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, 1997
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
(Exact name of registrant as specified in its charter)
Delaware 13-3776834
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11-30 47th Avenue, Long Island City, NY 11101
(Address, including zip code of principal executive offices)
(718) 340-6655
(Registrant's telephone number, including area code)
Not applicable
(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, 1997
<PAGE>
Index
DualStar Technologies Corporation
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - September
30, 1997 and June 30, 1997
Condensed consolidated statements of operations -
Three months ended September 30, 1997 and 1996
Condensed consolidated statements of cash flows -
Three months ended September 30, 1997 and 1996
Notes to condensed consolidated financial
statements - September 30, 1997
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K*
Signatures
* No exhibits are included in this filing
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, June 30,
1997 1997
(unaudited)
ASSETS
Current assets:
Cash $ 1,177,306 $ 1,110,615
Contracts receivable, net 21,140,119 15,815,168
Retainage receivable 2,889,218 2,863,049
Costs and estimated earnings
in excess of billings on
uncompleted contracts 1,412,125 622,951
Deferred tax asset - current 178,000 178,000
Prepaid expenses and sundry
receivable 222,805 319,942
------------ ------------
Total current assets 27,019,573 20,909,725
Property and equipment, net 3,652,972 3,443,777
Other assets:
Deferred tax asset - long-term 924,000 924,000
Other 1,452,451 1,299,254
------------ ------------
$33,048,996 $26,576,756
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $20,334,999 $15,559,135
Billings in excess of costs
and estimated earnings on
uncompleted contracts 2,786,703 2,741,542
Accrued expenses and other
liabilities 3,610,637 2,346,001
------------ ------------
Total current liabilities 26,732,339 20,646,678
Mortgage payable - long-term 806,250 813,750
Other liabilities 218,922 305,005
------------ ------------
Total liabilities 27,757,511 21,765,433
------------ ------------
Contingencies
Shareholders' equity:
Common stock 90,000 90,000
Additional paid-in capital 14,995,836 14,995,836
Deficit (9,794,351) (10,274,513)
------------ ------------
5,291,485 4,811,323
------------ ------------
$33,048,996 $26,576,756
============ ============
See notes to condensed consolidated financial statements
<PAGE>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
1997 1996
Contract revenues earned $22,721,247 $16,682,904
Cost of revenues earned 20,366,999 14,849,688
------------ ------------
Gross profit 2,354,248 1,833,216
General and administrative expenses 1,874,086 1,914,066
------------ ------------
Income (loss) before benefit for
income taxes 480,162 (80,850)
Benefit for income taxes - (36,500)
------------ ------------
Net income (loss) $480,162 ($44,350)
============ ============
Per share data:
Primary $0.05 ($0.01)
Weighted average shares outstanding 9,000,000 9,000,000
See notes to condensed consolidated financial statements
<PAGE>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
1997 1996
Cash provided by (used in) operating
activities $422,235 ($577,997)
----------- -----------
Cash flows from investing activities:
Acquisition of property and
equipment (326,452) (311,303)
Redemption of marketable securities
- net - 910,029
----------- -----------
Net cash (used in) provided by
investing activities (326,452) 598,726
----------- -----------
Cash flows from financing activities:
Principal payments on capital
lease obligations (21,592) -
Principal payments on mortgage (7,500) (7,500)
----------- -----------
Net cash used in financing
activities (29,092) (7,500)
----------- -----------
Net increase in cash 66,691 13,229
Cash - beginning of period 1,110,615 2,023,992
----------- -----------
Cash - end of period $1,177,306 $2,037,221
=========== ===========
See notes to condensed consolidated financial statements
<PAGE>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1997
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, 1997 are not necessarily indicative of
the results that may be expected for the fiscal year ending
June 30, 1998. For further information, refer to the
financial statements and footnotes thereto included in
DualStar Technologies Corporation and Subsidiaries' Annual
Report on Form 10-K for the fiscal year ended June 30, 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
Certain information contained in this report includes
"Forward-Looking Statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 and is
subject to certain risks and uncertainties, including those
"Risk Factors" set forth in DualStar Technologies
Corporation and Subsidiaries' (the "Company") Annual Report
on Form 10-K for the fiscal year ended June 30, 1997.
Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date
hereof. The Company undertakes no obligation to release
publicly any revisions to these forward-looking statements
to reflect events or circumstances after the date hereof or
to reflect unanticipated events or developments.
Capital Resources and Liquidity
Cash balances at September 30 and June 30, 1997 were
approximately $1,177,000 and $1,111,000, respectively. The
Company's operations provided approximately $422,000 of cash
during the three month period ended September 30, 1997, and
used approximately $578,000 of cash during the comparable
period of 1996. In addition, during the three months ended
September 30, 1997, the Company acquired capital assets of
approximately $326,000, substantially all of which
represented investment in a telephone switch system for a
high-rise building in return for long-term rights to provide
telephone, cable TV and high-speed Internet services to the
building's residents.
During the three months ended September 30, 1996, the
Company acquired capital assets of approximately $311,000,
substantially all of which represented acquisition and
improvements of real property located in Long Island City,
N.Y. for the purpose of centralizing and consolidating its
operations.
Working capital at September 30 and June 30, 1997 were
approximately $287,000 and $263,000, respectively. The
Company is considering the consolidation or sale of certain
subsidiaries in order to improve working capital. Also, in
addition to performing on existing backlog, the Company is
implementing a marketing plan to emphasize those contracts
which return higher margins than the Company has experienced
overall in the past two years. The Company's mechanical
contracting business is also reorganizing its engineering,
drafting and project management departments so that overhead
can be reduced and project costs can be controlled better.
The Company believes that based on the plans, current cash
on hand, and future cash from operating and investing
activities, should be sufficient to cover current
operations. There can be no assurance, however, that the
Company will achieve its plans. In addition, in the event
that additional working capital becomes necessary to fund
current operations, there can be no assurance that the
Company will be able to obtain financing on terms
satisfactory to it.
<PAGE>
Results of Operations
Contract revenues increased 36.2% in the three-month period
ended September 30, 1997 to $22.7 million, up approximately
$6.0 million from the comparable period in 1996. The
increase was due primarily to the improvement in the New
York City Metropolitan area's economy.
Gross profit increased approximately $521,000 or 28.4% in
the three-month period ended September 30, 1997. In
addition, the gross profit margins were 10.4% and 11.0% for
the three month periods ended September 30, 1997 and 1996,
respectively. The increase in gross profit was attributable
to the increase in revenues.
General and administrative expenses decreased approximately
$40,000 or 2.1% in the three-month period ended September
30, 1997, as compared to the same period in 1996. Further,
as a percentage of revenue, general and administrative
expenses decreased to 8.2% for the three months ended
September 30, 1997, from 11.5% for the comparable period of
1996. The decreases were due primarily to the reorganization
of the Company's mechanical contracting business undertaken
in fiscal 1997.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On November 12, 1997, the Company held the 1997 Annual
Meeting of Stockholders of DualStar Technologies
Corporation. At this meeting, the Company's Board of
Directors submitted proposals to the stockholders to elect
seven new directors and ratify the appointment of the
Company's independent auditors for the current fiscal year.
The holders of 8,371,720 shares of stock entitled to vote,
which constituted a quorum, were present at the annual
meeting in person or by proxy. As of the record date, there
were 9,000,000 shares issued and outstanding.
Proposal No. 1 - Election of Directors. Seven nominees,
Michael J. Abatemarco, Gregory Cuneo, Gary DeLuca, Ronald
Fregara, Armando Spaziani, Elven M. Tangel and Stephen J.
Yager were submitted to the stockholders. The nominations
of Messrs. Abatemarco, Cuneo, DeLuca, Fregara, Spaziani,
Tangel and Yager to serve as directors for a one-year term
were approved by the stockholders.
For Withheld
Michael J. Abatemarco 8,303,759 67,961
Gregory Cuneo 8,304,609 67,111
Gary DeLuca 8,303,759 67,961
Ronald Fregara 8,303,759 67,961
Armando Spaziani 8,301,759 69,961
Elven M. Tangel 8,304,609 67,111
Stephen J. Yager 8,304,609 67,111
Proposal No. 2 - Ratification of the Appointment of
Auditors. The appointment of the accounting firm of Grant
Thornton LLP was approved by the stockholders.
For Against Abstain
8,307,401 36,000 28,319
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, 1997
<PAGE>
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 13, 1997 By: GREGORY CUNEO
Gregory Cuneo
President and
Chief Executive Officer
Date November 13, 1997 By: ROBERT BIRNBACH
Robert Birnbach
Vice President and
Cheif Financial Officer
Date November 13, 1997 By: JOSEPH CHAN
Joseph Chan
Vice President and
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 1177306
<SECURITIES> 0
<RECEIVABLES> 21140119
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27019573
<PP&E> 3652972
<DEPRECIATION> 0
<TOTAL-ASSETS> 33048996
<CURRENT-LIABILITIES> 26732339
<BONDS> 0
0
0
<COMMON> 90000
<OTHER-SE> 5201485
<TOTAL-LIABILITY-AND-EQUITY> 33048996
<SALES> 22721247
<TOTAL-REVENUES> 22721247
<CGS> 20366999
<TOTAL-COSTS> 20366999
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 480162
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 480162
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0
</TABLE>
