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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, 1999 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 11, 1999 there were 26,294,856 shares of Common Stock, $.001 par
value outstanding.
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<PAGE>
CONTENTS
PART I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998
Unaudited Consolidated Statements of Operations and Retained Earnings
For The Three Months Ended September 30, 1999, 1998 and 1997
Unaudited Consolidated Statements of Operations and Retained Earnings
For The Nine Months Ended September 30, 1999, 1998 and 1997
Unaudited Consolidated Statements of Cash Flows For The Nine Months Ended
September 30, 1999, 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
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits & Reports on Form 8-K
Signatures
<PAGE>
<TABLE>
<CAPTION>
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ ------------------
ASSETS
------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ......................................... $ 658,810 $ 519,117
Marketable securities ............................................. 102,086 529,328
Accounts receivable, less allowance for doubtful
accounts of $591,739 and $507,739, respectively ............. 9,675,151 8,997,354
Inventories ....................................................... 25,614,540 20,001,547
Prepaid expenses and other current assets ......................... 1,641,990 1,948,347
------------ ------------
Total Current Assets .............................................. 37,692,577 31,995,693
PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation of
$2,228,083 and $1,657,951, respectively ........................... 7,445,252 7,104,233
------------ ------------
OTHER ASSETS
Intangible assets, net ............................................ 1,149,703 1,271,668
Investments in non-marketable securities .......................... 1,688,750 1,688,750
Deferred tax assets ............................................... 449,000 334,000
Deposits and other assets ......................................... 607,642 584,891
------------ ------------
Total Other Assets ................................................ 3,895,095 3,879,309
------------ ------------
TOTAL ASSETS ...................................................... $ 49,032,924 $ 42,979,235
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Note payable ...................................................... $ 5,000,000 $ 4,175,000
Current maturities of long term debt .............................. 150,614 159,607
Accounts payable .................................................. 7,989,014 6,233,131
Accrued expenses and other current liabilities .................... 4,200,981 2,324,114
------------ ------------
Total Current Liabilities ......................................... 17,340,609 12,891,852
------------ ------------
LONG TERM LIABILITIES
Long term debt, net of current maturities ......................... 294,793 387,512
Note Payable - stockholder ........................................ 11,527,604 11,527,604
------------ ------------
Total Long Term Debt .............................................. 11,822,397 11,915,116
------------ ------------
Total Liabilities ................................................. 29,163,006 24,806,968
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 100,000,000 shares authorized,
26,273,356 and 25,447,224, issued and outstanding, respectively .. 26,273 25,447
Additional paid-in capital ........................................ 22,841,154 21,215,849
Subscription receivable ........................................... (400,970)
Accumulated deficit ............................................... (2,631,132) (3,100,898)
Foreign currency translation adjustment ........................... 34,593 31,869
------------ ------------
STOCKHOLDERS' EQUITY .............................................. 19,869,918 18,172,267
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................ $ 49,032,924 $ 42,979,235
</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,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net sales ..................................... $ 13,938,019 $ 10,191,753 $ 9,004,476
Cost of sales ................................. 9,245,806 5,983,494 6,320,158
------------ ------------ ------------
Gross Profit .................................. 4,692,213 4,208,259 2,684,318
Selling, general and administrative expenses .. 3,883,991 3,553,922 2,444,343
------------ ------------ ------------
Income (Loss) before other income (expense) ... 808,222 654,337 239,975
------------ ------------ ------------
Other Income (Expense)
Interest expense, net of interest income ...... (537,361) (381,549) (93,391)
Other Income .................................. 26,965 -- 100
Foreign currency translation .................. 21,984 (9,493) 4,259
Realized gain on marketable securities ........ -- -- (28,124)
Unrealized gain on marketable securities ...... -- -- 113,693
------------ ------------ ------------
Total Other Income (Expense) .................. (488,412) (391,042) (3,463)
------------ ------------ ------------
Income (loss) before income taxes (benefit) ... 319,810 263,295 236,512
Income taxes (benefit) ........................ 10,518 7,473 10,739
------------ ------------ ------------
Net Income .................................... 309,292 255,822 225,773
Retained Earnings (Deficit) - Beginning ....... (2,940,424) (3,607,081) (3,947,036)
------------ ------------ ------------
Retained Earnings (Deficit) - End ............. $ (2,631,132) $ (3,351,259) $ (3,721,263)
============ ============ ============
Earnings (loss) per common share
Primary ....................................... $ 0.012 $ 0.010 $ 0.009
============ ============ ============
Fully Diluted ................................. $ 0.010 $ 0.009 $ 0.007
============ ============ ============
Primary weighted average number of shares ..... 26,013,541 24,832,394 25,775,527
Add warrants .................................. 4,306,390 4,673,200 4,402,188
------------ ------------ ------------
Fully Diluted weighted average number of shares 30,319,931 29,505,594 30,177,715
============ ============ ============
</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,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net sales ..................................... $ 33,924,063 $ 31,310,351 $ 24,549,991
Cost of sales ................................. 22,031,942 20,707,864 16,993,707
------------ ------------ ------------
Gross Profit .................................. 11,892,121 10,602,487 7,556,284
Selling, general and administrative expenses .. 10,134,537 9,975,477 6,826,504
------------ ------------ ------------
Income(Loss) before other income (expense) .... 1,757,584 627,010 729,780
------------ ------------ ------------
Other Income (Expense)
Interest expense, net of interest income ...... (1,510,216) (882,795) (243,225)
Other Income .................................. 271,896 19 38,851
Foreign currency translation .................. 29,437 (9,409) 3,629
Realized gain on marketable securities ........ (16,050) 119,818 (60,506)
Unrealized gain on marketable securities ...... -- 43,751 720,929
------------ ------------ ------------
Total Other Income (Expense) .................. (1,224,933) (728,616) 459,678
------------ ------------ ------------
Income (loss) before income taxes (benefit) ... 532,651 (101,606) 1,189,458
Income taxes (benefit) ........................ 62,885 18,953 139,131
------------ ------------ ------------
Net Income (loss) ............................. 469,766 (120,559) 1,050,327
Retained Earnings (Deficit) - Beginning ....... (3,100,898) (3,230,700) (4,771,590)
------------ ------------ ------------
Retained Earnings (Deficit) - End ............. $ (2,631,132) $ (3,351,259) $ (3,721,263)
============ ============ ============
Earnings (loss) per common share
Primary ....................................... $ 0.018 $ (0.005) $ 0.043
============ ============ ============
Fully Diluted ................................. $ 0.016 $ (0.004) $ 0.038
============ ============ ============
Primary weighted average number of shares ..... 25,829,387 24,869,291 24,648,520
Add warrants .................................. 4,306,390 4,543,219 2,945,978
------------ ------------ ------------
Fully Diluted weighted average number of shares 30,135,777 29,412,510 27,594,498
============ ============ ============
</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,
CASH FLOWS FROM OPERATING ACTIVITIES 1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net Income (loss) ................................................. $ 469,766 $ (120,559) $ 1,050,327
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ..................................... 704,859 894,763 305,313
Stock issued in settlement of a lawsuit ........................... 190,000 150,000
Stock returned in settlement of a lawsuit ......................... -- (21,131)
Stock issued for services ......................................... 65,156 372,000 277,500
Unrealized loss on marketable securities .......................... -- -- (598,900)
Changes in assets and liabilities
(Increase) Decrease in:
Accounts receivable ............................................... (677,797) (1,570,385) (2,777,321)
Marketable securities ............................................. 427,242 . 1,601,720 (138,687)
Inventories ....................................................... (5,612,993) (4,880,520) (2,164,571)
Prepaid expenses and other current assets ......................... 306,357 (905,230) (479,472)
Deferred taxes .................................................... (115,000) (22,118) 49,000
Deposits and other assets ......................................... (22,751) (97,945) (96,691)
Increase (decrease) in:
Accounts payable .................................................. 1,755,883 (522,225) 1,135,179
Accrued expenses and other current liabilities .................... 1,876,867 1,394,597 247,101
----------- ----------- -----------
Net cash used by operating activities ............................. (632,411) (3,855,902) (3,062,353)
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 .......................... (923,913) (929,755) (610,173)
----------- ----------- -----------
Net Cash used by investing activities ............................. (923,913) (5,853,830) (475,817)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (repayments) of note payable- bank ....................... 825,000 2,325,000 500,000
Proceeds from shareholder note .................................... -- 9,050,900 --
Principal payments on long-term debt .............................. (101,712) (74,391) (51,231)
Foreign Currency Translation ...................................... 2,724. 18,892 4,113
Purchase of treasury stock ........................................ (240,245) (2,770,002) (1,028,300)
Stock warrant exercised ........................................... 361,720 66,000
Net proceeds from sale of common stock ............................ 848,530 240,000 3,248,330
----------- ----------- -----------
Net cash provided by financing activities ......................... 1,696,017 8,856,399 2,672,912
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ................... 139,693 (853,333) (865,258)
CASH AND CASH EQUIVALENTS - BEGINNING ............................. 519,117 882,884 1,249,655
----------- ----------- -----------
CASH AND CASH EQUIVALENTS - END ................................... $ 658,810 $ 29,551 $ 384,397
=========== =========== ===========
</TABLE>
<PAGE>
Supplemental cash flow information
Cash paid for: 1999 1998 1997
-------- -------- --------
Interest $251,611 $280,399 $211,414
Taxes $63,933 $ 78,877 $17,739
See accompanying notes to financial statements.
<PAGE>
DHB CAPITAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999, 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.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Results of Operations
Three Months Ended September 30, 1999, Compared to the Three Months Ended
September 30, 1998 and 1997.
Consolidated net sales were approximately $13,938,000, $10,192,000 and
$9,004,000 for the three months ended September 30, 1999, 1998 and 1997,
respectively. Gross profit for the three months ended September 30, 1999
increased approximately $484,000 to $4,692,213 over the gross profit for the
three months ended September 30, 1998 and increased $2,007,895 over the gross
profit for the three months ended September 30, 1997. The increase in gross
profit is primarily a result of increased sales volume. Operating income
increased 21% to $319,810 for the three months ended September 30, 1999 as
compared to operating income of $263,295 for the three months ended September
30, 1998. The smaller percentage increase in operating income compared to gross
profit is the result of the Company settling a lawsuit with the former president
of one of its subsidiaries and the buyout of his employment agreement which
result in a charge to operations of $90,000.
<PAGE>
Nine Months Ended September 30, 1999, Compared to the Nine Months Ended
September 30, 1998 and 1997.
Consolidated net sales were approximately $33,924,000, $31,310,000 and
$24,550,000 for the nine months ended September 30, 1999, 1998 and 1997,
respectively. Gross profit for the three months ended September 30, 1999
increased to approximately $11,892,121 over the gross profit for the nine months
ended September 30, 1998 of $10,602,000 and $7,556,284 for the nine months ended
September 30, 1997. Net income for the nine months ended September 30, 1999 was
$469,766 as compared to a net loss of $120,559 for the nine months ended
September 30, 1998.
Liquidity and Capital Resources Liquidity and Capital ResourcesLiquidity and
Capital Resources
The Company's primary capital requirements over the next twelve months are to
assist PACA , Point Blank, NDL, OPI, Point Blank International, DHB KK and LEC
in financing their working capital requirements. Working capital is needed to
finance the receivables, manufacturing process and inventory. Working Capital at
September 30, 1999 was approximately $20,352,000 as compared to $15,558,000 in
1998 and $13,621,000 at September 30, 1997. The current ratio at September 30,
1999 is 2.17:1 and at September 30, 1998 it was 2.2:1 as compared to 2.6:1 at
September 30, 1997.
Cash, cash equivalents, and marketable securities totaled $760,896 at September
30, 1999 compared to $131,637 at September 30, 1998. The 1999 increase in cash,
cash equivalents and marketable securities was derived from operations. The
Company obtained a line of credit with the Bank of New York in May of 1998 for
up to $5,000,000. The line is secured by all of the Company's assets. As of
November 11, 1999 the Company has borrowed $5,000,000 on this line at an average
rate of 7.4% interest. The line of credit expires in January of 2000.
Effect of Inflation and Changing Prices.
The Company did not experience increases in raw material prices during the nine
months ended September 30, 1999, 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-
Item 1. Legal Proceedings
On or about August 3, 1999 LAX (DE) QRS 12-16 Inc. ("Landlord") commenced an
action against Lanxide Electronic Components Inc. ("LEC"), a wholly owned
subsidiary of the Company, in the Justice of the Peace Court of the State of
Delaware, New Castle County Court No.12, CA No. JP12-99-4928. The action was
commenced by the Landlord against LEC to recover possession of the space that
LEC currently leases in Delaware. The case was dismissed against the Landlord on
October 20, 1999. The Landlord appealed the lower courts ruling and the appeal
is scheduled to be heard November 18, 1999. The Company believes it has a strong
defense, however the outcome of the appeal cannot presently be determined.
This action is considered by management to be material to the business of LEC
and, if adversely determined, would have a material adverse effect on LEC's
financial condition.
Item 5. Other Information
In October 1999 Lanxide Armor Products Inc., a wholly owned subsidiary of the
Company, discontinued its operations, the result of which is not expected to
have a material adverse effect on the financial condition of the Company.
On November 17, 1999 the Company is scheduled to attend a NASDAQ Qualification
Hearing regarding the Company's ability to continue to be listed on The NASDAQ
Small Cap Market. While the Company plans on attending this hearing, no
assurance can be given regarding the outcome of the meeting.
Item 6. Exhibits and Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ender September 30,
1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed by the
undersigned, thereunto duly authorized.
Dated: November 11, 1999 DHB CAPITAL GROUP INC.
/S/ David H. Brooks
-------------------
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 11, 1999
- -------------------
David H. Brooks
/S/ Dawn M. Schlegel
- --------------------
Dawn M. Schlegel Chief Financial Officer November 11, 1999
/S/ Robert A. Bruno Vice President November 11, 1999
- -------------------
Robert A. Bruno
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 658,810
<SECURITIES> 102,086
<RECEIVABLES> 9,675,151
<ALLOWANCES> 591,739
<INVENTORY> 25,614,540
<CURRENT-ASSETS> 37,692,577
<PP&E> 7,445,252
<DEPRECIATION> 2,228,083
<TOTAL-ASSETS> 49,032,924
<CURRENT-LIABILITIES> 17,340,609
<BONDS> 0
<COMMON> 26,273
0
0
<OTHER-SE> 19,843,645
<TOTAL-LIABILITY-AND-EQUITY> 49,032,924
<SALES> 33,924,063
<TOTAL-REVENUES> 33,924,063
<CGS> 22,031,942
<TOTAL-COSTS> 10,134,537
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,510,216
<INCOME-PRETAX> 532,651
<INCOME-TAX> 62,885
<INCOME-CONTINUING> 469,766
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 469,766
<EPS-BASIC> 0.018
<EPS-DILUTED> 0.016
</TABLE>
