UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2004
Or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transmission period from _________ to __________
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Commission file number 0-4846-3
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MEMS USA, INC.
(Formerly Lumalite Holdings, Inc.)
(Exact name of registrant as specified in charter)
Nevada 82-0288840
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State or other jurisdiction IRS employer ID number
of Incorporation
5701 Lindero Canyon Road., #2-100
Westlake Village, CA 91362
(Address of Principal Executive Offices)
Registrants telephone number (818)-735-4750
State the number of shares outstanding of each of the issuers classes of common
equity as of the last practicable date (June 30, 2004) 13,385,779 shares
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MEMS USA, INC.
AND SUBSIDIARY
FOR THE THREE AND NINE MONTHS ENDED
JUNE 30, 2004
Page
Number
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2004 (unaudited) 3
Consolidated Statements of Income for the three and
nine months ended June 30, 2004 and
June 30, 2003 (Unaudited) 4
Consolidated Statements of Cash Flows for the nine months
ended June 30, 2004 and June 30, 2003 (Unaudited) 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Controls and Procedures 11
PART II OTHER INFORMATION 12
Item 1. Legal Proceedings 12
Item 2. Changes in Securities, Use of Proceeds and Issuer
Purchases of Equity Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to Vote of Security Holders 12
Item 5. Other Information 12
1
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
2
Part I - FINANCIAL INFORMATION
MEMS USA, INC.
(A Development Stage Company)
BALANCE SHEET
June 30, 2004
(Unaudited)
June 30
2004
-----------
ASSETS
Current Assets:
Cash and cash equivalents $ 58,272
Joint venture investment 350
Contracts in progress, net of reserves 257
-----------
Total current assets 58,879
-----------
Property and equipment, net 228,423
Deposits 343,880
-----------
Total assets $ 631,182
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses $ 151,152
Liability to be satisfied through the issuance of shares 1,874,080
-----------
Total current liabilities 2,025,232
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Stockholders' Deficit:
Convertible preferred stock, Series A, $.001 par value,
1,200,000 authorized, none issued and outstanding
Common stock, par value $.001 per share,
100,000,000 authorized, 13,385,779 shares issued and
outstanding 13,386
Stock subscriptions receivable (2,249)
Additional paid in capital 1,419,424
Accumulated deficit during development stage (2,824,611)
-----------
Total stockholders' deficit (1,394,050)
-----------
$ 631,182
===========
3
MEMS USA, INC.
--------------
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
(Unaudited)
Nine-Months Ended Nine-Months Ended Three-Months Ended Three-Months Ended
June 30 June 30 June 30 June 30
2004 2003 2004 2003
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CONTINUING OPERATIONS:
Revenues:
Contract revenue 95,350 95,350
Costs:
Contract costs $ 495,931 280,952
General and administrative expenses 1,174,712 126,401 444,149 68,007
Expenses related to merger 350,360
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Net income (loss)
from continuing operations (1,926,003) (126,401) (629,751) (68,007)
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Retained earnings (accumulated deficit),
beginning of period (898,958) (201,677) (2,194,860) (260,071)
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Retained earnings (accumulated deficit),
end of period $ (2,824,611) (328,078) (2,824,611) (328,078)
================================================================================
Net income (loss) per share:
Net Income (loss) per share, basic and diluted $ (0.16) (0.02) (0.05) (0.01)
================================================================================
Weighted average number of common
shares outstanding, basic: 11,913,477 8,118,778 13,385,779 8,212,099
================================================================================
From November 17,
2000 (inception) to
June 30, 2004
-------------------
CONTINUING OPERATIONS:
Revenues:
Contract Income 95,350
Costs:
Contract costs $ 514,338
General and administrative expenses 2,055,263
Expenses related to merger 350,360
--------------------
Net income (loss)
from continuing operations (2,824,611)
--------------------
Retained earnings (accumulated deficit),
beginning of period 0
-------------------
Retained earnings (accumulated deficit),
end of period $ (2,824,611)
===================
4
MEMS USA, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
From
Nine-Months Ended Nine-Months Ended November 17, 2000
June 30 June 30 (inception) to
2004 2003 June 30, 2004
---------------------------------------- --------------------
Cash flows provided by (used for) operating activities:
Net Loss $(1,926,003) (126,401) $(2,824,611)
------------------------------- -----------
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation 30,268 44,168
Common stock issued for services 350,360 748,610
(Increase) decrease in assets:
Contracts in progress 156,493 86,143
Joint Venture investment (350) (350)
Deposits (294,740) (49,140) (343,880)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (59,444) 25,050
Accrued salaries (161,695)
Payroll taxes payable 52,220 99,013
Liability for stock subscribed 1,874,080 1,874,080
Accrued interest payable 20,989
Dividends payable 6,100
Increase in loan payable 77,500
Deferred revenue (28,333) 28,333
------------------------------- -----------
Total adjustments 1,918,859 56,693 2,559,923
Net cash provided by (used for) operating activities (7,144) (69,708) (264,688)
Cash flows from investing activities:
Purchase of fixed assets (97,297) (53,194) (272,591)
Loss on discontinued operations
------------------------------- -----------
Net cash provided by (used for) investing activities: (97,297) (53,194) (272,591)
Cash flows from financing activities:
Increase in subscriptions receivable (151) 3,700 (2,249)
Dividends
Issuance of preferred and common stock 139,251 145,500 597,800
------------------------------- -----------
Net cash flows provided by (used for) financing
activities: 139,100 149,200 595,551
Net Increase (decrease) in cash and cash
equivalents during the period 34,659 26,298 58,272
Cash and cash equivalents, beginning of period 23,613 2,500 0
------------------------------- -----------
Cash and cash equivalents, end of period 58,272 28,798 $ 58,272
=============================== ===========
Supplemental disclosure of cash flow information:
Income taxes paid $ -- $ --
=============================== ===========
Interest paid $ -- $ --
=============================== ===========
Supplemental disclosure of non-cash financing activities:
Common stock issued for services $ 350,360 $ 748,610
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Dividends accrued $ -- $ --
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Stock issued in exchange for subscriptions receivable $ -- $ --
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Issuance of Series A preferred stock in satisfaction $ 228,250 $ 228,250
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5
MEMS USA, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
(1) Nature of Business:
MEMS USA, Inc. (the "Company") is currently a development stage company
under the provisions of Statement of Financial Accounting Standards
("SFAS") No. 7 "Accounting and Reporting by Development Stage Enterprises"
and was incorporated under the laws of the State of California on November
17, 2000. The Company is in the business of providing Micro Electrical
Mechanical Solutions for major scientific and engineering companies, using
existing technology and patent rights furnished by the customers. The
Company designs and engineers prototypes and manufactures products and
systems for distribution by the customer.
The accompanying unaudited consolidated financial statements of MEMS USA,
Inc., (MEMS USA, Inc. - a Nevada "public shell" company "MEMS NV" and its
subsidiary MEMS USA, Inc. - a California non-public corporation "MEMS CA"
together), "The Company" have been prepared in conformity with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States
of America for complete financial statements. In the opinion of
management, all adjustments considered necessary for fair presentation
have been included.
(2) Exchange Transaction:
On January 28, 2004 the Registrant entered into an Agreement and Plan of
Reorganization to acquire all of the issued and outstanding common stock
of MEMS USA, Inc. (a California Corporation and private company, "MEMS CA"
in exchange for up to 10,000,000 shares (post split) of the registrant's
common stock. Each of MEMS CA's outstanding common shares were converted
into 1.7125634 shares of MEMS NV (formerly known as Lumalite Holdings, Inc
a public company with 3,385,779 shares outstanding prior to the
transaction), subject to adjustment for the elimination of fractional
shares. No fractional shares were issued. Instead, cash equal to $2.50 per
share of eliminated fractional shares will be paid to the stockholders. At
the closing, MEMS CA became a wholly-owned subsidiary and the MEMS CA
stockholders were issued 10,000,000 shares, owning approximately 80% of
the outstanding common stock. Since the former stockholders of MEMS CA
became the controlling stockholders of the company after the transaction,
it was accounted for as an acquisition of MEMS NV by MEMS CA, using
reverse merger accounting.
(3) Stock Exchange:
In connection with the aforementioned exchange transaction, the Company
effected a 1.7125634 to one stock split. The retroactive effect of the
split has been made for all periods presented.
6
MEMS USA, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
(4) Interim Financial Statements:
The accompanying unaudited financial statements for the nine months ended
June 30, 2004 and 2003 include all adjustments (consisting of only normal
recurring accruals), which, in the opinion of management, are necessary
for a fair presentation of the results of operations for the periods
presented. Interim results are not necessarily indicative of the results
to be expected for a full year. These unaudited financial statements
should be read in conjunction with the audited financial statements for
the period from November 17, 2000 (inception) to September 30, 2003, to be
included in an amendment to the company's Form 8-K.
(5) Going Concern Consideration:
As discussed above (Nature of Business), the accompanying financial
statements have been prepared in conformity with accounting principles
generally accepted in the United States of America, which contemplate
continuation of the Company as a going concern. The Company's primary
operations and sources of revenue are currently being developed. MEMS CA
revenue streams have been established, yet as a development stage
enterprise, these streams remain to be classified as consistently
substantial on an ongoing basis. This characteristic raises doubt about
the Company's ability to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability
and classification of recorded asset amounts, or amounts and
classification of liabilities that might be necessary, should the Company
be unable to continue as a going concern.
The Company has undergone a merger and plan of reorganization, obtaining
all outstanding shares of MEMS CA as of February 18, 2004. MEMS NV
exchanged 10,000,000 shares of MEMS NV common stock for all of the
outstanding common and preferred stock of MEMS CA. Management plans to
issue remaining shares of MEMS NV through syndicators and investment
bankers in order to provide financing for ongoing operations. During the
nine months ended June 30, 2004, the Company generated common stock
subscriptions totaling $1,874,080. The funds for these shares have been
collected and the shares will be issued upon the closing of the current
offering.
(6) Private Placement of Securities:
In connection with a private placement of securities in the quarter ended
June 30, 2004, the Company received $1,874,080 for the sale of its shares
in a private offering transaction. The transaction originally provided for
the sale of up to $1,500,000 (subsequently increased by consent of MEMS'
board) in shares of the Company's unregistered common stock, $.001 par
value per share, in minimum investment amounts of $10,000, sold to
accredited investors within the meaning of Rule 501(a) of regulation D of
the Securities Act of 1933. The shares will be priced at a 30% discount
from the closing price posted on the OTCBB on the day that the investment
amount is received by the Company.
7
MEMS USA, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
(6) Private Placement of Securities, Continued:
As the shares related to the $1,874,080 receipts have not yet been issued
the amounts are classified in the accompanying balance sheet as a
liability to be satisfied through issuance of shares. On July 13, 2004,
the unregistered shares of common stock were issued.
8
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following should be read in conjunction with the Company's financial
statements and the notes thereto contained elsewhere in this filing.
Cautionary Statement Regarding Forward Looking Statements
With the exception of historical matters, the matters discussed herein are
forward-looking statements that involve risks and uncertainties. Forward-looking
statements include, but are not limited to, statements concerning anticipated
trends in revenues and net income, projections concerning operations and
available cash flow. The Company's actual results could differ materially from
the results discussed in such forward-looking statements. The following
discussion of the Company's financial condition and results of operations should
be read in conjunction with the Company's financial statements and the related
notes thereto appearing elsewhere herein.
The Company wishes to caution investors that any forward-looking statements made
by or on behalf of the Company are subject to uncertainties and other factors
that could cause actual results to differ materially from such statements. These
uncertainties and other factors include, but are not limited to, the Risk
Factors listed below (many of which have been discussed in prior SEC filings by
the Company). Though the Company has attempted to list comprehensively these
important factors, the Company wishes to caution investors that other factors
could in the future prove to be important in affecting the Company's results of
operations. New factors emerge from time to time and it is not possible for
management to predict all of such factors, nor can it assess the impact of each
such factor on the business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
Readers are further cautioned not to place undue reliance on such
forward-looking statements as they speak only of the Company's views as of the
date the statement was made. The Compny undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
9
(a) Plan of Operation
(i) The Company can satisfy its cash requirements and will raise additional
funds in the next twelve months through the issuance of common stock.
(ii) Please refer to form 8 - K filed with the Securities and Exchange
Commission on February 18, 2004, which discusses product research and
development and other relevant business plans for the term, as well as the
overall nature of business for MEMS USA, INC.
(b)(1) Micro-Electro-Mechanical-Systems (MEMS) technology is a developing
technology integrating electronics with miniature devices designed to assist
companies seeking to monitor and improve various aspects within the production
process. By improving, and in some cases developing, the monitoring processes of
temperature, pressure, flow rate, particle count, conductivity, PH/acidity,
lubricity, viscosity, and pressure differential, MEMS USA, INC. intends to
transform the production processes for many companies by allowing them to more
effectively monitor the development of critical business assets and to more
efficiently implement the utilization of valuable production resources. Oil &
gas companies (exploring and developing), Pharmaceutical companies, Food and
Beverage concerns and even Car rental enterprises could potentially obtain
significant and substantial savings by investing, today, in the production
processes of tomorrow.
The Company's primary operations are carried out at the subsidiary level. The
subsidiary, as a development stage company, is pursuing several activities to
establish core revenue generating sources: selling products and systems
developed by and manufactured for MEMS USA, obtaining revenue from products and
systems on a contract basis, developing and out-licensing Intellectual Property
internationally, increasing Principal Investigator Contracts that provide
product development revenues from private and publicly funded projects, and
developing the operations as a Center of Excellence in its areas of
technological expertise. Success of the company will be determined by its
ability to attract, develop and then maintain these significant core revenue
streams.
(b) Comparative Analysis
Revenues
We are a development stage company. There were job contracts generating revenues
of $95,000. Costs exceeded job-revenues, therefore, revenues are shown as
contract revenues and the costs of the contracts are shown as contract in the
statement of operations.
Contract Costs
The completion of two job contracts resulted in significantly higher contract
costs than had been reported in previous periods.
10
General and Administrative Expenses
General and administrative expenses increased in the current reporting periods
due to additional staffing expansions, consulting required on various projects,
and increased professional fees related to further stock offerings.
Expenses Related to Merger
Merger related expenses were incurred in the current reporting period as
compensation to brokers and securities firms actively engaged in promoting
corporate stock, resulting from a merger with a corporate entity (formerly
Lumalite, Inc.).
Liquidity and Capital Resources
The company continues to seek and establish an ongoing source of substantial
revenues. Currently, as a development stage enterprise, the operations of the
company are being financed by the issuance of corporate stock. Recent
developments in the company's support operations for the oil and gas industry
plan to be indicative of primary revenue streams. Company stock prices remain
steady and appear to sufficiently be able to support company operations until
ongoing revenue streams can be further developed and maintained.
Item 3. - CONTROLS AND PROCEDURES
As of the date of this report, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including
our Chief Executive Officer and our Chief Financial Officer, of the
effectiveness of the design and operation of our "disclosure controls and
procedures" (as defined in Rule12a-15(e) under the Securities Exchange Act of
1934, as amended). Based upon that evaluation, our Chief Executive Officer and
the Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective to ensure that material information relating to us and
our consolidated subsidiaries is recorded, processed, summarized and reported in
a timely manner. Management will continue to review this matter with particular
emphasis on the documentation of the Company's disclosure controls and
procedures. There has been no change in the Company's internal control over
financial reporting that occurred during the last fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
11
Part II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS NONE
Item 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND
ISSUER PURCHASES OF EQUITY SECURITIES NONE
Item 3. DEFAULTS UPON SENIOR SECURITIES NONE
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS NONE
Item 5. OTHER INFORMATION NONE
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
(1) Exhibits
Exhibit No. 1 Certification of Chief Executive Officer and Chief
Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of
2002.
Exhibit No. 2 Certification of Chief Executive Officer Pursuant to
18 U.S.C. 1350 As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
Forms 8-K were filed during the current reporting quarter. The
filings provided the company's likelihood of change of ownership and
intent to acquire the outstanding shares of MEMS USA, INC (a
California corporation), and the consummation of the reorganization
and merger plan. Financial Statements for this quarter are submitted
with this Form 10-QSB.
12
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 6, 2004
/s/ Lawrence Weisdorn
----------------------
Lawrence Weisdorn
Chief Executive Officer
Chief Financial Officer
13