UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996
Commission File Number 0-28348
DBS INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 84-1124675
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
495 Miller Avenue, Mill Valley, California 94941
(Address of principal executive offices) (Zip Code)
(415)380-8055
(Registrant's telephone number, including area code)
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:
Yes [X] No[ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common stock, $.0004 Par Value:
5,787,421 shares outstanding as of June 30, 1996.
Transitional Small Business Disclosure Format:
Yes [ ] No [X]
<PAGE>
PART I FINANCIAL INFORMATION
Condensed Consolidated Financial Statements (Unaudited)
The unaudited condensed financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
the Company believes the information included herein, when read in
conjunction with the financial statements and related notes included in
the Company's Annual Report on Form 10-KSB for the year ended December
31, 1995, filed with the Securities and Exchange Commission, to be not
misleading. Further, the following financial statements reflect, in the
opinion of management, all adjustments necessary to present fairly the
financial position and results of operations as of and for the periods
indicated.
<PAGE>
Item 1. Financial Statements
DBS INDUSTRIES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
June 30, December 31,
1996 1995
(Unaudited) (Audited)
Current assets: ----------- -----------
Cash and cash equivalents $ 48,559 $ 3,743
Restricted cash 300,000 300,000
Accounts receivable 100,000 -
Prepaid and other current assets 18,790 52,155
----------- -----------
Total current assets 467,349 355,898
Furniture and equipment (at cost),
net of accumulated depreciation of
$27,901 and $21,371 respectively 45,376 31,407
Investments in, & advances to, affiliated companies 1,470,334 1,349,312
Goodwill, net of accumulated amortization $60,643
and $51,543 respectively 30,347 39,447
Other assets 2,302,260 62,996
----------- -----------
Total assets $ 4,315,666 $ 1,839,060
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
June 30, December 31,
1996 1995
(Unaudited) (Audited)
----------- -----------
Current liabilities:
Accounts payable - trade $ 615,638 $ 273,713
Unearned revenue 100,000 -
Line of credit 160,000 300,000
Other accrued liabilities 298,081 54,815
----------- -----------
Total current liabilities 1,173,719 628,528
Convertible debentures 4,000,000 1,000,000
----------- -----------
Total liabilities 5,173,719 1,628,528
Stockholders' Equity (Deficit):
Preferred stock - -
Common stock 2,329 2,232
Capital in excess of par value 4,475,663 3,448,763
Deficit accumulated during the
development stage (5,251,045) (3,155,463)
Treasury Stock (85,000) (85,000)
----------- -----------
Total stockholders' equity (deficit) (858,053) 210,532
Total liabilities and
stockholders' equity (deficit) $ 4,315,666 $ 1,839,060
=========== ===========
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<PAGE>
<TABLE>
DBS INDUSTRIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Three Months Six Months Six Months 8/3/89
Ended Ended Ended Ended (Inception)
6/30/96 6/30/95 6/30/96 6/30/95 To 6/30/96
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue $ - $ - $ - $ - $ 150,000
- ------- ----------- ----------- ----------- ----------- -----------
Cost & Operating expenses:
Cost of revenue - - - - 116,730
Sales & marketing 3,839 854 15,628 1,680 15,628
General & administrative 398,877 112,068 1,131,379 283,218 3,876,617
Research & development 267,637 322,634 736,879 340,091 1,617,588
----------- ----------- ----------- ----------- -----------
670,353 435,556 1,883,886 624,989 5,626,563
----------- ----------- ----------- ----------- -----------
Loss from operations (670,353) (435,556) (1,883,886) (624,989) (5,476,563)
----------- ----------- ----------- ----------- -----------
Other income (expense):
Interest (125,954) 2,320 (210,096) 10,624 (248,584)
Other, net - - - - (56,634)
Equity in loss of investee - - - - (299,882)
Gain on sale of investment - - - - 836,478
----------- ----------- ----------- ----------- -----------
(125,954) 2,320 (210,096) 10,624 231,378
----------- ----------- ----------- ----------- -----------
Loss before provision
for income taxes and
minority interests (796,307) (433,236) (2,093,982) (614,365) (5,245,185)
Provision for income taxes - 684 1,600 1,711 14,435
----------- ----------- ----------- ----------- -----------
Net loss before
minority interests (796,307) (433,920) (2,095,582) (616,076) (5,259,620)
Minority interests in losses of
consolidated subsidiaries - - - - 8,575
----------- ----------- ----------- ----------- -----------
Net loss $ (796,307) $ (433,920) $(2,095,582) $ (616,076) $(5,251,045)
=========== =========== =========== =========== ===========
Net loss per share $ (.14) $ (.08) $ (.37) $ (.12)
=========== =========== =========== ===========
Weighted average number
of common stock shares 5,772,548 5,333,460 5,710,017 5,330,765
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<PAGE>
DBS INDUSTRIES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Six Months April 25, 1990
Ended Ended Inception
June 30, June 30, June 30,
1996 1995 1996
(Unaudited) (Unaudited) (Unaudited)
----------- ----------- -----------
Net cash used in operating
activities $(1,449,097) $(304,727) $(4,623,772)
----------- ----------- -----------
Cash flows from investing
activities:
Proceeds from sale of investment - - 900,000
Purchase of fixed assets (20,500) (15,136) (105,525)
Organization costs - - (28,526)
Advances to affiliates - - (157,754)
Proceeds from affiliate advances - - 152,500
Advances to officer - - (31,187)
Purchase of investments (2,345,543) (40,560) (3,015,325)
Net assets of purchased
subsidiaries - - (147,500)
Cash transferred from Fi-Tek
IV, Inc. pursuant to
the merger and
reorganization - - 156,648
Cash of divested subsidiary (277)
Purchase of patents - - (18,251)
Net cash used in ----------- ----------- -----------
investing activities $(2,366,043) $ (55,696) $(2,295,197)
----------- ----------- -----------
Cash flows provided by
financing activities:
Proceeds from credit line $ 160,000 $ 220,000 $ 655,000
Restricted cash on credit line (300,000)
Payment on credit line (300,000) - (495,000)
Issuance of debentures 3,000,000 - 4,070,000
Issuance of common stock 999,956 - 3,153,470
Redemption of common stock warrants - - (19,490)
Stock issue costs - - (57,235)
Purchase of shares - - (5,000)
Payment of debentures - - (125,000)
Proceeds from stockholders'
loans - - 293,000
Payment of stockholders'
loans - - (202,217)
----------- ----------- -----------
Net cash provided by
financing activities 3,859,956 220,000 6,967,528
----------- ----------- -----------
Net increase (decrease) in cash 44,816 (140,423) 48,559
Cash and cash equivalents,
beginning of period 3,743 464,353 -
----------- ----------- -----------
Cash and cash equivalents,
end of period $ 48,559 $ 323,930 $ 48,559
============ =========== ===========
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<PAGE>
DBS INDUSTRIES, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 UNAUDITED INTERIM FINANCIAL STATEMENTS
--------------------------------------
The information presented in these condensed consolidated
financial statements of DBS Industries, Inc. and its wholly
owned subsidiary Global Energy Metering Services, Inc., "The
Company" is unaudited. The financial statements include all
adjustments consisting of only normal recurring adjustments
which are, in the opinion of management, necessary to present
fairly the condensed consolidated financial position of the
Company at June 30, 1996, and condensed consolidated results of
operations and cash flows for the interim periods reported,
except as discussed in Note 2. The results of operations for
the interim period presented are not necessarily indicative of
expected results for the full fiscal year.
Certain information and footnote disclosures normally
contained in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted. The condensed consolidated financial statements
should be read in conjunction with the financial statements
and notes contained in the Company's 1995 Annual Report to
Shareholders.
NOTE 2 EQUITY IN INCOME & LOSSES OF INVESTEES
--------------------------------------
The financial statements of the Company for the six months
ended June 30, 1996 and June 30, 1995 do not reflect the
Company's equity in income or losses of Direct Broadcasting
Satellite Corporation, ESAT Corporation, or Seimac Limited.
Interim financial information of the investees is not
currently available.
NOTE 3 CHANGE IN FISCAL YEAR
----------------------
The Company changed its fiscal year from July 31 to December
31, effective January 1, 1996. The comparative condensed
income statement for the six months ended June 30, 1995,
is presented within the Company's financial statement.
NOTE 4 OTHER ASSETS
------------
On January 12, 1996, the Company acquired 72,030 shares of the
common stock of Continental Satellite Corporation
("Continental") for approximately $ 2.3 million from the
seller of the shares. On January 22, 1996, a Continental
shareholder filed a lawsuit in the Superior Court in and for
the County of Santa Clara, State of California, alleging that
the shares issued to the seller and acquired by the Company
should be voided as they were invalidly issued. On May 16,
1996, the court ruled that the Continental shares issued to
the seller and purchased by the Company were invalidly
issued. However, the court ruled that trial must be held to
determine the Company's equitable ownership interest, if any,
based upon the evidence presented at trial. The trial is
currently scheduled for September 16, 1996, but may be
continued at the court's discretion. Based upon the evidence
developed in the case, at this time, the Company believes that
it is entitled to an equitable ownership interest in
Continental commensurate with its original investment in
72,030 shares of Continental common stock. Until the trial is
completed, and a decision is rendered by the court, the
Company is not able to definitely determine the nature and
extent of its ownership interest in Continental. However,
pursuant to the stock purchase agreement, the seller agreed to
defend and indemnify the Company in the event that there was a
breach or inaccuracy of any representation made by the seller
in the stock purchase agreement. In the event that the
Company's interest in Continental is not recognized, the
Company may seek indemnity and damages from the seller
pursuant to their stock purchase agreement since the seller
indicated that it had good and marketable title to the 72,030
shares of Continental. The ultimate outcome of this matter
cannot presently be determined. The Company has reflected the
purchase price of the shares of Continental in other assets in
the condensed, consolidated balance sheet at June 30, 1996.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
On February 15, 1996, the Company amended its Articles of
Incorporation to decrease the number of authorized shares of its common
stock to 100 million shares and the number of its preferred shares to 5
million shares. The par value of the stock changed to $0.0004 upon
execution of a 40-to-1 reverse stock split authorized at the same time.
LIQUIDITY AND CAPITAL RESOURCES
The Company has been in the development stage since its inception
and has not recognized any significant revenues or capital resources
other than the receipt, of (i) a minimal amount of inside capitalization
funds at its inception, (ii) net proceeds in the amount of $166,175 from
its public offering, (iii) gross proceeds of $70,000 from a sale of
debentures, (iv) subscriptions representing gross proceeds of $2,024,588
in connection with five private placements of common stock, (v) gross
proceeds of $108,550 from bridge loans made by the Company's president
and two shareholders, (vi) gross proceeds of $1,056,500 from the sale of
the Company's interest in the stock of a company holding a DBS license,
and (vii) gross proceeds of $4,000,000 from the sale of two convertible
debentures. Additionally, the Company has an established line of credit
for $300,000 from The Pacific Bank, Burlingame, California,
collateralized by a restricted cash deposit in the amount of $300,000.
As of June 30, 1996, $160,000 has been drawn from the credit line.
Stockholders' deficit at June 30, 1996 was -$858,053 compared to
stockholders' equity of $210,532 at December 31, 1995. This decrease
occurred despite the sale of $1 million of common stock, due primarily
to the Company's sale of a $3 million debenture in order to finance its
purchase of interest in Continental Satellite Corporation ("Continental")
during the quarter ended March 31, 1996. The Company continues to incur
approximately $300,000 to $400,000 of monthly operating costs which will
continually act to increase stockholders' deficit in the absence of the
sale of additional equity or the sale of assets having unrecognized
appreciation.
The consolidated balance sheet as of June 30, 1996 reflects cash
and cash equivalents of $48,559 compared to $3,743 as of December 31,
1995. Cash will continue to be used by the Company for the ongoing
development of GEMS' AMR business and the Company's investing
activities. The Company anticipates monthly expenses of approximately
$300,000 to $400,000 to continue for the balance of the year. This
includes approximately $50,000 per month for operating expenses,
$150,000 per month for legal and consulting expenses, and $150,000 per
month for GEMS' research & development. Accordingly, cash resources
presently available to the Company are not sufficient to continue
operations at their projected level, and additional capital will be
necessary to expand operations or continue current operations for the
balance of the year. The Company does not expect its meter reading
operations to produce any significant revenue until late 1996 or become
profitable until 1999 at the earliest, if at all. Unless and until the
Company is able to raise additional funds or become profitable through
its subsidiary's meter reading operations, the Company's liquidity and
capital resources will continue to be depleted. Historically, the
Company has funded its operations and obligations through the private
placement of equity securities and convertible debentures. The Company
may continue to fund its commitments through these financing methods,
however, no assurance can be given that the Company will be able to
raise capital to meet its commitments; and in the event the Company is
unable to raise the necessary capital its business objectives will be
adversely affected. Notwithstanding the foregoing, the Company has an
approximate 24% ownership in Direct Broadcast Satellite Corporation, Inc.
("DBSC") which is currently undergoing merger proceedings with EchoStar
Communications Corporation ("EchoStar") that could provide the Company
with marketable securities the Company anticipates would be sufficient
to meet its financial requirements for the year.
During the quarter ended June 30, 1996, GEMS met its first
deliverable under the terms of the $1.2 million purchase order for
10,000 satellite radio units and posted unearned revenues of $100,000.
Terms of the order include a provision for five milestone payments of
$100,000 per month to begin in the summer of 1996. All such milestone
payments are subject to refund if the Company fails to meet certain
development and delivery milestones.
The Company's commitments may exceed the resources currently
available to the Company. In addition to the ongoing legal costs
necessary to defend its interest in Continental and legal and consulting
costs deemed advisable to maintain its interest in FCC licenses and
pursue pending FCC applications, the Company expects the development of
an ARGOS compatible transmitter scheduled for completion in 1996 to cost
approximately $650,000. The Company successfully negotiated a change in
its $3 million contract for access to the Argos satellites, eliminating
its long term commitment and replacing it with a time of use agreement.
Payroll costs as of June 30, 1996 were approximately $50,000 per month.
Total assets at June 30, 1996 were $4,315,666 compared to
$1,839,060 at December 31, 1995. The largest components of total assets
represented investments in and advances to affiliated companies of
$1,470,334 (34%) compared to $1,349,312 (73%) at December 31, 1995.
Other assets grew to $2,302,260 at June 30, 1996 from $62,996 at
December 31, 1995, due to the reclassification from investments in and
advances to, affiliated companies of approximately $2.3 million
representing the purchase price of the Continental common shares.
(See note 4 to the condensed consolidated financial statements.) Total
current assets increased from $355,898 at December 31, 1995 to $467,349
at June 30, 1996.
RESULTS OF OPERATIONS
The Company remains in the development stage and did not generate
any significant revenues or net interest earnings for the quarter ended
June 30, 1996 or the quarter ended June 30, 1995.
The Company's net loss for the quarter ended June 30, 1996 was
$796,307 and $2,095,582 for the six month period ended June 30, 1996,
compared to a net loss for the quarter ended June 30, 1995 of $433,920
and $616,076 for the six month period ended June 30, 1995. Research &
development costs associated with GEMS were $267,637 for the quarter
ended June 30, 1996 and $736,879 for the six month period ended June 30,
1996, compared to $322,634 for the quarter ended June 30, 1995 and
$340,091 for the six months ended June 30, 1995. Loss from operations
was $670,353 for the quarter ended June 30, 1996 and $1,883,886 for the
six month period ended June 30, 1996 compared to $435,556 for the
quarter ended June 30, 1995 and $624,989 for the six month period ended
June 30, 1995.
The Company's accumulated deficit at June 30, 1996 rose to
$5,252,045 from $3,155,463 at December 31, 1995 and will continue to
increase unless and until the Company begins to generate revenues from
the operations of GEMS in such amounts so as to cover the Company's
expenses or until the Company sells some or all of its equity interest
in its investments. If the DBSC merger with EchoStar, subject to FCC
approval, were to be completed, the Company expects to receive
approximately 270,414 shares of common stock of EchoStar in exchange for
its ownership in DBSC. Based on the market price of the stock, such an
exchange would result in the Company holding marketable securities that
may allow the Company to secure additional funding through the sale of,
or use as collateral of, the EchoStar stock. Revenues substantial enough
to make the Company profitable are not expected to be generated until 1999,
and no assurances can be given as to that estimate. The Company has been
devoting a substantial amount of its financial and personnel resources
toward developing the Company's AMR business.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
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
None.
<PAGE>
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.
DBS INDUSTRIES, INC.
Date: August 16, 1996 By: Fred W. Thompson
----------------------- -------------------------
Fred W. Thompson,
Chief Executive Officer, and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-QSB FOR DBS INDUSTRIES, INC. FOR THE QUARTER ENDED JUNE 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 48,559
<SECURITIES> 0
<RECEIVABLES> 100,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 467,349
<PP&E> 73,277
<DEPRECIATION> 27,901
<TOTAL-ASSETS> 4,315,666
<CURRENT-LIABILITIES> 1,173,719
<BONDS> 0
0
0
<COMMON> 2,329
<OTHER-SE> (860,382)
<TOTAL-LIABILITY-AND-EQUITY> 4,315,666
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 670,353
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 125,954
<INCOME-PRETAX> (796,307)
<INCOME-TAX> 0
<INCOME-CONTINUING> (670,353)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (796,307)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
