SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934 (Fee Required)
For the Fiscal Year Ended June 30, 1999
Commission File Number 0-25105
LITE KING CORP.
(Exact Name of Registrant as Specified in its Charter)
Delaware 11-2996988
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
240 Clarkson Avenue Brooklyn, New York 11226
(Address of Principal Executive Office) (Zip Code)
(718)469-3132
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $.001
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 and Exchange Act of 1934 during the preceding twelve
months and (2) has been subject to such filing requirements for the
past ninety days.
Yes / X / No / /
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 or Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.
Yes /X / No / /
As of September 17, 1999, there was no aggregate market value of
the voting stock held by non-affiliates of the Registrant due to
the fact that there was no trading market in the shares of the
Registrant.
The Number of Shares Outstanding of the Registrant at September 17,
1999 was 2,484,620
10Q-1
PART 1
Item 1. Description of Business
Lite King Corp. ("The Registrant") was incorporated in New
York on January 4, 1990 and is currently engaged in the manufacture
and assembly of wiring devices.
From February 1990 to March 31, 1999, the Registrant has
operated as a wholly owned subsidiary of Daine Industries, Inc.
("Daine"). The Board of Directors of Daine had determined to spin-
off Lite King Corp.'s shares of common stock to its shareholders on
a pro rata basis. Presently there are 248,461,935 shares of Daine
outstanding. Daine owned all of the 2,484,620 outstanding shares
of the Registrant which were distributed in May 1999 to its
shareholders as of November 30, 1998 on the basis of one share of
the Registrant for each 100 shares of Daine held. Fractional
shares were rounded up or down. Shares will be distributed in May
1999 to shareholders of record on November 30, 1998.
Management of Daine and the Registrant believe the two
companies as separate entities may create additional value for the
shareholders. There is no assurance of any trading market
developing. It should be noted that even though Daine is a public
company it has not traded in the past two years. Management will
attempt to use Daine as a "shell" vehicle to acquire an operating
business.
On February 26, 1990 Daine (through the Registrant) acquired
substantially all of the assets (with the exception of the cash)
and the business of Lite King Corporation, a manufacturer and
assembler of wiring devices, cord sets and sockets. The assets
acquired had a total cost of $738,079, consisting of machinery and
equipment, inventory, accounts receivable, a non compete clause
entered into with Lite King Corporation's former president and
principal shareholder and a rent deposit. The purchase price
($663,079 in cash and a $75,000 five year note payable in quarterly
installments with interest of 12%) was arrived at by arms length
negotiations and Daine obtained the funds for the purchase from its
own internal sources. There was no material relationship between
Daine and Lite King Corporation or any of its officers or directors
prior to this transaction. The Registrant had entered into a six
month consulting agreement with Lite King Corporation's former
president and owner Mr. Jerold Kolton. For the consulting services
rendered the Registrant paid Mr. Kolton the sum of $36,000 plus
expenses of $9,000 or a total of $45,000.
The Registrant and its predecessors have been in operation for
over twenty five years and its customers are in the Christmas,
Halloween, lamp, lighting, point of purchase display and ceramic
products field. Lite King's electrical wiring devices, consists of
wiring harnesses, "pigtails", power supply cords and the sale of
bulbs. Wiring harnesses consist of wire, one or more sockets on a
line with a polarized plug and with or without a plug and a switch
(which is optional). "Pigtails" consist of a socket and wire.
Power supply cords consists of a plug, wire and a switch (which is
optional). The Registrant's customers consists of manufacturers of
lamps, chandeliers, Christmas and Halloween illuminated
decorations, novelties, point of purchase displays, signs,
religious illuminated items, illuminated ceramic products and
electrical specialties. The Registrant's "pigtails" are primarily
sold to lamp and chandelier manufacturers while wiring devices and
power supply cords are sold primarily to the Registrant's other
customers.
The Registrant obtains its raw materials from a number of
different suppliers and believes that it is not dependent upon any
source of supply. It faces competition from a number of domestic
and international wiring device manufacturers, several of whom are
considerably larger than the Registrant. Competition is believed
to be intense and while the Registrant believes it is able to
finance future growth internally, management believes that a number
of the Registrant's competitors are materially stronger financially
along with having production facilities located domestically and
overseas, taking advantage of lower rates offshore.
Lite King's facilities consist of approximately 16,000 square
feet of office and factory space with annual lease payments of
$58,000 plus tax escalations. The lease is scheduled to expire on
April 30, 2002. At June 30, 1999, there were approximately 15
employees, all except three which were engaged in manufacturing and
assembly activities. For the year ended June 30, 1999, three
customers accounted for 62%, 15%, and 6%, respectively of total
revenues. For the fiscal year ended June 30, 1998 three customers
accounted for 38%, 28% and 18% respectively of total revenues. The
loss of any one of these customers would have a material adverse
effect on the Registrant's future operations. No other customer
accounted for 10% or more of revenues for the 1999 and 1998 fiscal
years.
Lite King recently embarked upon a modernization program which
resulted in upgrading some of its present tooling and equipment.
The modernization program has resulted in some improvement in
productivity in some production areas and in making available some
improved products. Management will also continue to seek out the
acquisition of other companies or the purchase of assets of other
firms which may be in a related field to Lite King or which may
complement Lite King's business although no assurances can be given
that such an acquisition or purchase will be completed in the near
future.
Item 2. Description of Property
As of June 30, 1999, the Registrant owned no property. Lite
King's facilities consist of 16,000 square feet of office and
factory space pursuant to a five year lease scheduled to expire on
April 30, 2002. Annual lease payments during the first two years
ending on April 30, 1999 will amount to $58,000 plus tax
escalations. During the third year the rental amounts to $60,000
plus tax escalations and during the fourth and fifth year of the
lease ending April 30, 2002, the annual lease payment amounts to
$62,000 plus tax escalations.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholders Matters.
The following table sets forth, for the periods indicated, the
Company's common stock as published by the National Daily Quotation
Service. Prices represent quotations between dealers without
adjustments for retail markups, markdowns or commissions, and may
not represent actual transactions.
High Bid Low Bid
Quarter ended September 30, 1997 * *
Quarter ended December 31, 1997 * *
Quarter ended March 31, 1998 * *
Quarter ended June 30, 1998 * *
Quarter ended September 30, 1998 * *
Quarter ended December 31, 1998 * *
Quarter ended March 31, 1999 * *
Quarter ended June 30, 1999 * *
*there were no pink sheet market makers for the Registrant's common
stock; no price information was available.
On September 17, 1999, there was no market for the shares of
the Registrant.
Number of shareholders of record on September 17, 1999 was
673.
Dividends - The Company has not paid any dividends since its
inception and presently anticipates that all earnings, if any, will
be retained for development and expansion of the Registrant's
business and that no dividends on the common stock will be declared
in the foreseeable future.
Item 6. Management's Discussion And Analysis or Plan of Operation
Sales increased 4% from fiscal year 1998 to fiscal year 1999.
This increase of approximately $69,000 was due to an increase in
orders from blow molded figurine customers who buy cord sets from
Lite King Corp. In addition, during fiscal year 1998 Underwriters
Laboratories mandated changes in fused plugs and wire used by Lite
King Corp. in seasonal outdoor cord sets. The Company also
experienced increased competition from cord set manufacturers based
in China, where labor costs are considerably lower than those
experienced by Lite King Corp.
During fiscal year 1998 these blow molded figurine
manufacturers purchased at lower levels, accounting for an 18%
decrease in sales of about $329,000 for fiscal year 1998 (as
compared with fiscal year 1997 sales).
Gross margins for fiscal year 1999 was 22% as compared with
27% in fiscal year 1998 and 30% in fiscal year 1997. The decrease
in fiscal year 1999 gross margins was due to an inability of
passing along price increases to company customers as higher unit
labor costs were absorbed by Lite King Corp. Fiscal year 1998
gross margins declined as compared with fiscal year 1997 gross
margins due to an inability of passing along price increases to
customers.
General and administrative expenses increased by approximately
$13,000 between fiscal year 1999 and fiscal year 1998. The
increase can be attributed to lower amounts for underwriters
laboratories fees $7,000; utilities $12,000; factory maintenance
$7,000; office salaries $3,000; freight out $3,000 and city and
state taxes $6,000 offset by higher officers' salaries $21,000;
legal and accounting fees $5,000 and rent expense $21,000. The
increases in these expense categories are consistent with higher
levels of sales activities. Increased officers' salaries were paid
to Lite King's president.
General and administrative expenses declined by approximately
$82,000 between fiscal year 1998 and fiscal year 1997. The decline
can be attributed to lower amounts for underwriters laboratories
fees $8,000; group insurance expenses $12,000; general insurance
expense $35,000; legal and accounting expense $18,000; rent expense
(real estate taxes) $35,000; and utilities expense $4,000 - offset
by higher officers' salaries $22,000 and maintenance expense
$8,000. The declines in these expense categories are consistent
with lower levels of sales activities. Increased officers'
salaries were paid to Lite King's president and treasurer.
Net loss increased by $53,937 between fiscal year 1999 and
fiscal year 1998. The loss of $67,331 in fiscal year 1999 can be
attributed to a lower gross margin and a small increase in general
and administrative expenses. The increase of the net loss from a
profit of $17,426 in fiscal year 1997 to a net loss of $13,394 in
fiscal year 1998 can be attributed to a decline in gross margins
offset by a decline in general and administrative expenses.
There has been a downward trend in sales as sales decreased
between fiscal year 1997 to 1999.
The Registrant has financed its activities primarily from
operating activities. For fiscal year 1999 and 1998 cash flows
from investing activities have not been material.
During fiscal years 1997, 1998 and 1999, cash flows from
financing activities have been immaterial.
As of June 30, 1999, the Registrant had total assets of
$1,698,825 as compared with total assets of $1,722,950 at June 30,
1998. The decline in assets of $24,125 can be attributed to an
increase of $11,736 in the following current asset categories: an
increase in cash and cash equivalents $18,911; prepaid expenses
$7,987; accounts receivable $17,391 and a decrease of $32,269 in
inventory and a decrease of $284 in deferred taxes. There was a
decrease in the fixed asset account $35,861 (net).
During fiscal year 1999, total liabilities increased by
$43,206 reflected by an increase in current liabilities of $49,353
and a decrease in deferred tax liabilities of $6,147. At June 30,
1999, shareholders' equity amounted to $1,323,372 as compared with
$1,390,703 at June 30, 1998. The current ratio (current assets to
current liabilities) at June 30, 1999 was approximately 4:1.
Management presently is considering a number of negative
factors which could have a material adverse effect on fiscal 2000
revenues and profitability. The Company will face intense
competition for the candelabra cord sets in fiscal year 2000 from
Chinese producers and their U.S. wholesaler representatives. It
also will have to import its Edison base cord sets from Chinese
sources at profit margins lower than those generated in earlier
years when this product line was produced at the Company's
facilities.
Item 7. Financial Statements
a) Financial Statements and Financial Statement Schedules.
Balance Sheets - June 30, 1999 and 1998
Statement of Shareholders' Equity for the period July 1,
1997 to June 30, 1999
Statement of Operations for the years ended June 30, 1999
and 1998
Statement of Cash Flows for the years ended June 30, 1999
and 1998
Notes to the Financial Statements for the years ended
June 30, 1999 and 1998
b) Schedules
Other schedules not submitted are omitted, because the
information is included elsewhere in the financial
statements or the notes thereto, or the conditions
requiring the filing of these schedules are not
applicable.
Item 8. Changes In and Disagreements with Accountants in
Accounting and Financial Disclosure.
None.
PART III
Item 9. Directors and Executive Officers
The executive officers and directors of the Registrant are as
follows:
Arthur Seidenfeld 48 President and Director
Anne Seidenfeld 86 Treasurer,Secretary
and Director
Gerald Kaufman 58 Director
Arthur Seidenfeld, President and Director of the Registrant
since formation, was awarded a B.S. Degree in Accounting from New
York University in 1972 and an M.B.A. in Finance in 1978 from Pace
University. He has also served as President and Director of Daine
Industries and of Modern Technology Corp. since 1988.
Anne Seidenfeld, Secretary-Treasurer and Director of the
Company. She is also Treasurer, Secretary and a Director of Modern
Technology Corp. and is Treasurer, Secretary and a Director of
Daine.
Gerald Kaufman, Director, has been a practicing attorney for
over thirty years. He has served as a director of the Company,
along with being a director of Modern Technology Corp. and Daine
since November 1990.
Arthur Seidenfeld is the son of Anne Seidenfeld.
Item 10. Executive Compensation
For the year ended June 30, 1999, Arthur Seidenfeld, President
and a Director of the Company received a salary of $92,250. Anne
Seidenfeld, Treasurer and a Director of the Company, received a
salary of $30,600 for the year ended June 30, 1999.
No other option or bonus plan exists.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
a. The following table sets forth information as of June 30, 1999
with respect to all shareholders known by the Company to be
beneficial owners of more than 5% of the outstanding Common
Stock, all directors, and all directors and executive officers
as a group. Except as noted below, each shareholder has sole
voting and investment power with respect to shares owned.
Number of Common
Name and Address Shares Beneficially
of Beneficial Owner Owned Percent*
Modern Technology Corp.
P.O. Box 0007
Belle Harbor, New York 11694 720,000 29.0%
Arthur Seidenfeld**
P.O. Box 0007
Belle Harbor, New York 11694 360,000 14.5%
Anne Seidenfeld**
P.O. Box 0007
Belle Harbor, New York 11694 200,000 8.0%
American Israel Ventures Corp.**
P.O. Box 0007
Belle Harbor, New York 11694 150,000 6.0%
Gerald Kaufman
33 Walt Whitman road
Huntington Station, New York 11746 30,000 1.2%
All 3 officers and directors
as a group 590,000 23.7%
*Based upon 2,484,620 shares outstanding which assumes a
distribution of one share of the Registrant for each 100 shares of
Daine.
** Arthur Seidenfeld and Anne Seidenfeld are President and
Secretary, Treasurer respectively of Modern Technology Corp. and
also own 48% and 12% respectively of the common stock of Modern
Technology Corp.
Arthur Seidenfeld owns 70% of the outstanding shares of American
Israel Ventures Corp. (AIV) and Anne Seidenfeld owns 25% of the
outstanding shares of AIV. Arthur Seidenfeld and Anne Seidenfeld
are President and Treasurer-Secretary respectively of American
Israel Ventures Corp.
b. The shares owned by management are as follows:
Common Stock.
Arthur Seidenfeld 360,000 14.5%
Anne Seidenfeld 200,000 8.0%
Gerald Kaufman 30,000 1.2%
Item 13. Certain Relationships and Related Transactions.
None
Supplemental information to be furnished with reports filed
pursuant to Section 15(d) of the Securities Act of 1934 by
Registrant which have not registered securities pursuant to Section
12 of the Securities Act of 1934:
a) No annual report or proxy material has been sent to
security holders. When such report or proxy materials are
furnished to securities holders subsequent to the filing of this
report, copies shall be furnished to the Commission when sent to
securities holders.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.
LITE KING CORP.
BY Arthur Seidenfeld
President
Dated: September 17, 1999
Pursuant to the requirements of the Securities 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 date
indicted.
Name Title Date
Arthur Seidenfeld President and Director
Principal Executive
Officer and Principal
Financial Officer Sept. 17, 1999
Anne Seidenfeld Treasurer, Secretary
and Director Sept. 17, 1999
Gerald Kaufman Director Sept. 17, 1999
LITE KING CORP.
FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
I N D E X
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT 1
BALANCE SHEETS - ASSETS 2
BALANCE SHEETS
- LIABILITIES AND SHAREHOLDERS' EQUITY 3
STATEMENTS OF SHAREHOLDERS' EQUITY 4
STATEMENTS OF OPERATIONS 5
STATEMENTS OF CASH FLOWS 6
NOTES TO THE FINANCIAL STATEMENTS 7-10
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors and Shareholders
LITE KING CORP.
Brooklyn, NY
We have audited the accompanying balance sheets of LITE KING CORP.
as of June 30, 1999 and 1998 and the related statements of
operations, statements of shareholders' equity and cash flows for
each of the two years in the period ended June 30, 1999. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based upon our audit.
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 audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of LITE
KING CORP. as of June 30, 1999 and 1998, and the results of its
operations and its cash flows for each of the two years in the
period ended June 30, 1999, in conformity with generally accepted
accounting principles.
GREENBERG & COMPANY LLC
Springfield, New Jersey
August 6, 1999
Page 1 of 10
LITE KING CORP.
BALANCE SHEETS
A S S E T S
June 30,
1999 1998
CURRENT ASSETS
Cash and Cash Equivalents $ 604,463 $ 585,552
Accounts Receivable 410,178 392,787
Inventory 562,925 595,194
Prepaid Expenses 21,335 13,348
Deferred Taxes -0- 284
Total Current Assets 1,598,901 1,587,165
FIXED ASSETS, At Cost
Machinery and Equipment 363,113 363,113
Leasehold Improvements 9,787 9,787
Less: Accumulated Depreciation
and Amortization (279,076) (243,215)
93,824 129,685
OTHER ASSETS
Deposits 6,100 6,100
TOTAL ASSETS $1,698,825 $1,722,950
See accompanying summary of accounting policies and notes to the
financial statements.
Page 2 of 10
LITE KING CORP.
BALANCE SHEETS
L I A B I L I T I E S A N D S H A R E H O L D E R S' E Q U I T Y
June 30,
1999 1998
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 373,177 $ 323,824
Total Current Liabilities 373,177 323,824
OTHER LIABILITIES
Deferred Income Tax Liability 2,276 8,423
TOTAL LIABILITIES 375,453 332,247
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock ($.001 Par Value
50,000,000 shares authorized,
2,484,620 shares issued and
outstanding 5,400 5,400
Paid-In Capital 1,139,880 1,139,880
Retained Earnings 178,092 245,423
TOTAL SHAREHOLDERS' EQUITY 1,323,372 1,390,703
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,698,825 $1,722,950
See accompanying summary of accounting policies and notes to the
financial statements.
Page 3 of 10
LITE KING CORP.
STATEMENTS OF SHAREHOLDERS' EQUITY
For The Period July 1, 1997 to June 30, 1999
Total
Number $.001 Share-
of Par Paid-In Retained holders'
Shares Value Capital Earnings Equity
BALANCES AT
JULY 1, 1997 2,484,620 $5,400 $1,137,880 $258,817 $1,402,097
Capital
Contribution 2,000 2,000
Net Income
(Loss) for the
Year Ended
June 30, 1998 (13,394) (13,394)
BALANCES AT
JUNE 30, 1998 2,484,620 5,400 1,139,880 245,423 1,390,703
Net Income
(Loss) for the
Year Ended
June 30, 1999 (67,331) (67,331)
BALANCES AT
JUNE 30, 1999 2,484,620 $5,400 $1,139,880 $178,092 $1,323,372
See accompanying summary of accounting policies and notes to the financial
statements.
Page 4 of 10
LITE KING CORP.
STATEMENTS OF OPERATIONS
For The Years Ended
June 30,
1999 1998
REVENUES
Sales - Net $1,590,235 $1,521,660
COST OF GOODS SOLD
Beginning Inventory 595,194 607,127
Purchase and Freight 986,707 852,570
Direct Labor 213,599 245,031
1,795,500 1,704,728
Less: Inventory - End of Period 562,925 595,194
1,232,575 1,109,534
GROSS MARGIN 357,660 412,126
Interest Income 21,246 15,238
General and Administrative
Expenses (415,551) (402,100)
Depreciation and Amortization Expense (35,861) (38,460)
INCOME (LOSS) BEFORE INCOME TAXES (72,506) (13,196)
Income Tax Expense (Benefit) (5,175) 198
NET INCOME (LOSS) $ (67,331) $ (13,394)
Earnings (Loss) Per Share $(.03) $(.01)
Weighted Average Number of Shares
of Common Stock Outstanding 2,484,620 2,484,620
See accompanying summary of accounting policies and notes to the financial
statements.
Page 5 of 10
LITE KING CORP.
STATEMENTS OF CASH FLOWS
For The Years Ended
June 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(67,331) $(13,394)
Adjustment to Reconcile Net Income
to Net Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization
Expense 35,861 38,460
Change in Assets and Liabilities:
Decrease (Increase) in Accounts
Receivable (17,391) 109,472
Decrease (Increase) in Inventory 32,269 11,933
Decrease (Increase) in Prepaid
Expenses (7,987) (2,497)
Decrease (Increase) in Deferred
Taxes - Current 284 (284)
Increase (Decrease) in Accounts
Payable and Accrued Expenses 49,353 180,497
Increase (Decrease) in Income Tax
Payable -0- (1,573)
Increase (Decrease) in Deferred
Income Tax Liability (6,147) (6,615)
Net Cash Provided By (Used In)
Operating Activities 18,911 315,999
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures -0- -0-
Net Cash Provided By (Used In)
Investing Activities -0- -0-
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from (Repayments to)
Parent Company -0- (2,000)
Net Cash Provided By (Used In)
Financing Activities -0- (2,000)
Net Increase (Decrease) in Cash and
Cash Equivalents 18,911 313,999
Cash and Cash Equivalents at
Beginning of Period 585,552 271,553
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $604,463 $585,552
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest $ -0- $ -0-
Income Taxes $ 1,282 $ 7,097
See accompanying summary of accounting policies and notes to the financial
statements.
Page 6 of 10
LITE KING CORP.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
NOTE 1: ORGANIZATION AND NATURE OF OPERATIONS
Lite King Corp. (LKC) is a New York corporation. LKC's
principal business is the manufacture and assembly of
electrical wiring devices, cord sets and sockets. LKC's
customers consist of manufacturers of lamps, chandeliers,
Christmas and Halloween illuminated decorations, novelties,
point of purchase displays, signs, and other electrical
specialties. The customers are located throughout North
America.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid, short-term
investments with maturities of 90 days or less. The carrying
amount reported in the accompanying balance sheets approximates
fair value.
ACCOUNTS RECEIVABLE
Accounts receivable are judged as to collectibility by
management and an allowance for bad debts is established as
necessary. As of each balance sheet date, no reserve was
considered necessary.
INVENTORY
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
Inventories consist of:
6/30/99 6/30/98
Raw Materials $506,633 $506,875
Work-in-Process 56,292 65,427
Finished Goods -0- 22,892
$562,925 $595,194
ADVERTISING
Advertising costs are expensed as incurred.
Advertising expense for the years ended June 30, 1999 and 1998
was $4,089 and $4,499, respectively.
Page 7 of 10
LITE KING CORP.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(Continued)
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentration of credit risk are accounts receivable. During
the years ended June 30, 1999 and 1998, three customers
accounted for approximately 62%, 15%, 6% and 38%, 28%, 18%,
respectively, of total revenues. The Company performs ongoing
credit evaluations of its customers but generally does not
require collateral to support customer receivables. The loss
of any one of these customers could have a material adverse
effect on the financial condition of the company.
PROPERTY AND EQUIPMENT
Renewals and betterments are capitalized; maintenance and
repairs are expensed as incurred.
Depreciation is calculated using the straight line method over
the asset's estimated useful life, which generally
approximates 10 years.
REVENUE RECOGNITION POLICY
The company recognizes sales, for both financial statement
purposes and for tax purposes, when the products are shipped
to customers.
ESTIMATES IN FINANCIAL STATEMENTS
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." SFAS 109 has as its basic
objective the recognition of current and deferred income tax
assets and liabilities based upon all events that have been
recognized in the financial statements as measured by the
provisions of the enacted tax laws.
Valuation allowances are established when necessary to reduce
deferred tax assets to the estimated amount to be realized.
Income tax expense represents the tax payable for the current
period and the change during the period in the deferred tax
assets and liabilities.
Page 8 of 10
LITE KING CORP.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1997
(Continued)
CAPITAL STOCK
In October 1998, the Company increased its authorized common
shares from 200 to 50,000,000, changed the par value from none
to $.001 per share, and declared a stock split of 24,846.2 to
one. All related share and per share amounts have been
retroactively restated for these changes.
SPINOFF
In April of 1999, Daine Industries Inc. (the former 100% owner
of Lite King Corp.) distributed all 2,484,620 issued and
outstanding shares of Lite King Corp. to the shareholders of
Daine Industries Inc. on a pro rata basis. Daine did not
recognize any gain or loss on the distribution and also relies
on Internal Revenue Code section 355 to treat the distribution
as a nontaxable stock dividend to Daine's shareholders.
NOTE 3: COMMITMENTS AND CONTINGENCIES
The company is currently in a lease for office and factory
space requiring minimum annual base rental payments for the
fiscal periods shown as follows:
2000 $ 60,333
2001 62,000
2002 51,667
Total $174,000
In addition to annual base rental payments, the company must
pay an annual escalation for real estate taxes.
Rental expense under this lease for the years ended June 30,
1999 and 1998 was $83,714 and $58,000, respectively.
NOTE 4: INCOME TAXES
Income taxes are accrued at the statutory U.S. and state income
tax rates.
Income tax expense is principally due to state and local income
taxes based upon capital. Deferred tax liabilities relate to
depreciation timing differences and operating loss carrybacks.
During the year ended June 30, 1999 the Company incurred a tax
net operating loss of approximately $55,000 which is allowed to
be carried forward for 20 years.
Page 9 of 10
LITE KING CORP.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(Continued)
June 30,
1999 1998
Current tax expense (benefit):
Income tax at statutory rates $ 972 $ 7,097
Deferred tax expense (benefit):
Depreciation (6,147) (6,615)
Operating loss carryback -0- (284)
(6,147) (6,899)
Total Tax Expense (Benefit) $(5,175) $ 198
The tax effect of significant temporary differences, which
comprise the deferred tax assets and liabilities are as
follows:
June 30,
1999 1998
Deferred tax asset:
Operating loss carryback $28,658 $ 284
Valuation allowance
Net deferred tax asset (28,658) -0-
$ -0- $ 284
Deferred tax liability:
Depreciation $ 2,276 $8,423
The Company has fully reserved the June 30, 1999 deferred tax
asset due to substantial losses and a lack of current operating
profitability.
NOTE 5: POSTRETIREMENT EMPLOYEE BENEFITS
The company does not have a policy to cover employees for any
health care or other welfare benefits that are incurred after
employment (postretirement). Therefore, no provision is
required under SFAS's 106 or 112.
Page 10 of 10
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