-----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, LGx13SgTxaUkDArJOXdnvnD3K+Q3X+FnhyDY7LpLoloe7tchl8fJg8eHCQwB0PuR ukdS6oE4hMOJlfAR+wdFyQ== 0000912057-96-026489.txt : 19961118 0000912057-96-026489.hdr.sgml : 19961118 ACCESSION NUMBER: 0000912057-96-026489 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 96665441 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 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 SEPTEMBER 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 November 1, 1996 there were 10,962,190 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 - September 30, 1996 and March 31, 1996 3 Condensed Consolidated Statements of Operations - Three and six months ended September 30, 1996 and 1995 4 Condensed Consolidated Statements of Cash Flows - Six months ended September 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 4. Matters Submitted to a Vote of Security Holders 12 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 2 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements BLYTH HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS
September 30, 1996 March 31, 1996 ------------------ --------------------- (Unaudited) (Derived from audited financial statements) Current Assets: Cash and equivalents $9,772,000 $5,129,000 Trade accounts receivable, less allowance for doubtful accounts of $396,000 and $400,000, respectively 2,365,000 2,303,000 Inventory 47,000 71,000 Other current assets 1,284,000 1,155,000 ------------------ ------------------- Total current assets 13,468,000 8,658,000 ------------------ ------------------- Property, furniture and equipment, net 1,562,000 1,831,000 Capitalized software development costs, net - 300,000 Other assets 52,000 52,000 ------------------ ------------------- Total Assets $15,082,000 $10,841,000 ------------------ ------------------- ------------------ ------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilites: Accounts payable and accrued liabilities $1,684,000 $1,822,000 Deferred revenue 1,047,000 1,093,000 Current portion of long term debt 213,000 108,000 ------------------ ------------------- Total current liabilites 2,944,000 3,023,000 ------------------ ------------------- Long term debt, net of unamortized issuance costs of $403,000 and $0, respectively 5,354,000 26,000 ------------------ ------------------- Total liabilites 8,298,000 3,049,000 ------------------ ------------------- Stockholders' Equity: Common stock 110,000 98,000 Paid in capital 37,058,000 35,722,000 Accumulated deficit (30,533,000) (28,152,000) Foreign currency translation adjustment 149,000 124,000 ------------------ ------------------- Total stockholders' equity 6,784,000 7,792,000 ------------------ ------------------- Total Liabilities and Stockholders' Equity $ 15,082,000 $ 10,841,000 ------------------ ------------------- ------------------ -------------------
3 BLYTH HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended September 30 September 30 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Net revenues: Products $ 1,377,000 $ 1,183,000 $ 2,450,000 $ 2,742,000 Services 1,454,000 1,928,000 3,382,000 3,804,000 ------------ ------------ ------------ ------------ Total net revenues 2,831,000 3,111,000 5,832,000 6,546,000 Costs and expenses: Cost of sales 1,118,000 1,739,000 2,941,000 3,718,000 Research & development 671,000 616,000 1,262,000 1,707,000 Sales, general and administrative 1,886,000 2,082,000 3,860,000 5,181,000 ------------ ------------ ------------ ------------ Total costs and expenses 3,675,000 4,437,000 8,063,000 10,606,000 ------------ ------------ ------------ ------------ Operating loss (844,000) (1,326,000) (2,231,000) (4,060,000) ------------ ------------ ------------ ------------ Other income (expense): Interest income 92,000 63,000 167,000 114,000 Interest expense (238,000) (35,000) (288,000) (105,000) Loss on foreign exchange transactions (1,000) (4,000) (1,000) (2,000) ------------ ------------ ------------ ------------ (147,000) 24,000 (122,000) 7,000 ------------ ------------ ------------ ------------ Loss before income taxes (991,000) (1,302,000) (2,353,000) (4,053,000) Income tax expense 8,000 4,000 28,000 28,000 ------------ ------------ ------------ ------------ Net loss $ (999,000) $ (1,306,000) $ (2,381,000) $ (4,081,000) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Net loss per common share: $ (0.10) $ (0.15) $ (0.24) $ (0.52) Weighted average number of common shares outstanding 10,261,989 8,457,882 10,017,785 7,913,085
4 BLYTH HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
Six Months Ended September 30 1996 1995 ------------- ------------ Cash flows from operating activities: Net loss $ (2,381,000) $ (4,081,000) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization expense 467,000 638,000 Capitalized software development cost amortization expense 300,000 562,000 Accrued interest converted into stock 22,000 83,000 Change in assets and liabilities: Net (increases) decreases in assets: Trade accounts receivable (62,000) 1,001,000 Inventory 24,000 18,000 Other current assets (129,000) 649,000 Other assets - 3,000 Net increases (decreases) in liabilities: Accounts payable and accrued liabilities (138,000) (413,000) Deferred revenue (46,000) 353,000 ------------- ------------ Net cash used for operating activities (1,943,000) (1,187,000) ------------- ------------ Cash flows from investing activities: Purchases of property, furniture and equipment (181,000) (159,000) ------------- ------------ Net cash used for investing activities (181,000) (159,000) ------------- ------------ Cash flows from financing activities: Exercise of stock options 122,000 114,000 Net proceeds from issuance of long-term debt 6,835,000 2,572,000 Repayments of debt (195,000) (51,000) ------------- ------------ Net cash provided by financing activities 6,762,000 2,635,000 ------------- ------------ Effect of exchange rate changes on cash 5,000 (43,000) ------------ ------------ Net increase (decrease) in cash and equivalents 4,643,000 1,246,000 Cash and equivalents at beginning of period 5,129,000 4,593,000 ------------- ------------ Cash and equivalents at end of period $9,772,000 $5,839,000 ------------- ------------ ------------- ------------ NON CASH INVESTING AND FINANCING ACTIVITIES Conversion of convertible subordinated debentures into common stock $1,226,000 $4,409,000 ------------- ------------ ------------- ------------
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 September 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 and six months ended September 30, 1996 is based on the weighted average number of common shares outstanding during the period including, where applicable, common stock equivalent shares. 3. In June 1996 the Company closed an offering of $7,350,000 aggregate principal amount of 8% Convertible Debentures due June 3, 1999, (net proceeds of $6,836,000). 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 primarily of long term leases. In September of 1996 the National Association of Security Dealers (Nasdaq) notified the Company that under its rules the 8% Convertible Debentures due June 3, 1999 must be ratified at a special meeting of its shareholders that has been scheduled for November 18, 1996. If the shareholders do not ratify the Debentures the Company will be forced to repurchase the Debentures or have its Common Stock delisted from Nasdaq National Market System. Repurchase of the Debentures would substantially reduce the Company's cash and equivalents and adversely affect the Company's ability to conduct its business. 6 BLYTH HOLDINGS INC. AND SUBSIDIARIES ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 REVENUES. Total net revenues declined 9% to $2,831,000 for the three months ended September 30, 1996 from $3,111,000 for the three months ended September 30, 1995. The decline in total net revenues for the three months ended September 30, 1996 as compared to the three months ended September 30, 1995 was due to a decline in service revenues offset in part by an increase in product revenues. In addition, total net revenues declined 11% to $5,832,000 for the six months ended September 30, 1996 from $6,546,000 for the six months ended September 30, 1995. The decline in total net revenues for the six months ended September 30, 1996 as compared to the six months ended September 30, 1995 was due to a decline of both service revenues and product revenues. Product revenues increased 16% to $1,377,000 for the three months ended September 30, 1996 from $1,183,000 for the three months ended September 30, 1995. The increase in product revenues for the three months ended September 30, 1996 as compared to the three months ended September 30, 1995 was primarily due to the recognition of a large sale of $425,000 to Informix Corporation. Product revenues decreased 11% to $2,450,000 for the six months ended September 30, 1996 from $2,742,000 for the six months ended September 30, 1995. The decrease in product revenues for the six months ended September 30, 1996 as compared to the six months ended September 30, 1995 was primarily due to decreased prices of the Company's software as a result of to competitive pressures. Service revenues for the three months ended September 30, 1996 decreased 25% to $1,454,000 from $1,928,000 from the three months ended September 30, 1995. Service revenues for the six months ended September 30, 1996 decreased 11% to $3,382,000 from $3,804,000 from the six months ended September 30, 1995. The decrease in service revenues for the three months and six months ended September 30, 1996 as compared to the three months and six months ended September 30, 1995, respectively, was a result of decreased consulting revenues from services provided in connection with customer implementation of the Company's products together with a decrease in maintenance and support revenues. 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 decreased to 39% for the three months ended September 30, 1996 from 56% for the three months ended September 30, 1995. This decrease was largely attributable to lower amortization of capitalized software development costs, the amortization of which was completed during the three months ended September 30, 1996. The decrease in cost of sales as a percentage of total net revenues in these periods was also due to a lower cost of product sales and an increase in the portion of total net revenues derived from product revenues which carry a significantly higher gross margin than services revenues. Cost of products and services as a percentage of total net revenues decreased to 50% for the six months ended September 30, 1996 from 57% for the six months ended September 30, 1995. This decrease was largely attributable to lower amortization of capitalized software development costs and lower cost of product sales. 7 RESEARCH AND DEVELOPMENT EXPENSE Research and development costs increased to $671,000 for the three months ended September 30, 1996 from $616,000 for the three months ended September 30, 1995. The increase in research and development costs for the three months ended September 30, 1996 as compared to the three months ended September 30, 1995 is primarily due to increased investment in the Company's new electonic commerce products. Research and development costs decreased to $1,262,000 for the six months ended September 30, 1996 from $1,707,000 for the six months ended September 30, 1995. The decrease in research and development costs for the six months ended September 30, 1996 as compared to the six months ended September 30, 1995 is primarily due to decreased staffing and associated support costs offset in part by increased investment in the Company's new electonic commerce products in the three months ended September 30, 1996. The Company continues to invest in the development of new products aimed at sales opportunities that the Company expects will expand its markets. SALES, GENERAL AND ADMINISTRATIVE EXPENSES Sales, general and administrative expenses decreased to $1,886,000 for the three months ended September 30, 1996 from $2,082,000 for the three months ended September 30, 1995, representing 67% of total net revenues during each of these periods, respectively. Sales, general and administrative expenses decreased to $3,860,000 for the six months ended September 30, 1996 from $5,181,000 for the six months ended September 30, 1995, representing 66% and 79% 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 the fiscal year ended March 31, 1996. 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 4, 1996 with net proceeds to the Company of $6,836,000), and loss on foreign currency transactions. Interest income increased to $92,000 for the three months ended September 30, 1996 from $63,000 for the three months ended September 30, 1995 and increased to $167,000 for the six months ended September 30, 1996 from $114,000 for the three months ended September 30, 1995, primarily due to higher average balances of cash and equivalents. Interest expense increased to $238,000 for the three months ended September 30, 1996 from $35,000 for the three months ended September 30, 1995 and increased to $288,000 for the six months ended September 30, 1996 from $105,000 for the six months ended September 30, 1995 due primarily to the accrual of interest on the outstanding 8% Convertible Debentures due June 3, 1999 and premiums paid in order to redeem certain of the 8% Convertible Debentures when they were submitted for conversion. As of September 30,1996, of the $7,350,000 aggregate principal amount of 8% Convertible Debentures due June 3, 1999, $1,291,663 aggregate principal amount has been converted into 1,125,809 shares of common stock and $307,333 aggregate principal amount has been redeemed for $392,968 of cash. The Company recognized a net loss of $999,000 for the three months ended September 30, 1996 compared to a net loss of $1,306,000 for the three months ended September 30, 1995. A net loss of $2,381,000 was recorded for the six months ended September 30, 1996 compared to a net loss of $4,081,000 for the six months ended September 30, 1995. These decreased losses primarily resulted from decreases in costs and expenses. 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 but are not limited to: 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 customer needs 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 sells its products in the worldwide market, and 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 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 September 30, 1996, the Company's principal sources of liquidity consisted of cash and equivalents of $9.8 million. The Company's working capital position increased to $10.5 million at September 30, 1996 from $5.6 million at March 31, 1995. This increase in working capital occurred in the first quarter of fiscal 1997 primarily as a result of the completion by the Company of 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 $6,836,000. In September of 1996 the National Association of Security Dealers (Nasdaq) notified the Company that under its rules the 8% Convertible Debentures due June 3, 1999 must be ratified at a special meeting of its shareholders that has been scheduled for November 18, 1996. If the shareholders do not ratify the Debentures the Company will be forced to repurchase the Debentures or have its Common Stock delisted from Nasdaq National Market System. Repurchase of the Debentures would substantially reduce the Company's cash and equivalents and adversely affect the Company's ability to conduct its business. Since September 30, 1995 the Company has curtailed spending, has implemented other actions to conserve cash and has increased cash balances through its financing activities. The Company believes that if the Company's shareholders ratify its 8% Convertible Debentures due June 3, 1999 at the special meeting scheduled for November 18, 1996, 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. If the Company is required to repurchase its 8% Convertible Debentures due June 3, 1999, the Company will likely be required to seek additional capital. 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 operating results may be materially and adversely impacted as management may be required to significantly curtail operations, which could have a significant adverse effect on the Company's business. 10 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At Blyth Holdings' Annual Meeting of Stockholders held August 20, 1996, the following matters were voted upon by stockholders pursuant to proxies solicited pursuant to Regulation 14A: The following individuals were elected to the Board of Directors: VOTES VOTE FOR WITHHELD ----- -------- Michael J. Minor 7,136,610 110,177 The following proposals were approved at Blyth Holdings's Annual Meeting of Stockholders: VOTES VOTES FOR AGAINST ABSTAINED ----- ------- --------- 1. Amendment of the Company's Certificate 7,011,434 2,222,205 13,148 of Incorporation to increase the number of authorized shares from 20 million to 40 million 2. Amendment of the Company's 6,254,492 967,967 24,328 1996 Stock Plan and the reservation of 450,000 shares of Common Stock for issuance thereunder 3. Ratification of appointment of 7,200,339 35,950 10,498 Deloitte & Touche as independent auditors Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11.1 Calculations of Earnings per Share 27.1 Financial Date Schedule (b) Reports on Form 8-K -- None 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: November 14, 1996 BLYTH HOLDINGS INC. (Registrant) /s/ Michael J. Minor --------------------- Michael J. Minor Chairman and Chief Executive Officer 12 EX-27 2 EXHIBIT 27 (FDS)
5 6-MOS MAR-31-1997 APR-01-1996 SEP-30-1996 360,000 9,412,000 2,761,000 396,000 47,000 13,468,000 3,929,000 2,367,000 15,082,000 2,944,000 5,354,000 0 0 110,000 6,674,000 15,082,000 1,377,000 2,831,000 1,118,000 3,675,000 147,000 396,000 238,000 (991,000) 8,000 (999,000) 0 0 0 (999,000) (0.10) (0.10)
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