SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: September 30, 1996
Commission file number: 1-12840
CSL LIGHTING MANUFACTURING, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4463033
(State of incorporation) (I.R.S. employer identification No.)
27615 Avenue Hopkins, Valencia, California 91355-3447
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including Area Code: 805-257-4155
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 5,759,460 shares of
common stock, $.01 par value, as of November 19, 1996.
<PAGE>
CSL LIGHTING MANUFACTURING, INC.
INDEX
PART I. - FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Condensed Balance Sheets at
September 30, 1996 (Unaudited) and
December 31, 1995 ................................................. 3-4
Condensed Statements of Operations
for the nine months ended
September 30, 1995 (Unaudited) and
September 30, 1996 (Unaudited)..................................... 5
Condensed Statements of Operations
for the three months ended
September 30, 1995 (Unaudited) and
September 30, 1996 (Unaudited)..................................... 6
Condensed Statements of Cash Flows
for the nine months ended September 30, 1995 (Unaudited)
and September 30, 1996 (Unaudited)................................. 7
Notes to Condensed Financial Statements............................ 8-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations ................................................... 11-14
PART II - OTHER INFORMATION.............................................. 15
SIGNATURES............................................................... 16
2
<PAGE>
CSL LIGHTING MANUFACTURING, INC.
CONDENSED BALANCE SHEETS
ASSETS
DECEMBER 31, September 30,
1995 1996
------------ -------------
(Unaudited)
CURRENT ASSETS:
Cash $ 120,000 $ 265,000
Accounts receivable, net of
allowance for doubtful
accounts of $145,000 at
December 31, 1995, and
$444,000 at September 30, 1996 1,961,000 1,347,000
Inventories 3,135,000 4,370,000
Other current assets 270,000 1,006,000
---------- ----------
5,486,000 6,988,000
---------- ----------
PROPERTY AND EQUIPMENT, at cost,
net of accumulated depreciation and
amortization of $1,491,000 at September 30,
1996 and $1,202,000 at December 31, 1995 1,640,000 1,636,000
---------- ----------
OTHER ASSETS 257,000 496,000
---------- ----------
$7,383,000 $9,120,000
========== ==========
-3-
<PAGE>
CSL LIGHTING MANUFACTURING, INC.
CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31, September 30,
1995 1996
------------ -------------
(Unaudited)
CURRENT LIABILITIES:
Current portion of long - term debt $ 412,000 $ 202,000
Current portion of notes payable
to stockholders 239,000 78,000
Short - term borrowings 3,409,000 2,679,000
Accounts payable 1,077,000 1,350,000
Accrued expenses 462,000 532,000
----------- -----------
5,599,000 4,841,000
----------- -----------
LONG - TERM DEBT, net of current portion 123,000 119,000
----------- -----------
NOTES PAYABLE TO STOCKHOLDERS,
net of current portion 200,000 100,000
----------- -----------
DEFERRED RENT 222,000 222,000
----------- -----------
7% - SUBORDINATED CONVERTIBLE NOTES -- 337,000
----------- -----------
12% - SUBORDINATED CONVERTIBLE NOTES -- 1,400,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value:
Authorized - 1,000,000 shares
Issued and Outstanding - none -- --
Common stock, $.01 par value:
Authorized - 10,000,000 shares
Issued and Outstanding -
5,442,069 shares at September 30, 1996
4,400,000 shares at December 31, 1995 44,000 54,000
Additional paid-in-capital 7,551,000 9,675,000
Less: Shares held in Treasury -- (1,223,000)
Deferred compensation (640,000) (591,000)
Retained deficit (5,716,000) (5,814,000)
----------- -----------
1,239,000 2,101,000
----------- -----------
$ 7,383,000 $ 9,120,000
=========== ===========
The accompanying notes are an integral part of these condensed balance sheets.
-4-
<PAGE>
CSL LIGHTING MANUFACTURING, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
1995 1996
----------- ------------
NET SALES $11,985,000 $ 9,250,000
COST OF GOODS SOLD 6,782,000 4,793,000
----------- -----------
5,203,000 4,457,000
----------- -----------
OPERATING EXPENSES:
Selling 3,022,000 2,387,000
General and administrative 2,685,000 2,699,000
Legal 579,000 89,000
----------- -----------
6,286,000 5,175,000
----------- -----------
Loss from operations (1,083,000) (718,000)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 43,000 --
Interest expense (306,000) (367,000)
Gain from legal settlement -- 1,137,000
Loss on licensing agreement -- (157,000)
Other, net -- 13,000
Loss on disposal of fixed assets (238,000) (5,000)
----------- -----------
(501,000) 621,000
----------- -----------
Loss before provision for income taxes (1,584,000) (97,000)
PROVISION FOR INCOME TAXES 1,000 1,000
----------- -----------
NET LOSS $(1,585,000) $ (98,000)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING 4,000,000 5,240,658
=========== ===========
NET LOSS PER COMMON SHARE $ (0.40) $ (0.02)
=========== ===========
The accompanying notes are an integral part of
these condensed financial statements.
-5-
<PAGE>
CSL LIGHTING MANUFACTURING, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
1995 1996
----------- ------------
NET SALES $ 4,027,000 $ 2,805,000
COST OF GOODS SOLD 2,498,000 1,720,000
----------- -----------
1,529,000 1,085,000
----------- -----------
OPERATING EXPENSES:
Selling 1,190,000 764,000
General and administrative 1,239,000 872,000
Legal 579,000 27,000
----------- -----------
3,008,000 1,663,000
----------- -----------
Loss from operations (1,479,000) (578,000)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 6,000 --
Interest expense (102,000) (168,000)
Gain from legal settlement -- --
Loss on licensing agreement -- --
Other, net (15,000) (1,000)
Loss on disposal of fixed assets (238,000) --
----------- -----------
(349,000) (169,000)
----------- -----------
Loss before provision for income taxes (1,828,000) (747,000)
PROVISION FOR INCOME TAXES -- (19,000)
----------- -----------
NET LOSS $(1,828,000) $ (728,000)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING 4,000,000 5,428,081
=========== ===========
NET LOSS PER COMMON SHARE $ (0.46) $ (0.13)
=========== ===========
The accompanying notes are an integral part of
these condensed financial statements.
-6-
<PAGE>
CSL LIGHTING MANUFACTURING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(1,585,000) $ (98,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Deferred compensation -- 49,000
Depreciation and amortization 394,000 413,000
Provision for doubtful accounts 273,000 299,000
Gain on legal settlement -- (1,137,000)
Loss on licensing agreement -- 157,000
Loss on disposal of fixed assets 238,000 5,000
Decrease (Increase) in assets:
Accounts receivable (682,000) 315,000
Inventories 77,000 (1,235,000)
Other 116,000 (377,000)
Increase (decrease) in liabilities:
Bank overdraft 122,000 --
Accounts payable 16,000 273,000
Accrued expenses (458,000) 70,000
Deferred rent 10,000 --
----------- -----------
Net cash used in operating activities (1,479,000) (1,266,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments received on notes receivable from employees -- 70,000
Increase in notes receivable - employees (212,000) --
Cash proceeds from the sale of property and equipment -- 12,000
Purchases of property and equipment (429,000) (324,000)
Other assets (108,000) (484,000)
----------- -----------
Net cash used in investing activities (749,000) (726,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to short-term borrowings 2,050,000 --
Repayments of short-term borrowings (1,640,000) (730,000)
Additions to long-term borrowings 200,000 --
Repayments of long-term debt (229,000) (214,000)
Net proceeds from the sale of subordinated convertible debt -- 2,600,000
Debt issuance costs -- (443,000)
Net proceeds from sale of common stock -- 924,000
Additional costs associated with the sale of common stock (19,000) --
----------- -----------
Net cash provided by financing activities 362,000 2,137,000
----------- -----------
NET INCREASE (DECREASE) IN CASH (1,866,000) 145,000
CASH, beginning of period 1,866,000 120,000
----------- -----------
CASH, end of period $ -- $ 265,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these condensed financial statements
-7-
<PAGE>
CSL LIGHTING MANUFACTURING, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with the requirements of Form 10-QSB and, therefore, do not include
all information and footnotes which would be presented were such financial
statements prepared in accordance with generally accepted accounting principles.
These statements should be read in conjunction with the Company's Annual report
on Form 10-KSB which contains audited financial information as of December 31,
1995 and 1994. In the opinion of management, these interim financial statements
reflect all adjustments necessary for a fair presentation of the financial
position and results of operations for the periods presented. These financial
statements should be read in conjunction with Management's Discussion and
Analysis. The results of operations and cash flows for such periods are not
necessarily indicative of results to be expected for the full year.
2. WEIGHTED AVERAGE NUMBER OF SHARES
Net loss per share are based upon the weighted average number of shares
outstanding during the period. Outstanding stock options and warrants were not
included in the weighted average computation because they were anti dilutive.
3. INVENTORIES
Inventories include costs of materials, labor and manufacturing overhead, and
are stated at the lower of cost (weighted average) or market and consist of the
following at December 31, 1995 and September 30, 1996:
December 31, September 30,
------------ -------------
1995 1996
---- ----
Raw Materials $ 781,000 $ 1,091,000
Finished Goods 2,354,000 3,279,000
----------- -----------
$ 3,135,000 $ 4,370,000
=========== ===========
4. INCOME TAXES
Upon conversion from a California Limited Partnership to a "C" corporation in
1994, the Company adopted FASB Statement No. 109, Accounting for Income Taxes,
as required by the Financial Accounting Standards Board. Under SFAS 109,
deferred tax assets may be recognized for temporary differences that will result
in deductible amounts in future periods and for loss carry-forwards. A valuation
allowance is recognized if, based on the weight of available evidence, it is
more likely than not that some portion or all of the deferred tax asset will not
be realized. Based on the Company's limited operating history, and inception to
date accumulated deficit, all of the Company's deferred tax assets are offset by
a valuation allowance.
The current provision for income taxes for the nine months ended September 30,
1995 and 1996, consists of the minimum state tax.
8
<PAGE>
5. STATEMENTS OF CASH FLOWS
Supplemental cash flows disclosures at September 30, 1995 and 1996 are as
follows:
September 30, September 30,
------------- -------------
1995 1996
---- ----
Interest paid $306,000 $320,000
======== ========
Income taxes paid $ 1,000 $ 1,000
======== ========
6. DEBT REFINANCING
On October 15, 1996, the Company successfully negotiated a new two year line of
credit agreement and a three year equipment term loan with a new bank. This line
of credit and term loan have replaced the Company's debt facility with Bank of
America The terms of the Company's new line of credit provides for a maximum
borrowing of $4,000,000 based on 80% of the Company's eligible accounts
receivable and 40% of the Company's eligible inventory (capped at $1,000,000).
The term loan is capped at $100,000 or 80% of the liquidation value of the
Company's eligible equipment. The interest rates for the line of credit and term
loan are prime plus 2.75% and prime plus 3%, respectively. The current maximum
availability on the Company's new line of credit is approximately $2 million.
7. SUBORDINATED CONVERTIBLE NOTES
7% Subordinated Convertible Notes
During the second quarter of 1996, the Company raised $500,000 through the
placement of seven percent convertible notes due March 31, 2001. The notes are
convertible into common stock commencing 90 days after issuance at a conversion
price equal to 80% of the average bid price for the five trading days preceding
conversion.
12% Subordinated Convertible Notes
During the second and third quarter of 1996, the Company raised $2,100,000
through the placement of twelve percent convertible notes due November 27, 1997.
The notes are convertible into common stock commencing 90 days after issuance at
a conversion price equal to 75% of the average bid price for the five trading
days preceding conversion.
The discount features for conversion of debt to common stock have resulted in
the allocation of approximately $800,000 to paid in capital.
8. Changes in Equity
During the nine months ended September 30, 1996, the Company completed a private
placement of 1,210,000 shares of common stock and received net proceeds of
$924,000. On March 18, 1996 the Company converted a $147,000 note payable to the
current Chairman of the Board into 106,909 shares of common stock. On April 18,
1996, the Company converted two $100,000 notes payable to a Director and the
Chairman of the Board into 100,000 shares of common stock each. On August 2,
1996, two seven percent subordinated debt holders converted $83,333 of debt into
40,160 shares of the Company's common stock.
9
<PAGE>
9. Litigation
On April 13, 1996 the Company received 515,000 shares of its common stock
pursuant to the terms of the Zukerman litigation settlement agreement dated
December 18, 1995. These shares are currently held in the Company's treasury.
The effect of this settlement has been reflected in the Company's statements of
operations.
10
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Conditions and
Results of Operations:
Overview:
The Company's strategy is to exploit new markets for its product offerings
and maximize the efficiencies of its manufacturing and distribution network on a
world-wide basis. In furtherance of this strategy, during 1996, the Company
expanded its operations to include a presence in Asia, Southeast Asia, Europe
and Africa. During 1995 and 1996, the Company successfully installed a new
management team and Board of Directors. This management team has implemented
significant new internal accounting and financial controls and has restructured
the Company's product offerings to achieve maximum penetration of its target
markets, specifically the Specification and the Consumer Retail Markets. The
Company has refoucsed its product offerings into five specific product
categories resulting in a reduction in SKU's and the inventory necessary to
support these discontinued product lines. The Company's new product offerings
were introduced in January 1996 and delivery commenced during the second and
third quarters of 1996. During the nine months ended September 30, 1996 the
Company began to realize the benefits of its new policies and procedures through
lower selling expenditures, increased gross profit margins as a percentage of
sales and the establishment of better working relationships with its vendors,
customers and joint venture partners. Further, during 1996, the Company has
entered into a number of joint venture and cooperative agreements in Europe,
Asia, Africa and the United States in an effort to further its business plan.
o In May 1996, the Company entered into a collaboration with SIMES, a large
European manufacturer of specification grade outdoor lighting products.
Under this arrangement, CSL has exclusive rights in the United States to
the SIMES product line which is being marketed and distributed under the
trade name "CSL/SIMES". The Company began shipping these products in the
third quarter of 1996. The Company is also collaborating with SIMES to
distribute certain CSL products in the European and Japanese marketplaces.
In April 1996, the Company entered into a joint venture, known as Venturi
Company, with MG Products Inc. to design, manufacture and distribute a new
recessed low voltage halogen lighting product for the Electrical
Distributor, Lighting Showroom and Home Center marketplaces.
o In June and July 1996, the Company opened two new offices in Singapore and
in Dong Guan City, China to support the Company's manufacturing, marketing
and sales efforts in those regions. The Dong Guan City office supports the
Company's efforts in the South China region. The Singapore office supports
the Company's business in Singapore, Thailand, Malaysia and Indonesia. Both
offices include architectural and design facilities.
o In August 1996, the Company opened an architectural lighting application
and design facility in Shanghai, China. The facility, which has been
approved by the Chinese government, provides manufacturing, marketing and
sales functions to support the Company's business development efforts in
mainland China. The Company is presently shipping product into mainland
China. Additionally, the Company has entered into a cooperative and agency
agreement with Xin Hua Electronic Co. Ltd. ("Xin Hua") to design,
manufacture and distribute energy efficient lighting products in North
America, Europe and Asia. Pursuant to this agreement CSL is Xin Hua's agent
in North America, Europe and South East Asia and Xin Hua is CSL's agent in
mainland China. The two Company's have jointly developed new energy
efficient products which are being offered, along with existing CSL
products, in China under the trade name "CSL Asia". The Company expects to
introduce energy efficient products worldwide incorporating Xin Hua's
electronic ballast technology beginning in the
11
<PAGE>
fourth quarter of 1996.
o In September 1996, the Company entered a joint venture with General
Technics, S.A. to establish a manufacturing, design and showroom facility
in Casablanca, Morocco. This facility will initially support product
offerings in Africa, Europe and the Middle East. The company will market
its products under the trade name "Creative Systems Lighting/ MOROCCO".
Sales
Sales decreased by $2,735,000 or 22.8% from $11,985,000 for the nine months
ended September 30, 1995, to $9,250,000 for the nine months ended September 30,
1996, and sales decreased by $1,222,000 or 30.3% from $4,027,000 for the three
months ended September 30, 1995, to $2,805,000 for the three months ended
September 30, 1996. While net sales have declined, the total units shipped have
increased to 25,880 units, 1,913 units more than in the prior year nine month
period shipments. The decrease in the overall domestic sales is attributable to
the Company focusing on the penetration of new markets overseas and the
reduction of its product pricing.
Gross Profit
Gross profit as a percentage of net sales increased 4.8% from 43.4% for the
nine months ended September 30, 1995, to 48.2% for the nine months ended
September 30, 1996. Gross profit as a percentage of net sales increased 0.7%
from 38.0% for the three months ended September 30, 1995, to 38.7% for the three
months ended September 30, 1996. Gross profit decreased by $746,000 or 14.3%
from $5,203,000 for the nine months ended September 30, 1995, to $4,457,000 for
the nine months ended September 30, 1996. Gross profit decreased by $444,000 or
29.1% from $1,529,000 for the three months ended September 30, 1995, to
$1,085,000 for the three months ended September 30, 1996. The gross profit
dollar decrease is due to a decrease in sales from the prior year period. Gross
profit as a percentage of sales has improved over the prior period due to
internal cost controls and lower material costs of the Company's product
offerings.
Selling Expense
Selling expenses as a percentage of net sales for the nine months ended
September 30, 1995 and 1996 were 25.2% and 25.8%, respectively. Selling expense
as a percentage of net sales for the three months ended September 30, 1995 and
1996 were 29.5% and 27.2%, respectively. For the quarter and nine months ended
September 30, 1996, selling expense were $764,000 and $2,387,000, respectively.
For the quarter and nine months ended September 30, 1995, selling expense were
$1,190,000 and $3,022,000, respectively. The decrease in selling expense during
the comparable quarter and nine month period is primarily attributable to lower
commission expense caused by lower sales volume and a reduction in salaries for
the sales department.
General and Administrative Expenses
General and administrative expenses as a percentage of net sales for the
nine months ended September 30, 1995 and 1996 were 22.4% and 29.2%,
respectively. General and administrative expenses as a percentage of net sales
for the three months ended September 30, 1995 and 1996 were 30.8% and 31.1%,
respectively. For the nine months ended September 30, 1995 and 1996, general and
administrative expenses were $2,685,000 and $2,699,000, respectively. For the
three months ended September 30, 1995 and 1996, general and administrative
expense were $1,239,000 and $872,000, respectively. The increase in general and
administrative expenses during the comparable three and nine month periods as a
percentage of
12
<PAGE>
net sales were attributable to increases in travel to establish the Company's
overseas offices, staffing and expenditures related to the Company's overseas
offices, bad debt expense, bank and consulting fees associated with the
refinancing of the Company's line of credit, and amortization of subordinated
debt issuance costs. The increase in expenditures in the three and nine months
ended September 30, 1996 were partially offset by the capitalization of salaries
for the Venturi Company joint venture in addition to a reduction in purchasing
department salaries.
Legal
Legal expenses as a percentage of net sales for the nine months ended September
30, 1995 and 1996 were 4.8% and 1%, respectively. Legal expenses as a percentage
of net sales for the three months ended September 30, 1995 and 1996 were 14.8%
and 1%, respectively. For the nine months ended September 30, 1995 and 1996,
legal expenses were $579,000 and $89,000, respectively. For the three months
ended September 30, 1995 and 1996, legal expense were $579,000 and $27,000,
respectively. The decrease in legal expenditures for the three and nine months
ended September 30, 1996 was due to the settlement of the Zukerman litigation
(see Note 9 - Notes to Unaudited Condensed Financial Statements).
Other (Income) and Expense
Other income and expense as a percentage of net sales for the quarter and
nine months ended September 30, 1996, were .6% and (6.7)%, respectively. Other
income and expense as a percentage of net sales for the quarter and nine months
ended September 30, 1995, were 8.7% and 4.2%, respectively. For the nine months
ended September 30, 1995 and 1996, income and expense were $501,000 and
$(621,000), respectively. For the three months ended September 30, 1995 and
1996, income and expense were $349,000 and $169,000, respectively. The increase
in income and expense during the comparable quarter and six months period as a
percentage of net sales were attributable to the recoginization of a legal
settlement, partly offset by the write-off a specific licensing agreement.
Provision for Income Taxes
The current provision for income taxes for the nine months ended September
30, 1995 and 1996, consists of minimum state tax.
Net Loss
Net loss for the nine months period ended September 30, 1995 and 1996 were
$1,585,000 and $98,000, respectively. The net loss for the three months period
ended September 30, 1995 and 1996 were $1,828,000 and $728,000, respectively.
Loss per share for the nine month period ended September 30, 1995 and 1996 were
$0.40 and $0.02, respectively. Loss per share for the three month period ended
September 30, 1995 and 1996 were $0.46 and $0.13, respectively
Liquidity and Capital Resources
For the nine months ended September 30, 1996 the Company relied upon
private placements of convertible debt and equity and trade credit to support
its operations and growth. During the nine months ended September 30, 1996 the
Company raised approximately $3,081,000, net of expenses and bond issuance
costs, through debt and equity placements. These funds were used to finance the
Company's operations and primarily to provide for inventory purchases for the
Company's new product lines and to support the establishment of its overseas
operations.
13
<PAGE>
Subsequent to September 30, 1996, the Company sold 329,000 shares of its
Common Stock for aggregate gross proceeds of approximately $549,000. In
addition, the Company raised $1,350,000 through the placement of seven and eight
percent convertible notes due October 24, 1999 and October 31, 1998,
respectively. The notes are convertible into common stock commencing 60 days
after issuance. The seven percent notes are convertible into common stock at a
conversion price equal to the lesser of 80% of the average bid price for the
five trading days preceding conversion or $2.875. The eight percent notes are
convertible into common stock at a conversion price equal to the lesser of 75%
of the average bid price for the five trading days preceding conversion or
$2.00.
On October 15, 1996, the Company successfully negotiated a new two year
line of credit agreement and a three year equipment term loan with a new bank.
This line of credit and term loan have replaced the Company's debt facility with
Bank of America The terms of the Company's new line of credit provides for a
maximum dollar borrowing of $4,000,000 based on 80% of the Company's eligible
accounts receivable and 40% of the Company's eligible inventory (capped at
$1,000,000). The term loan is capped at $100,000 or 80% of the forced
liquidation value of the Company's eligible equipment. The interest rates for
the line of credit and term loan are prime plus 2.75% and prime plus 3%,
respectively. The current maximum borrowing capacity on the Company's credit
facility is approximately $2 million.
The proceeds from the convertible debt financings together with the
Company's new credit facility were used to repay the Company's debt obligation
with Bank of America. If future losses are incurred the Company will be required
to raise additional funding to support the Company's operations. The failure to
consummate such financing will have a material adverse effect on the Company's
business.
The Company believes that it will be able to generate sufficient cash flows
to support its operations through fiscal 1996. However, there can be no
assurance that the Company will generate sufficient cash flows, the failure of
which would have a material adverse effect on the Company's operations and
financial position.
The Company believes that inflation has not had a material impact on it
operations.
14
<PAGE>
PART II - OTHER INFORMATION
Not Applicable
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly authorized and caused the undersigned to sign this Report on
the Registrant's behalf.
CSL LIGHTING MANUFACTURING, INC.
By: /s/ Sylvan Gerber
----------------------------
Sylvan Gerber,
Chairman of the Board
Chief Executive Officer
By: /s/ Mark Allen
----------------------------
Mark Allen,
Chief Operating Officer
Acting Principal Accounting
Officer, Director
Dated: November 19, 1996
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 265,000
<SECURITIES> 0
<RECEIVABLES> 1,791,000
<ALLOWANCES> 444,000
<INVENTORY> 4,370,000
<CURRENT-ASSETS> 6,988,000
<PP&E> 3,127,000
<DEPRECIATION> 1,491,000
<TOTAL-ASSETS> 9,120,000
<CURRENT-LIABILITIES> 4,841,000
<BONDS> 2,236,000
0
0
<COMMON> 54,000
<OTHER-SE> 2,047,000
<TOTAL-LIABILITY-AND-EQUITY> 9,120,000
<SALES> 9,250,000
<TOTAL-REVENUES> 9,250,000
<CGS> 4,793,000
<TOTAL-COSTS> 9,968,000
<OTHER-EXPENSES> (621,000)
<LOSS-PROVISION> 281,000
<INTEREST-EXPENSE> 367,000
<INCOME-PRETAX> (97,000)
<INCOME-TAX> 1,000
<INCOME-CONTINUING> (98,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (98,000)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
