U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB/A No. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1997
[ ] 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. 0-22429
DHB CAPITAL GROUP INC.
(Name of small business issuer in its charter)
Delaware 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B and no disclosure will be contained, to the best of the
registrant's knowledge, in the definitive proxy or information statements
incorporated by Reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [ ]
Issuer's revenues for the most recent fiscal year: $33,271,607
Aggregate market value of the voting stock held by non-affiliates computed by
reference to the price at which the stock sold, or the average bid and asked
price of such stock, as of March 20, 1998: $26,067,436.
Number of shares outstanding of the issuer's common equity, as of March 20, 1998
(exclusive of securities convertible into common equity) : 24,837,229
<PAGE>
The filing Form 10-KSB/A No. 1 amends the Annual Report on Form 10KSB Dated
March 20, 1998 of DHB Capital Group Inc. (the Company). The undersigned
Registrant hereby amends the following items, the weighted average number of
shares on the statements of operations and retained earnings in the financial
statements on Form 10-KSB dated March 20, 1998.
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS
CONTENTS
INDEPENDENT AUDITORS' REPORT
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Operations for the years ended
December 31, 1997 and 1996
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended December 31,
1997 and 1996
Consolidated Notes to the Financial Statements
Schedule II Valuation and Qualifying Accounts
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
DHB Capital Group Inc.
We have audited the accompanying consolidated balance sheet of DHB Capital Group
Inc. and Subsidiaries as of December 31, 1997 and the related consolidated
statements of operations, stockholders' equity and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated 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 consolidated 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 DHB Capital Group Inc. and
Subsidiaries as of December 31, 1997 and the results of its operations and its
cash flows for the year ended December 31, 1997 in conformity with generally
accepted accounting principles.
/s/Paritz and Company P.A.
- -------------------------
Paritz and Company P.A.
Hackensack, New Jersey
March 11, 1997
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
DHB Capital Group Inc.
We have audited the accompanying consolidated balance sheet of DHB Capital Group
Inc. and Subsidiaries as of December 31, 1996 and the related consolidated
statements of operations, stockholders' equity and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated 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 consolidated 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 DHB Capital Group Inc. and
Subsidiaries as of December 31, 1996 and the results of its operations and its
cash flows for the year ended December 31,1996 in conformity with generally
accepted accounting principles.
/s/Capraro, Centofranchi, and Kramer Co P.C.
- --------------------------------------------
Capraro, Centofranchi, and Kramer Co P.C.
So. Huntington, NY
March 21, 1997
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ..................................... $ 882,884 $ 1,249,655
Marketable securities ......................................... 1,703,806 1,342,027
Accounts receivable, less allowance for doubtful
accounts of $353,320 and $303,320 ....................... 6,285,181 3,499,535
Inventories ................................................... 12,543,474 7,290,205
Prepaid expenses and other current assets ..................... 727,421 255,218
----------- -----------
Total Current Assets ........................... 22,142,766 13,636,640
----------- -----------
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation and amortization ........................... 2,374,085 1,834,777
----------- -----------
OTHER ASSETS
Intangible assets, net ...................................... 588,017 214,213
Investments in non-marketable securities .................... 1,688,750 2,316,750
Deferred tax assets ......................................... 455,300 819,300
Deposits and other assets ................................... 425,711 338,739
----------- -----------
Total Other Assets ............................. 3,157,778 3,689,002
----------- -----------
TOTAL ASSETS ................................... $27,674,629 $19,160,419
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable - bank ......................................... $ 2,675,000 $ 1,400,000
Current maturities of long term debt ........................ 65,192 61,664
Accounts payable ............................................ 5,072,929 3,019,804
Accrued expenses and other current liabilities .............. 708,631 254,774
----------- -----------
Total Current Liabilities ...................... 8,521,752 4,736,242
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
1997 1996
----------- -----------
<S> <C> <C>
LONG TERM LIABILITIES
Long term debt, net of current maturities .................... 111,258 144,091
Notes Payable shareholder .................................. 1,300,000 1,300,000
----------- -----------
Total Long Term Debt ........................... 1,411,258 1,444,091
----------- -----------
Total Liabilities .............................. 9,933,010 6,180,333
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY .......................................... 17,741,619 12,980,086
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................... $27,674,629 $19,160,419
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
1997 1996
------------ -----------
<S> <C> <C>
Net sales ................................................... $ 33,271,607 $ 23,378,698
Cost of sales ............................................... 22,153,925 19,027,741
------------ ------------
Gross Profit .......................................... 11,117,682 4,350,957
Selling, general and administrative expenses ............... 9,641,655 8,668,950
------------ ------------
Income(Loss) before other income (expense) ............ 1,476,027 (4,317,993)
------------ ------------
Other Income (Expense)
Interest expense, net of interest income .............. (339,754) (327,347)
Other income .......................................... 51,599 24,350
Write-down of net assets in Subsidiary ................ -- (529,578)
Loss on holding of equity investments ................. 372,000 (1,000,000)
Realized gain on marketable securities ................ (72,175) 381,337
Unrealized gain on marketable securities .............. 449,702 69,168
------------ ------------
Total Other Income (Expense) ................. 461,372 (1,382,070)
------------ ------------
Income (loss) before income taxes (benefit) ........... 1,937,399 (5,700,063)
Income taxes (benefit) ................................ 396,509 (834,191)
------------ ------------
Net Income (loss) ..................................... $ 1,540,890 $ (4,865,872)
============ ============
Earnings (loss) per common share
Primary ...................................... $ 0.06 ($ 0.22)
============ ============
Fully Diluted ................................ $ 0.05 ($ 0.20)
============ ============
Primary weighted average number of shares outstanding . 24,837,771 22,530,504
Warrants .............................................. 2,695,719 2,349,017
------------ ------------
Fully Diluted weighted average number of shares
outstanding ........................................ 27,533,490 24,879,521
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
Number of Number of Additional
Preferred Par Common Par Paid-in
Shares Value Shares Value Capital
------ ----- ------ ----- -------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1995 ............... 21,875 $ 219 20,761,991 $ 20,762 $ 12,123,470
Net Loss for the year ended Dec 31, 1996 -- -- -- -- --
Issuance of stock to purchase subsidiary -- -- 180,000 180 578,820
Stock issued to buy-out lease ........... -- -- 6,000 6 79,994
Sale of common stock .................... -- -- 1,345,000 1,345 4,806,154
Conversion of preferred stock
into Common Stock ....................... (21,875) (219) 43,750 44 175
Common Stock - 50% dividend ............. -- -- 717,828 718 --
Preferred Dividend - Common Stock ....... -- -- 7,939 8 --
Fee for services regarding dividends .... -- -- -- -- (5,000)
Stock issued for services ............... -- -- 83,500 83 372,417
------- ---------- ---------- ------------ ------------
Balance December 31, 1996 ............... 0 0 23,146,008 $ 23,146 $ 17,956,030
Net Income for the year ended 12-31-97 .. -- -- -- -- --
Issuance of stock to purchase subsidiary -- -- 666,000 666 999,334
Stock issued to purchase lease .......... -- -- 144,200 144 209,856
Sale of common stock .................... -- -- 1,825,000 1,825 3,648,175
Stock issued for services ............... -- -- 13,500 13 67,487
Exercise of warrants .................... -- -- 100,000 100 149,900
Fee for services regarding stock issued . -- -- -- -- (9,171)
Stock issued in settlement of a lawsuit . -- -- 75,000 75 149,925
Stock returned in settlement of a lawsuit -- -- (38,625) (38) (73,596)
Effect of foreign currencytranslation ... -- -- -- -- --
Purchase of treasury stock .............. -- -- (583,859) (584) (2,144,833)
------- ---------- ---------- ------------ ------------
Balance December 31, 1997 ............... 0 0 25,347,224 $ 25,347 $ 20,953,107
======= ========== ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Common
Stock Foreign
Subscription Currency Retained
Receivable Translation Earnings Total
---------- ----------- -------- -----
<S> <C> <C> <C> <C>
Balance December 31, 1995 ............... $ (437,500) $ 0 $ 95,017 $ 11,801,968
Net Loss for the year ended Dec 31, 1996 -- -- $ (4,865,872) $ (4,865,872)
Issuance of stock to purchase subsidiary -- -- -- 579,000
Stock issued to buy-out lease ........... -- -- -- 80,000
Sale of common stock .................... 210,000 -- -- 5,017,499
Conversion of preferred stock
into Common Stock ....................... -- -- -- --
Common Stock - 50% dividend ............. -- -- (718) --
Preferred Dividend - Common Stock ....... -- -- (17) (9)
Fee for services regarding dividends .... -- -- -- (5,000)
Stock issued for services ............... -- -- -- 372,500
------------ ----------- ------------ ------------
Balance December 31, 1996 ............... $ (227,500) $ 0 $ (4,771,590) $ 12,980,086
Net Income for the year ended 12-31-97 .. -- -- 1,540,890 1,540,890
Issuance of stock to purchase subsidiary -- -- -- 1,000,000
Stock issued to purchase lease .......... -- -- -- 210,000
Sale of common stock .................... 227,500 -- -- 3,877,500
Stock issued for services ............... -- -- -- 67,500
Exercise of warrants .................... -- -- -- 150,000
Fee for services regarding stock issued . -- -- -- (9,171)
Stock issued in settlement of a lawsuit . -- -- -- 150,000
Stock returned in settlement of a lawsuit -- -- -- (73,634)
Effect of translation ................... -- (6,135) -- (6,135)
Purchase of treasury stock .............. -- -- -- (2,145,417)
------------ ------------ ------------ ------------
Balance December 31, 1997 ............... 0 (6,135) $ (3,230,700) $ 17,741,619
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) .............................................. $ 1,540,890 $(4,865,872)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ........................... 440,650 343,564
Valuation allowances/reserves ........................... (372,000) 2,462,898
Stock issued for services ............................... 67,500 452,500
Stock issued in settlement of a lawsuit ................. 150,000 --
Stock returned in settlement of a lawsuit ............... (73,596) --
Stock issued to purchase a lease ........................ 210,000 --
Unrealized gain on transfer from investment
in non-marketable securities to marketable securities (598,900) --
Deferred income taxes ................................... 364,000 (843,000)
Changes in assets and liabilities (Increase) Decrease in:
Accounts receivable ..................................... (2,663,565) 86,716
Marketable securities ................................... 1,237,121 487,829
Inventories ............................................. (5,018,686) (134,006)
Prepaid expenses and other current assets ............... (472,203) (46,708)
Deposits and other assets ............................... (86,972) (177,918)
Increase (decrease) in:
Accounts payable ........................................ 2,013,134 172,114
Accrued expenses and other current liabilities .......... 439,377 (57,304)
State income taxes payable .............................. (14,134) (39,772)
----------- -----------
Net cash used by operating activities ............................. (2,837,384) (2,158,959)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for purchase of assets of subsidiary,
net of cash acquired ................................. 134,356 --
Payments made for property and equipment ................ (801,150) (1,123,739)
----------- -----------
Net Cash (used) by investing activities ........................... (666,794) (1,123,739)
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (Repayments) of note payable- bank ............. 1,275,000 (1,150,000)
Proceeds from issuance of long-term debt ................ -- 243,573
Repayments of note payable- shareholder ................. -- (590,000)
Principal payments on long-term debt .................... (45,657) (37,818)
Dividends Paid .......................................... -- (7,656)
Proceeds from the exercise of warrants - common stock ... 150,000 --
Foreign Currency Translation ............................ (6,135) --
Purchase of treasury stock .............................. (2,145,417) --
Net proceeds from sale of common stock .................. 3,909,616 5,599,146
----------- -----------
Net cash provided (used) by financing activities .................. 3,137,407 4,057,245
----------- -----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ................... (366,771) 774,547
CASH AND CASH EQUIVALENTS - BEGINNING ............................. 1,249,655 475,108
----------- -----------
CASH AND CASH EQUIVALENTS - END ................................... $ 882,884 $ 1,249,655
=========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
DHB CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of
DHB Capital Group, Inc. and its subsidiaries ("DHB"), all of which
are wholly-owned. DHB has two major divisions, DHB Armor Group and
DHB Sports Group. DHB Armor Group consists of Protective Apparel
Corporation (PACA), Point Blank Body Armor Inc. and Zunblindage S.A.
DHB Sports Group consists of NDL Products Inc. (NDL) and Orthopedic
Products Inc. (OPI). All material inter-company balances and
transactions have been eliminated.
Business description
DHB Armor Group develops, manufactures, and distributes bullet
and projectile resistant garments, bullet resistant and
fragmentation vests, bomb projectile blankets, and related ballistic
accessories. DHB Sports Group manufactures and distributes
specialized protective athletic apparel and equipment and orthopedic
products.
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.
<PAGE>
Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Depreciation is provided for both financial reporting and
income tax purposes using the straight-line and accelerated methods.
Marketable/Non-Marketable Securities
Investments in marketable securities are accounted for
according to the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS 115). Management of DHB classified all its
marketable securities as trading securities and, accordingly,
unrealized gains and losses are reflected in earnings.
Non-marketable securities are valued at historical cost and if
necessary, reduced by a valuation allowance to the net realizable
value.
Intangible assets
Intangible assets are stated at cost and are amortized over
their estimated useful lives (see Note 7).
Income taxes
DHB and its domestic subsidiaries file a consolidated Federal
income tax return and separate state income tax returns.
DHB 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.
Stock based compensation
Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" (SFAS 123) encourages, but
does not require companies to record compensation cost for
stock-based employee compensation at fair value. DHB has chosen not
to adopt SFAS 123 and to continue to account for stock-based
compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Accordingly,
compensation cost for stock options is measured as the excess, of
any, of the quoted market price of the Company's stock at the date
of the grant over the amount an employee must pay to acquire the
stock.
<PAGE>
Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Impairment of long-lived assets
DHB 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.
Reclassification
Certain items on the 1996 financial statements have been
reclassified to conform to 1997 presentation..
Note 2 SUPPPLEMENTAL CASH FLOWS INFORMATION
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C> <C>
Cash paid for:
Interest 269,450 535,859
Taxes 11,971 33,301
</TABLE>
During the years ended December 31, 1997 and 1996, the Company had
non-cash investing activities when in issued common stock to acquire
all of the outstanding stock of Zunblindage and of OPI, respectively.
Note 3 BUSINESS ACQUISITIONS
In February, 1997 DHB acquired 100% of the issued and
outstanding common stock of Zunblindage S.A. ("ZSA"), a Belgian
corporation, in exchange for 666,000 shares of DHB common stock
valued at an aggregate of $1,000,000. ZSA manufactures and
distributes bullet resistant equipment, apparel and related products
generally in Europe and the Middle East.
In March, 1996 DHB acquired 100% of the issued and outstanding
common stock of Orthopedic Products, Inc. ("OPI"), a manufacturer
and distributor of orthopedic products to the medical industry, in
exchange for 270,000 shares of DHB common stock. In 1997, 38,625 of
these shares were returned as a result of a lawsuit which DHB won
against the former shareholders for misrepresentation and violating
a covenant not to compete. An additional 6,625 shares will be
returned in 1998.
The above acquisitions were accounted for using the purchase
method of accounting, pursuant to which the purchase price was
allocated based upon the estimated fair values of the assets
acquired as of the dates of acquisition. The purchase of Zunblindage
resulted in goodwill of $541,000.
<PAGE>
Note 3 BUSINESS ACQUISITIONS (continued)
In the opinion of management, if the results of operations of
the acquired businesses had been included in the consolidated
financial statements since the beginning of the year, it would not
have a materially effect on the results of operations.
Note 4 MARKETABLE SECURITIES/NON-MARKETABLE SECURITIES
The following is a comparison of the cost and market value of
marketable securities included in current assets:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Cost .......... $1,254,104 $1,272,859
Unrealized gain 449,702 69,168
---------- ----------
Market Value .. $1,703,806 $1,342,027
========== ==========
</TABLE>
The Company's has acquired minority interests in
non-marketable securities, at December 31, 1997 the historical cost
was $2,316,750 reduced by a valuation allowance of $628,000 to bring
the carrying value of these securities to the net realizable value
of $1,688,750.
Note 5 INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Finished goods ........... $ 5,776,562 $ 2,638,256
Work in process .......... 1,646,610 997,308
Raw materials and supplies 5,120,302 3,654,641
----------- -----------
$12,543,474 $ 7,290,205
=========== ===========
</TABLE>
<PAGE>
Note 6 PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment and the estimated
lives used in the computation of depreciation is as follows:
<TABLE>
<CAPTION>
Estimated
1997 1996 useful life
---------- ---------- -----------
<S> <C> <C> <C>
Land ............................ $ 47,500 $ 47,500 --
Buildings ....................... 427,500 427,500 39 years
Machinery and equipment ......... 1,225,812 1,025,072 5-10 years
Furniture, fixtures and
computer equipment ........... 819,019 343,098 5-7 years
Transportation equipment ........ 244,510 144,361 3-5 years
Leasehold improvements .......... 480,928 372,240 5-31.5 years
---------- ----------
3,245,269 2,359,771
Less accumulated depreciation and
amortization .................... 871,184 524,994
---------- ----------
$2,374,085 $1,834,777
========== ==========
</TABLE>
Note 7 INTANGIBLE ASSETS
A summary of intangible assets and the estimated lives used in
the computation of amortization is as follows:
<TABLE>
<CAPTION>
Estimated
1997 1996 useful life
---------- ---------- -----------
<S> <C> <C> <C>
Goodwill .................... $ 694,473 $ 226,209 15 years
On-going government
contracts ............... 312,086 312,086 1-5 years
Other ....................... 129,563 129,563 1-7 years
---------- ---------
1,136,122 667,858
Less accumulated amortization 548,105 453,645
---------- ---------
$ 588,017 $ 214,213
========== =========
</TABLE>
Note 8 NOTES PAYABLE - BANK
Notes payable - bank are due on demand and are collateralized
by marketable securities owned by the majority stockholder of the
Company. The weighted average interest rate on these borrowings was
6.6% at December 31, 1997.
<PAGE>
Note 9 NOTE PAYABLE STOCKHOLDER
These notes bear interest at 12% per annum and are due, as
extended, in November, 1999 (see Note 15 in connection with
additional loans made by the majority stockholder in 1998.)
Note 10 LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Notes payable in monthly principal installments of $112,798 $155,998
$3,600. Interest at the rate of 9% per annum
accrues and is payable upon maturity in 2001.
Note payable in monthly installments of $1,876 32,754 49,757
inclusive of interest at 9.71% per annum. This note
is collateralized by certain equipment originally
costing approximately $90,000.
Capital lease obligation payable in monthly 20,109 --
installments of $432 inclusive of interest at
9.87%. This note is collateralized by certain
equipment originally costing approximately $23,000.
Other 10,789 --
-------- --------
176,450 205,755
Less Current Portion 65,192 61,664
-------- --------
$111,258 $144,091
======== ========
</TABLE>
Long-term debt matures as follows:
1998 $58,917
1999 39,332
2000 4,069
2001 4,489
2002 4,451
-------
111,258
=======
Note 11 STOCKHOLDERS' EQUITY
Common and preferred stock
(1) During 1996, DHB amended its certificate of
incorporation increasing the number of authorized
shares of its $.001 par value Common Stock from
25,000,000 to 100,000,000. In addition, DHB is
authorized to issue 1,500,000 shares of Class A 10%
convertible Preferred Stock.
(2) In July, 1996, DHB declared a 50% stock dividend on
the outstanding Common Stock.
<PAGE>
Note 11 STOCKHOLDERS' EQUITY (continued)
Stock option plan
In October, 1995, the Company adopted a plan (the "1995 Stock
Option Plan" or the "Plan") pursuant to which the Board of Directors
is authorized to award options to purchase up to 3,500,000 shares of
Common Stock to selected officers, employees, agents, consultants
and other persons who render services to the Company. The options
may be issued on such terms and conditions as determined by the
Board or Committee, and may be issued so as to qualify as incentive
stock options under Internal Revenue Code Section 422A. No options
have been granted under this plan.
Stock warrants
During 1997, the Board of Directors granted 50,000 stock
warrants exercisable at $2.00 per share to a key employee expiring
in June 2000. Pursuant to employment agreements (See Note 14), the
Company has 1,549,500 stock warrants outstanding exercisable at
$1.33 per share and expiring in 2001. In December 1994, in
consideration for monies loaned to the Company, the Board of
Directors granted a relative of the majority stockholder, stock
warrants to purchase 3,750,000 shares of common stock for $1.33 per
share for a five year period commencing December 19, 1994. In June
1993, the Board of Directors granted stock warrants to certain
individuals and organizations with 150,000 warrants still
outstanding exercisable at $1.33 and expiring in June 1998.
Note 12 RELATED PARTY TRANSACTIONS
A summary of related party transactions for the years ended
December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Rental expense paid or accrued to the
relatives of the majority stockholder $546,000 $480,000
Rental expense paid to the President
of a subsidiary of DHB 48,000 48,000
Interest paid or accrued on a loan from
DHB's majority stockholder. 177,340 170,142
</TABLE>
See Note 14 for details of the lease with a related party
Note 13 RISKS AND UNCERTAINTIES
The Company maintains cash balances at various financial
institutions. Accounts at each institution are insured by the
Federal Deposit Insurance Corporation up to $100,000. The Company's
accounts at these institutions may, at times, exceed the Federally
insured limits. The Company has not experienced any losses in such
accounts.
<PAGE>
Note 13 RISKS AND UNCERTAINTIES (continued)
Approximately 27% and 23% for the years ended December 31,
1997 and 1996, respectively, of DHB's sales were made to the United
States Government or its agencies.
Certain factors relating to the industries in which DHB
operates and the Company's business should be carefully considered.
All of the products sold by DHB 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 DHB 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 DHB would be able to obtain such insurance at a
reasonable cost. The inability to obtain such insurance coverage
would prohibit DHB from bidding for certain orders for bullet
resistant products from certain governmental customers.
Substantially all of the raw materials used in the
manufacturing of ballistic-resistant garments are made from fabrics
which are patented by major corporations and which are purchased
from three independent weaving companies. Although, in the opinion
of management of DHB, DHB enjoys a good relationship with these
vendors, should any of the manufacturers cease to produce these
products for any reason, DHB would be required to use other fabrics.
In such an event, an alternative fabric would have to be selected
and ballistic test would have to be performed. Until this was done,
DHB's sale of ballistic resistant products would be severely
curtailed and DHB's financial condition would be materially
adversely affected.
Note 14 COMMITMENTS AND CONTINGENCIES
Leases
DHB leases a warehouse and manufacturing facility from a
partnership indirectly owned by the majority stockholder of DHB. The
lease provides for annual rentals of $480,000 for 1996 and 4% annual
increases through expiration in 1999. In addition, DHB must pay real
estate taxes and certain operating expenses of this property.
DHB leases a warehouse and manufacturing facility from the
president of one of its subsidiaries. The lease provides for annual
rentals of $43,200, plus real estate taxes. The space is occupied
pursuant to a five-year lease which expired in October 1997 and is
currently leased on a month to month basis.
In April 1997, the Company entered a one year lease for a
60,000 square foot warehouse adjacent to the existing Florida
facility with an annual rental of approximately $210,000, and an
option to extend the lease for four years.
In association with the acquisition of Zunblindage, the
Company assumed a lease for their warehouse and store in Liege,
Belgium. This space is occupied pursuant to a nine year lease with
annual rentals of approximately, $42,000.
<PAGE>
Note 14 COMMITMENTS AND CONTINGENCIES (continued)
Rent and real estate taxes expense charged to operations for
the years ended December 31, 1997 and 1996 aggregated approximately
$962,000 and $616,000, respectively.
Employment agreements
The Company is committed under an employment agreement with
its majority stockholder which expires in April, 2001 and provides
for an annual salary of $250,000 through April, 1997 and annual
increases of $25,000 thereafter. In addition, the contract provides
for the annual grant of 750,000 warrants to the principal
stockholder, which are exercisable at $2.33 per share and expire
five years from date of grant.
Concurrent with the purchase of PACA, the President of PACA
was given a five year employment agreement which expired in 1997.
This agreement calls for annual salaries of $115,000 with annual
increases of $10,000 plus certain fringe benefits. During the year
ended December 31, 1995, the vice president of NDL was given a three
year employment contract. This agreement calls for an annual base
salary of $100,000 and 16,500 stock warrants per year exercisable at
$1.33 and expiring in February 2001, as extended.
In 1997, the Company entered into an employment agreement with
a salesman for DHB Armor Group, expiring in 2000 with an annual
salary of $100,000 plus certain fringe benefits.
Litigation
DHB is a defendant in a lawsuit filed in the United States
District Court for the Southern District of New York. The lawsuit
seeks, among other things, compensatory damages of not less than
$2,500,000, punitive damages of not less than $500,000 breach of
contract and an order enabling the plaintiff to execute certain
stock purchase warrants.
DHB has filed an Answer and Counter-Claim and intends to
vigorously defend the claim and to pursue its Counter-Claims.
Due to the preliminary status of this litigation, counsel to
DHB is unable to predict the outcome of this litigation. In the
opinion of management of DHB, the ultimate outcome of this
litigation will not have a material adverse effect on the financial
condition of DHB.
The Company is subject to other legal proceedings and claims
which have risen in the ordinary course of its business and have not
been finally adjudicated. These actions when ultimately concluded
and determined will not, in the opinion of management, have a
material adverse effect on the results of operations or the
financial condition of the Company.
<PAGE>
Note 15 INCOME TAXES
Components of income taxes are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Current:
Federal .................. $ 455,000 $ 0
State .................... 22,509 8,809
Benefit of net operating
loss carryforward (455,000) --
----------- -----------
Total current ...... 22,509 8,809
Deferred:
Federal .................. 690,000 (1,686,000)
State .................... 430,700 (562,000)
Less: valuation allowance (1,494,700) 1,406,000
----------- -----------
Total Deferred ... 374,000 (843,000)
----------- -----------
Total income taxes (benefits) $ 396,509 $ (834,191)
=========== ===========
</TABLE>
The composition of the federal and state deferred taxes at
December 31, 1997 was arrived at as follows:
<TABLE>
<CAPTION>
<S> <C>
Operating Loss Carryforward $ 1,762,600
Allowance for Doubtful Accounts 141,200
Valuation Allowance - Non marketable securities 51,200
Net write down of investment in subsidiaries 175,000
Unrealized gain on Marketable Securities (180,000)
----------
Subtotal 1,950,000
Less: Valuation Allowance 1,494,700
----------
Net Deferred Taxes $ 455,300
==========
</TABLE>
<PAGE>
Note 16 SUBSEQUENT EVENTS
On January 16, 1998, DHB signed an exclusive (except for
certain rights in the field of products for horses) licensing
agreement, to make, use and sell magnetic products covered by
certain US and Canadian patents, along with the technical know how
related to the magenetic products in the possession of Magnesystems.
On February 9, 1998, the Company purchased the common stock of
two privately held Delaware corporations, Lanxide Armor Products
Inc. (LAP) and Lanxide Electronic Components Inc. (LEC). The
purchase price was approximately $4.8 million and was funded by
increasing loans from the majority shareholder of $7 million,
including amounts for working capital. LAP specializes in the
design, development and manufacture of ceramic/metal matrix
composites for protective armor applications. LEC is a leading
supplier of Silicon Carbide / Aluminum composites. This transaction
was accounted for as a purchase.
Since December 31, 1997, the Company has repurchased and
retired an additional 536,495 shares of the Company's common stock
in open market transactions for approximately $2,111,000 as
authorized by the Board of Directors. This was funded in part by an
additional shareholder loan of $2.2 million.
<PAGE>
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
SCHEDULE II TO THE FINANCIAL STATEMENTS
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1997
Allowances deducted from related balance sheet accounts:
<TABLE>
<CAPTION>
Additions Subtractions
Balance at charged to charged to Balance
the beginning costs and costs and at end of
of the year expenses expenses year
------------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Accounts Receivable ...... $ 303,230 $ 50,000 -- $ 353,230
Inventory ................ 700,000 -- (700,000) 0
Investment in Non-
marketable securities .... 1,000,000 0 (372,000) 628,000
Net Write down of ........ $ 529,578 -- -- $ 529,578
Investment in subsidiaries
</TABLE>
<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 on its
behalf by the undersigned, thereunto duly authorized on this the 24th day of
August, 1998.
DHB Capital Group Inc.
/S/ David Brooks
----------------
David Brooks
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on March 23, 1998.
Signature Capacity Date
- --------- -------- ----
/S/David H. Brooks Chairman of the Board August 24, 1998
- ------------------- and Director
David H. Brooks
/S/Mary Kreidell Treasurer/Director August 24, 1998
- ----------------- Principal Financial Officer
Mary Kreidell Principal Accounting Officer
/S/Gary Nadelman Director August 24, 1998
- ----------------
Gary Nadelman
