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 March 31, 1995
Commission File Number 33-31868-D
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:
5,526,207 shares outstanding as of March 31, 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. The results of operations for the interim period
presented are not necessarily indicative of expected results for the
full fiscal year.
<PAGE>
Item 1. Financial Statements
DBS INDUSTRIES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1996 1995
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 396,913 $ 3,743
Restricted cash 300,000 300,000
Prepaid and other current assets 22,121 52,155
--------- ---------
Total current assets 719,034 355,898
Furniture and equipment (at cost),
Net of accumulated depreciation of
$24,406 and $21,371 respectively 47,853 31,407
Investments in and advances to
affiliated companies 3,666,308 1,349,312
Goodwill, net of accumulated amortization
$56,093 and $51,543 respectively 34,897 39,447
Other assets 10,480 62,996
--------- ---------
Total assets $4,478,572 $1,839,060
LIABILITIES AND STOCKHOLDERS' DEFICIT
March 31, December 31,
1996 1995
(Unaudited) (Audited)
Current liabilities:
Accounts payable - trade $ 424,008 $ 273,713
Line of credit 300,000
Other accrued liabilities 143,307 54,815
--------- ---------
Total current liabilities 567,315 628,528
Convertible debentures 4,000,000 1,000,000
--------- ---------
Total liabilities 4,567,315 1,628,528
Stockholders' Deficit:
Preferred stock - -
Common stock 2,327 2,232
Capital in excess of par value 4,448,668 3,448,763
Deficit accumulated during the
development stage (4,454,738) (3,155,463)
Treasury Stock (85,000) (85,000)
--------- ---------
Total stockholders' deficit (88,743) 210,532
Total liabilities and --------- ---------
stockholders' deficit $4,478,572 $1,839,060
<PAGE>
DBS INDUSTRIES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Three Months April 25, 1990
Ended Ended Inception to
March 31, 1996 March 31, 1995 March 31, 1996
(Unaudited) (Unaudited) (Unaudited)
Revenue $ - $ - $ 150,000
Costs & Operating expenses:
Costs of revenue - - 116,730
General, administrative 744,291 171,976 3,489,529
Research and development 469,242 17,457 1,349,951
--------- --------- ---------
Total 1,213,533 189,433 4,956,210
Loss from operations (1,213,533) (189,433) (4,806,210)
--------- --------- ---------
Other income (expense):
Interest, net (84,142) 8,304 (122,630)
Equity in loss of investee - - (299,882)
Other, net - - (56,634)
Gain on sale of investment - - 836,478
--------- --------- ---------
Total (84,142) 8,304 357,332
Loss before provision
for income taxes and
minority interests (1,297 ,675) (181,129) (4,448,878)
Provision for income taxes 1,600 1,027 14,435
Loss before minority --------- --------- ---------
interests (1,299,275) (182,156) (4,463,313)
Minority interests in
losses of consolidated
subsidiaries - - 8,575
--------- --------- ---------
Net loss $ (1,299,275) $ (182,156) $ (4,454,738)
Net loss per share $ (0.23) $ (.03)
========= =========
Weighted average number of
shares of common stock 5,697,188 5,323,039
========= =========
<PAGE>
DBS INDUSTRIES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Three Months April 25, 1990
Ended Ended Inception to
March 31, 1996 March 31, 1995 March 31, 1996
(Unaudited) (Unaudited) (Unaudited)
Net cash used in
operating activities $(1,038,195) $(218,775) $(4,212,870)
Cash flows from investing
activities:
Proceeds from sale of
investment - - 900,000
Purchase of fixed assets (19,483) (12,373) (104,508)
Organization costs - - (28,526)
Advances to affiliates - - (157,754)
Proceeds from affiliate
advances - - 152,500
Advances to officer - - (31,187)
Purchase of investments (2,249,108) - (2,918,890)
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 by --------- --------- ---------
investing activities $ (2,268,591) $ (12,373) $(2,197,745)
Cash flows from financing
activities:
Proceeds from credit line - 60,000 495,000
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 3,699,956 60,000 6,807,528
Net increase (decrease)
in cash 393,170 (171,148) 396,913
Cash and cash equivalents,
beginning of period 3,743 511,685 -
--------- --------- ---------
Cash and cash equivalents,
end of period $ 396,913 $ 340,537 $ 396,913
========= ========= =========
<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. "DBSI or the Company" and its wholly
owned subsidiary Global Energy Metering Service, Inc. "the subsidiary"
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 DBSI at March 31, 1996, and
condensed consolidated results of operations and cash flows for the
interim periods reported. 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 DBSI's 1995 annual
report on Form 10-KSB.
NOTE 2 INVESTMENTS
The financial statements of the Company for the three months ended
March 31, 1996 do not reflect the Company's equity in income or losses
of Direct Broadcasting Satellite Corporation, E-SAT, Inc., Seimac
Limited or Continental Satellite Corporation. 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 31, 1996. The comparative condensed income statement
for the three months ended March 31, 1995 is presented within the body
of the Company's financial statement.
NOTE 4 INVESTMENT IN CONTINENTAL SATELLITE CORPORATION
On January 12, 1996, the Company entered into a stock purchase
agreement with a third party (the Seller) to acquire 72,030 shares of
common stock of Continental Satellite Corporation ("Continental") in
exchange for approximately $2.3 million in cash. Continental owns one
of nine direct broadcast satellite licenses awarded by the FCC. On
January 22,1996, Loral Aerospace Holdings, Inc., a Continental
shareholder, filed a complaint in the Superior Court of the State of
California against Continental and its shareholders alleging that the
shares purchased by the Company were improperly issued and, therefore,
should be voided. If Loral were to prevail in declaring the
Continental shares purchased by the Company invalid, the Company has a
right of indemnification against the Seller.
In connection with this purchase, the Company issued a three-year,
Series B convertible debenture to Echostar Communications Corp.
("Echostar")in January, 1996 for proceeds of $3 million. Interest on
the debt accrues, and is payable, quarterly at prime plus 2% for a
period of three years. At the end of the three year period, the
principle and unpaid interest is due and payable. As collateral for
the debenture, Echostar has a security interest in the 72,030 shares
of Continental purchased by the Company and 200,000 shares of the
common stock of Direct Broadcast Satellite Corporation owned by the
Company. If the Company were to elect to sell the Continental shares
to a third party purchaser while the debenture is outstanding, Echostar
has the right to buy one-half of the Continental shares at a price
equal to the original purchase price paid by the Company, and has the
right of first refusal to purchase the other one-half of Continental
shares on the same terms and conditions as agreed to with the third
party purchaser. The Company has accrued the interest on all
debentures held by Echostar, but has not paid the interest due for the
quarter ended March 31, 1996, because of ongoing discussions with
Echostar on the conversion of both debentures and the payment of all
accrued debenture interest in Company stock rather than cash.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
In January 1996, the Board of Directors changed the Company's fiscal
year end from July 31, 1996 to December 31, 1995. 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. All references to the
number of Company shares and the price of Company shares have been
adjusted to reflect the Company's 40-to-1 reverse stock split completed
on February 15, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Stockholders' equity at March 31, 1996 decreased to ($88,743) from
$210,532 at December 31, 1995 due to the net loss of approximately $1.3
million for the three month period ended March 31, 1996 which was
partially offset by the sale of $1 million of common stock. The
Company continues to incur approximately $300,000 to $400,000 of
monthly operating costs which will further reduce stockholders' equity
in the absence of the sale of additional equity or proceeds from the
sale of assets in excess of their carrying value.
During the quarter ended March 31, 1996, the Company's subsidiary,
Global Energy Metering Service, Inc. ("GEMS"), received a $1.2 million
purchase order for 10,000 satellite radio units. Terms of the order
include a provision for 5 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.
Total assets at March 31, 1996 were $4,478,572 compared to $1,839,060
at December 31, 1995. The largest components of total assets
represented investments in and advances to affiliated companies of
$3,666,308 or 82% compared to $1,349,312 or 73% at December 31, 1995.
This increase is due to the purchase of a 34% equity interest in
Continental Satellite Corporation for approximately $2.3 million which
is subject to litigation. (See: December 31, 1995 Form 10-KSB). Total
current assets increased from $355,898 at December 31, 1995 to $719,034
at March 31, 1996 due to balance of proceeds from the $3 million
debenture placed with Echostar Communications Corp.
The Company's commitments may exceed the resources currently available
to the Company. In addition to the ongoing legal costs necessary to
defend its investment in Continental Satellite Corporation 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 is currently
negotiating a change in its $3 million contract for access to the Argos
satellites and anticipates obtaining an agreement that payments for
satellite capacity will be more directly related to usage.
The consolidated balance sheet as of March 31, 1996 reflects cash and
cash equivalents of $396,913 compared to $3,743 as of December 31,
1995. During the quarter ended March 31, 1996, the Company raised
approximately $4 million of cash through the placement of a $3 million
convertible debenture and the sale of the Company's common stock in two
private placements. Cash will continue to be used by the Company for
the ongoing development of the Company's automatic meter reading
("AMR") business and the Company's investing activities. Of the funds
raised during the first quarter, approximately $2.3 million was used to
purchase an equity interest in Continental Satellite Corporation. 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
beyond approximately May or June 1996. 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 it is unable to
raise the necessary capital, the Company's business objectives will be
adversely affected.
RESULTS OF OPERATIONS
The Company remains in the development stage and did not generate any
revenues or net interest earnings for the quarter ended March 31, 1996
or the quarter ended March 31, 1995.
The Company's net loss for the period ended March 31, 1996 was
$1,299,275 compared to a net loss for the quarter ended March 31, 1995
of $182,156. Research and development costs associated with the
Company's AMR business were $469,242 for the quarter ended March 31,
1996 compared to $17,457 for the quarter ended March 31, 1995. Losses
from operations were $1,213,533 for the quarter ended March 31, 1996
compared to $189,433 for the quarter ended March 31, 1995. General and
administrative costs increased substantially from $171,976 for the
quarter ended March 31, 1995 to $744,291 for the quarter ended March
31, 1996 due to increased legal costs and employee payroll.
The Company's accumulated deficit at March 31, 1996 rose to $4,454,738
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 Direct Broadcasting Satellite Corporation
("DBSC") merger with Echostar, subject to FCC approval, were to be
completed, the Company expects to receive shares of common stock of
Echostar and may secure additional funding through the sale of, or use
as collateral of, the Echostar stock. As part of the merger and upon
approval by the FCC, the Company could elect to receive from Echostar
either cash valued at $7.99 for each of the 401,107 shares of DBSC
common stock that the Company holds or .67417 shares of Echostar common
stock for each share of DBSC common stock held. Based on the market
price of Echostar stock at the end of March, 1996, an exchange for
Echostar stock would result in the Company holding approximately $9
million of Echostar stock. There are no assurances the FCC will
approve the planned merger or that the shares of Echostar will increase
or decrease in value. 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, and anticipates it will continue to devote, a substantial
amount of its financial and personnel resources toward developing the
Company's AMR business.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Not Applicable.
Item 2. Changes In Securities
On February 15, 1996, the Company, pursuant to a vote by the Board of
Directors on January 13, 1996, amended its Articles of Incorporation to
decrease the number of shares of authorized common stock to 100 million
shares and the number of 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.
Item 3. Defaults Upon Senior Securities - None.
Item 4. Submission of Matters to a Vote of Security Holders
On April 18, 1996, the Company held its annual shareholders meeting
which was reconvened on April 30, 1996, wherein a majority of the
shareholders approved the following proposals:
1) Amendment of the Certificate of Incorporation to adopt a new
Article XIII creating fair price provision for certain business
combinations;
Votes cast For: 3,924,130 Against: 242,372 Abstain: 31,275
Not Voted: 42,082
2) Amendment of Article VIII of the Certificate of Incorporation to
divide the Board of Directors into three classes having staggered
three-year terms and related matters;
Votes cast For: 3,319,854 Against: 216,815 Abstain: 48,700
Not Voted: 654,490
3) The election of five directors of the Company, to serve until
the next annual meeting and until their representative successors are
elected and qualified;
Votes cast:
Directors For Witheld
Fred W. Thompson 4,137,348 102,511
Michael T. Schieber 4,106,048 133,811
Bruce Christopher 4,106,048 133,811
H. Tate Holt 4,134,048 105,811
E.A. James Peretti 4,147,348 92,511
4) The adoption of the Company's 1996 Stock Option Plan;
Votes cast For: 3,048,230 Against: 278,294 Abstain: 252,345
Not Voted: 654,490
Item 5. Other Information - None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K
Date of Report: January 12, 1996, reporting the acquisition of an
interest in Continental Satellite Corporation ("Continental") and
change in the Company's fiscal year.
Subsequent to the acquisition of the interest in Continental, the
Company requested financial information from Continental but to date
has not received any such financial information. It is the Company's
belief that Continental's failure to present its financial information
is due to its involvement in the litigation with Loral.
<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.
Registrant
May 13, 1996 Fred W. Thompson
Date 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-KSB FOR DBS INDUSTRIES, INC. FOR THE QUARTER ENDED MARCH 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 396,913
<SECURITIES> 0
<RECEIVABLES> 10,044
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 719,034
<PP&E> 72,259
<DEPRECIATION> 24,406
<TOTAL-ASSETS> 4,478,572
<CURRENT-LIABILITIES> 567,315
<BONDS> 0
0
0
<COMMON> 2,327
<OTHER-SE> (91,070)
<TOTAL-LIABILITY-AND-EQUITY> 4,478,572
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,213,533
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,142
<INCOME-PRETAX> (1,297,675)
<INCOME-TAX> 1,600
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,299,275)
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> (0.23)
</TABLE>
