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 March 31, 2000 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
MARCH 31, 2000
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 5-6
STATEMENTS OF CASH FLOWS 7
NOTES TO THE FINANCIAL STATEMENTS 8-11
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
March 31, 2000 and the related statement of operations, shareholders' equity
and cash flows for the nine month periods ended March 31, 2000 and 1999, 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 balance sheet as of June 30, 1999
is fairly stated in all material respects in relation to the balance sheet
from which it has been derived.
GREENBERG & COMPANY LLC
Springfield, New Jersey
April 26, 2000
Page 1 of 11
LITE KING CORP.
BALANCE SHEETS
A S S E T S
March 31, June 30,
2000 1999
(Unaudited)
CURRENT ASSETS
Cash and Cash Equivalents $ 836,193 $ 604,463
Accounts Receivable 14,888 410,178
Inventory 200,727 562,925
Prepaid Expenses 6,175 21,335
Total Current Assets 1,057,983 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 (323,734) (279,076)
50,064 93,824
OTHER ASSETS
Deposits 6,100 6,100
TOTAL ASSETS $1,114,147 $1,698,825
See accompanying notes to the financial statements and accountants'
review report.
Page 2 of 11
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
March 31, June 30,
2000 1999
(Unaudited)
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 7,619 $ 373,177
Total Current Liabilities 7,619 373,177
OTHER LIABILITIES
Deferred Income Tax Liability 2,276 2,276
TOTAL LIABILITIES 9,895 375,453
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock ($.001 Par Value
50,000,000 shares authorized,
2,484,620 shares issued and
outstanding 2,485 2,485
Paid-In Capital 1,142,795 1,142,795
Retained Earnings (Deficit) (41,028) 178,092
TOTAL SHAREHOLDERS' EQUITY 1,104,252 1,323,372
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,114,147 $1,698,825
See accompanying notes to the financial statements and accountants'
review report.
Page 3 of 11
LITE KING CORP.
STATEMENTS OF SHAREHOLDERS' EQUITY
For The Period July 1, 1998 to March 31, 2000
Total
Number $.001 Retained Share-
of Par Paid-In Earnings holders'
Shares Value Capital (Deficit) Equity
BALANCES AT
JULY 1, 1998 2,484,620 $2,485 $1,142,795 $245,423 $1,390,703
Net Income
(Loss) for the
Year Ended
June 30, 1999 (67,331) (67,331)
BALANCES AT
JUNE 30, 1999
(Audited) 2,484,620 2,485 1,142,795 178,092 1,323,372
Net Income (Loss)
for the nine
months ended
March 31, 2000
(Unaudited) (219,120) (219,120)
BALANCES AT
MARCH 31, 2000
(Unaudited) 2,484,620 $2,485 $1,142,795 $(41,028) $1,104,252
See accompanying notes to the financial statements and accountants' review
report.
Page 4 of 11
LITE KING CORP.
STATEMENTS OF OPERATIONS
(Unaudited)
For The Three Months Ended
March 31,
2000 1999
REVENUES
Sales - Net of returns
and Allowances $ 23,268 $ 72,052
COST OF GOODS SOLD
Beginning Inventory 302,926 570,002
Purchase and Freight 2,609 39,606
Direct Labor 8,290 23,522
313,825 633,130
Less: Inventory - End of Period (200,727) (582,002)
Cost of Goods Sold 113,098 51,128
GROSS MARGIN (LOSS) (89,830) 20,924
Interest Income 7,911 5,642
General and Administrative
Expenses (67,450) (80,311)
Depreciation Expense (28,658) (9,125)
Gain on Asset Sale 8,200 -0-
INCOME (LOSS) BEFORE INCOME TAXES (169,827) (62,870)
Income Tax Expense (Benefit) (22) (10,374)
NET INCOME (LOSS) $(169,805) $ (52,496)
Earnings (Loss) Per Share $(.07) $(.02)
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 11
LITE KING CORP.
STATEMENTS OF OPERATIONS
(Unaudited)
For The Nine Months Ended
March 31,
2000 1999
REVENUES
Sales - Net of Returns
and Allowances $ 527,347 $1,080,031
COST OF GOODS SOLD
Beginning Inventory 562,925 595,194
Purchase and Freight 43,405 611,591
Direct Labor 90,188 160,347
696,518 1,367,132
Less: Inventory - End of Period (200,727) (582,002)
Cost of Goods Sold 495,791 785,130
GROSS MARGIN 31,556 294,901
Interest Income 19,787 15,434
General and Administrative
Expenses (233,930) (319,381)
Depreciation Expense (44,658) (27,443)
Gain on Asset Sale 8,200 -0-
INCOME (LOSS) BEFORE INCOME TAXES (219,045) (36,489)
Income Tax Expense (Benefit) 75 (10,374)
NET INCOME (LOSS) $(219,120) $ (26,115)
Earnings (Loss) Per Share $(.09) $(.01)
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 6 of 11
LITE KING CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
For The Nine Months Ended
March 31,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(219,120) $(25,831)
Adjustment to Reconcile Net Income
to Net Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization
Expense 44,658 27,443
Gain on Asset Sale (8,200) -0-
Change in Assets and Liabilities:
Decrease (Increase) in Accounts
Receivable 395,290 355,281
Decrease (Increase) in Inventory 362,198 13,192
Decrease (Increase) in Other
Current Assets 15,160 (18,997)
Increase (Decrease) in Accounts
Payable and Accrued Expenses (365,558) (249,917)
Net Cash Provided By (Used In)
Operating Activities 224,428 101,171
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (898) -0-
Proceeds from Asset Sale 8,200 -0-
Net Cash Provided By Investing Activities 7,302 -0-
Net Increase (Decrease) in Cash and
Cash Equivalents 231,730 101,171
Cash and Cash Equivalents at
Beginning of Period 604,463 585,552
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 836,193 $686,723
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest $ -0- $ -0-
Income Taxes $ 6,300 $ 352
See accompanying notes to the financial statements and accountants' review
report.
Page 7 of 11
LITE KING CORP.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000
(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:
3/31/00 6/30/99
Raw Materials $160,582 $506,633
Work-in-Process -0- 56,292
Finished Goods 40,145 -0-
$200,727 $562,925
During the quarter ended March 31, 2000, the Company has
written down its inventory by $50,000 to the estimated net
realizable value.
ADVERTISING
Advertising costs are expensed as incurred.
Advertising expense for the nine months ended March 31, 2000
and 1999 was $475 and $2,139, respectively.
Page 8 of 11
LITE KING CORP.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000
(Continued)
(Unaudited)
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentration of credit risk are accounts receivable. During
the nine months ended March 31, 2000 and 1999, three customers
accounted for approximately 59%, 11%, 10% and 71%, 7%, 3%,
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.
During the quarter ended March 31, 2000, the Company wrote
down its equipment by $18,848. This was due to a mold that
management deems worthless.
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.
Page 9 of 11
LITE KING CORP.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000
(Continued)
(Unaudited)
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.
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 5,167
Total $127,500
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 nine months ended
March 31, 2000 and 1999 was $43,231 and $58,784, 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 10 of 11
LITE KING CORP.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000
(Continued)
(Unaudited)
March 31,
2000 1999
Current tax expense (benefit):
Income tax at statutory rates $ 75 $ 352
Deferred tax expense (benefit):
Operating loss carryforward -0- (10,726)
Total Tax Expense (Benefit) $ 75 $(10,374)
The tax effect of significant temporary differences, which
comprise the deferred tax assets and liabilities are as
follows:
March 31 June 30
2000 1999
Deferred tax asset:
Operating loss carryback $100,795 $28,658
Valuation allowance (100,795) (28,658)
Net deferred tax asset $ -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.
NOTE 6: INTERIM FINANCIAL REPORTING
The unaudited financial statements of the Company for the
period July 1, 1999 to March 31, 2000 have been prepared by
management from the books and records of the Company, and
reflect, in the opinion of management, all adjustments
necessary for a fair presentation of the financial position and
operations of the Company as of the period indicated herein,
and are of a normal recurring nature.
Page 11 of 11
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 4-15 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 nine months ended March 31,
2000, Lite King's three largest customers accounted for about 80% of its
total sales. (The largest of the three accounted for 59%, the second
for 11% and the third for 10%.)
Management of the Registrant has concluded that it will continue to
experience declining profit margins in its major core business:
seasonal holiday light sets. The declining margins are due to large
disparities in labor rates experienced by the Registrant as compared
with labor rates existing in Far Eastern markets. Prices offered by Far
Eastern competitors continue to decline and the Registrant cannot
compete effectively with these competitors.
The Registrant has concluded that its best strategy for the future
would be to close down its production activities, sell off its business
assets (inventory, equipment and customer accounts) and position itself
to be available as a merger candidate as a public shell company.
Management anticipates that once production and business activities in
the electrical cord field is completed in the near future, it will
distribute most of its cash to its shareholders as a dividend.
For the first six months of calendar year 2000 the Registrant will
continue to manufacture some product for its customers. It is presently
in discussion with a number of companies regarding their purchase of the
Registrant's inventory and equipment. At this time, no assurance can be
given that the firm will be able to sell all of its equipment and
inventory as a package to one customer. If the Registrant can't sell
all of its inventory and equipment to one customer and is forced to sell
off these assets individually, the Registrant may not be able to recoup
all of its cost in these assets and may suffer a loss on their sale.
During the quarter ended March 31, 2000, the Registrant has written down
its inventory by $50,000 to the estimated net realizable value.
The cash and cash equivalents balances of the Company as of March
31, 2000 and June 30, 1999 were $836,193 and $604,463, respectively.
The increase in cash and cash equivalents was principally the result of
lower inventory levels for the quarter ended March 31, 2000. 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: May 11, 2000
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