Item 1. Business
(a) General development of business
Tri-Lite, Inc., was incorporated in 1988 under the laws of the Commonwealth of Pennsylvania. As used in this report, the terms "Company", "Tri-Lite" and "Registrant" refer to Tri-Lite, Inc. and subsidiaries.
The Company completed an initial public offering of its common stock in October, 1993. The Company's shares were listed on the American Stock Exchange under the symbol "NRG" until February 26, 1996 when they were delisted. The Company's shares are anticipated to trade in the immediate future, on the over-the-counter market.
Subsequent to December 31, 1995, the Company, it's operating divisions and it's wholly owned subsidiaries experienced material changes in the mode of conducting their respective businesses. The following chronology of events will provide the basis for explaining the present status of the Company and its remaining operating subsidiaries (Self Powered Lighting, Inc. and Aim Energy, Inc.).
On February 26, 1996, Tri-Lite, Inc., (the "Debtor") filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code (Case No. SA 96-12049 JR), U.S. Bankruptcy Court, Central District of California and on March 22, 1996 Self Powered Lighting, Inc. (SPL) also filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code (Case No. SA 96-13178 JR), Central Distirct of California. On January 16, 1997, the Court confirmed the Company's plan of reorganization. The Company's approved plan of reorganization was based upon Helionetics, Inc. and Ms. Susan Barnes acting as its co-proponents. In April 1997, Helionetics also filed a voluntary petition under Chapter 11 of the Bankruptcy Code (Case No. SA 97-14645 JR) with the U.S. Bankruptcy Court, Central District of California. As a result, the funding of the Company's reorganization plan was combined with that of Helionetics bankruptcy plan, which included the provisions and methodology to fund the Company's plan. In addition, due to Helionetics creditors under its plan, the pay-out to the Company's creditors was negatively affected. The confirmation hearing for the Chapter 11 Liquidating Plan of Helionetics, Inc. held on November 24, 1998 was approved by the U.S. Bankruptcy Court on December 23, 1998. Provisions of the Combined Plans included the following:
o The Company issued 87.5% (5% of which was issued to the Helionetics Committee of Unsecured Creditors (Helionetics Committee) pursuant to a settlement agreement reached between the Helionetics Committee, the Company, Susan Barnes and an affiliate) of the Company's "new" common stock to Ms. Susan Barnes, as its co-proponent of the Company's plan of reorganization, and in exchange for her agreement to forgo any claims on her approximately $4.3 million secured claim against Helionetics, Inc. The shares are exempt from registration requirements under the 33 Act pursuant to the exemption provided by Section 1145 of the Bankruptcy Code.
o The Company's unsecured creditors will receive up to 47% of their allowed claims in cash as a result of the combined plan with Helionetics. The approved reorganization plan of the Company called for a 70% pay-out to the unsecured creditors. The payout is subject to the final determination of the Helionetics own plan of reorganization . The plan required an initial payment to the unsecured creditors of approximately 30% of the approved pay-out. However, only approximately $426,700 initial payment was made in May 1997. Ms. Barnes provided the funds for this initial payment.
o Helionetics contributed to the Company its interest (87.5%) in Aim Energy, Inc.
o The Company will issue on a pro rata basis to its existing shareholders (Class 6 claimant) 12.5% of its "new" common stock in exchange for their existing "old common shares" outstanding totalling 3,069,332 (which exclude the shares of 2,937,422 and 32,579 in the name of Helionetics and Susan Barnes, respectively). The new shares to be issued are exempt from registration pursuant to exemption provided by Section 1145 of the Bankruptcy Code.
o Under the approved plan of reorganization of Self Powered Lighting, Inc., all creditors of SPL will receive 100% of their allowed claims within 60 months from its effective date and the Company will retain its 100% interest in SPL.
o Helionetics canceled and released its claim against the Company for $1,800,000 note receivable secured by all assets of the Company.
o The Company issued two secured promissory note; a $800,000 senior note in favor of the Helionetics Committee and a $500,000 junior note in favor of Ms. Susan Barnes at 10.5% and 10% interest rate, respectively. Both notes are secured by the same collateral . The senior note matures on December 8, 2003. No payment is due on the junior note until the senior note is fully paid. Both notes are subordinated to any new financing that might be required by the Company.
As a result of the Company's Chapter 11 filing and in conjunction with the development of a plan of reorganization, the Company discontinued the operations of the NL Corporation division located in Cleveland, Ohio and its remaining recessed lighting business.
The Company, as a result of the approved plan of reorganization, is now comprised of the wholly owned subsidiary Self-Powered Ligthing, Inc.; the 87 1/2% owned Aim Energy, Inc. (see description of business) and the 100% owned subsidiary, Prolite Lighting and Sign Maintenance Co., Inc. (an inactive corporation).
At December 31, 1998, approximately 67% of the Company's common stock was owned by Susan Barnes.
(b) Financial information about industry segments:
Prior to the approval of the Company's plan of reorganization, the Company's business was in two business segments: (i) manufacturing and sale of electrical lighting fixture including emergency exit signs, and (ii) energy management. Financial information by industry segment for the Company is presented in the financial statements accompanying this report. Currently as a result of the approved plan of reorganization, the Company's business is now in two business segments: (I) emergency lighting fixtures, and (ii) energy conservation and safety equipment.
(c) Narrative description of business
EMERGENCY LIGHTING FIXTURES
1. Products
Through its wholly-owned subsidiary, Self Powered Lighting, Inc., the Company is engaged in the manufacture and distribution of specialized emergency and exit lighting fixtures. SPL offers two types of exit signs:
(1) low energy electrical (2) no energy (self luminous) - represents approximately 75% of total sales
Generally, SPL sells through a sales representative network. In-house sales orders are handled by SPL's own internal marketing staff.
2. Manufacturing and Suppliers
At December 31, 1998, the Company's manufacturing facility for SPL products is located in West Nyack, New York. SPL's primary raw material vendor is located in England. The 1996 Chapter 11 filing of the Company and SPL had the effect of causing difficulty in maintaining its credit terms with all vendors. However, in 1996, after a period of sourcing raw materials on a cash basis, SPL has been able to re-establish credit terms with it's primary vendor and a majority of its domestic vendors. Most finished products are supplied by a foreign manufacturer located in the Republic of China and paid, generally, on a letter of credit basis.
3. Working Capital Items
SPL maintained sufficient raw materials to sustain its manufacturing operations. Finished goods are generally purchased to support existing backlog. However, its ability to respond quickly to customer orders are somewhat hampered by its limited working capital. This sometimes resulted in lost revenues. SPL has in place a receivable factoring line of credit in the amount of $500,000 which it believes is sufficient for working capital purposes at the present time but will require additional funding if its plan of operations and increasing backlog is sustained. The Company is considering raising needed funds from the equity market to settle promptly its chapter 11 obligations and to provide for additional working capital.
4. Customers
During 1998, 1997 and 1996, SPL had no sales to a single customer which totalled more than 10% of their total sales respectively. During 1998, SPL obtained a "sole-source" agreement with Catalina Lighting Company (a NYSE company) to supply its entire emergency and exit lighting requirements under the Westinghouse brand name for resale to major home improvement chains. This source of business is expected to increase over the next 2-5 years.
5. Seasonality and Backlog
SPL has no substantial seasonal factors that affect it's emergency lighting fixture business. SPL's backlog at December 31, 1998 and December 31, 1997 totaled approximately $650,000 and $550,000 , respectively, which is anticipated to be shipped over the next 12 months. The increase in backlog at December 1998 is the result of increased sales representations, aggressive marketing and orders emanating from the Catalina Lighting sales arrangement .
6. Competition
SPL is one of two manufacturers that supply emergency signs to the airline industry. SPL is also one of four companies that manufacture and distribute self luminous exit signs.
7. Research and Development
SPL has not expended and does not require significant funds for development of new products.
8. Patents, Trademarks and Licenses
SPL has patents in place on certain of its products.
9. Environmental Matters
SPL uses Tritium, a regulated raw material, in the manufacture of its self luminous products. Tritium is a low energy isotope of hydrogen that emits a soft beta ray. Tritium is naturally present in the atmosphere as a result of cosmic ray bombardment of oxygen and nitrogen in the upper atmosphere as well as outer space. Tritium Oxide is the regulated element in Tritium gas and would have to be ingested for hours to be considered mildly dangerous. Tritium used in exit signs is 96% pure and contains less than 1% Tritium Oxide. There have been no reported incidents (harmful to either man or the environment) due to acute exposure to Tritium. The Company employs a radiation safety officer who oversees the Company's use of Tritium and sees to it that the Company complies with the appropriate regulations. No additional capital expenditure is required by the Company to comply with regulations.
10. Employees
At December 31, 1998 and 1997, SPL employed 21 and 25 employees, respectively at locations in West Nyack, NY and California.
ENERGY CONSERVATION AND SAFETY EQUIPMENT BUSINESS - During 1998 the Company operated it's energy conservation and safety equipment business through its 87 1/2% owned subsidiary, Aim Energy, Inc.
1. Products and services
The "Active Injection Mode Harmonic Conditioner" (the AIM Filter) is an electronic device which mitigates or cancels harmonic current distortion, also called Total Harmonic Distortion (THD). Harmonics waste energy, increase electrical bills, overheat wires and equipment, create interference, cause computers and computer controlled equipment to malfunction and interferes with telecommunications. Harmonics can require expensive rewiring to avoid overheating of wires and possible fires. Harmonics are an increasingly serious hazard due to the greater use of devices to improve energy efficiency and the rapid expansion in the use of computers and computer related equipment.
Harmonics. Alternating current (AC) is now universally used to deliver power in electric power systems. AC power is known as "alternating" because the flow of current is continuously reversing; positive current in any one wire becomes negative current and vice versa. This happens 60 times per second in the United States, Canada and Mexico and hence is called "60 cycle" power. Ideally, this alternation occurs smoothly and continuously, e.g., from positive 110 volts to negative 110 volts. If pictured on a graph (or oscilloscope), the alternation of current forms a smooth "sine wave" and thus the current is known as "sinusoidal". The flow of current is not smooth and continuous when there is harmonic distortion of current. Harmonic distortion of current causes voltage harmonics, i.e., increases or decreases in voltage from that which would conform to a smooth sine wave.
Equipment such as computers, electronic ballasts (used by fluorescent lights), welding equipment, battery chargers, motor speed control devices such as variable speed drives ("VSDs"), and uninterruptible power supplies ("UPSs") all use utility current to run an electronic power converter. The power converter changes the normal AC power supplied by the utility into direct current ("DC") (and in some cases back to the AC power) used by the machines. Power converters draw current in pulses, and the effect of each pulse is to generate harmonic distortion in the current carried by the wire. When harmonics from different sources are in synchronization, the effect is amplified.
Problems Caused by Harmonics. Current harmonics waste energy, requiring increased generation capacity and fuel use. Harmonics can cause computer shut downs, tripped circuit breakers, overloading of electric equipment, failure of electronic parts, premature failure of insulation on electrical wires ("conductors"), reduction in capacity of the large conductors and the useful output of power generators and serious reduction in the operating life of electrical motors.
Computers and computer controlled equipment must have essentially sinusoidal or "clean" voltage to operate. Voltage harmonics can cause a computer to "crash", resulting in lost data and reduced productivity. In addition telecommunications equipment is now generally controlled by computers sensitive to harmonics, telecommunications equipment can also suffer interference from harmonics, degrading the quality of the signal. Medical equipment, such as computer controlled monitors, CAT scanners, magnetic resonance imagers (MRI), and x-ray equipment can also malfunction because of harmonics.
Building wiring and transformers can suffer overheating and premature aging in the presence of harmonics. A problem found in large office buildings is a build up of current on the neutral conductor of three phase systems. While these conductors ideally would have no current flow at all, harmonics may cause them to carry a current substantially in excess of the current on any other conductor. This current can overheat the wire, requiring rewiring to prevent electrical fires. As a result, building owners may expend substantial sums to rewire or require tenants to limit or reduce the harmonics they create in order to protect the building wiring and the integrity of other tenants' power supply. Harmonics also cause transformers serving a building or a particular portion of the building to overheat, and heavier duty, more expensive harmonic resistant transformers ("x-rated transformers") are now required where harmonics are anticipated.
Uninterruptible power supplies ("UPSs") are used to protect computers and important equipment from power failure. Each UPS contributes harmonics because of its AC/DC power converter, while at the same time supplying power to equipment sensitive to harmonics. Thus, the UPS may require harmonic filtering to limit the harmonics it creates in the building and protective circuits to protect it against harmonics from other sources. In addition, harmonic filtering may be necessary for successful synchronization of the UPS power supply and the line power supply which is required for redundancy. A similar problem exists with respect to standby emergency generators, which may be unable to operate in a building with large harmonics due to an inability of the small generators to generate sufficient current and/or an inability to synchronize with other power sources (utility power or UPS power).
Harmonics also cause problems for utilities. Harmonics travel through the power line to utility equipment, such as switches, transformers and the nearest generators, potentially damaging such utility equipment. The utility must limit harmonics on the line to serve their customers and protect their own equipment. In addition, harmonics require larger conductors and generation capacity to supply the power needed to do a given amount of useful work.
As an additional benefit, the AIM Filters also provide substantial power factor correction. "Power factor" is the ratio of the watts of electricity consumed to volt-amps on the circuit, expressed as a ratio. Thus, if a traditional electricity meter indicates 80 watts consumed, but the utility is supplying 1 amp of power at 100 volts, or 100 volt-amps, the power factor would be .8. Several United States
utility companies have begun implementing surcharges for large customers with low power factors to recover the cost of supplying the larger volt-amps required by the customer. These surcharges are a material part of electric bills for large customers with low power factors. The AIM Filter increases the power factor, thus reducing the surcharge (in some cases the power factor is corrected to a level where the user actually qualifies for a reduced KWH rate charge); this may provide an additional cost justification for installation of such filters. However, it should be noted that in many if not most installations, the traditional alternative approach of adding power factor correction capacitors and equipment may be adequate, and the AIM Filter must compete with these approaches as a means of power factor correction.
The problems of harmonics are receiving growing attention worlwide. The Institute for Electrical and Electronics Engineers, a principal standard setting body for the industry, has promulgated its latest standard, IEEE 519-1992 Recommended Practice and Requirements for Harmonic Control in Electric Power Systems, replacing a 1981 version. The new standard sets a limit on harmonics to a maximum of 5% on total harmonic distortion of current ("TCD"), i.e., harmonic variations in current, and 5% total harmonic distortion of voltage ("TVD"). While IEEE 519-1992 is a professional standard for electrical engineers, and thus does not have the force of law, it is deemed to set the standard of care for the profession and thus result in potential liability if a professional authorizes a deviation therefrom and that deviation causes a loss. Compliance with this or other similar standards may become required by law on a state-by-state and country-by-country basis for new installations. In addition, the standard may be adopted by utilities. For example, SaskPower, a Canadian utility, requires compliance with this standard at the time of any change in the utility connection.
Methods to Solve the Harmonics Problem. Several methods other than active injection mode harmonic conditioners (such as the AIM Filters) are currently used to mitigate the problem of harmonics. These include: passive filters, zig-zag and phase shift transformers, and complex, higher order multiphase rectifiers (e.g., 12 pulse, 18 pulse, 24 pulse, etc.). There are serious limitations to the competing products and approaches.
Passive filters are the traditional approach. They must be designed for the specific harmonic problem, often at significant engineering cost, and are thus inflexible. In a dynamic environment, such as that caused by installation of new VSD, UPS and computer equipment, harmonic distortion changes, and passive filters will likely fail to mitigate harmonics and may even create resonance problems due to interference of the filters with each other or other equipment. This causes significant operational limitations. Thus, when used to address harmonics in a building or other electrical environment, passive filters are costly to design, time consuming to implement, and likely to require expensive changes over time. Passive filters may be designed to mitigate the harmonics caused by a particular device more easily, and this is the most common approach to preventing harmonic problems. However, this fails to address harmonics from other sources and there can be interference which defeats the filtering.
Zig-zag transformers and phase shift transformers are also used to reduce harmonics. The installation of phase shift transformers in existing installations may require extensive and expensive rewiring to balance loads, and both types of transformers add additional power dissipation to the system.
Improved AC-DC converters using higher-order multiphase rectification can be used to reduce the distortion generated by specific pieces of equipment. These prevent only the particular pieces of equipment from causing a problem-they do not protect the rectifier or the system itself from harmonics from other sources.
Management believes the AIM Filters are superior to these alternative methods because they can mitigate harmonics in existing installations without necessitating extensive engineering studies or changes in the equipment. The AIM Filters can adapt to changing harmonic conditions, and they are
comparatively simple and inexpensive to use. The AIM Filters are connected in parallel with the existing AC power supply, meaning that failure of an AIM Filter will not interrupt the power supply.
The Company is currently marketing AIM Filters for three types of applications: (1) three phase, three wire balanced loads; (2) three phase, four wire unbalanced loads; and (3) single phase loads.
AIM Filters for three phase, three wire loads are suitable for use with products such as VSDs, including both AC and DC motor speed controls, and are compatible with other balanced loads, such as UPSs, fluorescent lighting ballasts, mainframe computers and ultraviolet lighting. The AIM Filters in this category handle voltages of 208, 240, 400, 480, 600 volts and provide currents of up to 25, 50 or 100 amps. Over 200 of the three phase, three wire AIM Filters have been installed to date, including models in each of the five listed voltage configurations.
The Mean Time Between Failure (MTBF) which is the industry standard for product reliability, is in excess of 10 years for an AIM device. An MTBF greater than 10 years is considered to be excellent by industry standard.
2. Marketing
The first models of the AIM Filters are designed for use in the commercial, industrial, and public utility sectors to install in water/sewage treatment and other large facilities using VSD controlled motors; and office building and institutions with significant use of VSDs, computers, UPSs, or energy saving illumination. The AIM Filters can be used either in existing installations with harmonic problems or in connection with installation of new devices which are likely to cause harmonic problems, or can be sold together with (or incorporated into) specific products which are likely to cause harmonics.
One of the first focuses of AIM marketing has been to sell AIM Filters to those organizations installing VSDs and UPSs in either existing facilities or new facilities. The initial models of the AIM Filters are suitable to control the harmonics caused by many types of VSDs and UPSs, and subsequent models will be suitable for all but the largest VSDs and UPSs.
Installation of VSDs in existing buildings reduces electric consumption by 30% to 50% of the electricity used by motors in elevators, fans, and HVAC. The Company estimates that the expense of adding a VSD can be recovered quickly, making the change highly cost-effective. The harmonics caused by VSD installation may be unacceptable without harmonic filtering, and approaches to harmonic filtering other than the AIM Filter have serious drawbacks. Thus, the Company will market AIM Filters as a simple and cost effective way of using VSDs, allowing recovery of the VSD cost savings. Even with the cost of the AIM Filters, the Company believes that the cost of the VSD and filter can generally be recovered in less than three years.
AIM has entered into representation agreements with independent companies which sell and service VSDs and UPSs. These agreements generally are (but not always) exclusive within a territory. The distributor buys and sells in his own name and for his own account. He acts as an independent trader in regards to both the Company and the customers without thereby being authorized to act in the name of or on behalf of the Company or otherwise to bind the Company. AIM may contract with one or more stocking distributors who may purchase the filters for resale. In each case, the local representative will have local servicing responsibilities for the products. In addition, AIM will retain the right to sell directly to "national accounts" in territories serviced by a distributor, but will pay the representative a reduced fee to supply local service. In areas in which there are no distributors, AIM will market the filters directly. AIM presently has eighteen (18) sales representatives covering the United States, Canada, Japan, Australia and Europe. Plans are underway to add representatives.
AIM has also entered into a license and joint marketing venture with Shindengen Corporation, a Japanese power supply company, in March 1998 for the purpose of exploiting the Japanese and other Asian markets. The agreement with Shindengen calls for delivery of fifty (50) AIM Filters which at December 31, 1998 AIM has delivered 44 units.
3. Backlog
AIM has backlog of unfilled orders at December 31, 1998 of approximately $200,000. Backlog as of December 31,1997 totalled approximately $100,000. The backlog in 1997 and prior year is not significant due to the limited marketing activities for the product.
4. Working Capital Items
AIM maintains a very limited parts inventory on hand due to its limited resources in 1998 and 1997. Parts are purchased from suppliers on a COD basis. This arrangement was a result of the bankruptcy filing of Helionetics, Inc., its previous parent company. Virtually no finished goods are maintained and products are built when orders are received from customers. AIM finances its customers orders by requiring a partial payment (generally 25%) from customers. These advances are deducted later on from shipments to the customers. AIM offers discounts for early payments of its receivables thereby improving its liquidity.
5. Patents and Licenses
AIM has two patents relating to the AIM Filters. While the Company believes that the technology included in the patents significantly reduces the cost of production and improves the performance of active harmonic filters as compared to competitors' products, the patents will not prevent the development of other active harmonic filters or other methods of dealing with or preventing harmonics, and it is possible that competing products or approaches may have a competitive advantage.
6. Research and Development (and other Product Improvement Activities)
The Company intends to improve its existing AIM products through a cost reduction program. In addition to reducing its manufacturing cost, this project will have the added benefit of reducing the size of the AIM products and thereby improving its marketability. The Company will continue to offer the original version of its AIM products to customers. The Company believes that with this program it will be the only company, world-wide, who can offer to the market place all versions of active harmonic mitigation products. The Company estimates this market to be in the $300-500 million range and growing annually at the estimated rate of 35% per year. The Company estimates that it will need $250,000 to complete its initial cost reduction program. As part of the on-going effort to improve quality of its product line, AIM has further scheduled a size/cost reduction program. This program when completed will enable the Company to address many more applications which the existing product line currently cannot address due to cost and size restrictions. These additional lines of AIM devices are scheduled to enter the market place in early 2001. The Company also anticipates this program to contribute to the Company's revenue and profitability due to the presence of the extended product lines.
7. Employees
AIM currently has 6 employees. It employs a consultant for its engineering and other technical requirements. AIM plans on hiring additional engineering, sales and marketing staff in 1999.
Discontinued Operations
As a result of the Chapter 11 filing in February 1996, the Company discontinued and liquidated all of its operations, except for SPL.
The principal products and services of the discontinued operations were as follows: (a) lighting fixtures, which involves designing, sourcing, manufacturing and marketing of recessed lighting, track lighting and decorative lighting and (b) electrical energy management, which involves auditing, retrofitting, maintaining and managing lighting in order to reduce energy consumption used for lighting of industrial and commercial buildings. The electrical management business operated through Prolite Lighting and Sign Maintenance Co., Inc. and its subsidiary. The remaining subsidiaries (Allite, Inc., Trio California, Inc., Trio Lighting, Inc., and NL Corporation) comprised the lighting fixture division.
Revenues for 1996 of these discontinued operations were $5,509,800.
Item 2.
Item 2. Properties
At December 31. 1998, the Company leased the following properties:
(a) Corporate offices and warehouse of SPL California operations - a single industrial building with approximately 15,400 square ft. and annual rent of $74,064. The lease expiration is December 1, 2002.
(b) Manufacturing plant and offices of SPL in New York - a 14,000 sq. ft. single industrial building with annual rental of $63,000 for the first year ending May 1995; $70,000 for the second, third and fourth year; $73,060 for the fifth, sixth and seventh year and $76,300 for the eight, ninth and tenth year, which will expire May 2005.
Item 3.
Item 3. Legal Proceedings
Other than ordinary routine litigation incidental to the business, the Company and its subsidiaries are not involved in any material legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of the Security Holders
None were submitted to security holders for a vote in 1998.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) In conjunction with the Company's plan of reorganization, the Company's equity was recapitalized. The reorganized company issued effective 1998 new Tri-Lite Common Stock to satisfy the requirements of Section 6.6 of the plan. The plan called for issuance of 12.5% of the Company's new common stock of 4,000,000 shares, or 500,000 shares, to the existing shareholders holding 3,069,332 shares. As of March 31, 1999, there is no established public trading market for the Company's stock. The Company had filed with NASD in March 1999 for clearance of quotations of its new common stock on the OTC Bulletin Board.
(b) At March 31, 1999, there were approximately 3,450 holders of the Company's common stock.
(c) The Company presently intends to retain future earnings, if any, to provide funds for use in the operation and expansion of its businesses. Accordingly, the Company does not anticipate paying cash dividends on its common stock in the near future.
Item 6.
Item 6. Selected Financial Data
The following tables summarize certain selected financial data for the periods presented for the Company on a consolidated basis. The data for the years ended December 31, 1998, 1997 and 1996 should be read in conjunction with the more detailed audited consolidated financial statements for such years presented elsewhere herein.
Income Statement Data
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The Company operated with uncertainty in its two business segments in 1998 brought about by the Chapter 11 proceeding of Helionetics, Inc., a co-proponent of the Company's plan of reorganization. The Helionetics liquidating plan together with the settlement agreement between the parties was approved by the U.S. Bankruptcy Court on December 23, 1998 and had the effect of lifting the uncertainties surrounding the Company's ability to operate.
The Company's overall financial condition during 1997 and 1996 has changed significantly as a result of the Company's filing for protection under chapter 11 of the Bankruptcy Code in February 1996. The filing was the direct result from the decision by Star Bank to roll up and terminate the Company's line of credit in January 1996.
Liquidity and Capital Resources
For essentially all of 1996, the Company operated as a debtor in possession and was liquidating its Prolite subsidiary under the direction of a court appointed receiver. Proceeds from the Prolite liquidation were used to pay down the Star Bank loan. Additionally, almost all activities were directed to the reduction of the Star Bank loan balance which was completed in early December 1996. A receivable financing facility was obtained with a financial institution in December 1996 which essentially funded the remaining operations of the Company, namely SPL and the Allite operations for the year of 1997. The receivable financing, however, had very onerous provisions in terms of interest rate and other factoring cost. In June 1998, SPL replaced its receivable financing facility by entering into a financing agreement with another institution on more favorable terms. The new financing agreement requires SPL to pay the prime rate of interest, as defined, plus 6% on advances equal to 80% of its eligible account receivables. AIM Energy, Inc. operated from its own limited resources. In 1998 its liquidity was provided partly by the $270,000 net proceeds from its license agreement with Shindengen Electric Manufacturing Company, Ltd. (Shindengen) consummated in March 1998. Its liquidity for the year of 1997 was provided, in part, from occasional loans from Ms. Susan Barnes. In addition, advances were required in 1998 and 1997 from most of its customer orders which enabled AIM to purchase required parts. These sources of liquidity, while helpful, naturally hampered the efficient operation of AIM.
Working capital was a deficit in 1998, 1997, and 1996, of $762,500, $1,231,800, and $1,433,600, respectively. 1998 working capital improved from 1997 was caused by the combined increase in receivables and inventories of $301,700 and decreased accounts payable of $282,900. In 1997 and 1996, the deficit was a direct result of decreased receivables and inventories of $876,000 and $3,411,000, respectively which was caused by the Chapter 11 proceedings. Payables and accrued expenses decreased by $638,000 and $3,213,000 in 1997 and 1996. In 1997, pre-petition trade accounts payable did not change significantly due to the Chapter 11 proceedings which stayed all pre-petition liabilities. A significant accrued liability relates to the bankruptcy proceedings, primarily administrative cost.
The funding for the Company's plan of reorganization which was approved on January 16, 1997 was partly provided by Ms. Susan Barnes contribution of $426,737. This amount was used to fund the first payment to the unsecured creditors. The remaining balance due to unsecured creditors were funded by the Helionetics liquidating plan (primarily from proceeds of sale of shares of Laser Photonics, Inc. pursuant to the collateral pledge agreement between the Company and Helionetics). As part of the settlement agreement, a senior secured promissory note of $800,000 was issued by the Company in favor of the Committee of the Unsecured Creditors of Helionetics in addition to a subordinated junior promissory note of $500,000 in favor of Ms. Susan Barnes. Both the senior and junior note carried the same collateral base. The final distribution to unsecured creditors of the Company will be dependent upon the final resolution of the Helionetics Chapter 11 proceedings.
No substantial capital expenditures were made in 1998 and 1997; and there are none anticipated in 1999 except for the $250,000 requirement by AIM for its initial cost reduction program.
The Company's liquidity needs continued to be provided by its own internal operations, however, the Company will be needing additional working capital to fund the increasing backlog for both SPL and AIM and the cost reduction programs for AIM products.
Results of Operations -
1998 vs 1997
Revenues were $4,450,000 and $5,085,000 for the year ended December 31, 1998 and 1997, respectively. During 1997, the operations of the Company included three quarters of the year for AIM. It also included approximately $1,425,000 revenues of the discontinued lighting fixtures division. AIM's revenue contribution in 1998 of $820,000 (an increase of approximately $479,000 from 1997) included approximately $92,000 (out of a total of $300,000 to be earned over 5 years) of revenues relating to the sale to Shindengen of the right and license to design, manufacture and sell the AIM products in Japan and Asia. The agreement calls for payment to AIM of a 4% royalty for sales of AIM products by Shindengen and an initial order of 50 AIM units. At December 31, 1998 a total of 44 units were shipped to Shindengen amounting to approximately $499,000.
AIM expects to receive its UL (Underwriter Laboratories) approval on its AIM products by the second quarter of 1999, which will allow AIM to sell its product in the U.S. AIM currently holds a CE Mark (an electrical approval authority in the common market equivalent to UL in the U.S.A.) on its AIM products that enables it to market and sell its AIM products in Europe.
SPL's revenues for 1998 and 1997 amounted to $3,630,000 and $3,318,000, respectively. The increase of approximately $312,000 was the result of its increased marketing activities and, while still in its early stage, from its sales arrangement with Catalina Lighting.
The combined cost of sales in 1998 was 46% compared with 67% in 1997. Excluding the effect in gross margin of the discontinued lighting fixtures division in 1997, cost of sales was 56% in 1997. The improved combined gross margin in 1998 reflects the favorable effect in margins of the revenue contribution of AIM.
Selling, general and administrative expenses, as a percent of sales, were 50% in 1998 and 47% in 1997. In absolute dollars, 1998 expenses are $2,248,000 or $165,000 lower than in 1997. The decrease was attributed to the elimination of expenses of the discontinued lighting fixture division. Reorganization items decreased in 1998 due to the confirmation of the Company's plan of reorganization in 1997 and the subsequent confirmation in December 1998 of the Helionetics' liquidating plan.
Interest expense in 1998 of approximately $94,000 included $63,000 relating to SPL's obligation to its creditors as required by its plan of reorganization.
1997 vs 1996
Revenues for the year ended December 31, 1997 were $5,085,000, a decline of 37% from the 1996 revenues of $8,047,000. The decrease in 1997 revenues was primarily a reflection of the Chapter 11 proceedings.
The loss from continuing operations for 1997 and 1996 amounted to $974,800 and $4,212,700, respectively. During 1997 the operations of the Company were comprised mostly of SPL and three quarters of the year for AIM. The 1997 combined gross margin of approximately 33% was unfavorably affected by the margin contribution of the discontinued lighting fixtures division. Excluding the effect of such discontinued division, gross margin was approximately 44% compared to 32% in 1996.
Selling, general and administrative expenses, as a percent of sales were 47% and 48% for 1997 and 1996, respectively. The unusually high percentage of expenses in 1996 was the result of the Chapter 11 bankruptcy filing. 1996 expenses included chapter 11 administrative cost of approximately $1 million, accrual for employment contracts allowed as unsecured claims ($983,000), and write off of receivable from NL de Mexico ($529,000).
Interest expense of $302,000 in 1996 was the result of the Star Bank loan which was fully paid off in December 1996.
Included in 1997 income was the gain on chapter 11 proceedings of $576,300 as a result of the gain recognized on the initial payment to the unsecured creditors.
The profitability in 1997, while improved, continued to be impacted by the chapter 11 proceedings specifically in the areas of chapter 11 administrative cost and the higher cost charged by the receivable financing facility. The Company anticipated an improved profitability in 1998. The improvement will be attributed to: lower interest (factoring) cost as a result of a new receivable financing facility obtained in June 1998; consolidation of AIM's full year of operations in 1998 which will reflect the favorable effect in results of operations of the Shindengen agreement; the effect of cost savings implemented at SPL and reduced chapter 11 administrative cost.
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for Derivative Istruments and Hedging Activities". This statement is effective for fiscal years beginning after June 15, 1999. Earlier application is encouraged; however, the Company does not anticipate adopting SFAS No. 133 until the fiscal year beginning January 1, 2000. SFAS No. 133 requires that an entity recognize all derivatives as assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company does not believe the adoption of SFAS No. 133 will have a material impact on assets, liabilities or equity. The Company has not yet determined the impact of SFAS No. 133 on the income statement or the impact on comprehensive income.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement benefits" and SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the Sesuritization of Mortgage Loans Held for Sale by a Mortgage banking Enterpirse" were issued in 1998 and are not expected to impact the Company regarding future financial statement disclosures, results of operations and financial position.
Seasonality and Effect of Inflation. The Company's business is not subject to seasonal changes due to the high-technology nature of its AIM products. SPL's products are used primarily by the aircraft and building construction industries whose revenues are dictated by its customers requirements.
Year 2000 Problem
The Company has reviewed its operations as it relates to the Year 2000 issues. The effect on the Company's operations of the Year 2000 issues are minimal. SPL products do not utilize parts or processes that the Year 2000 issues need to address. AIM's products are analog based and therefore have no Year 2000 issues. An estimated capital expenditures of approximately $25,000-$30,000 however, will be required to update the Company's computer hardware, network and management systems to make it Year 2000 compliant. Implementation of these changes is anticipated to occur in the second quarter of 1999.
For vendors and suppliers, the Company believes, while assurance cannot be made, that its sources of materials and parts will not be affected by the Year 2000 problems. Important suppliers of the Company's manufacturing needs and customers are either major or fairly large corporations which we believe would be in compliance of the Year 2000. In addition, the Company will consider keeping ample inventories of its most critical parts. The Company is also keeping records of hard copies of its vendors and customers informational documents.
Item 7 (a). Quantitative and Qualitative Disclosures About Market Risk.
The Company does not have any market risk sensitive instruments at December 31, 1998.
Item 8.
Item 8. Financial Statements and Supplementary Data
The financial statements prepared in accordance with Regulation S-X are set forth beginning on page hereof.
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The names and ages of the directors and executive officers of the Company as of March 31, 1999 are as follows:
Name Age @ 12/98 Position ---- ----------- --------
E. Maxwell Malone 61 Director, President and Chief Executive Officer
Jack Katz 39 Director, President & CEO, Self-Powered Lighting, Inc.
Ernest Dageford 64 Director, President & CEO, Aim Energy, Inc.
Adrian Cayetano 54 Director and Principal Accounting Officer Fred de Boom 62 Director
The directors shall serve until the next annual meeting of shareholders or until their successors are elected. Background information on the Company's current Directors and Officers is as follows:
E. Maxwell Malone - is currently President and Chief Executive Officer of the Company since October 1997. He is currently the President and Director of Helionetics, Inc. since 1990. Helionetics, Inc. filed for protection under Chapter 11 of the U.S. Bankruptcy Code in April 1997; and its Liquidating Plan was approved in December 1998. Mr. Malone was a founder and, from its inception in August 1987, through June 1989, Chairman of the Board, President and Chief Executive Officer of Bristol Research, a manufacturer of primary processing boards for personal computers. Mr. Malone served as President of Pick Systems Corporation and Pencor International Corp., two computer software firms. Mr. Malone was a co-founder of Microdata Corporation, a manufacturer of computer systems acquired by McDonnell Douglas Corporation in 1978. Prior to that, Mr. Malone was also a senior programmer for Lockheed Missiles & Space corporation and Control Data Corporation as well as an instructor of Applied Statistics at Southern Illinois University.
Jack Katz has served as President of Self-Powered Lighting since 1996. He served as a director of the Company since April 1997. Mr. Katz has been in the lighting business for over ten years and had served as Regional Vice President of Catalina Lighting, Inc., a NYSE company, from November 1995 till September 1996. He was President of Allite, Inc., a subsidiary of the Company, from January 1993 to November 1995.
Ernest Dageford - Mr. Dageford served as President and Chief Executive Officer of Aim Energy, Inc. since 1992. He has been a Vice President of Energy Resource Group of JWP in New York from 1986 to 1992. From 1976 to 1986, Mr. Dageford was an owner and President of Climatron, Inc., a developer and manufacturer of computerized controls to monitor and control industrial commercial buildings. Climatron subsequently was sold to JWP of New York. Prior to 1976, Mr. Dageford served in various project engineering capacity with several electronics companies in the areas of power quality. Mr. Dageford' educational background is in Physics and Electronics and did graduate work in Plasma Physics.
Adrian Cayetano - Mr. Cayetano was a consultant of the Company since November 1997 and served as Director and Principal Accounting Officer beginning in December 1998. He served as Controller of Helionetics, Inc. from May 1990 to August 1996. Helionetics, Inc. filed for protection under Chapter 11 of the U.S. Bankruptcy Code in April 1997 and obtained approval of its Liquidating Plan in December 1998. Mr. Cayetano is a Certified Public Accountant in California and a member of the California Society of Certified Public Accountants. He worked as an auditor with Pricewaterhouse International in Manila, Philippines for five years until 1972. Mr. Cayetano holds a degree in Business Administration with a major in Accounting and had one year graduate studies work in business.
Fred de Boom - Mr. De Boom was elected as a director in January 1999. He is currently a pricipal of Sonfad Associates, an investment banking services company specializing in corporate finance services for middle market companies, since 1994. Prior to that, Mr. De Boom was a Senior lending officer at Tokai Bank for about 10 years. Mr. De Boom had over 30 years experience with 3 leading commercial banks as a commercial lending specialist. He has a degree in business from Michigan State University and holds an MBA from the University of Southern California.
Item 11.
Item 11. Executive Compensation
SUMMARY COMPENSATION TABLE
(1) Served as CEO from 1/1/95 to 7/15/95 and from 2/15/96 to July 1997.
(2) The Company also reimburses all reasonable, ordinary and necessary business expenses.
(3) Represents car allowance paid.
(4) Shares of common stock were issued to the following directors and officers:
E. Maxwell Malone 100,000 shares Jack Katz 300,000 shares Ernest Dageford 200,000 shares Adrian Cayetano 75,000 shares
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding beneficial ownership as of March 31, 1999, of the Company's common stock, by any person who is known to the Company to be the beneficial owner of more than five percent of the Company's voting securities and by each director and by officers and directors of the Company as a group.
Name and address of Amount and nature Percent beneficial owner of beneficial ownership of class - ------------------- ----------------------- --------- Susan E. Barnes 6626 W. 6th Street Los Angeles, California 90024 3,300,000 shares 67.0%
Jack Katz* 2701 Junipero Street Signal Hill, California 90806 300,000 shares 6.1%
E. Maxwell Malone 100,000 shares 2.0% Ernest Dageford 200,000 shares 4.1% Adrian Cayetano 75,000 shares 1.5% All current directors and officers as a group 675,000 shares 13.7%
* This address also applies to all persons listed.
Item 13.
Item 13. Certain Relationships and Related Transactions
(a) Transactions with management and others:
As of December 31, 1997, the Company owed Helionetics, Inc., it's former principal shareholder, $1,866,500 on a note payable including interest at 10%. Helionetics cancelled and released its claim against the note as part of the Company's plan of reorganization.
As of December 31, 1996, 1997 and 1998, the Company owed Richard B. Barnett, Senior VP - Marketing from July 15, 1995 to February 28, 1996, $195,000 on a note payable. This note and accrued interest has been settled in conjunction with the Company's plan of reorganization for $180,000.
Ms. Susan Barnes, as co-proponent of the Company's plan of reorganization, received 82.5% of the newly issued common stock of the Company. In addition, pursuant to the settlement agreement between the Committee of the Unsecured Creditors of Helionetics and Ms.Barnes, the Company issued a junior subordinated secured promissory note of $500,000 with interest of 10% in favor of Ms. Barnes. Regardless of any payment terms set forth in the junior note, in no event shall the junior note to Ms. Barnes oblige the Company to pay until such time as all principal, interest and others sums payable to the Senior Note of $800,000 have been fully satisfied.
Ms. Barnes had loaned the Company from 1996 to 1998 a total of approximately $248,400 and at December 31, 1998 had an outstanding loan to the Company of $95,991 excluding interest.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements and Financial Statement Schedules.
(1) The following financial statements of Tri-Lite, Inc.and Subsidiaries are included in Item 8:
Consolidated Balance Sheets--December 31, 1998 and 1997
Consolidated Statements of Operations--For the Years Ended December 31, 1998, 1997 and 1996
Consolidated Statement of Stockholder's Equity(Deficit)--For the period from January 1, 1996 through December 31, 1998
Consolidated Statements of Cash Flows--For the Years Ended December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
(2) Financial Statement Schedule
Schedule II - Valuation and qualifying accounts
(3) Exhibits - None
(b) Reports on Form 8-K--None was filed in 1998.
(c) Exhibits--License Agreement between AIM Energy, Inc. and Shindengen Electric Mfg. Co., Ltd. dated February 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on it's behalf by the undersigned, thereunto duly authorized.
TRI-LITE, INC.
By: \S\ E. Maxwell Malone Date: April 23, 1999 --------------------- E. Maxwell Malone President and Chief Executive Officer
By: \S\ Adrian Cayetano Date: April 23, 1999 --------------------- Adrian Cayetano Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: \S\ E. Maxwell Malone Date: April 23, 1999 --------------------- E. Maxwell Malone, President, Chief Executive Officer, Principal Executive Officer
By: \S\ Adrian O. Cayetano Date: April 23, 1999 ---------------------- Adrian O. Cayetano, Director, Principal Accounting Officer
By: \S\ Jack Katz Date: April 23, 1999 ------------- Jack Katz, Director
By: \S\ Ernest Dageford Date: April 23, 1999 ------------------- Ernest Dageford, Director
By: \S\ Fred de Boom Date: April 23, 1999 ---------------- Fred de Boom, Director
TRI-LITE, INC. AND SUBSIDIARIES
SCHEDULE II - Valuation and Qualifying Accounts
(1) Use of allowance in write-off of scheduled bad debts
(2) Use of allowance in write-off of obsolete inventories
TRI-LITE, INC. AND SUBSIDIARIES
Consolidated Financial Statements For the Years Ended December 31, 1998, 1997 and 1996
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ----
Independent Auditor's Report................................................F-2
Consolidated Balance Sheets - December 31, 1998 and 1997....................F-3
Consolidated Statements of Operations - For the Years Ended December 31, 1998, 1997 and 1996.......................................F-4
Consolidated Statement of Stockholders' Equity (Deficit) - For the Period from January 1, 1996 through December 31, 1998......................F-5
Consolidated Statements of Cash Flows - For the Years Ended December 31, 1998, 1997 and 1996.......................................F-6
Notes to Consolidated Financial Statements..................................F-8
INDEPENDENT AUDITOR'S REPORT
Board of Directors Tri-Lite, Inc. and Subsidiaries Signal Hill, California
We have audited the consolidated balance sheets of Tri-Lite, Inc. and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the years in the three year period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial condition of Tri-Lite, Inc. and subsidiaries as of December 31, 1998 and 1997 and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 1998, in conformity with generally accepted accounting principles.
Our audit referred to above includes audits of the financial statement schedule listed under Item 14(a)(2) of Form 10-K. In our opinion, the financial statement schedule presents fairly, in all material respects, in relation to the financial statements taken as a whole, the information required to be stated therein.
/s/HEIN + ASSOCIATES LLP
Certified Public Accountants
Orange, California April 15, 1999
TRI-LITE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
See accompanying notes to consolidated financial statements.
TRI-LITE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
See accompanying notes to consolidated financial statements.
TRI-LITE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) FOR THE PERIOD FROM JANUARY 1, 1996 THROUGH DECEMBER 31, 1998
(continued)
TRI-LITE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
TRI-LITE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
TRI-LITE, INC AND SUBSIDIARIES.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In December 1996, the Company entered into an agreement with Altres Financial to factor up to $1,000,000 in accounts receivable, $200,000 minimum per month, at a discount of 20%. The company is entitled to a rebate of the commissions less 1.25% of the amount factored plus 0.35% for every ten days past 30 days an account is outstanding, a daily funds charges equal to prime plus 1% dividend by 360 and a monthly collateral fee of 0.25%. The factor may also maintain a reserve of 5% of the outstanding balance on accounts factored. In June 1998 the company paid-off Altres Financial and entered into a receivable purchasing facility with FC Commercial for $500,000, $200,000 minimum purchases per month at a base fee of 6% plus prime rate. As of December 31, 1998, the face amount of receivables factored was $425,276.
9. LIABILITIES SUBJECT TO COMPROMISE:
Liabilities subject to compromise as of December 31, 1998 and 1997 consists of the following:
Trade payables and accrued expenses $ 3,520,776 Taxes 291,775 Commissions 257,765 Other expenses 338,025 Note payable 180,000 Claims under rejected executory 1,133,261 -------------- Total $ 5,721,602 ==============
9. COMMITMENTS AND CONTINGENCIES:
Leases - The Company leases its facilities and certain equipment under non-cancelable operating leases expiring at various dates through 2005.
Future annual minimum rental commitments in the aggregate under these non-cancelable operating leases are as follows:
FOR THE YEAR ENDING DECEMBER 31, -------------------------------- 1999 $ 156,049 2000 162,370 2001 169,300 2002 163,170 2003 76,300 Thereafter 108,092 ---------- $ 835,281 ==========
Total rental expense related to all operating leases amounted to $153,796, $235,827 and $408,480 in 1998, 1997 and 1996, respectively.
TRI-LITE, INC AND SUBSIDIARIES.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Litigation - In the ordinary course of business, there are various claims and lawsuits brought by or against the Company. In the opinion of management, the ultimate outcome of these matters will not materially affect the Company's operations or financial position.
Helionetics is a defendant in class actions seeking unspecified damages allegedly resulting from the purported violation of federal securities laws. In the opinion of Company management, the ultimate outcome of these actions will not have any impact on the Company's consolidated financial statements.
Employment Contracts - The Company had entered into employment agreements with several officers of the Company. These agreements were voided by the Bankruptcy Court. The Company has accrued the amounts allowed by the Bankruptcy Court under these agreements as of December 31, 1996.
10. INCOME TAXES:
Income tax expense for the years ended December 31, 1998, 1997 and 1996 is comprised of the following:
1998 1997 1996 ---- ---- ---- Current Federal $ - $ - $ - State 18,000 - - Foreign Tax 9,167 - - ---------- ------------ ------------ 27,167 - - ---------- ------------ ------------ Deferred Federal - - - State - - - ---------- ------------ ------------ - - - ---------- ------------ ------------ $ 27,167 $ - $ - ========== ============ ============
Income tax expense (benefit) for the years ended December 31, 1998, 1997, and 1996 differed from the amount computed by applying the U.S. Federal income tax rate of 34% for each period as follows:
The tax effects of temporary differences that give rise to significant portions of the deferred taxes at December 31, 1998 and 1997 are presented below:
TRI-LITE, INC AND SUBSIDIARIES.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 1998, the Company had net operating loss carry forwards for federal and state purposes of approximately $19,758,000 and $2,768,000, respectively, which expire in 2018 and 2003. The benefit of the net operating losses to offset future taxable income is subject to reduction or limitation of use as a result of consolidated return filing regulations and additional limitations relating to a greater than 50% change in ownership. The change in the valuation allowance for the year ended December 31, 1998 and 1997 was $67,416 and $108,724, respectively.
11. SEGMENT INFORMATION:
During the year ended December 31, 1996 the Company operated only in one industry segment, the lighting fixture business segment.
TRI-LITE, INC AND SUBSIDIARIES.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the year ended December 31, 1998 and 1997 the Company operated again in two industry segments, as follows:
1. The lighting fixture business segment 2. The energy conservation and safety equipment business segment
Identifiable assets by industry are those assets that are used in the Company's operations in each industry. Corporate assets are, principally, cash and cash equivalents.
Information concerning the Company's operations and related information in its two different industry segments for the year ended December 31, 1998 and 1997 is as follows:
TRI-LITE, INC AND SUBSIDIARIES.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Segment profit is total revenue less operating expenses, none of the following items has been added or deducted: general corporate expenses; dividend, interest, and miscellaneous income; interest expense; income tax; and extraordinary item.
TRI-LITE, INC AND SUBSIDIARIES.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(1) Use of allowance in write-off of scheduled bad debts (2) Use of allowance in write-off of obsolete inventories