U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended September 30,
1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from _______ to
_______
COMMISSION FILE NUMBER 0-28348
DBS INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 84-1124675
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Shoreline Highway, Suite 190A
Mill Valley, CA 94946
(Address of principal executive offices)
(415) 380-8055
(Issuer's telephone number)
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 |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class of Securities: Common Stock, $.0004 Par Value
Shares Outstanding as of October 31, 1998: 8,487,841
Transitional Small Business Disclosure Format: Yes ___ No X
<PAGE>ii
INDEX
PAGE
PART I - FINANCIAL INFORMATION............................................1
ITEM 1. Financial Statements...........................................1
Condensed Consolidated Balance Sheets:
As of September 30, 1998 (unaudited) and December 31, 1997 (audited) .....1
Condensed Consolidated Statements of Operations (unaudited):
For the Three Months and Nine Months Ended September 30, 1998
and September 30, 1997 and for the period from April 25, 1990
(Inception) to September 30, 1998.......................................2
Condensed Consolidated Statements of Cash Flows (unaudited):
For the Nine Months Ended September 30, 1998 and September 30, 1997
and for the period from April 25, 1990 (Inception) to September 30, 1998..3
Notes to Condensed Consolidated Financial Statements......................4
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................6
PART II - OTHER INFORMATION...............................................10
ITEM 1. Legal Proceedings...............................................10
ITEM 2. Changes in Securities...........................................10
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
<PAGE>1
DBS INDUSTRIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30
1998 December 31,
(Unaudited) 1997
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,305,162 $ 383,054
Prepaid and other current assets 134,522 119,265
------------ -----------
Total current assets 4,439,684 502,319
------------ -----------
Furniture and equipment (at cost) 76,997 73,277
Less accumulated depreciation 55,804 47,828
------------ -----------
21,193 25,449
------------ -----------
Other assets:
Investments and advances 851,490 1,248,649
Goodwill, net of accumulated amortization
of $86,799 and $81,864, respectively 4,191 9,126
------------ -----------
855,681 1,257,775
Total assets $ 5,316,558 $ 1,785,543
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 380,550 $ 152,485
Customer advances 400,000 400,000
Accrued liabilities 112,964 145,019
Deferred compensation 246,000 216,000
------------ -----------
Total current liabilities 1,139,514 913,504
------------ -----------
Stockholders' equity
Preferred stock - -
Common stock 3,556 2,373
Capital in excess of par value 9,214,019 4,681,295
Warrants 1,085,500 112,500
Deficit accumulated during the development
stage (6,041,031) (3,839,129)
Treasury stock (85,000) (85,000)
------------ -----------
Total stockholders' equity 4,177,044 872,039
------------ -----------
Total liabilities and stockholders' equity $ 5,316,558 $ 1,785,543
============ ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>2
DBS INDUSTRIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended April 25, 1990
September 30, September 30, (Inception) to
September 30,
1998 1997 1998 1997 1998
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $ - $ - $ - $ - $ 161,420
------------ ------------ ------------ ----------- ------------
Cost and operating expenses:
Cost of revenue - - - - 127,580
General and administrative 688,424 374,033 1,339,069 1,078,219 7,802,057
Research and development 198,358 85,474 545,772 294,836 2,715,343
------------ ------------ ------------ ----------- ------------
886,782 459,507 1,884,841 1,373,055 10,644,980
------------ ------------ ------------ ----------- ------------
Loss from operations (886,782) (459,507) (1,884,841) (1,373,055) (10,483,560)
------------ ------------ ------------ ----------- ------------
Other income (expense):
Interest, net 9,211 (52,304) 11,405 (317,054) (730,475)
Equity in loss of investees, net (6,733) (39,974) (100,143) (39,974) (512,920)
Gain (loss) on sale of investments - (1,003,714) (228,323) 5,217,556 5,829,218
Other, net - - - - (56,634)
------------ ------------ ------------ ----------- ------------
2,478 (1,095,992) (317,061) 4,860,528 4,529,189
------------ ------------ ------------ ----------- ------------
Income (loss) before provision for
income taxes and minority interest (884,304) (1,555,499) (2,201,902) 3,487,473 (5,954,371)
Provision for income taxes - - - - 95,235
------------ ------------ ------------ ----------- ------------
Income (loss) before minority
interests (884,304) (1,555,499) (2,201,902) 3,487,473 (6,049,606)
------------ ------------ ------------ ----------- ------------
Minority interests in income of
consolidated subsidiaries - - - - 8,575
------------ ------------ ------------ ----------- ------------
Net income (loss) $ (884,304) $ (1,555,499) $ (2,201,902) $ 3,487,473 $ (6,041,031)
============ ============ ============ =========== ============
Basic net income (loss) per share $ (0.13) $ (0.26) $ (0.35) $ 0.59
============ ============ ============ ===========
Diluted net income (loss) per share (0.13) (0.26) (0.35) 0.53
============ ============ ============ ===========
Weighted average number of shares of
common stock, basic 6,857,472 5,891,747 6,220,861 5,872,416
============ ============ ============ ===========
Weighted average number of shares of
common stock, diluted 6,857,472 5,891,747 6,220,861 6,635,102
============ ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>3
DBS INDUSTRIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
April 25, 1990
Nine Months Ended (Inception) to
September 30, September 30,
1998 1997 1998
------------- ------------- -------------
<S> <C> <C> <C>
Net cash used in operating activities $ (1,205,423) $ (2,063,438) $ (8,991,716)
------------- ------------- -------------
Cash flows from investing activities:
Proceeds from sale of investment 199,940 1,099,940
Proceeds from Loral settlement - 3,573,678 3,573,677
Purchase of fixed assets (3,720) - (109,244)
Organization costs - - (28,526)
Advance to officer - - (31,187)
Purchase of interest in Continental - - (2,292,409)
Investments and advances (407,292) - (1,208,726)
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)
Proceeds from repayment of advances to affiliate - - 152,500
Restricted cash on credit line - 300,000 300,000
------------- ------------- -------------
Net cash provided by (used in) investing
activities (211,072) 3,873,678 1,446,645
------------- ------------- -------------
Cash flows from financing activities:
Repayment of borrowing under credit line - (295,000) (300,000)
Issuance of debentures - - 4,817,501
Issuance of common stock 5,781,103 - 8,934,619
Redemption of common stock warrants - - (19,490)
Stock issue costs (442,500) - (499,735)
Purchase of shares - - (5,000)
Payment of debentures - (1,043,501) (1,168,445)
Proceeds from stockholders' loans - 2,000 442,750
Payment of stockholders' loans - - (351,967)
-------------- ------------- ------------
Net cash provided by (used in) financing activities 5,338,603 (1,336,501) 11,850,233
-------------- ------------- ------------
Net increase in cash 3,922,108 473,739 4,305,162
Cash and cash equivalents, beginning of period 383,054 402,588 0
-------------- ------------- -------------
Cash and cash equivalents, end of period $ 4,305,162 $ 876,327 $ 4,305,162
============== ============= ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>4
DBS INDUSTRIES, INC. AND SUBSIDIARIES
(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
subsidiaries, Global Energy Metering Services, Inc. and Newstar Limited is
unaudited. These condensed consolidated financial statements have been prepared
assuming the Company will continue as a going concern. Since inception, the
Company has devoted substantially all of its efforts to developing its business.
The Company has therefore incurred substantial losses and negative cash flows
from operating activities. To address financing needs, the Company is pursuing
various financing alternatives. During the nine month period ended September 30,
1998, the Company raised approximately $5.7 million from the sale of shares of
Common Stock. However, the Company will need a substantial amount of at least
$90 million to construct its proposed E-SAT satellite constellation. The
construction of the first two of the six planned satellites is required to
commence by April 1999 pursuant to the terms of the Federal Communications
Commission granted to E-SAT. Non-compliance with such terms may result in the
loss of the E-SAT license. These factors raise substantial doubt about the
Company's ability to continue as a going concern. These financial statements do
not reflect any adjustments that might result from the outcome of this
uncertainty.
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
September 30, 1998, 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 1997 Annual Report to Shareholders.
NOTE 2. EQUITY IN INCOME & LOSSES OF INVESTEES
E-SAT Corporation
In October 1994, the Company and EchoStar Communications, Inc. formed
E-SAT for the purpose of filing with the Federal Communications Commission for a
license to operate a low earth satellite system. E-SAT filed a license
application with the Federal Communications Commission on November 16, 1994. In
April 1998, the FCC formally approved E-SAT's application. The Company holds a
20% interest in E-SAT. The Company's total investments in and advances to E-SAT
were $127,265 as of September 30, 1998. The investment is accounted for using
the equity method. The Company's equity in losses of E-SAT for the nine months
ended September 30, 1998 were $100,143. As of September 30, 1998, the Company
had a net receivable of $724,225 from EchoStar which represents the excess of
advances to date to E-SAT in excess of its proportionate 20% share of its
investee's financing requirements.
<PAGE>5
NOTE 3. CUSTOMER ADVANCES
The Company's wholly-owned subsidiary, Global Energy Metering Services,
Inc. (GEMS), is party to a contract to deliver 10,000 satellite radio units. The
purchase order is for $1.2 million and under the terms of the purchase order,
GEMS would receive a total of $500,000 in advance payments on the contract,
based on certain milestone achievements. These milestone payments are refundable
if the contractee does not qualify GEMS' automatic meter reading system. As of
September 30, 1998, this purchase order had been suspended by both parties due
to the Company's limited access to the Argos System. The $400,000 in milestone
payments received are reported as customer advances on the accompanying balance
sheet.
NOTE 4. NET INCOME (LOSS) PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share,
which establishes standards for computing and presenting earnings (loss) per
share. Under the new standard, basic earnings per share is computed based on the
weighted average number of common shares outstanding and excludes any potential
dilution. Diluted earnings per share reflects diluted effects of all outstanding
common stock equivalents. The financial statements presented have been restated
to conform with current year presentation. Options and warrants to purchase
6,018,531 shares of common stock with exercise prices from $.40 to $5.60 were
outstanding as of September 30, 1998 and were excluded from the loss per share
calculation for the quarter and the nine month period then ended as they have
the effect of decreasing loss per share. Options and warrants to purchase
1,330,116 shares of common stock with exercise prices from $.40 to $5.60 were
outstanding as of September 30, 1997 and were excluded from the loss per share
calculation for the quarter ended September 30, 1997 but were included in the
earnings per share calculation for the nine month period ended September 30,
1997.
NOTE 5. EQUITY TRANSACTIONS
During the three months ended September 30, 1998, the Company issued
2,800,000 units each consisting of a share of common stock at a price of $2.00
per share and a warrant to purchase a share of common stock at an exercise price
of $3.00. In connection with this stock offering, the Company incurred the
following stock issuance costs: (i) cash payments of $442,500 and (ii)
commitments to issue warrants to purchase 728,000 shares of the Company's common
stock at exercise prices varying from $1.50 to $3.00. The fair value of such
warrants amounted to $973,000 and was recorded as a separate element of the
Company's equity
Under the terms of a stock purchase agreement, the Company is to
register a certain number of shares and warrants by December 4, 1998. In the
event that the related registration statement is not declared effective by the
Securities and Exchange Commission by December 4, 1998, the Company is required
to pay certain stockholders the amount of $2,500 for each subsequent day the
registration statement is not declared effective.
In September 1998, the Company issued 17,202 shares of its common stock
as a result of the exercises of the related options.
<PAGE>6
NOTE 6. OTHER MATTERS
In July 1998, the Company agreed to a severance package with one of its
former employees which consists of $125,000 in cash payments to be made through
July 1999 and the acceleration of vesting of the former employee's unvested
options.
In July 1998, the Company's president was named as a defendant in a
lawsuit filed by a firm claiming that it was promised shares of the Company's
common stock valued at $100,000.
In August 1998, the Company and Matra Marconi Space France SA ("MMS")
entered into a non-binding memorandum of understanding to engage MMS as prime
contractor for the design and construction of six little low earth orbit
satellites. Further, in August 1998, the Company and SAIT Radio Holland SA
("SAIT") entered into a non-binding letter of intent to explore an arrangement
with SAIT as the main contractor for the engineering, development and provision
of hardware and software for E-SAT's earth station. In the latter part of
September 1998, the Company and MMS mutually agreed to terminate their
non-binding memorandum of understanding. The letter of intent with SAIT will
expire under its terms on November 23, 1998. The Company has engaged SAIT to
perform studies on antennas for the proposed satellite radios, develop and test
satellite radio prototypes, and assist in radio design in anticipation of
manufacturing satellite radios for the Company. No assurance can be given that
the Company and SAIT will enter into a contract to manufacture the satellite
radios.
NOTE 7. SUBSEQUENT EVENTS
In October 1998, at the request of two shareholders due to changes in
their financial condition, the Company rescinded the stock purchase agreements
relating to 400,000 units and refunded $800,000 in proceeds to the two
shareholders.
In October 1998, the Company paid its president the amount of $246,000
related to his deferred compensation through June 1998. The president also
received a cash bonus of $20,000 in connection with his efforts in securing the
license granted to E-SAT by the FCC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The Company, through its 20% interest in E-SAT, proposes to construct,
launch, and operate a two-way, low-cost data messaging system (the "E-SAT
System") utilizing six low-earth orbit ("Little LEO") satellites. E-SAT's Little
LEO satellites will orbit the earth at altitudes of approximately 550 miles, and
with the Company's technology, are capable of collecting and transmitting data
at regular intervals from fixed devices such as meters in hard-to-access
locations and at a cost substantially less than manually retrieving and
transmitting the data. The Company intends to initially provide automated meter
reading services collecting and providing data from energy-related meters such
as electrical, natural gas, water or propane, but may provide other data
collection services in the areas of vending machines and environmental meters.
<PAGE>7
Results of Operations
Three and Nine Months Ended September 30, 1998 Compared to September 30, 1997
Revenues
The Company remains in the development stage and did not generate any
revenues in either the three or nine months ended September 30, 1998 or
September 30, 1997.
Cost and Operating Expenses
Cost and operating expenses for the three months ended September 30,
1998, were $886,782 as compared to $459,507 for the three months ended September
30, 1997. During the three months ended September 30, 1998, cost and operating
expenses increased primarily in research and development because the Company
devoted substantial amounts of its financial and personnel resources on
developing its automatic meter reading business. In addition, the Company
incurred substantial costs, including travel, relocation and housing costs, to
establish relationships with potential contractors to construct the E-SAT System
and potential strategic alliances with utility companies to market E- SAT's
services in Europe. The Company also recognized approximately $104,000 in
severance expense and $106,000 in consulting expense in connection with the
grant of options for services rendered by non-employees. Cost and operating
expenses for the nine months ended September 30, 1998, were $1,884,841 as
compared to $1,373,055 for the nine months ended September 30, 1997. General and
administrative expenses for the nine months ended September 30, 1998, increased
from the same period during the prior year primarily due to an increase in
research and development related to the development of its automatic meter
reading service and, as discussed above, to establish relationships in Europe.
The increase in general and administrative and research and development costs
during the nine months ended September 30, 1998, as discussed above, were
partially offset by a decrease in legal fees. During the nine months ended
September 30, 1997, the Company was involved in litigation over an interest in a
direct broadcast satellite license and incurred substantial legal fees.
This ligation was settled during 1997.
Other Income (Expense)
Other income for the three months ended September 30, 1998, was $2,478
as compared to other expense of $1,095,992 for the three months ended September
30, 1997. During the three months ended September 30, 1998, the Company earned
interest income of $9,211, which was offset by net equity in losses of E-SAT of
$6,733. Interest income was earned on cash received in connection with the sale
of approximately 2.8 million units of the Company at $2.00 per unit. Each unit
consists of one share of Common Stock and a warrant to purchase one share of
Common Stock at $3.00 per share. The interest income earned of $9,211 during the
three months ended September 30, 1998 compared to interest expense of $52,304
for the three months ended September 30, 1997. During 1997, the Company had
debentures outstanding upon which it paid interest. The debentures were paid off
during the third quarter of 1997. In connection with the retirement during 1997
of debentures due to EchoStar in exchange for EchoStar Common Stock that
EchoStar held as collateral against the debentures, the Company incurred a loss
of approximately $1 million. In addition, during the three
<PAGE>8
months ended September 30, 1997, the Company incurred a loss of $39,974
attributed to its equity investment in E-SAT and Seimac.
Other expense for the nine months ended September 30, 1998, was $317,061
as compared to other income of $ 4,860,528 for the nine months ended September
30, 1997. During the nine months ended September 30, 1997, the Company incurred
net interest expense of $317,054 due to debentures outstanding and recognized a
gain of approximately $6.2 million on the sale of marketable securities, which
was offset by a loss of approximately $1 million related to the retirement of
the debentures due to EchoStar in exchange for EchoStar Common Stock that
EchoStar held as collateral against the debentures. No similar net interest
expense or gain occurred during the nine months ended September 30, 1998.
Net Loss and Income
The Company's net loss for the three month period ended September 30,
1998, was $884,304 compared to a net loss of $1,555,499 for the three month
period ended September 30, 1997. Net loss for the nine months ended September
30, 1998, was $2,201,902 compared to net income of $3,487,473 for the nine month
period ended September 30, 1997. During the nine month period ended September
30, 1997, the Company's net income was due primarily to a one-time gain on
marketable equity securities of approximately $6.2 million offset by operating
and interest expenses.
LIQUIDITY AND CAPITAL RESOURCES
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. The Company
anticipates monthly expenses to average approximately $170,000 to $200,000 per
month for the remaining calendar year which includes $125,000 per month for
operating, legal and consulting expenses, and $45,000 to $75,000 per month for
GEMS & E-SAT research & development. However, expenses will continue to increase
with the demands of developing the E-SAT license and business applications and
additional capital will be necessary to expand operations.
Traditionally, the Company has relied on equity and debt financings to
finance its operations. This financing was supplemented from the sale of the
Company's interest in entities that held direct broadcast satellite licenses.
The Company no longer has any interest in direct broadcast satellite licensees.
Currently, the Company is offering to accredited investors in a private
placement up to 3 million units for $6 million in the aggregate with each unit
consisting of one share of Common Stock and one warrant to purchase one share of
Common Stock at $3.00 per share. As of September 30, 1998, the Company had sold
approximately 2.8 million units for gross proceeds of approximately $5.6 million
before finder's fees and commissions of $442,500. In October 1998, at the
request of two shareholders due to changes in their financial condition, the
Company rescinded the stock purchase agreements relating to 400,000 units and
refunded $800,000 in proceeds to the two shareholders. The Company believes that
it has sufficient operating working capital for the next twelve months. However,
the Company will need a substantial amount of at least $90 million to construct
the E-SAT
<PAGE>9
System. Further, the construction of the first two of the six planned satellites
is required to commence by April 1999 pursuant to the terms of the FCC license
granted to E-SAT.
The Company had cash and cash equivalents of $4,305,162 and $383,054 as
of September 30, 1998 and December 31, 1997, respectively. The Company had
working capital of $3,300,170 as of September 30, 1998, as compared to negative
working capital of $411,185 as of December 31, 1997. Until the Company is able
to develop, construct and operate its E-SAT System and derive revenues
therefrom, the Company will continue to use cash for its operations and
development of the E-SAT System.
Net cash used in operating activities was $1,333,827 for the nine months
ended September 30, 1998, as compared to $2,063,438 for the nine months ended
September 30, 1997. Net cash used in operating activities during the nine months
ended September 30, 1998, decreased from the same period during the prior year
primarily related to the payment of outstanding liabilities during 1997.
Net cash used in investing activities for the nine month period ended
September 30, 1998, was $8,628. This net cash used represents the difference
between the proceeds from the divestiture of Seimac of $199,940 less the
Company's net investment in E-SAT of $204,848. Net cash provided by investing
activities for the nine month period ended September 30, 1997 was $3,873,678
primarily related to the proceeds from Loral Aerospace Holdings, Inc. settlement
involving the Company's equitable interest in Continental Satellite Corporation.
Net cash provided by financing activities for the nine month period
ended September 30, 1998, was $5,264,563 compared to cash used of $1,336,501 for
the nine months ended September 30, 1997. Net cash provided by financing
activities during the nine months ended September 30, 1998, consisted entirely
of the issuance of Units representing gross proceeds of $5.7 million offset by
issuance costs of $442,500. Net cash used in financing activities during the
nine months ended September 30, 1997, consisted primarily of the repayment of
the debentures and line of credit of approximately $1.3 million in the
aggregate.
In July 1996, the Company began to receive milestone payments under the
terms of a $1.2 million purchase order for 10,000 satellite radio units. Under
this agreement, the Company was eligible to receive up to $500,000 towards
development costs upon meeting the milestone requirements of the contract. The
Company met the first four milestones of the contract and has received $400,000
in cash. Currently, the Company and ABB Power T&D Company, Inc. ("ABB") have
suspended their development under this agreement due to the expiration of the
Company's agreement for the use of the Argos system on December 31 1997, and the
proposed limit placed on future commercial use of the Argos system. Therefore,
such milestone payments could be subject to refund, in whole or in part.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's, or its suppliers' and customers' computer programs that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations including, among other things, a temporary
inability to process transactions, send invoices,
<PAGE>10
or engage in similar normal business activities. In the Company's assessment,
because the Company and its subsidiaries information systems are primarily
comprised of recently purchased personal computers and software, the Company
does not believe that the Year 2000 Issue will materially affect its operations.
In addition, in developing the E-SAT System, the Company will be relying
on vendors to, among other things, manufacture the Little LEO satellites, launch
the Little LEO satellites, manufacture the RTU and build the E-SAT
infrastructure including the ground station. The Company has not yet entered
into contracts with any vendors to develop the E-SAT System, and, therefore, no
assessment has been made as to their Year 2000 compliance. As part of the
contract negotiations, the Company will request and determine the vendor's Year
2000 readiness. In the event that it is determined that a key vendor will not be
Year 2000 compliant, this may have an adverse effect on the Company's business
plans.
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
Exhibit 27.1 Financial Data Schedule
<PAGE>11
SIGNATURES
Pursuant to the requirements of the Securities and 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.
FRED W. THOMPSON
DATE: November 23, 1998 -------------------------------------
Fred W. Thompson
President and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,305,162
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,439,684
<PP&E> 76,997
<DEPRECIATION> 55,804
<TOTAL-ASSETS> 5,316,558
<CURRENT-LIABILITIES> 1,139,514
<BONDS> 0
0
0
<COMMON> 3,556
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</TABLE>
