U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended March 31, 2004
[_] Transition report under Section 13 or 15(d) of the Exchange Act for the
transition period from ___to ___
Commission file number: 1-9009
DEFENSE INDUSTRIES INTERNATIONAL, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
NEVADA 84-1421483
(State of Incorporation) (I.R.S. Employer Identification No.)
INDUSTRIAL ZONE EREZ, P.O. BOX 779, ASHKELON 78101, ISRAEL
(Address of Principal Executive Offices)
(011) 972-7-689-1611
(Issuer's Telephone Number, Including Area Code)
______________________________________________
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS
As of May 6, 2004 the Issuer had 25,350,000 shares of Common Stock, $.0001
par value per share, outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [_] No [X]
EXPLANATORY NOTE
Defense Industries International, Inc. is filing this Amendment No. 1 on Form
10-QSB/A to its Quarterly Report on Form 10-QSB for the quarter ended March 31,
2004, which was filed on May 17, 2004, to amend the following Items:
(i) Item 1 of Part 1, "Financial Statements", to correct two inadvertent
clerical errors made in the original Form 10-QSB with respect to the (a)
Condensed Consolidated Balance Sheets as of March 31, 2004 (Unaudited) and
December 31, 2003: Total liabilities as of December 31, 2003 should be
$4,415,407; and (b) Condensed Consolidated Statements of Income and
Comprehensive Income for the Three Months Ended March 31, 2004 and 2003
(Unaudited): INCOME FROM OPERATIONS for the Three Months Ended March 31,
2004 should be $538,623; and
(ii) Item 6, "Exhibits and Reports on Form 8-K", to refurnish the certifications
required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.
PART I - FINANCIAL INFORMATION
ITEM 1.
DEFENSE INDUSTRIES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2004 December 31,
(Unaudited) 2003
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $1,096,023 $ 784,026
Trade accounts receivable, net 2,184,878 1,912,747
Trade accounts receivable - related parties, net 329,404 322,373
Inventory 1,962,507 2,115,825
Investment in marketable securities 692,564 704,046
Deferred taxes 41,066 45,353
Other assets 459,372 422,489
---------- ----------
Total Current Assets 6,765,814 6,306,859
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, NET 1,697,162 1,662,902
---------- ----------
OTHER ASSETS
Deposits for the severance of employer-employee relations 431,908 437,963
Deferred taxes, long-term 233,154 232,713
Intangible assets 37,268 41,105
---------- ----------
Total Other Assets 702,330 711,781
---------- ----------
TOTAL ASSETS $9,165,306 $8,681,542
========== ==========
See accompanying notes to condensed consolidated financial statements.
2
DEFENSE INDUSTRIES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 2004 December 31,
(Unaudited) 2003
----------- -----------
CURRENT LIABILITIES
Trade accounts payable $ 886,952 $ 730,562
Short-term debt 433,742 719,642
Current portion of long-term debt 426,103 489,524
Other liabilities 1,161,675 603,514
----------- -----------
Total Current Liabilities 2,908,472 2,543,242
----------- -----------
LONG-TERM LIABILITIES
Long-term portion of debt 632,080 728,678
Provisions for the severance of employer-employee
relations 290,010 290,573
Minority interest 837,866 852,914
----------- -----------
Total Long-Term Liabilities 1,759,956 1,872,165
----------- -----------
TOTAL LIABILITIES 4,668,428 4,415,407
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, $.0001 par value, 50,000,000 shares
authorized, none issued and outstanding - -
Common stock, $.0001 par value, 250,000,000 shares
authorized, 25,350,000 issued and outstanding 2,535 2,535
Additional paid-in capital 1,711,450 1,711,450
Retained earnings 3,117,005 2,767,781
Accumulated other comprehensive loss (334,112) (215,631)
----------- -----------
Total Shareholders' Equity 4,496,878 4,266,135
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 9,165,306 $ 8,681,542
=========== ===========
See accompanying notes to condensed consolidated financial statements.
3
DEFENSE INDUSTRIES INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED)
Three Months Ended March 31,
----------------------------
2004 2003
------------ ------------
NET REVENUES $ 3,746,079 $ 3,168,144
Cost of sales 2,779,840 2,273,812
------------ ------------
Gross profit 966,239 894,332
------------ ------------
OPERATING EXPENSES
Selling 120,919 188,676
General and administrative 306,697 323,348
------------ ------------
TOTAL OPERATING EXPENSES 427,616 512,024
------------ ------------
INCOME FROM OPERATIONS 538,623 382,308
------------ ------------
OTHER INCOME (EXPENSE)
Financial (expense), net (24,482) (70,753)
Other income - net 27,198 -
------------ ------------
TOTAL OTHER INCOME (EXPENSE) 2,716 (70,753)
------------ ------------
INCOME BEFORE INCOME TAXES 541,339 311,555
Less: Income tax expense 194,338 129,247
------------ ------------
INCOME BEFORE MINORITY INTEREST 347,001 182,308
Minority interest loss (income) 2,223 (8,196)
------------ ------------
NET INCOME 349,224 174,112
------------ ------------
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation gain (loss), net of
minority interest translation gain (loss) (118,481) 37,858
Unrealized gain (loss) on available-for-sale securities - (3,202)
------------ ------------
Other comprehensive income (loss) before tax (118,481) 34,656
Income tax (expense) benefit related to items of other
comprehensive income 42,653 (12,476)
------------ ------------
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX (75,828) 22,180
------------ ------------
COMPREHENSIVE INCOME $ 273,396 $ 196,292
============ ============
Net income per ordinary share - basic and diluted $ 0.01 $ 0.01
============ ============
Weighted average of number of shares outstanding during
the period - basic and diluted 25,350,000 25,350,000
============ ============
See accompanying notes to condensed consolidated financial statements.
4
DEFENSE INDUSTRIES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED)
For the Three Months Ended March 31,
----------- -----------
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 349,224 $ 174,112
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 71,317 71,904
Provision for doubtful accounts 3,388 --
Net realized and unrealized gain on marketable
securities 24,455 --
Stock issued for services -- 43,000
Minority interest in (loss) income of subsidiary (2,223) 8,196
Changes in operating assets and liabilities:
Decrease (increase) in deposits for employee
severance 6,055 (12,883)
Deferred taxes 3,846 1,104
(Increase) in trade accounts receivable (282,551) (539,338)
(Increase) in other assets (36,883) (175,344)
Decrease (increase) in inventory 153,318 (92,126)
Increase in trade accounts payable 156,392 27,395
Increase in other liabilities 558,161 476,698
Decrease (increase) in provision for employee severance
of employer-employee relations (563) 37,360
----------- -----------
Net Cash Provided By Operating Activities 1,003,936 20,078
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (118,404) (43,132)
Purchase of marketable securities (36,571) (146,011)
Proceeds from sale of marketable securities 48,999 134,156
----------- -----------
Net Cash Used In Investing Activities (105,976) (53,987)
----------- -----------
See accompanying notes to condensed consolidated financial statements.
5
DEFENSE INDUSTRIES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED)
For the Three Months Ended March 31,
--------------------------
CASH FLOWS FROM FINANCING ACTIVITIES: 2004 2003
----------- -----------
Short-term debt, net (285,900) 298,332
Payments on long-term debt (160,019) (91,698)
----------- -----------
Net Cash (Used In) Provided By Financing Activities (445,919) 206,634
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (140,044) 22,366
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 311,997 195,091
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 784,026 831,820
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 1,096,023 $ 1,026,911
=========== ===========
INTEREST PAID $ 26,225 $ 58,584
=========== ===========
TAXES PAID $ 49,489 $ 41,968
=========== ===========
See accompanying notes to condensed consolidated financial statements.
6
DEFENSE INDUSTRIES INTERNATIONAL, INC.
(FORMERLY PAWNBROKERS EXCHANGE, INC.) AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are presented
in United States dollars under accounting principles generally accepted in
the United States of America.
(B) PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of
Defense Industries International, Inc. and its wholly owned subsidiaries,
Export Erez, USA, Inc., Export Erez, Ltd., Mayotex, Ltd. and Dragonwear
Trading Ltd. and its 76% owned subsidiary Achidatex Nazareth Elite
(collectively, the "Company"). The minority interest represents the
minority shareholders' proportionate share of Achidatex.
All intercompany accounts and transactions have been eliminated in
consolidation.
(C) USE OF ESTIMATES
The preparation of condensed consolidated financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions
that effect the reported amounts of assets and liabilities and disclose the
nature of contingent assets and liabilities at the date of the condensed
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from
those estimates.
(D) PER SHARE DATA
Basic net income per common share is computed based on the weighted average
number of common shares outstanding during the period. Diluted net income
per common share is computed based on the weighted average number of common
shares and common stock equivalents outstanding during the period. There
were no common stock equivalents outstanding during the periods presented.
Accordingly, a reconciliation between basic and diluted earnings per share
is not presented.
7
(E) INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements as of and for the three
months ended March 31, 2004 and 2003 are unaudited. In the opinion of
management, such condensed consolidated financial statements include all
adjustments (consisting only of normal recurring accruals) necessary for
the fair presentation of the consolidated financial position and the
consolidated results of operations. The consolidated results of operations
for the three months ended March 31, 2004 and 2003 are not necessarily
indicative of the results to be expected for the full year. The
consolidated balance sheet information as of December 31, 2003 was derived
from the audited consolidated financial statements included in the
Company's annual report Form 10-KSB. The interim condensed consolidated
financial statements should be read in conjunction with that report.
NOTE 2 INVENTORY
Inventory consisted of the following:
March 31, 2004 December 31, 2003
---------- ----------
Raw materials $1,200,362 $1,175,453
Work in process 551,776 796,100
Finished goods 210,369 144,272
---------- ----------
$1,962,507 $2,115,825
========== ==========
NOTE 3 SEGMENT INFORMATION AND CONCENTRATIONS
The Company has two strategic business units: the civilian market and the
military market. The military market is further broken down between local
and export sales in order to better analyze trends in sales and profit
margins. The Company does not allocate assets between segments because
several assets are used in more than one segment and any allocation would
be impractical.
(A) SALES AND INCOME FROM OPERATIONS:
Civilian Military
Local Military Local Export Consolidated
---------- ---------- ---------- ----------
March 31, 2004
Net Sales $ 257,087 $ 442,017 $3,046,975 $3,746,079
Income from operations 40,669 99,178 398,776 538,623
March 31,2003
Net Sales $ 421,532 $ 998,747 $1,747,865 $3,168,144
Income from operations 73,316 97,562 211,430 382,308
(B) SINGLE CUSTOMERS EXCEEDING 10% OF SALES:
Sales 2004 2003
---------- ----------
Customer A (Military Local) $ - $ 324,432
Customer B (Military Export) $1,731,656 $ 618,902
8
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
99.1 Certification by Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification by Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
99.3 Certification by Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.4 Certification by Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
9
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.
DEFENSE INDUSTRIES INTERNATIONAL, INC.
(Registrant)
/S/ Joseph Postbinder
________________________
Name: Joseph Postbinder
Chief Executive Officer
/S/ Tsippy Moldovan
________________________
Name: Tsippy Moldovan
Chief Financial Officer
10
EXHIBIT 99.1
CERTIFICATION PURSUANT TO SECTION 302(A)
OF THE SARBANES-OXLEY ACT OF 2002
I, Joseph Postbinder, certify that:
1. I have reviewed this quarterly report on Form 10-QSB/A of Defense
Industries International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 15(e) and 15d- 15(e)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: May 18, 2004
/S/ Joseph Postbinder
_______________________________
Joseph Postbinder
Chief Executive Officer
EXHIBIT 99.2
CERTIFICATION PURSUANT TO SECTION 302(A)
OF THE SARBANES-OXLEY ACT OF 2002 I,
I, Tsippy Moldovan, certify that:
1. I have reviewed this quarterly report on Form 10-QSB/A of Defense
Industries International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 15(e) and 15d- 15(e)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: May 18, 2004
/S/ Tsippy Moldovan
________________________________
Tsippy Moldovan
Chief Financial Officer
EXHIBIT 99.3
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Defense Industries
International, Inc. (the "Company") on Form 10-QSB/A for the period ending March
31, 2004 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, Joseph Postbinder, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
/S/ Joseph Postbinder
________________________________
Joseph Postbinder
Chief Executive Officer
May 18, 2004
EXHIBIT 99.4
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Defense Industries
International, Inc. (the "Company") on Form 10-QSB/A for the period ending March
31, 2004 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, Tsippy Moldovan, Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
/S/ Tsippy Moldova
_____________________________
Tsippy Moldovan
Chief Financial Officer
May 18, 2004