<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
--------------------
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from __________ to ___________.
Commission File No. 1-12021.
NETLIVE COMMUNICATIONS, INC.
(Exact name of Small Business Issuer as Specified in its Charter)
Delaware 13-3848652
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
330 16th Street, Brooklyn, New York 11215
(Address of Principal Executive Offices)
(212) 343-7082
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of February 16, 1999: 16,899,359
<PAGE>
NETLIVE COMMUNICATIONS, INC.
INDEX
Page
Part I - Financial Information
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets at
December 31, 1998 and
June 30, 1998............................... 1
Consolidated Statements of Operations
for the Six Months Ended
December 31, 1998 and 1997.................. 2
Consolidated Statements of Operations
for the Three Months Ended
December 31, 1998 and 1997.................. 2
Consolidated Statements of Cash Flows
for the Six Months Ended
December 31, 1998 and 1997.................. 3
Notes to Consolidated Financial Statements..... 4
Item 2. Management's Discussion and Analysis or Plan
of Operation................................ 6
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds...... 11
Item 6. Exhibits and Reports on Form 8-K............... 11
Signatures
(i)
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NETLIVE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1998
- --------------------------------------------------------------------------------------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 63,991 $ 311
Restricted cash 9,099,000
Accounts receivable, net 396,949 2,618,952
Due from related parties 1,309,066 846,182
Investments 118,480 235,819
Inventories 5,023,542 3,582,617
Deferred tax asset 157,020 -
Prepaid expenses 256,609 403,101
- --------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 7,325,657 16,785,982
Property, Plant and Equipment, net 1,740,882 1,447,790
Intangible Assets 3,297,626 3,353,347
Deferred Tax Asset 20,995 37,397
- --------------------------------------------------------------------------------------
TOTAL ASSETS $12,385,160 $21,624,516
======================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank overdraft $ 745,829 $ 135,321
Note payable - bank 6,123,000 -
Note payable - seller 1,177,490 -
Accounts payable and accrued 1,305,376 1,572,970
Income taxes payable 137,812 393,254
Deferred tax liability - 48,661
Current portion of capital leases 87,596 15,837
Other current liabilities 148,508 161,097
- --------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 9,725,611 2,327,140
Capital leases, net of current portion 235,117 65,799
- --------------------------------------------------------------------------------------
TOTAL LIABILITIES 9,960,728 2,392,939
- --------------------------------------------------------------------------------------
Stockholders' Equity:
Capital stock 900 800
Convertible preferred stock 340 -
Additional paid-in capital 5,072,787 5,074,020
Retained earnings 1,541,197 17,459,071
Foreign currency translation adjustment (4,190,792) (3,302,314)
- --------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 2,424,432 19,231,577
- --------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $12,385,160 $21,624,516
======================================================================================
</TABLE>
The accompanying notes should be read in
conjunction with the consolidated financial statements
1
<PAGE>
NETLIVE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $2,233,923 $2,813,411 $ 712,673 $1,070,351
Cost of goods sold 1,953,037 1,948,838 877,409 653,567
- ------------------------------------------------------------------------------------------------------------------------
Gross profit (loss) 280,886 864,573 (164,736) 416,784
- ------------------------------------------------------------------------------------------------------------------------
Selling, general and administrative
expenses 1,092,681 787,644 541,620 401,876
Amortization expense 86,617 - 42,871 -
- ------------------------------------------------------------------------------------------------------------------------
Total operating expenses 1,179,298 787,644 584,491 401,876
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) from operations (898,412) 76,929 (749,227) 14,908
- ------------------------------------------------------------------------------------------------------------------------
Other expense (income):
Interest expense 28,870 5,521 28,870 1,070
Interest income (240,155) (301,819) (102,764) (58,490)
- ------------------------------------------------------------------------------------------------------------------------
(211,285) (296,298) (73,894) (57,420)
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) before provision
(benefit) for income taxes (687,127) 373,227 (675,333) 72,328
Provision (benefit) for income taxes (187,982) 134,362 (214,986) 26,039
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) $(499,145) $238,865 $(460,347) $46,289
========================================================================================================================
Basic income (loss) per common share ($0.06) $0.03 ($0.06) $0.01
========================================================================================================================
Weighted average number of
common shares outstanding 8,000,000 8,000,000 8,000,000 8,000,000
========================================================================================================================
</TABLE>
The accompanying notes should be read in
conjunction with the consolidated financial statements
2
<PAGE>
NETLIVE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
1998 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Receipts from customers $ 4,463,908 $ 7,207,204
Payments to suppliers and employees (4,407,594) (6,168,045)
Interest received 240,155 301,819
Interest paid (47,073) (5,521)
Income taxes paid (257,220) (275,114)
- ------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (7,824) 1,060,343
- ------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property, plant and equipment (324,179) -
Proceeds from sales of property, plant and equipmen - 1,202,216
Net proceeds from investments 118,670 466,005
Net payments from related parties (328,189) (2,303,708)
(Payments) proceeds from restricted cash 9,116,529 (10,700,287)
- ------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 8,582,831 (11,335,774)
- ------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase in bank overdraft 604,727 292,169
Dividends paid (16,417,019) -
Proceeds from note payable - bank 6,123,000 -
Increase in due to seller 1,177,490 -
- ------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (8,511,802) 292,169
- ------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 469 (500,381)
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 63,674 (10,483,643)
Cash and cash equivalents at beginning of year 317 10,484,302
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 63,991 $ 659
========================================================================================================================
Reconciliation of net income to net cash provided by operating activities:
Net income (loss) (499,145) 238,865
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 135,352 37,454
Gain on sale of property, plant and equipment (2,000) -
Decrease in accounts receivable 2,230,101 4,394,085
Increase in inventories (1,396,918) (3,145,035)
Decrease in prepaid expenses 25,792 20,525
Decrease in accounts payable (35,755) (344,736)
Decrease in income taxes payable (465,251) (140,815)
- ------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (7,824) $ 1,060,343
========================================================================================================================
</TABLE>
The accompanying notes should be read in
conjunction with the consolidated financial statements
3
<PAGE>
NETLIVE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BASIS OF The accompanying unaudited consolidated financial
PRESENTATION statements have been prepared in accordance with
AND BUSINESS generally accepted accounting principles and
COMBINATION: 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 consolidated 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 and Form 8-K dated December 10,
1998. 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.
In December 1998, NetLive formed two wholly owned
Australian subsidiaries, Linda Industries Pty
Limited ("Linda") and Modara Oaks Pty Limited
("Modara").
Effective December 31, 1998, NetLive, a
substantially inactive company subject to the
reporting requirements of the Securities and
Exchange Act of 1934, sold 8,000,000 shares of
common stock and 1,000,000 shares of convertible
preferred stock, as adjusted for a 1-for-3.4
reverse stock split, to several Australian
purchasers including Newton Grace Pty Limited
("Newton Grace") and the shareholders of Newton
Grace (the "Purchasers") for $10,000,000
Australian Dollars ("AUD"). Simultaneously, Linda
and Modara purchased (the "Asset Purchase") the
operating assets (excluding cash and certain
receivables) and registered trademarks
(collectively the "Assets") of Newton Grace for
AUD $21,923,060. The Asset Purchase was funded in
part by an AUD $10,000,000 loan from National
Australia Bank Limited and an AUD $1,923,060 note
payable to the seller, subject to adjustment.
This business combination has been accounted for
as a reverse acquisition whereby NetLive is being
treated as being acquired in a purchase
transaction by Newton Grace, as control rests with
the former Newton Grace shareholders.
Although prior to its acquisition by the
Purchasers, NetLive had been the Registrant, the
comparative financial statements of Newton Grace
are presented since such entity is deemed to be
the purchaser in a business combination accounted
for as a purchase. Accordingly, the Registrant
will now be reporting on a June 30 year-end. In
addition there have been no significant changes of
accounting policy since June 30, 1998.
2. SUMMARY OF In accordance with Statement of Financial
SIGNIFICANT Accounting Standards ("SFAS") No. 52, Foreign
ACCOUNTING Currency Translation, the financial position and
POLICIES: results of operations of the Company are measured
using local currency as the functional currency.
Assets and liabilities have been translated at
current exchange rates, and related revenue and
expenses have been translated at average monthly
4
<PAGE>
NETLIVE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
exchange rates. The aggregate effect of
translation gains and losses has been deferred and
is reflected as a separate component of
stockholders' equity until there is a sale or
liquidation of the underlying foreign investment.
The Company recognizes deferred tax liabilities
and assets for the expected future tax
consequences of temporary differences between the
carrying amounts and the tax bases of assets and
liabilities.
In February 1997, the Financing Accounting
Standards Board 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. Diluted
EPS is not presented since the effect would be
anti-dilutive.
3. NOTES PAYABLE: The note payable-bank bears interest at the bank's
lending rate (5.00% at December 31, 1998) and
additionally requires a facility fee equal to
1.25% per annum, as defined. The note is due and
payable on June 30, 1999. The note is
collateralized by all of Linda's assets and
guaranteed by NetLive. The bank also provided an
AUD $1,600,000 line of credit to Linda which
expires June 30, 1999 with interest currently at
8.5% per annum plus 1% to 3.5% based on
outstanding balances, as defined.
As part of the Asset Purchase, Linda issued a
promissory note payable to Newton Grace. The note
is non-interest bearing, due upon demand and
subject to certain adjustments, as defined.
5
<PAGE>
Item 2. Management's Discussion and Analysis
or Plan of Operation
GENERAL
On December 10, 1998, NetLive Communications, Inc., a Delaware corporation (the
"Registrant") sold shares of its Common Stock, $.0001 par value per share, and
non-voting Series A Convertible Preferred Stock which in the aggregate would
equal, when fully issued and converted, approximately ninety percent (90%) of
the Common Stock to several Australian purchasers, including Newton Grace Pty
Limited, an Australian corporation ("Newton Grace"). Simultaneously with such
purchase, Newton Grace sold all of the operating assets of its consumer electric
goods business to two wholly-owned Australian subsidiaries of the Registrant.
For accounting purposes, these transactions (the "Transactions") are treated as
a reverse merger in which Newton Grace becomes the accounting acquirer and the
historical financial statements of Newton Grace replace those of the Registrant.
Accordingly, the Registrant will now be reporting on a June 30 year end. The
Newton Grace financial statements presented in this report have been adjusted to
reflect the Common Stock and Preferred Stock of the Registrant as if the
Transactions were consummated and completed on December 31, 1998.
The financial statements presented in this report are expressed in United States
dollars (US Dollars or US$). To quantify the impact of foreign currency
fluctuations on the results of operations, comparative information is expressed
on a percentage basis for both US Dollars and Australian Dollars (AUD or A$).
The Australian Dollar percentages reflect operational changes between comparable
periods while differences between Australian Dollar percentages and US Dollar
percentages also reflect foreign currency fluctuations.
RESULTS OF OPERATIONS
COMPARISON OF THE SIX MONTHS ENDED DECEMBER 31, 1998 TO THE SIX MONTHS ENDED
DECEMBER 31, 1997
Net sales decreased by 20.6% (6.8% in AUD) to $2,233,923 for the six months
ended December 31, 1998 from $2,813,411 for the comparable period in 1997. This
decrease in sales is attributable to changes in Newton Grace's product line
(development of new products and termination of certain existing products) and
delays in commissioning tooling of a new kettle product. Notwithstanding this
decrease in sales, cost of goods sold increased by 0.2% (17.6% in AUD) for the
six months ended December 31, 1998 as compared to 1997 primarily due to the
additional manufacturing overheads and production inefficiencies caused by the
upgrading of the kettle product range. The Registrant believes that this trend
will be reversed during the second half-year as the new product range is
brought into
6
<PAGE>
production. As a result, gross profit declined by 67.5% (61.9% in AUD) to
$280,886 in 1998 from $864,573 in 1997. Gross margin was 12.6% (12.6% in AUD)
and 30.7% (30.7% in AUD) of sales for the six months ended December 31, 1998 and
1997, respectively. The decrease in gross margins was attributable to the
combination of decreased sales volume and increased cost of goods sold.
Operating expenses increased by 49.7% (75.7% in AUD) in 1998 from 1997 due to
additional management personnel, legal costs, accounting fees, consulting fees,
trade customer discounts, bank overdraft interest, and other costs associated
with the Transactions.
For the six months ended December 31, 1998, the Registrant recognized a net
loss from operations of ($898,412) as contrasted to net income of $76,929 in
1997.
Interest income in 1998 declined by 20.4% (6.6% in AUD) from the comparable
period in 1997, increasing the decline in comparable operating results. Interest
income decreased due to lower interest rates and lower balances on deposit. The
resulting benefit for income tax purposes ($187,982) of the net loss in 1998 as
compared to $134,362 of income tax expense in 1997 was a moderating influence so
that a net loss of ($499,145) was recognized in the 1998 period as contrasted to
net income of $238,865 in 1997.
COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 1998 TO THE THREE MONTHS ENDED
DECEMBER 31, 1997
Net sales decreased by 33.4% (22.7% in AUD) to $712,673 for the three months
ended December 31, 1998 from $1,070,351 for the comparable period in 1997. This
decrease in sales is attributable to changes in Newton Grace's product line
(development of new products and termination of certain existing products) and
delays in commissioning a new kettle product tooling. Cost of goods sold
increased by 34.2% (54.5% in AUD) for the three months ended December 31, 1998
as compared to 1997 because of higher labor costs, warehouse rental, and other
manufacturing costs. As a result, Registrant realized a gross loss of ($164,736)
in 1998 as compared to gross profit of $416,784 in 1997. The loss in 1998 was
attributable to the decrease in sales and the increase in cost of goods sold.
Operating expenses increased by 45.4% (67.1% in AUD) in 1998 from 1997 because
of additional management personnel, legal costs, accounting fees, consulting
fees, trade customer discounts, bank overdraft interest, and other costs
associated with the Transactions. For the three months ended December 31, 1998
the Registrant recognized a net loss from operations of ($749,227) as
contrasted to net income of $14,908 in 1997. This net operating loss is
primarily attributable to the reduced sales, increased cost of goods sold, and
increased operating costs as described above.
7
<PAGE>
Interest income in 1998 increased by 75.7% (102.5% in AUD) from the comparable
period in 1997, reducing the decline in comparable operating results, because of
interest received by Newton Grace from an affiliate. The resulting benefit for
income tax purposes ($214,986) of the net loss in 1998 as compared to $26,039 of
income tax expense in 1997 was a further moderating influence, so that a net
loss of ($460,347) was recognized in the 1998 period as contrasted to net income
of $46,289 in 1997.
LIQUIDITY AND CAPITAL RESOURCES
As described above, the financial statements included in this Report are the
historical financial statements of Newton Grace, a privately-held Australian
company, adjusted to reflect the Registrant's Common Stock and Preferred Stock
as if the Transactions were completed on December 31, 1998. At December 31, 1998
the consolidated balance sheet shows current assets of $7,325,657 and cash and
cash equivalents and accounts receivable of $460,940 as contrasted to total
liabilities of $9,960,728 and current liabilities (excluding deferred tax
liability and current portions of capital leases) of $9,638,015, respectively.
Accordingly, this balance sheet shows a working capital deficit of $2,399,953.
Net cash provided by (used in) operating activities was ($7,824) and $1,060,343
for the six months ended December 31, 1998 and 1997, respectively. This decline
is attributable to the combination of (i) a 38.1% decrease (27.3% in AUD) in
receipts from customers more than offsetting a 28.5% decrease (16.1% in AUD) in
payments to suppliers, and (ii) a 20.4% decrease (6.6% in AUD) in interest
earned. Customer receipts declined in the 1998 period from 1997 due to the
combination of lower sales and Newton Grace's implementation in the quarter
ended June 30, 1998 of an early payment settlement discount of four to five
percent. This early payment discount had the effect of shifting receipts to a
prior reporting period. The decrease in payments to suppliers was attributable
to lower sales achieved in 1998 as compared to the six month period ended
December 31, 1997.
Net cash provided by (used in) investing was $8,582,831 in 1998 and
($11,335,774) in 1997. This difference in comparable periods is primarily
attributable to the investment of $10,700,287 in a restricted term deposit in
1997 and the receipt of $9,116,529 of proceeds from such term deposit in 1998.
Net cash provided by (used in) financing activities was ($8,511,802) and
$292,169 for the six months ended December 31, 1998 and 1997, respectively. Such
use of cash in 1998 is primarily due to the excess of $16,417,019 in dividends
paid to Newton Grace's shareholder over $7,300,490 in proceeds from bank debt
and purchaser debt in connection with Newton Grace's sale of its
8
<PAGE>
operating assets to Linda Industries Pty Ltd., an Australian subsidiary of the
Registrant.
Pursuant to the terms of Overdraft and Multi-Option facilities (the "Overdraft
and Multi-Option Facilities"), dated February 9, 1999 between National Australia
Bank Limited (the "NAB") and Linda, as detailed in a letter of offer of the NAB
to Linda, dated February 9, 1999, Linda may borrow up to AUD $1,200,000 under
the Overdraft Facility in the form of a revolving credit line at NAB's base
variable rate (currently 8.50% per annum), plus a margin of 1.0% per annum on
balances up to AUD $500,000 and 3.5% per annum on balances over such amount,
calculated daily and payable monthly in arrears. The Overdraft Facility also
requires payment of a line fee equal to 0.8% per annum, payable semi-annually.
In addition, AUD $400,000 may be utilized by Linda under the Multi-Option
Facility in any combination of a documentary letter of credit facility, a
leasing facility or an encashment negotiation advice facility. Certain
negotiation fees were payable and ongoing annual fees are payable by Linda to
the NAB under the Overdraft and Multi-Option Facilities. The purpose of the
Overdraft and Multi-Option Facilities are to provide for day-to-day working
capital requirements of Linda's business, enable the importing and exporting of
goods and enable the leasing of equipment used for "business purposes" and the
assignment of exiting leases from Newton Grace. The Overdraft and Multi-Option
Facilities expire on June 30, 1999. As of February 18, 1999, AUD $1,332,000 was
outstanding under the Overdraft and Multi-Option Facilities.
In order to assist Linda with the purchase of the assets of Newton Grace, the
NAB and Linda have also entered into a Bills Accepted/Discounted (Floating)
facility (the "Bill Facility"), pursuant to which Linda borrowed AUD $10
million. The interest rate payable by Linda under the Bill Facility floats at
NAB's rate for Bank Accepted Bills, which rate currently is approximately 5.0%
per annum. The Bill Facility also requires Linda to pay a facility fee of 1.25%
per annum to the NAB, payable quarterly in advance. Amounts outstanding under
the Bill Facility mature on June 30, 1999.
The Overdraft and Multi-Option Facilities and the Bill Facility (collectively,
the "NAB Facilities") are secured by (i) liens over all of the assets of Linda
(in the form of registered charges over all assets in Australia), (ii) a
guarantee and indemnity to the NAB for AUD $11.6 million from the Registrant
supported by liens over all of its assets and (iii) guarantees and indemnities
to the NAB for AUD $11.6 million from Newton Grace and affiliated persons,
certain of which are supported by liens over all of their respective assets,
including over the shares of common stock of the Registrant held by each of the
foregoing guarantors.
Registrant anticipates that it will be able to meet its cash requirements for
fiscal 1999 with a combination of cash flow from
9
<PAGE>
operations, current cash balances, and/or borrowings under the NAB Facilities.
"YEAR 2000" PROBLEM. The Registrant is aware of the issues associated with the
programming code in existing computer systems acquired from Newton Grace by
Linda as the millennium (Year 2000) approaches. The "Year 2000" problem is
pervasive and complex as virtually every computer operation will be affected in
some way by the rollover of the latter two digit year value to 00. The issue is
whether computer systems will properly recognize date sensitive information when
the year changes to 2000. Systems that do not properly recognize such
information could generate erroneous data or cause a system to fail. Registrant
has upgraded its computers and believes that they are Year 2000 compliant and
that the "Year 2000" problem will not have a material adverse effect upon the
Company.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
(c) On December 10, 1998, pursuant to an Amended and Restated
Stock Purchase and Reorganization Agreement (the "Agreement"), the Registrant
sold to a group of Australian purchasers, including Newton Grace, for AUD
$10,000,000, an aggregate of (i) 27,200,000 shares of Common Stock (pre-reverse
split) and (ii) 3,400,000 shares of Preferred Stock (pre-reverse split). Because
the Registrant does not have a sufficient number of authorized shares of Common
Stock or Preferred Stock to issue all of such shares, the Registrant only was
able to issue to the purchasers 13,499,359 shares of Common Stock (pre-reverse
split). Upon obtaining shareholders' approval and after taking into account a
3.4 to 1 reverse split, the Registrant will issue the balance of such shares to
the purchasers so that there will be issued and outstanding 9,000,000 shares of
Common Stock (of which 8,000,000 will be owned by the purchasers and their
assignees) and 1,000,000 shares of preferred stock (owned by the purchasers).
In connection with the Agreement, the Registrant also sold
450,000 shares of Common Stock (on a pre-reverse split basis) to an individual
investor for a total consideration of US$150,000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
27. Financial Data Schedule
(B) REPORTS ON FORM 8-K
During the quarter ended December 31, 1998, the Registrant filed a Report
on Form 8-K dated December 10, 1998 detailing a change in control of the
Registrant in connection with the Agreement. Financial Statements will be filed
by amendment to the Report on Form 8-K.
11
<PAGE>
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
NETLIVE COMMUNICATIONS, INC.
(Registrant)
/s/Geoffrey R. Player
----------------------------------
Geoffrey R. Player
President and Director
(Chief Executive Officer and
Chief Financial Officer)
Date: February 18, 1999
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from registrant's
unaudited financial statements as of and for the six months ended December 31,
1998 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> $63,991
<SECURITIES> 0
<RECEIVABLES> 427,279
<ALLOWANCES> (30,330)
<INVENTORY> 5,023,542
<CURRENT-ASSETS> 7,325,657
<PP&E> 1,885,935
<DEPRECIATION> (145,053)
<TOTAL-ASSETS> 12,385,160
<CURRENT-LIABILITIES> 9,725,611
<BONDS> 0
0
340
<COMMON> 900
<OTHER-SE> 2,423,192
<TOTAL-LIABILITY-AND-EQUITY> 12,385,160
<SALES> 2,233,923
<TOTAL-REVENUES> 2,233,923
<CGS> 1,953,037
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</TABLE>
