-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, CTZvpzow0f0xEsL+vYA0ERH0tHcJ7MxE3JZ2RsybNrnxC7NgeWeLy2xaNJF6I+53 xu0xcvxeiNLJvteSJm8Z9Q== 0000912057-95-006347.txt : 19950814 0000912057-95-006347.hdr.sgml : 19950814 ACCESSION NUMBER: 0000912057-95-006347 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 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: 95561914 BUSINESS ADDRESS: STREET 1: 989 E HILLSDALE BLVD #400 CITY: FOSTER CITY STATE: CA ZIP: 94404 BUSINESS PHONE: 4152867174 MAIL ADDRESS: STREET 1: 989 HILLSDALE BLVD. #400 CITY: FOSTER CITY STATE: CA ZIP: 94404 10-Q 1 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, 1995 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 1, 1995 there were 7,990,070 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, 1995 and March 31, 1995 3 Condensed Consolidated Statements of Operations - Three months ended June 30, 1995 and 1994 4 Condensed Consolidated Statements of Cash Flows - Three months ended June 30, 1995 and 1994 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 (UNAUDITED) ASSETS
June 30, 1995 March 31, 1995 ---------------- ---------------- Current Assets: Cash and equivalents $3,244,765 $4,593,459 Trade accounts receivable, less allowance for doubtful accounts and returns of $195,293 and $242,899 at June 30 and March 31, respectively 3,453,423 3,966,551 Inventory 252,034 261,926 Other Current Assets 928,810 1,076,637 ------------- ------------- Total current assets 7,879,032 9,898,573 ------------- ------------- Property, furniture and equipment, net 2,770,507 2,979,029 Capitalized software development costs, net 1,149,572 1,439,925 Other assets 54,868 54,868 ------------- ------------- Total Assets $11,853,979 $14,372,395 ------------- ------------- ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilites: Accounts payable and accrued liabilities $2,114,868 $2,234,641 Deferred Revenue 1,383,535 1,040,249 Current portion of long term debt 12,654 97,178 ------------- ------------- Total current liabilites 3,511,057 3,372,068 Long term debt 806,737 2,758,883 Stockholders' Equity: Common stock 80,009 70,802 Paid in Capital 32,849,289 30,740,878 Treasury stock (1,557,214) (1,557,214) Accumulated deficit (24,070,682) (21,295,375) Foreign currency translation adjustment 234,783 282,353 ------------- ------------- Total stockholders' equity 7,536,185 8,241,444 ------------- ------------- Total liabilities and stockholders' equity $ 11,853,979 $ 14,372,395 ------------- ------------- ------------- -------------
3 BLYTH HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended June 30 1995 1994 ------------ ----------- Net revenues: Products $ 1,558,789 $ 2,752,589 Services 1,875,982 1,327,086 ----------- ----------- Total net revenues 3,434,771 4,079,675 Costs and expenses: Cost of sales 1,978,520 1,273,926 Research & development 1,090,828 298,926 Sales, general and administrative 3,099,405 3,662,911 ----------- ----------- Total costs and expenses 6,168,753 5,235,763 ----------- ----------- Operating loss (2,733,982) (1,156,088) ----------- ----------- Other income (expense): Interest income 50,943 86,820 Interest expense (68,384) (10,461) Gain on foreign currency transactions (7,272) ----------- ----------- (17,441) 69,087 ----------- ----------- Loss before income taxes (2,751,423) (1,087,001) Income tax expense 23,883 1,748 ----------- ----------- Net loss $(2,775,306) $(1,088,749) ----------- ----------- ----------- ----------- Net loss per common share: $ (0.36) $ (0.16) Weighted average number of common shares outstanding 7,714,012 6,656,337
4 BLYTH HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
Three Months Ended June 30 1995 1994 ------------ ------------ Cash flows from operating activities: Net loss $(2,775,306) $(1,088,749) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization expense 327,392 232,660 Capitalized software development cost amortization expense 290,352 100,554 Accrued interest converted into stock 47,995 Change in assets and liabilities: Net (increases) decreases in assets: Trade accounts receivable 513,128 (859,614) Note receivable-related party (10,000) Inventory 9,892 (146,468) Other current assets 147,827 (283,775) Other long-term assets 0 222,324 Net increases (decreases) in liabilities Accounts payable and accrued liabilities (119,773) (823,252) Deferred revenues 343,286 568,397 ------------ ------------ Net cash used for operating activities (1,215,207) (441,419) ------------ ------------ Cash flows from investing activities: Capitalized software development costs 0 (1,019,293) Purchases of property, furniture and equipment (118,870) (389,481) ------------ ------------ Net cash used for investing activities (118,870) (1,408,774) ------------ ------------ Cash flows from financing activities: Repurchase of common stock (1,764,007) Exercise of stock options 32,953 46,200 Repayments of debt (351,353) ------------ ------------ Net cash (used) for financing activities 32,953 (2,069,160) ------------ ------------ Effect of exchange rate changes on cash (47,570) 58,658 Net decrease in cash and cash equivalents (1,348,694) (3,860,695) Cash and equivalents at beginning of period 4,593,459 14,405,520 ------------ ------------ Cash and equivalents at end of period $ 3,244,765 $ 10,544,825 ------------ ------------ ------------ ------------ NON CASH INVESTING AND FINANCING ACTIVITIES Conversion of convertible subordinated debentures into common stock 2,200,000 ------------ ------------
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, 1995. The results of operations for the period ended June 30, 1995 are not necessarily indicative of results to be expected for any other interim period or the year ending March 31, 1996. 2. Net loss per share for the three months ended June 30, 1995 is based on the weighted average number of common shares outstanding during the period including, where applicable, common stock equivalent shares. 3. In a July 1995 offering of up to $5,850,000 of 5% Convertible Debentures due June 30 1997, the Company closed the offering by issuing $2,750,000 (net proceeds of $2,585,000) aggregate principal value of the debentures. 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 30, 1996. In March of 1995 the Company received $2.7 million from a similar offering of 8% Convertible Debentures due March 31, 1997. As of June 30, 1995 all but $700,000 of the 8% Convertible Debentures due March 31, 1997 had been converted to common stock. The Company's other of long term debt consists primarily of long term 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, 1995 AND JUNE 30, 1994 Total net revenues declined 16% to $3,434,771 for the quarter ended June 30, 1995 from $4,079,675 for the quarter ended June 30, 1994. Product revenues declined 43% to $1,558,789 from $2,752,589 in the corresponding quarter of the prior year. The higher level of product revenues in the first quarter of fiscal 1995 was in part attributable to the Company's introduction of a significant upgrade to its core product during that quarter. In addition the Company's North American direct sales were lower in the first quarter of fiscal 1996 as compared to the same quarter of fiscal 1995. In June 1995 the Company changed its sales strategy to put increased emphasis on sales through resellers in addition to direct sales by the Company's sales force. Partly as a result of the changed strategy and partly to reduce expenses, in June 1995 the North American direct sales force was reduced by approximately 50%. Service revenues for the quarter ended June 30, 1995 increased 41% to $1,875,982 from $1,327,086 for the corresponding quarter of the prior year, primarily a result of an increase in consulting services during this period. Cost of products and services 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 products and services as a percentage of total net revenues increased to 58% from 31% for the quarter ended June 30, 1995 compared to the quarter ended June 30, 1994. This increase was largely attributable to an increase in the portion of total net revenues derived from services which carry a lower gross margin than product revenues. The table below sets forth gross research and development costs, capitalized software development costs, and net research and development expenses both in absolute dollars (in thousands) and as a percentage of total net revenues for the periods indicated:
Three months ended June 30, --------------------------- 1995 1994 ---- ---- Dollar amounts: Gross research and development costs......... $1,091 $1,318 Capitalized software development costs....... -- (1,019) Research and development expenses............ 1,091 299 As a percentage of total net revenues: Gross research and development costs......... 30% 32% Research and development expenses............ 30% 7%
7 The decrease in gross research and development costs is primarily due to decreased staffing and associated support costs. In connection with its reduction in force in June of 1995 the company focused its research and development staff only on those projects that it felt were the most responsive to needs in the marketplace, and reduced its research and development staff by 35%. The Company continues to invest in the development of new products aimed at sales opportunities that the Company expects will expand its markets. The "net realizability" (as defined in SOP 91) for most of the Company's current development efforts cannot be currently determined, accordingly, the Company has not capitalized any research and development costs in the quarter ended June 30, 1995. The Company ended the quarter with $1,150,000 of capitalized software development costs which the Company expects to fully amortize during fiscal 1997. Sales, general and administrative expenses decreased to $3,099,405 for the quarter ended June 30, 1995 from $3,662,911 for the quarter ended June 30, 1994, representing 90% of total net revenues during both of these periods. The decrease in absolute dollars primarily represents the effect of the Company's June reduction in force and other expense control measures. 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 March 31, 1997 (issued March 31, 1995 with net proceeds to the Company of $2,647,337 ) and foreign currency transactions. Other income (expense) decreased to an expense of $14,908 for the quarter ended June 30, 1995 from income of $69,087 for the quarter ended June 30, 1994, primarily due to less interest income because of lower average balances of cash and equivalents and more interest expense due to the accrual of interest on the outstanding 8% Convertible Debentures due March 31, 1997 All of the outstanding aggregate principal amount of the debentures, except for $700,000, were converted into 897,988 shares of common stock by the end of the first quarter of fiscal 1996. A net loss of $2,775,306 was recorded for the quarter ended June 30, 1995 versus a net loss of $1,088,749 for the quarter ended June 30, 1994. The increased loss primarily resulted from a decrease of $644,904 in revenues, an increase of $791,902 in research and development expense which could not be capitalized (as discussed above), and the incurrence of approximately of $125,000 severance and other one time costs due to the reduction in force. The effect of the reduction in force on the net loss was minimal this quarter since it occurred in mid-June. The Company believes that its headcount reductions and other cost cutting measures has resulted in it significantly reducing its expense structure. Although the Company does not anticipate that it will incur similarly large expenses in fiscal 1996, there can be no assurance that the Company will be profitable. 8 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 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: 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. With the addition of the alternate channels and expanded geographical efforts which started in fiscal 1995, the Company has entered the worldwide market. 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 1996, the Company continues making significant investments in product development, marketing and expansion of its sales channel in an effort to increase its 9 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, 1995, the Company's principal sources of liquidity consisted of cash and equivalents of $3.2 million. The Company's working capital position declined to $4.4 million at June 30, 1995 from $6.5 million at March 31, 1995. The $2.1 decline in working capital resulted primarily from increased expenses from the Company's operations. On July 11, 1995 the Company completed a private offering under Regulation S of 5% Convertible Debentures due June 30, 1997. This resulted in net proceeds to the Company of $2,585,000. 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 1996. However, the Company believes the level of financial resources is a significant competitive factor in its industry and may chose, prior to the end of fiscal 1996, 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 is unable to raise additional capital 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 (i) The Company filed a current report on Form 8-K on April 7, 1995 with respect to its issuance of $2.9 million aggregate principal amount of 8% Convertible Debentures due March 31, 1997. (ii) The Company filed a current report on Form 8-K on July 14, 1995 with respect to its issuance of $2.8 million aggregate principal amount of 5% Convertible Debentures due June 30, 1997. 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 8, 1995 BLYTH HOLDINGS INC. (Registrant) /s/ Michael Minor ----------------------- Michael Minor Chairmen and Chief Executive Officer /s/ Stephen Lorentzen ------------------------- Stephen Lorentzen President and Chief Operating Officer 12 EX-27 2 EXHIBIT 27
5 3-MOS MAR-31-1996 APR-01-1995 JUN-30-1995 204,123 3,040,642 3,648,716 195,293 252,034 7,879,032 4,814,845 2,044,338 11,853,979 3,511,057 0 80,009 0 0 7,456,176 11,853,979 1,558,789 3,434,771 1,978,520 6,168,753 17,441 195,293 17,441 (2,751,423) 23,883 (2,775,306) 0 0 0 (2,775,306) (0.36) (0.36)
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