-----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, WZMf4LLLzzA/BW9qR60ac2+dKj3I2qkimjz1UgBO/cmqbCXLvuLGRlz2VR3XCdB5 +o9e4eMCZ5tGOhesDDC0VA== 0001000096-97-000799.txt : 19971107 0001000096-97-000799.hdr.sgml : 19971107 ACCESSION NUMBER: 0001000096-97-000799 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 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: 97709201 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 10QSB/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 ECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 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 4,924,570 Common Shares were outstanding as of June 30, 1997. Transitional Small Business Format: Yes No X Number of pages in this report is 10. PART I, FINANCIAL INFORMATION IS REPLACED IN ITS ENTIRETY WITH THIS AMENDED PART I Item 1. Financial Statements (Contains amended information) DCX, Inc. and Subsidiaries Condensed and Consolidated Balance Sheets June 30 September 30 1997 1996 (Unaudited) (Audited) - -------------------------------------------------------------------------------- Assets Current: Cash and cash equivalents $ 183,447 $ 209,637 Accounts receivable 1,703,845 995,040 Inventories 1,213,121 1,103,672 Prepaid expenses 272,828 195,832 - -------------------------------------------------------------------------------- Total current assets 3,373,241 2,504,181 - -------------------------------------------------------------------------------- Property and equipment: At cost 2,042,678 2,039,534 Less: accumulated depreciation (836,259) (767,233) - -------------------------------------------------------------------------------- Net property and equipment 1,206,419 1,272,301 Other assets 46,310 44,000 - -------------------------------------------------------------------------------- $ 4,625,970 $ 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 June 30 September 30 1997 1996 (Unaudited) (Audited) - -------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Current: Notes payable $ 902,428 $ 1,279,623 Accounts payable 888,445 494,646 Accounts payable - terminated contracts 0 66,377 Accrued expenses 161,961 85,759 Accrued litigation settlement 521,000 521,000 - -------------------------------------------------------------------------------- Total current liabilities 2,473,834 2,447,405 Long-term debt, less current maturities 5,280 24,060 - -------------------------------------------------------------------------------- Total liabilities 2,479,114 2,471,465 - -------------------------------------------------------------------------------- Commitments and Contingencies Stockholders' Equity: Preferred stock, $.001 par value, 20,000,000 shares authorized, No shares issued and outstanding 0 0 Common stock, no par value, 2,000,000,000 shares authorized; shares issued and outstanding, 4,924,570 and 4,434,109 at June 30, 1997 and September 30, 1996, respectively 5,545,806 5,060,357 Additional paid-in capital from common stock 329,384 329,384 from convertible preferred stock 0 0 Subscriptions receivable (179,000) (179,000) Accumulated deficit (3,549,334) (3,861,724) - -------------------------------------------------------------------------------- Total stockholders' equity 2,146,856 1,349,017 - -------------------------------------------------------------------------------- $ 4,625,970 $ 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 10) (Unaudited) Nine months ended Three months ended June 30 June 30 1997 1996 1997 1996 - ------------------------------------------------------------------------------------------------------- Net sales $ 3,964,929 $ 3,683,117 $ 1,427,786 $ 1,234,456 Cost of sales 3,530,824 2,776,167 1,477,077 1,046,675 - ------------------------------------------------------------------------------------------------------- Gross profit on sales 434,105 906,950 (49,291) 187,781 General and administrative expenses 702,705 771,053 163,862 282,931 - ------------------------------------------------------------------------------------------------------- Income (loss) from operations (268,600) 135,897 (213,153) (95,150) Other income (expense): Interest expense (101,622) (89,950) (31,858) (19,126) Insurance proceeds & other income 419,898 105,872 13,904 3,090 Other expense (4,152) (4,998) (1,417) (872) Litigation Settlement Expense 0 (521,000) 0 (521,000) - ------------------------------------------------------------------------------------------------------- Total other income (expense) 313,940 (510,076) (19,371) (537,908) ======================================================================================================= Income (loss) before extraordinary item 45,340 (374,179) (232,524) (633,058) ======================================================================================================= Extraordinary item: Gain on extinguishment of debt 267,050 0 267,050 0 ======================================================================================================= Net Income (loss) $ 312,390 $ (374,179) $ 34,526 $ (633,058) ======================================================================================================= Income (loss) from operations $ (.03) $ .03 $ (.04) $ (.02) per share of common stock Extraordinary item .06 0 .06 0 ======================================================================================================= Net income (loss) attributable to shareholders of common stock $ 146,724 $ (374,179) $ 34,526 $ (633,058) Net Income (loss) attributable to $ .03 $ (.09) $ .01 $ (.15) common shareholders per share ======================================================================================================= Weighted average number of shares of common stock outstanding 4,613,600 4,194,885 4,838,453 4,338,019 ======================================================================================================= 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 (Amended) (Unaudited) For the Nine Month Periods Ended June 30, 1997 1996 - ------------------------------------------------------------------------------------------ Operating activities: Net income (loss) $ 312,390 $(374,179) Adjustment to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 69,026 78,653 Gain on extinguishment of debt (267,050) 0 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (708,805) 710,244 Increase in inventory (109,449) (296,177) (Increase) decrease in prepaid expenses (76,996) (50,218) (Increase) decrease in other assets (2,310) (124,516) (Decrease) increase in accounts payable 327,422 (133,658) (Decrease) increase in other liabilities 76,202 (140,775) Increase in litigation settlement liability 0 371,000 - ------------------------------------------------------------------------------------------ Net cash provided by (used in) operating activities (379,570) 40,374 - ------------------------------------------------------------------------------------------ Investing activities: Acquisition (disposition)of property and equipment (3,144) 6,998 Restricted cash 0 154,985 - ------------------------------------------------------------------------------------------ Net cash provided by (used in) investing activities (3,144) 161,983 - ------------------------------------------------------------------------------------------ Financing activities: Payments on long-term debt, net (128,925) (348,894) Issuance of common stock 35,449 287,121 Issuance of convertible preferred stock 450,000 0 - ------------------------------------------------------------------------------------------ Net cash provided by (used in) financing activities 356,524 (61,773) - ------------------------------------------------------------------------------------------ Net increase (decrease) in cash (26,190) 140,584 - ------------------------------------------------------------------------------------------ Cash and cash equivalents, beginning of period 209,637 125,844 - ------------------------------------------------------------------------------------------ Cash and cash equivalents, end of period $ 183,447 $ 266,428 ========================================================================================== 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 June 30, 1997, the consolidated results of its operations for the nine periods ended June 30, 1997, and 1996 and statements of cash flows for the nine-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 nine-month period ended June 30, 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. In June 1997, the Financial Accounting Standards Board issue Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS 130), which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, SFAS 130 requires that all items tgat are required to be recognized under curent accounting standards as components of comprehensive jincome be reported in a financial statement that is displayed with the same prominence as other financial statements. SFAS 130 is effective for financial staements for periods beginning after December 1`5, 1997 and requires comparative information for earlier years to be restated. Because of the recent issuance of this standard, management has been unable to fully evaluate the impact, if any, the standard may have on futurer financial statement disclosures. Results of operations and financial position, however, will be unaffected by implementation of this standard. (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. 6 (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 June 30, 1997, the amount of the net operating loss carryforward balance is estimated at $2,340,610. 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 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, therefore, 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. The discovery process has begun and a hearing date has been set for March 28, 1998. (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. During the current quarter, the holder of Series A, 6% Cumulative Convertible Redeemable Preferred Stock converted its remaining 250 shares into common stock in accordance with the issue agreement. Accordingly, the Company issued 225,730 shares of its common stock in exchange which brought the number of shares of convertible redeemable preferred stock down to none. (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, were filed as exhibits 10.6, 10.7, and 10.8 with the Form 10-Q, dated March 31, 1997 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 7 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. (9) Subsequent Event. On August 1, 1997 the Company sold 650 shares of its Series A 6% Convertible Redeemable Preferred Stock for net proceeds of $547,500. On August 4, 1997, the proceeds were used to liquidate the SBA-held note at a discount. (10) (Amended) 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 attributable to common shareholders. PART I, ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Amended by replacement in its entirety with the following information) Financial Condition: Liquidity. Cash and cash equivalents decreased $26,190 to $183,447 from $209,637 at September 30, 1996, primarily as a result of cash used in operations which offset cash provided by financing activities. The Company presently has working capital of $919,407 as compared to $801,894 at June 30, 1996, and to $56,776 at the beginning of the fiscal year. The primary cause for the increase is the funding received during the Company's frist and second quarters and the recording of a discount of $267,050 granted by the SBA in June, 1997 for full settlement of its outstanding balance. (Final liquidation occurred subsequent to the current quarter.) These influxes were offset by a net use of cash of $122,520 durinhg the nine-month period and a reduction of long-term debt of $395,975. The Company's current ratio, the ratio of total current assets to total current liabilities, is 1:37as compared to 1:38 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. On August 1, 1997 the Company sold $650,000 of convertible preferred stock to meet the requirement for the June 3, 1997, balloon payment to the Small Business Administration. The stock was sold on August 1, 1997 resulting in net proceeds of $547,500; on August 4, 1997 the SBA-held note was liquidated. 8 Results of Operations (Amended): First Nine Months of Fiscal Year 1997 During the first nine months of fiscal year 1997 net sales increased by $281,812 or 7.7 percent, over the same period of the prior year. Cost of sales was 3,530,824, or 89 percent of sales, and resulted in a gross profit of $434,105, or 11 percent of sales, a decrease from 27 percent for same period of the prior year. Decrease in gross profit occurred due to increased hourly labor costs and use of direct labor on indirect overhead activities rather than on revenue producing production in order to improve Company efficiency. Sales increase resulted from the growing production requirements to meet increased demand in the defense industry and the receipt of new work. General and administrative expenses of $702,705 for the current period decreased from $771,053 a year prior and reflect management's actions toward eliminating unnecessary costs. Other income had an increase of $389,194 as a result of recording proceeds of $400,000 from keyman life insurance policies. Interest expense increased primarily due to factoring interest in accelerating the receipt of life insurance proceeds, to origination points paid in renewing a first mortgage note on the Company's real property and to imputed interest expense related to capital lease of equipment. Accrued litigation settlement expense decreased $521,000 from 1996 as a result of the reserve recorded in 1996 which did not reoccur in fiscal 1997. It was related to the denial of certiorari on the third terminated contract during the fourth quarter of fiscal year 1996. Third Quarter of Fiscal Year 1997. Third quarter sales for fiscal 1997 of $1,427,786 increased $193,330, or 16 percent, over the same quarter of the prior year. Cost of sales was $1,477,077, or 103 percent of sales, and resulted in a gross loss of $49,291, or four percent of sales versus gross profit of 15 percent for the same period of the prior year. The decrease in gross profit was attributable to increased hourly labor costs, slightly tighter margins on a contract coming into full scale production and the cost of management's activities to change manufacturing and ancillary activities for long-term improvement of production efficiencies. Management actions to stem unnecessary costs reduced general and administrative expenses for the quarter by $119,069 or 42 percent. Interest expense increased $12,732 because of increased interest expense from renewal of a note for the real property in the second quarter which was corrected during the third quarter and from imputed interest related to capital lease of equipment. Sales increased $193,330 during the quarter over the prior year's quarter; however, because of increased cost of sales, income from operations decreased by 124 percent. On the other hand, the Company recorded forgiveness of debt of $289,524 which resulted in net income of $44,526 or $.01 per share, as compared to the prior year's net loss of $633,058, or $.15 per share. Accrued litigation settlement expense decreased $521,000 from 1996 as a result of the reserve recorded in 1996 which did not reoccur in fiscal 1997. It was related to the denial of certiorari on the third terminated contract during the fourth quarter of fiscal year 1996. Contract Backlog The Company's manufacturing operation has active funded contracts and awarded work amounting to $10.3 million as compared to an approximately $7.9 million backlog with $3.6 million of uncompleted work a year prior. The current backlog also contains approximately $3.6 million of uncompleted work. Deliveries are scheduled over the next 32 months. The Company is aggressively bidding opportunities with defense and other prime contractors for defense opportunities. 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. 9 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 10 -----END PRIVACY-ENHANCED MESSAGE-----