8-K 1 file001.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 Date of Report - October 27, 2003 DUALSTAR TECHNOLOGIES CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 0-25552 13-3776834 ---------------------------- ----------- ------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 11-30 47th Avenue, Long Island City, New York, New York 11101 ------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (718) 340-6655 On October 27, 2003, DualStar Technologies Corporation (the "Company") exchanged with Madeleine, LLC, its senior lender ("Madeleine"), an affiliate of Blackacre Capital Management L.L.C. and Cerberus Capital Management L.P., certain assets and newly issued shares of common stock of the Company in consideration of the reduction to zero of the outstanding principal balance and accrued interest on the Company's note to Madeleine as described in Items 1 and 2 below. The Company had been in default under the terms of the note to Madeleine. As a result of the transactions, the Company no longer has any indebtedness to Madeleine. ITEM 1. CHANGE IN CONTROL OF REGISTRANT On October 27, 2003, pursuant to a Securities Purchase Agreement, the Company issued to its senior lender, Madeline, an aggregate of 7,659,899 shares of the Company's Common Stock, with a market value of $2,013,787 based on the average closing price of the common stock for the five business days immediately preceding the closing of the stock issuance. The issuance of such shares was in consideration of the reduction to zero of the Company's remaining indebtedness to Madeleine in the aggregate amount of $10,100,000 (principal plus accrued interest). The Company also granted certain registration rights to Madeleine. In connection with the transaction, certain officers and management employees surrendered options to purchase an aggregate of 2,248,000 shares of common stock and an affiliate of Madeleine terminated warrants to purchase 3,125,000 shares of common stock. New options may be granted to management, subject to shareholder approval. Madeleine currently owns approximately 31.7% of the total outstanding common stock of the Company. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On October 27, 2003, the Company through its wholly-owned subsidiary Property Control, Inc. sold and conveyed to an affiliate of its senior lender, Madeleine, certain real property in Long Island City, New York in consideration of the reduction of $3,000,000 of the Company's outstanding note to Madeleine. The consideration was determined by arms' length negotiations. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS (a) Financial Statements of Businesses Acquired. Not applicable. (b) Pro Forma Financial Information. On October 27, 2003, DualStar Technologies Corporation (the "Company") exchanged with Madeleine, LLC, its senior lender ("Madeleine"), certain assets and newly issued shares of common stock of the Company in consideration of the reduction to zero of the outstanding principal balance and accrued interest on the Company's note to Madeleine. The following unaudited pro forma financial statements and notes thereto are being filed herewith to illustrate the effects of the exchange on the historical financial position and operating results of the Company: Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2003 Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended June 30, 2003 The pro forma financial information represents, in the opinion of management, all adjustments necessary to present the Company's pro forma results of operations and financial position in accordance with Article 11 of the United States Securities and Exchange Commission ("SEC") Regulation S-X and are based upon available information and certain assumptions considered reasonable under the circumstances. The pro forma financial information also excludes the gain on sale discussed above, and any other non-recurring charges or credits attributable to the transaction. The pro forma condensed consolidated financial statements should be read in conjunction with the Company's audited condensed consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K/A for the period ended June 30, 2003, filed on October 3, 2003. The pro forma information may not necessarily be indicative of what the Company's financial position or results of operations would have been had the transaction been in effect as of the and for the period presented, nor is such information necessarily indicative of the Company's results of operations or financial position for any future period or date. DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET (UNAUDITED) The following table shows the unaudited pro forma condensed consolidated balance sheet at June 30, 2003 as if the exchange had taken place on June 30, 2003.

HISTORICAL PRO FORMA JUNE 30, PRO FORMA ~~MARCH~~JUNE 3130, ~~ADJUSTMENTS MARCH 31,~~ 2003 ~~(NOTE~~ADJUSTMENTS ~~A, B,C)~~ 2003 -------------------- ------------------ -------------------- ASSETS Current assets: Cash and cash equivalents $2 3,~~779~~055,~~361~~255 $2 3,~~779~~055,~~361~~255 Accounts receivable - net of allowance for doubtful accounts 1817,~~196~~067,~~996~~241 1817,~~196~~067,~~996~~241 Retainage receivable 3,~~732~~049,~~251~~667 3,~~732~~049,~~251~~667 Costs and estimated earnings in excess of billings on uncompleted contracts ~~973~~768,~~891~~409 ~~973~~768,~~891~~409 Assets held for sale 483,756 483,756 Prepaid expenses and other current assets ~~257~~220,~~693~~823 ~~257~~220,~~693~~823 -------------------- ------------------ -------------------- Total current assets 2524,~~940~~645,~~192~~151 - 2524,~~940~~645,~~192~~151 Property and equipment - net of accumulated depreciation and amortization ~~(Note A)~~ 1,~~650~~144,~~570~~282 (~~505,000~~A) (1,~~145~~066,~~570~~295) 77,987 Other ~~453~~431,~~039~~363 ~~453~~431,~~039~~363 -------------------- ------------------ -------------------- Total assets $28 26,~~043~~220,~~801~~796 $ (~~505~~1,~~000~~066,295) $2725,~~538~~154,~~801~~501 ==================== ================== ==================== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Senior secured promissory note payable ~~(Note B)~~ $ 16,~~268~~827,~~525~~583 (B) $ (416,~~120~~827,~~692~~583) $~~12,147,833~~ ~~Mortgage payable~~ - - Accounts payable 5,~~056~~466,~~603~~501 5,~~056~~466,~~603~~501 Billings in excess of costs and estimated earnings on uncompleted contracts 52,~~299~~788,~~069~~820 52,~~299~~788,~~069~~820 Liabilities held for sale 52,575 52,575 Accrued expenses and other current liabilities 4,~~360~~521,~~841~~913 4,~~360~~521,~~841~~913 -------------------- ------------------ -------------------- Total current liabilities 3029,~~985~~657,~~038~~392 (416,~~120~~827,~~692~~583) 2612,~~864~~829,~~346~~809 -------------------- ------------------ -------------------- Total liabilities 3029,~~985~~657,~~038~~392 (416,~~120~~827,~~692~~583) 2612,~~864~~829,~~346~~809 -------------------- ------------------ -------------------- Commitments and contingencies Shareholders' equity (deficit): Common stock 165,016 ~~165~~76,~~016~~599 241,615 Additional paid-in capital 41,~~575~~832,~~421~~721 411,~~575~~937,~~421~~188 43,769,909 Accumulated deficit (~~Note C~~45,434,333) (~~44,681,674~~C) 313,~~615~~747,~~692~~501 (4131,~~065~~686,~~982~~832) -------------------- ------------------ -------------------- Total shareholders' equity (deficit) (23,~~941~~436,~~237~~596) 315,~~615~~761,~~692~~288 ~~674~~12,~~455~~324,692 -------------------- ------------------ -------------------- Total liabilities and shareholders' equity (deficit) $28 26,~~043~~220,~~801~~796 $ (~~505~~1,~~000~~066,295) $27 25,~~538~~154,~~801~~501 ==================== ================== ====================

SEE NOTES TO CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET AS OF JUNE 30, 2003 (UNAUDITED) NOTE A ------ $1,066,295 represents the net book value of real property sold and conveyed. NOTE B ------ The $16,827,583 reduction of the senior secured promissory note payable is comprised of principal of $12,500,000, and related waived accrued interest of $4,327,583. NOTE C ------ $13,747,501 is the gain recognized on the sales transaction. DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED) The following table shows the unaudited pro forma results of operations for the year ended June 30, 2003 as if the exchange had taken place on July 1, 2002.

PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA NOTE A NOTE B ------------------- ----------------- ------------------ Revenues earned $1561,~~088~~157,~~273~~984 $~~(213~~61,~~508) $14~~157,~~874,765~~984 Costs of revenues earned, excluding depreciation and amortization 1149,~~503~~842,~~007~~333 ~~(101~~49,~~697) 11~~842,~~401,310~~333 ------------------- ----------------- ------------------ Gross profit 311,~~585~~315,~~266~~651 ~~(111~~11,~~811) 3~~315,~~473,455~~651 ------------------- ----------------- ------------------ Operating expenses: General and administrative expenses, excluding depreciation and amortization 210,~~824~~898,~~250~~732 ~~(105~~10,~~731)~~898,732 2Impairment of assets 808,~~718~~075 808,~~519~~075 Depreciation and amortization ~~176~~875,~~264~~745 (70222,~~280~~654) ~~105~~653,~~984~~091 ~~Impairment of equipment~~ - - - ------------------- ----------------- --------------~~----~~ Operating income (loss) ~~584~~(1,~~752~~266,901) 64222,~~200~~654 ~~648~~(1,~~952~~044,247) ------------------- ----------------- ------------------ Other (income) expense: Interest income (1128,~~582~~301) - (1128,~~582~~301) Interest expense ~~454~~1,~~854~~870,592 -(1,811,139) ~~454~~59,~~854~~453 ~~Gain~~Net gain on disposition of ~~communications~~ assets (412,~~035~~683) (712,~~862~~683) ~~(112,897) Loss on sale of marketable securities~~ - - - ------------------- ----------------- --------------~~----~~ Other expense - net ~~402~~1,~~237~~839,608 (711,~~862~~811,139) ~~330~~28,~~375~~469 ------------------- ----------------- ------------------ Income (loss) before provision for income taxes ~~182~~(3,~~515~~106,509) ~~136~~2,~~062~~033,793 ~~318~~(1,~~577~~072,716) Provision (benefit) for income taxes 4(16,~~113~~007) ~~- 4~~(16,~~113~~007) ------------------- ----------------- ------------------ Net income (loss) from operations $~~178~~(3,~~402~~090,502) ~~$136~~2,~~062~~033,793 $~~314~~(1,~~464~~056,709) =================== ================= ================== Basic and diluted income (loss) per share $(0.0119) $(0.0204) Weighted average shares outstanding 16,501,568 1624,~~501~~161,~~568~~467

SEE NOTES TO CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2003 (UNAUDITED) NOTE A ------ Reflects DualStar Technologies Corporation and Subsidiaries' historical operating results for the year ended June 30, 2003. NOTE B ------ Pro forma adjustments to record the effect of the exchange for the year ended June 30, 2003 Pro forma results were based on the specifically identifiable actual operating results where available, and allocations between the exchanged assets and the continuing business by management when an expense was for the benefit of both the disposed assets and the continuing business. (c) Exhibits 99.1 Securities Purchase Agreement, dated as of October 27, 2003, by and between the Company and Madeleine, L.L.C. 99.2 Bargain and Sale Deed with Covenant against Grantor's Acts, dated October 27, 2003, from Property Control, Inc. to 11-30 47TH Avenue Company, LLC 99.3 Registration Rights Agreement, dated as of October 27, 2003, by and between the Company and Madeleine, L.L.C. 99.4 Form of agreement to surrender options, dated June 25, 2003, executed by certain officers and management employees of the Company 99.5 Warrant Termination Agreement, dated as of October 27, 2003, by and between the Company and DSTR Warrant Co., LLC 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 hereunto duly authorized. DUALSTAR TECHNOLOGIES CORPORATION (Registrant) Dated: November 10, 2003 By: /s/ Michael Giambra ------------------- Michael Giambra Vice President and Chief Accounting Officer EXHIBIT INDEX Exhibit No. Regulation S-K Item 601 Designation Exhibit Description 99.1 Securities Purchase Agreement, dated as of October 27, 2003 by and between the Company and Madeleine, L.L.C. 99.2 Bargain and Sale Deed with Covenant against Grantor's Acts from Property Control, Inc. to 11-30 47TH Avenue Company, LLC 99.3 Registration Rights Agreement, dated as of October 27, 2003, by and between the Company and Madeleine, L.L.C. 99.4 Form of agreement to surrender options, dated June 25, 2003, executed by certain officers and management employees of the Company 99.5 Warrant Termination Agreement, dated as of October 27, 2003, by and between the Company and DSTR Warrant Co., LLC

PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA NOTE A NOTE B ------------------- ----------------- ------------------ Revenues earned $44,188,750 $(690,852) $43,497,898 Costs of revenues earned, excluding depreciation and amortization 36,024,425 (296,547) 35,727,878 ------------------- ----------------- ------------------ Gross profit 8,164,325 (394,305) 7,770,020 ------------------- ----------------- ------------------ Operating expenses: General and administrative expenses, excluding depreciation and amortization 7,746,177 (311,519) 7,434,658 Depreciation and amortization 692,747 (218,342) 474,405 Impairment of equipment 700,000 - 700,000 ------------------- ----------------- ------------------ Operating income (loss) (974,599) 135,556 (839,043) ------------------- ----------------- ------------------ Other (income) expense: Interest income (23,188) - (23,188) Interest expense 1,477,641 - 1,477,641 Gain on disposition of communications assets (115,580) (71,862) (187,442) Loss on sale of marketable securities - - - ------------------- ----------------- ------------------ Other expense - net 1,338,873 (71,862) 1,267,011 ------------------- ----------------- ------------------ Income (loss) before provision for income taxes (2,313,472) 207,418 (2,106,054) Provision for income taxes 24,373 - 24,373 ------------------- ----------------- ------------------ Net income (loss) $(2,337,845) $207,418 $(2,130,427) =================== ================= ================== Basic and diluted income (loss) per share $(0.14) $(0.13) Weighted average shares outstanding 16,501,568 16,501,568

PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA NOTE A NOTE B ------------------- ----------------- ------------------ Revenues earned $81,180,853 $(1,120,023) $80,060,830 Costs of revenues earned, excluding depreciation and amortization 70,561,255 (516,751) 70,044,504 ------------------- ----------------- ------------------ Gross profit 10,619,598 (603,272) 10,016,326 ------------------- ----------------- ------------------ Operating expenses: General and administrative expenses, excluding depreciation and amortization 11,976,760 (959,385) 11,017,375 Depreciation and amortization 2,046,519 (626,311) 1,420,208 Impairment of equipment 2,479,630 - 2,479,630 ------------------- ----------------- ------------------ Operating income (loss) (5,883,311) 982,424 (4,900,887) ------------------- ----------------- ------------------ Other (income) expense: Interest income (152,808) - (152,808) Interest expense 1,876,751 - 1,876,751 Loss on disposition of communications assets 482,324 (482,324) - Loss on sale of marketable securities 337,500 - 337,500 ------------------- ----------------- ------------------ Other expense - net 2,543,767 (482,324) 2,061,443 ------------------- ----------------- ------------------ Income (loss) before provision for income taxes (8,427,078) 1,464,748 (6,962,330) Provision for income taxes Current provision 80,325 - 80,325 Deferred 1,076,000 - 1,076,000 ------------------- ----------------- ------------------ Net income (loss) $(9,583,403) $1,464,748 $(8,118,655) =================== ================= ================== Basic and diluted income (loss) per share $(0.58) $(0.49) Weighted average shares outstanding 16,501,568 16,501,568

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