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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
SEPTEMBER 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 November 9, 1998, there were 24,855,872 shares of Common Stock, $.001 par
value outstanding.
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<PAGE>
CONTENTS
PART I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet as of September 30, 1998 and December 31, 1997
Unaudited Consolidated Statements of Operations and Retained Earnings
For The Three Months Ended September 30, 1998 and 1997
Unaudited Consolidated Statements of Operations and Retained Earnings
For The Nine Months Ended September 30, 1998 and 1997
Unaudited Consolidated Statements of Cash Flows For The Six Months Ended
September 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
SEPT. 30, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents ............................... $ 29,551 $ 882,884
Marketable securities ................................... 102,086 1,703,806
Accounts receivable, less allowance for doubtful
accounts of $369,369 and $303,320 ................. 8,574,072 6,285,181
Inventories ............................................. 18,797,668 12,543,474
Prepaid expenses and other current assets ............... 1,644,889 727,421
------------ ------------
Total Current Assets ..................... 29,148,266 22,142,766
------------ ------------
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation of $1,972,375 and $978,770, respectively 6,679,333 2,374,085
------------ ------------
OTHER ASSETS
Intangible assets, net ................................ 1,314,904 588,017
Investments in non-marketable securities .............. 1,688,750 1,688,750
Deferred tax assets ................................... 455,300 455,300
Deposits and other assets ............................. 568,054 425,711
------------ ------------
Total Other Assets ....................... 4,027,008 3,157,778
------------ ------------
TOTAL ASSETS ............................................... $ 39,854,607 $ 27,674,629
============ ============
<PAGE>
<CAPTION>
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
SEPT. 30, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Note payable .......................................... $ 5,000,000 $ 2,675,000
Current maturities of long term debt .................. 123,923 65,192
Accounts payable ...................................... 5,708,212 5,072,929
Accrued expenses and other current liabilities ........ 2,758,333 708,631
------------ ------------
Total Current Liabilities ................ 13,590,468 8,521,752
------------ ------------
LONG TERM LIABILITIES
Long term debt, net of current maturities .............. 365,288 111,258
Note Payable - stockholder .............................. 10,350,900 1,300,000
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Total Long Term Debt ..................... 10,716,188 1,411,258
------------ ------------
Total Liabilities ........................ 24,306,656 9,933,010
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STOCKHOLDERS' EQUITY
Common stock, $.001 par value,
100,000,000 shares authorized, 24,855,872 and
25,347,224 issued and outstanding, respectively .. 24,856 25,347
Additional paid-in capital ................................. 18,861,597 20,953,107
Accumulated deficit .................................... (3,351,259) (3,230,700)
Foreign currency translation adjustment ................ 12,757 (6,135)
------------ ------------
STOCKHOLDERS' EQUITY .................................... 15,547,931 17,741,619
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .............. $ 39,854,607 $ 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 SEPTEMBER 30,
1998 1997
------------ ------------
<S> <C> <C>
Net sales .......................................... $ 10,191,753 $ 9,004,476
Cost of sales ...................................... 5,983,494 6,320,158
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Gross Profit ........................................... 4,208,259 2,684,318
Selling, general and administrative expenses ........ 3,553,922 2,444,343
------------ ------------
Income before other income (expense) ................... 654,337 239,975
------------ ------------
Other Income (Expense)
Interest expense, net of interest income ............... (381,549) (93,391)
Dividend income ........................................ 0 100
Foreign currency translation gain (loss) ............... (9,493) 4,259
Realized gain (loss) on marketable securities .......... -- (28,124)
Unrealized gain on marketable securities ............... -- 113,693
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Total Other Income (Expense) .................. (391,042) (3,463)
------------ ------------
Income (loss) before income taxes ...................... 263,295 236,512
Income taxes ........................................... 7,473 10,739
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Net Income ............................................. 255,822 225,773
Accumulated Deficit - Beginning ........................ (3,607,081) (3,947,036)
------------ ------------
Accumulated Deficit - End .............................. $ (3,351,259) $ (3,721,263)
============ ============
Earnings per common share
Primary ........................ $ 0.010 $ 0.009
============ ============
Fully Diluted .................. $ 0.009 $ 0.007
============ ============
Primary weighted average number of shares ..... 24,832,394 25,775,527
Add warrants .................................. 4,673,200 4,402,188
------------ ------------
Fully Diluted weighted average number of shares 29,505,594 30,177,714
============ ============
</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 NINE MONTHS ENDED SEPTEMBER 30,
1998 1997
------------ ------------
<S> <C> <C>
Net sales .......................................... $ 31,310,351 $ 24,549,991
Cost of sales ...................................... 20,707,864 16,993,707
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Gross Profit ........................................... 10,602,487 7,556,284
Selling, general and administrative expenses ........ 9,975,477 6,826,504
------------ ------------
Income before other income (expense) ................... 627,010 729,780
------------ ------------
Other Income (Expense)
Interest expense, net of interest income ............... (882,795) (243,225)
Other income .......................................... 19 38,851
Foreign currency translation gain (loss) ............... (9,409) 3,629
Realized gain (loss) on marketable securities .......... 119,818 (60,506)
Unrealized gain on marketable securities ............... 43,751 720,929
------------ ------------
Total Other Income (Expense) .................. (728,616) 459,678
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Income (loss) before income taxes ...................... (101,606) 1,189,458
Income taxes ........................................... (18,953) 139,131
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Net Income ............................................. (120,559) 1,050,327
Accumulated Deficit - Beginning ........................ (3,230,700) (4,771,590)
------------ ------------
Accumulated Deficit - End .............................. $ (3,351,259) $ (3,721,263)
============ ============
Earnings (loss) per common share
Primary ........................ $ (0.005) $ 0.043
============ ============
Fully Diluted .................. $ (0.004) $ 0.038
============ ============
Primary weighted average number of shares ..... 24,869,291 24,648,520
Add warrants .................................. 4,543,219 2,945,978
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Fully Diluted weighted average number of shares 29,412,511 27,594,498
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</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) ........................................................... $ (120,559) $ 1,050,327
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ........................................ 894,763 305,313
Stock issued for services ............................................ 372,000 67,500
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 ................................................... (1,570,385) (2,777,321)
Marketable securities ................................................. 1,601,720 (138,687)
Inventories ........................................................... (4,880,520) (2,164,571)
Deferred taxes ........................................................ -- 49,000
Prepaid expenses and other current assets ............................. (905,230) (479,472)
Deposits and other assets ............................................. (120,063) (96,691)
Increase (decrease) in:
Accounts payable ...................................................... (522,225) 1,135,179
Accrued expenses and other current liabilities ........................ 1,394,597 247,101
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Net cash used by operating activities .......................................... (3,855,902) (3,062,353)
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CASH FLOWS FROM INVESTING ACTIVITIES
Payments for purchase of assets of subsidiary,
net of cash acquired ......................................... (4,924,075) 134,356
Payments made for property and equipment .......................... (929,755) (610,173)
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Net Cash used by investing activities .......................................... (5,853,830) (475,817)
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<PAGE>
<CAPTION>
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (repayments) of note payable- bank ........................ 2,325,000 500,000
Proceeds from shareholder note ..................................... 9,050,900 --
Principal payments on long-term debt ............................... (74,391) (51,231)
Stock warrant exercised ............................................ 66,000 --
Foreign Currency Translation ....................................... 18,892 4,113
Purchase of treasury stock ......................................... (2,770,002) (1,028,300)
Net proceeds from sale of common stock ............................. 240,000 3,248,330
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Net cash provided by financing activities ...................................... 8,856,399 2,672,912
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NET DECREASE IN CASH AND EQUIVALENTS ........................................... (853,333) (865,258)
CASH AND CASH EQUIVALENTS - BEGINNING .......................................... 882,884 1,249,655
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CASH AND CASH EQUIVALENTS - END ................................................ $ 29,551 $ 384,397
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Supplemental cash flow information
Cash paid for:
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Interest .............................................................. $ 280,399 $ 211,414
Taxes ................................................................. $ 78,877 $ 17,739
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DHB CAPITAL GROUP INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 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:
2. NASDAQ Small Cap Listing.
On September 4, 1998, the Company's stock was listed on the NASDAQ Small
Cap MarketTM. The listing was granted pursuant to satisfying certain
conditions imposed by the NASDAQ Listing Qualifications Panel and subject
to approval by the NASDAQ Review Committee. The following conditions were
required by NASDAQ: (1) David Brooks, the Chairman of the Board, CEO, and
majority shareholder of DHB and his brother, Jeffrey Brooks, were required
to placed all shares beneficially owned by them into two separate voting
trusts administered by a an independent trustee; who will vote the shares
the way the majority shareholders vote; (2) Mr. David Brooks entered into
a Standstill Agreement which prohibits him from buying or selling any
stock of DHB for three years; Jeffrey Brooks entered into a Standstill
Agreement which prohibited him from buying any stock of DHB for three
years. (3) Mr. David Brooks was required to resign as Chief Executive
Officer and a member of the Audit Committee; (4) An independent member was
elected to serve as Co-Chairman of the Board along with Mr. David Brooks.
(5) Jeffrey Brooks was required to lower his ownership of DHB to below
4.9% of the shares outstanding. Both David Brooks and Jeffrey Brooks
complied with the NASDAQ requirements to help facilitate the listing on
NASDAQ.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
Three Months Ended September 30, 1998, Compared to the Three Months Ended
September 30, 1997.
Consolidated net sales for the three months ended September 30, 1998 increased
by approximately $2,187,000 over sales for the three months ended September 30,
1997, an increase of 13%. Operating income increased from $239,975 for the three
months ended September 30, 1997 to $654,337 for the quarter ended September 30,
1998. This improvement is attributed to a higher sales volume and greater profit
margins.
The Company's interest expense for the quarter ended September 30, 1998
increased to approximately $382,000 from $93,000 for the quarter ended September
30, 1997 as a result of the increased borrowings to finance the acquisitions and
to support working capital requirements.
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 September 30,
1998 was approximately $15,558,000 as compared to $13,621,000 at December 31,
1997. Working Capital is needed to finance the receivables, the manufacturing
process, and inventory. The current ratio is 2.2:1 at September 30, 1998
compared to 2.6:1 at December 31, 1997.
Cash, cash equivalents, and marketable securities totaled $132,000 at September
30, 1998 and $2,587,000 at December 31, 1997.
The Company's capital expenditures for the nine months ended September 30, 1998
was approximately $930,000 which primarily was the result of equipment purchased
for LEC. Capital Expenditures for the nine months ended September 30, 1997 was
approximately $610,000.
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.
<PAGE>
PART II. OTHER INFORMATION
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: November 10, 1998 DHB CAPITAL GROUP INC.
/S/ David H. Brooks
Co-Chairman of the Board 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 Co-Chairman of the Board November 10, 1998
/S/ Mary Kreidell Chief Financial Officer November 10, 1998
/S/ Gary Nadelman Co-Chairman of the Board November 10, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 29,551
<SECURITIES> 102,086
<RECEIVABLES> 8,574,072
<ALLOWANCES> 369,369
<INVENTORY> 18,797,668
<CURRENT-ASSETS> 29,148,266
<PP&E> 6,679,333
<DEPRECIATION> 1,972,375
<TOTAL-ASSETS> 39,854,607
<CURRENT-LIABILITIES> 13,590,468
<BONDS> 0
24,856
0
<COMMON> 0
<OTHER-SE> 15,547,931
<TOTAL-LIABILITY-AND-EQUITY> 39,854,607
<SALES> 31,310,351
<TOTAL-REVENUES> 31,310,351
<CGS> 20,707,864
<TOTAL-COSTS> 9,975,477
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 882,795
<INCOME-PRETAX> (101,606)
<INCOME-TAX> 18,953
<INCOME-CONTINUING> (120,559)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (120,559)
<EPS-PRIMARY> (.005)
<EPS-DILUTED> (.004)
</TABLE>
