<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------
FORM 8-K
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) March 25, 1996
--------------
ADVANCED LIGHTING TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
OHIO O-27202 34-1803229
- --------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
2307 EAST AURORA ROAD, SUITE ONE, TWINSBURG, OHIO 44087
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (216) 963-6680
----------------------------
NOT APPLICABLE
- --------------------------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE> 2
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 25, 1996, a subsidiary of the Company acquired all of
the issued and outstanding capital stock (the "Stock") and certain indebtedness
(the "Indebtedness") of Spectro Electric, Inc. of Toronto, Ontario, a lighting
products distributor, as well as security interests ("Security Interests") in
the assets of Spectro Electric, Inc. The subsidiary acquired the Stock, the
Indebtedness and the Security Interests from the Bank of Nova Scotia ("BNS").
The Stock had been pledged as security to BNS by the parent corporation of
Spectro Electric, Inc. The cash purchase price for the Stock, Indebtedness and
Security Interests was approximately U.S. $1,700,000. The amount of
consideration for the Stock, Indebtedness and Security Interests was determined
by arms length negotiation. The acquisition was financed using a portion of the
proceeds of the Company's initial public offering. Under certain circumstances,
the Company may issue up to $500,000 in market value of Company stock in
connection with the acquisition.
Among other lighting product lines, Spectro Electric, Inc. is
a distributor of the Company's products in Canada. The Company intends to
continue the current business of Spectro Electric, Inc.
Certain information regarding this transaction was included in
the Company's quarterly report on Form 10-Q for the quarterly period ended March
31, 1996.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
ITEM 5. OTHER EVENTS.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired
(1) Spectro Electric Inc.
Report of Doane Raymond, Independent Auditors
Balance Sheet as of December 31, 1995
Statement of Operations and Deficit for the year December 31,
1995
Statement of Cash Flows for the year ended December 31, 1995
Notes to Financial Statements
(2) Spectro Electric Inc.
Balance Sheets (Unaudited) as of March 31, 1996 and 1995
Statements of Operations and Deficit (Unaudited) for three
months ended March 31, 1996 and 1995
Statements of Cash Flows (Unaudited) for three months ended
March 31, 1996 and 1995
Notes to Financial Statements (Unaudited)
(b) Pro Forma Financial Information
(1) Pro Forma Condensed Combined Financial Statements of Advanced
Lighting Technologies, Inc. and Spectro Electric Inc.
(Unaudited)
Pro Forma Condensed Combined Statements of Operations for the
year ended June 30, 1995 and the nine months ended
March 31, 1996 (Unaudited)
Notes to Pro Forma Condensed Combined Statements of
Operations (Unaudited)
<PAGE> 4
CHARTERED ACCOUNTANTS
Canadian Member Firm of
Grant Thornton International
AUDITORS' REPORT
To the Directors of
Spectro Electric Inc.
We have audited the balance sheet of Spectro Electric Inc. as at December 31,
1995, and the statements of operations and deficit and cash flow for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1995 and the
results of its operations and cash flow for the year then ended in accordance
with accounting principles generally accepted in the United States.
Markham, Canada
February 14, 1996, except as /s/ Doane Raymond
to Note 16, which is as of May 1, 1996 Chartered Accountants
Suite 400
7030 Woodbine Ave.
Markham
Ontario
L3R 6G2
Tel: (905) 475-1100
Fax: (905) 475-8906
<PAGE> 5
SPECTRO ELECTRIC INC.
BALANCE SHEET
(Expressed in Canadian Dollars)
December 31, 1995
<TABLE>
<S> <C>
ASSETS
Current
Cash...................................................................... Cdn.$ 6,911
Receivables (Note 3)...................................................... 1,455,097
Inventories (Note 4)...................................................... 2,642,680
Prepaid expenses and deposits............................................. 66,569
-----------
4,171,257
Other
Prepaid pension costs (Note 5)............................................ 141,018
Fixed assets (Note 6)....................................................... 124,287
-----------
Cdn.$ 4,436,562
===========
LIABILITIES
Current
Bank indebtedness (Note 7)................................................ Cdn.$ 1,839,198
Payables and accruals (Note 8)............................................ 1,461,716
Capital and other taxes................................................... 14,452
-----------
3,315,366
-----------
SHAREHOLDER'S EQUITY
Capital stock (Note 9).................................................... 6,200,001
Deficit................................................................... (5,078,805)
-----------
1,121,196
-----------
Cdn.$ 4,436,562
===========
Commitments (Note 10)
Contingent liabilities (Note 11)
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 6
SPECTRO ELECTRIC INC.
STATEMENTS OF OPERATIONS AND DEFICIT
(Expressed in Canadian Dollars)
Year Ended December 31, 1995
<TABLE>
<S> <C>
Sales....................................................................... Cdn$ 9,341,710
-----------
Cost of sales
Inventories, beginning of year............................................ 2,558,200
Purchases................................................................. 6,436,867
-----------
8,995,067
Inventories, end of year.................................................. 2,501,513
-----------
6,493,554
-----------
Gross profit................................................................ 2,848,156
Selling, general and administrative expenses................................ 2,767,455
Restructuring charges (Note 12)........................................... 497,266
-----------
Loss before the undernoted and income taxes................................. (416,565)
Interest expense.......................................................... (173,121)
Other income.............................................................. 3,408
-----------
Loss before income taxes.................................................... (586,278)
Income taxes (recoveries) (Note 13)......................................... (8,977)
-----------
Net loss.................................................................... Cdn$ (577,301)
===========
Deficit, beginning of year.................................................. Cdn$(4,501,504)
Net loss.................................................................... (577,301)
-----------
Deficit, end of year........................................................ Cdn$(5,078,805)
===========
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 7
SPECTRO ELECTRIC INC.
STATEMENTS OF CASH FLOW
(Expressed in Canadian Dollars)
Year Ended December 31, 1995
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss................................................................... Cdn.$ (577,301)
Depreciation and amortization.............................................. 68,412
Write-off of leasehold improvement......................................... 22,000
Changes in assets and liabilities
Receivables............................................................. 241,629
Inventories............................................................. 78,128
Capital and other taxes................................................. (16,620)
Prepaid expenses and deposits........................................... 262,662
Payables and accruals................................................... (451,685)
-------------
Net cash used in operating activities................................... (372,775)
-------------
FINANCING ACTIVITIES
Prepaid pension costs...................................................... (8,223)
Proceeds of bank borrowings -- net......................................... 384,842
-------------
Net cash provided by financing activities.......................... 376,619
-------------
INVESTING ACTIVITIES
Purchase of fixed assets................................................... (9,240)
Proceeds from sale of fixed assets......................................... 9,995
-------------
Net cash provided by investing activities.......................... 755
-------------
Net increase in cash....................................................... 4,599
Cash, beginning of year.................................................... 2,312
-------------
Cash, end of year.......................................................... Cdn.$ 6,911
=============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest..................................... Cdn.$ 173,121
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 8
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
December 31, 1995
1. OWNERSHIP
During the period under audit Spectro Electric Inc. (the Company) was a
wholly owned subsidiary of Sequel Industries Inc.
2. ACCOUNTING POLICIES
The Company's principal business activity is the wholesale distribution of
lighting products.
(A) INVENTORIES
Inventories are valued at the lower of cost or net realizable value. Cost
is determined on a moving weighted average basis.
(B) DEPRECIATION AND AMORTIZATION
Rates and bases of depreciation applied to write-off the cost less
estimated salvage value of property and equipment over their estimated lives are
as follows.
<TABLE>
<S> <C>
Computer 30% straight-line
Office furniture 20% declining balance
Equipment 20% declining balance
Vehicles 30% declining balance
-- straight-line over the term of the
Leasehold improvements lease
</TABLE>
(C) FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are recorded in Canadian dollars at the
rates of exchange prevailing on the date of transactions. Current assets and
liabilities at the year end are translated into Canadian dollars at the rates of
exchange prevailing on that date. Exchange gains and losses are reflected in
income.
(D) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash, trade receivables and accounts payable
approximate fair value due to the short term maturities of these instruments.
(E) USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
3. RECEIVABLES
<TABLE>
<S> <C>
Trade................................................................ Cdn.$ 1,425,287
Other................................................................ 29,810
--------------
Cdn.$ 1,455,097
==============
</TABLE>
<PAGE> 9
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
(Expressed in Canadian Dollars)
December 31, 1995
4. INVENTORIES
<TABLE>
<S> <C>
On hand.............................................................. Cdn.$ 2,501,513
Goods in transit..................................................... 141,167
--------------
Cdn.$ 2,642,680
==============
</TABLE>
5. PENSION PLAN AND PREPAID PENSION COSTS
The Company maintains a defined contribution pension plan which covers all
employees who have completed two years of service with the Company. Employees
are not required to contribute to the plan. The Company contributes 1% of the
employee earnings plus a portion of the profits of the Company. The proportion
of the profits, up to a maximum of 4%, is determined each year by the Company's
board of directors. The cost of the pension benefits to be provided in exchange
for services rendered during the year under this plan was $5,885.
The Company's 1995 required contributions were met from prepaid pension
costs and future required contributions will also be discharged from the prepaid
amount, subject to any limitation imposed by the Pension Commission of Ontario,
until such time as it has been fully amortized. Thereafter, the Company will
recommence making required employer contributions in accordance with the above.
6. FIXED ASSETS
<TABLE>
<CAPTION>
ACCUMULATED NET
COST DEPRECIATION BOOK VALUE
------------- ------------ ------------
<S> <C> <C> <C>
Computer............................... Cdn.$ 266,663 Cdn.$218,133 Cdn.$ 48,530
Office furniture....................... 239,907 210,045 29,862
Equipment.............................. 188,865 148,101 40,764
Vehicles............................... 4,805 4,805 --
Leasehold improvements................. 52,992 47,861 5,131
------------ ------------ ------------
Cdn.$ 753,232 Cdn.$628,945 Cdn.$124,287
============ ============ ============
</TABLE>
Included in the amount charged for depreciation and amortization for the
year is a write off of computer and software equipment totalling $39,489.
7. BANK INDEBTEDNESS
As security for bank indebtedness and letters of credit (Note 8), the
Company has pledged receivables and inventories, assigned fire insurance
proceeds and issued a demand debenture providing a floating charge on all
assets.
The loan agreement with the bank contains restrictive covenants with
respect to working capital levels, minimum tangible net worth, and maintenance
of certain financial ratios. As at December 31, 1995, the Company's financial
position did not satisfy certain of these covenants and, accordingly, the bank
indebtedness is classified as a current liability.
8. PAYABLES AND ACCRUALS
This includes Cdn.$141,245 owed to trade suppliers which are secured by
letters of credit.
<PAGE> 10
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
(Expressed in Canadian Dollars)
December 31, 1995
9. CAPITAL STOCK
<TABLE>
<S> <C>
Authorized:
Unlimited 7% non-voting, non-cumulative first preference shares
4,000 7% non-voting, non-cumulative second preference
shares
9,000,000 Common shares
Issued:
1,000,000 First preference shares.............................. Cdn.$3,000,000
9,000,000 Common shares........................................ 3,200,001
--------------
Cdn.$6,200,001
=============
</TABLE>
10. COMMITMENTS
The Company rents premises and equipment under long-term leases which
expire at various dates up to 1999 and for which minimum rentals total
Cdn.$182,300. Annual minimum rentals under these leases to date of expiry are as
follows:
<TABLE>
<CAPTION>
PREMISES
----------------------------
HEAD OFFICE BRANCHES EQUIPMENT TOTAL
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
1996...................... Cdn.$50,500 Cdn.$ 51,600 Cdn.$ 5,700 Cdn.$ 107,800
1997...................... -- 51,600 4,500 56,100
1998...................... -- 11,700 4,500 16,200
1999...................... -- -- 2,200 2,200
----------- ------------ ----------- ------------
Cdn.$50,500 Cdn.$114,900 Cdn.$16,900 Cdn.$ 182,300
=========== ============ =========== ============
</TABLE>
On January 10, 1996 the Company was given notice by the landlord of its
Toronto head office and warehouse facilities of termination of lease, effective
April 10, 1996.
11. CONTINGENT LIABILITIES
a) Unlimited guarantee issued to parent Company's bankers. At December 31,
1995 that Company's bank indebtedness amounted to Cdn.$389,812 together with
interest of Cdn.$69,303 accrued to that date.
b) Outstanding letters of credit amounting to Cdn.$100,645.
c) During 1994, a Receiver Manager was appointed for a partnership in which
the Company had an indirect interest and which was disposed of during 1991. The
Company is unable to determine the extent, if any, for which it may be liable
for any of the liabilities of the partnership.
<PAGE> 11
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
(Expressed in Canadian Dollars)
December 31, 1995
12. RESTRUCTURING CHARGES
During 1994 the Company initiated a restructuring plan to reduce costs and
consolidate facilities. These charges are comprised of the following:
<TABLE>
<S> <C>
Lease cancellations and other related costs........................... Cdn.$ 442,705
Writedown of leaseholds............................................... 22,000
Employee termination and related costs................................ 18,296
Relocation expenses................................................... 14,265
------------
Cdn.$ 497,266
============
</TABLE>
13. LOSSES
The Company has recorded deferred taxes for the income tax benefits of net
operating loss carryforwards. These losses which aggregate Cdn.$1,772,000 are
available to reduce taxable income in future years and will expire as follows:
<TABLE>
<S> <C>
1999.......................................................... Cdn.$181,000
2000.......................................................... Cdn.$452,000
2001.......................................................... Cdn.$605,000
2002.......................................................... Cdn.$534,000
</TABLE>
Due to historical losses, a valuation allowance of Cdn.$790,000 has been
recorded which offsets the entire amount of the deferred taxes related to the
net operating loss carryforwards.
14. RELATED PARTY TRANSACTION
A management fee of Cdn.$249,500 was paid to Sequel Industuries, Inc. for
management advisory services.
15. CONCENTRATION OF CREDIT RISK
The Company sells on credit terms to its customers, all of whom are located
in Canada. No single customer represented more than 10% of the Company sales in
1995.
16. SUBSEQUENT EVENTS
On February 5, 1996, the bank made a formal demand for repayment of the
bank indebtedness of the Company amounting to Cdn.$2,088,285 as at February 2,
1996. The bank also made a formal demand for immediate payment of the Company's
indebtedness under a guarantee of the bank indebtedness of the Company's parent
company amounting to Cdn.$389,812 as at February 2, 1996, together with interest
of Cdn.$72,012 accrued to that date.
On March 7, 1996, the bank appointed an agent, pursuant to certain
hypothetications to take control of the collateral provided by the Company's
parent. The right, title and interest of the bank in the shares of the Company
pledged, being all the issued and outstanding shares of the Company were sold on
March 25, 1996 to Advanced Lighting Technologies Inc. ("ADLT") on an "as is
basis." The consideration comprised the purchase price of the shares and the
purchase payment for the security held by the bank against the Company together
with the debt of the Company to the bank.
Following the above transaction, the Company became an indirect wholly
owned subsidiary of ADLT, a company listed on the Nasdaq stock market's national
market.
<PAGE> 12
SPECTRO ELECTRIC INC.
BALANCE SHEET
(Unaudited)
(Expressed in Canadian Dollars)
<TABLE>
<CAPTION>
March 31 1995 1996
- -------- ---- ----
<S> <C> <C>
ASSETS
Current
Cash Cdn.$ 2,200 Cdn.$ 2,578
Receivables (Note 3) 1,749,205 1,485,260
Receivable from related company -- 23,305
Inventories (Note 4) 2,548,236 2,905,392
Prepaid expenses and deposits 387,532 53,406
---------- ----------
4,687,173 4,469,941
Other
Prepaid pension costs (Note 5) 135,026 140,496
Fixed assets (Note 6) 201,124 111,581
---------- ----------
Cdn.$5,023,323 Cdn.$4,722,018
========== ==========
LIABILITIES
Current
Bank indebtedness (Note 7) Cdn.$1,625,542 Cdn.$ 208,685
Payables and accruals 1,633,495 724,531
Payable to related party -- 548,564
Capital and other taxes 18,560 14,336
---------- ----------
3,277,597 1,496,116
Loan from parent company (Note 8) -- 2,036,649
---------- ----------
3.277,597 3,532,765
SHAREHOLDER'S EQUITY
Capital stock (Note 9) 6,200,001 6,200,001
Deficit (4,454,275) (5,010,748)
---------- ----------
1,745,726 1,189,253
---------- ----------
Cdn.$5,023,323 Cdn.$4,722,018
========== ==========
Commitments (Note 10)
Contingent liabilities (Note 11)
</TABLE>
See accompanying notes to financial statements (unaudited).
<PAGE> 13
SPECTRO ELECTRIC INC.
STATEMENTS OF OPERATIONS AND DEFICIT
(Unaudited)
(Expressed in Canadian Dollars)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1995 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
Sales Cdn.$ 2,600,163 Cdn.$ 2,359,074
----------- -----------
Cost of sales
Inventories, beginning of period 2,558,200 2,501,513
Purchases 1,686,416 1,695,287
----------- -----------
4,244,616 4,196,800
Inventories, end of period 2,434,401 2,622,624
----------- -----------
1,810,215 1,574,176
----------- -----------
Gross profit 789,948 784,898
Selling, general and administrative expense 709,591 s 675,640
----------- -----------
Earnings before the undernoted and income taxes 80,357 109,258
Interest expense 42,105 41,201
----------- -----------
Earnings before income taxes 38,252 68,057
Income taxes (recoveries) - (Note 12) (8,977) -
----------- -----------
Net earnings Cdn.$ 47,229 Cdn.$ 68,057
=========== ===========
Deficit, beginning of period Cdn.$(4,501,504) Cdn.$(5,078,805)
Net earnings 47,229 68,057
----------- -----------
Deficit, end of period Cdn.$(4,454,275) Cdn.$(5,010,748)
=========== ===========
</TABLE>
See accompanying notes to the financial statements (unaudited).
<PAGE> 14
SPECTRO ELECTRIC INC.
STATEMENT OF CASH FLOWS
(Unaudited)
(Expressed in Canadian Dollars)
<TABLE>
Period ended March 31
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1995 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings Cdn.$ 47,229 Cdn.$ 68,057
Depreciation and amortization 18,612 15,955
Changes in assets and liabilities
Receivables (52,479) (30,163)
Inventories 172,572 (262,712)
Income taxes (12,512) (116)
Prepaid expenses and deposits (58,301) 13,163
Payables and accrual (279,906) (737,185)
Receivable from/payable to related party -- 525,259
----------- -----------
Net cash used in operating activities (164,785) (407,742)
----------- -----------
FINANCING ACTIVITIES
Prepaid pension costs (2,231) 522
Proceeds (repayments) of bank borrowings - net 171,186 (1,630,513)
Advances from parent company -- 2,036,649
---------- ----------
Net cash provided by financing activities 168,955 406,658
---------- ----------
INVESTING ACTIVITIES
Purchase of fixed assets (4,282) (3,249)
---------- ----------
Net cash used in investing activities (4,282) (3,249)
---------- ----------
Net (decrease) increase in cash (112) (4,333)
Cash, beginning of period 2,312 6,911
---------- ----------
Cash, end of period Cdn.$ 2,200 Cdn.$ 2,578
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest Cdn.$ 42,105 Cdn.$ 41,201
</TABLE>
See accompanying notes to the financial statements (unaudited).
<PAGE> 15
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
(Expressed in Canadian Dollars)
March 31, 1996
1. OWNERSHIP
Effective March 25, 1996, the Company became a wholly-owned subsidiary of
Advanced Lighting Technologies Inc. ("ADLT").
2. ACCOUNTING POLICIES
The Company's principal business activity is the wholesale distribution of
lighting product.
a) INVENTORIES
Inventories are valued at the lower of cost or net realizable value. Cost is
determined on a moving weighted average basis.
b) DEPRECIATION AND AMORTIZATION
Rates and bases of depreciation applied to write-off the cost less estimated
salvage value of property and equipment over their estimated lives are as
follows:
Computer 30% straight-line
Office furniture 20% declining balance
Equipment 20% declining balance
Vehicles 30% declining balance
Leasehold improvements - straight-line over the term of the lease
c) FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are recorded in Canadian dollars at the
rates of exchange prevailing on the date of transactions. Current assets and
liabilities at the period end are translated into Canadian dollars at the rates
of exchange prevailing on that date. Exchange gains and losses are reflected in
income.
d) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash, trade receivables and accounts payable approximate
fair value due to the short term maturities of these instruments.
e) USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and revenues and expenses during the reporting period. Actual results could
differ from those estimates.
<PAGE> 16
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
(Expressed in Canadian Dollars)
<TABLE>
<CAPTION>
March 31, 1996
3. RECEIVABLES
March 31, March, 31
1995 1996
--------------- ---------------
<S> <C> <C>
Trade Cdn.$ 1,712,764 Cdn.$ 1,467,229
Other 36,441 18,031
----------- -----------
Cdn.$ 1,749,205 Cdn.$ 1,485,260
=========== ===========
4. INVENTORIES
1995 1996
--------------- ---------------
On hand Cdn.$ 2,434,401 Cdn.$ 2,622,624
Goods in transit 113,835 282,768
----------- -----------
Cdn.$ 2,548,236 Cdn.$ 2,905,392
=========== ===========
</TABLE>
5. PENSION PLAN AND PREPAID PENSION COSTS
The Company maintains a defined contribution pension plan which covers all
employees who have completed two years of service with the Company. Employees
are not required to contribute to the plan. The Company contributes 1% of the
employee earnings plus a portion of the profits of the Company. The proportion
of the profits, up to a maximum of 4%, is determined each year by the Company's
board of directors. The cost of the pension benefits to be provided in exchange
for services rendered during the three months ended March 31, 1996 under this
plan was Cdn.$1,506 (three months ended March 31, 1995 -- Cdn.$1,295).
The Company's 1996 and 1995 required contributions were met from prepaid pension
costs and future required contributions will also be discharged from the prepaid
amount, subject to any limitation imposed by the Pension Commission of Ontario,
until such time as it has been fully amortized. Thereafter, the Company will
recommence making required employer contributions in accordance with the above.
<TABLE>
<CAPTION>
6. FIXED ASSETS March 31, March 31,
1995 1996
----------- ----------
Accumulated NET NET
Cost Depreciation BOOK VALUE BOOK VALUE
---- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Computer Cdn.$ 269,912 Cdn.$ 228,468 Cdn.$ 78,206 Cdn.$ 41,444
Office furniture 239,907 211,545 34,276 28,362
Equipment 188,865 150,171 51,210 38,694
Vehicles - - - -
Leasehold improvements 5,735 2,654 37,432 3,081
--------- --------- --------- ---------
Cdn.$ 704,419 Cdn.$ 592,838 Cdn.$ 201,124 Cdn.$ 111,581
========= ========= ========= =========
</TABLE>
<PAGE> 17
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
(Expressed in Canadian Dollars)
March 31, 1996
7. BANK INDEBTEDNESS
On March 7, 1996, the bank appointed an agent, pursuant to certain
hypothecations to take control of the collateral provided by the Company's
former parent, Sequel Industries Inc. The right, title and interest of the bank
in the shares of the Company pledged, being all the issue and outstanding
shares of the Company were sold on March 25, 1996 for $2,168,000 on an "as is
basis". This consideration comprised the purchase price for shares and the
purchase payment for the security held by the bank against the Company together
with the debt of the Company to the bank.
The bank indebtedness at March 31, 1996 of $208,685 consisted of an unsecured
bank overdraft of $77,400 and outstanding cheques in excess of cash balance
totalling $131,285.
8. LOANS PAYABLE TO PARENT - ADLT
Purchase of debt held by the bank against the Company -- refer to Note 7 above.
As part of the purchase transaction the bank assigned its security to ADLT,
part of which consists of general assignments of book debts and a $1,000,000
demand debenture providing a floating charge on all assets. The balance due to
ADLT at March 31, 1996 is Cdn.$2,036,649.
<TABLE>
<CAPTION>
9. CAPITAL STOCK
1995 1996
----------- -----------
<S> <C> <C>
Authorized:
Unlimited 7% non-voting, non-cumulative first
preference shares
4,000 7% non-voting, non-cumulative
second preference shares
9,000,000 Common shares
Issued:
1,000,000 First preference shares Cdn.$ 3,000,001 Cdn.$ 3,000,001
9,000,000 Common shares 3,200,000 3,200,000
----------- -----------
Cdn.$ 6,200,001 Cdn.$ 6,200,001
=========== ===========
</TABLE>
<PAGE> 18
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
(Expressed in Canadian Dollars)
March 31, 1996
10. COMMITMENTS
The Company rents premises and equipment under long-term leases which expire at
various dates up to 1999 and for which minimum rentals total $319,300. Annual
minimum rentals under these leases to date of expiry are as follows:
<TABLE>
<CAPTION>
Premises
--------
Head Office Branches Equipment Total
----------- -------- --------- -----
<S> <C> <C> <C> <C>
March 1997 Cdn.$ 56,500 Cdn.$ 51,600 Cdn.$ 4,500 Cdn.$ 112,600
March 1998 66,800 45,600 4,500 116,900
March 1999 72,400 4,700 4,500 81,600
March 2000 6,000 - 2,200 8,200
--------- --------- -------- ---------
Cdn.$ 201,700 Cdn.$ 101,900 Cdn.$ 15,700 Cdn.$ 319,300
========= ========= ======== =========
</TABLE>
11. CONTINGENT LIABILITIES
During 1994, a Receiver Manager was appointed for a partnership in which the
Company had an indirect interest and which was disposed of during 1991. The
Company is unable to determine the extent, if any, for which it may be liable
for any of the liabilities of the partnership.
12. LOSSES
The Company has recorded deferred taxes for the income tax benefits of net
operating loss carryforwards. These losses, which aggregate Cdn.$1,704,000 are
available to reduce taxable income in future years and will expire as follows:
<TABLE>
<S> <C>
1999 Cdn.$113,000
2000 452,000
2001 605,000
2002 534,000
</TABLE>
Due to historical losses, a valuation allowance of Cdn.$760,000 has been
recorded which offsets the entire amount of the deferred taxes related to the
net operating loss carryforwards.
<PAGE> 19
SPECTRO ELECTRIC INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
(Expressed in Canadian Dollars)
March 31, 1996
13. RELATED PARTY TRANSACTIONS
(a) Purchase of goods from an affiliated company during the period March 25 to
March 31, 1996 totalled Cdn.$21,700.
(b) Management fee of Cdn.$65,640 in the three months ended March 31, 1996
(Cdn $61,500 in the three months ended March 31, 1995)
was paid to the former parent company for management advisory services.
14. CONCENTRATION OF CREDIT RISK
The Company sells on credit terms to its customers, all of whom are located in
Canada. No single customer represented more than 10% of the Company sales in
the three months ended March 31, 1996.
<PAGE> 20
ADVANCED LIGHTING TECHNOLOGIES, INC. ("ADLT")
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands of U.S. dollars, except per share dollar amounts)
The following pro forma condensed combined statements of operations
(unaudited) for the year ended June 30, 1995, and the nine months ended March
31, 1996, have been prepared to reflect the results of operations of Advanced
Lighting Technologies, Inc. ("ADLT") as if the acquisition of Spectro Electric
Inc. ("Spectro") occurred on July 1, 1994.
<TABLE>
<CAPTION>
For the Year Ended June 30, 1995
------------------------------------------------
HISTORICAL PRO FORMA
------------------- ------------------------
ADLT SPECTRO ADJUSTMENTS COMBINED
------- ------- ----------- --------
<S> <C> <C> <C> <C>
Net sales......................................... $40,767 $ 7,531 $(429)(a) $47,869
Costs and expenses:
Cost of sales................................... 21,899 5,452 (442)(b) 26,909
Selling, general and administrative............. 11,833 2,150 -- 13,983
Research and development........................ 1,673 -- -- 1,673
Restructuring................................... (121) 254 -- 133
------- ------ ----- -------
35,284 7,856 (442) 42,698
------- ------ ----- -------
Income (loss) from operations..................... 5,483 (325) 13 5,171
Interest expense.................................. 2,129 129 -- 2,258
------- ------ ----- -------
Income (loss) from continuing operations before
income taxes.................................... 3,354 (454) 13 2,913
Income taxes...................................... 212 (6) -- 206
------- ------ ----- -------
Income (loss) from continuing operations.......... $ 3,142 $ (448) $ 13 $ 2,707
======= ====== ===== =======
Income per common share from continuing
operations...................................... $ 0.10 (c) $ 0.04 (c)
======= =======
Shares used for computing per share amounts....... 7,818 7,868 (d)
======= =======
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended March 31, 1996
------------------------------------------------
HISTORICAL PRO FORMA
------------------- ------------------------
ADLT SPECTRO ADJUSTMENTS COMBINED
------- ------- ----------- --------
<S> <C> <C> <C> <C>
Net sales......................................... $37,295 $ 5,002 $(908)(a)(d) $41,389
Costs and expenses:
Cost of sales................................... 19,957 3,375 (754)(b)(d) 22,578
Selling, general and administrative............. 10,259 1,480 (48)(e) 11,691
Research and development........................ 1,714 -- -- 1,714
Noncash settlement of claim..................... 2,732 -- -- 2,732
Restructuring................................... -- 182 -- 182
------- ------ ----- -------
34,662 5,037 (802) 38,897
------- ------ ----- -------
Income (loss) from operations..................... 2,633 (35) (106) 2,492
Interest expense.................................. 1,150 94 -- 1,244
------- ------ ----- -------
Income (loss) from continuing operations before
income taxes.................................... 1,483 (129) (106) 1,248
Income taxes...................................... 525 -- -- 525
------- ------ ----- -------
Income (loss) from continuing operations.......... $ 958 $ (129) $(106) $ 723
======= ====== ===== =======
Loss per common shares from continuing
operations...................................... $ (0.04) (f) $ (0.07) (f)
======= =======
Shares used for computing per share amounts....... 8,999 9,048 (d)
======= =======
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements of
Operations (Unaudited)
<PAGE> 21
ADVANCED LIGHTING TECHNOLOGIES, INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
The unaudited pro forma information is based on (i) ADLT's audited combined
statement of operations for year ended June 30, 1995 and unaudited consolidated
statement of operations for the nine months ended March 31, 1996 and (ii)
historical financial information for the comparable periods derived from
Spectro's audited financial statements for the years ended December 31, 1995 and
1994 and Spectro's unaudited statement of operations for the three months ended
March 31, 1996. The financial statements of Spectro, expressed in Canadian
dollars, have been translated to U.S. dollars using the principles of Statement
of Financial Accounting Standard No. 52, Foreign Currency Translation. The
acquisition of Spectro occurred on March 25, 1996, and, accordingly, Spectro
is included in the consolidated balance sheet of ADLT as of March 31, 1996.
Consequently, a pro forma balance sheet is not required. The acquisition was
accounted for as a purchase business combination.
The pro forma condensed combined statements of operations do not purport
to be indicative of the combined results of operations that actually would have
occurred if the acquisition of Spectro had been effected on July 1, 1994 or
the expected results of operations that may be achieved in the future.
The pro forma adjustments are made to reflect:
(a) The elimination of sales from ADLT to Spectro
(b) The elimination of cost of sales and intercompany profit related to
Spectro purchases from ADLT
(c) Income per common share from containing operations, on both a
historical and pro forma combined basis, is based upon income from
continuing operations attributable to common shareholders after
having been decreased by preferred share dividends of $58 and
increases in the value of warrants aggregating $2,302.
(d) Includes weighted-average common shares contingently issuable in
connection with the acquistion.
(e) The elimination of operations of Spectro included in both Spectro's
statement of operations and ADLT's consolidated statement of
operations from March 25, 1996 to March 31, 1996.
(f) Income per common share from continuing operations for the nine
months ended March 31, 1996, on both a historical and pro forma
combined basis, is based upon income from continuing operations
attributable to common shareholders after having been decreased by
increases in the value of warrants aggregating $1,350.
<PAGE> 22
ITEM 8. CHANGE IN FISCAL YEAR.
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ADVANCED LIGHTING TECHNOLOGIES, INC.
(Registrant)
Date: June 10, 1996 By: /S/ Louis S. Fisi
---------------------------------
Louis S. Fisi
Executive Vice President and
Chief Financial Officer
3190\030
09AA.8-K
<PAGE> 24
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBITS PAGE NO.
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
10.1 Letter Agreement between Venture Lighting International, Inc.
and the Bank of Nova Scotia dated March 11, 1996 regarding the
purchase of capital stock and certain indebtedness of Spectro
Electric, Inc. incorporated herein by reference to Exhibit 10.2
of the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1996.
23.1 Consent of Doane Raymond, Independent Auditors
</TABLE>
CH&S FILE COPY 3190\030
09aa.8-k
<PAGE> 1
Exhibit 23.1
CONSENT OF DOANE RAYMOND, INDEPENDENT AUDITORS
We consent to incorporation by reference of our report, dated February 14,
1996, except as to Note 16, which is as of May 1, 1996, into the Registration
Statement on Form S-8 (Registration No. 333-4642) of Advanced Lighting
Technologies, Inc.
/s/ Doane Raymond
CHARTERED ACCOUNTANTS
Markham, Canada
June 10, 1996
