<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [FEE REQUIRED]

                    For the Fiscal Year Ended March 31, 1997

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

          For the Transition period from _____________ to _____________
                         Commission File Number 0-12969

                          NET/GUARD TECHNOLOGIES, INC.
             ------------------------------------------------------
             (Exact name of Registrant as Specified in its Charter)

    DELAWARE                           33-0707961
    -------------------------------    --------------------------------
    (State or other jurisdiction of    (IRS Employer Identification No.)
    Incorporation or Organization)

12465 LEWIS ST., SUITE 101,
GARDEN GROVE, CALIFORNIA                             92840-8702
----------------------------------------             ----------
(Address of Principal Executive Offices)             (Zip Code)

(Registrant's Telephone Number including Area Code): (714) 703-2880

Securities Registered Pursuant to Section 12(b) of the Act:  NONE

           Securities Registered Pursuant to Section 12(g) of the Act:
                          COMMON STOCK, $.001 PAR VALUE
                                (Title of Class)

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. Yes X No




                                       -2-
<PAGE>   2
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 31, 1997 COMMON STOCK, PAR VALUE OR $.001 PER SHARE -
$8,866,184 based upon the closing bid price for the Company's common stock at
March 31, 1997.

The issuer's revenues for the year ended March 31, 1997 were $171,928.

The number of shares outstanding of the registrant's classes of common stock as
of March 31, 1997: COMMON STOCK, PAR VALUE OF $.001 PER SHARE - 9,975,000 
SHARES.

DOCUMENTS INCORPORATED BY REFERENCE:    None





                                       -3-

<PAGE>   3
                                     PART I

         This Annual Report on Form 10KSB contains forward-looking statements
that involve risks and uncertainties. NET/GUARD Technologies, Inc's ("NET/GUARD"
or the "Company") actual future results could differ materially from those
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those factors discussed in Item 1, "Business" and
elsewhere in this Report.

ITEM 1.   BUSINESS

General

         NET/GUARD primarily develops and manufactures PC network file server
fault-tolerant add-on sub-systems, used to reduce overall network downtime
attributed to failures of the network's file server. The Company's SERVivor(TM)
family of fault-tolerant add-on sub-systems are comprised of SCSI switch
hardware, proprietary monitoring software, and interface drivers. SERVivor's
hardware component is compatible with file servers platforms from most major
server grade PCs such as those manufactured by IBM, Hewlett Packard, Compaq, ALR
Research, and Dell. SERVivor's monitoring software will monitor network activity
on all network topology such as Ethernet, Token-ring, and Star. SERVivor's
interface drivers function with all present releases of Novell's NetWare and
Microsoft's Windows NT network operating systems.

         The Company markets its products domestically primarily through
Personal Computer (PC) network Value Added Resellers (VARs) for resale to
network end users. The Company's primary sales and marketing efforts during the
fiscal year ending March 31, 1997 were directed at increasing demand for
products at the end user sales level and increasing the number of VARs that
carry the Company's products. Such efforts have included using outside
representatives to present the Company's products to VAR's employees, and using
end user conferences and trade shows to increase the awareness of the end user.

         Organized in May 1996, the Company is a Delaware corporation whose
principal executive offices are located at 12465 Lewis Street, Suite 101, Garden
Grove, California, 9284, and its telephone number is (714) 703-2880.

INDUSTRY OVERVIEW

         During the last decade the networked personal computer (PC) has moved
to become the principal information system (IS) of choice for business and
government. Technological advances and increased functionality, combined with
lower pricing have made networked PCs common in business and governmental
agencies of all sizes. These networks of PCs are now integral to the profitable
or on-budget operation of the network users. A market for sophisticated network
downtime reduction sub-systems has evolved in response to the dependency of the
user's operation on the availability of their network's file server. In



                                       -4-

<PAGE>   4
addition, each major change of the operating system which runs a particular PC
network may lead to demand for even higher availability of a new operating
system.

STRATEGY

         The Company's strategy is to leverage the technological advances and
increased functionality of the network operating systems to expand its position
as a developer and manufacturer of quality fault-tolerant products for use in
businesses. Key elements of the Company's business strategy are as follows:

         CAPITALIZE ON BRAND NAME RECOGNITION. The Company intends to leverage
its brand name recognition to introduce new products into its VAR channel which
supplies the business and retail market. The Company's merchandising strategy is
intended to introduce allied network products to augment the Company's product
lines by allowing VARs to achieve relatively high revenues and margins from the
Company's products.

         TARGET TELECOMMUNICATIONS CUSTOMERS. In February, 1997, the Company
established a Telecommunications Sales Unit to sell products manufactured by
others which enable both networked and stand alone PC access to private and
public networks at data rates of 33.6KB and 56KB which are current standards.

         PURSUE STRATEGIC ALLIANCES AND ACQUISITIONS. The Company is seeking
strategic alliances that, through the addition of development, distribution, or
financial resources, would allow the Company to develop, and market network
fault-tolerant products into broader markets. The Company currently has targeted
strategic alliance prospects that are industry leaders with VAR and OEM channels
into which they distribute non-competitive but complimentary products.
Additionally, management anticipates that the Company will seek to accelerate
growth through strategic acquisition of complementary businesses, products, or
technologies. See "Acquisition of NetPage Communications" below.

         To date the Company has generated limited revenues and incurred a net
loss of more than $1,121,000. See "Management Discussion and Analysis of
Financial Condition" below in Item 6 and "Financial Statements" below in Item 7.
The Company has not been profitable to date, has had negative cash flows from
operations and the report of its independent auditors reflects that the
Company's financial statements "have been prepared assuming that the Company
will continue as a going concern." See Note 1 of Notes to Financial Statements.
No assurance can be given that the Company's strategy will prove successful or
that any of its products will be accepted in the market place.

PRODUCTS

         The following table sets forth selected products currently offered by
the Company:

Product Name:                               NSI 7000
-------------                               --------

The NSI 7000 is a Fault-Tolerant subsystem used to reduce the downtime of
networked file servers utilizing Novell NetWare. The NSI 7000 protects the
network file server from many types of hardware or software failure which would
otherwise result in file server network downtime. The NSI 7000 is a system made
up of both hardware and software. The disk drives which contain all the software
needed to operate the network are mounted in the NSI 7000 along with NET/GUARD's
proprietary SCSI switch. The NSI software monitors the network's operation and
when a failure within the network is detected the NSI 7000 automatically
switches from the failed file server to a designated standby file server. The
NSI 7000 is tailored to the network user with mirrored / duplexed disk
configurations.



                                       -5-

<PAGE>   5
Product Name:                               NSI 5000
-------------                               --------

The NSI 5000 is a Fault-Tolerant subsystem used to reduce the downtime of
network file servers utilizing Novell NetWare. The NSI 5000 protects the network
file server from many types of hardware or software failure which would
otherwise result in file server or network downtime. The NSI 5000 is a system
made up of both hardware and software. NSI 5000 is 19" rack-mount configuration
cabinet which contains the Company's proprietary SCSI switch. The NSI software
monitors the network's operation and when a failure is detected the NSI 5000
automatically switches from the failed file server to a standby file server. The
NSI 5000 is tailored to the network user with RAID disk configurations.

Product Name:                               SERVivor
-------------                               --------

The SERVivor is a low cost systems fault tolerant product which increases file
server availability for PC networks utilizing Novell NetWare or Microsoft
Windows NT software. SERVivor is a ISA form factor computer board that is
mounted in a standby server and with simple cable connections and monitoring
software protects the network from file server downtime that could be caused by
any hardware or software failure. The Company has designed SERVivor so that it
can interface with file servers that use either mirrored or RAID disk
configurations.


PRODUCT DEVELOPMENT

         The Company believes that significant investment in research and
development is required in order to remain competitive, accelerate the rate of
product introductions, incorporate new technologies, and sustain the quality of
its products. In addition to engineering and quality assurance, the Company's
research and development activities include the identification and validation of
a product's potential commercial success, as well as the incorporation of new
technologies in new products. The Company incurs significant expense in
preparing market research information and reviewing product specifications. In
addition, the Company works closely with hardware and software manufacturers to
anticipate user problems with new hardware and software. These efforts and the
resulting "core" technology are critical in enabling the Company to be
competitive, improve quality and consistency, and bring products to market
quickly.

         The product planning and development process begins with research and
analysis by both the marketing and research and development groups. The project
team typically may consist of two to three or more persons, including employees
and consultants. These products require varying degrees of development time
which frequently depend on general complexity of the product. Prior to release,
each product will undergo careful quality assurance testing that will involve
usability testing with external evaluators and a technical review of each
component of the final product and testing on various hardware platforms. The
Company endeavors, with the assistance of personal computer hardware, software,
and peripheral suppliers, to identify potential conflicts and other factors that
could lead to problems with personal computers due to incompatibility with
evolving technology. The Company then will adapt its "core" technology to
develop products, or enhance existing ones,



                                       -6-

<PAGE>   6
designed to assist the user in resolving the problem or adapting to new
technological environments. The Company's strategy for developing products
compatible with Novell NetWare, and future versions of Windows NT, is
substantially dependent on its ability to gain pre-release access to, and
develop expertise in, such versions.

         The Company's products are highly dependent on the continued widespread
use of Microsoft's Windows NT and Novell's NetWare operating system for
networked personal computers. Although NetWare and Windows NT operating systems
are currently used by many networked personal computer users, other companies,
including International Business Machines Corporation, have developed or are
developing other operating systems which compete and will compete with Novell's
NetWare and Microsoft's Windows NT. In the event that any of these alternative
operating systems become widely accepted in the personal computer marketplace,
demand for the Company's Windows-based products could be adversely affected,
thereby also affecting the Company's operating results. Microsoft announced
earlier in 1997 a new fault-tolerant facility for its operating system, Windows
NT. The Company is attempting to determine whether Microsoft's fault-tolerant
sub-systems, named Wolfpack, for networked personal computers using Windows NT
will have an adverse effect on the Company's products and market penetration.

         The costs associated with planning, researching, developing and testing
new products and services are substantial and no assurance can be given that the
Company will have adequate resources for such purposes.


ACQUISITION OF NETPAGE COMMUNICATIONS, INC.

         Effective April 30, 1997, the Company acquired 80% of NetPage 
Communications, ("NetPage") for stock and cash. The Company's chief executive
officer currently acts as the chief executive officer of NetPage and is actively
involved in strategic planning and the day to day operations of NetPage. NetPage
has agreed to pay the Company a monthly management fee of $20,000. Through July
15, 1997, the Company loaned NetPage approximately $160,000 for three years at
an interest rate of 10% per annum. NET/GUARD has the right to elect a majority
of NetPage's Board of Directors.

NETPAGE'S PRODUCTS

         NetPage's mission is to provide a complete Internet solution to the
small business environment. NetPage's products are offered in three models,
Standard, Gold and Platinum. Each model includes a computer (either desktop or
notebook), a custom Internet Web site created by NetPage specifically for the
client, electronic mail service, unlimited full time access to the entire
Internet and World Wide Web for each client, computer operating systems,
Internet browsing software, and a submission of each client's Web site to more
than 100 Internet search and registration services. In addition to the three
base models NetPage offers optional and add-on products and services including
various peripherals and more advanced web pages which may extend additional
capability and allow more business functions to be carried out in the new
e-commerce arena.



                                       -7-

<PAGE>   7
NETPAGE'S SALES AND MARKETING

         NetPage markets a "Complete Internet Solution" nationally through
Internet consultants, dealers and master dealers. NetPage recruits master
dealers using various electronic and print media. Each master dealer purchases a
set of sales and marketing tools and pays a tuition to NetPage for a five-day
training program. Upon completion of the training program a master dealer is
authorized to enlist dealers and/or Internet consultants in a nonspecific
geographical territory. Dealers and Internet consultants offer the Complete
Internet Solution to small businesses ranging from professionals, such as
lawyers and doctors, and other service providers to retailers, wholesalers and
manufacturers. The Complete Internet Solution is sold or may be leased, through
unaffiliated leasing companies arranged by NetPage to end user clients,
generally on a thirty-nine (39) month lease.


DISTRIBUTION, SALES AND MARKETING

         The Company markets its fault-tolerant products domestically through
VARs for resale to end users. The Company's reseller customers generally offer
products of several different companies, including products which may compete
with those of the Company. Accordingly, there is a risk that these resellers may
give higher priority to products of other suppliers and reduce their efforts to
sell the Company's products. In addition, any special distribution arrangements
and product pricing arrangements that the Company may implement in one or more
distribution channels for strategic purposes could adversely affect gross profit
margins for its products.

         In February 1997, NET/GUARD established a telecommunications sales unit
to expand the promotion of products to its present VAR channel. These
telecommunications products are mainly high speed modems which enable both
networked and stand-alone PC access to private and public networks at data rates
above the current generally available rate of 28,800 bits per second.

         The Company also uses media advertising, direct mail, attendance at
industry trade shows, press releases, and direct contacts through its marketing
and sales force as other means of generating new sales.

         The Company's sales force at July 11, 1997 consists of four people
based in the Company's office who receive salaries, commissions, and/or
incentive bonus compensation. In addition, the Company maintains an in-house
marketing department that handles most of the design and development of the
Company's product packaging, advertisements, and promotional items.


DUPLICATION, FABRICATION AND PACKAGING

         The Company's product manuals are printed by an unaffiliated commercial
printer, whose primary service is reproduction of manuals and brochures.
Substantially all of the Company's products are duplicated and packaged by Disk
Duplication Corporation, a software



                                       -8-

<PAGE>   8
manufacturing operation. The hardware component is assembled by CalQuality a
contract assembly operation. The Company believes its relations with these
suppliers are good. Although the Company believes that alternative resources
exist or can be obtained, a disruption of the Company's relationship with any of
these third-party contractors could adversely affect the Company's results of
operations until replacement sources are established. In addition, any material
changes in product and service quality and pricing by these outside resources
could adversely affect the Company's results of operations. The Company has
attempted to mitigate the risk of any such disruption by maintaining certain
levels of "safety stock" inventories and the limited use of "second source"
vendors.


COMPETITION

         The network fault-tolerant industry is intensely competitive. Consumer
demand for particular products may be adversely affected by the increasing
number of competitive products. The Company is aware of other companies which
have developed or are in the process of developing products which may compete in
whole or in part with the Company's products, including Microsoft, Novell,
Vinca, LanTegrity, Octopus, ApCon, and others. In addition, there exist a number
of large, well-capitalized software development firms that could, should they
choose to do so, provide products in direct competition with the Company, as
well as a number of large companies which may be in the process of developing
products which compete, in whole or in part, with the Company's products. Each
of these firms and certain of the Company's existing competitors have
substantially greater financial, technical, and marketing resources than the
Company. Moreover, there are no proprietary barriers to entry that could keep
competitors from developing and selling competing products in the Company's
markets. There is no assurance that the Company may be able to compete with such
concerns. Increased competition may result in loss of VARs and reduction in
consumer demand, any of which will have a material adverse effect on the
Company's operating results.

         In addition, the Company may face increasing pricing pressures from
current and future competitors and, accordingly, no assurance can be given that
competitive pressures will not require the Company to reduce its prices and
thereby adversely effect gross profit margins. In particular, over time, the
average selling prices for the Company's products may decline as the market for
these products becomes more competitive. Any material reduction in the price of
the Company's products would negatively affect gross margins and would require
the Company to increase unit sales in order to maintain historic levels of
sales. In addition, to the extent that Microsoft or other companies incorporate
applications comparable, or perceived as comparable, to those offered by the
Company into Novell, Windows NT, or other products (or separately offer such
products), sales of the Company's products could be materially adversely
affected, and there can be no assurance that any such action by Microsoft or
others would not render the Company's Windows NT or Novell based products
noncompetitive or obsolete. There can be no assurance that such competitors will
not develop products that are superior to the Company's products or that achieve
greater market acceptance, all of which may allow them to research, develop,
introduce and support new products more quickly and effectively than the
Company.



                                       -9-

<PAGE>   9
         The Company believes that competition in the network fault-tolerant
market is somewhat fragmented, and largely based on adaptation to a particular
market segment, availability of an integrated set of products, relationships
with distributors and retailers, and selection of appropriate distribution
channels.


PROPRIETARY RIGHTS

         The Company regards its SCSI switch hardware, monitoring software, and
operating systems drivers as proprietary and relies primarily on a combination
of copyright, trademark and trade secret laws, employee confidentiality and
nondisclosure agreements and third-party nondisclosure agreements, and other
methods of protection common in the industry. Despite these precautions, it may
be possible for an unauthorized third party to copy or reverse- engineer certain
portions of the Company's products or to obtain and use information that the
Company regards as proprietary.

         Under existing law, software products have been difficult to patent,
and copyright laws offer limited protection. The Company has filed and received
federal trademark registrations for the Company's stylized logo and although the
Company may file copyright applications with respect to programs developed for
the Company's software products, there can be no assurance that any such
copyrights will provide meaningful protection to the Company or that the Company
will be able to afford the expense of any litigation which might be necessary to
enforce its rights. However, the Company believes that trademark and copyright
protection are less significant to the Company's success than factors such as
knowledge, ability, and experience of the Company's personnel, research and
development, brand name recognition, and product loyalty. In addition, the laws
of some foreign countries do not protect the Company's proprietary rights to the
same extent as do the laws of the United States.

         The Company believes that its products, trademarks and other
proprietary rights do not infringe on the proprietary rights of third parties.
As the number of fault tolerant products in the industry increases and the
functionality of these products further overlaps, software/hardware developers
may become increasingly subject to infringement claims. There can be no
assurances that third parties will not assert infringement claims against the
Company in the future with respect to current or future products or that any
such assertion may not require the Company to enter into royalty arrangements or
result in costly litigation.

EMPLOYEES

         As of July 31, 1997, the Company had seven full time employees and four
part time. None of the Company's employees is covered by a collective bargaining
agreement. The Company considers its relationship with its employees to be good.
As of July 11, 1997 NetPage had 16 full time employees, of whom three are
executives engaged in administrative, marketing and sales, five in
accounting/leasing, and the balance in technical, customer support and clerical.

ITEM 2.   PROPERTIES



                                      -10-

<PAGE>   10
         The Company currently leases approximately 3400 square feet of office
space in Garden Grove, California under a lease expiring in March 1998. The
annual rent payments under this lease are currently $48,500.

ITEM 3.  LEGAL PROCEEDINGS

         To its knowledge, NET/GUARD has no current legal proceedings pending or
threatened.

         NetPage is currently a defendant in an action, brought by a former
consultant in Orange County, California, alleging that NetPage owes him $18,000
for services rendered. NetPage believes this suit to be without merit and
believes, based on current knowledge, that this action will not have any
material adverse effect on the financial condition of NetPage.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         During the quarter ended March 31, 1997, no matters were submitted for
vote to NET/GUARD's common stockholders.


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

         The Company's securities have been traded on the over-the-counter
Bulletin Board since about February 12, 1996. The Company's securities are
reported under the symbol "NTGD."

         In 1997 and 1996, the high and low bid prices quoted for a share of
common stock were:

<TABLE>
<CAPTION>
1997                                                LOW              HIGH
----                                                ---              ----
<S>                                                <C>               <C>  
Quarter ended June 30, 1997                        $1.875            $3.00
Quarter ended March 31, 1997                        2.875             3.00

1996
----
Quarter ended December 31, 1996                     2.75              2.875
Quarter ended September 30, 1996                    2.125             2.375
Quarter ended June 30, 1996                         2.00              2.00
Quarter ended March 31, 1996                        2.00              2.00
</TABLE>

         These market quotations reflect inter-dealer prices without retail
mark-up,mark-down, or commission and may not necessarily represent actual
transactions. The stock markets have experienced extreme price and volume
fluctuations during certain periods. These broad market fluctuations, and other
factors, may adversely affect the market price of the Company's Common Stock.
Any shortfall in revenue or earnings from levels expected by securities analysts
could have an immediate and significant adverse effect on the trading price



                                      -11-

<PAGE>   11
of the Company's common stock in any given period. Additionally, the Company may
not learn of such shortfalls until late in the fiscal quarter, which could
result in an even more immediate and adverse effect on the trading price of the
Company's stock. Finally, the Company participates in a highly dynamic industry,
which often results in significant volatility of the Company's common stock
price.

         As of March 31, 1997 and July 15, 1997, there were approximately 42 and
64 holders of record, respectively, of NET/GUARD's common stock, including
common stock held by affiliates and excluding an undetermined number of
shareholders whose shares are held in "street" or "nominee" names.

         NET/GUARD has not paid cash dividends on its common stock since its
inception. NET/GUARD intends to employ all available funds for the development
of its business, and, accordingly, does not intend to declare or pay any cash
dividends in the foreseeable future.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

GENERAL

         NET/GUARD is principally engaged as a developer and manufacturer of PC
network file server fault-tolerant add-on sub-systems used to reduce overall
network downtime attributed to failures of the network's file server. The
Company's SERVivor family of fault-tolerant add-on sub-systems are comprised of
SCSI switch hardware, monitoring software, and interface drivers. SERVivor's
hardware component is compatible with file servers platforms from most major
server grade PCs such as IBM, Hewlett Packard, Compaq, ALR Research, and Dell.
SERVivors monitoring software will monitor network activity on all network
topology such as Ethernet, Token-ring, and Star. SERVivor's interface drivers
function with all present releases of Novell's NetWare and Microsoft's Windows
NT network operating systems.

         The Company markets its products domestically primarily through
personal computer (PC) network value added resellers (VARs) for resale to
network end users. The Company's primary sales and marketing efforts in fiscal
year 1997 were directed at increasing demand for products at the end user sales
level and increasing the number of VARs that carry the Company's products. Such
efforts have included using outside representatives to present the Company's
products to VAR's employees, and using end user conferences and trade shows to
increase the awareness of the end user.

         In September 1994 NetGuard Systems, Inc. (a predecessor of the Company
hereinafter referred to as "Systems") entered into an investment agreement with
a capital investment group, whereby that group committed to provide $2,000,000
to Systems. These funds were never delivered and as a result, Systems continued
to experience severe cash shortages which materially and adversely negatively
impacted Systems' operations. In May 1996, Systems received an initial
investment of $500,000 from persons not then affiliated with the Company.
Systems was dissolved and on May 9, 1996 NET/GUARD Technologies, Inc.
("Technologies")



                                      -12-

<PAGE>   12
was formed to acquire the assets of and to operate substantially the same fault
tolerant operations as the predecessor.

         In October 1996 Rollo Entertainment, Inc. ("Rollo") effected a reverse
acquisition of Technologies, caused the then principal shareholders of Rollo to
return 2,890,000 shares of the Company's common stock and transferred Rollo's
entertainment-related assets to such shareholders. Thereafter Rollo changed its
name to NET/GUARD Technologies, Inc. in accordance with an amended Certificate
of Incorporation filed with the Secretary of State of Delaware in November 1996
(which amended the Certificate of Incorporation and also increased the number of
Company authorized shares of common stock from 10,000,000 to 20,000,000 shares).
See Note 1 of Notes to Financial Statements.

RESULTS OF OPERATIONS

         The following table sets forth certain statement of operations data for
the period from inception (May 9, 1996) to the year ended March 31, 1997 and for
period from April 1, 1996 to May 8, 1996 and the year ended March 31, 1996 of
the predecessor.

<TABLE>
<CAPTION>
                                                          Successor               Predecessor
                                                      ----------------- -------------------------------
                                                         May 9, 1996    April 1, 1996
                                                      to March 31, 1997 to May 8, 1996   March 31, 1996
                                                      ----------------- --------------   --------------
<S>                                                       <C>             <C>             <C>         
Net sales............................................     $   171,928                     $   132,900     
Cost of sales ........................................        157,850           9,403          68,565
                                                          -----------     -----------     -----------
     Gross Profit (loss) .............................         14,078          (9,403)         64,335
Selling, general, and administrative expenses ........      1,112,993              --       1,400,223
                                                          -----------     -----------     -----------
     Loss from operations ............................     (1,098,915)         (9,409)     (1,335,888)
Other Income (expense)
     Interest income .................................          6,205              --              --    
     Interest expense ................................        (27,891)             --        (102,529)
     Other expense ...................................             --              --            (841)
     IRS forgiveness .................................             --              --          19,735
                                                          -----------     -----------     -----------
        Total other income (expense) .................        (21,686)             --         (83,635)
                                                          -----------     -----------     -----------
Loss before provision for income taxes ...............     (1,120,501)         (9,403)     (1,419,523)
Provision for income taxes (Note 5) ..................            800             800             800
                                                          -----------     -----------     -----------
Net loss .............................................    $(1,121,401)    $   (10,203)    $(1,420,323)
                                                          -----------     -----------     -----------
</TABLE>

         The following is a discussion of the operating results for the period
from inception (May 9, 1996) to the year ended March 31, 1997, for the Company
compared to the year ended March 31, 1996 for Systems, the predecessor.

         Gross revenues from inception to March 31, 1997 were $171,928 as
compared to $132,900 for the year ended March 31, 1996. The increase of 29% is
attributed to the Company's ability to secure the necessary investment to form
NetGuard Technologies, Inc. and resume operations in May 1996.

         Gross profit was $14,078 and $64,335 for the periods ended March 31,
1997 and 1996, respectively. As a percentage of net sales, the gross profit
margins for the period ended March 31, 1997 and 1996 were 8.2% and 48.4%,
respectively. The decrease in gross profit is attributed to a $70,000 write down
of the predecessor's inventory that was acquired by the Company on May 9, 1996.


                                      -13-

<PAGE>   13
         Sales, general and administrative expenses were $1,112,993 and
$1,400,223 for the periods ended March 31, 1997 and 1996, respectively. As a
percentage of gross sales, expenses were 647% and 1053% for the periods ended
March 31, 1997 and 1996, respectively. The decreases in expenses were attributed
to the Company's reduction in payroll expenses. Also incurred was $96,000 in
legal expenses to secure the additional capital necessary for the initial
funding of NetGuard Technologies, Inc.

         The Company incurred a net loss of $1,121,401 from inception to the
period ended March 31, 1997 compared to a net loss of $1,420,323 for the year
ended March 31, 1996. The losses for the period from inception to March 31, 1997
are attributed to insufficient sales to cover the start-up costs of the new
operation and the write downs of old inventory of the predecessor. The losses
for the year ended March 31, 1996 are attributed to a lack of funding to
sufficiently market the Company's products and to salaries that were accrued but
not paid by the predecessor.

LIQUIDITY AND CAPITAL RESOURCES

         As of March 31, 1997, the Company had $523,530 in cash and cash
equivalents. The Company does not currently have any available lines of credit.
Since inception, the Company has financed its operations through the issuance of
notes to stockholders and the sale of common stock.

         Net cash of $1,210,816 was used in operating activities during the
period from inception (May 9, 1996) to the year ended March 31, 1979 and was
primarily attributed to the start-up costs of the new corporation.

         Net cash provided by the sale of common stock from inception (May 9,
1996) to March 31, 1997 was $1,779,712. Additionally the Company received loans
from stockholders in the amount of $115,400. See Note 4 of Notes to Financial
Statements.

         The Company's principal executive offices are located at 12465 Lewis
Street, Suite 101, Garden Grove, California 92840-4658, and its telephone number
is (714) 703-2880.


ITEM 7.  FINANCIAL STATEMENTS                       PAGE

Index to Financial Statements:

         1. Report of Independent Certified           15
            Public Accountants

         2. Financial Statements:                     16



                                      -14-

<PAGE>   14
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
NET/GUARD Technologies, Inc.

We have audited the accompanying balance sheet of NET/GUARD Technologies, Inc.
("Successor Company") as of March 31, 1997, and the related statements of
operations, stockholders' equity (deficiency), and cash flows for the period
from commencement of operations (May 9, 1996) through March 31, 1997, and the
statements of operations, stockholders' equity (deficiency), and cash flows of
NetGuard Systems, Inc. ("Predecessor Company" as described in Note 1 of notes to
financial statements) for the period from April 1, 1996 to May 8, 1996 and for
the year ended March 31, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the Successor Company's financial statements referred to above
present fairly, in all material respects, the financial position of NET/GUARD
Technologies, Inc. as of March 31, 1997, and the results of its operations and
cash flows for the period from commencement of operations (May 9, 1996) through
March 31, 1997, in conformity with generally accepted accounting principles.
Further, in our opinion, the Predecessor Company's financial statements referred
to above present fairly, in all material respects, the results of operations and
cash flows of the Predecessor Company for the period April 1, 1996 to May 8,
1996, and for the year ended March 31, 1996, in conformity with generally
accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of $1,121,401 for the period from Inception to
March 31, 1997 and had negative cash flows from operations. These factors among
others as discussed in Note 1 to the financial statements, raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.



SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
June 2, 1997



                                      -15-
<PAGE>   15

                                                    NET/GUARD TECHNOLOGIES, INC.
                                                    (FKA NETGUARD SYSTEMS, INC.)
                                                                   BALANCE SHEET
                                                                 AS OF MARCH 31,
                        (SEE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS)
================================================================================

                                     ASSETS

<TABLE>
<S>                                                                  <C>        
CURRENT ASSETS
        Cash and cash equivalents (Notes 1 and 2)                    $   523,530
        Accounts receivable                                               28,831
        Inventory (Note 1)                                               111,750
        Employee advances                                                 18,041
        Other current assets                                               5,284
                                                                     -----------
               Total current assets                                      687,436

FURNITURE AND EQUIPMENT, net (Notes 1 and 3)                              70,479
                                                                     -----------

OTHER ASSETS
        Trademark, net of accumulated amortization of $1,350              11,150
        Deposits                                                          18,639
                                                                     -----------
               Total other assets                                         29,789
                                                                     -----------
                             TOTAL ASSETS                            $   787,704
                                                                     ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
        Notes payable - stockholder (Note 4)                         $   206,333
        Accounts payable                                                  32,036
        Accrued expenses                                                  47,068
                                                                     -----------
               Total current liabilities                                 285,437

NOTES PAYABLE - STOCKHOLDER, net of current portion above (Note 4)       260,556
                                                                     -----------
                      Total liabilities                                  545,993
                                                                     -----------

COMMITMENTS AND CONTINGENCIES (Note 5)

STOCKHOLDERS' EQUITY (DEFICIT)
        Common Stock, $.0001 par value
               20,000,000 shares authorized
               9,975,000 shares issued and outstanding                       998
        Additional paid-in capital                                     1,362,114
        Accumulated deficit                                           (1,121,401)
                                                                     -----------
               Total stockholders' equity (deficit)                      241,711
                                                                     -----------
                      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $   787,704
                                                                     ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.




                                      -16-
<PAGE>   16
                                                    NET/GUARD TECHNOLOGIES, INC.
                                                    (FKA NETGUARD SYSTEMS, INC.)
                                                        STATEMENTS OF OPERATIONS
                                                   FOR THE YEARS ENDED MARCH 31,
                        (SEE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS)
================================================================================


<TABLE>
<CAPTION>
                                                   Successor             Predecessor
                                                 ------------   ---------------------------
                                                 May 9, 1996    April 1, 1996   Year Ended
                                                 to March 31,     to May 8,      March 31,
                                                      1997          1996           1996
                                                -------------   -----------     -----------
<S>                                             <C>            <C>              <C>        
NET SALES                                       $   171,928    $        --      $   132,900

COST OF SALES                                       157,850          9,403           68,565
                                                -----------    -----------      -----------
GROSS PROFIT (LOSS)                                  14,078         (9,403)          64,335

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES     1,112,993             --        1,400,223
                                                -----------    -----------      -----------

LOSS FROM OPERATIONS                             (1,098,915)        (9,403)      (1,335,888)
                                                -----------    -----------      -----------

OTHER INCOME (EXPENSE)
        Interest income                               6,205             --               --
        Interest expense                            (27,891)            --         (102,529)
        Other expense                                    --             --             (841)
        IRS forgiveness (Note 1)                         --             --           19,735
                                                -----------    -----------      -----------
               Total other income (expense)         (21,686)            --          (83,635)
                                                -----------    -----------      -----------

LOSS BEFORE PROVISION FOR INCOME TAXES           (1,120,601)        (9,403)      (1,419,523)

PROVISION FOR INCOME TAXES (Note 6)                     800            800              800
                                                -----------    -----------      -----------

NET LOSS                                        $(1,121,401)   $   (10,203)     $(1,420,323)
                                                ===========    ===========      ===========

NET LOSS PER SHARE                              $     (0.11)   $     (0.00)     $     (0.46)
                                                ===========    ===========      ===========

WEIGHTED AVERAGE COMMON SHARES
        OUTSTANDING                               8,520,835      3,116,176        3,116,176
                                                ===========    ===========      ===========
</TABLE>


   The accompanying notes are an integral part of these financial statements.




                                      -17-

<PAGE>   17
                                                    NET/GUARD TECHNOLOGIES, INC.
                                                    (FKA NETGUARD SYSTEMS, INC.)
                                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                                                   FOR THE YEARS ENDED MARCH 31,
                        (SEE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS)
================================================================================


<TABLE>
<CAPTION>
                                            Common Stock          Additional
                                    -------------------------       Paid-in         Accumulated
                                       Shares        Amount         Capital           Deficit        Total
                                    ----------    -----------    ---------------    -----------    -----------
<S>                                  <C>          <C>            <C>                <C>            <C>         
PREDECESSOR COMPANY
    Balance, March 31, 1995          3,116,176    $   802,000    $            --    $(2,137,659)   $(1,335,659)
    Additional capital
        contributions (Note 1)                                                          268,406        268,406
    Net loss                                                                         (1,420,323)    (1,420,323)
                                    ----------    -----------    ---------------    -----------    -----------

    Balance, March 31, 1996          3,116,176      1,070,406                 --     (3,557,982)    (2,487,576)
    Net loss for period April 1,
        1996 to May 8, 1996                                                             (10,203)       (10,203)
                                    ----------    -----------    ---------------    -----------    -----------

        BALANCE, MAY 15, 1996        3,116,176    $ 1,070,406    $            --    $(3,568,185)   $(2,497,779)
                                    ==========    ===========    ===============    ===========    ===========
</TABLE>

================================================================================

<TABLE>
<CAPTION>
                                                         Common Stock       Additional
                                                   ---------------------     Paid-in      Accumulated
                                                    Shares       Amount       Capital       Deficit         Total
                                                   ---------    --------   ------------   -----------    -----------
<S>                                                <C>          <C>        <C>            <C>            <C>
SUCCESSOR COMPANY
    Balance, May 9, 1996                                  --    $     --   $         --   $        --    $        --
    Issuance of common stock                       9,975,000         998      1,778,714                    1,779,712
    Purchase of technology
        from related party                                                     (416,600)                    (416,600)
    Net loss for period May 9,
        1996 to March 31, 1997                                                             (1,121,401)    (1,121,401)
                                                   ---------    --------   ------------   -----------    -----------

        BALANCE, MARCH 31, 1997                    9,975,000    $    998   $  1,362,114   $(1,121,401)   $   241,711
                                                   =========    ========   ============   ===========    ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.




                                      -18-
<PAGE>   18
                                                    NET/GUARD TECHNOLOGIES, INC.
                                                    (FKA NETGUARD SYSTEMS, INC.)
                                                        STATEMENTS OF CASH FLOWS
                                                   FOR THE YEARS ENDED MARCH 31,
                        (SEE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS)
================================================================================

<TABLE>
<CAPTION>
                                                                            Successor                  Predecessor
                                                                           -----------       ------------------------------
                                                                           May 9, 1996       April 1, 1996    Year Ended
                                                                           to March 31,         to May 8,       March 31,
                                                                               1997               1996            1996
                                                                           ------------      -------------    ------------
<S>                                                                        <C>               <C>              <C>            
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                                               $(1,121,401)      $ (10,203)       $(1,420,323)
    Adjustments to reconcile net loss to net cash
        used in operating activities
           Depreciation and amortization                                        14,026               -              13,379
    (Increase) decrease in
        Accounts receivable                                                    (28,831)              -               8,875
        Inventory                                                             (111,750)              -              76,138
        Employee advance                                                       (18,041)              -               4,329
        Prepaid expenses                                                             -               -                 365
        Deposits                                                               (18,639)              -               1,555
        Other current assets                                                    (5,284)              -                   -
    Increase (decrease) in
        Accounts payable                                                        32,036          (2,168)             81,012
        Accrued expenses                                                        47,068          10,203             435,910
                                                                           -----------       ---------        ------------

               Net cash used in operating activities                        (1,210,816)         (2,168)           (798,760)
                                                                           -----------       ---------        ------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of furniture and equipment                                        (83,155)              -                   -
    Purchase of trademark                                                      (12,500)              -                   -
                                                                           -----------       ---------        ------------

               Net cash used in investing activities                           (95,655)              -                   -
                                                                           -----------       ---------        ------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from the issuance of notes payable
        to stockholders                                                        115,400               -             520,568
    Principal payments on note payable to
        stockholders                                                           (65,111)              -                   -
    Proceeds from the sale of common stock and
        other capital contributions                                          1,779,712               -             268,406
                                                                           -----------       ---------        ------------

                  Net cash provided by financing activities                  1,830,001               -             788,974
                                                                           -----------       ---------        ------------

                      Net increase (decrease) in cash and
                          cash equivalents                                     523,530          (2,168)             (9,786)
                                                                           -----------       ---------        ------------

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                                        -           2,168              11,954
                                                                           -----------       ---------        ------------

CASH AND CASH EQUIVALENTS - END OF YEAR                                    $   523,530       $       -        $      2,168
                                                                           ===========       =========        ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.





                                      -19-

<PAGE>   19

                                                    NET/GUARD TECHNOLOGIES, INC.
                                                    (FKA NETGUARD SYSTEMS, INC.)
                                            STATEMENTS OF CASH FLOWS (CONTINUED)
                                                   FOR THE YEARS ENDED MARCH 31,
                        (SEE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS)
================================================================================


<TABLE>
<CAPTION>
                                                  Successor                    Predecessor
                                                -------------       ------------------------------
                                                May 9, 1996         April 1, 1996       Year Ended
                                                to March 31,          to May 8,          March 31,
                                                    1997                 1996               1996
                                                -------------       -------------       ----------
<S>                                             <C>                 <C>                 <C>       
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
    INFORMATION
        INTEREST PAID                           $      27,891       $           -       $    4,192
                                                =============       =============       ==========
        TAXES PAID$                             $           -       $           -       $        -
                                                =============       =============       ==========
</TABLE>

During the year ended March 31, 1996, the Company issued notes payable in the
amount of $98,338 in lieu of interest.

During the period from May 9, 1996 to March 31, 1997, the Company acquired the
technology developed by NetGuard Systems, Inc. from a stockholder of NetGuard
Systems, Inc. for $416,600. The historical cost of this technology recorded by
NetGuard Systems, Inc. was $0; therefore, the Company valued this technology at
$0 and recorded the $416,600 paid to the stockholder as a reduction to
additional paid-in capital.


   The accompanying notes are an integral part of these financial statements.




                                      -20-
<PAGE>   20
                                                    NET/GUARD TECHNOLOGIES, INC.
                                                    (FKA NETGUARD SYSTEMS, INC.)
                                                   NOTES TO FINANCIAL STATEMENTS
                                                                  MARCH 31, 1997
                        (SEE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS)
================================================================================

NOTE 1 - SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

        Business and Organization 

        NetGuard Technologies, Inc., (the "Company" or "NetGuard"), a California
        corporation, was incorporated on May 8, 1996 as the successor company to
        NetGuard Systems, Inc. ("Systems"). The Company continued the business
        operations of Systems with the same officers and directors as well as
        the same stockholder base. The accompanying financial statements present
        the Company ("Successor") from Inception to March 31, 1997 and Systems
        ("Predecessor") from April 1, 1995 to May 8, 1996.

        On October 22, 1996, Rollo Entertainment, Inc. ("Rollo"), a
        publicly-traded, development stage company incorporated in the State of
        Delaware, acquired all of the outstanding stock of NetGuard. For
        accounting purposes, the acquisition has been treated as a
        recapitalization of NetGuard, with NetGuard as the acquirer (reverse
        acquisition). Rollo subsequently changed its name to NET/GUARD
        Technologies, Inc., a Delaware corporation (hereafter referred to as the
        "Company" or "NET/GUARD"). On May 1, 1997, NetGuard Technologies, Inc.,
        a California corporation was dissolved. Prior to the acquisition, Rollo
        did not have any significant operations.

        The Company designs, manufactures, and sells fault-tolerant systems
        aimed at the Novell NetWare and Microsoft Windows NT file server market.
        NET/GUARD's products are combinations of both hardware and software that
        monitor the activity of the file server. When a failure of the server
        occurs, NET/GUARD's system is designed to automatically switch server
        operations to a standby server and reboot the operating system.
        NET/GUARD's systems are designed to reduce network downtime attributed
        to file server failure. NET/GUARD systems are sold through a chain of
        both domestic and international network re-sellers.

        In September 1994, Systems entered into an Investment Agreement with an
        investment banker in which the investment banker would invest $3,000,000
        into Systems. The investment banker completed a technical and financial
        audit during the subsequent few months. The investment banker disclosed
        to Systems that there would be a short delay in the closing date of the
        investment. In order to keep the sales, support, and engineering team on
        track, Systems' management made a decision to delay payment of the
        federal tax deposits until the time that the investment banker actually
        made the investment. The delay from the investment banker continued much
        longer than originally anticipated. On June 30, 1995, the Internal
        Revenue Service ("IRS") visited Systems and placed a lien against the
        Company. The Company worked closely with the IRS over the next few
        months while the investment banker worked around the problem that caused
        his investment delay. In October 1995, the IRS foreclosed on Systems. A
        Systems investor and stockholder acquired the assets of Systems at the
        IRS's auction. The stockholder successfully bid in excess of $35,000 for
        the Systems assets at the IRS auction held on October 28, 1995.




                                      -21-
<PAGE>   21
                                                    NET/GUARD TECHNOLOGIES, INC.
                                                    (FKA NETGUARD SYSTEMS, INC.)
                                                   NOTES TO FINANCIAL STATEMENTS
                                                                  MARCH 31, 1997
                        (SEE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS)
================================================================================

NOTE 1 - SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        Business and Organization (Continued)

        This bid amount satisfied the non-trust fund portion of the unpaid
        Internal Revenue taxes. The stockholder subsequently contributed the
        assets back to Systems. Certain officers of Systems personally assumed
        the financial responsibility for the trust fund and penalty portions of
        the unpaid Internal Revenue taxes which totaled $69,235, of which the
        IRS made an agreement to accept $49,500. The $49,500 was paid in full to
        the IRS on April 27, 1997, and the remaining balance of $19,735 was
        forgiven. Systems continued to operate until May 8, 1996 at which date
        the corporation was dissolved.

        Since the assets seized by the IRS were subsequently contributed back to
        the Company by the stockholder, the amount paid for the assets by the
        stockholder has been shown as a capital contribution in the accompanying
        financial statements. In addition, the $49,500 liability assumed by
        certain officers of the Company has also been shown as a capital
        contribution.

        Basis of Presentation

        The accompanying financial statements have been prepared in conformity
        with generally accepted accounting principles which contemplate
        continuation of the Company as a going concern. During the period from
        Inception to March 31, 1997, the Company had a net loss of $1,121,401
        and had negative cash flows from operations. The Company's ability to
        generate positive cash flows depends on its ability to maintain a level
        of revenues sufficient to meet its obligations and sustain its
        operations. The Company has had limited sales to date and has sustained
        substantial operating losses since inception due to its inability to
        generate a sufficient level of revenues. These factors, among others,
        raise substantial doubt about the Company's ability to continue as a
        going concern.

        In view of the matters described in the preceding paragraph,
        recoverability of a major portion of the recorded asset amounts shown in
        the accompanying balance sheet is dependent upon continued operations of
        the Company, which in turn is dependent upon the Company's ability to
        continue to meet its financing requirements and to succeed in its future
        operations. The financial statements do not include any adjustments
        relating to the recoverability and classification of recorded asset
        amounts or amounts and classification of liabilities that might be
        necessary should the Company be unable to continue in existence.

        Management has successfully raised capital through the sale of its
        common stock and plans to raise additional capital through the sale of
        common stock as needed to fund operations or acquisitions. Further, as
        more fully described in Note 7, the Company has acquired a majority
        interest in NetPage Communications, Inc.





                                      -22-

<PAGE>   22
                                                    NET/GUARD TECHNOLOGIES, INC.
                                                    (FKA NETGUARD SYSTEMS, INC.)
                                                   NOTES TO FINANCIAL STATEMENTS
                                                                  MARCH 31, 1997
                        (SEE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS)
================================================================================

NOTE 1 - SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        Cash Equivalents

        For purposes of the statements of cash flows, the Company considers all
        highly-liquid investments purchased with original maturities of three
        months or less to be cash equivalents.

        Inventory

        Inventory, which consists primarily of finished goods, is stated at the
        lower of cost (first-in, first-out method) or market.

        Furniture and Equipment

        Furniture and equipment are stated at cost. The Company provides for
        depreciation using the accelerated and straight-line methods over the
        estimated useful lives of five years as follows:

<TABLE>
               <S>                                     <C>
               Computers                               5 years
               Furniture and fixtures                  5 years
               Office equipment                        5 years
</TABLE>

        Expenditures for maintenance and repairs are charged to operations as
        incurred while renewals and betterments are capitalized. Gains or losses
        on the sale of furniture and equipment are reflected in the statements
        of operations.

        Revenue Recognition

        Revenue is recognized upon the shipment of products to the customer.

        Concentrations of Credit Risk

        The Company sells its products to customers throughout the United
        States. The Company's sales are not materially dependent on a single
        customer or small group of customers. The Company performs ongoing
        credit evaluations of its customers. The Company maintains reserves for
        potential credit losses based on historical credit write-offs.

        Income Taxes

        The Company accounts for income taxes in accordance with Statement of
        Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
        Taxes."

        Net Loss Per Share

        Net loss per share is based on the weighted average number of common and
        common equivalent shares outstanding during each year.




                                      -23-
<PAGE>   23
                                                    NET/GUARD TECHNOLOGIES, INC.
                                                    (FKA NETGUARD SYSTEMS, INC.)
                                                   NOTES TO FINANCIAL STATEMENTS
                                                                  MARCH 31, 1997
                        (SEE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS)
================================================================================

NOTE 1 - SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        Fair Value of Financial Instruments

        The Company measures its financial assets and liabilities in accordance
        with generally accepted accounting principles. For certain of the
        Company's financial instruments, including cash, accounts payable, and
        accrued expenses, the carrying amounts approximate fair value due to
        their short maturities. The amounts shown for notes payable also
        approximate fair value because current interest rates offered to the
        Company for notes payable of similar maturities are substantially the
        same.

        Estimates

        In preparing financial statements in conformity with generally accepted
        accounting principles, management makes estimates and assumptions that
        affect the reported amounts of assets and liabilities and disclosures of
        contingent assets and liabilities at the date of the financial
        statements, as well as the reported amounts of revenues and expenses
        during the reporting period. Actual results could differ from those
        estimates.


NOTE 2 - CASH

        The Company maintains its cash balances in one bank located in southern
        California. The balances are insured by the Federal Deposit Insurance
        Corporation up to $100,000. As of March 31, 1997, the uninsured portion
        of these balances held at the bank aggregated to $480,384.


NOTE 3 - FURNITURE AND EQUIPMENT

        Furniture and equipment at March 31, 1997 consist of the following:

<TABLE>
               <S>                                     <C>      
               Computers                               $  35,995
               Furniture and fixtures                     41,456
               Office equipment                            5,704
                                                       ---------
                                                          83,155
               Less accumulated depreciation              12,676
                                                       ---------
                          TOTAL                        $  70,479
                                                       =========
</TABLE>




                                      -24-
<PAGE>   24
                                                    NET/GUARD TECHNOLOGIES, INC.
                                                    (FKA NETGUARD SYSTEMS, INC.)
                                                   NOTES TO FINANCIAL STATEMENTS
                                                                  MARCH 31, 1997
                        (SEE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS)
================================================================================

NOTE 4 - NOTES PAYABLE - STOCKHOLDER

        As of March 31, 1997, notes payable - stockholder consisted of the
        following:

<TABLE>
                <S>                                                <C>
                6% note payable to stockholder, payable in
                  monthly installments of $13,028 plus
                  interest. Debt matures November 15, 1999.        $  416,889

                10% note payable to stockholder, payable in
                  semi-annual payments of interest only, due
                  on July 10, 1997.                                    50,000
                                                                   ----------

                                                                      466,889
                     Less current portion                             206,333
                                                                   ----------
                              LONG-TERM PORTION                    $  260,556
                                                                   ==========
</TABLE>

        As of March 31, 1997, scheduled maturities of notes payable -
        stockholder are as follows:

<TABLE>
<CAPTION>
                   Year ending
                     March 31,
                   -----------
                   <S>                               <C>
                       1998                          $   206,333
                       1999                              156,333
                       2000                               94,223
                                                     -----------
                              TOTAL                  $   456,889
                                                     ===========
</TABLE>

NOTE 5 - COMMITMENTS AND CONTINGENCIES

        Leases

        The Company leases certain facilities for its corporate and operations
        office under a non-cancelable lease agreement. The agreement, dated
        October 1, 1996, expires March 31, 1998 and provides for monthly rent
        payments of $4,042. For the period from Inception to March 31, 1997 and
        for the year ended March 31, 1996, total rent expense was $24,252 and
        $45,428, respectively.




                                      -25-
<PAGE>   25
                                                    NET/GUARD TECHNOLOGIES, INC.
                                                    (FKA NETGUARD SYSTEMS, INC.)
                                                   NOTES TO FINANCIAL STATEMENTS
                                                                  MARCH 31, 1997
                        (SEE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS)
================================================================================

NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

        Leases (Continued)

        The following is a schedule by years of future minimum rental payments
        required under this long-term lease agreement:

<TABLE>
<CAPTION>
                   Year ending
                     March 31,
                   -----------
                   <S>                              <C>
                       1998                         $48,504
                                                    -------
                              TOTAL                 $48,504
                                                    =======
</TABLE>


NOTE 6 - INCOME TAXES

        Income tax expense was $800 for both the period from Inception to March
        31, 1997 and the year ended March 31, 1996 and consists of the minimum
        State of California franchise taxes.

        Income tax expense for the period from Inception to March 31, 1997 and
        the year ended March 31, 1996 differs from the amounts computed by
        applying a United States Federal income tax rate of 34% to pretax loss
        as a result of the following:

<TABLE>
<CAPTION>
                                                             Inception to    Year Ended
                                                               March 31,      March 31,
                                                                 1997           1996
                                                             -----------    -------------
                                                             (Successor)    (Predecessor)

               <S>                                           <C>            <C>       
               Computed "expected" tax benefit                 $(381,004)     $(482,638)

               Reduction in income taxes resulting from
                 Change in the valuation allowance for
                   deferred tax assets allocated to
                   income tax expense                            381,004        482,638

                 State income taxes                                  800            800
                                                               ---------      ---------

                                     TOTAL                     $     800      $     800
                                                               =========      =========
</TABLE>

        The tax effect of temporary differences that give rise to significant
        portions of the deferred tax assets at March 31, 1997 and 1996 are
        presented below. Deferred tax liabilities at March 31, 1997 and 1996 are
        not significant.



                                      -26-
<PAGE>   26
                                                    NET/GUARD TECHNOLOGIES, INC.
                                                    (FKA NETGUARD SYSTEMS, INC.)
                                                   NOTES TO FINANCIAL STATEMENTS
                                                                  MARCH 31, 1997
                        (SEE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS)
================================================================================

NOTE 6 - INCOME TAXES (CONTINUED)

<TABLE>
<CAPTION>
                                                                  Inception to      Year Ended
                                                                    March 31,        March 31,
                                                                      1997             1996
                                                                  -----------      -------------
                                                                  (Successor)      (Predecessor)
               <S>                                                <C>              <C>
               Deferred tax assets
                 Inventory, principally due to allowance
                   for inventory obsolescence                       $      -        $   10,825
                 Net operating loss carryforwards                    414,918         1,365,967
                                                                    --------        ----------

                          Total gross deferred tax assets            414,918         1,376,792
                          Less valuation allowance                   414,918         1,376,792
                                                                    --------        ----------

                             NET DEFERRED TAX ASSETS                $      -        $        -
                                                                    ========        ==========
</TABLE> 

        At March 31, 1997, the Company had net operating loss carryforwards of
        approximately $1,100,000 and $550,000 for federal and state tax
        purposes, respectively, which if not utilized to offset future taxable
        income, will expire in 2005 and 2012, respectively.


NOTE 7 - SUBSEQUENT EVENT

        On April 30, 1997, the Company entered into an Agreement of Purchase and
        Sale of Stock with NetPage Communications, Inc. ("NetPage"), whereby the
        Company purchased 147,784,000 shares of NetPage common stock, which
        represents 80% of NetPage's issued and outstanding common stock, for
        $362,000 in cash and 200,003 shares of the Company's common stock.




                                      -27-
<PAGE>   27




ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         In connection with the reverse acquisition referenced in Item 6 above,
the Company ceased to engage in entertainment-related activities and moved its
operations from the East Coast to Garden Grove, California. In this process it
ceased to utilize the services of Bederson & Co., Rollo's independent auditors,
and thereafter in 1997 secured the services of its current independent auditors,
Singer Lewak Greenbaum & Goldstein LLP.



                                                     PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, AND KEY EMPLOYEES

         The directors and executive officers of the Company at March 31, 1997
are as follows:

<TABLE>
<CAPTION>
NAME                                AGE     TITLE
----                                ---     -----
<S>                                 <C>     <C>
William L. Van Liere                78      Chairman of the Board

E. Blaine Mansfield                 54      Chief Executive Officer, President, and Director

Donald Ackerman                     58      Vice President, Secretary, and Director

Victor V. Vurpillat, PhD            64      Director

Oleg Batrachenko                    32      Director
</TABLE>

         Mr. Van Liere has served as Chairman of the Company's Board of
Directors since the Company was founded in May 1996. Mr. Van Liere is a retired
chemical industry executive and private investor.

         Mr. Mansfield has served as Chief Executive Officer and President of
the Company since the Company was founded in May of 1996. From December 1992 to
April 1996 Mr. Mansfield was Chairman, Chief Executive Officer and President of
NetGuard Systems Inc. For more than the five years prior thereto Mr. Mansfield
has been engaged as an investor and consultant to various high technology
companies.

         Mr. Ackerman has served as Vice President and Secretary of the Company
since the Company was founded in May 1996. From December 1992 to April 1996 Mr.
Ackerman was Vice President of Sales of NetGuard Systems Inc.

         Dr. Vurpillat has served as a Director of the Company since the Company
was founded in May 1996. From January 1997 to the present Dr. Vurpillat has
served has Chief Executive Officer of Spanworks in Fremont, California. Dr.
Vurpillat served as Chief Technology Officer



                                      -28-

<PAGE>   28
of Safeguard Scientific, a venture capital firm from January 1974 to December
1991. He serves on the boards of directors of several other high technology
companies.

         Oleg Batratchenko has since April 1995 been Vice President of Research
at Berkshire International Finance, Inc. ("Berkshire"), a New York corporate
finance and investment banking boutique which has assisted the Company in
various corporate and financing matters. Mr. Batratchenko has been managing the
activities of Berkshire's equity research department and providing analytical
support for the process of banking clients selection, monitoring and deals
structuring. A generalist specializing in small cap firms, Mr. Batratchenko
provides comprehensive analytical coverage for over 20 U.S. and European growth
companies, mostly in the high-tech, biomedical, environmental, computer and
electronics sectors. From 1993 to 1995 Mr. Batratchenko was a research analyst
with Safian Investment Research, Inc., a White Plains, New York, financial
research and money management firm, where he was engaged in the analysis of
international markets on both macro and microeconomic levels. Prior to that Mr.
Batratchenko worked as a Performance Analyst with Neuberger and Berman, a major
New York money management firm. Mr. Batratchenko has a B.A. in Economics from
Moscow State University, a Russian MBA equivalent. Between 1987 and 1990 Mr.
Batratchenko was a Research Associate at the Moscow Institute of World Economy
and International Relations, where he completed a Master's program in Economics
and was involved in a number of high profile research projects being conducted
by this leading Russian think tank for the Kremlin. Mr. Batratchenko also has a
Master Degree in International Political Economy from New York University and is
an Associate member of the Financial Analysts - Money Managers Society (New
York).


         COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10 percent of
the Company's common stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission (SEC). Officers, directors, and
greater than 10 percent shareholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.

ITEM 10. EXECUTIVE COMPENSATION

         SUMMARY COMPENSATION TABLE

         The following table sets forth information regarding compensation for
services in all capacities paid or accrued for the fiscal years indicated by the
Company to its Chief Executive Officer and Executive Vice President. No other
executive officer received compensation in excess of $100,000 for the fiscal
year ended March 31, 1997.

<TABLE>
<CAPTION>
         Name and Position Held                      Annual Compensation
         ----------------------                      -------------------
         <S>                                              <C>      
         E. Blaine Mansfield                              $ 137,500(1)
         Chief Executive Officer and
         President

         Donald Ackerman                                  $ 137,500(2)
         Executive Vice President
</TABLE>
--------------
(1) Excludes $2,764 reimbursed to Mr. Mansfield for automobile expense.
(2) Excludes $1,951 reimbursed to Mr. Ackerman for automobile expense.


                                      -29-

<PAGE>   29
BOARD OF DIRECTORS

         During 1997, the Company's Board of Directors held seven regular and
special meetings and, otherwise took action by written consent. The Board has
not established any audit, executive, compensation or nominating committees.
Rather, the Board of Directors meets as a whole to determine the compensation of
corporate officers and nominate the individuals to be proposed by the Board of
Directors for election as directors of the Company.

EMPLOYMENT AGREEMENTS

         In May 1996 the Company entered into employment agreements with each of
its two principal executive officers, Mr. Mansfield and Mr. Ackerman.  Each of
the agreements provides for (i) a term of employment for three years, subject to
earlier termination under certain conditions; (ii) salary or $150,000 per year
payable in semi-monthly installments; (iii) a bonus equal to two percent of the
Company's net sales payable quarterly; and (iv) adjustments to annual salary
based on increases, if any, to a cost of living index for Los Angeles - Orange
County Areas as published by the United States Department of Labor. Each
employee has also been granted an incentive stock option to purchase 300,000
shares of the Company's Common stock at $1.50 per share, for six years.  Each
employee may exercise these options only to the extent that the Company achieves
the following cumulative earnings: $1,000,000 - $100,000 shares; $2,000,000 -
200,000 shares; and $3,000,000 - 300,000 shares.  The Company has also agreed to
provide each employee with disability benefits, vacation and medical benefits
and whole-life policy of insurance in the amount of $500,000 with the
beneficiary to be designated by the employee.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of March 31, 1997, certain
information concerning ownership of the Company's common stock by each director
and all officers and directors as a group. At March 31, 1997, no other person
nor entity owns more than 5% of the Company's outstanding shares, as indicated
by the Company's securities transfer agent.


<TABLE>
<CAPTION>
NAME AND ADDRESS OF                                          NUMBER OF SHARES                PERCENTAGE
BENEFICIAL OWNER                                             BENEFICIALLY OWNED             (*) OF CLASS
-------------------                                          ------------------             ------------
<S>                                                             <C>                             <C>
William L. Van Liere                                            2,687,500(1)                    26.94%
10 Stirrup Road
Rancho Palos Verdes, California 90274

E. Blaine Mansfield                                             1,543,750(2)                    15.48%
12465 Lewis Street
Suite 101
Garden Grove, California 92840

Donald Ackerman                                                 1,043,750(3)                    10.46%
12465 Lewis Street
Suite 101
Garden Grove, California 92840

All Officers and Directors                                      5,275,000                       52.88%
As a Group (3 persons)
    </TABLE>
------------------------

(1) Excludes 400,000 shares of common stock owned by adult children and grand-
    children of William L. Van Liere, as to which shares Mr. Van Liere disclaims
    any ownership.

(2) Includes 150,000 shares of common stock owned of record by children of Mr.
    Mansfield.

(3) Excludes 500,000 shares of Common Stock owned of record by adult children
    and grandchildren of Mr. Ackerman, as to which shares Mr. Ackerman
    disclaims any ownership.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         As of March 31, 1997, the Company was indebted to its principal
shareholder in the approximate amount of $466,890. The Company and its
predecessor have borrowed money from time to time from its principal
shareholder on terms which the Company deems to be favorable. See Note 1 and
Note 4 of Notes to Financial Statements.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)      DOCUMENTS FILED WITH REPORT

         1. Financial Statements. The financial statements listed in the index
to financial statements at Item 7 are filed as part of this report.



                                      -30-

<PAGE>   30
         2. Exhibits. The Exhibits listed on the accompanying Index to Exhibits
are filed as part of this report.

(b)      REPORTS ON FORM 8-K

1. Item reported:                   Item 4 - Change of Accountants

(c)      EXHIBITS                   See Item 13 (a) 2 above.



                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                       NET/GUARD Technologies, Inc.

                                       By  /s/ E. BLAINE MANSFIELD
                                         ---------------------------------------
                                           Chief Financial Officer, and Director
                                           (Principal Accounting Officer)

                                       Dated: August 8, 1997

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

August 11, 1997                        /s/ WILLIAM L. VAN LIERE
                                       -----------------------------------------
                                       Chairman of the Board

August 11, 1997                        /s/ E. BLAINE MANSFIELD
                                       -----------------------------------------
                                       Chief Executive Officer, President
                                       and Director

August 11, 1997                        /s/ DONALD ACKERMAN
                                       -----------------------------------------
                                       Vice President, Secretary and Director

August 11, 1997                        /s/ VICTOR V. VURPILLAT
                                       -----------------------------------------
                                       Victor V. Vurpillat, Phd., Director

August 11, 1997                        /s/ OLEG BATRACHENKO
                                       -----------------------------------------
                                       Oleg Batrachenko, Director





                                      -31-

<PAGE>   31
NET/GUARD Corporation

INDEX TO EXHIBITS

3.1      Certificate of Incorporation of Registrant. (1)

3.2      By-Laws of Registrant. (1)

3.3      Certificate of Amendment of Certificate of Incorporation.

10.1     Employment Agreement dated May 1, 1996 between Registrant and
         E. Blaine Mansfield.

10.2     Employment Agreement dated May 1, 1996 between Registrant and
         Donald Ackerman.

10.3     Agreement of Purchase and Sale of Stock dated as of April 30, 1997
         by and among NetPage Communications, Inc., its shareholders and
         Registrant.

21.      Subsidiaries of the Registrant.

27.      Financial Data Schedule.

(1) Incorporated by reference to the Exhibits to the Registration Statements on
Form SB-2, as amended, as filed with the Securities and Exchange Commission.



                                      -20-