U.S. 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 September 30, 1998
[ ] 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 (IRS Employer
incorporation or organization) Identification No.)
324 Datura St., Suite. 200, West Palm Beach, FL 33401
(Address of principal executive offices)
(561) 659-1196
(Issuer's telephone number)
(Former name, former address, and former fiscal year, if changed
since last report)
Check whether the Issuer (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 ___
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date: On November 6, 1998, there were outstanding approximately
2,634,102 shares of common stock, no par value.
Transitional Small Business Disclosure Format (check one);
Yes __ No _X__
<PAGE>
NET LNNX, INC.
Form 10-QSB Index
September 30, 1998
Page
Part I: Financial Information
Item 1. Financial Statements........................ 3
Balance Sheets Unaudited at September 30, 1998...... 4
Unaudited Statements of Operations for the
Period ended September 30, 1998..................... 5
Unaudited Statements of Cash Flow for the
Period Ended September 30, 1998..................... 6
Notes to Unaudited Financial Statements ............ 7
Item 2. Management's Discussion and Analysis
or Plan of Operation ............................... 9
Part II: Other Information
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 and Reports on Form 8-K ........ 10
Signatures .............................................. 11
<PAGE> 2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE> 3
NET LNNX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1998
(Unaudited) *
<S> <C> <C>
ASSETS
Current assets
Cash $ 18,082 $ 33,171
Loan receivables - related parties 4,648 10,500
Loan Receivable - Palm Capital - 50,000
Prepaid expenses 1,550 1,550
Total current assets 24,280 95,221
Property and equipment - net 5,580 7,405
$ 29,860 $ 102,626
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 3,300 $ 24,731
Accrued expenses 53 -
Total current liabilities 3,353 24,731
Stockholders' equity
Common stock 1,000 1,000
Additional paid-in capital 1,830,324 1,687,936
Retained earnings (deficit) (1,804,817) (1,611,041)
26,507 77,895
$ 29,860 $ 102,626
</TABLE>
* Condensed from audited financial statements.
<PAGE> 4
NET LNNX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine month's ended Three month's ended
September 30 September 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
General and administrative expenses $ 194,229 $ 135,749 $ 71,230 $ 58,733
Loss from operations (194,229) (135,749) (71,230) (58,733)
Other income:
Installment sale income - 6,731 - 7,724
Interest income 452 18,176 - 1,376
452 24,907 - 9,100
Operating loss from continuing
operations (193,777) (110,842) (71,230) (49,633)
Discontinued operations
Loss from operations of
discontinued operations - - - -
Loss from disposal of
discontinued operations - (118,002) - -
- (118,002) - -
Net loss (193,777) (228,844) (71,230) (49,633)
Weighted average number of
shares outstanding
Basic 2,337,876 2,073,574 2,606,929 2,058,209
Loss per common share:
Basic loss from continuing operations $ (0.08) $ (0.05) $ (0.03) $ (0.02)
Basic loss from discontinued operations $ - $ - $ - $ -
Basic loss from disposal of
discontinued operations $ - $ (0.06) $ - $ -
Net loss per share $ (0.08) $ (0.11) $ (0.03) $ (0.02)
</TABLE>
<PAGE> 5
NET LNNX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30
1998 1997
<S> <C> <C>
Cash provided by (used for)
Operations:
Net (loss) $ (193,777) $ (228,844)
Adjustments for noncash charges 64,213 (4,110)
Changes in assets and liabilities 34,475 (5,731)
Net cash (used for) operations (95,089) (238,685)
Investments:
Receipts from installment note - 44,824
Investment - (12,600)
Net cash provided by investments - 32,224
Financing
Proceeds from issuance of
additional paid-in capital 80,000 200,050
Loan advance by shareholder - 1,800
Net cash provided by financing 80,000 201,850
Net (decrease) in cash (15,089) (4,611)
Cash at beginning of period 33,171 25,044
Cash at end of period $ 18,082 $ 20,433
Cash payments for:
Interest $ - $ -
Income taxes $ - $ -
</TABLE>
<PAGE> 6
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
June 30, 1998 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1998.
Loss per Share - The Company has adopted Financial Accounting
Standards No. 128, "Earnings per Share" ("FAS 128"), effective
October 1, 1997. FAS 128 requires presentation of earnings or
loss per share on basic and diluted earnings per share. The
company has potentially dilutive shares, however, because the
Company has a loss, the shares are deemed anti-dilutive and only
basic loss per share is presented. Loss per share is computed by
dividing net income by the weighted average number of shares
outstanding during the period. Restatement of the prior period
for this pronouncement had no effect on the loss per share
amount.
2. CONTINUING OPERATIONS
The accompanying financial statements have been presented in
accordance with generally accepted accounting principles, which
assume the continuity of the Company as a going concern. The
Company has no operations but continues to incur expenses. Its
ability to continue is dependent on obtaining a merger partner.
The Company has entered into negotiations to merge, but no
agreement has been signed as of the date of this financial
statement. The Company has, however, sold additional capital
stock.
4. STOCK OPTION PLAN
A summary of the stock option activity for 1998 under the current
plan is as follows:
<TABLE>
<CAPTION>
Stock Weighted
Option Range Average
<S> <C> <C> <C> <C>
Balance at January 1, 1998 400,000 $ 0.200 To $ 0.875 $ 0.706
Granted - - - -
Exercised - - - -
Redeemed (175,000) 0.200 - 0.200
Balance at September 30, 1998 225,000 $ 0.200 $ 0.875 $ 0.706
</TABLE>
<PAGE> 7
NET LNNX, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
4. COMMON STOCK
The Company has issued approximately 244,000 shares of common
stock pursuant to a private placement offering authorized June
11, 1998 increasing paid-in capital $80,000. In addition, he
Company issued approximately 190,000 shares of common stock as
compensation for certain services rendered. The total expense
recorded was approximately $62,400 based upon the the market
value at the date of issuance.
<PAGE> 8
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. It receives no cash
flow from any source.
In August of 1998, a definitive binding reorganization
agreement was entered into between the registrant and Southern
Finance and Development Banking Corp., a privately held Florida
corporation ("Southern"), which engages in commercial financing,
real estate development, hotel franchising and management, car
rental and tour business, to merge a newly formed wholly owned
subsidiary of the registrant into Southern. The transaction is
subject to various conditions, including a complete audit of
Southern and its subsidiaries. As of the date of this report,
Southern has failed to provide the registrant with the necessary
documentation to effectuate this transaction, including an audit
of Southern and its subsidiaries which is satisfactory to the
Company.
There can be no assurance that this transaction will be
consummated. Although, as of the date hereof, management has not
exercised its right to terminate the reorganization agreement,
management considers this transaction unlikely to occur. In the
event this transaction does not occur, no assurance can be made
that another similar or other transaction will be entered into
with another company in the near future.
In the event a merger or acquisition does not occur, the
registrant considers itself to be in a position to meet its cash
requirements for the remainder of its fiscal year. During the
period covered by this report and the previous period, the
Company was successful in seeking a capital infusion of
approximately $80,000. The registrant may not be in a position
to meet its cash requirements subsequent to the first quarter of
1999; however, unless the registrant receives an additional
capital infusion. The registrant presently has no binding
commitments to obtain any capital infusion. The registrant can
make no assurances that a capital infusion will occur, or, that
if a capital infusion does occur, that it will not be on terms
that could adversely affect the registrant or its shareholders.
<PAGE> 9
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Change in Securities
During July and August of 1998, the registrant sold
213,521 shares of common stock at $0.328 per share pursuant to a
private placement transaction. The exemptions the registrant
relied upon were Sections 4(2), 4(6) and Regulation D of the
Securities Act of 1933, as amended. The stock was sold to
individuals and other persons who qualified as accredited
investors as that term is defined in Regulation D. The net
proceeds to the registrant for the sale of said 213,521 shares
was $70,000. No commissions were paid to any person with
respect to this sale of securities.
Also during July of 1998, the registrant issued 21,000
shares of common stock at $0.34 per share in exchange for legal
services valued at $7,140. The exemption the registrant relied
upon was Section 4(2) of the Securities Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter
ended September 30, 1998.
<PAGE> 10
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.
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/William R. Colucci
William R. Colucci,
Vice President and
Secretary
Date: November 6, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 18,082
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,280
<PP&E> 12,441
<DEPRECIATION> 6,861
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 3,353
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 1,830,324
<TOTAL-LIABILITY-AND-EQUITY> 29,860
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 194,229
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (193,777)
<INCOME-TAX> 0
<INCOME-CONTINUING> (193,777)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (193,777)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
