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, 1998
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
(650) 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, 1998 was 4,285,853.
Transitional Small Business Disclosure Format (check one):
Yes No X
<PAGE>
MYSOFTWARE COMPANY
FORM 10-QSB
For the Quarterly Period Ended March 31, 1998
Table of Contents
Part I. Financial Information Page
Item 1. Financial Statements
a) Condensed Balance Sheets
as of March 31, 1998 and December 31, 1997.......................3
b) Condensed Statements of Operations
for the three months ended March 31, 1998 and 1997...............4
c) Condensed Statements of Cash Flows
for the three months ended March 31, 1998 and 1997...............5
d) Notes to Condensed 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, 1998 and December 31, 1997
(unaudited)
(in thousands)
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,801 $ 5,035
Accounts receivable, net 1,162 1,031
Inventories 454 621
Other current assets 1,041 1,019
----------- ----------
Total current assets 7,458 7,706
Property and equipment, net 257 278
Other assets 716 674
----------- ----------
Total assets $ 8,431 $ 8,658
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 758 $ 848
Accrued compensation 406 464
Other accrued liabilities 2,696 2,655
----------- ----------
Total current liabilities 3,860 3,967
Stockholders' equity:
Common stock 4 4
Additional paid-in capital 8,639 8,568
Accumulated deficit (4,072) (3,881)
----------- ----------
Total stockholders' equity 4,571 4,691
----------- ----------
Total liabilities and stockholders' equity $ 8,431 $ 8,658
=========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MYSOFTWARE COMPANY
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND 1997
(unaudited)
(in thousands, except per share data)
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Net revenues $ 3,130 $ 3,011
Cost of revenues 1,056 946
----------- ----------
Gross profit 2,074 2,065
----------- ----------
Operating expenses:
Product development 327 520
Sales and marketing 1,482 1,683
General and administrative 516 529
---------- ----------
2,325 2,732
---------- ----------
Operating loss (251) (667)
Interest income, net 61 91
---------- ----------
Net loss $ (190) $ (576)
========== ==========
Net loss per share-basic and diluted $ (0.04) $ (0.14)
========== ==========
Shares used in computing
net loss per share-basic and diluted 4,257 4,233
========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MYSOFTWARE COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND 1997
(unaudited)
(in thousands)
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (190) $ (576)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization 184 176
Provision for returns and doubtful accounts (479) (443)
Changes in operating assets and liabilities:
Accounts receivable 349 (430)
Inventories 167 (5)
Other assets (10) 24
Accounts payable (90) 310
Accrued compensation (60) 12
Other accrued liabilities 41 144
----------- ---------
Net cash used for operating activities (88) (788)
----------- ---------
Cash flows from investing activities:
Additions to property and equipment --- (23)
Software production costs (217) (513)
----------- ---------
Net cash used for investing activities (217) (536)
----------- ---------
Cash flows from financing activities:
Proceeds from exercise of stock options 71 7
----------- ---------
Net cash provided by financing activities 71 7
----------- ---------
Net decrease in cash and cash equivalents (234) (1,317)
Cash and cash equivalents at beginning of period 5,035 7,718
----------- ---------
Cash and cash equivalents at end of period $ 4,801 $ 6,401
=========== =========
<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, 1997.
2. Per Share Computation
Basic net loss per share is computed using the weighted average number of
common shares outstanding during each period presented. Diluted net loss per
share is computed using the weighted average number of shares of common stock
and potential common stock using the treasury stock method, when dilutive.
The weighted average number of common stock options of 86,376 and 73,988 for
the three month periods ending March 31, 1998 and 1997, respectively, were
not included in the computation of diluted loss per share because to do so
would have been antidilutive for all periods presented.
3. Revenue Recognition
For software transactions entered into beginning January 1, 1998, the Company
adopted the American Institute of Certified Public Accountants' Statement of
Position (SOP) No. 97-2, Software Revenue Recognition. SOP 97-2 generally
requires revenue earned on software arrangements involving multiple elements
to be allocated to each element based on the relative fair value of the
elements. The fair value of the element must be based on evidence that is
specific to the vendor, and if no such evidence exists all revenue from the
arrangement is deferred until all elements are delivered. The adoption of SOP
97-2 did not have a material impact on the Company's results of operations.
4. Comprehensive Income
Effective January 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards (FASB) No. 130, Reporting of Comprehensive
Income. FASB No. 130 establishes standards for the display of comprehensive
income and its components in a full set of financial statements.
Comprehensive income includes all changes in equity during a period except
those resulting from the issuance of shares of stock and distributions to
shareholders. There were no material differences between net loss and
comprehensive loss.
<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, 1997, which has been filed with the Securities and
Exchange Commission.
Results of Operations
Net revenues for the three months ended March 31, 1998 increased $119,000, or
4.0 percent, to $3.1 million, compared with net revenues of $3.0 million for
the corresponding quarter in 1997. 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 My Data Base, which was introduced in the first quarter of 1998.
Gross profit for the three months ended March 31, 1998 remained unchanged at
$2.1 million, compared with the same period in 1997. Gross margin for the
three months ended March 31, 1998 was 66.2 percent, compared to 68.6 percent
for the same period in 1997. The decrease in the gross margin for the
quarter was due primarily to lower gross margins in the Company's OEM sales.
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 prepaid software production costs.
The Company's total operating expenses for the three months ended March 31,
1998 decreased 15 percent to $2.3 million from $2.7 million for the same
period of 1997. The decrease in operating expenses resulted primarily from
lower product development expenses as the Company has terminated further
development on its Internet-based products. Product development expenses were
down 37 percent to $327,000 in the three months ended March 31, 1998,
compared to $520,000 in the same period of 1997. Sales and marketing
expenses were down 12 percent to $1,482,000 in the three months ended March
31, 1998, compared to $1,683,000 in the same period of 1997. General and
administrative expenses were down 2 percent to $516,000 in the three months
ended March 31, 1998, compared to $529,000 in the same period of 1997.
Operating loss was $251,000 for the three months ended March 31, 1998,
compared with an operating loss of $667,000 in the comparable period of 1997.
Interest income was $61,000 for the quarter ended March 31, 1998, compared to
$91,000 for the comparable period of 1997. The decrease in interest income
was due primarily to lower cash balances during the first quarter of 1998
compared to the first quarter of 1997.
The Company reported no income tax benefit or expense for the three months
ended March 31, 1998, or the three months ended March 31, 1997. Based on the
<PAGE>
results of the current year operations and uncertainty of future realization
of the deferred tax assets, the Company's management does not believe that it
is sufficiently likely that the future taxable income will be generated to
realize all of the net deferred tax assets.
The resulting net loss for the three months ended March 31, 1998 was
$190,000, compared to a net loss of $576,000 in the comparable period in 1997.
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 home offices 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; cancellations or terminations by retail
or distributor accounts; shelf space reductions; delays in shipment; and
general market and economic conditions. For a more detailed discussion of
certain risks and uncertainties related to the Company's business, see the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1997,
which has been filed with the Securities and Exchange Commission.
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 its initial public offering in June, 1995, the
Company has not borrowed money or sold stock since 1988.
As of March 31, 1998, the Company had $4.8 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 1998.
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities: None since registration
Item 6. Exhibits and reports on form 8-K: None
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, 1998 By: /s/ Gregory W. Slayton
Gregory W. Slayton
Chief Executive Officer
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,801
<SECURITIES> 0
<RECEIVABLES> 1,162
<ALLOWANCES> 0
<INVENTORY> 454
<CURRENT-ASSETS> 7,458
<PP&E> 257
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,431
<CURRENT-LIABILITIES> 3,860
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 4,567
<TOTAL-LIABILITY-AND-EQUITY> 8,431
<SALES> 3,130
<TOTAL-REVENUES> 3,130
<CGS> 1,056
<TOTAL-COSTS> 1,056
<OTHER-EXPENSES> 2,325
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (190)
<INCOME-TAX> 0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (190)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
