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, 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 June
30, 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 June 30, 1997
Table of Contents
Part I. Financial Information Page
Item 1. Financial Statements
a) Condensed Balance Sheets
as of June 30, 1997 and December 31, 1996 3
b) Condensed Statements of Operations
for the three and six months ended June 30, 1997 and 1996 4
c) Condensed Statements of Cash Flows
for the six months ended June 30, 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 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and reports on form 8-K 10
Signatures 11
<PAGE>
<TABLE>
Part I. Financial Information
Item 1. Financial Statements
MYSOFTWARE COMPANY
CONDENSED BALANCE SHEETS
June 30, 1997 and December 31, 1996
(in thousands)
<CAPTION>
June 30, December 31,
1997 1996
-------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,951 $ 7,718
Accounts receivable, net 1,179 1,242
Inventories 575 596
Other current assets 823 821
Deferred income taxes 308 308
----------- -----------
Total current assets 8,836 10,685
Property and equipment, net 348 354
Other assets 2,118 1,370
----------- -----------
Total assets $ 11,302 $ 12,409
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,103 $ 730
Accrued compensation 386 388
Other accrued liabilities 1,896 2,551
----------- -----------
Total current liabilities 3,385 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) (681) 149
------------ -----------
Total stockholders' equity 7,892 8,715
------------ -----------
Total liabilities and stockholders' equity $ 11,302 $ 12,409
============ ===========
<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, 1997 AND 1996
(Unaudited)
(in thousands except per share data)
<CAPTION>
Three Months Ended Six Months Ended
------------------------ ---------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Net revenues $ 2,937 $ 3,455 $ 5,948 $ 6,168
Cost of revenues 811 891 1,757 1,652
---------- --------- --------- ----------
Gross profit 2,126 2,564 4,191 4,516
---------- --------- --------- ----------
Operating expenses:
Product development 524 452 1,044 912
Sales and marketing 1,378 1,459 3,061 2,859
General and administrative 558 421 1,087 823
Write-off of acquired technology ---- ---- ---- 255
---------- --------- --------- ---------
2,460 2,332 5,192 4,849
---------- --------- --------- ---------
Operating income(loss) (334) 232 (1,001) (333)
Interest income, net 80 94 171 193
---------- --------- --------- ---------
Income(loss) before taxes (254) 326 (830) (140)
Income taxes expense (benefit) ---- 124 ---- (53)
---------- --------- --------- ---------
Net income(loss) $ (254) $ 202 $ (830) $ (87)
========== ========= ========= =========
Net income(loss) per share $ (0.06) $ 0.05 $ (0.20) $ (0.02)
========== ========= ========= =========
Shares used in computing
net income(loss) per share 4,233 4,349 4,233 4,290
========== ========= ========= =========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MYSOFTWARE COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1996
(Unaudited)
(in thousands)
<CAPTION>
Six Months Ended
June 30,
1997 1996
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (830) $ (87)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation 89 52
Amortization of software production costs 277 83
Provision for returns and doubtful accounts (1,009) 236
Stock compensation expense 7 ---
Changes in operating assets and liabilities:
Accounts receivable 349 (45)
Inventories 21 148
Other assets (5) (150)
Accounts payable 373 (72)
Accrued compensation (2) 9
Deferred officers' compensation --- (53)
Other accrued liabilities 68 (186)
--------- ----------
Net cash used for operating activities (662) (65)
========= ==========
Cash flows from investing activities:
Additions to property and equipment (83) (128)
Software production costs (1,022) (679)
--------- ----------
Net cash used for investing activities (1,105) (807)
--------- ----------
Net decrease in cash and cash equivalents (1,767) (872)
Cash and cash equivalents at beginning of period 7,718 7,794
--------- ----------
Cash and cash equivalents at end of period $ 5,951 $ 6,922
========= ==========
<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 six months ended June 30, 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, 1996. Had SFAS No. 128 been effective for the quarter and six
month periods ended June 30, 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
Three Months Ended June 30, 1997 and 1996
Net revenues for the three months ended June 30, 1997 decreased $518,000, or
15 percent, to $2.9 million, compared with net revenues of $3.5 million for
the corresponding quarter in 1996. The decrease in net revenues resulted
primarily from decreased sales of the Company's existing product titles to
retailers and distributors due to sluggishness in the retail channel.
Gross profit for the three months ended June 30, 1997 decreased 17 percent to
$2.1 million, from $2.6 million in the same period in 1996. Gross margin for
the second quarter was 72.4 percent, compared to 74.2 percent for the same
period in 1996. The decrease in the gross margin for the quarter was due to
increased amortization of software production costs. 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 software production costs.
The Company's total operating expenses for the three months ended June 30,
1997 increased 5 percent to $2.5 million, from $2.3 million for the same
period of 1996. The increase in operating expenses resulted primarily from
increased general and administrative costs as well as continued investment
in new product development.
Product development expenses were up 16 percent to $524,000 in the three
months ended June 30, 1997, compared to $452,000 in the same period of 1996,
reflecting the Company's efforts to develop new products for both its
ProVenture and Pacifica brands.
Sales and marketing expenses decreased 6 percent to $1.4 million in the
second quarter, from $1.5 million in the comparable 1996 quarter. Sales and
marketing expenses decreased principally as a result of lower market
development funds accrued.
General and administrative expenses increased 33 percent to $558,000 in the
three months ended 1997 from $421,000 in the same period of 1996, primarily
as a result of greater occupancy costs and higher systems expenses.
The Company had an operating loss of $334,000 for the three months ended
June 30, 1997, compared with operating income of $232,000 in the comparable
period of 1996.
<PAGE>
Interest income was $80,000 for the quarter ended June 30, 1997, compared to
$94,000 for the comparable period of 1996. The decrease in interest income
was due to lower average cash balances during the 1997 quarter.
The Company reported no income tax benefit or expense for the three months
ended June 30, 1997, compared to an income tax expense of $124,000 for the
same quarter a year earlier. For further information, see 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 June 30, 1997 was $254,000,
compared to net income of $202,000 in the comparable period in 1996.
Six Months Ended June 30, 1997 and 1996
For the six months ended June 30, 1997, net revenues decreased $220,000, or 4
percent, to $5.9 million, compared with net revenues of $6.2 million for the
corresponding period in 1996. The decrease was primarily attributable to
decreased sales of the Company's existing titles in the retail channel.
For the six months ended June 30, 1997, gross profit decreased 7 percent to
$4.2 million, from $4.5 million for the corresponding period in 1996. Gross
margin for the six months ended June 30, 1997 was 70.5 percent, compared to
73.2 percent for the same period in 1996. The decrease in gross margin for
the quarter was due to increased amortization of software production costs.
For the six months ended June 30, 1997, total operating expenses increased 7
percent to $5.2 million, from $4.8 million for the corresponding period in
1996. 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, 1997, product development expenses were up
14 percent to $1,044,000, compared to $912,000 for the corresponding period
in 1996, reflecting the Company's efforts to develop new products for both
its ProVenture and Pacifica brands.
For the six months ended June 30, 1997, sales and marketing expenses
increased 7 percent to $3.1 million compared to $2.9 million for the
corresponding period in 1996, primarily as a result of higher headcount and
increased direct marketing expenses.
For the six months ended June 30, 1997, general and administrative expenses
increased 32 percent to $1,088,000, compared to $823,000 for the
corresponding period in 1996. The increase was attributable to greater
occupancy costs and higher systems expenses.
<PAGE>
For the six months ended June 30, 1997, the Company reported an operating
loss of $1,001,000 compared to an operating loss of $334,000 in the
corresponding period in 1996.
Interest income in the first half of 1997 was $171,000 compared to $193,000
for the corresponding period in 1996. The decrease in interest income was due
to lower average cash balances in 1997.
The Company reported no income tax benefit or expense for the six months
ended June 30, 1997, compared to an income tax benefit of $53,000 for the
same period a year earlier. For further information, see the footnotes
included in the Company's Annual Report on Form 10-KSB dated December 31,
1996.
For the six months ended June 30, 1997, the Company reported a net loss of
$830,000, compared to a net loss of $87,000 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, of 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 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 sold stock since 1988. The Company has no debt.
As of June 30, 1997, the Company had $6.0 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 1998.
<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 22, 1997.
The matters voted upon at the meeting and the voting of
stockholders with respect thereto are as follows:
b) The election of James F. Willenborg, David P. Mans, Michael H.
Thoma, John J. Katsaros, and Donald F. Wood as directors to
hold office until the 1998 annual meeting of stockholders:
For Withheld
----------- -----------
James F. Willenborg 4,128,187 95,080
David P. Mans 4,128,187 95,080
Michael H. Thoma 4,128,187 95,080
John J. Katsaros 4,132,937 90,330
Donald F. Wood 4,127,937 95,330
c) Amendment of MySoftware's 1995 Equity Incentive Plan:
For: 2,340,238 Against: 558,350 Abstain: 16,665
Broker Non-Vote: 1,308,014
d) Ratification of the selection of KPMG Peat Marwick LLP as
independent auditors of the Company for its fiscal year ended
December 31, 1997:
For: 4,203,717 Against: 11,120 Abstain: 8,430
Item 6. Exhibits and reports on form 8-K
Exhibit 11. Computation of Net Income (Loss) Per Share and Pro
Forma Net Income Per Share is on page 13.
Exhibit 27. Financial Data Schedule.
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 1, 1997 By:____________________
Thomas C. Hoster
Chief Financial Officer
<PAGE>
Index to Exhibits
Exhibit Number Page Number
- --------------- -----------------
11 Computation of Net Income (Loss) Per Share 13
27 Financial Data Schedule
<PAGE>
<TABLE>
MYSOFTWARE COMPANY
Exhibit 11
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(in thousands, except per share data)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income(loss) $ (254) $ 202 $ (830) $ (87)
-------- -------- -------- --------
Weighted average number of shares of
common stock outstanding 4,233 4,231 4,233 4,231
Number of Common Stock Equivalents
as a result of stock option outstanding
using the treasury stock method --- 118 --- 59
-------- -------- -------- --------
4,233 4,349 4,233 4,290
======== ======== ======== ========
Net income(loss) per share $ (0.06) $ 0.05 $ (0.20) $ (0.02)
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,951
<SECURITIES> 0
<RECEIVABLES> 1,179
<ALLOWANCES> 0
<INVENTORY> 575
<CURRENT-ASSETS> 8,836
<PP&E> 348
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,302
<CURRENT-LIABILITIES> 3,385
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 7,888
<TOTAL-LIABILITY-AND-EQUITY> 11,302
<SALES> 5,948
<TOTAL-REVENUES> 5,948
<CGS> 1,757
<TOTAL-COSTS> 1,757
<OTHER-EXPENSES> 5,192
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (830)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (830)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
