<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 0-27842
SPORTS-GUARD, INC.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 54-1778587
- --------------------------- ------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
3212 Skipwith Road, Suite G-1, Richmond, Virginia 23294
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(Address of principal executive offices)
(804) 967-0500
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(Issuer's telephone number)
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(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 of 1934 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 No X
----- -----
At June 30, 1997, 5,981,923 shares of the Company's common stock were
outstanding.
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PART 1 - FINANCIAL INFORMATION
PAGE
----
ITEM 1. Financial Statements
(a) Balance Sheets - June 30, 1997 (Unaudited) and September 30,
1996.............................................................2
(b) Statements of Operations (Unaudited) - Three and Nine Month
Periods Ended June 30, 1997 and 1996 and Period from
Inception (July 11, 1994) to June 30, 1997.......................3
(c) Statements of Cash Flows (Unaudited) - Nine Month
Periods Ended June 30, 1997 and 1996 and Period from
Inception (July 11, 1994) to June 30, 1997.......................4
(d) Notes to Unaudited Condensed Financial Statements................5
ITEM 2. Management's Discussion and Analysis or
Plan of Operation................................................6
PART II - OTHER INFORMATION................................................7
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SPORTS-GUARD, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
June 30, 1997 September 30,
(Unaudited) 1996
-------------- --------------
Cash $ 392 $ 22,832
Inventory 2,554 29,744
Prepaid Expenses 537 75
Property and equipment (net of accumulated 49,323 39,640
depreciation of $4,740 and $4,724)
Deposits 0 0
-------------- --------------
$ 52,806 $ 92,291
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable - trade $ 147,680 $ 37,030
Accrued expenses 41,128 7,809
Notes payable 118,880 118,880
Accounts payable - stockholder 204,392 126,855
-------------- --------------
Total liabilities $ 512,080 $ 290,574
-------------- --------------
Stockholders' equity
Common stock, $.01 par value 59,819 58,549
Additional paid-in capital 415,142 352,912
Deficit accumulated during the development stage (934,235) (609,744)
-------------- --------------
Total deficit in stockholders' equity $ (459,274) $ (198,283)
-------------- --------------
$ 52,806 $ 92,291
============== ==============
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<TABLE>
SPORTS-GUARD, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Three Months Nine Months Nine Months July 11, 1994
Ended June Ended June Ended June Ended June (Inception) to
30, 1996 30, 1997 30, 1996 30,1997 June 30, 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sales $ 459 $ 0 $ 1,298 $ 0 $ 1,495
Cost of sales 95 225 317
----------- ----------- ----------- ----------- -----------
Gross profit 364 0 1,073 0 1,178
----------- ----------- ----------- ----------- -----------
Expenses:
Advertising 29,430 142,429 143,087
Legal and accounting fees 55,988 5,700 68,788 36,654 127,475
Consulting fees 22,136 5,000 49,752 63,000 138,560
Executive compensation 24,000 24,000 48,000 72,000 144,000
Executive compensation (waived) 24,000 48,000
Rent 9,999 10,000 27,087 30,000 75,547
Travel 3,890 785 9,325 3,159 21,895
Auto expenses 30 1,123 3,232 4,742 20,586
Telephone 1,542 848 10,412 2,974 18,272
Contract labor 5,141 384 11,298 4,000 18,761
Office expenses 737 1,190 9,403 2,265 14,957
License and fees 6,221 3,646 7,026 9,531 20,050
Interest 2,931 6,911 3,260 21,183 28,119
Payroll taxes 2,038 3,874 3,151 8,861
Printing 1,362 5,680 5,680
Meals and entertainment 557 61 2,055 1,183 6,823
Testing 82 782 1,740 6,901
Postage 1,026 226 3,088 540 5,036
Depreciation 1,576 1,622 3,064 4,820 9,544
Supplies 3,027
Equipment rental 334 1,592 1,197 3,524
Dues and subscriptions 313 643 822 1,338 3,330
Insurance 1,344
Taxes 220 1,175
Miscellaneous 455 103 658 274 1,252
Utilities 214 449 160 769
Donations 125
Repairs 31 62
----------- ----------- ----------- ----------- -----------
Total Expenses 169,668 62,576 436,296 263,942 876,762
----------- ----------- ----------- ----------- -----------
Other Expenses
Loss on Disposal of Equipment 22,096 22,096 22,096
Loss on Disposal of Inventory 38,455 38,455 38,455
----------- ----------- -----------
Total Other Expenses 60,551 60,551 60,551
----------- ----------- -----------
Net loss $ (169,304) $ (123,127) $ (435,223) $ (324,493) $ (936,135)
=========== =========== =========== =========== ===========
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</TABLE>
<PAGE>
<TABLE>
SPORTS-GUARD, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
July 11, 1994
Nine Months Ended Nine Months Ended (Inception) to June
June 30, 1996 June 30, 1997 30,1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (435,223) $ (324,493) $ (936,135)
Adjustment to reconcile to net
cash used in operating activities:
Depreciation 3,064 4,820 9,544
Write-off of deferred charges 16,284
Waived compensation 24,000 48,000
Changes in:
Accounts payable 44,376 110,650 147,680
Other payables 10,355 15,637
Accrued expenses (17,328) 22,964 25,491
Inventory (30,800) 27,190 (2,554)
Prepaid expenses (150) (462) (537)
----------------- ----------------- -----------------
Net cash used in operating activities $ (395,777) $ (148,976) $ (692,874)
----------------- ----------------- -----------------
Cash flows from investing activities
Acquisition of equipment (12,383) (36,599) (80,963)
Disposal of equipment 22,096 22,096
Deposits 100 - -
----------------- ----------------- -----------------
Net cash used in investing activities (12,283) (14,503) (58,867)
----------------- ----------------- -----------------
Cash flows from financing activities
Proceeds from notes payable 10,000 10,000
Repayments of notes payable (3,750) (10,000)
Issuance of notes payable - Apportum 118,880 118,880
Proceeds from convertible notes -
Common stock subscriptions (net of
syndication costs of $0 and $15,941) 203,887 359,059
Issuance of common stock 63,500 69,800
Borrowings from shareholder 14,100 82,872 256,737
Repayments of borrowings from shareholder (18,400) (5,334) (52,345)
----------------- ----------------- -----------------
Net cash provided by financing activities 324,717 141,038 752,131
----------------- ----------------- -----------------
Net increase (decrease) in cash (83,343) (22,441) 391
Cash at beginning of period 84,746 22,832 -
----------------- ----------------- -----------------
Cash at end of period $ 1,403 $ 391 $ 391
================= ================= =================
</TABLE>
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<PAGE>
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Basis of Presentation
- ---------------------
The Company's unaudited condensed balance sheet as of June 30, 1997 and
September 30, 1996, and the interim unaudited condensed statements of
operations for the three month and the nine month periods ended June 30,
1997 and 1996, and the related unaudited condensed statements of cash flows
have been prepared by the Company without audit. In the opinion of
management, all adjustments considered necessary to present fairly the
financial position at June 30, 1997 and September 30, 1996, and the results
of operations and cash flows of the Company for each of the quarters and
nine months ended June 30, 1997 and 1996, have been made.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles, have been omitted from the Company's unaudited
financial statements. The audited financial statements and notes thereto
for the period ended September 30, 1996 should be referred to by the reader.
Losses on Disposal of Equipment and Inventory
- ---------------------------------------------
The Company wrote-off its finished-goods of the old Fielders-Guard masks
in the amount of $38,455. The Company also wrote-off the cost of the
original mold used to manufacture the old Fielders-Guard masks, in the
amount of $26,900.
Inventory
- ---------
Inventory consisted of the following at June 30, 1997:
Raw Material $ 2,554
Finished Goods 0
-------
Total $ 2,554
=======
Executive Compensation
- ----------------------
The salary for the Company's president was accrued for the quarter ended
June 30, 1997 at $24,000.
Shareholders' Equity
- --------------------
The Company has the authority to issue 20,000,000 shares of common stock,
$.01 par value. During the quarter ended June 30, 1997, no shares of the
Company's common stock was issued.
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<PAGE>
ITEM 2. Management's Discussion and Analysis or Plan of Operation.
----------------------------------------------------------
The Company is a development stage entity engaged in the design and
distribution of sports safety equipment. The Company's first product, known
as the Fielders-Guard, is a polycarbonate face guard for use primarily by
defensive players in the sports of baseball and softball.
Despite the Company's continued marketing efforts, the Company had no
sales of the Fielders-Guard and, consequently, no revenues during the nine
month period ended June 30, 1997. Revenues for the three month period ended
June 30, 1997 decreased by approximately 100% over the same period in the
prior year, and general and administrative expenses decreased by
approximately 63%. Management determined that the design of the Fielders-
Guard was a significant factor in the lack of market acceptance of the
product. Consequently, the Company developed a plan to redesign its product
in order to attempt to attain market acceptance. The Company engaged
Advanced Design Corporation of Newington, Virginia to develop structural
improvements in the Fielders-Guard while reducing the overall size and
thickness of the polycarbonate mask and impact pads. The redesigned
Fielders-Guard has a projection for the nose area and a more open design
allowing more ventilation and easier communication between players, it is
also lighter-weight and is constructed with a clear polycarbonate injection
molded mask which allows for clearer visibility.
The Company took a loss on the disposal of the original mold in the
amount of $26,900, and on the disposal of its inventory of the old masks in
the amount of $38,455 during the three month period ended June 30, 1997.
During the nine month period ended June 30, 1997, the Company's cash
position decreased by $22,440 to $392 at June 30, 1997. The Company also
had a deficiency in working capital which increased from a deficit of
$237,923 at September 30, 1996 to a deficit of $508,597 at June 30, 1997.
The decrease in the Company's liquidity is primarily due to the fact that
the Company depleted its cash to pay expenses, and continued to expend funds
for general and administrative expenses without adequate revenues from
operations to offset such expenses. During the nine month period ended June
30, 1997, the Company's inventory decreased to $2,554 as a result of the
disposal of the old Fielders-Guard masks.
The Company produced approximately 25 prototypes of the redesigned
Fielders-Guard, using a vacuum mold, for use in obtaining a preliminary
indication of market acceptance and establishing relationships with
potential dealers. The Company also entered into an agreement with Revere
Mold and Engineering of Chester, Virginia for production of the injection
mold for the redesigned Fielders-Guard. Subject to the availability of
funds, management intends to engage Reiss Corporation of Blackstone,
Virginia to begin contract manufacturing of the Fielders-Guard mask
following completion of the new injection mold, as well as to provide
product assembly and packaging services. The redesigned pads for the
Fielders-Guard will be produced by Rubatex Corporation of Bedford, Virginia,
using the Company's existing inventory of pads for initial production.
There can be no assurance that the redesigned product will result in market
acceptance or any meaningful level of sales.
The Company has previously conducted an unsuccessful private offering of
Common Stock to raise funds necessary in order to continue its operations.
There is no assurance that the Company will be successful in raising
additional capital, that the redesigned Fielder-Guard will result in market
acceptance, that the Company will be able to generate any meaningful level
of sales of the redesigned Fielders-Guard product or that the Company will
be able to continue its ongoing operations.
-6-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
Inapplicable
Item 2. Changes in Securities.
---------------------
Inapplicable.
Item 3. Defaults Upon Senior Securities.
-------------------------------
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
Inapplicable.
Item 5. Other Information.
-----------------
Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
--------
Inapplicable.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the period covered by this
report.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
SPORTS-GUARD, INC.
(Registrant)
Dated: October 20 , 1997 By: /s/ NORMAN O. MILLIGAN, SR.
---------------------------
Norman O. Milligan, Sr.,
Chief Financial Officer
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 392
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,554
<CURRENT-ASSETS> 3,483
<PP&E> 49,323
<DEPRECIATION> 4,820
<TOTAL-ASSETS> 52,806
<CURRENT-LIABILITIES> 393,200
<BONDS> 0
0
0
<COMMON> 59,819
<OTHER-SE> (519,093)
<TOTAL-LIABILITY-AND-EQUITY> 52,806
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 263,942
<OTHER-EXPENSES> 60,551
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,183
<INCOME-PRETAX> (324,493)
<INCOME-TAX> 0
<INCOME-CONTINUING> (324,493)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (324,493)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
