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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 33-99084-NY
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NET/GUARD Technologies, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 22-3372522
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12465 Lewis Street - Suite 101, Garden Grove, California 92840
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(Address of principal executive offices) (Zip Code)
714-703-2880
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(Registrant's telephone number, including area code)
Rollo Entertainment Inc., 5 Glenfield Road, Glenridge, New Jersey 07028
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
The number of shares outstanding of each of the registrant's classes of common
stock, as of June 18, 1997 is 10,900,003 shares, all of one class of $.0001
par value common stock.
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TABLE OF CONTENTS
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Page No.
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PART I
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Item 1. Financial Statements 3-6
Item 2. Management's Discussion and Analysis
or Plan of Operation 7-8
PART II
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a
Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
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NETGUARD TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
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UNAUDITED
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS
<S> <C> <C>
Cash .................................................. $ 353,250
Accounts receivable ................................... 7,118
Inventory ............................................. 35,673
Employee receivables .................................. 15,791
Prepaid expenses ...................................... 3,911
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Total current assets .............................. 415,743
FURNITURE AND EQUIPMENT, net ............................... 53,674
OTHER ASSETS ............................................... 16,671
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TOTAL ASSETS ................................. $ 486,088
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable ...................................... $ 6,786
Accrued expenses ...................................... 46,382
Note payable - stockholder ............................ 505,972
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Total current liabilities ......................... 559,140
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STOCKHOLDERS' DEFICIENCY
Common stock .......................................... 734,919
Accumulated deficit ................................... (807,971)
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Total stockholders' deficiency .................... (73,052)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 486,088
=========
</TABLE>
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NETGUARD TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31,
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<TABLE>
<CAPTION>
UNAUDITED
1996 1995
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(Predecessor)
<S> <C> <C>
NET SALES ................................... $ 4,568 $ 11,396
COST OF SALES ............................... 1,242 2,056
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GROSS PROFIT ................................ 3,326 9,340
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 260,595 412,252
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LOSS FROM OPERATIONS ........................ (257,269) (402,912)
OTHER INCOME (EXPENSE) ...................... -- 8,974
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NET LOSS ...................... $(257,269) $(393,938)
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</TABLE>
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NETGUARD TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FROM INCEPTION (MAY 16, 1996) TO DECEMBER 31, 1996 AND
THE NINE MONTHS ENDED DECEMBER 31, 1995
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<TABLE>
<CAPTION>
UNAUDITED
Nine Months
Inception to Ended
December 31, December 31,
1996 1995
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(Predecessor)
<S> <C> <C>
NET SALES ................................... $ 76,290 $ 117,797
COST OF SALES ............................... 16,559 24,523
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GROSS PROFIT ................................ 59,731 93,274
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 867,702 1,239,981
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LOSS FROM OPERATIONS ........................ (807,971) (1,146,707)
OTHER INCOME (EXPENSE) ...................... -- (90,115)
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NET LOSS ...................... $ (807,971) $(1,236,822)
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</TABLE>
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NETGUARD TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FROM INCEPTION (MAY 16, 1996) TO DECEMBER 31, 1996 AND
THE NINE MONTHS ENDED DECEMBER 31, 1995
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<TABLE>
<CAPTION>
UNAUDITED
Nine Months
Inception to Ended
December 31, December 31,
1996 1995
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(Predecessor)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss .................................................. $ (807,971) $(1,236,822)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization .................... 10,779 4,020
(Increase) decrease in
Accounts receivable ................................... (7,118) 8,875
Inventory ............................................. (35,673) 76,138
Employee advances ..................................... (15,791) 4,329
Prepaid expenses ...................................... (3,911) 365
Deposits .............................................. (8,639) 310
Increase (decrease) in
Accounts payable ...................................... 6,786 35,410
Accrued expenses ...................................... 46,382 417,185
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Net cash used in operating activities .... (815,156) (690,190)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment ....................... (59,985) --
Purchase of intangible assets ............................. (12,500) --
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Net cash used in investing activities .... (72,485) --
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of notes payable to stockholders 505,972 493,147
Proceeds from the sale of common stock and other capital
contributions ......................................... 734,919 185,906
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Net cash provided by financing activities 1,240,891 679,053
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Net increase (decrease) in cash and
cash equivalents ................ 353,250 (11,137)
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CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR .................. -- 11,954
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CASH AND CASH EQUIVALENTS - END OF YEAR ........................ $ 353,250 $ 817
=========== ===========
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion below should be read in conjunction with the Financial
Statements of the Company and Notes thereto appearing herein.
INTRODUCTION
This discussion summarizes the significant factors affecting the
operating results, financial condition and liquidity/cash flows of the Company
for the nine months ended December 31, 1996, compared to the nine months ended
December 31, 1995 of its predecessor and for the three months ended
December 31, 1996 compared to the three months ended December 31, 1995 of its
predecessor. The Company and its predecessor have sustained losses for both the
nine-months ended December 31, 1995 and from inception (May 9, 1996) to
December 31, 1996, due to a lack of working capital to finance adequate levels
of marketing expenditures.
In September 1994, NetGuard entered into an Investment Agreement
with a Capital Investment Group, in which the Group would invest $3,000,000
into NetGuard. This investment was delayed much longer than anticipated and as
a result of the delay, NetGuard dissolved on May 8, 1996. On May 9, 1996
NetGuard Technologies, Inc. was formed and operates substantially the same
business as the predecessor.
RESULTS OF OPERATIONS
The following is a discussion of the operating results for the period from
inception (May 9, 1996) to the nine months ended December 31, 1996, for the
Company compared to the nine months ended December 31, 1995 for NetGuard
Systems, the predecessor.
Gross revenues from inception to December 31, 1996 were $76,290 as
compared to $117,797 for the nine months ended December 31, 1995. The decrease
of 35% is attributed to the Company's inability to finance adequate levels of
marketing.
Gross profit was $59,731 and $93,274 for the periods ended December
31, 1996 and 1995, respectively. As a percentage of net sales, the gross profit
margins for the nine months ended December 31, 1996 and 1995 were 78% and 79%,
respectively.
Sales, general and administrative expenses were $867,702 and
$1,239,981 for the period ended December 31, 1996 and 1995, respectively. As a
percentage of gross sales, expenses were 1137% and 1053% for the nine months
ended December 31, 1996 and 1995, respectively. The decrease is principally
attributed to a deduction in payroll.
The Company incurred a net loss of $807,971 from inception to the
period ended December 31, 1996 compared to a net loss of $1,236,822 for the
nine months ended December 31, 1995. The losses in both periods are attributed
to the Company's inability to acquire sufficient working capital to market its
products.
The following is a discussion of the operation results for the three months
ended December 31, 1996, for the Company compared to the three months ended
December 31, 1995 for NetGuard Systems, the predecessor.
Gross revenues for the three months ended December 31, 1996 were
$4,568 as compared to $11,396 for the three months ended December 31, 1995. The
decrease of 60% is attributed to the Company's inability to finance adequate
levels of marketing.
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Gross profit was $3,326 and $9,340 for the three months ended
December 31, 1996 and 1995, respectively. As a percentage of net sales, the
gross profit margins for the three months ended December 31, 1996 and 1995 were
73% and 82%, respectively.
Sales, general and administrative expenses were $260,595 and $412,252
for the three months ended December 31, 1996 and 1995, respectively. As a
percentage of gross sales, expenses were 5705% and 3618% for the three months
ended December 31, 1996 and 1995, respectively. The decrease is principally
attributed to a reduction in payroll.
The Company incurred a net loss of $257,269 for the three months
ended December 31, 1996 compared to a net loss of $393,938 for the three months
ended December 31, 1995. The losses in both periods are attributed to the
Company's inability to acquire sufficient working capital to market its
products.
LIQUIDITY AND CAPITAL RESOURCES
From inception to December 31, 1996, the Company used net cash of
$815,156 in operations. The Company financed its operating cash requirements
through the sale of common stock and other capital contributions, which
generated cash proceeds of $734,919, and from the issuance of notes payable to
stockholders, which generated cash proceeds of $505,972.
For the nine months ended December 31, 1995, the Company used net
cash of $690,190 in operations. The Company financed its operating cash
requirements through the sale of common stock and other capital contributions,
which generated cash proceeds of $185,906, and from the issuance of notes
payable to stockholders, which generated cash proceeds of $493,147.
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PART II
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Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a
Vote of Security Holders - None
Item 5. Other Information - None
Item 6. (a) Exhibits - None
(b) Reports on Form 8-K None
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NET/GUARD TECHNOLOGIES, INC.
By /s/ E. Blaine Mansfield
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E. Blaine Mansfield, President
Dated: June 18, 1997
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> MAY-09-1996
<PERIOD-END> DEC-31-1996
<CASH> 353,250
<SECURITIES> 0
<RECEIVABLES> 7,118
<ALLOWANCES> 0
<INVENTORY> 35,673
<CURRENT-ASSETS> 415,743
<PP&E> 53,674
<DEPRECIATION> 0
<TOTAL-ASSETS> 486,088
<CURRENT-LIABILITIES> 559,140
<BONDS> 0
0
0
<COMMON> 734,919
<OTHER-SE> (807,971)
<TOTAL-LIABILITY-AND-EQUITY> 486,088
<SALES> 76,290
<TOTAL-REVENUES> 76,290
<CGS> 16,559
<TOTAL-COSTS> 867,702
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (807,971)
<INCOME-TAX> 0
<INCOME-CONTINUING> (807,971)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (807,971)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
