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 March 31, 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 May 12, 1997
<PAGE>
Index
DualStar Technologies Corporation
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - March 31, 1997 and June
30, 1996
Condensed consolidated statements of operations - Three and
nine months ended March 31, 1997 and 1996
Condensed consolidated statements of cash flows - Nine months
ended March 31, 1997 and 1996
Notes to condensed consolidated financial statements - March
31, 1997
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
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<S>
<C> <C>
March 31, June 30,
1997 1996
(unaudited)
ASSETS
Current assets:
Cash $2,129,359 $2,023,992
Marketable securities 43,151 910,029
Contracts receivable, net 14,849,345 13,220,282
Retainage receivable 4,063,954 4,547,101
Costs and estimated
earnings in excess of
billings on uncomplted
contracts 2,725,132 2,763,051
Income taxes receivable 243,015 1,225,532
Deferred tax asset -
current 178,000 178,000
Prepaid expenses and sundry
receivable 688,261 1,281,850
------------ ------------
Total current assets 24,920,217 26,149,837
Property and equipment, net 2,579,225 1,054,010
Other assets:
Deferred tax asset -
long-term 924,000 924,000
Deferred charge 857,532 -
Other 172,128 253,633
------------ ------------
$29,453,102 $28,381,480
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $16,146,049 $11,015,924
Billings in excess of
costs and estimated
earnings on uncomplted
contracts 2,552,404 3,477,465
Accrued expenses and other
liabilities 3,897,094 2,565,102
------------ ------------
Total current liabilities 22,595,547 17,058,491
Mortgage payable - long-term 828,750 -
Contingencies
Shareholders' equity:
Common stock 90,000 90,000
Additional paid-in capital 4,995,836 14,995,836
Deficit (9,057,031) (3,762,847)
------------ ------------
$29,453,102 $28,381,480
============ ============
See notes to condensed consolidated financial statements
</TABLE>
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<TABLE>
<CAPTION>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<S> <C> <C> <C> <C>
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
1997 1996 1997 1996
Contract revenues earned $19,787,495 $20,343,115 $59,449,280 $50,924,879
Cost of revenues earned 20,983,704 18,302,912 58,352,413 44,900,705
------------ ------------ ------------ ------------
Gross (loss) profit (1,196,209) 2,040,203 1,096,867 6,024,174
General and administrative
expenses 2,604,465 2,178,596 6,732,801 5,961,274
Costs incurred in connection
with joint venture - - - 4,096,428
------------ ------------ ----------- ------------
Loss before benefit for
income taxes (3,800,674) (138,393) (5,635,934) (4,033,528)
Benefit for income taxes - (46,933) - (1,877,933)
------------ ------------ ------------ ------------
Net loss ($3,800,674) ($91,460) ($5,635,934) ($2,155,595)
============ ============ ============ ============
Per share data:
Primary ($0.42) ($0.01) ($0.63) ($0.24)
Weighted average shares
outstanding 9,000,000 9,000,000 9,000,000 9,000,000
See notes to condensed consolidated financial statements
</TABLE>
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<TABLE>
<CAPTION>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31,
(UNAUDITED)
<S <C> <C>
1997 1996
Cash provided by (used in) operating
activities $237,498 ($1,550,345)
------------ ------------
Cash flows from investing activities:
Acquisition of property and
equipment (1,181,701) (320,655)
Decrease in sundry receivable 1,070,435 -
Increase in deferred charges (861,493) -
Redemption of investment in
marketable securities 866,878 4,107,684
------------ ------------
Net cash provided by (used in)
investing activities (105,881) 3,787,029
Cash flows from financing activities:
Principal payments on mortgage (26,250) -
------------- ------------
Net cash used in financing
activities (26,250) -
------------- ------------
Net increase in cash 105,367 2,236,684
Cash - beginning of period 2,023,992 2,072,856
------------- ------------
Cash - end of period $2,129,359 $4,309,540
============= ============
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
</TABLE>
<PAGE>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 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- and nine-month period ended March 31, 1997
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.
<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 $237,000 for the nine-month period
ended March 31, 1997 as compared to cash used by operations of $1.6
million in the comparable period in 1996. The Company's working
capital at March 31, 1997 decreased by $6.8 million 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 nine-month period ended March 31,
1997. 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 decreased 2.7% in the three-month period ended
March 31, 1997 to $19.8 million, down $556,000 from the comparable
period in 1996. The decrease was due primarily to the Company
either completing or beginning a few large contracts. Since such
revenue streams typically peak during the middle of a project, this
depressed contract revenues during this period. For the nine-month
period ended March 31, 1997, contract revenues were $59.4 million,
which were $8.5 million or 16.7% higher than the same period in
1996. This increase was due primarily to the revenues generated by
the Company's new subsidiaries.
Gross (loss) was ($1.2) million or (6.0%) for the three-month
period ended March 31, 1997, compared to gross profit of $2.0
million or 10.0% for the comparable period in 1996. Gross profit
decreased by $4.9 million or 81.8% in the nine-month period ended
March 31, 1997 from the comparable period in 1996. In addition,
the gross profit margins were 1.8% for the nine-month period ended
March 31, 1997, as compared to 11.8% for the same period in 1996.
The decreases were attributable primarily to cost overruns on the
Visy Paper and Mount Sinai Hospital projects by the Company's
mechanical contracting business. In addition, there has been
substantial and increasing competition in this business, which has
compressed job profit margins. In an effort to stay competitive in
its market place, the mechanical contracting subsidiary has
restructured its engineering, drafting and project management
departments.
<PAGE>
For the three-month period ended March 31, 1997, the Visy Paper and
Mount Sinai Hospital projects accounted for $3.7 million of
contract revenues and $6.0 million of costs of revenues. Excluding
these projects, contract revenues were $16.1 million and gross
profit was $1.1 million or 6.8% for the three-month period. For
the nine-month period ended March 31, 1997, the Visy Paper and
Mount Sinai Hospital projects accounted for $11.4 million of
contract revenues and $13.5 million of costs of revenues.
Excluding these two projects, contracts revenues were $48.0 million
and gross profit was $3.2 million or 6.7% for the nine-month
period.
For the three-month period ended March 31,1997, the Company's new
subsidiaries accounted for $5.7 million of revenues and had gross
profit of $644,000 or 11.3%. For the nine-month period ended March
31, 1997, the new subsidiaries accounted for $16.5 million of
revenues and had gross profit of $1.5 million or 9.1%.
General and administrative expenses increased $426,000 or 19.5% in
the three-month period ended March 31, 1997, and $772,000 or 12.9%
in the nine-month period ended March 31, 1997, as compared to the
same periods in 1996. The increase in the three-month period was
due primarily to the write-off of leasehold improvements abandoned
by the Company due to the relocation of the Company's headquarters.
The increase in the nine-month period was due primarily to the
leasehold improvement write-off and costs associated with the
continued growth of the Company's new subsidiaries. For the three-
and nine-month periods ended March 31, 1997, the new subsidiaries
accounted for $899,000 and $1.4 million of general and
administrative expenses respectively. In an effort to reduce
overhead, the Company has begun to implement several cost reduction
programs, including the centralization and consolidation of the
accounting and administrative functions.
Net loss was approximately $3.8 million in the three-month period
ended March 31, 1997 as compared to a net loss of $91,000 in the
comparable period in 1996. A net loss of approximately $5.6
million was incurred for the nine-month period ended March 31,
1997, as compared to a net loss of $2.2 million for the same period
in 1996. The net losses in 1997 were attributable primarily to the
above factors. The net losses in 1996 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 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the three-month period
ended March 31, 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 May 15, 1997 By: GREGORY CUNEO
Gregory Cuneo
President and Chief Executive Officer
Date May 15, 1997 By: ROBERT J. BIRNBACH
Robert J. Birnbach
Vice President and Chief Financial Officer
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<ARTICLE> 5
<LEGEND>
This schedule contains summary finanical information extracted from Form 10-Q
and is qualified in its entirety by reference to such Form 10-Q
</LEGEND>
<S> <C>
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<PERIOD-END> MAR-31-1997
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</TABLE>
