<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 December 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.
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(Exact name of small business issuer as specified in its charter)
California 95-2786709
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1513 East St. Gertrude Place, Santa Ana, California 92705
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(Address of principal executive offices) (Zip Code)
(714) 957-6101
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(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 December 31, 1996
----- --------------------------------
Common stock, $.001 par value 3,920,721
Class A Warrants to purchase Common Stock 1,362,150
Class B Warrants to purchase Common Stock 1,362,150
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TIVOLI INDUSTRIES, INC.
INDEX
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<CAPTION>
PART I - FINANCIAL INFORMATION Page No.
<S> <C>
Item 1. Financial Statements (Unaudited):
Balance Sheet December 31, 1996............................. 3
Statements of Operations
Three Months Ended December 31, 1996 and 1995............... 5
Statements of Cash Flows
Three Months Ended December 31, 1996 and 1995............... 6
Notes to Financial Statements............................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................... 12
Item 2. Changes in Securities....................................... 12
Item 3. Defaults upon Senior Securities............................. 12
Item 4. Submissions of Matters to a Vote of Security Holders........ 12
Item 5. Other Information........................................... 12
Item 6. Exhibits and Reports on Form 8-K............................ 12
Signatures................................................................. 13
</TABLE>
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
DECEMBER 31, 1996
TIVOLI INDUSTRIES, INC.
BALANCE SHEET
(UNAUDITED)
DECEMBER 31, 1996
12/31/96
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current Assets
Cash and cash equivalents $ 1,697,842
Accounts receivable, less allowance for
doubtful accounts of $15,599 983,878
Inventories 1,171,570
Prepaid expenses and other 427,745
-----------
Total current assets 4,281,035
-----------
Property and equipment
Machinery and equipment 291,482
Furniture and fixtures 565,609
Tooling 248,870
-----------
1,105,961
Less accumulated depreciation (585,937)
-----------
Net property and equipment 520,024
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Intangibles, net of accumulated amortization
of $235,762 (Note 2) 770,459
-----------
Deposits and other 105,459
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$ 5,676,977
===========
</TABLE>
See accompanying notes to financial statements.
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TIVOLI INDUSTRIES, INC.
BALANCE SHEET
(UNAUDITED)
DECEMBER 31, 1996
12/31/96
LIABILITIES AND STOCKHOLDERS' EQUITY
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<CAPTION>
<S> <C>
Current liabilities:
Accounts payable $ 858,471
Accrued expenses and other current liabilities 101,447
Notes payable to bank (Note 3) 690,896
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Total current liabilities 1,650,814
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Deferred income taxes 4,853
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Stockholders' equity
Preferred stock, $.001 par value; 1,000,000
shares authorized, none outstanding
Common stock, $.001 par value; 10,000,000
shares authorized, 3,920,721 shares outstanding 3,921
Additional paid-in capital 4,352,698
Accumulated deficit (335,309)
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Total stockholders' equity 4,021,310
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5,676,977
==========
</TABLE>
See accompanying notes to financial statements
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TIVOLI INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED DECEMBER 31
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1996 1995
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<S> <C> <C>
Net sales $ 1,896,092 $ 1,408,634
Cost of Sales 1,033,061 797,078
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Gross profit 863,031 611,556
Selling, general and administrative expenses 793,556 561,797
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Income from operations before interest
and benefit for income taxes 69,475 49,759
Interest (Income) Expense - Bank 895 (9,358)
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Income before benefit for income taxes 68,580 59,117
Benefit for income taxes 1,972 --
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Net income $ 70,552 $ 59,117
============ ============
Net income per share $ 0.02 $ 0.02
============ ============
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Weighted average shares outstanding 3,920,721 3,920,721
============ ============
</TABLE>
See accompanying notes to financial statements
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TIVOLI INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED DECEMBER 31
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1996 1995
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Cash flows from operating activities:
Net income $ 70,552 $ 59,117
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 35,771 55,251
Deferred income taxes (41)
Changes in operating assets and liabilities:
Accounts receivable, net 364,606 128,779
Inventories (123,170) (113,260)
Prepaid expenses and other (2,066) (40,631)
Accounts payable (113,442) (60,383)
Accrued expenses and other current liabilities (25,223) (8,600)
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Net cash provided by operating activities 206,987 20,273
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Cash flows from investing activities:
Deposits and other 13,683 (7,119)
Capital expenditures (236,203) (15,851)
Patent expenditures 11,074 (39,400)
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Net cash used in investing activities (221,446) (62,370)
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Cash flows from financing activities:
Net borrowings under line of credit and notes
payable to bank (Note 3) (19,373) 71,016
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Net cash provided by financing activities (19,373) 71,016
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Net increase in cash and cash equivalents 4,914 28,919
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Cash and equivalents, beginning of period 1,692,928 1,971,778
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Cash and equivalents, end of period $1,697,842 $2,000,697
============ ============
</TABLE>
See accompanying notes to financial statements
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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 ended December 31, 1996 and 1995.
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 December 31, 1996 consist of:
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<S> <C>
Goodwill $540,400
Patents 230,059
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$770,459
========
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3. NOTES PAYABLE TO BANK
Notes payable to Bank at December 31, 1996 consist of:
<TABLE>
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Line of Credit (see below) $667,500
Note Collateralized by a Truck & a Forklift 23,396
--------
$690,896
========
</TABLE>
On July 20, 1995, the Company refinanced its existing line of credit
agreement with a new lender, the Union Bank, Laguna Hills, California. The
agreement contains interest at the bank's prime rate (8.25% at 'December
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 December 31, 1996. At December 31, 1996, the Company had
approximately $82,500 available under this line of credit.
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TIVOLI INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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.
5. 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.
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TIVOLI INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussions 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 initialized
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 program, literature and
catalog development and its international reciprocal joint venture with Targetti
of Florence, Italy. This joint venture, originally announced in November of
1994, represents a key long term part of the Company's strategic plan. The
agreement establishes the Company as the exclusive licensee, distributor and
strategic partner for Targetti in the U.S. market, while providing 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 500 are active at any one
time.
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 and 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 initially introduced modified versions
of five 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. During the
third quarter of fiscal 1996, the Company introduced ten additional product
families from Targetti including recessed downlights, low voltage decorative
downlights, projectors, indirect and pendant units, will sconces and decorative
accent fixtures.
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TIVOLI INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED).
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 and $6,638,063
in fiscal 1996. Management believes that the growth strategies, investments and
expenditures made through fiscal year 1996 have produced this five year annual
growth rate of approximately 32% and will provide a base upon which the Company
will continue to grow.
CURRENT OVERVIEW
Results of Operations - Three Months Ended December 31, 1996 as Compared to
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Three Months Ended December 31, 1995.
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Net sales of $1,896,092 for the first quarter of fiscal year 1997 were 35%
higher than net sales of $1,408,634 in the same period of the prior year. This
increase was realized in all market segments including casino/gaming, theater
and specialty retail and was supported by sales of the new Targetti products.
The gross profit margin for the first quarter of the fiscal year 1997 was 45.5%
of net sales as compared to 43.4% of net sales for the same period of the prior
year. This increase was due to improved utilization of direct labor and
manufacturing support functions, and the capitalization of certain warehousing
costs in inventory (see "Financial Position, Capital Resources and Liquidity").
Selling, general and administrative expenses for the first quarter of
fiscal 1997 increased to 41.9% of net sales or $793,556 as compared to 39.9% or
$561,797 in the same quarter of the prior year. This increase was primarily due
to enhancements of the Las Vegas office and showroom, a slightly higher
commission rate on Targetti products and new product developments.
Operating profits for the first quarter increased to $69,475 as compared to
$49,759 in the same quarter of the prior year.
Net interest expense for the first quarter of fiscal year 1997 was $894 and
consisted of interest expense on the bank loan of $19,984 less interest income
of $19,090 on the investment of the proceeds of IPO funds. Net interest income
in the first quarter of fiscal year 1996 was $9,358 and was derived from
interest income of $24,358 on the investment of the IPO funds less interest
expense on the bank loan of $15,000.
As a result of factors mentioned above, the net income for the first
quarter of fiscal 1997 was $70,552 as compared to net income of $59,117 in the
same period of the prior year.
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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
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The Company's primary source of cash during the fiscal quarter of the
fiscal year 1997 were funds generated through operations of $206,987 which was
composed of $70,552 net income, depreciation and amortization of $35,771 and net
changes in accounts receivable, inventory and accounts payable of $127,994.
Working capital decreased to $2,630,221 at December 31, 1996, as compared
to $2,745,385 at September 30, 1996.
Accounts receivable as of December 31, 1996, decreased 30% to $938,878 from
$1,348,484 at September 30, 1996. The days sales outstanding in accounts
receivable declined to 47 days at December 31, 1996, as compared to 62 days at
September 30, 1996.
Inventories as of December 31, 1996, increased 12% to $1,171,570 as
compared to $1,048,400 at September 30, 1996. The number of months material
costs of sales in inventory at December 31, 1996, increased to 4.6 months as
compared to 3.8 months at September 30, 1996. The inventory increase was
primarily related to approximately $70,000 in stocking orders for overseas
sourced materials and new products received at the end of the quarter and the
capitalization of certain warehousing costs of $51,960 associated with the
handling of Targetti and other new products in inventory.
Accounts payable as of December 31, 1996, decreased 12% to $858,471 as
compared to $971,913 at September 30, 1996. The number of days in accounts
payable decreased to 53 days at December 31, 1996, as compared to 67 days as of
September 30, 1996.
Expenditures for catalogs in the three months of fiscal year 1997 totaled
$32,397.
Capital expenditures in the three months of fiscal year 1997 totaled
$246,203 and consisted of Manufacturing Resources Planning System hardware and
software $217,670, Las Vegas showroom $18,398, and new product tooling and
related machinery/equipment $10,135.
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TIVOLI INDUSTRIES, INC.
PART II. OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES.
Recent Sales of Unregistered Securities
In December 1996 the Company issued a warrant for 25,000 shares
of the Company's Common Stock to Gerald Morris, a director of the
Company, as compensation for certain services provided in
evaluating joint venture opportunities. The warrant is
exercisable at any time until December 5, 1998, at an exercise
price of $1.56 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
</TABLE>
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<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: February 10, 1997 TIVOLI INDUSTRIES, INC.
/s/ TERRENCE C. WALSH
----------------------------------
Terrence C. Walsh
President, Chief Executive Officer
and Director
/s/ VINCENT F. MONTE
----------------------------------
Vincent F. Monte
Director and Chief Financial
Officer (Principal Financial
and Accounting Officer)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,697,842
<SECURITIES> 0
<RECEIVABLES> 983,878
<ALLOWANCES> 15,599
<INVENTORY> 1,171,570
<CURRENT-ASSETS> 4,281,035
<PP&E> 1,105,961
<DEPRECIATION> 585,937
<TOTAL-ASSETS> 5,676,977
<CURRENT-LIABILITIES> 1,650,814
<BONDS> 0
0
0
<COMMON> 3,921
<OTHER-SE> 4,017,389
<TOTAL-LIABILITY-AND-EQUITY> 5,676,977
<SALES> 1,896,092
<TOTAL-REVENUES> 1,896,092
<CGS> 1,033,061
<TOTAL-COSTS> 1,826,617
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 895
<INCOME-PRETAX> 68,580
<INCOME-TAX> (1,972)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,552
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
