U.S. SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549








**FORM 10-QSB**


[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 2004





OR





[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from ____________ to ______________








**TechLite, Inc.**


(Exact name of registrant as specified in its charter)








Commission File No. 333-68071


State of Incorporation: Oklahoma


IRS Employer I.D. Number: 73-1522114





6106 East 32nd Place, Suite 101


Tulsa, Oklahoma 74135


918-664-1441


(Address and telephone number of registrants principal


executive offices and principal place of business)








Indicate by check mark whether any 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 twelve 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 [ ]





As of November 10, 2004, there were 14,735,959 shares of the registrants common stock, par value $0.001 per share, outstanding.





Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]











1









**TABLE OF CONTENTS**
 
 PagePART I - FINANCIAL INFORMATION
3Item 1.
Financial Statements
3Item 2.
Managements Discussion and Analysis or Plan of Operation
16Item 3.
Controls and Procedures
19PART II - OTHER INFORMATION
19Item 1.
Legal Proceedings
19Item 2.
Unregistered Sale of Equity Securities
19Item 3.
Defaults Upon Senior Securities
20Item 4.
Submission of Matters to a Vote of Security Holders
20Item 5.
Other Information
20Item 6.
Exhibits and Reports on Form 8-K
21SIGNATURES
20




2


PART I - FINANCIAL INFORMATION
 
 **Item 1. Financial Statements**PageBalance Sheets as of the nine months ended September 30, 2004(unaudited) and the year ended December 31, 2003(audited)
4Statements of Income (unaudited) Three Months EndedSeptember 30, 2004 and 2003 and Nine MonthsEnded September 30, 2004 and 2003
5Statements of Cash Flows (unaudited) Three Months EndedSeptember 30, 2004 and 2003 and Nine MonthsEnded September 30, 2004 and 2003
6Notes to Financial Statements (unaudited)
7






3







**TECHLITE, INC.****BALANCE SHEETS****As of the nine months ended September 30, 2004 and the year ended December 31, 2003**********************
****
****
****
****
****
************************
****
**September 30, 2004**
****
****
**December 31, 2003**
************************
****
**(Unaudited)**
****
****
**(Audited**)******ASSETS******************
****
****
****
****Cash

9,277


1,320Contract receivables

320,862


181,021Inventory

6,936


6,936Property & equipmentEquipment

205,291


207,400Furniture and fixtures

35,478


35,478Building and land

400,000


400,000Leasehold improvements

73,394


73,394Autos and trucks

202,460


202,460916,623


918,732Less accumulated depreciation

581,907


549,801334,716


368,931Other assets, net

51,823


32,397Total Assets

723,614


590,605**LIABILITIES**Accounts payable

1,347,688


1,697,964Accrued wages

238,044


157,390Billings in excess of costs & estimatedearnings on uncompleted contracts

21,779


7,269Taxes payable

312,430


216,349Notes payable

2,871,520


2,472,727Other liabilities

693,219


406,579Total Liabilities

5,484,680


4,958,278**EQUITY**Preferred stock, $.001 par value; 10,000,000authorized shares; none issued

-


-Common stock, $.001 par value; 40,000,000authorized shares; 10,994,910 and 10,194,910issued and outstanding at September 30, 2004and December 31, 2003, respectively

10,995


10,195Treasury stock

(10,000
)

(10,000
)Paid-in-capital

5,094,772


4,915,572Retained earnings(deficit)

(9,856,833
)

(9,283,440
)Total Equity

(4,761,066
)

(4,367,673
)Total Liabilities & Equity

723,614


590,605See Notes to Financial Statements







4





**TECHLITE, INC.****STATEMENTS OF INCOME****(****Unaudited)****Three Months Ended**


**Nine Months Ended****Sept. 30**


**Sept. 30**


**Sept. 30**


**Sept. 30****2004**


**2003**


**2004**


**2003**Contract revenues earned


103,325


1,592,689


125,332


2,713,727Cost of revenues earned


88,049


995,028


103,643


1,821,913Gross profit (loss)


15,276


597,661


21,689


891,814General & administrative expenses


220,388


268,436


732,127


843,937Income(Loss) from operations


(205,112
)

329,225


(710,438
)

47,877Other income


29,262


62,942


137,045


91,713Income(Loss) before taxes


(175,850
)

392,167


(573,393
)

139,590Provision for income taxes


-


-


-


-Net Income(Loss)


(175,850
)

392,167


(573,393
)

139,590Net Income(Loss) per common share


(0.02
)

0.05


(0.05
)

0.02See Notes to Financial Statements


5   **TECHLITE, INC.****STATEMENTS OF CASH FLOWS****(Unaudited)******
****
****
****
****
****
****
****
****
****
****
****
****
********
****
****
**Three Months Ended**
****
****
**Nine Months Ended**
********
****
****
**Sept. 30**
****
****
**Sept. 30**
****
****
**Sept. 30**
****
****
**Sept. 30**
********
****
****
**2004**
****
****
**2003**
****
****
**2004**
****
****
**2003****CASH FLOWS FROM OPERATING ACTIVITIES:**Net income (loss)


(175,850
)

392,167


(573,393
)

139,590Adjustments to reconcile net income to netcash provided by operating activities:Depreciation


10,702


18,413


32,107


54,669Stock given as compensation


-


-


31,250


-(Gain) loss of sale of assets


-


(1,633
)

-


(2,033
)Decrease (increase) in contract receivables


(112,285
)

399,528


(139,841
)

(13,713
)Decrease (increase) in other assets/receivables


(10,566
)

(877
)

(19,426
)

6,609Net increase (decrease) in billings related tocosts and estimated earnings onuncompleted contracts


8,961


(176,064
)

14,510


(233,151
)Increase (decrease) in accounts payable


(70,904
)

(156,324
)

(325,276
)

112,622Increase (decrease) in other accrued liabilities


435,246


(2,636
)

563,416


275,020Net cash provided by (used in) operating activities


85,304


472,574


(416,653
)

339,613**CASH FLOWS FROM INVESTING ACTIVITIES:**Acquisition of equipment


-


(5,700
)

-


(11,298
)Sale of equipment


-


-


-


-Net cash used in investing activities


-


(5,700
)

-


(11,298
)**CASH FLOWS FROM FINANCING ACTIVITIES:**Principle payments on notes payable


(78,019
)

(466,385
)

(181,140
)

(842,171
)New borrowings


-


87,577


562,000


601,269Sale of stock


-


-


43,750


-Net cash provided by (used in) financing activities


(78,019
)

(378,808
)

424,610


(240,902
)**NET INCREASE (DECREASE) IN CASH****AND CASH EQUIVALENTS**


7,285


88,066


7,957


87,413**CASH AND CASH EQUIVALENTS AT****BEGINNING OF PERIOD**


1,992


260


1,320


913**CASH AND CASH EQUIVALENTS AT****END OF PERIOD**


9,277


88,326


9,277


88,326See Notes to Financial Statements
   6   **TECHLITE, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**UNAUDITED** 
 NOTE 1:NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANTACCOUNTING POLICIES
 
 ***Nature of Operations***
 
 The Company is organized as an Oklahoma corporation located in Tulsa, Oklahoma. The Company is an energy-efficient lighting specialist primarily engaged in performing retrofits of lighting systems in commercial, educational and healthcare facilities. The work is performed primarily under fixed-price contracts, which were obtained either through negotiations or a bidding process. The length of the contracts varies, typically between 1 and 18 months. Due to the nature of the construction industry, once work is completed on a contract, new contracts must be identified and obtained. The ultimate success in obtaining new contracts from year to year is subject to the uncertainties of the bidding process associated with the construction industry.
 
 ***Revenue Recognition***
 
 Revenues from fixed-price construction contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs for each contract. Material costs are recorded as material is received on the job site. Only enough material for a few days is delivered to the job site at any one time. Excess materials are held in inventory and are not recorded as job expense until delivered. Labor costs are recorded when paid or accrued at the end of a reporting period. This method is used because the Company considers expended costs to be the best available measure of progress on these contracts. Because of the inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term. Revenue received from direct sale of materials and engineering work is recorded as other income. These amounts are not considered significant to the overall operation of the Company. Warranty work is covered by the manufacturer of the materials. Revenue from warranty work is recorded as other income.
 
 ***Contracts Receivable***
 
 Contracts receivable from performing construction contracts are based on contracted prices. The Company provides an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collections information, and existing economic conditions. Normal contracts receivable are due 30 days after the issuance of the invoice. Contract retentions are due 30 days after completion of the project and acceptance by the owner. Receivables past due more than 120 days are considered delinquent. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer.
  7 **TECHLITE, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**UNAUDITED**  NOTE 1:NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Continued)
 
 ***Cost Recognition***
 
 Contract costs include all direct material, labor, and equipment costs and those indirect costs related to contract performance such as indirect labor, supplies, and tool costs. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revenues are determined.
 
 ***Use of Estimates***
 
 The preparation of financial statements in conformity with U.S. generally accepted accounting principles require management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
 
 ***Depreciation***
 
 Furniture and equipment are depreciated using the straight-line method over the estimated useful life of each asset, which is generally from five to seven years.
 
 ***Income Taxes***
 
 Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax basis of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in FASB Statement No. 109, Accounting for Income Taxes. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized, as explained in Note 6. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.
  8 **TECHLITE, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**UNAUDITED**  NOTE 2:CONTRACT RECEIVABLES
 
 Contract receivables consist of:
 **SEPT 2004**
****
**DEC 2003**BilledCompleted contracts

$
3,882

$
3,882Contracts in progress


316,980


177,139$
320,862

$
181,021
  NOTE 3:COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
 
 Costs, estimated earnings and billings on uncompleted contracts are summarized as follows:
 **SEPT 2004**
****
**DEC 2003**Costs incurred on uncompleted contracts

$
2,348,831

$
2,234,699Estimated earnings


691,115


679,9153,039,946


2,914,614Billings to date


3,061,725


2,921,883$
(21,779
)
$
(7,269
)Included in the accompanying balance sheet under the following captions:Billings in excess of costs and estimatedearnings on uncompleted contracts

$
21,779

$
7,269
 
 
 NOTE 4:NOTES PAYABLE
 **SEPT 2004**
****
**DEC 2003**Unsecured notes payable, due on demand, at 7% to 10%

$
185,076

$
196,312Note payable, collateralized by second mortgage on building and land, due March 2003, at 5%


125,000


125,000Unsecured line of credit, at 16.75%


19,473


19,473Note payable, non-interest bearing, convertible
to Company stock at the option of the lender


30,000


30,000
 
  9 **TECHLITE, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**UNAUDITED**  NOTE 4:NOTES PAYABLE (Continued)
 
 Note payable, collateralized by accounts receivable,
quarterly interest due through June 2002, then due
in 48 monthly installments plus interest beginning
in July 2002 and ending in June 2006, at 7%

586,995

736,710Note payable, collateralized by Company stock,
real estate and vehicles, due July 2006, at 8.75%

75,841

93,479Note payable, collateralized by 750,692 shares of
Company stock owned by two officers and
additional real estate owned by one officer, due .
March 2003, at 5.75%

250,830

250,830Unsecured notes payable to company officers, due on
demand, at 7% to 8%

119,232

119,232Note payable, collateralized by 8300 shares of
Emerson Electric stock owned by a Company
shareholder, due March 2003, at 5.25%

395,100

395,100Note payable, due Sept 2004, at 10%, convertibleto Company stock at the option of the lender

80,000Note payable, due Sept 2004, at 10%, convertibleto Company stock at the option of the lender

170,000Note payable, due Dec 2004, at 10%, convertibleto Company stock at the option of the lender

130,000Note payable, due Aug 2004, at 6.5%

20,000Note payable, due July 2004, interest of $2,500is due with principle payment


25,000Note payable, due in monthly installments plusinterest to January 2005, at 10%


4,197Note payable, collateralized by specific accountsreceivable, 110,000 shares of Company stockgiven in lieu of interest, due April 2, 2004


125,000Note payable, building and land, due in monthly
installments plus interest to October 2013, at 9%


324,936


330,7212,666,680


2,296,857Accrued interest


204,840


175,870$
2,871,520

$
2,472,727
 10 **TECHLITE, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**UNAUDITED**
  NOTE 4:NOTES PAYABLE (Continued)
 
 Interest expense incurred during the period ended September 30, 2004 and the year ended December 31, 2003 was $185,016 and $243,638, respectfully. Interest actually paid during the period ended September 30, 2004 and the year ended December 31, 2003 was $77,379 and $130,016, respectfully.
 
 Aggregate annual maturities of debt at September 30, 2004, are:
 
 2004

$
1,814,8712005


317,5142006


236,4302007


27,6502008


30,244Thereafter


239,971$
2,666,680
 
 
 NOTE 5:PROPERTY AND EQUIPMENT
 
 Property and equipment consist of buildings, vehicles, equipment, furniture and leasehold improvements. The vehicles and equipment are depreciated over five years, furniture is depreciated over seven years, leasehold improvements are depreciated over ten years and buildings are depreciated over 25 years. Accumulated depreciation is summarized as follows:
 **SEPT 2004**
****
**DEC 2003**Buildings

$
115,400

$
100,400Vehicles


192,196


188,905Equipment


199,251


193,434Furniture


30,127


27,634Leasehold improvements


44,933


39,428$
581,907

$
549,801
 11 **TECHLITE, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**UNAUDITED**
  NOTE 6:INCOME TAXES AND DEFERRED INCOME TAXES
 
 There is no provision for income taxes included in these financial statements. The net operating losses will be carried forward.
 
 A reconciliation of the income tax expense (refund) at the statutory rate to income tax expense at the Company's effective tax rate is shown below:
 
 SEPT 2004

DEC 2003Computed at the statutory rate of 34%

$
(194,954
)
$
(131,552
)Increase in tax resulting from:Net operating loss carryforward allowance


194,954


131,552$
0

$
0
 
 As of September 30, 2004, the Company had federal and state net operating loss carryforwards, which may be applied to future taxable income of $8,035,621. Net operating loss carryforwards expire as follows:
 
 **Amount**


**Federal**


**State**$
109,832


2010


2010610,900


2018


20131,474,640


2019


20141,960,330


2020


20151,962,488


2021


20211,530,513


2022


2022386,918


2023


2023$
8,035,621

Based on the Companys significant net operating losses it appears it is more likely than not that the deferred tax asset created by the net operating losses may not be realized. Therefore, a 100% allowance has been applied to the net deferred tax asset.
12**TECHLITE, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**UNAUDITED****NOTE 7:BACKLOG**

The following schedule summarizes changes in backlog on contracts during the period ended September 30, 2004 and the year ended December 31, 2003. Backlog represents the amount of revenue the Company expects to realize from work to be performed on uncompleted contracts in progress at period-end and from contractual agreements on which work has not yet begun.

**SEPT 2004**
****
****
**DEC 2003**Backlog, beginning of period

$
7,269

$
604,728New contracts during the period


2,518,853


2,191,711Contract adjustments


24,266


138,5352,550,388


2,934,974Less contract revenues earned during the period


125,332


2,927,705Backlog, end of period

$
2,425,056

$
7,269


**NOTE 8:SIGNIFICANT ESTIMATES AND CONCENTRATIONS**

U.S. generally accepted accounting principles require disclosure of certain significant estimates and current vulnerability due to certain concentrations. Those matters include the following:

Estimates of revenue on uncompleted construction contracts are explained in Note 1, under Revenue Recognition and are described in detail in Note 3.


**NOTE 9:OTHER ASSETS**

At September 30, 2004 and December 31, 2003, the Company recorded $51,823 and $32,397 respectively, as other assets. Other assets at September 30, 2004 include $4,081 for cash deposits with a utility company, $9,856 in employee receivables, $11,886 in interest receivable and $26,000 in receivables for stock issued, but not paid for as of period-end. Other assets at December 31, 2003 include $4,081 for cash deposits with a utility company, $2,316 in employee receivables and $26,000 in receivables for stock issued, but not paid for as of period-end.

13
**TECHLITE, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**UNAUDITED**

**NOTE 10:CONTINGENCIES**

The Company is a defendant in, and is threatened with, various legal proceedings with respect to certain vendor creditors. Management believes the ultimate liability, to the extent not provided for in amounts currently recorded as liabilities in the financial statements, are not likely to have a material effect on the financial statements taken as a whole.


**NOTE 11:GOING CONCERN**

Management is continuing to develop strategic alliances with other companies to compliment the marketing and production capabilities of TechLite, Inc. Management believes this would provide TechLite, Inc. and its affiliates the ability to service customers more effectively. Management is also working to gain contracts on jobs which have been under development for some time. Management is also looking to obtain new equity funding to recapitalize the Company. The continued existence of the Company may be contingent on obtaining some or all of the above.

The Oklahoma Tax Commission has filed a tax lien with respect to unpaid payroll taxes. A payment arrangement has been made with the Oklahoma Tax Commission; however, the Company is behind on the payments agreed to be paid. The Company also has unpaid federal payroll taxes which are recorded as liabilities in the financial statements. The Company is attempting to raise additional equity capital, which could be used to fully pay all payroll taxes. However, the length of time the Company can continue as a going concern without paying these payroll taxes is unknown.


**NOTE 12:UNISSUED SHARES OF COMPANY STOCK**

During the year ended December 31, 2001, the Company collected $739,210 for the sale of 1,403,377 shares of Company stock. As of September 30, 2004 and December 31, 2003, 186,710 shares of this stock were still not issued and these financial statements reflect liabilities of $189,210 for the cash collected. During the year ended December 31, 2003, the Company collected $130,000 for the sale of 650,000 shares of stock which were not issued at year end. The financial statements at December 31, 2003 reflect liabilities of $130,000 for the cash collected. As of September 30, 2004, 400,000 of the 650,000 shares were issued. An additional $361,250 for the sale of 1,445,000 shares was received during the period ended September 30, 2004 and the stock is not issued at June 30, 2004. The financial statements at September 30, 2004 reflect liabilities of $600,460 for the cash collected. The number of shares of Company stock issued and outstanding at September 30, 2004 and December 31, 2003 and the net loss per share do not reflect these shares as they were not issued at September 30, 2004 and December 31, 2003.14**TECHLITE, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**UNAUDITED****NOTE 13:STOCK WARRANTS**

During the period ended June 30, 2004 the Company authorized Class A and Class B common stock purchase warrants. The warrants will be sold in connection with future stock sales bundled as units. Each unit will contain 10,000 shares of Company common stock, 5,000 Class A warrants and 3,333 Class B warrants. There are 300 units authorized. The Class A warrants can be exercised to purchase Company common stock at $0.50 per share prior to September 30, 2004. The Class B warrants can be exercised to purchase Company common stock at $1.00 per share prior to March 31, 2005. Should the Companys common stock closing bid price be at least $2.00 per share for 10 consecutive trading days, the Company can give the holder of the warrant 30 days written notice within which the warrant must be exercised or the warrant will expire. There were no additional shares of Company stock issued during the three months ended September 30, 2004.

**NOTE 14:SUBSEQUENT EVENTS**

During October 2004, 3,791,049 shares of Company stock were issued. The shares issued represent the remaining shares associated with the 300 units of stock and warrants as well as additional shares of Company stock without warrants. Included in the issued shares, $512,429 of debt was converted to stock and $516,783 shown as advance stock sales at September 30, 2004 was reduced as the stock was issued.






15



**Item 2.****Managements Discussion and Analysis of Financial Condition and Results of Operations**

*The following discussion and analysis should be read in conjunction with the financial statements and the accompanying notes thereto and is qualified in its entirety by the foregoing and by more detailed financial information appearing elsewhere. See Item 1. Financial Statements.*

**Results of Operations - Third Quarter of 2004 Compared to Third Quarter of 2003**

Our revenues of $1,592,689 for the quarter ended September 30, 2003 (Q3 2003) decreased by $1,489,364 or 94 percent to revenues of $103,325 for the quarter ended September 30, 2004 (Q3 2004). This decrease was due primarily to the decrease in sales.

General and administrative expenses for Q3 2004 were $220,388, a reduction of $48,048, compared with general and administrative expenses of $268,436 for Q3 2003. The decrease in general and administrative expenses was due primarily to cost-cutting measures.

We had a net loss of $175,850 for Q3 2004 compared to net income of $392,167 for Q3 2003. At the end of Q3 2004, however, our backlog of business was $2,425,056, compared to a backlog of $234,147, at the end of Q3 2003.

**Results of Operations - First Three Quarters of 2004 Compared to First Three Quarters of 2003**

Our revenues of $125,332 for the first three quarters of fiscal year 2004 represented a decrease of $2,588,395, or 95 percent, from revenues of $2,713,727 during the first three quarters of 2003. This decrease was due primarily to decrease in sales contracts.

General and administrative expenses for the first three quarters of 2004 were $732,127, compared with general and administrative expenses of $843,937 for the first three quarters of 2003, a reduction of $111,810 or 13 percent. This decrease was due primarily to expense and personnel reductions.

We had a net loss from operations of $573,393 during the first three quarters of 2004, a decrease of $712,983, or 511 percent, from a net income from operations of $139,590 during the first three quarters of 2003.

**Liquidity and Capital Reserves**

We had a positive cash flow at the end of the first three quarters of 2004. This was due primarily to new borrowings of $562,000 and sale of $43,750 of stock. Another contributing factor was an increase in other accrued liabilities of $563,416.


16
**Off-Balance Sheet Arrangements**

Our company has not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under which we have

·
an obligation under a guarantee contract,·
a retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets,·
any obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument, or·
any obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by us and material to us where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with us.
**Outlook**

*This outlook section contains a number of forward-looking statements, all of which are based on current expectations. Actual results may vary considerably.*

The following is not only the outlook, but an update of events that have and are occurring within TechLite and the energy service business.

In addition to working on sales prospects, TechLite determined it would be prudent to reduce debt, put in place an expanded long-term marketing capability and obtain adequate capital to handle future business. In early summer 2004, TechLite completed a private placement totaling $750,000. And, in October 2004 TechLite obtained a substantial line of credit. TechLite has reduced debt, much of which will not be reported until the end of the 4thquarter 2004. Contracts in the sales cycle total approximately $10 million and current jobs under contract total approximately $2.3 million at this time.

In 2004 TechLite and Educational Resources Associates (ERA) President Dr. Ronald Knight agreed to a long-term extension of their 2002 marketing agreement. ERA is a Texas company that provides customized and integrated services to help government entities plan, employ and manage their resources. ERA has an extensive background in working with school districts.

To compensate for peak demand shortages, utility companies in several states are offering cash rebates for energy efficient upgrades that reduce energy consumption. In addition; the pending new United States Energy Bill includes a $.70 per square foot tax reduction for energy efficient lighting upgrades. Should it be enacted, this bill will be another positive development for the energy service industry and TechLites marketing program.


17
The U.S. Department of Energy has mandated that all new air conditioning units have a 30% energy use reduction by 2006. This government mandate will impact TechLite Energy Service Business products in a very positive manner,*i.e*. the OAM Oil Purger, etc.

TechLite has completed a contract for the merger (acquisition) of two Texas-based businesses, Keystone Energy Management and Omni Sciences. Keystone Energy Management specializes in energy efficient upgrades for commercial properties and convenience stores based on a shared savings program. Customers include:

1. The Dallas Cowboys
2. McDonalds
3. Burger King
4. Aramark
5. State Farm
6. Western Beef
7. Associated Supermarkets
8. Marriott
9. Best Western
10. Subway

Omni Sciences brings TechLite two state-of-the-art energy reduction products, Frigi-Tech and the OAM Oil Purger. Frigi-Tech is a refrigerant additive for both high pressure and low pressure commercial and residential air conditioning systems. Frigi-Tech increases compressor efficiency, lowering electric costs by 10% to 18%. Frigi-Tech also reduces maintenance and prolongs the life of both chillers and air conditioning compressors.

The award-winning OAM Purger is an oil, acid and moisture purger which can be installed on both low pressure and high pressure chiller systems. The OAM purger increases the efficiency of chillers by continually drawing off a small quantity of refrigerant, typically 10 to 15 pounds at a time; the refrigerant is then distilled back to the chiller leaving all (escaped) oil behind. The recovered oil is then automatically returned to the chillers oil sumps where it belongs. Acid and moisture are also removed from the refrigerant and oil during the process. The refrigerant is permanently maintained in a virtual oil-free state increasing the chillers efficiency and reducing energy costs.

TechLite, Inc. and associates are in the process of implementing an expanded marketing program which includes the new products and related sales personnel associated with Keystone Energy Management,*i.e.*Frigi-Tech and the OAM Purger.


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**Item 3.****Controls and Procedures**

Evaluation of disclosure controls and procedures. The Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Companys disclosure controls and procedures as of September 30, 2004. Based on this evaluation, the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective for gathering, analyzing and disclosing the information the Company is required to disclose in the reports it files under the Securities Exchange Act of 1934, within the time periods specified in the SECs rules and forms.

Changes in internal controls. There were no significant changes in internal controls or other factors that could significantly affect our internal controls subsequent to the date of our evaluation.

**PART II - OTHER INFORMATION**

**Item 1.****Legal Proceedings**

On September 7, 2000, in Civil Action CJ 2000 C4310 filed in the District Court of Tulsa County, Oklahoma, entitledKriz-Davis Company vs. TechLite, Inc., et al,TechLite was sued on an open account for the purchase of goods and services in the alleged amount of $51,561. This amount plus attorney fees and court costs are sought in the action. TechLite admits the validity of the claim and has reached a settlement agreement whereby TechLite pays the creditor $1,000 a month.

On October 5, 2000, in Civil Action CJ 2000 04842 filed in the District Court of Tulsa County, Oklahoma, entitledBroken Arrow Electric Supply, Inc. vs. TechLite Applied Sciences, Inc. TechLite was sued on an open account for the purchase of goods and services in the alleged amount of $142,863.39. This amount plus attorney fees and court costs are sought in the action. TechLite has reached a settlement with the plaintiff in the case whereby TechLite pays the creditor $3,000 a month.

No director, officer or affiliate of the company, and no owner of record or beneficial owner of more than 5.0% of the securities of the company, or any associate of any such director, officer or security holder is a party adverse to the company or has a material interest adverse to the Company in reference to any litigation.

**Item 2.****Unregistered Sales of Equity Securities**

The following shares of common stock were issued on the dates shown in transactions exempt from registration pursuant to the provisions of Regulation D, Rule 506. Each purchaser had a pre-existing relationship with management and was an accredited investor.


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**Date**
**Purchaser**
**No. of Shares**
**$ Value of**
**Consideration**
**Received**
**Type of Consideration**10-15-04
10 persons
2,166,049
$0.25
Cash: $496,750; Cancellation of debt: $44,762;
Services: $93,75010-22-04
2 persons
1,200,000
$0.25
Services: $300,000

****
**Item 3.Defaults Upon Senior Securities**
****
None.
****
**Item 4.Submission of Matters to a Vote of Security Holders**
****
None.
****
**Item 5.Other Information**
****
None.
****
**Item 6.Exhibits and Reports on Form 8-K**

**(a)**
**Exhibits**
The following exhibits are filed, by incorporation by reference, as part of this Form 10-QSB:

Exhibit

Item2
-
Agreement of merger of October 16, 1998, between TechLite, Inc. and TechLite Applied Sciences, Inc.*3.1
-
Articles of Incorporation of TechLite, Inc.*3.2
-
Bylaws of TechLite, Inc.*10.1
-
1998 stock Option Plan adopted by TechLite, Inc.*31
-
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.1
-
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


20


32
-
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.1
-
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
Previously filed with Form S-4, Commission File No. 333-68137; incorporated herein.

**(b)****Reports on Form 8-K**

None


SIGNATURES

In accordance with the requirements of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TECHLITE, INC.Date: November 24, 2004
By:
/s/ *J.D. Arvidson*J.D. ArvidsonChief Executive Officer


21
**TechLite, Inc.**
**Commission File No. 333-68071**

**INDEX TO EXHIBITS TO FORM 10-QSB**
For the quarterly period ended September 30, 2004


The following exhibits are filed, by incorporation by reference, as part of this Form 10-QSB:

Exhibit

Item2
-
Agreement of merger of October 16, 1998, between TechLite, Inc. and TechLite Applied Sciences, Inc.*3.1
-
Articles of Incorporation of TechLite, Inc.*3.2
-
Bylaws of TechLite, Inc.*10.1
-
1998 stock Option Plan adopted by TechLite, Inc.*31
-
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.1
-
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
-
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.1
-
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
Previously filed with Form S-4, Commission File No. 333-68137; incorporated herein.



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