SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
/ 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, 1998
Commission File number 0-17330
DAINE INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 11-2881685
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
240 Clarkson Avenue, Brooklyn NY 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 $.00001
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 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. /X/
As of September 17, 1998, 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,
1998 was 248,461,935.
DAINE INDUSTRIES, INC.
Part 1
Item 1. Business.
Daine Industries, Inc. ("The Registrant") was incorporated on
September 24, 1987 and is currently engaged in the manufacture and
assembly of wiring devices.
On February 26, 1990, 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 the Registrant
obtained the funds for the purchase from its own internal sources.
There was no material relationship between the Registrant 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 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, 1998, there were approximately 25
employees, all except three which were engaged in manufacturing and
assembly activities. For the year ended June 30, 1998, four
customers accounted for 35%, 21%, 23% and 6%, respectively of total
revenues. For the fiscal year ended June 30, 1997 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 1998 and 1997 fiscal
years.
Lite King has 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. Properties
As of June 30, 1998, 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, 1997. On May 31, 1996, the lease was renewed for a five
year period scheduled to end 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. The
Registrant's corporate office is in the facility of Lite King Corp.,
the Registrant's wholly owned subsidiary.
Item 3. Legal Proceedings
The President and Secretary-Treasurer of the Registrant have
been included as defendants in a class action entitled "Barker et.
al v. Power Securities Corp., et. al" in the Western District of
New York which commenced in February 1989. The complaint alleges
violations of the securities laws(section 10b and Rule 10b-5 of the
Securities and Exchange Act of 1934) in trading certain securities
including those of the Company and its affiliated company, Davin
Enterprises Inc., by all of the defendants. A motion has been
submitted to the judge by the attorney for the class to discontinue
the action against the officers and directors of the Company. At
this time no date has been set by the judge to hear the motion by
the plaintiff's attorney. The officers and directors of the
Registrant named in the complaint deny the allegations and believe
the suit to be without merit. The Registrant has undertaken to
advance any expenses necessary and incurred by the officers and
directors in the litigation subject to an undertaking by such
officer and director to repay the advances if it be ultimately
determined that the officer or director is not entitled to be
indemnified. At this date, expenses are not material. A judgement
by settlement was entered against certain defendants other than
those who are officers of this Registrant. The officers of the
Registrant continue to deny the allegations against them and
plaintiffs have not been pursuing the suit against them. In the
event that the plaintiffs were to prevail against the officers and
directors and a judgment was issued against them, this may have a
material adverse effect on the Registrant's future financial
condition.
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, 1996 * *
Quarter ended December 31, 1996 * *
Quarter ended March 31, 1997 * *
Quarter ended June 30, 1997 * *
Quarter ended September 30, 1997 * *
Quarter ended December 31, 1997 * *
Quarter ended March 31, 1998 * *
Quarter ended June 30, 1998 * *
*there were no pink sheet market makers for the Registrant's common
stock; no price information was available.
On September 17, 1998, there was no market for the shares of
the Registrant.
Number of shareholders of record on September 17, 1998 was
705.
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. Selected Financial Data
For The Year Ended June 30,
1998 1997 1996 1995 1994
Net Sales $1,521,660 $1,850,407 $1,610,409 $2,907,587 $2,127,327
Interest Income 23,732 9,037 11,193 14,068 14,493
Net Income (Loss) (41,376) (8,909) (31,332) 114,996 71,878
Net Income (Loss)
Per Share NIL NIL NIL NIL NIL
Total Assets 1,916,848 1,782,416 1,981,225 2,232,032 2,065,842
Long Term Debt -0- -0- -0- -0- -0-
Dividends -0- -0- -0- -0- -0-
Item 7. Management's Discussion And Analysis of Results of
Operations.
Sales declined 18% from fiscal year 1997 to fiscal year 1998.
This decrease of approximately $328,000 was due to a downturn 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 1997 these blow molded figurine
manufacturers purchased at normal levels, accounting for a 14%
increase in sales of about $240,000 for fiscal year 1997 (as
compared with fiscal year 1996 sales).
Gross margins for fiscal year 1998 was 27% as compared with
30% in fiscal year 1997 and 24% in fiscal year 1996. The decrease
in fiscal year 1998 gross margins was due to the inability of
passing along price increases to company customers as higher unit
labor costs were absorbed by Lite King Corp. Fiscal year 1997
gross margins increased as compared with fiscal year 1996 gross
margins due to higher prices charged to company customers.
General and administrative expenses declined by approximately
$71,000 between fiscal year 1998 and fiscal year 1997. This
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.
General and administrative expenses increased by approximately
$120,000 between fiscal year 1996 and fiscal year 1997. The
increase can be attributed to increases in underwriters
laboratories fees $12,000; officers salaries $41,000; insurance
expense $21,000; and rent expense $32,000. The increase in
underwriters laboratories fees relate to new product listings. The
increase in rent expense relate to real estate taxes due for prior
periods presented by Lite King Corp's landlord and are escalations
in city real estate taxes paid by Lite King as part of its lease.
Increased officer's salaries were paid to Lite King Corp's
president and treasurer.
Net loss increased by about $32,467 between fiscal year 1998
and fiscal year 1997. The loss of $41,376 in fiscal year 1998 can
be attributed to a 18% decline in sales in fiscal year 1998 and a
related decline in general and administrative expenses. The
reduction of the net loss from $31,332 in fiscal year 1996 to a net
loss of $8,909 in fiscal year 1997 can be attributed to a 14%
increase in sales offset by a rise in general and administrative
expenses.
There was a downward trend in sales as sales decreased
between fiscal year 1997 to 1998 due to the factors discussed above.
The Registrant's has financed its activities primarily from
operating activities. For fiscal year 1998 and 1997 cash flows
from investing activities have not been material.
During fiscal years 1996, 1997 and 1998, cash flows from
financing activities have been immaterial.
As of June 30, 1998, the Registrant had total assets of
$1,916,848 as compared with total assets of $1,782,416 at June 30,
1997. The increase in assets of $134,432 can be attributed to an
increase of $299,258 in the following current asset categories: an
increase in cash and cash equivalents $281,883; prepaid expenses
$3,127; deferred taxes $14,248 and a decrease of $11,933 in
inventory and $109,472 in accounts receivables. There was a
decrease in the fixed asset account $43,421 (net).
During fiscal year 1998, total liabilities increased by
$175,808 reflected by an increase in current liabilities of
$182,423 and a decrease in deferred tax liabilities of $6,615. At
June 30, 1998, shareholders' equity amounted to $1,578,602 as
compared with $1,619,978 at June 30, 1997. The current ratio
(current assets to current liabilities) at June 30, 1998 was
approximately 5:1.
Management presently is considering a number of negative
factors which could have a material adverse effect on fiscal 1999
revenues and profitability. The Company presently works with two
non profit testing organizations for its U.S. and Canadian
electrical products(Underwriters Laboratories[U.L.] and the
Canadian Standards Association[C.S.A.]). U.L. has proposed new
standards for 1997 seasonal products for the U.S. which management
considers extreme and unrealistic. The Company has obtained a
listing for its candelabra based wiring harness under the new
standards and for its medium (edison) based wiring harness. The
Company has to purchase edison based wiring harnesses from a
supplier, lowering the Company's profitability on this product
line. This could have a materially negative effect on future
Company's revenues and operations. The Company will also face
intense competition for the candelabra cord sets in calendar year
1999 from Chinese producers. Because of these uncertainties,
management can not forecast fiscal year 1999 revenues or
profitability.
Item 8. Financial Statements
Attached and listed in Item 14.
Item 9. Changes In and Disagreements with Accountants in
Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers
The executive officers and directors of the Registrant are as
follows:
Age Term Expires
Arthur Seidenfeld 47 President and Director Next annual meeting
Anne Seidenfeld 85 Treasurer,Secretary
and Director Next annual meeting
Gerald Kaufman 57 Director Next annual meeting
Each of the above named individuals has served the Registrant
in the capacity indicated since its formation on September 24, 1987
(with the exception that Anne Seidenfeld became the Registrant's
secretary on December 17, 1989 and Gerald Kaufman became a director
in 1990), and Arthur Seidenfeld and Anne Seidenfeld may be deemed
a "parent" under the Rules and Regulations promulgated under the
Securities Act of 1933, as amended.
Arthur Seidenfeld, President and Director 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 Modern Technology Corp., a public company
since 1983. Mr. Seidenfeld is also President and a Director of
Davin Enterprises, Inc., a public company whose proposed business
is to provide a mechanism to take advantage of business
opportunities, which went public during the quarter ended September
30, 1987 until December 1997. From July 1994 until April 1997, he
was also treasurer-secretary of Soft Sail Wind Power Inc., a newly
established company engaged in wind energy research and development
activities. Since December 1996, he is President and Director of
Coral Development Corp., a public company seeking to provide a
mechanism to take advantage of business opportunities. Davin
Enterprises merged with Creative Master International Inc., a
manufacturer of collectible products. Coral Development Corp. has
signed a merger agreement with Omnicomm Inc., a computer software
developer and installer.
Anne Seidenfeld, Secretary-Treasurer and Director, received
her diploma from Washington Irving High School, New York City, in
1931. Mrs. Seidenfeld is Treasurer, Secretary and a Director of
Modern Technology Corp. and was Treasurer, Secretary and a Director
of Davin Enterprises, Inc. and is Treasurer, Secretary and a
Director of Coral Development Corp.
Gerald Kaufman, Director, has been a practicing attorney for
over twenty five years. He has served as a director of the
Registrant, along with being a director of Modern Technology Corp.
since November 1990. He has also been
a director of American Mayflower Life Insurance Co. since 1973.
Arthur Seidenfeld is the son of Anne Seidenfeld.
No forms 4 or 5 were filed by officers or directors during the
fiscal year ended June 30, 1997.
Item 11. Management - Remuneration and Transactions
For the year ended June 30, 1998, Arthur Seidenfeld, President
and a Director of the Company received a salary of $81,800. Anne
Seidenfeld, Treasurer and a Director of the Company, received a
salary of $24,220 for the year ended June 30, 1998 from Lite King
Corp. She has performed bookkeeping and other administrative
services for Lite King Corp. No other option or bonus plan exists.
The loss of the President's involvement with Lite King Corp. may
have an adverse effect on future Company operations.
The officers of the Company did not receive salaries from the
Registrant during the year ended June 30, 1998 with the exception
of the salaries received from Lite King Corp., listed above.
PART IV
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
a. The following are known to Registrant to be beneficial owners
of 5% or more of the Registrant's common stock:
Title of Class
Common Stock
Name of Beneficial Owner Amount & Percentage
Nature of of Class
Beneficial
Ownership
Modern Technology Corp.
461 Beach 124 Street
Belle Harbor, New York 72,000,000@ 29.0%
Arthur Seidenfeld
461 Beach 124 Street
Belle Harbor, New York 36,000,000 14.5%
Anne Seidenfeld
461 Beach 124 Street
Belle Harbor, New York 20,000,000 8.0%
American Israel Ventures Corp.
461 Beach 124 Street
Belle Harbor, New York 15,000,000@ 6.0%
@ Arthur Seidenfeld and Anne Seidenfeld are president and
secretary, treasurer respectively of Modern Technology Corp. and
also own 49% and 12% respectively of the common stock of Modern
Technology Corp.
Arthur Seidenfeld owns 70% of the outstanding shares of American
Israel Ventures Corp. Anne Seidenfeld owns 25% of the outstanding
shares of American Israel Ventures Corp. 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 36,000,000 14.5%
Anne Seidenfeld 20,000,000 8.0%
Gerald Kaufman 3,000,000 1.2%
<PAGE>
Item 13. Certain Relationships and Related Transactions.
The Registrant's corporate office is in the facility of Modern
Technology Corp., an affiliated company where it does not pay any
rent.
Item 14. Exhibits, Financial Statements and Schedules.
a) Financial Statements and Financial Statement Schedules.
Consolidated Balance Sheets - June 30, 1998 and 1997.
Consolidated Statement of Shareholders' Equity For the Period
July 1, 1995 to June 30, 1998.
Consolidated Statement of Operations For the Years Ended June
30, 1998, 1997 and 1996.
Consolidated Statement of Cash Flows For the Years Ended June
30, 1998, 1997, and 1996.
Notes to the Consolidated Financial Statements For the Years
Ended June 30, 1998, 1997 and 1996.
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.
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.
DAINE INDUSTRIES, INC.
BY Arthur Seidenfeld
President
Dated: September 23, 1998
DAINE INDUSTRIES, INC.
FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
I N D E X
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT 1
CONSOLIDATED BALANCE SHEETS - ASSETS 2
CONSOLIDATED BALANCE SHEETS
- LIABILITIES AND SHAREHOLDERS' EQUITY 3
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 4
CONSOLIDATED STATEMENTS OF OPERATIONS 5
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7-10
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors and Shareholders
DAINE INDUSTRIES, INC.
240 Clarkson Avenue
Brooklyn, NY 11226
We have audited the accompanying consolidated balance sheets of
DAINE INDUSTRIES, INC. as of June 30, 1998 and 1997 and the related
consolidated statements of operations, statements of shareholders'
equity and cash flows for each of the three years in the period
ended June 30, 1998. 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 DAINE
INDUSTRIES, INC. as of June 30, 1998 and 1997, and the results of
its operations and its cash flows for each of the three years in
the period ended June 30, 1998, in conformity with generally
accepted accounting principles.
GREENBERG & COMPANY LLC
Springfield, New Jersey
August 6, 1998
Page 1 of 10
DAINE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
A S S E T S
June 30,
1998 1997
CURRENT ASSETS
Cash and Cash Equivalents $ 750,874 $ 468,991
Accounts Receivable 392,787 502,259
Inventory 595,194 607,127
Prepaid Expenses 13,978 10,851
Deferred Taxes 14,248 -0-
Total Current Assets 1,767,081 1,589,228
FIXED ASSETS, At Cost
Machinery and Equipment 394,145 393,786
Leasehold Improvements 9,787 9,787
Less: Accumulated Depreciation
and Amortization (260,265) (216,485)
143,667 187,088
OTHER ASSETS
Deposits 6,100 6,100
TOTAL ASSETS $1,916,848 $1,782,416
The accompanying notes are an integral part of these financial
statements.
Page 2 of 10
DAINE INDUSTRIES, INC.
CONSOLIDATED 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,
1998 1997
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 329,823 $ 145,827
Income Tax Payable -0- 1,573
Total Current Liabilities 329,823 147,400
OTHER LIABILITIES
Deferred Income Tax Liability 8,423 15,038
TOTAL LIABILITIES 338,246 162,438
COMMITMENTS AND CONTINGENCIES
(Note 3)
SHAREHOLDERS' EQUITY
Common Stock (Par Value
$.00001) 350,000,000 shares
authorized, 248,461,935
shares issued and outstanding 2,485 2,485
Paid-In Capital 1,441,597 1,441,597
Retained Earnings 134,520 175,896
TOTAL SHAREHOLDERS' EQUITY 1,578,602 1,619,978
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,916,848 $1,782,416
The accompanying notes are an integral part of these financial
statements.
Page 3 of 10
DAINE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For The Period July 1, 1995 to June 30, 1998
Total
Number $.00001 Share-
of Par Paid-In Retained holders'
Shares Value Capital Earnings Equity
BALANCES AT
JULY 1, 1995 248,461,935 $2,485 $1,441,594 $216,137 $1,660,219
Net Income (Loss)
for the Year Ended
June 30, 1996 (31,332) (31,332)
BALANCES AT
JUNE 30, 1996 248,461,935 2,485 1,441,594 184,805 1,628,887
Net Income (Loss)
for the Year Ended
June 30, 1997 (8,909) (8,909)
BALANCES AT
JUNE 30, 1997 248,461,935 2,485 1,441,594 175,896 1,619,978
Net Income (Loss)
for the Year Ended
June 30, 1998 (41,376) (41,376)
BALANCES AT
JUNE 30, 1998 248,461,935 $2,485 $1,441,594 $134,520 $1,578,602
The accompanying notes are an integral part of these financial statements.
Page 4 of 10
DAINE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended June 30,
1998 1997 1996
REVENUES
Sales - Net $1,521,660 $1,850,407 $1,610,409
COST OF GOODS SOLD
Beginning Inventory 607,127 903,353 807,279
Purchase and Freight 852,570 757,890 1,106,998
Direct Labor 245,031 249,049 212,716
1,704,728 1,910,292 2,126,993
Less: Inventory - End of Period 595,194 607,127 903,353
1,109,534 1,303,165 1,223,640
GROSS MARGIN 412,126 547,242 386,769
Interest Income 23,732 9,037 11,193
General and Administrative
Expenses (442,984) (514,487) (391,837)
Interest Expense -0- -0- -0-
Depreciation and Amortization Expense (43,780) (47,943) (39,741)
INCOME (LOSS) BEFORE INCOME TAXES (50,906) (6,151) (33,616)
Income Tax Expense (Benefit) (9,530) 2,758 (2,284)
NET INCOME (LOSS) $ (41,376) $ (8,909) $ (31,332)
Earnings (Loss) Per Share NIL NIL NIL
Weighted Average Number of Shares
of Common Stock Outstanding 248,461,925 248,461,925 248,461,925
The accompanying notes are an integral part of these financial statements.
Page 5 of 10
DAINE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended June 30,
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (41,376) $ (8,909) $ (31,332)
Adjustment to Reconcile Net Income
to Net Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization
Expense 43,780 47,943 39,741
Change in Assets and Liabilities:
Decrease (Increase) in Accounts
Receivable 109,472 17,676 190,105
Decrease (Increase) in Inventory 11,933 296,226 (96,074)
Decrease (Increase) in Prepaid
Expenses (3,127) 27,386 (29,066)
Decrease (Increase) in Deferred
Taxes - Current (14,248) -0- -0-
Increase (Decrease) in Accounts
Payable and Accrued Expenses 183,996 (189,659) (220,499)
Increase (Decrease) in Income Tax
Payable (1,573) 1,573 -0-
Increase (Decrease) in Deferred
Income Tax Liability (6,615) (1,814) 1,024
Net Cash Provided By (Used In)
Operating Activities 282,242 190,422 (146,101)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (359) (8,913) (17,135)
Net Cash (Used In) Investing
Activities (359) (8,913) (17,135)
Net Increase (Decrease) in Cash and
Cash Equivalents 281,883 181,509 (163,236)
Cash and Cash Equivalents at
Beginning of Period 468,991 287,482 450,718
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 750,874 $ 468,991 $ 287,482
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest $ -0- $ -0- $ -0-
Income Taxes $ 12,024 $ 3,000 $ 52,519
The accompanying notes are an integral part of these financial statements.
Page 6 of 10
DAINE INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996
NOTE 1: ORGANIZATION AND NATURE OF OPERATIONS
Daine Industries, Inc. (Daine) is a Delaware corporation.
Daine owns 100% of the stock of Lite King Corp. (LKC) a New
York corporation. Daine's principal purpose is to hold the
stock of LKC. LKC's principal business is the manufacture and
assembly of electrical wiring devices, cord sets and sockets.
LKC's customers consists 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
BASIS OF PRESENTATION
The accounts of the Company and its consolidated 100% owned
subsidiary, Lite King Corporation, are included in the
consolidated financial statements. All significant
intercompany balances and transactions have been eliminated.
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:
6/30/98 6/30/97
Raw Materials $506,875 $288,582
Work-in-Process 65,427 213,182
Finished Goods 22,892 105,363
$595,194 $607,127
Page 7 of 10
DAINE INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996
(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, 1997 and 1996, three customers
accounted for approximately 38%, 28%, 18%, and 43%, 24%, 15%,
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.
YEAR 2000 COMPLIANCE
The Company has evaluated the impact of the Year 200 issue on the
business and does not expect to incur significant costs with
Year 2000 compliance. The Company 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.
Page 8 of 10
DAINE INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996
(Continued)
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.
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:
1999 58,333
2000 60,333
2001 62,000
2002 51,667
Total $232,333
In addition to annual base rental payments, the company must
pay an annual escalation for real estate taxes.
Certain officers and directors of the company have been
included as defendants in a class action entitled "Barker et
al v. Power Securities Corp., et al" in the Western District
of New York, which action alleges violations of the securities
laws, in trading certain securities including those of the
company and its affiliated company, Davin Enterprises Inc., by
all of the defendants. A motion has been submitted to the
judge by the attorney for the class to discontinue the action
against the officers and directors of the Company. At this
time no date has been set by the judge to hear the motion by
the plaintiff's attorney. Certain officers and directors of
the company, who were also officers and directors of Davin
Enterprises Inc., deny the allegations and believe the suit to
be without merit. The alleged violations refer to Section 10b
and Rule 10b-5 of the Securities and Exchange Act of 1934.
The company has undertaken to advance any expenses necessary
and incurred by the officers and directors in the litigation
subject to an undertaking by such officer and director to
repay the advances if it be ultimately determined that the
officer or director is not entitled to be indemnified. At
this date, expenses are not material. In the event that the
Page 9 of 10
DAINE INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996
(Continued)
plaintiffs were to prevail against the officers and directors
and a judgment was issued against them, this may have a
material adverse effect on the company's future financial
condition. Management feels that an estimate of the possible
range of loss cannot be made at this time.
NOTE 4: INCOME TAXES
Income taxes are accrued at the statutory U.S. and state income
tax rates.
Income tax expense for June 30, 1997 is principally due to
state and local income taxes based upon capital. Deferred tax
liabilities relate to depreciation timing differences.
June 30,
1998 1997 1996
Current tax expense (benefit):
Income tax at
statutory rates $ 7,016 $ 7,767 $ 3,143
Other differences (2,298) (1,872) (521)
4,718 4,572 (3,308)
Deferred tax expense (benefit):
Depreciation 6,615 (1,814) 1,024
Operating loss
carryback (20,863) (1,323) (5,930)
(14,248) (3,137) 4,906
Total Tax Expense
(Benefit) $(9,530) $ 2,758 $(2,284)
The tax effect of significant temporary differences, which
comprise the deferred tax assets and liabilities are as follows:
June 30,
1998 1997
Deferred tax asset
Operating loss
carryback $14,248 $ -0-
Deferred tax liability
Depreciation 8,423 15,038
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
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 indicated.
Name Title Date
Arthur Seidenfeld President and Director September 23, 1998
Principal Executive Officer
and Principal Financial Officer
Anne Seidenfeld Treasurer, Secretary September 23, 1998
and Director
Gerald Kaufman Director September 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 750874
<SECURITIES> 0
<RECEIVABLES> 392787
<ALLOWANCES> 0
<INVENTORY> 595194
<CURRENT-ASSETS> 1767081
<PP&E> 403932
<DEPRECIATION> 260265
<TOTAL-ASSETS> 1916848
<CURRENT-LIABILITIES> 329823
<BONDS> 0
0
0
<COMMON> 2485
<OTHER-SE> 1576117
<TOTAL-LIABILITY-AND-EQUITY> 1916848
<SALES> 1521660
<TOTAL-REVENUES> 1545392
<CGS> 1109534
<TOTAL-COSTS> 486764
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (50906)
<INCOME-TAX> (9530)
<INCOME-CONTINUING> (41376)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (41376)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
