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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A-1
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 28,1996
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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Commission file number 0-18863
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Armor Holdings, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 59-3392443
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
191 Nassau Place Road, Yulee, Florida 32097
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(Address of principal executive offices) (Zip Code)
(904)261-4035
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's class of common
equity, as of October 18, 1996: $.01 par value Common Stock - 7,556,084
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PART I
Item 1. Financial Statements
ARMOR HOLDINGS, INC. AND SUBSIDIARY
Three and Nine Month Periods Ended September 28, 1996 and September 30, 1995
The accompanying condensed consolidated financial statements of Armor Holdings,
Inc. and its wholly owned subsidiary, NIK Public Safety, Inc. (the "Company")
are unaudited for the interim periods, but include all adjustments (consisting
only of normal recurring accruals and the elimination of all intercompany items
and transactions) which management considers necessary for the fair
presentation of results as of September 28, 1996 and for the three and nine
month periods ended September 28, 1996 and September 30, 1995.
Moreover, these condensed consolidated financial statements should be read in
conjunction with the financial statements included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995.
2
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ARMOR HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
September 28,
ASSETS 1996
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(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 8,515,553
Accounts receivable, net of allowance for
doubtful accounts of $86,554 2,760,551
Inventories 1,486,444
Prepaid expenses and other current assets 759,297
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Total current assets 13,521,845
PROPERTY, PLANT AND EQUIPMENT, net 514,540
REORGANIZATION VALUE IN EXCESS OF
AMOUNTS ALLOCABLE TO IDENTIFIABLE
ASSETS, net 3,464,329
PATENTS AND TRADEMARKS 1,855,000
OTHER ASSETS 1,000,785
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TOTAL ASSETS $20,356,499
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See notes to condensed consolidated financial statements.
3
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ARMOR HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET (CONTINUED)
September 28,
1996
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(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capitalized lease obligation $ 7,613
Liability for acquisition of assets 1,232,493
Accounts payable, accrued expenses
and other current liabilities 1,894,525
Taxes currently payable 226,000
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Total current liabilities 3,360,631
5% CONVERTIBLE SUBORDINATED NOTES 11,500,000
CAPITALIZED LEASE OBLIGATION, less current portion 21,907
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Total liabilities 14,882,538
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000
shares authorized; 0 shares issued and outstanding --
Common stock, $.01 par value, 50,000,000
shares authorized; 6,926,642 shares issued
and outstanding 69,266
Additional paid-in capital 3,986,245
Retained earnings 1,418,450
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Total stockholders' equity 5,473,961
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $20,356,499
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See notes to condensed consolidated financial statements.
4
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ARMOR HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS ENDED
<TABLE>
<CAPTION>
September 28, September 30,
1996 1995
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(unaudited) (unaudited)
<S> <C> <C>
NET SALES $4,451,807 $2,929,806
COST AND EXPENSES:
Cost of sales 2,643,968 1,824,104
Selling, general and administrative expenses 1,292,413 892,411
Interest expense, net 52,111 71,697
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OPERATING INCOME 463,315 141,594
Non-Operating Income -- 227,500
Amortization of deferred debt issue costs 48,835 --
Amortization of reorganization value in excess of amounts
allocable to identifiable assets 12,750 --
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INCOME BEFORE INCOME TAXES 401,730 369,094
INCOME TAXES 163,000 143,000
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NET INCOME $ 238,730 $ 226,094
========== ==========
EARNINGS PER COMMON SHARE AND
COMMON EQUIVALENT SHARE $ .03 $ .03
WEIGHTED AVERAGE COMMON SHARES
AND COMMON EQUIVALENT SHARES 7,757,657 6,507,274
</TABLE>
See notes to condensed consolidated financial statements.
5
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ARMOR HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENTS
FOR THE NINE MONTHS ENDED
<TABLE>
<CAPTION>
September 28, September 30,
1996 1995
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(unaudited) (unaudited)
<S> <C> <C>
NET SALES $11,314,656 $ 8,405,940
COST AND EXPENSES:
Cost of sales 7,012,219 5,260,526
Selling, general and administrative expenses 3,268,901 2,409,202
Interest expense, net 154,570 201,374
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OPERATING INCOME 878,966 534,838
Non-Operating Income -- 227,500
Amortization of deferred debt issue costs 76,949 --
Amortization of reorganization value in excess of
amounts allocable to identifiable assets 38,245 --
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INCOME BEFORE INCOME TAXES 763,772 762,338
INCOME TAXES 310,000 297,000
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NET INCOME $ 453,772 $ 465,338
=========== ===========
EARNINGS PER COMMON SHARE AND
COMMON EQUIVALENT SHARE$ .06 $ .07
WEIGHTED AVERAGE COMMON SHARES
AND COMMON EQUIVALENT SHARES 7,646,024 6,523,050
</TABLE>
See notes to condensed consolidated financial statements.
6
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ARMOR HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
<TABLE>
<CAPTION>
September 28, September 30,
1996 1995
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(unaudited) (unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 453,772 $ 465,338
Adjustments to reconcile net income to cash used in
operating activities:
Depreciation and amortization 235,414 103,687
Deferred income taxes 84,000 297,000
Increase in accounts receivable (440,797) (108,409)
Increase in inventories (384,509) (273,955)
Increase in prepaid expenses
and other assets (2,314,911) (60,741)
Increase (decrease) in accounts payable, accrued
liabilities and other current liabilities 2,249,125 (476,282)
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Net cash used in operating activities (117,906) (53,362)
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INVESTING ACTIVITIES:
Capital expenditures (160,401) (68,527)
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Net cash used in investing activities (160,401) (68,527)
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FINANCING ACTIVITIES:
Preferred stock dividends (22,155) (43,323)
Exercise of stock grants and options 95,724 --
Net repayments under line of credit (2,050,647) (130,129)
Repayments of long-term debt and capitalized lease
obligation (29,781) --
Net proceeds from issuance of
5% convertible subordinated notes 10,527,747 --
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Net cash provided by (used in) financing activities 8,520,888 (173,452)
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INCREASE (DECREASE) IN CASH AND CASH 8,242,581 (295,341)
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 272,972 315,231
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,515,553 $ 19,890
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
7
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ARMOR HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For The Three and Nine Month Periods Ended September 28, 1996 and
September 30, 1995 (unaudited)
1. Basis of Presentation
The condensed consolidated financial statements include the accounts of Armor
Holdings, Inc. and its wholly - owned subsidiary, NIK Public Safety, Inc. (the
"Company"). The financial statements have been prepared in accordance with the
rules and regulations of the Securities and Exchange Commission related to
interim financial statements.
The financial statements should be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 1995 included in
the Company's Annual Report on Form 10-KSB for the year ended December 31,
1995.
All adjustments of a normal recurring nature which, in the opinion of
management, are necessary to present a fair statement of the results for the
interim periods have been made.
2. Acquisition of NIK Assets
On July 15, 1996, the Company acquired, effective as of July 1, 1996, certain
assets of the NIK Public Safety Product Line from Ivers-Lee Corporation (the
"NIK Assets"). The purchase price of the acquisition was 310,931 shares (the
"NIK Shares") of the Company's common stock valued at $2,400,000, plus $255,000
in costs incurred related to the purchase. The Company acquired inventory,
receivables and certain intangibles. The total purchase price was allocated to
the NIK Assets based upon their respective relative fair market values.
Patents, trademarks and other intangibles will be amortized over their
respective useful lives, which range from 5-25 years. On the closing date, the
Company advanced to the seller $1,200,000 (the "Advance"). The Advance will not
bear interest and must be repaid with the first $1,200,000 realized from the
sales of the NIK Shares. In the event that the sum of the aggregate net
proceeds from the sales of the NIK Shares and the Advance (the "Sum") is less
than $2,400,000 by December 31, 1996, the Company has agreed to pay the
difference between the Sum and $2,400,000 to the seller. Alternatively, if at
any time the Sum is greater than $2,400,000, the seller has agreed to pay the
difference to the Company.
3. Income Taxes
As of January 1, 1996, the Company had an income tax net operating loss carry
forward ("NOL") of approximately $5,000,000. Effective with the change in
control of the Company by Kanders Florida Holdings, Inc. on January 18, 1996,
the utilization of the NOL became restricted to approximately $300,000 per
year. As a result, the Company has income taxes currently payable. In previous
years, the future benefits obtained by the Company from utilization of the NOL
had been applied to reduce the reorganization value in excess of amounts
allocable to identifiable assets.
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Beginning in 1996, and for future years, amortization expenses related to this
intangible will be a minimum of approximately $51,000 per year which is
non-deductible for income tax purposes.
4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on July 16, 1996. Of the
6,812,490 shares of common stock entitled to vote at the meeting, 5,426,401
shares of common stock were present in person or by proxy and entitled to vote.
Such number of shares represented approximately 80% of the Company's
outstanding shares of common stock.
At the meeting, the Company's Shareholders approved: (i) an amendment to the
Company's Amended and Restated Articles of Incorporation changing the name of
the Company to "Armor Holdings, Inc."; (ii) the reincorporation of the Company
under the laws of the State of Delaware by means of a merger of the Company
with and into a newly formed wholly-owned subsidiary incorporated in the State
of Delaware for such purpose; (iii) an amendment to the Company's Amended and
Restated Articles of Incorporation, increasing the number of authorized shares
of the Company's common stock from 15,000,000 shares to 50,000,000 shares; (iv)
an amendment to the Company's Amended and Restated Articles of Incorporation,
creating a series of preferred stock, with the right conferred upon the Board
of Directors to set the dividend, voting, conversion, liquidation and other
rights, as well as such redemption or sinking fund provisions and the
qualifications, limitations and restrictions with respect thereto, as the Board
may from time to time determine; (v) the adoption of the Company's 1996 Stock
Option Plan of which 1,500,000 shares of common stock are reserved for
issuance; and (vi) the adoption of the Company's 1996 Non-Employee Directors
Stock Option Plan of which 300,000 shares of common stock are reserved for
issuance.
5. Acquisition of Defense Technology Corporation of America
On September 30, 1996, the Company acquired, through its newly formed
wholly-owned subsidiary, Defense Technology Corporation of America, a Delaware
corporation ("DTC"), substantially all of the assets of Defense Technology
Corporation of America, a Wyoming corporation ("DTCoA"). The purchase price was
$1,000,000 cash, 629,442 shares of the Company's common stock, having a value
of $4,650,000, the assumption of certain liabilities totalling approximately
$2,300,000 and $500,000 of costs associated with completing the transaction.
The total purchase price was allocated to the acquired assets based upon their
respective relative fair market values. Patents, trademarks and other
intangibles will be amortized over their respective useful lives, which range
from 5-25 years.
In order to secure the obligations of DTCoA and its seller in connection with
the transaction, 270,728 shares were delivered to Union Bank of Switzerland,
New York Branch ("UBS"), as escrow agent pursuant to an escrow agreement dated
September 30, 1996. One half of the shares held in escrow will be released
March 15, 1998 and the remainder will be held in escrow until June 30, 1999.
9
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Subject to a letter agreement dated August 16, 1996 (the "Key Bank Letter
Agreement") and in connection with the DTC transaction, 358,714 of the shares
(the "Key Bank Shares") issued at closing, having a value of $2,650,000 (the
"Amount Due"), were issued to Key Bank of Wyoming ("Key Bank") in consideration
for the release by Key Bank of its security interest in substantially all of
the assets of DTCoA. On the closing date, the Company advanced to Key Bank
$662,500 cash (the "Initial Amount") as an advance against the Amount Due. Also
on the closing date, the Company deposited $1,987,500 in an interest bearing
Certificate of Deposit ("CD") account at Key Bank (the "Deposit Account").
Subsequent to closing, any amounts paid to Key Bank on account of the Amount
Due, including the Initial Amount, or advances from the Deposit Account will
result in a reduction of the then outstanding balance of the Amount Due by a
like amount.
Pursuant to the Key Bank Letter Agreement, Key Bank agreed that upon the
registration of the Key Bank Shares, the Key Bank Shares would be sold,
provided that the Company would control, in its sole discretion, the timing,
manner and amount of Key Bank Shares to be sold; and in connection therewith,
the Company agreed to ensure that Key Bank realizes net proceeds from such
sales (the "Net Sale Proceeds"), which, together with any advances from the
Deposit Account and the Initial Amount will, in the aggregate, equal the Amount
Due, on or before September 30, 1997 (the "Maturity Date").
The Company will pay to Key Bank the remaining balance of the Amount Due in
accordance with the following schedule. The Company may at its option, however,
elect to prepay all or a portion of the Amount Due without penalty prior to the
Maturity Date:
Date: Payment Amount:
December 15, 1996 $300,000
January 31, 1997 $300,000
April 30, 1997 $350,000
July 31, 1997 $350,000
The Amount Due from time to time outstanding will accrue an effective annual
rate of interest equal to two thirds of the sum of the CD rate plus 1%. This
interest amount will be paid equally by DTCoA and the Company.
<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, thereunto duly
authorized.
ARMOR HOLDINGS, INC.
/s/ Robert R. Schiller
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Robert R. Schiller
Vice President of Corporate Development
Dated October 30, 1996
/s/ Carol T. Burke
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Carol T. Burke
Vice President of Finance
Dated October 30, 1996
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