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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_______ to________
Commission File No. 0-22429
DHB CAPITAL GROUP INC.
(Name of issuer in its charter)
DELAWARE 11-3129361
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
555 WESTBURY AVENUE, CARLE PLACE, NEW YORK 11514
(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)
Indicate by check mark whether the issuer (1) has 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 [ ]
Indicate by check mark if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-K is not contained herein, and will not 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-K
or any amendment to this Form 10-K [ X ]
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 16 2001: $49,058,765.
Number of shares outstanding of the issuer's common equity, as of March 16, 2001
(Exclusive of securities convertible into common equity): 31,491,914
DOCUMENTS INCORPORATED BY REFERENCE: None
1
ITEM 1. BUSINESS
GENERAL
- -------
DHB Capital Group Inc. (the "Company") is a holding company that has
two divisions: DHB Armor Group and DHB Sports Group. DHB Armor Group consists of
Protective Apparel Corporation of America ("PACA"), Point Blank Body Armor Inc.
("Point Blank"), and Point Blank International S.A. ("PB Int'l"). DHB Sports
Group consists of NDL Products Inc. ("NDL"). 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 protective
athletic apparel and equipment, such as elbow, breast, hip, groin, knee, shin
and ankle supports and braces, as well as, a line of therapy products.
DHB Capital Group Inc. was originally incorporated as a New York
Corporation in 1992 by Mr. David H. Brooks, the Company's Chairman. In 1995, the
Company was re-incorporated in Delaware. Under the terms of the
re-incorporation, the Delaware Corporation succeeded to all rights, interests,
assets and liabilities of the New York Corporation. Holders of certificates
evidencing the New York Corporation automatically became holders of a like
number of securities of the Delaware Corporation.
RECENT DEVELOPMENTS
BUYBACK OF COMMON STOCK. In December 2000, the Board of Directors of
the Company announced its authorization for the Company to purchase up to one
million additional shares of its common stock on the open market, from time to
time, at its discretion. The Board of Directors had previously authorized the
repurchase of two million shares of its common stock. To date, the Company has
repurchased and retired 2,304,605 shares at a cost of $7,061,353.
DHB ARMOR GROUP ("THE ARMOR GROUP")
PRODUCTS. Point Blank, PACA, and PB Int'l comprise the Armor Group and
they manufacture two basic types of body armor: concealable armor, which is
designed to be worn beneath the user's clothing, and tactical armor, which is
worn externally and is designed to protect against more serious ballistic
threats.
Both the concealable and tactical vests are manufactured using multiple
layers and/or a combination of KevlarTM, TwaronTM, Gold FlexTM, SpectrashieldTM,
SpectraFlexTM, ZylonTM, and other ballistic fabrics, covered and fully enclosed
in an outer carrier. Although some products of Point Blank and PACA are
competitive with each other, Point Blank and PACA products are distinguishable
by brand recognition, brand loyalty and the two entities utilize different
distribution channels.
Concealable vests are contoured to closely fit the user's body shape.
Vests are manufactured in standard male and female sizes and may also be
custom-made. Vests are
2
fastened using VelcroTM type elastic strapping. Concealable vests may be
supplemented for additional protection and supplied with an additional armor
plate, which consists of either metal or certain composite materials to
withstand greater threat levels than the vest is otherwise designed to protect
against.
During 2000, the NIJ (National Institute of Justice) introduced a new
NIJ STD 0101.04. This was the first update of the standard for certifying
performance of vests since 1987. Shortly after the introduction of the new
standard, the Armor Group introduced more than 12 new ballistic products
including a new vest line that meets the requirements of the new standard. The
new line is the LEGACY LINE featuring the NIJ level II-a "LEGACY PREMIERE". This
new vest is less than .10 inches thick with an aerial density of .47 lbs per
square foot. All levels of protection in the "LEGACY" line are the lightest and
thinnest ever certified to the NIJ Standard. The HP WHITE wearability rating was
the highest rating ever for concealable body armor. In addition, the
introduction of the LEGACY line provides law enforcement officers with the
highest level of ballistic protection in all NIJ threat levels available in the
body armor industry today. The Armor Group has also upgraded its Beast, Fusion
and Hi-lite Pro Plus lines to meet the new NIJ Standard .04 requirements, as
well as the requirements of the original NIJ .03 Standard. In addition the Armor
Group re-engineered the private label Galls' line to NIJ .04 Standard
requirements. Galls is a premier law enforcement catalog and the Armor Group
produces low cost, high performance, private label body armor as an exclusive
product for Galls. The Armor Group also launched the "Z3" (100% Zylon) Ballistic
series of vests in late 2000, with full rollout in 2001. This series features a
soft, comfortable Level II vest at .68psf, making it one of the highest
performing, lightest weight, and technologically advanced designs on the market
today.
DHB Armor's Corrections Division introduced in 2000 the BLOCK 10
series. This series is certified to NIJ Standard 0115.00, a new certification
initiative from NIJ. The Corrections Division also certified to NIJ Stab level
1-3 standards, the "LEGACY PREMIERE." This vest had already been certified to
stab level III and ballistic level II requirements. In total, the Armor Group
certified eleven new stab / ballistic resistant panels that are used
independently or in tandem to provide previously unavailable soft armor
protection against both stab and ballistics. The Armor Group also has certified
three new products to the New California Stab Standard. The Company has seen
growth in sales of its TAC Pants, a product developed to provide the corrections
professional with the ultimate in lower torso stab / slash protection. DHB Armor
Group's full line of correctional vests for anti-stab protection is derived from
extensive research and the realization that corrections officers have specific
needs unique to law enforcement. The Armor Group's Correction's Division
provides complete solutions for unique requirements including, for example,
combining the Hit-ManTM Training Suit with the Thrust-GuardTM Anti Stab
technology to be utilized together as a cell extraction suit.
The Armor Groups "Interceptor" contract with the U.S. Department of
Defense is an important and growing Company program. The Interceptor Outer
Tactical Vest has been in use by the US Marines for several years; recently the
US Army accepted the design and began purchasing Interceptor for its Troops
increasing the estimated contract value to at least $350 million. The
Interceptor System increases the level of fragmentation and ballistic protection
3
while dramatically reducing the overall weight of the vest. Orders received to
date for the Interceptor now total more than $100 million. The Armor Group plans
to triple manufacturing capacity for the units delivered by the fourth quarter
of 2001. The Interceptor program is designed as a continually upgradeable
modular, soft body armor system. The Outer Tactical Vest consists of a base
vest, collar assembly, throat protector and groin protector. The Armor Group's
research and development team continuously seeks ways to increase the
performance, reduce the weight, and maximize the protective capabilities of the
Interceptor vest.
The Armor Group's VectorTM garment system and Armor IceTM
introduced in late 1999 have seen sales increase throughout 2000. The Armor
Group has long recognized that the single most important factor in individuals
not wearing body armor is excessive body heat buildup under the armor. Working
in conjunction with Frisby Technology, the Armor Group developed this system to
keep personnel cool while wearing armor. In mid-1999, the Armor Group negotiated
the exclusive worldwide distribution rights to Frisby Technology's ComfortempTM
for all body armor applications and is marketing it under the brand name Armor
IceTM. Armor IceTM is the first active cooling system proven to work under armor
utilizing a patented open-cell foam technology that incorporates
micro-encapsulated phase change materials into the structure of the foam. This
Armor Group's agreement with Frisby is effective through August 31, 2001.
The Armor Group introduced the new Tactical "Spider" (Stealth
Protection Intergradedly Designed Equipment Resource) at the 2000 IACP
(International Association of Chiefs of Police) conference in San Diego.
Tactical vests are designed to give all-around protection and more coverage
around the neck, shoulders and kidneys than concealable vests. These vests
contain pockets to incorporate small panels constructed from hard composite
materials and high-alumina ceramic tiles, all of which provide additional
protection against high power rifle fire. Tactical vests come in a variety of
styles, including tactical assault vests, high-coverage armor, and flak jackets,
each of which is manufactured to protect against varying degrees of ballistic
threats.
The Armor Group's other body-armor products include a tactical police
jacket, military field jacket, executive vests, NATO-style vests, K-9 vests,
fragmentation vests and attack vests. Blast and fragmentation armor is designed
to specifications in U.S. government contracts to offer full torso protection
against materials and velocities associated with the fragmentation of explosive
devices such as grenades and artillery shells. In general, concealable vests
sold to law enforcement agencies and distributors are designed to resist bullets
from handguns. Blast and Fragmentation gear utilizes a variety of designs,
materials and patterns slightly different from bullet-resistant vests. The Armor
Group also manufactures a variety of accessories for use with its body armor
products.
POTENTIAL PRODUCT LIABILITY. The products manufactured or distributed
by the Armor Group are used in situations, which could result in serious
personal injuries or death, including injuries that may result from the failure
of such products. The Armor Group maintains product liability insurance for PACA
and Point Blank in the amount of $20,000,000 each per occurrence, and
$20,000,000 in the aggregate, less a deductible of $100,000 for each company. PB
Int'l maintains product liability insurance in the amount of $2,000,000 for each
occurrence, with a $5,000 deductible. There is no assurance that these amounts
would be sufficient to cover the
4
payment of any potential claim. In addition, there is no assurance that this or
any other insurance coverage will continue to be available or, if available,
that PACA, Point Blank and PB Int'l would be able to obtain such insurance at a
reasonable cost. Any substantial uninsured loss would have to be paid out of the
Armor Group's assets, as applicable, and may have a material adverse effect on
the Company's financial condition and results of operations on a consolidated
basis. The inability to obtain product liability coverage may prohibit PACA,
Point Blank, or PB Int'l, in the future from bidding for orders from certain
governmental customers. Currently many governmental agencies require such
insurance coverage, and any such inability to bid would have a material adverse
effect on the Company's financial condition and results of operations on a
consolidated basis.
RAW MATERIALS AND MANUFACTURING. The Armor Group manufactures
substantially all of their respective bullet, blast, fragmentation and
projectile-resistant garments and other ballistic-protection devices. The
primary raw material used by the Armor Group in a majority of its manufacturing
of ballistic-resistant garments is KevlarTM, a patented product of E.I. Du Pont
de Nemours & Co. SpectrashieldTM, GoldFlexTM, and SpectraFibreTM, which are
patented products of Honeywell (formerly Allied Signal), are used in
approximately one-quarter of all vests. Utilizing Honeywell's patented,
non-woven SHIELD technology, GoldFlexTM is softer and thinner than traditional
ballistic materials while offering the maximum in multi-hit and angled shot
protective capabilities. In 2000, Point Blank became the largest consumer and
manufacturer of ZylonTM based armor, which is utilized in many of the Company's
vests. ZylonTM, together with TwaronTM, a product utilized in a small percentage
of vests, are patented products of Barrday Inc. ZylonTM enables the Armor Group
to supply a lighter, more flexible, higher performance body armor. The Armor
Group purchases cloth woven from these materials from three independent weaving
companies. The woven fabric is placed on tables, layered over patterns for a
particular component of a garment (for example, the front or back of a vest),
cut using computerized cutting machines and electric knives, and then are
stitched together. The Armor Group utilizes several hundred patterns based upon
size, shape and style (depending upon whether the garment is a bullet-, blast-
or fragmentation-resistant garment). KevlarTM, GoldFlexTM, SpectrashieldTM,
SpectraFibreTM, TwaronTM, and ZylonTM differ in their pliability, strength and
cost, such that the materials are combined to suit a particular application. In
the opinion of management, the Armor Group enjoys a good relationship with its
suppliers. However, if supplies from DuPont, Honeywell, or Barrday, or its
affiliate, Toyobo, of their patented products were, for any reason, disrupted,
the Armor Group would be required to utilize other fabrics, and the
specifications of some of the Armor Group's products would have to be modified.
Until the Armor Group selected an alternative fabric and appropriate ballistic
tests were performed, its operations would be severely curtailed and the Armor
Group's financial condition and results of operations would be adversely
affected.
The Armor Group purchases other raw materials used in the manufacturing
of their products from a variety of sources and believes additional sources of
supply for these materials are readily available.
RESEARCH AND DEVELOPMENT. DHB Armor Group's research and development
team has combined 50 years of notable ballistic research and development
experience, including 24 years
5
of experience in an NIJ certification environment. Many of its research and
development personnel previously held positions of responsibility with H.P.
White Laboratories. Allen Price who heads an eight-man department that is
responsible for certification and new product development directs the research
and development department. Each location/facility for DHB Armor Group has
on-site ballistic laboratory test facilities or facility.
CUSTOMERS. The Armor Group's products are sold domestically to United
States law enforcement agencies and the military and internationally to
governments and distributors. Sales to the United States armed forces directly
or as a subcontractor accounted for 57%, 19%, and 5% of the Armor Group's
revenues for the years ended December 31, 2000, 1999, 1998, respectively. Sales
to domestic law enforcement agencies, security and intelligence agencies, police
departments, federal and state correctional facilities, highway patrols and
sheriffs' departments accounted for 7%, 29% and 22%, respectively, of the Armor
Group's revenues in each of the years ended December 31, 2000, 1999 and 1998.
With the exception of the U.S. Government, no other customer accounted for 10%
or more of the Company's revenues in 2000 nor would the loss of any such other
customer be expected to have a significant impact on the Company's business or
financial results.
Certain sales by the Armor Group to the armed services and other
federal agencies are made pursuant to standard purchasing contracts between PACA
or Point Blank and the General Services Administration of the Federal
Government, commonly referred to as a "GSA Schedule". The Armor Group also
responds to invitations by military branches and government agencies to bid for
particular orders. GSA Schedule contracts accounted for approximately 12%, 19%,
and 25%, respectively, of the Armor Group's sales for the year ended December
31, 2000, 1999 and 1998.
PACA and Point Blank, as GSA Schedule Contract vendors, are obligated
to make all sales pursuant to such contracts at its lowest unit price. Their
current GSA Contracts expires July 31, 2001. However, they have applied for the
renewal of their GSA Contracts.
During the years ended December 31, 2000, 1999 and 1998, commercial
sales (i.e., sales to non-governmental entities) were 23%, 26 %, and 44 % of the
Armor Group's revenues.
MARKETING AND DISTRIBUTION. The Armor Group employs eight customer
support representatives and four regional sales managers. In addition, the Armor
Group has twenty independent sales representatives who are paid solely on a
commission basis. These personnel and distributors are responsible for marketing
the Armor Group's products to law enforcement agencies in the United States.
Sales are made primarily through the independent sales representatives. However,
in areas in which there are no suitable distributors, the Armor Group will fill
orders directly.
GOVERNMENT AND INDUSTRY REGULATIONS AND STANDARDS. Bullet and blast
resistant garments and accessories manufactured and sold by the Armor Group are
not currently the subject of government regulations. However, law enforcement
agencies and the military publish invitations for bidding which specify certain
standards of performance the bidders' products must
6
meet. The National Institute of Justice, under the auspices of the United States
Department of Justice, has issued a revised voluntary ballistic standard
(NIJ0101.04) for bullet-resistant vests in several categories. The Armor Group
regularly submits its vests to independent laboratories for ballistic testing
under this voluntary ballistic standard and all of its products have, at the
time of manufacture, met or exceeded such standards in their respective
categories. The NIJ has also established various standards of performance
against stab attacks. Where applicable, the Company products have been submitted
for testing to determine compliance with these standards and have been found to
meet such standards.
The Armor Group regularly submits bullet-resistant garments and
hard-armor inserts for rating by independent laboratories in accordance with a
test commonly referred to as V50. This test involves exposing the tested item to
blasts of fragments of increasing velocity until 50% of the fragments penetrate
the materials. The tested item is then given a velocity rating which may be used
by prospective purchasers in assessing the suitability of the Armor Group's
products for a particular application. In addition, PACA, Point Blank and PB
Int'l perform similar tests internally.
COMPETITION. The ballistic-resistant garment business is highly
competitive and there are a significant number of United States manufacturers
are estimated to be less than twenty. Management is not aware of published
reports concerning the market, and most companies are privately held.
Nevertheless, the Company believes that is Armor Group is the largest
manufacturer of ballistic-resistant garments in the United States. In the
future, the Company may face other and unknown competitors, some of whom may
have substantially greater financial, marketing and other resources than those
possessed by the Company.
The Armor Group believes that the principal elements of competition in
the sale of ballistic-resistant garments are its innovative design, price and
quality. In dealings with law enforcement agencies and the military, PACA, Point
Blank, and PB Int'l bid for orders in response to invitations for bidding which
set forth specifications for product performance. The Company believes that the
Armor Group enjoys a favorable reputation in the industry with over twenty years
of supplying federal, state and municipal governments and agencies.
THE ARMOR GROUP'S BACKLOG. As of December 31, 2000, the Armor Group had
a backlog of approximately $42 million, as compared to approximately $32.7
million as of December 31, 1999. The Armor Group has several large orders,
subsequent to the year-end, which increased its backlog by over $23 million
bringing it to $65 million as of March 16, 2001. Backlog at any one date is not
a reliable indicator of future sales.
In addition to its backlog, from time to time the Armor Group receives
contract awards for municipal orders that may be extended over a period of time.
The actual dollar amount of products to be delivered pursuant to these and
similar contracts cannot be accurately predicted and is generally excluded from
reported backlog.
EMPLOYEES. As of March 1, 2000, the Armor Group's employed four hundred
twenty-nine full time employees. There were two officers of the Armor Group, 20
persons employed in
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supervisory capacities, 386 employed for manufacturing, shipping and
warehousing, 4 technical/research development personnel and 17 office personnel.
In the opinion of management, the Armor Group maintains a good relationship with
its employees.
DHB SPORTS GROUP
The Sports Group is a collection of brands that service specific
segments of the sporting goods and health care markets with its sports medicine,
protective gear, health supports and magnetic therapy products. The Sports Group
also offers private label or house brand programs to major retailers and large
wholesalers along with specific OEM programs to outside brands that service the
same markets.
Currently, the Sports Group manufactures and markets products under the
brands NDLTM, GRIDTM, MagneSystemsTM, FLEX-AIDTM, and Doctor Bone SaversTM. The
Sports Group markets its product to a variety of distribution points with an
emphasis on major retailers. Mass merchandisers, chain drug stores, food chains,
independent sporting goods and pharmacy retailers, catalog, wholesale and
e-commerce offer the various brands to the consumer. The Sports Group account
list includes retail and wholesale establishments such as Wal-Mart, Target,
Meijer and Phar Mor. Two customers, Walmart and Target, accounted for 54 % and
51% of the Sports Group revenue for the year ended December 31, 2000 and 1999,
respectively.
The Sports Group has negotiated private label programs with three of
the largest wholesalers to the retail trade: Amerisource, Cardinal Health and
CDMA. These wholesalers have begun servicing their 10,000 store networks with
their Family PharmacyTM, LeaderTM and Quality Choice BrandsTM of health support
products.
In 1998, the Company signed an exclusive (except for certain rights in
the field of products for horses) licensing agreement, to manufacture and sell
magnetic products covered by certain U.S. and Canadian patents owned by
MagneSystems.
In addition, the Sports Group added valuable distribution during 2000
in the area of magnetic therapy by securing a national sales organization
focusing on the distribution of natural products to specialty care and natural
products retailers.
The Sports Group is a member of NACDS (National Association of Chain
Drug Stores), PLMA (Private Label Manufacturers Association), and SGMA (Sporting
Goods Manufacturers Association).
DHB SPORTS GROUP'S POTENTIAL PRODUCT LIABILITY. Some of the products
manufactured or distributed by the Sports Group are used in situations where
serious personal injuries could occur, including injuries resulting from the
failure of the Sports Group's products. The Sports Group maintains product
liability insurance in the amount of $20,000,000 per occurrence and $20,000,000
in the aggregate, including legal fees, subject to a $100,000 deductible. There
can be no assurance that these amounts would be sufficient to cover payment of
potential claims, and there can be no assurance that this or any other insurance
coverage would continue to be
8
available, or if available, that the Sports Group would be able to obtain such
insurance at reasonable cost. Any substantial uninsured loss would have to be
paid out of the Sports Group's assets and could have a material adverse effect
on the Company's financial condition and results of operations.
EMPLOYEES. As of March 1, 2001, there were two officers of the Sports
Group, 4 persons employed in supervisory capacities, 40 employed in
manufacturing, shipping and warehousing, 3 in sales and customer service and 8
were office personnel. All of the Sports Group's employees are employed full
time. In the opinion of management, the Sports Group's relationship with its
employees is good. The Sports Group also have more than 50 independent sales
representatives who together the sales executives are responsible for sales
throughout the Untied States, Western Europe, Asia, the Middle East and Latin
America. The Sports Group has in-house sales support and state of the art EDI
order and invoicing capabilities.
DISCONTINUED OPERATIONS
In 1998, DHB sought to expand its product offerings addressing the
segment markets in which the Company participates through the acquisition of two
privately held domestic companies and one Japanese company. One of the entities,
Lanxide Armor Products Inc. ("LAP") manufactured "hard armor" products for
personal body armor as well as for use in ground vehicles and aircraft. The
other two entities, Lanxide Electronic Components Inc. ("LEC") and the Japanese
subsidiary, DHB KK, together with LEC, the "Electronics Group" manufactured
electronic component products used for thermal management, packaging and the
structural components for the electronics industry. In 1999, the Company made
the strategic decision to focus on its core businesses: soft body armor and
sports protective gear and related products. LAP and the Electronics Group had
very high research and development costs as well as engineering costs. The
Company has elected to focus the majority of its research and development funds
on the design, development and production of technologically advanced soft body
armor for the U.S. Military and law enforcement communities. The LAP facility
was closed in October 1999 and in March 2000, the Company sold the Electronics
Group to DMC2 Electronic Components Corporation, an unrelated third party. The
sales price was $4,375,000, less an outstanding loan of $141,217. The proceeds
of the sale were used to pay off all of the Company's bank indebtedness. The
Company realized a gain on the disposition of the Electronics Group of $857,860.
The results of operations of the Electronics Group and LAP are presented as
Discontinued Operations.
SEGMENT INFORMATION
As described in detail above, the Company operates in two principal segments:
Ballistic-resistant equipment and Protective athletic/medical equipment. The
Company disposed of the Electronics Group in March 2000, and closed its hard
armor company, LAP in October 1999. These two divestitures are accounted for as
discontinued operations. Financial information on the Company's business
segments was as follows:
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Net Sales 2000 1999 1998
- --------- ---- ---- ----
Ballistic-resistant equipment $64,720,773 $30,358,537 $28,695,127
Electronic components/LAP 401,299 8,441,393 8,398,107
Protective athletic & medical equipment 5,296,799 6,236,438 8,388,544
----------- ----------- -----------
70,418,871 45,036,368 45,481,778
Less inter-segment sales -- (2,381,099) (3,647,353)
Less discontinued operations (3) (401,299) (7,514,541) (8,761,007)
----------- ----------- -----------
Consolidated Net Sales $70,017,572 $35,140,728 $33,073,418
=========== =========== ===========
Income from Operations
- ----------------------
Ballistic-resistant equipment $10,591,126 $(9,629,504) $ 2,485,395
Electronic components (517,288) (1,835,137) (782,908)
Protective athletic & medical equipment (166,114) (2,390,834) 1,207,743
Corporate and Other (1) (2,225,757) (2,824,826) (1,508,027)
----------- ------------ -----------
Sub-total 7,681,967 (16,680,301) 1,402,203
Income (Loss) from discontinued
operations (3) 517,288 (6,809,082) 1,451,216
----------- ------------ -----------
Consolidated Operating Income $ 8,199,255 $(9,871,219) $ 2,853,419
=========== ============ ===========
Identifiable Assets (2)
- -----------------------
Ballistic-resistant equipment $22,383,129 $14,283,739 $23,743,604
Electronic components -- 6,177,019 5,749,438
Protective athletic & medical equipment 3,517,194 3,335,253 8,844,627
----------- ----------- -----------
25,900,323 23,796,011 38,337,669
Corporate and Other 2,155,948 400,038 4,641,566
----------- ----------- -----------
Consolidated Net Assets 28,056,271 24,196,049 42,979,235
Discontinued operations (3) (4,825,532) (5,568,122)
Assets held for sale -- 3,928,980 3,952,697
----------- ----------- -----------
Adjusted Net Assets $28,056,271 $23,299,497 $41,363,810
=========== =========== ===========
Foreign sales accounted for 2%, 17%, and 12%, of the total revenues for the
years ended December 31, 2000, 1999 and 1998, respectively. Foreign identifiable
assets accounted for 1%, 13%, and 5% of the total assets at December 31, 2000,
1999 and 1998, respectively.
(1) Corporate and Other includes corporate general and administrative expenses.
(2) Corporate assets are principally cash, marketable securities, and deferred charges.
(3) Discontinued operations included the Electronics Group sold on March 10, 2000, as well as the
loss from the shutdown of the LAP plant in 1999.
ITEM 2. PROPERTIES
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CORPORATE HEADQUARTERS. On January 1, 2000 the Company relocated its
corporate headquarters to a 3,750 square foot leased office located at 555
Westbury Avenue, Carle Place, NY 11514. The property is leased for three-years.
Previously, the corporate headquarters were located in a one-story building
located at 11 Old Westbury Road, Old Westbury, New York. The old headquarters
property was sold in July 2000.
PACA. On March 12, 2001, DHB Armor Group entered into an agreement for
a 60,060 square foot manufacturing facility with administrative offices in
Caryville, Tennessee, to relocate its subsidiary, PACA. The five-year lease
commences April 15, 2001, however, PACA was allowed to occupy the premises as of
March 15, 2001.
NDL/POINT BLANK FACILITY. Point Blank leases a 67,000 square foot
office and manufacturing facility (the "Oakland Park Facility") located at 4031
N.E. 12th Terrace, Oakland Park, Florida 33334, from V.A.E. Enterprises
("V.A.E."), a partnership controlled by Mrs. Terry Brooks, wife of Mr. David H.
Brooks, and beneficially owned by Mr. and Mrs. Brooks' minor children. NDL
Products occupies a portion of the space in the Oakland Park facility. The lease
expires on December 31, 2010. Management believes that the terms of the lease
are no less favorable to the Company than terms available from an unrelated
third party. In April 1997, the Company entered a five-year lease for a 60,000
square foot warehouse adjacent to the Oakland Park, Florida facility from an
unrelated third party. This warehouse is located at 1201 NE 38th Street Oakland
Park, Florida.
POINT BLANK INTERNATIONAL FACILITY. PB Int'l leases a 5,700 square foot
office and warehouse facility located at Rue Leon Frederiq, 14, 4020 Liege,
Belgium. This space is occupied pursuant to a three-year lease expiring in March
2003 with options to renew for an additional six years.
ITEM 3. PENDING LITIGATION
The Company has filed a lawsuit in Nassau County Supreme Court against
its insurance carrier as well as the insurance agent, for negligence and breach
of fiduciary duties as a result of the damages the Company incurred during
Hurricane Irene in October 1999. The Company claims damages of $9.4 million. The
Company intends to vigorously pursue this action.
Robert Bruno, the former Vice-president and General Counsel of DHB
Capital Group Inc., has initiated arbitration against the Company seeking two
years unearned compensation under a three-year employment contract. Arbitration
has been held and a determination is expected by May 31, 2001. The Company has
vigorously defended this action and intends to continue to do so.
The Company is involved in other litigation, none of which is
considered by management to be material to its business or, if adversely
determined, would have a material adverse effect on the Company's financial
condition.
11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: None
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock of the Company was traded on the Nasdaq Small Cap
MarketTM from September 4, 1998 until December 20, 1999 under the symbol "DHBT".
Nasdaq delisted the Company's securities effective December 20, 1999 for failure
to meet its listing qualifications. Since such date, the Company's common stock
has traded on the over-the-counter bulletin board ("OTC Bulletin Board"). The
following table shows the high and low bid prices of the Company's Common Stock
for each quarter in the two-year period ended December 31, 2000.
1999 1st Quarter 3.25 5.25
2nd Quarter 3.25 5.1875
3rd Quarter 3.0625 4.5625
4th Quarter .25 3.0625
2000 1st Quarter .75 1.75
2nd Quarter .96 1.75
3rd Quarter 1.06 1.81
4th Quarter 1.50 2.50
No cash dividends have been paid for the last three years. The Company
presently retains all of its earnings and anticipates that its future earnings
will be retained to finance the expansion of its business and the repurchase of
its Common Stock under its previously announced repurchase program. Any
determination to pay cash dividends in the future will be at the discretion of
the Board of Directors after taking into account various factors, including
financial condition, results of operations, current and anticipated cash needs,
and restrictions, if any, under the Company's credit agreements. No cash
dividends were declared for the last three years.
The number of holders of record of the Company's Common Stock on March
12, 2001 was 162; however, the number of holders of record includes brokers and
other depositories for
12
the accounts of others. The Company estimates that there are approximately 1,400
beneficial owners of Common Stock.
RECENT SALES/ISSUANCE OF UNREGISTERED SECURITIES
In 2000, 1999, and 1998, the Company issued 15,625, 79,414, and 55,211
shares, respectively, to certain of its salesmen pursuant to employment
contracts. In the same three-year period, the Company issued 23,709, 108,800,
and 10,000 additional shares for services to attorneys, consultants and other
service providers. The aggregate value of the services rendered for these
issuances totaled $58,850, $391,000 and $261,000 in 2000, 1999, and 1998,
respectively. The Company relied on the exemption to registration provided by
Section 4(2) of the Securities Act of 1933, as amended.
In December 1999, the Company sold 6,216,700 shares of common stock in
a private placement to accredited investors for proceeds of $3,125,000.
Companies affiliated with Morton Cohen, a director of the Company, purchased
500,000 of the above-mentioned shares. The Company also issued 60,000 shares of
its common stock to the broker associated with the above transaction. These
proceeds were used for general working capital requirements. The offering price
per common share ranged from $0.50 through $0.75. A commission of $43,700 was
paid and the Company relied on the exemption to registration provided by
Regulation D pursuant to the Securities Act of 1933, as amended.
In January and May 1999, the Company sold 369,000 shares of common
stock, respectively, in a private placement to accredited investors for proceeds
of $1,197,000. These proceeds were used for general working capital
requirements. The offering price per common share ranged from $3.00 to $4.00
depending on the market price. A commission of $20,000 was paid and the Company
relied on the exemption to registration provided by Regulation D pursuant to the
Securities Act of 1933, as amended.
In 1998, the Company sold an aggregate of 746,500 shares of common
stock in two private placements for proceeds of $2,746,000. The proceeds were
used for general working capital purposes. The offering price per common share
was $4.00. No commissions were paid. The Company relied on the exemption to
registration provided by Regulation D promulgated under the Securities Act of
1933, as amended.
ITEM 6. SELECTED FINANCIAL INFORMATION
The selected consolidated financial data set forth below for the year
ended December 31, 2000, 1999, 1998, 1997, and 1996, were derived from the
audited consolidated financial statements of the Company. The data set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated Financial
Statements and related Notes appearing elsewhere in this 10-K.
13
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Income Statement Data
Net Sales $70,017,572 $ 35,140,728 $33,073,418 $33,271,607 $23,378,698
Cost of Sales 49,358,476 27,566,278 20,441,663 22,153,925 19,027,741
----------- ------------ ----------- ----------- -----------
Gross Profit 20,659,096 7,574,450 12,631,755 11,117,682 4,350,957
Selling, General and
12,459,841 17,445,669 9,778,336 9,641,655 8,668,950
----------- ------------ ----------- ----------- -----------
Administrative
expenses
Operating income 8,199,255 (9,871,219) 2,853,419 1,476,027 (4,317,993)
(loss)
Interest expense (2,743,132) (2,908,495) (1,095,553) (339,754) (327,347)
Other 340,555 (9,560,523) 21,957 801,126 (1,054,723)
----------- ------------ ----------- ----------- -----------
income
(expense)
Income before discon-
tinued operations 5,796,778 (22,340,237) 1,779,823 1,937,399 (5,700,063)
Discontinued 340,572 (9,714,291) (1,628,371) -- --
----------- ------------ ----------- ----------- -----------
operations
Income before
income taxes 6,137,350 (32,054,528) 151,452 1,937,399 (5,700,063)
Income taxes 129,999 67,385 21,650 396,509 (834,191)
----------- ------------ ----------- ----------- -----------
Net income (loss) $ 6,007,351 $(32,121,913) $ 129,802 $ 1,540,890 (4,865,872)
=========== ============ =========== =========== ===========
Earnings per share
Basic $0.18 $(1.24) $0.005 $0.06 $(0.20)
Diluted $0.17 $(1.09) $0.005 $0.05 $(0.20)
Balance Sheet Data
Working capital $ 7,496,588 $ 2,047,312 $21,634,389 $13,621,014 $ 8,900,398
Total Assets 28,056,271 23,299,497 41,363,810 27,674,629 19,160,419
Short-term debt 16,949,494 5,152,815 4,334,607 2,740,192 1,461,664
Long-term debt 16,061,825 16,280,051 11,915,116 1,411,258 1,444,091
Stockholders' equity (4,955,048) (10,186,322) 18,172,267 17,741,619 12,980,086
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following analysis of the Company's financial condition and results
of operations should be read in conjunction with the financial statements,
including the notes thereto, contained elsewhere in this document.
GENERAL
14
The Company is a holding company, which currently conducts business
through its wholly owned subsidiaries organized in two divisions, the Armor
Group and DHB Sports Group. The Company's products are sold both nationally and
internationally. The Armor Group's sales are directed primarily to law
enforcement agencies and military services. Sales to the U.S. military comprise
the largest portion of the Armor Group's business, followed by sales to federal,
state and local law enforcement agencies, including correctional facilities.
Accordingly, any substantial increase or reduction in governmental spending or
change in emphasis in defense and law enforcement programs could have a material
effect on the Armor Group's business. The Sports Group manufactures and markets
a variety of sports medicine, protective gear, health supports and magnetic
therapy products under its own labels, private labels and house brands for major
retailers.
The Company commenced operations in November 1992 by acquiring the
outstanding common stock of PACA, a manufacturer and distributor of bulletproof
garments and accessories. From the acquisition of PACA through December 1994,
when the Company acquired the assets of its NDL subsidiary, PACA was the
Company's only source of revenue from operations.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000 AS COMPARED TO YEAR ENDED DECEMBER 31,
1999. Consolidated net sales for the Company nearly doubled for the year ended
December 31, 2000 to $70,017,572 as compared to $35,140,728 for the year ended
December 31, 1999. This increase is attributable to the increased volumes from
the Military as well as our domestic customers. Gross profit increased to
$20,659,096 or 29% as compared to $7,574,450 or 21.5% This increase is a result
of the manufacturing operating efficiencies resulting from higher sales volumes,
volume discounts from our vendors as a result of the increases in our purchasing
volumes, and management control of expenses.
Selling, general and administrative expenses decreased to $12,459,841
as compared to $17,445,669. The decrease is primarily attributable to a sharp
decline in 2000 in advertising, legal and other professional fees. The Company
was involved in several significant lawsuits in the prior year, which were
concluded in 1999 or early 2000.
Other income (Expense) in 2000 totaled ($2,402,477) as compared to
($12,469,018). Included in the 1999 figures are a $7.7 million loss attributable
to damages caused by Hurricane Irene, a $1,688,000 write down of investment in
subsidiaries and equity investments, and $118,136 loss on marketable securities.
Interest expense declined $165,000 to $2,743,132 in 2000, reflecting a decrease
in the amount of borrowed indebtedness. Also included in other income for 2000
was a gain on the sale of the old corporate headquarters of $235,694.
Discontinued operations contributed $340,555 to income in 2000, as a
result of the $858,000 gain on the sale of the Electronics Group, compared to a
loss in 1999 of $9,714,291 attributable both to operations of the discontinued
business and the write-down of the investment in the closed operations.
15
The effective tax rate for 2000 was nominal due to the utilization of
net operating loss carryforwards. The Company has recorded an estimated loss
carryfoward of $26 million, which can be utilized in 2001 and subsequent years
to offset taxable income in those years.
As a result of the foregoing, net income surged to $6,007,351 or $0.18
per share for 2000 reversing a net loss of $32,121,913 for 1999, or ($1.09) per
share.
YEAR ENDED DECEMBER 31, 1999 AS COMPARED TO YEAR ENDED DECEMBER 31,
1998. Consolidated net sales of the Company for the year ended December 31, 1999
increased from $33,073,418 to $35,140,728 primarily as a result of increased
sales volumes. The sales numbers do not include the revenue from discontinued
operations of approximately $7.5 million for the year ended December 31, 1999
and $8.7 million for the year ended December 31, 1998. In October 1999, the
Company announced its plan to divest its "Lanxide subsidiaries". This plan
included the shut down of the LAP plant and to enter into negotiations for the
sale of the Electronics Group. The sale of the Electronics group was consummated
on March 10, 2000 for a cash payment of approximately $4.2 million. The
divestiture of the Lanxide subsidiaries reflects the Company's strategic
decision to refocus and rededicate is efforts and resources on the design,
development and production of technologically advanced soft body armor. All
revenue and expenditures associated with LAP and the Electronics Group are
presented as a loss from discontinued operations. The year ended December 31,
1998 has been restated to reflect the discontinued operations.
Gross profit in 1999 was $7,574,450 as compared to $ 12,631,755 for
1998. Impacting gross profit in 1999 was the write-off of additional research
and development costs. Previously, the Company's ballistic testing for a
contract was a prepaid expense and expensed to the cost of goods sold over the
life of the contract. This change resulted in approximately $200,000 additional
expenditures in 1999. The Company also decided to write off some obsolete
inventory.
The Company's selling, general and administrative expenses ("S, G & A,"
expenses") for 1999 increased to $ 17,445,669 from $9,778,336 in 1998. The
reason for the increase is S,G, & A expenses is by-fold. Professional fees were
increased approximately $5 million in 1999. The increase in professional fees is
associated with winning the interceptor contract award, the defense of the
protest of the award, the professional fees associated with becoming Y2K
compliant and ISO9000 certified, and the legal fees associated with the lawsuits
against the company. Most of the legal fees are non-recurring in nature and the
majority of the cases were settled in 1999. The Company had a deductible on
their liability insurance of $100,000 during 1998. A claim was made during 1999
for a 1998 incident when the insurance policy had the $100,000 deductible and
the Company expensed $100,000 in legal fees in the defense of the claim. The
insurance company will pay the balance of the claim. The second reason selling,
general and administrative expenses is higher during 1999 is that advertising
expenditures increased from approximately $640,000 in 1998 to approximately
$1,062,000 in 1999. The Sports group successfully negotiated agreements with
some large retail companies, which required a one-time advertising rebate.
Included in expense for 1999 is approximately $400,000
16
in advertising incentives. The Sports Group produced an infomercial for $250,000
in 1999. The construction of DHB and subsidiaries website cost the company
approximately $70,000. Also included in expense were promotional samples given
to promote our various new lines of vests to our numerous distributors and
salesman resulting in a $600,000 charge to expense during 1999.
Other income (expense) also increased in 1999 to ($12,469,018) over
1998 (1,073,596). The primary reason for this increase was on October 15, 1999,
the office and manufacturing facility located in Oakland Park, Florida suffered
extensive damage, a $7.7 million dollar loss, related to Hurricane Irene. The
loss was primarily inventory and the corresponding overhead expenses on that
inventory. The Company currently has a lawsuit with their insurance companies to
recover some of the loss, but as of today no agreement has been reached. The
Company expensed the entire loss in October 1999 and has not recorded a
receivable for any amount, which may be due from the insurance companies.
Interest expense increased due to an increase in borrowing of approximately
$11,000,000 associated with the purchase of LAP and LEC. The Company also wrote
off the goodwill associated with their investment in Belgium Company as well as
the write down of their non-marketable securities, which resulted in a $688,000
expense.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's primary capital requirements over the next twelve months
are to assist the subsidiaries in financing their working capital requirements.
Its operating subsidiaries sell the majority of their products on 60 - 90 day
terms. Working capital is needed to finance the receivables, manufacturing
process and inventory. Working capital at December 31, 2000 was $7,496,588
compared to working capital of $2,047,312 at the end of 1999. This increase
reflects primarily a $4.9 million and $5.3 million increase in receivables and
inventory as a result of the increase in U.S. Military sales and a $5 million
decrease in current borrowed indebtedness, offsetting a $2.8 million dollar
increase in payables, and $3 million in increased accrued expenses and the
disposal of $3.9 million of the Electronics Group (previously classified as
assets held for sale).
During 2000, the Company repurchased and retired 697,538 shares in the
open market for an aggregate price of approximately $1,206,000.
The Company's capital expenditures for 2000 were $429,319, a decrease
from the $707,374 expended in 1999.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains certain forward-looking statements and information
relating to the Company that is based on the beliefs of the Company's management
as well as assumptions made by and information currently available to the
Company's management. When used in this
17
document, the words "anticipate," "believe," "estimate", "expect", "going
forward", and the similar expressions, as they relate to the Company or Company
management, are intended to identify forward-looking statements. Such statements
reflect the current views of the Company with respect to future events and are
subject to certain risks, uncertainties and assumptions, including, but not
limited to: general business and economic conditions, the maintenance of the
Company's military supply contacts, the level of governmental expenditures on
law enforcement equipment, continued supplies of materials from critical
vendors, and the continued availability of insurance for the Company's products.
Should one or more of these risks or uncertainties materialize, or should the
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated or expected. Readers
are cautioned not to place undue reliance on these forward-looking statements
that speak only as of the date hereof. The company undertakes no obligation to
publish revised forward-looking statements to reflect the occurrence of
unanticipated events or circumstances after the date hereof.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS
INTEREST RATE RISK: The Company's exposure to market risk for interest
rate changes relates primarily to its investment portfolio. The Company ensures
the safety and preservation of the invested principal funds by investing in safe
and high-credit quality securities, which includes only marketable securities
with active secondary or resale markets to ensure portfolio liquidity.
FOREIGN CURRENCY EXCHANGE RISK: The Company transacts business in
various foreign countries. Its primary foreign currency cash flows are in Japan
and Western Europe. Currently, the Company does not employ a foreign currency
hedge program utilizing foreign currency exchange contracts as the foreign
currency transactions and risks to date have not been significant.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA:
SEE INDEX TO CONSOLIDATED FINANCIAL STATEMENTS APPEARING IN THE CONSOLIDATED
FINANCIAL STATEMENT ANNEXED HERETO.
18
SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH
FISCAL 2000 QUARTER QUARTER QUARTER QUARTER
- ----------- ----------- ----------- ----------- -----------
Net Sales $13,575,648 $16,128,373 $18,591,351 $21,722,200
Cost of sales 9,594,341 11,516,371 13,033,727 15,214,037
----------- ----------- ----------- -----------
Gross profit 3,981,307 4,612,002 5,557,624 6,508,163
Selling, general and admin expenses 2,886,689 2,814,800 3,062,033 3,696,319
----------- ----------- ----------- -----------
Operating income 1,094,618 1,797,202 2,495,591 2,811,844
Other income (expense) (785,034) (762,998) (391,451) (462,994)
----------- ---------- ----------- -----------
Income before discontinued operations 309,584 1,034,204 2,104,140 2,348,850
Discontinued operations 340,572 -- -- --
----------- ----------- ----------- -----------
Income before income taxes 650,156 1,034,204 2,104,140 2,348,850
Income taxes 27,773 22,878 93,408 (14,060)
----------- ----------- ----------- -----------
Net income $ 622,383 $ 1,011,326 $ 2,010,732 $ 2,362,910
=========== =========== =========== ===========
Earnings per share
Basic 0.019 0.032 0.065 0.074
=========== =========== =========== ===========
Diluted
0.019 0.032 0.064 0.068
=========== =========== =========== ===========
Weighted average shares outstanding
Basic shares 32,332,181 32,343,941 32,237,463 31,964,196
=========== =========== =========== ===========
Diluted shares 32,332,181 32,343,941 32,751,423 34,969,533
=========== =========== =========== ===========
19
FIRST SECOND THIRD FOURTH
FISCAL 1999 QUARTER QUARTER QUARTER QUARTER
- ----------- ----------- ----------- ----------- -----------
Net Sales $ 7,370,132 $ 8,347,387 $11,993,788 $ 7,429,421
Cost of sales 4,697,820 4,667,251 7,552,182 10,649,025
----------- ----------- ----------- -----------
Gross profit 2,672,312 3,680,136 4,441,606 (3,219,604)
Selling, general and admin expenses 1,941,518 2,605,673 3,023,836 9,874,642
----------- ----------- ----------- -----------
Operating income 730,794 1,074,463 1,417,770 (13,094,246)
Other income (expense) (322,546) (323,392) (478,194) (11,344,886)
----------- ----------- ----------- -----------
Income before discontinued operations 408,248 751,071 939,576 (24,439,132)
Discontinued operations (333,871) (612,597) (619,765) (8,148,058)
----------- ----------- ----------- -----------
Income before income taxes 74,377 138,474 319,811 (32,587,190)
Income taxes 42,967 9,410 10,523 4,485
----------- ----------- ----------- -----------
Net income 31,410 129,064 309,288 (32,591,675)
=========== =========== =========== ===========
Earnings per share
Basic 0.001 0.005 0.012 (1.242)
=========== =========== =========== ===========
Diluted 0.001 0.004 0.010 (1.199)
=========== =========== =========== ===========
Weighted average shares outstanding
Basic shares 25,555,440 25,660,833 26,013,541 26,244,905
=========== =========== =========== ===========
Diluted shares 30,074,496 30,135,176 30,319,931 27,175,515
=========== =========== =========== ===========
FIRST SECOND THIRD FOURTH
FISCAL 1998 QUARTER QUARTER QUARTER QUARTER
- ----------- ----------- ----------- ----------- -----------
Net Sales $ 8,600,681 $ 8,045,467 $ 7,585,125 $ 8,842,145
Cost of sales 5,859,642 4,963,208 3,816,378 5,802,435
----------- ----------- ----------- -----------
Gross profit 2,741,039 3,082,259 3,768,747 3,039,710
Selling, general and admin expense 2,718,509 2,411,404 2,872,816 1,775,607
----------- ----------- ----------- -----------
Operating income 22,530 670,855 895,931 1,264,103
Other income (expense) (93,559) (139,617) (367,480) (472,940)
----------- ----------- ----------- -----------
Income before discontinued operations (71,029) 531,238 528,451 791,163
Discontinued operations (406,092) (419,014) (265,157) (538,108)
----------- ----------- ----------- -----------
Income before income taxes (477,121) 112,224 263,294 253,055
Income taxes 7,950 3,534 7,469 2,697
----------- ----------- ----------- -----------
Net income (485,071) 108,690 255,825 250,358
=========== =========== =========== ===========
Earnings per share
Basic (0.017) 0.004 0.010 0.009
=========== =========== =========== ===========
Diluted (0.017) 0.003 0.008 0.008
=========== =========== =========== ===========
Weighted average shares outstanding
Basic shares 27,137,331 24,774,376 24,832,394 25,160,628
=========== =========== =========== ===========
Diluted shares 28,053,959 29,227,939 29,505,594 30,345,085
=========== =========== =========== ===========
20
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE: NONE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The Directors serve for a term of one year following their election at
the Annual Meeting of Shareholders, and until their successors have been elected
and qualified. The officers serve at the discretion of the Board of Directors.
Set forth below is certain information regarding the Company's current directors
and officers:
DAVID H. BROOKS, age 46, has served as the Chairman or Co-Chairman of
the Company since its inception in 1992. Mr. Brooks has served as the Chief
Executive Officer of the Company since July 2000, having previously served in
that capacity prior to September 1998. Mr. Brooks also serves as Chairman of the
Board, President and a Director of Brooks Industries of L.I., Inc., a privately
held venture capital firm.
MORTON A. COHEN, age 65, has been a director of the Company since 1996.
Mr. Cohen has been Chairman, President and Chief Executive Officer of Clarion
Capital Corp., a private, small business investment company for more than five
years. He is also a director of Cohesant Technologies Inc. and Zemex
Corporation. He presently serves as the Chairman of the Company's audit and
compensation committees.
SANDRA HATFIELD, age 47, has been Chief Operating Officer of the
Company since December 2000. Form October 1996 until December 2000, she served
as President of Point Blank. For more than five years prior thereto she was the
Vice President of Production at PACA.
JEROME KRANTZ, age 45, has been a director of the Company since July
2000. He has over twenty years experience in the insurance and financial
industry. Mr. Krantz is a chartered life underwriter and a chartered financial
consultant. In addition he is a registered investment advisor. He currently
serves on the audit and compensation committees.
DAWN M. SCHLEGEL, age 31, is the Chief Financial Officer of the
Company. She has also served as Treasurer and Secretary of the Company since
September 1999, and was elected a Director as of July 2000. She has functioned
in various positions within the Company's operations and finances since 1996.
Prior to joining the Company, Mrs. Schlegel worked for Israeloff, Trattner & Co.
CPA's P.C., a certified public accounting firm, for more than five years.
ITEM 11. EXECUTIVE COMPENSATION
21
SUMMARY COMPENSATION TABLE. The following table sets forth certain
summary information regarding the compensation of the executive officers whose
total salary and bonus for the year ended December 31, 2000, 1999, and 1998,
exceeded $100,000:
Name and Principal Annual
Position Year Salary(1)
------------------------ ---- ---------
David Brooks,(2) 2000 $413,542
Chairman and CEO 1999 $143,750
1998 50,000
Sandra Hatfield 2000 $152,098
President of Point Blank 1999 149,196
1998 149,080
Leonard Rosen,(3) 2000 $165,400
President of PACA 1999 $165,400
1998 163,750
--------------------------------------------------------
1. Although certain officers receive certain benefits, such as auto allowances
and expense allowances, the value of such perquisites did not exceed the
lesser of $50,000 or 10% of the respective officers' salary and bonus.
2. Certain warrants were awarded to Mr. David Brooks in 2000 and 1999; see
"Employment Agreements" and "Certain Transactions."
3. Mr. Rosen employment was terminated in February 2001.
EMPLOYMENT AGREEMENTS. In July 2000, Mr. Brooks and the Company entered
into a new five-year employment agreement. Pursuant to the agreement Mr. Brooks
receives an annual salary of $500,000 through July 2001, with annual increases
of $50,000 thereafter. The terms of Mr. Brooks' contract provides for 3,750,000
warrants exercisable at $1.00 and vesting 20% immediately and in 20% annual
increments thereafter. The warrants expire in July 2010. As the Company has
businesses in Florida and requires Mr. Brooks to spend considerable time there,
this contract includes provisions for certain of his Florida living expenses.
STOCK WARRANTS. In December 2000 in conjunction with becoming the Chief
Operating Officer, Sandra Hatfield was awarded 400,000 warrants vesting 100,000
per year exercisable at $2.00 per share and expire in December 2006. Ms. Rhonda
Graves was also awarded warrants in conjunction with her promotion to Chief
Operations Officer of Point Blank Body Armor. During 1999, the then current
three Board Members were awarded 25,000 warrants exercisable at $3.25 for three
years for serving as board members. No additional stock options, warrants or
similar securities, rights or interests were granted to any of the executive
officers of the Company listed in the Summary Compensation Table above, no
options, warrants or similar securities, rights or interests were exercised by
any such executive officers with the exception of Joseph Giaquinto, who
exercised 49,500 warrants in 1998.
Under the Company's 1995 Stock Option Plan (the "Plan") the Board of
Directors or a committee (the "committee") of the Board is authorized to award
up to 3,500,000 shares of
22
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. The directors who are authorized to award options are not eligible to
receive options under the Plan.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes of ownership of Common Stock and other equity securities of the
Company.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 1999, all
Section 16(a) filing requirements applicable to its officers, directors and
greater-than-ten-percent beneficial owners were complied with.
The following table summarizes the named officers' stock option activity during
2000.
Warrants Granted in Last Fiscal Year
Number of Potential Gain at assumed Annual
Securities % of Total Rates of Stock Price
underlying Options/SARs Appreciation for Option Term(1):
options/ granted to Exercise or --------------------------------
SAR's employees in Base Price Expiration
Name Granted Fiscal Year ($/Share) Date 5% 10%
---- ------------ ------------ ----------- ---------- ---------- ----------
David Brooks 3,750,000(2) 88% $1.00 7/1/10 $2,358,355 $5,976,534
Sandra Hatfield 400,000(3) 9% $2.00 12/31/06 $ 503,116 $1,274,994
Leonard Rosen 0 0% N/A
1. These amounts assume hypothetical appreciation rates of 5% and 10% over the term of the option, as required by the SEC,
and are not intended to forecast the appreciation of the stock price. No gain to the name officers will occur unless the
price of DHB's common shares exceeds the options' exercise price.
2. One-fifth of the shares covered by these options are exercisable immediately, and 20% annual thereafter.
3. These shares vest annual over the next four years.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
23
The following table sets forth the beneficial ownership of the
Company's Common Stock as of March 16, 2001, for (i) each person known by the
Company to beneficially own more than five percent of the shares of outstanding
Common Stock, (ii) each of the executive officers listed in the Summary
Compensation Table in "Executive Compensation" and (iii) all of the Company's
executive officers and directors as a group. Except as otherwise indicated, all
shares are beneficially owned, and the persons named as the owners hold
investment and voting power.
Number of Shares Percent Owned (1)
Name Beneficially Owned(2) ----------------------
- ---- --------------------- * - Less than one (1%)
David Brooks(3) 20,750,600(3) 51.5%
Morton Cohen 1,290,300(4) 4.1%
Jerome Krantz 25,000 *
Sandra Hatfield 100,000(5) *
Dawn Schlegel 5,500(6) *
Leonard Rosen 45,142 *
All officers and 22,216,542(7) 55%(7)
Directors as a group
(6 people)
1. Based upon 31,491,914 shares outstanding as of March 16, 2001. In
calculating the percentage owned by any individual, officer, or
director, the number of currently exercisable warrants and options have
been included in calculation of percentage owned. Currently exercisable
options or warrants are those, which are exercisable within 60 days
after March 16, 2001.
2. Includes currently exercisable options or warrants are those, which are
exercisable within 60 days after the date of this form 10-KSB.
3. Consists of 7,500,600 shares owned by Mr. Brooks and 4,500,000 owned by
his wife as custodian for his minor children as well as 8,775,000
shares acquirable under currently exercisable warrants as described
below. Mrs. Brooks may acquire 3,750,000 shares at $1.33 per share and
500,000 shares at $3.50 per share upon the exercise of her currently
exercisable warrants for. Mr. Brooks may acquired 3,750,000 shares at
$2.33 per share, 25,000 shares at $3.25 per share, and 750,000 shares
at $1.00 per share upon exercise of his currently exercisable warrants.
As the only person with more than 5% ownership of the Company, Mr.
Brooks address is 555 Westbury Avenue, Carle Place NY 11514.
4. Clarion Capital Corporation, Clarion Offshore Fund Ltd, and Clarion
Partners of which Morton Cohen is an executive or director, own these
1,265,300 shares and 25,000 shares which may be acquired by Mr. Cohen
at $3.25 per share upon exercise of a currently exercisable warrant for
serving on the Board.
5. Includes 100,000 shares acquirable under currently exercisable warrants
awarded to Mrs. Hatfield.
6. Includes 5,000 shares acquirable under of a currently exercisable
warrant.
7. Includes 8,905,000 currently exercisable warrants of common stock held
by directors and officers
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
24
The Company has funded certain of its acquisitions through the use of
term loans from Mr. David H. Brooks, Chairman of the Board of the Company, and
Mrs. Terry Brooks, his wife. During 1998, Mr. Brooks loaned the Company in
excess of $7 million in conjunction with the purchases of LAP and LEC and
increased working capital for LAP and LEC. The balance of the shareholder loans
at December 31, 2000 is $16,046,469. These shareholders loans expire in November
2002 and bear interest at 12% per annum.
In 1998, the Company granted warrants to purchase 500,000 shares of
Common Stock, at a price of $3.50 per share and expiring in 2004, to Mrs. Brooks
in consideration for the outstanding and additional loans lent to the Company in
February 1998.
Point Blank leases a 67,000 square foot office and manufacturing
facility (the "Oakland Park Facility") located at 4031 N.E. 12th Terrace,
Oakland Park, Florida 33334, from V.A.E. Enterprises ("V.A.E."), a partnership
controlled by Terry Brooks, wife of Mr. David H. Brooks, and beneficially owned
by Mr. and Mrs. Brooks' minor children. NDL Products entered into a net-net
lease for a portion of the space in the Oakland Park facility. Annual aggregate
base rental is $607,353 in 2001 and is scheduled to increase by 6% per year
until the lease expires in December 31, 2010. Point Blank and NDL Products, as
lessees, are responsible for all real estate taxes and other operating and
capital expenses. Management believes that the terms of the lease are at the
current market price that would be obtained from an unrelated party.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8K
A. (1) FINANCIAL STATEMENTS
(2) FINANCIAL STATEMENT SCHEDULES
(3) EXHIBITS. THE EXHIBITS FILED HEREWITH ARE SET FORTH ON THE INDEX
TO EXHIBITS FILED AS PART OF THIS REPORT.
B. FORM 8-K: NO REPORTS ON FORM 8-K WERE FILED DURING THE QUARTER ENDED
DECEMBER 31, 2000.
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS INDEX
CONTENTS
Page
INDEPENDENT AUDITORS' REPORT F-1
Consolidated Balance Sheets as of December 31, 2000 and 1999 F-2
Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998 F-3
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 2000, 1999 and 1998 F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998 F-5
Consolidated Statements of Comprehensive Income for the years
ended December 31, 2000, 1999 and 1998 F-6
Notes to the Consolidated Financial Statements F-7 - F-18
Schedule II Valuation and Qualifying Accounts F-19
26
INDEPENDENT AUDITORS' REPORT
- ----------------------------
The Board of Directors of
DHB Capital Group Inc.
We have audited the accompanying consolidated balance sheets of DHB Capital
Group Inc. and Subsidiaries as of December 31, 2000 and 1999 and the related
consolidated statements of operations, stockholders' equity and other
comprehensive income and cash flows for each of the three-years in the period
ended December 31, 2000. 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 audits.
We conducted our audits 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 audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of DHB
Capital Group Inc. and Subsidiaries as of December 31, 2000 and 1999 and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 2000 in conformity with generally
accepted accounting principles.
Paritz and Company P.A.
Hackensack, New Jersey
March 1, 2001
F-1
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
ASSETS 2000 1999
------ ---- ----
CURRENT ASSETS
Cash and cash equivalents $ 566,887 $ 473,441
Marketable securities 368,996 --
Accounts receivable, less allowance for doubtful
accounts of $653,384 and $757,741 8,121,188 5,208,365
Inventories 14,297,059 9,045,853
Net assets held for sale -- 3,928,980
Prepaid expenses and other current assets 1,091,952 596,441
----------- -----------
Total Current Assets 24,446,082 19,253,080
----------- -----------
PROPERTY AND EQUIPMENT 1,940,326 2,252,693
----------- -----------
OTHER ASSETS
Investments in non-marketable securities 941,750 1,000,000
Deferred tax assets 429,300 444,000
Deposits and other assets 298,813 349,724
----------- -----------
Total Other Assets 1,669,863 1,793,724
----------- -----------
TOTAL ASSETS $28,056,271 $23,299,497
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
-------------------------------------------------
CURRENT LIABILITIES
Notes payable-bank $ - $ 5,000,000
Accounts payable 11,257,987 9,495,663
Accrued expenses and other current liabilities 5,547,759 2,557,290
Current maturities of long term debt 143,748 152,815
----------- -----------
Total Current Liabilities 16,949,494 17,205,768
----------- -----------
LONG TERM LIABILITIES
Long term debt, net of current maturities 15,356 233,582
Note payable - stockholder 16,046,469 16,046,469
----------- -----------
Total Long Term Debt 16,061,825 16,280,051
----------- -----------
Total Liabilities 33,011,319 33,485,819
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY) (4,955,048) (10,186,322)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY) $28,056,271 $23,299,497
=========== ===========
See accompanying notes to financial statements.
F-2
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
2000 1999 1998
---- ---- ----
Net sales $70,017,572 $35,140,728 $33,073,418
Cost of goods sold 49,358,476 27,566,278 20,441,663
----------- ------------ -----------
Gross profit 20,659,096 7,574,450 12,631,755
Selling, general & administrative expenses 12,459,841 17,445,669 9,778,336
----------- ------------ -----------
Income (loss) before other income (expense) 8,199,255 (9,871,219) 2,853,419
----------- ------------ -----------
Other income (expense)
Interest expense, net of interest income (2,743,132) (2,908,495) (1,095,553)
Hurricane loss -- (7,740,231) --
Other income 367,331 255,844 34,835
Settlement of employment contract - (270,000) (220,000)
Loss on holding of equity investments - (688,000) -
Write down of investment in subsidiary - (1,000,000) -
Realized gain (loss) marketable securities (26,676) (16,050) 154,155
Unrealized gain (loss) on marketable securities - (102,086) 52,967
----------- ------------ -----------
Total other income (expense) (2,402,477) (12,469,018) (1,073,596)
----------- ------------ -----------
Income (loss) from continuing operations before income taxes 5,796,778 (22,340,237) 1,779,823
Income taxes 129,999 67,385 633,650
----------- ------------ -----------
Income (Loss) from continuing operations 5,666,779 (22,407,622) 1,146,173
Discontinued operations
Loss from discontinued operations (517,288) (4,238,800) (1,016,371)
Gain (loss) on disposal of discontinued operations 857,860 (5,475,491) -
----------- ------------ -----------
Total discontinued operations 340,572 (9,714,291) (1,016,371)
----------- ------------ -----------
Net income (loss) $ 6,007,351 $(32,121,913) $ 129,802
=========== ============ ===========
Earnings (loss) per common share (Note 10)
Continuing operations $ 0.18 $ (0.86) $ 0.046
Discontinued operations 0.00 (0.38) (0.041)
----------- ------------ -----------
Net earnings (loss) per common share $ 0.18 $ (1.24) $ 0.005
=========== ============ ===========
See accompanying notes to financial statements.
F-3
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Accumulated
Number of Additional Common Stock Other
Common Par Paid-in Subscription Comprehensive
Shares Value Capital Receivable Income
----------- -------- ----------- ------------ -----------
Balance December 31, 1997 25,347,224 $ 25,347 $20,953,107 0 $ (6,135)
Net income
Effect of foreign currency translation 38,004
---------
Total comprehensive income
Sale of common stock 686,500 687 2,705,313
Stock issued for services 65,211 64 260,780
Exercise of warrants 49,500 50 65,950
Purchase of treasury stock (700,995) (701) (2,769,301) - -
---------- -------- ----------- --------- ---------
Balance December 31, 1998 25,447,440 $ 25,447 $21,215,849 0 $ 31,869
Net loss
Effect of foreign currency translation (19,461)
Total comprehensive income
Sale of common stock 6,645,700 6,646 4,241,609 (700,025)
Stock issued for services 273,214 273 390,777
Exercise of warrants 40,977 41 83,709
Purchase of treasury stock (75,150) (75) (240,170) - -
---------- -------- --------- --------- ---------
Balance December 31, 1999 32,332,181 $32,332 $25,691,774 $(700,025) $ 12,408
Net income
Effect of foreign currency translation (35,959)
Effective of valuation allowance marketable
securities (283,211)
---------
Total comprehensive income
Sale of common stock (8,900) 700,025
Stock issued for services 22,607 22 35,828
Stock issued in settlement of a lawsuit 16,727 17 22,983
Purchase of treasury stock (697,538) (697) (1,206,184) - -
---------- -------- ----------- --------- ---------
Balance December 31, 2000 31,673,977 $ 31,674 $24,535,501 $ -- $(306,762)
========== ======== =========== ========= =========
Retained
Earnings
Deficit) Total
--------- -----
Balance December 31, 1997 $(3,230,700) $17,741,619
Net income 129,802 129,802
Effect of foreign currency translation 38,004
-----------
Total comprehensive income 167,806
Sale of common stock 2,706,000
Stock issued for services 260,844
Exercise of warrants 66,000
Purchase of treasury stock - (2,770,002)
----------- ------------
Balance December 31, 1998 $(3,100,898) $18,172,267
Net loss (32,121,913) (32,121,913)
Effect of foreign currency translation (19,461)
-----------
Total comprehensive income (32,141,374)
Sale of common stock 3,548,299
Stock issued for services 390,981
Exercise of warrants 83,750
Purchase of treasury stock - (240,245)
----------- ------------
Balance December 31, 1999 $(35,222,811) $(10,186,322)
Net income 6,007,351 6,007,351
Effect of valuation allowances (319,170)
Effect of valuation allowance marketable
securities (283,211)
------------
Total comprehensive income 5,688,181
Sale of common stock 691,125
Stock issued for services 35,850
Stock issued in settlement of a lawsuit 23,000
Purchase of treasury stock - (1,206,882)
----------- -----------
Balance December 31, 2000 $(29,215,460) $(4,955,048)
============ ===========
See accompanying notes to financial statements.
F-4
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
CASH FLOWS FROM OPERATING ACTIVITIES 2000 1999 1998
---- ---- ----
Net Income (loss) $ 6,007,351 $(32,121,913) $ 129,802
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 324,161 592,213 112,562
Valuation allowances/reserves (283,211) 4,017,806 -
Stock issued for services 35,850 200,981 260,844
Stock issued in settlement of a lawsuit 23,000 190,000 -
Unrealized gain on transfers from non-marketable securities 58,250
Deferred income taxes 14,700 (110,000) 121,300
Changes in assets and liabilities:
Accounts receivable (2,912,823) 2,705,402 (910,080)
Marketable securities (368,996) 529,328 1,174,478
Inventories (5,251,206) 9,017,763 (4,146,468)
Assets held for sale - 23,717
Prepaid expenses and other current assets (495,511) 1,335,850 (3,952,697)
Deposits and other assets 41,195 217,601 (798,049)
Accounts payable 1,762,324 4,366,516 (1,101,290)
Accrued expenses and other current liabilities 2,990,469 744,616 448,938
----------- ------------ -----------
Net cash provided (used) by operating activities 1,945,553 (8,290,120) (8,660,660)
----------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale (payments for purchase) of assets of subsidiary, net of
cash acquired 3,933,980 - (2,884,360)
Sale of property and equipment 422,241
Payments made for property and equipment (429,319) (311,043) (819,870)
----------- ------------ -----------
Net cash provided (used) by investing activities 3,926,902 (311,043) (3,704,230)
----------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (repayments) of note payable- bank (5,000,000) 825,000 1,500,000
Proceeds of note payable- shareholder - 4,518,865 10,227,604
Proceeds from the issuance of long term debt 250,000
Principal payments on long-term debt (227,293) (160,722) (16,483)
Proceeds from the exercise of warrants - common stock - 83,750 66,000
Foreign currency translation (35,959) (19,461) 38,004
Purchase of treasury stock (1,206,882) (240,245) (2,770,002)
Net proceeds from sale of common stock 691,125 3,548,300 2,706,000
----------- ------------ -----------
Net cash provided (used) by financing activities (5,779,009) 8,555,487 12,001,123
----------- ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS 93,446 (45,676) (363,767)
CASH AND CASH EQUIVALENTS - BEGINNING 473,441 519,117 882,884
----------- ------------ -----------
CASH AND CASH EQUIVALENTS - END $ 566,887 $ 473,441 $ 519,117
=========== ============ ===========
See accompanying notes to financial statements.
F-5
DHB CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED 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 three major divisions, DHB Armor Group,
DHB Sports Group, and DHB Electronics Group (sold March 2000). DHB
Armor Group consists of Protective Apparel Corporation ("PACA"),
Point Blank Body Armor Inc., Lanxide Armor Products Inc. ("LAP"),
which was closed and terminated in 1999 and Point Blank
International S.A ("PB Int'l"). DHB Sports Group consists of NDL
Products Inc. ("NDL") and Orthopedic Products Inc. ("OPI"), which
ceased its operations in 2000. DHB Electronics Group consists of
Lanxide Electronic Components ("LEC") and DHB KK. 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, aircraft armor,
bullet resistant plates and shields and related ballistic
accessories. DHB Sports Group manufactures and distributes
specialized protective athletic apparel and equipment and orthopedic
products. DHB Electronics Group manufactures and markets thermal
management, packaging and structural components for the electronic
industry within the United States and Japan and was sold in March
2000.
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 are valued at the lower of cost (determined on the
first-in, first-out basis), or market.
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.
F-6
Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
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 held for investment and, accordingly,
unrealized gains and losses are reflected in the equity section of
the balance sheet.
Non-marketable securities are valued at historical cost and if
necessary, reduced by a valuation allowance to the net realizable
value.
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 than not that
some portion of the deferred tax asset will not be realized.
Research and development expenses
Research and development expenses are expensed as incurred.
The Company incurred approximately $317,000, $825,000, and $523,000
of research and development costs in 2000, 1999, and 1998 respec-
tively.
Advertising expenses
The cost of advertising is expensed as incurred. The Company
incurred approximately $728,000, $1,062,000, and $642,000 of
advertising costs in 2000, 1999, and 1998 respectively.
Earnings per share
The Company adopted SFAS no. 128, "Earnings Per Share" which
simplifies the computation of earnings per share and required the
presentation of basic and diluted earnings per share. Basic income
per share amounts are based on the weighted average number of shares
of common stock outstanding. Diluted income per share amounts are
based on the weighted average number of shares of common stock and
stock options outstanding during the years presented.
F-7
Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Comprehensive income (loss)
Effective January 1, 1998, the Company adopted the provision
of statement No. 130, Reporting comprehensive income that modifies
the financial presentation of comprehensive income and its
components. In accordance with this Statement, a Consolidated
Statement of Comprehensive Income is included in the Consolidated
financial statements to present all changes in Stockholders' equity
in the periods presented other than changes resulting from
transactions relating to the Company's stock.
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, if
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.
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.
Note 2 SUPPPLEMENTAL CASH FLOW INFORMATION
Cash paid for: 2000 1999 1998
------- ------- -------
Interest 124,757 355,160 308,282
Taxes 29,131 63,933 78,877
On March 10, 2000, the Company sold LEC and DHB KK for a cash
payment of approximately $4.234 million. During the year ended
December 31, 1998, the Company purchased LAP and the Electronics
Group for a cash payment of approximately $4,924,073 million net of
cash acquired.
Note 3 BUSINESS ACQUISITIONS
In 1998, the Company purchased the common stock of two
privately held Delaware corporations, Lanxide Armor Products Inc.
(LAP) and Lanxide Electronic Components Inc. (LEC) and one Japanese
company, DHB KKK for a cash payment of approximately $4,924,073
million net of cash acquired. The purchase price was funded by an
additional loan from the Company's majority shareholder. LAP
specializes in the design, development and manufacture of
ceramic/metal matrix composites for protective armor applications.
LEC and DHB KK are a leading supplier of silicon carbide / aluminum
composites for heat management applications in the electronics
industry. This transaction was accounted for as a purchase. On March
10, 2000 the Company sold its Electronics Division for a cash
payment of $4.234 million.
F-8
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:
2000 1999 1998
---- ---- ----
Cost $652,207 $ 0 $476,361
Unrealized gain (283,211) -- 52,967
-------- ---- --------
Market Value $368,996 $ 0 $529,328
======== ==== ========
Note 5 INVENTORIES
Inventories consist of the following:
2000 1999 1998
---- ---- ----
Finished goods $ 2,225,136 $ 3,376,747 $ 7,901,221
Work in process 5,365,685 1,889,701 5,533,648
Raw materials and supplies 6,706,238 5,001,428 6,566,678
---------- ----------- -----------
Sub-total 14,297,059 10,267,876 20,001,547
Discontinued Operations -- (1,222,023) (1,937,931)
----------- ----------- -----------
$14,297,059 $ 9,045,853 $18,063,616
=========== =========== ===========
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:
Estimated
2000 1999 useful life
---- ---- -----------
Land -- $ 47,500 --
Buildings -- 427,500 39 years
Machinery and equipment 1,767,158 5,012,360 5-30 years
Furniture, fixtures and
computer equipment 1,173,909 828,552 5-7 years
Transportation equipment 391,016 234,270 3-5 years
Leasehold improvements 751,062 688,560 5-31.5 years
---------- ----------
4,083,145 7,238,742
Less accumulated depreciation and
amortization 2,142,812 2,119,578
---------- ----------
1,940,326 5,119,164
Discontinued Operations -- 2,866,471
---------- ----------
$1,940,326 $2,252,693
========== ==========
Note 7 NOTES PAYABLE - BANK
Notes payable - bank were due in April 1999 and was
collateralized by the assets of the Company. The weighted average
interest rate on these borrowings was approximately 12% at December
31, 1999. The entire indebtedness was repaid in March 2000 using the
proceeds from the sale of the DHB Electronics Group.
Note 8 NOTES PAYABLE STOCKHOLDER
These notes bear interest at 12% per annum and are due, as
extended, in November 2002.
F-9
Note 9 LONG-TERM DEBT
Long-term debt consists of the following: 2000 1999
---- ----
Capital lease obligation payable in monthly payments of $121,324 $169,519
$5,281 this note is collateralized by certain equipment
originally costing $250,000
Note payable in monthly installments of $4,729 inclusive of - 153,500
interest at 5.1%.
37,780 63,378
Other
159,104 386,397
Less current portion 143,748 152,815
-------- -------
Total long term debt $ 15,356 $233,582
======== ========
Long-term debt matures as follows:
2001 $143,748
2002 7,286
2003 2,765
2004 5,305
--------
Total $159,104
========
Note 10 STOCKHOLDERS' EQUITY
Common and preferred stock
DHB has 100,000,000 shares authorized of its $.001 par value
Common. In addition, DHB is authorized to issue 1,500,000 shares of
Class A 10% convertible Preferred Stock, none of which was issued
and outstanding at December 31, 2000 and 1999. On December 1, 2000
the Board of Directors announced the directive to the Company to
purchase up to two million shares of its common stock in the open
market, from time to time, at its discretion.
Earnings Per share
Earnings per common share calculations are based on the
weighted average number of common shares outstanding during each
period; 32,219,376, 25,866,880 and 24,982,394 for the years ended
December 31, 2000, 1999, and 1998, respectively. Calculations for
diluted earnings per share are based on the weighted average number
of outstanding common shares and common share equivalents during the
periods; 34,086,963, 29,511,115, and 29,685,262 for the years ended
December 31, 2000, 1999 and 1998, respectively.
F-10
Note 10 STOCKHOLDERS' EQUITY - Continued
Income (loss) Shares Per Share
(numerator) (denominator) Amount
------------- ------------- ---------
Basic EPS
Income From continuing operations-2000 $ 5,796,778 32,219,376 $ 0.18
------------ ----------- ------
Diluted EPS $ 5,796,778 34,086,963 $ 0.17
============ =========== ======
Basic EPS
Loss from continuing operations-1999 $(22,340,237) 25,866,880 $(1.24)
------------ ----------- ------
Diluted EPS $(22,340,237) 25,866,880 $(1.24)
============ =========== ======
Basic EPS
Earnings from continuing operations-1998 $ 1,779,823 24,982,394 $0.005
------------ ----------- ------
Diluted EPS $ 1,779,823 24,982,394 $0.005
============ =========== ======
Stock options outstanding of 5,209,500, 3,644,236, and
3,216,188 at December 31, 2000, 1999, and 1998, respectively, have
not been included in diluted earnings per common share because to do
so would have been anti-dilutive for the periods presented.
Stock option plan
The Company adopted a 1995 Stock Option Plan pursuant to which
the Board of Directors was 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.
Stock warrants
In 2000, the board of directors awarded two key employees
warrants which vest over four to five years and are exercisable at
$2.00 per share. Pursuant to employment agreements (See Note 14),
the Company has 3,750,000 stock warrants outstanding exercisable at
$2.33 per share and expiring in 2006 and 3,750,000 stock warrants at
$1.00 and vesting 20% immediately and in 20% annual increments
thereafter. The warrants expire in July 2010. During 1999, the three
members of the board were awarded 25,000 warrants exercisable at
$3.25 for three years for serving as a board member.
Note 11 DISCONTINUED OPERATIONS.
In October 1999, the Company announced its strategic decision
to discontinue the operations of its LAP and the Electronics Group
(LEC and DHB KK). LAP operations where shut down in October 1999
while the Electronics Group was sold on March 10, 2000 for a sales
price of $4.234 million, less the outstanding long-term debt. The
results of the closure of LAP and the Electronics Group have been
reported separately as discontinued operations. Prior year financial
statements have been restated to present LAP and the Electronics
Group as a discontinued operation. The components of net assets of
the discontinued operations included in the balance sheet as of
December 31, 1999 are as follows:
F-11
Note 11 DISCONTINUED OPERATIONS - Continued.
1999
----
Current assets (mainly trade receivables and inventory) $1,865,454
Accounts payable and accrued expenses 896,552
----------
Net current assets 968,902
----------
Property, plant and equipment, net 2,866,471
Other non-current assets 93,607
----------
Net Long-term assets 2,960,078
----------
The condensed statements of operations relating to the discontinued
operations are presented below
2000 1999
---- ----
Net Sales $401,299 $7,514,541
Cost and expenses (918,587) 11,753,341
-------- ----------
Loss before income taxes (517,288) (4,238,800)
Gain (Loss) on Disposal 857,860 (5,475,491)
-------- ----------
Net Income (Loss) 340,572 (9,714,291)
-------- ----------
Note 12 HURRICANE LOSSES
On October 15, 1999, the office and manufacturing facility
located in Oakland Park, Florida suffered extensive damage due to
hurricane Irene. Substantial damage was done to the building as well
as inventory. The Company currently has a lawsuit with their
insurance carrier and agent to recover some of the loss, but as of
today no agreement has been reached. The Company expensed the entire
loss in October 1999 and has not recorded a receivable for any
amount, which may be due from the insurance companies.
Note 13 RELATED PARTY TRANSACTIONS
A summary of related party transactions for the years ended
December 31, 2000, 1999 and 1998 is as follows:
2000 1999 1998
---- ---- ----
Interest, rental, professional and other
expenses paid or accrued to DHB's majority
stockholder 3,528,995 5,064,765 992,359
The Company leases a warehouse and manufacturing facility from
a partnership indirectly owned by the majority stockholder of DHB
pursuant to a lease expiring December 31, 2010 with a annual
rental of approximately $607,353 and 6% increases per annum.
F-12
Note 14 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.
Approximately 64%, 35% and 22% for the years ended December
31, 2000, 1999 and 1998, 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.
A substantial portion 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 15 FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company's financial instruments include cash, accounts
receivable, accounts payable and long-term debt. The carrying values
of cash, accounts receivable, accounts payable and long-term debt
approximate their fair values.
Note 16 SEGMENT INFORMATION:
As described in detail above, the Company operates in two
principal segments: Ballistic-resistant equipment and Protective
athletic/medical equipment. The Company disposed of the Electronics
Group in March 2000, and closed its hard armor company, LAP in
October 1999. These two divestitures are accounted for as
discontinued operations. Financial information on the Company's
business segments was as follows:
F-13
Note 16 SEGMENT INFORMATION: -Continued
Net Sales 2000 1999 1998
- --------- ---- ---- ----
Ballistic-resistant equipment $64,720,773 $30,358,537 $28,695,127
Electronic components/LAP 401,299 8,441,393 8,398,107
Protective athletic & medical equipment 5,296,799 6,236,438 8,388,544
----------- ----------- -----------
70,418,871 45,036,368 45,481,778
Less inter-segment sales -- (2,381,099) (3,647,353)
Less discontinued operations (3) (401,299) (7,514,541) (8,761,007)
----------- ----------- -----------
Consolidated Net Sales $70,017,572 $35,140,728 $33,073,418
=========== =========== ===========
Income from Operations
Ballistic-resistant equipment $10,591,126 $(9,629,504) $ 2,485,395
Electronic components (517,288) (1,835,137) (782,908)
Protective athletic & medical equipment (166,114) (2,390,834) 1,207,743
Corporate and Other (1) (2,225,757) (2,824,826) (1,508,027)
----------- ----------- -----------
Sub-total 7,681,967 (16,680,301) 1,402,203
Income (loss) from discontinued
operations (3) 517,288 (6,809,082) 1,451,216
----------- ----------- -----------
Consolidated Operating Income $ 8,199,255 $(9,871,219) $ 2,853,419
=========== =========== ===========
Identifiable Assets (2)
Ballistic-resistant equipment $22,383,129 $14,283,739 $23,743,604
Electronic components --- 6,177,019 5,749,438
Protective athletic & medical equipment 3,517,194 3,335,253 8,844,627
----------- ----------- -----------
25,900,323 23,796,011 38,337,669
Corporate and Other 2,155,948 400,038 4,641,566
----------- ----------- -----------
Consolidated Net Assets 28,056,271 24,196,049 42,979,235
Discontinued operations (3) (4,825,532) (5,568,122)
Assets held for sale -- 3,928,980 3,952,697
----------- ----------- -----------
Adjusted Net Assets $28,056,271 $23,299,497 $41,363,810
=========== =========== ===========
Foreign sales accounted for 2%, 17%, and 12%, of the total
revenues for the years ended December 31, 2000, 1999 and 1998,
respectively. Foreign identifiable assets accounted for 1%, 13%, and
5% of the total assets at December 31, 2000, 1999 and 1998,
respectively.
(1) Corporate and Other includes corporate general and administrative expenses.
(2) Corporate assets are principally cash, marketable securities, and deferred charges.
(3) Discontinued operations included the Companies sold, LEC and DHB KK as well as the loss from
the shutdown of the LAP plant.
F-14
Note 17 COMMITMENTS AND CONTINGENCIES
Leases
The company has non-cancelable operating leases, which expire
through 2010. These leases generally require the Company to pay
certain costs, such as real estate taxes.
Future minimum lease commitments (excluding renewal options)
under non-cancelable leases are approximately:
Years Ending
2001 $ 966,000
2002 1,045,000
2003 1,035,000
2004 1,076,000
2005 1,119,000
Thereafter 1,075,000
----------
$6,316,000
==========
Rent and real estate tax expense on operating leases for the
years ended December 31, 2000, 1999 and 1998 aggregated
approximately $1,417,000, $1,684,000 and $1,917,000, respectively.
Employment agreements
The Company is committed under an employment agreement with
its majority stockholder, which expires in July 2006 and provides
for an annual salary of $500,000 and annual increases of $50,000
thereafter. In addition, the contract provides 3,750,000 stock
warrants at $1.00, which vest 20% immediately and in 20% annual
increments thereafter. The warrants expire in July 2010.
Litigation
In October 1999, certain agencies of the United States
government began a preliminary investigation of the Company's
employment practices, amongst other things. In April 2000, U.S.
Department of Justice notified the Company that it had terminated
its investigation and that no criminal prosecution was contemplated.
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.
F-15
Note 18 INCOME TAXES
Components of income taxes are as follows:
2000 1999 1998
---- ---- ----
Federal
Current $ 0 $ 0 $ 0
Deferred 0 0 605,000
-------- ------- --------
Total federal 0 0 605,000
State
Current 129,999 67,385 28,650
Deferred 0 0 0
-------- ------- --------
129,999 67,385 21,650
Total state $129,999 $67,385 $ 21,650
======== ======= ========
A reconciliation of the statutory federal income tax rates to the Company's
effective tax rate for the years ended December 31 is as follows:
2000 1999 1998
---- ---- ----
Statutory U.S. income tax rate 34% -34% 34%
Decrease resulting from:
Utilization of net operating loss carryforwards -34%
Increase resulting from:
State and local income taxes, net of federal benefits 2.10% 1.60%
Non-availability of net operating loss carryforwards 0% 34% 0%
---- --- ----
Effective tax rate 2.10% 0% 35.60%
==== === =====
The significant components of deferred tax assets and liabilities as of December
31, were as follows:
2000 1999 1998
---- ---- ----
Net operating loss carryforwards $ 8,840,000 $10,920,000 $1,000,000
Accounts receivable reserve 222,000 85,000 172,000
Write down of marketable securities 520,000 212,000 0
Write down of non-marketable securities 448,000 234,000 213,000
Write down of investment in 520,000 340,000 0,000
----------- ----------- ----------
10,550,000 11,791,000 1,385,000
Less valuation allowance 10,120,700 11,347,000 0
----------- ----------- ----------
Net deferred tax asset $ 429,300 $ 444,000 $1,385,000
=========== =========== ==========
F-16
DHB CAPITAL GROUP INC. AND SUBSIDIARIES
SCHEDULE II TO THE FINANCIAL STATEMENTS
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 2000, 1999 AND 1998
Allowances deducted from related balance sheet accounts:
Investment Net Write
in Non- Down of
Accounts marketable investment in
Receivable Inventory securities subsidiaries
---------- --------- ---------- -------------
Balance at December 31, 1997 $353,230 $ 0 $ 628,000 $ 529,579
Additions charged to
costs and expenses 154,509
Subtractions charged to
costs and expenses - - - -
-------- -------- ---------- ----------
Balance at December 31, 1998 $507,739 $ 0 $ 628,000 $ 529,579
======== ======== ========== ==========
Additions charged to
costs and expenses 250,002 624,898 688,750 1,000,000
Subtractions charged to
costs and expenses - - - -
-------- -------- ---------- ----------
Balance at December 31, 1999 $757,741 $624,898 $1,316,750 $1,529,579
Additions charged to
costs and expenses 36,000
Subtractions charged to
costs and expenses 140,357 - - -
-------- ------- ---------- ----------
Balance at December 31, 2000 $653,384 $624,898 $1,316,750 $1,529,579
======== ======== ========== ==========
F-17
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 16th day of
March 2001.
DHB Capital Group Inc.
/s/ DAVID BROOKS
-----------------------
David H. Brooks
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 and on the dates indicated.
Signature Capacity Date
- --------- -------- ----
/s/ DAVID H. BROOKS Chairman of the Board, March 24, 2000
- ------------------- and Director
David H. Brooks
/s/ DAWN SCHLEGEL Treasurer March 24, 2000
- ----------------- Principal Financial Officer
Dawn Schlegel Principal Accounting Officer
/s/ MORTON COHEN Director March 24, 2000
- ----------------
Morton Cohen
F-18
Item 13 (a) Exhibits.
Exhibit Description
- ------- -----------
3.1 Certificate of Incorporation of DHB Capital Group Inc., a Delaware corporation (hereinafter,
"DHB".) 1
3.2 Certificate of Amendment to Certificate of Incorporation of DHB filed December 31, 1996 2
3.3 By-laws of DHB 1
4.3 Form of Warrant Agreement with respect to all Outstanding Warrant together 3
10.1 Employment Agreement dated July 1, 2000 between DHB and David Brooks
10.2 Promissory Note between the Company and David Brooks dated November 6, 2000 1
10.3 1995 Stock Option Plan 4
10.4 Transfer Agreement, dated as of February 6, 1998 by and among Lanxide Corporation, DHB Capital
Group, Inc., Lanxide Armor Products, Inc. Lanxide Electronic Components, Inc. and Lanxide
Technology Company, L.P. 5
10.5 Sale agreement date March 10, 2000 with DHB and DMC2 Electronic Components - incorporated by
reference in the Company's filing of Form 8-K 6
10.6 Lease agreement dated January 1, 2001 between Point Blank Body Armor and VAE Enterprises.
10.7 Lease agreement dated April 15, 2001 between DHB Capital Group and A&B Holdings, Inc.
21 List of Subsidiaries
Notes to Exhibit Table:
1 Incorporated by reference to the Company's Definitive Proxy Material filed with the Commission in
connection with the Special Meeting in Lieu of Annual Meeting of Shareholders of the Company held
on February 15, 1995.
2 Incorporated by reference to Post-Effective Amendment No.#2 to Registration Statement 33-59764, on
Form SB-2, File # filed on Jan 31, 1997.
3 Incorporated by reference to the Company's Registration Statement on Form SB-2, No. 33-59764,
which became effective on May 14, 1993.
5 Incorporated by reference to Current Report on Form 8-K filed February 25, 1998.
4 Incorporated by reference to Registration Statement on Form S-8 filed on or about October 1, 1995.
6 Incorporated by reference to the Current Report on Form 8-K dated March 23, 2000.
F-19