<PAGE>
As filed with the Securities and Exchange Commission on May 30, 2000.
Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
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(Exact name of Registrant as specified on its Charter)
Delaware 7385 93-1197477
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(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classi- Identification
fication Code Number)
Number)
22570 Markey Court, Dulles, Virginia 20166-8901
(703) 444-7931
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(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
J. Andrew Moorer
Guardian Technologies International, Inc.
22570 Markey Court
Dulles, Virginia 20166-8901
(703) 444-7931
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(Name, address, including zip code, and telephone number of
agent for service of process)
Copies to:
David H. Drennen, Esq.
Neuman & Drennen, LLC
5445 DTC Parkway, PH-4
Englewood, Colorado 80111
(303) 221-4700
Fax: (303) 488-3454
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of the Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ x ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<PAGE>
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Each Class Offering Aggregate Amount of
of Securities to be Amount to Price Per Offering Registration
Registered be Registered Share (1) Price (1) Fee
-------------------- -------------- --------- --------- ------------
<S> <C> <C> <C> <C>
Common Stock, $.0005
par value to be sold
by the Selling
Stockholders 3,900,000 $.84 $3,276,000 $8,648.64
-------------- --------- ---------- ----------
TOTAL: 3,900,000 $.84 $3,276,000 $8,648.64
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Calculation based on the closing price of the Registrant's common stock
on Nasdaq on May 25, 2000. This calculation is made in accordance with
Rule 457(c). Pursuant to Rule 416, there are also being registered such
additional shares and warrants as may become issuable pursuant to anti-
dilution provisions upon the exercise of the warrants
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
Cross-Reference Index
<TABLE>
<CAPTION>
Item No. and Heading
In Form SB-2 Location
Registration Statement In Prospectus
---------------------- -------------
<S> <C>
1. Front of Registration Statement and Forepart of Registration Outside
Front Cover of Prospectus Outside Front Cover Page of
Statement; of Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back
Pages of Prospectus Cover Pages of Prospectus
3. Summary Information and Risk Factors Front Cover Page
4. Use of Proceeds Use of Proceeds; Risk Factors
5. Determination of Offering Price *
6. Dilution Dilution; Risk Factors
7. Selling Security Holders Selling Stockholders
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Legal Proceedings
10. Directors, Executive Officers, Management
Promoters, and Control Persons
11. Security Ownership of Certain Principal Stockholders
Beneficial Owners and Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Legal Matters; Experts
14. Disclosure of Commission Position on Limitation on Directors'
Indemnification for Securities Act Liability; Indemnification
Liabilities
15. Organization Within Last Five Years Prospectus Summary - General
Information About Us and Our
Business
16. Description of Business Prospectus Summary; Risk Factors;
Business
17. Management's Discussion and Management's Discussion and
Analysis or Plan of Operations Analysis of Financial Condition
and Results of Operations
18. Description of Property Business
19. Certain Relationships and Related Certain Relationships and
Transactions Related Transactions
20. Market for Common Equity and The Market for our Securities
Related Stockholder Matters
21. Executive Compensation Executive Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagreements with *
Accountants on Accounting and
Financial Disclosure
</TABLE>
* Omitted from prospectus because item is inapplicable or answer is in the
negative
<PAGE>
<PAGE>
The information in this prospectus is not complete and may be changed. The
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer of sale is not permitted.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY __, 2000
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
This is a public offering of 3,900,000 Shares of our common stock.
300,000 of the Shares are being offered by certain stockholders who acquired
them from us in a private transaction. The remaining shares may be offered by
such persons if they exercise warrants we have issued to them. We will not
receive any of the proceeds from the offer and sale of the shares. If the
warrants are exercised in full, we will receive proceeds from such exercise of
$3,825,000.
The Nasdaq Small Cap Market lists our shares under the symbol "GRDN."
Investing in the shares involves risks. You should not purchase the
shares unless you can afford to lose your entire investment. See "Risk
Factors" beginning on page 3 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. It is illegal for anyone to tell you
otherwise.
The information in this prospectus is not complete. It might change.
The selling stockholders are not allowed to sell the shares offered by this
prospectus until the registration statement that we have filed with the SEC
becomes effective. This prospectus is not an offer to sell the securities-and
does not solicit offers to buy-in any state where the offer or sale is not
permitted.
The date of this prospectus is _________, 2000.
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the shares of the common stock being
sold in this offering and our historical financial statements and notes
thereto included elsewhere in this prospectus. Our board of directors
authorized a two-for-one forward split of our common stock, which was
effective on April 3, 2000. All share amounts reflect that stock split,
including historical numbers and stock prices.
GENERAL INFORMATION ABOUT US AND OUR BUSINESS
Guardian Technologies International, Inc., a Delaware corporation, was
originally incorporated in 1989. We manufacture and distribute ballistic
protective equipment, including equipment commonly referred to as body armor.
Our product lines include four basic types of ballistic protective vests,
ballistic protective shields, a ballistic protective vests for police dogs,
aircraft ballistic protective equipment, and assorted other ballistic
protective devices, such as ballistic protective blankets and seat cover
liners.
We also are engaged in the specialty steel fabrication business through
our 50%-owned subsidiary, Structural Holdings, Inc.
Our executive offices are located at 22570 Markey Court, Dulles, Virginia
20166, telephone (703) 444-7931. We use the calendar year for our fiscal
year.
<TABLE>
<CAPTION>
<S> <C>
THE OFFERING
Common stock offered 3,900,000 shares
Common stock to be outstanding after this offering 7,211,662 shares
Nasdaq Market Symbol GRDN
</TABLE>
The total number of shares outstanding after the offering is based on
3,611,662 shares outstanding as of April 27, 2000, and the 3,600,000 shares
offered by this prospectus. It excludes:
- Options granted under our stock option plan to purchase 270,000
shares of common stock outstanding on April 27, 2000, and
- 1,628,712 shares issuable upon exercise of warrants that are
exercisable at $7.50 per share.
All of the shares are being offered by selling stockholders, who must
deliver a copy of this prospectus to persons who buy them. The selling
stockholders will probably sell the shares at prevailing market prices,
through broker-dealers, although they are not required to do so. The selling
stockholders will retain all of the proceeds of their sales, except for
commissions they may pay broker-dealers. We will not receive any money when
they sell. However, we will receive the proceeds from the exercise of the
warrants. We are paying the costs of registering the shares.
The market price of our common stock has fluctuated significantly since
it was first traded. The last price that the shares were sold for on May 25,
2000, was $.84.
Summary Financial Data
The following financial information summarizes the more complete historical
financial information enclosed in this prospectus. You should read the
information below along with all other financial information and analyses in
this prospectus. Please do not assume that the results below indicate results
we will achieve in the future.
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended
1999 March 31, 2000
------------ ---------------
(unaudited)
<S> <C> <C>
Current assets $ 868,459 $ 1,295,155
Equity investment 1,027,376 994,590
Property and equipment, net 52,064 48,007
Total assets 1,960,109 2,355,857
Current liabilities 362,030 126,350
Working capital 506,429 1,168,805
Shareholders' equity 1,561,590 2,229,507
</TABLE>
<TABLE>
<CAPTION>
For the Periods Ended Three Months
December 31, Ended March 31,
------------------------ -------------------
1999 1998 2000 1999
-------- ------- ----- ------
(unaudited)(unaudited)
<S> <C> <C> <C> <C>
Net sales $1,100,076 $1,656,649 $226,438 $216,842
Gross profit 163,424 278,672 53,136 26,093
Operating loss (954,220) (419,184) (147,395) (165,009)
Equity in net earnings
(loss) of investment 33,467 - (47,786) -
Net loss $(825,076) $(447,255) $(168,180) $(30,810)
</TABLE>
<PAGE>
<PAGE>
RISK FACTORS
You should carefully consider the risks and uncertainties described below
before making an investment decision. The risks described below are not the
only ones facing our company. Additional risks not presently known to us or
that we currently deem immaterial may also impair our business operations.
Our business, financial condition, or operating results could be materially
adversely affected by any of these risks. The trading price of our common
stock could decline due to any of these risks, and you may lose all or part of
your investment.
This prospectus also contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including the risks faced by us described below and elsewhere in this
prospectus.
RISKS RELATING TO OUR BUSINESSES
We May Be Unable To Complete And Integrate Acquisitions
We intend to grow through the acquisition of businesses and assets that
will complement our current businesses. We cannot be certain that we will be
able to complete attractive acquisitions, obtain financing for acquisitions on
satisfactory terms, or successfully acquire identified targets. We may not be
successful in integrating acquired businesses into our existing operations.
This integration may result in unanticipated liabilities or unforeseen
operational difficulties, which may be material, or require a disproportionate
amount of management's attention. Competition for acquisition opportunities
in our industries may rise, thereby increasing our cost of making acquisitions
or causing us to refrain from making further acquisitions.
We intend to consider acquisitions of and alliances with other companies
in industries that could complement our business, including the acquisition of
entities in diverse geographic regions and entities offering greater access to
industries and markets that we do not currently serve. We cannot provide
assurance that suitable acquisition or alliance candidates can be identified
or, if identified, that we will be able to consummate such transactions. We
also cannot assure that we will be able to integrate successfully any acquired
companies into our existing operations, which could increase our operating
expenses. Moreover, any acquisition may result in potentially dilutive
issuances of equity securities, incurrence of additional debt, and
amortization of expenses related to goodwill and intangible assets, all of
which could adversely affect our profitability. Acquisitions involve numerous
risks, such as diverting attention of our management from other business
concerns, our entrance into markets in which we have had no or only limited
experience, and the potential loss of key employees of the acquired company,
any of which could have a material adverse effect on our business, financial
condition and operating results.
Our Success Will Depend On Our Ability To Attract And Retain Key Personnel.
If We Are Unable To Attract And Retain Key Personnel, We Will Be Unable To
Succeed In Our Business Plan.
Our success depends on the continued services of our senior management
and key employees, particularly Messrs. Moorer and Payne, as well as our
ability to attract additional members to our management team with experience
in the steel fabrication and protective equipment industries. Although we
intend to implement a stock option plan designed to retain key management and
other employees, and we believe that we offer competitive compensation to such
personnel other than with Mr. Moorer, we have no employment agreements with
our management or key employees. The unexpected loss of the services of any
of our management or other key personnel, or our inability to attract new
management when necessary, could have a material adverse effect upon us.
The Industries In Which We Operate Are Highly Competitive
The industries in which we operate are highly competitive in all product
and service lines. Some of our competitors have significantly greater
financial resources, larger facilities and operations and depth and experience
of personnel. In the security industry, some of our competitors have more
recognizable trademarks for products similar to those sold by us. In
addition, our competitors may develop or improve their products, which could
render our products obsolete or less marketable. The security industry is
extremely competitive and highly fragmented. We expect that the level of
competition will increase in the future. We cannot assure you that we will be
able to continue to compete successfully.
Many small and various large companies offer fabrication, erection, and
related services that compete with those we provide. Local and regional
companies offer competition in one or more of our geographic markets or
product segments. Out of state or international companies may provide
competition in any market. We compete for every project we obtain. Although
we believe customers consider, among other things, the availability and
technical capabilities of equipment and personnel, efficiency, safety record
and reputation, price competition usually is the primary factor in determining
which qualified contractor with available equipment is awarded a contract.
Competition has resulted in pressure on pricing and operating margins, and the
effects of competitive pressure in the industry may continue. Many of our
competitors have greater capital and other resources than we do and are well
established in their respective markets. We cannot assure that our
competitors will not substantially increase their commitment of resources
devoted to competing aggressively with us or that we will be able to compete
profitably with our competitors.
We Are Subject To Extensive Government Regulation
We are subject to federal licensing requirements with respect to the sale
in foreign countries of certain of our protective equipment products. In
addition, we are obligated to comply with a variety of federal, state and
local regulations governing certain aspects of our operations and the
workplace, including regulations promulgated by, among others, the U.S.
Departments of Commerce, State and Transportation, and the U.S. Environmental
Protection Agency
To the extent that we sell our products internationally, we are subject
to the Foreign Corrupt Practices Act and other laws which prohibit improper
payments to foreign governments and their officials by U.S. and other business
entities. We operate in countries known to experience endemic corruption.
Our activities in such countries, though limited, create the risk of an
unauthorized payment by an employee or agent of ours that would be in
violation of various laws including the Foreign Corrupt Practices Act.
Violations of the Foreign Corrupt Practices Act may result in severe criminal
penalties that could have a material adverse effect on our business, financial
condition, and operating results.
Many aspects of our operations are subject to governmental regulations in
the United States, including regulations relating to occupational health and
workplace safety, principally the Occupational Safety and Health Act and
regulations thereunder. In addition, we are subject to licensure and we hold
or have applied for licenses in each of the states in the United States in
which we operate and in certain local jurisdictions within such states.
Although we believe that we are in material compliance with applicable laws
and permitting requirements, there can be no assurance that we will be able to
maintain this status. Further, we cannot determine to what extent our future
operations and earnings may be affected by new legislation, new regulations,
or changes in or new interpretations of existing regulations.
The Failure of Our Products Could Give Rise To Product Liability Claims
Our protective equipment products are used in applications where their
failure could result in serious personal injuries and death. We believe that
the insurance coverage that we maintain is adequate under the circumstances.
However, we cannot assure that this coverage would be sufficient to cover the
payment of any potential claim. In addition, we cannot assure that this or
any other insurance coverage will continue to be available or, if available,
that we will be able to obtain it at a reasonable cost. Any substantial
uninsured loss could have a material adverse effect on our business, financial
condition, and operating results. In addition, the inability to obtain
product liability coverage would prohibit us from bidding for orders from
certain municipal customers since, at present, many municipal bids require
such coverage, and any such inability would have a material adverse effect on
our business, financial condition and operating results.
There Are Limited Sources For Some Of Our Raw Materials
The primary raw material that we use in manufacturing ballistic-resistant
garments is Spectrashield, a patented product of Honeywell. Although we enjoy
a good relationship with Honeywell, if our supply of that material were cut
off or if there were a material increase in the prices of that material, our
manufacturing operations could be severely curtailed and our business,
financial condition and operating results would be materially adversely
affected.
Although the raw materials we use in our steel fabrication business are
available from numerous suppliers, steel prices have risen in the past and may
rise again. An unexpected rise in the price of steel or other raw materials
would increase our costs on projects, and could result in reducing our profit
margins, or even create losses on certain projects.
Many Of Our Customers Have Fluctuating Budgets
Customers for our protective equipment products include law enforcement
and governmental agencies. Government tax revenues and budgetary constraints,
which fluctuate from time to time, can affect budgetary allocations for law
enforcement. Many domestic and foreign government agencies have experienced
budget deficits that have led to decreased spending in certain areas. Our
operating results may be subject to substantial period-to-period fluctuations
as a result of these and other factors affecting capital spending. A
reduction of funding for law enforcement related to security products or
funding for military base construction related to steel fabrication products
could have a material adverse effect on our business, financial condition, and
operating results.
We Are Dependent Upon Our Proprietary Technology
We are dependent in our protective equipment business upon a variety of
methods and techniques that we regard as proprietary trade secrets. We are
also dependent upon a variety of trademarks, service marks, and designs to
promote brand name development and recognition. We rely on a combination of
trade secrets, copyright, patent, trademark, unfair competition and other
intellectual property laws as well as contractual agreements to protect our
rights to such intellectual property. Due to the difficulty of monitoring
unauthorized use of and access to intellectual property, however, such
measures may not provide adequate protection. In addition, there can be no
assurance that courts will always uphold our intellectual property rights, or
enforce the contractual arrangements that we have entered into to protect our
proprietary technology. Any unenforceability or misappropriation of our
intellectual property could have a material adverse effect on our business,
financial condition, and operating results. In addition, if we bring or
become subject to litigation to defend against claimed infringement of our
rights or of the rights of others or to determine the scope and validity of
our intellectual property rights, such litigation could result in substantial
costs and diversion of our resources which could have a material adverse
effect on our business, financial condition and operating results.
Unfavorable results in such litigation could also result in the loss or
compromise of our proprietary rights, subject us to significant liabilities,
require us to seek licenses from third parties, or prevent us from selling our
products which could have a material adverse effect on our business, financial
condition and operating results.
Our Steel Fabrication Business' Dependence on the Construction Industry may
Create Variations in our Operating Results.
Our steel fabrication business has experienced variations in its
operating results because of a number of factors, many of which are outside
our control. We expect that those variations may continue. In particular,
our operating results may vary because of downturns in one or more segments of
the building construction industry, changes in economic conditions, our
failure to obtain, or delays in awards of, major projects, the cancellation of
major projects, our failure to timely replace projects that have been
completed or are nearing completion, or declines in the amount of our billings
in excess of costs and recognized earnings on uncompleted projects. Any of
these factors could result in the periodic inefficient or underutilization of
our resources and could cause our operating results to fluctuate significantly
from period to period, including on a quarterly basis.
Our steel fabrication business earns virtually all of its revenues in the
building construction industry, which is subject to local, regional, and
national economic cycles. Those revenues and cash flows depend to a
significant degree on major construction projects in various industries,
including government military installations, commercial offices and hotels,
and school systems, each of which industries may be adversely affected by
general or specific economic conditions. If construction activity declines
significantly in our principal markets, our business, financial condition and
operating results would be adversely affected.
When we bid on projects, we estimate our costs, including projected
increases in costs of labor, materials, and services. Costs and gross profit
realized on a fixed price contract may vary from estimated amounts because of
unforeseen conditions or changes in job conditions, variations in labor and
equipment productivity over the terms of contracts, higher than expected
increases in labor or material costs, and other factors. These variations
could have a material adverse effect on our business, financial condition, and
operating results for any period.
We routinely rely on subcontractors to perform a portion of our
fabrication and all of our project detailing to fulfill projects that we
cannot fulfill in-house due to capacity constraints, or that are in markets in
which we have not established a strong local presence. In order to complete
these projects successfully we must retain and successfully manage these
subcontractors. Any difficulty we may have in attracting and retaining
qualified subcontractors on terms and conditions favorable to us could have an
adverse effect on our ability to complete these projects in a timely and cost
effective manner.
Our Use of Percentage of Completion Accounting May Adversely Affect Operating
Results in Future Periods.
We recognize steel fabrication revenues using the percentage of
completion accounting method. Under this method, we recognize revenue based
on the ratio that costs incurred to date bear to the total estimated costs to
complete the project. We estimate losses on contracts in full when we
determine that we will incur a loss on the project. We frequently review and
revise revenues and total cost estimates as work progresses on a contract and
as contracts are modified. Accordingly, we reflect revenue adjustments based
upon the revised completion percentage in the period that estimates are
revised. Although we base revenue estimates on management assumptions
supported by historical experience, these estimates could vary materially from
actual results. To the extent percentage of completion adjustments reduce
previously reported revenues, we would recognize a charge against operating
results, which could have a material adverse effect on our operating results
for the applicable period.
The Concentration of Our Steel Fabrication Operations in One Industry and in
One Geographical Region May Create Periodic Fluctuations of Our Revenues.
Our fabrication and erection operations currently are conducted primarily
in the governmental sector of the construction industry, which has experienced
substantial growth during recent years. Because of this concentration, future
construction activity and our business may be adversely affected in the event
of a downturn in economic conditions existing in the governmental sector,
including military base construction as well as commercial construction in the
Oklahoma area and in the Southern United States generally. Factors that may
affect economic conditions include increases in interest rates or limitations
in the availability of financing for construction projects, decreases in the
amount of funds budgeted for governmental projects, decreases in capital
expenditures devoted to the construction of plants, distribution centers,
industrial facilities, hotels, office buildings, convention centers, and other
facilities, and downturns in occupancy rates, office space demand, tourism and
convention related activity and population growth.
The Nature of Our Operations Creates Risks of Costly Litigation and Damages
that We May not Be Adequately Insured Against.
Construction and heavy steel plate weldments involve a high degree of
operational risk. Natural disasters, adverse weather conditions, design,
fabrication, and erection errors, and work environment accidents can cause
death or personal injury, property damage and suspension of operations.
Furthermore, delays in project deliveries can result in significant back
charges and/or liquidated damages. The occurrence of any of these events could
result in loss of revenues, increased costs, and liability to third parties.
Although we are not currently involved in any such claims, we are subject to
litigation claims in the ordinary course of our business, including
backcharges and liquidated damage claims, and the resultant lawsuits asserting
substantial claims. Currently, we do not maintain any reserves for potential
litigation, and we expense litigation costs if and when we incur them. We
maintain risk management, insurance, and safety programs intended to prevent
or mitigate losses. There can be no assurance that any of these programs will
be adequate or that we will be able to maintain adequate insurance in the
future at rates that we consider reasonable.
The Nature of Our Business may Create Liquidity Problems.
Since our inception we have incurred continuing losses, including
$825,076 in 1999 and $447,255 in 1998, respectively. If losses continue
and/or we are unable to raise adequate capital to fund future operations, we
may be required to curtail operations, liquidate assets or enter into capital
or financing arrangements on terms which may have an adverse effect on future
operations.
Our steel fabrication operations require significant amounts of working
capital to procure materials for contracts to be performed over relatively
long periods, and for purchases and modifications of heavy-duty and
specialized fabrication equipment. In addition, our contract arrangements
with customers sometimes require us to provide payment and performance bonds
and, in selected cases, letters of credit, to partially secure our obligations
under our contracts, which may require us to incur significant expenditures
prior to receipt of payments. Furthermore, our customers often will retain a
portion of amounts otherwise payable to us during the course of a project as a
guarantee of completion of that project. To the extent we are unable to
receive project payments in the early stages of a project, our cash flow would
be reduced, which could have a material adverse effect on our business,
financial condition and operating results. To finance our operations, we are
customarily highly leveraged, which creates a substantial risk that we would
be unable to make timely payments on our debt.
Structural's 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. It was not in compliance with certain covenants as of December
31, 1999 and as of March 31, 2000. It is currently seeking a waiver of said
covenants. Management believes the waiver will be granted; however, we have
included the related indebtedness as a current liability until such time that
the waiver has been granted.
We May Be Adversely Affected By Applicable Environmental Laws
We are subject to federal, state, and local laws and regulations
governing the protection of the environment, including those regulating
discharges to the air and water, the management of wastes, and the control of
noise and odors. We cannot assure you that we are at all times in complete
compliance with all such requirements. Like all companies, we are subject to
potentially significant fines or penalties if we fail to comply with
environmental requirements. We have made and will continue to make capital
expenditures in order to comply with environmental requirements.
Environmental requirements are complex, change frequently, and could become
more stringent in the future. Accordingly, we cannot assure you that these
requirements will not change in a manner that will require material capital or
operating expenditures or will otherwise have a material adverse effect on us
in the future.
Our operations and properties are affected by numerous federal, state and
local environmental protection laws and regulations, such as those governing
discharges to air and water and the handling and disposal of solid and
hazardous wastes. Compliance with these laws and regulations has become
increasingly stringent, complex, and costly. There can be no assurance that
such laws and regulations or their interpretation will not change in a manner
that could materially and adversely affect us. Certain environmental laws,
such as the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") and its state law counterparts, provide for strict and joint
and several liability for investigation and remediation of spills and other
releases of toxic and hazardous substances. These laws may apply to
conditions at properties currently or formerly owned or operated by an entity
or its predecessors, as well as to conditions at properties at which wastes or
other contamination attributable to an entity or its predecessors come to be
located. Although we have not incurred any material environmental related
liability in the past and we believe that we are in material compliance with
environmental laws, there can be no assurance that we will not incur such
liability in connection with the investigation and remediation of facilities
we currently operate (or formerly owned or operated) or other locations in a
manner that could materially and adversely affect us.
Delaware Law May Limit Possible Takeovers
Our certificate of incorporation makes us subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law. In
general, Section 203 prohibits publicly held Delaware corporations to which it
applies from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. This provision could
discourage others from bidding for our shares and could, as a result, reduce
the likelihood of an increase in our stock price that would otherwise occur if
a bidder sought to buy our stock.
Delaware Law And Our By-Laws Protect Our Directors From Certain Types Of
Lawsuits.
Delaware law provides that our directors will not be liable to us or our
stockholders for monetary damages for all but certain types of conduct as
directors. Our Bylaws require us to indemnify our directors and officers
against all damages incurred in connection with our business to the fullest
extent provided or allowed by law. The exculpation provisions may have the
effect of preventing stockholders from recovering damages against our
directors caused by their negligence, poor judgment or other circumstances.
The indemnification provisions may require us to use our assets to defend our
directors and officers against claims, including claims arising out of their
negligence, poor judgment, or other circumstances. We have also entered into
indemnity agreements with each of our directors and officers, and we have
directors' and officers' liability insurance.
RISKS RELATED TO OUR SHARES
The Market Price For Our Common Stock Is Volatile
The market price for our common stock has been highly volatile. We
believe that a variety of factors, including announcements by us or our
competitors, quarterly variations in financial results, trading volume,
general market trends, and other factors, have caused, and may in the future
cause the market price of our common stock to fluctuate substantially. Due to
our relatively small size, our winning or losing a large contract may have the
effect of distorting our overall financial results.
We Will Have Broad Discretion To Allocate Any Proceeds We Receive From The
Exercise Of Warrants. We Cannot Guarantee That The Monies Received Will
Improve Our Operations.
Any monies we may receive from the exercise of the warrants have been
allocated generally to provide funds for future acquisitions and for working
capital for operations. As such, we will use funds as they are received for
such purposes and in such proportions as we deem advisable. While we will
apply the proceeds in a manner consistent with our fiduciary duty and in a
manner consistent with our best interests, we cannot assure you that the
monies received will result in any present or future improvement in our
operating results.
We Currently Do Not Intend To Pay Dividends
We currently do not intend to pay any cash dividends on our common stock.
We currently intend to retain any earnings for working capital, repayment of
indebtedness, capital expenditures, and general corporate purposes.
The Sales of Restricted Securities and Shares underlying Options and Warrants
Could Adversely Affect the Market Price of our Common Stock.
Actual sales or the prospect of future sales of shares of our common
stock under Rule 144, and sales or the prospect of sales of shares by means of
this prospectus may have a depressive effect upon the price of, and market
for, our common stock. As of March 31, 2000, 3,571,662 shares of our common
stock were issued and outstanding. An additional 40,000 shares were issued in
the first quarter of 2000, so that as of April 27, 2000, there were 3,611,662
shares outstanding. Approximately 475,000 of those shares are not presently
available to be sold in the public market. If all of the warrants are
exercised, an additional 3,600,000 shares will be issued, or a 100% increase
in our shares. Upon the effectiveness of the registration statement of which
this prospectus is a part, all of the shares that are issued upon exercise of
the warrants, as well as 300,000 of the restricted shares, will be newly
available for sale on the open market.
We cannot predict what effect, if any, that sales of shares of common
stock, or the availability of these shares for sale, will have on the market
prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of common stock may be sold in the public market will
probably adversely effect prevailing prices for our common stock and could
impair our ability to raise capital in the future through the sale of equity
securities.
The Exercise Of Outstanding Options And Warrants And/Or Our Ability To Issue
Additional Securities Without Stockholder Approval Could Have Substantial
Dilutive And Other Adverse Effects On Existing Stockholders And Investors In
This Offering.
We are authorized to issue up to 1,000,000 shares of preferred stock. We
can fix and determine the relative rights and preferences of preferred shares
and may issue these shares without further stockholder approval. As a result,
we could authorize the issuance of a series of preferred stock that would:
- grant to holders preferred rights to our assets upon liquidation;
- grant to holders the right to receive dividend coupons before
dividends would be declared to common stockholders; and
- grant to holders the right to the redemption of those shares,
together with a premium, prior to the redemption of common stock.
Common stockholders have no redemption rights.
We also have the authority to issue additional shares of common stock and
to issue options and warrants to purchase shares of our common stock without
stockholder approval. We could issue large blocks of voting stock to fend off
unwanted tender offers or hostile takeovers without further stockholder
approval. At March 31, 2000, we had outstanding options exercisable to
purchase up to 270,000 shares of common stock at a weighted average exercise
price of $.96, and warrants exercisable to purchase up to 1,628,712 shares of
common stock at an exercise price of $7.50 per share. We also issued warrants
to purchase 3,600,000 shares of common stock, exercisable at a weighted
average price of $1.06 per share, in January 2000. Holders of the options or
warrants can be expected to exercise them at a time when we would, in all
likelihood, be able to obtain any needed capital on terms which are more
favorable to us than the exercise terms provided by such options or warrants.
Exercise of these warrants and options could have a further dilutive effect on
existing stockholders and you as an investor in this Offering. See
"Description of Securities."
The Trading Volume of Our Common Stock May Diminish Significantly if Our
Common Stock is Prohibited from Being Traded on the Nasdaq Small Cap Market.
The over-the-counter markets for securities such as the shares offered
hereby historically have experienced extreme price and volume fluctuations
during certain periods. These broad market fluctuations and other factors,
such as new product developments and trends in our industry and investment
markets generally, as well as economic conditions and quarterly variations in
our operating results, may adversely affect the market price of our common
stock.
Although our common stock is currently included in Nasdaq Small Cap
Market, there can be no assurance that they will remain eligible to be
included in Nasdaq. At December 31, 1999, our net tangible assets were
slightly below the level required to maintain the listing of our common stock
on Nasdaq. We believe that our net tangible assets were above the required
level as of March 31, 2000. Nevertheless, in the event that our common stock
were no longer eligible to be included in Nasdaq, trading in our common stock
could be subject to rules adopted by the Commission regulating broker-dealer
practices in connection with transactions in "penny stocks" which could
materially, adversely affect the liquidity of our securities. The regulations
define a penny stock as any equity security not listed on a regional or
national exchange or Nasdaq that has a market price of less than $5.00 per
share, subject to certain exceptions. The material, adverse effects of such
designation could include, among other things, impaired liquidity with respect
to our securities and burdensome transactional requirements associated with
transactions in our securities, including, but not limited to, waiting
periods, account and activity reviews, disclosure of additional personal
financial information and substantial written documentation. These
requirements could lead to a refusal of certain broker-dealers to trade or
make a market in our securities.
<PAGE>
<PAGE>
FORWARD-LOOKING STATEMENTS
We believe that it is important to communicate our expectations to our
investors. Accordingly, this prospectus contains discussion of events or
results that have not yet occurred or been realized. Certain of the matters
discussed concerning our operations, economic performance, financial
condition, including in particular the execution of acquisition strategies,
expansion of product lines and increase of distribution networks or product
sales, are areas, among others, which include forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Statements that are predictive in nature, that depend upon or
refer to future events or conditions, or that include words such as,
"expects," "anticipates," "intends," "plans," "believes," "estimates" and
similar expressions are forward-looking statements. You should read forward-
looking statements carefully because they discuss our future expectations,
contain projections of our future operating results or of our financial
position, or state other expectations of future performance. The actions of
current and potential new competitors, changes in technology, seasonality,
business cycles, and new regulatory requirements are factors that impact
greatly upon strategies and expectations and are outside our direct control.
There may be events in the future that we are not able accurately to predict
or to control. The factors listed in the section captioned "Risk Factors," as
well as any cautionary language in this prospectus, provide examples of risks,
uncertainties and events that may cause our actual results to differ from the
expectations we express in our forward-looking statements. Before you invest
in our common stock, you should be aware that the occurrence of the events
described in the section caption "Risk Factors" and elsewhere in this
prospectus could materially adversely affect our business, financial
condition, and operating results.
TRADEMARKS
The Spectra(-Registered Mark-) Spectra Shield(-Registered Mark-), Spectra
Flex(-TM-), Gold Shield(-TM-) and Gold Flex(-TM-) trademarks included in this
prospectus are owned by Honeywell International, Inc.
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth our cash, short-term debt, and total
capitalization as of December 31, 1999. We have not made any adjustment for
the possible exercise of any options or warrants, although shares sold under
this prospectus would have been acquired by the Selling Shareholder through
exercise of warrants.
This section should be read in conjunction with the financial statements
and notes to the financial statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of As of
December 31, March 31,
1999 2000
------------- ------------
(unaudited)
<S> <C> <C>
Cash and cash equivalents $ 191,690 $ 766,270
Short-term debt 33,133 55,825
Long term debt, net of current portion 36,489 -
Stockholders' equity:
Preferred stock, $.20 par value,
1,000,000 Shares authorized;
no shares issued and outstanding
Common stock, $.001 par value;
30,000,000 shares authorized;
2,762,668 shares issued and
outstanding on December 31, 1999;
3,167,168 shares issued and
outstanding on March 31, 2000 2,763 3,572
Additional paid-in capital 4,660,908 5,496,196
Accumulated deficit (3,102,081) (3,270,261)
------------- ------------
Total stockholders' equity 1,561,590 2,229,507
------------- ------------
Total capitalization $1,598,079 $2,229,507
============= ============
</TABLE>
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We do
not intend to pay dividends on our share of common stock. We intend to retain
all future earnings, if any, for use in our business. Future cash dividends,
if any, will be at the discretion of our board of directors and will depend
upon our future operations and earnings, capital requirements, and surplus,
general financial condition, contractual restrictions, and other factors as
the board of directors may deem relevant.
<PAGE>
<PAGE>
USE OF PROCEEDS
We will not receive any of the proceeds from the offer and sale of the
shares; however, 3,600,000 of the shares being offered are issuable upon the
exercise of warrants. If all of those warrants are exercised, we will receive
proceeds of $3,825,000. The selling stockholders will not pay any of the
expenses that are incurred in connection with the registration of the shares,
but they will pay all commissions, discounts, and other compensation to any
securities broker-dealers through whom they sell any of the shares.
We will utilize the net proceeds, if any, realized from the exercise of
the warrants for acquisitions, working capital, and for general corporate
purposes, at our discretion. Actual expenditures may vary substantially
depending upon economic conditions and opportunities we are unable to identify
at this time.
THE MARKET FOR OUR SECURITIES
Our common stock trades on the Nasdaq Small Cap Market under the symbol
"GRDN."
The following table sets forth the high and low sales prices for each
quarter during 1998 and 1999 and for the first and second quarters of 2000.
<TABLE>
<CAPTION>
Common Stock
-----------------------
Quarter Ended Low High
------------- --- ----
<S> <C> <C>
March 31, 1998 $1.33 $2.88
June 30, 1998 $2.19 $3.31
September 30, 1998 $2.00 $3.75
December 31, 1998 $1.25 $3.81
March 31, 1999 $1.04 $1.88
June 30, 1999 $1.19 $2.12
September 30, 1999 $1.18 $1.50
December 31, 1999 $1.06 $2.12
March 31, 2000 $1.00 $4.50
June 30, 2000 (through May 25,
2000) $0.81 $1.44
</TABLE>
There were 71 record holders and approximately 1,400 beneficial owners of
our common stock as of April 27, 2000.
No dividends have been declared or paid by the Company, nor does the
Company anticipate paying cash dividends on the shares of common stock in the
foreseeable future.
<PAGE>
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected consolidated financial data.
You should read this information together with our financial statements and
the notes to those financial statements beginning on page F-1 of this
prospectus, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this prospectus. The
selected balance sheet and statement of operation data is derived from our
audited consolidated financial statements and related notes included elsewhere
in this prospectus and is qualified by reference to these consolidated
financial statements and the related notes thereto.
Statements of Operations Data
<TABLE>
<CAPTION>
Years Ended Three Months
December 31, Ended March 31,
------------------------ -------------------
1999 1998 2000 1999
-------- ------- ----- ------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net Sales $1,100,076 $ 1,656,649 $ 226,438 $
216,842
Gross Profit 163,424 278,672 53,136 26,093
Operating Expenses 1,117,644 697,856 200,531 191,102
Operating Loss (954,220) (419,184) (147,395) (165,009)
Loss Before Earnings From
Equity Investment (858,552) (447,255) (120,394) (30,810)
Net Loss $(825,076) $(447,255) $(168,180) $(30,810)
Basic and Diluted Loss
Per Share (1) $ (.62) $ (.40) $ (.06) $(.02)
Weighted Average Number of
Share Outstanding 1,338,513 1,120,310 2,992,363 1,243,831
</TABLE>
(1) Based upon the weighted average number of shares outstanding for the
years ended December 31, 1998 and 1999; and for the three-months ended
March 31, 2000 and 1999.
Balance Sheet Data
<TABLE>
<CAPTION>
At December 31, At March 31
1999 2000
--------------- -----------
(Unaudited)
<S> <C> <C>
Total Assets $1,960,109 $2,355,857
Working Capital 506,429 1,168,805
Total Liabilities 398,519 126,356
Accumulated Deficit (3,102,081) (3,270,261)
Stockholders' Equity $1,561,590 $2,229,507
</TABLE>
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
The following discussion of our financial condition and operating results
should be read in conjunction with the consolidated financial statements and
related notes thereto.
Overview
ARMOR:
In late 1999, we decided to restructure our armor business in order
to achieve profitability. We began implementing the restructuring plan during
the first quarter of 2000 with full implementation expected by the end of the
second quarter. The successful implementation of the restructuring strategy
is intended to produce positive cash flow in the armor business by year-end.
The basic elements involved in the strategy are outlined below:
(a) To develop new products that will make us more competitive in the
market.
- During the first quarter of 2000 management worked with several
composite material vendors to develop new lightweight ballistic
material packages that will reduce the material cost component
of each vest.
- The first product developed, the CENTURIAN 2000, was certified
by the National Institute of Justice (NIJ) in two models. Law
enforcement personnel certified the Undergarment model at NIJ
Threat Levels II and III-A in male and female styles for use.
The SWAT vest was certified at NIJ Threat Level III-A.
- These vest models are constructed with Honeywell's latest
technological advancement -Spectra Shield Plus Flex (a non-
woven material) and Spectra woven fabric to produce a
lightweight and flexible vest.
- In addition, we are currently developing the POLARIS 2000, the
lightest and lowest cost product we have developed to date.
The POLARIS 2000 will utilize an entirely new ballistic
material package. Development and NIJ testing and
certification is due to be completed by the end of the second
quarter.
(b) 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, we retained the services of Steven Young, an
experienced industry professional. Mr. Young will become our
Chief Operating Officer responsible for the day to day
operations of our armor business.
(c) To outsource our manufacturing operation to reduce labor and
overhead costs.
- In conjunction with bringing Mr. Young on board, we decided to
relocate manufacturing to North Carolina, the heart of the
textile belt and Mr. Young's base of operation. We expect to
complete the relocation process during the early part of the
third quarter.
In addition to the aforementioned restructuring of the armor business, we
continue to research private companies in the security and safety products
industry with profitable operations as potential acquisition candidates that
would compliment our body armor business. We anticipate that we will use
funds received from our private placement and the exercise of common stock
options (see liquidity and capital resources), coupled with our common stock,
to acquire a company in the security and safety products business.
STRUCTURAL HOLDINGS:
During 1999, we sold our land and building. We used the proceeds
from the sale 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). Structural purchased H&M in 1999 for approximately
$5,000,000. The purchase resulted in the recognition of approximately
$3,025,000 of goodwill that is being amortized over 15 years. The purchase
was financed by Structural with approximately $1,700,000 in cash (of which
$850,000 was paid by the Company), a $650,000 note payable to the seller and a
3-year $2,650,000 term loan from a financial institution. Additionally, H&M
obtained a 3-year $2,350,000 revolving line of credit from the same financial
institution.
H&M is engaged in the business of structural steel fabrication. Through
our investment in Structural we have embarked on an aggressive acquisition
campaign in the area of structural steel fabrication. We believe this
fragmented industry represents an opportunity to complete a consolidation
strategy. Since the acquisition of H&M, Structural has executed letters of
intent for three additional fabricators. We expect Structural to close on one
of the acquisitions during the second quarter and we anticipate closing the
remaining two opportunities during the third quarter of 2000. Our portion of
the funding for these acquisitions by Structural will come from external
equity capital and debt financing.
Results of Operations (Armor)
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net sales for 1999 were $1,100,076 compared to $1,656,649 in 1998, a
decrease of $556,573 or 33.6%. Sales in 1999 lagged behind 1998 due to
limited government funding of local law enforcement programs. Although the
"Bulletproof Vest Partnership Act of 1998" was enacted, the funding for this
program was slow. In addition, the funding that was received did not
materialize in quantities expected by industry. The "Bulletproof Vest
Partnership Act of 1998" provides matching funds to law enforcement agencies
for purposes of procuring body armor for law enforcement personnel. In
essence, the matching funds would cover roughly half of the cost of procuring
body armor. Due to the slow nature and quantity of funding available under
this program, many procurement departments delayed the purchase of body armor.
Revenues in 1999 were also negatively impacted by a smaller than anticipated
order from a distributor that supplies armor products to an allied government.
A similar order in 1998 from this same distributor was nearly double the size
of the 1999 order.
Our gross profit in 1999 was $163,424 or 14.8% compared to gross profit
of $278,672 or 16.8%. As the gross margin percentage remained relatively
stable, the reduction in gross margin dollars of $115,248 was the result of
reduced sales volume.
Total operating expenses of $1,117,644 during 1999 were comprised of
selling expenses of $83,955 and general and administrative expenses of
$1,033,689. Total operating expenses of $697,856 during 1998 were comprised
of selling expenses of $129,070 and general and administrative expenses of
$568,786. Selling expenses decreased $45,115 primarily from reduced sales
consultant costs. Management increased general and administrative expenses by
$464,903 in order to properly position the Company for long-term growth and
was attributable primarily to the following:
a) Salary, travel and related costs of $118,500. These costs were
partially offset by $45,000 in fees we are to receive under a
management contract with Structural. Our fees under the management
contract will increase significantly when Structural completes
another acquisition.
b) $30,000 in audit fees we incurred in connection with the acquisition
of H&M by Structural.
c) Rent expense of $50,000 associated with our manufacturing operation
in Dulles, Virginia for the period April 1, 1999 to December 31,
1999. Prior to this time, we owned the building that housed our
manufacturing operation and therefore did not incur rent expense.
d) Increased investor relations fees of $65,000 related to actual cash
payments and options granted to an outside firm to assist us in the
dissemination of information to the investing public.
e) Consulting fees paid to an officer and director of $169,000 ($64,000
in the value of stock grants and the balance in cash) and $50,000
paid to a related party entity for financial advisory services.
Other income was $95,668 in 1999 compared to other expenses of $28,071 in
1998. Other income recorded in 1999 was comprised of the gain on sale of the
Company's land and building of $107,974 and rental income of $49,233 received
prior to the building sale. Partially offsetting 1999 other income were
miscellaneous expenses of $62,533. Other expense in 1998 was comprised of
interest expense of $100,717 related to loans associated with our building
prior to its sale and costs incurred related to a failed acquisition of
$111,423. These expenses were partially offset by rental income of $184,069.
We incurred a net loss in 1999 of $825,076 or $.62 per share compared to
a net loss of $447,255 or $.40 per share for 1998. Lower sales volume coupled
with increased general and administrative expenses (discussed in detail above)
produced a loss from armor operations of $954,220 for the period. Partially
offsetting this loss was income of $33,476 from the Company's equity method
investment for the period related to the Company recognizing its pro-rata
share of earnings in Structural, the parent of H&M.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31,
1999
Net sales for the three months ended March 31, 2000 were $226,438
compared to $216,842 for the same period in 1998, an increase of $9,586 or
4.4%.
Our gross profit for the three months ended March 31, 2000 was $53,136 or
23.5% compared to gross profit of $26,093 or 12.0%. Gross margin as a
percentage of sales nearly doubled during the current period because of
reductions in direct labor and overhead costs.
Total operating expenses for the three months ended March 31, 2000 were
$200,531 comprised of selling expenses of $12,516 and general and
administrative expenses of $188,015. Total operating expenses for the three
months ended March 31, 1999 were $191,102 comprised of selling expenses of
$12,952 and general and administrative expenses of $178,150. As selling
expenses remained stable period to period, the increase in total operating
expenses of $9,429 was attributable to the increase in general and
administrative expenses. These costs were negatively impacted by one-time
consulting costs of $25,000 ($20,000 in stock and $5,000 in cash) paid to a
director of the Company pertaining to a one-year agreement signed in February
1999. These consulting costs will not be duplicated in future quarters.
Other income for the three months ended March 31, 2000 was $27,001
compared to $134,199 during the same period a year ago. The decrease in other
income during the current period of $107,198 resulted from the gain recognized
during the first quarter of 1999 from the sale of our land and building. The
gain recorded in 1999 was $109,759.
We posted a net loss for the three months ended March 31, 2000 of
$168,180 or $.06 per share compared to a net loss of $30,810 or $.02 per share
for the three months ended March 31, 1999. Without the gain on sale of our
land and building of $109,759, the net loss sustained for the three months
ended March 31, 1999 would have been $140,569. Net results for the three
months ended March 31, 2000 were negatively impacted by the recognition of a
$47,786 loss associated with the our equity investment in Structural (see
discussion below). Without the impact of the loss attributable to Structural,
our net loss would have been $120,394.
Results Of Operations (Structural)
The following discussion pertains to the results of operations of H&M (a
wholly-owned subsidiary of Structural) for the three months ended March 31,
2000. Since we did not acquire our equity interest in Structural until April
1999, it is not possible to compare results of operations for the three months
ended March 31, 2000 with results of operations for the same period a year
ago. Therefore, this discussion will focus on comparisons, where relevant, of
results of operations for the three months ended March 31, 2000 and results of
operations for the nine months ended December 31, 1999 (pertaining to our
ownership since April 01, 1999.
H&M's revenues for the three months ended March 31, 2000 totaled
$3,605,716 compared to $6,049,236 for the nine months ended December 31, 1999.
First quarter 2000 revenues represent approximately 60% of the revenues
recognized during all of 1999. The increase in revenues is attributable to
increased production and shipping levels associated with increased backlog.
H&M initiated a second shift in the middle of the fourth quarter of 1999. The
positive effect of operating a second shift, coupled with increased production
on the day shift, was not fully recognized until the first quarter of 2000.
Additionally, design delays on two military base fabrication jobs caused
significant delays in production and resulted in decreased revenues of
approximately $3-$4 million for the nine months ended December 31, 1999. The
fabrication of these two projects was shifted to the first quarter of 2000.
Gross profit was $610,595, or 16.9% for the three months ended March 31,
2000 compared to $1,178,097, or 19.5% for the nine months ended December 31,
1999. Gross profit dollars during the first quarter increased on an average
run rate basis (average of $204,000) per month compared to the run rate
(average of $131,000) per month for the nine months ended December 31, 1999.
The dollar increase in average monthly gross profit during first quarter is
attributable to H&M's increased fabrication activities. The decrease in gross
profit percentage during the first quarter is due principally to not
recognizing any gross profit on one of the military base projects due to
anticipated labor cost overruns incurred on the job to make up for time lost
from the design delays.
Operating expenses were $334,213, or 9.3% of revenues for the three
months ended March 31, 2000 compared to $1,024,403, or 16.9% for the nine
months ended December 31, 1999. The percentage of revenue decrease in
operating expenses during the first quarter (9.3% versus 16.9%) is primarily
attributable to increased revenues during the first quarter compared to the
nine months ended December 31,1999. The increase in revenues is associated
with delays in the two military base fabrication projects. Operating expense
dollars for the three months ended March 31, 2000 have decreased on an average
run rate basis (average of $111,000) per month compared to the run rate
(average of $114,000) per month for the ten months ended December 31, 1999.
This reduction is due principally to greater fabrication levels in the plant,
which causes certain operating expenses to be included in cost of sales
(following percentage of completion accounting).
Earnings before interest, taxes, depreciation and amortization (EBITDA)
was $442,170 or 12.3% of revenues for the three months ended March 31, 2000
compared to $616,528 or 10.2% of revenues for the nine months ended December
31, 1999. EBITDA dollars for the current quarter have increased on an average
run rate basis (average of $147,000) per month compared to the run rate
(average of $66,000) per month for the nine months ended December 31, 1999.
The dollar increase in average monthly EBITDA is attributable to increased
fabrication activities in the plant. The increase was partially offset by not
recognizing any profit on one of the military base projects.
Net income for the three months ended March 31, 2000 was $93,263 compared
to a net loss of ($121,883) for the nine months ended December 31, 1999. The
net income posted during the first quarter of 2000 is attributable to greater
fabrication levels during the period, coupled with the revenue shift
associated with project delays in 1999 on the two military base projects,
which pushed fabrication on these jobs into the first quarter of 2000.
We recorded our 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 our 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, we reduced our equity in earnings of Structural for the
three months ended March 31, 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 three months ended
March 31, 2000 presented above of $46,632, results in a net equity loss of
$47,786 for three months ended March 31, 2000 as recorded on our books. The
December 31, 1999, unadjusted column below represents amounts prior to
Structural's amounts prior to Structural's change in its estimate of
percentage of completion. The December 31, 1999, adjusted column below
represents amounts adjusted for Structural's change in its estimate of
percentage of completion.
The table below reflects the results of operations of H&M for the three
months ended March 31, 2000 compared to the nine months ended December 31,
1999:
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended 9 Months Ended
3/31/2000 12/31/1999 12/31/99
----------- ---------- ------------
(Adjusted) (Unadjusted)
<S> <C> <C> <C>
Net Revenues $3,605,716 $6,049,236 $6,228,109
Cost of Goods Sold 2,995,121 4,871,139 4,775,306
Gross Profit Margin 610,595 1,178,097 1,452,803
EBITDA 442,170 616,528 886,363
Interest Expense 105,026 248,577 248,577
Income Taxes 87,000 47,000 129,000
Depreciation 24,000 69,737 69,737
Amortization 132,881 373,097 373,097
Net Income (Loss) 93,263 (121,883) 65,952
</TABLE>
Liquidity And Capital Resources (Armor)
During the twelve months ended December 31, 1999, we used net cash in
operating activities of $391,893 compared with $331,182 in 1998. Cash used in
operating activities was provided by $585,937 in available cash existing at
the beginning of the year.
In March 1999 we sold our land and building generating net cash of
$883,000 after the repayment of a 1st mortgage on the facility in the amount
of $1,857,000.
In June 1999 we sold 133,334 shares of common stock generating proceeds
of $100,000.
The net proceeds from the sale of the building and the private placement
proceeds referred to above were used to fund our 50% investment in Structural
of $850,000, plus acquisition related expenses totaling $98,900.
We do not anticipate any significant capital expenditures for property
and equipment in the coming year.
Our only long-term indebtedness at December 31, 1999 relates to a three-
year premium financing arrangement for Director's and Officer's insurance in
the amount of $36,489.
During the three months ended March 31, 2000, we used net cash in
operating activities of $159,268 compared with $102,865 during the same period
last year. Cash used in operating activities was provided by $191,690 in
available cash balances existing at the beginning of the year.
We do not anticipate any significant capital expenditure for property and
equipment in the coming year.
We had Notes Receivable from unrelated parties of $150,000 at year-end.
Following year-end, we collected $50,000 of this amount. The remaining
balance of Notes Receivable is due June 30, 2000. Management is confident the
Note will be paid in full on or before the due date, which will provide us an
additional $100,000 of cash flow for working capital purposes.
During the three months ended March 31, 2000, we raised additional equity
capital of $225,000 and $480,000 through proceeds from a private placement of
common stock and the exercise of common stock options, respectively. Included
in the private placement were warrants to purchase common stock over a 6 month
period that when exercised will provide additional proceeds of $3,825,000. We
will use funds raised from these sources for acquisitions and general working
capital requirements.
From January 2000 through March 2000, options for 384,000 shares of
common stock were exercised generating net proceeds to us of $480,000. We
will use these funds for general working capital purposes.
In January 2000 we 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>
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 $1.375 180 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 we will receive additional proceeds from
this offering of $3,825,000. These funds will be used for acquisitions and
general working capital purposes.
Liquidity And Capital Resources (Structural)
The following discussion pertains to the working capital position of H&M
as of March 31, 2000. Since we did not acquire our equity interest in
Structural until April 1999, it is not possible to compare changes in working
capital for the three months ended March 31, 2000 with changes in working
capital for the same period a year ago. Therefore, this discussion will focus
on Structural's current working capital position and changes thereto since
December 31, 1999 (our year-end).
As of March 31, 2000, Structural had total current assets of $4,580,412
comprised of cash and equivalents of $5,260, net accounts receivable of
$2,480,821, raw material inventory of $74,100, costs and related earnings in
excess of billings of $1,974,164 and other current assets of $46,067.
As of March 31, 2000, Structural had total current liabilities of
$6,986,091 comprised of trade accounts payable of $2,076,173, the current
portion of long term debt of $4,102,022, billings in excess of costs and
related earnings on uncompleted contracts of $251,696 and other current
liabilities of $556,200.
Working capital deficit at March 31, 2000, was $2,405,679 compared to a
working capital deficit at December 31, 1999, of $349,378.
Structural increased property, plant and equipment from December 31, 1999
by $24,087 to $1,290,750. Structural believes that it's available funds, cash
generated by operating activities and funds available under its bank credit
facilities will be sufficient to fund ordinary capital expenditures. However,
Structural may expand property, plant, and equipment through future
acquisitions that will require additional equity and/or debt financing.
Long-term debt at March 31, 2000, was $798,648 comprised of notes payable
associated with the acquisition of H&M of $413,548, non-compete liability with
the seller of H&M of $182,100 and deferred taxes of $203,000. Long term debt
at December 31, 1999, was $3,081,095 comprised of H&M acquisition indebtedness
of $2,245,557, line of credit liability of $410,964, non-compete liability
with the seller of H&M of $205,574 and deferred taxes of $219,000. Since
year-end, H&M acquisition indebtedness has been reduced $153,675.
Structural's line of credit balance has increased $1,237,113 since year-end.
This increase is attributable to the growth in revenues (and related cost of
goods sold) during the first quarter of 2000.
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, the Company 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.
Structural's notes payable and line of credit with the financial
institution are collateralized by all of H&M's assets and Structural Holdings,
Inc.'s ownership in the common stock of H&M. Additionally, Structural
Holdings 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 March 31, 2000. H&M is currently
seeking a waiver of said covenants. Management believes the waiver will be
granted, however, and has included the related indebtedness as a current
liability until such time that the waiver has been granted.
At March 31, 2000, Structural had executed 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 firmly
obligate Structural to close unless substantially all terms and conditions of
closing are acceptable to Structural. In order to close on certain of these
potential acquisitions, Structural will require additional equity and/or debt
financing.
<PAGE>
<PAGE>
BUSINESS
General
We are engaged in two different businesses:
- the manufacture and distribution of ballistic protective equipment,
and
- specialty steel fabrication.
Our Ballistic Protective Equipment Business
We manufacture ballistic protective equipment, including equipment
commonly referred to as body armor. Our product lines include four basic
types of ballistic protective vests, K-9 ballistic protective vests, and
assorted other ballistic protective devices, such as aircraft ballistic
protective equipment and ballistic protective shields, blankets, and seat
cover liners.
Overview of the Industry
We participate in the global security industry through the manufacture of
security products marketed to law enforcement and correctional personnel.
Increasingly, governments, businesses, and individuals have recognized the
need for our products to protect them from the risks associated with physical
attacks and threats of violence.
Certain industry studies estimate that worldwide expenditures for
security products will grow at a compounded annual rate of 7.9% from
approximately $14 billion in 1990 to approximately $60 billion in 2010.
Although these statistics do not correlate directly to our product lines, we
believe that the increasing spending in the private security sector is
indicative of a greater demand for our products in the law enforcement,
correctional and governmental sectors.
In response to an increased emphasis on safety and protection, the number
of police officers has increased significantly over the past several years.
By 1996 there were approximately 738,000 full-time sworn law enforcement
officers in the U.S. In 1993, a U.S. Department of Justice survey of local
police departments indicated that 65% of such organizations have purchased
body armor for all of their officers, 60% supply their officers with pepper
spray, 35% supply their officers with tear gas and 10% maintain inventories of
stun grenades and less-than-lethal projectiles. In addition, the U.S. prison
population has doubled since 1985 to approximately 1.8 million inmates in
1998. We believe this rise in the prison population has spurred demand from
institutional correctional facilities for manufactured security products.
Our Products
We manufacture and sell body armor products that are designed to protect
against bodily injury caused by bullets. Our principal armor products are
ballistic resistant vests and shields. Our line of ballistic protective vests
provides varying levels of protection depending upon the configuration of
ballistic materials and the standards (domestic or international) to which the
armor is built. We recently introduced a lighter, more comfortable and
flexible ballistic resistant vest under the brand name Thin Blue Line.
Based on studies and testing performed at an independent testing
laboratory and our own test experience, we believe that protective vests and
equipment manufactured with Honeywell's high performance materials provide,
pound for pound, greater ballistic protection and reduced blunt trauma to the
wearer, at higher projectile velocities and with longer durability than
similar equipment made with other forms of ballistic resistant materials.
Manufacturing
We manufacture substantially all of our products under our own label at
our facility in Dulles, Virginia.
Raw Materials
We manufacture our products primarily with high performance Spectra 1000
woven fabric and non-woven composite ballistic materials Spectra Shield,
Spectra Flex, Gold Shield, and Gold Flex. These materials are available only
from Honeywell International, Inc., which holds the patent for the
unidirectional fiber/resin process incorporating Spectra ultra high molecular
weight polyethylene fibers. Honeywell also controls the proprietary
thermoplastic process used to manufacture its Shield and Flex materials.
Our Customers
Sales to the US government represented 23% of our total sales in 1999.
Sales to municipal law enforcement agencies represented 20% of our total sales
in 1999. Approximately 20% of our total sales were made to a distributor who
purchased products on behalf of a foreign police and military organization.
Marketing and Distribution
We market our products directly and through selected dealers of police
equipment to local, state, and federal agencies, private security companies,
and private individuals with legitimate security needs. Our marketing methods
include personal sales presentations, advertising in magazines and periodicals
aimed at the law enforcement profession, direct mail campaigns, and
participation in selected trade shows and conferences. We also make joint
presentations with other companies to bring together technical expertise,
sales and marketing efforts, and production capabilities; and we respond to
agency and department solicitations for bids and proposals.
In June 1997, we entered into a four-year contract with the General
Services Administration (GSA) - the federal government's principal procurement
channel - that enables us to sell all of our products directly through GSA.
We have our own home page (www.guardiantech.com) and E-Mail address
([email protected]) that have become channels for marketing products in the
United States and around the world.
We subscribe to two marketing services: BidNet and FACNet. BidNet tracks
bids and solicitations for proposals from local and state jurisdictions
throughout the United States. FACNet provides information on federal
procurements and is a required on-line service for GSA contract suppliers
seeking to sell to the U.S. Department of Defense. In order to respond to
Defense Department solicitation opportunities, we seek manufacturers of
compatible products and/or materials with which we can match our technical
expertise, sales and marketing efforts and production capabilities.
Our Competition
The ballistic protective equipment business is highly competitive. We
have at least five major competitors in the domestic law enforcement, federal
government, and military markets,. We believe that the principal elements of
competition in the sale of ballistic protective vests are (1) materials used
in construction, (2) style and design of the vest, and (3) price. In the law
enforcement and military markets, we frequently bid for orders in response to
invitations for bidding which set forth product performance specifications.
Although our products are priced slightly higher than that of our competition,
we believe that our prices are justified by our products' better
craftsmanship, the higher ballistic capability of the materials we use, the
fact that our products generally provide more body area coverage, and the fact
that we provide a longer warranty. In international markets, our competition
consists of several American competitors and a few international companies.
Environmental Matters
We are subject to federal, state, and local laws and regulations
governing the protection of the environment, including those regulating
discharges to the air and water, the management of wastes, and the control of
noise and odors. While we always strive to operate in compliance with these
requirements, we cannot assure you that we are at all times in complete
compliance with all such requirements. Like all companies, we are subject to
potentially significant fines or penalties if we fail to comply with
environmental requirements. Although we have made and will continue to make
capital expenditures in order to comply with environmental requirements, we do
not expect material capital expenditures for environmental controls in 2000.
However, environmental requirements are complex, change frequently, and could
become more stringent in the future. Accordingly, we cannot assure you that
these requirements will not change in a manner that will require material
capital or operating expenditures or will otherwise have a material adverse
effect on us in the future.
Our Specialty Steel Fabrication Business
Through Structural Holdings, Inc., our 50%-owned subsidiary, we fabricate
and erect structural steel for governmental, military, commercial and
industrial construction projects such as dormitories, aircraft hangers,
special operations centers, high and low rise buildings and office complexes,
hotels and casinos, convention centers, sports arenas, shopping malls, and
hospitals, and a variety of customized projects. We seek to differentiate our
operations by offering complete, turnkey steel construction services featuring
engineering, detailing, shop fabrication and field erection. Certain turnkey
services are provided by subcontractors in the areas of detailing and
erection. By offering an integrated package of steel construction services
from a single source, we are able to respond more efficiently to the design
and construction challenges associated with large, complex, ``fast track''
construction projects.
We provide our integrated steel services primarily to general contractors
and engineering firms, including, among others, the US Army Corps of
Engineers, Flintco, McMasters, and Manhatten, that focus on a wide variety of
projects, including hotels, office complexes, hospitals, shopping malls and
centers, sports stadiums, restaurants, convention facilities, entertainment
complexes, aircraft facilities, schools, churches and warehouses.
Representative projects include: the Marriott Renaissance Hotel, Special
Operations Aircraft Facility, Fine Airport Parking Facility, and Dobson
Communications Corporate Office buildings. We maintain relationships with a
number of local or regional general contracting and engineering firms.
Overview of Industry
Companies engaged in the steel fabrication and erection industry prepare
detailed shop drawings, fabricate, and erect structural steel and steel plate
weldments, and perform related engineering services for the construction of
various facilities. The primary customers for these services are private
developers, general contractors, engineering firms, and governmental agencies
involved in a variety of large scale construction projects. Historically,
these customers have relied on multiple subcontractors to perform various
services to complete a single project, primarily because few companies in this
industry offer fully integrated engineering, detailing, fabrication and
erection services.
We believe that the steel fabrication and erection industry is highly
fragmented and that many of our competitors are businesses operating in local
or regional markets. Given the trend toward the use of fully integrated
contractors and the large number of smaller companies engaged in this
industry, we believe the industry may experience consolidation.
Business Strategy
Our objective is to achieve and maintain a leading position in the
geographic and project markets in which we compete by providing timely, high
quality services to our customers, continuing to grow internally, and making
selected strategic and consolidating acquisitions. We believe that the steel
fabrication industry will continue to be characterized by large, complex, fast
track projects. The complexity and size of these projects requires companies
with extended financial and operational capabilities. We intend to take
advantage of this trend with our integrated service capabilities.
Additionally, the fragmented nature of the industry provides us with
opportunities for growth. We seek to achieve continued growth and diminish
the impact of business and economic cycles by pursuing a growth strategy
consisting of the following components:
We are pursuing this objective with a strategy comprised of the following
components:
- Expand Revenue Base. We are seeking to expand our revenue base by
internal growth and through making strategic acquisition, thereby
leveraging our long-term relationships with regional and national
construction and engineering firms, national and regional accounts,
and other customers. We also intend to continue to grow our
operations by developing new project capabilities and services and
by targeting specific types of projects in which we have an existing
reputation for expertise, such as military base projects. We
believe that continuing to diversify our revenue base will reduce
the impact of periodic adverse market or economic conditions.
- Promote Internal Growth. We intend to pursue continued internal
growth by adding sales and marketing personnel to dedicated, fast
growing markets in which we are actively pursuing new projects, by
further developing our engineering and design capabilities and
fabrication capacity, and by continually updating our fabrication
and detailing equipment and technologies. We believe that these
efforts will enhance our market share, revenues, and operating
income in our existing and targeted principal markets and improve
our operating capacity.
- Acquire Synergistic Businesses. We intend to pursue selective
acquisitions of steel detailing, fabrication and erection companies
that offer us increased plant facilities, opportunities to increase
market share in selected geographic markets, penetration of new
product market segments, and access to domestic and international
markets targeted by us for geographic expansion. Such acquisitions
may also provide the continued and additional benefits of increased
purchasing efficiencies with respect to steel and other raw
materials, payment and performance bonding and insurance premiums,
and more efficient allocation and utilization of labor resources
among projects within our geographic markets. We believe that many
of our competitors operate primarily on a local or limited
geographic basis and, while having established relationships in
those markets, lack the resources to compete for large or more
complex projects. In addition, the industry is highly fragmented
with many of our competitors being closely or family held entities.
- Manage Capacity Through Outsourcing. We increase our project
capacity by outsourcing certain amounts of our detailing,
fabrication and erection work to reputable subcontractors.
Outsourcing has enabled us to effectively increase the capacity of
our fabrication facilities while usually maintaining margins
comparable to in-house services. We believe outsourcing will play a
key role in our strategy to continue to expand our presence in
selected international markets, where we typically provide design
engineering and project management services and utilize local
subcontractors for fabrication and erection. The ability to expand
or contract capacity through the use of outsourcing provides us
flexibility to meet changing market demands in a cost-effective
manner.
- Maintain Entrepreneurial Environment. We believe that our
management and operating structure, which emphasizes quality,
innovation, flexibility, performance and safety, has contributed
significantly to profitability and the ability to develop new
business in competitive or difficult economic environments. Our
operating structure provides incentives to employees at all levels
to focus on pursuing profitable growth opportunities, attaining
financial objectives and delivering superior customer service.
- Emphasize Innovative Services. We focuses our engineering,
detailing, fabrication and erection expertise on distinct product
segments requiring unique or innovative techniques, where we
typically experience less competition and more advantageous
negotiated contract opportunities. We have extensive experience in
providing services requiring complex fabrication and erection
techniques and other unusual project needs, such as specialized
transportation, steel treatment or specialty coating applications.
These service capabilities have enabled us to address such design
sensitive projects as the Denver Courthouse.
- Diversify Customer and Product Base. Although we seek to garner a
leading share of the geographic and product markets in which we
compete, we also seek to diversify our projects across a wide range
of commercial, industrial, and specialty projects.
We believe that our combined diversification into new geographic,
specific product and national markets will enable us to expand our revenue
base and to reduce the impact of periodic market or economic conditions
adversely impacting one or more of our market segments.
Primary Markets and Products
Our current principal geographic markets include the Southwest,
principally Oklahoma, Texas, and Colorado.
Our projects are awarded through a competitive bid process or are
obtained through negotiation, in either case generally using fixed price or
cost-plus pricing. While customers may consider a number of factors,
including availability, capability, reputation, and safety record, price and
the ability to meet customer imposed project schedules are the principal
factors on which we obtain contracts. Generally, our contracts and projects
vary in length from one to twelve months depending on the size and complexity
of the project, project owner demands, and other factors.
Our contract arrangements with customers sometimes require us to provide
payment and performance bonds to partially secure our obligations under our
contracts. Bonding requirements typically arise in connection with public
works projects and sometimes with respect to certain private contracts.
Backlog
We consider backlog an important indicator of our operating condition
because our engineering, detailing, fabrication, and erection services are
characterized by long lead times for projects and orders. We define our
backlog of contract commitments as the potential future revenues to be
recognized upon performance of contracts awarded to us. Backlog increases as
new contract commitments are obtained, decreases as work is performed and the
related revenues are recognized, and increases or decreases as modifications
in work are performed under a contract.
Competition
The principal geographic and product markets we serve are highly
competitive. We compete with other contractors on a local and regional basis,
and in certain cases, on a national basis. We have different competitors for
each of our services and product segments and within each geographic market we
serve. Among the principal competitive factors within the industry are price,
timeliness of completion of projects, quality, reputation, and the desire of
customers to utilize specific contractors with whom they have favorable
relationships and prior experience. Certain of our competitors have financial
and operating resources greater than ours.
Governmental Regulation
Our operations are governed by and subject to government regulations,
including laws and regulations relating to workplace safety and worker health,
principally the Occupational Safety and Health Act and regulations thereunder.
Our operations are subject to the risk of changes in federal, state, and local
laws and policies that may impose restrictions on us. We believe that we are
in material compliance with the laws and regulations under which we operate,
and we do not believe that future compliance with such laws and regulations
will have a material and adverse effect on us. We cannot determine, however,
to what extent our future operations and earnings may be affected by new
legislation, new regulations, or changes in or new interpretations of existing
regulations.
We are subject to licensure in each of the states in the United States in
which we operate and in certain local jurisdictions within such states. We
believe that we are in material compliance with all contractor licensing
requirements in the various states in which we operate. The loss or
revocation of any license or the limitation on any of our services thereunder
in any state in which we conduct substantial operations could prevent us from
conducting further operations in such jurisdiction and would have a material
adverse effect on us.
Our Suppliers
We currently purchase a majority of our steel and steel components from
several domestic and foreign steel producers, suppliers, and warehouses.
However, steel is readily available from numerous foreign and domestic steel
producers and we are not dependent on any one supplier. We believe that our
relationships with our suppliers are good. We have no long-term commitments
with any of our suppliers. In recent periods, there has been an increased
demand for steel from domestic mills and we have purchased a greater portion
of our steel requirements from warehouses.
Our Employees
As of March 31, 2000, we had 10 full time and 5 part time employees,
including two full time and 2 part time employees in management and
administration; one full time sales person; and seven full time and three part
time employees in manufacturing. We consider our relationship with our
employees to be good.
Legal Proceedings
We are not presently involved in any material legal proceedings.
However, construction in general and the fabrication and erection of
structural steel and heavy steel plate in particular involve a high degree of
operational risk. Adverse weather conditions, operator and other error, and
other unforeseen factors can cause personal injury or loss of life, severe
damage to or destruction of property and equipment, and suspension of
operations. Litigation arising from such occurrences may result in the
Company being named as a party to lawsuits asserting substantial claims or to
administrative or criminal actions that may involve substantial monetary
penalties or the restriction of the Company's operations in one or more
jurisdictions. The Company may become a defendant in lawsuits from time to
time, including lawsuits arising in the normal course of its business.
We maintain workers compensation insurance that provides full coverage of
statutory workers compensation benefits. We also maintain employer liability
insurance in our principal geographic markets and umbrella coverage. We also
maintain insurance against property damage caused by fire, flood, explosion,
and similar catastrophic events that may result in physical damage or
destruction of our facilities and property. All policies are subject to
various deductibles and coverage limitations. Although management believes
that our insurance is adequate for its present needs, there can be no
assurance that we will be able to maintain adequate insurance at premium rates
that management considers commercially reasonable, nor can there be any
assurance that such coverage will be adequate to cover all claims that may
arise.
Properties
On March 31, 1999, we sold our land and building for $2,825,000. The
building was constructed in 1997 for a total cost of $2,762,119 comprised of
$237,339 for land and $2,524,780 in building costs. As a result of the sale
we no longer received rental income from sublease agreements or incurred
depreciation expense and other operating expenses associated with owning and
managing a commercial building. Following the sale we signed a five-year
lease to occupy 15,000 square feet of space for approximately $14,000 per
month.
Structural Holdings, operates through its wholly-owned subsidiary, H&M
Steel, owns and operates its fabrication facilities which consist of five
metals buildings containing approximately 40,000 square feet, located on 73.8
acres in Luther, Oklahoma. Structural also leases office space in Oklahoma
City from which its estimating, marketing, accounting, and executive
management services are provided. The monthly rent on the office space is
$1,375; the lease is cancellable upon 30-days written notice.
<PAGE>
<PAGE>
MANAGEMENT
Directors, Executive Officers and Key Employees
Our executive officers and directors are listed in the table below and
brief summaries of their business experience and certain other information
with respect to them are set forth thereafter.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Oliver L. North 56 Chairman of the Board, and Secretary
J. Andrew Moorer 38 President and CEO
Herbert M. Jacobi* 60 Director
Kevin L. Houtz* 37 Director
David W. Stevens* 64 Director
David R. Payne 42 President, Structural Holdings
</TABLE>
-------------
* Members of the Audit Committee
Oliver L. North is our Chairman of the Board and Secretary. From our
inception until February 1999 Mr. North was also our President and Chief
Executive Officer. In February 1999, Mr. North resigned as President and CEO
because of increased responsibilities associated with his broadcasting
interests. Mr. North graduated from the United States Naval Academy in June
1968 and served in the United States Marine Corps for twenty years. His
service included a tour of duty in Vietnam where he earned a Silver Star for
heroism, a Bronze Star with a "V" for valor, and two Purple Hearts for wounds
in action. From 1981 through 1986, he served as a member of President Ronald
Reagan's National Security Council staff and became Deputy Director of
Political-Military Affairs. In this capacity, he helped plan the liberation
of Grenada, the capture of terrorists who hijacked the cruise ship Achille
Lauro, and the U.S. raid on Mohmar Quaddafi's terrorist training camps in
Libya. He retired from the Marine Corps in 1988.
J. Andrew Moorer has been our President and Chief Executive Officer since
February 1999. Mr. Moorer was named Chief Operating Officer of the Company in
l998. He was Chief Financial Officer of Redwood MicroCap Fund from 1994 until
1998. Mr. Moorer began his career as a Certified Public Accountant in the
Audit and Emerging Business Services Group of the international accounting
firm of PriceWaterhouseCoopers. Since leaving public accounting in l987, Mr.
Moorer has held various positions in finance with increasing levels of
responsibility, including the position of Chief Financial Officer for several
firms. Mr. Moorer received his formal education at Loyola College of
Maryland.
Herbert M. Jacobi has been an attorney in private practice in New York,
New York, since 1967.
Kevin L. Houtz is the founder of Elements of Design, a full service
graphic design firm located in Baltimore, Maryland. The firm, which
specializes in the development of corporate identity and collateral and
packaging design, has served a variety of regional and national clients since
its inception in 1989. Mr. Houtz graduated from the University of Maryland in
1984 receiving a Bachelor of Arts degree in Visual Arts/Design.
David W. Stevens has been the Chief Operations Officer of Hargrove, Inc.,
a company specializing in exhibits and special events, for more than the past
five years. He has been the CEO of several public and private companies for
the past twenty-four years. His assignments have focused on restructuring and
turnaround situations in the manufacturing, defense electronics, and
engineering services industries. Mr. Stevens is also a consultant to the
International Finance Corporation of the World Bank Group in organizational
development.
David R. Payne has been President of Structural Holdings, our 50% - owned
subsidiary, since its formation in April 1999. Prior to serving as President,
Mr. Payne was employed as President of D.R. Payne & Associates, Inc., a
financial management and consulting firm based in Oklahoma. Mr. Payne
received a Bachelor of Science Degree in accounting from Oklahoma Christian
University.
Board of Directors
Our certificate of incorporation authorizes our board to consist of
either five or seven directors. There are presently six directors. The
certificate provides that board will be divided into three (3) classes of
directors, which classes serve for varying terms. The certificate also grants
to the sitting directors the authority to fill any vacancies on the Board
and/or to appoint members to the Board to fill any vacancies resulting from an
increase in the authorized number of directors. Beginning in 1998 all
directors were elected for one-year terms. At the next annual meeting, the
Board intends to nominate candidates to fill staggered terms as provided in
the articles. This classification of the board of directors may have the
effect of delaying or preventing changes in control or of our management.
Our board of director has an audit committee. The audit committee makes
recommendations to the board of directors regarding the selection of
independent accountants, and reviews the results and scope of audit and other
services provided by our independent accountants, and reviews and evaluates
our audit and control functions. The board intends to form a compensation
committee in the near future, which will consist of a majority of board
members who are not employees. The compensation committee will administer our
stock plans, and will make decisions concerning salaries and incentive
compensation for our employees.
We do not currently provide our directors with cash compensation for
their services as members of the board of directors. However, each member of
the board of directors is reimbursed his actual expenses in attending
meetings. In addition, each director was issued 20,000 shares of common stock
for his services as a director in 1999.
EXECUTIVE COMPENSATION
The following table sets forth the executive compensation paid to Mr.
North, our President for the in January and February 1999, and Mr. Moorer, who
succeeded Mr. North in February 1999. No other executive officer of the
Company was paid compensation in excess of $100,000 in 1999.
<PAGE>
<TABLE>
TABLE 1
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
----------------------------------
Annual Compensation(1) Awards Payouts
-------------------------- ------------- --------
Other All
Annual Restricted Other
Name and Compen- Stock LTIP Compen-
Principal Year Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($)(2) ($) SARs ($) ($)
--------------- ------- -------- ----- --------- ----------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Oliver L. North,
Chairman and Secretary 1999 -0- -0- $55,000 100,000 -0- -0- -0-
J. Andrew Moorer,
President and Chief
Executive Officer 1999 $82,500 $12,175 -0- -0- 100,000 -0- -0-
</TABLE>
<PAGE>
<PAGE>
--------------------
(1) The above table reflects salary expenses as recorded on the Company's
financial statements in accordance with generally accepted accounting
principles. As such, the amounts may differ from the base salary rates
discussed below.
Aggregated Option Exercises in Fiscal Year 1999 and Fiscal Year 1999 Year-end
Option Values
The following table sets forth information concerning option exercises
and option holdings for each of the names executive officers during the fiscal
year ended December 31, 1999. All of the listed options were exercisable at
December 31, 1999.
<TABLE>
TABLE 2
Option/SAR Grants for Last
Fiscal Year - Individual Grants
<CAPTION>
Number of Value of
Securities Unexercised
Underlying in-the-Money
Options/SARs Options
Name Granted (#) at 12/31/99
---------------------- ------------ ------------
<S> <C> <C>
Oliver L. North, Chairman
and Secretary 110,000 -0-
J. Andrew Moorer, Chief
Executive Officer 140,000 $30,000
</TABLE>
<PAGE>
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1999, Mr. North granted Mr. Moorer an option to acquire from
Mr. North 100,0000 shares of our common stock at an exercise price of $1.75
per share for a period of six months and 57,990 shares of common stock at an
exercise price of $5.00 for a period of one year. During 1999 Mr. Moorer
exercised the option to purchase 100,000 shares of common stock from North for
$175,000. The remaining 57,990 options expired unexercised.
During 1999, we paid Mr. North $55,000 in cash and issued him 75,006
shares of common stock valued at $51,087 for consulting services.
In 1999 we sold TAIM Special Equities III 133,334 shares of common stock
for $100,000. TAIM owns 50% of Structural.
During 1999 we loaned TAIM $85,000. The interest rate on the note is 9%,
with interest due monthly and with principal due June 30, 2000. The note is
collateralized by 10% of TAIM's ownership of Structural and consulting fee
payments of $12,500 per month made to TAIM by Structural.
During 1999 we issued Redwood MicroCap Fund, Inc. 66,666 shares of common
stock valued at $50,000 for services Redwood provided in connection with the
acquisition of Structural. Mr. Moorer is an officer of Redwood. We also paid
Redwood $50,000 for financial advisory services.
In January 2000 we issued 20,000 shares of common stock to each of our
five directors as compensation to them for their services as directors in
1999. The shares were valued at $.98 per share.
In January 2000, we sold in a private offering 150,000 units, each
consisting of two shares of common stock and twenty-four warrants. The units
were priced at $1.50, so that the total proceeds from the offering were
$225,000. The common stock component of the units and the common stock into
which the warrants are exercisable are the shares being sold in this offering.
Two of our directors, Messrs. Houtz and Stevens, purchased 10,000 units and
2,000 units, respectively, in the offering.
We issued 194,000 options in 1999. 100,000 of those options were issued
to Mr. Moorer.
The Options to Mr. Moorer have an exercise price of $.705 per share and
expire in 2006. We issued an additional 100,000 options to Mr. Moorer in
January 2000 that are exercisable at $1.00 per share and expire in 2007.
<PAGE>
<PAGE>
PRINCIPAL STOCKHOLDERS
To our knowledge, the following table sets forth information regarding
ownership of our common stock on April 27, 2000 by
- beneficial owners of more than 5% of the outstanding shares of
Common Stock;
- each director and each executive officer; and
- all directors and executive officers as a group.
Except as otherwise indicated below and subject to applicable community
property laws, each owner has sole voting and sole investment powers with
respect to the stock listed.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership (1) of class (2)
------------------- ---------------------------- ------------
<S> <C> <C>
J. Andrew Moorer 420,000 (3) 11.0%
4528 E. Duane Ln.
Cave Creek, AZ 85331
Oliver L. North 229,980 6.4%
Rt. 1, Box 560
Bluemont, VA 20135 (3)
Herbert M. Jacobi 20,000 (5) *
8 West 38th Street
New York, NY 10018
Kevin L. Houtz 284,000 7.6%
3000 Chestnut Ave.,
Ste. 343D
Baltimore, MD 21211 (4)
David W. Stevens
312 Greenwood Point Rd. 46,000 1.3%
Grasonville, MD 21638 (5)
All Officers and Directors as 999,980 25.3%
a Group (5 Persons)
</TABLE>
-------------------
* Less than 1%
(1) Under SEC Rules, we include in the number of shares owned by each person
the number of shares issuable under outstanding options or warrants if
those options or warrants are exercisable within 60 days of the date of
this prospectus. We calculate the ownership of each person who owns
exercisable options by adding (i) the number of exercisable options for
that person only to (ii) the number of total shares outstanding and
dividing that result into (iii) the total number of shares and
exercisable options owned by that person.
(2) In calculating percentage ownership, all shares of Common Stock that the
named stockholder has the right to acquire within 60 days upon exercise
of any option or warrant are deemed to be outstanding for the purpose of
calculating the percentage of Common Stock owned by such stockholder, but
are not deemed outstanding for the purpose of computing the percentage of
Common Stock owned by any other stockholder. Shares and percentages
beneficially owned are based upon 3,603,336 shares outstanding on April
27, 2000.
(3) Includes 200,000 shares purchasable upon exercise of options.
(4) Includes 120,000 shares purchasable upon exercise of warrants.
(5) Includes 24,000 shares purchasable upon exercise of warrants.
(6) Includes Messrs. Moorer, North, Jacobi, Houtz and Stevens.
<PAGE>
<PAGE>
SELLING STOCKHOLDERS
The selling stockholders have indicated that they may sell the shares
from time to time by them or by their pledgees, donees, transferees or other
successors in interest.
We have also registered in the registration statement of which this
prospectus is a part an additional number of shares of our common stock that
we may be required to issue to the selling stockholders as a result of any
stock split, stock dividend, or similar transaction involving our common
stock, in order to prevent dilution, in accordance with Rule 416 under the
Securities Act of 1933. In the following table, we have calculated percentage
ownership by assuming that all shares of common stock which the selling
stockholder has the right to acquire within 60 days from the date of this
prospectus upon the exercise of options, warrants, or convertible securities
are outstanding for the purpose of calculating the percentage of common stock
owned by such selling stockholder.
Except as noted in the tables below, within the past three years none of
the selling stockholders have held any position or office with us; or entered
into a material relationship with us.
There is no assurance that the selling stockholders will sell the
warrants or shares offered by this prospectus.
The following table sets forth:
- The name of each of the selling stockholders;
- The number of shares of our common stock owned by each of them as of
December 31, 1999;
- The number of shares offered by this prospectus that may be sold
from time to time by each of them;
- The number of shares of our common stock that will be beneficially
owned by each of them if all of the shares offered by them are sold;
- The percentage of the our total shares outstanding that will be
owned by each of them at the completion of this offering, if the
stockholder sells all of the shares included in this prospectus.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
---------------------------------------------------
Percentage of
Number of Number Number of Common Stock
Shares of Shares That Will Be
Beneficially Shares Owned Beneficially
Owned Prior Offered After Owned After
to Offering Hereby Offering Offering
----------- -------- -------- ----------
<S> <C> <C> <C> <C>
James Amira 6,000 72,000 -0- -0-
Cassandra Appleman 6,666 79,992 -0- -0-
Marga D. Armenta 5,000 60,000 -0- -0-
Ashland Capital Advisors,
Inc. 6,666 79,992 -0- -0-
Neil Berman 22,000 264,000 -0- -0-
Steve and Deborah
Calandrella (1) 24,000 288,000 -0- -0-
Dorothy Calandrella 6,500 78,000 -0- -0-
Allan Williams 15,000 180,000 -0- -0-
Chase Investment Group 16,000 192,000 -0- -0-
Kim Davis 66,666 799,992 -0- -0-
Thomas DeMere 4,000 48,000 -0- -0-
Linda DeGregorio 6,666 79,992 -0- -0-
Edward and Joanne Gizdich 4,000 48,000 -0- -0-
Nannette Goldberg 39,670 476,040 -0- -0-
Steve Goodman 12,000 144,000 -0- -0-
Marie L. Kanger 6,500 78,000 -0- -0-
Kevin Houtz (2) 10,000 120,000 154,000 4.6%
Carla Lattinelli 5,000 60,000 -0- -0-
John R. Overturf, Jr. 6,000 72,000 -0- -0-
Ralph S. Pittman, Jr. 2,000 24,000 -0- -0-
Evan Posses 5,000 60,000 -0- -0-
Ratna Enterprises, LLC (3) 2,000 24,000 -0- -0-
Thomas Reid 6,000 72,000 -0- -0-
Steven B. Rosner 6,666 79,992 -0- -0-
Donald Samaria 4,000 48,000 -0- -0-
Roger Schwartz 4,000 48,000 -0- -0-
Mary Jane Stevens and David
Woods Stevens (2) 2,000 24,000 20,000 *
</TABLE>
-----------
* Less than 1%
(1) 16,000 of these shares are owned by the Calandrella Family Foundation.
Steve and Deborah Calandrella, who are husband and wife, are the sole
directors of the Foundation. Mr. Calandrella was a director of the
Company until January 2000.
(2) Mr. Houtz and Mr. Stevens are directors of the Company.
(3) Ratna Enterprises, LLC, is beneficially owned by Clifford Neuman. See
"Legal Matters."
<PAGE>
<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders may sell the shares through the Nasdaq Small Cap
Market or other over-the-counter markets or otherwise at prices and at terms
then prevailing or at prices related to the then current market price or in
negotiated transactions. These shares may be sold in one or more of the
following types of transactions:
- A block trade in which the broker or dealer so engaged will attempt
to sell shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction.
- Purchases by a broker or dealer as principal and resale by a broker
or dealer for its account in accordance with this prospectus.
- Ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
- In privately negotiated transactions not involving a broker or
dealer.
In effecting sales, brokers or dealers engaged to sell the shares may
arrange for other brokers or dealers to participate. Brokers or dealers
engaged to sell the shares will receive compensation in the form of
commissions or discounts in amounts to be negotiated immediately prior to each
sale. Those brokers or dealers and any other participating brokers or dealers
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933 in connection with these sales. We anticipate that the brokers or
dealers, if any, participating in the sales of the shares will receive the
usual and customary selling commissions.
To comply with the securities laws of some states, if applicable, the
shares will be sold in those states only through brokers or dealers. In
addition, in some states, the shares may not be sold in those states unless
they have been registered or qualified for sale in those states or an
exemption from registration or qualification is available and is complied
with.
LIMITATION ON DIRECTORS' LIABILITY; INDEMNIFICATION
Our articles of incorporation limit the liability of a director for monetary
damages for his conduct as a director, except for:
- Any breach of the duty of loyalty to Guardian or its stockholders,
- Acts or omissions not in good faith or that involved intentional
misconduct or a knowing violation of law,
- Dividends or other distributions of corporate assets from which the
director derives an improper personal benefit.
- Liability under federal securities law
The effect of these provisions is to eliminate our right and the right of
our stockholders (through stockholder's derivative suits on our behalf) to
recover monetary damages against a director for breach of his fiduciary duty
of care as a director, except for the acts described above. These provisions
does not limit or eliminate our right or the right of a stockholder to seek
non-monetary relief, such as an injunction or rescission, in the event of a
breach of a director's duty of care. Our by-laws provide that if Delaware law
is amended, in the case of alleged occurrences of actions or omissions
preceding any such amendment, the amended indemnification provisions shall
apply only to the extent that the amendment permits us to provide broader
indemnification rights than the law permitted prior to such amendment.
Our articles of incorporation and by-laws also provide that we shall
indemnify, to the full extent permitted by Delaware law, any of our directors,
officers, employees or agents who are made, or threatened to be made, a party
to a proceeding by reason of the fact that he or she is or was one of our
directors, officers, employees or agents. The indemnification is against
judgments, penalties, fines, settlements, and reasonable expenses incurred by
the person in connection with the proceeding if certain standards are met.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons in
accordance with these provisions, or otherwise, we have been advised that, in
the opinion of the SEC, indemnification for liabilities arising under the
Securities Act of 1933 is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
<PAGE>
<PAGE>
DESCRIPTION OF SECURITIES
We are authorized to issue up to 15,000,000 shares of common stock and
1,000,000 shares of preferred stock. The shares of common stock covered by
this prospectus, when they are received upon exercise of warrants or options,
will be fully paid and nonassessable.
Common Stock
Each holder of our common stock is entitled to one vote for each share
held of record. Voting rights in the election of directors are not
cumulative, and, therefore, the holders of more than 50% of our common stock
could, if they chose to do so, elect all of the directors.
The shares of common stock are not entitled to preemptive rights and are
not subject to redemption or assessment. Subject to the preferences that may
be granted to holders of preferred stock, each share of common stock is
entitled to share ratably in distributions to stockholders and to receive
ratably such dividends as we may declare. Upon our liquidation, dissolution
or winding up, subject to prior liquidation or other preference rights of
holders of preferred stock, if any, the holders of common stock are entitled
to receive pro rata those assets which are legally available for distribution
to stockholders. The issued and outstanding shares of common stock are
validly issued, fully paid, and nonassessable.
Preferred Shares
Our articles of incorporation authorize issuance of a maximum of
1,000,000 preferred shares. No shares of preferred stock have been issued.
The articles of incorporation give the board of directors the authority to
divide the class of preferred shares into series and to fix and determine the
relative rights and preferences of the shares of any such series so
established to the full extent permitted by the laws of the State of Delaware
and those articles of incorporation in respect of, among other things, the
number of preferred shares to constitute such series, and the distinctive
designations thereof, the rate and preference of dividends, if any, the time
of payment of dividends, whether dividends are cumulative and the date from
which any dividend shall accrue; whether preferred shares may be redeemed and,
if so, the redemption price and the terms and conditions of redemption; the
liquidation preferences payable on preferred shares in the event of
involuntary or voluntary liquidation; sinking fund or other provisions, if
any, for redemption or purchase of preferred shares; the terms and conditions
by which preferred shares may be converted, if the preferred shares of any
series are issued with the privilege of conversion; and voting rights, if any.
The board of directors has not designated any series of preferred stock.
In the event of a proposed merger, tender offer, proxy contest or other
attempt to gain control of us, which we have not approved, we could authorize
the issuance of one or more series of preferred stock with voting rights or
other rights and preferences which would impede the success of the proposed
merger, tender offer, proxy contest or other attempt to gain control of us.
Such issuance would be subject to any limitations imposed by applicable law,
our Certificate of Incorporation, the terms and conditions of any outstanding
class or series of preferred shares and the applicable rules of any securities
exchanges upon which our securities are at any time listed or of other markets
on which our securities are at any time listed. The issuance of preferred
stock may have an adverse effect on the rights (including voting rights) of
holders of common stock.
Warrants
The following summarizes the terms of the warrants.
We sold a total of 150,000 Units at a price of $1.50 per Unit. Each Unit
consisted of two shares of Common Stock, four Class A Common Stock Purchase
Warrants ("Class A Warrants"), four Class B Common Stock Purchase Warrants
("Class B Warrants"), four Class C Common Stock Purchase Warrants ("Class C
Warrants"), four Class D Common Stock Purchase Warrants ("Class D Warrants"),
four Class E Common Stock Purchase Warrants ("Class E Warrants"), and four
Class F Common Stock Purchase Warrants ("Class F Warrants"). The six classes
of warrants will be referred to as an aggregate as the "Warrants."
The six classes of warrants are identical, except for their exercise
periods and exercise prices. Each Warrant is exercisable to purchase one
share of Common Stock. The Warrants are exercisable at the prices and for the
periods set forth below:
<TABLE>
<CAPTION>
EXERCISE EXERCISE
WARRANT PRICE PERIOD (1)
------- --------- ----------
<S> <C> <C>
Class A $.75 30 days
Class B $.875 60 days
Class C $1.00 90 days
Class D $1.125 120 days
Class E $1.25 150 days
Class F $1.375 180 days
</TABLE>
--------------
(1) The Exercise Period of all of the Warrants begins on day the registration
statement of which this prospectus is a part is declared effective.
The holder of a Warrant is not entitled to exercise any Warrant to the
extent that after such exercise the sum of (i) the number of shares of common
stock beneficially owned prior to such exercise and (ii) the number of shares
of common stock issuable upon exercise of such Warrants with respect to which
the determination of this limitation is made, would result in beneficially
ownership by the holder and its affiliates of more than 4.99% of the
outstanding shares of our common stock. This provision does not apply if the
holder beneficially owned more than 4.99% of the outstanding shares prior to
the exercise.
The Warrants contain provisions that provide that if we should sell
shares of common stock (other that pursuant to the exercise of outstanding
options and warrants, including the Warrants) at a price below the exercise
price of the Warrants while the Warrants are outstanding, the exercise price
of the outstanding Warrants shall be adjusted down to such lower price.
Additionally, we have agreed that, so long as any of the Warrants are
outstanding and unexercised, we will not issue any additional options,
warrants, or other debt or equity instruments convertible into Common Stock
(except pursuant to existing stock incentive plans) without the consent of the
holders of the Warrants. The holders of the Warrants cannot unreasonably
withhold their consent to such issuances.
We have the right to redeem any or all outstanding and unexercised
Warrants at a redemption price of $.01 per Warrant upon thirty days written
notice in the event (i) the registration statement is in effect on the date of
written notice and on the redemption date set forth in the notice; (ii) there
has been maintained and continues to exist on the date of the written notice a
public trading market for the common stock and such securities are listed for
quotation on the Nasdaq Stock Market or the OTC Electronic Bulletin board; and
(iii) the public trading closing price of the Common Stock has equaled or
exceeded 200% of the exercise price of such Warrant for twenty or more
consecutive trading days.
Anti-takeover Effects of Certain Provisions of Our Certificate of
Incorporation and Delaware Law
We are subject to Section 203 of the Delaware General Corporation Law, an
anti-takeover law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date the person became
an interested stockholder, unless (with certain exceptions) the "business
combination" or the transaction in which the person became an "interested
stockholder" is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the interested stockholder. Generally, an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior to the determination of
interested stockholder status, did own) 15% or more of the corporation's
voting stock. The existence of this provision would be expected to have an
anti-takeover effect with respect to transactions not approved in advance by
the board of directors, including discouraging takeover attempts that might
result in a premium over the market price for the shares of common stock held
by stockholders.
Transfer and Warrant Agent
Signature Stock Transfer, Inc., Dallas, Texas, is the transfer agent and
registrar for our common stock.
Shares Eligible for Future Sale
Future sales of substantial amounts of our common stock in the public
market could adversely affect prevailing market prices. We have 3,586,668
shares of common stock outstanding. Of these shares, 2,911,660 shares are
freely tradable without restriction under the Securities Act. The remaining
675,000 shares are "restricted securities" as defined in Rule 144 and may be
sold under Rule 144.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least one year is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of 1% of the then
outstanding shares of the issuer's common stock or the average weekly trading
volume during the four calendar weeks preceding such sale, provided that
certain public information about the issuer as required by Rule 144 is then
available and the seller complies with certain other requirements. Affiliates
may sell such shares in compliance with Rule 144, other than the holding
period requirement. A person who is not an affiliate, has not been an
affiliate within three months prior to sale, and has beneficially owned the
restricted securities for at least two years, is entitled to sell such shares
under Rule 144 without regard to any of the limitations described above.
LEGAL MATTERS
Our legal counsel, Neuman & Drennen, LLC, will issue an opinion regarding
the legality of the shares. Clifford L. Neuman, a member of the firm, owns
2,000 shares of our common stock and warrants to purchase an additional 24,000
shares.
ADDITIONAL FILING AND COMPANY INFORMATION
We have filed a registration statement on Form SB-2 with the Commission.
This prospectus, which is a part of the registration statement, does not
contain all of the information included in the registration statement.
Certain information is omitted and you should refer to the registration
statement and its exhibits. You may review a copy of the registration
statement, including exhibits, at the Commission's public reference rooms at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or Seven World
Trade Center, 13th Floor, New York, New York 10048, or Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the
Commission at 1-800-SEC-0330 for further information on the operation of the
public reference rooms.
We also file annual, quarterly, and current reports, proxy statements,
and other information with the Commission. You may read and copy any reports,
statements, or other information on file at the public reference rooms. You
can also request copies of these documents, for a copying fee, by writing to
the Commission.
Our Commission filings and the registration statement can also be
reviewed by accessing the Commission's Internet site at http://www.sec.gov,
which contains reports, proxy and information statements, and other
information regarding registrants that file electronically with the
Commission.
EXPERTS
The financial statements of Guardian Technologies International, Inc. as
of December 31, 1999, and for each of the years ended December 31, 1999 and
1998, have been incorporated by reference herein in reliance upon the reports
of Hein + Associates LLP, independent certified public accountants, and upon
the authority of said firm as experts in accounting and auditing.
<PAGE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditors' Reports. . . . . . . . . . . . . . . . . . . . . . . F-2
Balance Sheet - March 31, 2000 (Unaudited) and December 31, 1999 . . . . . F-3
Statements of Operations - For the Three Months Ended March 31, 2000 and 1999
(Unaudited) and
For the Years Ended December 31, 1999 and 1998. . . . . . . . . . . . F-4
Statement of Changes in Shareholders' Equity - For the Three Months Ended
March 31, 2000 and
1999 (Unaudited) and For the Years Ended December 31, 1999 and 1998 . F-5
Statements of Cash Flows - For the Three Months Ended March 31, 2000 and 1999
(Unaudited) and
For the Years Ended December 31, 1999 and 1998. . . . . . . . . . . . F-6
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . F-7
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
Guardian Technologies International, Inc.
Dulles, Virginia
We have audited the accompanying balance sheet of Guardian Technologies
International, Inc. as of December 31, 1999 and the related statements of
operations, changes in shareholders' equity, and cash flows for the years
ended December 31, 1999 and 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Guardian Technologies
International, Inc. as of December 31, 1999, and the results of its operations
and its cash flows for the years ended December 31, 1999 and 1998, in
conformity with generally accepted accounting principles.
Hein + Associates LLP
Denver, Colorado
March 16, 2000
<PAGE>
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents $ 766,270 $ 191,690
Accounts receivable, no allowance
considered necessary 106,220 185,279
Inventories 145,029 158,745
Notes receivable:
Related party 85,000 85,000
Other 100,000 150,000
Prepaid expenses and other 92,636 97,745
------------- --------------
Total current assets 1,295,155 868,459
------------- --------------
Equity Investment 994,590 1,027,376
Property and Equipment, net 48,007 52,064
Deposits and Other 18,105 12,210
------------- --------------
Total Assets $ 2,355,857 $ 1,960,109
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Notes payable and current portion of long-term
debt $ 55,825 $ 33,133
Accounts payable 52,908 218,243
Accrued director fees - 97,655
Accrued payroll and related benefits expenses 17,617 12,999
------------- --------------
Total current liabilities 126,350 362,030
Long-Term Debt, net of current portion - 36,489
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, 3,571,662 (unaudited)
and 2,762,668 shares issued and outstanding 3,572 2,763
Additional paid-in capital 5,496,196 4,660,908
Accumulated deficit (3,270,261) (3,102,081)
------------- --------------
Total shareholders' equity 2,229,507 1,561,590
------------- --------------
Total Liabilities and Shareholders' Equity $ 2,355,857 $ 1,960,109
============== ==============
<PAGE>
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
For the Three For the
Months Ended Years Ended
March 31, December 31,
---------------------- -------------------------
2000 1999 1999 1998
----------- ---------- ------------ -----------
(Unaudited)
<S> <C> <C> <C> <C>
Net Sales $ 226,438 $ 216,842 $1,100,076 $1,656,649
Cost of goods sold 173,302 190,749 936,652 1,377,977
----------- ---------- ------------ -----------
Gross Profit 53,136 26,093 163,424 278,672
Operating Expenses:
Selling expenses 12,516 12,952 83,955 129,070
General and administra-
tive 188,015 178,150 1,033,689 568,786
----------- ---------- ------------ -----------
Total operating
expenses 200,531 191,102 1,117,644 697,856
----------- ---------- ------------ -----------
Operating Loss (147,395) (165,009) (954,220) (419,184)
Other Income (Expense):
Interest income (expense) 7,894 (24,932) 994 (100,717)
Rental income - 49,372 49,233 184,069
Gain on sale of assets (1,007) 109,759 107,974 -
Miscellaneous income
(expense) 20,114 - (62,533) -
Costs related to failed
acquisition - - - (111,423)
----------- ---------- ------------ -----------
Total other income
(expense) 27,001 134,199 95,668 (28,071)
----------- ---------- ------------ -----------
Loss Before Earnings From
Equity Investment (120,394) (30,810) (858,552) (447,255)
Equity in net loss of
investment (47,786) - 33,476 -
----------- ---------- ------------ -----------
Net Loss $(168,180) $ (30,810) $ (825,076) $ (447,255)
=========== ========== ============ ===========
Net Loss per Common Share,
Basic and Dilutive $ (.06) $ (.02) $ (.62) $ (.40)
=========== ========== ============ ===========
Average Common Shares
Outstanding,
Basic and Dilutive 2,992,363 1,243,831 $ 1,338,513 $ 1,120,310
=========== ========== ============ ===========
</TABLE>
<PAGE>
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
FOR THE THREE MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional Accumu-
------------------ Paid-in lated
Shares Amount Capital Deficit Total
--------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balances, January 1,
1998 2,228,402 $2,228 $4,106,310$(1,829,750)$2,278,788
Exercise of options 200,000 200 249,800 - 250,000
Issuance of common
stock 59,260 60 49,940 - 50,000
Net loss - - - (447,255) (447,255)
--------- -------- ---------- ---------- ----------
Balances, December 31,
1998 2,487,662 2,488 4,406,050 (2,277,005)2,131,533
Issuance of common stock:
Cash 133,334 133 99,867 - 100,000
Services 141,672 142 154,991 - 155,133
Net loss - - - (825,076) (825,076)
--------- -------- ---------- ---------- ----------
Balances, December 31,
1999 2,762,668 2,763 4,660,908 (3,102,081)1,561,590
Issuance of common stock:
Cash (unaudited) 684,000 684 704,315 - 704,999
Services
(unaudited) 124,994 125130,973 - 131,098
Net loss (unaudited) - - - (168,180) (168,180)
--------- -------- ---------- ---------- ----------
Balances, March 31,
2000 (Unaudited) 3,571,662 $3,572 $5,496,196$(3,270,261)$2,229,507
========= ======== ========== ========== ==========
</TABLE>
<PAGE>
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three For the Years
Months Ended Years Ended
March 31, December 31,
----------------------------------------------------
2000 1999 1999 1998
---------- ---------- ----------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Cash Flows from Operating
Activities:
Net loss $ (168,180) $ (30,810) $ (825,076) $(447,255)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation and
amortization of property
and equipment 5,300 23,160 40,720 92,949
Common stock and options
for services - - 155,133 -
Write down of assets to
net realizable value - - - 68,224
Gain on sale of property
and equipment 7 (109,759) 107,974 -
Equity in net loss of
investment 47,786 - (33,476) -
Changes in operating assets
and liabilities:
(Increase) decrease in:
Accounts receivable 55,047 98,226 (32,748) 42,382
Inventories 13,716 8,184 22,040 235,550
Prepaid expenses and
other 14,120 (41,610) 50,889 (66,697)
Increase (decrease) in:
Accounts payable (262,990) (55,747) 122,171 (155,725)
Accrued expenses 135,716 5,491 792 (19,629)
Customer deposits 210 - (312) (80,981)
---------- ---------- ----------- ----------
Net cash used in
operating activities (159,268) (102,865) (391,893) (331,182)
---------- ---------- ----------- ----------
Cash Flows from Investing
Activities:
Purchase of property and
equipment (7,430) (648) (3,248) (7,729)
Sale of property and
equipment 75 877,941 2,519,374 -
Issuance of notes receivable - - (505,000) (500,000)
Payments on notes re-
ceivable 50,000 150,000 670,000 100,000
Investment in Structural
Holdings, Inc. - - (948,900) -
Deposit on acquisition - (286,900) - -
---------- ---------- ----------- ----------
Net cash provided by
investing activities 42,645 740,393 1,732,226 (407,729)
Cash Flows from Financing
Activities:
Proceeds from issuance of
notes payable - 50,000 - 1,926,161
Payment on notes payable (13,797) (35,864)(1,834,581) (1,010,774)
Exercise of options 480,000 - - 250,000
Proceeds of common stock
issued 225,000 - 100,000 50,000
---------- ---------- ----------- ----------
Net cash provided by
financing activities 691,203 14,136 (1,734,581) 1,215,387
---------- ---------- ----------- ----------
Increase (Decrease) in Cash
and Cash Equivalents 574,580 651,664 (394,248) 476,476
Cash and Cash Equivalents,
beginning of period 191,690 585,937 585,938 109,461
---------- ---------- ----------- ----------
Cash and Cash Equivalents,
end of period $766,270 $1,237,601 $191,690 $585,937
========== ========== =========== ===========
Supplemental Schedule of
Cash Flow Information:
Cash paid for interest $ 1,519 $35,816 $39,685 $ 146,842
========== ========== =========== ===========
Common stock issued for
accrued liabilities $131,098 $ - $ - $ -
========== ========== =========== ===========
</TABLE>
<PAGE>
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(Information After December 31, 1999 is Unaudited)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF OPERATIONS - Guardian Technologies International, Inc. (the
"Company") is incorporated in the State of Delaware. The Company
manufactures and distributes soft armor products, primarily superior
quality ballistic protective vests, for law enforcement officers, armed
forces personnel, and other legitimate individuals or groups requiring
protective equipment. During 1999, the Company acquired a 50% interest
in Structural Holdings, Inc. (Structural). Structural is a holding
company and its only investment at December 31, 1999 is 100% of the
common stock of H&M Steel (H&M). H&M is engaged in the business of
structural steel fabrication.
INVESTMENTS - The Company's 50% ownership interest in Structural is
accounted for under the equity method of accounting and is recorded at
cost as adjusted for its proportionate share of earnings and
distributions.
REVENUE RECOGNITION - Manufacturing revenue is recognized upon shipment
of product.
USE OF ESTIMATES - The preparation of the Company's financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes. Actual
results could differ from those estimates. H&M enters into long-term
contracts with its customers and recognizes revenue on a percentage of
completion basis, which requires significant estimates.
FINANCIAL INSTRUMENTS - The estimated fair value of cash and cash
equivalents, accounts receivable, notes receivable, accounts payable and
accrued expenses approximate their carrying amounts in the financial
statements due to the short-term nature of these instruments.
Based on the borrowing rates currently available to the Company for loans
with similar terms and average maturities, the fair value of long-term
debt approximates its carrying value.
CONCENTRATIONS OF CREDIT RISK - Financial instruments which potentially
subject the Company to concentrations of credit risk consist of trade
accounts receivable and cash. The Company grants credit terms in the
normal course of business to its customers, who are primarily dealers or
municipal, state and Federal law enforcement agencies, and who are
located throughout the United States. As part of its ongoing procedures,
the Company monitors the credit worthiness of its customers.
The Company maintains cash in commercial banks in accounts which are
insured by the Federal Deposit Insurance Corporation (FDIC) up to
$100,000 per customer and in uninsured accounts. The cash amount
presented on the balance sheet reflects the actual amounts on deposit
with banks reduced for outstanding checks and increased for deposits in
transit. At December 31, 1999, the Company had cash in banks in excess
of FDIC insured limits of approximately $87,200.
CASH EQUIVALENTS - For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
ACCOUNTS RECEIVABLE - It is the practice of management to write-off
receivables in the year amounts are determined to be uncollectible. No
allowance for doubtful accounts is reflected in these financial
statements since management believes all accounts at December 31, 1999 to
be fully collectible.
INVENTORIES - Inventories consist of purchased materials and components,
work-in-process, and finished goods. Inventories are stated at the lower
of cost or market, with cost being determined on a first-in, first-out
basis. Inventories consisted of the following at December 31, 1999:
<TABLE>
<CAPTION>
<S> <C> <C>
Raw materials and components $135,437
Finished goods 23,308
--------
$158,745
========
</TABLE>
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost and
depreciated over their estimated useful lives. The Company uses the
straight-line and accelerated methods of depreciation, respectively, for
financial statement and income tax reporting purposes.
A summary of the estimated useful lives follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Office furniture and equipment 5 - 7 years
Manufacturing equipment 7 - 8 years
</TABLE>
Expenditures for maintenance and repairs which do not materially extend
the useful lives of property and equipment are charged to earnings. When
property or equipment is sold or otherwise disposed of, the cost and
related accumulated depreciation are removed from the respective accounts
with the resulting gain or loss reflected in earnings.
IMPAIRMENT OF LONG-LIVED ASSETS - The Company performs an assessment for
impairment whenever events or changes in circumstances indicate that the
carrying amount of a long-lived asset may not be recoverable. If the net
carrying value exceeds estimated undiscounted future net cash flows, then
impairment is recognized to reduce the carrying value to the estimated
fair value.
RENTAL INCOME - The Company leased a portion of the building which it
owned until March 31, 1999. Rental income and payments are recorded and
received on a monthly basis. Rental income was $49,233 in the quarter
ended March 31, 1999 and fiscal year ended December 31, 1999 and $184,069
in the fiscal year ended December 31, 1998.
INCOME TAXES - The Company utilizes the liability method for accounting
for income taxes. The liability method accounts for deferred income
taxes by applying enacted statutory rates in effect at the balance sheet
date to differences between financial statement amounts and tax bases of
assets and liabilities. The resulting deferred income tax liabilities
are adjusted to reflect changes in tax laws and rates. Temporary
differences consist of the difference in financial statement and income
tax bases for property and equipment. Deferred income taxes related to
an asset or liability are classified as current or noncurrent based on
the classification of the related asset or liability.
NET LOSS PER COMMON SHARE - The Company has adopted SFAS No. 128 which
establishes standards for computing and presenting earnings per share
(EPS) for entities with publicly held common stock. The standard
requires presentation of two categories of EPS - basic EPS and diluted
EPS. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common
shares outstanding for the year. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the
Company. All potential dilutive securities are antidilutive as a result
of the Company's net loss for the years ended December 31, 1999 and 1998.
Accordingly, basic and diluted EPS are the same for each year.
COMPREHENSIVE LOSS - SFAS No. 130 establishes standards for reporting and
display of comprehensive loss, its components and accumulated balances.
Comprehensive loss is defined to include all changes in equity except
those resulting from investments by owners and distributions to owners.
Comprehensive loss was the same as net loss in 1999 and 1998.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT - SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, was issued in June 1998.
This statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. This statement is effective for the Company's financial
statements for the year ended December 31, 2000 and the adoption of this
standard is not expected to have a material effect on the Company's
financial statements.
2. LIQUIDITY:
The Company has incurred losses since inception, including $825,076 in
1999 and $447,255 in 1998, respectively. If losses continue and/or the
Company is unable to raise adequate capital to fund future operations,
the Company may be required to curtail operations, liquidate assets or
enter into capital or financing arrangements on terms which may have an
adverse effect on future operations. In an effort to improve operations
and cash flow, the Company is currently pursuing the following
activities:
- Outsourcing of the manufacture of its ballistic product line to
reduce labor and overhead costs (mostly rent) incurred in the
production process at its Dulles, Virginia facility. The
Company is also working with several vendors to provide a
lightweight ballistic material in order to reduce material
costs in its product lines. The Company anticipates that these
actions will not only increase gross margin percentages, but
will allow the Company to lower the price on its product lines.
Management is also seeking experienced body armor sales
personnel that will be able to capitalize on this lower priced
product line, thereby increasing sales volume.
- Seeking profitable and privately held strategic acquisition
candidates that are in the security and safety product
industry. The Company intends to acquire the candidates
through a combination of cash (raised through equity
financings) and common stock of the Company.
- Subsequent to December 31, 1999, the Company raised additional
equity financing of $225,000 and $480,000 through proceeds from
a private placement and option exercises, respectively. The
Company anticipates the exercise of warrants included in the
private placement in fiscal 2000. Assuming all warrants are
exercised, the Company would receive proceeds of $3,825,000.
However, there can be no assurances that any of these warrants
will be exercised (see Note 13).
For these reasons, management believes that no adjustments or
reclassifications of recorded assets and liabilities is necessary at this
time.
3. INVESTMENT IN STRUCTURAL HOLDINGS:
In 1999, the Company purchased a 50% interest in Structural for $850,000
cash and incurred $98,900 of costs directly associated with this
investment. The investment is accounted for under the equity method of
accounting.
<TABLE>
<CAPTION>
SUMMARIZED FINANCIAL INFORMATION FOR STRUCTURAL HOLDINGS
(Amounts in 000's)
For the Nine For the Nine
For the ThreeMonths Ended Months Ended
March 31, December 31, December 31,
2000 1999 1999
---------------------------------------
(Unaudited) (Unadjusted) (Adjusted)
<S> <C> <C> <C> <C>
Current assets $4,580,000 $2,387,000 $2,296,000
========== ========== ==========
Total assets $9,481,000 $7,164,000 $7,329,000
========== =========== ==========
Current liabilities $6,986,000 $4,733,000 $4,867,000
========== ========== ==========
Total liabilities $7,785,000 $5,374,000 $5,726,000
========== ========== ==========
Total stockholders' equity $1,696,000 $1,790,000 $1,603,000
========== ========== ==========
Sales revenue $3,606,000 $6,228,000 $1,049,000
========== ========== ==========
Gross margin $ 611,000 $1,453,000 $1,178,000
========== ========== ==========
Net income (loss) $ 93,000 $66,000 $(122,000)
========== =========== ==========
</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-K 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 Structural's net income to a net loss. As a
result, the Company reduced its equity in earnings of Structural for the
three months ended March 31, 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 three
months ended March 31, 2000 presented above of $46,632, results in a net
equity loss of $47,786 for three months ended March 31, 2000 as recorded
on the Company's books. The December 31, 1999 unadjusted column above
represents amounts prior to Structural's change in its estimate of
percentage of completion. The December 31, 1999 adjusted column above
represents amounts adjusted for Structural's change in its estimate of
percentage of completion.
Structural purchased an entity (H&M) in 1999 for approximately
$5,000,000. The purchase of H&M was accounted for under the purchase
method of accounting, and as a result, approximately $3,025,000 of
goodwill was recorded which is being amortized over 15 years. The
purchase was financed by Structural with approximately $1,700,000 in cash
(of which $850,000 was paid by the Company), a $650,000 note payable to
the seller and $2,650,000 of 3-year term loans to a financial institution
to H&M. Additionally, H&M obtained a $2,350,000 3-year revolving line-
of-credit from the same financial institution. H&M was not in compliance
with certain financial covenants of the financial institution as of
December 31, 1999 and March 31, 2000 and as such, the notes have been
classified as current. However, H&M is currently attempting to obtain
waivers of these loan covenant violations. The loan agreements have
restrictions on payment of dividends, salaries and fees to the
principals/shareholders of Structural. Consulting fees of $225,000,
primarily related to obtaining the loan from the financial institution,
were paid to an entity that has a common equity interest holder with a
shareholder of Structural. The equity interest holder is also the chief
executive officer of Structural. This fee has been recorded as deferred
financing fees and is being amortized over the 3-year life of the loans.
The Company receives fees of $5,000 per month from Structural. Included
in the Company's investment in Structural is a $45,000 receivable due
from Structural for accrued fees. The net investment in Structural of
approximately $982,000, after deducting the fee receivable, differs from
the Company's 50% interest in the net equity of Structural totaling
$895,000. This difference, totaling $87,000, is the result of the
Company capitalizing direct costs it incurred for the purchase of its 50%
interest in Structural and a timing difference from when Structural
effectively acquired H&M and when the Company acquired its interest in
Structural for purposes of allocating net income. This difference is
being amortized over 15 years.
4. NOTE RECEIVABLE:
In conjunction with a failed acquisition of an entity in 1998, the
Company loaned $500,000 to this entity. The interest rate is 8%. A 637-
acre parcel of land and a building have been pledged as collateral on the
note. At December 31, 1999, the note balance had been reduced to
$100,000. The remaining balance is due June 30, 2000.
The Company loaned $50,000 to an unrelated entity. The interest rate is
12% and the principal plus interest is payable in full on March 31, 2000.
An interest in the underlying mortgage was assigned to the Company by the
entity's lender as collateral on the note. This note was repaid during
the three months ended March 31, 2000.
A related party note receivable of $85,000 is from an entity that is a
stockholder in the Company and the other 50% stockholder in Structural.
The interest rate is 9 %, with interest due monthly with the principal
due June 30, 2000. This note is collateralized by 10% of the entity's
common stock ownership of Structural and consulting fee payments of
$25,000 per month made to the entity by Structural.
5. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at December 31, 1999:
<TABLE>
<CAPTION>
<S> <C> <C>
Manufacturing equipment $ 74,494
Furniture and fixtures 74,555
Computer equipment 44,800
------------
193,849
Accumulated depreciation (141,785)
------------
$ 52,064
============
</TABLE>
Depreciation expense for the three months ended March 31, 2000 and 1999
and for the years ended December 31, 1999 and 1998 was $5,300, $23,160,
$40,720 and $92,949, respectively.
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 is collateralized by the building, which balance was
approximately $1,857,000 on the date of the sale. The total proceeds to
the Company was approximately $883,000. The Company also signed a 5-year
lease totaling approximately $13,000 per month on 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.
6. NOTES PAYABLE:
Included in notes payable are two insurance premium finance agreements
totaling $36,489. The agreements mature in May 2000 and April 2001 and
call for monthly payments of principal and interest of $2,585 and $2,492
with interest at 10.5% and 8.375%, respectively.
The following is a schedule of future principal payments as of December
31, 1999:
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ending
December 31,
------------
2000 $ 33,133
2001 27,775
2002 8,714
-----------
69,622
Less current portion (33,133)
-----------
$ 36,489
===========
</TABLE>
7. LEASE COMMITMENTS:
OFFICE LEASE - The Company leases office space, under a five-year
operating lease. Total rental expense was $131,500 for the year ended
December 31, 1999. The total minimum rental commitments at December 31,
1999 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
2000 $ 175,300
2001 175,300
2002 175,300
2003 175,300
2004 43,800
-----------
$ 745,000
============
</TABLE>
8. SHAREHOLDERS' EQUITY:
STOCK SPLIT - Subsequent to December 31, 1999, the Company's Board of
Directors approved a 2 for 1 reverse stock split. Accordingly, all
common stock reflected in the accompanying financial statements and notes
reflect this split.
PREFERRED STOCK - The Company has the authority to issue 1,000,000 shares
of preferred stock. The Board of Directors has the authority to issue
such preferred shares in series and determine the rights and preferences
of the shares as may be determined by the Board of Directors. There were
no outstanding shares of preferred stock in 1999 or 1998.
ISSUANCES OF COMMON STOCK - During 1999, the Company issued 66,666 shares
of common stock valued at $50,000 to an entity which has a common officer
with the Company for services provided in connection with the acquisition
of Structural (see Note 3). In addition to $55,000 in cash for
consulting services to a shareholder/director, the Company issued 75,006
shares of common stock to an entity owned by this shareholder/director
for consulting services valued at $51,087. During 1999, the Company
issued 133,334 shares of common stock for $100,000 to an entity that owns
50% of Structural.
During the three months ended March 31, 2000, the Company granted 124,994
shares of common stock valued at $131,098 to the directors of the Company
for services performed in fiscal 1999. The amount was recorded as an
accrued liability as of December 31, 1999 and was recorded as an increase
to common stock and additional paid-in capital during the first quarter
of fiscal 2000.
From January 1, 2000 through March 31, 2000, options for 384,000 shares
of common stock were exercised resulting in total proceeds of $480,000.
During the three months ended March 31, 2000, the Company sold 150,000
units for $1.50 each, totaling $225,000. Each unit is comprised of 2
shares of common stock and four Class A, Class B, Class C, Class D, Class
E, and Class F warrants. The warrants have the following terms:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Warrant Exercise Price Exercise Period*
Class A $ .750 30 days
Class B $ .875 60 days
Class C $ 1.000 90 days
Class D $ 1.125 120 days
Class E $ 1.250 150 days
Class F $ 1.375 180 days
</TABLE>
________________________
* The exercise period begins the effective date of a registration
statement registering the underlying shares of common stock issuable
upon 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.
WARRANTS - In conjunction with the initial public offering in 1996, the
Company issued 1,628,712 warrants. These warrants have an exercise price
of $7.50 per share and expire in the year 2001. None of these warrants
have been exercised.
STOCK OPTION PLANS - In 1997, the shareholders approved a stock option
plan authorizing options for 300,000 shares of the Company's common
stock. Under the terms of the plan, the exercise price of non-qualified
options will be the lesser of the book value per share of the common
stock as of the end of the Company's fiscal year immediately preceding
the date of such grant or 50% of the fair market value per share of the
common stock on the date of such grant. For incentive stock options, the
exercise price shall not be less than fair market value per share at the
date of such grant. Options shall expire on the date specified by the
Board but not more than 10 years from the date of grant for non-qualified
and incentive stock options and options granted to employees expire 90
days after termination. Following is a summary of activity under the
stock option plan for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
Weighted Weighted
Average Average
Number Exercise Number Exercise
of Shares Price of Shares Price
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Outstanding, beginning
of year 466,666 $ 1.165 66,666 $ .660
Granted 194,000 .970 600,000 1.250
Exercised - - (200,000) 1.250
Expirations (66,666) .660 - -
--------- ---------- --------- ---------
Outstanding, end of year 594,000 $ 1.160 466,666 $ 1,165
========= ========== ========== ==========
Vested Options 508,284 $ 1.235 466,666 $ 1.165
========= ========== ========== ==========
</TABLE>
Of the 194,000 options issued in 1999, 100,000 options were issued to
officers and directors of the Company and 94,000 were issued to employees
and unrelated parties for services. All options granted during 1998 were
to employees and directors.
If not previously exercised or forfeited, vested options outstanding at
December 31, 1999 will expire in the year ending December 31, 2000 at a
weighted average exercise price of $1.165 per share. The remaining
85,716 options will vest ratably each quarter over seven years and will
expire in February 2006 at a weighted average exercise price of $.705 per
share. At December 31, 1998, the weighted average remaining contractual
life of options outstanding was approximately 14 months.
Presented below is a comparison of the weighted average exercise price
and fair values of the Company's common stock on the measurement date for
all stock options granted to employees during 1999:
<TABLE>
<CAPTION>
Number of Exercise Fair
Shares Price Value
---------- --------- ---------
<S> <C> <C> <C> <C>
Market price equal to
exercise price 100,000 $ .705 $ .705
Exercise price greater than
market price 24,000 1.250 1.188
Exercise price greater than
market price 70,000 1.250 1.235
--------- ----------- ----------
194,000 $ 1.070 $ 1.040
========= ============ ===========
</TABLE>
PRO FORMA STOCK-BASED COMPENSATION DISCLOSURES - The Company applies APB
Opinion 25 and related interpretations in accounting for its stock
options and warrants which are granted to employees. Accordingly, no
compensation cost has been recognized for grants of options and warrants
to employees since the exercise prices were not less than the market
value of the Company's common stock on the grant dates. Had compensation
cost been determined based on the fair value at the grant dates for
awards under those plans consistent with the method of SFAS No. 123, the
Company's net loss and EPS would have been increased to the pro forma
amounts indicated below.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1999 1998
------- --------
<S> <C> <C> <C>
Net loss applicable to common shareholders:
As reported $ (460,897) $(447,255)
Pro forma $ (596,542) $(579,363)
Net loss per common shareholders:
As reported - basic and diluted $ (.33) $ (.40)
Pro forma - basic and diluted $ (.43) $ (.52)
</TABLE>
The fair value of each option granted in 1998 was estimated on the date
of grant, using the Black-Scholes option-pricing model with the following
weighted average assumptions:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Expected volatility 125.3% 165.2%
Risk-free interest rate 5.3% 5.5%
Expected dividends - -
Expected terms (in years) 3.7 2.0
</TABLE>
9. INCOME TAXES:
There was no provision for income taxes for the years ended December 31,
1999 or 1998 due to net operating losses, and deferred tax assets being
offset by a valuation allowance.
The net deferred tax asset for the years ended December 31, are comprised
of the following items:
<TABLE>
<CAPTION>
1999 1998
----------- ------------
<S> <C> <C> <C>
Deferred tax assets:
Options $ 20,000 $ -
Net operating loss carryforward 1,112,000 843,000
Other 37,000 37,000
------------- -----------
Gross deferred tax assets 1,169,000 880,000
Deferred tax liability:
Equity investment (12,000) -
Property and equipment (2,000) (65,000)
------------- ------------
Net deferred tax asset before valuation
allowance 1,155,000 815,000
Less deferred tax asset valuation
allowance (1,155,000) (815,000)
----------- -----------
Net deferred tax asset $ - $ -
=========== ===========
</TABLE>
Total income tax expense for 1999 and 1998 differed from the amounts
computed by applying the U.S. Federal statutory tax rates to pre-tax
income as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C> <C>
Statutory rate (34)% (34)%
State income taxes, net of Federal income
tax benefit (4)% (4)%
Increase (reduction) in valuation allowance
related to of net operating loss
carryforwards and change in temporary
differences 38% 38%
------- ---------
- -
======= =========
</TABLE>
In 1999, the valuation allowance increased $344,000. At December 31,
1999, the Company has net operating loss carryforwards of approximately
$2,980,000 available under provisions of the Internal Revenue Code to be
applied against future taxable income. These carryforwards are subject
to annual limitations on utilization and expire from December 31, 2010
through December 31, 2018.
10. MAJOR CUSTOMERS:
The Company sells its products primarily to authorized dealers for resale
to municipal, county and state law enforcement agencies throughout the
United States. Approximately 2% of sales in 1999 and 1998 were to
foreign governments and agencies.
Percentage of sales to major domestic customers at December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C> <C>
Government Customer:
-------------------
U.S. Government Agency and
subcontract 23% 19%
Municipal law enforcement agency 20% 26%
Non-Governmental Customer 20% 49%
</TABLE>
11. MAJOR SUPPLIER CONCENTRATION:
The ballistic resistant products of the Company are primarily
manufactured with the raw materials Spectra 1000 woven fabric and Spectra
Shield. These two products are manufactured and distributed by one
company only. As of December 31, 1999 and 1998, Guardian Technologies
International, Inc., owed $72,700 and $80,600, respectively, to this
company.
<PAGE>
<PAGE>
You should rely only on the
information incorporated by
reference or provided in this
prospectus. We have not authorized GUARDIAN TECHNOLOGIES
anyone to provide you with different INTERNATIONAL, INC.
information. We are not making an
offer of these securities in any
state where the offer would not be
permitted. You should not assume
that the information contained in
this prospectus is accurate as of 3,900,000
any date other than the date on the Shares of Common Stock
front of this document or the date
of documents incorporated by reference.
TABLE OF CONTENTS
-----------------
Page
Prospectus Summary. 7
Risk Factors. 10
Forward-Looking Statements 20
Trademarks 20
Capitalization. 21
Dividend Policy 21
Use of Proceeds 22
The Market for Our Securities 22
Selected Consolidated Financial
Data 23
Management's Discussion and ----------------------
Analysis of Financial PROSPECTUS
Condition and Results of -----------------------
Operations 24
Business 33
Management 41
Executive Compensation 42
Certain Relationships and Related
Transactions 44
Principal Stockholders 45 __________________, 2000
Selling Stockholders 47
Plan of Distribution 50
Limitation on Directors'
Liability; Indemnification 51
Description of Securities 52
Legal Matters 55
Additional Filings and Company
Information 55
Experts 56
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The only statute, charter provision, by-law, contract, or other
arrangement under which any controlling person, director or officers of the
Registrant is insured or indemnified in any manner against any liability which
he may incur in his capacity as such, is as follows:
The Company's Articles of Incorporation permit and its By-laws require
the Company to indemnify officers and directors to the fullest extent
permitted by the Delaware Business Corporation Law (OBCA). The Company has
also entered into agreements to indemnify its directors and executive officers
to provide the maximum indemnification permitted by Delaware law. These
agreements, among other provisions, provide indemnification for certain
expenses (including attorney fees), judgments, fines and settlement amounts
incurred in any action or proceeding, including any action by or in the right
of the Company.
Article VI of the Company's By-laws permits the Company to indemnify its
directors, officers, employees and agent to the maximum extent permitted by
the OBCA. Section 317 of the OBCA provides that a corporation has the power
to indemnify and hold harmless a director, officer, employer, or agent of the
corporation who is or is made a party or is threatened to be made a party to
any threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative, against all expense, liability and loss
actually and reasonably incurred by such person in connection with such a
proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in the best interest of the corporation, and, with
respect to any criminal proceeding, had no reasonable cause to believe that
the conduct was unlawful. If it is determined that the conduct of such person
meets these standards, such person may be indemnified for expenses incurred
and amounts paid in such proceeding if actually and reasonably in connection
therewith.
If such a proceeding is brought by or on behalf of the corporation (i.e.,
a derivative suit), such person may be indemnified against expenses actually
and reasonably incurred if such person acted in good faith and in a manner
reasonably believed to be in the best interest of the corporation and its
stockholders. There can be no indemnification with respect to any matter as
to which such person is adjudged to be liable to the corporation unless and
only to the extent that the court in which such action or suit was brought
shall determine upon application that, despite such adjudication but in view
of all of the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the court shall deem proper.
Where any such person is successful in any such proceeding, such person
is entitled to be indemnified against expenses actually and reasonably
incurred by him or her. In all other cases (unless order by a court),
indemnification is made by the corporation upon determination by it that
indemnification of such person is proper in the circumstances because such
person has met the applicable standard or conduct.
A corporation may advance expenses incurred in defending any such
proceeding upon receipt of an undertaking to repay any amount so advanced if
it is ultimately determined that the person is not eligible for
indemnification.
The indemnification rights provided in Section 317 of the OBCA are not
exclusive of additional rights to indemnification for breach of duty to the
corporation and its stockholders to the extent additional rights are
authorized in the corporation's articles of incorporation and are not
exclusive of any other rights to indemnification under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, with as to
action in his or her office and as to action in another capacity which holding
such office.
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses of the offering, all of which are to be borne by
us, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
SEC Filing Fee $ 8,649
Printing Expenses* 600
Accounting Fees and Expenses* 2,000
Legal Fees and Expenses* 10,000
Blue Sky Fees and Expenses* 1,000
Registrar and Transfer Agent Fee* 1,000
Miscellaneous* 751
-----------
Total* $ 24,000
</TABLE>
__________________________
* Estimated
Item 26. Recent Sales of Unregistered Securities.
a. In 1998 the Registrant sold 59,260 shares to Redwood MicroCap Fund,
Inc for $50,000. The Registrant relied on Section 4(2) for the
issuance. The investor was sophisticated and was given access to
all material information about the Registrant.
b. During 1998 officer and directors of the Registrant exercised
options to purchase a total of 100,000 shares of Common Stock. The
Registrant relied on Section 4(2) for the issuances.
c. During 1999 the Registrant issued 75,006 shares of Common Stock to
its Chairman, Oliver North, for consulting services. The Registrant
relied on Section 4(2) for the issuance.
d. During 1999 the Registrant sold TAIM Special Equities III 133,334
shares of Common Stock for $100,000. TAIM owns 50% of Structural
Holdings, the Company's 50%-owned subsidiary. The Registrant relied
on Section 4(2) for the issuance. TAIM is a sophisticated investor
that was given access to all material information about the
Registrant.
e. During 1999 the Registrant issued to Redwood MicroCap Fund, Inc.,
66,666 shares of common stock for services provided in connection
with the acquisition of Structural. Mr. Moorer, the Registrant's
President, is an officer of Redwood. The Registrant relied on
Section 4(2) for the issuance. Redwood is a sophisticated investor
that was given access to all material information about the
Registrant.
e. In January 2000 the Registrant issued 20,000 to each of its five
directors as partial compensation for their services as directors in
1999. Each of the directors was accredited and had all material
information about the Registrant.
f. In January 2000 the Registrant sold a total of 150,000 Units to 28
investors at a purchase price of $1.50 per Unit. Each Unit
consisted of two shares of Common Stock and twenty-four Common Stock
Purchase Warrants. The Warrants are described in the section of the
Prospectus "Description of Securities - Warrants." The offering was
made pursuant to Section 4(2) and Regulation D; each investor was a
sophisticated, accredited investor, who was given access to all
material information about the Registrant.
g. In January 2000 the Registrant issued 24,994 shares of Common Stock
to its Chairman, Oliver North, for consulting services. The
Registrant relied on Section 4(2) for the issuance.
Item 27. Exhibits
a. The following Exhibits are filed as part of this Registration
Statement pursuant to Item 601 of Regulation S-B:
Exhibit
Number Description
------ -----------
3.1 Certificate of Incorporation of the Company *
3.2 Bylaws of the Company.*
4.1 Form of Common Stock Certificate.*
4.2 Form of Warrant.*
10.1 Employment Agreement between the Company and Oliver L. North.**
10.2 Employment Agreement between the Company and Joseph F. Fernandez.**
10.3 Revolving Line of Credit Agreement dated December 7, 1995 among the
Company, Creditanstalt Corporate Finance, Inc. and Oliver L. North,
as Guarantor.**
10.4 Promissory Note dated December 7, 1995 from the Company to
Creditanstalt Corporate Finance, Inc.**
10.5 Guaranty dated December 7, 1995 from Oliver L. North to
Creditanstalt Corporate Finance, Inc.**
10.6 Amendment dated November 26, 1996 relating to Revolving Loan of
Credit Agreement among the Company, Creditanstalt Corporate Finance,
Inc. and Oliver L. North, as Guarantor.**
10.7 Margin Agreement dated June 24, 1996 between the Company and
Pershing, Division of Donaldson, Lufkin & Jenrette Securities
Corporation.**
10.8 Promissory Note dated February 7, 1997 from the Company to Dashco,
Inc.**
10.9 Deed of Trust between the Company and Marc A. Busman and Rosalyn R.
Busman, Trustees.**
10.10 Deed of Lease dated January 23, 1997 between the Company, as
Landlord, and Freedom Alliance, as Tenant.**
10.11 Letter re: Line of Credit facility between the Company and Adler
Financial Group.**
10.12 Letter re: Loan commitment between the Company and The Baltimore
Life Insurance Company/Life of Maryland, Inc.***
10.13 Stock Purchase Agreement dated August 12, 1999 between the Company
and Taim Investment Company regarding Structural Holdings, Inc.****
10.14 Employment Agreement between the Company and J. Andrew Moorer dated
February 1, 1999.*****
10.15 Option dated February 19, 1999 by and between J. Andrew Moorer and
Oliver North.*****
10.16 Promissory Note dated May 1, 1999 from Taim Special Equities III to
the Company.*****
10.17 Consulting Agreement between the Company and Structural Holdings,
Inc. dated April 1, 1999.*****
10.18 Consulting Agreement between the Company and Oliver L. North dated
February 19, 1999.*****
10.19 Consulting Agreement between the Company and Redwood MicroCap Fund,
Inc. dated December 31, 1998.*****
11.0 Statement re: Computation of Per Share Earnings*****
21.1 Subsidiaries
23.1 Consent of Neuman & Drennen, LLC
23.2 Consent of Hein & Associates
24 Power of Attorney (included in the Signature Page to this
Registration Statement)
27.0 Financial Data Schedule******
* Filed as an Exhibit to the Company's Registration Statement on Form
SB-2 dated March 22, 1996 (Reg. No. 333-2712-NY) and incorporated
herein by reference.
** Filed as an Exhibit to the Company's 1996 Form 10-KSB dated April
15, 1997 and incorporated herein by reference.
*** Filed as an Exhibit to the Company's 1997 Form 10-KSB dated March
31, 1998 and incorporated herein by reference.
**** Filed as an Exhibit to the Company's Current Report on Form 8-K/A-3
filed with the Commission on August 16, 1999
***** Filed as an Exhibit to the Company's 1999 Form 10-KSB dated April
14, 2000, and incorporated herein by reference.
****** Filed as an Exhibit to the Company's Form 10-QSB dated May 22, 2000,
and incorporated herein by reference
_____________________
Item 28. Undertakings
The undersigned Registrant hereby undertakes:
1. To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
a. Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
b. Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement;
c. Include any additional or changed material information on the plan
of distribution.
2. That, for determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
3. To file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
4. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.
5. In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred and paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered hereby, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing the Form SB-2 Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized. In the
City of Carefree, State of Arizona, on the 30th day of May, 2000.
GUARDIAN TECHNOLOGIES INTERNATIONAL,
INC., A Delaware Corporation
By: /s/ J. Andrew Moorer
-------------------------------
J. Andrew Moorer, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints J. Andrew Moorer his true and lawful attorney-
in-fact and agent, with full power of substitution and re-substitution, for
him and in his name, place, and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1933, this
Registration Statement on Form SB-2 has been signed by the following persons
in the capacities with Guardian Technologies International, Inc. and on the
dates indicated.
Signature Title Date
/s/ J. Andrew Moorer President, Chief Executive Officer May 30, 2000
----------------------- and Director
J. Andrew Moorer
/s/ Oliver L. North Chairman of the Board May 30, 2000
------------------------ and Secretary
Oliver L. North
/s/ Kevin L. Houtz Director May 30, 2000
------------------------
Kevin L. Houtz
/s/ David W. Stevens Director May 30, 2000
------------------------
David W. Stevens
/s/ Herbert M. Jacobi Director May 30, 2000
--------------------------
Herbert M. Jacobi
