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 September 30, 1996
--------------
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
------------ -----------------
(State of other jurisdiction (IRS Employer ID No.)
of incorporation of organization)
584 Broadway, New York, NY 10012
--------------------------------------------------
(Address of principal executive offices)
(212) 343-7082
-------------------
(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_X_ No __
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 November 14, 1996
------- -----------------------------------
Common Stock, $0.0001 par value 2,650,000
<PAGE>
NETLIVE COMMUNICATIONS, INC.
(a development stage company)
INDEX
<TABLE>
<CAPTION>
Page Number
-----------------
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of September 30, 1996 (unaudited)
and as of March 31, 1996 3
Statement of Operations for the three and six month periods ended
September 30, 1996 (unaudited), and the period from August 23, 1995
(inception) to March 31, 1996 and the period from August 23, 1995
(inception) to September 30, 1996 (unaudited) 4
Statement of Cash Flows for the six months ended September 30, 1996
(unaudited), the period from August 23, 1995 (inception) to September 30,
1995 (unaudited), the period from August 23, 1995 (inception) to March 31,
1996, the period from August 23, 1995 (inception) to September 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 8-10
PART II
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 11
</TABLE>
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements
NETLIVE COMMUNICATIONS, INC.
(a development stage company)
Balance Sheet
<TABLE>
<CAPTION>
September 30,1996 March 31, 1996
----------------- --------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash & cash equivalents $3,970,776 $160,395
Prepaid expenses and other current assets 111,371 1,771
------------- -----------
TOTAL CURRENT ASSETS 4,082,147 162,166
Property and Equipment, net 60,766 46,001
Deferred income tax asset, net of valuation
allowance - -
Debt Issue Costs - 24,479
Deferred Offering Costs - 43,500
Other Assets 65,420 6,292
------------ ---------
TOTAL ASSETS $4,208,333 $282,438
============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable & accrued expenses $130,967 $144,813
Notes Payable - 88,348
Current Portion of obligations under capital leases 5,533 5,190
----------- --------
TOTAL CURRENT LIABILITIES 136,500 238,351
Obligations under capital leases, net of current portion 9,409 12,280
----------- --------
TOTAL LIABILITIES 145,909 250,631
----------- --------
STOCKHOLDERS' EQUITY
Preferred stock--$.0001 par value; authorized 1,000,000
shares, none issued - -
Common Stock--$.0001 par value: authorized 19,000,000
shares, issued and outstanding 2,650,000 and
1,500,000 shares, respectively 265 150
Additional paid-in capital 5,268,228 289,661
Deficit accumulated during development stage (943,569) (243,129)
Deferred offering Costs relating to common stock
issued for services related to intended IPO - (14,875)
Deferred Compensation (262,500) -
----------- --------
TOTAL STOCKHOLDERS' EQUITY 4,062,424 31,807
----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,208,333 $282,438
=========== =========
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
<PAGE>
NETLIVE COMMUNICATIONS, INC.
(a development stage company)
Statement of Operations
<TABLE>
<CAPTION>
Period from Period from
Three months Six months August 23,1995 August 23,1995
ended ended (inception) to (inception) to
September 30, 1996 September 30, 1996 March 31, 1996 September 30, 1996
------------------ ------------------ --------------- -------------------
<S> <C> <C> <C> <C>
(unaudited) (unaudited) (unaudited)
Selling, general & administrative expenses:
Salaries $99,077 $192,176 $160,714 $352,890
Research and development 68,850 133,980 - 133,980
Professional fees 38,235 61,909 27,812 89,721
Rent 11,813 22,849 9,724 32,573
Depreciation & amortization 6,431 11,611 4,727 16,338
Interest (income) expense, net and financing costs
(Note 2) (19,425) 169,932 5,189 175,121
Other 74,152 107,983 34,963 142,946
------- -------- ------- -------
Net loss $279,133 $700,440 $243,129 $943,569
======= ======== ======== =========
Net loss per common share $ (0.11) $ (0.30) $ (0.16)
======= ========= =========
Weighted average number of common shares
outstanding 2,646,563 2,348,292 1,543,385
========= ========= =========
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
<PAGE>
NETLIVE COMMUNICATIONS, INC.
(a development stage company)
Statement of Cash Flows
<TABLE>
<CAPTION>
Period from Period from Period from
Six August 23, 1995 August 23, 1995 August 23, 1995
months ended (inception) to (inception) to (inception) to
September 30, 1996 September 30, 1995 March 31, 1996 September 30, 1996
------------------ ------------------ -------------- ------------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net Loss $ (700,440) - $(243,129) $ (943,569)
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 37,500 - - 37,500
Amortization of debt issue costs and discount on
notes payable 186,131 - 3,869 190,000
Depreciation and amortization 11,611 - 4,727 16,338
Changes in operating assets and liabilities
Increase in prepaid expenses and other current assets (109,600) $(3,266) (1,771) (111,371)
Increase other assets (57,500) - (2,175) (59,675)
Increase (decrease) in accounts payable and accrued
expenses (13,846) - 144,813 130,967
-------- -------- ------- -------
Net cash flow used in operating activities (646,144) (3,266) (81,660) (727,804)
--------- -------- -------- ---------
Cash flows from investing activities
Purchase of property and equipment (26,084) - (14,703) (40,787)
Acquisition of intangibles (1,920) - (4,220) (6,140)
-------- ------- ------- --------
Net cash flow used in investing activities (28,004) - (18,923) (46,927)
------- ------- ------- -------
Cash flows from financing activities
Net proceeds from issuance of common stock 4,737,057 6,750 79,640 4,816,697
Principal payments on obligations under capital leases (2,528) - (162) (2,690)
Proceeds from issuance (repayment of) notes payable (250,000) - 250,000 -
Debt issue costs - - (25,000) (25,000)
Deferred offering costs - - (43,500) (43,500)
------- ------- ------- -------
Net cash provided from financing activities 4,484,529 6,750 260,978 4,745,507
------- ------- ------- -------
Net increase in cash 3,810,381 3,484 160,395 3,970,776
Cash and cash equivalents at beginning of period 160,395 - - -
------- ------- ------- -------
Cash and cash equivalents at end of period $3,970,776 $3,484 $160,395 $3,970,779
========== ======= ======== ==========
Supplemental disclosure of cash flow information
Cash paid during the period for interest $7,155 $3,484 $70 $7,225
========== ======= ======== ==========
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.
<PAGE>
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 of accounting policy since March 31, 1996. The Company
had no revenue or expenses during the period from August 23,1995 (date of
inception) to September 30, 1995, accordingly, no statement of operations has
been presented for this period.
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 net proceeds to the Company,
after deducting underwriting commissions and expenses of the offering of
approximately $1.1 million, were approximately $4.2 million. Additionally, the
Company received net proceeds of approximately $9,500 from the issuance of
common stock purchase warrants and the underwriters warrant pursuant to an
over-allotment option.
6
<PAGE>
NETLIVE COMMUNICATIONS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 3
NET LOSS PER COMMON 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 and six month
periods ended September 30, 1996 as the Company has net operating losses.
These net operating losses have resulted in a deferred tax asset at September
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 recorded a valuation allowance for the entire amount of the deferred tax
asset at September 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 20,000 stock options
to an employee under the plan during the quarter ended September 30, 1996
at $5.50 per share, the fair market value at date of issuance. The Company
subsequently canceled these options in October of 1996. In May, 1996,
in connection with an employment agreement, the Company issued options
to purchase 100,000 shares of common stock to an employee. In connection
with the issuance of the options, the Company recorded deferred
compensation of $300,000 to reflect the difference between the fair market
price of the stock and the exercise price of the options at the date of
issuance. The deferred compensation will be amortized over three years, the
term of the employment agreement. During the three and six month periods ended
September 30, 1996, the Company recorded a charge to earnings of $25,000 and
$37,500, respectively, for amortization of deferred compensation.
7
<PAGE>
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 strategically related Internet
businesses 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 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 $700,440 during the six months ended
September 30, 1996, as compared to $243,129 during the period from August 23,
1995 (date of inception) to March 31, 1996. Net losses were $279,133 during
the quarter ended September 30, 1996, as compared to $421,307 during the
quarter ended June 30, 1996. Net loss per share during the six months ended
September 30, 1996 was $0.30 as compared to $0.16 during the period from
August 23, 1995 (date of inception) to March 31, 1996. Net loss per share
during the second quarter of fiscal 1997 was $0.11 as compared to $0.21 during
the first quarter of fiscal 1997.
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,
8
<PAGE>
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
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 September 30, 1996. As of
September 30, 1996, the Company had an accumulated deficit during the
development stage of $943,569. 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 six
months ended September 30, 1996 increased in absolute dollars as compared to
the period from August 23, 1995 (date of inception) to March 31, 1996. In
addition, research and development expenses in the second quarter of fiscal
1997 increased in absolute dollars as compared to the first quarter of fiscal
1997. The dollar increases in the latter periods 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 $530,508
for the six months ended September 30, 1996, as compared to $237,940 for the
period from August 23, 1995 (date of inception) to March 31, 1996. In
addition, selling, general and administrative expenses were $298,558 for the
second quarter of fiscal 1997, as compared to $231,950 for the first quarter
of fiscal 1997.
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. 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 (income), net and financing costs
Interest expense (income), net and financing costs, consists of interest
incurred on equipment financing, financing costs and debt, offset by interest
earned on cash and cash equivalents. In
9
<PAGE>
connection with the Company's initial public offering and the May 1996
private placement, interest expense (income), net and financing costs was
$169,932 for the six months ended September 30, 1996 as compared to $5,189 for
the period from August 23, 1995 (date of inception) to March 31, 1996.
However, interest expense (income), net and financing costs changed to
interest income, net of $19,425 for the three months ended September 30, 1996
as compared to interest expense, net of $189,357 for the first quarter of
fiscal 1997, reflecting interest earned on the proceeds from the initial
public offering.
During the quarter ended September 30, 1996, the Company received net proceeds
from the initial public offering in August of 1996, of approximately $4.2
million.
Provision for Income Taxes
The Company has no provision for income taxes for the three and six month
periods ended September 30, 1996, since it incurred net losses.
Liquidity and Capital Resources
The Company's cash and cash equivalent balance was $3,970,776 at September 30,
1996, as compared to $20,142 at June 30, 1996 and as compared to $160,395 at
March 31, 1996. Net cash used in operations was $646,144 for the six months
ended September 30, 1996, as compared to $81,660 used in operations for the
period from August 23, 1995 (date of inception) to March 31, 1996. The
increase in net cash used in operations from period to period was primarily
attributable to the increased net losses stemming from continued expansion of
operations.
Net cash used in investing activities was $28,004 for the six months ended
September 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 $4,484,529 for the six months
ended September 30, 1996, as compared to $260,978 for the period from August
23, 1995 (date of inception) to March 31, 1996.
The increase in net cash from financing activities resulted primarily from
receipt of the proceeds of the initial public offering in August of 1996. The
uses of cash during the six months ended September 30, 1996, were financed
mainly by the sale in August of 1996, of 950,000 shares of common stock and
730,000 warrants to purchase common stock which resulted in proceeds of $4.2
million, net of offering expenses, as well as the sale, in May, 1996, of
200,000 shares of common stock in a private placement which resulted in
proceeds of $376,000, net of offering expenses.
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.
10
<PAGE>
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.
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: November 14, 1996 By:/s/ LAURENCE M. ROSEN
- ------------------------ ----------------------------------------
Laurence M. Rosen
Chief Executive Officer,
President and Treasurer
(Principal Financial Officer)
11
