FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1999
Commission File Number 13-4051167
NAVARONE, INC.
(Exact name of registrant as specified in its charter)
Nevada 13-4051167
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
c/o Salem Krieger, 228 East 85th Street, New York, NY 10028
(Address of principal executive offices)
(Zip Code)
(212) 439-6268
(Registrant's telephone number, including area code)
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.
X Yes ___ No
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of November 12, 1999
Common Stock 1,038,500
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
NAVARONE, INC.
[A Development Stage Company]
UNAUDITED CONDENSED BALANCE SHEETS
ASSETS
September 30, December 31,
1999 1998
___________ ___________
CURRENT ASSETS:
Cash $ 9,098 $ 17,925
___________ ___________
Total Current Assets 9,098 17,925
___________ ___________
OTHER ASSETS:
Organizational costs, net - 1,000
___________ ___________
Total Other Assets - 1,000
___________ ___________
$ 9,098 $ 18,925
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 830 $ 187
___________ ___________
Total Current Liabilities 830 187
___________ ___________
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value,
25,000,000 shares authorized,
1,038,500 shares
issued and outstanding 1,039 1,039
Capital in excess of par value 34,326 31,826
Deficit accumulated during the
development stage (27,097) (14,127)
___________ ___________
Total Stockholders' Equity 8,268 18,738
___________ ___________
$ 9,098 $ 18,925
___________ ___________
NOTE: The balance sheet at December 31, 1998 was taken from the audited
financial statements at that date and condensed.
The accompanying notes are an integral part of these unaudited condensed
financial statements.
2
<PAGE>
NAVARONE, INC.
[A Development Stage Company]
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three For the Nine From Inception
Months Ended Months Ended on March 19,
September 30, September 30, 1997 Through
___________________ ___________________ September 30,
1999 1998 1999 1998 1999
_________ _________ _________ _________ ______________
REVENUE $ - $ - $ - $ - $ -
_________ _________ _________ _________ ______________
EXPENSES:
General and
administrative 2,635 - 7,970 - 22,097
Research and
development - - 4,000 - 4,000
_________ _________ _________ _________ ______________
Total Expense 2,635 - 11,970 - 26,097
_________ _________ _________ _________ ______________
LOSS BEFORE CHANGE IN
ACCOUNTING PRINCIPLE (2,635) - (11,970) - (26,097)
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE - - (1,000) - (1,000)
_________ _________ _________ _________ ______________
LOSS BEFORE INCOME
TAXES (2,635) - (12,970) - (27,097)
CURRENT TAX EXPENSE - - - - -
DEFERRED TAX EXPENSE - - - - -
_________ _________ _________ _________ ______________
NET LOSS $(2,635) $ - $(12,970) $ - $(27,097)
_________ _________ _________ _________ ______________
LOSS PER COMMON
SHARE $ (.00) $ - $ (.01) $ - $ (.03)
_________ _________ _________ _________ ______________
The accompanying notes are an integral part of these unaudited condensed
financial statements.
3
<PAGE>
NAVARONE, INC.
[A Development Stage Company]
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Nine From Inception
Months Ended on March 19,
September 30, 1997 Through
___________________ September 30,
1999 1998 1999
_________ _________ ______________
Cash Flows Provided by Operating
Activities:
Net loss $(12,970) $ - $(27,097)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Non-cash expense 1,000 - 1,000
Changes in assets and liabilities:
Increase in accounts payable 643 - 830
_________ _________ ______________
Net Cash (Used) by Operating
Activities (11,327) - (25,267)
_________ _________ ______________
Cash Flows Provided by Investing
Activities:
Payments for organization costs - - (1,000)
_________ _________ ______________
Net Cash (Used) by Investing
Activities - - (1,000)
_________ _________ ______________
Cash Flows Provided by Financing
Activities:
Proceeds from common stock issuance - - 39,500
Payment of stock offering costs - - (6,635)
Capital contribution 2,500 - 2,500
_________ _________ ______________
Net Cash Provided by Financing
Activities 2,500 - 35,365
_________ _________ ______________
Net Increase in Cash (8,827) - 9,098
Cash at Beginning of Period 17,925 - -
_________ _________ ______________
Cash at End of Period $ 9,098 $ - $ 9,098
_________ _________ ______________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Supplemental Schedule of Noncash Investing and Financing Activities:
For the Period Ended September 30, 1999
None
For the Period Ended September 30, 1998
None
The accompanying notes are an integral part of these unaudited condensed
financial statements.
4
<PAGE>
NAVARONE, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Navarone, Inc. (the Company) was organized under the laws of
the State of Nevada on March 19, 1997. It intends to develop and pursue
patent protection for novelty items for the photographic industry. The
Company also intends to manufacture and market its inventions.
Condensed Financial Statements - The accompanying financial statements have
been prepared by the Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
September 30, 1999 and for all the periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December 31, 1998
audited financial statements. The results of operations for the periods ended
September 30, 1999 are not necessarily indicative of the operating results for
the full year.
Organization Costs - The Company has expensed its organization costs, which
reflect amounts expended to organize the Company, in accordance with the
Statement of Position 98-5.
Loss Per Share - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented in accordance
with Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share". [See Note 6]
Cash and Cash Equivalents - For purposes of the financial statements, the
Company considers all highly liquid debt investments purchased with a maturity
of three months or less to be cash equivalents.
Accounting Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosures of contingent assets and liabilities at the date
of the financial statements, and the reported amount of revenues and expenses
during the reported period. Actual results could differ from those estimated.
Research and Development - The Company expenses research and development costs
as incurred. Expenditures for research and development were $0 and $4,000 for
the three and nine months ended September 30, 1999, respectively.
NOTE 2 - CASH
The Company's attorney (an officer of the Company) currently holds monies
belonging to the Company in a non-interest bearing and noninsured account.
5
<PAGE>
NAVARONE, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 3 - CAPITAL STOCK
Common Stock - In October 1998, the Company issued 38,500 shares of its
previously authorized, but unissued common stock. Proceeds from the sale of
stock amounted to $31,865 (or $1 per share), net of stock offering costs of
$6,635.
On March 19, 1997, in connection with its organization, the Company issued
1,000,000 shares of its previously authorized, but unissued common stock.
Total proceeds from the sale of stock amounted to $1,000 (or $.001 per share).
NOTE 4 - RELATED PARTY TRANSACTIONS
The principal shareholders are officers of the Company who also provide legal
and managerial services to the Company. Prototype development has been
provided by the President of the Company utilizing existing studio space,
equipment and materials at an estimated total value of $7,000. The President
has donated $2,500 of these expenses as a capital contribution.
As anticipated in the offering plan the following fees have been paid to
principal shareholders of the Company:
Officers fees $ 5,000
Legal fees 5,000
________
$ 10,000
________
The Company maintains, rent free, a mailing address at the office of one of
its officers.
NOTE 5 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". SFAS
No.109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards. At September 30, 1999, the
Company has available unused operating loss carryforwards of approximately
$25,500, which may be applied against future taxable income and which expire
in 2018 through 2019.
The amount of and ultimate realization of the benefits from the operating loss
carryforwards for income tax purposes is dependent, in part, upon the tax laws
in effect, the future earnings of the Company, and other future events, the
effects of which cannot be determined. Because of the uncertainty surrounding
the realization of the loss carryforwards the Company has established a
valuation allowance equal to the tax effect of the loss carryforwards and,
therefore, no deferred tax asset has been recognized for the loss
carryforwards. The net deferred tax assets are approximately $8,700 and
$4,800 as of September 30, 1999 and December 31, 1998, respectively, with an
offsetting valuation allowance at each period end of the same amount resulting
in a change in the valuation allowance of approximately $3,900 for the nine
months ended September 30, 1999.
6
<PAGE>
NAVARONE, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 6 - LOSS PER SHARE
The following data show the amounts used in computing loss per share for the
periods ended September 30, 1999 and 1998:
For the Three For the Nine From Inception
Months Ended Months Ended on March 19,
September 30, September 30, 1997 Through
___________________ ___________________ September 30,
1999 1998 1999 1998 1999
_________ _________ _________ _________ ______________
Loss from continuing
operations available
to common shareholders
(numerator) $ (2,635) $ - $(12,970) $ - $(27,097)
_________ _________ _________ _________ ______________
Weighted average number
of common shares
outstanding usedin
loss per share for the
period(denominator) 1,038,500 1,000,000 1,038,500 1,000,000 1,015,150
_________ _________ _________ _________ ______________
NOTE 7 - DEVELOPMENT STAGE COMPANY
The Company was formed with a very specific business plan. However, the
possibility exists that the Company could expend virtually all of its working
capital in a relatively short time period and may not be successful in
establishing on-going profitable operations.
7
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. The discussion should
be read in conjunction with the financial statements and notes thereto.
Plan of Operation
Navarone, Inc. is a new company in the development phase, engaged in the
development of novelty items. The Company is currently developing a cloud
lamp or serenity lamp which is a small decorative lamp inside a clear
plexiglass box, supported by a frosted or semi-opaque white plexi base,
containing pre-sunset clouds and a soothing photographic image which will
appear to be lit from within. The Company is also pursuing the development
of booger bubble gum collectibles, which are collectible cards bearing
photos of drawings or grotesque characters and scenes, design to gross out
kids. There is no guarantee that these products will prove to patentable,
or the manufacturing, marketing and sales will ever occur.
The Company does not have sufficient funding to meet its anticipated cash
needs. The current officers and directors are presently contemplating a
secondary offering of securities to fund the costs of operating the Company,
but no decision has yet been made in this regard. There is no assurance that
the Company will be able to successfully generate sufficient cash flows
through the marketing and selling of its product to fund continuing operations
or that the Company will be successful in raising additional funding.
The Company has experienced net losses during the development stage
(March 19, 1997 to present) and has had no revenues during such period. Since
inception, the Company has expended $27,097 of its working capital and has had
no significant cashflows from business operations. On the date of this report,
it had assets of only $9,098 in the form of cash being held by an officer of
the Company. In light of these circumstances, the ability of the Company to
continue as a going concern is significantly in doubt. The attached financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
Forward-Looking Statements
When used in this Form 10-Q or other filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized officer of the Company's executive officers, the
words or phrases "would be", "will allow", "intends to", "will likely result",
"are expected to", "will continue", "is anticipated", "estimate", "project",
or similar expressions are intended to identify "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
The Company cautions readers not to place undue reliance on any forward-
looking statements, which speak only as of the date made, and advises readers
that forward-looking statements involve various risks and uncertainties. The
Company does not undertake, and specifically disclaims any obligation to
update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statement.
8
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to Vote of Securityholders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K:
None.
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.
NAVARONE, INC.
Date: November 13, 1999 By /s/ Salem Krieger
Salem Krieger
President
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
financial statements for the nine months ended September 30, 1999
and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 9,098
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,098
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,098
<CURRENT-LIABILITIES> 830
<BONDS> 0
0
0
<COMMON> 1,039
<OTHER-SE> 7,229
<TOTAL-LIABILITY-AND-EQUITY> 9,098
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,970
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (11,970)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,970)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1,000)
<NET-INCOME> (12,970)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
