<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 six month period ended December 31, 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 December 31, 1997, there were 4,446,017 shares of the issuer's Common Stock,
$0.01 par value, outstanding.
<PAGE>
DSSI CORPORATION
INDEX
Page
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Part I - Financial Information
Item 1 - Financial Statements 3
Item 2 - Management's Discussion and Analysis or Plan of Operation 9
Part II - Other Information
Item 1 - Legal Proceedings 9
Item 2 - Changes in Securities 9
Item 3 - Defaults Upon Senior Securities 10
Item 4 - Submission of Matters to a Vote of Security Holders 10
Item 5 - Other Information 10
Item 6 - Exhibits and Reports on Form 8-K 10
2
<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-month and six-month periods ended December 31,
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 ("Annual Report") for the year ended June 30, 1997
("Fiscal 1997").
Page
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Index to Financial Statements
Balance Sheets at December 31, 1997 (unaudited) and June 30, 1997 4
Statements of Operations and Accumulated Deficit (unaudited) for the
three and six months ended December 31, 1997 and 1996 5
Statements of Cash Flows (unaudited) for the six months ended
December 31, 1997 and 1996 6
Notes to Financial Statements 7
3
<PAGE>
DSSI Corporation
Balance Sheets, December 31, 1997 (Unaudited) and June 30, 1997
<TABLE>
<CAPTION>
December 31, June 30,
------------ ------------
1997 1997
Assets
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 639,189 $ 801,979
Accounts receivable, net of allowance of $20,000 at December 31, 1997
and $60,000 at June 30, 1997 26,486 53,073
Receivable from purchase holdback, net of allowance of $59,775 at December 31,
1997 and $0 at June 30, 1997 160,000
Prepaid expenses and other 6,116 42,044
------------ ------------
Total Current Assets 671,791 1,057,096
Equipment and improvements, net 1,255 1,506
Other Assets:
Deposits -- 8,585
------------ ------------
Total Assets $ 673,046 $ 1,067,187
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities of long-term debt and capital leases $ -- $ 233,213
Accounts payable and accrued expenses 39,081 72,346
------------ ------------
Total Current Liabilities 39,081 305,559
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 December 31, 1997 and
June 30, 1997 issued and outstanding 44,460 44,460
Additional paid-in-capital 15,118,555 15,118,555
Accumulated deficit (14,529,050) (14,401,387)
------------ ------------
Total Stockholders' Equity 633,965 761,628
------------ ------------
Total Liabilities and Stockholders' Equity $ 673,046 $ 1,067,187
============ ============
</TABLE>
See notes to financial statements
4
<PAGE>
DSSI Corporation
Statements of Operations and Accumulated Deficit (unaudited) For the three and
six-month periods ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 7,220 $ 513,046 $ 14,281 $ 1,108,666
Cost of sales 281,707 629,395
------------ ------------ ------------ ------------
Gross profit 7,220 231,339 14,281 479,271
Operating expenses:
Research and development 95,201 193,569
Selling, general and administrative 95,188 283,343 141,944 594,876
------------ ------------ ------------ ------------
95,188 378,544 141,944 788,445
------------ ------------ ------------ ------------
Net loss (87,968) (147,205) (127,663) (309,174)
Accumulated deficit - beginning of period $(14,441,082) (14,605,177) (14,401,387) (14,443,208)
============ ------------ ------------ ------------
Accumulated deficit - end of period $(14,529,050) $(14,752,382) $(14,529,050) $(14,752,382)
============ ============ ============ ============
Net loss per share
$ (0.02) $ (0.03) $ (0.03) $ (0.07)
============ ============ ============ ============
Weighted average number of shares
outstanding 4,446,017 4,246,017 4,446,017 4,246,017
============ ============ ============ ============
</TABLE>
See notes to financial statements
5
<PAGE>
DSSI Corporation
Statement of Cash Flows for the Six Months (unaudited)
Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Six Months ended December 31,
----------------------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(127,663) $(309,174)
Adjustments to reconcile net loss to net cash used
Depreciation and amortization 251 33,738
Decrease (increase) in assets:
Accounts receivable 26,587 122,986
Receivable from purchase holdback 160,000 --
Inventory -- 97,700
Prepaid expenses and other 35,928 (44,476)
Increase (decrease) in liabilities
Accounts payable and accrued expenses (33,265) 1,074
--------- ---------
Net cash provided by (used in) operating activities 61,838 (98,152)
Cash flows from investing activities:
Expenditures for equipment and improvements -- (17,358)
Recovery or loss of deposits 8,585 --
--------- ---------
Net cash provided by (used in) investing activities 8,585 (17,358)
Cash flows used in financing activities:
Proceeds from non-bank financing -- 210,258
Principal payments on debt and capital leases (233,213) (112,102)
--------- ---------
Net cash provided by (used in) financing activities (233,213) 98,156
--------- ---------
Net decrease in cash and cash equivalents (162,790) (17,354)
Cash and cash equivalents:
Beginning of period 801,979 91,807
--------- ---------
End of period $ 639,189 $ 74,453
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 957 $ 1,361
========= =========
</TABLE>
See notes to financial statements
6
<PAGE>
DSSI CORPORATION
Notes to Financial Statements
For the Six Months Ended December 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 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 had 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. Casco increased
its offer price from the originally accepted amount of $1,600,000 adjusted for
net asset fluctuations to partially offset the effect of this payment.
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. The shareholder meeting will
be held February 17, 1998.
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 $470,024 during
the first six months of Fiscal 1997. There were no sales during the first six
months of Fiscal 1998.
7
<PAGE>
C. Accounts Receivable
As of December 31, 1997, the Company reduced the reserve requirement on its
accounts receivable based upon the timely compliance, over the last six months,
by a former customer with an extended payment plan to satisfy its obligation to
the Company. The Company believes the total remaining obligation, which
approximates the outstanding accounts receivable balance as of December 31,
1997, will be collected.
D. Receivable from Purchase Holdback
On December 16, 1997, the date for the payment by Casco of the holdback relating
to the sale of substantially all of the Company's assets to Casco, Casco
notified the Company it was experiencing some product performance problems and
wished to investigate any claim under the purchase and sale agreement before
paying the holdback. Subsequent discussions resulted in the payment of $90,000
of the holdback on December 31, 1997 with Casco given additional time to
investigate the product performance. The Company contends that Casco tested the
product prior to shipment, which was Casco's responsibility, and allowed the
product to go unrefrigerated for a period during the transfer which could cause
product failure. The Company contends that any claim Casco may have should be
with their insurer, not the Company. However since the outcome is not certain at
the time of this filing the Company has reserved the remaining balance of the
holdback.
E. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at December 31, 1997 and June 30, 1996
consist of the following:
December 31 June 30
----------- -------
Accounts payable - trade $ 17,289 $ 22,346
Accrued expenses 21,792 50,000
------------ ------------
$ 39,081 $ 72,346
============ ============
E. Earnings Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per
Share. This new standard requires dual presentation of basic and diluted
earnings per share (EPS) on the face of the statement of operations and the
reconciliation of the numerators and denominators of the basic and diluted EPS
calculations. The Company adopted this standard in Fiscal Year 1998, which
requires the restatement of previously reported EPS data.
Basic and diluted loss per share is the same for the three-month period ended
September 30, 1997 and 1996 and the and the six-month period ended December 31,
1997 and 1996 which is shown on the statement of operations. Options and
warrants outstanding were excluded from the calculation of diluted loss per
share since the options and warrants would be antidilutive due to the loss.
Options outstanding, exercise prices and average market prices are as follows:
<TABLE>
<CAPTION>
Options Outstanding Exercise Price Average Market Price
------------------- -------------- --------------------
<S> <C> <C> <C>
September 30, 1996 317,119 $0.25 - $8.61 $0.50
December 31, 1996 317,119 " " $0.37
September 30, 1997 345,000 $0.25 - $0.62 $1.25
December 31, 1997 345,000 " " $1.50
</TABLE>
8
<PAGE>
Warrants outstanding, exercise prices and average market price are as follows:
<TABLE>
<CAPTION>
Options Outstanding Exercise Price Average Market Price
------------------- -------------- --------------------
<S> <C> <C> <C>
September 30, 1996 2,516,963 $2.82 - $12.50 $0.50
December 31, 1996 591,911 " " $0.37
September 30, 1997 416,029 $2.28 - $3.46 $1.25
December 31, 1997 416,029 " " $1.50
</TABLE>
G. Income Taxes
The tax effects of significant items comprising the Company's net deferred taxes
as of December 31, 1997 were as follows:
Deferred Tax Assets:
Allowance for doubtful accounts $ 20,000
Operating loss carryforwards 6,240,000
Valuation allowance (6,260,000)
--------------
$ -
==============
There was an increase of $36,000 in the valuation allowance in the six months
ended December 31, 1997.
There was no provision for current income taxes for either the first six 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 six
months of Fiscal 1998 is interest income on its cash and cash equivalents and
its expenses consist of maintaining the corporate shell in good standing.
Liquidity and Capital Resources
As of December 31, 1997, the Company had working capital of $632,710 and a cash
balance of $639,189. 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.
9
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None
(b) Reports on Form 8-K.
None
10
<PAGE>
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: February 13, 1998
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000828747
<NAME> DSSI CORPORATION
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1998
<PERIOD-START> JUL-01-1997 JUL-01-1997
<PERIOD-END> DEC-31-1997 DEC-31-1997
<CASH> 639,189 0
<SECURITIES> 0 0
<RECEIVABLES> 106,261 0
<ALLOWANCES> (79,775) 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 671,791 0
<PP&E> 1,501 0
<DEPRECIATION> (246) 0
<TOTAL-ASSETS> 673,046 0
<CURRENT-LIABILITIES> 39,081 0
<BONDS> 0 0
0 0
0 0
<COMMON> 44,450 0
<OTHER-SE> 589,505 0
<TOTAL-LIABILITY-AND-EQUITY> 673,046 0
<SALES> 0 0
<TOTAL-REVENUES> 7,220 14,281
<CGS> 0 0
<TOTAL-COSTS> 95,188 141,944
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (87,968) (127,663)
<EPS-PRIMARY> (0.02) (0.03)
<EPS-DILUTED> (0.02) (0.02)
</TABLE>
