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 March 31, 1997
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 March
31, 1997 was 4,233,366.
Transitional Small Business Disclosure Format (check one):
Yes No X
<PAGE>
MYSOFTWARE COMPANY
FORM 10-QSB
For the Quarterly Period Ended March 31, 1997
Table of Contents
Part I. Financial Information Page
Item 1. Financial Statements
a) Condensed Balance Sheets
as of March 31, 1997 and December 31, 1996..........................3
b) Condensed Statements of Operations
for the three months ended March 31, 1997 and 1996...................4
c) Condensed Statements of Cash Flows
for the three months ended March 31, 1997 and 1996..................5
d) Notes to Financial Statements........................................6
Item 2. Management's Discussion and Analysis or Plan of Operation.........7
Part II. Other Information
Item 2. Changes in Securities.............................................9
Item 6. Exhibits and reports on form 8-K..................................9
Signatures................................................................10
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MYSOFTWARE COMPANY
CONDENSED BALANCE SHEETS
March 31 1997 and December 31, 1996
(in thousands)
<CAPTION>
March 31, December 31,
1997 1996
---------- ------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,401 $ 7,718
Accounts receivable, net 1,624 1,242
Inventories 601 596
Other current assets 797 821
Deferred income taxes 308 308
---------- ---------
Total current assets 9,731 10,685
Property and equipment, net 335 354
Other assets 1,749 1,370
---------- ---------
Total assets $ 11,815 $ 12,409
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,040 $ 730
Accrued compensation 400 388
Other accrued liabilities 2,204 2,551
---------- ---------
Total current liabilities 3,644 3,669
Other liabilities 25 25
---------- ---------
Stockholders' 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; 4,233,366 and 4,231,366
shares issued and outstanding 4 4
Additional paid-in capital 8,569 8,562
Retained earnings (deficit) (427) 149
---------- ---------
Total stockholders' equity 8,146 8,715
Total liabilities and stockholders' equity $ 11,815 $ 12,409
========== =========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MYSOFTWARE COMPANY
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996
(unaudited)
(in thousands, except per share data)
<CAPTION>
Three Months Ended
March 31,
1997 1996
--------- ---------
<S> <C> <C>
Net revenues $ 3,011 $ 2,712
Cost of revenues 946 760
--------- ---------
Gross profit 2,065 1,952
--------- ---------
Operating expenses:
Product development 520 460
Sales and marketing 1,683 1,400
General and administrative 529 403
Write-off of acquired technology ---- 255
--------- ---------
2,732 2,518
--------- ---------
Operating loss (667) (566)
Interest income, net 91 98
--------- ---------
Loss before income taxes (576) (468)
Income tax benefit ---- (178)
--------- ---------
Net loss $ (576) $ (290)
========= =========
Net loss per share $ (0.14) $ (0.07)
========= =========
Shares used in computing
net loss per share 4,233 4,231
========= =========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MYSOFTWARE COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996
(unaudited)
(in thousands)
<CAPTION>
Three Months Ended
March 31,
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (576) $ (290)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation 42 24
Amortization of software production costs 134 26
Provision for returns and doubtful accounts (443) (65)
Stock compensation expense 7 ----
Changes in operating assets and liabilities:
Accounts receivable (430) 546
Inventories (5) (11)
Other current assets 24 (160)
Deferred officers' compensation ---- (53)
Accounts payable 310 (65)
Accrued compensation 12 10
Other accrued liabilities 144 (65)
--------- ---------
Net Cash used for operating activities (781) (103)
--------- ---------
Cash flows from investing activities:
Addition to property and equipment (23) (50)
Software production costs (513) (339)
--------- ---------
Net cash used for investing activities (536) (389)
--------- ---------
Net decrease in cash and cash equivalents (1,317) (492)
Cash and cash equivalents at beginning of period 7,718 7,794
--------- ---------
Cash and cash equivalents at end of period $ 6,401 $ 7,302
========= =========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
MYSOFTWARE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. Basis 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-KSB dated December 31, 1996.
2. Per Share Computation
Net loss per share is computed using the weighted average number of common and
common equivalent shares outstanding during each period presented using the
treasury stock method. Common stock equivalents are not considered in the
computation of net loss per share as their inclusion would be anti-dilutive.
Common stock equivalents consist of stock options.
3. Writeoff of Acquired In-Process Research and Development
The three months ended March 31, 1996 include a one-time write-off of $255,000
resulting from the Company's acquisition of technology which had not reached
technology feasibility from MediaTech Corporation, an Internet publishing tools
company.
4. Recent Pronouncements
The Financial Accounting Standards Board recently issued Statements of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share." SFAS No. 128 requires
the presentation of basic earnings per share ("EPS") and, for companies with
complex capital structures or potentially dilutive securities, such as
convertible debt, options and warrants, diluted EPS. SFAS No. 128 is effective
for annual and interim periods ending after December 31, 1997. Had SFAS No. 128
been effective for the quarter ended March 31, 1997, basic EPS and diluted EPS
would not have been significantly different from the reported net loss per
share.
<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-KSB for the
year ended December 31, 1996, which has been filed with the Securities and
Exchange Commission.
Results of Operations
Net revenues for the three months ended March 31, 1997 increased $299,000, or
11 percent, to $3.0 million compared with net revenues of $2.7 million for the
corresponding quarter in 1996. The increase in net revenues primarily resulted
from increased sales to retailers and distributors of the Company's existing
product titles. During the quarter, the Company also benefited from sales of
four new products that were introduced at the end of the fourth quarter of 1996.
These included MyMailManager, Jalapeno Hot Buttons, Jalapeno Hot Banners, and
Pacifica Personal Web Page Builder.
Gross profit for the three months ended March 31, 1997 increased 6 percent to
$2.1 million, from $2.0 million in the same period in 1996. Gross margin for
the three months ended March 31, 1997 was 68.6 percent compared to 72.0 percent
for the same period in 1996. The decrease in the gross margin percentage for
the quarter was due to a change in the freight arrangements with certain
customers and higher promotional expenses. The Company's gross margins vary
primarily due to changes in product mix, the timing and nature of promotional
activities, changes in product return levels and the amortization of software
production costs.
The Company's total operating expenses for the three months ended March 31, 1997
increased 9 percent to $2.7 million from $2.5 million for the same period of
1996. The increase in operating expenses resulted primarily from a continued
investment in new product development and marketing as well as the costs
associated with the Company building its infrastructure. Product Development
expenses were up 13 percent at $520,000 in the three months ended March 31, 1997
compared to $460,000 in the same period of 1996. Sales and Marketing expenses
were up 20 percent at $1,683,000 in the three months ended March 31, 1997
compared to $1,400,000 in the same period of 1996. General and Administrative
expenses were up 31 percent at $529,000 in the three months ended March 31, 1997
compared to $403,000 in the same period of 1996. Operating Expenses in the
quarter ended March 31, 1996 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.
Operating loss was $667,000 for the three months ended March 31, 1997, compared
with an operating loss of $566,000 in the comparable period of 1996.
<PAGE>
Interest income was $91,000 for the quarter ended March 31, 1997, compared to
$98,000 for the comparable period of 1996. The decrease in interest income was
due to lower cash balances during the first quarter of 1997 compared to the
first quarter of 1996.
The Company reported no income tax benefit or expense for the three months ended
March 31, 1997, compared to an income tax benefit of $178,000 for the same
quarter a year earlier. For further information, refer to the footnotes included
in the Company's Annual Report on Form 10-KSB dated December 31, 1996.
The resulting net loss for the three months ended March 31, 1997 was $576,000,
compared to a net loss of $290,000 in the comparable period in 1996.
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 the Internet 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.
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 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 sold stock since 1988. The Company has no debt.
As of March 31, 1997, the Company had $6.4 million in cash and cash equivalents.
The Company believes that its existing cash, 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 2. Changes in Securities: None since registration
Item 6. Exhibits and reports on form 8-K
Exhibit 11. Computation of Net Loss Per Share is on page 12.
Items 1,3,4 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: May 8, 1997 By: /s/ James F. Willenborg
James F. Willenborg
Chief Executive Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Page Number
11 Computation of Net Loss Per Share 12
<PAGE>
<TABLE>
MYSOFTWARE COMPANY
Exhibit 11
COMPUTATION OF NET LOSS PER SHARE
(in thousands, except per share data)
<CAPTION>
Three Months Ended
March 31,
-------------------
1997 1996
--------- --------
<S> <C> <C>
Net loss $ (576) $ (290)
========= ========
Weighted average number of shares of
common stock outstanding 4,233 4,231
========= ========
Net loss per share $ (0.14) $ (0.07)
========= ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,401
<SECURITIES> 0
<RECEIVABLES> 1,624
<ALLOWANCES> 0
<INVENTORY> 601
<CURRENT-ASSETS> 9,731
<PP&E> 335
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,815
<CURRENT-LIABILITIES> 3,644
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 8,142
<TOTAL-LIABILITY-AND-EQUITY> 11,815
<SALES> 3,011
<TOTAL-REVENUES> 3,011
<CGS> 946
<TOTAL-COSTS> 946
<OTHER-EXPENSES> 2,732
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (576)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (576)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
