<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period ended: MARCH 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 0-15891
DK INDUSTRIES, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-0891674
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
425 John Deere Road, Fort Collins, Colorado 80524
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(Address of principal executive offices)
(303) 484-1900
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No
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As of March 31, 1996, 12,004,226 shares of common stock were outstanding.
Transitional Small Business Disclosure Format: Yes No X
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PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
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For financial information, please see the financial statements and the
notes thereto, attached hereto and incorporated herein by this reference.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
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General Development of Business
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DK Industries, Inc. (the "Company") was incorporated under the laws of
the State of Colorado on December 9, 1982 as Vetline, Inc., for the main purpose
of selling animal drugs, vaccines and supplies to livestock producers primarily
through its retail outlet located in Fort Collins, Colorado. Since that time,
the Company has undertaken the production of a retail catalog for horse care
products, including its own, on a retail and wholesale basis in conjunction with
free veterinary advice.
On May 7, 1993, the company entered into a Sale/Purchase Agreement
with Equine Line, Inc. ("ELI") for the sale (the "Sale") of all of the Company's
operations and assets to ELI in exchange for the assumption of substantial all
liabilities of the Company by the purchaser. ELI is owned by Dr. Kenneth A.
Larson, President, founder, and principal shareholder of the Company, and his
family. ELI was incorporated in Colorado on March 25, 1991 and conducted no
business until the disposition described herein. Its assets consisted only of
2,000,000 shares of Vetline common stock, all of which have been contributed
back to the Company for no consideration as a result of the Sale.
The Sale/Purchase Agreement provided for the transfer of all assets of
the Company to ELI in exchange for the assumption of substantially all
liabilities of the Company rising from its operations prior to the transaction's
closing date. The only liability which was not assumed by ELI was the Company's
cost of certain legal services related to the Sale and the annual shareholder's
meeting (the "Excluded Liability"). ELI agreed to purchase the assets "as is,"
and to assume liabilities resulting from Vetline operations prior to the Sale
date, whether or not contingent, or even known, as of such date.
As the Annual Meeting of Shareholders on February 7, 1994, the
Company's shareholders approved the Sale, a change in its business purpose, and
the change of the Company's name. The Company's new purpose generally is to hold
itself out as a "public shell" in order to attract and merge with a new business
with existing management.
On April 30, 1994, the Company sold to Equine Line, Inc. ("ELI"), an
affiliated party, all of its operations and assets in exchange for the
assumption by ELI of substantially all Registrant's liabilities. The assets
were appraised at $717,310. The liabilities assumed, as of April 30, 1994, were
approximately $775,000. The Company also changed its name to DK Industries,
Inc. in connection with the sale.
Plan of Operation
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The Company's search will be directed toward small and medium-sized
enterprises. The Company intends to concentrate its efforts to merge with
properties or businesses that it believes to be undervalued. Given the above
factors, investors should expect that any merger candidate may have a history of
losses or low profitability. In fact, the Company anticipates that most
business
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opportunities presented to it could (i) be recently organized with no operating
history, or a history of losses attributable to under-capitalization or other
factors; (ii) be experiencing financial or operating difficulties; (iii) be in
need of funds to develop a new product or service or to expand into a new
market; (iv) be relying upon an untested product or marketing concept; or (v)
have a combination of the characteristics mentioned in (i) through (iv).
The Company does not propose to restrict its search for business
opportunities to any particular geographical area or industry, and may
therefore, engage in essentially any business, to the extent of its limited
resources. This includes industries such as service, finance, natural resource,
manufacturing, high technology, product development, medical, communications and
others. The Company's discretion in the selection of business opportunities is
unrestricted, subject to availability of such opportunities, economic
conditions, and other factors.
The Company may be acquired by another entity that desires to become a
public company by means of a reverse merger with an existing public company. In
connection with such an acquisition, any amount of stock constituting control of
the Company most certainly would be issued by the Company or purchased from the
Company's current officers and directors, or from other current stockholders, by
that entity. If stock is purchased from the officers and directors, the
transaction could result in substantial gains to them relative to their purchase
price for such stock.
It is anticipated that business opportunities will come to the
Company's attention from various sources, including its officers and directors,
its other stockholders, professional advisors such at attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals.
The Company entered into a letter of intent, dated September 7, 1995,
which was amended as of October 5, 1995 and further amended as of April 5, 1996,
with GDC Enviro Solutions, Inc. ("GDC") and its shareholders pursuant to which
the Company would acquire all of the outstanding stock of GDC Holdings
Corporation ("GDC Holdings"), the parent corporation of GDC, by means of a
merger of the Company's wholly-owned subsidiary DK Acquisition Corp., with and
into GDC Holdings (the "Merger"). If the Merger is consummated as contemplated
in the letter of intent, GDC Holdings would become the wholly-owned subsidiary
of the Company. The consummation of the Merger is subject to a number of
conditions, which are standard in transactions such as the Merger and which are
described in the letter of intent.
GDC is a Louisiana corporation engaged in the business of
environmental consulting and remediation of hazardous waste sites. The Merger
and the letter of intent were the subject of a Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 18, 1995. The parties
to the letter of intent are pursuing the negotiation of a definitive agreement
and the consummation of the Merger, and the Company anticipates that the letter
of intent will be amended to reflect the changes, if any, to the Merger or any
other provisions of the letter of intent to be negotiated by the parties.
As of May 10, 1996, a number of conditions to the consummation of the
Merger had been met; however, certain other conditions remain to be satisfied
before the Merger can be consummated, and the parties had not yet executed a
definitive merger agreement respecting the Merger. Although management of the
Company believes that a definitive merger agreement can be reached and that the
Merger will be consummated, the letter of intent does not bind the parties to
complete the Merger, and there can be no assurance that the Merger can or will
be consummated.
As of March 31, 1996, the Company had no cash or other assets with
which to conduct operations. There can be no assurance that the Company will be
able to complete its business plan and to exploit fully any business opportunity
that management may be able to locate on behalf of the Company. Due to the lack
of a specified business opportunity (other than the potential merger with GDC),
the Company is unable to predict the period for which it can conduct operations.
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Accordingly, the Company may need to seek additional financing through loans,
the sale and issuance of additional debt and/or equity securities, or other
financing arrangements. No such financing arrangements currently exist or are
contemplated, and there can be no assurance that such arrangements may be
available to the Company in the future should the need arise.
Employees
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The Company currently has no employees, other than the Company's
President who devotes only a limited amount of time pursuing the Company's new
business plan as a "public shell." The Company's President has received no
compensation for these duties.
The Company does not anticipate the purchase of plant and
significant equipment during the next twelve (12) months.
The Company does not anticipate making any expenditures for product
research and development or any significant changes in the number of employees
during the next twelve months.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
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There are no pending legal proceedings, and the Company is not aware
of any threatened legal proceedings, to which the Company is a party or to which
its property is subject.
ITEM 2. CHANGES IN SECURITIES.
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(a) There have been no material modifications in any of the
instruments defining the rights of the holders of any of the Company's
registered securities.
(b) None of the rights evidenced by any class of the Company's
registered securities have been materially limited or qualified by the issuance
or modification of any other class of the Company's securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
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(Not applicable)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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No matters were submitted by the Company to a vote of the
shareholders, through the solicitation of proxies or otherwise, during the
period covered by this report.
ITEM 5. OTHER INFORMATION.
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(Not applicable)
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
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(a) Exhibits
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Exhibit No. Description Location
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2.1 Letter of Intent between /(1)/
the Registrant and GDC
Enviro-Solutions, Inc.
_______________________________________
/(1)/ Incorporated by reference to the Company's Current Report on Form 8-K
dated September 7, 1995.
(b) Reports on Form 8-K
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No reports on Form 8-K were filed during the quarter for which
this report is filed.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, as amended, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DK Industries, Inc.
Date: May 10, 1996 /s/ Dr. Kenneth Larson
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Dr. Kenneth Larson, Chief Executive Officer,
Principal Financial Officer, and Chief
Accounting Officer
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D.K. INDUSTRIES, INC.
(formerly Vetline, Inc.)
BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
March 1, June 30,
1996 1995
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ASSETS (Unaudited)
-----------
Current Assets:
Cash $0 $0
Total Current Assets 0 0
$0 $0
========= ==========
LIABILITIES & STOCKHOLDERS' DEFICIT
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Current Liabilities:
Accounts payable $ 45,655 $ 18,170
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Total Current Liabilities 45,655 18,170
STOCKHOLDERS' DEFICIT:
Common stock, par value 240,324 240,324
Additional paid-in capital 1,579,928 1,579,928
Accumulated deficit (1,853,872) (1,826,387)
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(33,620) (6,135)
Less: Common stock held in
treasury, 12,000 shares at cost (12,035) (12,035)
----------- -----------
Total Stockholders' Deficit (45,655) (18,170)
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$0 $0
============== ===========
</TABLE>
See Note to Financial Statements.
F-1
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D.K. INDUSTRIES, INC.
(formerly Vetline, Inc.)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three months ended Nine months ended
March 31, March 31,
1996 1995 1996 1995
---- ---- ---- ----
Operating Expenses:
Legal and accounting 6,721 0 26,985 0
Other 0 0 500 0
Total Operating Expenses 6,721 0 27,485 0
----- ---- ------ ----
Net (Loss) ($6,721) $0 ($27,485) $0
======= == ======== ==
Net (Loss) per Common Share ($0.001) $0.00 ($0.002) $0.00
======= ====== ====== ======
</TABLE>
See Note to Financial Statements
F-2
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D.K. INDUSTRIES, INC.
(formerly Vetline, Inc.)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
March 31,
1996 1995
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<S> <C> <C>
CASH FROM OPERATING ACTIVITIES:
Net loss ($27,485) $ 0
Adjustments to reconcile net loss
from operating activities:
Changes in operating assets
and liabilities:
Increase in:
Accounts payable 27,485 0
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Net Cash Provided by (Used in)
Operations 0 0
INCREASE (DECREASE) IN CASH 0 0
CASH, beginning of period 0 0
CASH, end of period $ 0 $ 0
======== =====
</TABLE>
See Note to Financial Statements.
F-3
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D.K. INDUSTRIES, INC.
(formerly Vetline, Inc.)
NOTE TO FINANCIAL STATEMENTS
(Unaudited)
1. The financial statements included herein have been prepared by the
Company without audit except the June 30, 1995 balance sheet which was
audited. The statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and reflect all
adjustments, consisting of only normal recurring accruals, which are, in the
opinion of management, necessary for a fair statement of the results of
operations for the periods shown. These statements do not include all
information required by generally accepted accounting principles to be
included in a full set of financial statements. These financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's latest annual report on Form 10-K.
F-4
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's quarterly report on Form 10-QSB for the period ended March 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 45,655
<BONDS> 0
0
0
<COMMON> 240,324
<OTHER-SE> (285,979)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 27,485
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (27,485)
<INCOME-TAX> 0
<INCOME-CONTINUING> (27,485)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,485)
<EPS-PRIMARY> (0.002)
<EPS-DILUTED> 0
</TABLE>
