<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 30, 1998 Commission File No. 1-12462
TRI-LITE, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2515309
(State of incorporation or organization) (IRS Employer ID Number)
2701 Junipero Street, Signal Hill, California 90806
(Address of principal executive offices)
(562) 426-8622
(Registrant's telephone number)
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class On which registered
Common Stock, no par value Not Applicable
Securities registered pursuant to Section 12 (g) of the Act: None
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
YES NO x
--- ---
Shares of common stock outstanding as of January 31, 1999: 4,060,000
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INDEX
PART I. FINANCIAL INFORMATION PAGE #
Item 1. Financial Statements
Statement of Operations 3
Balance Sheets 4-5
Statement of Cash Flows 6
Notes to Consolidated Financial Statements 7-9
Item 2. Management Discussion and Analysis of
Financial Condition and Results of Operations 10-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. None
Item 3. None
Item 4. None
Item 5. None
Item 6. Exhibit and Reports 12
2
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TRI-LITE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Unaudited
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $1,119,300 $1,068,600 3,620,500 4,075,700
--------------------------- --------------------------
COST AND EXPENSES
Cost of Sales 508,900 658,500 1,618,500 2,414,000
Selling, general and administrative 488,600 466,500 1,561,400 2,160,800
Chapter 11 administrative cost - 43,600 - 112,600
Interest and factoring cost 27,500 - 107,800 -
--------------------------- --------------------------
1,025,000 1,168,600 3,287,700 4,687,400
--------------------------- --------------------------
OTHER INCOME (EXPENSES)
Gain resulting from Chapter 11 proceeding - - - 576,200
--------------------------- --------------------------
INCOME BEFORE PROVISION FOR TAXES 94,300 332,800 (35,500)
Provision for taxes - - - -
--------------------------- --------------------------
NET INCOME (LOSS) $ 94,300 ($100,000) $332,800 (35,500)
=========================== ==========================
EARNINGS PER COMMON SHARE (Note 1):
Primary $0.02 ($0.02) $0.06 $(0.01)
Fully Diluted $0.02 ($0.02) $0.06 $(0.01)
</TABLE>
The accompanying notes are an integral part of these statements
3
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TRI-LITE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 99,400 $ 84,000
Accounts receivable, net 669,400 529,400
Inventories 376,300 317,800
Prepaid expenses 63,200 54,400
----------- -----------
Total current assets 1,208,300 985,600
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost
Machinery and equipment 1,200,800 1,178,900
Leasehold improvement 338,200 344,700
----------- -----------
1,539,000 1,523,600
Less-Accumulated depreciation and amortization (1,300,300) (1,277,600)
----------- -----------
238,700 246,000
----------- -----------
OTHER ASSETS
Other assets 90,900 131,600
----------- -----------
$1,537,900 $1,363,200
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
4
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TRI-LITE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of notes payable $ 117,700 $ 305,200
Note Payable to related party 346,800 322,700
Accounts payable and accrued expense 1,594,800 1,589,500
------------ ------------
2,059,300 2,217,400
------------ ------------
LONG-TERM DEBT, net of current maturities 566,000 566,000
NOTES PAYABLE, Related Parties 500,000 500,000
LIABILITIES SUBJECT TO COMPROMISE 5,721,600 5,721,600
NOTE PAYABLE TO HELIONETICS, INC.,
COMMITTEE OF UNSECURED CREDITORS 800,000 800,000
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock, no par value
Authorized-25,000,000 shares in 1998 and 1997
Outstanding-4,000,000 shares in 1998
and 1997 11,813,300 11,813,300
Additional paid in capital 1,800,800 1,800,800
Accumulated deficit (21,723,100) (22,055,900)
------------ ------------
(8,109,000) (8,441,800)
------------ ------------
$ 1,537,900 $ 1,363,200
------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements
5
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TRI-LITE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 332,800 $ (35,500)
Less: Non-cash-gain from Chapter 11 proceedings (576,200)
Adjustment to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 22,700 8,200
Change in operating assets and liabilites (389,600) 66,600
--------- ---------
Net cash provided by (used in) operations $ (34,100) $ (39,300)
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment (15,400) -
Other assets 40,700 73,300
--------- ---------
Net cash provided by (used in) investing activities 25,300 73,300
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes and loan payable - (426,700)
Net borrowings from related party 24,200 77,400
Capital contribution from Ms. Susan Barnes - 426,700
others - 200
--------- ---------
Net cash provided by (used in) financing activities 24,200 77,600
--------- ---------
Net Increase (decrease) in cash and equivalents 15,400 111,600
Cash and equivalents at beginning of period 84,000 140,100
--------- ---------
Cash and equivalent at end of period $ 99,400 $ 251,700
--------- ---------
Interest and factoring cost paid 62,900 77,100
</TABLE>
The accompanying notes are an integral part of these statements
6
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TRI-LITE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Summary of Significant Accounting Policies
The unaudited consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
and are unaudited except for the balance sheet as of December 31, 1997. Certain
information and footnote disclosures normally included in the financial
statements have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's latest annual report on Form 10-K. In the opinion of management the
accompanying financial statements contain all adjustments necessary to present
fairly the Company's financial position and the results of operations for the
periods presented. The results of operations for the nine months ended September
30, 1998, are not necessarily indicative of the results to be expected for the
full year.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its subsidiaries. Upon consolidation all
material intercompany transactions and accounts have been eliminated.
Inventories
Inventories are valued at the lower of cost (first-in, first-out
method) or estimated net realizable value.
Earnings Per Share
Earnings per common share is based upon the weighted average number of
shares outstanding during each period. There are no common equivalent
shares.
(2) Notes Payable
Notes Payable at September 30, 1998 and December 31, 1997 consisted of
the following:
<TABLE>
<CAPTION>
9/30/98 12/31/97
------- --------
<S> <C> <C>
Helionetics Committee of Unsecured Creditors
with interest at 10.5% secured by all assets
of the Company, due 2003 $ 800,000 $ 800,000
Susan Barnes, junior promissory note at 10.5%
interest, secured by all assets of the Company 500,000 500,000
Advances from Receivable Factoring Facility
at a discount rate of 1.5% in 1997 and prime
plus 6% in 1998 117,700 305,200
----------- -----------
1,417,700 1,605,200
Less: Current portion (117,700) (305,200)
----------- -----------
Total Notes Payable, long-term 1,300,000 1,300,000
</TABLE>
(3) Notes Payable, Related Party
7
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Notes payable, related party, comprised of the following:
9/30/98 12/31/97
------- --------
Susan Barnes, secured by all assets of the
Company at prime plus 2% 176,800 146,700
Others 170,000 176,000
------- -------
346,800 322,700
------- -------
(4) Plan of Reorganization
On February 15, 1996, Star Bank demanded payment in full of the
Company's credit facility by February 20, 1996 as a result of certain loan
provision defaults which had not been cured. On February 23, 1996, the Court of
Common Pleas, Cuyahoga County, Ohio granted Star Bank an emergency order
appointing a receiver to collect and remit to Star Bank all collections on
accounts receivable of the Company. In response, on February 26, 1996 Tri-Lite,
Inc. (Tri-Lite) filed a voluntary petition under Chapter 11 of the United States
Bankruptcy Code with the U.S. Bankruptcy Court, Central District of California.
Additionally, Self Powered Lighting, Inc. (SPL) filed a voluntary petition under
Chapter 11 of the United States Bankruptcy Code with the U.S. Bankruptcy Court,
Central District of California on March 22, 1996.
Under Chapter 11, certain claims against the Company in existence prior
to the filing of the petitions for relief under the federal bankruptcy laws are
stayed while the Company continues business operations as debtor-in-possession.
These claims are reflected in the balance sheet as "Liabilities Subject to
Compromise". Claims against the Company's assets which are secured are also
stayed, although the holders of such claims have the right to move the court for
relief from the stay.
On January 16, 1997, the Bankruptcy Court approved the Tri-Lite Plan of
Reorganization with Helionetics, Inc. (Helionetics) and Susan Barnes as
co-proponents of the plan. In April 1997, Helionetics also filed a voluntary
petition under Chapter 11 of the United States Bankruptcy Code with the U.S.
Bankruptcy Court, Central District of California. As a result, the Company's
reorganization plan was combined with Helionetics own plan of reorganization. On
December 23, 1998, the U.S. Bankruptcy Court approved the Helionetics, Inc.
Chapter 11 Liquidating Plan. Provisions of the Combined Plan included the
following:
o The Company will issue 82.5% to Susan Barnes as a co-proponent and in
exchange for her agreement to forgo any claims on her approximately
$4.3 million claim against Helionetics. The Company will also issue 5%
of its new common stock to the Helionetics Committee of Unsecured
Creditors with anti-dilution provision.
o The Company's unsecured creditors will receive up to 47% of their
allowed claims in cash. The pay-out is subject to the final
determination of the Helionetics own plan of reorganization.
o The Company will issue 12.5% of its new common stock to its existing
shareholders.
o Helionetics will cancel and release its claims against the Company for
$1,800,00 note receivable secured by all assets of the Company.
o The Company will issue a senior secured promissory note of $800,000 in
favor of the Helionetics Committee of Unsecured Creditors and a junior
secured promissory note of $500,000 in favor of Ms. Susan Barnes. Both
notes are subordinated to any new financing that might be required by
the Company.
o Helionetics contributed to the Company its 87.5% interest in AIM
Energy, Inc.
8
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(5) Income Taxes
No provision for federal and state income taxes was provided for the
period as a result of the Company's net operating loss carryforwards for federal
and state income tax purposes.
The Company accounts for income taxes under the liability method, which
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statements and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the difference are expected to reverse.
9
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TRI-LITE, INC. AND SUBSIDIARIES
Item 2. Management Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
Working capital improved significantly in 1998. A new receivable based
credit facility was obtained in June 1998 with significant reduction in the cost
of borrowing under the credit facility. Interest rate under the new credit
facility is 6 over prime, almost half the previous rate. Additionally, AIM
received $300,000 from Shindengen Corporation (Shindengen), a Japanese power
supply company, relating to the sale of the right to manufacture and sale its
AIM products in Japan and Asia. Additionally, the agreement called for delivery
of fifty (50) AIM units to Shindengen. The agreement provide for a 4% royalty
for sales of AIM products made by Shindengen. AIM continue to require advance
deposits from certain of its customers to assist in its liquidity needs.
Additional working capital is required, moreover, to fund the increased backlog
in both SPL and AIM. Additionally AIM will require $250,000 of engineering cost
to implement its cost savings plan for its existing AIM products.
Receivables and inventories, combined, increased by approximately
$198,500 in the nine months ended September 1998 a result of AIM inclusion for
the full nine month of 1998 compared with 1997.
Under the terms of the Helionetics settlement agreement, the
installment payments to the SPL unsecured creditors was moved up such that the
first payment of approximately $114,000 is now due in August 1999.
The Company will require additional working capital to fund its
increasing backlog. Additionally, AIM will require $250,000 of engineering to
reduce the cost of its various AIM products.
The Company's liquidity will be met partly by its operations, however,
additional funding will be obtain from either from loans from Ms. Susan Barnes
and from possible sale of the Company's common stock.
Year 2000 Issues
As described more fully in the Company's Form 10-K, the Company does
not have a major year 2000 problems due to the nature of its products. The
Company would require, however, approximately $30,000 to update its hardware and
management system software to comply with the year 2000 issues. While the
Company believes that it does not foresee any problems with its suppliers and
customers, it cannot provide assurance that such will be the case.
Results of Operations
Revenues for the nine months and three months ended September 30, 1998
and 1997 were $3,620,000 and $1,119,000 and $4,075,000 and $1,068,000,
respectively. The net decrease in revenues in the nine months of 1998 of
$455,000 was the result of the discontinuance of the lighting fixtures division
which in the nine months of 1997 included approximately $1,390,000 of revenues.
The decrease in the lighting fixtures division revenues was offset by SPL's
revenue increase of approximately $181,000 and AIM's net contribution of
approximately $736,000 which included proceeds from the sale of the licensing
right of $270,000 and shipment of AIM's products of approximately $349,000
pursuant to the agreement reached with Shindengen.
The increase of approximately $52,000 in revenues for the three months
ended September 1998 compared with the same period in 1997 was the result of the
combined net increase in SPL and AIM revenues of approximately
10
<PAGE>
$280,000 offset by the revenues in 1997 (none in 1998) of approximately $228,000
by the discontinued lighting fixtures division.
Cost of sales, as a percent of sales were 45% for the nine and three
months of 1998 compared with 59% and 62% in the same period in 1997. The
decrease was attributed primarily to the inclusion of the full nine months of
AIM's operations in 1998. AIM was included in 1997 beginning in the second
quarter. Also the revenues recognized from to Shindengen agreement favorably
affected the combined gross margin.
Income in 1997 was favorably impacted by the gain recognized from the
chapter 11 proceedings of $576,200.
11
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TRI-LITE, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 6. Exhibits and Reports on Form 8-K
None
12
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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 thereunto duly authorized.
TRI-LITE, INC.
DATE: March 9, 1999 /s/ E. Maxwell Malone
-----------------------------
E. Maxwell Malone
Chief Executive Officer
DATE: March 9, 1999 /s/ Adrian Cayetano
-----------------------------
Adrian Cayetano
Principal Accounting Officer
13
