-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OOZddYvkUEK85p+fl3fEI9Yj7Onot4Gw1zL+5BnPHaKL0scGv8WeVvVBk1yfVMGr 8v1k62CmgzYTnF3FP7jErg== 0000912057-96-017948.txt : 19960816 0000912057-96-017948.hdr.sgml : 19960816 ACCESSION NUMBER: 0000912057-96-017948 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLYTH HOLDINGS INC CENTRAL INDEX KEY: 0000820738 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 943046892 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16449 FILM NUMBER: 96615283 BUSINESS ADDRESS: STREET 1: 989 E HILLSDALE BLVD #400 CITY: FOSTER CITY STATE: CA ZIP: 94404 BUSINESS PHONE: 4152867174 MAIL ADDRESS: STREET 1: 989 E HILLSDALE BLVD. #400 CITY: FOSTER CITY STATE: CA ZIP: 94404 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTER ENDED JUNE 30, 1996 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ------------ ------------ Commission File number 0-16449 BLYTH HOLDINGS INC. (Exact name of registrant as specified in its charter) Delaware 94-3046892 (State of incorporation) (IRS Employer Identification No.) 989 E. Hillsdale Boulevard #400 Foster City, California 94404 (Address of principal executive offices) (415) 571-0222 (Registrant's telephone number) 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 August 9, 1996 there were 10,280,944 shares of registrant's Common Stock, $.01 par value, outstanding. 1 BLYTH HOLDINGS INC. INDEX PART I. FINANCIAL INFORMATION Page No. Item 1. Financial Statements: Condensed Consolidated Balance Sheets - June 30, 1996 and March 31, 1996 3 Condensed Consolidated Statements of Operations - Three months ended June 30, 1996 and 1995 4 Condensed Consolidated Statements of Cash Flows - Three months ended June 30, 1996 and 1995 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12 2 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements BLYTH HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS
June 30, 1996 March 31, 1996 --------------- --------------- (Unaudited) (Derived from audited financial statements) Current Assets: Cash and equivalents $10,630,000 $5,129,000 Trade accounts receivable, less allowance for doubtful accounts and returns of $410,000 and $400,000, respectively 2,649,000 2,303,000 Inventory 63,000 71,000 Other current assets 1,091,000 1,155,000 --------------- --------------- Total current assets 14,433,000 8,658,000 --------------- --------------- Property, furniture and equipment, net 1,646,000 1,831,000 Capitalized software development costs, net 31,000 300,000 Other assets 52,000 52,000 --------------- --------------- Total Assets $16,162,000 $10,841,000 --------------- --------------- --------------- --------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilites: Accounts payable and accrued liabilities $1,569,000 $1,822,000 Deferred revenue 1,136,000 1,093,000 Current portion of long term debt 66,000 108,000 --------------- --------------- Total current liabilites 2,771,000 3,023,000 --------------- --------------- Long term debt, net of unamortized issuance costs of $514,000 and $0, respectively 6,850,000 26,000 --------------- --------------- Total liabilites 9,621,000 3,049,000 --------------- --------------- Stockholders' Equity: Common stock 98,000 98,000 Paid in capital 35,833,000 35,722,000 Accumulated deficit (29,534,000) (28,152,000) Foreign currency translation adjustment 144,000 124,000 --------------- --------------- Total stockholders' equity 6,541,000 7,792,000 --------------- --------------- Total Liabilities and Stockholders' Equity $16,162,000 $10,841,000 --------------- --------------- --------------- ---------------
3 BLYTH HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended June 30 1996 1995 ---------- ---------- Net revenues: Products $1,073,000 $1,559,000 Services 1,928,000 1,876,000 ------------ ------------ Total net revenues 3,001,000 3,435,000 Costs and expenses: Cost of sales 1,823,000 1,979,000 Research & development 591,000 1,091,000 Sales, general and administrative 1,974,000 3,099,00 ------------ ------------ Total costs and expenses 4,388,000 6,169,000 ------------ ------------ Operating loss (1,387,000) (2,734,000) ------------ ------------ Other income (expense): Interest income 75,000 51,000 Interest expense (50,000) (68,000) ------------ ------------ 25,000 (17,000) ------------ ------------ Loss before income taxes (1,362,000) (2,751,000) Income tax expense 20,000 24,000 ------------ ------------ Net loss $(1,382,000) $(2,775,000) ------------ ------------ ------------ ------------ Net loss per common share: $(0.14) $(0.36) Weighted average number of common shares outstanding 9,770,898 7,714,012
4 BLYTH HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
Three Months Ended June 30 1996 1995 ----------- ----------- Cash flows from operating activities: Net loss $(1,382,000) $(2,775,000) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization expense 248,000 328,000 Capitalized software development cost amortization expense 261,000 290,000 Accrued interest converted into stock - 48,000 Change in assets and liabilities: Net (increases) decreases in assets: Trade accounts receivable (346,000) 513,000 Inventory 9,000 10,000 Other current assets 64,000 148,000 Net increases (decreases) in liabilities: Accounts payable and accrued liabilities (253,000) (120,000) Deferred revenue 43,000 343,000 ------------ ------------ Net cash used for operating activities (1,356,000) (1,215,000) ------------ ------------ Cash flows from investing activities: Purchases of property, furniture and equipment (49,000) (119,000) ------------ ------------ Net cash used for investing activities (49,000) (119,000) ------------ ------------ Cash flows from financing activities: Exercise of stock options 121,000 33,000 Net proceeds from issuance of long-term debt 6,835,000 - Repayments of debt (54,000) - ------------ ------------ Net cash provided by financing activities 6,902,000 33,000 ------------ ------------ Effect of exchange rate changes on cash 4,000 (48,000) Net increase (decrease) in cash and equivalents 5,501,000 (1,349,000) Cash and equivalents at beginning of period 5,129,000 4,594,000 ------------ ------------ Cash and equivalents at end of period $10,630,000 $3,245,000 ------------ ------------ ------------ ------------
5 BLYTH HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The unaudited financial information furnished herein reflects all adjustments, consisting only of normal recurring items, which in the opinion of management are necessary to fairly state the Company's financial position, the results of its operations and the changes in its financial position for the periods presented. These financial statements should be read in conjunction with the Company's audited financial statements for the year ended March 31, 1996. The results of operations for the period ended June 30, 1996 are not necessarily indicative of results to be expected for any other interim period or the year ending March 31, 1997. 2. Net loss per share for the three months ended June 30, 1996 is based on the weighted average number of common shares outstanding during the period. 3. In June 1996 the Company issued $7,350,000 of 8% Convertible Debentures due June 3, 1999 which after issuance costs of $514,000 resulted in net proceeds of $6,835,000. The issuance costs are capitalized and amortized to interest expense using the effective interest method over the expected life of the debt. The principal and interest are convertible into shares of the Company's common stock and the Company may force conversion at its option after June 3, 1999. The Company's other long term debt consists of the long-term portion of capital leases. 6 BLYTH HOLDINGS INC. AND SUBSIDIARIES ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995 REVENUES. Total net revenues declined 13% to $3,001,000 for the three months ended June 30, 1996 as compared to $3,435,000 for the three months ended June 30, 1995. The decline in total net revenues in the three months ended June 30, 1996 as compared to the three months ended June 30, 1995 was due to a decline in product revenues during this period offset in part by increases in service revenues during this same period. Product revenues declined 31% to $1,073,000 for the three months ended June 30, 1996 as compared to $1,559,000 in the corresponding period of the prior year. The decrease in product revenues in the three months ended June 30, 1996 as compared to the three months ended June 30, 1995 was primarily due to the lower list prices of the Company's new products which were introduced in September 1995 as part of the Company's new product strategy. Service revenues for the three months ended June 30, 1996 increased 3% to $1,928,000 from $1,876,000 for the corresponding period of the prior year. The increase in service revenues in the three months ended June 30, 1996 as compared to the three months ended June 30, 1995 was a result of increased revenues from the Company's International User Conference that was held in June 1996 and from revenues from IBM for the development of the OMNIS OS/2 platform. COST OF SALES. Cost of sales is comprised of the following: 1) product cost, which includes the cost of both internal and subcontracted production, technical support and maintenance services during the warranty period (primarily personnel related), and amortization of capitalized software development costs, and 2) service cost, primarily personnel related, which consists of consulting, technical support, maintenance services outside the warranty period and training. Cost of sales as a percentage of total net revenues increased to 61% from 58% for the three months ended June 30, 1996 compared to the three months ended June 30, 1995. This increase in cost of sales as a percentage of total net revenues was primarily attributable to the higher proportion of service revenue to product revenue. Service revenue has a significantly higher cost of sales as compared to product sales. The decrease in cost of products and services in absolute dollars for the three months ended June 30, 1996 compared to the three months ended June 30, 1995 was due to the lower revenues in the quarter ended June 30, 1996. RESEARCH AND DEVELOPMENT EXPENSE Research and development expense decreased to $591,000 for the three months ended June 30, 1996 from $1,091,000 for the three months ended June 30, 1995, representing 20% and 30% of total net revenues during these periods, respectively. The decrease in research and development costs is primarily due to decreased staffing and associated support costs. In June of 1995 the Company refocused its product software development strategy to focus its near term marketing and sales efforts on products addressing the needs of its developed customer base, resulting in a reduction of personnel. The Company continues to invest in the 7 development of new products aimed at sales opportunities that the Company expects will expand its markets. The Company expenses its research and development costs as they are incurred. The Company ended the three months ended June 30, 1996 with $31,000 of capitalized software development costs which the company expects to fully amortize by the end of the second quarter of fiscal 1997. SALES, GENERAL AND ADMINISTRATIVE EXPENSES Sales, general and administrative expenses decreased to $1,974,000 for the three months ended June 30, 1996 from $3,099,000 for the three months ended June 30, 1995, representing 66% and 90% of total net revenues during these periods, respectively. The decrease in absolute dollars primarily represents the effect of the Company's cost control measures instituted during June of 1995. OTHER INCOME (EXPENSE). Other income (expense) is comprised primarily of interest income earned on cash and equivalents, interest expense related to the Company's 8% Convertible Debentures due June 3, 1999 (issued June 3, 1996 with net proceeds to the Company of $6,835,000 ) and foreign currency transactions. Total other income (expense) increased to income of $25,000 for the three months ended June 30, 1996 from an expense of $17,000 for the three months ended June 30, 1995, primarily due to higher interest income because of higher average balances of cash and equivalents. NET LOSS. The Company recognized a net loss of $1,382,000 for the three months ended June 30, 1996 versus a net loss of $2,775,000 for the three months ended June 30, 1995. This decreased loss primarily resulted from a decrease of $1,125,000 in sales, general and administrative costs in the three months ended June 30, 1996 as compared to the three months ended June 30, 1995, a decrease in cost of sales of $156,000 in the three months ended June 30, 1996 as compared to the three months ended June 30, 1995 and a decrease in research and development expense of $500,000 in the three months ended June 30, 1996 as compared to the three months ended June 30, 1995, which was offset in part by a decline in total net revenues of $434,000 in the three months ended June 30, 1996 as compared to the three months ended June 30, 1995. VARIABILITY OF RESULTS The Company has experienced significant quarterly fluctuations in operating results and anticipates such fluctuations in the future. The Company generally ships orders as received and, as a result, typically has little or no backlog. Quarterly revenues and operating results, therefore, depend on the volume and timing of orders received during the quarter, which are difficult to forecast. Furthermore, the Company has typically sold to large corporate enterprises which often purchase in significant quantities, and therefore, the timing of the receipt of such orders could cause significant fluctuations in the operating results. Historically, the Company has often recognized a substantial portion of its license revenues in the last month of the quarter. Service revenues tend to fluctuate as consulting projects, which may continue over several quarters, are undertaken or completed. Operating results may also fluctuate due to factors such as the demand for the Company's products, the size and timing of customer orders, the introduction of new products and product enhancements by the Company or its competitors, changes in the proportion of revenues attributable to licenses and service fees, commencement or conclusion of significant consulting projects, changes in the level of operating expenses, and competitive conditions in the industry. The Company's staffing and other operating expenses are based on anticipated revenue, a substantial portion of which is not typically generated until the end of each quarter. As a result, despite careful planning, delays in the receipt of orders can cause significant variations in operating results from quarter to quarter. In addition, revenues in 8 quarters after a new product release may be significantly affected by the amount of upgrade revenue, which tends to increase soon after the release of a new product and then decline rapidly. A number of additional factors have, from time to time, caused and may in the future cause the Company's revenues and operating results to vary substantially from period-to-period. These factors include: changes in operational strategies, pricing competition, delays in introduction of new products or product enhancements, size and timing of demand for existing products and shortening of product life cycle, inventory obsolescence and general economic conditions. The Company's future operating results will depend, to a considerable extent, on its ability to rapidly and continuously develop new products that offer its customers enhanced performance at competitive prices. Inherent in this process are a number of risks. The development of new, enhanced software products is a complex and uncertain process requiring high levels of innovation from the Company's designers as well as accurate anticipation of customers and technical trends by the marketing staff. Once a product is developed, the Company must rapidly bring it into production, a process that requires long lead times on some product components and accurate forecasting of production volumes, among other things, in order to achieve acceptable product costs. The Company's operating results will also be affected by the volume, mix and timing of orders received during a period and by conditions in the industries that it serves as well as the general economy. The Company's products are sold in many countries Accordingly, changes in the economies, trade policies and fluctuations in interest or exchange rates of other countries in which the Company sells its products may have an impact on its future financial results. The Company's operating expenses may increase as it expands its operations. During fiscal 1997, the Company expects to continue making significant investments in product development, marketing and expansion of its sales channel in an effort to increase its presence in the increasingly competitive client/server market place. Future operating results will be adversely affected if net revenues do not increase accordingly. The development and introduction of new or enhanced products also requires the Company to manage the transition from older, displaced products in order to minimize disruptions in customer ordering patterns and excessive levels of older product inventory and to ensure that adequate supplies of new products can be delivered to meet customer demand. Because the Company is continuously engaged in this product development and transition process, its operating results may be subject to considerable fluctuations, particularly when measured on a quarterly basis. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1996, the Company's principal sources of liquidity consisted of cash and equivalents of $10.6 million. The Company's working capital position increased to $11.7 million at June 30, 1996 from $5.6 million at March 31, 1996. This increase in working capital during the first quarter of fiscal 1997 was primarily due to the fact that on June 3, 1996 the Company completed a private offering under Regulation S of the Securities Act of 1933, as amended, of 8% Convertible Debentures due June 3, 1999 which resulted in net proceeds to the Company of $6,835,000. As of August 9, 1996 $519,998 of convertible debentures have been converted into 476,143 shares of the Company's common stock. 9 The Company has curtailed spending, reduced its workforce significantly and has implemented other actions to conserve cash. The Company believes that its cash and equivalents, together with expected net revenues, will be adequate to meet the Company's anticipated cash needs through fiscal 1997. However, the Company believes the level of financial resources is a significant competitive factor in its industry and may choose, prior to the end of fiscal 1997, to raise additional capital through debt or equity financings to strengthen its financial position, to accelerate growth or to provide the Company with additional flexibility to take advantage of business opportunities that might arise. There can be no guarantee that additional capital will be available to the Company or, if available, on terms favorable to the Company. If the Company requires additional capital and is unable to raise it through operations or financings, the Company's business and operation results may be materially and adversely impacted as management would be required to significantly curtail operations, which could have a significant adverse effect on the Company's business. 10 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - None (b) Reports on Form 8-K. The Company has filed a current report on form 8-K on June 4, 1996 with respect to its issuance of $7.35 million aggregate principal amount of 8% Convertible Debentures due June 3, 1999. 11 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. Date: August 12, 1996 BLYTH HOLDINGS INC. (Registrant) /s/ Michael Minor ----------------- Michael Minor Chairman and Chief Executive Officer /s/ Stephen Lorentzen --------------------- Stephen Lorentzen President and Chief Operating Officer and Chief Financial Officer 12 EX-27 2 EXHIBIT 27
5 3-MOS MAR-31-1997 APR-01-1996 JUN-30-1996 33,000 10,597,000 3,059,000 410,000 63,000 14,433,000 3,965,000 2,319,000 16,162,000 2,771,000 6,850,000 0 0 98,000 6,443,000 16,162,000 1,073,000 3,001,000 1,823,000 4,388,000 (25,000) 410,000 (25,000) (1,362,000) 20,000 (1,382,000) 0 0 0 (1,382,000) (0.14) (0.14) Details for U.S. only
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