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 June 30, 1999
[ ] 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 Common Stock, $.0004 Par Value
Shares Outstanding as of July 30, 1999: 14,195,427
Transitional Small Business Disclosure Format: Yes: ___ No X
<PAGE>ii
INDEX
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PAGE
PART I - FINANCIAL INFORMATION.................................................................................1
ITEM 1. Financial Statements................................................................................1
Condensed Consolidated Balance Sheets:
As of June 30, 1999 (unaudited) and December 31, 1998 (audited) ..............................................1
Condensed Consolidated Statements of Operations (unaudited):
For the Three Months and Six Months Ended June 30, 1999 and June 30, 1998
and for the period from April 25, 1990 (Inception) to June 30, 1999..........................................2
Condensed Consolidated Statements of Cash Flows (unaudited):
For the Six Months Ended June 30, 1999 and June 30, 1998
and for the period from April 25, 1990 (Inception) to June 30, 1999............................................3
Notes to Condensed Consolidated Financial Statements...........................................................4
ITEM 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................................7
PART II - OTHER INFORMATION...................................................................................10
ITEM 4.Submission of Matters to a Vote of Security Holders...................................................10
ITEM 5.Other Information.....................................................................................11
ITEM 6.Exhibits and Reports on Form 8-K......................................................................11
</TABLE>
<PAGE>1
DBS INDUSTRIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
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June 30, 1999 December 31,
(Unaudited) 1998
------------------ ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,944,917 $ 1,291,711
Prepaid and other current assets 544,776 71,138
------------------ ---------------
Total current assets 5,489,693 1,362,849
Furniture and equipment (at cost) 68,596 65,516
Less accumulated depreciation 48,641 42,989
------------------ ---------------
19,955 22,527
------------------ ---------------
Other assets:
Investments and advances 851,490 851,490
Goodwill, net of accumulated amortization of
$88,685 and $87,428 respectively 2,305 3,562
Satellite construction costs 10,282,667 1,272,083
------------------ ---------------
11,136,462 2,127,135
------------------ ---------------
Total assets $ 16,646,110 $ 3,512,511
================== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 92,275 $ 240,240
Customer advances 400,000 400,000
Accrued liabilities 62,615 489,531
------------------ ---------------
Total current liabilities 554,890 1,129,771
------------------ ---------------
Stockholders' equity:
Common stock 5,697 3,452
Capital in excess of par value 24,129,383 8,511,410
Warrants 1,194,136 1,085,500
Note receivable from shareholder (60,000) -
Deficit accumulated during the development stage (9,092,996) (7,132,622)
Treasury stock (85,000) (85,000)
------------------ ---------------
Total stockholders' equity 16,091,220 2,382,740
------------------ ---------------
Total liabilities and stockholders' equity $ 16,646,110 $ 3,512,511
================== ===============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>2
DBS INDUSTRIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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April 25, 1990
Three Months Ended Six Months Ended (Inception) to
June 30, June 30, June 30,
1999 1998 1999 1998 1999
-------------- -------------- -------------- --------------- ----------------
Revenue $ - $ - $ - $ - $ 161,420
-------------- -------------- -------------- --------------- ----------------
Cost and operating expenses:
Cost of revenue - - - - 127,580
General and administrative 778,757 340,898 1,676,799 646,380 10,338,488
Research and development 138,623 285,349 359,224 347,413 3,325,942
-------------- -------------- -------------- --------------- ----------------
917,380 626,247 2,036,023 993,793 13,792,010
-------------- -------------- -------------- --------------- ----------------
Loss from operations (917,380) (626,247) (2,036,023) (993,793) (13,630,590)
-------------- -------------- -------------- --------------- ----------------
Other income (expense):
Interest, net 63,280 3,872 75,649 2,194 (633,810)
Equity in loss of investees, net - (56,492) - (93,410) (512,920)
Gain (loss) on sale of investment - (228,323) - (228,323) 5,829,218
Other, net - - - - (56,634)
-------------- -------------- -------------- --------------- ----------------
63,280 (280,943) 75,649 (319,539) 4,625,854
-------------- -------------- -------------- --------------- ----------------
Loss before provision for income
taxes and minority interests (854,100) (907,190) (1,960,374) (1,313,332) (9,004,736)
Provision for income taxes - 4,265 - 4,265 96,835
-------------- -------------- -------------- --------------- ----------------
-------------- -------------- -------------- ---------------
Loss before minority interests (854,100) (911,455) (1,960,374) (1,317,597) (9,101,571)
Minority interests in income of
consolidated subsidiaries - - - - 8,575
-------------- -------------- -------------- --------------- ----------------
Net loss $ (854,100) $ (911,455) $ (1,960,374) $ (1,317,597) $ (9,092,996)
============== ============== ============== =============== ================
Basic net loss per share $ (0.06) $ (0.15) $ (0.17) $ (0.22)
============== ============== ============== ===============
Diluted net loss per share $ (0.06) $ (0.15) $ (0.17) $ (0.22)
============== ============== ============== ===============
Weighted average number of
shares of common stock, basic 14,019,273 5,897,652 11,838,062 5,897,281
============== ============== ============== ===============
Weighted average number of
shares of common stock, diluted 14,019,273 5,897,652 11,838,062 5,897,281
============== ============== ============== ===============
</TABLE>
<PAGE>3
DBS INDUSTRIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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April 25, 1990
Six Months Ended (Inception) to
June 30, June 30,
1999 1998 1999
-------------- ------------- ---------------
Net cash used in operating activities $ (2,148,734) $ (451,507) $ (12,096,138)
-------------- ------------- ---------------
Cash flows from investing activities:
Proceeds from sale of investment - 199,940 1,099,940
Proceeds from Loral settlement - - 3,573,677
Purchase of fixed assets (3,080) - (114,127)
Satellite construction payments (9,010,584) - (10,282,667)
Organization costs - - (28,526)
Advances to officers and shareholders (60,000) - (91,187)
Purchase of interest in Continental - - (2,292,409)
Investments and advances (500,000) (204,848) (1,708,726)
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
-------------- ------------- ---------------
Net cash used in investing activities (9,573,664) (4,908) (9,400,905)
-------------- ------------- ---------------
Cash flows from financing activities:
Repayment of borrowing under credit line - - (300,000)
Issuance of debentures - - 4,817,501
Issuance of common stock 15,479,704 97,929 23,630,446
Redemption of common stock warrants - - (19,490)
Stock issue costs (104,100) - (603,835)
Purchase of shares - - (5,000)
Payment of debentures - - (1,168,445)
Proceeds from stockholders' loans - - 442,750
Payment of stockholders' loans - - (351,967)
-------------- ------------- ---------------
Net cash provided by financing activities 15,375,604 97,929 26,441,960
-------------- ------------- ---------------
Net increase (decrease) in cash 3,653,206 (358,486) 4,944,917
Cash and cash equivalents,
beginning of period 1,291,711 383,054 -
-------------- ------------- ---------------
Cash and cash equivalents,
end of period $ 4,944,917 $ 24,568 $ 4,944,917
============== ============= ===============
Supplemental disclosures:
Noncash financing activities:
Value of warrants granted to non-employees 300,250
Value of warrants representing stock issue costs 270,000
Amortization of options granted to non-employees 53,000
</TABLE>
<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 (the subsidiaries), 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 June 30, 1999 and condensed consolidated results
of operations and cash flows for the interim periods reported. The
results of operations for the 1999 interim period presented are not
necessarily indicative of expected results for the full 1999 fiscal
year.
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 financial
alternatives. 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.
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 1998 Annual
Report to Shareholders.
NOTE 2 EQUITY IN INCOME & LOSSES OF INVESTEES
E-SAT, Inc.
In October 1994, the Company and Echostar Communications
Corporation formed E-SAT, Inc. ("E-SAT") for the purpose of
filing with the Federal Communications Commission for a license
to operate a low earth orbiting satellite system. E-SAT filed a
license application with the Federal Communications Commission
(FCC) on November 16, 1994. In April 1998, the FCC formally
approved E-SAT's application. The Company holds a 20% interest in
E-SAT and Echostar holds the remaining 80%. The Company's total
investments in and advances to E-SAT were $851,490 as of June 30,
1999. The investment is accounted for using the equity method. As
of June 30, 1999, 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.
On July 30, 1999, the Company entered into an agreement with
Echostar under which it will receive 60.9% of E-SAT's shares from
Echostar in exchange for rights to use up to 20% of the satellite
capacity of the E-SAT system by Echostar. As a result of this
transaction, the Company will own 80.9% of the E-Sat shares. This
share purchase agreement is subject to approval by the FCC. In
connection with the negotiations of the share purchase agreement
with EchoStar, the Company has entered into a service contract
with a consultant for a minimum of $1.5 million in fees. As of
June 30, 1999, the Company had paid $500,000 on this contract.
NOTE 3 SATELLITE CONSTRUCTION COSTS
On December 15, 1998, the Company and Alcatel Space Industries
("Alcatel") entered into a Memorandum of Understanding and
authorization to proceed ("MOU") pursuant to which Alcatel would
become the General Contractor for the design, construction and launch
services for the Company's planned low earth orbit satellites. Upon
signing of the MOU, the Company made a $1 million advance payment to
Alcatel and, in January and February 1999, the Company made
additional payments totaling $1 million. The Company and Alcatel are
negotiating a definitive agreement.
<PAGE>5
DBS INDUSTRIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
During the construction of the E-SAT System, the Company is
capitalizing all construction costs. Included in satellite
construction costs are engineering and construction costs incurred
in connection with the design of the satellites and the $2 million
payments to Alcatel for design services.
On March 31, 1999, the Company signed construction and launch
contracts with two European entities and made advance payments of
$7.8 million in April 1999. Total payments under these cancelable
contracts will amount to approximately $47 million through January
2001. On April 8, 1999, the Company notified the FCC that it had
entered into a construction contract for the first two satellites of
the E-SAT System.
In July 1999, the Company and its two European contractors reached
agreements under which $3.2 million of the required milestone
payments due in July 1999 totaling $4.8 million were deferred to yet
to be agreed upon dates.
NOTE 4 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. Under the terms of the $1.2 million 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. These milestone payments could be subject
to refund in whole or in part.
NOTE 5 NET LOSS PER SHARE
The Company presents net loss per share in accordance with Statement
of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share,
whereby basic net loss per share is computed based on the
weighted-average number of common shares outstanding and excludes any
potential dilution. Diluted net loss per share does not include
common stock equivalents due to their antidilutive effect. Options
and warrants to purchase 3,509,906 shares of common stock with
exercise prices from $.531 to $5.60 were outstanding as of June 30,
1999 and were excluded from the loss per share calculation for the
quarter and the six month periods then ended as they have the effect
of decreasing loss per share. Options and warrants to purchase
2,507,733 shares of common stock with exercise prices from $.40 to
$5.60 were outstanding as of June 30, 1998 and were excluded from the
loss per share calculation for the quarter and six month periods then
ended as they have the effect of decreasing loss per share.
NOTE 6 EQUITY TRANSACTIONS
In January and February 1999, the Company received proceeds of
approximately $1.45 million from the exercise of options and
warrants.
In February 1999, the Company issued 500,000 units each consisting of
a share of Common Stock at a price of $3.00 per share and a warrant
to purchase a share of Common Stock at an exercise price of $4.00.
Sale of these units resulted in gross proceeds to the Company of $1.5
million.
In March 1999, the Company received proceeds of approximately $7.5
million from the exercise of warrants to purchase 2.5 million shares
of the Company's Common Stock issued in connection with the unit
offering discussed above.
<PAGE>6
DBS INDUSTRIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
During April 1999, the two European contractors purchased 1,666,667
shares of the Company's Common Stock for a total of $5 million in
cash.
Also in April 1999, the Company received proceeds of $30,000 from the
exercise of options to purchase 20,000 shares of the Company's Common
Stock.
Subsequent to December 31, 1998, the Company solicited stockholder
approval to increase the number of authorized shares of Common Stock
from 20,000,000 to 50,000,000. The requisite stockholder approval was
obtained.
<PAGE>7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company proposes to design, construct, launch, and operate a system
of six satellites positioned in a low earth orbit which will provide two-way,
low cost data messaging services worldwide (the "E-SAT Communications System").
The Company, through its subsidiaries including Newstar LTD., intends to
initially develop data services monitoring energy related industries such as
utilities, heavy equipment, and environmental businesses, but may provide other
commercial data collection services in other markets. Subsequent to the end of
this quarter the Company successfully negotiated an agreement with EchoStar DBS
Corporation ("EchoStar") to acquire a controlling interest in E-SAT, however
this agreement is subject to regulatory approval. Upon approval, the Company
would own 80.9% of E-SAT and EchoStar would own 19.1% and would have rights to
20% of E-SAT's satellite capacity.
RESULTS OF OPERATIONS
Revenues
The Company remains in the development stage and did not generate any
revenues or significant net interest income in either the three or six months
ended June 30, 1999 or June 30, 1998.
Cost and Operating Expenses
Cost and operating expenses for the three months ended June 30, 1999
were $917,380 as compared to $626,247 for the three months ended June 30, 1998.
During the three months ended June 30, 1999, cost and operating expenses
increased primarily in General and Administrative ("G & A") as a result of the
Company devoting substantial amounts of its financial and personnel resources on
developing its data services business. Cost and operating expenses for the six
months ended June 30, 1999 were $2,036,023 as compared to $993,793 for the six
months ended June 30, 1998. G & A expenses for the three months ended June 30,
1999 were $778,757 as compared to $340,898 for the three-month period ended June
30, 1998, and $1,676,799 for the six months ended June 30, 1999 as compared to
$646,380 for the six months ended June 30, 1998. Research & development expenses
decreased slightly to $138,623 for the three months ended June 30, 1999 as
compared to $285,349 for the three months ended June 30, 1998. The decrease was
due to the transition from costs on the E-SAT Communications project being
expensed as research & development, to the implementation of satellite
construction contracts which are capitalized.
Other Income (Expense)
The Company experienced a non-operating gain of $63,280 for the three
months ended June 30, 1999, as compared to an expense of $280,943 for the three
months ended June 30, 1998. The Company had a non-operating gain of $75,649 for
the six months ended June 30, 1999 as compared to an expense of $319,539 for the
same period in 1998.
During 1999 earned net interest income of $63,280 was recognized on cash
received in connection with the Company's fundraising efforts through the
exercise of warrants and options as well as other equity transactions totaling
approximately $15.4 million.
During 1998 the Company earned net interest of $3,872 for the
three-month period ended June 30, 1998 and $2,194 for the six-month period ended
June 30, 1998. This income was offset by the loss of $56,492 of equity in the
<PAGE>8
Company's investments for the three months ended June 30, 1998 and a loss of
$93,410 for the six months ended June 30, 1998. The Company also recorded a loss
of $228,323 on the sale of its 20% interest in Seimac Limited which is reflected
in both periods.
Net Loss
The Company's net loss for the three-month period ended June 30, 1999, was
$854,100 compared to $911,455 for the three-month period ended June 30, 1998.
Net loss for the six months ended June 30, 1999 was $1,960,374 compared to a net
loss of $1,317,597 for the six-month period ended June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has been in the development stage since its inception and has
not generated any significant revenues from operations. The Company's monthly
expenses averaged approximately $350,000 per month during the second quarter of
1999 which included approximately $250,000 per month for operating, legal and
consulting expenses, and $100,000 per month for research & development relating
to the E-SAT Communications System. However, the Company anticipates that
expenses will continue to increase during 1999 with the development of the
satellites for the E-SAT Communications System (and contractual obligations
related to such development) and business applications of the E-SAT
Communications System. Additional capital will be necessary to expand operations
or continue current operations. During the quarter ended June 30, 1999, the
Company raised $5 million in gross proceeds from a private placement of its
Common Stock and $30,000 from the exercise of outstanding options. The Company
made approximately $7.8 million in payments to several contractors during the
second quarter of 1999 in connection with the construction of the satellites for
the E-SAT Communications System.
In connection with the negotiations of the share purchase agreement with
EchoStar, the Company has entered into a service contract with a consultant
requiring payment of a minimum $1.5 million in fees. As of June 30, 1999, the
Company has paid $500,000 on this contract.
Traditionally, the Company has relied on equity and debt financings to fund
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. The Company
anticipates needing substantial additional capital, an estimated $111 million
over the next 24 months, to construct and launch the satellites comprising the
E-SAT Communications System. Further, the construction of the first two of the
six planned satellites commenced prior to March 31, 1999 pursuant to the terms
of the FCC license granted to E-SAT and will require milestone payments of an
additional $24.5 million over the next 12 months, through June 30, 2000.
However, the Company anticipates signing additional contracts relating to the
construction of the satellites which will likely result in milestone payments of
an additional $20 to $25 million over the next 12 months, through June 30, 2000.
The Company had cash and cash equivalents of $4,944,917 and $24,568 as of
June 30, 1999 and 1998, respectively. The Company had working capital of
$4,934,803 as of June 30, 1999 compared to a negative working capital of
$1,087,438 as of June 30, 1998. Until the Company is able to develop, construct
and operate its E-SAT Communications System and derive revenues therefrom, the
Company will continue to use cash obtained from outside sources for its
operations and development of its data services business.
Net cash used in operating activities was $2,648,734 for the six months
ended June 30, 1999, as compared to $451,507 for the six months ended June 30,
1998. Net cash used in operating activities increased during 1999 as compared
with the same quarter last year as a result of increased cash expenditures as
the Company expanded its development activity relating to the E-SAT
Communications System. This increased level of development costs is expected to
continue through the launch of the satellites in 2001.
Net cash used in investing activities for the six months ended June 30,
1999, was $9,073,644. This net cash used represents a loan to a director secured
by the Company's stock for $60,000 and approximately $9 million in progress
payments relating to satellite construction costs. Net cash used by investing
<PAGE>9
activities was $4,908 for the six months ended June 30, 1998 and was comprised
of investments in and advances to E-SAT of $204,848 offset by net proceeds from
the sale of the Company's 20% interest in Seimac Limited of $199,940.
Net cash provided by financing activities for the six months ended June 30,
1999, was $15,375,604 compared to $97,929 for the six months ended June 30,
1998. Net cash provided by financing activities during 1999 was $15,479,704 and
related to the net proceeds from the sale of units of common stock for $1.5
million, exercise of warrants for $7.5 million, the sale of common stock to two
European contractors for $5 million, and the exercise of options by directors,
officers and employees of the Company, as well as other non-employee grants. Net
cash provided was offset by stock issue costs of $104,100 in the six-month
period ended June 30, 1999.
The Company continues to carry a liability of $400,000 for customer
advances stemming from a 1996 development agreement that was subsequently
suspended in 1997, prior to completion. Under the terms of the agreement, the
Company may be required to refund these payments in whole or in part. (See:
Notes to Condensed Consolidated Financial Statements, Note 4.)
Risks and Uncertainties Affecting Future Operating Results
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995.
With the exception of historical facts stated herein, the matters
discussed in this report are "forward looking" statements that involve risks and
uncertainties that could cause actual results to differ materially from
projected results. Such "forward looking" statements include, but are not
necessarily limited to, statements regarding anticipated levels of future
revenue and earning from the operations of the Company, and its subsidiaries
including NewStar Limited (collectively the "Company"), projected costs and
expenditures relating to the Company's interest in low earth orbiting satellites
("E-SAT Communications System") technology and development of its automated
meter reading ("AMR") business and the fact that the Company was negotiating
with EchoStar regarding the Company's obtaining a controlling interest in E-SAT,
which owns the FCC license. EchoStar owns 80% of E-SAT. Other factors, in
addition to those identified in this report, which could affect future results
would include: (i) the Company's ability to retain the prime contractor for the
development, construction and deployment of the E-SAT Communications System;
(ii) the Company's ability to raise significant additional debt and equity
capital from outside sources for the development of the E-SAT Communications
System and the availability of capital on commercially acceptable terms; (iii)
the completion of a commercially viable E- SAT Communications System and AMR
service; (iv) the dependence and uncertainty of commercial customers to utilize
the Company's AMR service; (v) the reliance on third parties for the advancement
of the design, manufacturing and marketing of the E-SAT Communications System;
(vi) satisfying the milestones of E-SAT's FCC license and construction
contracts; (vii) the fulfillment of contract obligations by suppliers and other
third parties and the availability of qualified personnel and equipment; (viii)
delays in the receipt of or failure to receive necessary governmental approvals
or obtaining permits and licenses or renewals thereof. Readers of this report
are cautioned not to put undue reliance on "forward looking" statements which
are, by their nature, uncertain as reliable indicators of future performance.
The Company disclaims any intent or obligation to publicly update these "forward
looking" statements, whether as a result of new information, future events, or
otherwise.
Successfully addressing the factors discussed above is subject to
various risks described in this report, as well as other factors such as risks
and uncertainties relating to general economic and political conditions, both
domestically and internationally, changes in the law and regulations governing
the Company's activities in the Little LEO satellite technology, results of the
Company's financing efforts and marketing conditions, and other risk factors
<PAGE>10
related to the Company's business set forth in the Company's registration
statement on Form SB-2, SEC File No. 333-77687 which was declared effective on
June 1, 1999. These factors could affect the price of the Company's stock and
could cause such stock prices to fluctuate significantly over relatively short
periods of time.
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, or engage in similar normal
business activities. In the Company's assessment, because the Company's 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 Communications System, the Company
will be relying on vendors to, among other things, manufacture the Little LEO
satellites, launch the Little LEO satellites, manufacture the remote terminal
units and build the E-SAT infrastructure including the control stations which
are Y2K compliant. The Company has entered into contracts with several vendors
to develop the E- SAT Communications System, and, an assessment has been made as
to their Year 2000 compliance. As part of ongoing contract negotiations, the
Company will request and determine the vendors' 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 4. Submission of Matters to a Vote of Security Holders.
On June 18, 1999, the Company held its annual meeting of shareholders
for the election of three directors and to adopt the 1999 Employee Stock
Purchase Plan.
Election of Director For Votes Withheld
-------------------- ---------- --------------
Fred W. Thompson 9,073,684 16,384
E. A. James Peretti* 8,810,650 179,418
Jessie J. Knight, Jr. 9,068,459 21,609
For Against Abstain
Approval to adopt the 1999 Employee --------- --------- --------
Stock Purchase Plan 8,748,052 313,004 29,012
-------------------
*On July 26, 1999 Mr. Peretti resigned as an officer and director of the
Company.
<PAGE>11
Item 5. Other Information.
On July 26, 1999, Mr. James Peretti, the Company's Chief Operating
Officer and a Director, resigned from the Company.
Item 6. Exhibits and Reports on Form 8-K
ExhibitFinancial Data Schedule
<PAGE>11
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.
DATE: August 19, 1999 BY: /S/ FRED W. THOMPSON
-------------------
Fred W. Thompson
President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
10-QSB FOR THE PERIOD ENDED JUNE 30, 1999 FOR DBS INDUSTRIES, INC. AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,944,917
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,489,693
<PP&E> 68,596
<DEPRECIATION> 48,641
<TOTAL-ASSETS> 16,646,110
<CURRENT-LIABILITIES> 554,890
<BONDS> 0
0
0
<COMMON> 5,697
<OTHER-SE> 16,085,523
<TOTAL-LIABILITY-AND-EQUITY> 16,646,110
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,036,023
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (75,649)
<INCOME-PRETAX> (1,960,374)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,960,374)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,960,374)
<EPS-BASIC> (.17)
<EPS-DILUTED> (.17)
</TABLE>
