<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 June 30, 1997
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 specifies 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.
Class OUTSTANDING AT JUNE 30, 1997
----- ----------------------------
Common stock, $.001 par value 3,937,863
Class A Warrants to purchase Common Stock 1,362,150
Class B Warrants to purchase Common Stock 1,362,150
<PAGE>
TIVOLI INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page No.
<S> <C>
Item 1. Financial Statement (Unaudited)
Balance Sheet June 30, 1997................................... 3
Statements of Operations
Three Months Ended June 30, 1997 and 1996..................... 5
Statements of Operations
Nine Months Ended June 30, 1997 and 1996...................... 6
Statements of Cash Flows
Nine Months Ended June 30, 1997 and 1996...................... 7
Notes to Financial Statements................................. 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................. 15
Item 2. Changes in Securities......................................... 15
Item 3. Defaults upon Senior Securities............................... 15
Item 4 Submissions of Matters to a Vote of Security Holders.......... 15
Item 5 Other Information............................................. 15
Item 6. Exhibits and Reports on Form 8-K.............................. 15
Signatures................................................................... 16
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
JUNE 30, 1997
TIVOLI INDUSTRIES, INC.
BALANCE SHEET
(UNAUDITED)
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,802,686
Accounts receivable, less allowance for
doubtful accounts of $23,018 1,128,621
Inventories 1,529,264
----------
Prepaid expenses and other 519,528
----------
Total current assets 4,980,099
----------
Property and equipment
Machinery and equipment 293,363
Furniture and fixtures 787,545
Tooling 293,497
----------
1,374,405
Less accumulated depreciation (629,589)
----------
Net property and equipment 744,816
----------
Intangibles, net of accumulated amortization
of $281,175 (Note 2) 737,413
----------
Deposits and other 92,856
----------
$6,555,184
==========
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
TIVOLI INDUSTRIES, INC.
BALANCE SHEET - CONTINUED
(UNAUDITED)
JUNE 30, 1997
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 994,561
Accrued expenses and other current liabilities 313,234
Notes payable to bank (Note 3) 19,483
Capital lease obligation - Current (Note 4) 41,672
----------
Total current liabilities 1,368,950
----------
Long Term Liabilities
Capital lease obligation - Long term (Note 4) 167,447
Notes payable to Bank - Long term (Note 3) 667,500
----------
Total long term liabilities 834,947
----------
Deferred income taxes 4,894
Stockholders' equity
Preferred stock, $.001 par value; 1,000,000
shares authorized, none outstanding
Common stock, $.001 par value; 10,000,000
shares authorized, 3,937,863 shares outstanding 3,938
Additional paid-in capital 4,375,176
Accumulated deficit (32,721)
----------
Total stockholders' equity 4,346,393
----------
6,555,184
==========
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
TIVOLI INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30
--------------------------
1997 1996
---- ----
<S> <C> <C>
Net sales $2,800,598 $1,646,232
Cost of sales 1,605,261 942,858
---------- ----------
Gross profit 1,195,337 703,374
Selling, general and administrative expenses 1,008,170 685,276
---------- ----------
Income from operations before interest and
income taxes 187,167 18,098
Interest Expense 10,960 3,063
---------- ----------
Income before income taxes 176,207 15,035
Income tax provision 27,258 -0-
---------- ----------
Net income $ 148,949 $ 15,035
========== ==========
Net income per share $ 0.04 $ 0.00
========== ==========
Weighted average shares outstanding 3,937,863 3,857,705
========== ==========
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
TIVOLI INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended June 30
-------------------------
1997 1996
---- ----
<S> <C> <C>
Net sales $7,260,696 $4,553,278
Cost of sales 4,236,234 2,606,854
---------- ----------
Gross profit 3,024,462 1,946,424
Selling, general and administrative expenses 2,619,801 1,868,003
---------- ----------
Income from operations before interest and
income taxes 404,661 78,421
Interest (Income) 6,235 (12,264)
---------- ----------
Income before income taxes 398,426 90,685
Income tax (benefit) provision 25,286 (2,200)
---------- ----------
Net income $ 373,140 $ 92,885
========== ==========
Net income per share $ 0.10 $ 0.02
========== ==========
Weighted average shares outstanding 3,926,568 3,857,705
========== ==========
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
TIVOLI INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended June 30
-------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 373,140 $ 92,885
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 112,473 168,215
Deferred income taxes (3,000)
Changes in operating assets
and liabilities:
Accounts receivable, net 219,863 (124,468)
Inventories (480,864) (58,707)
Prepaid expenses and other (82,599) (168,507)
Accounts payable 33,893 14,487
Accrued expenses and other
current liabilities 186,564 (6,449)
---------- ----------
Net cash provided by (used in) operating activities 362,470 (85,544)
---------- ----------
Cash flows from investing activities:
Deposits and other 26,285 (248)
Capital expenditures (Note 4) (279,649) (167,628)
Patent expenditures 11,073 (135,770)
---------- ----------
Net cash (used in) investing activities (242,291) (303,646)
---------- ----------
Cash flows from financing activities:
Net borrowings under line of credit and
notes payable to bank (Note 3) 15,460 142,096
Repayments under capital lease financing
(Note 4) (25,881)
---------- ----------
Net cash provided by (used in) financing
activities (10,421) 142,096
---------- ----------
Net increase (decrease) in cash and cash equivalents 109,758 (247,094)
---------- ----------
Cash and cash equivalents, beginning of period 1,692,928 1,971,779
---------- ----------
Cash and cash equivalents, end of period $1,802,686 $1,724,685
========== ==========
</TABLE>
See accompanying notes to financial statements
7
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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 nine months ended June 30, 1997
and 1996. The financial statements and notes thereto should be read in
conjunction with the audited financial statements and notes and the form
10-KSB for the year ended September 30, 1996.
2. INTANGIBLES
Intangibles net at June 30, 1997 consist of:
Goodwill $529,408
Patents 208,005
--------
$737,413
========
3. NOTES PAYABLE TO BANK
Notes payable to Bank at June 30, 1997 consist of:
Line of Credit: Long Term Liability (see below) $667,500
Note Collateralized by a Truck & a Forklift:
Current Liability 19,483
--------
$686,983
========
On July 20, 1995, the Company refinanced its existing line of credit
agreement with a new lender, the Union Bank, Laguna Hills, California. This
agreement expired on February 28, 1997, and was subsequently renewed with
an expiration date of March 1, 1999. The renewal agreement contains
interest at the bank's prime rate (8.5% at June 30, 1997) plus 1% per
annum. 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. At June 30, 1997, the Company
had approximately $82,500 available under this line of credit.
8
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TIVOLI INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
4. Capital Lease Obligation
The Company is the lessee of equipment under a capital lease that expires
in 2002. The assets and liabilities under the capital lease are recorded at
the lower of the present value of the minimum lease payments or the fair
market value of the assets. The assets are depreciated over their estimated
useful lives. Depreciation of the assets is included in depreciation
expense for the nine months ended June 30, 1997.
The future annual minimum lease payments under the capital lease are as
follows :
Years Ending
September 30
------------
1997 (3 months) $ 14,469
1998 57,876
1999 57,876
2000 57,876
2001 57,876
2002 4,823
--------
Total annual future minimum lease payments 250,796
Less : amount representing interest (41,677)
--------
Present value of net minimum lease payments 209,119
Less : current maturities (41,672)
--------
167,447
========
Capital additions of $235,000 were acquired under capital lease financing
during the period.
5. 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.
9
<PAGE>
TIVOLI INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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 not be significant.
7. NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which is required to be adopted for fiscal
periods ending after December 15, 1997 (fiscal 1998 for the Company). At
that time, the Company will be required to change the method currently used
to compute earnings per share. Under the new standard, the dilutive effect
of stock options and stock warrants will be excluded from basic earning per
share. If earnings per share have been calculated under the new
requirement, the effect would not have been material to the periods
presented.
10
<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, 1996.
HISTORICAL OVERVIEW
The Company, since its founding in 1967, has established a reputation as an
innovator and supplier of miniature and low voltage lighting products. From 1991
forward the Company expanded its product range and is now regarded as a
designer, developer, manufacturer and supplier of specialty lighting and related
products, both domestically and internationally. Applications of the Company's
products, globally, are movie theater aisle, step marquee and concession
lighting, illuminated ceiling systems, architectural cove, miniature lighting in
cabinetry, decorative, accent, task and energy efficient lighting in casinos,
hotels, restaurants, gaming vessels, cruise ships, specialty retail, themed
venues and high end residential.
In 1991, the Company was acquired by its present management who implemented
a strategy to revitalize and expand the Company's market position through
product line expansion and aggressive market penetration programs. The Company
completed a successful public offering in September of 1994, and continued to
focus, refine and implement its strategic business plan which encompassed new
product and patent development, market penetration, literature and catalog
development and an international reciprocal joint venture with Targetti of
Florence, Italy. This joint venture, announced in November of 1994, represents a
key long term part of the Company's strategic plan. The agreement established
the Company as the exclusive licensee, distributor and strategic partner for
Targetti in the U.S. market, and provided the Company's products to Targetti's
global network of 35 representatives, distributors and sales offices. In North
America and Mexico, the Company's products are sold through 67 independent
marketing representatives, and directly by the Company's personnel, to
approximately 4,000 accounts, of which approximately 600 may be active at any
one time. In January of 1994, the Company formed and incorporated its first
international subsidiary, Tivoli de Mexico, S.A. de CV, in Mexico City, Mexico,
to strengthen and expand the Company's presence in Mexico and Central America.
Additionally, in the first quarter of 1997, the Company opened a sales support
office and demonstration center in Las Vegas, Nevada, to support the continued
growth of the casino/gaming and hospitality markets.
11
<PAGE>
TIVOLI INDUSTRIES, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED).
The Company currently holds ten U.S. patents on mechanical features and
three U.S. patents on design features. The Company's product lines include
linear lighting systems, miniature tube lighting systems, accent and task
lighting, decorative chandeliers, illuminated ceiling systems, specialized
vehicular, marine and aircraft lighting, long life low voltage lamps, electronic
transformers, dimmers and circuit protection devices. Through its joint venture
with Targetti, the Company introduced modified versions of a number of product
families including a truss support system, low voltage performance track
lighting fixtures, an open frame lighting system, an open grid lighting system
and an illuminated stained glass product family, recessed downlights, low
voltage decorative downlights, projectors, indirect and pendant units, wall
sconces and decorative accent fixtures. An energy efficient fluorescent down
light product family was added in the second quarter of fiscal 1997.
Since the acquisition of the Company in 1991, sales have consistently
trended upwards, with sales of $2,529,053 in fiscal 1992, $2,974,819 in fiscal
1993, $3,544,533 in fiscal year 1994, $4,518,502 in fiscal 1995, $6,638,063 in
fiscal 1996 and $7,260,696 in the first nine months of fiscal 1997. Management
believes that the growth strategies, investments and expenditures made from
acquisition through fiscal year-to-date June 30, 1997, have produced an annual
growth rate of approximately 46% and provide a base upon which the Company will
continue to grow.
CURRENT OVERVIEW
Results of Operations - Three Months Ended June 30, 1997 as Compared to Three
- -----------------------------------------------------------------------------
Months Ended June 30, 1996.
- ---------------------------
Net sales of $2,800,598 for the third quarter of fiscal year 1997 were 70%
higher than net sales of $1,646,232 in the same period of the prior year. This
increase was attributed to the final shipment of a large project order for a
national customer. The initial shipment of this order was made in the second
fiscal quarter ended March 31, 1997. This order consisted of a package of
lighting products representing the Company's core lighting systems and Targetti
products. The gross profit margin for the third quarter of the fiscal year 1997
was 42.7% of net sales which was the same as the gross profit margin for the
third quarter of the fiscal 1996 year.
Selling, general and administrative expenses for the third quarter of
fiscal 1997 decreased to 36.0% of net sales or $1,008,170 as compared to 41.6%
or $685,276 in the same quarter of the prior year. This decrease in selling,
general and administrative expenses as a percentage of sales was attributable to
the increase in sales volume and to an emphasis on SG&A expense controls.
Operating profits for the third quarter of fiscal 1997 increased to
$187,167 as compared to $18,098 in the same quarter of the prior year.
12
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TIVOLI INDUSTRIES, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED).
Net interest expense for the third quarter of fiscal year 1997 was $10,960
and consisted of interest income of $16,900 on the investment of the proceeds of
IPO funds less interest expense on the bank loan of $16,123 and capital lease
interest of $11,737. Net interest income in the third quarter of fiscal year
1996 was $3,063 and was derived from interest income of $13,056 on the
investment of the IPO funds less interest expense on the bank loan of $16,119.
As a result of the above factors, the net income for the third quarter of
fiscal 1997 improved to $148,949 or $0.04 per share as compared to net income of
$15,035 or $0.00 per share in the same period of the prior year.
Results of Operations - Nine Months Ended June 30, 1997 as Compared to Nine
- ---------------------------------------------------------------------------
Months Ended June 30, 1996.
- ---------------------------
Net sales of $7,260,696 for the first nine months of fiscal year 1997 were
59% higher than net sales of $4,553,278 in the same period of the prior year.
This increase was aided by the shipment of a large project order for a national
customer as described in the previous section, Results of Operations - Three
Months Ended June 30, 1997, and by increasing demand for the Company's new
products. The gross profit margin for the first nine months of fiscal year 1997
was 41.7% of net sales as compared to 42.7% of net sales for the same period of
the prior year. This decrease was due primarily to the competitive pricing
related to the above mentioned large project order.
Selling, general and administrative expenses for the first nine months of
fiscal 1997 decreased to 36.1% of net sales or $2,619,801 as compared to 41.0%
or $1,868,003 in the same period of the prior year. This decrease in SG&A
expenses as a percentage of sales was related to the increase in sales volume
described above and a focus on control of SG&A expenses.
Operating profits for the first nine months increased to $404,661 as
compared to $78,421 in the same period of the prior year.
Net interest expense for the first nine months of fiscal year 1997 was
$6,235 and consisted of interest income of $57,116 on the investment of the
proceeds of IPO funds less interest expense on the bank loan of $51,614 and
capital lease interest of $11,737. Net interest income in the first nine months
of fiscal year 1996 was $12,264 and was derived from interest income of $59,358
on the investment of the IPO funds less interest expense on the bank loan of
$47,094.
As a result of the above factors, the net income for the first nine months
of fiscal 1997 improved to $373,140 or $0.10 per share as compared to net income
of $92,885 or $0.02 per share in the same period of the prior year.
13
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TIVOLI INDUSTRIES, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED).
Financial Position, Capital Resources and Liquidity
- ---------------------------------------------------
The Company's sources of cash during the first nine months of the fiscal
year 1997 were funds generated through operations of $485,613 which was composed
of net income of $373,140 and depreciation and amortization of $112,473.
Working capital increased to $3,611,149 at June 30, 1997, as compared to
$2,745,385 at September 30, 1996. A portion of this increase was due to the
change in the classification of the Notes payable to the Bank of $667,500 from
current to long term liabilities. (See Financial Statements Note 3)
Accounts receivable as of June 30, 1997, decreased to $1,128,621 from
$1,348,484 at September 30, 1996. The days sales outstanding in accounts
receivable decreased to 37 days at June 30, 1997, as compared to 62 days at
September 30, 1996.
Inventories as of June 30, 1997, increased to $1,529,264 as compared to
$1,048,400 at September 30, 1996. The number of months material costs of sales
in inventory at June 30, 1997, increased to 4.0 months as compared to 3.8 months
at September 30, 1996. The inventory increase was primarily related to new
product materials.
Accounts payable as of June 30, 1997, increased to $994,561 as compared to
$971,913 at September 30, 1996. The number of days in accounts payable
decreased to 49 days at June 30, 1997, as compared to 67 days as of September
30, 1996.
Capital expenditures, including the non-cash capital lease obligation of
$235,000, in the first nine months of fiscal year 1997 totaled $514,649 and
consisted of Manufacturing Resources Planning System hardware and software
$353,671, Las Vegas showroom $81,799, and new product tooling and related
machinery/equipment $79,179.
14
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TIVOLI INDUSTRIES, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES.
(c) In April 1997 the Company issued warrants for 100,000 shares of
the Company's Common Stock to Hill Thompson Capital Markets. The
warrants are exercisable from a period beginning June 30, 1997 with
respect to 25,000 shares, December 31, 1997 with respect to a further
25,000, June 30, 1998 with respect to the remaining 50,000 shares and
ending with respect to all shares on December 31, 2003. The exercise
price for all of these warrants is $1.78 per share. No underwriter or
placement agent was involved in the transaction. The sale was made in
reliance on Section 4(2) of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits
None
b) Reports on Form 8-K
None
15
<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: August 11, 1997 TIVOLI INDUSTRIES, INC.
/s/ Terrence C. Walsh
-------------------------------
Terrence C. Walsh
Chairman, Chief Executive Officer and
Director
/s/ Charles Kimmel
-------------------------------
Charles Kimmel
President and Chief Financial Officer
(Principal Financial and Accounting Officer)
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,802,686
<SECURITIES> 0
<RECEIVABLES> 1,128,621
<ALLOWANCES> 23,018
<INVENTORY> 1,529,264
<CURRENT-ASSETS> 4,980,099
<PP&E> 1,374,405
<DEPRECIATION> 629,589
<TOTAL-ASSETS> 6,555,184
<CURRENT-LIABILITIES> 1,368,950
<BONDS> 0
0
0
<COMMON> 3,938
<OTHER-SE> 4,342,455
<TOTAL-LIABILITY-AND-EQUITY> 6,555,184
<SALES> 2,800,598
<TOTAL-REVENUES> 2,800,598
<CGS> 1,605,261
<TOTAL-COSTS> 2,613,431
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,960
<INCOME-PRETAX> 176,207
<INCOME-TAX> 27,258
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 148,949
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
