<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, 1999
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.
- --------------------------------------------------------------------------------
(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 [_]
State the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 20, 1999
----- -----------------------------
Common stock, $.001 par value 1,236,723
<PAGE>
TIVOLI INDUSTRIES, INC.
INDEX
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet at March 31, 1999. . . . . . 3
Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and 1998. . . . . . . 4
Consolidated Statements of Operations for the
Six Months Ended March 31, 1999 and 1998. . . . . . . . 5
Consolidated Statements of Cash Flows for the
Six Months Ended March 31, 1999 and 1998. . . . . . . . 6
Notes to Consolidated 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 . . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2
<PAGE>
TIVOLI INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(UNAUDITED)
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents $1,431,170
Accounts receivable, less allowance for doubtful accounts
of $79,482 1,989,732
Inventories 1,696,149
Prepaid expenses and other 573,599
----------
Total current assets 5,690,650
----------
Property and equipment:
Machinery and equipment 928,219
Furniture and fixtures 281,995
Tooling 354,378
----------
Total property and equipment 1,564,592
Less: accumulated depreciation (946,811)
----------
Net property and equipment 617,781
----------
Goodwill, net of accumulated amortization of $168,603 490,935
Patents, net of accumulated amortization of $188,241 103,901
Deferred tax asset 105,518
Deposits and other 186,248
----------
Total Assets $7,195,033
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,448,024
Accrued expenses 322,728
Current maturities of obligations under a capital lease 52,993
----------
Total current liabilities 1,823,745
Bank line of credit 823,677
Obligations under a capital lease, net of current portion 90,123
Deferred tax liability 133,051
Minority Interest 160,271
----------
Total liabilities 3,030,867
----------
Stockholders' equity:
Preferred stock, $.001 par value; 1,000,000 shares
authorized, none outstanding -
Common stock, $.001 par value; 10,000,000 shares
authorized, 1,236,724 shares outstanding 3,710
Additional paid-in capital 4,341,227
Retained earnings (180,771)
----------
Total stockholders' equity 4,164,166
----------
Total Liabilities and Shareholders Equity $7,195,033
==========
</TABLE>
3
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1999 1998
------------ -------------
<S> <C> <C>
Net sales $2,864,733 $2,460,003
Cost of sales 1,527,078 1,486,684
---------- ----------
Gross profit 1,337,655 973,319
Selling, general and administrative expenses 1,114,722 884,576
---------- ----------
Income from operations 222,933 88,743
Other income (expense)
Interest expense (21,199) (19,461)
Interest income 11,965 15,874
Foreign currency exchange gain 41,578 5,791
---------- ----------
Total other income (expense) 32,344 2,204
Minority interest in net (income) losses of
consolidated subsidiary (50,574) 20,806
---------- ----------
Income before provision for income taxes 204,703 111,753
Provision for income taxes 3,100 45,000
---------- ----------
Net income $ 201,603 $ 66,753
========== ==========
Basic earnings per share (Note 2):
Earnings per share $ 0.16 $ 0.05
Weighted average shares 1,244,030 1,312,624
Diluted earnings per share (Note 2):
Earnings per share $ 0.16 $ 0.05
Weighted average shares 1,244,030 1,335,457
</TABLE>
4
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended March 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Net sales $5,508,574 $5,112,921
Cost of sales 3,023,099 3,005,973
---------- ----------
Gross profit 2,485,475 2,106,948
Selling, general and administrative expenses 2,121,344 1,882,572
---------- ----------
Income from operations 364,131 224,376
Other income (expense)
Interest expense (44,660) (38,511)
Interest income 23,263 31,390
Foreign currency exchange gain 41,578 5,791
---------- ----------
Total other income (expense) 20,181 (1,330)
Minority interest in net (income) losses of
consolidated subsidiary (40,740) 29,782
---------- ----------
Income before provision for income taxes 343,572 252,828
Provision for income taxes 3,100 101,000
---------- ----------
Net income $ 340,472 $ 151,828
========== ==========
Basic earnings per share (Note 2):
Earnings per share $ 0.27 $ 0.12
Weighted average shares 1,265,469 1,312,624
Diluted earnings per share (Note 2):
Earnings per share $ 0.27 $ 0.11
Weighted average shares 1,265,469 1,346,486
</TABLE>
5
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended March 31
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 340,472 $ 151,828
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 125,514 147,012
Change in allowance for doubtful accounts 25,214 (2,832)
Minority Interest in net income / (losses)
of consolidated subsidiary 40,740 (29,782)
Warrants for the purchase of common stock
issued for services - 15,000
Changes in operating assets and liabilities:
Accounts receivable (576,911) (139,043)
Other receivable - (250,000)
Inventories 161,716 (137,877)
Prepaid expenses and other 34,615 (42,694)
Accounts payable 71,769 (127,921)
Accrued expenses and other current liabilities 39,204 71,026
---------- ----------
Net cash (used in) provided by operating activities 262,333 (345,283)
---------- ----------
Cash flows from investing activities:
Deposits and other (17,675) (27,979)
Capital expenditures (32,980) (67,350)
Investment in minority interest 286,494
---------- ----------
Net cash used in investing activities (50,655) 191,165
---------- ----------
Cash flows from financing activities:
Net borrowings under line of credit and notes payable
to bank (10,000) (943)
Stock repurchase (108,109)
Principal payments on capital lease obligations (25,038) (23,233)
---------- ----------
Net cash (used in) provided by financing activities (143,147) (24,176)
---------- ----------
Net increase (decrease) in cash and cash equivalents 68,531 (178,294)
Cash and cash equivalents, beginning of period 1,362,639 1,389,720
---------- ----------
Cash and cash equivalents, end of period $1,431,170 $1,211,426
========== ==========
</TABLE>
6
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED 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 March 31, 1999 and 1998. 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,
1998.
NOTE 2 - EARNINGS PER SHARE
- ---------------------------
Effective December 31, 1997, the Company adopted statement of Financial
Accounting Standards No. ("Statement") No.128, "Earnings Per Share". In
accordance with Statement 128 , primary earnings per share have been replaced
with basic earnings per share, and fully diluted earnings per share have been
replaced with diluted earnings per share which includes potentially dilutive
securities such as outstanding stock options and warrants. Prior periods have
been restated to conform to Statement 128.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
For the quarters ending March 31,
1999 1998
---------------------------- ----------------------------
Income Shares Per Share Income Shares Per Share
Amount Amount
-------- --------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available to
Shareholders $201,603 1,244,030 $0.16 $66,753 1,312,624 $0.05
Effect of Dilutive Securities
Warrants 3,493
Stock Options 19,340
---------
Diluted EPS
Income available to
Shareholders $201,603 1,244,030 $0.16 $66,753 1,312,624 $0.05
-------- --------- ----- ------- --------- -----
</TABLE>
7
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - EARNINGS PER SHARE - CONT.
- -----------------------------------
<TABLE>
<CAPTION>
For the six month period ending March 31,
1999 1998
---------------------------- ----------------------------
Income Shares Per Share Income Shares Per Share
Amount Amount
-------- --------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available to
Shareholders $340,472 1,265,469 $0.27 $151,828 1,312,624 $0.12
Effect of Dilutive Securities
Warrants 7,086
Stock Options 26,776
---------
Diluted EPS
Income available to
Shareholders $340,472 1,265,469 $0.27 $ 85,075 1,346,486 $0.11
-------- --------- ----- -------- --------- -----
</TABLE>
Options to purchase 174,500 shares of Common Stock at prices between $4.125 and
$11.25 per share were outstanding at March 31, 1998, but were not included in
the computation of diluted earnings per share. Options to purchase 359,000
shares of Common Stock at prices between $2.25 and $11.25 per share were
outstanding at March 31, 1999, but were not included in the computation of
diluted earnings per share. These options were excluded from the computation of
diluted EPS because the options' exercise price was greater than the average
market price of the common shares during the respective periods, and therefore
the effect would be antidilutive.
NOTE 3 - NOTES PAYABLE TO BANK
- --------------------------------
On May 10, 1999, the Company renewed its existing line of credit agreement with
Union Bank of California maintaining the borrowing base at $1,250,000. The
agreement has an expiration date of March 1, 2001. The renewal agreement
contains interest at the bank's Reference Rate (7.75% at March 31,1999) plus 1%
per annum. The terms of the new agreement provide for borrowings of up to the
lessor of $1,250,000 or the aggregate of 80% of eligible accounts receivable
plus 50% of eligible inventory up to $400,000. At March 31, 1999, the Company
had approximately $532,500 available under this line of credit.
The renewal agreement also provides an additional line of credit of $250,000 to
be used for fixed asset purchases. This part of the agreement contains interest
at the bank's Reference Rate (7.75% at March 31, 1999) plus 1.0% per annum. The
Company may borrow, repay and re-borrow amounts up to $250,000, at any time
prior to March 3, 2000. The Company will then repay the balance by monthly
installments through March 1, 2004. At March 31, 1999, the Company had not
borrowed any amounts under this agreement.
8
<PAGE>
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,
1998.
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 Sankey
S.p.A. of Florence, Italy. In November 1997, the joint venture was expanded with
the formation of a jointly owned Company in the U.S., Targetti USA., LLC.
Through this joint venture, Targetti USA, LLC offers a wide range of product
families, developed by Targetti Sankey S.p.A., which broadens and complements
the Company's products.
Results of Operations - Three months Ended March 31, 1999 as Compared to Three
Months Ended March 31, 1998
Net sales of $2,864,733 for the second quarter of fiscal year 1999 were 16%
higher than net sales of $2,460,003 in the same period of the prior year. This
increase was stimulated by new product introductions and increased market
penetration.
The gross profit for the second quarter of fiscal year 1999 was $1,337,655
or 46.7% of net sales compared to gross profit of $973,319 or 39.6% for the
second quarter of fiscal year 1998. This increase was due to cost-reduction
programs implemented during the three month period ending March 31, 1999 and a
favorable product mix.
Selling, general and administrative expenses for the second quarter of
fiscal 1999 were 38.9% of net sales or $1,114,722 as compared to 36.0% or
$884,576 in the same quarter of the prior year. Prior year SG & A included a
one-time payment to the Company of $250,000 for settlement of a trademark
dispute. Without this one-time payment, SG & A expenses in the second fiscal
quarter of 1998 would have been 46% of net sales.
Operating profits for the second quarter of fiscal year 1999 of $222,933 or
7.8% of net sales improved from $88,743 or 3.6% of net sales in the same quarter
of fiscal year 1998.
Interest expense for the second quarter of fiscal year 1999 was $21,199 and
consisted of interest expense on the bank loan of $17,440 and capital lease
interest of $3,759. Interest income of $11,965 represents interest received on
bank deposits. Interest expense for the second quarter of fiscal year 1998 was
$19,461 and was derived from interest expense on the bank loan of $15,518 and
capital lease interest of $3,943. Interest income was $15,874 received on bank
deposits.
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS - continued
- ---------------------------------
An unrealized foreign currency exchange gain of $ 41,578 was generated
during the second quarter of fiscal 1999 on an account payable balance
denominated in Italian Lire. This compares to an unrealized gain of $5,791 in
the second quarter of the prior fiscal year.
The provision for income tax in the second quarter of fiscal year 1999 was
$3,100 and represented 1997 LLC fees and tax. Net operating loss carry forwards
covered both the federal and state income tax provisions. The provision for
income tax in the second quarter of fiscal year 1998 was $45,000 and represented
both federal and state income tax requirements.
Minority interest in net income of the consolidated subsidiary was $50,574
in the second quarter of fiscal year 1999 compared to the minority interest in
net loss of the consolidating subsidiary of $20,806 in the second quarter of the
prior fiscal year. This minority interest represents 50% of the net income or
loss generated by Targetti USA, LLC.
As a result of the above factors, net income for the second quarter of
fiscal year 1999 was $201,603 or $0.16 per share as compared to net income of
$66,753 or $0.05 per share in the second quarter of fiscal year 1998.
Results of Operations - Six months Ended March 31, 1999 as Compared to Six
Months Ended March 31, 1998
Net sales of $5,508,574 for the first six months of fiscal year 1999 were
8% higher than net sales of $5,112,921 in the same period of the prior year.
This increase was stimulated by new product introductions and increased market
penetration.
The gross profit for the first six months of fiscal year 1999 was
$2,485,475 or 45.1% of net sales compared to gross profit of $2,106,948 or 41.2%
for the same period of the prior fiscal year.. This increase was due to cost-
reduction programs implemented during the six month period ending March 31, 1999
and a favorable product mix.
Selling, general and administrative expenses for the first six months of
fiscal 1999 increased to 38.5% of net sales or $2,121,344, as compared to 36.8%
or $1,882,572 in the same period of the prior year. Prior year SG & A included a
one-time payment to the Company of $250,000 for settlement of a trademark
dispute. Without this one-time payment last year, SG & A expenses in the current
six month period would have been substantially the same as in the corresponding
period of the prior year.
Operating profits for the first six months of fiscal year 1999 of $364,131
or 6.6% of net sales improved from $224,376 or 4.4% of net sales in the same
period of fiscal year 1998.
Interest expense for the first six months of fiscal year 1999 was $44,660
and consisted of interest expense on the bank loan of $36,562 and capital lease
interest of $8,098. Interest income of $23,263 represents bank interest received
on investments. Interest expense for the same period of fiscal year 1998 was
$38,511 and was derived from interest expense on the bank loan of $30,404 and
capital lease interest of $8,107. Interest income was $31,390 represents bank
interest received on investments.
An unrealized foreign currency exchange gain of $41,578 was generated
during the first six months of fiscal 1999 on an account payable balance
denominated in Italian Lire. This compares to an unrealized gain of $5,791 in
the same period of the prior fiscal year.
10
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS - continued
- ---------------------------------
The provision for income tax in the second quarter of fiscal year 1999 was
$3,100 and represented 1997 LLC fees and tax. Net operating loss carry forwards
covered both the federal and state income tax provisions. The provision for
income tax in the same period of fiscal year 1998 was $101,000 and represented
both federal and state income tax requirements.
Minority interest in net income of the consolidated subsidiary was $40,740
in the first six months of fiscal year 1999 compared to the minority interest in
net loss of the consolidating subsidiary of $29,782 in the same period of the
prior fiscal year. This minority interest represents 50% of the net income or
loss generated by Targetti USA LLC.
As a result of the above factors, net income for the first six months of
fiscal year 1999 was $340,472 or $0.27 per share as compared to net income of
$151,828 or $0.12 per share in the same period of fiscal year 1998.
Financial Position, Capital Resources and Liquidity
The Company's primary source of cash during the first six months of fiscal
year 1999 were funds provided by operations of $262,333, which consisted of net
income of $340,472, depreciation and amortization of $125,514, and a decrease in
inventories of $161,716, offset by increased accounts receivables of $576,911.
On August 6, 1998 the Company announced that its Board of Directors had
approved the repurchase of up to an aggregate of 250,000 shares of its Common
Stock. During the first six months of fiscal 1999 the Company purchased 180,700
shares at a total cost of $108,109. The total shares purchased to date at March
31, 1999 is 227,700 at a total cost of $137,380.
The above factors contributed to a net increase in cash of $68,531 during
the first six months of fiscal year 1999.
Working capital increased to $3,866,905 at March 31, 1999, as compared to
$3,555,994 at September 30, 1998.
Accounts receivable as of March 31, 1998, increased to $1,989,732 from
$1,438,036 at September 30, 1998. The days sales outstanding in accounts
receivable increased to 63 days at March 31, 1999, which as compared to 57 days
at September 30, 1998. Additional resources are being applied to the cash
collection activity in order to improve collections performance.
Inventories as of March 31, 1999, decreased to $1,696,149 as compared to
$1,857,865 at September 30, 1998. The number of months costs of sales in
inventory at March 31, 1999, decreased to 3.4 months as compared to 4.0 months
at September 30, 1998. The improvement is the result of inventory reduction
programs implemented in the latter quarters of the prior fiscal year.
Accounts payable as of March 31, 1999, increased to $1,448,024 as compared
to $1,376,254 at September 30, 1998. The number of days in accounts payable
increased from 55 days at September 30, 1998, to 67 days at March 31, 1998.
Capital expenditures in the first six months of fiscal year 1999 totaled
$32,980 and consisted of new product tooling, and related machinery and
equipment.
11
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS - continued
- ---------------------------------
"Year 2000" Requirements
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 has identified its manufacturing and financial
planning software as being most critical. The manufacturing and financial
planning software was purchased and installed in fiscal year ending September
30, 1997. The Company has received information from the vendor of this software
indicating that the software will properly handle dates for the year 2000 and
beyond. In addition, the Company currently relies upon computer hardware and
software systems from various third party vendors to manage other 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. A
failure by a third party vendor to adequately address the Year 2000 issue could
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. The Company does not have more than 10% of
its revenue with any one customer. Therefore, the financial exposure to the
Company of the failure of any one customer to be Year 2000 compliant is limited.
Should a number of customers not be Year 2000 compliant , or should a number the
Company's customers be negatively impacted by Year 2000 problems, the negative
consequences to the Company's customers could have a material adverse effect on
the Company's business, financial position, and results of operation. The costs
to become Year 2000 compliant and to obtain certificates from third party
vendors is not material to the Company. When its internal reviews and external
surveys are complete, the Company will prepare contingency plans to prepare for
problems that may reasonably be expected to arise. However, there can be no
assurance that any such plans will prevent Year 2000 problems which may have a
material adverse impact on the Company's business, financial position and
results of operation.
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.
(a) The Annual Meeting of Shareholders of Tivoli Industries, Inc.
was held on March 17, 1999.
(b) The matters voted upon at the meeting and the voting of
shareholders with respect thereto are as follows:
(b1) The election of Terence C. Walsh, Vincent F. Monte,
Gerald E. Morris, Peter J. Shaw and Gordon C. Westerling to the Board of
Directors to hold office until the next annual meeting of shareholders and until
his successor is elected and has qualified, or until such director's earlier
death, resignation or removal:
<TABLE>
<CAPTION>
Name Votes For Votes Withheld
<S> <C> <C>
Terrence C. Walsh 3,204,383 290,989
Vincent F. Monte 3,417,172 78,200
Gerald E. Morris 3,417,172 78,200
Peter J. Shaw 3,408,372 87,000
Gordon C. Westerling 3,416,972 78,400
</TABLE>
12
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. (cont.)
(b2) Approval of a reverse stock split whereby the Company would
issue one (1) new share of the Company's Common Stock in exchange for three (3)
shares of the Company's outstanding Common Stock.
For: 3,311,197 Against: 174,975 Abstain/Non-Votes: 9,200
(b3) Approval of the reincorporation of the Company in the State of
Delaware from the State of California.
For: 2,166,866 Against: 84,589 Abstain/Non-Votes: 1,243,923
(b4) Ratification of the selection of Corbin & Wertz as independent
auditors of the Company for its fiscal year ending September 30, 1999.
For: 3,427,142 Against: 56,600 Abstain: 11,630
Based on the voting results, each of the directors nominated was
elected, the Company's 1-for-3 reverse stock split, the Company's
reincorporation in the State of Delaware, and the ratification of Corbin & Wertz
as independent auditors of the Company were approved.
Item 5. Other Information.
A 1-for-3 reverse stock split of the Company's common stock was
effected as of the close of business on March 26, 1999.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits Index
Exhibit No Description
---------- -----------
10.1 Amended and restated Line of Credit agreement with Union
Bank of California as at March 31, 1999.
27 Financial Data Schedules
b) Reports on Form 8-K None
13
<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 12, 1999 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)
14
<PAGE>
EXHIBIT 10.1
UNION BANK OF CALIFORNIA
BUSINESS LOAN AGREEMENT
This Business Loan Agreement (this "Agreement") is entered into as of the date
set forth below between Union Bank of California. N.A. ("Bank") and the
undersigned ("Borrower") with respect to each and every extension of credit
(whether one or more, collectively referred to as the "Loan") from Bank to
Borrower. In consideration of the Loan, Bank and Borrower agree to the
following terms and conditions.
1. THE LOAN
1.1 The Note. The Loan is evidenced by one or more promissory notes or
other evidences of indebtedness, including each amendment, extension,
renewal or replacement thereof, which are incorporated herein by this
reference (whether one or more, collectively referred to as the "Note").
1.2 Revolving Loan Clean-up Period. For any portion of the Loan which is a
revolving loan, at least N/A consecutive days during each 12 month
---
period, the principal amount outstanding under such revolving loan must
be zero.
1.3 Term Loan Availability Period. For any portion of the Loan which is a
term loan, loan proceeds shall be available for disbursement from N/A,
---
through _____, ____, only.
1.4 Fee. Borrower shall pay to Bank a fee of $N/A.
---
1.5 Collateral. The payment and performance of all obligations of Borrower
under the Loan Documents are and shall be during the term of the Loan
secured by a perfected security interest in such real or personal
property collateral as is required by Bank and each security interest
shall rank in first priority unless otherwise specified in writing by
Bank.
1.6 Guaranty. The payment and performance of all obligations of Borrower
under the Loan Documents are and shall be during the term of the Loan
guaranteed by N/A.
---
1.7 Subordination. Certain other obligations of Borrower are and shall be
during the term of the Loan subordinated to the repayment of the Loan
and all other obligations of Borrower to Bank, pursuant to one or more
subordination agreement(s) in favor of Bank executed and delivered by
N/A.
---
2. CONDITIONS TO AVAILABILITY OF THE LOAN. Before Bank is obligated to disburse
all or any portion of the Loan, Bank must have received (a) the Note and
every other document required by Bank in connection with the Loan, each of
which must be in form and substance satisfactory to Bank (together with this
Agreement, referred to as the "Loan Documents"), (b) confirmation of the
perfection of its security interest in any collateral for the Loan, and
(c) payment of any fee required in connection with the Loan.
3. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants (and each
request for a disbursement of the proceeds of the Loan shall be deemed a
representation and warranty made on the date of such request) that:
3.1 Borrower is an individual or Borrower is duly organized and existing
under the laws of the state of its organization and is duly qualified to
conduct business in each jurisdiction in which its business is
conducted;
3.2 The execution, delivery and performance of the Loan Documents executed
by Borrower are within Borrower's power, have been duly authorized, are
legal, valid and binding obligations of Borrower, and are not in
conflict with the terms of any charter, bylaw, or other organization
papers of Borrower or with any law, indenture, agreement or undertaking
to which Borrower is a party or by which Borrower is bound or affected;
3.3 All financial statements and other financial information submitted by
Borrower to Bank are true and correct in all material respects, and
there has been no material adverse change in Borrower's financial
condition since the date of the latest of such financial statements;
<PAGE>
3.4 Borrower is properly licensed and in good standing in each state in
which Borrower is doing business, and Borrower has complied with all
laws and regulations affecting Borrower, including without limitation,
each applicable fictitious business name statute;
3.5 There is no event which is, or with notice or lapse of time or both
would be, an Event of Default (as defined in Article 5);
3.6 Borrower is not engaged in the business of extending credit for the
purpose of, and no part of the Loan will be used, directly or
indirectly, for purchasing or carrying margin stock within the meaning
of Federal Reserve Board Reg. U; and
3.7 Borrower is not aware of any fact, occurrence or circumstance which
Borrower has not disclosed to Bank in writing which has, or could
reasonably be expected to have, a material adverse effect on Borrower's
ability to repay the Loan or perform its obligations under the Loan
Documents.
4. COVENANTS. Borrower agrees, so long as the Loan or any commitment to make
any advance under the Loan is outstanding and until full and final payment of
all sums outstanding under any Loan Document, that Borrower will:
4.1 Maintain:
(a) Working Capital of at least $N/A (As used herein, "Working
---
Capital" means the excess of current assets over current liabilities.
"Current Assets" means cash, marketable securities, accounts
receivable and inventory);
(b) A ratio of current assets to current liabilities of at least
N/A:1.00;
---
(c) A quick ratio of cash, accounts receivable and marketable
securities to current liabilities of at least N/A:1.00;
---
(d) Tangible Net Worth of at least $ 3,000,000.00 (As used herein,
------------
"Tangible Net Worth" means net worth increased by indebtedness of
Borrower subordinated to Bank and decreased by patents, licenses,
trademarks, trade names, goodwill and other similar intangible assets,
organizational expenses, and monies due from affiliates (including
officers, shareholders and directors));
(e) A ratio of total liabilities to Tangible Net Worth of not greater
than N/A:1.00 (As used herein "Tangible Net Worth" means net worth
---
increased by indebtedness of Borrower subordinated to Bank and
decreased by patents, licenses, trademarks, trade names, goodwill and
other similar intangible assets, organizational expenses, and monies
due from affiliates (including officers, shareholders and directors));
(f) A profit after taxes of not less than $ N/A, to be measured as of
---
the end of each fiscal ____ of Borrower for the ______ period
immediately preceding the date of measurement;
(g) A ratio of Cash Flow to Debt Service of at least N/A:1:00.
---
Compliance with this subsection to be measured as of the end of each
fiscal ______ of Borrower. (As used herein, "Cash Flow" means net
profit after taxes, to which depreciation, amortization and other non-
cash expenses are added for the _______ month period immediately
preceding the date of calculation, and "Debt Service" means that
portion of long-term liabilities and capital leases coming due within
______ months after the date of calculation); and
(h) N/A
---
All accounting terms used in this Agreement shall have the definitions given
them by generally accepted accounting principles, unless otherwise defined
herein.
4.2 Give written notice to Bank within 15 days of the following:
(a) Any litigation or arbitration proceeding affecting Borrower where
the amount in controversy is $ N/A or more;
---
(b) Any material dispute which may exist between Borrower and any
government regulatory body or law enforcement body;
(c) Any Event of Default or any event which, upon notice, or lapse of
time, or both, would become an Event of Default;
<PAGE>
(d) Any other matter which has resulted or is likely to result
in a material adverse change in Borrower's financial condition or
operation; and
(e) Any change in Borrower's name or the location of Borrower's
principal place of business, or the location of any collateral for
the Loan, or the establishment of any new place of business or the
discontinuance of any existing place of business.
4.3 Furnish to Bank an income statement, balance sheet, and statement of
retained earnings, with supportive schedules ("Financial Statement"),
and any other financial information requested by Bank, prepared in
accordance with generally accepted accounting principles and in a form
satisfactory to Bank as follows:
(a) Within sixty (60) days after the close of each fiscal three-
--------- -------------
month period, Borrower's Financial Statement as the close of such
------------
period;
(b) Within one hundred twenty (120) days after the close of each
-----------------------
fiscal year, a copy of Borrower's annual Financial Statement
prepared by an independent certified public accountant on a(n)
------------------------------------------
audited basis. Any independent certified public accountant who
-------
prepares Borrower's Financial Statement shall be selected by
Borrower and reasonably satisfactory to Bank;
(c) Annually, upon request, a copy of each guarantor's annual
Financial Statement;
(d) If a Borrowing Base Addendum is made part of this Agreement,
within twenty (20) days after each calendar month-end, in form
----------
required by Bank, a copy of Borrower's monthly accounts receivable
and accounts payable agings, a report of Borrower's inventory, and
a certificate of compliance with the borrowing base described in
said Borrowing Base Addendum, which certificate shall accurately
report the collateral in form required by Bank; and
(e) Promptly upon request, any other financial information
requested by Bank.
4.4 Furnish to Bank, on Bank's request, a copy of Borrower's and each
guarantor's most recently filed federal income tax return with all
accompanying schedules.
4.5 Pay or reimburse Bank for all costs, expenses and fees incurred by
Bank in preparing and documenting this Agreement and the Loan, and
all amendments and modifications thereof, including but not limited
to all filing and recording fees, costs of appraisals, insurance
and attorney's fees, including the reasonable estimate of the
allocated costs and expenses of in-house legal counsel and staff.
4.6 Maintain and preserve Borrower's existence, present form of
business and all rights, privileges and franchises necessary or
desirable in the normal course of its business, and keep all of
Borrower's properties in good working order and condition.
4.7 Maintain and keep in force insurance with companies acceptable to
Bank and in such amounts and types, including without limitation
fire and public liability insurance, as is usual in the business
carried on by Borrower, or as Bank may reasonably request. Such
insurance policies must be in form and substance satisfactory to
Bank.
4.8 Maintain adequate books, accounts and records and prepare all
financial statements required hereunder in accordance with
generally accepted accounting principles, and in compliance with
the regulations of any governmental regulatory body having
jurisdiction over Borrower or Borrower's business and permit
employees or agents of Bank at any reasonable time to inspect
Borrower's assets and properties, and to examine or audit
Borrower's books, accounts and records and make copies and
memoranda thereof.
4.9 At all times comply with, or cause to be complied with, all laws,
statutes, rules, regulations, orders and directions of any
governmental authority having jurisdiction over Borrower or
Borrower's business, and all material agreements to which Borrower
is a party.
4.10 Except as provided in this Agreement, or in the ordinary course of
its business as currently conducted, not make any loans or
advances, become a guarantor or surety, pledge its credit or
properties in any manner, or extend credit.
4.11 Not purchase the debt or equity of another person or entity except
for savings accounts and certificates of deposit of Bank, direct
U.S. Government obligations and commercial paper
<PAGE>
issued by corporations with top ratings of Moody's or Standard &
Poor's, provided that all such permitted investments shall mature
within one year of purchase.
4.12 Not create, assume or suffer to exist any mortgage, encumbrance,
security interest, pledge or lien ("Lien") on Borrower's real or
personal property, whether now owned or hereafter acquired, or upon
the income or profits thereof except the following: (a) Liens in
favor of Bank, (b) Liens for taxes or other items not delinquent or
contested in good faith and (c) other Liens which do not exceed in
the aggregate $N/A at any one time.
---
4.13 Not sell or discount any account receivable or evidence of
indebtedness, except to Bank; not borrow any money or become
contingently liable for money borrowed, except pursuant to
agreements made with Bank.
4.14 Neither liquidate, dissolve, enter into any consolidation, merger,
partnership or other combination; nor convey, sell or lease all or
the greater part of its assets or business; nor purchase or lease
all or the greater part of the assets or business of another.
4.15 Not engage in any business activities or operations substantially
different from or unrelated to Borrower's present business
activities and operations.
4.16 Not, in any single fiscal year of Borrower, expend or incur
obligations of more than $N/A for the acquisition of fixed or
---
capital assets.
4.17 Not, in any single fiscal year of Borrower, enter into any lease of
real or personal property which would cause Borrower's aggregate
annual obligations under all such real and personal property leases
to exceed $N/A.
----
4.18 Borrower will promptly, upon demand by Bank, take such further
action and execute all such additional documents and instruments in
connection with this Agreement as Bank in its reasonable discretion
deems necessary, and promptly supply Bank with such other
information concerning its affairs as Bank may request from time to
time.
5. EVENTS OF DEFAULT. The occurrence of any of the following events ("Events of
Default") shall terminate any obligation on the part of Bank to make or
continue the Loan and automatically, unless otherwise provided under the Loan
Documents, shall make all sums of interest and principal and any other
amounts owing under the Loan immediately due and payable, without notice of
default, presentment or demand for payment, protest or notice of nonpayment
or dishonor, or any other notices or demands:
5.1 Borrower shall default in the due and punctual payment of the principal
of or the interest on the Note or any of the other Loan Documents.
5.2 Any default shall occur under the Note or any of the other Loan
Documents:
5.3 Borrower shall default in the due performance or observance of any
covenant or condition of the Loan Documents;
5.4 Any guaranty or subordination agreement required hereunder shall be
breached or become ineffective, or any guarantor or subordinating
creditor shall die or disavow or attempt to revoke or terminate such
guaranty or subordination agreement; or
5.5 There shall be a change in ownership or control of 10% or more of the
issued and outstanding stock of Borrower or any guarantor, or (if the
Borrower is a partnership) there shall be a change in ownership or
control of any general partner's interest.
6. MISCELLANEOUS PROVISIONS
6.1 The rights, powers and remedies given to Bank hereunder shall be
cumulative and not alternative and shall be in addition to all rights,
powers and remedies given to Bank by law against Borrower or any other
person, including but not limited to Bank's rights of setoff and
banker's lien.
6.2 Any forbearance or failure or delay by Bank in exercising any right,
power or remedy hereunder shall not be deemed a waiver thereof and any
single or partial exercise of any right,
<PAGE>
power or remedy shall not preclude the further exercise thereof. No
waiver shall be effective unless it is in writing and signed by an
officer of Bank.
6.3 The benefits of this Agreement shall inure to the successors and assigns
of Bank and the permitted successors and assigns of Borrower, and any
assignment by Borrower without Bank's consent shall be null and void.
6.4 This Agreement and all other agreements and instruments required by Bank
in connection herewith shall be governed by and construed according to
the laws of the State of California.
6.5 Should any one or more provisions of this Agreement be determined to be
illegal or unenforceable, all other provisions nevertheless shall be
effective.
6.6 Except for documents and instruments specifically referenced herein,
this Agreement constitutes the entire agreement between Bank and
Borrower regarding the Loan and all prior communications, verbal or
written, between Borrower and Bank shall be of no further effect or
evidentiary value.
6.7 The section and subsection headings herein are for convenience of
reference only and shall not limit or otherwise affect the meaning
hereof.
6.8 This Agreement may be amended only in writing signed by all parties
hereto.
6.9 Borrower and Bank may execute one or more counterparts to this
Agreement, each of which shall be deemed an original, but taken together
shall be one and the same instrument.
6.10 Any notices or other communications provided for or allowed hereunder
shall be effective only when given by one of the following methods and
addressed to the respective party at its address given with the
signatures at the end of this Agreement and shall be considered to have
been validly given: (a) upon delivery, if delivered personnally; (b)
upon receipt, if mailed, first class postage prepaid, with the United
States Postal Service; (c) on the next business day if sent by overnight
courier service of recognized standing; and (d) upon telephoned
confirmation of receipt, if telecopied.
7. ADDITIONAL PROVISIONS
The following additional provisions, if any, are hereby made a part of this
Agreement:
N/A
THIS AGREEMENT is executed on behalf of the parties as of 5/10 , 1999.
-----------------
Union Bank of California, N.A. Tivoli Industries, Inc.
("Bank") ("Borrower")
By: /s/ Laura Pinkerton By: /s/ Terrence C. Walsh
Title: Assistant Vice President Title: Chief Executive Officer
Printed Name: Laura L. Pinkerton Printed Name: Terrence C. Walsh
Address where notices to Bank Address where notices to Borrower
are to be sent: are to be sent:
23511 Paseo de Valencia 1513 E. St. Gertrude Place
Laguna Hills, CA 92653 Santa Ana, CA 92705
Attn: Laura Pinkerton Attn: Terrence C. Walsh
Fax Number: (949) 457-1148 Fax Number:
Telephone No. (949) 457-1146 Telephone No. (714) 957-6101
<PAGE>
BORROWING BASE ADDENDUM
This Borrowing Base Addendum is hereby made a part of and incorporated into the
Business Loan Agreement dated as of ___________, _______ as amended and
supplemented from time to time (the "Agreement") between Union Bank of
California, N.A. and the undersigned ("Borrower").
1.8 Borrowing Base. An amount of the Loan equal to $1,250,000, evidenced by
---------
the Note dated _________, ______ or any substitutions or replacements
thereof, is a revolving loan subject to a borrowing base ("Borrowing Base
Loan"). Notwithstanding any other provision of the Agreement or any other
Loan Document, Bank shall not be obligated to advance any funds under the
Borrowing Base Loan if the principal amount of such Borrowing Base Loan
including such advance exceeds 80% of Borrower's Eligible Accounts plus
--
50% of Borrower's Eligible Inventory. However, extensions of credit under
--
the Borrowing Base Loan which are based on availability under Borrower's
Eligible Inventory shall not at any time exceed $400,000. If at any time
-------
Borrower's obligations to Bank under the Borrowing Base Loan exceed the sum
so permitted, Borrower shall immediately repay to Bank such excess.
The term "Accounts" means all presently existing and hereafter arising
accounts receivable, contract rights, chattel paper, and all other forms of
obligations owing to Borrower, payable in U.S. Dollars, arising out of the
sale or lease of goods, or the rendition of services by Borrower, whether
or not earned by performance, and any and all credit insurance, guaranties
and other security, as well as all merchandise returned to or reclaimed by
Borrower and Borrower's books and records relating to any of the foregoing.
The term "Eligible Accounts" means those Accounts, net of finance charges,
which have been validly assigned to Bank and strictly comply with all of
Borrower's representations and warranties to Bank, but Eligible Accounts
shall not include the following:
(a) Any Account with respect to which the account debtor is an officer,
shareholder, director, employee or agent of Borrower;
(b) Any Account with respect to which the account debtor is a subsidiary of,
related to, or affiliated or has common officers or directors with
Borrower;
(c) Any Account relating to goods placed on consignment, guaranteed sale or
other terms by reason of which the payment by the account debtor may be
conditional;
(d) Any Account with respect to which the account debtor is not a resident of
the United States;
(e) Any Account with respect to which the account debtor is a federal, state or
local governmental entity or agency;
(f) Any Account with respect to which Borrower is or may become liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower;
(g) Any Account with respect to which there is asserted a defense,
counterclaim, discount or setoff, whether well-founded or otherwise; except
for those discounts, allowances and returns arising in the ordinary course
of Borrower's business;
(h) Any Account with respect to which the account debtor becomes insolvent,
fails to pay its debts as they mature or goes out of business or which is
owed by an account debtor which has become the subject of a proceeding
under any provision of the United States Bankruptcy Code, as amended, or
under any other bankruptcy or insolvency law, including, but not limited
to, assignments for the benefit of creditors, formal or informal
moratoriums, compositions or extensions with all or substantially all of
its creditors;
(i) Any account owed by any account debtor with respect to which twenty-five
-----------
percent (25%) or more of the aggregate dollar amount is its Accounts is not
-------------
paid within ninety (90) days from the date of invoice;
-----------
(j) Any Account that is not paid by the account debtor within ninety (90) days
-----------
of the date of invoice;
(k) That portion of the Account owed by any single account debtor which exceeds
25% of all of the Accounts;
--
(l) Any Account which Bank deems not to be an Eligible Account; and
(m)
<PAGE>
The term "Inventory" means all present and future inventory of Borrower held by
Borrower for sale or lease or to be furnished under a contract of service and
all of Borrower's present and future raw materials, work in process used or
consumed in Borrower's business.
The term "Eligible Inventory" means that portion of Borrower's Inventory of raw
materials and finished goods consisting of Borrower's main line(s) of business
products, which is (a) owned by Borrower, free and clear of all liens and
encumbrances except those in favor of Bank, (b) held for sale or lease by
Borrower and normally and currently saleable in the ordinary course of
Borrower's business, (c) of good and merchantable quality, free from defects (d)
located only at locations of which Bank is notified in writing, and (e) at all
times subject to a perfected first priority security interest in favor of Bank.
"Eligible Inventory" does not include any of the following: work in process,
spare parts, returned items, damaged, defective or recalled items, items unfit
for further processing, obsolete or unmerchantable items, items used as
salesperson's samples or demonstrators, inventory held in stock more than twelve
(12) months, or inventory which Bank otherwise deems not to be Eligible
Inventory.
Capitalized terms used herein which are not otherwise defined shall have the
meanings given to them in the Agreement.
THIS AGREEMENT is executed on behalf of the parties as of 5/10, 1999.
---- ----
Union Bank of California, N.A. Tivoli Industries, Inc.
("Bank") ("Borrower")
By: /s/ LAURA PINKERTON By: /s/ TERRENCE C. WALSH
Title: Assistant Vice President Title: Chief Executive Officer
Printed Name: Laura L. Pinkerton Printed Name: Terrence C. Walsh
<PAGE>
UNION BANK OF CALIFORNIA
COMMERCIAL PROMISSORY NOTE
Borrower Name:
TIVOLI INDUSTRIES, INC.
Borrower Address: Office: Loan Number:
1513 E. ST. GERTRUDE PLACE 04402 9209823046 0002-00-0000
SANTA ANA, CA 92705
Maturity Date: Amount:
MARCH 1, 2001 $1,250,000.00
- --------------------------------------------------------------------------------
DATE:
April 13, 1999 $1,250,000.00
-------------
FOR VALUE RECEIVED, on MARCH 1, 2001 the undersigned ("Debtor") promises
-------------
to pay to the order of UNION BANK OF CALIFORNIA, N.A. ("Bank"), as indicated
below, the principal sum of ONE MILLION TWO HUNDRED FIFTY THOUSAND AND NO/100
-------------------------------------------------
Dollars ($1,250,000.00), or so much thereof as is disbursed, together with
------------
interest on the balance of such principal sum from time to time outstanding, at
a per annum rate equal to the Reference Rate plus ONE AND NO/100 percent
--------------
(1.000%), such per annum rate to change as and when the Reference Rate shall
-----
change.
As used herein, the term "Reference Rate" shall mean the rate announced by Bank
from time to time at its corporate headquarters as its "Reference Rate." The
Reference Rate is an index rate determined by Bank from time to time as a means
of pricing certain extensions of credit and is neither directly tied to any
external rate of interest or index nor necessarily the lowest rate of interest
charged by Bank at any given time. All computations of interest under this note
shall be made on the basis of a year of 360 days, for actual days elapsed.
1. Interest Payments. Debtor shall pay interest on the 1ST day of each
---
MONTH commencing MAY 1, 1999. Should interest not be so paid, it shall
----- -----------
become a part of the principal and thereafter bear interest as herein
provided.
At any time prior to the maturity of this note, the maker(s) may borrow,
repay and reborrow hereon so long as the total outstanding at any one time
does not exceed the principal amount of this note.
Debtor shall pay all amounts due under this note in lawful money of the
United States at SOUTH ORANGE COUNTY - BBC Office, or such other office as
-------------------------
may be designated by Bank, from time to time.
2. Late payments. If any installment payment required by the terms of this note
shall remain unpaid ten days after due, at the option of Bank, Debtor shall
pay a fee of $100 to Bank.
3. Interest Rate Following Default. In the event of default, at the option of
Bank, and, to the extend permitted by law, interest shall be payable on the
outstanding principal under this note at a par annum rate equal to five
percent (5%) in excess of the interest rate specified in the initial
paragraph of this note, calculated from the date of default until all amounts
payable under this note are paid in full.
4. Default and Acceleration of Time For Payment. Default shall include , but
not be limited to, any of the following: (a) the failure of Debtor to make
any payment required under this note when due; (b) any breach,
misrepresentation or other default by Debtor, any guarantor, co-maker,
endorser, or any person or other entity other than Debtor providing security
for this note (hereinafter individually and collectively referred to as the
"Obligor") under any security agreement, guaranty or other agreement
<PAGE>
between Bank and any Obligor; (c) the insolvency of any Obligor or the
failure of any Obligor generally to pay such Obligor's debts as such debts
become due; (d) the commencement as to any Obligor of any voluntary or
involuntary proceeding under any laws relating to bankruptcy, insolvency,
reorganization, arrangement, debt adjustment or debtor relief; (e) the
assignment by any Obligor's creditors; (f) the appointment, or commencement
of any proceedings for the appointment, of a receiver, trustee, custodian or
similar official for all or substantially all of any Obligor's property; (g)
the commencement of any proceeding for the dissolution or liquidation of any
Obligor; (h) the termination of existence or death of any Obligor; (i) the
revocation of any guaranty or subordination agreement given in connection
with this note (j) the failure of any Obligor to comply with any order,
judgment, injunction, decree, writ or demand of any court or other public
authority; (k) the filing or recording against any Obligor, or the property
of any authority; (k) the filing or recording against any Obligor, or the
property of any Obligor, of any notice of levy, notice to withhold, or other
legal process for taxes, other than property taxes (l) the default by any
Obligor personally liable for amounts owed hereunder on any obligation
concerning the borrowing of money; (m) the issuance against any Obligor, or
the property of any Obligor,of any writ of attachment, execution, or other
judicial lien; or (n) the deterioration of the financial condition of any
Obligor which results in Bank deeming itself, in good faith, insecure.
Upon the occurrence of any such default, Bank, in its discretion, may cease
to advance funds hereunder and may declare all obligations under this note
immediately due and payable; however, upon the occurrence of an event of
default under d, e, f, or g, all principal and interest shall automatically
become immediately due and payable.
5. Additional Agreements of Debtor. If any amounts owing under this note are
not paid when due, Debtor promises to pay all costs and expenses, including
reasonable attorney's fees, incurred by Bank in the collection of enforcement
of this note. Debtor and any endorsers of this note, for the maximum period
of time and the full extent permitted by law, (a) waive diligence,
presentment, demand, notice of nonpayment, protest, notice of protest, and
notice of every kind; (b) waive the right to assert the defense of any
statute of limitations to any debt or obligation hereunder; and (c) consent
to renewals and extensions of time for the payment of any amounts due under
this note. If this note is signed by more than one party, the term "Debtor"
includes each of the undersigned and any successors in interest thereof; all
of whose liability shall be joint and several. Any married person who signs
this note agrees that recourse may be had against the separate property of
that person for any obligations hereunder. The receipt of any check or other
item of payment by Bank, at its option, shall not be considered a payment on
account until such a check or other item of payment is honored when presented
for payment at the drawee bank. Bank may delay the credit of such payment
based upon Bank's schedule of funds availability, and interest under this
note shall accrue until the funds are deemed collected. In any action
brought under or arising out of this note, Debtor and any endorser of this
note, including their successors and assigns, hereby consents to the
jurisdiction of any competent court within the State of California, as
provided in any alternative dispute resolution agreement executed between
Debtor and Bank, and consents to service of process by any means authorized
by California law. The term "Bank" includes, without limitation, any holder
of this note. This note shall be construed in accordance with and governed
by the laws of the State of California. This note hereby incorporates any
alternative dispute resolution agreement previously, concurrently or
hereafter executed between Debtor and Bank.
TIVOLI INDUSTRIES, INC.
By: /s/ TERRENCE C. WALSH Title: Chief Executive Officer
<PAGE>
UNION BANK OF CALIFORNIA
COMMERCIAL PROMISSORY NOTE
Borrower Name:
TIVOLI INDUSTRIES, INC.
Borrower Address: Office: Loan Number:
1513 E. ST. GERTRUDE PLACE 04402 9209823046 0004-00-000
SANTA ANA, CA 92705
Maturity Date: Amount:
MARCH 1, 2004 $250,000.00
- --------------------------------------------------------------------------------
DATE:
APRIL 13, 1999 $250,000.00
FOR VALUE RECEIVED, the undersigned ("Debtor") promises to pay to the order of
UNION BANK OF CALIFORNIA, N.A. ("Bank"), as indicated below, the principal sum
of TWO HUNDRED FIFTY THOUSAND AND NO/100 Dollars ($250,000.00), or so
------------------------------------- -----------
much thereof as is disbursed, together with interest on the balance of such
principal sum from time to time outstanding, at a per annum rate equal to the
Reference Rate plus ONE AND NO/100 percent (1.000%) such per annum rate
-------------- -----
to change as and when the Reference Rate shall change.
As used herein, the term "Reference Rate" shall mean the rate announced by Bank
from time to time at its corporate headquarters as its "Reference Rate." The
Reference Rate is an index rate determined by Bank from time to time as a means
of pricing certain extensions of credit and is neither directly tied to any
external rate of interest or index nor necessarily the lowest rate of interest
charged by Bank at any given time. All computations of interest under this note
shall be made on the basis of a year of 360 days, for actual days elapsed.
AT ANY TIME PRIOR TO MARCH 1, 2000, THE DEBTORS(S) MAY BORROW UNDER THIS NOTE;
PROVIDED THAT AT NO TIME MAY DEBTOR REBORROW AND AMOUNT REPAID TO BANK.
1. PAYMENTS. Interest Payments. Debtor shall pay interest on the
1ST day of each MONTH commencing MAY 1, 1999.
--- ----- -----------
Principal Payments. PRINCIPAL PAYMENTS SHALL BE PAYABLE IN FORTY EIGHT (48)
-------------------------------------------------------
EQUAL CONSECUTIVE MONTHLY INSTALLMENTS, EACH INSTALLMENT IN AN AMOUNT SUFFICIENT
- --------------------------------------------------------------------------------
TO FULLY AMORTIZE THE PRINCIPAL BALANCE BY THE FINAL MATURITY DATE, BEGINNING
- -----------------------------------------------------------------------------
APRIL 1, 2000, AND CONTINUING ON THE FIRST (1ST) DAY OF EACH CONSECUTIVE MONTH.
- ------------------------------------------------------------------------------
On MARCH 1,2004, all principal and interest then unpaid shall be due and
------------
payable.
Debtor shall pay all amounts due under this note in lawful money of the United
States at SOUTH ORANGE COUNTY - BBC Office, or such other office as may be
-------------------------
designated by Bank, from time to time.
2. Late payments. If any installment payment required by the terms of this note
shall remain unpaid ten days after due, at the option of Bank, Debtor shall
pay a fee of $100 to Bank.
<PAGE>
3. Interest Rate Following Default. In the event of default, at the option of
Bank, and, to the extend permitted by law, interest shall be payable on the
outstanding principal under this note at a par annum rate equal to five
percent (5%) in excess of the interest rate specified in the initial
paragraph of this note, calculated from the date of default until all amounts
payable under this note are paid in full.
4. Default and Acceleration of Time For Payment. Default shall include , but
not be limited to, any of the following: (a) the failure of Debtor to make
any payment required under this note when due; (b) any breach,
misrepresentation or other default by Debtor, any guarantor, co-maker,
endorser, or any person or other entity other than Debtor providing security
for this note (hereinafter individually and collectively referred to as the
"Obligor") under any security agreement, guaranty or other agreement between
Bank and any Obligor; (c) the insolvency of any Obligor or the failure of any
Obligor generally to pay such Obligor's debts as such debts become due; (d)
the commencement as to any Obligor of any voluntary or involuntary proceeding
under any laws relating to bankruptcy, insolvency, reorganization,
arrangement, debt adjustment or debtor relief; (e) the assignment by any
Obligor's creditors; (f) the appointment, or commencement of any proceedings
for the appointment, of a receiver, trustee, custodian or similar official
for all or substantially all of any Obligor's property; (g) the commencement
of any proceeding for the dissolution or liquidation of any Obligor; (h) the
termination of existence or death of any Obligor; (i) the revocation of any
guaranty or subordination agreement given in connection with this note (j)
the failure of any Obligor to comply with any order, judgment, injunction,
decree, writ or demand of any court or other public authority; (k) the filing
or recording against any Obligor, or the property of any authority; (k) the
filing or recording against any Obligor, or the property of any Obligor, of
any notice of levy, notice to withhold, or other legal process for taxes,
other than property taxes (l) the default by any Obligor personally liable
for amounts owed hereunder on any obligation concerning the borrowing of
money; (m) the issuance against any Obligor, or the property of any
Obligor,of any writ of attachment, execution, or other judicial lien; or (n)
the deterioration of the financial condition of any Obligor which results in
Bank deeming itself, in good faith, insecure.
Upon the occurrence of any such default, Bank, in its discretion, may cease
to advance funds hereunder and may declare all obligations under this note
immediately due and payable; however, upon the occurrence of an event of
default under d, e, f, or g, all principal and interest shall automatically
become immediately due and payable.
5. Additional Agreements of Debtor. If any amounts owing under this note are
not paid when due, Debtor promises to pay all costs and expenses, including
reasonable attorney's fees, incurred by Bank in the collection of enforcement
of this note. Debtor and any endorsers of this note, for the maximum period
of time and the full extent permitted by law, (a) waive diligence,
presentment, demand, notice of nonpayment, protest, notice of protest, and
notice of every kind; (b) waive the right to assert the defense of any
statute of limitations to any debt or obligation hereunder; and (c) consent
to renewals and extensions of time for the payment of any amounts due under
this note. If this note is signed by more than one party, the term "Debtor"
includes each of the undersigned and any successors in interest thereof; all
of whose liability shall be joint and several. Any married person who signs
this note agrees that recourse may be had against the separate property of
that person for any obligations hereunder. The receipt of any check or other
item of payment by Bank, at its option, shall not be considered a payment on
account until such a check or other item of payment is honored when presented
for payment at the drawee bank. Bank may delay the credit of such payment
based upon Bank's schedule of funds availability, and interest under this
note shall accrue until the funds are deemed collected. In any action
brought under or arising out of this note, Debtor and any endorser of this
note, including their successors and assigns, hereby consents to the
jurisdiction of any competent court within the State of California, as
provided in any alternative dispute resolution agreement executed between
Debtor and Bank, and consents to service of process by any means authorized
by California law. The term "Bank" includes, without limitation, any holder
of this note. This note shall be construed in accordance with and governed
by the laws of the State of California. This note hereby incorporates any
alternative dispute resolution agreement previously, concurrently or
hereafter executed between Debtor and Bank.
<PAGE>
TIVOLI INDUSTRIES, INC.
By: /s/ TERRENCE C. WALSH Title: Chief Executive Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> JAN-1-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,431,170
<SECURITIES> 0
<RECEIVABLES> 1,989,732
<ALLOWANCES> 79,482
<INVENTORY> 1,696,149
<CURRENT-ASSETS> 5,690,650
<PP&E> 1,564,592
<DEPRECIATION> 946,811
<TOTAL-ASSETS> 7,195,033
<CURRENT-LIABILITIES> 1,823,745
<BONDS> 0
0
0
<COMMON> 3,710
<OTHER-SE> 4,160,456
<TOTAL-LIABILITY-AND-EQUITY> 7,195,033
<SALES> 2,864,733
<TOTAL-REVENUES> 2,864,733
<CGS> 1,527,078
<TOTAL-COSTS> 2,641,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,199
<INCOME-PRETAX> 204,703
<INCOME-TAX> 3,100
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 201,603
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
