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 quarterly period ended June 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-26008
MYSOFTWARE COMPANY
STATE OF INCORPORATION: DELAWARE
IRS EMPLOYER I.D. NUMBER: 77-0195362
2197 E. BAYSHORE ROAD
PALO ALTO, CA 94303
(415) 473-3600
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
The number of shares outstanding of the registrant's common stock as of June
30, 1996 was 4,231,366.
Transitional Small Business Disclosure Format (check one):
Yes No X
<PAGE>
MYSOFTWARE COMPANY
FORM 10-QSB
For the Quarterly Period Ended June 30, 1996
Table of Contents
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
a) Condensed Balance Sheets
as of June 30, 1996 and December 31, 1995 3
b) Condensed Statements of Operations for the three
and six months ended June 30, 1996 and 1995 4
c) Condensed Statements of Cash Flows for the six
months ended June 30, 1996 and 1995 5
d) Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and reports on form 8-K 12
SIGNATURES 13
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MYSOFTWARE COMPANY
CONDENSED BALANCE SHEETS
June 30, 1996 and December 31, 1995
(in thousands)
<CAPTION>
June 30, December 31,
1996 1995
-------------- --------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,922 $ 7,794
Accounts receivable, net 2,688 2,525
Inventories 301 449
Other current assets 307 157
Deferred income taxes 449 449
----------- -----------
Total current assets 10,667 11,374
Property and equipment, net 291 215
Prepaid royalties and other 1,272 676
----------- -----------
Total assets $ 12,230 $ 12,265
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 705 $ 777
Accrued compensation 352 342
Other accrued liabilities 1,573 1,406
----------- ------------
Total current liabilities 2,630 2,525
Other liabilities 17 70
----------- ------------
Stockholder equity:
Preferred stock; $0.001 par value; 2,000,000
shares authorized; none outstanding --- ---
Common stock; $0.001 par value; 20,000,000
shares authorized; 4,231,366 shares issued
and outstanding 4 4
Additional paid-in capital 8,562 8,562
Retained earnings 1,017 1,104
----------- -----------
Total stockholders' equity 9,583 9,670
----------- -----------
Total liabilities and stockholders' equity $ 12,230 $ 12,265
=========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MYSOFTWARE COMPANY
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 1996 AND 1995
(Unaudited)
(in thousands except per share data)
<CAPTION>
Three Months Ended Six Months Ended
--------------------- ---------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net revenues $ 3,455 $ 2,604 $ 6,168 $ 5,525
Cost of revenues 891 601 1,652 1,378
--------- --------- -------- --------
Gross profit 2,564 2,003 4,516 4,147
--------- --------- -------- --------
Operating expenses:
Product development 452 232 912 543
Sales and marketing 1,459 1,190 2,859 2,330
General and administrative 421 339 823 621
Write-off of acquired technology --- --- 255 ---
--------- -------- ------- -------
2,332 1,761 4,849 3,494
--------- -------- ------- -------
Operating income(loss) 232 242 (333) 653
Interest income, net 94 23 193 27
--------- -------- ------- -------
Income(loss) before taxes 326 265 (140) 680
Income taxes expense (benefit) 124 (254) (53) (252)
--------- -------- ------- -------
Net income(loss) $ 202 $ 519 $ (87) $ 932
========= ======== ======= =======
Net income(loss) per share $ 0.05 $ (0.02)
========= =======
Shares used in computing
net income(loss) per share 4,349 4,290
========= =======
Pro forma net income data (unaudited)
Income before taxes as reported $ 265 $ 680
Pro forma income taxes 98 251
------- ------
Pro forma income $ 167 $ 429
======= ======
Pro forma net income per share $ 0.05 $ 0.12
======= ======
Shares used in computing pro forma 3,703 3,615
net income per share ======= ======
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MYSOFTWARE COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995
(Unaudited)
(in thousands)
<CAPTION>
Six Months Ended
June 30,
1996 1995
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (87) $ 932
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Depreciation and amortization 135 15
Provision for returns and doubtful accounts (118) (123)
Deferred officers' compensation (53) (43)
Changes in operating assets and liabilities:
Accounts receivable (45) 851
Inventories 148 (101)
Other current assets (150) (186)
Deferred income taxes --- (334)
Accounts payable (72) 343
Accrued compensation 9 (12)
Other accrued liabilities 168 253
-------- -------
Net Cash provided by (used for)
operating activities (65) 1,595
-------- -------
Cash flows from investing activities:
Additions to property and equipment (128) (50)
Prepaid royalties (679) (58)
-------- -------
Net cash used for investing activities (807) (108)
-------- -------
Cash flows from financing activities:
Stockholder distributions --- (1,375)
Proceeds from sales of common stock --- 9,551
-------- --------
Net cash used for financing activities --- 8,176
-------- --------
Net increase(decrease) in cash and cash equivalents (872) 9,663
Cash and cash equivalents at beginning of period 7,794 924
-------- --------
Cash and cash equivalents at end of period $ 6,922 $ 10,587
======== ========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
MYSOFTWARE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. Basic of Presentation
In the opinion of management, the accompanying balance sheets, statements of
operations, and statements of cash flows include all material adjustments
necessary for their fair presentation. The interim results presented are not
necessarily indicative of results for a full year. Certain reclassifications
have been made for consistent presentation. For further information, refer to
the financial statements and footnotes thereto included in the Company's
Annual Report on Form 10-K dated December 31, 1995.
2. Income Taxes
The Company's statements of operations for the three-month and six-month
periods ended June 30, 1995 include a $269,000 one-time net credit resulting
from the establishment of the Company's net deferred tax assets upon its
conversion to a C corporation.
3. Pro Forma Information
The unaudited pro forma amounts included in the accompanying pro forma
statement of operations for the three-month and six-month periods ended June
30, 1995, reflect an unaudited pro forma adjustment for the provision for
income taxes as if the Company had been a C Corporation, fully subject to
federal and state income taxes.
4. Pro Forma Per Share Computations
Per share computations are computed based on the weighted average number of
shares of common stock outstanding and common equivalent shares from the
stock options outstanding (using the treasury stock method). In accordance
with certain Securities and Exchange Commission (SEC) Staff Accounting
Bulletins, such computations include all common and common equivalent shares
issued within 12 months of the date of the Company's initial public offering
as if they were outstanding for all periods presented using the treasury
stock method and the anticipated initial public offering price. In addition,
the pro forma calculation includes 160,000 shares deemed to be outstanding
representing the number of shares (at the assumed initial public offering
price) sufficient to fund the final S Corporation distribution made in the
three months ended September 30, 1996.
<PAGE>
5. Write-off of Acquired In-Process Research and Development
The statement of operations for the six months ended June 30, 1996 includes a
one-time write-off of $255,000, resulting from the Company's acquisition of
technology from MediaTech Corporation, an Internet publishing tools company,
which had not reached technological feasibility.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This discussion contains forward looking statements, which are subject to
certain risks and uncertainties, including without limitation those risks and
uncertainties described in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, which has been filed with the Securities and
Exchange Commission. Actual results may differ materially.
Results of Operations
Three Months Ended June 30, 1996 and 1995
Net revenues for the three months ended June 30, 1996 increased $851,000, or
33 percent, to $3.5 million, compared with net revenues of $ 2.6 million for
the corresponding quarter in 1995. The increase in net revenues resulted
primarily from increased sales of the Company's existing product titles to
retailers and distributors. During the quarter, the Company also benefited
from sales of four new products that were introduced at the end of the first
quarter. These included MyAdvancedLabelDesigner for Windows 95,
MyProfessionalBusinessCards for Windows 95, MyDeluxeMailList and MyLabels.
Gross profit for the three months ended June 30, 1996 increased 28 percent to
$2.6 million, from $2.0 million in the same period in 1995. Gross margin for
the second quarter was 74.2 percent, compared to 76.9 percent for the same
period in 1995. The decrease in the gross margin for the quarter was due to
a change in the freight arrangements with certain customers and to the
Company's normal accounting for anticipated sales returns. The Company's
gross margins vary from period to period, primarily due to changes in product
mix, the timing and nature of promotional activities, changes in product
return levels, and the amortization of prepaid royalties.
The Company's total operating expenses for the three months ended June 30,
1996 increased 32 percent to $2.3 million, from $1.8 million for the same
period of 1995. The increase in operating expenses resulted primarily from
increase in sales, continued investment in new product development and
marketing, as well as the costs associated with the Company's status as a
public company.
Product development expenses were up 95 percent to $452,000 in the three
months ended June 30, 1996, compared to $232,000 in the same period of 1995,
reflecting the Company's efforts to upgrade its products to operate with
Windows 95 while adding additional features.
<PAGE>
Sales and marketing expenses increased 23 percent to $1.5 million in the
second quarter, from $1.2 million in the comparable 1995 quarter. Sales and
marketing expenses increased principally as a result of higher headcount and
support for increased revenues.
General and administrative expenses increased 24 percent to $421,000 in the
three months ended 1996 from $339,000 in the same period of 1995, primarily
as a result of costs associated with the Company's status as a public
company, higher headcount, and lease expense for additional facilities.
Operating income was $232,000 for the three months ended June 30, 1996,
compared with operating income of $242,000 in the comparable period of 1995.
Interest income was $94,000 for the quarter ended June 30, 1996, compared to
$23,000 for the comparable period of 1995. The increase in interest income
was due to higher average cash balances resulting from the proceeds of the
Company's initial public offering completed in June 1995.
The Company reported an income tax expense for the three months ended June
30, 1996 of $124,000, with an effective tax rate of 38 percent. This tax rate
assumes no benefit from the Federal Research and Development Tax Credit
because that tax credit expired as of June 30, 1995. Income tax benefit in
the three months ended June 30, 1995 was $254,000 due to a one time $269,000
net credit from the establishment of the Company's net deferred tax assets
upon its conversion to a C corporation, in June 1995.
The resulting net income for the three months ended June 30, 1996 was
$202,000, compared to net income of $519,000 in the comparable period in 1995
and to a pro forma net income for the 1995 period of $167,000. The pro forma
net income reflects a provision for income taxes as if the Company had been a
C Corporation, fully subject to federal and state taxes, during the period.
The pro forma taxes were based on the effective tax rate of 36 percent for
the 1995 period.
Six Months Ended June 30, 1996 and 1995
For the six months ended June 30, 1996, net revenues increased $643,000, or
12 percent, to $6.2 million, compared with net revenues of $5.5 million for
the corresponding period in 1995. The increase was primarily attributable to
increased sales of the Company's existing titles, in addition to four new
product releases during the first six months of 1996.
For the six months ended June 30, 1996, gross profit increased 9 percent to
$4.5 million, from $4.1 million for the corresponding period in 1995. Gross
margin for the six months ended June 30, 1996 was 73.2 percent, compared to
75.1 percent for the same period in 1995. The decrease in gross margin
for the quarter was due to a change in the freight arrangements with certain
customers and to the Company's normal accounting for anticipated sales returns.
<PAGE>
For the six months ended June 30, 1996, total operating expenses increased 39
percent to $4.8 million, from $3.5 million for the corresponding period in
1995. The six-month 1996 period included a one-time write-off of $255,000 of
in-process research and development, resulting from the Company's acquisition
of technology from MediaTech Corporation, an Internet publishing tools
company.
For the six months ended June 30, 1996, product development expenses were up
68 percent to $912,000, compared to $543,000 for the corresponding period
in 1995, reflecting the Company's efforts to upgrade its products to operate
with Windows 95 while adding additional features.
For the six months ended June 30, 1996, sales and marketing expenses
increased 23 percent to $2.9 million compared to $2.3 million for the
corresponding period in 1995, primarily as a result of higher headcount and
support for increased revenues.
For the six months ended June 30, 1996, general and administrative expenses
increased 33 percent to $823,000, compared to $621,000 for the corresponding
period in 1996. The increase was attributable to higher expenses associated
with the Company's status as a public company, higher headcount, and lease
expense for additional facilities.
For the six months ended June 30, 1996, the Company reported an operating
loss of $333,000 compared to operating income of $653,000 in the
corresponding period in 1995.
Interest income in the first half of 1996 was $193,000 compared to $27,000
for the corresponding period in 1995. The increase in interest income was
due to higher average cash balance resulting from proceeds of the Company's
initial public offering completed in June 1995.
For the six months ended June 30, 1996, the Company reported an income tax
benefit of $53,000, and the Company reported an income tax benefit of
$252,000 for the corresponding period in 1995. The Company received an
income tax benefit in June 1995 of $252,000 due to a one-time $269,000
net credit from the establishment of net deferred tax assets upon conversion
to a C corporation.
For the six months ended June 30, 1996, the Company reported a net loss of
$87,000, compared to net income of $932,000 in the comparable period in 1995
and to pro forma net income of $429,000 for the comparable 1995 period.
The Company has experienced, and may continue to experience, significant
fluctuations in operating results due to a variety of factors. These factors
include: the size and rate of growth of the market for task-specific
applications for small businesses and of the software market in general;
market acceptance of the Company's products and those of its competitors;
development and promotional expenses; product returns; changes in pricing
policies by the Company and its competitors; accuracy of retailers' forecasts
of consumer demand; the timing of orders from major retailer and distributor
customers; and cancellations or terminations by retail or distributor accounts;
shelf space reductions; and delays in shipment.
<PAGE>
The Company's business has experienced and is expected to continue to
experience significant seasonality, primarily due to retailer, distributor
and end-user buying patterns. Typically, net revenues are weakest in the
second and third quarters. The Company expects its net revenues and
operating results to continue to reflect this seasonality.
Liquidity and Capital Resources
Since its inception, the Company has financed its activities almost
exclusively from cash generated by operations and contributions to capital by
its stockholders. Except for its initial public offering in June, 1995, the
Company has not borrowed money or sold stock since 1988.
As of June 30, 1996, the Company had $6.9 million in cash and cash
equivalents. The Company believes that its existing cash, its ability to
obtain additional credit, and cash generated by operations will be sufficient
to meet its working capital needs at least through 1997.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The annual meeting of stockholders of MySoftware Company was held on
May 23, 1996.
b) The matters voted upon at the meeting and the voting of stockholders
with respect thereto are as follows:
The election of James F. Willenborg, David P. Mans, Michael H.
Thoma, Kenneth A. Eldred, and Donald F. Wood as directors to hold
office until the 1997 annual meeting of stockholders:
For Withheld
---------- ------------
James F. Willenborg 3,585,199 6,170
David P. Mans 3,584,999 6,370
Michael H. Thoma 3,585,199 6,170
Kenneth A. Eldred 3,584,699 6,670
Donald F. Wood 3,584,699 6,670
Ratification of the selection of KPMG Peat Marwick LLP as
independent auditors of the Company for its fiscal year ended
December 31, 1996:
For: 3,580,217 Against: 5,020 Abstain: 6,132
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 11. Computation of Net Income (Loss) Per Share and Pro
Forma Net Income (Loss) Per Share is on page 15.
No reports have been filed on Form 8-K during this quarter.
ITEMS 1,2,3 and 5 are not applicable.
<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 thereunto duly authorized.
MySoftware Company
Date: August 12, 1996 Thomas C. Hoster
Thomas C. Hoster
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Page Number
11 Computation of Net Income (Loss) Per Share 15
and Pro Forma Income Per Share
<PAGE>
<TABLE>
MYSOFTWARE COMPANY
Exhibit 11
COMPUTATION OF NET INCOME (LOSS) PER SHARE
AND PRO FORMA NET INCOME PER SHARE
(in thousands, except per share data)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
1996 1995 1996 1995
------- -------- ------- -------
<S> <C> <C> <C> <C>
Net Income(loss) $ 202 $ (87)
------- --------
Weighted average number of shares of
common stock outstanding 4,231 4,231
Number of Common Stock Equivalents
as a result of stock option outstanding
using the treasury stock method 118 59
-------- ---------
4,349 4,290
======== =========
Net income(loss) per share $ 0.05 $ (0.02)
======== =========
Pro forma net income $ 167 $ 429
------- ------
Weighted average number of shares of
common stock outstanding 3,394 3,307
Number of stock options granted in
accordance with SAB No. 83 149 148
Shares deemed outstanding to fund final
S Corporation shareholder distribution 160 160
------- -------
3,703 3,615
------- -------
Pro forma net income per share $ 0.05 $ 0.12
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,922
<SECURITIES> 0
<RECEIVABLES> 2,688
<ALLOWANCES> 0
<INVENTORY> 301
<CURRENT-ASSETS> 10,667
<PP&E> 428
<DEPRECIATION> 137
<TOTAL-ASSETS> 12,230
<CURRENT-LIABILITIES> 2,630
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 9,579
<TOTAL-LIABILITY-AND-EQUITY> 12,230
<SALES> 6,168
<TOTAL-REVENUES> 6,168
<CGS> 1,652
<TOTAL-COSTS> 1,652
<OTHER-EXPENSES> 4,849
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (333)
<INCOME-TAX> (53)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (87)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
