<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
OR
[ ] 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 0-28238
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
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DELAWARE 54-1521616
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
</TABLE>
45472 HOLIDAY DRIVE, STERLING, VIRGINIA 20166
(Address of Principal Executive Offices)
(703) 709-7788
(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 Securities 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 X NO___
Number of shares of common stock, par value $.001 per share, outstanding at
August 13, 1996: 3,342,483
Transitional Small Business Disclosure Format (check one): YES ___ NO X
<PAGE> 2
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
INDEX
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PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheets at June 30, 1996 and June 30, 1995................................ 3
Statements of Income for Three Month Periods Ended June 30, 1996 and June 30,
1995; and Six Month Periods Ended June 30, 1996 and June 30, 1995............... 5
Statements of Cash Flows for Periods Ended June 30, 1996 and June 30, 1995....... 6
Notes to Financial Statements.................................................... 7
Item 2. Management's Discussion and Analysis of Results of Operations.............. 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................................... 10
Signature............................................................................. 11
Exhibit 11 -- Statement re Computation of Per Share Earnings.......................... 13
Exhibit 27 -- Financial Data Schedule................................................. 15
</TABLE>
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
BALANCE SHEETS
JUNE 30, 1996 AND 1995
UNAUDITED
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<CAPTION>
JUNE 30, JUNE 30,
1996 1995
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents....................................... $3,080,644 $ 11,615
Accounts receivable............................................. 155,500 38,222
Inventories:
Raw materials................................................ 189,699 45,950
Work in process.............................................. 88,330 1,635
Finished goods............................................... 31,389 60,908
Prepaid expenses................................................ 21,167 42,291
---------- ---------
Total current assets.................................... $3,566,729 $ 200,621
PROPERTY AND EQUIPMENT
Leasehold improvements.......................................... $ 114,494 $ 114,494
Manufacturing equipment......................................... 63,477 44,235
Office furniture and equipment.................................. 61,150 38,416
Land............................................................ 255,224 --
Construction in process......................................... 253,010 --
Less accumulated depreciation................................... (177,304) (156,962)
---------- ---------
$ 570,051 $ 40,183
---------- ---------
OTHER ASSETS
Certifications and patents...................................... $ 119,749 $ 110,205
Less accumulated amortization................................... (115,781) (89,813)
---------- ---------
$ 3,968 $ 20,392
Deposits........................................................ 16,625 5,326
---------- ---------
$ 20,593 $ 25,718
Total assets............................................ $4,157,373 $ 266,522
========== =========
</TABLE>
See Notes to Financial Statements
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<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1995
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes payable.................................................. $ -- $ 67,800
Notes payable -- related parties............................... 1,200 110,610
Accounts payable............................................... 523,764 368,512
Customer deposits.............................................. 3,212 --
Accrued expenses............................................... 57,597 51,581
---------- -----------
Total current liabilities................................. $ 585,773 $ 598,503
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $0.001, authorized 15,000,000 shares,
issued and outstanding 3,342,483 shares in 1996; par value
$1.00, authorized 5,000,000 shares, issued and outstanding
357,900 shares in 1995...................................... $ 3,342 $ 358
Additional paid-in capital, including contributed services of
$37,500 in 1996 and $50,000 in 1995......................... 4,121,932 1,798,548
Less notes receivable for the purchase of common stock......... (33,080) --
Preferred stock, $.20 par value, authorized 1,000,000 shares;
no shares issued and outstanding in 1996 and 1995........... -- --
Accumulated deficit since December 7, 1995, (termination of S
corporation status in which a deficit of $2,320,227 was
applied against additional paid-in capital)................. (520,594) --
Accumulated deficit............................................ -- (2,130,888)
---------- -----------
Total stockholders' equity (deficit)...................... $3,571,600 $ (331,982)
Total liabilities and stockholders' equity (deficit)...... $4,157,373 $ 266,522
========== ===========
</TABLE>
See Notes to Financial Statements
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GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 1996 AND 1995
UNAUDITED
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<CAPTION>
THREE MONTH PERIODS SIX MONTH PERIODS ENDED
ENDED JUNE 30, JUNE 30,
----------------------- -------------------------
1996 1995 1996 1995
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Sales....................................... $ 329,259 $ 206,293 $ 869,283 $ 340,921
Cost of goods sold.......................... 277,973 230,019 772,175 403,756
---------- ---------- ---------- ----------
Gross profit (loss)....................... $ 51,286 $ (23,726) $ 97,108 $ (62,835)
General and administrative expenses......... 179,843 86,353 317,760 188,478
Selling expenses............................ 124,479 19,493 283,796 46,006
--------- --------- ---------- ----------
Operating loss............................ $ (253,036) $ (129,572) $ (504,448) $ (297,319)
Financial income (expense):
Interest income........................... 6,922 -- 7,916 --
Interest expense.......................... (7,557) (7,630) (9,106) (11,102)
---------- ---------- ---------- ---------
Loss before income taxes.................. $ (253,671) $ (137,202) $ (505,638) $ (308,421)
Income taxes................................ -- -- -- --
---------- ---------- ---------- ----------
Net loss.................................. $ (253,671) $ (137,202) $ (505,638) $ (308,421)
========== ========== ========== ==========
Primary loss per common and common
equivalent shares......................... $ (.08) $ (.05) $ (.17) $ (.11)
Fully diluted loss per common and common
equivalent shares......................... $ (.08) $ (.05) $ (.17) $ (.11)
Weighted Average Shares Outstanding......... $3,309,733 $2,820,983 S3,065,358 $2,820,983
No dividends paid.
</TABLE>
See Notes to Financial Statements
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GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
UNAUDITED
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JUNE 30, JUNE 30,
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss....................................................... $ (505,638) $(308,421)
Adjustments to reconcile net loss to cash used
by operating activities:
Depreciation................................................ 5,156 15,187
Amortization................................................ 14,462 11,507
Contributed services........................................ 50,000 50,000
Change in assets and liabilities:
(Increase) decrease in accounts receivable................ (55,256) 21,523
(Increase) decrease in inventories........................ (72,395) 43,313
Increase in prepaid expenses and deposits................. (3,505) (15,374)
Increase in accounts payable and accrued expenses......... 409,951 127,897
Decrease in customer deposits............................. (54,859) --
---------- ---------
Net cash used in operating activities.................. $ (212,084) $ (54,368)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property and equipment............................. $ (550,210) $ --
Acquisition of patent rights................................... (9,544) --
---------- ---------
Net cash used in investing activities.................. $ (559,754) $ --
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings............................ $ -- $ 185,910
Principal payments on short-term borrowings.................... (222,292) (137,943)
Proceeds from public offering.................................. 4,985,250 --
Public offering costs.......................................... (1,286,783) --
Proceeds from issuance of common stock
(prior to public offering).................................. -- 15,000
---------- ---------
Net cash provided by financing activities.............. $3,476,175 $ 62,967
Net increase in cash and cash equivalents........................ $2,704,337 $ 8,599
Cash and cash equivalents at beginning of period................. 376,307 3,016
---------- ---------
Cash and cash equivalents at end of period....................... $3,080,644 $ 11,615
========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.................................................... $ 18,300 $ 2,362
========== =========
Income taxes................................................ $ -- $ --
========== =========
</TABLE>
See Notes to Financial Statements
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION AND BUSINESS
Guardian Technologies International, Inc. (The Company) was reincorporated in
the State of Delaware in February, 1996, as part of a Plan of Agreement and
Merger between Guardian International Technologies International, Inc., a
Virginia corporation, and Guardian Technologies International, Inc., a Delaware
corporation. The Company manufactures and distributes soft armor products,
primarily superior quality ballistic protective vests, for law enforcement
officers, armed forces personnel, and other legitimate individuals or groups
requiring protective equipment.
NOTE 2 BASIS OF PRESENTATION
The accompanying financial statements have been prepared by the Company.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. In the opinion of the Company's management, the
disclosures are adequate to make the information presented not misleading, and
the financial statements contain all adjustments necessary to present fairly
the financial position as of June 30, 1996 and 1995, results of operations for
the three months and six months ended June 30, 1996 and 1995 and cash flows for
the six months ended June 30, 1996 and 1995.
The results of operations for the six months ended June 30, 1996 are not
necessarily indicative of the results to be expected for the full year.
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
Net sales for the three months ended June 30, 1996 were $329,259, compared
to $206,293 for the same period in 1995. The increase in sales was attributable
to the Company's completing a significant new contract. The Company's gross
profit for the three month period ended June 30, 1996 was $51,286 compared to a
gross loss of $23,726 for the same period in 1995. Gross profit increased due to
higher production volume level and expense controls. Sales in the second
quarter of 1996 decreased from the first quarter due to the completion of a
contract. Total operating expenses for the three month period ended June 30,
1996 were $304,322, compared to $105,846 for the same period in 1995. The
increase in cost of $198,476 was composed of a $93,490 increase in general and
administrative expenses and $104,986 increase in selling expenses. The increase
in general and administrative expenses included increased salaries and related
costs of $29,174 and a $49,105 increase in professional fees, including legal
fees related to reincorporation in the state of Delaware. Substantially all of
the increase in selling expenses of $104,986 was composed of commissions and
fees related to increased sales. In the three months ended June 30, 1996,
non-operating net interest expense for the Company decreased $6,995 over the
same period in 1995, because of increased investment income in 1996. The net
loss for the three months ended June 30, 1996 was $253,671, or $116,469 more
than the loss of $137,202 for the same period in 1995.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net sales for the first six months in 1996 were $869,283, compared to
$340,921 for the same period in 1995. The increase in sales was attributable to
the Company's securing several contracts. The Company's gross profit for the
first six months in 1996 was $97,108, compared to a gross loss of $62,835 for
the same period in 1995. Gross profit increased in the 1996 period due to
increased sales, and because increased production levels spread costs over
more units with larger margins. Total operating expenses for the first six
months in 1996 were $601,556, compared to $234,484 for the same period 1995.
This $367,072 increase in expenses was attributable to the Company's gearing
up for anticipated increased production and sales. Included in the increased
expenses was $129,282 of additional general and administrative expenses.
Salaries and related expenses increased by $57,930, with most of the remaining
increase related to professional fees. Additionally, selling expenses
increased by $237,790 on account of higher commissions, salaries, and fees
due to increased sales. The 1996 non-operating net interest expense for the
Company decreased $9,912 over 1995's total due to an increase in short-term
investment income in the amount of $7,916. The net loss for the six months ended
June 30, 1996 was $505,638, or $197,217 more than the loss of $308,421 for the
same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has satisfied its capital requirements
through the sale of common stock to investors, loans from affiliated lenders
and shareholders, and notes payable personally guaranteed by officers and
principal shareholders of the Company. In addition, the Company has issued
common stock in lieu of cash for services rendered.
In May, 1996, the Company completed an initial public offering. In the
offering, the Company issued and sold 977,500 units, each unit consisting of one
share of common stock and one warrant to purchase common stock. The gross
proceeds from the offering totaled $4,985,250, and the Company received net
proceeds of $3,614,542, after deducting commissions, fees and other costs
associated with the offering.
At June 30, 1996, the Company had net working capital of $2,980,956,
stockholders' equity of $3,571,600, and accumulated losses of $520,594 and
$2,320,227 which was reclassified paid in capital upon termination of the S
corporation election on December 7, 1995.
<PAGE> 9
The Company has purchased land and begun construction on a new facility.
The total cost at June 30, 1996 is $508,234 with $195,000 included in accounts
payable. The Company intends to finance the building with permanent financing.
At June 30, 1996, the Company's inventories were $309,418 or $108,493 more
than the prior year. The additional inventories have been purchased for
work in progess at June 30, 1996 and anticipated future projects.
For the six months ended June 30, 1995, the Company incurred a loss of
$308,421. Working capital, which was a negative $181,155 at the beginning of the
period, decreased to a deficit of $397,882 at June 30, 1995. The Company
financed these losses and cash used in operations through significant borrowings
and/or stock transactions in 1995.
The Company's independent auditor's report on the financial statements as
of and for the year ended December 31, 1995, includes a statement to the effect
that there is substantial doubt about the Company's ability to continue as a
going concern. Management intends to address these conditions by increasing
revenues from its existing and planned market expansion. There can be no
assurance, however, that the Company will be successful in these plans.
<PAGE> 10
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
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Exhibit
Number Description
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the Company
during the quarter ended June 30, 1996.
<PAGE> 11
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant has
duly caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
(Registrant)
Date: August 14, 1996 By: /s/ Joseph F. Fernandez
Joseph F. Fernandez
Vice President, Chief Financial
Officer,
Chief Accounting Officer and
Treasurer
<PAGE> 12
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
INDEX TO EXHIBITS
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<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------ --------------------------------------------------------------------------- ----
<C> <S> <C>
11 Statement re Computation of Per Share Earnings............................. 13
27 Financial Data Schedule.................................................... 15
</TABLE>
<PAGE> 1
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS AND SIX MONTHS ENDED 6/30/95
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Actual shares outstanding 6/30/95 Adjusted for stock splits and dividends....... 1,324,230
Common shares subject to SAB Topic 4D (outstanding for all periods presented)
Shares issued to employee for contributed services (11/95).................... 3,330
Securities sold in private offering(12/95).................................... 842,835
Securities issued for notes receivable (12/95)................................ 194,588
Common equivalents subject to SAB Topic 4D (outstanding for all periods
presented, treasury method) Options issued to selected individuals in 1/96
(Exercise price $.44)......................................................... 500,000
Less shares purchased at IPO price per Topic 4D............................... (44,000)
--------
Common and common equivalent shares outstanding at 6/30/95...................... 2,820,983
</TABLE>
<TABLE>
<CAPTION>
THREE SIX
MONTHS MONTHS
ENDED ENDED
6/30/95 6/30/95
--------- ---------
<S> <C> <C>
Net Income (Loss).................................................. $(137,202) $(308,421)
Net Loss per common and common equivalent shares................... $ (0.0486) $ (0.109)
Rounded.......................................................... $ (0.05) $ (0.11)
</TABLE>
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<PAGE> 2
COMPUTATION OF PER SHARE EARNINGS
SIX MONTHS ENDED 6/30/96
<TABLE>
<S> <C>
Actual shares outstanding at 1/1/96............................................. 2,364,983
Common equivalents subject to SAB Topic 4D
(outstanding for all periods presented, treasury method)
Options issued to selected individuals in 1/96 (Exercise price $.44).......... 500,000
Less shares purchased at IPO price per Topic 4D............................ (44,000)
--------
Common and common equivalent shares outstanding at 3/31/96...................... 2,820,983
Weighted Average Computation for 6 months ended 6/30/96
Common and common equivalent shares outstanding for entire 6 months............. 2,820,983
Shares issued at IPO 977,500
Outstanding for 1.5/6 months .25 244,375
--------
Weighted average shares outstanding for 6 months ending 6/30/96................. 3,065,358
========
Weighted Average Computation for 3 months ended 6/30/96
Common and common equivalent shares outstanding for entire 3 months............. 2,820,983
Shares issued at IPO 977,500
Outstanding for 1.5/3 months .50 488,750
--------
Weighted average shares outstanding for 3 months ending 6/30/96................. 3,309,733
========
</TABLE>
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<CAPTION>
THREE SIX
MONTHS MONTHS
ENDED ENDED
6/30/96 6/30/96
--------- ---------
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Net Income (Loss).................................................. $(253,671) $(505,638)
Net Loss per common and common equivalent shares................... $ (0.077) $ (0.165)
Rounded............................................................ $ (0.08) $ (0.17)
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,080,644
<SECURITIES> 0
<RECEIVABLES> 155,500
<ALLOWANCES> 0
<INVENTORY> 309,418
<CURRENT-ASSETS> 3,566,729
<PP&E> 747,355
<DEPRECIATION> (177,304)
<TOTAL-ASSETS> 4,157,373
<CURRENT-LIABILITIES> 585,773
<BONDS> 0
<COMMON> 3,342
0
0
<OTHER-SE> 3,568,258
<TOTAL-LIABILITY-AND-EQUITY> 4,157,373
<SALES> 869,283
<TOTAL-REVENUES> 869,283
<CGS> 772,175
<TOTAL-COSTS> 1,373,731
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,106
<INCOME-PRETAX> (505,638)
<INCOME-TAX> 0
<INCOME-CONTINUING> (505,638)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (505,638)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
