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, 1998.
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 Indentification No.)
incorporation or organization)
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, 1998
<PAGE>
Index
DualStar Technologies Corporation
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - March 31, 1998
and June 30, 1997
Condensed consolidated statements of operations - Three
and nine months ended March 31, 1998 and 1997
Condensed consolidated statements of cash flows - Nine
months ended March 31, 1998 and 1997
Notes to condensed consolidated financial statements -
March 31, 1998
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>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31,
1998 June 30,
(unaudited) 1997
------------ ------------
ASSETS
Current assets:
Cash $ 1,914,020 $ 1,110,615
Contracts receivable, net 20,224,448 15,815,168
Retainage receivable 4,124,074 2,863,049
Costs and estimated earnings
in excess of billings on
uncompleted contracts 422,643 622,951
Deferred tax asset - current 178,000 178,000
Prepaid expenses and sundry
receivable 435,950 319,942
------------ ------------
Total current assets 27,299,135 20,909,725
Property and equipment, net 3,553,084 3,443,777
Other assets:
Deferred tax asset -
long-term 924,000 924,000
Other 1,527,765 1,299,254
------------ ------------
$33,303,984 $26,576,756
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $18,477,644 $15,559,135
Billings in excess of costs
and estimated earnings on
uncompleted contracts 4,783,070 2,741,542
Accrued expenses and other
liabilities 3,424,945 2,346,001
------------ ------------
Total current liabilities 26,685,659 20,646,678
Mortgage payable - long-term 783,750 813,750
Other liabilities 196,926 305,005
------------ ------------
Total liabilities 27,666,335 21,765,433
Contingencies
Shareholders' equity:
Common stock 90,000 90,000
Additional paid-in capital 14,995,836 14,995,836
Deficit (9,448,187) (10,274,513)
------------ ------------
$33,303,984 $26,576,756
============ ============
See notes to condensed consolidated financial statements
<PAGE>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
Contract revenues earned $23,242,049 $19,787,495 $72,126,401 $59,449,280
Cost of revenues earned 21,250,759 20,983,704 65,311,089 58,352,413
------------ ------------ ------------ ------------
Gross profit (loss) 1,991,290 (1,196,209) 6,815,312 1,096,867
General and administrative
expenses 1,887,410 2,604,465 5,988,986 6,732,801
------------ ------------ ------------ ------------
Income (loss) before
provision for income taxes 103,880 (3,800,674) 826,326 (5,635,934)
Provision for income taxes - - - -
------------ ------------ ------------ ------------
Net income (loss) $ 103,880 ($3,800,674) $ 826,326 ($5,635,934)
============ ============ ============ ============
Basic income (loss) per share:
Net income (loss) per share $0.01 ($0.42) $0.09 ($0.63)
Weighted average shares
outstanding 9,000,000 9,000,000 9,000,000 9,000,000
Diluted income (loss) per share:
Net income (loss) per share $0.01 ($0.42) $0.09 ($0.63)
Weighted average shares
outstanding 9,480,993 9,000,000 9,458,781 9,000,000
See notes to condensed consolidated financial statements
<PAGE>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31,
(UNAUDITED)
1998 1997
------------ ------------
Cash provided by operating activities $ 1,609,296 $ 237,498
------------ ------------
Cash flows from investing activities:
Capital expenditure (732,302) (2,043,194)
Redemption of investment in
marketable securities - 866,878
Decrease in sundry receivable - 1,070,435
------------ ------------
Net cash used in investing activities (732,302) (105,881)
------------ ------------
Cash flows from financing activities:
Principal payments on capital
lease obligations (43,589) -
Principal payments on mortgage (30,000) (26,250)
------------ ------------
Net cash used in financing activities (73,589) (26,250)
------------ ------------
Net increase in cash 803,405 105,367
Cash - beginning of period 1,110,615 2,023,992
------------ ------------
Cash - end of period $ 1,914,020 $ 2,129,359
============ ============
See notes to condensed consolidated financial statements
<PAGE>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1998
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 periods ended March 31, 1998
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.
NOTE B - NET INCOME (LOSS) PER SHARE
Basic income (loss) per share is based on the weighted average
number of common shares outstanding during the period. Diluted
income (loss) per share includes the dilutive effect of securities
that can be converted into common stock, including options and
warrants, unless the effect is anti-dilutive.
The weighted average number of shares outstanding for the periods
presented is as follows:
Three Months Ended Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
--------- --------- --------- ---------
Basic shares 9,000,000 9,000,000 9,000,000 9,000,000
Dilution (options) 480,993 - 458,781 -
--------- --------- --------- ---------
Diluted shares 9,480,993 9,000,000 9,458,781 9,000,000
========= ========= ========= =========
<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 March 31, 1998 and June 30, 1997 were
approximately $1,914,000 and $1,111,000, respectively. The
Company's operations provided approximately $1,609,000 and $237,000
of cash during the nine month periods ended March 31, 1998 and
1997, respectively. In addition, during the nine months ended
March 31, 1998, the Company acquired capital assets of
approximately $732,000, substantially all of which represented
investment in information technology systems for high-rise
buildings in return for rights to provide telephone, cable TV and
high-speed Internet services to the buildings' residents.
During the nine months ended March 31, 1997, the Company acquired
capital assets of approximately $2,043,000, of which approximately
$1,182,000 represented acquisition and improvements of real
property located in Long Island City, N.Y. for the purpose of
centralizing and consolidating its operations. In addition,
$861,000 represented investment in information technology systems
for high-rise buildings in return for rights to provide telephone,
cable TV and high-speed Internet services to the buildings'
residents.
Working capital at March 31, 1998 and June 30, 1997 was
approximately $578,000 and $263,000, respectively. To improve
working capital, the Company is consolidating certain subsidiaries
and is considering the sale of certain subsidiaries. In addition,
the Company's mechanical contracting and service businesses
reorganized 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 the event that additional working
capital becomes necessary to fund operations, there can be no
assurance that the Company will be able to obtain financing on
terms satisfactory to it.
Results of Operations
Contract revenues increased 17.5% in the three-month period ended
March 31, 1998 to $23.2 million, up $3.4 million from the
comparable period in 1997. Contract revenues increased 21.3% in
the nine-month period ended March 31, 1998 to $72.1 million, up
$12.7 million from the comparable period in 1997. The increases
were due primarily to the improvement in the New York City
Metropolitan area's economy and the implementation of the Company's
business plan to create a larger group of related and integrated
businesses.
Gross profit increased $3.2 million in the three-month period ended
March 31, 1998 to $2.0 million compared to a loss of $1.2 million
in the three-month period ended March 31, 1997. The gross profit
margins were 8.6% and -6.0% for the three-month periods ended March
31, 1998 and 1997, respectively. Gross profit increased $5.7
million or 518.2% in the nine-month period ended March 31, 1998 to
$6.8 million from the comparable period in 1997. The gross profit
margins were 9.4% and 1.8% for the nine-month periods ended March
31, 1998 and 1997, respectively. The increases in gross profit and
gross profit margins were attributable to increases in revenues,
increased control over project costs and higher margins on new
projects.
Even though contract revenues increased substantially in the three-
and nine-month periods ended March 31, 1998, general and
administrative expenses decreased from the comparable periods in
1997. The Company recorded a one-time write-off of $0.4 million of
leasehold improvements due to the relocation of the Company's
headquarters in the three-month period ended March 31, 1997.
Excluding the write-off in 1997, general and administrative
expenses decreased 14.4% in the three-month period ended March 31,
1998 to $1.9 million, down $0.3 million from the comparable period
in 1997; therefore, as a percentage of revenue, general and
administrative expenses decreased to 8.1% for the three months
ended March 31, 1998, from 11.1% for the comparable period of 1997.
Excluding the write-off in 1997, general and administrative
expenses decreased 5.4% in the nine-month period ended March 31,
1998 to $6.0 million, down $0.3 million from the comparable period
in 1997; therefore, as a percentage of revenue, general and
administrative expenses decreased to 8.3% for the nine months ended
March 31, 1998, from 10.7% for the comparable period in 1997. The
improvements were due primarily to the reorganization and overhead
reduction of the Company's mechanical contracting and service
businesses undertaken in the latter part of fiscal 1997 and in the
current fiscal year.
<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, 1998.
<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, 1998 By: GREGORY CUNEO
Gregory Cuneo
President and Chief Executive Officer
Date May 15, 1998 By: ROBERT BIRNBACH
Robert Birnbach
Vice President and Chief Financial Officer
Date May 15, 1998 By: JOSEPH CHAN
Joseph Chan
Vice President and Chief Accounting Officer
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