UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the period ended March 31, 1997.
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934Commission 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 8, 1997, there were 3,374,967 shares of the Registrant's Common
Stock outstanding.
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<PAGE> 2
MUSTANG SOFTWARE, INC.
FORM 10-QSB
INDEX
Page
PART I. Financial Information:
Balance Sheets as of March 31, 1997 and December 31, 1996 3
Statements of Operations for the three ended March 31, 1997 and 1996 4
Statements of Cash Flows for the three months ended March 31, 1997
and 1996 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
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<PAGE> 3
<TABLE>
MUSTANG SOFTWARE, INC.
BALANCE SHEETS
ASSETS
<CAPTION>
March 31, December 31
1997 1996
(Unaudited)
<C> <C>
<S>
CURRENT ASSETS:
Cash and cash equivalents $ 2,492,621 $ 2,920,231
Accounts receivable, net of allowance
for doubtful accounts of $400,000 at
December 31, 1996 and March 31, 1997 28,635 63,529
Income taxes receivable 173,540 173,540
Inventories 219,076 228,136
Other 19,003 55,500
- - - - -------------------------------------------------------------------------
Total current assets 2,932,875 3,440,936
- - - - -------------------------------------------------------------------------
PROPERTY AND EQUIPMENT:
Property and equipment 1,256,337 1,256,337
Accumulated depreciation (430,656) (393,337)
- - - - -------------------------------------------------------------------------
Net property and equipment 825,681 863,000
- - - - -------------------------------------------------------------------------
OTHER ASSETS:
Capitalized software development costs, net 5,124 5,475
Other 1,300 1,300
- - - - -------------------------------------------------------------------------
Total other assets 6,424 6,775
- - - - -------------------------------------------------------------------------
Total Assets $ 3,764,980 $ 4,310,711
= =============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 540,126 $ 859,053
Accrued payroll and liabilities 168,158 163,056
Accrued warranty and support 45,000 45,000
Deferred revenue 80,000 80,000
- - - - -------------------------------------------------------------------------
Total current liabilities 833,284 1,147,109
- - - - -------------------------------------------------------------------------
CAPITAL LEASE OBLIGATION, net of current portion 322,326 337,221
- - - - -------------------------------------------------------------------------
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--3,374,967 shares
at December 31,1996 and March 31, 1997 6,628,722 6,628,722
Retained earnings (4,019,352) (3,802,341)
- - - - -------------------------------------------------------------------------
Total shareholders' equity 2,609,370 2,826,381
- - - - -------------------------------------------------------------------------
Total Liabilities & Shareholders Equity $ 3,764,980 $ 4,310,711
= =============================================================================
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<PAGE> 4
<TABLE>
MUSTANG SOFTWARE, INC.
STATEMENTS OF OPERATIONS
Three Months Ended March 31,
1997 1996
<C> <C>
<S>
REVENUE $ 799,922 $ 1,203,354
COSTS OF REVENUE 122,366 217,736
- - - - -------------------------------------------------------------------------
Gross profit 677,556 985,618
- - - - -------------------------------------------------------------------------
OPERATING EXPENSES:
Research and development 171,207 202,069
Selling and marketing 328,440 896,004
General and administrative 421,863 613,482
- - - - -------------------------------------------------------------------------
Total operating expenses 921,510 1,711,555
- - - - -------------------------------------------------------------------------
Income(loss)from operations (243,954) (725,937)
- - - - -------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest expense (9,711) (11,254)
Interest income 36,654 85,821
- - - - -------------------------------------------------------------------------
Total other income (exp). 26,943 74,567
- - - - -------------------------------------------------------------------------
Income (loss) before
provision for income taxes (217,011) (651,370)
PROVISION (BENEFIT) FOR INCOME TAXES -- --
- - - - -------------------------------------------------------------------------
NET INCOME (LOSS) $ (217,011) $ (651,370)
= =============================================================================
NET INCOME (LOSS) PER COMMON SHARE $ (.06) $ (.19)
= =============================================================================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 3,374,967 3,358,200
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<PAGE 5>
<TABLE>
MUSTANG SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
1997 1996
<C> <C>
<S>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ (217,011) $ (651,370)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 37,670 46,902
Net changes in assets and liabilities (233,374) 69,909
- - - - -------------------------------------------------------------------------
Net cash provided (used) by
operating activities (412,715) (534,559)
- - - - -------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITES:
Purchase of property and equipment -- (32,659)
- - - - -------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of stock -- 3,000
Payments on capital lease obligation (14,895) (13,503)
- - - - -------------------------------------------------------------------------
Net Cash provided (used) by financing
activities (14,895) (10,503)
- - - - -------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (427,610) (577,721)
CASH BALANCE, beginning of period 2,920,231 5,615,404
- - - - -------------------------------------------------------------------------
CASH BALANCE, end of period $ 2,492,621 $ 5,037,683
= =============================================================================
SUPPLEMENTAL DISCLOSURES:
Interest paid 9,711 11,254
Taxes paid -- --
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<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, 1996, included in the 1996 Form 10KSB.
The condensed Balance Sheet at December 31, 1996 has been taken from
the audited financial statements at that date and condensed.
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<PAGE> 7
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, 1996.
Results of Operations:
Three Months Ended March 31, 1997 and 1996
Revenues for the three months ended March 31, 1997 were $799,922 a
decrease of $403,432 or 33.5% under revenues for the same period in 1996.
As a percentage of revenues by product category for the first quarter 1997 vs.
1996 showed the QmodemPro line at 15% and 1%, the Wildcat! line at 82% and
96%, and other products at 3% and 3%, respectively. The increased Wildcat!
revenues in 1996 was directly related to the release of Wildcat! version 5 in
March 1996.
Gross profit for the quarter decreased from $985,618 in 1996 to
$677,556 in 1997, and increased as a percentage of revenues from 81.9% in 1996
to 84.7% in 1997. Gross profit percentage has averaged between 80-84% over
the last three calendar years.
Research and development expenses decreased $30,862 in the first
quarter of 1997 from 1996, and increased as a percentage of revenues
from 16.8% in 1996 to 21.4% in 1997. 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 has devoted and is devoting a substantial portion of its
research and development resources to the Windows 95 and Windows NT
environments and now offers a suite of Web server and internet/intranet
utility applications for Windows 95 and Windows NT environments. The
headcount in this department decreased from 14 to 10 in 1996 to 1997,
respectively. The headcount reduction accounts for the majority of the
decrease.
Selling and marketing expenses for the quarter were $328,440, a
decrease of $567,564 under the same quarter the previous year, and they
decreased as a percentage of revenues from 74.4% in 1996 to 41.1% in
1997. The items primarily attributing to the decrease was a reduction of
advertising and promotional costs for existing products, also the launch of
Wildcat! 5 expenses in 1996 were not duplicated in 1997. Trade shows and the
costs associated with them were reduced in 1997. The decrease in headcount
from 17 in 1996 to 9 in 1997, also contributed to the decrease.
General and administrative expenses decreased for the quarter compared
to the previous year, from $613,482 in 1996 to $421,863 in 1997, but increased
as a percentage of revenues, from 50.9% in 1996 to 52.7% in 1997. The items
primarily accounting for the decrease were, salaries and costs associated
with employee benefits. The General and administrative headcount decreased
26% from the prior year.
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<PAGE> 8
Liquidity and Capital Resources
Cash and cash equivalents balance at March 31, 1997 were approximately
$2,493,000, a decrease of approximately $428,000 from December 31, 1996.
Accounts receivable decreased approximately $35,000 and Accounts Payable
decreased approximately $319,000 in 1997. Accounts receivable average days
to collect for the quarter ended March 31, 1996 and 1997 were 68 and 64 days,
respectively. Average days to collect in 1996 was 50 days. Management's
goal is to maintain receivable collection days at or below 50 for 1997.
Inventory levels have decreased $9,060 in 1997 from December 31, 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 and cash generated from operations , 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, 1997.
There are no exhibits to this report
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<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
_/s/ James A. Harrer_ President and Chief Executive
James A. Harrer Officer (Principal Executive
Officer) and a Director May 13, 1997
_/s/ Donald M. Leonard_
Donald M. Leonard Vice President Finance and Chief
Financial Officer (Principal
Financial and Accounting Officer)
and a Director May 13, 1997
<PAGE> 1 EXHIBIT 11.
MUSTANG SOFTWARE, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except earnings per share) (Unaudited)
- - -----------------------------------------------------------------------------
<TABLE>
Three Months Ended
March 31,
1996 1997
- - -----------------------------------------------------------------------------
<S> <C> <C>
Weighted average number of common shares outstanding 3,358 3,375
Common stock equivlents from outstanding stock options 0 0
- - -----------------------------------------------------------------------------
Average common and common stock equivalents outstanding 3,358 3,375
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Net Income $ (651) $ (217)
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Earnings per share (1) $ (.19) $ (.06)
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</TABLE>
(1) Fully diluted earnings per share have not been presented because the
effects are not material.
- - -----------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> $2,492,621
<SECURITIES> 0
<RECEIVABLES> 428,635
<ALLOWANCES> 400,000
<INVENTORY> 219,076
<CURRENT-ASSETS> 2,932,875
<PP&E> 1,256,337
<DEPRECIATION> 430,656
<TOTAL-ASSETS> 3,764,980
<CURRENT-LIABILITIES> 833,284
<BONDS> 322,326
0
0
<COMMON> 6,628,722
<OTHER-SE> (4,019,352)
<TOTAL-LIABILITY-AND-EQUITY> 3,764,980
<SALES> 799,922
<TOTAL-REVENUES> 799,922
<CGS> 122,366
<TOTAL-COSTS> 122,366
<OTHER-EXPENSES> 921,510
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,711
<INCOME-PRETAX> ( 217,011)
<INCOME-TAX> ( 217,011)
<INCOME-CONTINUING> ( 217,011)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ( 217,011)
<EPS-PRIMARY> ( .06)
<EPS-DILUTED> ( .06)
</TABLE>
