U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB/A NO. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the quarter ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from_______ to________
Commission File No. 2-88678-NY
DHB CAPITAL GROUP INC.
(Name of small business issuer in its charter)
New York 11-3129361
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
11 Old Westbury Road, Old Westbury, New York 11568
(Address of principal executive offices)
Issuer's telephone number: (516) 997-1155
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 Par Value
(Title of Class)
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 [ ]
Number of shares outstanding of the issuer's common equity, as of May 15, 1996
(exclusive of securities convertible into common equity) : 14,456,330
<PAGE>
This filing Form 10-KSB/A No. 1 amends the Annual Report on Form 10-QSB dated
May 15, 1996 of DHB Capital Group Inc. (the Company). The undersigned Registrant
hereby amends the following items, financial statements, exhibits or other
portions of such report on Form 10-QSB dated May 15, 1996 (The "Form 10-QSB"),
as set forth below:
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
The Company is a holding company which is principally engaged through
its wholly-owned subsidiaries in the development, manufacture and distribution
of bullet- and projectile-resistant garments, and the manufacture and
distribution of protective athletic equipment and apparel. (The Company's
acquisition of a subsidiary which manufactures orthopedic products occurred
after the end of the fiscal periods hereinafter discussed.) In August 1995, the
Company acquired certain assets, free of all liabilities (the "Point Blank
Assets") of Point Blank Body Armor, L.P., and an affiliated company
(collectively, "Old Point Blank") at an auction held pursuant to Chapter 7 of
the United States Bankruptcy Code. In late December 1994, the Company started up
its protective athletic equipment business by acquiring the trade inventory,
work in process, raw materials, trade names and trademarks (the "NDL Assets") of
N.D.L. Products, Inc., a Delaware corporation, at an auction held pursuant to
Chapter 7 of the Bankruptcy Code. In March 1996, the Company acquired Orthopedic
Products, Inc. ("OPI"), which is a manufacturer of orthopedic products and a
distributor of general medical supplies. Intelligent Data Corporation ("ID"), a
development stage company which is a 98% owned subsidiary of the Company, is
engaged in the design and production of sophisticated telecommunications
equipment for the remote execution and authentication of documents. The Company
also owns a minority interest in several other companies, some privately held
and some publicly held, in the pharmaceuticals business, health care, mining and
snowboard manufacturing. The management of the Company is engaged in the review
of potential acquisitions and in providing management assistance to the
Company's operating subsidiaries.
The Company commenced operations in November 1992 by acquiring the
outstanding common stock of PACA, a manufacturer and distributor of bullet-proof
garments and accessories. From the acquisition of PACA through December 20,
1994, i.e., the date of the start-up of NDL, PACA was the Company's only source
of revenue from operations. Thereafter, and to date, NDL and Point Blank are
also a source of revenue from operations.
The discussion that follows must be considered in light of the
significant changes in the Company's business at the end of 1994, and the
acquisition of the Point Blank Assets in August 1995, and should be read in
conjunction with the financial statements, including the notes thereto. The
Company's financial condition and results of operations in the future may also
be materially affected by the Company's acquisition of OPI in March 1996.
The Armor Group's products are sold nationally and internationally,
primarily to law enforcement agencies and military services. Sales to domestic
law enforcement agencies, including government, security and intelligence
agencies, police departments, federal and state correctional facilities, highway
patrol and Sheriffs' departments, comprise the largest portion of the Armor
<PAGE>
Group's business. Accordingly, any substantial reduction in governmental
spending or change in emphasis in defense and law enforcement programs could
have a material adverse effect on the Armor Group's business. The acquisition of
the Point Blank Assets is expected to improve the Company's overall penetration
of the market for ballistic-resistant garments, equipment and accessories.
Results of Operations
Three Months ended March 31, 1996, compared to the three months ended
March 31, 1995. Consolidated net sales of the Company for the three months ended
March 31, 1996, increased from, $2,652,000 to approximately $7,045,000. The
increase was primarily due to the inclusion of Point Blank and NDL. The
acquisition of OPI on March 22, 1996 contributed less than $100,000 to sales in
1996. The Company had consolidated net income for 1996 and 1995 of approximately
$581,000 and $30,000, respectively, principally because of the appreciation of
marketable securities and increased sales volume.
Gross profit in 1996 increased 72% over 1995 to $1,950,091. The
Company's gross profit ratio decreased from 43% in 1995 to 27% in 1996; due to
the diversity of the product mix, certain products are being sold at lower
margins.
The Company's selling, general and administrative expenses for 1996
increased to $1,707,026 from $922,157 in 1995. However. as a percentage of net
sales, expenses decreased to 24% of net sales in 1996 compared to 37% in 1995.
This decrease principally resulted from the efficiencies of operating NDL and
Point Blank at the same location.
Interest expense, net of interest income, for the three months ended
1996 increased to $68,532 from $21,569 for 1995, principally due to a decline in
interest income because of the use of the Company's funds in its operating
business, and increases in the borrowings of the Company.
The Company had a net realized loss of $13,985 and an unrealized gain
on its investments in marketable securities of $548,443 for the three months
ended March 31, 1996, as compared to a net realized gain of $16,853 and an
unrealized loss of $98,560 for the three months ended March 31, 1995.
The Company's principal sources of cash to date have been proceeds from
private offerings of the Company's securities, and, as more fully set forth
below, term bank loans of up to a year's duration, guaranteed by Mr. David H.
Brooks, Chairman of the Board, and certain affiliated persons. At the present
time, the Company is obligated on a note due in September 1996 to the Chase
Manhattan Bank ("Chase") in the principal sum of $1,150,000 bearing interest at
6.255% per year, and on a note due in December 1996 to the Bank of New York
("BNY"), bearing interest at 6.43% per year. The Chase loans are secured by a
security interest in the marketable investment securities of the Company and
certain marketable investment securities of the majority shareholders. The
Company expects to renew these loans, at prevailing interest rates, when they
become due. Of the proceeds drawn down to date, $1,400,000 were used by the
Company to refinance PACA's obligations to another financial institution, and
$1,150,000 were used to purchase the NDL Assets and provide NDL with working
capital. In 1995, the Company realized $815,000 from the exercise of outstanding
Redeemable Warrants.
Mr. David H. Brooks, Chairman of the Board, and/or his wife, Mrs. Terry
Brooks, made term loans due in April 1997 of $1,140,000, bearing interest at 9%
<PAGE>
per year, and entered into a collateral agreement [third party] (the "Collateral
Agreement") with Chase to pledge certain marketable securities owned by Mr.
Brooks and Mrs. Brooks to partially secure the term loans and other obligations
of the Company to Chase. In exchange for this, the Company granted to Mrs. Terry
Brooks, on December 20, 1994, 5-year warrants to purchase 3,750,000 shares of
the Company's Common Stock after giving effect to the 50% Stock Dividend, at a
price of $1.33 per share. The warrants contain provisions for a one-time demand
registration, and piggyback registration rights. All of the aforesaid loans were
made directly to the Company, and the Company has lent the loan proceeds to NDL.
Mr. David Brooks also lent $2,000,000 to the Company to provide the major
portion of funds needed to purchase the Point Blank Assets, of which $750,000 is
currently outstanding. Mr. and Mrs. Brooks have also pledged certain of their
personal assets to secure the BNY Loan. See "Principal Shareholders" and
"Certain Transactions."
In connection with the start-up of NDL, the Company relocated
substantially all the NDL Assets to a 67,000 square foot office and warehouse
facility located at 4031 N.E. 12th Terrace, Oakland Park, Florida 33334, which
is now owned by affiliates of Mr. Brooks. That facility will also be used by
Point Blank and ID. See "Properties - NDL Facility."
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 734,462 $ 475,108
Marketable securities 2,254,260 1,829,856
Accounts receivable, less allowance for
doubtful accounts of $80,695 & $70,000 4,576,830 3,819,571
Inventories 6,960,293 7,856,199
Prepaid expenses and other current assets 220,156 208,510
------------ ------------
Total Current Assets 14,746,001 14,189,244
------------ ------------
Property, and Equipment, at cost, less accumulated
depreciation of $374,929 and $325,454 1,562,002 1,077,066
------------ ------------
Other Assets
Intangible assets, net 769,686 812,006
Investment in non-marketable securities 3,316,750 3,316,750
Deposits and other assets 230,144 160,821
------------ -----------
Total Other Assets 4,316,580 4,289,577
------------ ------------
Total Assets $ 20,624,583 $ 19,555,887
============ ============
(Continued)
<PAGE>
<CAPTION>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
LIABILITIES AND EQUITY
Current Liabilities
Note payable $ 2,550,000 $ 2,550,000
Current Maturities 43,715 --
Accounts payable 2,076,181 2,847,690
Accrued expenses and other liabilities 307,965 301,067
Deferred taxes payable 11,100 36,900
Income taxes payable 146,635 62,972
------------ ------------
Total Current Liabilities 5,135,596 5,798,629
------------ ------------
Long Term Debt
Long Term Debt 199,858 --
Due to shareholder 1,890,000 1,890,000
------------ ------------
Total Long Term Debt 2,089,858 1,890,000
Total Liabilities 7,225,454 7,688,629
------------ ------------
Stockholders' Equity
Preferred stock 219 219
Common stock 14,021 13,841
Additional paid-in capital 12,702,289 12,123,470
Common stock subscription receivable -- (437,500)
Retained earnings 682,600 167,228
------------ ------------
Total Stockholders' Equity 13,399,129 11,867,258
------------ ------------
Total Liabilities and Shareholders' Equity $ 20,624,583 $ 19,555,887
============ ============
</TABLE>
See Accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31,
UNAUDITED UNAUDITED
1996 1995
------------ ------------
<S> <C> <C>
Net Sales $ 7,044,626 $ 2,652,090
Cost of sales 5,094,536 1,517,235
------------ ------------
Gross Profit 1,950,090 1,134,855
Selling, general and administrative expenses 1,707,026 992,157
------------ ------------
Income before other income (expense) 243,064 142,698
Other Income (Expense)
Interest expense, net of interest (68,532) (21,569)
Dividend income 1,890 2,850
Realized gain (loss) on marketable securities (13,985) 16,853
Unrealized gain (loss) on marketable securities 548,443 (98,560)
------------ ------------
Total Other Income (Expense) 467,816 (100,246)
------------ ------------
Income (loss) before income taxes 710,880 42,272
Income taxes 130,219 12,500
------------ ------------
Net Income (loss) 580,661 29,772
Retained Earnings (Deficit) - Beginning 101,939 (142,537)
------------ ------------
Retained Earnings (Deficit) - End $ 682,600 (112,765)
============ ============
Earnings (loss) per common share:
Primary $ 0.041 $ 0.015
Fully Diluted $ 0.040 $ 0.015
Weighted average number of common shares outstanding:
Primary 14,123,704 11,409,416
========== ==========
Fully Diluted 14,471,704 11,409,416
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 580,661 $ 29,772
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 62,771 29,188
Deferred income taxes -- 8,000
Changes in assets and liabilities (Increase) Decrease in:
Accounts receivable (329,971) 282,530
Marketable securities (424,404) 286,460
Inventories 1,404,527 (664,699)
Prepaid expenses and other current assets (4,338) 120,368
Other assets (63,093) (50,215)
Increase (Decrease) in:
Accounts payable (1,002,972) 192,798
Accrued expenses and other current liabilities (4,369) 20,468
State income taxes payable 89,041 (24,000)
----------- -----------
Net cash provided (used) by operating activities 307,853 230,670
CASH FLOWS FROM INVESTING ACTIVITIES
Cash payments for the purchase of property (434,954) (77,427)
Cash payments for acquisition costs (51,045) --
Payments to acquire non-marketable securities -- (575,000)
----------- -----------
Net cash provided (used) by investing activities (485,999) (652,427)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from sale of common stock 437,500 100,000
----------- -----------
Net cash provided (used) by financing activities 437,500 100,000
----------- -----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 259,354 (321,757)
CASH AND CASH EQUIVALENTS - BEGINNING 475,108 407,425
----------- -----------
CASH AND CASH EQUIVALENTS - END $ 734,462 $ 85,668
=========== ===========
Supplemental Cash Flow Information
Cash paid for interest and taxes
Interest 34,496 28,923
Taxes 33,301 31,101
Noncash transaction: The Company had a noncash transaction in March 1996
when the Company issue 180,000 in lieu of a cash payment to acquire OPI for a
cash value of $579,000.
</TABLE>
See Accompanying notes to financial statements.
<PAGE>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION/REPORTING ENTITIES
The consolidated financial statements of DHB Capital Group, Inc. and
Subsidiaries (the "Company") are unaudited and reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim period. The
consolidated Company includes the following entities:
DHB Capital Group, Inc.
DHB Capital Group Inc. ("DHB") was incorporated on October 22, 1992 under the
laws of the State of New York. DHB was organized to seek, acquire and finance,
as appropriate, one or more operating companies. On February 15, 1995, the
holders of the common stock approved a re-incorporation of DHB as a Delaware
corporation, through a merger with a newly formed Delaware corporation.
Protective Apparel Corporation of America
Protective Apparel Corporation of America ("PACA") was organized in 1975 and is
engaged in the development, manufacture and distribution of bullet and
projectile resistant garments, including bullet resistant vests, fragmentation
vests, bomb projectile blankets and tactical load bearing vests. In addition,
PACA distributes other ballistic protection devices including helmets and
shields. PACA is dependent upon a few suppliers for the raw materials utilized
to manufacture its products.
On November 6, 1992, PACA became a wholly-owned subsidiary of DHB, when DHB
purchased all of the issued and outstanding stock of PACA from PACA's former
parent, E.S.C. Industries, Inc, for $800,000. The transaction was accounted for
as a purchase and resulted in an excess purchase price over the fair market
value of the identifiable assets acquired and liabilities assumed of $465,278,
of which $312,086 was allocated to on-going government contracts and $153,192
was allocated to goodwill.
Intelligent Data Corp.
On April 1, 1994, the Company acquired 4,530,000 common shares (60.4% interest)
and 1,100,000 preferred shares of stock in Intelligent Data Corp. ("ID"), in
exchange for 425,000 shares of the Company's common stock. ID is engaged in the
development of sophisticated telecommunication systems. On July 1, 1994, a put
option was exercised by certain shareholders of ID resulting in an increase in
the Company's ownership to 89.58%. In December 1994, the Company converted all
of its preferred shares to common shares, increasing the Company's ownership to
98.35%. This transaction was accounted for as a purchase, and resulted in an
excess purchase price over the fair value of identifiable assets acquired and
liabilities assumed of $472,666 which was allocated to patents owned by ID.
DHB Media Group, Inc.
On April 15, 1994, DHB Media Group, Inc. ("Media"), a wholly-owned subsidiary of
the Company acquired all of the outstanding common stock of Royal Acquisition
Corp. in exchange for 100,000 shares of the Company's common stock, for a
purchase price of $300,000. Subsequent negotiations resulted in the reduction of
the acquisition cost by $36,550. Royal Acquisition Corp.'s primary assets were a
film library and a loan receivable of $150,000. The transaction was accounted
for as a purchase and resulted in the excess purchase price over the fair F-29
market value of $113,450, of which $54,000 was allocated to the film library and
<PAGE>
$59,450 was allocated to goodwill. Media intends to syndicate and market these
films. The loan receivable was collected in full during the year ended December
31, 1994.
NDL Products, Inc.
On December 20, 1994, the Company through a newly organized, wholly-owned
subsidiary, DHB Acquisition, Inc., ("Acquisition") purchased certain assets from
a debtor-in-possession, N.D.L. Products, Inc. for $3,080,000. Acquisition did
not assume any continuing obligations of the debtor-in-possession, nor did the
management of the debtor-in-possession continue. On February 21, 1995,
Acquisition changed its corporate name to NDL Products, Inc. NDL manufactures
and distributes specialized protective athletic apparel and equipment.
DHB Armor Group, Inc.
On August 8, 1995, the Company started a new Delaware Corporation which is a
wholly-owned subsidiary of the Company. The subsidiary, DHB Armor Group, Inc.,
("Armor"), now wholly owns PACA and Point Blank Body Armor, Inc., ("Point
Blank").
Point Blank Body Armor, Inc.
In August 1995, the Company, through a wholly-owned subsidiary known as USA
Fitness & Protection Corp, a Delaware Corporation, acquired from a trustee in
bankruptcy certain assets of Point Blank Body Armor, L.P. and an affiliated
company ("Old Point Blank"), for a cash payment of $2,000,000, free of all
liabilities. Prior to the filing of the petition in bankruptcy, Old Point Blank
had been a leading U.S. manufacturer of bullet-resistant garments and related
accessories. After acquiring the Old Point Blank, USA Fitness & Protection
Corp., amended its articles of incorporation to change their name to Point Blank
Body Armor, Inc. ("Point Blank").
Orthopedic Products, Inc.
On March 22 and March 26, 1996, the Company exchanged a total of
180,000 shares of its registered common stock to acquire 100% of the
common stock of OPI, a Florida Corporation engaged in the manufacturing
and distribution of orthopedic products to the medical industry. This
transaction was accounted for as a purchase, and resulted in an excess
purchase price over the fair value of identifiable assets acquired and
liabilities assumed which was allocated to goodwill. Fifty thousand of
these shares are restricted as follows: 25,000 shares cannot be sold
until March 22, 1997 and 25,000 shares cannot be sold until March 22,
1998.
PRINCIPLES OF CONSOLIDATION
All material intercompany transactions have been eliminated in the consolidated
financial statements.
MARKETABLE/NON-MARKETABLE SECURITIES
Effective for calendar year 1994, the Company adopted Financial Accounting
Standards Board Statement No. 115 "Accounting for Certain Investments in Debt
and Equity Securities." In accordance with this standard, Securities which are
classified as "trading securities" are recorded in the Company's balance sheet
at fair market value, with the resulting unrealized gain or loss recognized as
income in the current period. Securities which are classified as "available for
sale" are also reported at fair market value, however, the unrealized gain or
loss on these securities is listed as a separate component of shareholder's
equity.
<PAGE>
Non-marketable securities, such as investments in privately-held companies are
carried at historical cost, if necessary, reduced by a valuation allowance to
net realizable value. F-30 The Company actively seeks to acquire and finance, as
appropriate, additional operating companies or interest therein.
EARNINGS PER SHARE
The computation of earnings per common share is based on the weighted average
number of outstanding common shares outstanding during the period. Primary
earnings per share and fully diluted earnings per share amounts assume the
conversion of the Cumulative Convertible Preferred Stock, and the exercise of
the stock warrants.
2. SUBSEQUENT EVENTS
Private Placement-Common Stock
During April and May, 1996 the Company sold 435,000 shares of common stock in
private placements for proceeds of $1,522,500. These shares have not been
registered with the Securities and Exchange Commission.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed by the
undersigned, thereunto duly authorized.
Dated: August 1, 1996 DHB Capital Group Inc.
/S/ DAVID BROOKS
Chairman of the Board
Pursuant to the requirements of the Securities Exchange1934, this report has
been signed on behalf of the Registrant and in capacities and at the dates
indicated:
Signature Capacity Date
/S/ David Brooks Chairman of the Board August 1, 1996
- ----------------
/S/ Mary Kreidell Treasurer August 1, 1996
/S/ Mel Paikoff Director Augst 1, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 734,462
<SECURITIES> 2,254,260
<RECEIVABLES> 4,576,830
<ALLOWANCES> 80,695
<INVENTORY> 6,960,293
<CURRENT-ASSETS> 14,746,001
<PP&E> 1,562,002
<DEPRECIATION> 374,929
<TOTAL-ASSETS> 20,624,583
<CURRENT-LIABILITIES> 5,135,596
<BONDS> 0
0
219
<COMMON> 14,021
<OTHER-SE> 13,384,889
<TOTAL-LIABILITY-AND-EQUITY> 20,710,753
<SALES> 7,044,626
<TOTAL-REVENUES> 7,044,626
<CGS> 5,094,536
<TOTAL-COSTS> 1,707,026
<OTHER-EXPENSES> (467,816)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,532
<INCOME-PRETAX> 710,880
<INCOME-TAX> 130,218
<INCOME-CONTINUING> 580,662
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 580,662
<EPS-PRIMARY> .041
<EPS-DILUTED> .040
</TABLE>
