<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, 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.
------------------------------------------------------------------
(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
-----------------------------------------------------
(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, 2000, the Company had 3,973,462 shares of its $0.001
par value common stock outstanding.
Transitional Small Business Disclosure Format (Check one). Yes [ ] No [X]
<PAGE>
PART 1. FINANCIAL INFORMATION
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Balance Sheet - September 30, 2000 . . . . . . . . . . . . . . . . . . . . . 3
Statements of Operations - For the Three and Nine Months Ended September
30, 2000 and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Changes in Shareholders' Equity - For the Nine Months Ended
September 30, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Statements of Cash Flows - For the Nine Months Ended September 30, 2000
and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
BALANCE SHEET
SEPTEMBER 30, 2000
(UNAUDITED)
ASSETS
------
<S> <C>
Current Assets:
Cash and cash equivalents $ 139,009
Accounts receivable, no allowance
considered necessary 59,299
Inventories 147,952
Notes receivable:
Related Party 159,500
Other 402,699
Prepaid expenses and other 177,609
--------------
Total current assets 1,086,068
Equity Investment 771,365
Property and Equipment, net 342,373
Deposits and Other 140,414
--------------
Total Assets $ 2,340,220
--------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 95,474
Notes payable and current portion of
long-term debt 60,874
--------------
Total current liabilities 156,348
Long-Term Debt, net of current portion 108,781
Minority Interest: -
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, 3,973,462 shares issued and
outstanding 3,974
Additional paid-in capital 5,927,218
Accumulated deficit (3,856,101)
--------------
Total shareholders' equity 2,075,091
--------------
Total Liabilities and Shareholders' Equity $ 2,340,220
--------------
</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
September 30,
------------------------
2000 1999
---------- ---------
<S> <C> <C>
Net Sales $ 112,513 $ 421,986
Cost of goods sold 95,636 283,911
----------- ----------
Gross Profit (Loss) 16,877 138,075
Operating Expenses:
Selling expenses 22,006 23,044
General and administrative 261,344 179,697
----------- ----------
Total operating expenses 283,350 202,741
----------- ----------
Operating Loss (266,473) (64,666)
Other Income (Expense):
Interest income (expense) 11,592 7,932
Rental income (expense) 13,600 -
Gain (loss) on sale of assets - -
Miscellaneous income (expense) 27,274 3,255
----------- -----------
Total other income (expense) 52,466 11,187
----------- -----------
Loss Before Minority Interest
and Earnings From Equity
Investment (214,007) (53,479)
Minority Interest 49,000 -
----------- ----------
Loss Before Earnings from Equity
Investment (165,007) (53,479)
Equity in net earnings (loss) of
investment (180,841) 51,375
----------- -----------
Net Loss $ (345,848) $ (2,104)
=========== ===========
Net Loss per Common Share,
Basic and Dilutive $ (0.10) $ -
=========== ==========
Average Common Shares Outstanding,
Basic and Dilutive 3,631,331 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 Nine
Months Ended
September 30,
-------------------------
2000 1999
----------- ----------
<S> <C> <C>
Net Sales $ 460,218 $ 852,071
Cost of goods sold 391,185 660,235
----------- ----------
Gross Profit 69,033 191,836
Operating Expenses:
Selling expenses 55,211 57,420
General and administrative 719,441 544,224
---------- ----------
Total operating expenses 774,652 601,644
----------- ----------
Operating Loss (705,619) (409,808)
Other Income (Expense):
Interest income (expense) 31,111 (7,731)
Rental income (expense) 26,200 49,234
Gain (loss) on sale of assets (1,007) 109,759
Miscellaneous income (expense) 57,306 (5,252)
----------- ----------
Total other income (expense) 113,610 146,010
----------- ----------
Loss Before Minority Interest and
Earnings From Equity Investment (592,009) (263,800)
Minority Interest 49,000 -
----------- -----------
Loss Before Earnings from Equity
Investment (543,009) (263,800)
Equity in net earnings (loss)
of investment (211,011) 300,000
----------- -----------
Net Loss $ (754,020) $ 36,202
============ ===========
Net Loss per Common Share,
Basic and Dilutive $ (0.22) $ .03
=========== ==========
Average Common Shares Outstanding,
Basic and Dilutive 3,399,450 1,310,498
=========== ==========
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital Deficit Total
--------- ------- -------- ------------ ------
<S> <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 724,000 724 754,316 - 755,000
Palo Verde
Acquisition 361,800 362 361,438 - 361,800
Services 124,994 125 130,973 - 131,098
Other - - 19,623 - 19,623
Net loss - - - 754,020 754,020
----------- ----------- ------------ ------------ ------------
Balances,
September 30,
2000 3,973,462 $ 3,974 $ 5,927,218 (3,856,101) 2,075,091
=========== =========== ============ =========== ============
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine
Months Ended
September 30,
------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (754,020) $ 36,202
Adjustments to reconcile net
Income (loss) to net cash
used in operating activities:
Depreciation and amortization of
property and equipment 14,722 37,920
Gain (loss) on sale of property
and equipment 1,007 (109,759)
Common stock for service 131,098
Cash received in Palo Verde
acquisition (9,365)
Minority Interest (49,000)
Equity in net income (loss) of
investment 211,011 (300,000)
Changes in operating assets and
liabilities:
(Increase) decrease in:
Accounts receivable 125,980 62,472
Inventories 10,793 36,900
Prepaid expenses and other (79,864) (117,793)
Increase (decrease) in:
Accounts payable (122,769) (90,161)
Accrued expenses and other (110,654) 25,057
----------- -----------
Net cash provided by (used in)
operating activities (631,061) (419,162)
----------- -----------
Cash Flows from Investing Activities:
Purchase of property and
equipment 0 (648)
Sale of property and equipment 11,505 877,941
Payments on notes receivable 50,000 620,000
Issuance of notes receivable (249,000) (505,000)
Investment in Structural Holding,
Inc. - (850,000)
----------- -----------
Net cash provided by (used in)
investing activities (187,495) 142,293
Cash Flows from Financing Activities:
Proceeds from issuance of
notes payable - 91,978
Other 19,623
Payment on notes payable (8,748) (170,728)
Exercise of options 530,000 -
Proceeds of common stock issued 225,000 100,000
----------- -----------
Net cash provided by (used in)
financing activities 765,875 21,250
----------- -----------
Increase (Decrease) in Cash and
Cash Equivalents (52,681) (255,619)
Cash and Cash Equivalents,
beginning of period 191,690 585,937
----------- -----------
Cash and Cash Equivalents,
end of period $ 139,009 $ 330,318
=========== =============
Supplemental Schedule of Cash
Flow Information:
Cash paid for interest $ 5,275 $ 37,609
=========== =============
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 September 30, 2000
and its results of operations for the nine months ended September 30,
2000:
<TABLE>
<CAPTION>
<S> <C> <C>
Net sales $ 12,516,531
Cost of sales $ 11,667,032
Depreciation $ 657,484
Net income $ (252,069)
Guardian share of net income $ (126,035)
Current assets $ 4,515,000
Noncurrent assets $ 4,789,768
Total assets $ 9,304,768
Current liabilities $ 7,412,051
Noncurrent liabilities $ 542,152
Total liabilities $ 7,954,203
Net assets $ 1,350,565
</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 nine months
ended September 30, 2000 by $84,976, which represents the Company's pro
rata portion of the reduction in net income of Structural for the year
ended December 31, 1999. This amount coupled with Structural's net loss
for the nine months ended September 30, 2000 presented above of $126,035,
results in a net equity loss of $211,011 for nine months ended September
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 September 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, 1999, the Note balance had been reduced to
$100,000. On May 5, 2000, the Company increased the Note by an
additional $150,000. 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. The Note is due December 31,2000.
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 was repaid on September 29, 2000.
5. Palo Verde Acquisition.
----------------------
On September 27, 2000, Guardian Technologies International, Inc.
completed the acquisition of 100% of the issued and outstanding shares of
common stock of Palo Verde Group, Inc., a Colorado corporation. In the
transaction, Guardian issued 361,800 shares of its common stock to
Redwood MicroCap Fund, Inc., the sole shareholder of Palo Verde Group,
Inc. Under the terms of the agreement, Guardian has agreed to register
the distribution of the 361,800 shares of Guardian common stock to the
shareholders of Redwood MicroCap Fund, Inc., pro rata, which is a
publicly reporting company whose shares are traded on the over-the-
counter market and quoted on the OTC Electronic Bulletin Board.
The assets of Palo Verde Group, Inc. consist of certain real property
located in Carefree, Arizona and a second mortgage held against certain
property located in the State of Wyoming. The Arizona property is held
for development.
Guardian will hold Palo Verde Group as a wholly-owned subsidiary.
6. 49% Sale of ForceOne, LLC.
-------------------------
On September 30, 2000, Guardian Technologies International, Inc.
(the"Company") completed a reorganization and restructuring of its armor
division.
The Company had previously formed and organized a wholly-owned
subsidiary, Guardian Security and Safety Products, Inc. ("GSSP"). In
forming that subsidiary, the Company transferred all of its assets and
liabilities associated with its armor manufacturing division to GSSP in
exchange for a total of 3,611,662 shares of GSSP common stock.
Following this restructuring, the Company then formed and organized
Guardian Armor, LLC, a Delaware limited liability company. Guardian
Armor, LLC then changed its name to ForceOne, LLC. GSSP then transferred
to ForceOne, LLC certain assets and liabilities associated with the armor
division consisting of accounts receivable, accounts payable, inventory
and fixed assets. The assets and liabilities transferred to ForceOne,
LLC had a net value of approximately $50,000, for which GSSP received a
51% membership interest in ForceOne,LLC.
The remaining 49% membership interests in ForceOne, LLC were sold to the
following: Composix, Inc. purchased an undivided 24.5% membership
interest and Steven A. Young purchased the remaining 24.5% membership
interest. The membership interests purchased by Composix and Young were
issued in consideration of promissory notes in the amount of $24,500
each, payable June 30, 2001. At September 30, 2000, Composix had paid
its note in full.
7. Merger Agreement.
----------------
On November 2, 2000 the Company announced the execution of a non-binding
letter of intent to acquire Travelinput, LLC. Travelinput is assembling
a global travel, entertainment and leisure products and services network
that is expected to range from air, hotel and car bookings to restaurant,
spa and tee-time reservations, as well as movie, theatre, sports and
special event ticketing. The transaction is to be classified as a
reverse merger. Closing is subject to the completion of customary due
diligence matters, the consummation, by Travelinput, of an equity
financing and an acquisition, NASDAQ approval, the approval of the
shareholders of both companies, and the completion of a satisfactory
audit of the financial statements of Travelinput and any probable
acquisition target.
<PAGE>
<PAGE>
Item 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 assumed the role of President of the Company's armor
division responsible for day to day operations.
b) To outsource the Company's manufacturing operation to reduce
production 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 latter half of the second quarter and completed
by September 30.
c) To develop new products that will make the Company more
competitive in the market. During the third quarter, the
Company developed an entire new line of low-cost, lightweight
body armor designed to make the Company competitive in the
market. The new line will be manufactured and marketed through
the Company's majority-owned subsidiary ForceOne.
Manufacturing will take place at ForceOne's new facility
located in North Carolina's textile belt. The new line was
certified by the National Institute of Justice's recently
adopted "04" standard requiring greater protection and reduced
trauma. The new line was introduced for the first time at the
International Association of Chiefs of Police Convention held
in San Diego, California during November 2000.
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. 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 SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30,
1999.
Net sales for the three months ended September 30, 2000 were $112,513
compared to $421,986 for the same period in 1999, a decrease of $309,473. The
decrease in sales is attributable to a decline in demand for the Company's
existing products and to the suspension of sales efforts until the completion
of the relocation of the Company's manufacturing facility to North Carolina.
The Company spent most of the current quarter re-designing its line of armor
products and establishing into its new production facility.
Lower sales volume generated a gross profit of $16,877 for the three
months ended September 30, 2000 compared to a gross profit of $138,075 for the
same period in 1999.
Total operating expenses for the three months ended September 30, 2000
were $283,350 comprised of selling expenses of $22,006 and general and
administrative expenses of $261,344. Total operating expenses for the three
months ended September 30, 1999 were $202,741 comprised of selling expenses of
$23,044 and general and administrative expenses of $179,697.
The Company posted a net loss for the three months ended September 30,
2000 of $345,848 or $0.10 per share compared to a net loss of $2,104, or nil
per share for the same period a year ago. Lower sales volume caused a loss
from armor operations of $266,473 for the period. Partially offsetting this
loss was minority interest of $49,000. Augmenting the loss for the period was
a loss of $180,841 associated with the Company's equity investment in
Structural Holdings.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1999.
Net sales for the nine months ended September 30, 2000 were $460,218
compared to $852,071 for the same period in 1999, a decrease of 45%. The
decrease in revenues during the nine-month period is attributable to reduced
demand for the Company's previously outdated product line (see discussion
above on new armor product line development) and reduced sales efforts during
the Company's relocation of its armor production capability to North Carolina
and elimination of the Dulles, Virginia work force.
Gross profit for the nine months ended September 30, 2000 was $69,033 or
15% compared to gross profit of $191,836 or 23% for the nine months ended
September 30, 1999. The reduction in gross margin dollars is a function of
reduced sales volume (as previously discussed). The reduction in gross margin
percentage is a function of inefficient production during the relocation of
the manufacturing facility to North Carolina.
Total operating expenses for the nine months ended September 30, 2000
were $774,652 comprised of selling expenses of $55,211 and general and
administrative expenses of $719,441. Total operating expenses for the nine
months ended September 30, 1999 were $601,644 comprised of selling expenses of
$57,420 and general and administrative expenses of $544,224.
The Company posted a net loss for the nine months ended September 30,
2000 of $754,020 or $0.22 per share compared to a net profit of $36,202 or
$0.03 per share for the same period a year ago.
After adjusting for the loss allocated to the minority interest
shareholders in the Company's armor business, the Company posted a loss from
armor operations of $656,619 for the period compared to a loss from armor
operations of $409,808 a year ago. The loss is attributable to reduced sales
volume during the period.
Net results for the nine months ended September 30, 2000 were negatively
impacted by the recognition of a $211,011 loss associated with the Company's
equity investment in Structural Holdings. The Company recorded its equity
investment 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 the
audit, Structural's management changed some of its estimates in the cost to
complete certain jobs, thereby changing its percentage 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 nine months ended September 30, 2000
by $84,976, which represents the Company's pro-rata portion of the reduction
in net income of Structural for the year ended December 31, 1999. This amount
coupled with the Company's attributable loss of Structural's net loss for the
nine months ended September 30, 2000 of $126,035, results in a net equity loss
of $211,011 for the nine months ended September 30, 2000 as reported on the
Company's books.
Through the nine months ended September 30, 2000 H&M has struggled to
complete several fabrication jobs. One job, to supply fabricated steel to a
large military base construction site, was the largest project ever undertaken
by H&M. Design delays encountered during 1999 caused significant production
delays. However, the completion schedule was never amended to reflect the
design delays. Through September 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 loss position. A second job that has
affected the third quarter was actually underbid when submitted to the general
contractor over two years ago. The estimator on the job had significantly
underbid material costs on the job, the impact of which was not known until
the job was being fabricated in 2000. The estimator on the job was terminated
after the facts were known, but no contract price adjustment was allowed by
the general contractor. This project is nearing completion and has run into a
loss position. As H&M has encountered several problems in the area of
estimation and analysis of costs to complete on contracts in progress,
management has undertaken the task of developing stringent procedures for
preparing, analyzing and reconciling actual costs and costs to complete to
mitigate these types of problems in the future.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 2000, the Company used net
cash in operating activities of $631,061. 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 May
2000, the Company loaned an additional $150,000 to the same unrelated party
and extended the due date of the Note Receivable to December 31, 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 $530,000. 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.
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 September 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.
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.
On September 27,2000, the Company, completed the acquisition of 100% of
the issued and outstanding shares of common stock of Palo Verde Group, Inc., a
Colorado corporation. In the transaction, the Company issued 361,800 shares
of its common stock to Redwood MicroCap Fund, Inc., the sole shareholder of
Palo Verde Group, Inc. Under the terms of the agreement, the Company has
agreed to register the distribution of the 361,800 shares of the Company's
common stock to the shareholders of Redwood MicroCap Fund, Inc., pro rata,
which is a publicly reporting company whose shares are traded on the over-the-
counter market and quoted on the OTC Electronic Bulletin Board. The Company
maintains Palo Verde Group as a wholly-owned subsidiary.
The assets of Palo Verde Group, Inc. consist of certain real property
located in Carefree, Arizona and a second mortgage held against certain
commercial property located in the State of Wyoming. The Arizona property is
held for development.
On September 30, 2000, the Company completed a reorganization and
restructuring of its armor division.
The Company had previously formed and organized a wholly-owned
subsidiary, Guardian Security and Safety Products, Inc. ("GSSP"). In forming
that subsidiary, the Company transferred all of its assets and liabilities
associated with its armor manufacturing division to GSSP in exchange for a
total of 3,611,662 shares of GSSP common stock.
Following the restructuring, the Company then formed and organized
Guardian Armor, LLC, a Delaware limited liability company. Guardian Armor,
LLC then changed its name to ForceOne, LLC. GSSP then transferred to
ForceOne, LLC certain assets and liabilities associated with the armor
division consisting of accounts receivable, accounts payable, inventory and
fixed assets. The assets and liabilities transferred to ForceOne, LLC had a
net value of approximately $50,000, for which GSSP received a 51% membership
interest in ForceOne, LLC.
The remaining 49% membership interests in ForceOne, LLC were sold to the
following: Composix, Inc. purchased an undivided 24.5% membership interest
and Steven A. Young purchased the remaining 24.5% membership interest. The
membership interests purchased by Composix and Young were issued in
consideration of promissory notes in the amount of $24,500 each, payable June
30, 2001.
On November 2, 2000 the Company announced the execution of a non-binding
letter of intent to acquire Travelinput, LLC. Travelinput is assembling a
global travel, entertainment and leisure products and services network that is
expected to range from air, hotel and car bookings to restaurant, spa and tee-
time reservations, as well as movie, theatre, sports and special event
ticketing. The transaction is to be classified as a reverse merger. Closing
is subject to the completion of customary due diligence matters, the
consummation, by Travelinput, of an equity financing and an acquisition,
NASDAQ approval, the approval of the shareholders of both companies, and the
completion of a satisfactory audit.
<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: November 20, 2000 By: /s/ J. Andrew Moorer
-------------------- -----------------------------------
J. Andrew Moorer, President and CEO
