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, 1999
------------------
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
--------------------------------------------------------
(Address of Principal Executive Offices)
(703) 444-7931
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(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
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Number of shares of common stock, par value $.001 per share, outstanding at
May 14, 1999: 1,243,831
------------
Transitional Small Business Disclosure Format (check one): YES NO X
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<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
INDEX
Page
Item 1. Financial Statements
BALANCE SHEET - March 31, 1999 4
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - For the
Three Month Periods Ended March 31, 1999 and 1998 5
STATEMENTS OF CASH FLOWS - For the Three Month Periods
Ended March 31, 1999 and 1998 6
NOTES TO FINANCIAL STATEMENTS 8
Item 2. Management's Discussion and Analysis of Results of Operations 10
Item 3. Defaults on Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signature 10
Exhibit 11 - Statement re Computation of Per Share Earnings 11
Exhibit 27 - Financial Data Schedule 13
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
BALANCE SHEET
March 31, 1999
Unaudited
ASSETS
CURRENT ASSETS
Cash and cash equivalents .................................. $ 1,237,601
Accounts receivable ........................................ 95,492
Inventories ................................................ 172,602
Note receivable ............................................ 250,000
Prepaid expenses and other ................................. 209,510
-----------
Total Current Assets ................................ 1,965,205
PROPERTY AND EQUIPMENT, net .................................. 65,257
DEPOSIT FOR ACQUISITION ...................................... 286,900
-----------
TOTAL ASSETS ................................................. $ 2,317,362
===========
LIABILITIES AND SHAREHOLDERS'EQUITY
CURRENT LIABILITIES
Notes payable .............................................. $ 60,960
Accounts payable ........................................... 137,979
Accrued payroll and related benefits ....................... 17,700
-----------
Total Current Liabilities ........................... 216,639
-----------
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; 1,243,831 shares issued and outstanding ...... 1,244
Additional paid-in capital ................................. 4,407,294
Accumulated deficit ........................................ (2,307,815)
-----------
Total Shareholders' Equity .......................... 2,100,723
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................... $ 2,317,362
===========
See accompanying notes to these financial statements.
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Three Months Ended March 31, 1999 and 1998
Unaudited
Three Month Periods
Ended March 31,
--------------------------
1999 1998
----------- -----------
Net sales ....................................... $ 216,842 $ 562,022
Cost of goods sold .............................. 190,749 483,854
----------- -----------
Gross profit .................................... 26,093 78,168
Operating expenses:
Selling expenses .............................. 12,952 40,150
General and administrative .................... 178,150 207,343
----------- -----------
Total operating expenses .................... 191,102 247,493
----------- -----------
Operating Loss .................................. (165,009) (169,325)
Other Income (Expense):
Financing expense, net ........................ (24,932) (33,298)
Rental income ................................. 49,372 41,799
Gain on sale of assets ........................ 109,759 -
----------- -----------
Total other income (expense) ................ 134,199 8,501
----------- -----------
Net Loss and Comprehensive Loss ................. $ (30,810) $ (160,824)
=========== ===========
Net Loss per Common Share,
Basic and Dilutive ............................ $ (.02) $ (.14)
Average Common Shares Outstanding,
Basic and Dilutive ............................ 1,243,831 1,114,201
See accompanying notes to these financial statements
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
For the Three months Ended March 31, 1999 and 1998
Unaudited
March 31, March 31,
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ........................................ $ (30,810) $ (160,824)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation ................................ 20,865 22,148
Amortization ................................ 2,295 2,049
Gain on sale of property and equipment ...... (109,759) -
Compensation expense ........................ - 36,500
Change in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable ......................... 98,226 108,066
Inventories ................................. 8,184 102,548
Prepaid expenses and other .................. (41,610) (57,228)
Increase (decrease) in:
Accounts payable ............................ (55,747) 21,999
Accrued payroll and related benefits ........ 5,491 -
Customer deposits ........................... - (83,000)
----------- -----------
Net cash (used in)
operating activities ...................... (102,865) (7,742)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property and equipment .............. (648) -
Proceeds from sale of property and equipment .... 877,941 -
Acquisition of patent rights and certification .. - (1,300)
Payments on notes receivable .................... 150,000 -
Deposit on acquisition .......................... (286,900) -
----------- -----------
Net cash provided by/(used in)
investing activities ..................... 740,393 (1,300)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings .............. 50,000 1,900,000
Principal payments on long-term debt ............ (35,864) (916,189)
----------- -----------
Net cash provided by
financing activities ..................... 14,136 983,811
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .. 651,664 974,769
CASH AND CASH EQUIVALENTS, beginning of period .... 585,937 109,461
----------- -----------
CASH AND CASH EQUIVALENTS, end of period .......... $ 1,237,601 $ 1,084,230
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest ........................ $ 35,816 $ 36,611
=========== ===========
Debt assumed by sale of building .............. $ 1,857,379 $ -
=========== ===========
See accompanying notes to these financial statements
<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
adjustements (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 SALE OF FACILITY
On March 31, 1999, the Company sold its land and building for $2,825,000, which
was greater than its net cost of approximately $2,640,000. In conjunction with
the sale, the purchaser assumed the Company's note payable which was
collateralized by the building. The balance of the note payable was
approximately $1,857,000 on the date of the sale. The Company received net
proceeds from the sale of approximately $883,000. The Company also signed a
5-year lease calling for rental payments of approximately $13,000 per month for
manufacturing and office space in the building after it was sold. In conjunction
with the sale, the Company will no longer recognize rental income nor will it
recognize depreciation expense related to the building or general operating
costs attributable to being the owner of a building.
Note 3 ACQUISITION
During the first quarter of 1999, the Company disbursed $286,900 representing a
deposit toward the purchase of a material interest in Structural Holdings, Inc.,
a Delaware Corporation.
Note 4 SUBSEQUENT EVENT - ACQUISITION
On April 23, 1999, the Company consummated the acquisition of a material
interest in Structural Holdings, Inc., a Delaware corporation ("Structural
Holdings").
The acquisition involved the purchase of approximately 45% of the total issued
and outstanding shares of Common Stock of Structural Holdings in consideration
of aggregate cash payments in the amount of $765,000. In addition, the Company
purchased $96,000 of convertible debt of Structural Holdings, convertible into
an additional 5.7% of outstanding shares. Structural Holdings was formed and
organized for the sole purpose of serving as an intermediary to acquire H & M
Steel, Inc., an Oklahoma corporation ("H & M"). Structural Holdings acquired
100% of the issued and outstanding shares of Common Stock of H & M in a
transaction which was also consumated on April 23, 1999.
The total consideration paid for H & M was $4,500,000 plus net working capital
retained by the sellers, paid as follows: the sum of $1,700,000 was contributed
by Structural Holdings in cash at closing; the sum of $2,650,000 was provided by
Finova Capital Corporation ("Finova") through a credit facility extended to
Structural Holdings, and the balance was financed by the Seller. The Finova
credit facility includes a term loan for acquisition purposes and also a
$2,350,000 revolving line of credit.
The Company intends to convert the debt and increase its equity investment in
Structural Holdings by an additional which, when combined with its prior
investment of $765,000, will give the Company ownership of Common Stock of
Structural Holdings representing 55% of the total issued and outstanding shares
of equity securities of that company.
H & M is engaged in the business of structural steel fabrication. Through its
control of Structural Holdings, the Company plans to maintain the operations of
H & M consistent with prior practices.
<PAGE>
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
March 31, 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, which 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 MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998.
Net sales for the three months ended March 31, 1999 were $216,842 compared to
$562,022 for the same period in 1998, a decrease of $345,180. The decrease is
primarily attributable to one specific order to supply armor products to an
allied government. During the three months ended March 31, 1998, sales
associated with this order were $219,317 compared to nil for the same period in
1999. However, the Company received an order to supply armor products to the
same allied government of approximately $200,000 during the second quarter of
1999. Therefore, the majority of the decrease in revenue during the current
quarter is represented by a revenue shift rather than an overall decline in
business.
The Company's gross profit for the three months ended March 31, 1999 was $26,093
compared to $78,168 for the same period in 1998. Gross profit decreased as a
result of lower sales volume.
Total operating expenses for the three months ended March 31, 1999 were $191,102
compared to $247,493 for the same period in 1998. General and administrative
costs for the three months ended March 31, 1999 were $178,150 compared to
$207,343 for the same period in 1998, a decrease of $29,193 or 14%. The decrease
was primarily attributable to a decrease in legal and professional expenses.
Selling expenses for the three months ended March 31, 1999 were $12,952 compared
to $40,150 for the same period in 1998, a decrease of $27,198 or 68%. The
decrease was primarily attributable to a decrease in sales consultant costs of
$7,500 and a decrease in sales salaries of $16,000.
Other income for the three months ended March 31, 1999 was $134,199 compared to
$8,501 for the same period in 1998, an increase of $125,698. The increase was
primarily attributable to the gain on sale of the Company's land and building of
$106,039. Increases in rental income and interest income accounted for the
remainder of the overall increase for the quarter.
The net loss for the three month period ended March 31, 1999 was $30,810 or $.02
per share compared to a net loss of $160,824 or $.14 per share for the same
period in 1998.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999 the Company had total assets of $2,317,362 compared to total
assets of $4,241,669 as of December 31, 1998, a decrease in assets of
$1,924,307. Total liabilities decreased from $2,110,136 as of December 31, 1998
to $206,639 as of March 31, 1999. Total shareholders' equity decreased $30,810
to $2,100,723 as of March 31, 1999.
Total current assets as of March 31, 1999 were $1,965,205 and consisted of cash
and equivalents of $1,237,601, net accounts receivable of $95,492, inventory of
$172,602, notes receivable of $250,000 and prepaid expenses and other assets of
$209,510. Total current liabilities as of March 31, 1999 were $216,639 and
consisted of trade accounts payable and accrued expenses of $155,679 and the
current portion of notes payable of $60,960. Working capital as of March 31,
1999 was $1,748,566 representing an increase in working capital since December
31, 1998 of $504,812. Working capital increased during the period primarily due
to the the receipt of approximately $880,000 in excess funds from the sale of
the Company's office and manufacturing facility and the land thereon less
payment of approximately $287,000 as a deposit toward the acquisition of a
material interest in Structural Holdings, Inc. (See Note 3 and Note 4).
As of March 31, 1999 the Company reported total assets of $2,317,362 including,
in addition to the current assets of $2,252,105 discussed above, net property
and equipment of $65,257 and a deposit toward the acquisition of a material
interest in Structural Holdings, Inc. of $286,900.
As of March 31, 1999 the Company reported total liabilities of $216,639,
represented entirely by the the current liabilities discussed above. Long term
debt as of March 31, 1999 was zero compared to $1,823,256 as of December 31,
1998. The decrease is attributable to the sale of the Company's land and
building. When the assets were sold on March 31, 1999, the buyer assumed the
mortgage on the building, the approximate amount of which was $1,857,379. The
mortgage was classified as long term debt of $1,823,256 plus the current portion
of long term debt of $45,079 as of December 31, 1998.
As of March 31, 1999 the Company reported shareholders' equity of $2,100,723.
This represents a decrease of $30,810 from the December 31, 1998 shareholders'
equity of $2,131,533. The decrease is attributable to the Company's net loss
during the period of $30,810.
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 the 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 later in 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 effect 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.
<PAGE>
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
---------- ---------------
11 Statement re Computation of Per Share Earnings
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.
-----------------------------------------
(Registrant)
Date: May 17, 1999 By: /s/ J. Andrew Moorer
--------------------------------------
J. Andrew Moorer, President
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
INDEX TO EXHIBITS
Exhibit
Number Description
- ---------- --------------
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED 3/31/99
<TABLE>
<S> <C>
Actual shares outstanding at 1/1/99 ..................................... 1,243,831
Common and common equivalent shares outstanding at 3/31/99 .............. 1,243,831
Weighted average shares outstanding for the three months ended 3/31/99... 1,243,831
</TABLE>
<TABLE>
<CAPTION>
Three months
ended
3/31/99
-------------
<S> <C>
Net Income (Loss) ...................................... $ (30,810)
Net Loss per common and common equivalent shares ....... $ (0.0247)
Rounded ................................................ $ (0.02)
</TABLE>
<PAGE>
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED 3/31/98
<TABLE>
<S> <C>
Actual shares outstanding at 1/1/98 ..................................... 1,114,201
Common and common equivalent shares outstanding at 3/31/98 .............. 1,114,201
Weighted average shares outstanding for the three months ended 3/31/98... 1,114,201
</TABLE>
<TABLE>
<CAPTION>
Three months
ended
3/31/98
-----------
<S> <C>
Net Income (Loss) .............................................. $ (160,824)
Net Loss per common and common equivalent shares ............... $ (0.1443)
Rounded ........................................................ $ (0.14)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,237,601
<SECURITIES> 0
<RECEIVABLES> 95,492
<ALLOWANCES> 0
<INVENTORY> 172,602
<CURRENT-ASSETS> 1,965,205
<PP&E> 200,334
<DEPRECIATION> 135,077
<TOTAL-ASSETS> 2,317,362
<CURRENT-LIABILITIES> 216,639
<BONDS> 0
0
0
<COMMON> 1,244
<OTHER-SE> 2,099,479
<TOTAL-LIABILITY-AND-EQUITY> 2,317,362
<SALES> 216,842
<TOTAL-REVENUES> 216,842
<CGS> 190,749
<TOTAL-COSTS> 381,851
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,816
<INCOME-PRETAX> (30,810)
<INCOME-TAX> 0
<INCOME-CONTINUING> (30,810)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (30,810)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
