-----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, FiezqEUy1f97niR0nt/ODf+5vU5Z1Tf9NYL8cMV5s9BYsZnlEOg+A+aQMXwBQrTy p5z4kw8yJfL7sfBtruAs3w== 0001000096-97-000800.txt : 19971107 0001000096-97-000800.hdr.sgml : 19971107 ACCESSION NUMBER: 0001000096-97-000800 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19971106 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DCX INC CENTRAL INDEX KEY: 0000783284 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 840868815 STATE OF INCORPORATION: CO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-14273 FILM NUMBER: 97709202 BUSINESS ADDRESS: STREET 1: 1597 COLE BLVD STREET 2: STE 300B CITY: GOLDEN STATE: CO ZIP: 80401 BUSINESS PHONE: 3032742700 MAIL ADDRESS: STREET 1: PO BOX 569 STREET 2: PO BOX 569 CITY: FRANKTOWN STATE: CO ZIP: 80116 FORMER COMPANY: FORMER CONFORMED NAME: DOUGLAS COUNTY INDUSTRIES INC DATE OF NAME CHANGE: 19860109 10QSB/A 1 FORM 10-QSB/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB/A [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 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 0-14273 DCX, INC. ---------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) COLORADO 84-0868815 - --------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1597 Cole Boulevard, Suite 300B, Golden, CO 80401 ------------------------------------------------- (Address of principal executive offices) (Zip Code) (303) 274-8708 ------------------------------------------------- (Registrant's telephone number, including area code) 3002 N. State Highway 83, Franktown, Colorado 80115-0569 -------------------------------------------------------- (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. [X] Yes [ ] No 4,698,840 Common Shares were outstanding as of March 31, 1997. Transitional Small Business Format: Yes No X Number of pages in this report is 9. PART I, FINANCIAL INFORMATION IS AMENDED BY REPLACEMENT IN ITS ENTIRETY WITH THE FOLLOWING: Item 1. Financial Statements DCX, Inc. and Subsidiaries Condensed and Consolidated Balance Sheets March 31 September 30 1997 1996 (Unaudited) (Audited) - -------------------------------------------------------------------------------- Assets Current: Cash and cash equivalents $ 428,580 $ 209,637 Accounts receivable 1,634,999 995,040 Inventories 1,266,668 1,103,672 Prepaid expenses 236,556 195,832 - -------------------------------------------------------------------------------- Total current assets 3,566,803 2,504,181 - -------------------------------------------------------------------------------- Property and equipment: At cost 2,040,246 2,039,534 Less: accumulated depreciation (813,188) (767,233) - -------------------------------------------------------------------------------- Net property and equipment 1,227,058 1,272,301 - -------------------------------------------------------------------------------- Other assets 44,000 44,000 - -------------------------------------------------------------------------------- $ 4,837,861 $ 3,820,482 ================================================================================ See accompanying notes to financial statements 2 PART I, FINANCIAL INFORMATION Item 1. Financial Statements DCX, Inc. and Subsidiaries Condensed and Consolidated Balance Sheets March 31 September 30 1997 1996 (Unaudited) (Audited) - -------------------------------------------------------------------------------- Liailities and Stockholders' Equity Current: Notes payable $ 1,225,961 $ 1,279,623 Accounts payable 875,302 494,646 Accounts payable - terminated contracts 0 66,377 Accrued expenses 83,573 85,759 Accrued litigation settlement 521,000 521,000 - -------------------------------------------------------------------------------- Total current liabilities 2,705,836 2,447,405 - -------------------------------------------------------------------------------- Long-term debt, less current maturities 24,060 24,060 - -------------------------------------------------------------------------------- Total liabilities 2,729,896 2,471,465 - -------------------------------------------------------------------------------- Commitments and Contingencies (Note 5) Stockholders' Equity: Preferred stock, $.001 par value, 20,000,000 shares authorized, 250 shares issued and outstanding 1 0 Common stock, no par value, 2,000,000,000 shares authorized; shares issued and outstanding, 4,698,840 and 4,434,109 at March 31, 1997 and September 30, 1996, respectively 5,271,440 5,060,357 Additional paid-in capital from common stock 329,384 329,384 from convertible preferred stock 269,999 0 Subscriptions receivable (179,000) (179,000) Accumulated deficit (3,583,859) (3,861,724) - -------------------------------------------------------------------------------- Total stockholders' equity 2,107,965 1,349,017 - -------------------------------------------------------------------------------- $ 4,837,861 $ 3,820,482 ================================================================================ See accompanying notes to financial statements 3
PART I, FINANCIAL INFORMATION Item 1. Financial Statements DCX, Inc. and Subsidiaries Condensed and Consolidated Statements of Operations (Amended, see Note 9) (Unaudited) Six months ended Three months ended March 31 March 31 1997 1996 1997 1996 - ---------------------------------------------------------------------------------------------- Net sales $ 2,537,164 $ 2,448,661 $ 1,672,052 $ 1,544,350 Cost of sales 2,059,827 1,729,492 1,369,173 1,121,479 - ---------------------------------------------------------------------------------------------- Gross profit on sales 477,337 719,169 302,879 422,871 - ---------------------------------------------------------------------------------------------- General and administrative expenses 531,631 488,122 206,911 255,424 - ----------------------------------------------------------------------------------------------- Income (loss) from operations (54,294) 231,047 95,968 167,447 Other income (expense): Interest expense (69,764) (70,824) (39,614) (33,602) Insurance proceeds & other income 404,658 14,956 403,587 4,599 Other expense (2,735) (4,126) (819) (4,126) Forgiveness of debt 0 87,826 0 0 - ---------------------------------------------------------------------------------------------- Total other income (expense) 332,159 27,832 363,154 (33,129) ============================================================================================== Net Income $ 277,865 $ 258,879 $ 459,122 $ 134,318 ============================================================================================== Income (loss) from operations per share of common stock $ (.01) $ .06 $ .02 $ .04 - --------------------------------------------------------------------------------------------- Net income (loss) attributable to shareholders of common stock $ 111,199 $ 258,879 $ 459,122 $ 134,318 Net Income (loss) attributable to Shareholders of common stock $ .06 $ .06 $ .10 $ .03 ============================================================================================= Weighted average number of shares of common stock outstanding 4,501,174 4,152,710 4,554,656 4,200,298 ============================================================================================== See accompanying notes to financial statements 4
PART I, FINANCIAL INFORMATION Item 1. Financial Statements DCX, Inc. and Subsidiaries Condensed and Consolidated Statements of Cash Flows (Unaudited) For the Six-Month Periods Ended March 31, 1997 1996 - -------------------------------------------------------------------------------- Operating activities: Net income $ 277,865 $ 258,879 Adjustment to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 45,955 50,100 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (639,959) 794,605 Increase in inventory (162,996) (321,422) (Increase) decrease in prepaid expenses (40,724) (118,583) (Increase) decrease in other assets 0 (124,516) (Decrease) increase in accounts payable 380,656 (248,649) (Decrease) increase in other liabilities (68,563) (147,815) Decrease in litigation settlement liability (150,000) - -------------------------------------------------------------------------------- Net cash provided by (used in) operating activities (207,766) 17,602 - -------------------------------------------------------------------------------- Investing activities: Acquisition of property and equipment (712) 6,998 Restricted cash 0 154,985 - -------------------------------------------------------------------------------- Net cash provided by (used in) investing activities (712) 161,983 - -------------------------------------------------------------------------------- Financing activities: Payments on long-term debt, net (53,662) (336,341) Issuance of common stock 31,083 233,371 Issuance of convertible preferred stock 450,000 0 - -------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 427,421 (102,970) Net increase in cash 218,943 76,615 - -------------------------------------------------------------------------------- Cash and cash equivalents, beginning of period 209,637 125,844 - -------------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 428,580 $ 202,459 ================================================================================ See accompanying notes to financial statements 5 DCX, INC. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Condensed Consolidated Financial Statements The condensed consolidated financial statements included herein have been prepared by DCX, INC. without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. DCX, INC. believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's consolidated financial position as of March 31, 1997, the consolidated results of its operations for the six-periods ended March 31, 1997, and 1996 and statements of cash flows for the six-month periods then ended. The accounting policies followed by the Company are set forth in the annual report of September 30, 1996, filed on Form 10-KSB and the audited consolidated financial statements therein with the accompanying notes thereto. While management believes the procedures followed in preparing these consolidated financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by DCX, INC. later in the year. The consolidated results of operations for the six-month period ended March 31, 1997, are not necessarily indicative of the results to be expected for the full year ending September 30, 1997. New Accounting Pronouncements On March 3, 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS NO. 128). This pronouncement provides a different method of calculating earnings per share than is currently used in accordance with Accounting Principles Board Opinion (APB) No. 15, "Earnings per Share." SFAS 128 provides for the calculation of "Basic" and "Diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of an entity, similar to fully diluted earnings per share. The Company will adopt SFAS No. 128 in 1998 and its implementation is not expected to have a material effect on the consolidated financial statements. (2) Accounts Receivable Accounts receivable contain amounts computed under the cost-to-cost method to determine percentage of completion as described in the Form 10-KSB for September 30, 1996. (3) Provision for Income Taxes At the beginning of the fiscal year the Company had net operating loss carryforwards of $2,663,000 with expirations through 2011. At March 31, 1997, the amount of the net operating loss carryforward balance is estimated at $2,385,135. The Company expects to incur a minimal amount of alternative minimum tax for the fiscal year. Since the Company is unable to determine that deferred tax assets exceeding tax liabilities are more likely than not to be realized, it has recorded a valuation allowance equal to the excess deferred tax assets. (4) Litigation Claim for Breach of Contract. Following the termination of merger discussions between the Company and an unrelated company, Airtech International Corporation ("Airtech"), the Company filed a claim for resulting damages of approximately $400,000. During January 1997, Airtech filed an answer to the claim denying the Company's claim and counterclaiming for breach of contract, fraud and negligence claiming damages exceeding $27 million. The cognizant district court has recorded the stipulation of all parties dismissing all claims with prejudice. 6 Terminated Contracts. As reported in the Form 10-K for September 30, 1995, and Form 10-KSB for September 30, 1996, the Company and the Defense Logistics Agency (DLA) agreed to a final settlement in November, 1995, on two of three terminated contracts. The last partial payment, therefor, was received in January, 1996, and, accordingly, was recorded in the prior year's data appearing in this report. A third contract with DLA required the Company to design, develop test and manufacture light sets to a specified schedule. Testing of the lights was subcontracted; scheduling delays caused the Company to miss a required submission date for the testing and resulted in termination of the contract in 1988. Vigorous litigation asserting the delay was government caused were pursued to the Untied States Supreme Court where the Company's petition for certiorari was denied in November, 1996. The Company had recorded a reserve of $521,000 for the loss in June, 1996; which is believed to be sufficient for the possible reprocurement costs related to the difference between the Company's contract price and the price incurred by DLA from the next lowest vendor as provided for in the Federal Acquisition Regulations. The Company has filed with the Armed Services Board of Contract Appeals a reinstatement of its appeal of the propriety of the assessed reprocurement costs which had been held in abeyance pending the outcome at the Supreme Court. While the discovery process has begun, no hearing date has been set as yet. (See also Item 3, Legal Matters, and Note 5, Litigation, to the financial statements in Form 10-KSB for September 30, 1996.) (5) Lease Obligations The Company leases various equipment under capital leases that expire through June 2000 as noted in Note 7 to the Financial Statements in Form 10-KSB, September 30, 1996. (6) Key Man Life Insurance Proceeds. On January 7, 1997, the Company recorded $400,000 of accounts receivable related to the proceeds of two Company owned key man life insurance policies on a director of the Company. All proceeds were received during the current quarter. (7) Series A, 6% Cumulative Convertible Redeemable Preferred Stock. Dividends on the convertible preferred stock accrue quarterly at a rate of 6% per annum and are payable at the election of the Company in cash or in additional shares of convertible preferred stock. During the current quarter the holders of convertible preferred stock became entitled to dividends of $7,164. The Company's Board of Directors has not yet declared the dividend payable and, accordingly, no related transaction appears in the financial statements. Subsequent to the end of the current quarter, the holder of Series A, 6% Cumulative Convertible Redeemable Preferred Stock converted 150 shares into common stock in accordance with the issue agreement. Accordingly, the Company issued 139,770 shares of its common stock in exchange. (8) Employment Agreements. On March 28, 1997, the Company approved employment agreements for three officers of the Company which were executed on April 1, 1997. The agreements, are filed as exhibits 10.6, 10.7, and 10.8 with this report and set base salary for the President & CEO, Vice President & General Manager, and the Vice President - Finance & Administration of $120,000; $70,000, and $60,000, respectively. The agreements grant fully vested nonqualified stock options as incentives to the officers of 200,000; 70,000 and 70,000 respectively and further grant the officers 180,000; 50,000 and 50,000 of performance stock options requiring the attainment of certain goals. The incentive and performance options are priced at the Company's NASDAQ bid price at close of business on January 2, 1997, which was $1.125. The employment agreements provide for certain cash bonus payments upon meeting defined performance goals. The executives are entitled to continuation of base compensation for a period of three years, two years and two years, respectively, if employment is terminated for any reason other than death, disability, cause, voluntary resignation or the expiration of the term of the employment agreement; otherwise termination for the stated reasons results in payment of base salary, performance and incentive bonuses for 18 months, 12 months and 12 months, respectively. 7 (9) Accounting for Preferred Stock Convertible at a Discount to the Market. The statement of operations has been amended to give effect for a discount of 25% of the common stock which would result and is deemed to be additional dividend to the holders of the Company's 6% convertible preferred stock sold on November 12, 1996. The convertible preferred stock is convertible into common stock at a 25% discount to the five day average market price of the common stock immediately preceding the conversion date which was lower than the five day average market price at the date of placement. This difference, $166,666, on the first possible date of conversion is an imputed discount and is deemed to be additional dividend available to the holders of the preferred stock which reduces income available to common stock shareholders. Accordingly, it was reduced from cumulative net income to arrive at net income or loss attributable to common shareholders. -------------------------------- PART I, ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Amended and replaced in its entirety with the following) Financial Condition: Liquidity. Cash and marketable securities increased $218,943 to $428,580 from $209,637 at September 30, 1996, primarily as a result of payments received from keyman life insurance policies carried on a director of the Company and from proceeds of the sale of convertible preferred stock of the Company. The Company presently has working capital of $860,967 as compared to $1,377,650 at March 31, 1996, and to $56,776 at the beginning of the fiscal year. The primary cause is the accrual of $521,000 for litigation settlement related to the denial of certiorari by the U.S. Supreme Court on the third terminated contract. The Company's current ratio, the ratio of total current assets to total current liabilities, decreased to 1.32:1 from 1.94:1 a year ago and is improved over 1.02:1 at September 30, 1996. Capital Resources. During its first fiscal quarter the Company sold a total of 500 shares of convertible preferred stock which resulted in net funding of $450,000. During the second quarter it received the proceeds from $400,000 of keyman life insurance policies carried on a director of the Company. During the second fiscal quarter the Company retained Transition Partners Ltd (TPL) to advise the Company in certain matters and to assist in capital formation efforts. TPL has developed plans addressing the consolidation of the company's three notes payable into one instrument; the Company is confident the consolidation will take place and meet the requirement for the June 3, 1997, balloon payment to the Small Business Administration. Results of Operations: First Half of Fiscal Year 1997 During the first six months of fiscal year 1997 net sales increased slightly by $88,503 or 4 percent, over the same period of the prior year. Cost of sales was 2,059,827, or 81 percent of sales, and resulted in a gross profit of $477,337, or 19 percent of sales, a decrease from 29 percent for same period of the prior year. Decrease in gross profit occurred due to learning curve associated with complex new products in certain new contracts and increased hourly labor costs. Sales increase resulted from the growing production requirements to meet increased demand in the defense industry. General and administrative expenses of $531,631 for the current period increased from $488,122 a year prior and reflect the increased costs of consulting and legal advice during the period. Other income had an increase of $389,702 as a result of proceeds from keyman life insurance policies. 8 Second Quarter of Fiscal Year 1997. Second quarter sales for fiscal 1997 of $1,672,052 increased $127,702, or eight percent, over the same quarter of the prior year. Cost of sales was $1,369,173, or 82 percent of sales, and resulted in a gross profit of $302,879, or 18 percent of sales versus 27 percent for the same period of the prior year. The decrease in gross profit was attributable to the learning curve effect associated with new and more complex products, increased hourly labor costs and slightly tighter margins on a contract coming into full scale production. Management actions to stem unnecessary costs reduced general and administrative expenses for the quarter by $48,513 or 39 percent. Interest expense has increased somewhat because of imputed interest expense on leased equipment. Sales increased slightly during the quarter over the prior year's quarter; however, because of increased cost of sales, income from operations decreased by 43 percent. On the other hand, the Company recorded other income of $403,587 which propelled net income to $459,122, or $.10 per share, as compared to the prior year's net income of $134,318, or $.03 per share. Contract Backlog The Company's manufacturing operation has active funded contracts and awarded work amounting to $8.5 million as compared to an approximate $9.7 million backlog with $5.5 million of uncompleted work a year prior. The current backlog contains approximately $4.2 million of uncompleted work. Deliveries are scheduled over the next 36 months. The Company is aggressively bidding opportunities with prime contractors for defense opportunities and sends its technical staff to meet personally with program managers in order to more competitively meet their requirements. The Company is confident that during the ensuing year these projects will result in additional orders as during the past fiscal year. In addition, the Company continues to be invited to bid on more projects with new and existing customers. 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. D C X , I N C . Dated: November 6, 1997 /S/ Fred Beisser ------------------------------------------- Frederick G. Beisser Vice President - Finance & Administration, Secretary & Treasurer and Principal Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----