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U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
Mark One:
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended September 30, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-11968
SAF T LOK INCORPORATED
(Exact name of small business issuer
as specified in its charter)
FLORIDA 65-0142837
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
18245 S. E. FEDERAL HWY.
TEQUESTA, FL 33469
(Address of principal executive offices)
Telephone No. (561) 743-5625
-----------------------
(Former name, former address and former fiscal year,
if changed since last report.)
-------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports); and (2) has been
subject to such filing requirements for the past 90 days: Yes X No
--- ---
As of October 31, 1997 there were 8,737,077 shares of the issuer's common stock
outstanding.
Transitional Small Business Disclosure Format: Yes No X
--- ---
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Part I. Financial Information
Item 1. Financial Statement.
The required financial statements are attached hereto.
Item 2. Management's Discussion and Analysis or Plan of Operation.
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Actual results could differ materially from
those projected in the forward-looking statements as a result of important
factors accompanying the forward-looking statements. The following discussion
should be read in conjunction with the unaudited financial statements and notes
thereto, attached hereto, and in conjunction with the audited financial
statements and notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in the Company's Annual
Report on Form 10-K filed with the SEC on April 15, 1997.
Sales of the Saf T Lok(TM) have continued to languish at about the same level as
the previous quarter.
Surveys with gun dealers and locksmiths indicate an overall apathy towards gun
safety products with the gun buying public. However, there is a bright light at
the end of an ever shortening tunnel. The October 9, 1997, joint announcement by
President Clinton and the major gun manufacturers to sell child safety locks
with their guns not only caused considerable activity with the Company's stock
but also raised the public consciousness of this important issue. As reported in
the New York Times, the most recent Federal statistics report 185 children
killed in accidental shootings in 1994. As a result, the firearms industry is
under increasing pressure from state governments as well as the Clinton
administration. Coupled with the scheduled production of the new magazine lock
and increased marketing activities later this year sales are expected to show
significant increases. Sales could be adversely affected by the long purchasing
cycle in purchases by police departments, delays in completion of tooling for
the magazine lock and changes in the regulatory environment for gun locks.
At recent trade shows, most notably the International Organization of Chiefs of
Police in late October, the Company received markedly increased interest in our
locks from the law enforcement community. Once the police act to secure their
guns from children and other unauthorized users, the general public will not be
far behind.
The Company is continuing to take steps to reduce debt and keep expenses and
cash flow in line while maintaining essential operating, sales and product
development efforts to insure the future growth of the Company. Since November
1996, in order to conserve cash, all management salaries have been waived or
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very substantially reduced. As a result, approximately $120,000 in accrued wages
have been credited back to G & A expenses for this year.
$47,951 was spent on marketing activities during the quarter. The majority of
that was for trade shows, primarily the Associated Locksmiths of America show in
July, the Fraternal Order of Police show in August and prepaid expenses for the
International Association of Chiefs of Police show in October. Both the
Associated Locksmiths of America and the Fraternal Order of Police have endorsed
the Saf T Lok(TM) product. All three shows generated considerably greater
interest in both the magazine lock and the Saf T Lok(TM).
G & A expenses for the quarter totaled $233,200. The major portions consisted of
$94,596 in placement fees and commissions related to the raising of capital,
$33,793 for a variety of expenses to maintain the company listing on the Nasdaq
SmallCap Market, $17,518 for expenses relating to the 1997 annual shareholder
meeting, and $18,676 in product development expenses.
As a result of additional funds obtained this quarter, the Company's cash
position is up $215,110 to $452,308. The remaining increase in assets is
primarily due to the acquisition of tooling for the new magazine lock as it
nears completion. On the other side of the balance sheet payables and accrued
expenses also showed a net increase to $639,015 due to the acquisition of
tooling for the new magazine lock.
With the Company's funds being limited, the first order of business continues to
be to complete the magazine lock, bring it to volume production before the end
of this year, and intensify the sales efforts to the law enforcement market.
Marketing efforts to the law enforcement community are considerably less costly
than to the general public and are expected to yield significant sales and
favorable publicity. See the important factors above that could adversely
affect sales.
Part II. Other Information
Item 1. Legal proceedings
In December 1996 Lisa Broderick Fogel and her husband Bruce Fogel sued the
Company and Franklin Brooks for defamation and loss of consortium arising out of
her brief tenure in November 1996 as president of the Company, in the Circuit
Court of Martin County, Florida. The complainants have since dropped their
claims for monetary damages. Mr. Brooks has made an offer to settle the
remaining issues and awaits a reply. The Company's insurance company, Reliance
Insurance Company is defending the Company and Mr. Brooks.
The Company is not a party in any other ongoing or pending legal proceedings,
nor are any of the Company's properties the subject of litigation, and the
Company is not aware of any pending or contemplated proceeding against it by
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governmental authorities concerning environmental matters. The Company knows of
no legal proceedings, pending or threatened, or judgments entered against any
director or officer of the Company in his capacity as such.
Item 2. Changes In Securities.
During the period of July 1, 1997 through September 30, 1997, 586,983 shares of
common stock were issued due to the exercise of convertible debentures in the
principal amount of $245,000.
During the period of July 1, 1997 through September 30, 1997, 93,583 shares of
common stock were issued to West Marketing Industries in exchange for ongoing
marketing services.
During the month of October, 1997, 1,560,264 shares of common stock were issued
due to the exercise of convertible debentures and 200,000 shares were issued to
John L. Gardner due to the exercise of stock options.
On November 12, 1997, the Company sold 1,500,000 shares of common stock and
issued stock purchase warrants for 2,500,000 shares. Please see the Form 8-K
filed on November 14, 1997.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission Of Matters To A Vote Of Security Holders.
During the third quarter of 1997, no matters were submitted to a vote of
security holders through the solicitation of proxies or otherwise.
The Annual Shareholders Meeting was held on October 10, 1997. The only official
business was the election of Directors. All current directors were re-elected.
Item 5. Other Information
On October 22, 1997, it was announced that Senator Dennis DeConcini and
Representative James Stanton have accepted appointments to the Company's Board
of Directors.
The Company's listing on the Nasdaq Small Cap Market, set to expire on October
15, 1997, was conditionally extended by Nasdaq until November 15, 1997 to allow
the company sufficient time to obtain more favorable terms on additional funding
needed to meet shareholder's equity and total asset requirements.
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Previously filed reports on Form 8-K erroneously reported the sale of a total of
$725,000 in convertible debentures. The correct amount of convertible
debentures sold and reported on those Form 8-Ks is $705,000.
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Item 6. Exhibits and Reports on Form 8-K.
(a) Reports on Form 8-K
1. Form 8K/A filed July 1, 1997, amending report of change in accountant.
2. Form 8K filed July 2, 1997, reporting the receipt of delisting letter from
Nasdaq.
3. Form 8K filed July 22, 1997, reporting the sale of convertible debentures.
4. Form 8K filed August 19, 1997, reporting the sale of convertible debentures.
5. Form 8K filed September 11, 1997, reporting conditional stock listing on
Nasdaq.
6. Form 8K filed October 10, 1997, reporting the sale of convertible debentures.
7. Form 8K filed October 27, 1997, reporting the conversion of debentures.
8. Form 8K filed November 14, 1997, reporting the sale on common stock and
warrants pursuant to Regulation S.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SAF T LOK INCORPORATED
By: /s/ David P. Chapman
--------------------
David P. Chapman
Chief Financial Officer
Chief Accounting Officer
By: /s/ John L. Gardner
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John L. Gardner
President
Chief Executive Officer
November 12, 1997
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SAF T LOK INCORPORATED
F/K/A RGB COMPUTER & VIDEO, INC.
REPORT
AS OF SEPTEMBER 30, 1997
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
CONTENTS
PAGE 8-9 CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1997 AND
DECEMBER 31, 1996.
PAGE 10 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND THE YEAR ENDED
DECEMBER 31, 1996.
PAGE 11 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996.
PAGE 12-13 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996.
PAGE 14-16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30,1997 (UNAUDITED) AND DECEMBER 31, 1996
ASSETS
SEPTEMBER 30, DECEMBER 31,
1997 1996
CURRENT ASSETS
Cash and Cash Equivalents $ 452,308 $ 88,956
Accounts Receivable
(net of allowance for doubtful
accounts of $13,310 and
$23,000, respectively.) 5,889 10,419
Inventories 457,950 466,680
Prepaid expenses 43,584 21,111
Total Current Assets 959,731 587,166
PROPERTY AND EQUIPMENT,
NET OF ACCUMULATED
DEPRECIATION 1,092,730 932,028
OTHER ASSETS
Patents, (net of accumulated amortization
of $53,000 and $28,000, respectively) 349,147 374,147
Loans Receivable 183,029 199,842
Other Assets 975 975
Total Other Assets 533,151 574,964
TOTAL ASSETS $2,585,612 $2,094,158
Please read notes to consolidated financial statement
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SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
SEPTEMBER 30, DECEMBER 31,
1997 1996
CURRENT LIABILITIES
Notes Payable - current portion $ 80,649 $ 67,353
Accounts Payable and accrued expenses 558,366 836,402
Total Current Liabilities 639,015 903,755
LONG TERM LIABILITIES
Notes Payable, net of current portion 33,564 58,061
Notes Payable-Debentures 430,000 0
Total Long Term Liabilities 463,564 58,061
TOTAL LIABILITIES 1,102,579 961,816
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value,
20,000,000 shares authorized,
6,972,647 and 5,651,089 shares
issued and outstanding, respectively. 69,726 56,511
Capital in excess of par 10,239,164 9,167,898
Deficit (8,825,857) (8,092,067)
TOTAL SHAREHOLDERS' EQUITY 1,483,033 1,132,342
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $2,585,612 $2,094,158
Please read notes to consolidated financial statements
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SAF T LOK INCORPORATED
F/K/A RGB COMPUTER & VIDEO, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
Capital
Common Stock in Excess
Shares Amount of Par Deficit Total
Balance-
December 31,
1996 5,651,089 56,511 9,167,898 (8,092,067) 1,132,342
Conversion of
Debentures 586,983 5,870 264,130 - 270,000
Issuance of Common
Stock 734,575 7,346 807,135 - 814,481
Net Loss - - - (733,790) (733,790)
Balance-
September 30
1997 6,972,647 69,726 10,239,163 (8,825,857) 1,483,033
Please read notes to consolidated financial statements
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SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTH PERIOD NINE MONTH PERIOD
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
1997 1996 1997 1996
Revenue $ 5,010 - 38,531 -
Cost of Sales 2,005 - 21,210 -
Gross Profit 3,005 - 17,321 -
Selling, General and
Administrative Expenses 273,645 565,737 634,476 1,675,180
Depreciation and
Amortization 29,962 45,105 116,635 144,881
Loss from continuing
operations (300,602) (557,807) (733,790) (1,434,594)
Loss from discontinued
operations - (137,334) - (474,706)
Net Loss (300,602) (695,141) (733,790) (1,909,300)
LOSS PER COMMON SHARE
Loss from continuing
operations (.04) (.10) (.12) (.28)
Loss from discontinued
operations - (.03) - (.09)
Net Loss (.04) (.13) (.12) (.37)
Weighted average number
of common shares
outstanding 6,972,647 5,522,057 6,136,393 5,137,711
Please read notes to consolidated financial statements
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SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
AND 1996
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss from continuing operations $(574,617) (1,434,594)
Loss from discontinued operations - (474,706)
ADJUSTMENTS TO RECONCILE NET(LOSS)
TO NET CASH (USED IN) OPERATING ACTIVITIES:
Depreciation and Amortization 116,635 144,881
Bad Debt Expense 2,504 146
Loss on sale and disposal of fixed assets - 1,412
Exchange of fixed asset in payment of
consulting fees 22,734 -
CHANGE IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN:
Accounts Receivable 4,530 (196,193)
Inventories 8,730 (501,211)
Prepaid and other current assets (22,473) (30,412)
INCREASE(DECREASE) IN:
Accounts Payable and Accrued Expenses (278,036) 196,768
Other Assets - (725)
NET CASH (USED IN) OPERATING
ACTIVITIES (719,993) (2,325,298)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment (177,859) (360,248)
Proceeds from sale of fixed assets - 12,392
Proceeds from investments - 518,362
Proceeds from loans receivable 16,813 18,100
(Increase) decrease in loans receivable-officers - 3,017
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (161,046) 191,623
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SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
AND 1996
1997 1996
CASH FLOWS FROM FINANCING:
Principal payments on borrowings,
including capital lease obligations $ (1,436) (28,378)
Increase in Loan Payable-Shareholder - 120,000
Proceeds from sale of common stock
and debentures 1,405,000 -
Expenses from sale of common stock
and debentures (159,173) -
Equity Changes due to acquisition - 111,686
NET CASH PROVIDED (USED IN) FINANCING
ACTIVITIES 1,244,391 203,308
NET INCREASE (DECREASE) IN CASH 363,352 (1,930,659)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 88,956 1,981,217
CASH AND CASH EQUIVALENTS
AT END OF PERIOD 452,308 50,558
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash payments for interest $ 212 -
Please read notes to consolidated financial statements
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SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
The unaudited financial information furnished herein reflects all
adjustments which in the opinion of management are necessary to fairly state the
company's financial position, the changes in its financial position and the
results of its operations for the periods presented. This report on Form 10-QSB
should be read in conjunction with the Company's financial statements and notes
thereto included on Form 10-KSB for the year ended December 31, 1996. The
Company presumes that users of the interim financial information herein have
read or have access to the audited financial statements for the preceding fiscal
year and that the adequacy of additional disclosure needed for a fair
presentation may be determined in that context. Accordingly, footnote disclosure
that would substantially duplicate the disclosure contained in the Company's
financial statements for the year ended December 31, 1996 has been omitted. The
results of operations for the nine month period ended September 30, 1997 are not
necessarily indicative of results for the entire year ending December 31, 1997.
NOTE 2
Inventories are composed of the following as of September 30, 1997 and
December 31, 1996:
1997 1996
Raw Materials and
Finished Goods $457,950 $466,680
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SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following as of September 30,
1997 and December 31, 1996:
1997 1996
Equipment $ 374,260 373,344
Furniture and Fixtures 52,997 52,997
Automobile -- 34,000
Tools and Dies 1,046,481 762.560
Software 37,214 37,214
Leasehold Improvements 11,436 11,436
Total 1,522,388 1,271,551
Less accumulated depreciation 429,658 339,523
$1,092,730 932,028
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses are comprised of the following as of
September 30, 1997 and December 31, 1996. The accrued amount is for rent for
the year starting February 1997. An agreement has been reached to repay this
amount in common stock. An agreement has also been reached to repay one of the
Company's creditors, "The Investor Relations Company" with stock. Salaries
accrued as of December 30, 1996 have all been forgiven.
1997 1996
Accounts Payable $529,170 714,215
Accrued payroll and taxes - 122,187
Accrued rent 29,196 -
Total $558,366 836,402
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SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHAREHOLDERS' EQUITY
During the three month period of July 1, 1997 through September 30, 1997,
$705,000 of convertible debentures were sold. Of this total, $245,00 was
converted into 586.983 shares of common stock.
In September, 93,583 shares of commons stock were issued to West Marketing
Industries in exchange for ongoing marketing services.
NOTE 7 - SUBSEQUENT EVENTS
During the month of October, the balance of $430,000 in convertible
debentures was converted into 1,560,264 shares of common stock.
On November 12, 1997, the Company reached an agreement to close a
Regulation S offering with a group of offshore investors that will net
approximately $2 million.
During the month of October, John Gardner, President & CEO exercised a
portion of his stock options and purchased 200,000 shares.
18
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 452,308
<SECURITIES> 0
<RECEIVABLES> 19,199
<ALLOWANCES> 13,310
<INVENTORY> 457,950
<CURRENT-ASSETS> 959,731
<PP&E> 1,522,388
<DEPRECIATION> 429,658
<TOTAL-ASSETS> 2,585,612
<CURRENT-LIABILITIES> 639,015
<BONDS> 0
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<COMMON> 69,726
<OTHER-SE> 10,239,164
<TOTAL-LIABILITY-AND-EQUITY> 2,585,612
<SALES> 38,531
<TOTAL-REVENUES> 38,531
<CGS> 21,210
<TOTAL-COSTS> 136,494
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