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 December 31, 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
(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 February 10, 1997
<PAGE>
Index
DualStar Technologies Corporation
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - December 31, 1996 and
June 30, 1996
Condensed consolidated statements of operations - Three and six months
ended December 31, 1996 and 1995
Condensed consolidated statements of cash flows - Six months ended
December 31, 1996 and 1995
Notes to condensed consolidated financial statements - December 31, 1996
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
<TABLE>
<CAPTION>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<S>
<C> <C>
December 31, June 30,
1996 1996
(unaudited)
ASSETS
Current assets:
Cash $3,581,572 $2,023,992
Marketable securities 43,151 910,029
Contracts receivable, net 13,552,298 13,220,282
Retainage receivable 4,245,419 4,547,101
Costs and estimated earnings
in excess of billings on
uncompleted contracts 6,118,183 2,763,051
Income taxes receivable 915,532 1,225,532
Deferred tax asset - current 178,000 178,000
Prepaid expenses and sundry
receivable 532,631 1,281,850
----------- -----------
Total current assets 29,166,786 26,149,837
Property and equipment, net 2,568,042 1,054,010
Other assets:
Deferred tax asset - long-term 924,000 924,000
Other 371,523 253,633
----------- -----------
$33,030,351 $28,381,480
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $15,241,369 $11,015,924
Billings in excess of costs
and estimated earnings on
uncompleted contracts 4,185,541 3,477,465
Accrued expenses and other
liabilities 3,275,712 2,565,102
----------- -----------
Total current liabilities 22,702,622 17,058,491
Mortgage payable - long-term 840,000 -
Contingencies
Shareholders' equity:
Common stock 90,000 90,000
Additional paid-in capital 14,995,836 14,995,836
Deficit (5,598,107) (3,762,847)
----------- -----------
$33,030,351 $28,381,480
============ ===========
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<S>
<C> <C> <C> <C>
For the Three Months For the Six Months
Ended December 31, Ended December 31,
1996 1995 1996 1995
----------- ----------- ----------- -----------
Contract revenues earned $22,978,881 $15,603,491 $39,661,785 $30,581,764
Cost of revenues earned 22,519,021 13,133,052 37,368,709 26,597,793
----------- ----------- ----------- -----------
Gross profit 459,860 2,470,439 2,293,076 3,983,971
General and administrative
expenses 2,214,270 2,088,063 4,128,336 3,782,678
Costs incurred in
connection with joint
venture - 4,096,428 - 4,096,428
----------- ----------- ----------- -----------
Loss before provision
(benefit) for income
taxes (1,754,410) (3,714,052) (1,835,260) (3,895,135)
Provision (benefit) for
income taxes 36,500 (1,746,000) - (1,831,000)
----------- ----------- ----------- -----------
Net Loss ($1,790,910) ($1,968,052) ($1,835,260) ($2,064,135)
=========== =========== =========== ===========
Per share data:
Primary ($0.20) ($0.22) ($0.20) ($0.23)
Weighted average shares
outstanding 9,000,000 9,000,000 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 SIX MONTHS ENDED DECEMBER 31,
(UNAUDITED)
<S> <C> <C>
1996 1995
----------- -----------
Cash provided by (used in) operating
activities $493,841 ($561,827)
----------- -----------
Cash flows from investing activities:
Acquisition of property and
equipment (858,574) (173,761)
Decrease in sundry receivable 1,070,435 -
Redemption of investment in
marketable securities 866,878 1,254,477
---------- ----------
Net cash provided by investing
activities 1,078,739 1,080,716
---------- ----------
Cash flows from financing activities:
Principal payments on mortgage (15,000) -
---------- ----------
Net cash used in financing
activities (15,000) -
---------- ----------
Net increase in cash 1,557,580 518,889
Cash - beginning of period 2,023,992 2,072,856
---------- ----------
Cash - end of period $3,581,572 $2,591,745
========== ==========
</TABLE>
Non-cash financing transactions:
In August 1996, the Company acquired real property which is financed by a
$900,000 mortgage loan.
See notes to condensed consolidated financial statements
<PAGE>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 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-
and six-month period ended December 31, 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 DualStar
Technologies Corporation and Subsidiaries (the "Company"). Such statements
are subject to certain risks and uncertainties, including, but not limited
to, substantial and increasing competition in the Company's core businesses,
the Company's entry into new lines of business, the evolving market for the
Company's emerging businesses, general economic conditions in the New York
Tri-State area, dependence upon major customers, acceptance by customers of
new services, potential liability and possible insufficiency of insurance,
entry into new geographic markets, additional substantial capital
requirements of the emerging businesses, dependence upon a small number of
key executives, dependence upon internal expansion, stock market listing
requirements, and current labor conditions. Readers are urged to carefully
review and consider the above risks and uncertainties, as well as other
disclosures made by the Company in its periodic reports on Forms 10-K, 10-Q
and 8-K which have been filed, or will be filed, with the Securities and
Exchange Commission. Such disclosures attempt to advise interested parties of
the factors affecting the Company's business.
Liquidity and Sources of Capital
Cash provided by operations was $494,000 for the six-month period ended
December 31, 1996 as compared to cash used by operations of $562,000 in the
comparable period in 1995. The Company's working capital at December 31,
1996 decreased by $2,627,000 from June 30, 1996. The decrease was due to
capital expenditures associated with the purchase and refurbishment of new
corporate headquarters and the Company's net loss for the six-month period
ended December 31, 1996. Future operations may require additional working
capital. 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 47.3% in the three-month period ended December
31, 1996 to $23.0 million, up approximately $7,375,000 from the comparable
period in 1995. For the six-month period ended December 31, 1996, contract
revenues were $39.7 million, approximately $9,080,000 or 29.7% higher than
the same period in 1995. These increases were due primarily to the revenue
generated by the Company's new subsidiaries.
Gross profit decreased approximately $2,011,000 or 81.4% in the three-month
period ended December 31, 1996, and $1,691,000 or 42.4% in the six-month
period ended December 31, 1996. In addition, the gross profit margins were
2.0% and 5.8% for the three- and six-month periods ended December 31, 1996,
respectively, as compared to 15.8% and 13.0% for the same period in 1995.
The decreases were attributable primarily to labor overruns on certain jobs
by the Company's mechanical contracting businesses. In addition, there has
been substantial and increasing competition in these businesses, which have
compressed job profit margins.
General and administrative expenses increased $123,000 or 5.9% in the
three-month period ended December 31, 1996, and $342,000 or 9.0% in the
six-month period ended December 31, 1996, as compared to the same periods in
1995. The increase was due primarily to the continued growth of the
Company's new subsidiaries.
<PAGE>
Net loss was approximately $1,787,000 in the three-month period ended
December 31, 1996 as compared to a net loss of $1,968,000 in the comparable
period in 1995. A net loss of approximately $1,832,000 was incurred for the
six-month period ended December 31, 1996 as compared to a net loss of
$2,064,000 for the same period in 1995. The net losses in 1996 were
attributable primarily to the above factors. The net losses in 1995 were
attributable primarily to the costs incurred in connection with the joint
venture that performed services on the Lincoln Square project.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On November 13, 1996, the Company held the 1996 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 7,397,020 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, Gregory Cuneo, Gary
DeLuca, Stephen J. Drescher, Ronald Fregara, Armando Spaziani, Elven M.
Tangel and Stephen J. Yager, were submitted to the stockholders. The
nominations of Messrs. Cuneo, DeLuca, Drescher, Fregara, Spaziani, Tangel and
Yager to serve as directors for a one-year term were approved by the
stockholders. 7,246,170 shares voted for the proposal, 150,850 shares voted
against the proposal and 1,602,980 shares unvoted, with no votes abstained.
Proposal No. 2 - Ratification of the Appointment of Auditors. The
appointment of the accounting firm of Grant Thornton LLP was approved by the
stockholders. 7,325,209 shares voted in favor of the proposal, 46,061 shares
voted against the proposal, 25,750 shares abstained from voting and 1,602,980
shares unvoted.
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the three-month period ended
December 31, 1996.
<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 February 13, 1997 By: GREGORY CUNEO
Gregory Cuneo
President and Chief Executive Officer
Date February 13, 1997 By: ROBERT J. BIRNBACH
Robert J. Birnbach
Vice President and Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary finanical information extracted from Form 10-Q
and is qualified in its entirety by reference to such 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 3581572
<SECURITIES> 43151
<RECEIVABLES> 13552298
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29166786
<PP&E> 2568042
<DEPRECIATION> 0
<TOTAL-ASSETS> 33030351
<CURRENT-LIABILITIES> 22702622
<BONDS> 0
0
0
<COMMON> 90000
<OTHER-SE> (5598107)
<TOTAL-LIABILITY-AND-EQUITY> 33030351
<SALES> 39661785
<TOTAL-REVENUES> 39661785
<CGS> 37368709
<TOTAL-COSTS> 37368709
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1835260)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1835260)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> 0
</TABLE>
