<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 June 30, 1998
--------------
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 Identification No.)
of incorporation or organization)
584 Broadway, New York, NY 10012
--------------------------------------------------
(Address of principal executive offices)
(212) 343-7082
-------------------
(Issuer's telephone number, including area code)
Indicate by check mark whether the Issuer (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 Issuer
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 equity, as of the latest practicable date.
Class Outstanding at August 15, 1998
------- -----------------------------------
Common Stock, $0.0001 par value 2,950,000
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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 June 30, 1998 (unaudited)
and as of March 31, 1998 (audited) 3
Statement of Operations for the three month periods ended
June 30, 1998 and 1997 (unaudited), and the period from
August 23, 1995 (inception) to June 30, 1998 (unaudited) 4
Statement of Cash Flows for the three month periods ended
June 30, 1998 and 1997 (unaudited) and the period from
August 23, 1995 (inception) to June 30, 1998 (unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan
of Operation 11
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 17
</TABLE>
2
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PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements
NETLIVE COMMUNICATIONS, INC.
(a development stage company)
Balance Sheet
<TABLE>
<CAPTION>
June 30,1998 March 31, 1998
------------ --------------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 266,065 $ 119,375
Marketable securities -- 393,485
Prepaid expenses and other current assets 34,113 51,416
----------- -----------
TOTAL CURRENT ASSETS 300,178 564,276
Property and Equipment Held for Sale 10,000 10,000
Deferred income tax asset, net of valuation
allowance -- --
Other Assets 7,298 14,798
----------- -----------
TOTAL ASSETS $ 317,476 $ 589,074
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable & accrued expenses 77,130 129,769
----------- -----------
TOTAL CURRENT LIABILITIES $ 77,130 $ 129,769
----------- -----------
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 2,950,000 shares 295 295
Additional paid-in capital 5,256,578 5,245,628
Deficit accumulated during development stage (5,016,527) (4,786,618)
----------- -----------
STOCKHOLDERS' EQUITY 240,346 459,305
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 317,476 $ 589,074
=========== ===========
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
3
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NETLIVE COMMUNICATIONS, INC.
(a development stage company)
Statement of Operations
<TABLE>
<CAPTION>
Period from
Three months Three months August 23,1995
ended ended (date of inception)
June 30, 1998 June 30, 1997 to June 30, 1998
(unaudited) (unaudited) (unaudited)
---------- ---------- -----------
<S> <C> <C> <C>
Net revenue $ -- $ 10,256 $ 17,945
---------- ---------- ------------
Selling, general & administrative expenses:
Salaries 62,447 124,209 1,097,967
Research and development -- -- 568,855
Professional fees 106,660 187,304 1,033,687
Payroll taxes and other employee benefits 7,607 20,802 141,817
Rent 9,717 9,085 97,143
Depreciation & amortization -- 11,391 87,931
Interest expense and financing costs -- -- 197,290
Interest and dividend income (4,039) (31,635) (201,485)
Impairment loss on property and equipment 0 0 94,725
Impairment loss on capitalized software development costs 0 0 715,344
Other 47,517 134,352 1,201,198
---------- ---------- ------------
Total expenses 229,909 455,508 5,034,472
---------- ---------- ------------
Net loss $ (229,909) $ (445,252) $ (5,016,527)
========== ========== ============
Basic loss per common share $(0.08) $(0.15) --
========== ========== ============
Weighted average number of common shares
Outstanding 2,950,000 2,950,000 --
========== ========== ============
</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
Three Three August 23, 1995
months ended months ended (inception) to
June 30, 1998 June 30, 1997 June 30, 1998
------------- ------------- -------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net Loss $ (229,909) $ (700,440) $(5,016,527)
Adjustments to reconcile net loss to net cash used in
operating activities:
Expenses paid by stockholders, contributed to Company -- -- 12,006
Amortization of deferred compensation expense -- 61,438 277,430
Amortization of debt issue costs and discount on
notes payable -- -- 190,000
Depreciation and amortization -- 11,391 87,931
Impairment loss on property and equipment -- -- 94,725
Impairment loss on capitalized software development costs -- -- 715,344
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses and other current assets 17,303 (5,600) (34,113)
(Increase) decrease in other assets 7,500 (7,500) (1,861)
Increase in capitalized software development costs -- (160,620) (715,344)
Increase (decrease) in accounts payable and accrued
expenses (52,639) (286,306) 77,130
----------- ----------- -----------
Net cash used in operating activities (257,745) (817,449) (4,313,279)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment -- (20,314) (156,031)
Acquisition of intangibles -- -- (6,140)
Purchase of available-for-sale securities -- -- (4,984,826)
Proceeds from sales of available-for-sale securities 393,485 1,965,257 4,984,826
----------- ----------- -----------
Net cash provided by (used in) investing activities 393,485 1,965,943 (162,171)
----------- ----------- -----------
Cash flows from financing activities:
Net proceeds from issuance of common stock and warrants 10,950 -- 4,827,647
Principal payments on obligations under capital leases -- -- (17,632)
Debt issue costs -- -- (25,000)
Deferred offering costs -- -- (43,500)
----------- ----------- -----------
Net cash provided from financing activities 10.950 -- 4,741,515
----------- ----------- -----------
Net increase in cash and cash equivalents 146,690 1,148,494 --
Cash and cash equivalents at beginning of period 119,375 32,958 --
----------- ----------- -----------
Cash and cash equivalents at end of period $ 266,065 $ 1,181,452 $ 266,065
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest -- -- $ 7,290
=========== =========== ===========
Supplemental schedule of noncash financing and investing activities:
Contributed property and equipment -- -- $ 18,290
=========== =========== ===========
Capital lease obligations incurred -- -- $ 17,632
=========== =========== ===========
Common stock issued for services related to
initial public offering -- -- $ 14,875
=========== =========== ===========
Common stock and stock options issued under
employment agreement and for services -- -- $ 1,088,750
=========== =========== ===========
Termination of common stock granted under the
performance share program and employment agreement -- -- $ 811,320
=========== =========== ===========
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
5
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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, 1998 and for the year then ended
and the notes thereto included in the Company's Form 10-KSB and amendment
thereto. 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, 1998.
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.
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In August 1996, the Company completed an initial public offering ("IPO") 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.
NOTE 3
CAPITALIZED SOFTWARE COSTS
Certain software development costs are capitalized in accordance with SFAS No.
86, Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed, and are stated at the lower of unamortized cost or net
realizable value. Capitalization of software development costs begins upon the
establishment of technological feasibility and ends when the product is
available for general release to customers. The Company determined that it
achieved technological feasibility during April 1997. Amortization of
capitalized software development costs shall start when the product is
available for general release to customers and will be provided at the greater
of the amount computed using (a) the ratio of current gross revenue for a
product to the total of current and anticipated future gross revenue or (b) the
straight-line method over the remaining estimated economic life of the product.
All other research and development expenses, consisting primarily of salaries
and consulting fees to support technology and services content development, are
expensed as incurred.
In connection with the Company ceasing development of its Internet call center
software during March 1998, all software development costs capitalized through
March 1998 have been expensed.
7
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NOTE 4
BASIC LOSS PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, Earnings per Share. SFAS No. 128 requires dual presentation of basic
earnings per share ("EPS") and diluted EPS on the face of all statements of
earnings issued after December 15, 1997 for all entities with complex capital
structures. Basic EPS is computed as net earnings divided by the
weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur from common shares
issuable through stock-based compensation including stock options, restricted
stock awards, warrants and other convertible securities.
For purposes of this computation shares of common stock issued for nominal
consideration prior to the initial filing of the Registration Statement
relating to the Initial Public Offering ("IPO") and shares issuable upon the
exercise of all common stock purchase options outstanding issued for nominal
consideration, with exercise prices below the IPO price, have been included in
weighted average number of shares outstanding, since inception, utilizing the
treasury stock method. Common stock equivalents issued after the IPO are not
included in the weighted average number of shares since the effect would be
anti-dilutive. Diluted EPS is not presented since the effect would be
anti-dilutive.
NOTE 5
INCOME TAXES
No provision for income taxes has been made for all periods presented since the
Company had net operating losses. These net operating losses have resulted in a
deferred tax asset at June 30, 1998. 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 June 30, 1998.
NOTE 6
EMPLOYEE STOCK OPTIONS AND PERFORMANCE SHARE PROGRAM
During February 1996, the board of directors of the Company adopted the 1996
Stock Option Plan (the "1996 Plan") which authorizes the granting to employees,
officers and
8
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directors of the Company options to purchase up to an aggregate of 800,000
shares of common stock. 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 was being amortized
over three years, the term of the employment agreement. During the years ended
March 31, 1997 and 1998, the Company recorded charges to earnings of $87,500
and $91,666, respectively, for amortization of deferred compensation. In March
1998, in connection with the employee's termination and severance agreement,
these options were canceled. Accordingly, the remaining unamortized deferred
compensation aggregating $120,834 was reversed to additional paid-in capital.
During February 1997, the board of directors of the Company adopted a
restricted stock program which authorized the establishment of a trust and
contributed to the trust 300,000 shares of the Company's common stock that
shall be held therein, until distributed to employees, as defined. Shares to be
awarded in the name of the employee will have all rights of a stockholder,
subject to certain restrictions or forfeitures. During March 1997, 106,000
shares of common stock were granted to certain employees. The market value on
the date of these grants was $728,750, which had been recorded as deferred
compensation and was shown as a separate component of stockholders' equity.
Restrictions on these awards expire annually over a five-year period. The
deferred compensation was being charged to selling, general and administrative
expense over the five-year vesting period. During September 1997, an award for
10,000 shares of common stock was made to an employee. The market value on the
date of grant was $60,000 which had been recorded as deferred compensation and
was shown as a separate component of stockholders' equity. The deferred
compensation was being charged to selling, general and administrative expenses
over the 13-month vesting period. During the year ended March 31, 1998,
previously issued awards relating to 101,233 shares of common stock have been
forfeited due to employee departures in connection with the ceasing of
operations. Accordingly, the remaining
9
<PAGE>
unamortized deferred compensation aggregating $690,486 was reversed to
additional paid-in capital. Compensation charged to selling, general and
administrative expense was $12,146 and $86,118, respectively, for the years
ended March 31, 1997 and 1998.
During October 1997, the board of directors of the Company adopted the 1997
Stock Option Plan (the "1997 Plan") which authorizes the granting to employees,
officers and directors of the Company options to purchase up to an aggregate of
600,000 shares of common stock. Although the compensation committee of the
board of directors has recommended the issuance of 350,000 stock options to the
Company's chairman of the board of directors, no board of directors' action
regarding such options has been taken at the request of the Company's chairman
of the board of directors.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THIS FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE
U.S. SECURITIES LITIGATION REFORM ACT OF 1995. THESE STATEMENTS INVOLVE UNKNOWN
RISKS AND UNCERTAINTIES THAT MAY CAUSE THE COMPANY'S ACTUAL RESULTS OR OUTCOMES
TO BE MATERIALLY DIFFERENT FROM THOSE ANTICIPATED AND DISCUSSED HEREIN. IN
ASSESSING THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN, READERS ARE URGED TO
READ CAREFULLY ALL RISK FACTORS AND CAUTIONARY STATEMENTS CONTAINED IN THIS
FORM 10-QSB AND IN OTHER FILINGS MADE BY NETLIVE COMMUNICATIONS, INC. WITH THE
SECURITIES AND EXCHANGE COMMISSION.
PLAN OF OPERATION
NetLive Communications, Inc. (the "Company" or "NetLive"), a development stage
company, was incorporated on August 23, 1995 in the State of Delaware. The
Company was developing live, one-on-one videoconferenced entertainment,
educational and counseling services over the Internet and technologies designed
to deliver such content services to consumers. After March 31, 1997, the
Company shifted its focus to concentrate principally on developing Internet
call center software technologies to license to businesses.
On March 11, 1998, the Company entered into a non-binding letter of intent with
an affiliate of Newton Grace Pty. Ltd. ("Newton Grace"). Under the terms of the
proposed transaction, the stockholders of the affiliate would exchange all of
their shares in the affiliate for a combination of shares of common stock and
convertible preferred stock, representing a substantial majority of the common
stock, of NetLive.
To preserve resources, the Board decided that it was necessary to terminate all
employees other than those who would be instrumental in completing the Newton
Grace transaction or another similar transaction. Accordingly, on March 13,
1998 the Company laid-off the vast majority of its non-executive staff and
ceased its historic business operations.
During the next three months and continuing through the date hereof, the
Company concentrated on winding up its operations, negotiating settlement
agreements with departing personnel and others, and conducting due diligence
on, and negotiating with the principals of, Newton Grace. As a result of
various tax considerations and ongoing negotiations, the stock-for-stock
transaction contemplated in the letter of intent was modified.
On June 22, 1998, NetLive and its newly-formed Australian subsidiary, Linda
Industries Pty Limited ("LIP"), entered into a Stock Purchase and
Reorganization Agreement ("Purchase Agreement"), dated as of June 22, 1998,
with Playbyrne Investments Pty Limited, Budbox Pty Limited, Newton Grace,
Intercorp Group Pty Limited, Hallendon Pty Limited, Geoffrey Russell Player and
Vicki Gaye Player (collectively the "Purchasers"). Pursuant to the Purchase
11
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Agreement, the Company has agreed, in general, to acquire certain of Newton
Grace's operating assets (excluding its cash, trademarks and certain
receivables) (collectively, the "Assets"), subject to the assumption of certain
liabilities, for an aggregate purchase price of Australian Dollars (AUD)
$19,000,000. Newton Grace is an Australian corporation engaged in the consumer
electric goods business.
Under the Purchase Agreement, the Company has also agreed, among other things,
to (a) use its best efforts to effect a reverse stock split of approximately
3.4-for-1 (the "Split") and (b) issue 8 million shares of common stock ("Common
Stock"), subject to adjustment, and 1 million shares of non-voting Series A
Preferred Stock ("Preferred Stock"), in each case post-Split, to Newton Grace
and certain of its affiliates and other entities for an aggregate purchase
price of (AUD) $10,000,000. Immediately upon receipt of the funds from the sale
of stock, the Company will use part of such capital contribution to capitalize
its newly-formed subsidiary by purchasing 1,666,667 shares of LIP in exchange
for (AUD) $1,666,667 and by loaning (AUD) $3,333,333 to LIP, to be evidenced by
a promissory note. It is anticipated that LIP will immediately thereafter
acquire substantially all of Newton Grace's assets (excluding its trademarks,
cash and certain receivables), subject to the assumption of certain of its
liabilities, for an aggregate of (AUD) $19,000,000. The purchase price will be
composed of the following: (i) the (AUD) $5,000,000 invested and loaned by the
Company as described above, (ii) (AUD) $10,000,000 in cash derived from a loan
from the National Australia Bank to LIP, currently being negotiated, and (iii)
(AUD) $4,000,000 to be paid by LIP over time, which is to be evidenced by a
promissory note. Contemporaneously therewith, pursuant to the various trademark
assignments, it is anticipated that the Company will use the balance of the
capital contributed by the Purchasers to acquire all of the trademarks from
Newton Grace for (AUD) $5,000,000 in cash. Such trademarks will be immediately
licensed, pursuant to the license agreements, to LIP, which will pay license
fees to the Company for the use thereof.
The transactions contemplated by the Purchase Agreement (collectively the
"Transaction") are subject to, among other things, all of the parties
completing their due diligence, the negotiation and execution of certain
agreements, and the Company obtaining stockholder and regulatory approvals. The
Company, LIP and the Purchasers are currently negotiating an amendment to the
Purchase Agreement that would extend until late August the time by which the
certain of such agreements must be executed and certain contingencies
satisified.
The description of the Transaction is qualified in its entirety by reference to
the full text of the Purchase Agreement, which was filed in a Form 8-K filed by
the Company with the Securities Exchange Commission ("SEC") on June 30, 1998.
When and if the Transaction is consummated, it would result in the acquisition
of a significant amount of assets of, and a change in control of, the Company.
On July 29, 1998, the Company received a letter from The Nasdaq Stock Market,
Inc. ("Nasdaq") regarding the continued listing of its common stock and common
stock purchase warrants. In the letter, Nasdaq indicated that such securities
will continue to be listed on The Nasdaq SmallCap Market via an exception from
the net tangible assets/market capitalization/net income continued listing
requirement.
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While the Company has failed to meet this requirement since February 23, 1998,
NetLive was granted a temporary exception from this standard subject to it
meeting certain conditions. The letter indicated that continuation of the
exception was subject to the satisfaction of several conditions, including,
among other things, the Company's having no less than $2,000,000 in net
tangible assets by August 20, 1998. The Company is currently attempting to
obtain the financing required to meet the net tangible assets condition from
the Purchasers. Although it believes that it will be unable to meet the net
tangible asset condition by August 20, 1998, the Company is in the process of
requesting an extension of such deadline from Nasdaq. There can be no
assurance, however, that such extension will be granted or that the Company
will meet the net tangible asset condition in a timely manner if the extension
is granted.
The exception will expire on November 2, 1998. In the event that the Company is
deemed to have met the terms of the conditions and the exception, it shall
continue to be listed on The Nasdaq SmallCap Market. There can be no assurance,
however, that the Company will meet such terms. If at some future date the
Company's securities should cease to be listed on The Nasdaq SmallCap Market,
they may continue to be listed in the OTC-Bulletin Board. For the duration of
the exception, the Company's Nasdaq symbols will be NETLC and NETWC.
During the quarter ended June 30, 1998, the Company directed a significant part
of its efforts toward completing the Transaction. Based on this strategy, the
Company directed a significant percentage of its capital reserves towards
operating expenses and towards non-operating expenses associated with the
Transaction. Net losses were $229,909 during the quarter ended June 30, 1998,
as compared to $445,252 during the quarter ended June 30, 1997. Net loss per
share was $0.08 during the quarter ended June 30, 1998, as compared to $0.15
during the quarter ended June 30, 1997.
The Company has incurred net losses since inception through the quarter ended
June 30, 1998. As of June 30, 1998, the Company had an accumulated deficit
during the development stage of $5,016,527. The Company's survival is dependent
upon the consummation of the Transaction or a similar transaction in the near
future.
As the Company has ceased its historic business operations, it does not
anticipate any material effect from, nor has it set aside any reserves for,
potential year 2000 programming flaws.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, General and Administrative expenses consist primarily of expenses for
administration, office operations, finance and general management activities,
including legal, accounting and other professional fees. Selling, general and
administrative expenses were $233,948 for the quarter ended June 30, 1998, as
compared to $455,508 for the quarter ended June 30, 1997.
Included in Selling, General and Administrative expenses are salaries
aggregating $62,447 for quarter ended June 30, 1998, as compared to $124,209
for the quarter ended June 30, 1997. Such decrease is attributable to the
reduction of the Company's administrative staff.
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PROVISION FOR INCOME TAXES
The Company has no provision for income taxes for all periods presented since
it incurred net losses for such periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents and marketable securities aggregated
$266,065 at June 30, 1998, as compared to $2,180,021 at June 30, 1997. Net cash
used in operations was $257,745 for the quarter ended June 30, 1998, as
compared to $817,449 for the quarter ended June 30, 1997. The reduction in net
cash used in operations from period to period was primarily attributable to the
costs from reduction of operations.
The Company does not expect any purchase of plant or significant equipment
during fiscal 1999.
The uses of cash during the quarter ended June 30, 1998 were financed mainly by
the sale in August 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. 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.
Net cash provided by investing activities was $393,485 for the quarter ended
June 30, 1998, as compared to $1,965,943 for the quarter ended June 30, 1997.
The change in investing activities was due to proceeds from sales of available
for sale securities. Such cash was provided primarily by the proceeds of the
Company's initial public offering.
Net cash provided by financing activities was $10,950 for the quarter ended
June 30, 1998, as compared to zero for the quarter ended June 30, 1997. Such
cash was provided by the May Davis Group, Inc.'s exercise of the portion of its
Underwriter's Warrant entitling it to purchase 73,000 common stock purchase
warrants of the Company for $0.15 each.
The Company's management has substantial doubts about the Company's ability to
continue as a going concern and whether its existing cash and marketable
securities will be sufficient to fund the Company's operations until the
Transaction is consummated. There can be no assurance that the Company's
capital resources will be sufficient. Management anticipates that if and when
an interim financing with the Purchasers is consummated, this would alleviate
such cash shortage. Management is also considering additional cost-cutting
measures to further conserve resources. If such measures are not sufficient or
if such interim financing or the Transaction are not successful in the near
future, material adverse consequences would result. There is a substantial
likelihood that such consequences would involve liquidation of the Company,
which would likely result in loss to investors of all or a substantial portion
of their investment.
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PART II: OTHER INFORMATION
ITEMS 1 THROUGH 5, INCLUSIVE, ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The following exhibits are filed herewith or incorporated
herein by reference:
Exhibit
Number Name of Exhibit
- ------- ---------------
1.1 Underwriting Agreement (1)
2.1 Stock Purchase and Reorganization Agreement (10) 3.1 Articles of
Incorporation, as amended to date(1) (6) 3.2 By-Laws (1) (2) (7) 4.1
Form of Underwriter's Warrant(1) 4.2 Form of Financial Advisory and
Investment Banking Agreement with the Underwriter(1)
4.3 Form of Common Stock Certificate(1)
4.4 Form of Common Stock Purchase Warrant(1)
4.5 Form of Common Stock Purchase Warrant used for Bridge Loans(1) 4.6 Form
of Warrant Agreement(1)
10.1 Employment Agreement with Laurence Rosen(1) 10.2 Employment Agreement
with Michael Kharitonov(1) 10.3 Employment Agreement with Jeffrey Wolf,
as amended(1)
10.4 Amendment No. 1 to Employment Agreement with Michael Kharitonov(1)
10.5 Employment Agreement with Vladislav Rysin(1)
10.6 License Agreement with Jeane Dixon(1)
10.7 Company's 1996 Incentive Stock Option Plan (1)(9)
10.8 NetLive Communications, Inc. Performance Share Program and Performance
Share Program Trust(3)
10.9 Settlement and Voting Agreement, dated as of June 12, 1997, among the
Company, May Davis Group, Inc. et al.(4)
10.10 Letter agreement, dated as of June 12, 1997, between the Company and
Gary Rogers(4)
10.11 Severance Agreement, dated as of June 12, 1997, between the Company and
Laurence M. Rosen and exhibits thereto including the Consulting
Agreement.(4)
10.12 Amendment to Settlement and Voting Agreement, dated as of September 23,
1997, by and among the Company, May Davis Group, Inc. et al. (5)
10.13 Amendment to Underwriting Agreement, dated as of September 23, 1997, by
and between the Company and May Davis Group, Inc. (5)
15
<PAGE>
10.14 Letter Agreement, dated as of September 23, 1997, by and between the
Company and Gary Rogers (5)
10.15 Company's 1997 Stock Option Plan (8)
27.1 Financial Data Schedule (11)
- -----------------
(1) Filed with the Company's Registration Statement filed on Form SB-2 (File
No. 333-4057).
(2) Amendment to Article II, Section 7 of the Company's By-laws filed with the
Company's Current Report on Form 8-K dated January 28, 1997.
(3) Filed with the Company's Current Report on Form 8-K dated February 27,
1997.
(4) Filed with the Company's Current Report on Form 8-K dated July 3, 1997
(5) Filed with the Company's Current Report on Form 8-K dated October 8, 1997
(6) Additional Articles IX, X and XI were filed with the Company's Current
Report on Form 10-QSB dated November 14, 1997.
(7) The amendment to Article III, Sections 1(a), 1(c), 6 and 9 and the
amendment to Article IV, Sections 1(b), 1(c) and 3 were filed with the
Company's Current Report on Form 10-QSB dated November 14, 1997.
(8) Filed with the Company's Current Report on Form 10-QSB dated November 14,
1997.
(9) Amended and corrected version filed with the Company's Current Report on
Form 10-QSB dated November 14, 1997.
(10) Filed with the Company's Current Report on Form 8-K dated June 30, 1998.
(11) Filed herewith.
(b) Reports on Form 8-K
A Form 8-K was filed by the Company on June 30, 1998. This filing disclosed,
under Item 5: (1) the entry of the Company and its newly-formed Australian
subsidiary, Linda Industries Pty Limited, into a Stock Purchase and
Reorganization Agreement with Playbyrne Investments Pty Limited, Budbox Pty
Limited, Newton Grace Pty Limited, Intercorp Group Pty Limited, Hallendon Pty
Limited, Geoffrey Russell Player and Vicki Gaye Player, dated June 22, 1998;
and (2) that the Company had curtailed its business operations and had
terminated the employment of all of its non-executive employees.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Issuer has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NETLIVE COMMUNICATIONS, INC.
Date: 8/19/98 By: /s/ Michael Kharitonov
- ------------------------------ --------------------------------
Michael Kharitonov
Chief Executive Officer and
President
Date:8/19/98 By: /s/ Andrew Schwartz
- ------------------------------ ---------------------------------------
Andrew Schwartz
Chief Financial Officer, Treasurer
and Secretary (Principal Accounting
and Financial Officer)
17
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