due to increased reliance on internet marketing to secure clients
through the new automated CRM system.
Research and Development expenses decreased from $38,255 for the three months
ended September 30, 2012 to $0 for the three months ended September 30, 2013.
This was decrease was due to the elimination of the R&D expended in 2012 to
determine the issue related to the faulty manufacturer products.
16
INCOME TAXES. For the three months ended September 30, 2013, management has
decided not to record the tax benefit. The tax benefit was not recorded for the
three months ending September 30, 2012 as well.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2013 COMPARED
TO NINE MONTHS ENDED SEPTEMBER 30, 2012
NET SALES. Net sales increased from $500,849 for the nine months ended June 30,
2012 to $688,251 for the nine months ended September 30, 2013. This increase in
sales was due to the resolution of the manufacturing problem with the production
of our GPS Controller. Ciralight terminated its relationship in mid-September,
2012, with the manufacturer and elected to move production of its GPS
Controllers to a new supplier. The new manufacturer has been able to reach full
production and we have been able to fill back orders that had accumulated, as
well as proceed with new orders.
COST OF SALES. Cost of sales increased from $441,163 for the nine months ended
September 30, 2012 to $510,442 for the nine months ended September 30, 2013. The
cost of sales increased due to the increase in net sales. As a percent of sales,
the ratio decreased as a result of production efficiencies that reduced costs,
as well as decreased warranty and product replacement costs.
GROSS PROFIT. Gross profit substantially increased from $59,686 for the nine
months ended June 30, 2012 to $177,809 for the nine months ended September 30,
2013. This increase in gross profit was due to increased sales, and lower
production costs and elimination of the warranty costs.
OPERATING EXPENSES. Our operating expenses consist of research and development
expenses, selling and marketing expenses and general and administrative
expenses. Total operating expenses decreased from $882,696 for the nine months
ended September 30, 2012 to $679,148 for the nine months ended September 30,
2013. This decrease was the result of changes in operations to make the company
more efficient and reduce costs.
General and administrative expenses decreased from $706,997 for the nine months
ended September 30, 2012 to $617,384 for the nine months ended September 30,
2013. This decrease was due to changes in our operations that result in cost
efficiencies such as outsourcing the warehouse operations which cut certain
staffing and related occupancy costs.
Selling and marketing expenses decreased from $122,875 for the nine months ended
September 30, 2012 to $56,565 for the nine months ended September 30, 2013. This
decrease was the result of changes in our marketing and selling programs which
included increased reliance on internet marketing.
17
Research and Development expenses decreased from $52,824 for the nine months
ended June 30, 2012 to $5,199 for the nine months ended September 30, 2013. This
decrease was the result of lower engineering costs associated with the
manufacturer issue that occurred in 2012.
INCOME TAXES. For the nine months ended September 30, 2013, management has
decided not to record the tax benefit. The tax benefit was not recorded for the
nine months ending September 30, 2012 as well.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS - FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2013 and 2012.
Net cash used in operating activities was $(259,733) for the nine months ended
September 30, 2013 and resulted primarily from a net loss of $256,048 partially
offset by sales, collection of receivables, increases in other payables,
collection of deferred revenue and increases in accounts payable. Net cash used
in operating activities was $(517,164) for the nine month period ended September
30, 2012 and resulted primarily from a net loss of $851,548 partially offset by
decreases in accounts receivable and related party notes receivable and an
increase in deferred revenues.
Net cash was used in investing activities for the nine months ended September
30, 2013 for the purchase of Patent application costs in the amount of $18,470,
and Net cash used in investing activities for the nine months ended September
30, 2012 for Software Development in the amount of $21,710.
Net cash provided by financing activities was $201,350 for the nine months ended
September 30, 2013 and resulted primarily from net proceeds from related party
notes payable. Net cash provided by financing activities was $460,000 for the
nine month period ended September 30, 2012 and resulted primarily from net
proceeds from related party notes payable.
The Company had net losses of $526,048, and $851,548 for the nine months ended
September 30, 2013 and 2012 respectively. As of September 30, 2013, the Company
had cash of $4,207 and restricted cash of $7,636. In addition, the Company had
accounts receivable of $96,493, inventory on hand at a cost valuation of
$158,051, and accounts payable of $251,852.
The Company has experienced losses primarily attributable to an interruption in
the product supply during the third and fourth quarters of 2012, as well as
increased research, development, marketing and other costs associated with the
strategic plan to position the company as a world class supplier of sustainable
lighting technologies. Cash flows from operations have not been sufficient to
meet our obligations. Therefore, we have had to raise funds through several
18
financing transactions. At least until we reach breakeven volume in sales and
develop and/or acquire the capability to manufacture and sell our products
profitably, we will need to continue to rely on cash from external financing
sources. Our operations during the quarter ended September 30, 2013 and the year
ended December 31, 2012 were financed by product sales contracts, common stock
issuances, as well as from working capital reserves. In addition, on March 23,
2012, the company entered into a revolving line of credit with the Adams family,
a related party, in the amount of up to $500,000. The line of credit was
initially for a period of six months at an interest rate of prime plus 2%. This
line of credit has been extended through 2013.
In addition, the Company was approved by the XM Bank (by the Dept. of Commerce)
to insure and finance transactions for international Distributors and Dealers.
This provides up to $270,000 in financing. Under this XM Bank program, the
Company will receive 90% of an international sale at the time the order ships
thus improving the Company's cash flow. The international Distributor and Dealer
than have 90 days, instead of 21 days to pay back the XM Bank which is a good
incentive for our Distributors and Dealers to sell more product. When the
Distributor or Dealer pays back XM Bank, the balance of the order is remitted to
the Company. In addition, The Company will continue to obtain working capital by
accessing capital markets. In May 2013 the Company signed an agreement with BCC
Valuation Advisors, an investment Banking Company to raise up to $5,000,000 for
Ciralight Global, Inc. BCC Capital has presented the company to a number of
Venture Capital Companies and potential strategic partners. BCC continues to
work with a number of candidates with varying levels of interest and believes it
has a serious investor in consideration for a seven figure investment. The
Company put out a call to the existing shareholders to advance their pro-rata
share of a $300,000 bridge loan was distributed on June 14th. This was done as a
one year loan with interest at 6% per year, convertible to stock between months
six and twelve at $0.35/share. In addition, with the Jobs Act implementation,
the company is contracting with Crowdfunder.com to raise equity funds in an
amount of $500,000 to $1,500,000, and Kickstarter to fund specific new products.
Management believes that with the increased level of sales, the call to the
shareholders, the working capital funding to be provided by BCC, Crowdfunder,
Kickstarter and the XM Bank financing the company will have sufficient liquidity
to carry on operations for the next twelve months. However, there can be no
assurance that management will be able to fully deliver on its business plans.
CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
CONTRACTUAL OBLIGATIONS
We have certain fixed contractual obligations and commitments that include
future estimated payments. Changes in our business needs, cancellation
provisions, changing interest rates, and other factors may result in actual
payments differing from the estimates. We cannot provide certainty regarding the
timing and amounts of payments. We have presented below a summary of the most
19
significant assumptions used in our determination of amounts presented in the
tables, in order to assist in the review of this information within the context
of our consolidated financial position, results of operations and cash flows.
The following table summarizes our contractual obligations as of September 30,
2013, and the effect these obligations are expected to have on our liquidity and
cash flows in future periods.
Payments Due by Period
------------------------------------------------
Less than
Total 1 year 1-3 Years 3-5 Years 5 years +
-------- -------- --------- --------- ---------
Contractual Obligations:
Advances payable - related parties $623,684 $623,684 $ -- $ -- $ --
Notes Payable - related parties 80,850 80,850
Interest Payments (1) 38,327 38,327 -- -- --
Commitments to Purchase Inventory 28,718 28,718 -- -- --
-------- -------- -------- -------- --------
Totals: $771,579 $771,579 $ -- $ -- $ --
======== ======== ======== ======== ========
----------
(1) Advances payable - related parties bear interest at the rate of Prime Rate
(as quoted in the Wall Street Journal) plus 2% per annum and estimated
interest payments are expected to be paid upon payment or satisfaction of
the advances.
OFF-BALANCE SHEET ARRANGEMENTS
We have not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as
stockholders' equity or that are not reflected in our financial statements.
Furthermore, we do not have any retained or contingent interest in assets
transferred to an unconsolidated entity that serves as credit, liquidity or
market risk support to such entity. We do not have any variable interest in any
unconsolidated entity that provides financing, liquidity, market risk or credit
support to us or engages in leasing, hedging or research and development
services with us.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
20
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our management,
of the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in the Securities Exchange Act Rules 13a-15(e) and
15d-15(e)). Based on that evaluation, we have concluded that as of the end of
the period covered by this report, our disclosure controls and procedures were
effective to ensure that information required to be disclosed by us in reports
we file or submit under the Exchange Act is (1) recorded, processed, summarized
and reported within the time periods specified in SEC rules and forms, and (2)
accumulated and communicated to our management, to allow timely decisions
regarding required disclosure.
Changes in Internal Control over Financial Reporting.
There have not been changes in our internal controls over financial reporting
during the period covered by this report that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We have no legal matters pending against us. On August 15, 2011 we filed a
collection action against Nature's Lighting for their failure to pay for product
purchased from us. On January 30, 2012 we were successful in obtaining a default
judgment and now are proceeding to collect the balance owed to us. The final
settlement amount owed to us is $23,000, of which $20,000 has been received by
the company through September 30, 2013.
The Company is not aware of any other threatened or pending litigation against
the Company.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three month period ended March 31, 2013, a total of 402,624 shares of
common stock were issued. In January 2013, 33,334 shares of common stock were
issued to Directors Eisenberg, Katz, Brain and Adams each, for a total of
21
133,336 shares for services rendered, at $.55 per share. In addition, George
Adams converted $67,322 of his line of credit at the rate of $.25/share for a
total of 269,288 shares of common stock.
During the three month period ended June 30, 2013, a total of 14,286 shares of
common stock were issued. These shares were purchased by a shareholder at the
rate of $.35 per share.
During the three month period ended September 30, 2013, a total of 126,662
shares of common stock were issued. Of these shares $10,000 were purchased by a
shareholder at the rate of $.35 per share and 116,662 shares were issued to
Board Members for their services.
The above shares were issued in reliance on the exemption from registration
requirements of the 33 Act provided by Section 4(2) or Regulation D, Rule 506,
promulgated there under.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See Exhibit Index below for exhibits required by Item 601 of regulation S-K.
22
EXHIBIT INDEX
List of Exhibits attached or incorporated by reference pursuant to Item 601 of
Regulation S-K:
Exhibit No. Description
----------- -----------
3(i).1* Articles of Incorporation of Ciralight West, Inc. filed February
26, 2009, with the Secretary of State of Nevada
3(i).2* Certificate of Amendment to the Articles of Incorporation filed on
March 13, 2009, with the Secretary of State of Nevada (changing
name to Ciralight Global, Inc.).
3(i).3* Certificate of Amendment to the Articles of Incorporation filed on
April 22, 2009, with theSecretary of State of Nevada.
3(ii)* By-Laws of Ciralight Global, Inc.
4.1* Certificate of Designation of Series A Preferred Stock filed on
July 22, 2009, with the Secretaryof State of Nevada
10.1* Exchange of Stock for Assets Agreement dated as of April 1, 2009,
by and between Ciralight Global, Inc. and George Adams, Sr.
10.2* Amendment to Exchange of Stock for Assets Agreement by and between
Ciralight Global,Inc. and George Adams, Sr. dated December 15,
2009.
10.3* Assignment of Issued United States Patent and Pending United
States Patent Application dated December 17, 2009
10.4* Domestic Non-Exclusive Dealer Agreement(undated and unsigned
prototype)
10.5* Domestic Non-Exclusive Distribution Agreement(undated and unsigned
prototype)
10.6* Domestic Non-Exclusive Dealer Agreement by and between Ciralight
Global, Inc. and Chaparral Green Energy Solutions, LLC dated as of
January 1, 2010
10.7* Domestic Non-Exclusive Dealer Agreement dated December 1, 2009, by
and between Ciralight Global, Inc. and Green Tech Design-Build,
Inc.
10.8* International Distribution Agreement dated January 15, 2010, by
and between Ciralight Global, Inc. and ZEEV Shimon & Sons, Ltd.
10.9* International Dealership Agreement dated June 18, 2009, by and
between Ciralight Global, Inc. and RSB Construction LTD.
10.10* Domestic Non-Exclusive Dealer Agreement dated April 1, 2010, by
and between Ciralight Global, Inc. and J-MACS Consulting, LLC.
23
10.11* Domestic Non-Exclusive Dealer Agreement dated April 15, 2010, by
and between Ciralight Global, Inc. and The Energy Solutions Group
Worldwide, LLC.
10.12* Domestic Non-Exclusive Dealer Agreement dated April 15, 2010, by
and between Ciralight Global, Inc. and Kemper & Associates, Inc.,
d/b/a Total Roofing & Reconstruction.
10.13* Domestic Non-Exclusive Dealer Agreement dated December 1, 2009, by
and between Ciralight Global, Inc. and Eco-Smart, Inc.
10.14* Commercial Lease Agreement dated April 1, 2010, by and between
Ciralight Global, Inc. and Frederick Feck.
10.15* Material Liability Agreement dated September 3, 2009, by and
between Ciralight Global, Inc. and Suntron Corporation.
10.16* Material Terms and Conditions of Verbal Office Lease for Executive
Offices in Irvine, California.
10.17* Material Terms and Conditions of Verbal Office Lease for
Warehouse/Offices in Corona, California
14* Code of Business Conduct and Ethics
21* Subsidiaries.
31.1** Certification of Principal Executive Officer and Principal
Financial Officer Pursuant to 18 U.S.C. Section 1350
32.1** 906 Certification of Principal Executive Officer and Principal
Financial Officer
101** Interactive data files pursuant to Rule 405 of Regulation S-T
----------
* Exhibits incorporated by reference to Registrant's Form S-1 Registration
Statement, Registration No. 333-165638.
** Filed herewith.
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CIRALIGHT GLOBAL, INC.
Date: November 13, 2013 /s/ Jeffrey S. Brain
----------------------------------------
Jeffrey S. Brain
President, Chief Executive Officer
2
