<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 December 31, 1996
[ ] 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 December 31, 1996, 5,981,923 shares of the Company's common stock were
outstanding.
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PART 1 - FINANCIAL INFORMATION
PAGE
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ITEM 1. Financial Statements
(a) Balance Sheets - December 31, 1996 (Unaudited) and
September 30, 1996................................................2
(b) Statements of Operations (Unaudited) - Three Month
Periods Ended December 31, 1996 and 1995 and Period from
Inception (July 11, 1994) to December 31, 1996....................3
(c) Statements of Cash Flows (Unaudited) - Three Month
Periods Ended December 31, 1996 and 1995 and Period from
Inception (July 11, 1994) to December 31, 1996....................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
December 31,
1996 September 30,
(Unaudited) 1996
-------------- --------------
Cash $ 366 $ 22,832
Inventory 40,755 29,744
Prepaid Expenses 5,707 75
Property and equipment (net of accumulated 34,184 39,640
depreciation of $4,740 and $4,724)
Deposits 11,670 -
-------------- --------------
$ 92,682 $ 92,291
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable - trade $ 64,349 $ 37,030
Accrued expenses 25,951 7,809
Notes payable 118,880 118,880
Accounts payable - stockholder 146,452 126,855
-------------- --------------
Total liabilities $ 355,632 $ 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 (737,911) (609,744)
-------------- --------------
Total deficit in stockholders' equity $ (262,950) $ (198,283)
-------------- --------------
$ 92,682 $ 92,291
============== ==============
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<PAGE>
SPORTS-GUARD, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
(UNAUDITED)
July 11,
Three Three 1994
Months Months (Inception)
Ended Ended to
December December December
31,1995 31, 1996 31,1996
----------- ----------- -----------
Sales $ 0 $ 0 $ 1,495
Cost of sales 0 0 317
----------- ----------- -----------
Gross profit 0 0 1,178
----------- ----------- -----------
Expenses:
Advertising 107,611 143,087
Legal and accounting fees 5,562 12,287 103,108
Consulting fees 19,750 58,000 133,560
Executive compensation 24,000 96,000
Executive compensation 24,000 48,000
(waived)
Rent 7,088 10,000 55,547
Travel 4,233 2,148 20,884
Auto expenses 1,266 2,464 18,308
Telephone 2,058 1,057 16,355
Contract labor 3,433 2,417 17,178
Office expenses 650 503 13,195
License and fees 397 1,985 12,504
Interest 6,529 13,465
Payroll taxes 1,259 6,969
Printing 3,848 5,680
Meals and entertainment 1,083 956 6,596
Testing 700 1,740 6,901
Depreciation 1,576 6,300
Supplies 3,027
Equipment rental 690 435 2,762
Dues and subscriptions 346 274 2,266
Insurance 1,344
Taxes 1,175
Miscellaneous 203 145 1,123
Utilities 181 161 770
Donations 125
Repairs 31
----------- ----------- -----------
Total Expenses $ 183,674 $ 128,169 $ 740,989
----------- ----------- -----------
Net Loss $ (183,674) $ (128,169) $ (739,811)
=========== =========== ===========
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<PAGE>
<TABLE>
SPORTS-GUARD, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
July 11, 1994
Three Months Three Months (Inception) to
Ended December Ended December December 31,
31, 1995 31, 1996 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (183,674) $ (128,169) $ (739,811)
Adjustment to reconcile to net
cash used in operating activities:
Depreciation 1,576 6,300
Waived compensation 24,000 48,000
Changes in:
Accounts payable 847 27,320 64,350
Other payables 10,355 10,355
Accrued expenses (20,203) 7,788 15,597
Inventory (15,100) (11,010) (40,754)
Prepaid expenses (28,300) (5,632) (5,707)
----------------- ----------------- -----------------
Net cash used in operating activities: $ (222,430) $ (97,772) $ (641,670)
----------------- ----------------- -----------------
Cash flows from investing activities:
(Acquisition) disposal of equipment (8,703) 3,880 (40,484)
Deposits (13,600) (11,670) (11,670)
----------------- ----------------- -----------------
Net cash used in investing activities: (22,303) (7,790) (52,154)
----------------- ----------------- -----------------
Cash flows from financing activities:
Proceeds from notes payable 13,750 10,000
Repayments of notes payable (10,000)
Proceeds from convertible notes 118,880
Common stock subscriptions (net of
syndication costs of $1,113 and
$15,941) 203,887 359,059
Issuance of common stock 63,500 69,800
Borrowings from shareholder 23,296 197,161
Repayments of borrowings from
shareholder (18,400) (3,700) (50,710)
----------------- ----------------- -----------------
Net cash provided by financing activities: 199,237 83,096 694,190
----------------- ----------------- -----------------
Net increase (decrease) in cash (45,496) (22,466) 366
Cash at beginning of period 84,746 22,832 -
----------------- ----------------- -----------------
Cash at end of period $ 39,250 $ 366 $ 366
================= ================= =================
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</TABLE>
<PAGE>
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Basis of Presentation
- ---------------------
The Company's unaudited condensed balance sheet as of December 31, 1996 and
September 30, 1996, and the interim unaudited condensed statements of
operations for the three month periods ended December 31, 1996 and 1995, 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 December 31,
1996 and September 30, 1996, and the results of operations and cash flows of
the Company for each of the quarters ended December 31, 1996 and 1995, 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.
Inventory
- ---------
Inventory consisted of the following at December 31, 1996:
Raw Materials $ 2,300
Finished Goods 38,455
---------
Total $ 40,755
=========
Convertible Notes Payable
- -------------------------
During the quarter ended June 30, 1996, the Company issued convertible
promissory notes in the amount of $118,880 to an accredited investor in a
private offering. The notes bear interest at the rate of 10% per annum and are
due 24 months from the date of issuance. Interest is payable on the notes
quarterly and in arrears beginning on June 30, 1996. The notes are
convertible, at the option of the holder, into the Company's common stock at an
initial conversion price of $1.00 per share. The Company used the entire
proceeds for working capital purposes, including the payment of advertising and
marketing expenses, and general and administrative expenses.
Shareholders' Equity
- --------------------
The Company has the authority to issue 20,000,000 shares of common stock,
$.01 par value. During the quarter ended December 31, 1996, 127,000 shares of
common stock were issued to individuals for the following: (1) consulting
services provided to the Company ($58,500); and (2) as part of a prepaid
marketing services agreement ($5,000). At December 31, 1996 there were
5,981,923 shares of common stock of the Company outstanding.
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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 three
month periods ended December 31, 1996 and 1995. General and administrative
expenses decreased by approximately 30%. Management has 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 an effort 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 for better ventilation and easier communication between
players and it is lighter-weight and constructed with a clear polycarbonate
injection molded mask which allows for clearer visibility of the player's
face.
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 which will cost $35,000 and is expected to be completed by May 30,
1997. 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 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.
The Company's current cash position is not sufficient to fund redesign of
the product or continued operations, including the advertising and marketing
expenses which management believes will be necessary to introduce the
redesigned product. There can be no assurance that the redesigned product
will result in market acceptance or any meaningful level of sales. During
the next twelve months, general and administrative expenses are expected to
substantially increase due to product development costs, advertising costs
related to continuation of the Company's marketing plan, legal and
accounting fees related to maintaining the Company's reporting status with
the Securities and Exchange Commission and other expenses related to the
Company's marketing efforts.
During the three month period ended December 31, 1996, the Company's cash
position decreased by $22,466 to $366 at December 31, 1996. The Company
also has a deficiency in working capital which increased from a deficit of
$237,923 at September 30, 1996 to a deficit of $297,134 at December 31,
1996. The decrease in the Company's liquidity is primarily due to the
continued expenditure of funds for general and administrative expenses with
insufficient revenues from operations to offset such expenses. Inventory
levels increased from $29,744 to $40,755 during the three month period ended
December 31, 1996.
There is no assurance that the Company will be successful in raising
additional capital, that the redesigned Fielders-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> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 12,036
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 40,755
<CURRENT-ASSETS> 58,498
<PP&E> 34,184
<DEPRECIATION> 1,576
<TOTAL-ASSETS> 92,682
<CURRENT-LIABILITIES> 236,752
<BONDS> 0
0
0
<COMMON> 59,819
<OTHER-SE> (322,769)
<TOTAL-LIABILITY-AND-EQUITY> 92,682
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 128,169
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,529
<INCOME-PRETAX> (128,169)
<INCOME-TAX> 0
<INCOME-CONTINUING> (128,169)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (128,169)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
