<PAGE>
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 December 31, 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 or 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
-------------------
(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 February 14, 1997
------- --------------------------------
Common Stock, $0.0001 par value 2,650,000
1
<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 December 31, 1996 (unaudited)
and as of March 31, 1996 1
Statement of Operations for the three and nine month periods ended
December 31, 1996 (unaudited), the three month period ended
December 31, 1995, the period from August 23, 1995(inception) to
March 31, 1996 and the period from August 23, 1995(inception) to
December 31, 1996 (unaudited) 2
Statement of Cash Flows for the nine month period ended December
31, 1996 (unaudited), the period from August 23, 1995 (inception)
to December 31, 1995 (unaudited), the period from August 23, 1995
(inception) to March 31,1996 and the period from August 23, 1995
(inception) to December 31, 1996 (unaudited). 3
Notes to Financial Statements (unaudited) 4-5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-8
PART II: OTHER INFORMATION
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 9
</TABLE>
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements
NETLIVE COMMUNICATIONS, INC.
(a development stage company)
Balance Sheet
<TABLE>
<CAPTION>
December 31,1996 March 31, 1996
---------------- --------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash & cash equivalents $3,578,063 $160,395
Prepaid expenses and other current assets 82,158 1,771
---------------- --------------
TOTAL CURRENT ASSETS 3,660,221 162,166
Property and Equipment, net 83,535 46,001
Deferred income tax asset, net of valuation
allowance - -
Debt Issue Costs - 24,479
Deferred Offering Costs - 43,500
Other Assets 57,766 6,292
---------------- --------------
TOTAL ASSETS $3,801,522 $282,438
================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable & accrued expenses $118,718 $144,813
Notes Payable - 88,348
Current Portion of obligations under capital leases - 5,190
---------------- --------------
TOTAL CURRENT LIABILITIES 118,718 238,351
Obligations under capital leases, net of current portion - 12,280
---------------- --------------
TOTAL LIABILITIES 118,718 250,631
---------------- --------------
STOCKHOLDERS' EQUITY
Preferred stock--$.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 (1,348,189) (243,129)
Deferred offering Costs relating to common stock
issued for services related to intended IPO - (14,875)
Deferred Compensation (237,500) -
---------------- --------------
TOTAL STOCKHOLDERS' EQUITY 3,682,804 31,807
---------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,801,522 $282,438
================ ==============
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
3
<PAGE>
NETLIVE COMMUNICATIONS, INC.
(a development stage company)
Statement of Operations
<TABLE>
<CAPTION>
Period from Period from
Three months Three months Nine months August 23,1995 August 23,1995
ended ended ended (inception) to (inception) to
December 31, 1996 December 31, 1995 December 31, 1996 March 31, 1996 December 31, 1996
----------------- ----------------- ----------------- -------------- -----------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Selling, general & administrative
expenses:
Salaries $105,110 $63,901 $297,286 $160,714 $458,000
Research and development 73,042 - 207,022 - 207,022
Professional fees 56,258 4,571 118,167 27,812 145,979
Rent 12,335 900 35,184 9,724 44,908
Depreciation & amortization 6,929 - 18,540 4,727 23,267
Interest (income) expense, net
and financing costs (Note 2) (50,904) - 119,028 5,189 124,217
Other 201,850 9,055 309,833 34,963 344,796
---------- -------- ----------- ---------- ----------
Net loss $404,620 $90,317 $1,105,060 $243,129 $1,348,189
========== ======== =========== ========== ==========
Net loss per common share $ (0.13) $ (0.10) $ (0.43) $ (0.16)
========== ======== =========== ==========
Weighted average number of common
shares outstanding 3,080,259 898,033 2,593,168 1,543,385
========== ======== =========== ==========
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
4
<PAGE>
NETLIVE COMMUNICATIONS, INC.
(a development stage company)
Statement of Cash Flows
<TABLE>
<CAPTION>
Period from Period from Period from
Nine August 23, 1995 August 23, 1995 August 23,1995
months ended (inception) to (inception) to (inception) to
December 31, 1996 December 31, 1995 March 31, 1996 December 31,1996
----------------- ----------------- --------------- ----------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net Loss $(1,105,060) $ (90,317) $ (243,129) $(1,348,189)
Adjustments to reconcile net loss to net cash used in
operating activities:
Expenses paid by stockholders, contributed to Company - 12,006 12,006 12,006
Amortization of deferred compensation expense 62,500 - - 62,500
Amortization of debt issue costs and discount on
notes payable 186,131 - 3,869 190,000
Depreciation and amortization 18,540 - 4,727 23,267
Changes in operating assets and liabilities
Increase in prepaid expenses and other current assets (80,387) - (1,771) (82,158)
Increase other assets (50,000) (2,175) (2,175) (52,175)
Increase (decrease) in accounts payable and accrued
expenses (26,095) 60,417 144,813 118,718
------------ ---------- ----------- ------------
Net cash flow used in operating activities (994,371) (20,069) (81,660) (1,076,031)
------------ ---------- ----------- ------------
Cash flows from investing activities
Purchase of property and equipment (55,628) (2,775) (14,703) (70,331)
Acquisition of intangibles (1,920) - (4,220) (6,140)
------------ ---------- ----------- ------------
Net cash flow used in investing activities (57,548) (2,775) (18,923) (76,471)
------------ ---------- ----------- ------------
Cash flows from financing activities
Net proceeds from issuance of common stock 4,737,057 29,640 79,640 4,816,697
Principal payments on obligations under capital leases (17,470) - (162) (17,632)
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 4,469,587 29,640 260,978 4,730,565
------------ ---------- ----------- ------------
Net increase in cash 3,417,668 6,796 160,395 3,578,063
Cash and cash equivalents at beginning of period 160,395 - - -
------------ ---------- ----------- ------------
Cash and cash equivalents at end of period $3,578,063 $6,796 $160,395 $3,578,063
============ ========== =========== ============
Supplemental disclosure of cash flow information
Cash paid during the period for interest $7,155 - $70 $7,225
============ ========== =========== ============
Supplemental schedule of noncash financing and
investing activities
Contributed property and equipment - $18,290 $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.
5
<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, a statement of
operations for the period from August 23, 1995 (date of inception) to December
31, 1995 has not been presented.
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 nine month
periods ended December 31, 1996 as the Company has net operating losses. These
net operating losses have resulted in a deferred tax asset at December 31,
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 December 31, 1996.
NOTE 5
EMPLOYEE STOCK OPTIONS
The Company maintains a stock option plan to motivate and reward its employees,
officers and directors. During the quarter ended December 31, 1996, the Company
issued stock options to purchase 75,000 shares of common stock to an employee
at $4.81 per share, the fair market value at date of issuance. Additionally,
stock options to purchase 59,444 shares of common stock were canceled during
the quarter ended December 31,1996.
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 is being amortized over three years, the
term of the employment agreement. During the three and nine month periods ended
December 31, 1996, the Company recorded a charge to earnings of $25,000 and
$62,500, 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 commenced test marketing the Jeane Dixon pay-per-call telephone
service, utilizing 900 telephone numbers, in December of 1996. The timing, and
degree to which, the Company will make further investment in marketing the
Jeane Dixon 900 telephone number pay-per-call service will be determined by
results of the initial market tests. The results of these tests, as well as the
likelihood of success of the Company's planned videoconferenced psychic
service, Jeane Dixon's PsychicNet, may be adversely affected by the death of
Mrs. Dixon on January 27, 1997. The Company is exploring the possibility of
affiliating with an entity created by the estate of Mrs. Dixon to continue
marketing the 900 telephone number and videoconferenced Internet service under
the auspices of Jeane Dixon. The Company is also considering marketing an
unbranded videoconferenced psychic service, or branding such service with the
name of another well known individual, in addition to, or in lieu of, Jeane
Dixon's PsychicNet.
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 $1,105,060 during the nine months ended December 31, 1996, as
compared to $243,129 during the period from August 23, 1995 (date of inception)
to March 31, 1996. Net losses were $404,620 during the quarter ended December
31, 1996, as compared to $90,317 during the quarter ended December 31, 1995.
Net loss per share during the nine months ended December 31, 1996 was $0.43 Net
loss per share during the third quarter of fiscal 1997 was $0.13 as compared to
$0.10 during the third quarter of fiscal 1996.
During the quarter ended December 31,1996, the Company created two new officer
positions: Vice President of Technology and Vice President of Business
Development. The Company appointed Vladislav Rysin to the former and Andrew
Schwartz to the latter. In addition, Andrew Schwartz was appointed during the
fiscal quarter to the position of Secretary of the Company to replace Michael
Kharitonov, who resigned from that position but remains as Chairman of the
Company's Board.
8
<PAGE>
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
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 December 31, 1996. As of
December 31, 1996, the Company had an accumulated deficit during the
development stage of $1,348,189. 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 nine
months ended December 31, 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 third quarter of fiscal 1997 increased
in absolute dollars as compared to the third quarter of fiscal 1996. The dollar
increases in the later 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, royalties, administration, office operations,
finance and general management activities, including legal, accounting and
other professional fees. Selling, general and administrative expenses were
$986,032 for the nine months ended December 31, 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 $455,524 for the
third quarter of fiscal 1997, as compared to $90,317 for the third quarter of
fiscal 1996.
The Company anticipates that general and administrative expenses will increase
substantially as the Company hires additional personnel. 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.
9
<PAGE>
In connection with the Company's initial public offering and the May 1996
private placement, interest expense (income), net and financing costs were
$119,028 for the nine months ended December 31, 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 $50,904 for the third quarter of fiscal 1997, reflecting interest earned
on the proceeds from the initial public offering.
Provision for Income Taxes
The Company has no provision for income taxes for the three and nine month
periods ended December 31, 1996 since it incurred net losses.
Liquidity and Capital Resources
The Company's cash and cash equivalent aggregated $3,578,063 at December 31,
1996, as compared to $160,395 at March 31, 1996. Net cash used in operations
was $994,371 for the nine months ended December 31, 1996, as compared to
$20,069 used in operations for the period from August 23, 1995 (date of
inception) to December 31, 1995. The increase in net cash used in operations
from period to period was primarily attributable to the increased net loss
stemming from continued expansion of operations.
Net cash used in investing activities was $57,548 for the nine months ended
December 31, 1996, as compared to $2,775 for the period from August 23, 1995
(date of inception) to December 31, 1995. Investing activities consisted
primarily of purchases of property and equipment.
Net cash provided by financing activities was $4,469,587 for the nine months
ended December 31, 1996, as compared to $29,640 for the period from August 23,
1995 (date of inception) to December 31, 1995. 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 nine
months ended December 31, 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 5. OTHER INFORMATION
In January of 1997, the Company received from The Zodiac Group Inc. ("Zodiac")
an unsolicited offer to merge the two companies. While very preliminary
discussions between the two companies have taken place, no substantive
negotiations were held, in part, because Zodiac failed to cooperate with
NetLive's requests for information. NetLive had not been considering any
similar proposals and the transaction proposed by Zodiac is a significant
departure from the strategy contemplated by NetLive's business plan. After
considering the proposed departure, and in light of Zodiac's lack of
cooperation and other factors, NetLive's Board of Directors has determined that
a merger with Zodiac is not in the best interests of NetLive or its
stockholders. NetLive's Board of Directors has, therefore, terminated all
negotiations with Zodiac. On February 10, 1997 the Company issued a press
release confirming the foregoing.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
None.
(b) Reports on Form 8-K:
A Form 8-K was filed by the Company on January 28, 1997. This
Form disclosed the amendment to Article II, Section 7 of the Company's by-laws,
which modified the procedure relating to action by written consent of the
stockholders. Such amendment was adopted by the Company's Board of Directors on
January 13, 1997.
ITEMS 1, 2, 3, AND 4 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: February 14, 1996 By: /s/ LAURENCE M. ROSEN
-------------------- -------------------------------
Laurence M. Rosen
Chief Executive Officer,
President and Treasurer
(Principal Financial Officer)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001013277
<NAME> NETLIVE COMMUNICATIONS, INC.
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,578,063
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,710,221
<PP&E> 83,535
<DEPRECIATION> 6,929
<TOTAL-ASSETS> 3,851,522
<CURRENT-LIABILITIES> 118,718
<BONDS> 0
0
0
<COMMON> 265
<OTHER-SE> 3,732,539
<TOTAL-LIABILITY-AND-EQUITY> 3,851,522
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 303,716
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (50,904)
<INCOME-PRETAX> (354,620)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (354,620)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
