<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, 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.
<TABLE>
<CAPTION>
Class Outstanding at March 31, 1997
----- --------------------------------
<S> <C>
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
</TABLE>
<PAGE>
TIVOLI INDUSTRIES, INC.
INDEX
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statement (Unaudited)
Balance Sheet March 31, 1997 . . . . . . . . . . . . . 3
Statements of Operations
Three Months Ended March 31, 1997 and 1996 . . . . . . 5
Statements of Operations
Six Months Ended March 31, 1997 and 1996 . . . . . . . 6
Statements of Cash Flows
Six Months Ended March 31, 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
March 31, 1997
TIVOLI INDUSTRIES, INC.
BALANCE SHEET
(UNAUDITED)
MARCH 31, 1997
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents $ 1,108,972
Accounts receivable, less allowance
for doubtful accounts of $13,018 1,915,496
Inventories 1,728,285
Prepaid expenses and other 595,905
-------------
Total current assets 5,348,658
Property and equipment
Machinery and equipment 286,266
Furniture and fixtures 676,161
Tooling 263,308
-------------
$ 1,225,735
Less accumulated depreciation (605,927)
-------------
Net property and equipment 619,808
-------------
Intangibles, net of accumulated
amortization of $264,652 (Note 2) 753,936
-------------
Deposits and other 115,086
-------------
$ 6,837,488
=============
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
TIVOLI INDUSTRIES, INC.
BALANCE SHEET - CONTINUED
(UNAUDITED)
MARCH 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
Current Liabilities:
Accounts payable $ 1,578,838
Accrued expenses and other current liabilities 170,827
Notes payable to bank (Note 3) 21,483
Capital lease obligation - Current (Note 4) 40,798
-------------
Total current liabilities 1,811,946
-------------
Long Term Liabilities
Capital lease obligation - Long term (Note 4) 178,199
Notes payable to Bank - Long term (Note 3) 667,500
-------------
Total long term liabilities 845,699
-------------
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, 3,920,921 shares outstanding 3,921
Additional paid-in capital 4,352,698
Accumulated deficit (181,670)
-------------
Total stockholders' equity 4,174,949
-------------
6,837,488
=============
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
TIVOLI INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net sales $ 2,564,005 $ 1,498,412
Cost of sales 1,597,911 866,925
------------ ------------
Gross profit 966,094 631,487
Selling, general and administrative
expenses 818,075 620,921
------------ ------------
Income from operations before
interest and benefit for income taxes 148,019 10,566
Interest (Income) - Bank (5,620) (5,970)
Income before benefit
for income taxes 153,639 16,536
Benefit for income taxes -0- (2,190)
------------ ------------
Net income $ 153,639 $ 18,726
============ ============
Net income per share $ 0.04 $ 0.00
============ ============
--------- ---------
Weighted average shares outstanding 3,920,921 3,920,921
============ ============
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
TIVOLI INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended March 31
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net sales $ 4,460,097 $ 2,907,046
Cost of sales 2,630,972 1,663,980
------------ ------------
Gross profit 1,829,125 1,243,066
Selling, general and administrative
expenses 1,611,631 1,182,741
------------ ------------
Income from operations before
interest and benefit for income taxes 217,494 60,325
Interest (Income) - Bank (4,725) (15,327)
------------ ------------
Income before benefit
for income taxes 222,219 75,652
Benefit for income taxes (1,972) (2,190)
------------ ------------
Net income $ 224,191 $ 77,842
============ ============
Net income per share $ 0.06 $ 0.02
============ ============
--------- ---------
Weighted average shares outstanding 3,920,921 3,920,921
============ ============
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
TIVOLI INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended March 31
-------------------------------
1997 1996
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 224,191 $ 77,842
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 72,284 113,699
Deferred income taxes (3,000)
Changes in operating assets and liabilities:
Accounts receivable, net (567,012) (79,829)
Inventories (679,885) (112,757)
Prepaid expenses and other (170,226) (156,568)
Accounts payable 606,925 86,088
Accrued expenses and other
current liabilities 44,157 9,081
------------ ------------
Net cash (used in) operating activities (469,566) (65,445)
------------ ------------
Cash flows from investing activities:
Deposits and other 4,056 (13,807)
Capital expenditures (Note 4) (130,979) (47,113)
Patent expenditures 11,073 (86,223)
------------ ------------
Net cash (used in) investing activities (115,850) (147,142)
------------ ------------
Cash flows from financing activities:
Net borrowings under line of credit and
notes payable to bank (Note 3) 17,460 70,331
Repayments under capital lease financing
(Note 4) (16,000)
------------ ------------
Net cash provided by financing activities 1,460 70,331
------------ ------------
Net decrease in cash and cash equivalents (583,956) (142,256)
------------ ------------
Cash and cash equivalents, beginning of period 1,692,928 1,971,779
------------ ------------
Cash and cash equivalents, end of period $ 1,108,972 $ 1,829,522
============ ============
</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, 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 March 31, 1997 consist of:
<TABLE>
<S> <C>
Goodwill $534,904
Patents 219,032
--------
$753,936
========
</TABLE>
3. Notes Payable to Bank
Notes payable to Bank at March 31, 1997 consist of:
<TABLE>
<S> <C>
Line of Credit: Long Term Liability (see below) $667,500
Note Collateralized by a Truck & a Forklift:
Current Liability 21,483
--------
$688,983
========
</TABLE>
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 March 31, 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 March 31, 1997, the Company
had approximately $82,500 available under this line of credit.
8
<PAGE>
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
six months ended March 31, 1997.
The future annual minimum lease payments under the capital lease are as
follows:
<TABLE>
<CAPTION>
Years Ending
September 30
------------
<S> <C>
1997 (6 months) $ 28,938
1998 57,876
1999 57,876
2000 57,876
2001 57,876
2002 4,823
--------
Total annual future minimum lease payments 265,265
Less : amount representing interest (46,268)
--------
Present value of net minimum lease payments 218,997
Less : current maturities (40,798)
--------
178,199
========
</TABLE>
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.
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 600 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, 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.
11
<PAGE>
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, $6,638,063 in
fiscal 1996 and $4,460,097 in the first six months of fiscal 1997. Management
believes that the growth strategies, investments and expenditures made from
acquisition through fiscal year-to-date March 31, 1997, have produced an annual
growth rate of approximately 39% and provide a base upon which the Company will
continue to grow.
Current Overview
Results of Operations - Three Months Ended March 31, 1997 as Compared to Three
- ------------------------------------------------------------------------------
Months Ended March 31, 1996.
- ----------------------------
Net sales of $2,564,005 for the second quarter of fiscal year 1997 were 71%
higher than net sales of $1,498,412 in the same period of the prior year. This
increase was attributed to the partial shipment of a large project order for a
national customer (previously announced). This order consisted of a package of
lighting products representing the Company's core lighting systems, internally
developed products and Targetti products. The gross profit margin for the
second quarter of the fiscal year 1997 was 37.7% of net sales as compared to
42.1% 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 second quarter of
fiscal 1997 decreased to 31.9% of net sales or $818,075 as compared to 41.4% or
$620,921 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 cost awareness programs which focused on
SG&A expense controls.
Operating profits for the second quarter of fiscal 1997 increased to
$148,019 as compared to $10,566 in the same quarter of the prior year.
Net interest income for the second quarter of fiscal year 1997 was $5,620
and consisted of interest income of $21,127 on the investment of the proceeds of
IPO funds less interest expense on the bank loan of $15,507. Net interest
income in the second quarter of fiscal year 1996 was $5,970 and was derived from
interest income of $21,944 on the investment of the IPO funds less interest
expense on the bank loan of $15,974.
As a result of the above factors, the net income for the second quarter of
fiscal 1997 improved to $153,639 or $0.04 per share as compared to net income of
$18,726 or $0.00 per share in the same period of the prior year.
12
<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, 1997 as Compared to Six
- --------------------------------------------------------------------------
Months Ended March 31, 1996.
- ----------------------------
Net sales of $4,460,097 for the first six months of fiscal year 1997 were
53% higher than net sales of $2,907,046 in the same period of the prior year.
This increase was stimulated by the partial shipment of a large project order
for a national customer as described in the above section, Results of Operations
- - Three Months Ended March 31, 1997, and by increasing demand for the Company's
new products. The gross profit margin for the first six months of fiscal year
1997 was 41.0% of net sales as compared to 42.8% 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 six months of
fiscal 1997 decreased to 36.1% of net sales or $1,611,631 as compared to 40.7%
or $1,182,741 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, increased cost effectiveness programs and a focus on control of
SG&A expenses.
Operating profits for the first six months increased to $222,219 as
compared to $75,652 in the same period of the prior year.
Net interest income for the first six months of fiscal year 1997 was $4,725
and consisted of interest income of $40,216 on the investment of the proceeds of
IPO funds less interest expense on the bank loan of $35,491. Net interest
income in the first six months of fiscal year 1996 was $15,327 and was derived
from interest income of $46,302 on the investment of the IPO funds less interest
expense on the bank loan of $30,975.
As a result of the above factors, the net income for the first six months
of fiscal 1997 improved to $224,191 or $0.06 per share as compared to net income
of $77,842 or $0.02 per share in the same period of the prior year.
13
<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
- ---------------------------------------------------
The Company's sources of cash during the first six months of the fiscal
year 1997 were funds generated through operations of $296,475, which was
composed of net income of $224,191 and depreciation and amortization of $72,284,
and a lease of $235,000 to finance the Manufacturing Resources Planning System.
Working capital increased to $3,536,712 at March 31, 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 March 31, 1997, increased to $1,915,496 from
$1,348,484 at September 30, 1996. This increase was due primarily to the
partial shipment of a large project order mentioned in the Results of Operations
section above which was shipped in March. The days sales outstanding in
accounts receivable increased to 68 days at March 31, 1997, as compared to 62
days at September 30, 1996.
Inventories as of March 31, 1997, increased to $1,728,285 as compared to
$1,048,400 at September 30, 1996. The number of months material costs of sales
in inventory at March 31, 1997, increased to 4.4 months as compared to 3.8
months at September 30, 1996. The inventory increase was primarily related to
components for the portion of the large project order which will be shipped in
April 1997 and to new product materials.
Accounts payable as of March 31, 1997, increased to $1,578,838 as compared
to $971,913 at September 30, 1996. The number of days in accounts payable
decreased to 59 days at March 31, 1997, as compared to 67 days as of September
30, 1996.
Expenditures for catalogs in the first six months of fiscal year 1997
totaled $158,949.
Capital expenditures in the first six months of fiscal year 1997 totaled
$365,977 and consisted of Manufacturing Resources Planning System hardware and
software $262,217, Las Vegas showroom $70,481, and new product tooling and
related machinery/equipment $33,279. (See Financial Statements Note 4)
14
<PAGE>
TIVOLI INDUSTRIES, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
(c) In February 1997 the Company issued warrants for 25,000 shares
of the Company's Common Stock to each of Steven J. Goodman and
Vincent Monte, directors of the Company. For each recipient, the
warrant is exercisable from a period beginning February 5, 1998
with respect to 12,500 shares and February 5, 1999 with respect to
the remaining 12,500 shares, and ending with respect to all shares
on February 4, 2002. The exercise price for all of these warrants
is $1.75 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
27 Financial Data Schedule
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: May 13, 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)
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,108,972
<SECURITIES> 0
<RECEIVABLES> 1,915,496
<ALLOWANCES> 13,018
<INVENTORY> 1,728,285
<CURRENT-ASSETS> 5,348,658
<PP&E> 1,225,735
<DEPRECIATION> 605,927
<TOTAL-ASSETS> 6,837,488
<CURRENT-LIABILITIES> 1,811,946
<BONDS> 0
0
0
<COMMON> 3,921
<OTHER-SE> 4,171,028
<TOTAL-LIABILITY-AND-EQUITY> 6,837,488
<SALES> 2,564,005
<TOTAL-REVENUES> 2,564,005
<CGS> 1,597,911
<TOTAL-COSTS> 2,415,986
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (5,620)
<INCOME-PRETAX> 153,639
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 153,639
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
