<PAGE>
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 EXCHANGE
ACT OF 1934 For the Quarterly Period Ended September 30, 1996
or
[ ] 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 0-25552
DUALSTAR TECHNOLOGIES CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3776834
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 EAST 42ND STREET, NEW YORK, NY 10017
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(Address, including zip code of principal executive offices)
(212) 986-9186
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed since last
report)
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 Exchange
Act of 1934 during the preceding 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 .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's common stock,
as of the latest practicable date.
COMMON STOCK, $.01 PAR VALUE --- 9,000,000 SHARES AS OF NOVEMBER 12, 1996
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INDEX
DUALSTAR TECHNOLOGIES CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - September 30, 1996 and
June 30, 1996
Condensed consolidated statements of operations - Three months ended
September 30, 1996 and 1995
Condensed consolidated statements of cash flows - Three months ended
September 30, 1996 and 1995
Notes to condensed consolidated financial statements -
September 30, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K*
Signatures
* No exhibits are included in this filing
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
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<CAPTION>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, JUNE 30,
1996 1996
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(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 2,037,221 $ 2,023,992
Marketable securities 18,151 910,029
Contracts receivable, net 13,895,214 13,220,282
Retainage receivable 4,206,875 4,547,101
Costs and estimated earnings in excess of
billings on uncompleted contracts 2,502,452 2,763,051
Income taxes receivable 953,531 1,225,532
Deferred tax asset - current 178,000 178,000
Prepaid expenses and sundry receivable 1,278,316 1,281,850
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TOTAL CURRENT ASSETS 25,069,760 26,149,837
PROPERTY AND EQUIPMENT, NET 2,252,671 1,054,010
OTHER ASSETS:
Deferred tax asset - long-term 924,000 924,000
Other 313,970 253,633
=========== ===========
$28,560,401 $28,381,480
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 10,695,831 $ 11,015,924
Billings in excess of costs and estimated
earnings on uncompleted contracts 3,178,737 3,477,465
Accrued expenses and other liabilities 2,559,694 2,565,102
------------ ------------
TOTAL CURRENT LIABILITIES 16,434,262 17,058,491
MORTGAGE PAYABLE - LONG-TERM 847,500
CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock 90,000 90,000
Additional paid-in capital 14,995,836 14,995,836
Deficit (3,807,197) (3,762,847)
============ ============
$ 28,560,401 $ 28,381,480
============ ============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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<TABLE>
<CAPTION>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
1996 1995
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<S> <C> <C>
Contract revenues earned $ 16,682,904 $ 14,978,273
Cost of revenues earned 14,849,688 13,464,741
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Gross profit 1,833,216 1,513,532
General and administrative expenses 1,914,066 1,694,615
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Loss before benefit for income taxes (80,850) (181,083)
Benefit for income taxes (36,500) (85,000)
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Net Loss ($44,350) ($96,083)
============ ============
PER SHARE DATA:
Primary ($0.01) ($0.01)
Weighted average shares outstanding 9,000,000 9,000,000
============ ============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
1996 1995
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<S> <C> <C>
CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES ($577,997) $ 1,781,791
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (311,303) (159,484)
Redemption of (investment in) marketable securities - net 910,029 (51,817)
Due from shareholders 0 (19,908)
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 598,726 (231,209)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgage (7,500) 0
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NET CASH USED IN FINANCING ACTIVITIES (7,500) 0
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NET INCREASE IN CASH 13,229 1,550,582
CASH - BEGINNING OF PERIOD 2,023,992 2,072,856
=========== ===========
CASH - END OF PERIOD $ 2,037,221 $ 3,623,438
=========== ===========
NON-CASH FINANCING TRANSACTIONS:
In August 1996, the Company acquired real property which is financed by a
$900,000 mortgage loan.
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three-month
period ended September 30, 1996 are not necessarily indicative of the results
that may be expected for the fiscal year ended June 30, 1997. For further
information, refer to the financial statements and footnotes thereto included
in the DualStar Technologies Corporation and Subsidiaries' annual report for
the fiscal year ended June 30, 1996.
NOTE B - MORTGAGE PAYABLE
In August 1996, the Company acquired real property located in Long Island City,
New York for the purpose of centralizing and consolidating its subsidiaries
operations. The cost of the real property was approximately $1,109,000 of which
$900,000 was financed by a ten-year mortgage loan. The mortgage bears interest
at a fixed rate of 9.25% per annum for the first five years and then, for the
last five years, a fixed rate per annum equal to 1% above the Prime Rate in
effect thereof. The mortgage includes a final balloon payment in the amount of
$453,750 which is due on August 1, 2006.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
This Report contains forward-looking statements concerning the Company. Such
statements are subject to certain risks and uncertainties, including, but not
limited to, general economic conditions in the New York Tri-State area,
acceptance by customers of new services, as well as services previously
provided by the Company, product liability and other litigation, and the impact
of inflation and current labor conditions. Readers are urged to carefully
review and consider the various disclosures made by the Company which attempt
to advise interested parties of the factors affecting the Company's business,
including disclosures in this Report as well as the Company's future periodic
reports on Forms 10-K, 10-Q and 8-K filed with the Securities Exchange
Commission.
Liquidity and Sources of Capital
Cash used by operations was $578,000 for the three-month period ended September
30, 1996 as compared to cash provided by operations of $1,782,000 in the
comparable period in 1995. DualStar Technologies Corporation and Subsidiaries'
(the "Company") working capital at September 30, 1996 decreased by $456,000
from June 30, 1996. The decrease was due primarily to capital expenditures
associated with the purchase and refurbishment of new corporate headquarters.
The Company believes cash on hand and cash from future operations should be
sufficient to cover current operations; however, additional working capital may
be needed for future expansion. There can be no assurance that the Company will
be able to obtain such capital on terms satisfactory to it.
Results of Operations
Contract revenues increased 11.4% in the three-month period ended September 30,
1996 to $16.7 million, up approximately $1,705,000 from the comparable period
in 1995. The increase was due primarily to the revenue generated by the
Company's new subsidiaries.
Gross profit increased approximately $320,000 or 21.1% in the three-month
period ended September 30, 1996. In addition, the gross profit margins were
11.0% and 10.1% for the three month periods ended September 30, 1996 and 1995,
respectively. The increase was attributable primarily to the higher gross
profit margins of certain emerging businesses of the Company's new
subsidiaries.
General and administrative expenses increased $219,000 or 12.9% in the
three-month period ended September 30, 1996, as compared to the same period in
1995. The increase was due primarily to the continued growth of the Company's
new subsidiaries.
Net loss was approximately $44,000 in the three-month period ended September
30, 1996 as compared to a net loss of $96,000 in the comparable period in 1995.
The net loss for the three-month period ended September 30, 1996 was
attributable primarily to all the above factors.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the three-month period ended September
30, 1996
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DualStar Technologies Corporation
Date November 12, 1996 By: GREGORY CUNEO
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Gregory Cuneo
President and Chief
Executive Officer
Date November 12, 1996 By: STEPHEN J. YAGER
-------------------------- ---------------------------------
Stephen J. Yager
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-1-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,037,221
<SECURITIES> 18,151
<RECEIVABLES> 13,895,214
<ALLOWANCES> 297,000
<INVENTORY> 0
<CURRENT-ASSETS> 25,069,760
<PP&E> 2,252,671
<DEPRECIATION> 62,642
<TOTAL-ASSETS> 28,560,401
<CURRENT-LIABILITIES> 16,434,262
<BONDS> 0
0
0
<COMMON> 90,000
<OTHER-SE> 11,188,639
<TOTAL-LIABILITY-AND-EQUITY> 28,560,401
<SALES> 16,682,904
<TOTAL-REVENUES> 16,682,904
<CGS> 14,849,688
<TOTAL-COSTS> 14,849,688
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,895
<INCOME-PRETAX> (80,850)
<INCOME-TAX> (36,500)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (44,350)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
