<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number: 0-24604
TIVOLI INDUSTRIES, INC.
- - -----------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
California 95-2786709
- - -----------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1513 East St. Gertrude Place,
Santa Ana, California 92705
- - -----------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(714) 957-6101
- - -----------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark 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
---- ----
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at March 31, 1996
----- -----------------------------
<S> <C>
Common Stock, $.001 par value 3,857,705
Class A Warrants to purchase Common Stock 1,362,150
Class B Warrants to purchase Common Stock 1,362,150
</TABLE>
1
<PAGE>
TIVOLI INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page No.
<S> <C>
Item 1. Financial Statements (Unaudited):
Balance Sheet March 31, 1996 ................................. 3
Statements of Operations
Three Months Ended March 31, 1996 and 1995 ................... 5
Statements of Operations
Six Months Ended March 31, 1996 and 1995 ..................... 6
Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 ................... 7
Notes to Financial Statements ................................ 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ................ 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ............................................ 14
Item 2. Changes in Securities ........................................ 14
Item 3. Defaults upon Senior Securities .............................. 14
Item 4. Submission of Matters to a Vote of Security Holders .......... 14
Item 5. Other Information ............................................ 14
Item 6. Exhibits and Reports on Form 8-K ............................. 14
Signatures .................................................................. 15
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
March 31, 1996
TIVOLI INDUSTRIES, INC.
BALANCE SHEET
(UNAUDITED)
MARCH 31, 1996
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current assets:
Cash and cash equivalents $1,829,522
Accounts receivable, less allowance for
doubtful accounts of $13,131 1,036,164
Inventories 1,041,925
Prepaid expenses and other 552,962
----------
Total current assets 4,460,573
----------
Property and equipment
Machinery and equipment 215,949
Furniture and fixtures 249,825
Tooling 225,995
----------
691,769
Less accumulated depreciation (493,412)
----------
Net property and equipment 198,357
----------
Intangibles, net of accumulated amortization
of $31,805 (Note 2) 800,332
----------
Deposits and other 41,145
----------
$5,500,407
==========
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
TIVOLI INDUSTRIES, INC.
BALANCE SHEET - CONTINUED
(UNAUDITED)
MARCH 31, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
Current Liabilities:
Accounts payable $ 935,652
Accrued expenses and other current liabilities 69,265
Notes payable to bank (Note 3) 622,937
----------
Total current liabilities 1,627,856
----------
Deferred income taxes 10,153
----------
Stockholders' equity
Preferred stock, $.001 par value; 1,000,000
shares authorized, none outstanding ---
Common stock, $.001 par value; 10,000,000
shares authorized, 3,857,705 shares
outstanding 3,858
Additional paid-in capital 4,352,761
Accumulated deficit (494,219)
----------
Total stockholders' equity 3,862,400
----------
$5,500,407
==========
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
TIVOLI INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
-----------------------------
1996 1995
------------- -------------
<S> <C> <C>
Net sales $1,498,412 $1,033,792
Cost of sales 866,925 586,008
---------- ----------
Gross profit 631,487 447,784
Selling, general and administrative expenses 620,921 463,537
---------- ----------
Income (loss) from operations before interest
and benefit for income taxes 10,566 (15,753)
Gain on discount of note payable to bank -0- -0-
Interest (Income) - Bank (5,970) (31,325)
---------- ----------
Income before benefit
for income taxes 16,536 15,572
Benefit for income taxes (2,190) (1,050)
---------- ----------
Net income $ 18,726 $ 16,622
========== ==========
Net income per share $0.00 $0.00
========== ==========
---------- ----------
Weighted average shares outstanding 3,857,705 3,912,500
========== ==========
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
TIVOLI INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended March 31
--------------------------
1996 1995
---------- ----------
<S> <C> <C>
Net sales $2,907,046 $2,054,932
Cost of sales 1,663,980 1,193,753
---------- ----------
Gross profit 1,243,066 861,179
Selling, general and administrative expenses 1,182,741 856,282
---------- ----------
Income from operations
before interest and benefit for income taxes 60,325 4,897
Gain on discount of note payable to bank -0- (25,750)
Interest (Income) - Bank (15,327) (38,278)
---------- ----------
Income before benefit for income taxes 75,652 68,925
Benefit for income taxes (2,190) (2,900)
---------- ----------
Net income $ 77,842 $ 71,825
========== ==========
Net income per share $ 0.02 $ 0.02
========== ==========
---------- ----------
Weighted average shares outstanding 3,857,705 3,897,986
========== ==========
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
TIVOLI INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended March 31
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 77,842 $ 71,825
Adjustments to reconcile net income
to net cash provided by
(used in) operating activities:
Depreciation and amortization 113,699 107,053
Deferred income taxes (3,000) (3,700)
Changes in operating assets
and liabilities:
Accounts receivable, net (79,829) (83,183)
Inventories (112,757) (254,867)
Prepaid expenses and other (156,568) (330,663)
Accounts payable 86,088 (139,797)
Accrued expenses and other
current liabilities 9,081 (21,419)
---------- ----------
Net cash (used in) operating activities (65,445) (654,752)
---------- ----------
Cash flows from investing activities:
Deposits and other (13,807) (5,162)
Capital expenditures (47,113) (55,645)
Patent expenditures (86,223) (16,714)
---------- ----------
Net cash (used in) investing activities (147,142) (77,526)
---------- ----------
Cash flows from financing activities:
Net borrowings under line of credit and
notes payable to bank (Note 3) 70,331 (27,395)
Capital contributions (Note 5) 413,847
Payment of notes payable
to related party 30,000
---------- ----------
Net cash provided by financing activities 70,331 356,452
---------- ----------
Net decrease in cash and cash equivalents (142,256) (375,826)
---------- ----------
Cash and cash equivalents, beginning of period 1,971,779 2,731,691
---------- ----------
Cash and cash equivalents, end of period $1,829,522 $2,355,865
========== ==========
</TABLE>
See accompanying notes to financial statements
7
<PAGE>
TIVOLI INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statement presentation.
The Company, in its opinion, has included all adjustments (consisting only
of normal recurring accruals) necessary for a fair presentation of the
results of operations for the quarters and six months ended March 31, 1996
and 1995. The financial statements and notes thereto should be read in
conjunction with audited financial statements and notes for the fiscal year
ended September 30, 1995.
<TABLE>
<CAPTION>
<S> <C>
2. INTANGIBLES
Intangibles net at March 31, 1996 consist of:
Goodwill $556,888
Patents 243,443
--------
$880,331
========
3. NOTES PAYABLE TO BANK
Notes payable to Bank at March 31, 1996 consist of:
Line of Credit (see below) $617,500
Note Collateralized by a Truck 5,437
--------
$622,937
========
</TABLE>
On July 20, 1995, the Company refinanced its existing line of credit
agreement with a new lender, Union Bank of Laguna Hills, California. The
agreement contains interest at the bank's prime rate (8.5% at March 31,
1996) plus 1% per annum and an expiration date of February 28, 1997. The
terms of the agreement provide for borrowings of up to the lesser of
$750,000 or the aggregate of 80% of eligible accounts receivable plus 50%
of eligible inventory up to $300,000. This arrangement is secured by
substantially all of the company's assets. The agreement contains certain
restrictive covenants which require the Company to maintain certain
financial ratios, among other restrictions. The agreement also contains a
"termination without cause" provision which states that either party may
terminate the agreement upon 60 days prior written notice. As a result,
the obligation is reflected as a current liability in the accompanying
balance sheet at March 31, 1996. At March 31, 1996, the Company had
approximately $132,500 available under this line of credit.
8
<PAGE>
TIVOLI INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONT.)
4. INCOME TAXES
Effective October 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (Statement
109). Under Statement 109, the asset and liability method is used and
deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases, and are measured using the
enacted tax rates and laws that will be in effect when temporary
differences are expected to reverse.
In connection with the acquisition of the Company in July 1991, the Company
recorded a deferred tax liability of $43,000 for the step-up in bases of
certain property, equipment and patents for financial reporting purposes:
the tax bases of the assets acquired and liabilities assumed carryover to
the acquiror due to the tax-free nature of the acquisition.
5. COMMON STOCK
On October 17, 1994 warrants for 8,571 shares were exercised at $0.01 per
share which resulted in net proceeds to the Company of $86.
On October 21, 1994, the underwriters exercised their over-allotment option
under the underwriting agreement which resulted in the Company issuing an
additional 137,150 units at a price of $3.50. The net proceeds to the
Company amounted to $417,622. Offering costs of $3,861 were included as a
reduction of paid in capital.
6. NET INCOME PER SHARE
Net income per share of common stock is computed using the weighted average
number of shares outstanding for the quarters presented. Common stock
equivalents have been excluded from the net income per share computation
because the impact would be insignificant.
9
<PAGE>
TIVOLI INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements that involve risks
and uncertainties. The Company's actual results could differ materially from
those discussed here. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this section, as
well as in the Company's Form 10-KSB for the fiscal year ended September 30,
1995.
HISTORICAL OVERVIEW
TIVOLI Industries, Inc. (the "Company") designs, develops, manufactures,
markets and sells specialty lighting and related products for use primarily in
architectural applications where efficient and economical light sources are
required, as in movie theaters, night clubs and restaurants, and where
decorative effect is desired, as in casinos, theme parks, night clubs, theater
lobbies, and specialty retail stores. In addition, the Company also markets an
expanded line of products for the general commercial construction applications
when decorative and accent lighting products are specified.
The Company introduced "tube lighting," (a series of low voltage miniature
lamps inserted into a plastic tube) for commercial applications more than 25
years ago, and has been an innovator in low voltage miniature lighting.
In July 1991, the Company was acquired by its present management. For four
years prior to this acquisition, sales had been declining and the company's
market share had eroded precipitously. The new management immediately initiated
a strategy to increase marketing and distribution efforts, market existing
products for use in additional markets and applications, and expand the
Company's product offerings through product line acquisitions, marketing
alliances and internal product development.
The Company's product lines have been expanded to include linear lighting
systems, accent and task lighting, high performance linear systems, decorative
chandeliers, specialized aircraft, marine and vehicular lighting, customized
lighting ceiling panels, electronic transformers and long life, low voltage
lamps. The Company currently holds seven U.S. patents on technical features and
three U.S. patents on design features. As a result of an international joint
venture announced in November of 1994 with Targetti Sankey SPA ("Targetti") of
Florence, Italy, the Company has also introduced 5 complete Targetti product
families to its U.S. distribution channels. These product families are a truss
support system, a family of low-voltage performance track fixtures, an open
frame lighting system, an open grid lighting system and a range of stained glass
illuminated skylight type fixtures. The Company is developing plans to
introduce additional product families during the current fiscal year. The
Company's products are sold through approximately 60 independent marketing
representatives in the United States, and directly by the Company to
approximately 3,500 established accounts, of which about 400 are active at any
one time. As a result of the Joint Venture with Targetti, the Company now has
an additional 23 international representatives responsible for both Targetti and
Tivoli products.
The Company completed a successful initial public offering ("IPO") in
September of 1994 which enabled it to finance its growth. The net proceeds from
the IPO are being used for aggressive marketing programs, new catalogs and
literature, expanded trade shows, product and patent development, technology
acquisition and the development of the international joint venture with
Targetti.
10
<PAGE>
TIVOLI INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED).
HISTORICAL OVERVIEW (CONTINUED)
From the acquisition in 1991 forward, sales have trended upward with sales
of $2,529,053 in fiscal 1992, $2,974,819 in fiscal 1993, $3,544,553 in fiscal
1994, $4,518,502 in fiscal 1995 and $2,907,046 in the first half of fiscal 1996.
It is management's belief that the changes in the Company's operations and
marketing strategies that were initiated in fiscal 1992, and continued through
the inital public offering in 1994, with subsequent use of proceeds, have
contributed significantly to the Company's improved sales and have provided a
base upon which the Company will continue to grow.
CURRENT OVERVIEW
Results of Operations - Three Months Ended March 31, 1996 as Compared to Three
- - ------------------------------------------------------------------------------
Months Ended March 31, 1995.
- - ----------------------------
Net sales of $1,498,412 for the second quarter of fiscal year 1996 were
44.9% higher than net sales of $1,033,792 in the same period of the prior year.
This increase was primarily due to the sales of new and expanded product lines
including Targetti and cove lighting products. The gross profit margin for the
second quarter of fiscal year 1996 was $631,487 or 42.1% of net sales as
compared to $447,784 or 43.3% of net sales for the same period of the prior
year.
Selling, general and administrative expenses for the second quarter of
fiscal 1996 decreased to 41.1% of net sales or $620,921 as compared to 44.8% or
$463,537 in the same quarter of the prior year. This decrease in percentage of
net sales was due to the higher sales volume generated by the continuing
implementation of the Company's marketing and sales strategy. This commitment
was further demonstrated by the increases in product and technical literature,
engineering activities for new products, patent development and registration,
and sales commissions.
Operating profits for the second quarter of fiscal year 1996 were $10,566
as compared to a loss of ($15,753) in the same quarter of the prior year.
Net interest income for the second quarter of fiscal year 1996 was $5,970
as compared to interest income of $31,325 in the same quarter of the prior year.
The interest income in the second quarters of fiscal years 1996 and 1995 came
primarily from the investment of the proceeds of the Company's IPO in September
1994.
As a result of the factors mentioned above, the net income for the second
quarter of fiscal year 1996 was $18,726 as compared to $16,622 for the same
period in the prior year.
11
<PAGE>
TIVOLI INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED).
Results of Operations - Six Months Ended March 31, 1996 as Compared to Six
- - --------------------------------------------------------------------------
Months ended March 31, 1995.
- - ----------------------------
Net sales of $2,907,046 for the first six months of fiscal year 1996 were
41.5% higher than net sales of $2,054,932 in the same period of the prior year.
The gross profit margin for the first six months of the fiscal year 1996 was
$1,243,066 or 42.8% of net sales as compared to the gross profit margin of
$861,179 or 41.9% of sales for the same period of the prior year.
Selling, general and administrative expenses for the first six months of
fiscal 1996 decreased to 40.7% of net sales or $1,182,741 as compared to 41.7%
or $856,282 in the first six months of the prior year. As indicated in the
Results of Operation - three months ended March 31, 1996 section above, the
decrease in SG&A expenses as a percent of sales in the six months ended March
31, 1996 as compared to the same period in the prior year was due to the higher
sales volume generated by the continuing implementation of the Company's
marketing and sales strategy. Commitment to these programs was also
demonstrated by the continuing increases in product development and sales
related activities.
Operating profits for the first six months of Fiscal Year 1996 increased to
$60,325 as compared to $4,897 in the same period of the prior year.
Other income and interest for the first six months of fiscal year 1996 was
$15,327 for net interest income as compared to interest and other income of
$64,028 in the same period of the prior year. The interest income in the second
quarters of fiscal years 1996 and 1995 came primarily from the investment of the
proceeds of the Company's IPO in September 1994. Other income of $25,750 as
reported in the first quarter of fiscal year 1995, represented partial
recognition of the discount offered by the FDIC on refinancing the prior bank
loan, See Note 3, to the financial statements in Form 10-QSB for the quarter and
six months ended March 31, 1995.
As a result of the factors mentioned above, net income for the first six
months of fiscal year 1996 was $77,842 as compared to $71,825 in the same period
of the prior year.
Financial Position, Capital Resources, and Liquidity
- - ----------------------------------------------------
The Company's primary sources of cash during the fiscal Quarter ended March
31, 1996 were funds generated through operations of $191,541 ($77,842 net income
plus depreciation and amortization of $113,699) and borrowings under the line of
credit of $70,331.
Working capital increased to $3,076,163 at March 31, 1996 as compared to
$2,791,301 at September 30, 1995.
Accounts receivable as of March 31, 1996 increased 8.3% to $1,036,164 from
$956,334 at September 30, 1995. The days sales outstanding in accounts
receivable declined to 63 days at March 31, 1996 as compared to 65 days at
September 30, 1995.
12
<PAGE>
TIVOLI INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED).
Financial Position, Capital Resources, and Liquidity (Continued)
- - ----------------------------------------------------------------
Inventories as of March 31, 1996 increased 12% to $1,041,925 as compared to
$929,168 at September 30, 1995. The number of months material costs of sales in
inventory at March 31, 1996 increased to 5.3 months as compared to 5.1 months at
September 30, 1995. The inventory increase was related to the increased sales
volume and the materials required to support the introduction of Targetti
product lines and other internally developed new products.
Accounts payable as of March 31, 1996 increased to $935,654 as compared to
$849,569 at September 30, 1995. The number of days in accounts payable increased
to 74 days at March 31, 1996 as compared to 58 days as of September 30, 1995.
Prepaid expenditures in the first six months of fiscal year 1996 were
$156,568 and were primarily related to the new product catalogs and sales
promotions.
Capital expenditures in the first six months of fiscal year 1996 were
$47,112 and were primarily for new product tooling and trade show displays.
Expenditures for new product patents in the first six months of fiscal year
1996 totaled $86,223.
13
<PAGE>
TIVOLI INDUSTRIES, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held an Annual Meeting of Shareholders on March 29,
1996.
The stockholders elected the Board's nominees as directors by the
votes indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
Nominee Votes in Favor Votes Withheld
Terrence C. Walsh 3,395,387 13,900
Vincent F. Monte 3,395,387 13,900
Steven J. Goodman 3,395,387 13,900
Gerald E. Morris 3,391,087 18,200
</TABLE>
The selection of Corbin & Wertz as the Company's independent
auditors was ratified with 3,394,977 votes in favor, 10,375
against and 3,575 abstentions.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits
None
b) Reports on Form 8-K
None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: _________, 1996 TIVOLI INDUSTRIES, INC.
-----------------------------------------------
Terrence C. Walsh
President, Chief Executive Officer and Director
-----------------------------------------------
Vincent F. Monte
Director and Chief Financial Officer
(Principal Financial and Accounting Officer)
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF TIVOLI INDUSTRIES, INC. AT MARCH 31, 1996, AND THE RELATED STATEMENTS
OF OPERATIONS AND OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 22,906
<SECURITIES> 1,806,616
<RECEIVABLES> 1,049,295
<ALLOWANCES> 13,131
<INVENTORY> 1,041,925
<CURRENT-ASSETS> 4,460,573
<PP&E> 691,769
<DEPRECIATION> 493,412
<TOTAL-ASSETS> 5,500,407
<CURRENT-LIABILITIES> 1,638,007
<BONDS> 0
<COMMON> 3,858
0
0
<OTHER-SE> 3,858,542
<TOTAL-LIABILITY-AND-EQUITY> 5,500,407
<SALES> 2,907,046
<TOTAL-REVENUES> 0
<CGS> 1,663,980
<TOTAL-COSTS> 1,182,741
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 75,652
<INCOME-TAX> (2,190)
<INCOME-CONTINUING> 77,842
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77,842
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
