<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A-1
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended June 30, 2000
[ ] 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.
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(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
11 Sundial Circle, Suite 17, Carefree, Arizona 85377
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (480) 575-6972
22570 Markey Court, Dulles, Virginia 20166-6901
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(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 August 14, 2000, the Company had 3,611,662 shares of its $0.001 par
value common stock outstanding.
Transitional Small Business Disclosure Format (Check one). Yes [ ] No [X]
<PAGE>
<PAGE>
PART 1. FINANCIAL INFORMATION
INDEX TO FINANCIAL STATEMENTS
PAGE
Balance Sheet - June 30, 2000 . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Operations - For the Three and Six Months Ended June 30,
2000 and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Changes in Shareholders' Equity - For the Six Months Ended June
30, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Statements of Cash Flows - For the Six Months Ended June 30, 2000 and
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
BALANCE SHEET
JUNE 30, 2000
(UNAUDITED)
ASSETS
--------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 379,010
Accounts receivable, no allowance considered
necessary 76,732
Inventories 152,229
Notes receivable:
Related party 85,000
Other 250,000
Prepaid expenses and other 169,090
-----------
Total current assets 1,112,061
EQUITY INVESTMENT 952,206
PROPERTY AND EQUIPMENT, net 44,032
DEPOSITS AND OTHER 70,927
-----------
TOTAL ASSETS $2,179,226
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 127,460
Accrued payroll and related benefits expenses 11,654
Notes payable and current portion of long-term
debt 50,596
-----------
Total current liabilities 189,710
LONG-TERM DEBT, net of current portion -
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, 3,611,662 shares issued and
outstanding 3,612
Additional paid-in capital 5,546,157
Note Receivable Officer (50,000)
Accumulated deficit (3,510,253)
-----------
Total shareholders' equity 1,989,516
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,179,226
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE
MONTHS ENDED
JUNE 30,
-------------
2000 1999
-------- ---------
<S> <C> <C>
NET SALES $ 121,267 $ 213,243
Cost of goods sold 122,247 185,575
------------ -----------
GROSS PROFIT (Loss) (980) 27,668
OPERATING EXPENSES:
Selling expenses 20,689 21,424
General and administrative 270,082 186,377
------------ -----------
Total operating expenses 290,771 207,801
------------ -----------
OPERATING LOSS (291,751) (180,133)
OTHER INCOME (EXPENSE):
Interest income (expense) 11,625 9,269
Rental income (expense) 12,600 (138)
Gain (loss) on sale of assets - -
Miscellaneous income (expense) 9,918 (8,507)
----------- -----------
Total other income (expense) 34,143 624
----------- -----------
LOSS BEFORE EARNINGS FROM EQUITY
INVESTMENT (257,608) (179,509)
Equity in net earnings (loss) of
investment 17,616 248,625
----------- -----------
NET LOSS $ (239,992) $ (69,116)
============ ===========
NET LOSS PER COMMON SHARE,
Basic and Dilutive $ (.07) $ (.05)
============= ===========
AVERAGE COMMON SHARES OUTSTANDING,
Basic and Dilutive 3,564,470 1,310,498
============= ===========
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE SIX
MONTHS ENDED
JUNE 30,
----------
2000 1999
----------- ------------
<S> <C> <C>
NET SALES $ 347,705 $ 430,085
Cost of goods sold 295,549 376,324
----------- -----------
GROSS PROFIT 52,156 53,761
OPERATING EXPENSES:
Selling expenses 33,205 34,376
General and administrative 458,097 364,527
----------- ------------
Total operating expenses 491,302 398,903
----------- ------------
OPERATING LOSS (439,146) (345,142)
OTHER INCOME (EXPENSE):
Interest income (expense) 19,519 (15,663)
Rental income (expense) 12,600 49,234
Gain (loss) on sale of assets (1,007) 109,759
Miscellaneous income (expense) 30,032 (8,507)
----------- ------------
Total other income (expense) 61,144 134,823
----------- ------------
LOSS BEFORE EARNINGS FROM EQUITY
INVESTMENT (378,002) (210,319)
Equity in net earnings (loss) of
investment (30,170) 248,625
----------- ------------
NET LOSS $ (408,172) $ (38,306)
----------- ------------
NET LOSS PER COMMON SHARE,
Basic and Dilutive $ (.11) $ (.03)
============ ===========
AVERAGE COMMON SHARES OUTSTANDING,
Basic and Dilutive 3,564,470 1,310,498
============ ===========
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
Additional Note
Common Stock Paid-In Receivable Accumulated
Shares Amount Capital Officer Deficit Total
------ ------ ---------- ---------- --------------- -
<S> <C> <C> <C> <C> <C> <C>
BALANCES,
December 31,
1999 2,762,668 $ 2,763 $ 4,660,908 $ - $(3,102,081) $ 1,561,590
Issuance of
common
stock:
Cash 684,000 684 704,316 - - 705,000
Services 124,994 125 130,973 - - 131,098
Note
Receivable 40,000 40 49,960 (50,000) - -
Net loss - - - - (408,172) (408,172)
---------- ---------- ----------- ---------- ----------- -------------
BALANCES,
June 30,
2000 3,611,662 $3,612 $5,546,157 $(50,000) $(3,510,253) $ 1,989,516
=========== ========== =========== ========= ============ ==============
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX
MONTHS ENDED
June 30,
--------------
2000 1999
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (408,172) $ 38,306
Adjustments to reconcile net
income (loss) to net cash
used in operating activities:
Depreciation and amortization
of property and equipment 10,700 30,540
Gain (loss) on sale of property
and equipment 1,007 (109,759)
Equity in net income (loss) of
investment 30,170 -
Changes in operating assets and
liabilities:
(Increase) decrease in:
Accounts receivable 108,547 125,526
Inventories 6,516 (35,268)
Prepaid expenses and other (55,062) 47,635
Increase (decrease) in:
Accounts payable (90,783) (45,973)
Accrued expenses and other (1,345) 23,748
---------- -----------
Net cash provided by (used in)
operating activities (398,422) 74,755
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (7,430) (648)
Sale of property and equipment 7,198 877,941
Payments on notes receivable 50,000 426,590
Issuance of notes receivable (150,000) (455,000)
Investment in Structural Holding,
Inc. - (1,098,625)
----------- -----------
Net cash provided by (used in)
investing activities (100,232) (249,742)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes
payable -
Payment on notes payable (19,026) (63,370)
Exercise of options 480,000 -
Proceeds of common stock issued 225,000 -
----------- ------------
Net cash provided by (used in)
financing activities 685,974 (66,370)
----------- ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 187,320 (241,357)
CASH AND CASH EQUIVALENTS,
beginning of period 191,690 585,937
----------- ------------
CASH AND CASH EQUIVALENTS,
end of period $ 379,010 $ 344,580
============ =============
SUPPLEMENTAL SCHEDULE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 3,766 $ 35,960
============ ==============
Debt assumed by sale of building $ - $ 1,857,379
============= ==============
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
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, 1999, as the notes to these
interim financial statements omit certain information required for complete
financial statements.
2. EQUITY INVESTMENT (UNAUDITED):
-----------------------------
The Company has an investment in Structural Holdings, Inc. (Structural)
which is recorded under the equity method of accounting. The following is
a financial summary of the Company's investment in Structural. The table
reflects the financial position of Structural at June 30, 2000 and its
results of operations for the six months ended June 30, 2000:
<TABLE>
<CAPTION>
<S> <C> <C>
Net sales $8,678,953
Cost of sales $7,612,265
Depreciation $ 48,000
Net income $ 128,495
Guardian share of net income $ 64,248
Current assets $5,285,673
Noncurrent assets $4,922,513
Total assets $10,208,186
Current liabilities $7,656,491
Noncurrent liabilities $ 847,963
Total liabilities $8,413,454
Net assets $1,794,732
</TABLE>
The Company recorded its equity in estimated earnings of Structural totaling
$33,476 at December 31, 1999, based on Structural's management's best estimate
of profit on uncompleted contracts at the time the Company's Form 10-KSB was
required to be filed with the SEC. However, Structural had not completed the
audit of its December 31, 1999 financial statements as of that date and the
audit still has not yet been issued. Based on a change of estimate in the
cost to complete certain jobs, Structural changed its percent of completion
calculation at December 31, 1999, thereby reducing its net income to a net
loss. As a result, the Company reduced its equity in earnings of Structural
for the six months ended June 30, 2000 by $94,418, which represents 50% of the
reduction in net income of Structural for the year ended December 31, 1999.
This amount coupled with Structural's net income for the six months ended June
30, 2000 presented above of $64,248, results in a net equity loss of $30,170
for six months ended June 30, 2000 as recorded on the Company's books.
Significant estimates are made in connection with Structural's financial
statements as to percentage of completion calculations and recoverability of
revenues recorded in excess of original contract values. Due to the
significance of these estimates, it is possible the Company's share of equity
income could materially change in the near term. Additionally, Structural is
not in compliance with certain covenants on its loan agreements with a
financial institution as of June 30, 2000 and as such, these loans have been
classified as a current liability on Structural's financial statements.
3. NOTE RECEIVABLE.
---------------
In conjunction with a failed acquisition of an entity in 1998, the Company
loaned $500,000 to this entity in the form of a Note Receivable (the "Note").
At December 31, the Note balance had been reduced to $100,000. In June, in
order to facilitate the timely delivery of products sold to the federal
government by this entity, the Company increased the Note by an additional
$150,000. The Note is to be repaid from proceeds from the close-out of the
federal contract following delivery. The interest rate on the Note is 8%. A
637-acre parcel of land and a building have been pledged as collateral on the
Note. In conjunction with the increase in the Note, the due date on the Note
was extended from June 30, 2000 to September 30, 2000, the anticipated close-
out date of the entity's contract with the federal government.
4. NOTE RECEIVABLE OFFICER.
-----------------------
On April 1, 2000, an officer of the Company exercised 40,000 options to
purchase common stock at $1.25 per share by issuing a Note Receivable (the
"Note") to the Company. The interest rate on the Note is 8% and due in one
year. The Note has been recorded as a contra-equity account until paid.
5. MERGER AGREEMENT:
----------------
On June 15, 2000 the Company announced it had executed a non-binding letter of
intent to acquire a privately owned interactive media agency in a transaction
classified as a reverse merger. The transaction was subject to the completion
of due diligence which included an audit of the private company's financial
statements. One August 8, 2000 the Company announced that it had terminated
the non-binding letter of intent due to the Company's inability to conclude
satisfactory due diligence.
<PAGE>
<PAGE>
6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL
The following discussion of the financial condition and results of operations
of the Company should be read in conjunction with the consolidated financial
statements and related notes thereto.
OVERVIEW
ARMOR:
In late 1999, the Company decided to restructure its armor business in
order to achieve profitability. Management began implementing the
restructuring plan during the first quarter of 2000 with full implementation
expected by the end of the third quarter. The successful implementation of
the restructuring strategy is intended to produce positive cashflow in the
armor business by year-end. The basic elements involved in the strategy are
outlined below:
a) To retain experienced senior management and sales personnel able to
capitalize on the newly developed, light weight, lower priced armor
products in order to increase sales volume.
- In early May 2000, the Company retained the services of Steven
Young, an experienced industry professional. Mr. Young will
assume the role of Chief Operating Officer of the Company
responsible for the day to day operations of the Company's
armor business.
b) To outsource the Company's manufacturing operation to reduce labor
and overhead costs.
- In conjunction with bringing Mr. Young on board, management
decided to relocate manufacturing to North Carolina, the heart
of the textile belt and Mr. Young's base of operation. The
relocation process was started during the second quarter and is
expected to be completed during the third quarter.
c) To develop new products that will make the Company more competitive
in the market.
- During the first quarter management worked with several
composite material vendors to develop new lightweight ballistic
material packages that will reduce the material cost component
of each vest. Early versions of these products contained too
high a material cost component so new low-cost ballistic
packages are currently in the process of being tested.
In addition to the aforementioned restructuring of the armor business,
the Company continues to research private companies in the security and safety
products industry with profitable operations as potential acquisition
candidates that would compliment the body armor business. It is anticipated
that funds received from the Company's private placement, coupled with the use
of the Company's common stock, will be used to acquire a company in the
security and safety products business.
STRUCTURAL HOLDINGS:
During 1999 the Company sold its land and building. Proceeds from the sale
were used to purchase 50% of the outstanding shares of common stock of
Structural Holdings, Inc., a Delaware holding company (Structural).
Structural has no operations and was formed specifically to purchase 100% of
the outstanding shares of common stock of H&M Steel, Inc., an Oklahoma
corporation (H&M). H&M is engaged in the business of structural steel
fabrication. The Company believes this fragmented industry represents an
opportunity to complete a consolidation strategy. After the acquisition of
H&M, Structural embarked on an aggressive acquisition campaign in the area of
structural steel fabrication. Several non-binding letters of intent were
executed by Structural to acquire synergistic fabrication facilities.
However, H&M operations since the acquisition by Structural have been
negatively impacted by contract overruns (see operations discussion below).
These two factors have forced Structural's management to suspend the
acquisition strategy until H&M's current base of operations is running more
smoothly and a new lender is found.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999.
Net sales for the three months ended June 30, 2000 were $121,267 compared to
$213,243 for the same period in 1999, a decrease of $91,976. The decrease in
sales is primarily attributable to a decline in demand for the company's
existing products. During the first six month of 2000, the Company has worked
with customers and material vendors to design a series of new ballistic
products. These efforts are anticipated to produce a lighter, less expensive
product line expected to make the Company more competitive in the market.
Lower sales volume generated a gross loss of $980 for the three months ended
June 30, 2000 compared to gross profit of $27,668 for the same period in 1999.
The decrease in sales of $91,976, based on an average gross margin of 15%,
accounted for approximately $14,000 of the reduction in gross margin dollars.
The remaining difference is attributable to an upward adjustment to cost of
goods sold to correct an error made during the first quarter to inventory that
overstated the first quarters gross margin percentage by understating cost of
goods sold. This adjustment had no effect on the net loss posted for quarter.
Total operating expenses for the three months ended June 30, 2000 were
$290,771 comprised of selling expenses of $20,689 and general and
administrative expenses of $270,082. Total operating expenses for the three
months ended June 30, 1999 were $207,801 comprised of selling expenses of
$21,424 and general and administrative expenses of $186,377. Selling expenses
for the quarter approximated last year. General and administrative expenses
for the quarter were $83,705 higher than the previous year. The increase is
attributable to bad debts expense ($9,000), travel expenses ($29,000),
investor relations costs ($9,000) and insurance premiums ($6,000). The bad
debts expense was related to specific write-offs of receivables during the
quarter in excess of the Company's allowance for doubtful accounts. The
increased travel expenses were associated with the relocation of the Company's
armor manufacturing facility, the hiring of a new Chief Operating Officer to
run the armor manufacturing operation and travel related to performing due
diligence procedures on potential acquisition candidates by the Company's
President and CEO. These costs are not expected to continue at the level
sustained during the current quarter. The investor relations cost began
during 2000 so there was no equivalent cost incurred in the prior year
comparable quarter. The insurance premium cost is attributable to the
Company's Accidental Death & Dismemberment policy provided to each law
enforcement officer that procures body armor. The policy period for the
current year runs until October 2000. The premium was not paid until June
2000. Therefore, 9 months of expense from October 1999 through June 2000 was
recorded during the current quarter.
The Company posted a net loss for the three months ended June 30, 2000 of
$239,992 or $0.07 per share compared to a net loss of $69,116, or $0.05 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 $291,751 for the period. Partially offsetting this loss was other income
(primarily interest income and sub-lease rental income) of $34,143. In
addition, the Company recognized earnings attributable to its equity
investment in Structural Holdings of $17,616 for the quarter.
Net results for the three months ended June 30, 2000 were positively impacted
by the recognition of $17,616 in earnings associated with the Company's equity
investment in Structural Holdings. The Company recorded its equity in
estimated earnings of Structural Holdings totaling $33,476 at December 31,
1999 based on Structural's management's best estimate of profit on uncompleted
contracts at the time the Company's Form 10K-SB was required to be filed with
the SEC. However, Structural had not completed the audit of its December 31,
1999 financial statements as of that date. In completing its audit,
Structural's management changed some of its estimates in the cost to complete
certain jobs, thereby changing its percent of completion calculation at
December 31, 1999. These changes in estimate reduced Structural's net income
to a net loss. As a result, the Company reduced its equity in earnings of
Structural for the six months ended June 30, 2000 by $94,418, which represents
50% of the reduction in net income of Structural for the year ended December
31, 1999. This amount coupled with Structural's net income for the six months
ended June 30, 2000 of $64,248, results in a net equity loss of $30,170 for
the six months ended June 30, 2000 as recorded on the Company's books. This
adjustment during the first quarter produced a net equity loss during the
first quarter of $47,786. Therefore, the improvement in Structural's earnings
during the first six months of 2000 generated the positive equity in net
earnings of Structural for the quarter of $17,616.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999.
Net sales for the six months ended June 30, 2000 were $347,705 compared to
$430,085 for the same period in 1999, a decrease of $82,380. The decrease in
revenues during the six month period is attributable to the decline of
approximately $90,000 during the second quarter compared to that of the
previous year (see discussion above).
Gross profit for the six months ended June 30, 2000 was $52,156 or 15%
compared to a gross profit of $53,761 or 13% for the six months ended June 30,
1999.
Total operating expenses for the six months ended June 30, 2000 were $491,302
comprised of selling expenses of $33,205 and general and administrative
expenses of $458,097. Total operating expenses for the six months ended June
30, 1999 were $398,903 comprised of selling expenses of $34,376 and general
and administrative expenses of $364,527. Selling expenses for the period
approximated last year. General and administrative expenses for the six
months ended June 30, 2000 were $93,570 higher than the previous year. The
increase is primarily attributable to rent expense ($47,000) travel expenses
($35,000), investor relations costs ($18,000). Rent expense increased over
that of the previous year because the Company owned its manufacturing and
administrative facility during the period from January 1, 1999 through March
31, 1999, at which time the building was sold. At that time the Company began
paying rent to the new owner of approximately $15,000 per month. The increase
in rent during the six months ended June 30, 2000 represents rent for the
period January 1, 2000 through March 31, 2000 that was not incurred in the
prior year. Travel expenses have increased significantly during the first six
months of the current year because of travel and related expenses being
incurred as part of the Company's restructuring of its manufacturing
operation, the hiring of a new Chief Operating Officer to run the armor
manufacturing operation and travel related to performing due diligence
procedures on potential acquisition candidates by the Company's President and
CEO. Investor relations fees have increased over that of the prior year
because the Company retained an investor relations firm in 2000 to assist in
disseminating Company information to its shareholders. No such arrangement
existed during 1999.
The Company posted a net loss for the six months ended June 30, 2000 of
$408,172 or $0.11 per share compared to a net loss of $38,306, or $0.03 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 $439,136 for the period. Partially offsetting this loss was other income
(primarily interest income, sub-lease rental income and consulting income) of
$61,144.
Net results for the six months ended June 30, 2000 were negatively impacted by
the recognition of a $30,170 loss associated with the Company's equity
investment in Structural Holdings. The Company recorded its equity in
estimated earnings of Structural Holdings totaling $33,476 at December 31,
1999 based on Structural's management's best estimate of profit on uncompleted
contracts at the time the Company's Form 10K-SB was required to be filed with
the SEC. However, Structural had not completed the audit of its December 31,
1999 financial statements as of that date. In completing its audit,
Structural's management changed some of its estimates in the cost to complete
certain jobs, thereby changing its percent of completion calculation at
December 31, 1999. These changes in estimate reduced Structural's net income
to a net loss. As a result, the Company reduced its equity in earnings of
Structural for the six months ended June 30, 2000 by $94,418, which represents
50% of the reduction in net income of Structural for the year ended December
31, 1999. This amount coupled with Structural's net income for the six months
ended June 30, 2000 of $64,248, results in a net equity loss of $30,170 for
the six months ended June 30, 2000 as recorded on the Company's books.
Through the six months ended June 30, 2000 H&M has struggled to complete a
large military base fabrication job. The project was the largest ever
undertaken by H&M. Design delays encountered during 1999 caused significant
production delays. However, the completion schedule for the project was never
amended to reflect the design delays. Through June 30, 2000 labor cost
overruns incurred to complete this job on a timely basis have pushed what
would otherwise have been a highly profitable endeavor into a break-even
situation. H&M's management believes this contract will be completed within
current estimates and no further loss reserves are necessary.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 2000, the Company used net cash in
operating activities of $398,422. Cash used in operating activities was
provided by $191,690 in available cash balances existing at the beginning of
the year, collection of Notes Receivable and the completion of various equity
transactions during the period.
The Company had Notes Receivable from an unrelated party of $150,000 at year-
end. In January the Company collected $50,000 of this amount. In June the
Company loaned an additional $150,000 to the same unrelated party and extended
the due date of the Note Receivable to September 30, 2000. Management is
confident the $250,000 Note Receivable will be paid in full on or before the
due date.
From January 2000 through March 2000, options represented by 384,000 shares of
common stock were exercised generating net proceeds to the company of
$480,000. These funds were used for general working capital purposes.
In January 2000 the Company sold 150,000 units (comprised of 2 common shares
and 24 common stock purchase warrants) for $1.50 each receiving net proceeds
of $225,000. The warrants have the following terms:
<TABLE>
<CAPTION>
WARRANT PRICE PERIOD*
<S> <C> <C> <C>
Class A $.7500 30 days
Class B $.8750 60 days
Class C $1.000 90 days
Class D $1.125 120 days
Class E $1.250 150 days
Class F $1.500 180 days
</TABLE>
*The exercise period begins upon the effective date of a registration
statement registering the underlying shares of common stock issuable upon the
exercise of these warrants. Warrants must be exercised in alphabetical order
by warrant class. If any warrant is not exercised during the term of the
warrant by an individual warrant holder, all remaining classes of warrants
will automatically expire.
Should all warrants be exercised, the Company will receive additional proceeds
from this offering of $3,825,000. These funds will be used for acquisitions
and general working capital purposes.
On June 15, 2000 the Company announced it had executed a non-binding letter of
intent to acquire a privately owned interactive media agency in a transaction
classified as a reverse merger. The transaction was subject to numerous
conditions and the completion of due diligence which included an audit of the
private companies financial statements. On August 8, 2000 the Company
announced that it had terminated the non-binding letter of intent due to the
Company's inability to conclude satisfactory due diligence.
Structural's wholly-owned subsidiary, H&M, has a $2,350,000 3-year operating
line of credit with a financial institution with two 1-year automatic renewal
terms unless terminated earlier under certain conditions. Interest is at
prime plus 1.5%. Additionally, for each quarter, H&M must pay an unused line
of credit fee equal to 1/2% of the difference between $2,350,000 and the
average outstanding daily balance. The amount of borrowing under the line of
credit is limited to 80% of the net amount of eligible receivables, less any
allowance for doubtful accounts.
H&M's notes payable and line of credit with the financial institution are
collateralized by all of H&M's assets and Structural's ownership in the common
stock of H&M. Additionally, Structural has guaranteed the notes payable and
line of credit.
The notes payable and line of credit have various financial and operational
covenants, including certain working capital and debt to equity ratios,
operating cash flow to annual debt service ratios, net worth requirements, a
limitation on capital expenditures and a minimum cash flow requirement.
Additionally, the notes payable and line of credit restricts H&M's ability to
pay dividends, salaries and fees to the principals/shareholders of Structural.
H&M was not in compliance with certain covenants as of December 31, 1999 and
as of June 30, 2000. H&M is currently seeking a waiver of said covenants and
is trying to negotiate changes in certain covenants to better reflect the
nature of H&M's business. Management believes the waiver will be granted and
the covenants changed. However, until such time as waiver is granted and
covenants changed the indebtedness has been classified as a current liability
on H&M's financial statements.
At June 30, 2000 Structural had executed non-binding letters of intent (LOI's)
to acquire three separate structural steel fabrication entities. Each of the
LOI's is subject to due diligence and adequate financing so as to not obligate
Structural to close unless substantially all terms and conditions of closing
are acceptable to Structural. In light of H&M's difficulties in achieving
profitability on certain large contracts (see operations discussion above),
and the loan covenant situation with its lender, Structural's management has
suspended its acquisition strategy until H&M's current base of operations is
running more smoothly and a new lender is found.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
See "Liquidity and Capital Resources (Armor)" in Management's Discussion
and Analysis of Financial Condition and Results of Operation, Part I,
Item 6.
Item 3. Default Upon 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
Exhibits:
None.
<PAGE>
<PAGE>
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: August 21, 2000 By: /s/ J. Andrew Moorer
----------------- -----------------------------------
J. Andrew Moorer, President and CEO
