<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended September 30, 1997
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ___________ to ____________
Commission File Number
NET/GUARD TECHNOLOGIES, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware FEIN 22-3372522
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
12465 Lewis Street #101
Garden Grove, California 92840
(Address of Principal Executive Offices)
(714) 703-2280
(Registrant's Telephone Number, Including Area Code)
Check whether the Registrant: (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 [ ]
<PAGE> 2
TABLE OF CONTENTS
Part I
Item 1. Financial Statements 3
Item 2. Management Discussion & Analysis 8
Part II
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits - Reports on Form 8-K 10
Item 7. Signatures 11
<PAGE> 3
NET/GUARD TECHNOLOGIES, INC.*
CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
NET SALES $698,951
Cost of Sales $385,962
---------
GROSS PROFIT $312,988
Operating Expenses $572,500
--------
$572,500
Other Income and Expenses
Interest Earned $9,626
Interest Expense $6,930
---------
($2,696)
MINORITY INTEREST* ($20,337)
NET INCOME (LOSS) ($236,478)
</TABLE>
*Net/Guard Technologies, Inc. owns 80 percent of NetPage Communications, Inc.
3
<PAGE> 4
NETGUARD TECHNOLOGIES, INC.*
CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED SEPTEMBER 97 ENDED SEPTEMBER 96
<S> <C> <C> <C> <C>
REVENUE
Sales $738,512 $540
Less: Returns & Allowances ($39,561) $0
--------- ---------
Net Sales $698,951 $540
Less: Cost of Sales $385,962 $0
--------- ---------
GROSS PROFIT $312,989 $540
Operating Expenses $569,804 $197,789
--------- ---------
$197,789
MINORITY INTEREST* ($20,337) $0
---------
($20,337) $0
--------- ---------
NET INCOME (LOSS) ($236,478) ($197,249)
========= =========
</TABLE>
*Net/Guard Technologies, Inc. owns 80 percent of NetPage Communications, Inc.
4
<PAGE> 5
NET/GUARD TECHNOLOGIES, INC.*
CONSOLIDATED BALANCE SHEET
30-Sep-97
(Unaudited)
<TABLE>
<CAPTION>
CURRENT ASSETS
<S> <C> <C>
Cash $5,026
Accounts Receivable $151,311
Inventory $105,665
Prepaid Expenses $167,052
TOTAL CURRENT ASSETS $429,054
OTHER ASSETS
Trademark (Net) $9,066
Minority Interest* ($73,302)
-----------
TOTAL OTHER ASSETS ($64,236)
FIXED ASSETS
PROPERTY & EQUIPMENT $141,847
-----------
TOTAL FIXED ASSETS $141,847
-----------
TOTAL ASSETS $506,665
===========
LIABILITIES
CURRENT LIABILITIES:
Account Payable $294,875
Commissions & Royalties Payable $3,468
Current Portion of Long-Term Debt $156,333
Accrued Expenses $5,816
Wages Payable $20,788
-----------
TOTAL CURRENT LIABILITIES $481,280
LONG-TERM LIABILITIES
Note Payable $50,000
Long-Term Debt $195,417
-----------
TOTAL LONG-TERM LIABILITIES $245,417
-----------
TOTAL LIABILITIES $726,697
</TABLE>
*Net/Guard Technologies, Inc. owns 80 percent of NetPage Communications, Inc.
5
<PAGE> 6
<TABLE>
<S> <C> <C>
EQUITY
Common Stock $2,159,366
Retained Earnings ($1,502,727)
Net Income (Loss) ($803,370)
-----------
TOTAL STOCKHOLDERS EQUITY ($146,731)
MINORITY INTEREST* ($73,302)
-----------
($73,302)
-----------
TOTAL $506,665
===========
</TABLE>
*Net/Guard Technologies, Inc. owns 80 percent of NetPage Communications, Inc.
6
<PAGE> 7
NET/GUARD TECHNOLOGIES, INC.*
CONSOLIDATED STATEMENT OF CASH FLOWS FROM OPERATIONS
FOR THE PERIOD OF SIX MONTHS ENDED SEPTEMBER 1997
<TABLE>
<CAPTION>
Cash Flows from Operations
<S> <C>
Net Income ($236,477)
Depreciation & Amortization $32,559
Other Current Liabilities $189,566
Account Receivable ($120,389)
Other Current Assets ($499,217)
Net Cash From Operations ($633,959)
Cash Flows for Financing
Common Stock Issued $64,369
Long-Term Liabilities ($26,055)
Net Cash Used for Financing $38,314
Cash Flows Used for Investments
Additions to property, plant, and equipment ($9,492)
Net Cash Used for Investment ($9,492)
Net change in cash and equivalents ($605,137)
</TABLE>
*Net/Guard Technologies, Inc. owns 80 percent of NetPage Communications, Inc.
7
<PAGE> 8
NET/GUARD TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYLYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
1. GENERAL
The consolidated financial statements of Net/Guard Technologies, Inc.
(the company) includes the financial statements of Netpage Communications, Inc.,
which is 80% owned by the Company. The Company acquired Netpage Communications,
Inc. in April 1997. All intercompany transfers have been eliminated for the
purposes of the consolidated financial statements in accordance with generally
accepted accounting principles. These consolidated financial statements have
been prepared by the Company, without audit, and include all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results of operations in conformity with generally accepted accounting
principles. Actual results may differ from these estimates. Interim results are
not necessarily indicative of results for a full year. The following is a
discussion of significant factors affecting the operating results, financial
condition and liquidity/cash flows of the Company for the six months ended
September 30, 1997 compared to September 30, 1996. The discussion below should
be read in conjunction with the Financial Statements of the Company and Notes
hereto appearing herein.
2. RESULTS OF OPERATIONS
Net/Guard Technologies, Inc. has substantially changed its primary focus
from fault-tolerant technologies to Internet related technologies with the
acquisition of Netpage Communications, Inc. Therefore, the six months ended
September 30, 1996 and the six months ended September 30, 1997 is a comparison
of operations resulting from the sale of two primarily different products.
Gross revenue for the six months ended September 30, 1997 was $738,512 as
compared to $540 in September 1996. The increase is due to the introduction of
new product lines and the acquisition of Netpage Communications, Inc. Netpage
Communications, Inc. experienced rapid expansion, which yielded an increase of
revenue 2.8 times greater than that of the first quarter which also led to a
substantial increase in expenses. Revenue growth was attributed to the
introduction of new products, increased client base, as well as improvements of
efficiency and productivity.
The change in gross profit from $540 to $312,989 for the period ended
September 1996 and September 1997, respectively, is due to a change in product
lines. The major portion of sales in the six months ended September 1997 were
hardware related with an associated cost of sales.
Operating Expenses increased from $197,789 for the six months-ended
September 1996 to $569,804 in the six-month period ended September 30, 1997. The
increase in operating expenses is due to an increased workforce, expansion, and
a substantial amount of amortization, which stemmed from the acquisition of
Netpage.
The company incurred a net loss of $236,478 for the period ended
September 30, 1997 as compared to a net loss of $197,249 in the period ended
September 30, 1996.
Net/Guard has not paid principal and interest on a promissory note in the
amount of $50,000, owed to an officer, which matured on November 15, 1997. The
Note carries a 10% interest rate with payments being interest only. The last
payment was made on August 15, 1997 in the amount of $486.10. September,
October, and November 1997 payments have also not been made. The balance due,
inclusive of interest, on this Note is $52,458.30.
<PAGE> 9
Long term debt, also owing to the same officer, totaling $351,750 carries
an 8% interest rate and is currently in arrears. The current portion of long
tern debt, due this year, is $156,333. This debt was originally incurred in May
15, 1996 with an original principal balance of $469,000. The Company has not
made payments for September, October, and November 1997 aggregating $44,166.16.
There are no assurances that Net/Guard will be able to satisfy all of its
obligations given its current liquidity position. As of September 30, 1997, the
Company had total assets of $506,665 and total liabilities of $726,697 The
company also had a negative working capital ( current assets less current
liabilities).
<PAGE> 10
PART II
Item 1. Legal Proceedings
A) Superior Court of the State of California For the County of
Orange
Case #783338
Scott J. Walker, an individual, Plantiff vs. E. Blaine
Mansfield, an individual; Net/Guard Technologies, Inc. a
Delaware Corporation; Netpage Communications, Inc. an
Illinois Corporation
A complaint for money damages and equitable relief based
upon:
1. Fraud Based Upon Intentional Misrepresentation;
2. Fraud and Deceit Based Upon Negligent
Misrepresentation of Fact;
3. Fraud based Upon Suppression of Material Fact;
4. Conversion
5. Breach of Contract
6. Promissory Estoppel; and
7. Temporary Restraining Order, Preliminary and
Permanent Injunctions.
was filed on August 22, 1997 with a jury trial requested.
As of November 1997, the Company has not filed an answer.
The Company and the plaintiff are currently engaged in
settlement discussions, which if successful, the company
believes will not result in any material liability. No
assurances can be given that the Company's belief will
prove correct.
B) Municipal Court of California, Orange County Harbor
Judicial District
Case #97HC02294
Rainer Freytag, an individual DBA as Adman vs. Netpage
Communications, Inc.,
Rainer Freytag, former president of Netpage Communications,
Inc., is suing for $18,750 in compensation plus 10%
prejudgement interest per year from December 31, 1996. This
case was filed May 7, 1997. Trial is set for February 1998.
The company expects to file an answer although the matter
is in its preliminary stages, the Company believes the
matter is without merit.
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. Exhibits - Reports on Form 8-K None
<PAGE> 11
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.
By [SIG] Date 12/12/97
----------------------------------- ---------------
E. Blaine Mansfield, President
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> $5,026
<SECURITIES> 0
<RECEIVABLES> 151,611
<ALLOWANCES> (64,236)
<INVENTORY> 105,665
<CURRENT-ASSETS> 167,052
<PP&E> 141,847
<DEPRECIATION> 0
<TOTAL-ASSETS> 506,665
<CURRENT-LIABILITIES> 481,280
<BONDS> 245,417
0
(73,302)
<COMMON> (146,731)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> $506,665
<SALES> $698,951
<TOTAL-REVENUES> 708,577
<CGS> (385,962)
<TOTAL-COSTS> (572,500)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,930)
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (236,478)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
