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SECURITIES AND EXCHANGE COMMISSION
Washington, DC
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
- ------- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
For the transition period from _____________ to ________________
Commission file number 0-28728
NETLIVE COMMUNICATIONS, INC.
(exact name of registrant as specified in its charter)
Delaware 13-3848652
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(State of other jurisdiction (IRS Employer ID No.)
of incorporation of organization)
584 Broadway, New York, NY 10012
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(Address of principal executive offices)
(212) 343-7082
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes__ No X
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at September 26, 1996
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Common Stock, $0.0001 par value 2,650,000
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NETLIVE COMMUNICATIONS, INC.
(a development stage company)
INDEX
Page Number
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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of June 30, 1996 (unaudited)
and as of March 31, 1996 3
Statement of Operations for the three months ended
June 30, 1996 (unaudited), the period from August 23, 1995
(inception) to March 31, 1996 and the period from
August 23, 1995 (inception) to June 30, 1996 (unaudited) 4
Statement of Cash Flows for the three months ended
June 30, 1996 (unaudited), the period from August 23, 1995
(inception) to March 31, 1996 and the period from
August 23, 1995 (inception) to June 30, 1996 (unaudited) 5
Notes to Financial Statements (unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
PART II
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
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PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements
NETLIVE COMMUNICATIONS, INC.
(a development stage company)
Balance Sheet
June 30, 1996 March 31, 1996
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ASSETS (Unaudited)
Current Assets
Cash & cash equivalents $ 20,142 $ 160,395
Prepaid expenses and other current assets 51,171 1,771
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TOTAL CURRENT ASSETS 71,313 162,166
Property and equipment, net 63,068 46,001
Deferred income tax asset, net of valuation
allowance - -
Debt issue costs - 24,479
Deferred offering costs 108,820 43,500
Other assets 8,074 6,292
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TOTAL ASSETS $ 251,275 $ 282,438
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities
Accounts payable & accrued expenses $ 236,022 $ 144,813
Notes Payable - 88,348
Current Portion of obligations under
capital leases 5,370 5,190
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TOTAL CURRENT LIABILITIES 241,392 238,351
Obligations under capital leases, net of current
portion 10,854 12,280
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TOTAL LIABILITIES 252,246 250,631
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STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock--$.0001 par value; authorized
1,000,000 shares, none issued - -
Common Stock--$.0001 par value; authorized
19,000,000 shares, issued and outstanding 1,700,000
and 1,500,000 shares, respectively 170 150
Additional paid-in capital 965,670 289,661
Deficit accumulated during development stage (664,436) (243,129)
Deferred offering costs relating to common stock
issued for services related to intended IPO (14,875) (14,875)
Deferred compensation (287,500) -
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TOTAL STOCKHOLDERS EQUITY (DEFICIENCY) (971) 31,807
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY) $ 251,275 $ 282,438
========= =========
The accompanying notes should be read in conjunction with the financial
statements.
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NETLIVE COMMUNICATIONS, INC.
(a development stage company)
Statement of Operations
<TABLE>
<CAPTION>
Period from Period from
Aug. 23, 1995 Aug. 23, 1995
Three months ended (inception) to (inception) to
June 30, 1996 March 31, 1996 June 30, 1996
------------------ -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Selling, general and administrative expense:
Salaries $ 93,099 $ 160,714 $ 253,813
Research and development 65,130 - 65,130
Professional fees 23,674 27,812 51,486
Rent 11,036 9,724 20,760
Depreciation and amortization 5,180 4,727 9,907
Interest expense, net and financing costs (Note 2) 189,357 5,189 194,546
Other 33,831 34,963 68,794
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Net Loss $ 421,307 $ 243,129 $ 664,436
========= ========= =========
Net loss per common share $ (0.21) $ (0.16)
========= =========
Weighted average number of common shares outstanding 2,046,743 1,543,385
========= =========
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
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NETLIVE COMMUNICATIONS, INC.
(a development stage company)
Statement of Cash Flows
<TABLE>
<CAPTION>
Period from Period from
Aug. 23, 1995 Aug. 23, 1995
Three months ended (inception) to (inception) to
30-Jun-96 31-Mar-96 30-Jun-96
--------- --------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net Loss $ (421,307) $ (243,129) $ (664,436)
Adjustments to reconcile net loss to net cash used in operating
activities:
Expenses paid by stockholders, contributed to Company - 12,006 12,006
Amortization of deferred compensation expense 12,500 - 12,500
Amortization of debt issue costs and discount on notes payable 186,131 3,869 190,000
Depreciation and amortization 5,180 4,727 9,907
Changes in operating assets and liabilities
Increase in prepaid expenses and other current assets (49,400) (1,771) (51,171)
Increase other assets - (2,175) (2,175)
Increase in accounts payable and accrued expenses 91,209 144,813 236,022
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Net cash flow used in operating activities (175,687) (81,660) (257,347)
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Cash flows from investing activities
Purchase of property and equipment (22,109) (14,703) (36,812)
Acquisition of intangibles (1,920) (4,220) (6,140)
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Net cash flow used in investing activities (24,029) (18,923) (42,952)
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Cash flows from financing activities
Net proceeds from issuance of common stock 376,029 79,640 455,669
Principal payments on obligations under capital leases (1,246) (162) (1,408)
Proceeds from issuance (repayment of) notes payable (250,000) 250,000 -
Debt issue costs - (25,000) (25,000)
Deferred offering costs (65,320) (43,500) (108,820)
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Net cash provided from financing activities 59,463 260,978 320,441
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Net increase (decrease) in cash (140,253) 160,395 20,142
Cash and cash equivalents at beginning of period 160,395 - -
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Cash and cash equivalents at end of period $ 20,142 $ 160,395 $ 20,142
=========== ============ ==========
Supplemental disclosure of cash flow information
Cash paid during the period for interest $ 5,578 $ 70 $ 5,648
=========== ============ ==========
Supplemental schedule of noncash financing and investing activities
Contributed property and equipment - $ 18,290 $ 18,290
=========== ============ ==========
Capital lease obligations incurred - $ 17,632 $ 17,632
=========== ============ ==========
Common stock issued for services related to initial public
offering - $ 14,875 $ 14,875
=========== ============ ==========
Deferred compensation $ 300,000 - $ 300,000
=========== ============ ==========
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
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NETLIVE COMMUNICATIONS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles and reflect all
adjustments (consisting of normal recurring adjustments) which, in the
opinion of management, are necessary for a fair presentation of the results
for the periods shown. The results of operations for such periods are not
necessarily indicative of the results expected for the full fiscal year or
for any future period. The accompanying financial statements should be read
in conjunction with the audited financial statements of NetLive
Communications, Inc. ("NetLive" or the "Company") as of March 31, 1996 and
for the period from August 23, 1995 (date of inception) to March 31, 1996 and
the notes thereto included in the Company's registration Statement on Form
SB-2 (No. 333-4057). Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission. The Company
believes, however, that the disclosures in this report are adequate to make
the information presented not misleading in any material respect. There have
been no significant changes in accounting policy since March 31, 1996.
NOTE 2
PRIVATE PLACEMENT AND PUBLIC OFFERING
During May, 1996, the Company completed a private placement offering of
securities in which it issued 200,000 shares of common stock at an offering
price of $2.50 per share with proceeds to the Company of approximately
$376,000, which is net of approximately $124,000 of offering expenses. The
company used a portion of the net proceeds to repay $250,000 of aggregate
principal amount of notes payable and approximately $4,500 of interest. The
Company recorded a charge to earnings of approximately $165,000 during the
quarter ended June 30, 1996 in connection with the repayment of the notes
payable.
In August, 1996, the Company completed an initial public offering of
950,000 shares of its common stock at $5.50 per share and 730,000 common
stock purchase warrants for $0.10 per warrant. The proceeds to the Company,
net of underwriting commissions and offering expenses, were approximately $4.2
million.
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NETLIVE COMMUNICATIONS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 3
NET LOSS PER SHARE
The net loss per common share is calculated using the weighted average number of
common shares outstanding during the period. For purposes of this calculation,
shares of common stock issued prior to the filing of the registration statement
relating to the initial public offering, and shares issuable upon exercise of
all common stock purchase warrants and options outstanding, with exercise prices
below the initial public offering price of $5.50, have been included in weighted
average number of shares outstanding, since inception, using the treasury stock
method.
NOTE 4
INCOME TAXES
No provision for income taxes has been made for the three months ended June 30,
1996 as the Company has net operating losses. These net operating losses have
resulted in a deferred tax asset at June 30 , 1996. Due to the uncertainty
regarding the ultimate amount of income tax benefits to be derived from the
Company's net operating losses, the Company has a recorded a valuation allowance
for the entire amount of the deferred tax asset at June 30, 1996.
NOTE 5
EMPLOYEE STOCK OPTIONS
The Company maintains a stock option plan to motivate and reward its employees,
officers and directors. The Company issued 120,000 stock options to senior
employees under the plan during the quarter ended June 30, 1996. During the
quarter ended June 30, 1996, the Company recorded $300,000 as deferred
compensation in connection with the issuance of 100,000 employee stock options,
based on the difference between the fair market value of the common stock
underlying the stock options at the time of issuance, and the exercise price of
the stock options. During the quarter ended June 30, 1996, the Company also
recorded a charge to earnings of approximately $12,500 to recognize amortization
of the deferred compensation. The Company will amortize the deferred
compensation recorded in connection with the issuance of the 100,000 employee
stock options in the amount of approximately $25,000 each quarter over the next
three fiscal years.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Report contains, in addition to historical information, forward looking
statements that involve risks and uncertainties. These forward looking
statements include statements regarding the Company's growth and expansion plans
and the sufficiency of the Company's liquidity and capital. Such statements are
based on management's current expectations and are subject to a number of
uncertainties and risks that could cause actual results to differ materially
from those described in the forward-looking statements. Factors that may cause
such a difference include, but are not limited to, those described under "Risk
Factors" in the Company's prospectus dated August 12, 1996, issued in connection
with the Company's Registration Statement on Form SB-2 (No. 333-4057).
OVERVIEW
NetLive is a development stage software and World Wide Web content development
company. NetLive is developing several unique Web services to deliver one-on-one
videoconferenced entertainment and professional services content directly to
consumers' desk tops utilizing a proprietary video call center commerce system.
NetLive plans to develop a computer services consulting business that is focused
on implementing advanced software solutions for business that leverage the
powerful qualities of the Internet and maximize a business's marketing and
customer service capabilities.
The Company believes that significant ongoing investment in all areas of the
business will continue to be critical to the success of NetLive. Specifically,
the Company plans to continue increasing its operating expenses to fund greater
levels of technology research and development and to develop its capabilities
in the computer services consulting field.
The Company plans to commence test marketing of the Jeane Dixon PsychicNet
pay-per-call telephone service, utilizing 900 telephone numbers, in the third
fiscal quarter of 1997. The expansion of marketing and operation of this
service will be based upon the results of the initial market tests.
Furthermore, the Company continues to seek strategic alliances and joint
ventures that complement the Company's overall business strategy. Based on
this strategy, the Company directs a significant percentage of its capital
reserves towards operating expenses and towards non-operating expenses
associated with business development, and anticipates continuing to do so for
the near future. Net losses were $421,307 in the first quarter of fiscal 1997
as compared to $243,129 in the period from August 23, 1995 (date of inception)
to March 31, 1996. Net loss per share in the first quarter of fiscal 1997 was
$0.21 as compared to $0.16 in the period from August 23, 1995 (date of
inception) to March 31, 1996.
The Company has only a limited operating history upon which an evaluation of the
Company and its prospects can be based. The Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving markets. To address these risks, the
Company must, among other things, respond to competitive developments, continue
to attract, retain and motivate qualified persons, and continue to develop its
technologies and commercialize products and services
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incorporating such technologies. There can be no assurance that the Company
will be successful in addressing such risks. The Company has incurred net
losses since inception through the quarter ended June 30, 1996. As of June
30, 1996, the Company had an accumulated deficit during the development stage
of $971. There can be no assurance that the Company will achieve profitability.
Research and Development
Research and development expenses consist primarily of salaries to support
product research and development. Research and development expenses in the
first quarter of fiscal 1997 were primarily attributable to increased
staffing costs. Management believes that research and development activities
are the single most critical area for investment in the Company and, as a
result, anticipates further increasing staff and making significant
expenditures in an effort to achieve completion of the Company's video call
center commerce system, as well as to develop new and enhanced products and
services. This may cause research and development expenses to increase as a
percentage of total expenses in future periods.
Selling, General and Administrative
Selling, general and administrative expenses consist primarily of expenses for
sales and marketing activities, administration, office operations, finance and
general management activities, including legal, accounting and other
professional fees. Selling, general and administrative expenses were $231,950
for the three months ended June 30, 1996, as compared to $237,940 for the
period from August 23, 1995 (date of inception) to March 31, 1996.
The Company recorded deferred compensation of $300,000 for the difference
between the grant price and the deemed fair value of the Company's common stock
for stock options granted in the quarter ended June 30, 1996. Selling, general
and administrative expense in the quarter ended June 30, 1996 include $12,500 of
non-cash charges associated with the amortization of such deferred compensation.
The Company will record additional charges of approximately $25,000 in each of
the next twelve quarters in connection with the amortization of deferred
compensation.
The Company anticipates that general and administrative expenses will increase
substantially as the Company hires additional personnel and incurs additional
costs related to being a public company, such as expenses related to directors'
and officers' insurance, investor relations programs and increased professional
fees. In addition, the Company anticipates continued increases in its
infrastructure-related expenses, such as costs for facilities,
telecommunications and management information systems.
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Additionally, the Company anticipates further increasing the size of its sales
and marketing staff and expects to incur significant increased expenditures for
promotional and advertising activities.
Interest expense, net and financing costs
Interest expense, net and financing costs, consists of interest incurred on
equipment financing, financing costs and debt, offset by interest earned on cash
and cash equivalents. Interest expense, net and financing costs increased to
$189,357 for the three months ended June 30, 1996 from $5,189 for the period
from August 23, 1995 (date of inception) to March 31, 1996.
During the quarter ended June 30, 1996, the Company used a portion of the
proceeds from a private placement to repay its outstanding notes payable in the
aggregate principal amount of $250,000 plus interest of approximately $4,500.
After repaying its outstanding debt, and together with the proceeds from the
initial public offering, which the Company received in August, 1996, the
Company expects to see an increase in interest income over prior periods.
Provision for Income Taxes
The Company has no provision for income taxes for this quarter ended June 30,
1996, since it incurred net losses.
Liquidity and Capital Resources
The Company's cash and cash equivalent balance was $20,142 at June 30, 1996, as
compared to $160,395 at March 31, 1996. Net cash used in operations was $175,687
for the three months ended June 30, 1996, as compared to $81,660 used for
operations for the period from August 23, 1995 (date of inception) to March 31,
1996. The increase in net cash used in operations was primarily attributable to
the increased net loss stemming from expansion of operations.
Net cash used in investing activities was $24,029 for the three months ended
June 30, 1996, as compared to $18,923 for the period from August 23, 1995 (date
of inception) to March 31, 1996. Investing activities consisted primarily of
purchases of property and equipment.
Net cash provided by financing activities was $59,463 for the three months
ended June 30, 1996, as compared to $260,978 for the period from August 23,
1995 (date of inception) to March 31, 1996. This decrease resulted from
repaying outstanding notes payable of $250,000 and incurring deferred
offering costs in connection with the initial public offering. These uses of
cash were financed mainly by the sale, in May, 1996, of 200,000 shares of
common stock in a private placement which generated proceeds of $376,000, net
of offering expenses.
The Company completed an initial public offering in August, 1996 and received
gross proceeds totaling approximately $5.3 million. The Company estimates that
it has incurred approximately $1.1 million in initial public offering expenses
that will be paid out of the proceeds.
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Assuming that there is no significant change in the Company's business, the
Company believes that existing cash balances and proceeds from the initial
public offering will be sufficient to meet its working capital requirements for
at least the next twelve months.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
None.
(b) Reports on Form 8-K:
None
ITEMS 1, 2, 3, 4, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NETLIVE COMMUNICATIONS, INC.
Date: September 26, 1996 By:/s/ LAURENCE M. ROSEN
______________________ _________________________________
Laurence M. Rosen
Chief Executive Officer, President
and Treasurer
(Principal Financial Officer)
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