UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the period ended March 31, 1996.
[ ] Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number: 0-25678
MUSTANG SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
California
(State of incorporation)
77-0204718
(I.R.S. employer identification number)
6200 Lake Ming Road
Bakersfield, California 93306
(Address of principal executive offices)
(805) 873-2500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days:
Yes [X] No [ ]
As of May 5, 1996, there were 3,358,200 shares of the Registrant's
Common Stock outstanding.
==============================================================================
<PAGE> 2
MUSTANG SOFTWARE, INC.
FORM 10-QSB
INDEX
PART I. Financial Information: Page
Balance Sheets as of March 31, 1996 and December 31, 1995 3
Statements of Operations for the three ended
March 31, 1996 and 1995 4
Statements of Cash Flows for the three months ended
March 31, 1996 and 1995 5
Notes to Financial Statements 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. Other Information:
Exhibits and Reports on Form 8-K 8
Signatures 9
=============================================================================
<PAGE> 3
MUSTANG SOFTWARE, INC.
BALANCE SHEETS
ASSETS
March 31, 1996 December 31 1995
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 5,037,683 $ 5,615,404
Accounts receivable, net of allowance
for doubtful accounts of $425,000
and $825,000 at December 31, 1995
and March 31, 1996, respectively 464,251 352,174
Income taxes receivable 404,340 404,340
Inventories 324,964 230,486
Other 4,679 28,945
- - ----------------------------------------------------------------------------
Total current assets 6,235,917 6,631,349
- - ----------------------------------------------------------------------------
PROPERTY AND EQUIPMENT:
Property and equipment 1,303,424 1,270,765
Accumulated depreciation (318,653) (278,603)
- - ----------------------------------------------------------------------------
Net property and equipment 984,771 992,162
- - ----------------------------------------------------------------------------
OTHER ASSETS:
Capitalized software development costs, net 18,232 22,483
Other 28,616 30,882
- - ----------------------------------------------------------------------------
Total other assets 46,848 53,365
- - ----------------------------------------------------------------------------
Total Assets $7,267,536 $7,676,876
= ============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $956,823 $750,124
Accrued payroll and liabilities 156,310 145,077
Accrued warranty and support 45,000 45,000
Deferred revenue 123,100 88,500
- - ----------------------------------------------------------------------------
Total current liabilities 1,281,233 1,028,701
- - ----------------------------------------------------------------------------
CAPITAL LEASE OBLIGATION, net of current portion 385,557 399,060
- - ----------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, no par value:
Authorized-10,000,000 shares
None issued or outstanding - --
Common stock, no par value:
Authorized--30,000,000 shares
Issued and outstanding--
3,356,000 and 3,358,200 shares at
December 31,1995 and
March 31, 1996, respectively 6,601,633 6,598,632
Retained earnings (1,000,887) (349,517)
- - ----------------------------------------------------------------------------
Total shareholders' equity 5,600,746 6,249,115
- - ----------------------------------------------------------------------------
Total Liabilities & Shareholders Equity $7,267,536 $7,676,876
= ============================================================================
The accompanying notes are an integral part of these financial statements.
==============================================================================
<PAGE> 4
MUSTANG SOFTWARE, INC.
STATEMENTS OF OPERATIONS
Three Months Ended March 31,
1996 1995
REVENUE $1,203,354 $1,050,768
COSTS OF REVENUE 217,736 190,630
- - ----------------------------------------------------------------------------
Gross profit 985,618 860,138
- - ----------------------------------------------------------------------------
OPERATING EXPENSES:
Research and development 202,069 133,615
Selling and marketing 896,004 261,878
General and administrative 613,482 438,652
- - ----------------------------------------------------------------------------
Total operating expenses 1,711,555 834,145
- - ----------------------------------------------------------------------------
Income(loss)from operations (725,937) 25,993
- - ----------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest expense (11,254) (10,755)
Interest income 85,821 1,468
- - ----------------------------------------------------------------------------
Total other(income)exp. 74,567 (9,287)
- - ----------------------------------------------------------------------------
Income (loss) before
provision for income taxes (651,370) 16,706
- - ----------------------------------------------------------------------------
PROVISION (BENEFIT)
FOR INCOME TAXES -- 5,000
- - ----------------------------------------------------------------------------
NET INCOME (LOSS) $ (651,370) $ 11,706
= ============================================================================
NET INCOME (LOSS)
PER COMMON SHARE $ (.19) $ .01
= ============================================================================
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 3,358,200 2,131,000
The accompanying notes are an integral part of these financial statements.
==============================================================================
<PAGE> 5
MUSTANG SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ (651,370) $ 11,706
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 46,902 36,200
Net changes in assets and liabilities 69,909 (107,035)
- - ----------------------------------------------------------------------------
Net cash provided (used)
by operating activities (534,559) (59,129)
- - ----------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITES:
Purchase of property and equipment (32,659) (47,073)
- - ----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of stock 3,000 --
Payments on capital lease obligation (13,503) (13,000)
- - ----------------------------------------------------------------------------
Net Cash provided (used) by
financing activities (10,503) (13,000)
- - ----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (577,721) (119,202)
CASH BALANCE, beginning of period 5,615,404 209,799
- - ----------------------------------------------------------------------------
CASH BALANCE, end of period $5,037,683 $ 90,597
= ============================================================================
SUPPLEMENTAL DISCLOSURES:
Interest paid 11,254 10,755
Taxes paid 0 0
The accompanying notes are an integral part of these financial statements.
==============================================================================
<PAGE> 6
MUSTANG SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. Accounting Policies
The accompanying unaudited Condensed Financial Statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in annual financial statements prepared in accordance with generally accepted
accounting principles have either been condensed or omitted pursuant to those
rules and regulations. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. The results of operations and cash flows for
the periods presented are not necessarily indicative of the results that may
be expected for the full fiscal year. For further information, refer to the
financial statements and notes thereto for the year ended December 31, 1995,
included in the 1995 Form 10KSB.
The condensed Balance Sheet at December 31, 1995 has been taken from the
audited financial statements at that date and condensed.
=============================================================================
<PAGE> 7
MUSTANG SOFTWARE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In addition to the comments that follow, further information can be obtained
by referring to the management's discussion and analysis of financial
condition and results of operations section included in the Form 10KSB,
filed for the year ended December 31, 1995.
Results of Operations:
Three Months Ended March 31, 1996 and 1995
Revenues for the three months ended March 31, 1996 were $1,203,354 an increase
of $152,586 or 14.5% over revenues for the same period in 1995. As a
percentage of revenues by product category for the first quarter 1996 vs. 1995
showed the QmodemPro line at 1% and 30%, the Wildcat! line at 96% and 63%, and
other products at 3% and 7%, respectively. The increase in Wildcat! revenues
was directly related to the release of Wildcat! version 5 in March 1996.
Gross profit for the quarter increased from $860,138 in 1995 to $985,618
in 1996, and increased as a percentage of revenues from 81.8% in 1995 to 81.9%
in 1996. Gross profit percentage has averaged between 80-84% over the last
three calendar years.
Research and development expenses increased $68,454 in the first quarter of
1996 from 1995, and increased as a percentage of revenues from 12.7% in 1995
to 16.8% in 1996. Research and development is concentrated in Windows NT and
Windows 95 and directly targets the expanded use of international networks,
including the Internet. The Company expects that the release of Windows 95
by Microsoft will generate demand for products capable of making use of its
new features, and has devoted a substantial portion of its research and
development expenditures to such products. The headcount in this department
increased from 11 to 14 in 1995 to 1996, respectively.
Selling and marketing expenses for the quarter were $896,004, an increase of
$634,126 over the same quarter the previous year, and they increased as a
percentage of revenues from 24.9% in 1995 to 74.4% in 1996. The items
primarily attributing to the increase were advertising and promotional costs
of existing products and the launch of Wildcat! version 5 in March 1996. The
increase in headcount from 3 in 1995 to 17 in 1996, also contributed to the
increase.
General and administrative expenses increased for the quarter over the
previous year, from $438,652 in 1995 to $613,482 in 1996, and increased as a
percentage of revenues, from 41.7% in 1995 to 50.9% in 1996. The items
primarily accounting for the increase were, insurance, investor relations,
and legal and accounting expenses. These increases were directly related
to the Company going public in April 1995. The General and administrative
headcount increased 27% from the prior year.
==============================================================================
<PAGE> 8
Liquidity and Capital Resources
Cash and cash equivalents balance at March 31, 1996 were approximately
$5,038,000, an decrease of approximately $578,000 from December 31, 1995.
Accounts receivable increased approximately $113,000 in 1996. Accounts
receivable average days to collect for the quarter ended March 31, 1995
and 1996 were 53 and 68 days, respectively. Average days to collect in
1995 was 50 days. Management's goal is to maintain receivable collection
days at or below 50 for 1996. Inventory levels have increased $94,500
in 1996 from December 31, 1995. The increase is due to the introduction
of the two new product lines QmodemPro for Windows 95 in August 1995 and
Wildcat! for Windows95/NT in March 1996.
Longer term cash requirements, other than normal operating expenses, are
anticipated for development of new software products and enhancements of
existing products, launching new products and enhancements, financing
anticipated growth and the possible acquisition of businesses, software
products or technologies complementary to the Company's business. The
Company believes that its existing cash, cash equivalents, marketable
securities, cash generated from operations and available line of credit,
will be sufficient to meet the Company's working capital and capital
expenditure requirements for at least the next 12 months.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended March 31, 1996.
There are no exhibits to this report.
===============================================================================
<PAGE> 9
SIGNATURES
In accordance with the requirements of the Securities Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Signature Title Date
James A. Harrer President and Chief Executive
Officer (Principal Executive
Officer) and a Director May 14, 1996
Donald M. Leonard Vice President Finance and Chief
Financial Officer (Principal
Financial and Accounting Officer) May 14, 1996
