<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ____________
Commission file number 0-28238
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
-----------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 54-1521616
- ------------------------ -------------------
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification number
22570 Markey Court, Dulles, Virginia 20166-6901
-----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 444-7931
________________________________________________________________
(Former Name or Address 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 Issuer was required to file such reports), and (2) has
been subject to filing requirements for the past 90 days.
Yes [ X ] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the Registrant has filed all documents and reports required
to be filed by Sections 12, 13, or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ] *** not applicable ***
APPLICABLE ONLY TO CORPORATE ISSUERS
As of November 14, 1999, the Company had 1,310,498 shares of its $0.001
par value common stock outstanding.
Transitional Small Business Disclosure Format (Check one). Yes [ ] No [X]
<PAGE>
<PAGE>
INDEX
-----
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements
BALANCE SHEET - September 30, 1999 4
STATEMENTS OF OPERATIONS - For the Three and Nine Month Periods
Ended September 30, 1999 and 1998 6
STATEMENTS OF CASH FLOWS - For the Nine Month Periods
Ended September 30, 1999 and 1998 8
NOTES TO FINANCIAL STATEMENTS 10
Item 2. Management's Discussion and Analysis of Results of Operations 13
Item 3. Defaults on Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signature 17
Exhibit 27 18
<PAGE>
<PAGE>
Item 1. Financial Information
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 330,318
Accounts receivable 131,246
Inventory 143,886
Notes receivable 285,000
Prepaid expenses and other 287,986
------------
Total Current Assets 1,178,436
PROPERTY AND EQUIPMENT, net 55,087
INVESTMENT CARRIED AT COST, PLUS EQUITY
IN UNDISTRIBUTED EARNINGS 1,150,000
DEPOSITS AND OTHER 117,019
------------
TOTAL ASSETS 2,500,542
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 103,565
Accrued expenses and other 37,264
Notes payable 91,978
------------
Total Current Liabilities 232,807
SHAREHOLDERS' EQUITY
Preferred stock, $.20 par value,
1,000,000 shares authorized; no
shares issued and outstanding -
Common stock, $.001 par value,
15,000,000 shares authorized;
1,310,498 issued and outstanding 1,311
Additional paid-in capital 4,507,227
Accumulated deficit (2,240,803)
-------------
Total Shareholders' Equity 2,267,735
-------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,500,542
============
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
For the Three Months Ended September 30,
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net sales $ 421,986 $ 100,579
Cost of goods sold 283,911 99,706
---------- ----------
Gross profit 138,075 873
Operating expenses:
Selling expenses 23,044 25,038
General and administrative 179,697 92,649
---------- ----------
Total operating expenses 202,741 117,687
---------- ----------
Operating income (loss) (64,666) (116,814)
Other income (expense):
Financing expense, net 7,932 (16,087)
Rental income - 40,458
Gain on sale of assets - -
Other 3,255 (53,923)
---------- ----------
Total other income (expense) 11,187 (29,552)
---------- ----------
Income (loss) before earnings from
equity method investment (53,479) (146,366)
Equity in net earnings of
affiliated entity 51,375 -
---------- -----------
Net income $ (2,104) $(146,366)
========== ===========
Net income (loss) per common share,
basic and dilutive $ - $ (.13)
Average common shares outstanding,
basic and dilutive 1,310,498 1,114,201
</TABLE>
See accompanying notes to these financial statements
<PAGE>
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30,
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net sales $ 852,071 $1,292,939
Cost of goods sold 660,235 1,077,921
---------- -----------
Gross profit 191,836 215,018
Operating expenses:
Selling expenses 57,420 90,897
General and administrative 544,224 407,547
---------- -----------
Total operating expenses 601,644 498,444
---------- -----------
Operating loss (409,808) (283,426)
Other Income (Expense):
Financing expense, net (7,731) (74,520)
Rental income 49,234 131,818
Gain on sale of assets 109,759 -
Other (5,252) (53,923)
---------- ----------
Total other income (expense) 146,010 3,375
---------- ----------
Loss before earnings from equity
method investment (263,800) (280,051)
Equity in net earnings of
affiliated entity 300,000 -
---------- ----------
Net income (loss) $ 36,202 $(280,051)
========== ==========
Net loss per common share,
basic and dilutive $ .03 $ (.25)
Average common shares outstanding,
basic and dilutive 1,310,498 1,114,201
</TABLE>
See accompanying notes to these financial statements
<PAGE>
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30,
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 36,202 (280,051)
Adjustments to reconcile net
income (loss) to cash provided
by (used in) operating activities
Depreciation 31,035 66,443
Amortization 6,885 6,149
Gain on sale of property and
equipment (109,759) -
Compensation expense - 36,500
Equity in net earnings of
affiliated entity (300,000) -
Change in operating assets and
liabilities:
(Increase) decrease in:
Accounts receivable 62,472 174,614
Inventories 36,900 238,510
Prepaid expenses and other (117,793) (100,199)
Increase (decrease) in:
Accounts payable (90,161) (85,065)
Accrued expenses and other 25,057 (105,019)
----------- ----------
Net cash provided by (used in)
operating activities (419,162) (48,118)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property and equipment (648) (6,429)
Sale of property and equipment 877,941 -
Acquisition of patent rights and
certification - (1,300)
Payments on notes receivable 620,000 -
Issuance of notes receivable (505,000) (500,000)
Investment in Structural
Holdings, Inc. (850,000) -
----------- ---------
Net cash provided by (used in)
investing activities 142,293 (507,729)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term
borrowings 91,978 -
Proceeds from long-term borrowings - 1,900,000
Principal payments on long-term
debt (170,728) (992,304)
Proceeds from issuance of
common stock 100,000 -
---------- ---------
Net cash provided by (used in)
financing activities 21,250 907,696
---------- ----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (255,619) 351,849
CASH AND CASH EQUIVALENTS,
beginning of period 585,937 109,461
---------- -----------
CASH AND CASH EQUIVALENTS,
end of period 330,318 461,310
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid for interest 37,609 110,405
Debt assumed by sale of building 1,857,379 -
</TABLE>
See accompanying notes to these financial statements
<PAGE>
<PAGE>
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 1. Unaudited Interim Financial Statements
The accompanying unaudited interim financial statements have been
prepared in accordance with the instructions to Form 10-QSB and do not include
all the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The results
of operations for any interim period are not necessarily indicative of results
for the entire fiscal year. These statements should be read in conjunction
with the financial statements and related notes included in Form 10-KSB for
Guardian Technologies International, Inc. ("GRDN" or the "Company") for the
year ended December 31, 1998, as the notes to these interim financial
statements omit certain information required for complete financial
statements.
Note 2. Acquisition of and Investment in Structural Holdings, Inc.
On April 23, 1999 the Company acquired securities representing the right
to acquire up to 55% of the outstanding shares of Structural Holdings, Inc., a
Delaware holding company ("Structural"). Concurrently with that transaction,
Structural acquired 100% of the outstanding shares of Common Stock of H & M
Steel, Inc., an Oklahoma corporation (H&M). Structural has no operations and
was formed specifically to purchase the shares of Common Stock of H&M. H&M is
engaged in the business of structural steel fabrication.
On August 12, 1999, the Company entered into a Stock Purchase Agreement
pursuant to which it sold 5% of its outstanding shares of Structural to
Structural's other shareholder. As a result, and in light of the composition
of management, the directors and shareholders of Structural following the sale
of stock, the Company was deemed to have relinquished effective control of
Structural. As such, the Company has reported its investment in Structural
under the equity method of accounting for the period ending September 30,
1999.
The following is a financial summary of the Company's investment in
Structural. The table reflects the unaudited financial position of Structural
at September 30, 1999 and its results of operations for the current quarter
and since inception (April 1, 1999). Structural has current contract backlog
of $11,500,000.
<TABLE>
<CAPTION>
Three months
ended
September 30, Since
1999 inception
-------------- ----------
<S> <C> <C>
Net Sales $2,416,824 $4,358,063
Cost of Sales 1,406,672 2,701,471
Depreciation 17,574 35,148
Net Income 102,750 600,000
Guardian Share of Net Income $ 51,375 $ 300,000
Current Assets $2,675,199
Noncurrent Assets 4,727,414
Total Assets` 7,402,613
Current Liabilities 2,126,386
Noncurrent Liabilities 3,053,940
Total Liabilities 5,180,327
Net Assets 2,222,287
Guardian Share of Equity $1,150,000
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
OVERVIEW
The following is a discussion of the consolidated financial condition
and results of operations of the Company as of and for the two fiscal periods
ended September 30, 1999 and 1998. This discussion should be read in
conjunction with the Consolidated Financial Statements of the Company and the
Notes related thereto included in the Company's Form 10-KSB for the fiscal
year ended December 31, 1998.
The forward-looking statements included in Management's Discussion and
Analysis of Financial Condition and Results of Operations, reflect
management's best judgement based on factors currently known, involve
risks and uncertainties. Actual results could differ materially from those
anticipated in the forward-looking statements as a result of a number of
factors, including but not limited to those discussed herein.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998.
Net sales for the three months ended September 30, 1999 were $421,986
compared to $100,579 for the same period in 1998, an increase of $321,407.
The increase is primarily attributable to a third quarter sale of ballistic
equipment in the amount of $192,000 to an allied government (equipment in the
amount of $329,432 was sold to this same allied government during the second
quarter of 1998), a one-time, custom order during the current quarter of
$63,000 to a commercial entity, and the sale of Guardian's canine vest that
was introduced for the first time during the current year. Canine vest sales
helped push third quarter 1999 revenues over that of the previous year.
The Company's gross profit for the three months ended September 30, 1999
was $138,075 or 33% compared to $873 or 1% for the same period in 1998. Gross
profit dollars increased quarter to quarter due to higher sales volume. Gross
profit percentage increased quarter to quarter due to improved manufacturing
operations and shipments (allied government order, one-time commercial order
and canine vests) of higher margin products.
Total operating expenses for the three months ended September 30, 1999
were $202,741 compared to $117,687 for the same period in 1998. While selling
expenses remained flat quarter to quarter, general and administrative expenses
increased from $92,649 for the three months ended September 30, 1998 to
$179,697 for the three months ended September 30, 1999, an increase of
$62,010. The increase during the current quarter is attributable to
consulting costs, rent expense (the Company did not incur rent expense in 1998
as the owner of the building) and salary, benefits and other corporate
expenses of the Company's president hired February 1, 1999.
The Company posted a net loss for the three months ended September 30,
1999 of ($2,104) compared to a net loss of ($146,366), or ($0.13) per share
for the same period a year ago. Lower sales volume coupled with increased
general and administrative costs caused a loss from armor operations of
($64,666) for the period. Mostly offsetting this loss was income of $51,375
recorded under the equity method relating to the company's investment in
Structural Holding's, Inc.(Structural). Under the equity method of accounting
the Company records a pro-rata share of Structural's earnings even though the
company does not receive any cash from this investment except for consulting
services.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1998.
Net sales for the nine months ended September 30, 1999 were $852,071
compared to $1,292,939 for the same period in 1998, a decrease of $440,868.
The decrease in sales is primarily attributable to lower sales generated
through the Company's contract with the General Services Administration of
$56,261, and an order from a local police department of approximately $150,000
completed during the second quarter of 1998 that was not duplicated in 1999.
The Company's gross profit for the nine months ended September 30, 1999
was $191,836 or 23% compared to $215,018 or 17% for the same period in 1998.
Gross profit dollars decreased because of lower sales volume. The gross
profit percentage increased 6% because higher margin products were shipped
during the period.
Total operating expenses for the nine months ended September 30, 1999
were $601,644 compared to $498,444 for the same period in 1998. Selling
expenses for the nine months ended September 30, 1999 were $57,420 compared to
$90,897 for the same period in 1998, a decrease of $33,477 or 37%. General
and administrative costs for the nine months ended September 30, 1999 were
$544,224 compared to $407,547 for the same period in 1998, an increase of
$136,677. The increase is attributable to consulting costs, rent expense (the
Company did not incur rent expense in 1998 as the owner of the building) and
salary, benefits and related expenses of the Company's president hired
February 1, 1999.
Other income for the nine months ended September 30, 1999 was $146,010
compared to $3,375 for the same period in 1998, an increase in other income of
$142,635. The increase was primarily attributable to the gain on sale of the
Company's land and building of $109,759 recorded in March, 1999, coupled with
a reduction in other expense of $53,923 associated with a proposed
acquisition that was not consummated by the Company in 1998 and reduced
interest expense related to the Company paying off a mortgage when the Company
sold its land and building.
The Company posted net income for the nine months ended September 30,
1999 of $36,202 or $0.03 per share compared to a net loss of ($280,051), or
($0.12) per share for the same period a year ago. Lower sales volume coupled
with increased general administrative costs caused a loss from armor
operations of ($409,808) for the period. Partially offsetting this loss was
income of $300,000 from the Company's equity method investment for the nine
months ended September 30, 1999 related to the Company recognizing its pro-
rata share of earnings in Structural Holdings, Inc.
LIQUIDITY AND CAPITAL RESOURCES
Total current assets at September 30, 1999 were $1,178,436 and consisted
of cash and equivalents of $330,318, net accounts receivable of $131,246,
inventory of $143,886, notes receivable of $285,000 and prepaid expenses and
other current assets of $287,986. Total current liabilities at September 30,
1999 were $232,807 and consisted of trade accounts payable of $103,565,
accrued expenses of $37,264 and notes payable of $91,978. Working capital at
September 30, 1999 was $945,629 compared to working capital of $1,243,754 at
December 31, 1998.
At September 30, 1999 the Company reported total assets of $2,500,542
including, in addition to the current assets of $1,178,436 discussed above,
net property and equipment of $55,087, deposits and other assets of $117,019
and an investment carried at equity (Structural Holdings, Inc.) of $1,150,000.
At September 30, 1999 the Company reported total liabilities of $232,807
represented entirely by the current liabilities discussed above. At December
31, 1998 the Company had total liabilities of $2,110,136 consisting of current
liabilities of $286,880 (comprised of trade accounts payable of $193,726,
accrued expenses of $12,207 and the current portion of long term debt of
$80,947) and long term debt of $1,823,256. The decrease in total liabilities
since December 31, 1998 of $1,877,329 is primarily related to the sale of the
Company's land and building. When these assets were sold on March 31, 1999,
the buyer assumed the mortgage on the building of approximately $1,857,379.
The mortgage was classified as long-term debt of $1,823,256 plus the current
portion of long-term debt of $45,047 at December 31, 1998.
At September 30, 1999 the Company reported shareholders' equity of
$2,267,735 compared to shareholders' equity of $2,131,533 at December 31,
1998. The increase in equity of $136,202 is attributable to an equity
infusion of $100,000 received June 23, 1999 coupled with net income for the
nine months ended September 30, 1999 of $36,202.
THE YEAR 2000 ISSUE
The Year 2000 Issue (Y2K) is the result of computer programs being
written using two digits rather than four to define the applicable year. Any
of the Company's computer programs that have date sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
Based upon a recent assessment, the Company has made a preliminary
determination that it may be required to upgrade or replace certain portions
of its software so that its computer systems will properly utilize dates
beyond December 31, 1999. The Company presently believes that, with upgrades
of existing software and conversions to new software at minimal cost, Y2K can
be mitigated. However, the Y2K solutions have not been implemented and are
not scheduled to be completed until December 1999. If such upgrades and
conversions are not made, or are not completed or available timely, the Year
2000 Issue could have a material impact on the operations of the Company.
Furthermore, the Company has yet to initiate formal communications with
its significant suppliers and large customers to determine the extent to which
the Company is vulnerable to those third parties' failure to remediate their
own Year 2000 Issue. The Company has one supplier upon which it relies for
the majority of its ballistic materials. Should this supplier suffer from
problems related to Y2K, the Company has alternate sources to which it could
turn to obtain these materials. As a secondary alternative, the Company also
has other sources to which it could turn to obtain alternative ballistic
materials made from other raw materials. As a result, the Company believes
that the effects of Y2K, as it may affect its significant suppliers, can be
mitigated. However, there can be no guarantee that the systems of other
companies on which the Company's business relies will be timely converted, or
that a failure to convert by another company, or a conversion that is
incompatible with the Company's systems, would not have a material adverse
effect on the Company. In the view of the foregoing, there can be no assurance
that the Year 2000 Issue will not have a material adverse effect upon the
Company.
Item 3. Defaults on Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit
Number Description
------- -----------
27 Financial Data Schedule
SIGNATURE
In accordance with the requirements 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.
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
Date: November 15, 1999 By: /s/ J. Andrew Moorer
------------------------------------
J. Andrew Moorer, President and CEO
<PAGE>
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- ------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENTS OF OPERATIONS FOUND ON PAGES 4 AND 6 OF THE COMPANY'S FORM
10-QSB FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 330,318
<SECURITIES> 0
<RECEIVABLES> 131,246
<ALLOWANCES> 0
<INVENTORY> 143,886
<CURRENT-ASSETS> 1,178,436
<PP&E> 200,334
<DEPRECIATION> 145,247
<TOTAL-ASSETS> 2,500,542
<CURRENT-LIABILITIES> 232,807
<BONDS> 0
0
0
<COMMON> 1,311
<OTHER-SE> 4,507,227
<TOTAL-LIABILITY-AND-EQUITY> 2,500,542
<SALES> 852,071
<TOTAL-REVENUES> 852,071
<CGS> 660,235
<TOTAL-COSTS> 601,644
<OTHER-EXPENSES> 5,252
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,731
<INCOME-PRETAX> 36,202
<INCOME-TAX> 0
<INCOME-CONTINUING> 36,202
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,202
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
