SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ---- to ----
Commission File number 333-5862
Net Lnnx, Inc.
(Exact name of small business issuer as specified in its charter)
Pennsylvania 23-1726390
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
324 Datura St., Suite. 330, West Palm Beach, FL 33401
(Address of principal executive office and zip code)
Issuer's telephone number, including area code (561) 659-1196
324 Datura St., Suite 150, West Palm Beach, FL 33401
(Former name, former address, and former fiscal year,
if changed since last year)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act of 1934 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 at least
the past 90 days.
Yes _X_ No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
At March 31, 1997, there were outstanding 1,624,876 shares of common stock, no
par value.
<PAGE>
NET LNNX, INC.
Form 10-QSB Index
March 31, 1997
Page
Part I: Financial Information ..............................3
Item 1. Financial Statements ..........................3
Balance Sheets Unaudited at March 31, 1997........3
Unaudited Statements of Operations for the
Period ended March 31, 1997......................4
Unaudited Statements of Cash Flow for the
Period Ended March 31, 1997.......................5
Notes to Unaudited Financial Statements ..........6
Item 2. Management's Discussion and Analysis or Plan
of Operation ..................................7
Part II: Other Information ...............................8
Item 1. Legal Proceedings ..........................8
Item 2. Changes in Securities ......................8
Item 3. Defaults Upon Senior Securities ............8
Item 4. Submission of Matters to a Vote of
Security Holders ...........................8
Item 5. Other Information ..........................8
Item 6. Exhibits and Reports on Form 8-K ...........9
Signatures .................................................9
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
NET LNNX, INC.
CONDENSED BALANCE SHEET
March 31, 1997
(Unaudited)
ASSETS
Current assets:
Cash $ 73,409
Note receivable 38,035
Total current assets 111,444
Property and equipment (net) 8,723
Note receivable - long term 410,590
Net assets of discontinued operations 70,497
$ 601,254
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 23,151
Deferred gain - installment sale 43,247
Stockholders' equity:
Common stock 1,000
Additional paid-in capital 996,335
Retained deficit (462,479)
Total stockholders' equity 534,856
$ 601,254
See Accompanying Notes
<PAGE>
NET LNNX, INC.
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1997 1996
<S> <C> <C>
Sales, net $ - $ -
Cost of sales - 11,172
Gross profit (loss) - (11,172)
General and administrative expenses 15,944 66,837
Loss from operations (15,944) (78,009)
Other income (expense)
Interest earned 2,625 -
Loss on subsidiary equity - (70,948)
Installment gain - sale of subsidiary 4,953 -
Total other income (expense) 7,578 (70,948)
Net loss (8,306) (148,957)
Retained earnings(deficit), beginning of period (454,113) 1,164
Retained earnings(deficit), end of period $ (462,479) $ (147,793)
Net loss per share $ (.00) $ (.00)
Weighted average shares outstanding 2,190,935 1,102,296
</TABLE>
See Accompanying Notes
<PAGE>
NET LNNX, INC.
CONDENSED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1997 1996
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ (8,366) $ (148,957)
Adjustments for non-cash items (4,538) 86,128
Changes in assets and liabilities (66,956) 71,463
Net cash provided (used) for operations (79,860) 8,634
Investments activities:
Acquisition of property (10,798)
Receipts from installment sale note 26,375 --
Cash used for investment activities 26,375 (10,798)
Financing activities:
Proceeds from issuance paid-in capital 100,050 --
Loan payable - shareholder 1,800 --
Net cash provided by financing activities 101,850 --
Net increase (decrease) in cash 48,365 (2,164)
Cash, beginning of period 25,044 2,164
Cash, end of period $ 73,409 $ --
Supplemental disclosure:
Cash paid for interest $ -- $ --
Income taxes paid $ -- $ --
<PAGE>
See Accompanying Notes
<PAGE>
NET LNNX, INC.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited financial statements of Net Lnnx, Inc. (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 1997
are not necessarily indicative of the results that may be expected for the
year ended December 31, 1997.
These financial statements should be read in conjunction with the audited
financial statements and related notes for the year ended December 31, 1996
included in the Company's 10-KSB for the year ended December 31, 1996.
2. Discontinuance of Operations
As reported in the consolidated financial statements for the year ended
December 31, 1996, the Company sold its 55% interest in Communications/USA,
Inc. ("CUSA") which operated as a consolidated subsidiary. The consideration
of the sale was cash and a promissory note. Through March 31, 1997, receipt
of payments in accordance with the terms of the promissory note has been met.
The gain on the sale is being reported on the installment method.
The Company's other subsidiary, TrueNet, Inc., was also sold. The
consideration was stock in the name of the purchaser, Banana Corporation, Inc.
("BCI"). The estimated loss on the disposal of TrueNet, Inc. offset by the
consideration of the sale, net of taxes, was recognized during the year ended
December 31, 1996.
Potential tax benefits from the loss on disposition have not been recognized
since the ultimate realization of the tax benefits is dependent on the Company
generating future capital gains.
3. - Shareholder Activity
In March, 1997, the Company sold 250,000 shares of common stock in a private
placement transaction at $ .40 per share. The proceeds to the Company, net of
$500 expenses, was $99,500.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
(a) Plan of Operation
The registrant is presently a holding company conducting virtually no
business operation, other than its efforts to seek merger partners or
acquisition candidates. As disclosed in the registrant's press release dated
April 25 ,1997, on April 25, 1997, the registrant entered into a non-binding
letter of intent with Techni-Logic Consultants, Inc. ("TLC"), a Texas based
corporation which is a national telecommunications service/reseller
organization which provides high quality telephone communication services and
products. As of the date of this report, no definitive binding merger
agreement has to been entered into between the registrant and TLC, and since
the letter of intent is non-binding, no assurances can be made that such a
merger agreement will be entered into and that a merger will close.
The registrant receives a cash flow from a 7% note receivable made to the
registrant. The note receivable is a 7% interest promissory note in the
amount of $475,000 with 12 monthly payments of $9,000 per month, 12 monthly
payments of $12,000 per month, and a balloon payment of the balance due on
March 1, 1999. Further, the registrant received a capital infusion of
approximately $100,000 in March of 1997, and a capital infusion of
approximately $100,000 in April of 1997.
Until such time as the registrant closes a merger or acquisition
transaction, with the exception of professional fees and costs for such a
transaction, the registrant expects that it will incur only minor operating
costs in 1997. The registrant expects that it will meet its cash requirements
until such time as a merger or acquisition transaction occurs. The
registrant has been operated by new management since January 1997. To the
best of such new management's knowledge, the registrant's past liabilities
have been paid to the satisfaction of all creditors, with the exception of two
creditors which have made claims to the registrant in the approximate
aggregate amount of $57,000. Upon investigation, the registrant considers
such claims to be without merit, however; one creditor has brought suit
against the registrant in the amount of $25,645 as of the date of this
report. No legal action has been brought against the registrant in connection
with the other such claim, although suit has been threatened. In the event
the other creditor brings legal action against the registrant, and either or
both are successful in such actions against the registrant, depending upon the
costs involved and the monetary damage awards obtained against the registrant,
the registrant might have difficulty meeting its cash requirements. Also,
although the registrant's management has conducted what they consider a
thorough investigation of all potential liabilities of the registrant,
management may not be aware of all the registrant's outstanding liabilities;
therefore, in the event present, material, unknown liabilities exist, the
registrant might have difficulties meeting its cash flow requirements in the
event it is required to pay such liabilities.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
On April 15, 1997, CommGroup, Inc. d/b/a Communications Group, a Florida
corporation ("CommGroup"), filed suit against the registrant in the Circuit
Court of the Fifteenth Judicial Circuit, Palm Beach County, Florida.
CommGroup is a company which provides marketing support and public
relations services ("Services"). CommGroup alleges that it performed Services
for the registrant valued at approximately $25,645 pursuant to an oral
contract between the registrant and CommGroup. CommGroup brought this suit
for breach of contract, account stated and quantum meruit relief against the
registrant. The registrant filed a motion to dismiss or alternative motion
for a more definite statement based upon the insufficiency of the original
complaint filed by CommGroup. As of the date hereof, the registrant's motions
are pending resolution.
Item 2. Change in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
A special meeting of the shareholders of the registrant was held on
January 31, 1997. Shareholders representing 814,000 shares of the 1,441,000
shares outstanding on that date attended the meeting and unanimously passed
the following resolutions:
1. To amend the bylaws of the registrant to increase the number of
directors from one to five, and to permit the existing directors to fill the
vacancies until the next annual meeting of the shareholders;
2. To reincorporate the corporation under the laws of the state of
Delaware;
3. To approve the sale of the registrant's interest in
Communications/USA, Inc. to Palm Capital, Inc.
Item 5. Other Information
The following proposals were approved by the registrant's Board of
Directors during April, 1997.
<PAGE>
(1) The registrant's anticipated reverse merger with Techni-Logic
Consultants, Inc.
(2) The transfer of two of the registrant's assets into two new wholly
owned subsidiary corporations of the registrant. The registrant
intends to transfer its 7% note receivable in the amount of
$475,000 into one subsidiary, and to transfer its 20% interest in
Banana Online, Inc; a privately held internet access and service
provider into the other subsidiary. The registrant intends for
this transfer of assets to occur prior to its anticipated merger
with TLC, or any other company the registrant might merge
with. The registrant intends to distribute the shares of stock of
the subsidiaries to shareholders of the registrant and make the
subsidiaries operating public corporations on a future date.
Also, in March 1997, the registrant sold 250,000 shares of common stock
in a private placement transaction at $0.40 per share. The net proceeds to
the registrant, after offering expenses of $500 were $99,500.
Item 6. Exhibits and Reports on Form 8-K
(a) Financial Data Schedule
(b) The following reports on Form 8-K were filed during the quarter
ended March 31,1997.
1. Form 8-K dated 1/10/97
2. Form 8-K dated 2/14/97
3. Form 8-K dated 3/24/97.
SIGNATURES
In accordance with 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 LNNX, INC.
Registrant
/s/ Ronald W. Hayes, Jr.
Ronald W. Hayes, Jr.
President.
/s/ Ronald W. Hayes, Jr.
Ronald W. Hayes, Jr.
President.
/s/ Ronald P. Perella
Ronald P. Perella,
Vice President and
Executive Secretary
Date: May 13, 1997
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statements of Cash Flow and Notes thereto
incorprated in Part I, Item 1. of this Form 10-QSB and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,730
<SECURITIES> 0
<RECEIVABLES> 38,035
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 111,444
<PP&E> 10,798
<DEPRECIATION> 2,075
<TOTAL-ASSETS> 601,254
<CURRENT-LIABILITIES> 23,151
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 996,235
<TOTAL-LIABILITY-AND-EQUITY> 601,254
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 15,994
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,308
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
