<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 3 or 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
for the quarterly period ended September 30, 1997; or
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE
EXCHANGE ACT
for the transition period from ___________________ to ___________________
Commission file number 0-17293
DSSI Corporation
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Pennsylvania 22-2795073
---------------------------- ----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
P. O. Box 1570, West Chester, PA 19380
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(610) 696-3479
- --------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 5(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
--- ---
On September 30, 1997, there were 4,446,017 shares of the issuer's Common
Stock, $0.01 par value, outstanding.
2
<PAGE>
DSSI Corporation
INDEX
Page
----
Part I - Financial Information
Item 1 - Financial Statements 3
Item 2 - Management's Discussion and Analysis 9
or Plan of Operation
Part II - Other Information
Item 1 - Legal Proceedings 9
Item 2 - Changes in Securities 9
Item 3 - Defaults Upon Senior Securities 9
Item 4 - Submission of Matters to a Vote of Security Holders 9
Item 5 - Other Information 10
Item 6 - Exhibits and Reports on Form 8-K 10
3
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying unaudited condensed financial statements of DSSI Corporation
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and the instructions
to Form 10-QSB and Item 310 of Regulation S-B of the Securities and Exchange
Commission. Accordingly, the financial statements do not include all of the
information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the three months ended September 30,
1997 are not necessarily indicative of the results that may be expected for
the year ending June 30, 1998 ("Fiscal 1998"). The accompanying condensed
financial statements and notes thereto should be read in conjunction with the
Company's Annual Report on Form 10-KSB (the "Annual Report") for the year
ended June 30, 1997 ("Fiscal 1997").
Page
-----
Index to Financial Statements
Balance Sheets at September 30, 1997 (unaudited) and June 30, 1997 4
Statements of Operations and Accumulated Deficit (unaudited) for the
three months ended September 30, 1997 and 1996 5
Statement of Cash Flows (unaudited) for the three months ended
September 30, 1997 and 1996 6
Notes to Financial Statements 7
4
<PAGE>
DSSI Corporation
Balance Sheets, September 30, 1997 (Unaudited) and June 30, 1997
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
----------------- -----------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 606,203 $ 801,979
Accounts receivable, net of allowance of $50,000 at September 30, 1997
and $60,000 at June 30, 1997
4,411 53,073
Receivable from purchase holdback
156,000 160,000
Prepaid expenses and other
19,912 42,044
----------------- -----------------
Total Current Assets
786,526 1,057,096
Equipment and improvements, net
1,380 1,506
Other Assets:
Deposits
150 8,585
----------------- -----------------
Total Assets $ 788,056 $ 1,067,187
================= =================
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities of long-term debt and capital leases $ 10,388 $ 233,213
Accounts payable and accrued expenses
55,735 72,346
----------------- -----------------
Total Current Liabilities
66,123 305,559
Commitments and contingencies
- -
Stockholders' Equity
Class "A" preferred stock, $0.01 par value; 2,000
shares authorized; none issued
- -
Common stock, $0.01 par value; 20,000,000
shares authorized; 4,446,017 shares at September 30, 1997 and
June 30, 1997 issued and outstanding
44,460 44,460
Additional paid-in-capital
15,118,555 15,118,555
Accumulated deficit
(14,441,082) (14,401,387)
----------------- -----------------
Total Stockholders' Equity
721,933 761,628
----------------- -----------------
Total Liabilities and Stockholders' Equity $ 788,056 $ 1,067,187
================= =================
</TABLE>
See notes to financial statements
5
<PAGE>
DSSI Corporation
Statements of Operations and Accumulated Deficit (unaudited) For Three Months
ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
Three Months ended September 30,
1997 1996
------ ------
<S> <C> <C>
Revenues $ 7,061 $ 595,620
Cost of sales 347,688
----------------- -----------------
Gross profit
7,061 247,932
Operating expenses:
Research and development
98,368
Selling, general and administrative
46,756 311,533
----------------- -----------------
46,756 409,901
----------------- -----------------
Net loss
(39,695) (161,969)
Accumulated deficit - beginning of period $ (14,401,387) $ (14,443,208)
----------------- -----------------
$ (14,441,082) $ (14,605,177)
================= =================
Net loss per share $ (0.01) $ (0.04)
================= =================
Weighted average number of shares
outstanding 4,466,017 4,266,017
================= =================
</TABLE>
See notes to financial statements
6
<PAGE>
DSSI Corporation
Statements of Cash Flows for the Three Months (Unaudited)
Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
Three Months ended September 30,
---------------------------------
1997 1996
------ ------
Cash flows from operating activities:
<S> <C> <C>
Net loss
(39,695) (161,969)
Adjustments to reconcile net loss to net cash
used
Depreciation and amortization
126 16,909
Gain on sale of equipment held for sale
Decrease (increase) in
assets:
Accounts receivable
48,662 80,966
Receivable from holdback
4,000
Inventory
- 70,343
Prepaid expenses and other
22,132 (51,627)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses
(16,611) 23,036
------------ --------------
Net cash provided by (used in) operating activities
18,614 (22,342)
Cash flows from investing activities:
Expenditures for equipment and improvements
(14,631)
Recovery of deposits
8,435
------------ --------------
Net cash provided by (used in) investing activities
8,435 (14,631)
Cash flows from financing activities:
Proceeds from non-bank financing
- 95,258
Principal payments on debt and capital leases
(222,825) (74,900)
Net cash provided by financing activities (222,825) 20,358
------------ --------------
Net decrease in cash and cash equivalents
(195,776) (16,615)
Cash and cash equivalents:
Beginning of period
801,979 91,807
------------ --------------
End of period $ 606,203 $ 75,192
============ ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 574 $ 782
============ ==============
</TABLE>
See notes to financial statements
7
<PAGE>
DSSI CORPORATION
Notes to Financial Statements
For the Three Months Ended September 30, 1997 and 1996
A. Basis of Presentation
As a result of the net losses aggregating $15,070,555 from inception
through March 31, 1997, the Company's cash flows from operating activities had
been negative. Accordingly, the Company had been required to finance its
operations and research and development program primarily through proceeds
received from its initial public offering in May 1988, the exercise of
warrants thereafter and subsequent securities offerings, including the sale of
shares of the Common Stock through a rights offering in June and July, 1993.
The directors and other beneficial owners financed the Company from November
1994 until Fiscal 1997 with two private placements which resulted in aggregate
gross proceeds of $825,000 and subsequent secured loans in principal amounts
totaling $245,000. Total equity raised by the Company since inception is
$15,113,015.
During Fiscal 1997, the Board unanimously approved the sale
of substantially all of the assets to Casco Standards, Inc. ("Casco").
Effective June 16, 1997, Casco acquired the Company's inventory, capital
equipment (except for leasehold improvements) and intellectual property. Casco
also acquired the right to do business as Drug Screening Systems, Inc. Casco
paid $1,908,635 plus a payment for an agreed-upon inventory build-up of the
products. Sybron International Corporation ("Sybron"), Casco's ultimate
parent, reported revenues of $674.5 million and net income of $57.6 million
for its fiscal year ended September 30, 1996. Casco did not purchase the
accounts receivable of the Company. As part of the agreement, Casco agreed to
use its best efforts at collecting cash receipts for the Company. As of
September 30, 1997, substantially all unreserved accounts receivable have been
collected. As a condition of the agreement, the Company manufactured specific
quantities of finished goods to have a six-month supply on hand for Casco.
In April 1994, the Company, under the previous management, entered
into an exclusive license and distributorship agreement with AccuScreen Labs,
Inc. ("AccuScreen"). The Company granted AccuScreen the license to sell or
distribute the Company's drug screening panel to direct marketing purchasers
or to retailers in the United States. The license was for a term of five years
and six months from the date permission from the Food and Drug Administration
(the "FDA") to market the tests to direct marketing purchasers or to retailers
was obtained. AccuScreen has invested funds in the efforts to prepare for the
appropriate filings with the FDA, but, as of June 16, 1997, had not submitted
a filing. Casco determined that it did not want to accept the assignment of
the AccuScreen agreement and discussions among Casco, AccuScreen and the
Company resulted in a termination agreement whereby the Company paid
AccuScreen the sum of $600,000 upon closing of the Casco purchase. The
termination fee paid to AccuScreen was reflected as a charge to earnings in
Fiscal 1997 and is reflected in the Company's accumulated deficit. Casco
increased its offer price from the originally accepted amount of $1,600,000 as
adjusted for asset fluctuations by $350,000 to partially offset the effect of
this payment.
8
<PAGE>
The Board continued the Company subsequent to the closing with Casco as a
shell corporation, while seeking a potential business to enhance shareholder
value. On August 18, 1997, the Company entered into an agreement to sell a
controlling interest to Michael J. Blumenfeld who intends to have the Company
enter into the business of distributing sports equipment to the institutional
markets. Under this agreement, Mr. Blumenfeld will purchase 10,000,000 shares
of the Common Stock of the Company for $2,000,000. In addition, current
directors and a beneficial owner, or their designees will purchase 1,500,000
shares for $300,000. Upon completion of the transaction, the Company will
change its name to Collegiate Pacific, Inc. and purchase the assets Mr.
Blumenfeld has acquired in starting the operation. The transaction with Mr.
Blumenfeld is subject to shareholder approval, which will be sought by proxy
material filed pursuant to Section 14(a) of The Securities and Exchange Act.
B. Revenue Recognition
During Fiscal 1997, the Company recognized revenues at the time Product was
shipped. The Company had an arrangement with a customer whereby title and risk
of loss transfers to the customer upon transfer of Product from the Company's
finished goods inventory into a segregated refrigeration unit on the Company's
premises and, accordingly, the Company recognized revenues at the time such
Product was transferred. Sales under this arrangement totaled $248,928 during
the first three months of Fiscal 1997. There were no sales during the first
three months of Fiscal 1998.
C. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at September 30, 1997 and June 30, 1996
consist of the following:
September 30 June 30
------------ -------
Accounts payable - trade $ 38,510 $ 22,346
Accrued expenses 17.225 50,000
-------- --------
$ 55,735 $ 72,346
======== ========
D. Income Taxes
The tax effects of significant items comprising the Company's net deferred
taxes as of September 30, 1997 were as follows:
Deferred Tax Assets:
Allowance for doubtful accounts $ 20,000
Operating loss carryforwards 6,200,000
Valuation allowance (6,220,000)
-----------
$ -
===========
There was a decrease of $4,000 in the valuation allowance in the three months
ended September 30, 1997.
9
<PAGE>
There was no provision for current income taxes for either the first three
months of Fiscal 1998 or 1997.
Item 2. Management's Discussion and Analysis or Plan of Operation.
The Company sold its business during the fourth quarter of Fiscal 1997, and
since then has had no operations. The Company's only revenue in the first
three months of Fiscal 1998 is interest income on its cash & cash equivalents
and its expenses consist of maintaining the corporate shell in good standing.
Liquidity and Capital Resources
As of September 30, 1997, the Company had working capital of $720,403 and a
cash balance of $606,203. This position should allow the Company to
successfully complete the sale of the controlling interest in the Company to
Michael J. Blumenfeld as further explained in the Basis of Presentation
footnote to the Financial Statements.
PART II - OTHER INFORMATION
Item 1. Legal Proceeding
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
10
<PAGE>
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None
(b) Reports on Form 8-K.
A Form 8-K was filed on August 27, 1997 and Amended September 11,
1997 to include a copy of the Stock Purchase Agreement, describing the sale of
the controlling interest in the Company to Michael J. Blumenfeld.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, there unto duly
authorized.
DSSI CORPORATION
/s/ Patrick J. Brennan
--------------------------------------
Patrick J. Brennan, Vice President and
Chief Financial Officer
Date: November 11, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000828747
<NAME> DSSI CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-01-1997
<EXCHANGE-RATE> 1
<CASH> $606,203
<SECURITIES> 0
<RECEIVABLES> 210,411
<ALLOWANCES> (50,000)
<INVENTORY> 0
<CURRENT-ASSETS> 786,526
<PP&E> 1,506
<DEPRECIATION> 126
<TOTAL-ASSETS> 788,056
<CURRENT-LIABILITIES> 66,123
<BONDS> 0
0
0
<COMMON> 44,460
<OTHER-SE> 677,473
<TOTAL-LIABILITY-AND-EQUITY> 788,056
<SALES> 0
<TOTAL-REVENUES> 7,061
<CGS> 0
<TOTAL-COSTS> 46,756
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $(39,695)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
