UNITED STATES
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 quarterly period ended December 31, 1995.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 0-14273
DCX, INC.
(Exact name of registrant as specified in its charter)
COLORADO 84-0868815
................................ .....................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3002 N. State Highway 83, Franktown, Colorado 80115-0569
....................................................................
(Address of principal executive offices)
(Zip Code)
(303) 688-6070
.............................................
(Registrant's telephone number, including area code)
Not Applicable
.......................................................................
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
4,094,631 Common Shares were outstanding as of December 31, 1995.
<PAGE>
PART I, FINANCIAL INFORMATION
Item 1. Financial Statements
DCX, Inc. and Subsidiaries
Condensed and Consolidated Balance Sheets
December 31 September 30
1995 1995
(Unaudited) (Audited)
- -------------------------------------------------------------------------------
Assets
Current:
Cash and Cash equivalents $ 335,676 $ 125,844
Restricted cash 0 154,985
Accounts receivable 688,948 2,061,931
Inventories 1,204,845 810,922
Prepaid expenses 112,958 118,316
Subscriptions receivable 25,000 25,000
- -------------------------------------------------------------------------------
Total current assets 2,367,426 3,296,998
- -------------------------------------------------------------------------------
Property and equipment:
At cost 2,032,536 2,039,534
Less: accumulated depreciation (674,583) (653,031)
- -------------------------------------------------------------------------------
Net property and equipment 1,357,953 1,386,503
- -------------------------------------------------------------------------------
Other assets 146,431 131,431
- -------------------------------------------------------------------------------
$ 3,871,810 $ 4,814,932
===============================================================================
See accompanying summary of accounting policies
and notes to financial statements
2
<PAGE>
PART I, FINANCIAL INFORMATION
Item 1. Financial Statements
DCX, Inc. and Subsidiaries
Condensed and Consolidated Balance Sheets
December 31 September 30
1995 1995
(Unaudited) (Audited)
- -------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current:
Notes payable $ 965,207 $ 1,026,024
Accounts payable 324,430 588,965
Accounts payable - terminated contracts 87,697 373,042
Accrued expenses 124,908 206,150
Accrued litigation settlement 0 150,000
- -------------------------------------------------------------------------------
Total current liabilities 1,502,242 2,344,181
Long-term debt, less current maturities 362,897 362,897
- -------------------------------------------------------------------------------
Total liabilities 1,865,139 2,707,078
- -------------------------------------------------------------------------------
Commitments and Contingencies (Note 5)
Stockholders' Equity:
Preferred stock, $.001 par value, 20,000,000 shares
authorized, no shares issued or outstanding
Common stock, no par value, 2,000,000,000 shares
authorized; shares issued and
outstanding, 4,115,631 and 3,453,569 at
June 30, 1995 and 1994, respectively. 4,765,540 4,765,540
Additional paid-in capital 329,384 329,384
Subscriptions receivable (179,000) (179,000)
Accumulated deficit (2,909,253) (2,808,070)
- -------------------------------------------------------------------------------
Total stockholders' equity 2,006,671 2,107,854
- -------------------------------------------------------------------------------
$ 3,871,810 $ 4,814,932
===============================================================================
See accompanying summary of accounting policies
and notes to financial statements
3
<PAGE>
PART I, FINANCIAL INFORMATION
Item 1. Financial Statements
DCX, Inc. and Subsidiaries
Condensed and Consolidated Statements of Operations
(Unaudited)
Three months ended
December 31
1995 1994
- -------------------------------------------------------------------------------
Net sales $ 678,569 $ 478,988
Cost of sales 608,013 292,331
- -------------------------------------------------------------------------------
Gross profit on sales 70,556 186,657
- -------------------------------------------------------------------------------
General and administrative expenses 232,698 354,472
- -------------------------------------------------------------------------------
Loss from operations (162,142) (167,815)
Other income (expense):
Interest expense ( 37,222) ( 12,517)
Investment and other income 10,357 2,866
Other expense 0 ( 433)
Forgiveness of debt 87,826 0
- -------------------------------------------------------------------------------
Net loss $ (101,181) $ (177,899)
===============================================================================
Net loss per share $ (.02) $ (.05)
===============================================================================
Weighted average number of shares of
common stock outstanding 4,105,121 3,853,569
===============================================================================
See accompanying summary of accounting policies
and notes to financial statements
4
<PAGE>
PART I, FINANCIAL INFORMATION
Item 1. Financial Statements
DCX, Inc. and Subsidiaries
Condensed and Consolidated Statements of Cash Flows
(Unaudited)
For the Three-Month Periods Ended December 31, 1995 1994
- -------------------------------------------------------------------------------
Operating activities:
Net loss $ (101,181) $ (177,899)
Adjustment to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 21,552 8,801
(Increase) decrease in accounts receivable 1,222,979 (160,038)
Increase in inventory (393,923) ( 73,225)
(Increase) decrease in prepaid expenses (82,073) 105,060
(Increase) decrease in other assets 72,431 (49,623)
(Decrease) increase in accounts payable (269,036) 131,744
(Decrease) increase in other liabilities (81,241) 74,124
- -------------------------------------------------------------------------------
Net cash provided by (used in)
operating activities 389,508 (141,056)
- -------------------------------------------------------------------------------
Investing activities:
Acquisition of property and equipment 6,999 ( 45,879)
- -------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities 6,999 ( 45,879)
- -------------------------------------------------------------------------------
Financing activities:
Payments on long-term debt, net (341,660) (26,311)
Stock subscriptions paid/issuance
of common stock 95,500
- -------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities (341,660) 69,189
- -------------------------------------------------------------------------------
Net increase (decrease) in cash 54,847 (117,746)
- -------------------------------------------------------------------------------
Cash and cash equivalents,
beginning of period $ 280,829 $ 201,561
- -------------------------------------------------------------------------------
Cash and cash eqivalents,
end of period $ 335,676 $ 83,815
===============================================================================
See accompanying summary of accounting policies
and notes to financial statements
5
<PAGE>
DCX, INC.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Condensed Consolidated Financial Statements
The condensed consolidated financial statements included herein have been
prepared by DCX, INC. without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. DCX, INC. believes that the disclosures
are adequate to make the information presented not misleading. In the opinion of
management, the accompanying unaudited consolidated financial statements contain
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the Company's consolidated financial position as of December 31,
1995, the consolidated results of its operations for the three-periods ended
December 31, 1994, and 1995 and statements of cash flows for the three-month
periods then ended.
The accounting policies followed by the Company are set forth in the annual
report of September 30, 1995, filed on Form 10-K, and the audited consolidated
financial statements therein with the accompanying notes thereto. While
management believes the procedures followed in preparing these consolidated
financial statements are reasonable, the accuracy of the amounts are in some
respects dependent upon the facts that will exist, and procedures that will be
accomplished by DCX, INC. later in the year.
During April, 1994, the Company formed a subsidiary corporation, GeoStars,
International, Inc. which in turn subsequently formed two subsidiary operating
corporations to provide products and services in the geographic information
services (GIS) arena. Accordingly, these quarterly consolidated financial
statements represent the consolidated results of operations. All intercompany
balances and transactions have been eliminated in the consolidation of the
financial statements.
The consolidated results of operations for the three-month period ended December
31, 1995, are not necessarily indicative of the results to be expected for the
full year ending September 30, 1996.
(2) Accounts Receivable
Accounts receivable contain amounts computed under the cost-to-cost method to
determine percentage of completion as described in the Form 10-K for September
30, 1995. A portion of the total amount of receivables represents unrecovered
costs and estimated profits subject to future negotiation and represented by
certain portions of a settlement proposal and related claim asserted against the
Department of Defense for contracts terminated by the Government (See Note 10 to
the financial statements accompanying the Form 10-K and Note 4, below). Such
receivables amounted to $197,467 at December 31, 1995 and $1,702,009 at
September 30, 1995 as compared to $2,062,550 at December 31, 1994.
(3) Provision for Income Taxes
At the beginning of the fiscal year the Company had net operating loss
carryforwards of $2,053,000 with expirations through 2010. At December, 1995,
the amount of the net operating loss carryforward balance is estimated at
$2,154,000. The Company expects to incur a minimal amount of alternative minimum
tax for the fiscal year. Since the Company is unable to determine that deferred
tax assets exceeding tax liabilities are more likely than not to be realized, it
will record a valuation allowance equal to the excess deferred tax assets at
fiscal year end.
6
<PAGE>
(4) Terminated Contracts
As reported in the Form 10-K for September 30, 1995, the Company and the Defense
Logistics Agency (DLA) agreed to a final settlement in November, 1995, on two of
three terminated contracts. The last partial payment, therefor, was received in
January, 1996.
A third contract with DLA required the Company to design, develop test and
manufacture light sets to a specified schedule. Testing of the lights was
subcontracted; scheduling delays resulting from a higher priority Government
contract caused the Company to miss the contractually required date for an
environmental test report by three days. Federal regulations require a delivery
date extension equal to the Government caused delay. The contract was terminated
for default by the Government in July, 1988. The Company asserted in July 1991
hearings the termination for default was erroneous as it resulted from
Government caused delays in testing and, therefor, the termination should be
characterized as for the convenience of the Government. The Company received a
decision from the ASBCA holding for the Government. The Company filed an appeal
before the U.S. Court of Appeals for the Federal Circuit; oral arguments were
presented on February 7, 1996. Were the Company not to prevail, it could record
a loss of approximately $521,000. Neither of the possible results is recorded in
the financial statements as the ultimate outcome cannot be determined at
present.
See also the more detailed explanation of terminated contracts in Note 10 to the
Consolidated Financial Statements for September 30, 1995, as filed on Form 10-K.
(5) Lease Obligations
The Company leases various equipment under capital leases that expire through
June 2000 as noted in Note 7 to the Financial Statements in Form 10-K, September
30, 1995.
7
<PAGE>
PART I, ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition:
Liquidity.
Final negotiations related to two terminated Government contracts were recently
concluded. (See Form 10-K, Item 3, Legal Proceedings, and Item 7, MD & A,
Liquidity) As a result the Company received three payments in final settlement,
the last of which arrived during January, 1996. A third contract was also
appealed; it is now in the U.S. Court of Appeals where oral agruments were
recently heard. (See Note 4, above.)
Cash and marketable securities increased $209,832 to $335,676 from $125,844 at
September 30, 1995, as a result of payments received for the terminated
contracts. The increase resulted primarily from cash provided by operations,
$389,508 while cash was used for debt reduction payments $341,600.
The Company presently has working capital of $865,184 as compared to $1,488,720
at December 31, 1994, and to $952,817 at the beginning of the fiscal year. The
primary causes for the decrease from a year ago are the payments on long term
debt of $370,530, and reduction in terminated contract payables of $254,470 and
the Company's operating losses during that period. The decrease in accounts
receivable was used as noted, as well as to lay in materials for the Company's
increasing contract backlog.
The Company's current ratio, the ratio of total current assets to total current
liabilities, increased to 1.58:1 which compares to 1.63:1 a year ago and is
improved over 1.41:1 at September 30, 1995.
Capital Resources.
Until fiscal year 1993 the Company's primary source of liquidity historically
consisted of cash flow from operations. During fiscal years 1993 through 1996
the Company received reimbursements of from the two successfully litigated
terminated contracts in the form of a number of partial payments against the
settlement proposals. As a result of final negotiations concluded with Defense
Logistics Agency, the Company has received the remaining amounts of the agreed
settlement.
Subsequent to this quarter, the Company completed a refinancing of its real
property mortgage and reduced monthly cash payments by $6,000. This is the first
phase of its refinancing efforts and provides an interim period during which it
expects to secure permanent financing to consolidate its real property mortgage
and the note payable which matures on June 3, 1996. The Company's mortgage
financing advisor is confident of completing the phase two consolidation in a
timely manner. See also the "Going Concern Issues" caption under Item 7, MD & A,
Liquidity, of Form 10-K.
The Company entered into a definitive agreement to purchase substantially all
the assets and liabilities of Westinghouse Landmark GIS, Inc., a wholly owned
subsidiary of Westinghouse Electric Corporation, on January 11, 1996. (See
"Major Asset Purchase Agreement" caption under Item 7 of Form 10-K). In order to
raise funds for the $2.4 million purchase price which is due at closing on March
5, 1996, and for both Landmark and Company manufacturing working capital
requirements, the Company issued a private offering memorandum for the sale of
its securities on February 7, 1996.
The Company's long-term liquidity requirements may be significant in order to
implement its plans. While confident the funds will be secured, there can be no
guarantee the efforts will be successful.
8
<PAGE>
Results of Operations:
First Quarter of Fiscal Year 1996.
During the first quarter of fiscal year 1996 net sales increased by $199,581, or
42 percent, over the same period of the prior year. Cost of sales was $608,013,
or 90 percent of sales, and resulted in a narrow gross profit of $70,556, or 10
percent of sales. The gross margin decreased significantly from 24 percent of
sales for the same period of the prior year. The decrease in gross profit is
attributable to the learning curve associated with complex new products in
certain new contracts. It is expected to return to normal levels in the coming
quarter. Sales increases during the current fiscal year resulted from
restructuring in the defense industry causing prime contractors to outsource
more work.
General and Administrative expenses of $232,698 for the current period decreased
$121,774 from a year ago and reflect the control efforts of management and the
curtailment of nonproductive GIS subsidiaries. After factoring out acquisition
expenses of $49,509, G & A expenses amount to $183,189. Interest expense
increased because of capital lease imputed interest costs this quarter;
investment income increased as a result of increased cash balance on hand. In
liquidating a $287,826 note balance related to the terminted contracts the
Company recorded a discount of $87,826 as forgiveness of debt.
Restricted cash and accrued litigation settlement both decreased to nil as a
result of the release of a bond (posted by the Company to indemnify a Director
of the Company) to a former employee. The release resulted from a final decision
on a case which was pending before the Colorado Court of Appeals. The finding
was for the plaintiff and the expense had been recorded in a prior year.
First Quarter of Fiscal Year 1995.
During the first quarter of fiscal year 1995 net sales increased by $171,298, or
56 percent, over the same quarter of the prior year. Cost of sales was $292,331,
or 61 percent of sales, and resulted in a gross profit of $186,657, or 39
percent of sales which compares favorably to gross profit of 27 percent of sales
for the same period of the prior year. the increase was atributable to the the
increased volume of production during the current quarter.
General and administrative expenses for the quarter reflected the effects of
funding the development stage subsidiaries. While G & A expenses had increased
$236,557 over the same period of the prior year, approximately $164,228 resulted
from financial support developing the subsidiaries. After factoring out this
amount, G & A expenses related to manufactuirng operations would amount to
$117,915, or a decrease of almost 30 percent from the prior year. While interest
expense has decreased slightly, investment income decreased by $6,594, or 69
percent from the prior year because of decreased amounts of cash and marketable
securities on hand.
While sales increased during the quarter as compared to the same period of the
prior year, the Company experienced a net loss of $177,899, or $.05 per share.
Of this amount, approximately $153,678, or $.04 per share, resulted from
activities related to the GIS subsidiaries resulting in a loss per share of $.01
from activities comparable to the prior year's first quarter.
Contract Backlog
The Company's manufacturing operation has active funded contracts and awarded
work amounting to $7.1 million as compared to an approximate $5.4 million
backlog with $4.2 million of uncompleted work a year prior. The current backlog
contains approximately $6.5 million of uncompleted work of which approximately
$.5 million is unfunded. Deliveries on funded orders are scheduled over the next
40 months. The Company is aggressively bidding opportunities with prime
contractors for defense opportunities and sends its technical staff to meet
personally with program managers in order to more competitively meet their
requirements. The Company is confident that during the ensuing year these
9
<PAGE>
projects will result in additional orders as during the past fiscal year. In
addition, the Company continues to be invited to bid on more projects with new
and existing customers.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K.
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
D C X , I N C .
Dated: February 16, 1996
/S/ FREDERICK G. BEISSER
---------------------------------------
Frederick G. Beisser
Chief Financial Officer,
Secretary & Treasurer
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 335,676
<SECURITIES> 0
<RECEIVABLES> 688,948
<ALLOWANCES> 0
<INVENTORY> 1,204,845
<CURRENT-ASSETS> 2,367,426
<PP&E> 2,032,426
<DEPRECIATION> 674,583
<TOTAL-ASSETS> 3,871,810
<CURRENT-LIABILITIES> 1,502,242
<BONDS> 0
0
0
<COMMON> 4,765,540
<OTHER-SE> 2,758,869
<TOTAL-LIABILITY-AND-EQUITY> 3,871,810
<SALES> 678,569
<TOTAL-REVENUES> 678,569
<CGS> 608,013
<TOTAL-COSTS> 608,013
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,222
<INCOME-PRETAX> (101,181)
<INCOME-TAX> 0
<INCOME-CONTINUING> (101,181)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (101,181)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
