Item 1. Business.
Daine Industries, Inc. ("The Registrant") was incorporated on September 24, 1987 and is currently engaged in the manufacture and assembly of wiring devices.
On February 26, 1990, the Registrant acquired substantially all of the assets (with the exception of the cash) and the business of Lite King Corporation, a manufacturer and assembler of wiring devices, cord sets and sockets. The assets acquired had a total cost of $738,079, consisting of machinery and equipment, inventory, accounts receivable, a non compete clause entered into with Lite King Corporation's former president and principal shareholder and a rent deposit. The purchase price ($663,079 in cash and a $75,000 five year note payable in quarterly installments with interest of 12%) was arrived at by arms length negotiations and the Registrant obtained the funds for the purchase from its own internal sources. There was no material relationship between the Registrant and Lite King Corporation or any of its officers or directors prior to this transaction. The Registrant had entered into a six month consulting agreement with Lite King Corporation's former president and owner Mr. Jerold Kolton. For the consulting services rendered, the Registrant paid Mr. Kolton the sum of $36,000 plus expenses of $9,000, or a total of $45,000.
Lite King and its predecessors have been in operation for over twenty five years and its customers are in the Christmas, Halloween, lamp, lighting, point of purchase display and ceramic products field. Lite King's electrical wiring devices, consists of wiring harnesses, "pigtails", power supply cords and the sale of bulbs. Wiring harnesses consist of wire, one or more sockets on a line with a polarized plug and with or without a plug and a switch (which is optional). "Pigtails" consist of a socket and wire. Power supply cords consists of a plug, wire and a switch (which is optional). The Registrant's customers consists of manufacturers of lamps, chandeliers, Christmas and Halloween illuminated decorations, novelties, point of purchase displays, signs, religious illuminated items, illuminated ceramic products and electrical specialties. The Registrant's "pigtails" are primarily sold to lamp and chandelier manufacturers while wiring devices and power supply cords are sold primarily to the Registrant's other customers.
The Registrant obtains its raw materials from a number of different suppliers and believes that it is not dependent upon any source of supply. It faces competition from a number of domestic and international wiring device manufacturers, several of whom are considerably larger than the Registrant. Competition is believed to be intense and while the Registrant believes it is able to finance future growth internally, management believes that a number of the Registrant's competitors are materially stronger financially along with having production facilities located domestically and overseas, taking advantage of lower rates offshore.
Lite King's facilities consist of approximately 16,000 square feet of office and factory space with annual lease payments of $54,000 plus tax escalations. The lease is scheduled to expire on April 30, 2002. At June 30, 1996, there were approximately 31 employees, all except three which were engaged in manufacturing and assembly activities. For the year ended June 30, 1995, four customers accounted for 31.3%, 29.8%, 25% and 5%, respectively of total revenues. For the fiscal year ended June 30, 1996 four customers accounted for 43%, 24.4%, 15.1% and 5.2% respectively of total revenues. The loss of any one of these customers would have a material adverse effect on the Registrant's future operations. No other customer accounted for 10% or more of revenues for the 1995 and 1996 fiscal years.
Lite King has embarked upon a modernization program which resulted in upgrading some of its present tooling and equipment. The modernization program has resulted in some improvement in productivity in some production areas and in making available some improved products. Management will also continue to seek out the acquisition of other companies or the purchase of assets of other firms which may be in a related field to Lite King or which may complement Lite King's business although no assurances can be given that such an acquisition or purchase will be completed in the near future.
Item 2.
Item 2. Properties
As of June 30, 1996, the Registrant owned no property. Lite King's facilities consist of 16,000 square feet of office and factory space pursuant to a five year lease scheduled to expire on April 30, 2002. Annual lease payments during the first two years ending on June 30, 1999 will amount to $58,000 plus tax escalations. During the third year the rental amounts to $60,000 plus tax escalations and during the fourth and fifth year of the lease ending April 30, 2992, the annual lease payment amounts to $62,000 plus tax escalations. The Registrant's corporate office is in the facility of Modern Technology Corp., an affiliated company for which it does not pay rent.
Item 3.
Item 3. Legal Proceedings
The President and Secretary-Treasurer of the Registrant have been included as defendants in a class action entitled "Barker et. al v. Power Securities Corp., et. al" in the Western District of New York which commenced in February 1989. The complaint alleges violations of the securities laws(section 10b and Rule 10b-5 of the Securities and Exchange Act of 1934) in trading certain securities including those of the Company and its affiliated company, Davin Enterprises Inc., by all of the defendants. The officers and directors of the Registrant named in the complaint, who are also officers and directors of Davin Enterprises Inc., deny the allegations and believe the suit to be without merit. The Registrant has undertaken to advance any expenses necessary and incurred by the officers and directors in the litigation subject to an undertaking by such officer and director to repay the advances if it be ultimately determined that the officer or director is not entitled to be indemnified. At this date, expenses are not material. A judgement by settlement was entered against certain defendants other than those who are officers of this Registrant. The officers of the Registrant continue to deny the allegations against them and plaintiffs have not been pursuing the suit against them. In the event that the plaintiffs were to prevail against the officers and directors and a judgment was issued against them, this may have a material adverse effect on the Registrant's future financial condition.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholders Matters.
The following table sets forth, for the periods indicated, the Company's common stock as published by the National Daily Quotation Service. Prices represent quotations between dealers without adjustments for retail markups, markdowns or commissions, and may not represent actual transactions.
High Bid Low Bid
Quarter ended September 30, 1994 * * Quarter ended December 31, 1994 * * Quarter ended March 31, 1995 * * Quarter ended June 30, 1995 * * Quarter ended September 30, 1995 * * Quarter ended December 31, 1995 * * Quarter ended March 31, 1996 * * Quarter ended June 30, 1996 * *
*there were no pink sheet market makers for the Registrant's common stock; no price information was available.
On September 12, 1996, there was no market for the shares of the Registrant. Number of shareholders of record on September 12, 1996 was 695.
Dividends - The Company has not paid any dividends since its inception and presently anticipates that all earnings, if any, will be retained for development and expansion of the Registrant's business and that no dividends on the common stock will be declared in the foreseeable future.
Item 6.
Item 6. Selected Financial Data
For The Year Ended June 30, 1996 1995 1994 1993 1992
Net Sales $1,610,409 $2,907,587 $2,127,327 $1,759,895 $ $1,597,229 Interest Income 11,193 14,068 14,493 14,820 24,059 Net Income (Loss) (31,332) 114,996 71,878 93,732 80,424 Net Income (Loss) Per Share NIL NIL NIL NIL NIL Total Assets 1,981,225 2,232,032 2,065,842 1,798,703 1,609,284 Long Term Debt -0- -0- -0- 11,250 26,250 Dividends -0- -0- -0- -0- -0-
Item 7.
Item 7. Management's Discussion And Analysis of Results of Operations.
For the year ended June 30, 1994, the Registrant generated revenues of $2,127,327. During the year ended June 30, 1995, the Registrant generated revenues of $2,907,587. During the year ended June 30, 1996, the Registrant generated revenues of $1,610,409. During the year ended June 30, 1996, the Registrant generated a net loss of $31,332 as compared with a net income after taxes of $114,996 for the year ended June 30, 1995 and net income after taxes of $71,878 for the year ended June 30, 1994. The decrease in profitability for fiscal year 1996 as compared with fiscal year 1995 was due to lower revenues. The fiscal year 1996 loss figure consists of a gross margin of $386,769 and interest income of $11,193, offset by general and administrative expenses of $391,837, and depreciation and amortization expense of $39,741 less an income tax expense benefit amounting to $2,284 resulting in a net loss of $31,332. For the year ended June 30, 1995, net income before income taxes amounted to $191,959 and income tax expense of $76,963, resulting in net income of $114,996.
The fiscal year 1995 net income figure of $114,996, consisted of a gross margin of $748,897 and interest income of $14,068, offset by general and administrative expenses of $521,783, interest expense of $718 and depreciation and amortization expense of $48,505 and combined federal and state income taxes of $76,963.
As of June 30, 1996, the Registrant had total assets of $1,981,225 as compared with total assets of $2,232,032 at June 30, 1995. The decrease in assets of $250,807 can be attributed to a decline in the following current asset categories: cash and cash equivalents ($163,236), and accounts receivable ($190,105) and and increase in several current asset categories, such as inventory $96,074 and prepaid expenses $29,066. There was a decrease in the fixed asset account: $22,606 (net).
During fiscal year 1996, total liabilities declined by $219,475 reflected by a decrease in current liabilities of $220,499, while deferred tax liabilities rose by $1,024. At June 30, 1996, shareholders' equity amounted to $1,628,887 as compared with $1,660,219 at June 30, 1995. The current ratio (current assets to current liabilities) at June 30, 1996 was approximately 5:1.
Management presently is considering a number of negative factors which could have a material adverse effect on fiscal 1997 revenues and profitability. The Company presently works with two non profit testing organizations for its U.S. and Canadian electrical products(Underwriters Laboratories[U.L.] and the Canadian Standards Association[C.S.A.]). U.L. has proposed new standards for 1997 seasonal products for the U.S. which management considers extreme and unrealistic. For example, as of 9/15/96, no new fused plug for the seasonal cord sets has been approved by U.L. for 1997. Since this is an important component of the Company's product, the lack of an approved plug could have a material adverse effect on the Company's business. The company is working to have its components approved for the 1997 U.L. standard before 12/31/96. While the company is attempting to also obtain another testing organization's approval for the 1997 seasonal product standards, no assurance can be given at this time that approval for 1997 U.S. seasonal products will be obtained. If the Company's customers require product with these 1997 approvals and approvals are not received by January 1, 1997, this could have a materially negative effect on Company's revenues and operations. Because of these uncertainties, management can not forecast fiscal year 1997 revenues or profitability.
Item 8.
Item 8. Financial Statements
Attached and listed in Item 14.
Item 9.
Item 9. Changes In and Disagreements with Accountants in Accounting and Financial Disclosure.
None.
PART III
Item 10.
Item 10. Directors and Executive Officers
The executive officers and directors of the Registrant are as follows:
Age Term Expires
Arthur Seidenfeld 45 President and Director Next annual meeting Anne Seidenfeld 83 Treasurer,Secretary and Director Next annual meeting Gerald Kaufman 55 Director Next annual meeting
Each of the above named individuals has served the Registrant in the capacity indicated since its formation on September 24, 1987 (with the exception that Anne Seidenfeld became the Registrant's secretary on December 17, 1989 and Gerald Kaufman became a director in 1990), and Arthur Seidenfeld and Anne Seidenfeld may be deemed a "parent" under the Rules and Regulations promulgated under the Securities Act of 1933, as amended.
Arthur Seidenfeld, President and Director was awarded a B.S. Degree in Accounting from New York University in 1972 and an M.B.A. in Finance in 1978 from Pace University. He has also served as President and Director of Modern Technology Corp., a public company since 1983. Mr. Seidenfeld is also President and a Director of Davin Enterprises, Inc., a public company whose proposed business is to provide a mechanism to take advantage of business opportunities, which went public during the quarter ended September 30, 1987. From July 1994, he is also treasurer-secretary of Soft Sail Wind Power Inc., a newly established company engaged in wind energy research and development activities.
Anne Seidenfeld, Secretary-Treasurer and Director, received her diploma from Washington Irving High School, New York City, in 1931. Mrs. Seidenfeld is Treasurer, Secretary and a Director of Modern Technology Corp. and is Treasurer, Secretary and a Director of Davin Enterprises, inc.
Gerald Kaufman, Director, has been a practicing attorney for over twenty five years. He has served as a director of the Registrant, along with being a director of Modern Technology Corp. and Davin Enterprises, Inc. since November 1990. He has also been a director of American Mayflower Life Insurance Co. since 1973.
Arthur Seidenfeld is the son of Anne Seidenfeld.
No forms 4 or 5 were filed by officers or directors during the fiscal year ended June 30, 1996.
Item 11.
Item 11. Management - Remuneration and Transactions
For the year ended June 30, 1996, Arthur Seidenfeld, President and a Director of the Company received a salary of $66,473 from Lite King Corp. Anne Seidenfeld, Treasurer and a Director of the Company, received a salary of $20,700- for the year ended June 30, 1996 from Lite King Corp. She has performed bookkeeping and other administrative services for Lite King Corp. No other option or bonus plan exists. The loss of the President's involvement with Lite King Corp. may have an adverse effect on future Company operations. The officers of the Company did not receive salaries from the Registrant during the year ended June 30, 1996 with the exception of the salaries received from Lite King Corp., listed above. PART IV
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
a. The following are known to Registrant to be beneficial owners of 5% or more of the Registrant's common stock:
Title of Class Common Stock
Name of Beneficial Owner Amount & Percentage Nature of of Class Beneficial Ownership
Modern Technology Corp. 461 Beach 124 Street Belle Harbor, New York 72,000,000@ 29.0%
Arthur Seidenfeld 461 Beach 124 Street Belle Harbor, New York 36,000,000 14.5%
Anne Seidenfeld 461 Beach 124 Street Belle Harbor, New York 20,000,000 8.0%
American Israel Ventures Corp. 461 Beach 124 Street Belle Harbor, New York 15,000,000@ 6.0%
@ Arthur Seidenfeld and Anne Seidenfeld are president and secretary, treasurer respectively of Modern Technology Corp. and also own 49% and 12% respectively of the common stock of Modern Technology Corp.
Arthur Seidenfeld owns 70% of the outstanding shares of American Israel Ventures Corp. Anne Seidenfeld owns 25% of the outstanding shares of American Israel Ventures Corp. Arthur Seidenfeld and Anne Seidenfeld are president and treasurer-secretary respectively of American Israel Ventures Corp.
b. The shares owned by management are as follows: Common Stock.
Arthur Seidenfeld 36,000,000 14.5% Anne Seidenfeld 20,000,000 8.0% Gerald Kaufman 3,000,000 1.2% Item 13.
Item 13. Certain Relationships and Related Transactions.
The Registrant's corporate office is in the facility of Modern Technology Corp., an affiliated company where it does not pay any rent.
Item 14.
Item 14. Exhibits, Financial Statements and Schedules.
a) Financial Statements and Financial Statement Schedules.
Consolidated Balance Sheets - June 30, 1996 and 1995. Consolidated Statement of Shareholders' Equity For the Period July 1, 1993 to June 30, 1996. Consolidated Statement of Operations For the Years Ended June 30, 1996, 1995 and 1994. Consolidated Statement of Cash Flows For the Years Ended June 30, 1996, 1995, and 1994.
b) Schedules
V PROPERTY AND EQUIPMENT VI ACCUMULATED DEPRECIATION X STATEMENT OF EXPENSES AMOUNTING TO 1% OR MORE OF NET SALES XIII CAPITAL SHARES XVI SUPPLEMENTARY INCOME STATEMENT INFORMATION
Other schedules not submitted are omitted, because the information is included elsewhere in the financial statements or the notes thereto, or the conditions requiring the filing of these schedules are not applicable.
Supplemental information to be furnished with reports filed pursuant to Section 15(d) of the Securities Act of 1934 by Registrant which have not registered securities pursuant to Section 12 of the Securities Act of 1934:
a) No annual report or proxy material has been sent to security holders. When such report or proxy materials are furnished to securities holders subsequent to the filing of this report, copies shall be furnished to the Commission when sent to securities holders.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DAINE INDUSTRIES, INC.
BY Arthur Seidenfeld President Dated: September 18, 1996
DAINE INDUSTRIES, INC.
FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
I N D E X
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT 1
CONSOLIDATED BALANCE SHEETS - ASSETS 2
CONSOLIDATED BALANCE SHEETS - LIABILITIES AND SHAREHOLDERS' EQUITY 3
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 4
CONSOLIDATED STATEMENTS OF OPERATIONS 5
CONSOLIDATED STATEMENTS OF CASH FLOWS 6-7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 8-11
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors and Shareholders DAINE INDUSTRIES, INC. 461 Beach 124 Street Belle Harbor, New York 11694
We have audited the accompanying consolidated balance sheets of DAINE INDUSTRIES, INC. as of June 30, 1996 and 1995 and the related consolidated statements of operations, statements of shareholders' equity and cash flows for each of the three years in the period ended June 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based upon our audit.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of DAINE INDUSTRIES, INC. as of June 30, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 1996, in conformity with generally accepted accounting principles.
GREENBERG & COMPANY LLC
Springfield, New Jersey August 7, 1996
Page 1 of 11
DAINE INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS
A S S E T S
June 30, 1996 1995
CURRENT ASSETS Cash and Cash Equivalents $ 287,482 $ 450,718 Accounts Receivable 519,935 710,040 Inventory 903,353 807,279 Prepaid Expenses 38,237 9,171 Total Current Assets 1,749,007 1,977,208
FIXED ASSETS, At Cost Machinery and Equipment 384,873 369,890 Leasehold Improvements 9,787 7,635 Less: Accumulated Depreciation and Amortization (168,542) (128,801) 226,118 248,724
OTHER ASSETS Deposits 6,100 6,100
TOTAL ASSETS $1,981,225 $2,232,032
The accompanying notes are an integral part of these financial statements.
Page 2 of 11 DAINE INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS
L I A B I L I T I E S A N D S H A R E H O L D E R S' E Q U I T Y
June 30, 1996 1995
CURRENT LIABILITIES Accounts Payable and Accrued Expenses $ 335,486 $ 555,985
OTHER LIABILITIES Deferred Income Tax Liability (Note 4) 16,852 15,828
TOTAL LIABILITIES 352,338 571,813
COMMITMENTS AND CONTINGENCIES (Note 3)
SHAREHOLDERS' EQUITY Common Stock (Par Value $.00001) 350,000,000 shares authorized, 248,461,935 shares issued and outstanding 2,485 2,485 Paid-In Capital 1,441,597 1,441,597 Retained Earnings 184,805 216,137
TOTAL SHAREHOLDERS' EQUITY 1,628,887 1,660,219
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,981,225 $2,232,032
The accompanying notes are an integral part of these financial statements.
Page 3 of 11 DAINE INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For The Period July 1, 1993 to June 30, 1996
Total Number $.00001 Share- of Par Paid-In Retained holders' Shares Value Capital Earnings Equity
BALANCES AT JULY 1, 1993 248,461,935 $2,485 $1,441,597 $ 29,263 $1,473,345
Net Income for the Year Ended June 30, 1994 71,878 71,878
BALANCES AT JUNE 30, 1994 248,461,935 2,485 1,441,594 101,141 1,545,223
Net Income for the Year Ended June 30, 1995 114,996 114,996
BALANCES AT JUNE 30, 1995 248,461,935 2,485 1,441,594 216,137 1,660,219
(Loss) for the Year Ended June 30, 1996 (31,332) (31,332)
BALANCES AT JUNE 30, 1996 248,461,935 $2,485 $1,441,594 $184,805 $1,628,887
The accompanying notes are an integral part of these financial statements.
Page 4 of 11 DAINE INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended June 30, 1996 1995 1994
REVENUES Sales - Net $1,610,409 $2,907,587 $2,127,327
COST OF GOODS SOLD Beginning Inventory 807,279 810,385 561,479 Purchase and Freight 1,106,998 1,795,974 1,470,378 Direct Labor 212,716 359,610 285,578 2,126,993 2,965,969 2,317,435
Less: Inventory - End of Period 903,353 807,279 810,385 1,223,640 2,158,690 1,507,050
GROSS MARGIN 386,769 748,897 620,277
Interest Income 11,193 14,068 14,493
General and Administrative Expenses (391,837) (521,783) (466,189)
Interest Expense -0- (718) (2,475) Depreciation and Amortization Expense (39,741) (48,505) (47,509)
INCOME (LOSS) BEFORE INCOME TAXES (33,616) 191,959 118,597
Income Tax Expense (Benefit) (Note 4) (2,284) 76,963 46,719
NET INCOME (LOSS) $ (31,332) $ 114,996 $ 71,878
Earnings (Loss) Per Share NIL NIL NIL
Weighted Average Number of Shares of Common Stock Outstanding 248,461,935 248,461,935 248,461,935
The accompanying notes are an integral part of these financial statements.
Page 5 of 11 DAINE INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended June 30, 1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (31,332) $114,996 $ 71,878 Adjustment to Reconcile Net Income to Net Cash Provided By (Used In) Operating Activities: Depreciation and Amortization Expense 39,741 48,505 47,509 Change in Assets and Liabilities: Decrease (Increase) in Accounts Receivable 190,105 (204,584) (103,961) Decrease (Increase) in Inventory (96,074) 3,106 (248,906) Decrease (Increase) in Prepaid Expenses (29,066) (5,206) 7,180 Decrease (Increase) in Deferred Taxes - Current -0- -0- 4,814 Decrease (Increase) in Deposits -0- -0- 14,500 Decrease (Increase) in Deferred Taxes - Noncurrent -0- -0- 2,467 Increase (Decrease) in Accounts Payable and Accrued Expenses (220,499) 53,148 203,729 Increase (Decrease) in Deferred Income Tax Liability 1,024 9,296 6,532 Net Cash Provided By (Used In) Operating Activities (146,101) 19,261 5,742
CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures (17,135) (82,157) (50,950) Net Cash (Used In) Investing Activities (17,135) (82,157) (50,950)
The accompanying notes are an integral part of these financial statements.
Page 6 of 11 DAINE INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For The Years Ended June 30, 1996 1995 1994
CASH FLOWS FROM FINANCING ACTIVITIES Net Borrowings (Repayment) Under Short-Term and Long-Term Debt -0- (11,250) (15,000)
Net Cash Provided By (Used In) Financing Activities -0- (11,250) (15,000)
Net Increase (Decrease) in Cash and Cash Equivalents (163,236) (74,146) (60,208)
Cash and Cash Equivalents at Beginning of Period 450,718 524,864 585,072
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 287,482 $450,718 $524,864
Supplemental Disclosures of Cash Flow Information: Cash Paid During the Year for: Interest $ -0- $ 718 $ 2,475 Income Taxes $ 52,519 $ 41,407 $ 18,639
The accompanying notes are an integral part of these financial statements.
Page 7 of 11 DAINE INDUSTRIES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accounts of the Company and its consolidated 100% owned subsidiary, Lite King Corporation, are included in the consolidated financial statements. All intercompany balances and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid, short-term investments with maturities of 90 days or less.
ACCOUNTS RECEIVABLE
Accounts receivable are judged as to collectibility by management and an allowance for bad debts is established as necessary. As of each balance sheet date, no reserve was considered necessary.
INVENTORY
Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. Inventories consist of:
6/30/96 6/30/95 Raw Materials $766,527 $627,270 Work-in-Process 27,412 61,503 Finished Goods 109,414 118,506 $903,353 $807,279
MAJOR CUSTOMERS
During the years ended June 30, 1996 and 1995, three customers accounted for approximately 43%, 24%, 15%, and 31%, 30%, 25%, respectively, of total revenues. The loss of any one of these customers could have a material adverse effect on the financial condition of the company.
PROPERTY AND EQUIPMENT
Renewals and betterments are capitalized; maintenance and repairs are expensed as incurred.
Depreciation is calculated using the straight line method over the asset's estimated useful life, which generally approximates 10 years.
Page 8 of 11 DAINE INDUSTRIES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (Continued)
REVENUE RECOGNITION POLICY
The company recognizes sales, for both financial statement purposes and for tax purposes, when the products are shipped to customers.
SHAREHOLDERS' EQUITY
The company issued 50,000,000 units, consisting of one share common stock, $.00001 par value, one redeemable Class A Common Stock Purchase warrant and one redeemable Class B Common Stock Purchase warrant, and 152,000,000 shares to officers of the company and other individuals. As of June 30, 1994, June 30, 1993 and June 30, 1992, 37,224,425 Class "A" and 9,237,510 Class "B" warrants were exercised, and the balance of the warrants have expired.
NOTE 2: ACQUISITION
On February 26, 1990 Daine Industries, Inc. purchased the assets of Lite King Corporation. The purchase price was $738,079, which was paid $663,079 in cash and $75,000 in a note (see footnote 4).
The acquisition was accounted for by the purchase method of accounting and, accordingly, the purchase price has been allocated to assets acquired based on their fair market value at the date of acquisition.
NOTE 3: COMMITMENTS AND CONTINGENCIES
The company is currently in a lease for office and factory space requiring minimum annual base rental payments for the fiscal periods shown as follows:
1997 $ 54,667 1998 58,000 1999 58,333 2000 60,333 2001 62,000 Total $293,333
In addition to annual base rental payments, the company must pay an annual escalation for real estate taxes.
Certain officers and directors of the company have been included as defendants in a class action entitled "Barker et al v. Power Securities Corp., et al" in the Western District of New York, which action alleges violations of the securities laws, in trading certain securities including those of the company and its affiliated
Page 9 of 11 DAINE INDUSTRIES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (Continued)
company, Davin Enterprises Inc., by all of the defendants. Certain officers and directors of the company, who are also officers and directors of Davin Enterprises Inc., deny the allegations and believe the suit to be without merit. The alleged violations refer to Section 10b and Rule 10b-5 of the Securities and Exchange Act of 1934.
The company has undertaken to advance any expenses necessary and incurred by the officers and directors in the litigation subject to an undertaking by such officer and director to repay the advances if it be ultimately determined that the officer or director is not entitled to be indemnified. At this date, expenses are not material. In the event that the plaintiffs were to prevail against the officers and directors and a judgment was issued against them, this may have a material adverse effect on the company's future financial condition. Management feels that an estimate of the possible range of loss cannot be made at this time.
NOTE 4: INCOME TAXES
Income taxes are accrued at the statutory U.S. and state income tax rates. The company has been following APB Opinion No. 11 for reporting income taxes in prior years. Beginning with the year ended June 30, 1993, the company adopted FAS 109 for reporting income taxes. This did not have a material effect on the financial statements.
Income tax expense for June 30, 1996 is principally due to state and local income taxes based upon capital. Deferred tax liabilities relate to depreciation timing differences.
June 30, 1996 1995 1994
Current tax expense (benefit): Income tax at statutory rates $ 3,143 $67,666 $56,645 Operating loss carryback (5,930) -0- (13,992) Other differences (521) -0- (2,466) (3,308) 67,666 40,187
Deferred tax expense: Depreciation 1,024 9,297 6,532
Total Tax Expense (Benefit) $(2,284) $76,963 $46,719
Page 10 of 11 DAINE INDUSTRIES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (Continued)
NOTE 5: POSTRETIREMENT EMPLOYEE BENEFITS
The company does not have a policy to cover employees for any health care or other welfare benefits that are incurred after employment (postretirement). Therefore, no provision is required under SFAS's 106 or 112.
Page 11 of 11
Our examination was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The information contained in the following Schedules is presented for purposes of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Securities and Exchange Commission. Such information has been subjected to the auditing procedures applied in the examination of the basic financial statements and, in our opinion, is fairly stated in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
GREENBERG & COMPANY LLC
Springfield, New Jersey August 7, 1996
SCHEDULE V
DAINE INDUSTRIES, INC. PROPERTY AND EQUIPMENT For The Year Ended June 30, 1996
Column A Column B Column C Column D Column E Column F
Classification Balance at Additions Retirements Other Changes Balance at Beginning At Cost Add (Deduct) End of of Period Describe Period
EQUIPMENT $369,890 $14,983 $384,873
STRAIGHT LINE BASIS 10 YEAR LIFE
IMPROVEMENTS $7,635 $2,152 $9,787
STRAIGHT LINE BASIS 5 YEAR LIFE
-------- -------- -------- TOTAL $377,525 $17,135 $394,660 ======== ======== ========
SCHEDULE VII
DAINE INDUSTRIES, INC. ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY AND EQUIPMENT For The Year Ended June 30, 1996
Column A Column B Column C Column D Column E Column F
Description Balance at Additions Retirements Other Changes Balance at Beginning Charged to Add (Deduct) End of of Period Costs and Describe Period Expenses
ACCUMULATED DEPRECIATION $128,801 $39,741 $168,542
STRAIGHT LINE BASIS 5 & 10 YEAR LIFE
SCHEDULE X
DAINE INDUSTRIES, INC.
STATEMENT OF EXPENSES AMOUNTING TO 1% OR MORE OF NET SALES For the Year Ended June 30, 1996
ITEM AMOUNT
Officers Salaries $87,173
Utilities 18,859
Insurance - Employee Group 45,641
Insurance - General 47,119
Professional Fees 31,738
Total $230,530
SCHEDULE XVI DAINE INDUSTRIES, INC.
SUPPLEMENTAL STATEMENT OF OPERATIONS INFORMATION
For the Year Ended June 30, 1996
Column A Column B
Item Charged to costs and expenses for the period
Maintenance and Repairs $ 10,488
Depreciation 39,741
Taxes, Other Than Income Taxes - Payroll 24,684
State and Local Income Taxes 4,289
Commercial Rent Tax 2,356
Rent 54,000
Advertising Costs 6,407
Total $141,965
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
Name Title Date
Arthur Seidenfeld President and Director September 18, 1996 Principal Executive Officer and Principal Financial Officer
Anne Seidenfeld Treasurer, Secretary September 18, 1996 and Director
Gerald Kaufman Director September 18, 1996