UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) : February 6, 1998
DHB Capital Group Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-22429 11-3129361
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
11 Old Westbury Road, Old Westbury, New York 11568
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code : (516) 997-1155
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(Former name or former address, if changed since last report)
<PAGE>
This filing on Form 8-K/A No. 1 amends the Current Report on 8-K dated February
9, 1998 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 8-K dated February 9, 1998 (the "Form 8-K"), as
set forth below:
Item 7. Financial Statements and Exhibits.
Filed herewith are the following Financial Statements of the businesses acquired
<TABLE>
<CAPTION>
<S> <C>
Page #
AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 31, 1997
LANXIDE ELECTRONIC COMPONENTS INC
Independent Auditors' Report 2
Balance Sheet as of September 30, 1997 3
Statement of Operations for the year ended September 30, 1997 4
Statement of Stockholders' Equity for the year ended September 30, 1997 5
Statements of Cash Flows for the year ended September 30, 1997 6
Notes to the Financial Statements 7 - 10
LANXIDE ARMOR PRODUCTS INC
Independent Auditors' Report 11
Balance Sheet as of September 30, 1997 12
Statement of Operations for the year ended September 30, 1997 13
Statement of Stockholders' Equity for the year ended September 30, 1997 14
Statements of Cash Flows for the year ended September 30,1997 15
Notes to the Financial Statements 16 -19
INTERIM FINANCIAL STATEMENTS FOR THE QUARTER ENDED DECEMBER 31, 1997
LANXIDE ELECTRONIC COMPONENTS INC
Balance Sheet as of December 31, 1997 20
Statement of Operations for the three months ended December 31, 1997 21
Statements of Cash Flows for the three months ended December 31,1997 22
LANXIDE ARMOR PRODUCTS INC
Balance Sheet as of December 31, 1997 23
Statement of Operations for the three months ended December 31, 1997 24
Statement of Stockholders' Equity for the year ended September 30, 1997
Statements of Cash Flows for the year ended September 30, 1997
Statements of Cash Flows for the three months ended December 31, 1997 25
b) Pro Forma Financial Information
PRO FORMA CONSOLIDATED DHB FINANCIAL STATEMENTS
Introduction to the unaudited pro forma financial statements 26
Unaudited pro forma Balance as of December 31, 1997 27
Unaudited pro forma Income Statement for the year ended December 31, 1997 28
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly casued this report to be signed on its behalf by the
undersigned hereunto duly authorized
DHB Capital Group, Inc.
Registrant
Date: April 22,1998 /s/ David H. Brooks
-------------------
David H. Brooks, Chairman & CEO
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<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
DHB Capital Group Inc.
We have audited the accompanying balance sheet of Lanxide Electronic Components
Inc. as of September 30, 1997 and the related statement of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lanxide Electronic Components
Inc. as of September 30, 1997 and the results of its operations and its cash
flows for the year ended September 30, 1997 in conformity with generally
accepted accounting principles.
/s/Paritz and Company P.A.
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Paritz and Company P.A.
Hackensack, New Jersey
April 21, 1998
<PAGE>
<TABLE>
<CAPTION>
LANXIDE ELECTRONIC COMPONENTS INC.
BALANCE SHEET
SEPTEMBER 30, 1997
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents ................................. $ 131,667
Accounts receivable ....................................... 406,560
Inventories ............................................... 683,521
Prepaid expenses and other current assets ................. 46,794
----------
Total Current Assets ....................... 1,268,542
----------
PROPERTY AND EQUIPMENT ................................... 1,376,713
----------
TOTAL ASSETS ................................................. $2,645,255
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long term debt .................... $ 30,730
Due to factor ........................................... 220,750
Accounts payable ........................................ 411,852
Accrued expenses and other current liabilities .......... 283,176
----------
Total Current Liabilities .................. 946,508
----------
LONG TERM LIABILITIES
Long term debt, net of current maturities ................ 127,511
----------
Total Liabilities .......................... 1,074,019
----------
STOCKHOLDERS' EQUITY ...................................... 1,571,236
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................ $2,645,255
==========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
<TABLE>
<CAPTION>
LANXIDE ELECTRONCI COMPONENTS INC
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<S> <C>
Net sales ................................................... $ 4,715,037
Cost of sales ............................................... 4,187,820
-----------
Gross Profit ................................................ 527,217
Selling, general and administrative expenses ................ 1,910,262
-----------
Loss before other expenses .................................. (1,383,045)
Other Expense ............................................... (1,722)
-----------
Net loss .................................................... $(1,384,767)
===========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
<TABLE>
<CAPTION>
LANXIDE ELECTRONIC COMPONENTS INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1997
Number of Number of Additional
Preferred Par Common Par Paid - In Accumulated
Shares Value Shares Value Capital Deficit Total
------ ----- ------ ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
Sept. 30, 1996 1,000 $ 10 90,000 $ 900 $20,688,808 $(19,122,342) $1,567,376
Increase in
Paid-in capital 1,388,627 1,388,627
Net Loss for
the year ended
Sept 30, 1997 - - - - - (1,384,767) (1,384,767)
----- --- ------ ----- ----------- ------------ ----------
Balance
Sept 30, 1997 1,000 $10 90,000 $ 900 $22,077,435 $(20,507,109) $1,571,236
===== === ====== ===== =========== ============= ==========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
<TABLE>
<CAPTION>
LANXIDE ELECTRONIC COMPONENTS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) ........................................ $(1,384,767)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ..................... 172,240
Changes in assets and liabilities
(Increase) Decrease in:
Accounts receivable ................................ 163,598
Inventories ........................................ (164,037)
Prepaid expenses and other current assets .......... (33,989)
Increase (decrease) in:
Accounts payable ................................... 108,315
Accrued expenses and other current liabilities ..... 155,630
-----------
Net cash used by operating activities ....................... (983,010)
-----------
CASH FLOWS USED IN INVESTING ACTIVITIES
Payments made for property and equipment ................. (510,914)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt ............ (196,759)
Net proceeds from sale of common stock .......... 1,606,000
-----------
Net cash provided by financing activities .................. 1,409,241
-----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ............. (84,683)
CASH AND CASH EQUIVALENTS - BEGINNING ....................... 216,350
-----------
CASH AND CASH EQUIVALENTS - END ............................. $ 131,667
===========
</TABLE>
See accompanying notes to financial statements
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<PAGE>
LANXIDE ELECTRONIC COMPONENTS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business description
Lanxide Electronic Components Inc. ("LEC") designs,
manufactures and sells unique heavily patented thermal management,
packaging and structural components for the electronics industry.
LEC's current products are primarily based on silicon carbide /
aluminum composites which provide a unique combination of desirable
properties including, high thermal conductivity, low coefficient of
thermal expansion, light weight and high stiffness.
Uses of estimates in the preparation of financial statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
net revenue and expenses during each reporting period. Actual
results could differ from those estimates.
Revenue recognition
Revenue from product sales is recognized at the time the
product is shipped.
Inventories
Inventories, consisting of merchandise purchased for resale,
are valued at the lower of cost or market, determined on the
first-in, first-out basis (replacement cost).
Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost. Major
additions, improvements, and renewals, which substantially increase
the useful lives of assets, are capitalized. Maintenance, repairs,
and minor renewals are expensed as incurred.
Depreciation is provided for both financial reporting and
income tax purposes using the straight-line and accelerated methods.
Income taxes
LEC and its domestic parent file a consolidated Federal income
tax return and separate state income tax returns.
-7-
<PAGE>
Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
LEC accounts for deferred income taxes in accordance with SFAS
Statement No. 109 which requires that deferred tax assets and
liabilities be recognized for the future tax consequence
attributable to differences between financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. In addition, SFAS No. 109 requires recognition of future tax
benefits, such as net operating loss carryforwards, to the extent
that realization of such benefits is more likely than not and that a
valuation allowance be provided when it is more likely that not that
some portion of the deferred tax asset will not be realized.
Impairment of long-lived assets
LEC accounts for the impairment of long-lived assets in
accordance with SFAS No. 121 which requires that long-lived assets
and identifiable intangibles held and used by a company be reviewed
for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable.
Note 2 INVENTORIES
Inventories consist of the following:
Finished goods $ -
Work in process 683,462
Raw materials and supplies 59
---------
$ 683,521
=========
Note 3 PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment and the estimated
lives used in the computation of depreciation is as follows:
Estimated
1997 useful life
Machinery and equipment 1,572,373 5-10 years
Less accumulated depreciation and
amortization 195,660
----------
$1,376,713
==========
Note 4 DUE TO FACTOR
Pursuant to various agreements, the Company sold and assigned
certain accounts receivable to factors, and pays a factoring
commission of approximately 10% of factored sales.
-8-
<PAGE>
Note 5 LONG-TERM DEBT
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<CAPTION>
Long-term debt consists of the following:
<S> <C> <C>
Note payable in monthly installments of $3,446 158,241
inclusive of interest at 9.45% per annum. This note
is collateralized by certain equipment originally
costing approximately $165,565.
Less Current Portion 30,730
--------
$127,511
========
Long-term debt matures as follows:
1998 $ 29,178
1999 32,058
2000 35,222
2001 31,053
--------
$127,511
========
</TABLE>
Note 6 STOCKHOLDERS' EQUITY
Common and preferred stock
LEC is authorized to issue 100,000 shares of its $.01 par
value Common Stock. In addition, LEC is authorized to issue 1,000
shares of Class A Preferred Stock.
Stock option plan
The 1996 LEC Stock Option Plan was adopted by LEC's Board of
Directors in July 1996. This plan provided for the issuance of
incentive stock options and replaced a previous plan which only
allowed for the issuance of non-qualified stock options. The
combined Plans are underlied by 10,000 shares of LEC Common Stock.
As of September 30, 1997, options to purchase 7,225 shares were
outstanding.
Note 7 RELATED PARTY TRANSACTIONS
LEC was part of a consolidated group for the year ended
September 30, 1997. As such they had transactions in the normal
course of business with the parent company, Lanxide Corporation. The
parent company has a sub lease agreement with each of their
commercial venture companies, including LEC. See Note 9. Also, the
parent provides accounting, purchasing, payroll and human resource
services to these ventures.
-9-
<PAGE>
Note 8 RISKS AND UNCERTAINTIES
Approximately 80% of the company's sales for the year ended
September 30, 1997 were made to two companies.
Note 9 COMMITMENTS AND CONTINGENCIES
Leases
LEC sub-leases a warehouse and manufacturing facility from
their parent company, which provides for annual rentals of $79,184
for 1997 expiring in March 2001. In addition, LEC must pay real
estate taxes and certain operating expenses of this property.
Note 11 SUBSEQUENT EVENTS
On October 3, 1997, LEC obtained a loan from the Delaware
Economic Development Authority commencing December 1, 1997 for five
years bearing interest at 5.1% per annum with monthly installments
of principal and interest of $4,729.27. Certain machinery and
equipment are collaterized by this loan.
On February 9, 1998, DHB Capital Group purchased the common
stock LEC and its sister company Lanxide Armor Products Inc. (LAP)
The purchase price for the two companies was approximately $4.8
million and was accounted for as a purchase by DHB Capital Group
Inc. DHB Capital Group Inc. is a well capitalized holding company,
which has two major divisions, DHB Armor Group and DHB Sports Group.
-10-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
DHB Capital Group Inc.
We have audited the accompanying balance sheet of Lanxide Armor Products Inc. as
of September 30, 1997 and the related statement of operations, stockholders'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lanxide Armor Products Inc. as
of September 30, 1997 and the results of its operations and its cash flows for
the year ended September 30, 1997 in conformity with generally accepted
accounting principles.
/s/Paritz and Company P.A.
- --------------------------
Paritz and Company P.A.
Hackensack, New Jersey
April 21, 1998
-11-
<PAGE>
<TABLE>
<CAPTION>
LANXIDE ARMOR PRODUCTS INC
BALANCE SHEET
SEPTEMBER 30, 1997
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents .................................. $ 19,504
Accounts receivable ........................................ 240,340
Inventories ................................................ 922,871
Prepaid expenses and other current assets .................. 118
----------
Total Current Assets ........................ 1,182,833
PROPERTY AND EQUIPMENT .................................... 4,764,960
OTHER ASSETS .............................................. 12,622
----------
TOTAL ASSETS ......................................... $5,960,415
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Due to factor ............................................ $ 33,834
Accounts payable ......................................... 320,327
Accrued expenses and other current liabilities ........... 195,644
Deferred revenue ......................................... 58,000
----------
Total Current Liabilities ................... 607,805
----------
LONG TERM LIABILITIES
Deferred Compensation ..................................... 20,099
----------
Total Liabilities ........................... 627,904
----------
STOCKHOLDERS' EQUITY ....................................... 5,332,511
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................. $5,960,415
==========
</TABLE>
See accompanying notes to financial statements.
-12-
<PAGE>
<TABLE>
<CAPTION>
LANXIDE ARMOR PRODUCTS INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<S> <C>
Net sales .......................................... $ 1,447,768
Cost of sales ...................................... 2,406,934
-----------
Gross Profit ....................................... (959,166)
Selling, general and administrative expenses ....... 1,367,115
-----------
Loss before other income (expense) ................. (2,326,281)
Other income ....................................... 75,589
-----------
Net loss .......................................... $(2,250,692)
===========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
LANXIDE ARMOR PRODUCTS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1997
Number of Additional
Common Par Paid-in Accumulated
Shares Value Capital Deficit Total
------ ----- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance Sept 31, 1996 1,000 $10 $38,812,268 $(32,195,369) $6,616,909
- - 966,294 - 966,294
Net Loss for the year
ended Sept 30, 1997 - - - (2,250,692) (2,250,692)
----- --- ----------- ------------ ----------
Balance Sept 30, 1997 1,000 $10 $39,778,562 $(34,446,061) $5,332,511
===== === =========== ============= ==========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
<TABLE>
<CAPTION>
LANXIDE ARMOR PRODUCTS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) ........................................ $(2,250,692)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ..................... 589,081
Changes in assets and liabilities
(Increase) Decrease in:
Accounts receivable ................................ 927,337
Inventories ........................................ (323,888)
Prepaid expenses and other current assets .......... 34,102
Other assets ....................................... 131
Increase (decrease) in:
Accounts payable ................................... (8,717)
Accrued expenses and other current liabilities ..... (97,993)
Deferred revenue ................................... 58,000
Deferred compensation .............................. 2,224
-----------
Net cash used by operating activities ....................... (1,070,415)
-----------
CASH FLOWS USED IN INVESTING ACTIVITIES
Payments made for property and equipment ................. (173,834)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds on long-term debt ................. 33,834
Net proceeds from sale of common stock ......... 967,166
-----------
Net cash provided by financing activities .................. 1,001,000
-----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ............. (243,249)
CASH AND CASH EQUIVALENTS - BEGINNING ....................... 262,753
-----------
CASH AND CASH EQUIVALENTS - END ............................. $ 19,504
===========
</TABLE>
See accompanying notes to financial statements
-15-
<PAGE>
LAXIDE ARMOR PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business description
Lanxide Armor Products Inc. ("LAP") develops, tests,
manufactures, and distributes composite hard armor systems. LAP's
composite hard armor systems are based on patented and highly
proprietary ceramic / metal composite systems.
Uses of estimates in the preparation of financial statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
net revenue and expenses during each reporting period. Actual
results could differ from those estimates.
Revenue recognition
Revenue from product sales is recognized at the time the
product is shipped.
Inventories
Inventories, consisting of merchandise purchased for resale,
are valued at the lower of cost or market, determined on the
first-in, first-out basis (replacement cost).
Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost. Major
additions, improvements, and renewals, which substantially increase
the useful lives of assets, are capitalized. Maintenance, repairs,
and minor renewals are expensed as incurred.
Depreciation is provided for both financial reporting and
income tax purposes using the straight-line and accelerated methods.
Income taxes
LAP and its domestic parent file a consolidated Federal income
tax return and separate state income tax returns.
-16-
<PAGE>
Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Income taxes
LAP accounts for deferred income taxes in accordance with
SFAS Statement No. 109 which requires that deferred tax assets and
liabilities be recognized for the future tax consequence
attributable to differences between financial statement carrying
amounts of existing assets and liabilities and their respective
tax bases. In addition, SFAS No. 109 requires recognition of
future tax benefits, such as net operating loss carryforwards, to
the extent that realization of such benefits is more likely than
not and that a valuation allowance be provided when it is more
likely that not that some portion of the deferred tax asset will
not be realized.
Impairment of long-lived assets
LAP accounts for the impairment of long-lived assets in
accordance with SFAS No. 121 which requires that long-lived assets
and identifiable intangibles held and used by a company be
reviewed for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable.
Note 2 INVENTORIES
Inventories consist of the following:
Finished goods $ 225,947
Work in process 555,178
Raw materials and supplies 141,746
----------
$ 922,871
==========
Note 3 PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment and the estimated
lives used in the computation of depreciation is as follows:
Estimated 1997 useful life
Machinery and equipment 4,048,703 5-10 years
Leasehold improvements 1,489,872 5-31.5 years
----------
5,538,575
Less accumulated depreciation and
amortization 773,615
----------
$4,764,960
==========
Note 4 DEFERRED COMPENSATION PLAN
During the period June 1993 to May 1994, the Parent Company
implemented a Deferred Compensation plan whereby a portion of a
specific employees' compensation was deferred. Payment was to be in
cash or common Stock at a rate of $13 per share at the option of the
employees. There were no contributions made during the year ended
September 30, 1997.
-17-
<PAGE>
Note 5 STOCKHOLDERS' EQUITY
Common stock
LAP is authorized to issue 1,000 shares of its $.01 par value
Common Stock.
Stock option plan
The 1995 LAP Stock Option Plan was adopted by LAP's Board of
Directors in November 1995 for the benefit of LAP's employees. The
Plan is underlied by shares of Lanxide Corporation (the parent)
Common Stock. On July 3, 1997, LAP's Board of Directors amended the
Stock Option Plan by increasing the number of shares authorized for
grant from 22,760 to 44,191. As of September 30, 1997, options to
purchase 7,225 shares were outstanding.
Note 6 RELATED PARTY TRANSACTIONS
LAP was part of a consolidated group for the year ended
September 30, 1997. As such they had transactions in the normal
course of business with the parent company, Lanxide Corporation. The
parent company has a sub lease agreement with each of their
commercial venture companies, including LAP. See note 8. Also, the
parent provides accounting, purchasing, payroll and human resource
services to these ventures.
Note 7 RISKS AND UNCERTAINTIES
Approximately 75% of LAP's sales for the year ended September
30, 1997 were made to two companies.
Certain factors relating to the industries in which LAP
operates and the Company's business should be carefully considered.
All of the products sold by LAP are used in situations which could
result in serious personal injuries or death, whether on account of
the failure of such products, or otherwise. Although LAP maintains
substantial amounts of insurance coverage to cover such risks, there
is no assurance that these amounts would be sufficient to cover the
payment of any potential claims. In addition, there is no assurance
that this or any other insurance coverage will remain available or,
if available, that LAP would be able to obtain such insurance at a
reasonable cost. The inability to obtain such insurance coverage
would prohibit LAP from bidding for certain orders for bullet
resistant products from certain governmental customers.
Note 8 COMMITMENTS AND CONTINGENCIES
Leases
LAP sub-leases a warehouse and manufacturing facility from
their parent company, which provides for annual rentals of
$338,125 for 1997 expiring in March 2001. In addition, LEC must
pay real estate taxes and certain operating expenses of this
property.
-18-
<PAGE>
Note 10 SUBSEQUENT EVENTS
On February 9, 1998, DHB Capital Group purchased the common stock LAP
and its sister company Lanxide Electronic Components Inc. (LEC) The purchase
price was approximately $4.8 million and was accounted for as a purchase by DHB
Capital Group Inc. DHB Capital Group Inc. is a well capitalized holding company
which has two major divisions, DHB Armor Group and DHB Sports Group.
-19-
<PAGE>
<TABLE>
<CAPTION>
LANXIDE ELECTRONIC COMPONENTS
UNAUDITED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents ............................... $ 254,740
Accounts receivable ..................................... 706,743
Inventories ............................................. 595,932
Prepaid expenses and other current assets ............... 37,835
------------
Total Current Assets ..................... 1,595,250
------------
PROPERTY AND EQUIPMENT ................................. 1,826,205
------------
TOTAL ASSETS ............................................... $ 3,421,455
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long term debt ................. $ 70,730
Due to factor ........................................ 392,361
Accounts payable ...................................... 639,221
Accrued expenses and other current liabilities ........ 196,956
------------
Total Current Liabilities ................ 1,299,268
------------
LONG TERM LIABILITIES
Long term debt, net of current maturities .............. 326,238
------------
Total Liabilities ........................ 1,625,506
------------
STOCKHOLDERS' EQUITY
Common stock .......................................... 900
Preferred stock ...................................... 10
Additional paid-in capital ........................... 22,584,909
Accumulated Deficit .................................. (20,789,870)
------------
Total stockholders' equity ............... 1,795,949
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .............. $ 3,421,455
============
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
LANXIDE ELECTRONIC COMPONENTS INC
UNAUDITED STATEMENTS OF OPERATIONS AND EQUITY
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
<S> <C>
Net sales .................................................. $ 1,662,853
Cost of sales .............................................. 1,347,310
------------
Gross Profit ............................................... 315,543
Selling, general and administrative expenses ............... 576,046
------------
Loss before other income (expense) ......................... (260,503)
Other Expense............................................... (22,258)
------------
Net loss ................................................... $ (282,761)
Accumulated deficit - beginning ............................ (20,507,109)
------------
Accumulated deficit - ending ............................... $(20,789,870)
============
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
LANXIDE ELECTRONIC COMPONENTS, INC.
UNAUDITED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ................................................... $(282,761)
Adjustments to reconcile netincome to net
cash provided by operating activities:
Depreciation and amortization ....................... 50,340
Changes in assets and liabilities
(Increase) Decrease in:
Accounts receivable .................................. (300,183)
Inventories .......................................... 87,589
Prepaid expenses and other current assets ............ 8,959
Increase (decrease) in:
Accounts payable ..................................... 227,369
Accrued expenses and other current liabilities ....... (86,220)
---------
Net cash used by operating activities ......................... (294,907)
---------
CASH FLOWS USED IN INVESTING ACTIVITIES
Payments made for property and equipment ................... (499,832)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt .............. 410,338
Net proceeds from sale of common stock ............ 507,474
---------
Net cash provided by financing activities .................... 917,812
---------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ............... 123,073
CASH AND CASH EQUIVALENTS - BEGINNING ......................... 131,667
---------
CASH AND CASH EQUIVALENTS - END ............................... $ 254,740
=========
</TABLE>
-22-
<PAGE>
<TABLE>
<CAPTION>
LANXIDE ARMOR PRODUCTS INC
UNAUDITED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents ................................ $ 152,390
Accounts receivable ...................................... 287,728
Inventories .............................................. 925,211
------------
Total Current Assets ..................................... 1,365,329
PROPERTY AND EQUIPMENT .................................. 4,680,943
OTHER ASSETS ............................................ 12,622
------------
TOTAL ASSETS ....................................... $ 6,058,894
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long term debt .................. $ 10,619
Accounts payable ....................................... 422,769
Accrued expenses and other current liabilities ......... 178,734
------------
Total Current Liabilities ................. 612,122
------------
LONG TERM LIABILITIES
Long term debt, net of current maturities ............... 20,607
------------
Total Liabilities ......................... 632,729
------------
STOCKHOLDERS' EQUITY
Common stock .......................................... 10
Additional paid-in capital ............................ 40,646,637
Accumulated Deficit ................................... (35,220,482)
------------
Total stockholders' equity ................ 5,426,165
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............... $ 6,058,894
============
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
LANXIDE ARMOR PRODUCTS INC.
UNAUDITED STATEMENTS OF OPERATIONS AND EQUITY
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
<S> <C>
Net sales .................................................. $ 850,890
Cost of sales .............................................. 830,004
------------
Gross Profit ............................................... 20,886
Selling, general and administrative expenses ............... 366,716
------------
Loss before other income (expense) ......................... (345,830)
Other income ............................................... 17,224
------------
Net loss ................................................... (328,606)
Accumulated deficit - beginning ............................ (34,446,061)
------------
Accumulated deficit - ending ............................... $(34,774,667)
============
</TABLE>
-24-
<PAGE>
<TABLE>
<CAPTION>
LANXIDE ARMOR PRODUCTS, INC.
UNAUDITED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ................................................... $(328,606)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ....................... 84,017
Changes in assets and liabilities
(Increase) Decrease in:
Accounts receivable .................................. (47,388)
Inventories .......................................... (2,340)
Prepaid expenses and other current assets ............ 118
Increase (decrease) in:
Accounts payable ..................................... 102,442
Accrued expenses and other current liabilities ....... (16,910)
Deferred Revenue ..................................... (58,000)
Deferred Compensation ................................ 508
---------
Net cash used by operating activities ......................... (266,159)
---------
CASH FLOWS USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds on long-term debt ................... (23,215)
Net proceeds from sale of common stock ........... 422,260
---------
Net cash provided by financing activities .................... 399,045
---------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ............... 132,886
CASH AND CASH EQUIVALENTS - BEGINNING ......................... 19,504
---------
CASH AND CASH EQUIVALENTS - END ............................... $ 152,390
=========
</TABLE>
-25-
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
INTRODUCTION
The unaudited pro forma data presented in the unaudited pro forma
combined financial statements are included in order to illustrate the effect on
the Company's financial statements of the transactions described below. The pro
forma information is based on the historical financial statements of the
Companies.
The unaudited pro forma combined balance sheet data as of December 31,
1997 gives effect to the acquisition of Lanxide Electronic Components Inc. and
Lanxide Armor Products Inc. The adjustments are presented as if, at such date,
the Company had acquired Lanxide Electronic Components Inc. and Lanxide Armor
Products Inc. (which was finalized during the first quarter 1998).
The unaudited pro forma combined statement of operations data for the
year ended December 31, 1997 and present adjustments for these two combinations.
All adjustments are presented as if, these transactions were consummated as of
January 1, 1997.
In the opinion of management, all adjustments have been made that are
necessary to present fairly the pro forma data.
The unaudited pro forma combined financial statements should be read in
conjunction with the Company's Consolidated Financial Statements and the Notes
thereto, and the Financial Statements and the Notes thereto of Lanxide
Electronic Components Inc. and Lanxide Armor Products Inc. The pro forma
combined statement of income (loss) data are not necessarily indicative of the
results that would have been reported had such events actually occurred on the
date specified, nor are they indicative of the Company's future results.
-26-
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP INC AND SUBSIDIARIES
UNAUDITED PRO FORMA BALANCE
DECEMBER 31, 1997
Lanxide Lanxide
DHB Capital Electronics Armor Pro Forma
Group Audited Unaudited Unaudited Consolidated
12-31-97 12-31-97 12-31-97 Adjustments 12-31-97
-------- -------- -------- ----------- --------
ASSETS
<S> <C> <C> <C> <C> <C>
Current Assets
1 7,000,000
Cash $ 884,000 $ 254,000 $ 152,000 2 (4,800,000) $ 3,490,000
Marketable Securities 1,704,000 - 1,704,000
Accounts Receivable 6,285,000 707,000 288,000 7,280,000
Inventories 12,543,000 596,000 925,000 14,064,000
Prepaid & Other 727,000 38,000 - - 765,000
------------ ---------- ---------- ------------ -----------
Total current assets 22,143,000 1,595,000 1,365,000 2,200,000 27,303,000
------------ ---------- ---------- ------------ -----------
Property & Equipment 2,374,000 1,826,000 4,681,000 8,881,000
------------ ---------- ---------- ------------ -----------
Other Assets
Intangibles 588,000 - - 2 (2,422,000) (1,834,000)
Investment in non-
marketable securities 1,689,000 - - 1,689,000
Deferred taxes 455,000 - - 455,000
Deposit & other 426,000 - 13,000 - 439,000
------------ ---------- ---------- ------------ -----------
Total Other assets 3,158,000 - 13,000 (2,422,000) 749,000
------------ ---------- ---------- ------------ -----------
TOTAL ASSETS $ 27,675,000 $ 3,421,000 $6,059,000 $ (222,000) $36,933,000
============ =========== ========== ============ ===========
</TABLE>
-27-
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP INC AND SUBSIDIARIES
UNAUDITED PRO FORMA BALANCE
DECEMBER 31, 1997
Lanxide Lanxide
DHB Capital Electronics Armor Pro Forma
Group Audited Unaudited Unaudited Consolidated
12-31-97 12-31-97 12-31-97 Adjustments 12-31-97
-------- -------- -------- ----------- --------
ASSETS
<S> <C> <C> <C> <C> <C>
Current Liabilities
Note Payable $ 2,675,000 $ - $ - $ 2,675,000
Current Maturities 65,000 463,000 10,000 538,000
Accounts Payable 5,073,000 639,000 423,000 6,135,000
Accrued expenses 709,000 197,000 179,000 1,085,000
------------ ---------- ---------- -----------
Total current 8,522,000 1,299,000 612,000 10,433,000
Long-term liabilities
Long term debt 111,000 326,000 21,000 458,000
Notes to Shareholder 1,300,000 - - 1 7,000,000 8,300,000
------------ ---------- ---------- ----------- -----------
Total long-term 1,411,000 326,000 21,000 7,000,000 8,758,000
------------ ---------- ---------- ----------- -----------
Total Liabilities 9,933,000 1,625,000 633,000 7,000,000 19,191,000
------------ ---------- ---------- ----------- -----------
Stockholders Equity 17,742,000 1,796,000 5,426,000 - 24,964,000
------------ ---------- ---------- ----------- -----------
TOTAL LIABILITIES &
EQUITY $ 27,675,000 $ 3,421,000 $ 6,059,000 $ 222,000 $36,933,000
============ =========== =========== =========== ===========
</TABLE>
-28-
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP INC AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
Lanxide
DHB Capital Electronics Lanxide Armor Pro Forma
Group Audited Audited Audited Consolidated
12-31-97 09-30-97 09-30-97 Adjustments 12-31-97
----------- ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
3- (613,250)
2- 168,758
Net Sales $33,271,607 $4,715,037 $1,447,768 1- 872,164 $39,862,084
3- (613,250)
2- 250,156
Cost of Sales 22,153,925 4,187,820 2,406,934 1- 585,778 28,971,363
----------- ---------- ---------- ------------ -----------
Gross Profit 11,117,682 527,217 (959,166) 204,988 10,890,721
Selling, General 2- (61,874)
& administrative 9,641,655 1,910,262 1,367,115 1- 121,817 12,978,975
----------- ---------- ---------- ------------ -----------
Operating
Income (Loss) 1,476,027 (1,383,045) (2,326,281) 145,045 (2,088,254)
2- 13,316
Other Income (Expense) 461,372 (1,722) 75,589 1- (23,848) 524,707
----------- ---------- ---------- ------------ -----------
Income (Loss)
before 1,937,399 (1,384,767) (2,250,692) 134,513 (1,563,547)
Taxes
Income Taxes 396,509 - - - 396,509
----------- ---------- ---------- ------------ -----------
Net Income (Loss) $1,540,890 $(1,384,767) $(2,250,692) 134,513 $(1,960,056)
========== =========== =========== ============ ===========
</TABLE>
1 - To record the adjustment to change LEC from a 9/30 year end to a 12/31/97
year end
2- To record the adjustment to change LAP from a 9/30 year end to a 12/31/97
year end
3- To eliminate intercompany sales from LAP to a DHB subsidiary
-29-
