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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER
ENDED
JUNE 30, 1998 Commission File No. 0-22429
DHB CAPITAL GROUP INC
(Exact name of Registrant as specified in its charter)
Delaware 11-3129361
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification No.)
11 Old Westbury Road, Old Westbury, New York 11568
(Address of principal executive offices)
Registrant's telephone number: (516) 997-1155
Former name, former address and former fiscal year,
if changed since last report: Not applicable
Indicate by check whether the registrant (1) filed all reports required to be
filed by section 13 or 15(d) of the Exchange Act 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 [ ]
As of August 13, 1998, there were 24,855,872 shares of Common Stock, $.001 par
value outstanding.
<PAGE>
CONTENTS
PART I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 1998 and December 31, 1997
Unaudited Consolidated Statements of Operations and Retained Earnings
For The Three Months Ended June 30, 1998 and 1997
Unaudited Consolidated Statements of Operations and Retained Earnings
For The Six Months Ended June 30, 1998 and 1997
Unaudited Consolidated Statements of Cash Flows For The Six Months Ended
June 30, 1998 and 1997
Unaudited Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Results of Operations
Operations and Financial Condition
PART II Other Information
Signatures
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ............................................... $ 131,110 $ 882,884
Marketable securities ................................................... 102,108 1,703,806
Accounts receivable, less allowance for doubtful
accounts of $369,369 and $303,320 ................................. 7,804,293 6,285,181
Inventories ............................................................. 16,250,322 12,543,474
Prepaid expenses and other current assets ............................... 1,717,371 727,421
------------ ------------
Total Current Assets ..................................... 26,005,204 22,142,766
------------ ------------
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation of $1,421,780 and $742,460, respectively ............... 6,764,473 2,374,085
------------ ------------
OTHER ASSETS
Intangible assets, net ................................................ 1,354,795 588,017
Investments in non-marketable securities .............................. 1,688,750 1,688,750
Deferred tax assets ................................................... 477,418 455,300
Deposits and other assets ............................................. 549,778 425,711
------------ ------------
Total Other Assets ....................................... 4,070,741 3,157,778
------------ ------------
TOTAL ASSETS ............................................................... $ 36,840,418 $ 27,674,629
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
UNAUDITED
JUNE 30, 1998 DECEMBER 31, 1997
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable .......................................................... $ 5,000,000 $ 2,675,000
Current maturities of long term debt .................................. 135,069 65,192
Accounts payable ...................................................... 5,663,930 5,072,929
Accrued expenses and other current liabilities ........................ 2,227,292 708,631
------------ ------------
Total Current Liabilities ................................ 13,026,291 8,521,752
------------ ------------
LONG TERM LIABILITIES
Long term debt, net of current maturities .............................. 387,116 111,258
Note Payable - stockholder .............................................. 8,400,000 1,300,000
------------ ------------
Total Long Term Debt ..................................... 8,787,116 1,411,258
------------ ------------
Total Liabilities ........................................ 21,813,407 9,933,010
------------ ------------
STOCKHOLDERS' EQUITY
Common stock ........................................................... 24,796 25,347
Additional paid-in capital ............................................. 18,621,637 20,953,107
Accumulated deficit .................................................... (3,607,081) (3,230,700)
Foreign currency translation adjustment ................................ (12,341) (6,135)
------------ ------------
STOCKHOLDERS' EQUITY .................................................... 15,027,011 17,741,619
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .............................. $ 36,840,418 $ 27,674,629
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30,
1998 1997
------------ ------------
<S> <C> <C>
Net sales ................................................... $ 10,523,527 $ 8,400,842
Cost of sales ............................................... 6,848,302 5,758,367
------------ ------------
Gross Profit ................................................ 3,675,225 2,642,475
Selling, general and administrative expenses ................ 3,319,788 2,609,411
------------ ------------
Income(Loss) before other income (expense) .................. 355,437 33,064
------------ ------------
Other Income (Expense)
Interest expense, net of interest income .................... (329,672) (99,449)
Dividend income ............................................. 7 5,003
Foreign currency translation ................................ (658) 3,914
Realized gain on marketable securities ...................... 73,359 (262,323)
Unrealized gain on marketable securities .................... 13,751 895,687
------------ ------------
Total Other Income (Expense) ....................... (243,213) 542,832
------------ ------------
Income (loss) before income taxes (benefit) ................. 112,224 575,896
Income taxes (benefit) ...................................... 3,534 115,392
------------ ------------
Net Income (loss) ........................................... 108,690 460,504
Retained Earnings (Deficit) - Beginning ..................... (3,715,771) (4,407,540)
------------ ------------
Retained Earnings (Deficit) - End ........................... $ (3,607,081) $ (3,947,036)
============ ============
Earnings (loss) per common share
Primary ............................. $ 0.004 $ 0.018
============ ============
Fully Diluted ....................... $ 0.004 $ 0.018
============ ============
Weighted average number of common share outstanding:
Primary ............................. 29,702,704 25,720,460
============ ============
Fully Diluted ....................... 29,728,599 25,720,460
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30,
1998 1997
------------ -------------
<S> <C> <C>
Net sales ................................................... $ 21,118,599 $ 15,545,517
Cost of sales ............................................... 14,724,382 10,527,531
------------ ------------
Gross Profit ................................................ 6,394,217 5,017,986
Selling, general and administrative expenses ................ 6,421,538 4,528,195
------------ ------------
Income(Loss) before other income (expense) .................. (27,321) 489,791
------------ ------------
Other Income (Expense)
Interest expense, net of interest income .................... (501,244) (149,820)
Other income ............................................... 15 38,751
Foreign currency translation ................................ 84 (630)
Realized gain on marketable securities ...................... 119,818 (32,382)
Unrealized gain on marketable securities .................... 43,751 607,237
------------ ------------
Total Other Income (Expense) ....................... (337,576) 463,156
------------ ------------
Income (loss) before income taxes (benefit) ................. (364,897) 952,947
Income taxes (benefit) ...................................... 11,484 128,393
------------ ------------
Net Income (loss) ........................................... (376,381) 824,554
Retained Earnings (Deficit) - Beginning ..................... (3,230,700) (4,771,590)
------------ ------------
Retained Earnings (Deficit) - End ........................... $ (3,607,081) $ (3,947,036)
============ ============
Earnings (loss) per common share
Primary ............................. $ (0.013) $ 0.032
============ ============
Fully Diluted ....................... $ (0.013) $ 0.032
============ ============
Weighted average number of common share outstanding:
Primary ............................. 28,530,291 25,720,460
============ ============
Fully Diluted ....................... 28,584,093 25,720,460
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
CASH FLOWS FROM OPERATING ACTIVITIES 1998 1997
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<S> <C> <C>
Net Income (loss) ....................................................... $ (376,381) $ 824,554
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization .................................... 620,302 192,581
Stock issued for services ........................................ 372,000 --
Stock issued to purchase a lease ................................. -- 210,000
Stock issued in settlement of a lawsuit .......................... -- 150,000
Stock returned in settlement of a lawsuit ........................ -- (21,131)
Unrealized gain on transfer from non-marketable to marketable .... -- 598,900
Changes in assets and liabilities
(Increase) Decrease in:
Accounts receivable ............................................... (800,606) (1,871,981)
Marketable securities ............................................. 1,601,698 (261,487)
Inventories ....................................................... (2,333,174) (1,817,859)
Deferred taxes .................................................... (22,118) 49,000
Prepaid expenses and other current assets ......................... (977,712) (790,748)
Deposits and other assets ......................................... (101,787) (61,883)
Increase (decrease) in:
Accounts payable .................................................. (566,507) 1,193,752
Accrued expenses and other current liabilities .................... 841,270 (17,158)
State income taxes payable ........................................ 22,286 84,580
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Net cash used by operating activities ...................................... (1,720,729) (1,538,880)
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CASH FLOWS FROM INVESTING ACTIVITIES
Payments for purchase of assets of subsidiary, net of cash acquired (4,924,073) --
Payments made for property and equipment .......................... (780,347) (417,730)
----------- -----------
Net Cash used by investing activities ...................................... (5,704,073) (417,730)
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
CASH FLOWS FROM FINANCING ACTIVITIES 1998 1997
----------- -----------
<S> <C> <C>
Proceeds (repayments) of note payable- bank ....................... 2,325,000 500,000
Proceeds from shareholder note .................................... 7,100,000 --
Principal payments on long-term debt .............................. (41,417) (34,472)
Stock warrant exercised ........................................... 66,000 --
Foreign Currency Translation ...................................... (6,206) 12,163
Purchase of treasury stock ........................................ (2,770,002) --
Net proceeds from sale of common stock ............................ -- 3,198,625
----------- -----------
Net cash provided by financing activities .................................. 6,673,375 3,676,316
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NET DECREASE IN CASH AND EQUIVALENTS ....................................... (751,774) 1,719,706
CASH AND CASH EQUIVALENTS - BEGINNING ...................................... 882,884 1,398,905
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CASH AND CASH EQUIVALENTS - END ............................................ $ 131,110 $ 3,118,611
=========== ===========
Supplemental cash flow information
Cash paid for: .................................................... 1998 1997
----------- -----------
Interest .......................................................... $ 174,350 $ 165,760
Taxes ............................................................. $ 27,134 $ 17,160
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DHB CAPITAL GROUP INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
1. Consolidated Financial Statements:
The consolidated balance sheet at the end of the preceding year has been
derived from the audited consolidated balance sheet contained in the
Company's form 10-KSB and is presented for comparative purposes. All other
financial statements are unaudited. All unaudited amounts are subject to
year-end adjustments and audit, but Company believes all adjustments,
consisting only of normal and recurring adjustments, necessary to present
fairly the financial condition, results of operations and changes in cash
flows for all interim periods have been made. The results of operations
for interim periods are not necessarily indicative of the operating
results for the full year.
Footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
in accordance with published rules and regulations of the Securities and
Exchange Commission. These consolidated financial statements should be
read in conjunction with the audited consolidated financial statements and
notes thereto included in the Company's form 10-KSB for the most recent
fiscal year.
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:
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
Three Months Ended June 30, 1998, Compared to the Three Months Ended June 30,
1997.
Consolidated net sales for the three months ended June 30, 1998 increased by
approximately $2,182,000 over sales for the three months ended June 30, 1997. In
February of 1998, DHB acquired two subsidiaries, Lanxide Armor Products Inc.
(LAP) and Lanxide Electronic Components Inc. (LEC). These acquisitions
contributed approximately, $1,770,000 to the Company's sales for the quarter.
The gross profit improved by 4% for the quarter ended June 30, 1998 over the
quarter ending June 30, 1997 due to new product lines which yield a larger
profit margin.
Operating income increased from $63,069 for the three months ended June 30, 1997
to $410,555 for the quarter ended June 30, 1998. This improvement is attributed
to a higher sales volume and greater profit margins.
The Company's interest expense for the quarter ended June 30, 1998 increased to
approximately $329,000 from $82,000 for the quarter ended June 30, 1997 as a
result of the increased borrowings to finance the acquisitions.
<PAGE>
Liquidity and Capital Resources
The Company's primary capital requirements over the next twelve months are to
assist PACA , Point Blank, NDL, OPI, Zunlindage, LAP, LEC and DHB KK in
financing their working capital requirements. Working Capital at June 30, 1998
was $12,979,000 as compared to $14,403,000 at June 30, 1997. Working capital is
needed to finance the receivables, manufacturing process and inventory. The
current ratio is 2:1 at June 30, 1998 as compared to 3.20:1 at June 30, 1997.
Cash, cash equivalents, and marketable securities totaled $233,000 at June 30,
1998 and $5,122,000 at June 30, 1997. The Company repurchased and retired
approximately $386,000 of its common stock in the open market during the quarter
ended June 30, 1998.
Effect of Inflation and Changing Prices.
The Company did not experience increases in raw material prices during the three
months ended June 30, 1998 and 1997. The Company believes it will be able to
increase prices on their products to meet future price increases in raw
materials, should they occur.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
DL Cromwell Investments Inc. filed an action against the Company in the United
States District Court Eastern Division of New York in connection with the breach
of a consulting agreement. The Company and its attorneys believe the case is
meritless and intends to vigorously defend the claim and to pursue a
counterclaim.
Renaissance Financial Securities Corp. ("Renaissance") filed an action against
the Company and David H. Brooks in the United States District Court for the
Southern District of New York in connection with the breach of a consulting
agreement pursuant to which Renaissance was to provide certain services to the
Company. Renaissance seeks, among other things, compensatory damages of not less
than $2,500,000, punitive damages of not less than $500,000 and an order
enabling Renaissance to execute certain stock purchase warrants. The Company
filed an Answer and Counter-Claim and intends to vigorously defend the claim and
to pursue its Counter-Claims.
In June 1996, the Company commenced a lawsuit against the former
president of NDL, Mr. Barry Finn, for breach of his employment agreement. On
December 13, 1996, Mr. Finn filed a counterclaim against the Company asserting
Breach of Contract. The Company intends to vigorously pursue its claim and
vigorously defend Mr. Finn's counterclaim.
The Company is party to other litigation matters and claims which are
normal in the course of its operations, and while the results of the litigation
and claims cannot be predicted with certainty, management believes, based on
advice of counsel, the final outcome of such matters will not have a materially
adverse effect on the consolidated financial position.
<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 13, 1998 DHB CAPITAL GROUP INC.
/S/ David H. Brooks
-------------------
David H. Brooks
Chairman of the Board, Chief
Executive Officer, and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on behalf of the Registrant and in capacities and at the dates
indicated:
Signature Capacity Date
--------- -------- ----
/S/ David H. Brooks Chairman of the Board August 13, 1998
-------------------
David H. Brooks
/S/ Mary Kreidell Chief Financial Officer August 13, 1998
-----------------
Mary Kreidell
/S/ Gary Nadelman Director August 13, 1998
-----------------
Gary Nadelman
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 131,110
<SECURITIES> 102,108
<RECEIVABLES> 7,804,293
<ALLOWANCES> 369,369
<INVENTORY> 16,250,322
<CURRENT-ASSETS> 26,005,204
<PP&E> 6,764,473
<DEPRECIATION> 1,421,780
<TOTAL-ASSETS> 36,840,418
<CURRENT-LIABILITIES> 13,026,291
<BONDS> 0
<COMMON> 24,796
0
0
<OTHER-SE> 15,002,215
<TOTAL-LIABILITY-AND-EQUITY> 36,840,418
<SALES> 21,118,599
<TOTAL-REVENUES> 21,118,599
<CGS> 14,724,382
<TOTAL-COSTS> 6,421,538
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 501,244
<INCOME-PRETAX> (364,897)
<INCOME-TAX> 11,484
<INCOME-CONTINUING> (376,381)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (376,381)
<EPS-PRIMARY> (.013)
<EPS-DILUTED> (.013)
</TABLE>
