<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earlier event reported): December 10, 1998
------------------
NETLIVE COMMUNICATIONS, INC.
---------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 1-12021 13-3848652
- ------------------------ --------------------- -------------------
(State of Incorporation (Commission File No.) (IRS Identification
or other Jurisdiction) Number)
330 16th Street
Brooklyn, New York 11215
----------------------------------------
(Address of Principal Executive Offices)
(212) 343-7082
---------------------------------------------------
(Registrant's Telephone Number Including Area Code)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
As disclosed in the Current Report on Form 8-K (the "8-K") which is
amended hereby, 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.
Because when the Registrant filed the 8-K it did not have available the
financial statements required to be filed, the Registrant did not file such
financial statements at that time. Pursuant to Item 7.(a)4 of Form 8-K, the
Registrant is filing all required financial statements in this amendment on Form
8-K/A-1.
(a) Financial Statements of Businesses Acquired.
--------------------------------------------
This Report includes the following financial statements of Newton
Grace:
Auditor's Report
Consolidated Statements of Operations
for the Years Ended
June 30, 1998, 1997, and 1996 (audited)
Consolidated Balance Sheets at
June 30, 1998 and 1997 (audited)
Consolidated Statements of Changes in Shareholders
Equity for the Years Ended
June 30, 1998, 1997, and 1996 (audited)
Consolidated Statements of Cash Flows
for the Years Ended
June 30, 1998, 1997, and 1996 (audited)
Notes to Consolidated Financial Statements
<PAGE>
Consolidated Balance Sheet at
December 31, 1998 (unaudited)
Consolidated Statements of Operations
for the Six Months Ended
December 31, 1998 and 1997 (unaudited)
Consolidated Statements of Cash Flows
for the Six Months Ended
December 31, 1998 and 1997 (unaudited)
Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information.
--------------------------------
Because the Transactions are treated for accounting purposes as a
reverse merger in which Newton Grace becomes the accounting acquirer, no pro
forma financial information is required.
(c) Exhibits:
---------
2(a) Amended and Restated Stock Purchase and Reorganization
Agreement dated as of December 10, 1998 by and among NetLive
Communications, Inc., Linda Industries Pty Limited, Modara
Oaks Pty Limited, Budbox Pty Limited, Playbyrne Investments
Pty Limited, Newton Grace Pty Limited, Intercorp Group Pty
Limited, Hallendon Pty Limited, Geoffrey Russell Player, and
Vicki Gaye Player, incorporated by reference to Exhibit 2(a)
to Registrant's Current Report on Form 8-K Dated December 10,
1998.
<PAGE>
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 hereunto duly authorized.
NETLIVE COMMUNICATIONS, INC.
By: /s/Geoffrey Russell Player
--------------------------------------------
Name: Geoffrey Russell Player
Title: Chief Executive Officer and President
Dated: February 22, 1999
<PAGE>
Item 7.(a) Financial Statements of Businesses Acquired
NEWTON GRACE PTY LTD
CONSOLIDATED FINANCIAL STATEMENTS
PREPARED UNDER US GAAP
30 JUNE 1998
Pricewaterhouse Coopers
[logo]
<PAGE>
NEWTON GRACE PTY LTD
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheets of Newton Grace Pty Ltd as of
June 30, 1998, 1997 and 1996 and the related statements of income, changes in
shareholders equity, and cash flows for the years then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Newton Grace Pty Ltd as of
June 30, 1998, 1997 and 1996 and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles in the United States.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
Melbourne, Australia
19 August 1998
<PAGE>
NEWTON GRACE PTY LTD
CONSOLIDATED STATEMENTS OF INCOME
IN UNITED STATES DOLLARS
<TABLE>
<CAPTION>
(ACQUISITION
12 MONTH DATE) JULY 1 TO 12 MONTH 12 MONTH
PERIOD TO NOV. 21 TO (ACQUISITION PERIOD TO PERIOD TO
JUNE 30 JUNE 30 DATE) JUNE 30 JUNE 30
1998 1998 NOV. 21 1997 1997 1996
NOTE $US $US $US $US $US
<S> <C> <C> <C> <C> <C>
Net sales 11,774,468 8,929,617 2,540,258 15,502,040 13,700,067
Cost of goods sold 7,637,898 5,693,852 1,757,658 9,361,584 8,782,690
----------- ----------- ----------- ----------- -----------
Gross profit 4,136,570 3,235,765 782,600 6,140,455 4,917,377
Operating expenses/(income):
Selling, general and 2,714,057 2,029,051 618,117 2,485,274 2,797,935
administrative expense
Amortisation of intangibles 111,755 111,755 - - -
Provision for stock obsolescence - - - 207,737 -
Bad debts 8,481 - 8,481 4,055 763
Bank charges and interest 29,049 16,747 12,150 17,817 19,465
Travel and entertainment expenses 43,709 28,003 15,160 15,500 13,431
Provision for warranties - - - 76,580 -
Provision for redundancy pay (64,755) (64,755) - 76,580 -
Provision for doubtful debts (5,101) (971) (4,326) 19,145 -
Profit on sale of assets (2,362) (2,362) - (8,146) -
Penalty on late payment of tax 30,001 30,001 - - -
instalments
Sundry 600 600 - - (2,036)
----------- ----------- ----------- ----------- -----------
Operating Income 1,271,136 1,087,696 133,018 3,245,913 2,087,819
Other Expense/(Income):
Interest expense 30,438 30,438 - 908 -
Interest income
- - third parties (523,263) (290,628) (231,154) (710,357) (791,644)
- - related parties 15 (29,673) (29,673) - (132,257) (223,061)
Option premium expense 140,029 140,029 - - -
----------- ----------- ----------- ----------- -----------
Income before tax 1,653,605 1,237,530 364,172 4,087,618 3,102,524
Income taxes 2 726,965 574,433 131,102 1,477,270 1,123,222
----------- ----------- ----------- ----------- -----------
Net Income 926,640 663,097 233,070 2,610,349 1,979,302
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes form an integral part of these financial statements.
<PAGE>
NEWTON GRACE PTY LTD
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 1998, 1997 AND 1996
IN UNITED STATES DOLLARS
<TABLE>
<CAPTION>
NOTES 1998 1997 1996
ASSETS $US $US $US
<S> <C> <C> <C> <C>
Cash and cash equivalents 311 10,424,120 6,407,622
Cash under restricted use 9,099,000 - -
Receivables, net 3 2,618,952 6,010,383 5,997,788
Amounts receivable from related parties 3 846,182 - 97,529
Investments 4 235,819 508,893 3,775,386
Inventories 5 3,582,617 2,865,607 2,172,175
Prepaid expenses 75,173 40,594 2,116
Prepaid expenses to a related party 15 327,928 - -
Deferred tax asset 2 - 36,999 -
------------- ------------ ------------
Total current assets 16,785,982 19,886,596 18,452,616
Amounts receivable from related parties 3 - - 1,403,937
Property, plant and equipment, net 6 1,447,790 489,116 680,044
Intangibles, net 7 3,353,347 - -
Deferred tax asset 2 37,397 84,331 18,107
------------- ------------ ------------
Total non-current assets 4,838,534 573,447 2,102,088
------------- ------------ ------------
TOTAL ASSETS 21,624,516 20,460,043 20,554,704
============= ============ ============
LIABILITIES
Bank overdraft 135,321 - -
Accounts payable and accrued expenses 1,572,970 1,474,821 1,900,464
Amounts payable to related parties 8 - 360,305 28,736
Provision for income tax 393,254 1,196,310 806,319
Deferred tax liability 2 48,661 - 49,673
Lease liabilities 9 15,837 - -
Other 10 161,097 306,022 176,583
------------- ------------ ------------
Total current liabilities 2,327,140 3,337,458 2,961,775
Lease liabilities 9 65,799 - -
Amounts payable to related parties 8 - - 1,485,246
------------- ------------ ------------
Total non-current liabilities 65,799 - 1,485,246
------------- ------------ ------------
Total liabilities 2,392,939 3,337,458 4,447,021
------------- ------------ ------------
SHAREHOLDERS' EQUITY
Share Capital - 10,000 shares authorised,
12 shares issued and outstanding 9 9 9
Additional paid-in capital 5,072,271 - -
Capital profits reserve 2,540 2,540 2,540
Retained earnings 17,459,071 16,532,431 14,594,942
Foreign Currency Translation Reserve (3,302,314) 587,605 1,510,192
------------- ------------ ------------
Total shareholders equity 19,231,577 17,122,585 16,107,683
============= ============ ============
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 21,624,516 20,460,043 20,554,704
============= ============ ============
Commitments for expenditure 11
Contingent liabilities 12
</TABLE>
The accompanying notes form an integral part of these financial statements.
<PAGE>
NEWTON GRACE PTY LTD
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
IN UNITED STATES DOLLARS
<TABLE>
<CAPTION>
ADDITIONAL CAPITAL FOREIGN TOTAL
ISSUED PAID-IN PROFITS RETAINED CURRENCY SHAREHOLDERS
NOTE CAPITAL CAPITAL RESERVE EARNINGS TRANSLATION EQUITY
RESERVE
$US $US $US $US $US $US
<S> <C> <C> <C> <C> <C> <C> <C>
Opening balance - 9 - 2,540 14,486,600 - 14,489,148
1 July 1995
Net income - - - 1,979,302 - 1,979,302
Dividends paid - - - (1,870,960) - (1,870,960)
Foreign Currency - - - - 1,510,192 1,510,192
Translation
-------- -------- --------- ----------- ----------- ------------
Closing balance - 9 - 2,540 14,594,942 1,510,192 16,107,682
30 June 1996
Net income - - - 2,610,349 - 2,610,349
Dividends paid - - - (672,860) - (672,860)
Foreign Currency - - - - (922,587) (922,587)
Translation
-------- -------- --------- ----------- ----------- ------------
Closing balance - 9 - 2,540 16,532,431 587,605 17,122,584
30 June 1997
Net income - - - 240,995 - 240,995
Dividends paid - - - - - -
-------- -------- --------- ----------- ----------- ------------
Closing balance - 9 - 2,540 16,773,426 587,605 17,363,579
21 November 1997
(Acquisition date)
Net income - - - 685,645 - 685,645
Dividends paid - - - - - -
Additional paid-in 14 - 5,072,271 - - - 5,072,271
capital
Foreign Currency - - - - (3,889,918) (3,889,918)
Translation
-------- -------- --------- ----------- ----------- ------------
Closing balance - 9 5,072,271 2,540 17,459,071 (3,302,313) 19,231,577
30 June 1998 ======== ========= ========= =========== =========== ============
</TABLE>
The accompanying notes form an integral part of these financial statements.
<PAGE>
NEWTON GRACE PTY LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
IN UNITED STATES DOLLARS
<TABLE>
<CAPTION>
(ACQUISITION
12 MONTH DATE) JULY 1 TO 12 MONTH 12 MONTH
PERIOD TO NOV. 21 TO (ACQUISITION PERIOD TO PERIOD TO
JUNE 30 JUNE 30 DATE) JUNE 30 JUNE 30
1998 1998 NOV. 21 1997 1997 1996
$US $US $US $US $US
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 14,239,846 7,319,401 6,238,918 14,939,362 12,853,703
Payments to suppliers (11,396,583) (5,646,015) 5,205,121 13,002,923 11,060,813
and employees ------------- ------------ ------------ ------------ -------------
2,843,263 1,673,386 1,033,797 1,936,439 1,792,890
Interest received 606,970 290,628 287,292 750,132 783,993
Interest and finance costs paid (33,041) (33,041) - (908) -
Income tax paid (1,203,797) (912,818) (233,364) (1,185,846) (2,200,378)
------------- ------------ ------------ ------------ -------------
Net cash provided by operating 2,213,396 1,018,155 1,087,725 1,499,817 376,505
activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for purchases of property, (104,243) (94,367) (4,886) (63,959) (128,097)
plant and equipment
Proceeds from sales of property, 9,797 6,087 3,241 74,681 -
plant and equipment
(Payments) for/proceeds from 200,293 (251,739) 442,446 3,143,921 1,441,535
investments
Net proceeds from/(payments to) (1,700,557) (1,700,557) - 490,559 452,031
related parties
Payments for cash deposits held under (8,775,000) (8,775,000) - - -
restriction
------------- ------------ ------------ ------------ -------------
Net cash provided/(used) by investing (10,369,710) (10,815,576) 440,800 3,645,202 1,765,469
activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in bank overdraft 144,456 144,456 - - -
Dividends paid - - - (672,860) (1,870,960)
------------- ------------ ------------ ------------ -------------
Net cash flows provided/(used) in 144,456 144,456 - (672,860) (1,870,960)
financing activities
NET INCREASE/(DECREASE) IN CASH AND (8,011,858) (9,652,965) 1,528,525 4,472,159 271,014
CASH EQUIVALENTS
Effects of exchange rate changes in (2,411,951) (1,608,063) (691,306) (442,658) 531,535
the balances of cash held in foreign
currencies at the beginning of the
financial year
Cash and cash equivalents at 10,424,120 11,261,339 10,424,120 6,394,619 5,592,070
beginning of the period
------------- ------------ ------------ ------------ -------------
CASH AND CASH EQUIVALENTS 311 311 11,261,339 10,424,120 6,394,619
AT END OF THE PERIOD ============= ============ ============ ============ =============
Non cash financing activities Note 19
</TABLE>
The accompanying notes form an integral part of these financial statements.
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996
IN UNITED STATES DOLLARS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Newton Grace Pty Ltd was incorporated in Melbourne, Australia in September 1982
and acquired the electric blanket manufacturing business known as "Linda
Electric Industries". The principal activities of the company are the
manufacturing, importing and sale of electrical consumable household and
personal care products such as electric blankets, kettles, toasters, hair care
and irons.
Effective November 21, 1997 the company was beneficially acquired by Budbox Pty
Ltd for US$21.1 million. Refer to note 14 for details of change in ownership.
A summary of the significant accounting policies used in the preparation of the
accompanying financial statements follows:
BASIS OF PREPARATION
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles in the United States ("US GAAP").
The financial statements include the consolidation of Peter Pan Electrics Pty
Ltd. All transactions between entities included in the financial statements
have been eliminated.
The functional and reporting currency of the company is Australian dollars. All
numbers reported are in Australian dollars unless otherwise specifically
stated.
Due to the company being privately owned, with ultimate management control and
ownership of the company being held by the directors, the operating results and
financial position of the company as disclosed in the financial statements may
significantly differ from those that would have been obtained if the management
control of the company was independent from ownership. Transactions between the
company and its directors, included in the determination of net income, are set
out in Note 15.
USE OF ESTIMATES
The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements and related notes to the financial statements.
Actual results may differ from these estimates.
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
Revenue from net sales of products is recognised upon shipments of products to
customers. In addition, accruals for customers returns and rebates are recorded
when revenues are recognised. The returns and rebates are recorded as a
reduction to trade receivables of the company.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and highly liquid investments
with original maturities of three months or less. Cash with financial
institutions in the form of short term deposits, held as collateral against
borrowings of the parent entity and for which the use by the company is
restricted, are not considered to be cash and cash equivalents due to the
restrictions in place. Cash of this nature is disclosed as cash under
restricted use in the balance sheet (refer to note 12 for terms of the
deposit).
INCOME TAX
The company accounts for income taxes under Statement of Financial Accounting
Standards No 109 " Accounting for Income Taxes" whereby income taxes are
recognised during the period in which transactions enter into the determination
of financial statement income, with deferred taxes being provided for temporary
differences between amounts of assets and liabilities for financial reporting
purposes and such amounts as measured by tax laws. Income tax accounting
information is disclosed in note 2.
INVENTORIES
Inventories are measured at the lower of cost or market value. If the cost of
inventories exceeds their market value, provisions are made for the difference
between cost and market value. Costs are determined based on standard costing
which approximates the first-in first-out (FIFO) basis and includes direct
materials, direct labour and a proportion of variable and fixed overhead
expenses.
PROPERTY, PLANT AND EQUIPMENT
To the date of the change in the beneficial ownership of the company (referred
to in note 14), property, plant and equipment (excluding die casting machines)
was stated at cost and was principally depreciated using the reducing balance
method over the estimated useful lives of the assets. Die casting machines were
stated at cost and were depreciated using a straight line method over the
estimated useful lives of the assets.
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Rates of depreciation applied for major classes of assets were as follows;
Plant and Machinery 10 - 30%
Other factory and office equipment 20 - 40%
Die casting machines 10 - 20%
Motor vehicles & furniture and fittings 20 - 40%
On the change in ownership of the company effective November 21, 1997 property,
plant and equipment was restated to fair value. Items of property, plant and
equipment carried at fair value are being depreciated over the remaining useful
life of the assets on a straight line basis. Assets acquired since 21 November
1997 are stated at cost and are being depreciated over the estimated useful
lives of the assets. The rates of depreciation applied to the major classes of
property, plant and equipment are as follows;
Plant and Machinery (including die casting) 10%
Other factory and office equipment 20%
Motor vehicles 20%
Furniture and fittings 20%
Equipment under capital leases 15-20%
IMPAIRMENT OF LONG-LIVED ASSETS
At each balance sheet date, and on significant changes of circumstances or
events which indicate the carrying value of an asset may not be recoverable,
the company reviews long-lived assets and intangibles for possible impairment
in accordance with FAS No. 121, "Accounting for the Impairment of Long-Lived
Assets". The implementation of FAS 121 did not have a material impact on the
company.
INTANGIBLES
Goodwill
The company has classified as goodwill the excess of purchase consideration to
fair value of assets of the company acquired by Budbox Pty Ltd with effect from
November 21, 1997. Refer to note 14. Goodwill is being amortised on a straight
line basis over 20 years. Amortisation of goodwill charged to earnings in the
period amounted to US$14,426. There was no amortisation of goodwill in prior
periods.
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLES (CONTINUED)
Brand names
Brand names represent the portion of the purchase consideration paid by Budbox
Pty Ltd which was allocated to the cost of purchasing the "Linda" brand names.
Refer to note 14. These assets are amortised on a straight line basis over 20
years. Amortisation of brand names in 1998 was US$102,947. At each balance
sheet date, the carrying value of brand names is evaluated in relation to the
operating performance and future undiscounted net cash flows generated by the
brand names.
ADVERTISING EXPENSES
All costs associated with advertising and promoting products are expensed in
the period incurred. Advertising expenses of US$364,026, US$919,147 and
US$1,326,891 were charged against earnings in 1998, 1997 and 1996 respectively.
WARRANTY
The company provides the ultimate consumer a warranty with each product against
defects in design, materials and workmanship. The company has provided for
estimated future costs relating to warranty expense based upon previous claims
history. The provision for warranties at balance date was US$60,660
(1997:US$74,480, 1996 : Nil).
LEASES
Lease payments under operating leases entered into by the company, where
substantially all the risks and benefits remain with the lessor, are charged as
expenses in the periods in which they are incurred. Lease payments charged to
earnings were US$55,995, US$222,082 and US$126,666 in 1998, 1997 and 1996 in
respect to the lease of rental property under operating leases.
Certain non-cancellable leases are classified as capital leases, and the leased
assets are included as part of "Property, plant & equipment" in the balance
sheet. Items under capital leases include motor vehicles and office equipment.
Finance provided in taking out capital leases are included in lease liabilities
as disclosed in note 9. Lease commitments payable under capital leases are
disclosed in note 11.
EMPLOYEE ENTITLEMENTS
Provision is made in respect of the company's liability for vacation and long
service leave at balance date. Provisions for long service leave are made for
all employees with whom long service leave is legally vested which includes all
employees with more than 10 years service with the company. No provision is
made at balance date in respect of the company's liability for sick leave which
does not vest with the employee.
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PENSION PLANS
The company contributes to the Linda Electric Industries Superannuation Plan
("the Plan"). The Plan is an accumulation plan which provides benefits to
employees upon retirement.
The company is obliged to contribute on behalf of all permanent employees a
minimum of 6% of annual employees salary to the plan, and this is legally
enforceable. Defined contribution pension expense for the company was
US$152,729, US$209,580 and US$223,510 for 1998, 1997 and 1996 respectively.
Sufficient funds are available for the purposes of the Plan to satisfy all
benefits that would have been vested under the Plan on the voluntary or
compulsory termination of employment of each employee member. Actuarial
assessments are not required as the Plan is fully vested.
The Plan forms part of the AMP Superleader Plan managed by the AMP Society in
Australia.
EARNINGS PER SHARE
Due to the company being privately owned with only 12 issued shares, disclosure
of primary net income per share is not considered appropriate as it would be
misleading to users of the financial statements.
FINANCIAL INSTRUMENTS AND FINANCING FACILITIES
The carrying amount of cash and cash equivalents, short term investments,
receivables and unsecured loans approximates fair value because of the short
maturity of the instruments.
On June 30, 1998 the company purchased US dollar foreign currency options for
speculative purposes. The options were purchased on June 30, 1998 for a cost of
US$131,295. The cost of purchasing the options has been included in the
determination of net income. The options have an expiry date of October 30,
1998 and are for a notional amount of US$2,426,400. The options are considered
to be "held for trading" with the fair value of the options at the balance date
being nil. Accordingly the company has not brought to account any unrealised
gains or losses on the options. The fair value of the options is based on both
market rates as at the balance date and forward rates. As the options were
purchased by the company the risk of material loss to the company is minimal as
the options are exercisable at management's discretion.
As at June 30, 1998 the company had a overdraft facility with an Australian
financial institution to a limit of US$303,300. As at the balance date
US$135,321 of this facility was used by the company. The interest rate
applicable to the facility was 11.25%.
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS AND FINANCING FACILITIES (CONTINUED)
Further financing facilities available to the company, and the used and unused
portion, as at the balance date are as follows;
FACILITY USED UNUSED TOTAL FACILITY
$US $US $US
Leasing facility 52,453 372,167 424,620
Documentary letter of credit - 242,640 242,640
---------- ---------- ------------
52,453 615,169 667,260
NOTE 2 INCOME TAX
The actual income tax expense attributable to earnings for the years ended June
30, 1998, 1997 and 1996 differed from the amounts computed by applying the
Australian federal tax rate of 36% to pre-tax earnings as a result of the
following:
<TABLE>
<CAPTION>
1998 1997 1996
$US $US $US
<S> <C> <C> <C>
Net income before tax 1,643,226 4,087,618 3,102,524
Prima facie tax expense for the period at the rate of 36% 591,561 1,471,543 1,116,908
The following tax effect on these items caused the total
charge for income tax to vary from the above:
Non deductable depreciation 19,335 - -
Amortisation of intangibles 42,255 - -
Non-deductable consulting fees 62,471 - -
Other 11,343 5,727 6,314
------------ ----------- -----------
Income tax expense for the year 726,965 1,477,270 123,222
============ =========== ===========
</TABLE>
Income tax expense for the year relates entirely to Australian company taxation
levied by the Australian Federal Government.
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 2 INCOME TAX (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the company's deferred tax assets which required no valuation allowance and
liabilities are as follows;
<TABLE>
<CAPTION>
Current deferred tax asset/(liability); 1998 1997 1996
$US $US $US
<S> <C> <C> <C>
Inventories 59239 72736 -
Interest receivable (10006) (35737) (49673)
Prepaid expenses (145116) - -
Other 47,222 - -
---------- --------- ---------
Total current deferred tax asset/(liability) (48,661) 36,999 (49,673)
Non-current tax asset/(liability);
Employee and post-retirement benefits 36,157 88,316 77,083
Other 32,688 40,219 7,096
Depreciation (31,448) (44,204) (66,072)
---------- --------- ---------
Total Non-current tax asset 37,397 84,331 18,107
---------- --------- ---------
Net deferred tax asset / (liability) 11,264 121,330 (31,566)
========== ========= =========
</TABLE>
NOTE 3 RECEIVABLES, NET
<TABLE>
<CAPTION>
NOTES
CURRENT
<S> <C> <C> <C>
Trade debtors 2,647,016 5,948,998 5,875,176
Less: Provision for doubtful debts 30,330 42,826 25,623
------------- ------------ ------------
2,616,686 5,906,172 5,849,553
Accrued interest receivable - 91,671 137,982
Other debtors 2,266 12,539 10,253
------------- ------------ ------------
2,618,952 6,010,383 5,997,788
============= ============ ============
</TABLE>
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
In United States Dollars
NOTE 3 RECEIVABLES, NET (CONTINUED)
AMOUNTS RECEIVABLE FROM RELATED PARTIES
<TABLE>
<CAPTION>
NOTES 1998 1997 1996
$US $US $US
<S> <C> <C> <C> <C>
CURRENT
Accrued interest receivable 15 27,796 - -
Loans to related party 15 818,385 - 97,529
--------- --------- ---------
846,182 - 97,529
========= ========= =========
NON-CURRENT
Loans to Trustees of Trusts in which a 15 - - 1,403,937
director has a beneficial interest
========= ========= =========
</TABLE>
NOTE 4 INVESTMENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Deposits held in trust 235,819 - -
Short term interest bearing investments - 508,893 3,775,386
--------- --------- ---------
235,819 508,893 3,775,386
========= ========= =========
</TABLE>
Deposits held in trust represents monies held in trust which are not readily
accessible by the company. Interest is receivable on the deposits at market
rates, excluding a deposit of US$48,528 which is held as security against a
property occupied under an operating lease.
Short term investments include interest bearing term deposits with Australian
banks with maturities in excess of 3 months from balance date. The average
interest rate on the investments was 6%.
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 5 INVENTORIES
<TABLE>
<CAPTION>
1998 1997 1996
$US $US $US
<S> <C> <C> <C>
Raw materials and stores 1,604,748 1,751,114 1,134,150
Work-in-progress 336,556 115,063 89,905
Finished goods 1,805,864 1,201,470 948,120
------------ ------------ -----------
3,747,168 3,067,647 2,172,175
Less: Provision for inventory obsolescence 164,551 202,040 -
(excess of cost over market value)
------------ ------------ -----------
3,582,617 2,865,607 2,172,175
============ ============ ===========
NOTE 6 PROPERTY, PLANT & EQUIPMENT, NET
Plant and equipment 1,354,008 1,845,773 1,939,003
Motor vehicles 26,690 69,937 63,205
Office equipment 39,964 99,637 103,911
Furniture and fittings 34,895 88,594 180,705
Leased assets 88,571 - -
------------ ------------ -----------
1,544,128 2,103,941 2,286,824
Less: Accumulated depreciation 96,338 1,614,825 1,606,780
------------ ------------ -----------
Total property, plant and equipment 1,447,790 489,116 680,044
============ ============ ===========
NOTE 7 INTANGIBLES, NET
Brand names 3,033,000 - -
Goodwill 425,036 - -
------------ ------------ -----------
3,458,036 - -
Less: Accumulated amortisation 104,689 - -
------------ ------------ -----------
Total intangibles 3,353,347 - -
============ ============ ===========
</TABLE>
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 8 AMOUNTS PAYABLE TO RELATED PARTIES
<TABLE>
<CAPTION>
1998 1997 1996
$US $US $US
CURRENT
<S> <C> <C> <C> <C>
Unsecured loans from a director 15 - 360,305 28,736
=========== ========== ===========
NON-CURRENT
Unsecured loans from entities in which a 15 - - 1,485,246
director has a beneficial interest =========== ========== ===========
No interest charge is incurred on amounts payable to related parties and there
is no fixed repayment schedule.
NOTE 9 LEASE LIABILITIES
Current
Lease liability 22,408 - -
Less : Unexpired lease charges 6,571 - -
---------- --------- ----------
15,837 - -
Non current
Lease liability 76,702 - -
Less : Unexpired lease charges 10,903 - -
---------- --------- ----------
65,799 - -
---------- --------- ----------
Total lease liabilities 81,636 - -
=========== ========== ===========
The average weighted interest rate on capital leases during the period was
8.5%.
NOTE 10 OTHER CURRENT LIABILITIES
Employee entitlements 100,437 157,062 176,583
Warranty claims 60,660 74,480 -
Redundancy pay - 74,480 -
---------- --------- ----------
161,097 306,022 176,583
=========== ========== ===========
</TABLE>
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 11 COMMITMENTS FOR EXPENDITURE
At June 30, 1998 the future minimum lease payments under operating and capital
leases are as follows:
OPERATING LEASES CAPITAL
$US LEASES
YEAR $US
1998/99 133,452 22,408
1999/00 257,198 22,408
2000/01 195,325 22,408
2001/02 - 18,416
2002/03 - 13,470
--------- ----------
Total minimum lease payments 585,976 99,110
=========
Less amount representing interest 17,474
----------
Future lease obligations Note 9 81,636
==========
Rental of property and advertising space for which no lease has been executed,
and for which there is no expenditure commitments, amounted to US$55,995,
US$222,082 and US$126,666 in 1998, 1997 and 1996 respectively.
During the ordinary course of business the company enters into standing order
arrangements with suppliers. These arrangements are cancellable at the option
of the company.
NOTE 12 CONTINGENT LIABILITIES
Customer returns
As a manufacturer of goods for the retail market, the company is exposed to
returns and claims from customers in respect to its products. Known returns and
claims are deducted from accounts receivable at each balance date. In addition
a provision for warranty claims of US$60,660 has been brought to account to
cover future potential warranty claims and is based on the best estimates and
the most current information available to the company. As at the balance date
the directors of the company were unaware of any contingent liabilities in
respect to product returns and claims, which had not been provided for, or any
other matter which is likely to have a material effect on the company.
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 12 CONTINGENT LIABILITIES (CONTINUED)
Registered charge against assets of the company
With effect from November 21, 1997, certain charges over the assets of the
company have been granted to an Australian financial institution. The charges
over the assets of the company are as follows;
(a) A registered mortgage debenture to the value of US$15,650,280 from the
company over the whole of the company's assets including goodwill and
uncalled capital and called but unpaid capital.
(b) A term deposit letter of set-off over a term deposit of the company,
included in cash under restricted use to a value of US$9,099,000. The
term deposit letter of set-off allows the Australian financial
institution, with whom the deposit is held, to set-off the term
deposit of the company against the borrowings of Budbox Pty Ltd.
The term deposit has a maturity of July 16, 1998 however the deposit
is continually rolled into new maturities. The average interest rate
on the deposit during the period was 5.3%.
Contingent liabilities to the ultimate parent company, Budbox Pty Ltd
The company has entered into an agreement whereby if the manufacturing assets
and brand names of the company are sold, Budbox Pty Ltd is entitled to a fee
equalling 100% of the prior year management fee and bonus paid by the company
to Budbox Pty Ltd for the provision of management services.
NOTE 13 CONCENTRATION OF CREDIT RISK
In the normal course of business the company extends credit to its customers
who consist of large retail chain stores throughout Australia. In 1998 the
largest retail group in Australia, Coles Myer Ltd, accounted for approximately
43% (1997: 53%, 1996 - 51%) of net sales. The Australian retail market is
dominated by a small number of large retail groups. The majority of companies
operating in the Australian retail market are subject to similar concentrations
of credit risk as experienced by the company. The company does not believe that
this concentration of sales and credit risk represents a material risk of loss
with respect to its financial statements as at the balance date.
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 14 CHANGE IN BENEFICIAL OWNERSHIP OF THE COMPANY
On November 21, 1997 the ultimate beneficial ownership of the company was
acquired by Budbox Pty Ltd from Mr V Smart and Mrs S Smart for a cash price of
US$21,120,626. Mr V Smart and Mrs V Smart were the ultimate beneficial
shareholders in all of the share capital of the company until this date. On
this date the ultimate beneficial shareholding of the company passed to Budbox
Pty Ltd of which Mr G Player and Mrs V Player are directors and ultimate owners
of all of the issued capital. Mr V Smart and Mrs V Smart ceased to be directors
as at this date. The acquisition has been treated as a business combination
using the purchase method of accounting.
An analysis of the purchase consideration and the fair value of assets, as
determined by the acquirer, is as follows;
$US
Purchase consideration 21,120,626
Less fair value of assets acquired:
Cash and cash equivalents 11,261,339
Receivables 1,260,506
Inventories 5,321,232
Prepaid expenses 40,075
Property, plant and equipment 1,557,645
Deferred tax asset 150,588
Brands and trademarks 3,442,500
Trade creditors and accruals (1,171,768)
Provision for income tax (920,973)
Provision for employee entitlements (165,240)
Other provisions (137,700)
----------------
Total fair value of assets acquired (20,638,203)
----------------
Excess of cost over fair value 482,422
================
The excess of cost over fair value of assets acquired has been treated as
goodwill and is included in note 7. The restatement of assets and liabilities
to fair value with effect from November 21, 1997 has resulted in an increase in
additional paid-in capital of US$5,072,271.
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 15 RELATED PARTIES
Directors
The directors of the company during the financial year were as follows;
Mr V Smart (Resigned November 21, 1997)
Mrs S Smart (Resigned November 21, 1997)
Mr G Player (Appointed November 21, 1997)
Mrs V Player (Appointed November 21, 1997)
Mr G Watkins (Appointed November 21, 1997 resigned June 5, 1998)
Items included in the determination of net income
During the year the following items, representing transactions between the
company and directors and entities in which directors have a beneficial
interest, were incurred which had an effect on the determination of net income
of the company:
<TABLE>
<CAPTION>
12 MONTH 12 MONTH
NOV. 21 TO JULY 1 TO PERIOD TO PERIOD TO
JUNE 30 NOV. 21 1997 JUNE 30, JUNE 30,
1998 $US 1997 1996
$US $US $US
<S> <C> <C> <C> <C>
Mr V Smart & Mrs S Smart
Rental of property - 59,370 222,082 126,666
Remuneration of directors (including superannuation) - - 85,077 129,500
Interest received on loans with entities in which - - 132,257 223,061
directors have a beneficial interest
Mr G Player & Mrs V Player
Management fees - Mr G Player 356,180 - - -
Directors fee - Mrs V Player 16,190 - - -
Reimbursement of travel expenses of G Player paid by 28,005 - - -
Budbox Pty Ltd
Rental facility fee paid to Budbox Pty Ltd 129,520 - - -
Interest income on Budbox Pty Ltd receivable 29,673 - - -
</TABLE>
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 15 RELATED PARTIES (CONTINUED)
Items included in the determination of net income (continued)
12 MONTH 12 MONTH
NOV. 21 TO JULY 1 TO PERIOD TO PERIOD TO
JUNE 30 NOV. 21 JUNE 30, JUNE 30,
1998 1997 1997 1996
$US $US $US $US
Mr G Watkins
Consulting fees 117,201 - - -
Balances with related entities
During the year the company paid and received cash on behalf of directors, and
entities associated with the directors, which were of a personal nature and had
no effect on the determination of net income. Transactions of this nature were
entered into the loan accounts of the respective parties held with the company.
The balances of the loan accounts, and all other balances with related
companies included in the balance sheet of the company, are set out below;
<TABLE>
<CAPTION>
NOTES 1998 1997 1996
PAYABLES $US $US $US
<S> <C> <C> <C> <C>
Unsecured loans - Mr V Smart 8 - 360,305 28,736
Unsecured loans from entities in which a director 8 - - 1,485,246
has a beneficial interest
</TABLE>
The unsecured loan with Mr V Smart, represents the balance of transactions
between the company and Mr V Smart including the rental of property from which
the company operates, payment of dividends and other cash transactions
processed by the company on the behalf of Mr V Smart for which there is no
effect on the determination of income. No interest was charged to the company
on the loan by Mr V Smart.
Unsecured loans from entities in which a director has a beneficial interest
represents loans obtained from entities associated with Mr V Smart. No interest
was charged to the company on the loan and the amount was transferred to the
unsecured loan account with Mr V Smart during 1997.
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 15 RELATED PARTIES (CONTINUED)
Balances with related entities (continued)
<TABLE>
<CAPTION>
NOTES 1998 1997 1996
RECEIVABLES AND OTHER ASSETS $US $US $US
<S> <C> <C> <C> <C>
Unsecured Loan - Budbox Pty Ltd 3 818,385 - -
Interest receivable on Budbox Pty Ltd loan 27,796 - -
Prepaid management fee to Budbox Pty Ltd 181,982 - -
Prepaid rent and outgoings 145,946 - -
Loan to Dudley Pines Pty Ltd 3 - - 97,529
Loans to Trustees of Trusts in which Mr V Smart 3 - - 1,403,937
has a beneficial interest
</TABLE>
The receivable from Budbox Pty Ltd represents the balance of transactions
outstanding between the company and Budbox Pty Ltd. The transactions represent
cash payments processed by the company on the behalf of Budbox Pty Ltd for
which there is no effect on the determination of income. Management fees to Mr
G Player, reimbursements of travel expenses and the rental facility fee have
been offset against the balance of the receivable with Budbox Pty Ltd. Interest
is charged on the receivable from Budbox Pty Ltd at the end of each month at
the rate of 6.7%. The total interest income earned on the receivable during the
year was US$31,164.
In the month of June 1998 the company has prepaid to Budbox Pty Ltd the 1999
management fee for Mr G Player. In addition the rent and outgoing commitments
for the lease of property from an unrelated third party for the 11 month period
ending 30 June 1999 have been paid to entity associated with Mr G Player. The
commitments are payable to the third party lessor monthly in advance, with the
entity associated with Mr G Player to whom the advance payments were made,
being responsible for ensuring the timely payments of the lease commitments to
the lessor.
Dudley Pines Pty Ltd is an entity of which Mr V Smart is a director. No
interest was received on the loan during the year and it was repaid in full
during 1997.
Interest income of US$132,257 and US$223,061 was received in 1997 and 1996
respectively on the loans to trustees of trusts in which Mr V Smart has a
beneficial interest. The interest rate in 1997 was 10.5% (1996 - 10.5%). During
1997 the loans were offset with the unsecured loan with Mr V Smart and
therefore reduced to a nil balance at June 30, 1997. Accordingly there was no
interest income earned on the balance in the year ended June 30, 1998.
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 16 SEGMENT INFORMATION
The company operates principally in the one industry segment being the
manufacture and sale of electrical home appliances. The company's operations
are in Australia and all sales are made to the Australian domestic market.
NOTE 17 POST BALANCE DATE EVENTS
The company is currently engaged in negotiations with Netlive Entertainment
Inc. ("Netlive"), a U.S. publicly listed corporation. It is proposed, subject
to various approvals, that Netlive will acquire the "Linda" business from the
company. The company will become one of the shareholders in Netlive.
A letter of intent has been signed. Various legal agreements and contracts have
been prepared to complete the transaction. Completion is expected in October
1998.
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 18 RECONCILIATION OF NET INCOME TO NET CASH INFLOW PROVIDED BY
OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1998 1997 1996
$US $US $US
<S> <C> <C> <C>
NET INCOME 926,640 2,610,349 1,979,302
Adjustments to reconcile net income to net cash provided by:
Depreciation and amortisation 268,212 155,071 163,016
Provision for doubtful debts (5,101) 19,145 -
Provision for redundancy pay (68,010) 76,580 -
Provision for inventory obsolescence - 207,737 -
Provision for warranties - 76,580 -
Net gain on sale of current assets (2,481) (8,145) -
Interest income on loans from related parties (31,164) (132,257) (222,724)
Non cash expenses applied against receivable from 533,866 - -
related party
Change in operating assets and liabilities:
Increase/(decrease) in provision for income tax (651,484) 446,835 (1,046,149)
Increase/(decrease) in trade creditors 416,857 (329,580) 362,809
Increase in inventories (1,400,038) (1,044,233) (279,334)
(Increase)/decrease in receivables 2,548,368 (373,135) (632,044)
(Increase)/decrease in prepaid expenses (414,875) (39,688) 42,216
(Increase)/decrease in deferred tax balances 123,418 (155,411) (24,507)
Decrease in other operating assets - - 9,608
Increase/(decrease) in employee provisions (30,812) (10,031) 24,312
------------- ----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,213,396 1,499,817 376,505
============= =========== ==========
</TABLE>
NOTE 19 NON CASH FINANCING ACTIVITIES
During the year the company financed the purchase of office equipment and motor
vehicles to a total value of US$96,861 using capital leases.
<PAGE>
NEWTON GRACE PTY LTD
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 JUNE 1998, 1997 AND 1996 (CONTINUED)
IN UNITED STATES DOLLARS
NOTE 20 RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued certain Statements of
Financial Accounting Standards which are not effective with respect to the
fiscal years presented in the consolidated financial statements.
FAS No. 130 "Reporting Comprehensive Income" was issued by the Financial
Accounting Standards Board in June, 1997 and is effective for fiscal years
beginning after December 15, 1997. It will be effective for the consolidated
financial statements for the year ended 30 June 1999. Reclassification of
financial statements for earlier periods provided for comparative purposes is
required. This Statement establishes the guidelines for the reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general - purpose financial statements. It
requires that all items that are required to be recognised under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements, it does not address issues of recognition or measurement. The Group
has assessed the requirements of the statement and it is not expected that
adoption of the statement will significantly effect the disclosures within the
financial statements.
FAS No. 131 " Disclosures about Segments of an Enterprise and Related
Information" is effective for fiscal years beginning after December 15, 1997.
It will be effective for the consolidated financial statements for the year
ending 30 June, 1999. Reclassification of financial statements for earlier
periods provided for comparative purposes is required. The Statement
establishes guidelines for the way that public business enterprises report
information about operating segments in financial statements. The Statement
also establishes guidelines for related disclosures about products and
services, geographic areas, and major customers. Adoption of this Statement
will not effect the Group's results or financial position. The company
currently only predominates in one segment (as set out in Note 6). Due to this
the adoption of this statement is not expected to have any effect on the
segment information presented by the company.
FAS No. 132, "Employers Disclosures about Pensions and Other Post Retirement
Benefits" was issued in February 1998. It requires revised footnote disclosure
related to pension and other benefits. The Group is currently assessing the
impact of adopting this Statement on its consolidated financial statements. The
statement is effective for the consolidated financial statements for the year
ending June 30, 1999.
FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was
issued in June 1998. The statement will be effective for the consolidated
financial statements for the year ending June 30, 2000. The company is
currently assessing the impact of this statement on the operations of the
company.
<PAGE>
NEWTON GRACE PTY LTD
MANAGEMENT REPORT ON FINANCIAL STATEMENTS
The consolidated financial statements have been prepared by management, which
is responsible for the integrity and objectivity of that information. Where
appropriate, they reflect estimates based on judgements of management. The
statements have been prepared in conformity with accounting principles
generally accepted in the United States.
The company maintains a system of internal control over financial reporting and
over safeguarding of assets against unauthorised acquisition, use or
disposition which is designed to provide reasonable assurance as to the
reliability of financial records and the safeguarding of such assets. The
system is maintained by the selection and training of qualified personnel and
by establishing and communicating sound accounting and business policies.
The company's independent auditors have been engaged to render an opinion on
the consolidated financial statements. They review and make appropriate tests
of the data included in the financial statements.
/s/ Geoffrey R. Player
- -----------------------
Executive Chairman
Melbourne, Australia
19 August 1998
<PAGE>
NETLIVE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1998
- ---------------------------------------------------------------------------
(unaudited)
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 63,991
Accounts receivable, net 396,949
Due from related parties 1,309,066
Investments 118,480
Inventories 5,023,542
Deferred tax asset 157,020
Prepaid expenses 256,609
- ---------------------------------------------------------------------------
TOTAL CURRENT ASSETS 7,325,657
Property, Plant and Equipment, net 1,740,882
Intangible Assets 3,297,626
Deferred Tax Asset 20,995
- ---------------------------------------------------------------------------
TOTAL ASSETS $12,385,160
===========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank overdraft $ 745,829
Note payable - bank 6,123,000
Note payable - seller 1,177,490
Accounts payable and accrued expenses 1,305,376
Income taxes payable 137,812
Current portion of capital leases 87,596
Other current liabilities 148,508
- ---------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 9,725,611
Capital leases, net of current portion 235,117
- ---------------------------------------------------------------------------
TOTAL LIABILITIES 9,960,728
- ---------------------------------------------------------------------------
Stockholders' Equity:
Capital stock 900
Convertible preferred stock 340
Additional paid-in capital 5,072,787
Retained earnings 1,541,197
Foreign currency translation adjustment (4,190,792)
- ---------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 2,424,432
- ---------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $12,385,160
===========================================================================
</TABLE>
The accompanying notes should be read in
conjunction with the consolidated financial statements
<PAGE>
NETLIVE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
1998 1997
- --------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Net sales $2,233,923 $2,813,411
Cost of goods sold 1,953,037 1,948,838
- --------------------------------------------------------------------------------
Gross profit (loss) 280,886 864,573
- --------------------------------------------------------------------------------
Selling, general and administrative
expenses 1,092,681 787,644
Amortization expense 86,617 -
- --------------------------------------------------------------------------------
Total operating expenses 1,179,298 787,644
- --------------------------------------------------------------------------------
Net income (loss) from operations (898,412) 76,929
- --------------------------------------------------------------------------------
Other expense (income):
Interest expense 28,870 5,521
Interest income (240,155) (301,819)
- --------------------------------------------------------------------------------
(211,285) (296,298)
- --------------------------------------------------------------------------------
Net income (loss) before provision
(benefit) for income taxes (687,127) 373,227
Provision (benefit) for income taxes (187,982) 134,362
- --------------------------------------------------------------------------------
Net income (loss) $(499,145) $238,865
================================================================================
Basic income (loss) per common share ($0.06) $0.03
================================================================================
Weighted average number of
common shares outstanding 8,000,000 8,000,000
================================================================================
</TABLE>
The accompanying notes should be read in
conjunction with the consolidated financial statements
<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 equipment - 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 (used in) 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) -
Changes in operating assets and liabilities:
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 and accrued expenses (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
<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
<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
antidilutive.
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 noninterest bearing, due upon demand and
subject to certain adjustments, as defined.
