<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 December 31, 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 [ ]
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TABLE OF CONTENTS
Part I
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Item 1. Financial Statements
Item 2. Management Discussion & Analysis
Part II
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits - Reports on Form 8-K
Item 7. Signatures
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NET/GUARD TECHNOLOGIES, INC.*
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
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Current Assets
Accounts Receivable $172,377
Inventory $101,142
Prepaid Expenses $148,705
-----------
Total Current Assets $422,224
Fixed Assets (Net) $142,543
-----------
$142,543
Other Assets $12,622
-----------
$12,622
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TOTAL ASSETS $577,389
==========
Liabilities and Equity
Current Liabilities
Bank Overdraft $50,144
Accounts Payable $293,058
Other Payables $99,953
Current Portion of Long-Term Debt $156,333
Short-Term Loan $40,000
-----------
Total Current Liabilities
$639,488
Long-Term Liabilities
Note Payable $50,000
Long-Term Debt $195,417
-----------
$245,417
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Total Liabilities $884,905
Minority Interest $96,352
-----------
Stockholders Equity $96,352
Common Stock $2,159,366
Retained Earnings $(1,532,470)
Net Income/Loss $(1,030,763)
-----------
Total Stockholders Equity $(403,868)
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TOTAL LIABILITIES, MINORITY INTEREST, AND STOCKHOLDERS EQUITY $577,389
==========
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*Net/Guard Technologies, Inc. owns 80 percent of NetPage Communications, Inc.
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NET/GUARD TECHNOLOGIES, INC.*
CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
NET SALE $573,833
Cost of Sales $289,576
----------
GROSS PROFIT $284,257
Operating Expenses $544,902
--------
$544,902
Other Income and Expenses
Interest Earned $8,213
Interest Expense $15,209
----------
$6,996
MINORITY INTEREST* ($40,249)
NET INCOME (LOSS) ($227,392)
* Net/Guard Technologies, Inc. owns 80 percent of NetPage Communications, Inc.
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NET/GUARD TECHNOLOGIES, INC.*
CONSOLIDATED INCOME STATEMENT
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<CAPTION>
INCEPTION TO NINE MONTHS
DECEMBER 31, 1996 ENDED DECEMBER 31, 1997
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REVENUE
Sales $ 76,290 $1,683,033
Less: Cost of Sales $ 16,559 $1,038,607
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GROSS PROFIT $ 59,731 $ 644,425
Operating Expenses $867,702 $1,791,149
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$ 867,702
MINORITY INTEREST* $ 0 $ (129,075)
--------
$ 0 $ (129,075)
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NET INCOME (LOSS) $(807,971) $(1,030,763)
========= ===========
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*Net/Guard Technologies, Inc. owns 80 percent of NetPage Communications, Inc.
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NET/GUARD TECHN0LOGIES, INC.*
CONSOLIDATED STATEMENT OF CASH FLOW FROM OPERATIONS
FOR THE PERIOD OF THREE MONTHS ENDED DECEMBER 31, 1997
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<CAPTION>
<S> <C>
Cash in the Beginning of the period $5,026
Cash Flows from Operations
Net Income $(267,641)
Depreciation & Amortization $53,975
Other Current Liabilities $117,165
Account Receivable $21,066
Other Current Assets $(18,273)
Net Cash From Operations $(93,708)
Cash Flows for Financing
Common Stock Issued $0
Short-Term Loan $47,500
Long-Term Liabilities $0
Net Cash Used for Financing $47,500
Cash Flows Used for Investments
Additions to property, plant, and equipment $(8,962)
Net Cash Used for Investment $(8,962)
Net change in cash and equivalents (55,170)
Cash at the End of the Period (50,144)
Net Change in Cash (55,170)
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*Net/Guard Technologies, Inc. owns 80 percent of NetPage Communications, Inc.
<PAGE> 7
NET/GUARD TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1997
1. GENERAL
The consolidated financial statements of Net/Guard Technologies, Inc.
(the company) includes the financial statements of Netpage Communications, Inc.,
which is approximately 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
nine months ended December 31, 1997 compared to inception (May 9, 1996) through
December 31, 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
The following is a discussion of the operating results for the period of
nine months ended December 31, 1997 for the company compared to inception (May
9, 1996) through December 30, 1996. Net/Guard Technologies, Inc. focus has
substantially changed from fault-tolerant technologies to Internet related
technologies with the acquisition of Netpage Communications, Inc. Therefore, the
period of inception through December 30, 1996 and the nine months ended December
30, 1997 is a comparison of operations resulting from the sale of two primarily
different products.
Gross revenue for the nine months ended December 31, 1997 were
$1,683,033 as compared to $76,290 in December 1996. The increase is due to the
change in focus from fault-tolerant to internet related technologies.
Gross profit was $644,425 and $59,731 for the periods ended December 31,
1997 and 1996 respectively. As a percentage of net sales, the gross profit
margins for the nine months ended December 31, 1997 and 1996 were 38% and 78%
respectively. The substantial change in margins are due to changes in product
lines which have a higher hardware cost associated in the cost of sales. Margins
are expected to increase as is evidenced in the three months period ended
December 31, 1997 in which margins are 50%.
Operating Expenses increased from $867,702 from inception through
December 1996 to $1,791,149 in the nine-month period ended December 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 $1,030,763 for the period ended
December 30, 1997 as compared to a net loss of $807,971 in the period ended
December 30, 1996. The losses are attributed to the Company's inability to
acquire sufficient working capital.
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.
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December, October, and November 1997 payments have also not been made. The
balance due, inclusive of interest, on this Note is $52,458.30. Additional
penalties may apply the longer payment is prolonged.
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
term 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, December 1997 and January
1998 aggregating $73,610.27.
There are no assurances that Net/Guard will be able to satisfy all of its
obligations given its current liquidity position. As of December 30, 1997, the
Company had total assets of $527,244 and total liabilities of $834,761. The
Company is currently operating with a negative working capital.
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PART II
Item 1. Legal Proceedings
A) 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 but a preliminary
settlement has been reached. The Company has agreed to pay Mr.
Freytag $2,000 over a three month period starting in March 1998.
As an incentive for this payment, Mr. Freytag agreed to return
all of his common stock which consists of 20,000 shares to the
Company.
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
B) Olag Butrachenko, a director, resigned in November to pursue
personal business.
C) Victor Vurpillait, a director, resigned in October to pursue
personal business.
D) The current Board of Directors, as of December 31, 1997, consists
of E. Blaine Mansfield, Donald Ackerman, and William Van Liere.
Item 6. Exhibits -- Reports on Form 8-K None
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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.
By /s/ E. BLAINE MANSFIELD Date 3/5/98
------------------------------- -----------------
E. Blaine Mansfield, President
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 12,622
<SECURITIES> 148,705
<RECEIVABLES> 172,377
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0
96,352
<COMMON> 2,159,366
<OTHER-SE> (2,563,233)
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<EPS-PRIMARY> 0
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