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,
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 February 10, 1998
<PAGE>
Index
DualStar Technologies Corporation
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - December 31,
1997 and June 30, 1997
Condensed consolidated statements of operations - Three
and six months ended December 31, 1997 and 1996
Condensed consolidated statements of cash flows - Six
months ended December 31, 1997 and 1996
Notes to condensed consolidated financial statements -
December 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>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31 June 30,
1997 1997
(unaudited)
----------- -----------
ASSETS
Current assets:
Cash $ 1,338,884 $ 1,110,615
Contracts receivable, net 23,513,945 15,815,168
Retainage receivable 3,392,160 2,863,049
Costs and estimated earnings
in excess of billings on
uncompleted contracts 1,136,701 622,951
Deferred tax asset - current 178,000 178,000
Prepaid expenses and sundry
receivable 260,030 319,942
------------ ------------
Total current assets 29,819,720 20,909,725
Property and equipment, net 3,652,424 3,443,777
Other assets:
Deferred tax asset -
long-term 924,000 924,000
Other 1,443,414 1,299,254
------------ ------------
$35,839,558 $26,576,756
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $21,650,320 $15,559,135
Billings in excess of costs
and estinated earnings on
uncompleted contracts 4,857,945 2,741,542
Accrued expenses and other
liabilities 2,783,602 2,346,001
------------ ------------
Total current liabilities 29,291,867 20,646,678
Mortgage payable - long-term 795,000 813,750
Other liabilities 218,922 305,005
------------ ------------
Total liabilities 30,305,789 21,765,433
Contingencies
Shareholders' equity:
Common stock 90,000 90,000
Additional paid-in capital 14,995,836 14,995,836
Deficit (9,552,067) (10,274,513)
------------ ------------
$35,839,558 $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 Six Months
Ended December 31, Ended December 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
Contract revenues earned $26,163,105 $22,978,881 $48,884,352 $39,661,785
Cost of revenues earned 23,693,331 22,519,021 44,060,330 37,368,709
------------ ------------ ------------ ------------
Gross profit 2,469,774 459,860 4,824,022 2,293,076
General and administrative
expenses 2,227,490 2,214,270 4,101,576 4,128,336
------------ ------------ ------------ ------------
Income (loss) before
provision for income
taxes 242,284 (1,754,410) 722,446 (1,835,260)
Provision for income
taxes - 36,500 - -
------------ ------------ ------------ ------------
Net income (loss) $242,284 ($1,790,910) $722,446 ($1,835,260)
============ ============ ============ ============
Basic income (loss) per share:
Net income (loss) per
share $0.03 ($0.20) $0.08 ($0.20)
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 $0.03 ($0.20) $0.08 ($0.20)
Weighted average shares
outstanding 9,568,409 9,000,000 9,447,675 9,000,000
See notes to condensed consolidated financial statements
<PAGE>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31,
(UNAUDITED)
1997 1996
----------- -----------
Cash provided by operating activities $ 729,018 $ 493,841
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (450,881) (858,574)
Redemption of investment in
marketable securities - 866,878
Decrease in sundry receivable - 1,070,435
------------ -----------
Net cash (used in) provided by
investing activities (450,881) 1,078,739
------------ -----------
Cash flows from financing activities:
Principal payments on capital
lease obligations (31,118) -
Principal payments on mortgage (18,750) (15,000)
----------- -----------
Net cash used in financing activities (49,868) (15,000)
----------- -----------
Net increase in cash 228,269 1,557,580
Cash - beginning of period 1,110,615 2,023,992
----------- -----------
Cash - end of period $1,338,884 $3,581,572
=========== ===========
See notes to condensed consolidated financial statements
<PAGE>
DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 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-month period ended December 31, 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.
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 is based on the assumption that all
dilutive securities were converted at the beginning of the period
or the issuing date, if later.
The weighted average number of shares outstanding for the periods
presented is as follows:
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
Basic shares 9,000,000 9,000,000 9,000,000 9,000,000
Dilution (options) 568,409 - 447,675 -
--------- --------- --------- ---------
Diluted shares 9,568,409 9,000,000 9,447,675 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 December 31 and June 30, 1997 were approximately
$1,339,000 and $1,111,000, respectively. The Company's operations
provided approximately $729,000 and $494,000 of cash during the six
month period ended December 31, 1997 and 1996, respectively. In
addition, during the six months ended December 31, 1997, the
Company acquired capital assets of approximately $451,000,
substantially all of which represented investment in information
technology systems for two high-rise buildings in return for rights
to provide telephone, cable TV and high-speed Internet services to
the buildings' residents.
During the six months ended December 31, 1996, the Company acquired
capital assets of approximately $859,000, 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. The cost of the real property
was approximately $1,109,000 of which $900,000 was financed by a
ten-year mortgage loan.
Working capital at December 31, and June 30, 1997 were
approximately $528,000 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.
Results of Operations
Contract revenues increased 13.9% in the three-month period ended
December 31, 1997 to $26.2 million, up $3.2 million from the
comparable period in 1996. Contract revenues increased 23.3% in
the six-month period ended December 31, 1997 to $48.9 million, up
$9.2 million from the comparable period in 1996. The increases were
due primarily to the improvement in the New York City Metropolitan
area's economy.
Gross profit increased $2.0 million or 437.1% in the three-month
period ended December 31, 1997 to $2.5 million from the comparable
period in 1996. The gross profit margins were 9.4% and 2.0% for
the three-month periods ended December 31, 1997 and 1996,
respectively. Gross profit increased $2.5 million or 110.4% in the
six-month period ended December 31, 1997 to $4.8 million from the
comparable period in 1996. The gross profit margin were 9.9% and
5.8% for the six-month periods ended December 31, 1997 and 1996,
respectively. The increases in gross profit and gross profit
margins were attributable to the increase in revenues, the
increased control over project costs and the higher margins on new
projects.
Even though contract revenues increased substantially in the three-
and six-month periods ended December 31, 1997, general and
administrative expenses were relatively unchanged from the
comparable periods in 1996. General and administrative expenses
were $2.2 million for both three- month periods ended December 31,
1997 and 1996; therefore, as a percentage of revenue, general and
administrative expenses decreased to 8.5% for the three months
ended December 31, 1997, from 9.6% for the comparable period of
1996. General and administrative expenses were $4.1 million for
both six-month periods ended December 31, 1997 and 1996; therefore,
as a percentage of revenue, general and administrative expenses
decreased to 8.4% for the six months ended December 31, 1997, from
10.4% for the comparable period of 1996. The improvements were due
primarily to the reorganization of the Company's mechanical
contracting business undertaken in the latter part of fiscal 1997.
<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 December 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 February 13, 1998 By: GREGORY CUNEO
Gregory Cuneo
President and Chief Executive Officer
Date February 13, 1998 By: ROBERT BIRNBACH
Robert Birnbach
Vice President and Chief Financial Officer
Date February 13, 1998 By: JOSEPH CHAN
Joseph Chan
Vice President and Chief Accounting Officer
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