-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Et5/txcn6G0Rq0KCdqro0NQFYAEL1xPDjh36kOY/sJjjLk27RUN2P9Lrf5tUjzKp vovTo6+hqWo7LhBbzEhmFQ== 0000028613-99-000013.txt : 19991215 0000028613-99-000013.hdr.sgml : 19991215 ACCESSION NUMBER: 0000028613-99-000013 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19991214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DI AN CONTROLS INC CENTRAL INDEX KEY: 0000028613 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 042237138 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-03788 FILM NUMBER: 99774091 BUSINESS ADDRESS: STREET 1: 530 WEST STREET CITY: BRAINTREE STATE: MA ZIP: 02184-3831 BUSINESS PHONE: 7818481299 MAIL ADDRESS: STREET 1: 530 WEST STREET CITY: BRAINTREE STATE: MA ZIP: 02184-3831 FORMER COMPANY: FORMER CONFORMED NAME: EAGLE COUNTY DEVELOPMENT CORP DATE OF NAME CHANGE: 19730718 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or15(d) of the Securities Exchange Act of 1934 For the fiscal year ended DECEMBER 31, 1998 Commission File Number 2-29967 DI-AN CONTROLS, INC (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-2237138 (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) 530 WEST STREET, BRAINTREE, MASSACHUSETTS 02184 (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, including Area Code (781) 848-1299 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock, $.10 Par Value OTC Securities registered pursuant to Section 12(g) of the Act: (NONE) 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 twelve (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 ninety (90) days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X There is no significant market for the stock in the year 1998, and no such established market value of the voting stock held by non-affiliates of the registrant. A market maker reports an amount of $.50 as an average between bid and asked. That amount of $.50 would provide a total value of $413,203 for the 826,405 shares. A total of 14,330 shares were transferred in the year 1998, equal to 1.7% of the issued stock. PART I Item 1. BUSINESS DI-AN Controls, Inc. business is in two market segments. Both segments are applications of the DI-AN CONCESSION/MASTER system. The C/M system is a management and point of sale computer system with DI-AN designed and manufactured hardware and software. Market 1 using the C/M System is food service in public assembly facilities which are stadiums, arenas, and convention halls. DI-AN pioneered this application in Bush Stadium in St. Louis in 1989. Market 2 using the C/M System for ticketing of fairs and other general admission events. BACK LOG OF ORDERS Orders for the DI-AN C/M System orders are usually filled quickly from stock. Thus order back-logs are low and not an indicator of future, or near term shipments and sales. ITEM 2. PROPERTIES The Company does not own any real estate. The company operates from leased premises of 9,000 sq. feet. ITEM 3. LEGAL PROCEEDINGS NONE ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS NONE PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's common stock is traded over the counter. Trading activity reported by the transfer agent for the year 1998 was 10 transfers consisting of 14,330 shares. Trading on the "books" of Cede & Co. is not visible to the fransfer agent. Cede & Company is a nominee holder of 318,581 shares. The approximate number of holders of the Company's stock at December 31, 1998 was 491. At this time, the Company has no plans to institute dividend payments on its common stock. ITEM 6. SELECTED FINANCIAL DATA Year Ended December 31 1998 1997 1996 1995 1994 (In thousands of dollars, except per share amounts) Net sales and other operating revenues $ 593 $ 556 $ 522 $ 347 $ 330 Net income (loss) $ (184) $(70) $(393) $(557) $(695) Total assets $ 510 $ 291 $ 444 $ 249 $ 183 Per common share: Net income (loss) $(0.22) $(.08) $(.48) $(.30) $(.22) ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The operating loss of $183,700 for the year 1998 is partially the result of the expenditure of $392,714 for new product development, and marketing of current products, none of which is capitalized. The operating loss of $183,700 in 1998 is greater then the 1997 loss of $69,879 due to the large increase of Cost of Goods Sold. LIQUIDITY AND SOURCES OF CAPITAL Working capital deficit was $4,936,142 at December 31, 1998, a decrease of working capital of $183,416 from December 31, 1997. During 1998, the Company received loans from a principal shareholder to meet operating cash flow requirements. INFLATION Inflation was not a significant factor during 1998, 1997, or 1996. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this item is included in Item 14 of this Form 10-K. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Name, Age, Position with Registrant, Began Term of Other Business Experience Office ROBERT D. KODIS, 78, President, Treasurer, 1958 Director, DI-AN Controls Corporation. ITEM 11. EXECUTIVE COMPENSATION CASH & CASH EQUIVALENT FORMS OF REMUNERATION IN 1998 Securities, Salaries, Property, Fees, Insurance Directors' Benefits, and Aggregate of Fees, Reimbursement Contingent Commissions of Personal Forms of Name Capacities and Bonuses Benefits Remuneration Robert D. Kodis President, $4903.92 None None Treasurer, & Director Robert D. Kodis was not paid his full salary during the year due to cash flow constraints, the Company accrued salary amounting to $80,096.08 related to his services for the year 1998. Mr. Kodis has a total accured salary for 1998 and prior years of $701,195.00. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Amount of class Name & Address of of Beneficial Percentage Common Stock, Robert D. Kodis 327,825 (1) 40% $.10 Par Value 85 Wallis Road Brookline, MA Common Stock, Kodis Family Trust $.10 Par Value James B. Marcus, Trustee 100,500 (2) 12% Reva J. Kodis, Trustee 15 Court Square Boston, MA (1) This amount representing 40% of the voting power of all shares of outstanding capital stock of the Company includes 50,000 shares owned by the wife and children of Mr. Kodis. It does not include 100,500 shares, representing 12% of the voting power, owned by the Robert D. Kodis Family Trust as to which Mr. Kodis disclaims beneficial interest and Mr. Kodis has no vote or investment power with respect to such shares. (2) Mr. Marcus is a co-trustee of the Robert D. Kodis Family Trust and, in conjunction with his co-trustee, has voting and investment powers for those 100,500 shares but he has no beneficial ownership. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS As of December 31, 1998, the Company owed the principal shareholder, Robert D. Kodis, $1,847,741 in notes payable at the interest rate of 12%. The loans were made to fund the operating needs of the Company. Accrued interest in the amount of $1,572,651 is also owed to the principal shareholder, Robert D. Kodis. Accrued rent of $1,179,436.is owed to The Kodis Girls Trust, owners of the facility leased by the Companyin prior years. The amount represents unpaid rent for the years 1991 through October 1996. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) and (2) The response to this portion of Item 14 is submitted as a separate section of this report. (3) Listing of Exhibits (3) Articles of incorporation and bylaws. These exhibits are included with a Registration Statement on Form S-1 which was filed on August 26, 1968 and is incorporated herein by reference. (b) Reports on Form 8-K filed in the fourth quarter of 1998: NONE (c) Exhibits - See Item 14(a)(3) above for list of exhibits incorporated herein by reference. (d) Financial Statement Schedules - The response to this portion of Item 14 is included as a separate section of this report. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized. DI-AN CONTROLS, INC. (Registrant) Robert D. Kodis, President (Date) and Treasurer (Chief Executive Officer) Pursuant to the requirements of the Securities Exchange 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 dates indicated. Robert D. Kodis, Director (Date) Di/An CONTROLS, INC. FINANCIAL STATEMENTS Years Ended December 31, 1998 and 1997 CONTENTS Page Independent Auditors' Report 1 Financial Statements: Balance Sheets 2 Statements of Operations and Accumulated Deficit 3 Statements of Cash Flows 4 Notes to Financial Statements 5-7 INDEPENDENT AUDITORS' REPORT LEVINE, KATZ, NANNIS & SOLOMON, PC To the Board of Directors and Stockholders Di/An Controls, Inc. We have audited the accompanying balance sheets of Di/An Controls, Inc. (a Massachusetts corporation) as of December 31, 1998 and 1997 and the related statements of operations and accumulated deficit, and cash flows for the year ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 mis-statement. 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 Di/An Controls, Inc. as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the year ended December 31, 1998 in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note C to the financial statements, the Company carries debt disproportional to its current size and is dependent on a single product. These conditions raise substantial doubt about its ability to continue as a going concern. Managements' plans regarding those matters are also described in Note C. The financial statements do not include any adjustments that might result from the outcome of this un-certainty. The comparative amounts in the statements of operations and accumulated deficit and cash flows have not been audited by us. The statements of operations and accumulated deficit for the years ended December 31, 1997 and 1996, and the related statements of cash flows for the years then ended, have been compiled from information supplied by the Company. We have not audited or reviewed these statements and, accordingly, we do not express an opinion or any other form of assurance on them. July 7, 1999 Di/An CONTROLS, INC. BALANCE SHEETS December 31, 1998 1997 ASSETS CURRENT ASSETS Cash and cash equivalents $ 39,386 $ 9,295 Investments 224,914 - Accounts receivable, net of allowance for bad debts: 1998-$0; 1997-$13,715 20,101 21,210 Inventory 184,038 225,072 Other current assets 7,038 456 ----------- ----------- TOTAL CURRENT ASSETS 475,477 256,033 ----------- ----------- EQUIPMENT Equipment and tooling 22,477 22,477 Accumulated depreciation (22,477) (22,477) ----------- ----------- NET EQUIPMENT - - ----------- ----------- OTHER ASSETS Cash surrender value, life insurance, net of loans payable: 1998-$457,251; 31,947 32,231 Deposits 2,917 2,917 ----------- ----------- TOTAL OTHER ASSETS 34,864 35,148 ----------- ----------- TOTAL ASSETS $ 510,341 $ 291,181 =========== =========== 1998 1997 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 4,963 $ 29,404 Related party liabilities 3,505,590 3,226,330 Note payable, officer 1,847,741 1,681,515 Other current liabilities 53,325 71,510 ----------- ----------- TOTAL CURRENT LIABILITIES 5,411,619 5,008,759 ----------- ----------- COMMITMENTS AND CONTINGENCIES (Note K) - - STOCKHOLDERS' EQUITY Common stock 82,641 82,641 Additional paid-in capital 1,124,451 1,124,451 Accumulated deficit (6,108,370) (5,924,670) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY (4,901,278) (4,717,578) ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' $ 510,341 $ 291,181 =========== =========== The accompanying notes are an integral part of these financial statements. 2. Di/An CONTROLS, INC. STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT Years ended December 31, 1998 1997 1996 Audited Unaudited Unaudited SALES $ 592,817 $ 555,544 $ 522,332 COST OF GOODS SOLD 269,955 99,501 495,260 ----------- ----------- ----------- GROSS PROFIT ON SALES 322,862 456,043 27,072 OPERATING EXPENSES 310,597 324,637 354,438 ----------- ----------- ----------- INCOME (LOSS) FROM OPERATIONS 12,265 131,406 (327,366) ----------- ----------- ----------- OTHER INCOME (EXPENSES) Interest expense (195,894) (207,500) (216,877) Gain on sale of equipment - 6,215 150,828 Other (71) - - ----------- ----------- ----------- TOTAL OTHER INCOME (EXPENSES) (195,965) (201,285) (66,049) ----------- ----------- ----------- NET LOSS (183,700) (69,879) (393,415) Accumulated deficit, beginning of year (5,924,670) (5,854,791) (5,461,376) ----------- ----------- ----------- ACCUMULATED DEFICIT, END OF YEAR $(6,108,370 $(5,924,670 $(5,854,791 =========== =========== =========== NET LOSS PER SHARE $ (0.22) $ (0.08) $ (0.48) =========== =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES USED IN CALCULATION OF LOSS PER SHARE 826,405 826,405 826,405 =========== =========== =========== The accompanying notes are an integral part of these financial statements. 3. Di/An CONTROLS, INC. STATEMENTS OF CASH FLOWS Years Ended December 31, 1998 1997 1996 Audited Unaudited Unaudited OPERATING ACTIVITIES: Net loss $(183,700) $ (69,879) $(393,415) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization - 6,263 3,489 Gain on sale of equipment - (6,215) (150,828) Decrease in allowance for bad debts (13,715) - - Changes in other assets 370 (2,971) 5,079 Increase (decrease) in cash from: Accounts receivable 14,825 19,153 (1,596) Inventory 41,033 (180,973) 77,980 Other current assets (6,582) 1,094 (394) Other assets - 14,544 34,344 Accounts payable and accrued expenes (24,438) (26,006) (39,818) Other current liabilities (18,188) 40,869 15,370 Related party liabilities 279,260 309,008 473,653 Total adjustments 272,565 174,766 417,279 NET CASH OPERATING ACTIVITIES 88,865 104,887 23,864 INVESTING ACTIVITIES: Acquisition of invest- ments (225,000) - - Proceeds from disposal of equipment - 7,238 150,569 NET CASH INVESTING ACTIVITIES (225,000) 7,238 150,569 FINANCING ACTIVITIES Net borrowings, officer's loan 166,226 (131,000) (146,400) NET CASH FINANCING ACTIVITIES 166,226 (131,000) (146,400) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 30,091 (18,875) 28,033 Cash and cash equivalents, beginning of year 9,295 28,170 137 CASH AND CASH EQUIVALENTS, END OF YEAR $ 39,386 $ 9,295 $ 28,170 No cash was disbursed for interest or income taxes in 1998, 1997, or 1996. The accompanying notes are an integral part of these financial statements. 4. A. DESCRIPTION OF BUSINESS Di/An Controls, Inc., located in Braintree, Massachusetts, manufactures and installs point-of-sale terminals and management software to entertainment and sports facilities throughout the United States. The Company was incorporated in 1958. Credit is extended under terms customary in the industry. B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Use of estimates - The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates relate primarily to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts. 2. Cash and cash equivalents - For purposes of financial statement presentation, the Company considers all highly liquid instruments with a maturity of three months or less to be cash. 3. Inventory - Inventory is stated at the lower of cost or market using the first-in, first-out method. 4. Equipment and depreciation - Equipment is stated at cost. Depreciation is provided over the estimated useful lives of the assets by straight line and accelerated methods for both financial reporting and income tax purposes as the effect on net income is considered immaterial. Equipment, furniture and fixtures are depreciated using lives ranging from three to ten years. 5. Investments - The Company classifies its marketable debt securities as "held to maturity" if it has the positive intent and ability to hold the securities to maturity. All other marketable securities are classified as "available for sale". Securities classified as "available for sale" are carried in the financial statements at fair market value. Realized gains and losses, determined using specific identification of the securities, are included in earnings; unrealized holding gains and losses are reported as a separate component of stockholders' equity, where considered to be material. Securities classified as held to maturity are carried at amortized cost. 6. Revenue recognition - Revenue from service contracts is earned ratably over the life of the contract. B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 7. Income taxes - Deferred income taxes are the result of the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities. Generally, deferred income taxes are classified as current or non-current in accordance with the classification of the related asset or liability. Those not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. A valuation allowance is provided against deferred income tax assets in circumstances where management believes recoverability of a portion of the assets is not reasonably assured. C. GOING CONCERN The financial statements of the Company have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred significant operating losses since 1988 and accumulated indebtedness to the principal stockholders which exceeds the cash that can reasonably be expected to be generated from operations. In recent years, the interest expense from this debt has exceeded the profit from operations. At December 31, 1998, it has a deficiency in working capital of $4,936,142, an increase of approximately $183,000 from the prior year. The Company continues to be dependent upon sales of its one product, the Concession/Master system of hardware and software. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The Company's ability to continue depends upon future events, which include its ability to obtain sufficient operating capital, the achievement of profitable operations and the development of new and enhanced products. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. D. INVESTMENTS Investments at December 31, 1998 consist of the following: Contract Carrying Amount Value U.S. Treasury Index Fund $ 200,000 $ 199,537 Money Market Fund 25,000 25,377 $ 225,000 $ 224,914 D. INVESTMENTS (continued) These investments may be redeemed at any time and have been classified as available for sale by the Company. The dividend income re-invested amounted to $2,292, while the unrealized loss amounted to $2,363, which have been included as part of the net loss for the year in the statements of operations and accumulated deficit for 1998. The investments' carrying value is the fair value of the publicly traded securities. E. INVENTORY Inventory at December 31, consists of the following: 1998 1997 Raw materials $ 73,335 $ 47,542 Work in process 110,703 177,530 Total $ 184,038 $ 225,072 F. NOTE PAYABLE, OFFICER The note payable, officer is due on demand and bears interest at 12%. No interest is charged on the accrued interest on this note. The note is secured by substantially all of the assets of the Company. Interest on this note accrued for the years ending 1998, 1997 and 1996 was $195,894, $207,500, and $216,877, respectively. G. CAPITAL STRUCTURE The Company has 2,500,000 shares of $.10 par value stock authorized of which 826,405 are issued and outstanding. Common shares are voting and dividends are paid at the discretion of the Board of Directors. H. RELATED PARTY ACTIVITY Through January, 1997, the Company rented property from a trust which is a member of the group that owns the majority of the Company's stock. Unpaid liabilities incurred in connection with this lease agreement are included in related party liabilities. I. CONCENTRATIONS 1. In 1998 and 1997, a single customer accounted for approximately 38% and 20%, respectively, of total sales. In 1996, a different customer accounted for 11% of total sales. 2. In 1998, 1997 and 1996, purchases from 6 vendors accounted for approximately 82%, 35% and 27% of total purchases, respectively. J. DEFERRED TAXES The following is a summary of the significant components of the Company's deferred tax assets as of December 31: Net operating losses $ 940,000 Accrued expenses, related parties 1,400,000 2,340,000 Valuation allowance (2,340,000) Net asset $ - The Company has $2,700,000 of Federal net operating losses available that expire in years from 2003-2009. Massachusetts state net operating losses of $200,000 expire after 1999. K. COMMITMENTS In January, 1997, the company entered into a five-year lease for its current operating facilities. Minimum annual amounts due under this lease are as follows: 1999 $ 35,000 2000 35,000 2001 35,000 2002 2,917 $ 107,917 L. RESEARCH AND DEVELOPMENT The Company incurred research and development costs amounting to $41,995, $52,379 and $51,892 during the three years ended December 31, 1998, 1997 and 1996, respectively. -----END PRIVACY-ENHANCED MESSAGE-----