<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSBA
AMENDMENT NO. 1 TO 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For Quarterly Period Ended December 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
Commission File Number: 1-13338
TIVOLI INDUSTRIES, INC.
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(Exact name of small business issuer as specifies 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
- --------------------------------------------------- ----------
(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 December 31, 1997
----- --------------------------------
<S> <C>
Common stock, $.001 par value 3,937,871
</TABLE>
<PAGE>
TIVOLI INDUSTRIES, INC.
INDEX
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements (Unaudited)
Balance Sheet December 31, 1997......................... 3
Statements of Operations
Three Months Ended December 31, 1997 and 1996........... 4
Statements of Cash Flows
Three Months Ended December 31, 1997 and 1996........... 5
Notes to Financial Statements........................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings....................................... 10
Item 2. Changes in Securities................................... 10
Item 3. Defaults upon Senior Securities......................... 10
Item 4 Submissions of Matters to a Vote of Security Holders.... 10
Item 5 Other Information....................................... 10
Item 6. Exhibits and Reports on Form 8-K........................ 10
Signatures............................................................. 11
2
<PAGE>
TIVOLI INDUSTRIES, INC.
BALANCE SHEET
DECEMBER 31,1997
(UNAUDITED)
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents $1,883,989
Accounts receivable, less allowance for doubtful accounts
of $79,482 1,405,270
Inventories 1,769,002
Prepaid expenses and other 439,783
----------
Total current assets 5,498,044
----------
Property and equipment:
Machinery and equipment 253,116
Furniture and fixtures 341,290
Tooling 301,877
Computer equipment and software 575,719
----------
1,472,002
Less: accumulated depreciation (714,805)
----------
Net property and equipment 757,197
----------
Goodwill, net of accumulated amortization of $141,122 518,416
Patents, net of accumulated amortization of $179,656 226,895
Deferred tax asset 127,400
Deposits and other 112,965
----------
$7,240,917
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,117,164
Accrued expenses 144,294
Income taxes payable 51,953
Current maturities of obligations under a capital lease 47,823
Current portion of notes payable to bank 71
----------
Total current liabilities 1,361,305
Notes payable to bank, net of current portion 667,500
Obligations under a capital lease, net of current portion 156,390
Deferred tax liability 154,933
Minority Interest 299,128
----------
Total liabilities 2,639,256
----------
Stockholders' equity:
Preferred stock, $.001 par value; 1,000,000 shares authorized,
none outstanding -
Common stock, $.001 par value; 10,000,000 shares authorized,
3,937,871 shares outstanding 3,938
Additional paid-in capital 4,406,747
Retained earnings 190,976
----------
Total stockholders' equity 4,601,661
----------
$7,240,917
==========
</TABLE>
3
<PAGE>
TIVOLI INDUSTRIES, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended December
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net sales $2,652,918 $1,896,092
Cost of sales 1,519,289 1,033,061
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Gross profit 1,133,629 863,031
Selling, general and administrative expenses 997,996 793,556
---------- ----------
Income from operations 135,633 69,475
Interest expense 3,534 895
Minority interest in net losses of consolidated
subsidiary (8,976)
Income before benefit (provision) for income
taxes 141,075 68,850
(Provision) benefit for income taxes (56,000) 1,972
---------- ----------
Net income $ 85,075 $ 70,552
========== ==========
Basic earnings per share (Note 2):
Earnings per share $ 0.02 $ 0.02
Weighted average shares 3,937,871 3,920,721
Diluted earnings per share (Note 2):
Earnings per share $ 0.02 $ 0.02
Weighted average shares 4,546,371 4,031,38
</TABLE>
4
<PAGE>
TIVOLI INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 85,075 $ 70,552
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 73,510 35,771
Change in allowance for doubtful accounts (7,518)
Minority Interest (8,976)
Deferred income taxes (41)
Warrants for the purchase of common stock
issued for services 15,000 -
Changes in operating assets and liabilities:
Accounts receivable 217,809 364,606
Inventories (55,449) (123,170)
Prepaid expenses and other (16,098) (2,066)
Accounts payable (12,241) (113,442)
Accrued expenses and other current liabilities (21,798) (25,223)
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Net cash provided by operating activities 269,314 206,987
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Cash flows from investing activities:
Deposits and other (32,479) 13,683
Capital expenditures (16,663) (246,203)
Patent expenditures 11,074
Investment by Minority Interest 286,494
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Net cash (used in) provided by investing activities 237,352 (221,446)
---------- ----------
Cash flows from financing activities:
Net borrowings under line of credit and notes
payable to bank (872) 19,373
Principal payments on capital lease obligations (11,525) -
---------- ----------
Net cash (used in) provided by financing activities (12,397) 19,373
---------- ----------
Net increase (decrease) in cash and cash equivalents 494,269 4,914
Cash and cash equivalents, beginning of period 1,389,720 1,692,928
---------- ----------
Cash and cash equivalents, end of period $1,883,989 $ 1,697842
========== ==========
</TABLE>
5
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TIVOLI INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
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, 1997 and 1996. The financial
statements and notes thereto should be read in conjunction with the audited
financial statements and notes and form 10-KSB for the year ended September 30,
1997.
The Company formed a jointly owned company with Targetti Sankey S.p.A during the
quarter ended December 31,1997. The accounts of the new entity, Targetti USA LLC
are consolidated with the accounts of the Company since the Company controls the
operations of Targetti USA LLC by virtue of the fact that the operating
agreement entitles the Company to designate two members of the three-member
Board of Directors of Targetti USA LLC.
NOTE 2 - NEW ACCOUNTING STANDARD
- --------------------------------
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).
The following table represents the reconciliation of Basic EPS to Diluted EPS:
<TABLE>
<CAPTION>
For the quarters ending December 31,
1997 1996
------------------------------- -------------------------------
Income Shares Per Share Income Shares Per Share
Amount Amount
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available to Shareholders $85,075 3,937,871 $0.02 $70,552 3,920,721 $0.02
Effect of Dilutive Securities
Warrants 185,000 18,334
Stock Options 423,500 92,333
--------- ---------
Diluted EPS
Income available to Shareholders $85,075 4,546,371 $0.02 $70,552 4,031,388 $0.02
------- --------- ----- ------- --------- -----
</TABLE>
Options to purchase 453,500 shares of Common Stock at prices between $2.80 and
$3.31 per share were outstanding during the period ending December 31, 1997.
Options to purchase 486,000 shares of Common Stock at prices between $2.80 and
$3.31 per share were outstanding during the period ending December 31, 1996.
These options were not included in the computation of diluted EPS because the
options' exercise price was greater than the average market price of the common
shares. These options which expire between May 10, 2004 and November 14, 2005
were still outstanding at December 31, 1997.
6
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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,
1997.
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 onward 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. The original joint venture, announced in November 1994,
consisted of a reciprocal license and distribution agreement between the Company
and Targetti in the U.S. market, and provided the Company's products to
Targetti's global network of 66 representatives, distributors and sales offices.
In November 1997, the scope of the joint venture was expanded with the formation
of a jointly owned Company in the U.S. - Targetti USA, LLC ("Targetti USA"), in
which the Company holds a 50% interest. Through this joint venture, Targetti
offers a wide range of product families, developed by Targetti, which broadens
and complements the Company's products.
In North America and Mexico, the Company's products are sold through 69
independent marketing representatives, and directly by the Company's personnel
to a large customer base consisting of electrical distributors, contractors,
owner representatives, hotels, showrooms, theater distributors and other end
users. The Company has an international subsidiary, Tivoli de Mexico, S.A. de
C.V., in Mexico City, Mexico, to support the Company's sales in Mexico and
Central America. The Company also has opened a sales support office and
demonstration center in Las Vegas, Nevada, to support the growth of the
casino/gaming and hospitality markets in North America and internationally.
The Company currently holds eight U.S. patents on mechanical features and
three U.S. patents on design features. The Company's product families lines
include low voltage tube lighting, linear lighting systems, accent and task
lighting, chandelier and light curtains, decorative ceiling systems, specialized
vehicular, marine and aircraft lighting, long life, low voltage lamps, energy
efficient fluorescent cove, low voltage linear cove, illuminated surveillance
system, electronic transformers, dimmers and circuit protection devices, and
furniture, cabinet and kiosk lighting. The products offered through the
Targetti USA joint venture include low voltage track lighting, low voltage open
frame and open conductor systems, illuminated sky lights, low voltage recessed
lighting fixtures, precision adjustable projectors, energy efficient compact
fluorescent ("CF") down-lights, decorative wall sconces, and a variety of
lighting accessories and options.
Since the acquisition of the Company in 1991, sales have consistently
trended upward, 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, $9,846,174 in fiscal 1997, and $2,652,918 in the first three months
of fiscal 1998. Management believes that the growth strategies and expenditures
made from acquisition through December 31, 1997 account for the strong annual
growth rate and provide an expanded foundation to support future Company growth.
7
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TIVOLI INDUSTRIES, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS - continued
-------------------------
Results of Operations - Three months Ended December 31, 1997 as Compared to
Three Months Ended December 31, 1996
Net sales of $2,652,918 for the first quarter of fiscal year 1998 were 40%
higher than net sales of $1,896,092 in the same period of the prior year. This
increase was attributed to new product introductions and successful
implementation of market penetration programs in the core markets of theater,
retail and casino gaming and expansion of the sales of products sold through
Targetti USA, LLC. The gross profit margin for the first quarter of the fiscal
year 1998 was 42.7% of net sales which was lower than the gross profit margin of
45.5% for the first quarter of fiscal year 1997. The first quarter of fiscal
year 1997 benefited from the capitalization of certain warehouse costs in
inventory.
Selling, general and administrative expenses for the first quarter of
fiscal 1998 decreased to 37.6% of net sales or $997,996 as compared to 41.9% or
$793,556 in the same quarter 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 increased efforts to control operating costs.
Operating profits for the first quarter of fiscal year 1998 increased to
$135,633 or 5.1% of net sales as compared to $69,475 or 3.7% of net sales in the
same quarter of fiscal year 1996.
Net interest expense for the first quarter of fiscal year 1998 was $3,534
and consisted of interest income of $15,516 on the investment of the proceeds of
IPO funds, less interest expense on the bank loan of $14,886 and capital lease
interest of $4,164. Net interest expense for the first quarter of fiscal year
1997 was $895 and was derived from interest income of $19,090 on the investment
of IPO funds less interest expense on the bank loan of $19,985.
The provision for income tax in the first quarter of fiscal year 1998 was
$56,000 and represented both federal and state income tax requirements. In the
same quarter of the prior fiscal year net operating loss carry forwards covered
both the federal and state income tax provisions.
As a result of the above factors, net income for the first quarter of
fiscal year 1998 was $85,075 or $0.02 per share as compared to net income of
$70,552 or $0.02 per share in the 1997 fiscal year.
8
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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 primary sources of cash during the first quarter of fiscal
year 1998 were funds generated through operations of $247,704 which consisted of
net income of $85,075, depreciation and amortization of $73,510, and net changes
in accounts receivable, inventory and accounts payable of $112,223. In addition,
Targetti Sankey S.P.A. contributed cash of $286,494 to the Targetti USA, LLC
partnership during the period.
Working capital increased to $4,145,715 at December 31, 1997, as compared
to $3,725,303 at September 30, 1997. A portion of this increase was due to the
cash contribution of $286,494 by Targetti Sankey S.P.A. referenced above.
Accounts receivable as of December 31, 1997, decreased to $1,414,246 from
$1,615,561 at September 30, 1997. The days sales outstanding in accounts
receivable decreased to 49 days at December 31, 1997, as compared to 59 days at
September 30, 1997.
Inventories as of December 31, 1997, increased to $1,769,002 as compared to
$1,691,943 at September 30, 1997. The number of months costs of sales in
inventory at December 31, 1997, decreased to 3.5 months as compared to 3.6
months at September 30, 1997.
Accounts payable as of December 31, 1997, decreased to $1,117,164 as
compared to $1,129,405 at September 30, 1997. The number of days in accounts
payable remained constant at 56 days at December 31,1997 and September 30, 1997.
Capital expenditures in the first three months of fiscal year 1998 totaled
$16,663 and consisted of new product tooling, and related machinery and
equipment.
The Company is currently assessing computer hardware and software
difficulties that may be experienced in connection with the so-called "Year
2000" problems. The Company currently relies upon computer hardware and software
systems from various third party vendors to manage critical functions of the
company. Internally generated software systems do not comprise a material
element of the Company's information technology. The Company is in the process
of securing from third party software and hardware vendors, including providers
of telephone services, certificates of compliance with Year 2000 issues for
currently installed systems that are material to the Company's operations. At
this time, the Company expects that its key information technology vendors will
be compliant with Year 2000 requirements. A failure by a third party vendor to
adequately address the Year 2000 issue would have a material adverse effect on
the Company. In addition, the magnitude of certain risks, for example those
associated with embedded chips, are unknown at this point, and could
nevertheless have a material adverse impact on the Company and other companies
in its industry.
9
<PAGE>
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.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
Bank agreement effective April 22, 1997.
b) Reports on Form 8-K
None
10
<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, 1998 TIVOLI INDUSTRIES, INC.
/S/ Terrence C. Walsh
---------------------------------------
Terrence C. Walsh
Chairman, Chief Executive Officer and
Director
/S/ Charles Kimmel
---------------------------------------
Charles Kimmel
President, Chief Operation Officer and
Chief Financial Officer
(Principal Financial and Accounting
Officer)
11
