-----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, T1MPlNNRMUpprewUZ8xtngVBQcxlSefQqlSzbwJF36fVPrHiNFOI998cIQq1PmS2 hP7noCRH1Mj64zqMvEEzPw== 0000914317-97-000261.txt : 19970520 0000914317-97-000261.hdr.sgml : 19970520 ACCESSION NUMBER: 0000914317-97-000261 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-13112 FILM NUMBER: 97608988 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 10QSB 1 ================================================================================ U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------- Form 10-QSB [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 1997 Commission File No. 0-22429 DHB CAPITAL GROUP INC (Exact name of Registrant as specified in its charter) Delaware 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) Registrant's telephone number: (516) 997-1155 Not applicable Former name, former address and former fiscal year, if changed since last report Indicate by check whether the registrant (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act 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. Yes [ X ] No [ ] As of May 13, 1997, there were 24,042,583 shares of Common Stock, $.001 par value outstanding. CONTENTS PART I Financial Information Item 1. Financial Statements Consolidated Balance Sheet as of March 31, 1997 and December 31, 1996 Unaudited Consolidated Statements of Operations and Retained Earnings For The Three Months Ended March 31, 1997 and 1996 Unaudited Consolidated Statements of Cash Flows For The Three Months Ended March 31, 1997 and 1996 Unaudited Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Results of Operations Operations and Financial Condition PART II Other Information Signatures
DHB CAPITAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS UNAUDITED MARCH 31, 1997 DECEMBER 31, 1996 -------------- ----------------- ASSETS CURRENT ASSETS Cash and cash equivalents ......................... $ 340,970 $ 1,249,655 Marketable securities ............................. 2,655,740 1,342,027 Accounts receivable, less allowance for doubtful accounts of $303,320 ........................ 4,914,543 3,499,535 Inventories ....................................... 8,154,263 7,290,205 Prepaid expenses and other current assets ......... 861,427 255,218 ------------ ------------ Total Current Assets ............... $ 16,926,943 $ 13,636,640 PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation of $592,849 and $522,907 respectively................................. 1,926,244 1,834,777 OTHER ASSETS Intangible assets, net .......................... 871,718 214,213 Investments in non-marketable securities ........ 2,316,750 2,316,750 Deferred tax assets ............................. 819,300 819,300 Deposits and other assets ....................... 360,820 338,739 ------------ ------------ Total Other Assets ................. 4,368,588 3,689,002 ------------ ------------ TOTAL ASSETS ....................... $ 23,221,775 $ 19,160,419 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Note payable .................................... $ 1,400,000 $ 1,400,000 Current maturities of long term debt ............ 63,895 61,664 Accounts payable ................................ 4,920,161 3,019,804 Accrued expenses and other current liabilities .. 217,255 243,763 State income taxes payable ...................... 36,934 11,011 ------------ ------------ Total Current Liabilities .......... $ 6,638,245 $ 4,736,242 LONG TERM LIABILITIES Long term debt, net of current maturities ........ 144,302 144,091 Due to shareholders .............................. 1,300,000 1,300,000 ------------ ------------ Total Long Term Debt ............... 1,444,302 1,444,091 ------------ ------------ Total Liabilities .................. 8,082,547 6,180,333 DHB CAPITAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS UNAUDITED MARCH 31, 1997 DECEMBER 31, 1996 -------------- ----------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock ...................................... 24,043 23,146 Additional paid-in capital ........................ 19,742,887 17,956,030 Common stock subscription receivable .............. (227,500) (227,500) Retained earnings (Deficit) ....................... (4,407,540) (4,771,590) Foreign currency translation adjustment ........... 7,338 -- ------------ ------------ Total Stockholders' Equity 15,139,228 12,980,086 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........ $ 23,221,775 $ 19,160,419 ============ ============ See accompanying notes to financial statements.
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 1996 ------------ ------------ Net sales ................................................ $ 7,144,676 $ 7,044,626 Cost of sales ............................................ 4,762,894 5,094,536 ------------ ------------ Gross Profit ....................................... 2,381,782 1,950,090 Selling, general and administrative expenses ............ 1,925,056 1,707,026 ------------ ------------ Income(Loss) before other income (expense) ......... 456,726 243,064 ------------ ------------ Other Income (Expense) Interest expense ................................... (63,830) (68,886) Interest Income .................................... 13,459 354 Dividend income .................................... 12,617 1,890 Other income ....................................... 21,131 -- Foreign currency translation ....................... (4,544) -- Realized gain (loss) on marketable securities ...... 229,941 (13,985) Unrealized gain (loss) on marketable securities .... (288,450) 548,443 ------------ ------------ Total Other Income (Expenses) ............. (79,676) 467,816 ------------ ------------ Income (loss) before income tax expense .................. 377,050 710,880 Income taxes expense ..................................... 13,000 130,218 ------------ ------------ Net Income ............................................... $ 364,050 $ 580,661 Retained Earnings (Deficit) - Beginning ............ (4,771,590) 101,939 ------------ ------------ Retained Earnings (Deficit) - End .................. ($ 4,407,540) $ 682,600 ============ ============ Earnings (loss) per common share Primary ................................... $ 0.015 $ 0.027 ============ ============ Fully Diluted ............................. $ 0.015 $ 0.027 ============ ============ Weighted average number of common share outstanding: Primary ................................... 25,078,097 21,185,556 ============ ============ Fully Diluted ............................. 25,078,097 21,707,556 ============ ============ See accompanying notes to financial statements
DHB CAPITAL GROUP INC AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1997 1996 ---------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income.................................................. $364,050 $580,661 ---------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .................... 88,027 62,771 Stock return in settlement of lawsuit ............ (21,131) -- Stock issued to purchase lease ................... 279,388 -- Stock issued in settlement of a lawsuit ...... 150,000 -- Changes in assets and liabilities (Increase) Decrease in: Accounts receivable ............................... (1,292,927) (329,971) Marketable securities ............................. (1,313,713) (424,404) Inventories ....................................... (489,475) 1,404,527 Prepaid expenses and other current assets ......... (606,209) (4,338) Deposits and other assets ......................... (22,081) (63,093) Increase (decrease) in: Accounts payable .................................. 1,860,367 (1,002,972) Accrued expenses and other current liabilities .... (29,550) (4,369) State income taxes payable ........................ 349 89,041 ----------- ----------- Total Adjustments ....................................... (1,396,955) (272,808) ----------- ----------- Net cash used by operating activities ...................... (1,032,905) (307,853) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Payments made for property and equipment ................ (118,458) (485,999) Payments of capitalized acquisition cost ................ -- -- ----------- ----------- Net Cash used by investing activities ...................... (118,458) (485,999) ----------- ----------- DHB CAPITAL GROUP INC AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, (continued) 1997 1996 ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on long-term debt .................... (13,910) -- Foreign currency exchange ............................... 7,338 -- Net proceeds from sale of common stock .................. 100,000 437,500 ----------- ----------- Net cash provided by financing activities .................. 93,428 437,500 ----------- ----------- NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ............ (1,057,935) 259,354 CASH AND CASH EQUIVALENTS - BEGINNING ...................... 1,398,905 475,108 ----------- ----------- CASH AND CASH EQUIVALENTS - END ............................ $ 340,970 $ 734,462 =========== =========== See accompanying notes to financial statements
DHB CAPITAL GROUP INC AND SUBSIDIARIES UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ORGANIZATION/REPORTING ENTITIES The consolidated financial statements of DHB Capital Group, Inc. and Subsidiaries (the "Company") are unaudited and reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim period. The consolidated Company includes 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. DHB Armor Group, Inc. On August 8, 1995, the Company formed a new Delaware Corporation which is a wholly-owned subsidiary of the Company. The subsidiary, DHB Armor Group, Inc., ("Armor"), now wholly owns PACA, Point Blank Body Armor, Inc., ("Point Blank"), and Zunblindage S.A. 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. 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"). 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"). Zunblindage S.A. On February 28, 1997, the Company, through DHB Armor Group, acquired all of the outstanding stock of Zunblindage S.A. a privately held Belgian corporation in exchange for a total of 666,000 shares of the Company's registered common stock. Zunblindage is engaged in the manufacture and distribution and marketing in the European theater and the Middle East regions. DHB CAPITAL GROUP INC AND SUBSIDIARIES UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 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. On February 21, 1995, Acquisition changed its corporate name to NDL Products, Inc. NDL manufactures and distributes specialized protective athletic apparel and equipment. Orthopedic Products, Inc. On March 22 and March 26, 1996, the Company acquired OPI, a Florida Corporation engaged in the manufacturing and distribution of orthopedic products to the medical industry. Intelligent Data Corp. On April 1, 1994, the Company acquired Intelligent Data Corp. ("ID"). ID was engaged in the development of sophisticated telecommunication systems. At the end of 1996, the Company wrote down the net assets of this subsidiary. 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. Royal Acquisition Corp.'s primary assets were a film library. At the end of 1996 the Company wrote down the net assets of this subsidiary. 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. MARKETABLE/NON-MARKETABLE SECURITIES 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. DHB CAPITAL GROUP INC AND SUBSIDIARIES UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 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 domestic subsidiaries. Accordingly, Federal income taxes are provided on the consolidated group's taxable income if and when the consolidated group has taxable income after utilizing available carryforward losses. State income taxes are provided on a separate company basis. 2. SUPPLEMENTAL CASH FLOW INFORMATION
1997 1996 ---- ---- Cash paid for: Interest ............................ $59,525 $34,496 Income taxes ........................ $12,007 $33,301
During the year three months ended March 31, 1997 and 1996, the Company had non-cash investing activities when it issued common stock to acquire all of the outstanding common stock of Zunblindage in February 1997 and OPI March 1996. 3.OTHER INCOME The Company initiated a lawsuit against the former shareholders of OPI alleging misrepresentation and injunctive relief seeking to enforce a covenant not to compete. This case was settled in mediation in favor of the Company. It resulted in the return of 38,625 shares of the Company's common stock which was subsequently retired. Approximately 8,500 shares or $17,000 related to the breech of the covenant not to compete and is recorded as other income in the financial statements for the three months ended March 31, 1997. The balance resulted in the reduction of the acquisition cost of OPI. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Results of Operations Three Months Ended March 31, 1997, Compared to the Three Months Ended March 31, 1996. Consolidated net sales for the three months ended March 31, 1997 increased by approximately $100,000 to $7,144,676 compared to the three months ended March 31, 1996. This increase was primarily due to the inclusion of Zunblindage S.A. in 1997. The Company's gross profit percentage increased to 33% for the three months ended March 31, 1997 as compared to 28% for the three months ended March 31, 1996. This increase was the result of the improved production controls on material usage and pricing which were instituted at the end of 1996. Operating income increased from $243,064 for the three months ended March 31, 1996 to $456,726 for the three months ended March 31, 1997 as a result of the higher profit margins. Net income for the three months ended March 31, 1997 was $364,050 as compared to $580,661 for the three months ended March 31, 1996. This decrease was primarily due to a lower total gain on marketable securities at March 31, 997 as compared to March 31, 1996. The Company received "other income" of approximately $21,000 as a result of a settlement of a lawsuit the Company initiated against the former shareholders of OPI. $17,000 of this income was the result of the former shareholders breach of their covenant not to compete with the Company within a certain area. The balance related to breach of their employment contracts and misrepresentation of the net worth. Liquidity and Capital Resources The Company's primary capital requirements over the next twelve months are to assist PACA, Point Blank, NDL, OPI, and Zunblindage's in financing their working capital requirements, and to make possible acquisitions. PACA, Point Blank, NDL, and Zunblindage sell most of their products on 60-90 day terms, and OPI sells most of its products on 30-60 day terms. Working capital is needed to fiance the receivables, manufacturing process and inventory. Working Capital at March 31, 1997 was $10,288,698 as compared to $9,610,405 at March 31, 1996. Cash, cash equivalents, and marketable securities totaled $340,970 at March 31, 1997 compared to $734,462 at March 31, 1996 and $1,249,655 at December 31, 1996. The decrease in cash, cash equivalents and marketable securities was primarily used to fund operations. The Company throughout its existence, obtained funds for acquisitions and operations from term bank loans for periods of up to a year, which ave been secured, in part, by the controlling shareholders's hypothecation of marketable securities. In the past, the Company has always been able to roll over such loans with new loans at prevailing interest relates. At the present time, it has a loan of $1,400,000 from the Bank of New York coming due in May 1997, bearing interest at 6.4375% per year. There is no assurance that the Company will be able to roll over such loans as they become due. The Company expects to renew this loan, at prevailing interest rates, when it becomes due. The Company's principal commitments at March 31, 1997 consisted of obligations under their operating leases for its facilities. The Company's capital expenditures for the quarter ended March 31, 1997 was $118,458 compared to capital expenditures of $485,999 for the quarter ended March 31, 1996. The Company's capital expenditures for the year ended December 31, 1996 was $1,123,739 as compared to $4,222,257 for the year ended December 31, 1995. The company purchased OPI in March 1996 and Zunblindage in February 1997 by issuing stock in lieu of a cash payment. The Company invested approximately $3,316,750 as of March 31, 1997 at historical cost. 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. As of December 31, 1996, the Company has recorded a valuation allowance of $1,000,000 against two specific investments to bring the net realizable value to $2,316,750 at December 31, 1996 and March 31, 1997. The Company's current ratio is 2.5% at March 31, 1997 and was 2.87% at March 31, 1996. The Company's quick ratio was 1.19% at March 31, 1997 as compared to 1.47% at March 31, 1996. Total Stockholders' Equity at March 31, 1997 was $15,139,228 as compared to $13,399,129 at March 31, 1996. The Company believes it has sufficient resources to meet its working capital requirements for the next twelve months. Effect of Inflation and Changing Prices. The Company did not experience increases in raw material prices during the three months ended March 31, 1997 and 1996. The Company believes it will be able to increase prices on their products to meet future price increases in raw materials, should they occur. PART II. OTHER INFORMATION Item 1. Legal Proceedings. In August 1996, the Company commenced a lawsuit against the former shareholders of OPI for breach of their employment contract, misrepresentation and injunctive relief seeking to enforce a covenant not to compete. On April 23, 1997, this lawsuit was settled in mediation and resulted in the former shareholders returning 38,625 shares of the Company's common stock which was subsequently retired. In June 1996, the Company commenced a lawsuit against the former president of NDL, Barry Finn, for breach of his employment agreement. On December 13, 1996, Mr. Finn filed a counterclaim asserting breach of contract. The legal counsel handling the case for the company have advised that it is too early to reliably predict the outcome of the case. The Company is party to other litigation matters and claims which are normal in the course of its operations, and while the results of the ligation and claims cannot be predicted with certainty, management believes, based on advice of counsel, the final outcome of such matters will not have a materially adverse effect on the consolidated financial position. 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: May 13, 1997 DHB CAPITAL GROUP INC. -------------------------- Chairman of the Board, Chief Executive Officer, and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on behalf of the Registrant and in capacities and at the dates indicated: Signature Capacity Date --------- -------- ---- /s/David H. Brooks - ------------------ David H. Brooks Chairman of the Board May 14, 1997 /s/Mary Kreidell - ---------------- Mary Kreidell Chief Financial Officer May 14, 1997 /s/Gary Nadelman - ---------------- Gary Nadelman Director May 14, 1997 /s/Robert Trevisani - ------------------- Robert Trevisani Director May 14, 1997 EX-27 2
5 3-MOS DEC-31-1997 MAR-31-1997 340,970 2,655,740 4,914,543 303,695 8,154,263 16,926,943 1,926,244 592,849 23,221,775 6,638,245 0 0 0 24,043 15,115,185 23,221,775 7,144,676 7,144,676 4,762,894 1,925,056 0 0 63,830 377,050 13,000 364,050 0 0 0 364,050 .015 .015
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