-----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, TE11S7LlDR4nabV6Jm1CGJAHdIYmbWEPgIHyON1gCw1cSk6DyHSKVni+xAWSKEEt EU8jw0qHtaM+LUu+8g/Tvg== 0000914317-96-000257.txt : 19960816 0000914317-96-000257.hdr.sgml : 19960816 ACCESSION NUMBER: 0000914317-96-000257 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960814 SROS: BSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DHB CAPITAL GROUP INC /DE/ CENTRAL INDEX KEY: 0000899166 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 113129361 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-13112 FILM NUMBER: 96612476 BUSINESS ADDRESS: STREET 1: 11 OLD WESTBURY RD CITY: OLD WESTBURY STATE: NY ZIP: 11568 BUSINESS PHONE: 5166212552 MAIL ADDRESS: STREET 1: 11 OLD WESTBURY RD CITY: OLD WESTBURY STATE: NY ZIP: 11568 10KSB/A 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-KSB/A NO. 1 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required] For the fiscal year ended December 31, 1995 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from_______ to________ Commission File No. 2-88678-NY DHB CAPITAL GROUP INC. (Name of small business issuer in its charter) New York 11-3129361 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) 11 Old Westbury Road, Old Westbury, New York 11568 (Address of principal executive offices) Issuer's telephone number: (516) 997-1155 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.001 Par Value (Title of Class) Check whether the issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 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. Yes [ X ] No [ ] Number of shares outstanding of the issuer's common equity, as of March 29, 1996 (exclusive of securities convertible into common equity): 13,841,236 This filing Form 10-KSB/A No. 1 amends the Annual Report on Form 10-KSB dated March 29, 1996 of DHB Capital Group Inc. (the Company). The undersigned Registrant hereby amends the following items, financial statements, exhibits or other portions of such report on Form 10-KSB dated March 29, 1996 (The "Form 10-KSB"), as set forth below: Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. General The Company is a holding company which is principally engaged through its wholly-owned subsidiaries in the development, manufacture and distribution of bullet- and projectile-resistant garments, and the manufacture and distribution of protective athletic equipment and apparel. (The Company's acquisition of a subsidiary which manufactures orthopedic products occurred after the end of the fiscal periods hereinafter discussed.) In August 1995, the Company acquired certain assets, free of all liabilities (the "Point Blank Assets") of Point Blank Body Armor, L.P., and an affiliated company (collectively, "Old Point Blank") at an auction held pursuant to Chapter 7 of the United States Bankruptcy Code. In late December 1994, the Company started up its protective athletic equipment business by acquiring the trade inventory, work in process, raw materials, trade names and trademarks (the "NDL Assets") of N.D.L. Products, Inc., a Delaware corporation, at an auction held pursuant to Chapter 7 of the Bankruptcy Code. In March 1996, the Company acquired Orthopedic Products, Inc. ("OPI"), which is a manufacturer of orthopedic products and a distributor of general medical supplies. Intelligent Data Corporation ("ID"), a development stage company which is a 98% owned subsidiary of the Company, is engaged in the design and production of sophisticated telecommunications equipment for the remote execution and authentication of documents. The Company also owns a minority interest in several other companies, some privately held and some publicly held, in the pharmaceuticals business, health care, mining and snowboard manufacturing. The management of the Company is engaged in the review of potential acquisitions and in providing management assistance to the Company's operating subsidiaries. The Company commenced operations in November 1992 by acquiring the outstanding common stock of PACA, a manufacturer and distributor of bullet-proof garments and accessories. From the acquisition of PACA through December 20, 1994, i.e., the date of the start-up of NDL, PACA was the Company's only source of revenue from operations. Thereafter, and to date, NDL and Point Blank are also a source of revenue from operations. The discussion that follows must be considered in light of the significant changes in the Company's business at the end of 1994, and the acquisition of the Point Blank Assets in August 1995, and should be read in conjunction with the financial statements, including the notes thereto. The Company's financial condition and results of operations in the future may also be materially affected by the Company's acquisition of OPI in March 1996. The Armor Group's products are sold nationally and internationally, primarily to law enforcement agencies and military services. Sales to domestic law enforcement agencies, including government, security and intelligence agencies, police departments, federal and state correctional facilities, highway patrol and Sheriffs' departments, comprise the largest portion of the Armor Group's business. Accordingly, any substantial reduction in governmental spending or change in emphasis in defense and law enforcement programs could have a material adverse effect on the Armor Group's business. The acquisition of the Point Blank Assets is expected to improve the Company's overall penetration of the market for ballistic-resistant garments, equipment and accessories. Year Ended December 31, 1995, compared to year ended December 31, 1994. Consolidated net sales of the Company for the year ended December 31, 1995, increased by $5,391,721, or 59% to approximately $14,494,000. The increase was primarily due to the inclusion of Point Blank and NDL. The start-up of NDL on December 20, 1994, contributed less than $100,000 to sales in 1994 as compared to $4,276,603 in 1995. The Company had consolidated net income of approximately $244,000 for 1995, as compared to a consolidated net loss of $75,243 for 1994. The improved results are attributable to the ability to utilize volume discounts and eliminating duplication of expenses, as well as income derived from the sale and appreciation of the Company's marketable securities. Gross profit in 1995 increased to $5,405,477, an increase of 119% over 1994. The Company's gross profit ratio increased from 27% in 1994 to 37% in 1995, primarily because of the products sold by Point Blank yielded greater margins. The Company's selling, general and administrative expenses for 1995 increased to $5,140,399 from $2,250,550 in 1994. These expenses as a percentage of net sales were 35% in 1995, compared to 25% in 1994. The increase was attributable to costs associated with move of Point Blank and NDL into the present location and other nonrecurring expenses. Interest expense, net of interest income, for 1995 increased to $261,829 from $78,602 for 1994, principally due to a decline in interest income because of the use of the Company's funds in its operating business, and increases in the borrowings of the Company. The Company had a net realized gain of $675,743 and an unrealized gain on its investments in marketable securities of $347,817 for the year ended December 31, 1995, as compared to a net realized loss of $360,817 and an unrealized loss of $293,854 for the year ended December 31, 1994. Year ended December 31, 1994, compared to the year ended December 31, 1993. Consolidated net sales of the Company for the year ended December 31, 1994, increased by $1,995,000 (28%) to approximately $9,102,000. The increase was primarily due to higher unit sales of ballistic- resistant vests and related products by PACA. The start-up of NDL on December 20, 1994, contributed less than $100,000 to sales in 1994. The Company had a consolidated net loss of approximately $75,000 for 1994, as compared to consolidated net income of $231,000 for 1993, principally because of the costs of ID's research and development on telecommunication products. Gross profit in 1994 increased to $2,480,756, an increase of 46% over 1993. The Company's gross profit ratio increased from 24% in 1993 to 27% in 1994, primarily because of the mix of products sold in 1993 versus 1994. The Company's selling, general and administrative expenses for 1994 increased to $2,250,650 from $1,645,921 in 1993. These expenses as a percentage of net sales were 25% in 1994, compared to 23% in 1993, principally because of the acquisition of ID in April 1994. In 1994, the Company wrote off a loan-receivable of approximately $58,000, which was made to the corporation from which the Company acquired PACA. The loan was secured by accounts receivable, inventory and a personal guaranty from an officer of the corporation. The corporation became insolvent and ceased doing business. After all attempts to collect the debt out of the security, including the personal guaranty, were unsuccessful, the loan was written off. Interest expense, net of interest income, for 1994 increased to $65,072 from $31,533 for 1993, principally due to a decline in interest income because of the use of the Company's funds in its operating business, and increases in the interest rates available to the Company. The Company had a net realized loss of $360,817 and an unrealized loss on its investments in marketable securities of $293,854 for the year ended December 31, 1994, as compared to a net realized gain of $196,063 and an unrealized loss of $19,239 for the year ended December 31, 1993. Liquidity and Capital Resources. The Company's primary capital requirements over the next twelve months are to assist PACA, Point Blank, NDL, OPI, ID and Media in financing their working capital requirements, and to make possible acquisitions. PACA, Point Blank, NDL and OPI sell most of their products on 60 - 90 day terms, and OPI sells most of its products on 30-60 day terms, and working capital is needed to finance the receivables, manufacturing process and inventory. The Company's principal sources of cash to date have been proceeds from private offerings of the Company's securities, and, as more fully set forth below, term bank loans of up to a year's duration, guaranteed by Mr. David H. Brooks, Chairman of the Board, and certain affiliated persons. At the present time, the Company is obligated on a note due in September 1996 to the Chase Manhattan Bank ("Chase") in the principal sum of $1,150,000 bearing interest at 6.255% per year, and on a note due in December 1996 to the Bank of New York ("BNY"), bearing interest at 6.43% per year. The Chase loans are secured by a security interest in the marketable investment securities of the Company and certain marketable investment securities of the majority shareholders. The Company expects to renew these loans, at prevailing interest rates, when they become due. Of the proceeds drawn down to date, $1,400,000 were used by the Company to refinance PACA's obligations to another financial institution, and $1,150,000 were used to purchase the NDL Assets and provide NDL with working capital. In 1995, the Company realized $815,000 from the exercise of outstanding Redeemable Warrants. Mr. David H. Brooks, Chairman of the Board, and/or his wife, Mrs. Terry Brooks, made term loans due in April 1997 of $1,140,000, bearing interest at 9% per year, and entered into a collateral agreement [third party] (the "Collateral Agreement") with Chase to pledge certain marketable securities owned by Mr. Brooks and Mrs. Brooks to partially secure the term loans and other obligations of the Company to Chase. In exchange for this, the Company granted to Mrs. Terry Brooks, on December 20, 1994, 5-year warrants to purchase 3,750,000 shares of the Company's Common Stock after giving effect to the 50% Stock Dividend, at a price of $1.33 per share. The warrants contain provisions for a one-time demand registration, and piggyback registration rights. All of the aforesaid loans were made directly to the Company, and the Company has lent the loan proceeds to NDL. Mr. David Brooks also lent $2,000,000 to the Company to provide the major portion of funds needed to purchase the Point Blank Assets, of which $750,000 is currently outstanding. Mr. and Mrs. Brooks have also pledged certain of their personal assets to secure the BNY Loan. See "Principal Shareholders" and "Certain Transactions." In connection with the start-up of NDL, the Company relocated substantially all the NDL Assets to a 67,000 square foot office and warehouse facility located at 4031 N.E. 12th Terrace, Oakland Park, Florida 33334, which is now owned by affiliates of Mr. Brooks. That facility will also be used by Point Blank and ID. See "Properties - NDL Facility." The Company's consolidated working capital at December 31, 1995 and 1994 were $6,526,004 and $5,202,592 respectively, and its ratio of current assets to current liabilities was 1.85:1 and 2.55:1, respectively, on such dates. The Company believes that it has sufficient resources to meet its working capital requirements for the next twelve months. ID's working capital requirements are to finance the manufacturing and marketing costs associated with its initial product, and research and development costs associated with product enhancements and new products. ID's principal sources of working capital will be borrowings. Media's working capital requirements will be determined as different avenues for the exploitation of its film library are researched and developed. The film library is not expected to bring in significant revenues to the Company. The Company believes that it has sufficient funds to meet Media's anticipated needs for the next twelve months. The Company invested approximately $3,316.750 (as of March 31, 1996, on a historical cost basis) in the securities of certain privately held companies and restricted securities of certain public companies, which are included in "Investments in Non-marketable Securities" on the Company's balance sheet. Effect of Inflation and Changing Prices. The Company did not experience increases in raw material prices during the year ended December 31, 1995 or 1994, or in the first quarter of 1996. The Company believes PACA, Point Blank and NDL will be able to increase prices on their products to meet future price increases in raw materials, should they occur. INDEPENDENT AUDITORS' REPORT The Board of Directors of DHB Capital Group, Inc. We have audited the accompanying consolidated balance sheet of DHB Capital Group, Inc. and Subsidiaries as of December 31, 1995 and the related consolidated statements of income (loss), stockholders' equity and cash flows for the years ended December 31, 1995 and 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidating financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits 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 DHB Capital Group, Inc. and Subsidiaries as of December 31, 1995, and the results of its operations and its cash flows for the years ended December 31, 1995 and 1994, in conformity with generally accepted accounting principles. Capraro, Centofranchi, Kramer & Co., P.C. South Huntington, New York March 14, 1996
DHB CAPITAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET DECEMBER 31, 1995 ASSETS ------ CURRENT ASSETS Cash and cash equivalents $ 475,108 Marketable securities 1,829,856 Accounts receivable, less allowance for doubtful accounts of $70,000 3,819,571 Inventories 7,856,199 Prepaid expenses and other current assets 208,510 ------------ Total Current Assets $ 14,189,244 PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation and amortization of $325,454 1,077,066 OTHER ASSETS Intangible assets, net 721,327 Investments in non-marketable securities 3,316,750 Deposits and other assets 160,821 ------------ Total Other Assets 4,198,898 ------------ TOTAL ASSETS $ 19,465,208 ============ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES Note Payable $ 2,550,000 Accounts Payable 2,847,690 Due to shareholders 1,890,000 Accrued expenses and other current liabilities 301,068 Deferred taxes payable 23,700 State income taxes payable 50,782 ------------ Total Current Liabilities $ 7,663,240 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock 219 Common stock 13,841 Additional paid-in capital 12,123,470 Common stock subscription receivable (437,500) Retained earnings 101,938 ------------ Total Stockholders' Equity 11,801,968 ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 19,465,208 ============ See accompanying notes to financial statements.
DHB CAPITAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 1995 1994 ------------ ------------ Net sales $ 14,494,094 $ 9,102,373 Cost of sales 9,088,617 6,621,617 ------------ ------------ Gross Profit 5,405,477 2,480,756 Selling, general and administrative expenses 5,140,399 2,250,550 ------------ ------------ Income before other income (expense) 265,078 230,206 ------------ ------------ Other Income (Expense) Interest expense, net of interest income (303,615) (65,072) Dividend income 1,710 1,140 Payment to rescind restrictive covenant (250,000) Write-off of uncollectible loan receivable -- (57,889) Realized gain (loss) on marketable securities 675,743 (360,817) Unrealized gain (loss) on marketable securities 347,481 (293,854) ------------ ------------ Total Other Income (Expenses) 471,319 (776,492) ------------ ------------ Income (loss) before minority interest and income tax (benefit) 736,397 (546,286) Minority interest of consolidated subsidiary -- 91,655 ------------ ------------ Income (loss) before income tax (benefit) 736,397 (454,631) Income taxes (benefit) 491,922 (379,388) ------------ ------------ Net Income (loss) $ 244,475 $ (75,243) ============ ============ Earnings (loss) per common share Primary $ 0.02 ($ 0.01) ============ ============ Fully Diluted $ 0.02 ($ 0.01) ============ ============ Weighted average number of common share outstanding: Primary 14,111,836 11,134,149 ============ ============ Fully Diluted 14,459,836 11,236,574 ============ ============ See accompanying notes to financial statements
DHB CAPITAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 Number of Number of Additional Common Stock Preferred Par Common Par Paid-in Subscription shares Value shares Value Capital Receivable ------- ------ ---------- ------- ----------- ---------- Balance, December 31, 1993 104,687 $1,047 10,504,452 $10,504 $5,002,499 -- Loss for the year ended December 31, 1994 Sale of common stock 812,500 812 2,007,668 Conversion of preferred stock into common stock (40,625) (406) 81,250 82 324 Issuance of common stock to acquire subsidiary 100,000 100 299,900 ------- ------ ---------- ------- ----------- ---------- Balance- December 31, 1994 64,062 641 11,498,202 11,498 7,310,391 -- Net income for the year ended December 31, 1995 Sale of common stock 1,955,000 1,955 3,863,045 (437,500) Conversion of preferred stock into common stock (42,187) (422) 84,374 84 338 Exercise of stock warrants 303,750 304 949,696 ------- ------ ---------- ------- ----------- ---------- Balance- December 31, 1995 21,875 $219 13,841,326 $13,841 $12,123,470 ($437,500) ======= ====== ========== ======= =========== ========== See accompanying notes to financial statements. DHB CAPITAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 Retained Earnings Total -------- ----------- Balance, December 31, 1993 ($67,294) $4,946,756 Loss for the year ended December 31, 199 Sale of common stock 2,008,480 Conversion of preferred stock into common stock -- Issuance of common stock to acquire subsidiary 300,000 -------- ----------- Balance- December 31, 1994 (142,537) 7,179,993 Net income for the year ended December 31, 1995 244,475 244,475 Sale of common stock 3,427,500 Conversion of preferred stock into common stock -- Exercise of stock warrants 950,000 -------- ----------- Balance- December 31, 1995 $101,938 $11,801,968 ======== ===========
See accompanying notes to financial statements.
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995 1994 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income (loss) $ 244,475 ($ 75,243) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 254,956 217,091 Minority interest in loss of consolidated subsidiary -- (91,655) Realized (gain) loss on marketable securities (675,743) 360,817 Unrealized (gain) loss on marketable securities (347,481) 293,854 Write-off of uncollectible loan receivable -- 57,889 Deferred income taxes 440,000 (416,300) Changes in assets and liabilities (Increase) Decrease in: Accounts receivable (1,276,870) (346,261) Marketable securities 1,150,655 (1,201,224) Inventories (3,093,118) (94,863) Prepaid expenses and other current assets 148,538 (22,102) Deposits and other assets (76,962) (2,403) Increase (decrease) in: Accounts payable 2,336,854 104,322 Accrued expenses and other current liabilities 34,854 148,302 State income taxes payable 22,282 28,500 ----------- ----------- Total Adjustments (1,082,035) (964,033) ----------- ----------- Net cash provided (used) by operating activities (837,560) 1,039,276) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Payments for purchase of assets of subsidiary, net of cash acquired (2,000,000) (2,934,854) Payments to acquire subsidiary -- (425,000) Payments to acquire non-marketable securities (1,938,750) (1,378,000) Collection of loan receivable acquired by issuance of common stock -- 150,000 Collections of loan receivable -- 9,000 Payments made for property and equipment (269,230) (142,555) Payments for software development costs -- (10,691) Payments of capitalized acquisition cost ( 14,277) -- ----------- ----------- Net Cash provided (used) by investing activities (4,222,257) (4,732,100) ----------- ----------- (Continued) DHB CAPITAL GROUP, INC. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995 1994 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from note payable- bank -- 1,150,000 Net proceeds from note payable- shareholder 750,000 1,140,000 Net proceeds from sale of common stock 4,377,500 2,008,480 ----------- ----------- Net cash provided (used) by financing activities 5,127,500 4,298,480 ----------- ----------- NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 67,683 (1,472,896) CASH AND CASH EQUIVALENTS - BEGINNING 407,425 1,880,321 ----------- ----------- CASH AND CASH EQUIVALENTS - END $ 475,108 $ 407,425 =========== ===========
See accompanying notes to financial statements DHB CAPITAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ORGANIZATION/REPORTING ENTITIES The consolidated financial statements of DHB Capital Group, Inc. and Subsidiaries (the "Company") include the following entities: DHB Capital Group, Inc. DHB Capital Group Inc. ("DHB") was incorporated on October 22, 1992 under the laws of the State of New York. DHB was organized to seek, acquire and finance, as appropriate, one or more operating companies. On February 15, 1995, the holders of the common stock approved a re-incorporation of DHB as a Delaware corporation, through a merger with a newly formed Delaware corporation. Protective Apparel Corporation of America Protective Apparel Corporation of America ("PACA") was organized in 1975 and is engaged in the development, manufacture and distribution of bullet and projectile resistant garments, including bullet resistant vests, fragmentation vests, bomb projectile blankets and tactical load bearing vests. In addition, PACA distributes other ballistic protection devices including helmets and shields. PACA is dependent upon a few suppliers for the raw materials utilized to manufacture its products. On November 6, 1992, PACA became a wholly-owned subsidiary of DHB, when DHB purchased all of the issued and outstanding stock of PACA from PACA's former parent, E.S.C. Industries, Inc, for $800,000. The transaction was accounted for as a purchase and resulted in an excess purchase price over the fair market value of the identifiable assets acquired and liabilities assumed of $465,278, of which $312,086 was allocated to on-going government contracts and $153,192 was allocated to goodwill. Intelligent Data Corp. On April 1, 1994, the Company acquired 4,530,000 common shares (60.4% interest) and 1,100,000 preferred shares of stock in Intelligent Data Corp. ("ID"), in exchange for 425,000 shares of the Company's common stock. ID is engaged in the development of sophisticated telecommunication systems. On July 1, 1994, a put option was exercised by certain shareholders of ID resulting in an increase in the Company's ownership to 89.58%. In December 1994, the Company converted all of its preferred shares to common shares, increasing the Company's ownership to 98.35%. This transaction was accounted for as a purchase, and resulted in an excess purchase price over the fair value of identifiable assets acquired and liabilities assumed of $472,666 which was allocated to patents owned by ID. DHB Media Group, Inc. On April 15, 1994, DHB Media Group, Inc. ("Media"), a wholly-owned subsidiary of the Company acquired all of the outstanding common stock of Royal Acquisition Corp. in exchange for 100,000 shares of the Company's common stock, for a purchase price of $300,000. Subsequent negotiations resulted in the reduction of the acquisition cost by $36,550. Royal Acquisition Corp.'s primary assets were a film library and a loan receivable of $150,000. The transaction was accounted for as a purchase and resulted in the excess purchase price over the fair market value of $113,450, of which $54,000 was allocated to the film library and $59,450 was allocated to goodwill. Media intends to syndicate and market these films. The loan receivable was collected in full during the year ended December 31, 1994. NDL Products, Inc. On December 20, 1994, the Company through a newly organized, wholly-owned subsidiary, DHB Acquisition, Inc., ("Acquisition") purchased certain assets from a debtor-in-possession, N.D.L. Products, Inc. for $3,080,000. Acquisition did not assume any continuing obligations of the debtor-in-possession, nor did the management of the debtor-in- possession continue. On February 21, 1995, Acquisition changed its corporate name to NDL Products, Inc. NDL manufactures and distributes specialized protective athletic apparel and equipment. DHB Armor Group, Inc. On August 8, 1995, the Company started a new Delaware Corporation which is a wholly-owned subsidiary of the Company. The subsidiary, DHB Armor Group, Inc., ("Armor"), now wholly owns PACA and Point Blank Body Armor, Inc., ("Point Blank"). Point Blank Body Armor, Inc. In August 1995, the Company, through a wholly-owned subsidiary known as USA Fitness & Protection Corp, a Delaware Corporation, acquired from a trustee in bankruptcy certain assets of Point Blank Body Armor, L.P. and an affiliated company ("Old Point Blank"), for a cash payment of $2,000,000, free of all liabilities. Prior to the filing of the petition in bankruptcy, Old Point Blank had been a leading U.S. manufacturer of bullet-resistant garments and related accessories. After acquiring the Old Point Blank, USA Fitness & Protection Corp., amended its articles of incorporation to change their name to Point Blank Body Armor, Inc. ("Point Blank"). PRINCIPLES OF CONSOLIDATION All material intercompany transactions have been eliminated in the consolidated financial statements. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include those relating to the valuation of inventories and non-marketable securities, and collectibility of receivables. REVENUE RECOGNITION Revenue is recognized on product sales upon shipment to the customer. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company includes cash on deposit, money market funds and amounts held by brokers in cash accounts to be cash equivalents. MARKETABLE/NON-MARKETABLE SECURITIES Effective for calendar year 1994, the Company adopted Financial Accounting Standards Board Statement No. 115 "Accounting for Certain Investments in Debt and Equity Securities." In accordance with this standard, Securities which are classified as "trading securities" are recorded in the Company's balance sheet at fair market value, with the resulting unrealized gain or loss recognized as income in the current period. Securities which are classified as "available for sale" are also reported at fair market value, however, the unrealized gain or loss on these securities is listed as a separate component of shareholder's equity. Non-marketable securities, such as investments in privately-held companies are carried at historical cost, if necessary, reduced by a valuation allowance to net realizable value. INVENTORIES Inventories are valued at the lower of cost (first-in, first-out) or market. PROPERTY, EQUIPMENT AND DEPRECIATION Property and equipment is stated at cost. Major expenditures for property and those which substantially increase useful lives are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in income. Depreciation is provided by both straight-line and accelerated methods over the estimated useful lives of the assets. INTANGIBLE ASSETS Goodwill is being amortized on a straight-line basis over ten years. The amount allocated to on-going government contracts is being amortized over the life of the individual contracts, which are typically 1-5 years. Patents are being amortized on a straight-line basis over 17 years. Other intangible assets are being amortized on a straight-line basis over their estimated lives, typically 5-15 years. Accumulated amortization was $409,297 and $301,033 as of December 31, 1995 and 1994, respectively. EARNINGS PER SHARE The computation of earnings per common share is based on the weighted average number of outstanding common shares outstanding during the period. Primary earnings per share and fully diluted earnings per share amounts assume the conversion of the Cumulative Convertible Preferred Stock, and the exercise of the stock warrants. INCOME TAXES The Company files a consolidated Federal tax return, which includes all of the subsidiaries. Accordingly, Federal income taxes are provided on the taxable income of the consolidated group. State income taxes are provided on a separate company basis, if and when taxable income, after utilizing available carryfoward losses, exceeds certain levels. DEFERRED INCOME TAXES Deferred taxes arise principally from net operating losses and capital losses available for carryfoward against future years taxable income, and the recognition of unrealized gains(losses) on marketable securities for financial statement purposes, which are not taxable items for income tax purposes. 2. SUPPLEMENTAL CASH FLOW INFORMATION 1995 1994 -------- ------- Cash paid for: Interest $261,829 $78,602 Income taxes $ 35,774 $ 7,983 Additionally, during, the year ended December 31, 1995 the Company had a non-cash financing activity of $437,500 for a stock subscription receivable. During the year ended December 31, 1994, the Company had non-cash investing activities and it issued common stock to acquire all of the outstanding common stock of Media at a value of $273,450. The Company also purchased a majority interest in a subsidiary through the issuance of 425,000 shares of its common stock. 3. MARKETABLE SECURITIES/NON-MARKETABLE SECURITIES Following is a comparison of the cost and market value of marketable securities included in current assets: 1995 1994 ----------- ----------- Cost $ 1,482,375 $ 2,251,141 Unrealized gain (loss) 347,481 (293,854) ----------- ----------- Market value $ 1,829,856 $ 1,957,287 =========== =========== The Company's portfolio value of trading securities has been pledged as collateral for the bank loans (see Note 6). However, the bank has placed no restrictions on the Company's ability to trade freely in their portfolio. The Company's investments in non-marketable securities is summarized as follows: 1995 1994 ---------- ---------- Darwin Molecular Corporation (approximately 3.9% interest) $1,000,000 $1,000,000 Zydacron, Inc. (approximately 3.1% interest) 941,750 378,000 Pinnacle Diagnostics, Inc. (approximately 16.7% interest) 500,000 -- FED Corporation (approximately 2.9% interest) 375,000 -- Solid Manufacturing Co. - 10% convertible debentures (approximately 9.5% interest, if converted) 500,000 -- ---------- ---------- Totals $3,316,750 $1,378,000 ========== ========== All of these investments are carried at historical cost on the financial statements of the Company, and are included under the caption "Investment in non-marketable securities" on the balance sheet. 4. INVENTORIES Inventories are summarized as follows: 1995 ---------- Finished products $3,844,506 Work-in process 1,209,849 Raw materials and supplies 2,801,844 ---------- Total $7,856,199 ========== 5. PROPERTY AND EQUIPMENT Major classes of property and equipment consist of the following: Estimated useful life-years 1995 ---------------- ---------- Deposit on building 39 $ 47,500 Machinery and equipment 5-10 759,797 Furniture and fixtures 5-7 249,986 Computer equipment 3-5 41,959 Transportation equipment 3-5 41,862 Leasehold improvements 5-31.5 261,416 ---------- 1,402,520 Less: accumulated depreciation and amortization 325,454 ---------- Net property and equipment $1,077,066 ========== 6. NOTES PAYABLE- FINANCIAL INSTITUTIONS The Company has borrowed $2,550,000 in the form of two term loans. The first is with the Bank of New York for $1,400,000 with interest at 6.43%, maturing in June, 1996. The second loan is with Chase Manhattan Bank for $1,150,000 with interest at 6.255%. This loan matures in September, 1996. These loans are secured by substantially all of the Company's marketable securities portfolio value, and certain personal investments of the majority shareholder. Both of these loans require monthly payments of interest only. 7. DUE TO SHAREHOLDER The amount due to shareholder represent notes payable which bear interest at 9%, payable April and September, 1996. 8. RELATED PARTY TRANSACTIONS DHB: DHB leased its office location from a relative of the former president of DHB. Included in DHB's statement of income (loss) for the years ended December 31, 1995 and 1994 is $16,514 and $15,424 of rent paid or accrued under this lease, respectively (see note 10). Effective January 1996, the Company vacated the premises and purchased a building for use as the corporate headquarters. PACA: PACA leases its location (see note 10) from the President of PACA. Included in the statement of income (loss) for the years ended December 31, 1995 and 1994 is $48,000 of rent paid under this lease for each period. ID: ID leased its office location from a relative of the former President of DHB. Included in DHB's statement of income (loss) for the year ended December 31, 1995 and 1994 is $5,511 and $13,175 of rent paid or accrued under this lease, respectively (see note 10). The premises were vacated in April, 1995. NDL and POINT BLANK: NDL Products, Inc. and Point Blank Body Armor, Inc. lease their facilities from a partnership indirectly owned by relatives of the majority shareholder of DHB (note 10). Included in the statement of income (loss) for the year ended December 31, 1995 is $300,000 of rent paid or accrued under the lease. 9. COMMITMENTS AND CONTINGENCIES LEASES PACA: PACA is obligated under a lease for its manufacturing facility with a related party (note 9). This lease expires October 31, 1997, and provides for minimum annual rentals of $43,200, plus increases based on real estate taxes and operating costs. ID: ID was obligated under a lease for its office space with a related party (note 9), which expired in April, 1995 for minimum annual rentals of $15,000, plus increases based on real estate taxes and operating costs. The space was relinquished in April, 1995 and there are no further obligations. Media: Media leases its facilities for storing its film library on a month-to-month basis. The current rental rate is $210 per month. The company relinquished this space in January 1996 and is storing the film library at the corporate headquarters. NDL Products, Inc. and Point Blank Body Armor, Inc. NDL Products, Inc. and Point Blank Body Armor are obligated under a lease for its facilities with a related party (note 9). The lease commenced January 1, 1995 and expires December, 1999. The lease provides for minimum annual rentals of $300,000 for the initial year and then $480,000 the following year with scheduled increases of 4% per year thereafter, plus real estate taxes, operating costs and capital expenditures. The following is a schedule by year of future minimum lease obligations under noncancellable leases as of December 31,1995 1996 $ 523,200 1997 542,400 1998 562,368 1999 583,135 ----------- Total minimum obligation $ 2,211,103 =========== Total rental expense under cancelable and noncancellable operating leases was $440,269 and $85,989 for the years ended December 31, 1995 and 1994, respectively. EMPLOYMENT AGREEMENT Concurrent with the purchase of PACA, the President of PACA was given a five year employment agreement. This agreement calls for annual salaries ranging from $115,000 in 1993 to $155,000 in 1997, plus certain fringe benefits. During the year ended December 31, 1995, Two of NDL's officers were given three year employment contracts. These agreement calls for annual base salaries of 100,000 and 96,000 plus certain fringe benefits. OPEN LETTERS OF CREDIT At December 31, 1995 the Company was contingently liable for open unused letters of credit totaling $120,253. LITIGATION Media brought suit against an individual, corporation and others with respect to alleged representations involving the acquisition of the film library. Media is seeking compensatory and punitive damages. No determination of the outcome can be made at this time, and accordingly, there is no provision for any recoverable amount, if any included in the financial statements. ID is also involved in a lawsuit with a former consultant to the Company regarding his alleged misappropriation of several of the Company's confidential computer programs, and to restrain their dissemination. Management has commenced prosecuting its position, however, no determination of the outcome can be made at this time. 10. CAPITAL STOCK Capital stock is as follows:
1995 1994 ----------- ----------- DHB: - --- Class A Preferred stock, 10% convertible, $.01 par value, 1,500,000 shares authorized (see amendment below) Shares issued and outstanding 21,875 64,062 =========== =========== Par Value $ 219 $ 641 =========== =========== Common stock, $.001 par value, 25,000,000 shares authorized, Shares issued and outstanding 13,841,326 11,498,202 =========== =========== Par Value $ 13,841 $ 11,498 =========== ===========
Amendment to Certificate of Incorporation: In January, 1993, DHB amended its certificate of incorporation, as follows: a) To expand and qualify the relative rights and preferences of the previously authorized Preferred shares as follows: Class A Preferred stock, $.40 per annum dividend, non-voting, cumulative, convertible, $.01 par value, 1,500,000 shares authorized, no shares issued and outstanding, (redeemable in liquidation at $4 per share, or callable at $.01 per share after November 30, 1994, convertible into 2 shares of common stock.) These shares were called in November, 1995. As of December 31, 1995, the outstanding preferred shares represent shares which have not yet been surrendered for conversion. b) To eliminate preemptive rights. c) To provide for indemnification of officers and directors. d) To permit the holders of a majority of the outstanding shares of voting stock to take action by written consent. 11. PRIVATE PLACEMENTS Common Stock: During June, July, and August, 1995 the Company sold 1,955,000 shares of common stock in private placements for proceeds of $3,910,000. Out of these proceeds $45,000 of direct expenses were paid. These shares have not been registered with the Securities and Exchange Commission. During June, October, and November, 1994 the Company sold 387,500 shares of common stock in private placements for proceeds of $875,000. Out of these proceeds, direct expenses of $8,703 were paid. 12. STOCK WARRANTS During 1995, various warrants which would have expired in November, 1995 from the Company's original private placement were exercised by certain shareholders. These shareholders were issued 303,750 shares of the Company's common stock for net proceeds of $950,000. All remaining warrants for the original private placement have expired. In December, 1994, in consideration for monies loaned to the Company, the Board of Directors granted Mrs. Terry Brooks, a related party, stock warrants to purchase 2,500,000 shares of common stock for $2 per share for a five year period commencing December 19, 1994. In June, 1993, the board of directors granted stock warrants to certain individuals and organizations to purchase 295,000 shares of the Company's common stock for $2 per share during the three year period commencing July 1, 1994. The Company has reserved these shares for issuance upon the exercise of the warrants. Certain of these individuals are also employees of the Company, and the warrants issued to these employees are contingent based upon continued employment until July 1, 1994. 210,000 of the warrants issued in 1993 have been terminated by the Company. 13. STOCK DIVIDEND Subsequent to year end, the Board of Directors declared a preferred stock dividend of 7,944 common shares with a market value of $3.77 per share for the years ended December 31, 1995 and 1994, which has not yet been paid. All earnings per share data has been restated giving retroactive effect to the intended stock dividend. 14. INCOME TAXES Components of income taxes are as follows:
1995 1994 --------- --------- Current: Federal $ 5,400 $ 72,350 State 58,922 36,912 Benefit of net operating loss carryfoward (12,400) (72,350) --------- --------- Total current 51,922 36,912 --------- --------- Deferred: Federal 451,300 (459,100) State 60,300 (104,900) Less: valuation allowance (71,800) 147,700 --------- --------- Total deferred 440,000 (416,300) --------- --------- Total income taxes (benefit) $ 491,922 $(379,388) ========= =========
The composition of the federal and state deferred taxes at December 31, 1995 was arrived at as follows:
Federal State -------- -------- Net Operating Loss $ 36,000 $ -- Allowance for Doubtful Accounts 10,500 5,600 Capital Loss Carryforwards -- 70,300 Unrealized gain on Marketable Securities (52,100) (31,300) -------- -------- Subtotal (5,600) 44,600 Less: Valuation Allowance -- 75,900 -------- -------- Net Deferred Taxes $ (5,600) $(31,300) ======== ========
The Valuation Allowance changed from $147,700 at December 31, 1994 to $75,900 at December 31, 1995, for a decrease of $71,800. At December 31, 1995 the Company has operating losses available for carryfoward against future years' taxable income of approximately $240,000 for tax purposes, which would expire in 2008. The deferred tax assets for the future benefit of the capital loss carryfoward was reduced in full by a valuation allowance of $70,300 as the Company estimates that sufficient future taxable capital gains on a separate company basis for state tax purposes may not be available to provide the full realization of such an asset. 15. SUBSEQUENT EVENT As of March 7, 1996, the entire subscription received of $437,500 has been collected. 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 by the undersigned, thereunto duly authorized. Dated: August 1, 1996 DHB Capital Group Inc. /S/ DAVID BROOKS Chairman of the Board Pursuant to the requirements of the Securities Exchange1934, this report has been signed on behalf of the Registrant and in capacities and at the dates indicated: Signature Capacity Date - --------- -------- ---- /S/ David Brooks Chairman of the Board August 1, 1996 - ---------------- /S/ Mary Kreidell Treasurer August 1, 1996 - ----------------- /S/ Mel Paikoff Director August 1, 1996 - --------------- EX-27 2
5 12-MOS DEC-31-1995 DEC-31-1995 475,108 1,829,856 3,819,571 70,000 7,856,199 14,189,244 1,077,066 325,454 19,465,208 7,663,240 0 0 219 13,841 11,787,908 19,465,208 14,494,094 14,494,094 9,088,617 5,140,399 471,319 0 303,615 736,397 491,922 491,922 0 0 0 491,922 .002 .002
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