SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Act of 1934
For the quarterly period ended September 30, 1999 or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Act of 1934
For the transition period from to
Commission file number 0-25105
LITE KING CORP.
(Exact Name of Registrant as Specified in its Charter)
New York 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)
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 or for such shorter period that the Registrant was required
to file such reports, and (2) has been subject to such filing
requirements for the past ninety days.
Yes / X / No / /
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes / / No / /
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date. 2,484,620
10Q-1
LITE KING CORP.
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
I N D E X
Page
ACCOUNTANTS' REVIEW REPORT 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
ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Shareholders
LITE KING CORP.
Brooklyn, New York
We have reviewed the accompanying balance sheet of LITE KING CORP. as of
September 30, 1999 and the related statements of operations, shareholders'
equity and cash flows for the three month periods ended September 30, 1999
and 1998, in accordance with standards established by the American Institute
of Certified Public Accountants. All information included in these financial
statements is the representation of management of LITE KING CORP.
A review of interim financial information consists principally of obtaining
an understanding of the system for the preparation of interim financial
information, applying analytical review procedures to financial data, and
making inquiries of persons responsible for financial and accounting matters.
It is substantially less in scope than an examination in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of June 30, 1999, and the related statements
of operations, shareholders' equity and cash flows for the year then ended
(not presented herein); and in our report dated August 6, 1999, we expressed
an unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
June 30, 1998 is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
GREENBERG & COMPANY LLC
Springfield, New Jersey
October 21, 1999
Page 1 of 10
LITE KING CORP.
BALANCE SHEETS
A S S E T S
Sept. 30, June 30,
1999 1999
(Unaudited)
CURRENT ASSETS
Cash and Cash Equivalents $ 703,007 $ 604,463
Accounts Receivable 421,278 410,178
Inventory 402,926 562,925
Prepaid Expenses 7,921 21,335
Total Current Assets 1,535,132 1,598,901
FIXED ASSETS, At Cost
Machinery and Equipment 364,011 363,113
Leasehold Improvements 9,787 9,787
Less: Accumulated Depreciation
and Amortization (287,076) (279,076)
86,722 93,824
OTHER ASSETS
Deposits 6,100 6,100
TOTAL ASSETS $1,627,954 $1,698,825
See accompanying notes to the financial statements and accountants'
review report.
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
Sept. 30, June 30,
1999 1999
(Unaudited)
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 281,680 $ 373,177
Total Current Liabilities 281,680 373,177
OTHER LIABILITIES
Deferred Income Tax Liability 2,276 2,276
TOTAL LIABILITIES 283,956 375,453
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 198,718 178,092
TOTAL SHAREHOLDERS' EQUITY 1,343,998 1,323,372
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,627,954 $1,698,825
See accompanying notes to the financial statements and accountants'
review report.
Page 3 of 10
LITE KING CORP.
STATEMENTS OF SHAREHOLDERS' EQUITY
For The Period July 1, 1998 to September 30, 1999
Total
Number $.001 Share-
of Par Paid-In Retained holders'
Shares Value Capital Earnings Equity
BALANCES AT
JULY 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
Net Income (Loss)
for the three
months ended
Sept. 30, 1999
(Unaudited) 20,626 20,626
BALANCES AT
SEPT. 30, 1999
(Unaudited) 2,484,620 $5,400 $1,139,880 $198,718 $1,343,998
See accompanying notes to the financial statements and accountants' review
report.
Page 4 of 10
LITE KING CORP.
STATEMENTS OF OPERATIONS
(Unaudited)
For The Three Months Ended
September 30,
1999 1998
REVENUES
Sales - Net $343,080 $ 759,850
COST OF GOODS SOLD
Beginning Inventory 562,926 595,194
Purchase and Freight 37,680 423,246
Direct Labor 42,965 84,864
643,571 1,103,304
Less: Inventory - End of Period 402,926 550,002
240,645 553,302
GROSS MARGIN 102,435 206,548
Interest Income 4,036 5,092
General and Administrative
Expenses (77,013) (107,344)
Depreciation and Amortization Expense (8,000) (9,615)
INCOME (LOSS) BEFORE INCOME TAXES 21,458 94,681
Income Tax Expense (Benefit) 832 28,198
NET INCOME (LOSS) $ 20,626 $ 66,483
Basic and Diluted Earnings (Loss) Per Share $ .01 $ .03
Weighted Average Number of Shares
of Common Stock Outstanding 2,484,620 2,484,620
See accompanying notes to the financial statements and accountants' review
report.
Page 5 of 10
LITE KING CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
For The Three Months Ended
September 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 20,626 $ 66,483
Adjustment to Reconcile Net Income
to Net Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization
Expense 8,000 9,615
Change in Assets and Liabilities:
Decrease (Increase) in Accounts
Receivable (11,100) (232,476)
Decrease (Increase) in Inventory 159,999 45,192
Decrease (Increase) in Prepaid
Expenses 13,414 (416)
Increase (Decrease) in Accounts
Payable and Accrued Expenses (91,497) 55,493
Increase (Decrease) in Income Tax
Payable -0- 28,198
Increase (Decrease) in Deferred
Income Tax Liability -0- -0-
Net Cash Provided By (Used In)
Operating Activities 99,442 (27,911)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (898) -0-
Net Cash Provided By (Used In)
Investing Activities (898) -0-
Net Increase (Decrease) in Cash and
Cash Equivalents 98,544 (27,911)
Cash and Cash Equivalents at
Beginning of Period 604,463 585,552
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $703,007 $557,641
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest $ -0- $ -0-
Income Taxes $ 832 $ -0-
See accompanying notes to the financial statements and accountants' review
report.
Page 6 of 10
LITE KING CORP.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
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:
9/30/99 6/30/99
Raw Materials $366,633 $506,633
Work-in-Process 36,293 56,292
Finished Goods -0- -0-
$402,926 $562,925
ADVERTISING
Advertising costs are expensed as incurred.
Advertising expense for the three months ended September 30,
1999 and 1998 was $438 and $438, respectively.
Page 7 of 10
LITE KING CORP.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Continued)
(Unaudited)
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentration of credit risk are accounts receivable. During
the three months ended September 30, 1999 and 1998, three
customers accounted for approximately 62%, 13%, 11% and 64%,
12%, 12%, 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 THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Continued)
(Unaudited)
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 May 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 three months ended
September 30, 1999 and 1998 was $14,500 and $14,500,
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 THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Continued)
(Unaudited)
September 30,
1999 1998
Current tax expense (benefit):
Income tax at statutory rates $ 6,979 $28,198
Deferred tax expense (benefit):
Operating loss carryforward (6,147) -0-
Total Tax Expense (Benefit) $ 832 $28,198
The tax effect of significant temporary differences, which
comprise the deferred tax assets and liabilities are as
follows:
Sept. 30 June 30
1999 1998
Deferred tax asset:
Operating loss carryback $22,511 $28,658
Valuation allowance
Net deferred tax asset (22,511) (28,658)
$ -0- $ -0-
Deferred tax liability:
Depreciation $ 2,276 $ 2,276
The Company has fully reserved the deferred tax asset due to
substantial losses and a lack of 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
PART 1 Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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.
The Registrant had operated as a wholly owned subsidiary of Daine
Industries, Inc. ("Daine"). The Board of Directors of Daine determined
to spin-off Lite King Corp.'s shares of common stock to its shareholders
on a pro rata basis. Daine owned all of the 2,484,620 outstanding
shares of the Registrant which were distributed to its shareholders on
the basis of one share of the Registrant for each 100 shares of Daine
held. Fractional shares were rounded up or down. Shares were
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 will 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 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.
Lite King's facilities consist of approximately 16,000 square feet
of office and factory space with annual lease payments of $58,000. Lite
King's work force fluctuates during the year, from about 6-15 employees,
all, except three, which were engaged in manufacturing and assembly
activities.
Lite King's main customer base are manufacturers of Christmas,
Easter and Halloween products. Management considers its principal
business to be seasonal in nature with sales usually at its lowest point
during the quarter ended March 31st, with sales rising steadily during
the June, September quarters and declining in the December quarter. The
Registrant is experiencing lower gross profit margins because of the
introduction of some new components used on some products, mandated by
Underwriters Laboratories Inc., and added competition from firms with
manufacturing facilities in China. For the three months ended September
30, 1999, Lite King's three largest customers accounted for about 86% of
its total sales. (The largest of the three accounted for 62%, the
second for 13% and the third for 11%.)
The cash and cash equivalents balances of the Company as of
September 30, 1999 and June 30, 1999 were $703,007 and $604,463,
respectively. The increase in cash and cash equivalents was principally
the result of lower inventory levels for the quarter ended September 30,
1999. The Company expects that its current balances of cash and cash
equivalents will be sufficient to meet its minimum planned capital and
liquidity needs for the next year.
The Company does not believe that the impact of inflation on its
activities is significant.
Year 2000 Compliance
The Registrant has evaluated the impact of the Year 2000 issue on
the business and does not expect to incur significant costs with Year
2000 compliance. The Registrant believes that all software and hardware
requirements to enable it to cope with the Year 2000 issue have been or
are being currently implemented. However, there can be no assurance
that unanticipated costs may arise in implementing these requirements.
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. None.
Item 3. Defaults upon Senior Securities. None.
Item 4. Submission of Matters To A Vote of Security Holders. None.
Item 5. Other Materially Important Events. None.
Item 6. Exhibits and Reports on Form 8-K. None.
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.
By: Arthur Seidenfeld
President
Dated: November 11, 1999
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