<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 March 31, 1997
----------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-28238
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 54-1521616
------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation) or Organization Number)
22570 Markey Court, Dulles, Virginia 20166
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(Address of Principal Executive Offices)
(703) 444-7931
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(Issuer's Telephone Number, Including Area Code)
45472 Holiday Drive, Sterling, Virginia 20166
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
<PAGE> 2
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
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Number of shares of common stock, par value $.001 per share, outstanding at
May 15, 1997: 3,342,483
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Transitional Small Business Disclosure Format (check one): YES NO X
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<PAGE> 3
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
INDEX
<TABLE>
<S> <C>
Part I. Financial Information Page
Item 1. Financial Statements 3
Balance Sheets at March 31, 1997 and March 31, 1996 3
Statements of Income for Three Month Periods Ended
March 31, 1997 and March 31, 1996. 5
Statements of Cash Flows for Periods Ended March 31, 1997
and March 31, 1996. 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 11
Signature 12
Exhibit 11 - Statement re Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
</TABLE>
<PAGE> 4
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
BALANCE SHEETS
March 31, 1997 and 1996
Unaudited
<TABLE>
<CAPTION>
March 31, March 31,
ASSETS 1997 1996
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<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 308,827 $ 24,952
Accounts receivable 103,372 140,695
Interest receivable 15,931 -
Inventories:
Raw materials 370,245 251,538
Work in process 52,022 41,750
Finished goods 81,077 18,867
Prepaid expenses 59,230 171,445
Marketable securities 1,959,145 -
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Total current assets $2,949,849 $ 649,247
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PROPERTY AND EQUIPMENT
Leasehold improvements $ 115,394 $ 114,494
Manufacturing equipment 63,477 58,049
Office furniture and equipment 111,274 45,574
Land 237,339 4,513
Building 2,530,555
Less accumulated depreciation (214,768) (177,668)
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$2,843,271 $ 44,962
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</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
OTHER ASSETS
Certifications and patents $ 147,641 $ 110,497
Less accumulated amortization (123,868) (107,187)
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$ 23,773 $ 3,310
Deposits 7,125 18,194
Deferred Taxes 4,405 -
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$ 35,303 $ 21,504
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Total assets $5,828,423 $ 715,713
========== =========
</TABLE>
See Notes to Financial Statements
<PAGE> 6
<TABLE>
<CAPTION>
March 31, March 31,
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1997 1996
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<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ 2,533,678 $ 236,200
Current portion of long-term debt - insurance 58,145 -
Accounts payable 348,253 200,027
Customer deposits - 58,071
Accrued expenses 22,041 38,390
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Total current liabilities $ 2,962,117 $ 532,688
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LONG-TERM DEBT - INSURANCE $ 73,850 $ -
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STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $0.001, authorized 15,000,000
shares, issued and outstanding 3,342,483 shares in
1997; 2,364,983 shares in 1996 $ 3,342 $ 2,365
Additional paid-in capital, including contributed
services of $37,500 in 1996 4,138,275 480,663
Less notes receivable for the purchase of common stock (33,080) (33,080)
Preferred stock, $.20 par value, authorized 1,000,000
shares; no shares issued and outstanding in 1997
and 1996 - -
Unrealized loss on marketable securities (24,964) -
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) (1,291,117) (266,923)
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Total stockholders' equity (deficit) $ 2,792,456 $ 183,025
----------- -----------
Total liabilities and stockholders'
equity (deficit) $ 5,828,423 $ 715,713
=========== ===========
</TABLE>
See Notes to Financial Statements
<PAGE> 7
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF INCOME
For the Three Months Ended March 31, 1997 and 1996
Unaudited
<TABLE>
<CAPTION>
Three Month Periods
Ended March 31,
------------------------
1997 1996
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<S> <C> <C>
Net sales $ 186,573 $ 540,024
Cost of goods sold 271,288 494,202
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Gross profit (loss) (84,715) $ 45,822
General and administrative 201,347 137,917
expenses
Selling expenses 68,227 159,317
---------- ----------
Operating loss $ (354,289) $ (251,412)
Financial income (expense):
Interest income 35,830 994
Interest expense (41,783) (1,549)
Rent Income 17,771 -
Gain on Sale of Investments 8,076 -
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Loss before income taxes $ (334,395) $ (251,967)
Income taxes - -
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Net loss $ (334,395) $ (251,967)
========== ==========
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C>
Primary loss per common and common
equivalent shares $ (.10) $ (.11)
Fully diluted loss per common and
common equivalent shares $ (.10) $ (.11)
Weighted Average Shares Outstanding 3,342,483 2,364,983
No dividends were paid.
</TABLE>
See Notes to Financial Statements
<PAGE> 9
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
For the Three months Ended March 31, 1997 and 1996
Unaudited
<TABLE>
<CAPTION>
March 31, March 31
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (334,395) $ (251,967)
Adjustments to reconcile net loss to cash used
by operating activities:
Depreciation 16,990 5,520
Amortization 7,287 7,169
Change in assets and liabilities:
(Increase) in accounts receivable (42,374) (40,451)
Decrease in interest receivable 44,517 -
(Increase) decrease in inventories 82,238 (75,132)
(Increase) decrease in prepaid expenses and deposits 35,707 (156,652)
Decrease in deferred offering costs - 82,948
Increase (decrease) in accounts payable and
accrued expenses (528,532) 67,007
Decrease in customer deposits ( 3,999) -
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Net cash used in operating activities $ (722,561) $ (361,558)
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CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property and equipment $ (250,089) $ (25,486)
Acquisition of patent rights and certification (3,190) (292)
Proceeds from redemption of marketable securities 1,498,760 -
Purchase of securities available for sale (996,257) -
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Net cash used in investing activities $ 249,224 (25,778)
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</TABLE>
<PAGE> 10
<TABLE>
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings $1,230,000 $ 113,909
Principal payments on short-term borrowings (546,876) (101,200)
Principal payments on long-term debt (14,966) -
Proceeds from issuance of common stock
(prior to public offering) - 23,272
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Net cash provided by financing activities $ 668,158 $ 35,981
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Net increase (decrease) in cash and cash equivalents $ 194,821 $ (351,355)
Cash and cash equivalents at beginning of period 114,006 376,307
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Cash and cash equivalents at end of period $ 308,827 $ 24,952
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 45,932 $ 1,549
========== ==========
</TABLE>
See Notes to Financial Statements
<PAGE> 11
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 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 in all material respects the financial position as of March 31, 1997 and
1996, results of operations for the three months ended March 31, 1997 and 1996
and cash flows for the three months ended March 31, 1997 and 1996.
The results of operations for the three months ended March 31, 1997 are
not necessarily indicative of the results to be expected for the full year.
<PAGE> 12
Item 2. Management's Discussion and Analysis of Results of Operations
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE MONTHS ENDED MARCH 31,
1996.
Net sales for the three months ended March 31, 1997 were $186,573,
compared to $540,024 for the same period in 1996. The decrease in sales was
attributable to a number of factors, including completion of a significant
contract which accounted for 21 percent of sales in the three months ended
March 31, 1996, which was not replaced in 1997, and dislocations caused by the
Company's move to its new office and manufacturing facility. The Company's
gross loss for the three-month period ended March 31, 1997 was $84,715 compared
to a gross profit of $45,822 for the same period in 1996. Gross profit
decreased due to the lower production volume level. Total operating expenses
for the three month period ended March 31, 1997 were $269,574, compared to
$297,234 for the same period in 1996. The decrease in cost of $27,660 was
composed of a $63,430 increase in general and administrative costs and $91,090
decrease in selling expenses. The increase in general and administrative
expenses included a $40,239 increase in professional fees and increased
depreciation of $6,187 and other costs related to moving to the new
facility. The decrease in selling expenses was composed primarily of a decrease
in commissions and fees of $90,237. In the three months ended March 31, 1997,
non-operating net income increased over the same period last year by $20,449
due primarily to rental income of $17,771 derived from leasing excess space in
the new facility. The net loss for the three months ended March 31, 1997 was
$334,395, or $82,428 more than the loss of $251,967 for the same period in
1996.
<PAGE> 13
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 security holders, and notes payable personally guaranteed by officers and
principal security holders 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 $3,628,019, after deducting commissions, fees and other costs
associated with the offering.
Proceeds of the public offering were temporarily invested in short-term
securities with maturities geared to anticipated operating needs and the
pending completion of the company's new office headquarters.
At March 31, 1997, the Company had net working capital of ($12,268),
stockholders' equity of $2,792,456, and accumulated losses of $1,291,117 and
$2,320,227, which was reclassified paid-in capital upon termination of the S
corporation election on December 7, 1995.
The Company has purchased land and completed construction of a new
facility. The total cost at March 31, 1997 is $2,767,894, composed of
$237,339 for land and $2,530,555 in construction costs. Construction of the
new facility, which houses the Company's manufacturing, administrative and
sales operations, was completed and occupancy commenced during January, 1997.
Management has leased approximately 25 percent of the building to other
tenants. Management has initiated discussions with several financial
institutions to obtain permanent financing for the building.
On February 7, 1997, the Company executed a one year note for $900,000 with
a commercial entity. Interest at 15 percent, annual rate, is due monthly. After
payment of three months interest, there are no further prepayment penalties.
The principal balance is due at maturity. The note is secured by a first deed
of trust on the Company's office and manufacturing facility.
At March 31, 1997, the Company's inventories are $503,344 or $191,189 more
than the prior year. The additional inventories have been purchased for
anticipated increased production.
In connection with the company's efforts to reduce costs, the salaries of
the President and Vice President have each been reduced from $100,000 to $75,000
effective with the pay period commencing on February 17, 1997.
In an effort to increase sales of the Company's products in overseas
markets, management has hired one of three new international sales
representatives. Management has identified additional candidates for the two
remaining positions, though they have not yet been filled.
<PAGE> 14
Management continues to carry out its plan for the use of proceeds as
described in the Company's Prospectus dated May 14, 1996. The Company does not
plan to purchase the rigid product fabrication equipment identified in the
prospectus until some future time. Management has used a portion of the
resources allocated for "research/development and patents on new products" to
develop a new type of armor for community police officers and other equipment
for law enforcement. Some of the funds allocated for
"marketing/advertising/promotions" are being used to introduce these new
products in the marketplace.
The Company's independent auditor's report on the financial statements as
of and for the year ended December 31, 1996, 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> 15
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit
Number Description
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11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the Company
during the quarter ended March 31, 1997.
<PAGE> 16
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: May 15, 1997 By: /s/Joseph F. Fernandez
---------------------------
Joseph F. Fernandez Vice
President, Chief Financial Officer, Chief
Accounting Officer and Treasurer
<PAGE> 17
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
INDEX TO EXHIBITS
Exhibit
Number Description
- -------- -----------
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED 3/31/96
Actual shares outstanding at 1/1/96 2,364,983
Common and common equivalent shares outstanding at 3/31/96 2,364,983
Weighted average shares outstanding for three months ended 3/31/96 2,364,983
<TABLE>
<Caption
Three months
ended
3/31/96
-------------
<S> <C>
Net Income (Loss) $(251,967)
Net Loss per common and
common equivalent shares $ (0.1065)
Rounded $ ( 0.11)
</TABLE>
<PAGE> 2
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED 3/31/97
Actual shares outstanding at 1/1/97 3,342,483
Common and common equivalent shares outstanding at 3/31/97 3,342,483
Weighted average shares outstanding for three months ended 3/31/97 3,342,483
<TABLE>
<CAPTION>
Three months
ended
3/31/97
------------
<S> <C>
Net Income (Loss) $(334,395)
Net Loss per common and
common equivalent shares $ (0.0495)
Rounded $ (0.05)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 308,827
<SECURITIES> 1,959,145
<RECEIVABLES> 103,372
<ALLOWANCES> 0
<INVENTORY> 503,344
<CURRENT-ASSETS> 2,949,849
<PP&E> 2,843,271
<DEPRECIATION> 214,768
<TOTAL-ASSETS> 5,828,423
<CURRENT-LIABILITIES> 2,962,117
<BONDS> 0
0
0
<COMMON> 3,342
<OTHER-SE> 2,789,114
<TOTAL-LIABILITY-AND-EQUITY> 5,828,423
<SALES> 186,573
<TOTAL-REVENUES> 186,573
<CGS> 271,288
<TOTAL-COSTS> 540,862
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,783
<INCOME-PRETAX> (334,395)
<INCOME-TAX> 0
<INCOME-CONTINUING> (334,395)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (334,395)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
