-----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, N9YCIX0ZFOyJF1THs4GUSr9qr4QU0yk/iIzmpaE/T5wfNGe41fL8e7JO8uW/jJ4k mmHiQwFbSO21IxDJbE0R3Q== 0000914317-98-000269.txt : 19980424 0000914317-98-000269.hdr.sgml : 19980424 ACCESSION NUMBER: 0000914317-98-000269 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980206 ITEM INFORMATION: FILED AS OF DATE: 19980423 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: 8-K/A SEC ACT: SEC FILE NUMBER: 001-13112 FILM NUMBER: 98599142 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 8-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A No. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) : February 6, 1998 DHB Capital Group Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-22429 11-3129361 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 11 Old Westbury Road, Old Westbury, New York 11568 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code : (516) 997-1155 - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) This filing on Form 8-K/A No. 1 amends the Current Report on 8-K dated February 9, 1998 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 8-K dated February 9, 1998 (the "Form 8-K"), as set forth below: Item 7. Financial Statements and Exhibits. Filed herewith are the following Financial Statements of the businesses acquired
Page # AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 31, 1997 LANXIDE ELECTRONIC COMPONENTS INC Independent Auditors' Report 2 Balance Sheet as of September 30, 1997 3 Statement of Operations for the year ended September 30, 1997 4 Statement of Stockholders' Equity for the year ended September 30, 1997 5 Statements of Cash Flows for the year ended September 30, 1997 6 Notes to the Financial Statements 7 - 10 LANXIDE ARMOR PRODUCTS INC Independent Auditors' Report 11 Balance Sheet as of September 30, 1997 12 Statement of Operations for the year ended September 30, 1997 13 Statement of Stockholders' Equity for the year ended September 30, 1997 14 Statements of Cash Flows for the year ended September 30,1997 15 Notes to the Financial Statements 16 -19 INTERIM FINANCIAL STATEMENTS FOR THE QUARTER ENDED DECEMBER 31, 1997 LANXIDE ELECTRONIC COMPONENTS INC Balance Sheet as of December 31, 1997 20 Statement of Operations for the three months ended December 31, 1997 21 Statements of Cash Flows for the three months ended December 31,1997 22 LANXIDE ARMOR PRODUCTS INC Balance Sheet as of December 31, 1997 23 Statement of Operations for the three months ended December 31, 1997 24 Statement of Stockholders' Equity for the year ended September 30, 1997 Statements of Cash Flows for the year ended September 30, 1997 Statements of Cash Flows for the three months ended December 31, 1997 25 b) Pro Forma Financial Information PRO FORMA CONSOLIDATED DHB FINANCIAL STATEMENTS Introduction to the unaudited pro forma financial statements 26 Unaudited pro forma Balance as of December 31, 1997 27 Unaudited pro forma Income Statement for the year ended December 31, 1997 28
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly casued this report to be signed on its behalf by the undersigned hereunto duly authorized DHB Capital Group, Inc. Registrant Date: April 22,1998 /s/ David H. Brooks ------------------- David H. Brooks, Chairman & CEO -1- INDEPENDENT AUDITORS' REPORT The Board of Directors of DHB Capital Group Inc. We have audited the accompanying balance sheet of Lanxide Electronic Components Inc. as of September 30, 1997 and the related statement of operations, stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material 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 financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lanxide Electronic Components Inc. as of September 30, 1997 and the results of its operations and its cash flows for the year ended September 30, 1997 in conformity with generally accepted accounting principles. /s/Paritz and Company P.A. - -------------------------- Paritz and Company P.A. Hackensack, New Jersey April 21, 1998
LANXIDE ELECTRONIC COMPONENTS INC. BALANCE SHEET SEPTEMBER 30, 1997 ASSETS CURRENT ASSETS Cash and cash equivalents ................................. $ 131,667 Accounts receivable ....................................... 406,560 Inventories ............................................... 683,521 Prepaid expenses and other current assets ................. 46,794 ---------- Total Current Assets ....................... 1,268,542 ---------- PROPERTY AND EQUIPMENT ................................... 1,376,713 ---------- TOTAL ASSETS ................................................. $2,645,255 ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long term debt .................... $ 30,730 Due to factor ........................................... 220,750 Accounts payable ........................................ 411,852 Accrued expenses and other current liabilities .......... 283,176 ---------- Total Current Liabilities .................. 946,508 ---------- LONG TERM LIABILITIES Long term debt, net of current maturities ................ 127,511 ---------- Total Liabilities .......................... 1,074,019 ---------- STOCKHOLDERS' EQUITY ...................................... 1,571,236 ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................ $2,645,255 ==========
See accompanying notes to financial statements. -3-
LANXIDE ELECTRONCI COMPONENTS INC STATEMENTS OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1997 Net sales ................................................... $ 4,715,037 Cost of sales ............................................... 4,187,820 ----------- Gross Profit ................................................ 527,217 Selling, general and administrative expenses ................ 1,910,262 ----------- Loss before other expenses .................................. (1,383,045) Other Expense ............................................... (1,722) ----------- Net loss .................................................... $(1,384,767) ===========
See accompanying notes to financial statements. -4-
LANXIDE ELECTRONIC COMPONENTS INC. STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEAR ENDED SEPTEMBER 30, 1997 Number of Number of Additional Preferred Par Common Par Paid - In Accumulated Shares Value Shares Value Capital Deficit Total ------ ----- ------ ----- ------- ------- ----- Balance Sept. 30, 1996 1,000 $ 10 90,000 $ 900 $20,688,808 $(19,122,342) $1,567,376 Increase in Paid-in capital 1,388,627 1,388,627 Net Loss for the year ended Sept 30, 1997 - - - - - (1,384,767) (1,384,767) ----- --- ------ ----- ----------- ------------ ---------- Balance Sept 30, 1997 1,000 $10 90,000 $ 900 $22,077,435 $(20,507,109) $1,571,236 ===== === ====== ===== =========== ============= ==========
See accompanying notes to financial statements. -5-
LANXIDE ELECTRONIC COMPONENTS, INC. STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net Income (loss) ........................................ $(1,384,767) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ..................... 172,240 Changes in assets and liabilities (Increase) Decrease in: Accounts receivable ................................ 163,598 Inventories ........................................ (164,037) Prepaid expenses and other current assets .......... (33,989) Increase (decrease) in: Accounts payable ................................... 108,315 Accrued expenses and other current liabilities ..... 155,630 ----------- Net cash used by operating activities ....................... (983,010) ----------- CASH FLOWS USED IN INVESTING ACTIVITIES Payments made for property and equipment ................. (510,914) ----------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on long-term debt ............ (196,759) Net proceeds from sale of common stock .......... 1,606,000 ----------- Net cash provided by financing activities .................. 1,409,241 ----------- NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ............. (84,683) CASH AND CASH EQUIVALENTS - BEGINNING ....................... 216,350 ----------- CASH AND CASH EQUIVALENTS - END ............................. $ 131,667 ===========
See accompanying notes to financial statements -6- LANXIDE ELECTRONIC COMPONENTS, INC. NOTES TO FINANCIAL STATEMENTS Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business description Lanxide Electronic Components Inc. ("LEC") designs, manufactures and sells unique heavily patented thermal management, packaging and structural components for the electronics industry. LEC's current products are primarily based on silicon carbide / aluminum composites which provide a unique combination of desirable properties including, high thermal conductivity, low coefficient of thermal expansion, light weight and high stiffness. Uses of estimates in the preparation of financial statements 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 net revenue and expenses during each reporting period. Actual results could differ from those estimates. Revenue recognition Revenue from product sales is recognized at the time the product is shipped. Inventories Inventories, consisting of merchandise purchased for resale, are valued at the lower of cost or market, determined on the first-in, first-out basis (replacement cost). Property, plant and equipment and depreciation Property, plant and equipment are stated at cost. Major additions, improvements, and renewals, which substantially increase the useful lives of assets, are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. Depreciation is provided for both financial reporting and income tax purposes using the straight-line and accelerated methods. Income taxes LEC and its domestic parent file a consolidated Federal income tax return and separate state income tax returns. -7- Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued LEC accounts for deferred income taxes in accordance with SFAS Statement No. 109 which requires that deferred tax assets and liabilities be recognized for the future tax consequence attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, SFAS No. 109 requires recognition of future tax benefits, such as net operating loss carryforwards, to the extent that realization of such benefits is more likely than not and that a valuation allowance be provided when it is more likely that not that some portion of the deferred tax asset will not be realized. Impairment of long-lived assets LEC accounts for the impairment of long-lived assets in accordance with SFAS No. 121 which requires that long-lived assets and identifiable intangibles held and used by a company be reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Note 2 INVENTORIES Inventories consist of the following: Finished goods $ - Work in process 683,462 Raw materials and supplies 59 --------- $ 683,521 ========= Note 3 PROPERTY, PLANT AND EQUIPMENT A summary of property, plant and equipment and the estimated lives used in the computation of depreciation is as follows: Estimated 1997 useful life Machinery and equipment 1,572,373 5-10 years Less accumulated depreciation and amortization 195,660 ---------- $1,376,713 ========== Note 4 DUE TO FACTOR Pursuant to various agreements, the Company sold and assigned certain accounts receivable to factors, and pays a factoring commission of approximately 10% of factored sales. -8- Note 5 LONG-TERM DEBT
Long-term debt consists of the following: Note payable in monthly installments of $3,446 158,241 inclusive of interest at 9.45% per annum. This note is collateralized by certain equipment originally costing approximately $165,565. Less Current Portion 30,730 -------- $127,511 ======== Long-term debt matures as follows: 1998 $ 29,178 1999 32,058 2000 35,222 2001 31,053 -------- $127,511 ========
Note 6 STOCKHOLDERS' EQUITY Common and preferred stock LEC is authorized to issue 100,000 shares of its $.01 par value Common Stock. In addition, LEC is authorized to issue 1,000 shares of Class A Preferred Stock. Stock option plan The 1996 LEC Stock Option Plan was adopted by LEC's Board of Directors in July 1996. This plan provided for the issuance of incentive stock options and replaced a previous plan which only allowed for the issuance of non-qualified stock options. The combined Plans are underlied by 10,000 shares of LEC Common Stock. As of September 30, 1997, options to purchase 7,225 shares were outstanding. Note 7 RELATED PARTY TRANSACTIONS LEC was part of a consolidated group for the year ended September 30, 1997. As such they had transactions in the normal course of business with the parent company, Lanxide Corporation. The parent company has a sub lease agreement with each of their commercial venture companies, including LEC. See Note 9. Also, the parent provides accounting, purchasing, payroll and human resource services to these ventures. -9- Note 8 RISKS AND UNCERTAINTIES Approximately 80% of the company's sales for the year ended September 30, 1997 were made to two companies. Note 9 COMMITMENTS AND CONTINGENCIES Leases LEC sub-leases a warehouse and manufacturing facility from their parent company, which provides for annual rentals of $79,184 for 1997 expiring in March 2001. In addition, LEC must pay real estate taxes and certain operating expenses of this property. Note 11 SUBSEQUENT EVENTS On October 3, 1997, LEC obtained a loan from the Delaware Economic Development Authority commencing December 1, 1997 for five years bearing interest at 5.1% per annum with monthly installments of principal and interest of $4,729.27. Certain machinery and equipment are collaterized by this loan. On February 9, 1998, DHB Capital Group purchased the common stock LEC and its sister company Lanxide Armor Products Inc. (LAP) The purchase price for the two companies was approximately $4.8 million and was accounted for as a purchase by DHB Capital Group Inc. DHB Capital Group Inc. is a well capitalized holding company, which has two major divisions, DHB Armor Group and DHB Sports Group. -10- INDEPENDENT AUDITORS' REPORT The Board of Directors of DHB Capital Group Inc. We have audited the accompanying balance sheet of Lanxide Armor Products Inc. as of September 30, 1997 and the related statement of operations, stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material 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 financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lanxide Armor Products Inc. as of September 30, 1997 and the results of its operations and its cash flows for the year ended September 30, 1997 in conformity with generally accepted accounting principles. /s/Paritz and Company P.A. - -------------------------- Paritz and Company P.A. Hackensack, New Jersey April 21, 1998 -11-
LANXIDE ARMOR PRODUCTS INC BALANCE SHEET SEPTEMBER 30, 1997 ASSETS CURRENT ASSETS Cash and cash equivalents .................................. $ 19,504 Accounts receivable ........................................ 240,340 Inventories ................................................ 922,871 Prepaid expenses and other current assets .................. 118 ---------- Total Current Assets ........................ 1,182,833 PROPERTY AND EQUIPMENT .................................... 4,764,960 OTHER ASSETS .............................................. 12,622 ---------- TOTAL ASSETS ......................................... $5,960,415 ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Due to factor ............................................ $ 33,834 Accounts payable ......................................... 320,327 Accrued expenses and other current liabilities ........... 195,644 Deferred revenue ......................................... 58,000 ---------- Total Current Liabilities ................... 607,805 ---------- LONG TERM LIABILITIES Deferred Compensation ..................................... 20,099 ---------- Total Liabilities ........................... 627,904 ---------- STOCKHOLDERS' EQUITY ....................................... 5,332,511 ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................. $5,960,415 ==========
See accompanying notes to financial statements. -12-
LANXIDE ARMOR PRODUCTS INC. STATEMENTS OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1997 Net sales .......................................... $ 1,447,768 Cost of sales ...................................... 2,406,934 ----------- Gross Profit ....................................... (959,166) Selling, general and administrative expenses ....... 1,367,115 ----------- Loss before other income (expense) ................. (2,326,281) Other income ....................................... 75,589 ----------- Net loss .......................................... $(2,250,692) ===========
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LANXIDE ARMOR PRODUCTS INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEAR ENDED SEPTEMBER 30, 1997 Number of Additional Common Par Paid-in Accumulated Shares Value Capital Deficit Total ------ ----- ------- ------- ----- Balance Sept 31, 1996 1,000 $10 $38,812,268 $(32,195,369) $6,616,909 - - 966,294 - 966,294 Net Loss for the year ended Sept 30, 1997 - - - (2,250,692) (2,250,692) ----- --- ----------- ------------ ---------- Balance Sept 30, 1997 1,000 $10 $39,778,562 $(34,446,061) $5,332,511 ===== === =========== ============= ==========
See accompanying notes to financial statements. -14-
LANXIDE ARMOR PRODUCTS, INC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net Income (loss) ........................................ $(2,250,692) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ..................... 589,081 Changes in assets and liabilities (Increase) Decrease in: Accounts receivable ................................ 927,337 Inventories ........................................ (323,888) Prepaid expenses and other current assets .......... 34,102 Other assets ....................................... 131 Increase (decrease) in: Accounts payable ................................... (8,717) Accrued expenses and other current liabilities ..... (97,993) Deferred revenue ................................... 58,000 Deferred compensation .............................. 2,224 ----------- Net cash used by operating activities ....................... (1,070,415) ----------- CASH FLOWS USED IN INVESTING ACTIVITIES Payments made for property and equipment ................. (173,834) ----------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds on long-term debt ................. 33,834 Net proceeds from sale of common stock ......... 967,166 ----------- Net cash provided by financing activities .................. 1,001,000 ----------- NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ............. (243,249) CASH AND CASH EQUIVALENTS - BEGINNING ....................... 262,753 ----------- CASH AND CASH EQUIVALENTS - END ............................. $ 19,504 ===========
See accompanying notes to financial statements -15- LAXIDE ARMOR PRODUCTS, INC. NOTES TO FINANCIAL STATEMENTS Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business description Lanxide Armor Products Inc. ("LAP") develops, tests, manufactures, and distributes composite hard armor systems. LAP's composite hard armor systems are based on patented and highly proprietary ceramic / metal composite systems. Uses of estimates in the preparation of financial statements 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 net revenue and expenses during each reporting period. Actual results could differ from those estimates. Revenue recognition Revenue from product sales is recognized at the time the product is shipped. Inventories Inventories, consisting of merchandise purchased for resale, are valued at the lower of cost or market, determined on the first-in, first-out basis (replacement cost). Property, plant and equipment and depreciation Property, plant and equipment are stated at cost. Major additions, improvements, and renewals, which substantially increase the useful lives of assets, are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. Depreciation is provided for both financial reporting and income tax purposes using the straight-line and accelerated methods. Income taxes LAP and its domestic parent file a consolidated Federal income tax return and separate state income tax returns. -16- Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Income taxes LAP accounts for deferred income taxes in accordance with SFAS Statement No. 109 which requires that deferred tax assets and liabilities be recognized for the future tax consequence attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, SFAS No. 109 requires recognition of future tax benefits, such as net operating loss carryforwards, to the extent that realization of such benefits is more likely than not and that a valuation allowance be provided when it is more likely that not that some portion of the deferred tax asset will not be realized. Impairment of long-lived assets LAP accounts for the impairment of long-lived assets in accordance with SFAS No. 121 which requires that long-lived assets and identifiable intangibles held and used by a company be reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Note 2 INVENTORIES Inventories consist of the following: Finished goods $ 225,947 Work in process 555,178 Raw materials and supplies 141,746 ---------- $ 922,871 ========== Note 3 PROPERTY, PLANT AND EQUIPMENT A summary of property, plant and equipment and the estimated lives used in the computation of depreciation is as follows: Estimated 1997 useful life Machinery and equipment 4,048,703 5-10 years Leasehold improvements 1,489,872 5-31.5 years ---------- 5,538,575 Less accumulated depreciation and amortization 773,615 ---------- $4,764,960 ========== Note 4 DEFERRED COMPENSATION PLAN During the period June 1993 to May 1994, the Parent Company implemented a Deferred Compensation plan whereby a portion of a specific employees' compensation was deferred. Payment was to be in cash or common Stock at a rate of $13 per share at the option of the employees. There were no contributions made during the year ended September 30, 1997. -17- Note 5 STOCKHOLDERS' EQUITY Common stock LAP is authorized to issue 1,000 shares of its $.01 par value Common Stock. Stock option plan The 1995 LAP Stock Option Plan was adopted by LAP's Board of Directors in November 1995 for the benefit of LAP's employees. The Plan is underlied by shares of Lanxide Corporation (the parent) Common Stock. On July 3, 1997, LAP's Board of Directors amended the Stock Option Plan by increasing the number of shares authorized for grant from 22,760 to 44,191. As of September 30, 1997, options to purchase 7,225 shares were outstanding. Note 6 RELATED PARTY TRANSACTIONS LAP was part of a consolidated group for the year ended September 30, 1997. As such they had transactions in the normal course of business with the parent company, Lanxide Corporation. The parent company has a sub lease agreement with each of their commercial venture companies, including LAP. See note 8. Also, the parent provides accounting, purchasing, payroll and human resource services to these ventures. Note 7 RISKS AND UNCERTAINTIES Approximately 75% of LAP's sales for the year ended September 30, 1997 were made to two companies. Certain factors relating to the industries in which LAP operates and the Company's business should be carefully considered. All of the products sold by LAP are used in situations which could result in serious personal injuries or death, whether on account of the failure of such products, or otherwise. Although LAP maintains substantial amounts of insurance coverage to cover such risks, there is no assurance that these amounts would be sufficient to cover the payment of any potential claims. In addition, there is no assurance that this or any other insurance coverage will remain available or, if available, that LAP would be able to obtain such insurance at a reasonable cost. The inability to obtain such insurance coverage would prohibit LAP from bidding for certain orders for bullet resistant products from certain governmental customers. Note 8 COMMITMENTS AND CONTINGENCIES Leases LAP sub-leases a warehouse and manufacturing facility from their parent company, which provides for annual rentals of $338,125 for 1997 expiring in March 2001. In addition, LEC must pay real estate taxes and certain operating expenses of this property. -18- Note 10 SUBSEQUENT EVENTS On February 9, 1998, DHB Capital Group purchased the common stock LAP and its sister company Lanxide Electronic Components Inc. (LEC) The purchase price was approximately $4.8 million and was accounted for as a purchase by DHB Capital Group Inc. DHB Capital Group Inc. is a well capitalized holding company which has two major divisions, DHB Armor Group and DHB Sports Group. -19-
LANXIDE ELECTRONIC COMPONENTS UNAUDITED BALANCE SHEET DECEMBER 31, 1997 ASSETS CURRENT ASSETS Cash and cash equivalents ............................... $ 254,740 Accounts receivable ..................................... 706,743 Inventories ............................................. 595,932 Prepaid expenses and other current assets ............... 37,835 ------------ Total Current Assets ..................... 1,595,250 ------------ PROPERTY AND EQUIPMENT ................................. 1,826,205 ------------ TOTAL ASSETS ............................................... $ 3,421,455 ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long term debt ................. $ 70,730 Due to factor ........................................ 392,361 Accounts payable ...................................... 639,221 Accrued expenses and other current liabilities ........ 196,956 ------------ Total Current Liabilities ................ 1,299,268 ------------ LONG TERM LIABILITIES Long term debt, net of current maturities .............. 326,238 ------------ Total Liabilities ........................ 1,625,506 ------------ STOCKHOLDERS' EQUITY Common stock .......................................... 900 Preferred stock ...................................... 10 Additional paid-in capital ........................... 22,584,909 Accumulated Deficit .................................. (20,789,870) ------------ Total stockholders' equity ............... 1,795,949 ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .............. $ 3,421,455 ============
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LANXIDE ELECTRONIC COMPONENTS INC UNAUDITED STATEMENTS OF OPERATIONS AND EQUITY FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 Net sales .................................................. $ 1,662,853 Cost of sales .............................................. 1,347,310 ------------ Gross Profit ............................................... 315,543 Selling, general and administrative expenses ............... 576,046 ------------ Loss before other income (expense) ......................... (260,503) Other Expense............................................... (22,258) ------------ Net loss ................................................... $ (282,761) Accumulated deficit - beginning ............................ (20,507,109) ------------ Accumulated deficit - ending ............................... $(20,789,870) ============
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LANXIDE ELECTRONIC COMPONENTS, INC. UNAUDITED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net loss ................................................... $(282,761) Adjustments to reconcile netincome to net cash provided by operating activities: Depreciation and amortization ....................... 50,340 Changes in assets and liabilities (Increase) Decrease in: Accounts receivable .................................. (300,183) Inventories .......................................... 87,589 Prepaid expenses and other current assets ............ 8,959 Increase (decrease) in: Accounts payable ..................................... 227,369 Accrued expenses and other current liabilities ....... (86,220) --------- Net cash used by operating activities ......................... (294,907) --------- CASH FLOWS USED IN INVESTING ACTIVITIES Payments made for property and equipment ................... (499,832) --------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on long-term debt .............. 410,338 Net proceeds from sale of common stock ............ 507,474 --------- Net cash provided by financing activities .................... 917,812 --------- NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ............... 123,073 CASH AND CASH EQUIVALENTS - BEGINNING ......................... 131,667 --------- CASH AND CASH EQUIVALENTS - END ............................... $ 254,740 =========
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LANXIDE ARMOR PRODUCTS INC UNAUDITED BALANCE SHEET DECEMBER 31, 1997 ASSETS CURRENT ASSETS Cash and cash equivalents ................................ $ 152,390 Accounts receivable ...................................... 287,728 Inventories .............................................. 925,211 ------------ Total Current Assets ..................................... 1,365,329 PROPERTY AND EQUIPMENT .................................. 4,680,943 OTHER ASSETS ............................................ 12,622 ------------ TOTAL ASSETS ....................................... $ 6,058,894 ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long term debt .................. $ 10,619 Accounts payable ....................................... 422,769 Accrued expenses and other current liabilities ......... 178,734 ------------ Total Current Liabilities ................. 612,122 ------------ LONG TERM LIABILITIES Long term debt, net of current maturities ............... 20,607 ------------ Total Liabilities ......................... 632,729 ------------ STOCKHOLDERS' EQUITY Common stock .......................................... 10 Additional paid-in capital ............................ 40,646,637 Accumulated Deficit ................................... (35,220,482) ------------ Total stockholders' equity ................ 5,426,165 ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............... $ 6,058,894 ============
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LANXIDE ARMOR PRODUCTS INC. UNAUDITED STATEMENTS OF OPERATIONS AND EQUITY FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 Net sales .................................................. $ 850,890 Cost of sales .............................................. 830,004 ------------ Gross Profit ............................................... 20,886 Selling, general and administrative expenses ............... 366,716 ------------ Loss before other income (expense) ......................... (345,830) Other income ............................................... 17,224 ------------ Net loss ................................................... (328,606) Accumulated deficit - beginning ............................ (34,446,061) ------------ Accumulated deficit - ending ............................... $(34,774,667) ============
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LANXIDE ARMOR PRODUCTS, INC. UNAUDITED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net loss ................................................... $(328,606) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ....................... 84,017 Changes in assets and liabilities (Increase) Decrease in: Accounts receivable .................................. (47,388) Inventories .......................................... (2,340) Prepaid expenses and other current assets ............ 118 Increase (decrease) in: Accounts payable ..................................... 102,442 Accrued expenses and other current liabilities ....... (16,910) Deferred Revenue ..................................... (58,000) Deferred Compensation ................................ 508 --------- Net cash used by operating activities ......................... (266,159) --------- CASH FLOWS USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds on long-term debt ................... (23,215) Net proceeds from sale of common stock ........... 422,260 --------- Net cash provided by financing activities .................... 399,045 --------- NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ............... 132,886 CASH AND CASH EQUIVALENTS - BEGINNING ......................... 19,504 --------- CASH AND CASH EQUIVALENTS - END ............................... $ 152,390 =========
-25- UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS INTRODUCTION The unaudited pro forma data presented in the unaudited pro forma combined financial statements are included in order to illustrate the effect on the Company's financial statements of the transactions described below. The pro forma information is based on the historical financial statements of the Companies. The unaudited pro forma combined balance sheet data as of December 31, 1997 gives effect to the acquisition of Lanxide Electronic Components Inc. and Lanxide Armor Products Inc. The adjustments are presented as if, at such date, the Company had acquired Lanxide Electronic Components Inc. and Lanxide Armor Products Inc. (which was finalized during the first quarter 1998). The unaudited pro forma combined statement of operations data for the year ended December 31, 1997 and present adjustments for these two combinations. All adjustments are presented as if, these transactions were consummated as of January 1, 1997. In the opinion of management, all adjustments have been made that are necessary to present fairly the pro forma data. The unaudited pro forma combined financial statements should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto, and the Financial Statements and the Notes thereto of Lanxide Electronic Components Inc. and Lanxide Armor Products Inc. The pro forma combined statement of income (loss) data are not necessarily indicative of the results that would have been reported had such events actually occurred on the date specified, nor are they indicative of the Company's future results. -26-
DHB CAPITAL GROUP INC AND SUBSIDIARIES UNAUDITED PRO FORMA BALANCE DECEMBER 31, 1997 Lanxide Lanxide DHB Capital Electronics Armor Pro Forma Group Audited Unaudited Unaudited Consolidated 12-31-97 12-31-97 12-31-97 Adjustments 12-31-97 -------- -------- -------- ----------- -------- ASSETS Current Assets 1 7,000,000 Cash $ 884,000 $ 254,000 $ 152,000 2 (4,800,000) $ 3,490,000 Marketable Securities 1,704,000 - 1,704,000 Accounts Receivable 6,285,000 707,000 288,000 7,280,000 Inventories 12,543,000 596,000 925,000 14,064,000 Prepaid & Other 727,000 38,000 - - 765,000 ------------ ---------- ---------- ------------ ----------- Total current assets 22,143,000 1,595,000 1,365,000 2,200,000 27,303,000 ------------ ---------- ---------- ------------ ----------- Property & Equipment 2,374,000 1,826,000 4,681,000 8,881,000 ------------ ---------- ---------- ------------ ----------- Other Assets Intangibles 588,000 - - 2 (2,422,000) (1,834,000) Investment in non- marketable securities 1,689,000 - - 1,689,000 Deferred taxes 455,000 - - 455,000 Deposit & other 426,000 - 13,000 - 439,000 ------------ ---------- ---------- ------------ ----------- Total Other assets 3,158,000 - 13,000 (2,422,000) 749,000 ------------ ---------- ---------- ------------ ----------- TOTAL ASSETS $ 27,675,000 $ 3,421,000 $6,059,000 $ (222,000) $36,933,000 ============ =========== ========== ============ ===========
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DHB CAPITAL GROUP INC AND SUBSIDIARIES UNAUDITED PRO FORMA BALANCE DECEMBER 31, 1997 Lanxide Lanxide DHB Capital Electronics Armor Pro Forma Group Audited Unaudited Unaudited Consolidated 12-31-97 12-31-97 12-31-97 Adjustments 12-31-97 -------- -------- -------- ----------- -------- ASSETS Current Liabilities Note Payable $ 2,675,000 $ - $ - $ 2,675,000 Current Maturities 65,000 463,000 10,000 538,000 Accounts Payable 5,073,000 639,000 423,000 6,135,000 Accrued expenses 709,000 197,000 179,000 1,085,000 ------------ ---------- ---------- ----------- Total current 8,522,000 1,299,000 612,000 10,433,000 Long-term liabilities Long term debt 111,000 326,000 21,000 458,000 Notes to Shareholder 1,300,000 - - 1 7,000,000 8,300,000 ------------ ---------- ---------- ----------- ----------- Total long-term 1,411,000 326,000 21,000 7,000,000 8,758,000 ------------ ---------- ---------- ----------- ----------- Total Liabilities 9,933,000 1,625,000 633,000 7,000,000 19,191,000 ------------ ---------- ---------- ----------- ----------- Stockholders Equity 17,742,000 1,796,000 5,426,000 - 24,964,000 ------------ ---------- ---------- ----------- ----------- TOTAL LIABILITIES & EQUITY $ 27,675,000 $ 3,421,000 $ 6,059,000 $ 222,000 $36,933,000 ============ =========== =========== =========== ===========
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DHB CAPITAL GROUP INC AND SUBSIDIARIES UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 Lanxide DHB Capital Electronics Lanxide Armor Pro Forma Group Audited Audited Audited Consolidated 12-31-97 09-30-97 09-30-97 Adjustments 12-31-97 ----------- ---------- ---------- ------------ ----------- 3- (613,250) 2- 168,758 Net Sales $33,271,607 $4,715,037 $1,447,768 1- 872,164 $39,862,084 3- (613,250) 2- 250,156 Cost of Sales 22,153,925 4,187,820 2,406,934 1- 585,778 28,971,363 ----------- ---------- ---------- ------------ ----------- Gross Profit 11,117,682 527,217 (959,166) 204,988 10,890,721 Selling, General 2- (61,874) & administrative 9,641,655 1,910,262 1,367,115 1- 121,817 12,978,975 ----------- ---------- ---------- ------------ ----------- Operating Income (Loss) 1,476,027 (1,383,045) (2,326,281) 145,045 (2,088,254) 2- 13,316 Other Income (Expense) 461,372 (1,722) 75,589 1- (23,848) 524,707 ----------- ---------- ---------- ------------ ----------- Income (Loss) before 1,937,399 (1,384,767) (2,250,692) 134,513 (1,563,547) Taxes Income Taxes 396,509 - - - 396,509 ----------- ---------- ---------- ------------ ----------- Net Income (Loss) $1,540,890 $(1,384,767) $(2,250,692) 134,513 $(1,960,056) ========== =========== =========== ============ ===========
1 - To record the adjustment to change LEC from a 9/30 year end to a 12/31/97 year end 2- To record the adjustment to change LAP from a 9/30 year end to a 12/31/97 year end 3- To eliminate intercompany sales from LAP to a DHB subsidiary -29- -----END PRIVACY-ENHANCED MESSAGE-----