-----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, EjJGUbm0nkLpWj45GczboM+HNQliNcWskISj285S0of+jClO98iRrvf6LuXQOtJU jpwc+NUaohywyJPELpHmiA== 0000912057-97-027887.txt : 19970815 0000912057-97-027887.hdr.sgml : 19970815 ACCESSION NUMBER: 0000912057-97-027887 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97661375 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 JUNE 30, 1997 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.) 851 Traeger Avenue San Bruno, California 94066 (Address of principal executive offices) (415) 829-6000 (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 6, 1997 there were 21,096,358 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, 1997 and March 31, 1997 3 Condensed Consolidated Statements of Operations - Three months ended June 30, 1997 and 1996 4 Condensed Consolidated Statements of Cash Flows - Three months ended June 30, 1997 and 1996 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 1. Legal Proceedings 11 Item 2. Changes in Securities 11 Item 3. Defaults upon Senior Securities 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 2 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements BLYTH HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS
June 30, 1997 March 31, 1997 ------------- -------------- Current Assets: Cash and equivalents $2,883,000 $6,150,000 Trade accounts receivable, less allowance for doubtful accounts and returns of $681,000 and $676,000, respectively 2,665,000 1,743,000 Inventory 102,000 18,000 Other current assets 995,000 686,000 ------------ ------------ Total current assets 6,645,000 8,597,000 ------------ ------------ Property, furniture and equipment, net 1,572,000 1,450,000 ------------ ------------ Total Assets $8,217,000 $10,047,000 ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilites: Accounts payable and accrued liabilities $2,831,000 $2,051,000 Deferred revenue 1,184,000 927,000 Current portion of long term debt 8,000 91,000 ------------ ------------ Total current liabilites 4,023,000 3,069,000 ------------ ------------ Long term debt, net of unamortized issuance costs of $0 and $128,000, respectively - 1,646,000 ------------ ------------ Total liabilites 4,023,000 4,715,000 ------------ ------------ Stockholders' Equity: Common stock 211,000 174,000 Paid in capital 42,811,000 41,038,000 Accumulated deficit (38,995,000) (36,147,000) Foreign currency translation adjustment 167,000 267,000 ------------ ------------ Total stockholders' equity 4,194,000 5,332,000 ------------ ------------ Total Liabilities and Stockholders' Equity $ 8,217,000 $ 10,047,000 ------------ ------------ ------------ ------------
3 BLYTH HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended June 30 1997 1996 ------------ ----------- Net revenues: Products $ 1,270,000 $ 1,073,000 Services 1,139,000 1,928,000 ------------ ----------- Total net revenues 2,409,000 3,001,000 Costs and expenses: Cost of product revenues 144,000 382,000 Cost of service revenues 1,046,000 1,441,000 Selling 921,000 968,000 Marketing 1,500,000 353,000 Research & development 899,000 591,000 General and administrative 760,000 653,000 ------------ ----------- Total costs and expenses 5,270,000 4,388,000 ------------ ----------- Operating loss (2,861,000) (1,387,000) ------------ ----------- Other income (expense): Interest income 60,000 75,000 Interest expense (49,000) (593,000) Loss on foreign exchange transactions 7,000 - ------------ ----------- 18,000 (518,000) ------------ ----------- Loss before income taxes (2,843,000) (1,905,000) Income tax expense 5,000 20,000 ------------ ----------- Net loss $ (2,848,000) $(1,925,000) ------------ ----------- ------------ ----------- Net loss per common share: $ (0.14) $ (0.20) Weighted average number of common shares outstanding 20,160,375 9,770,898
4 BLYTH HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
Three Months Ended June 30 1997 1996 ------------ ------------ Cash flows from operating activities: Net loss $ (2,848,000) $ (1,382,000) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization expense 199,000 248,000 Capitalized software development cost amortization expense - 261,000 Change in assets and liabilities: Net (increases) decreases in assets: Trade accounts receivable (924,000) (346,000) Inventory (84,000) 9,000 Other current assets (310,000) 64,000 Net increases (decreases) in liabilities: Accounts payable and accrued liabilities 780,000 (253,000) Deferred revenue 257,000 43,000 ------------ ------------ Net cash used for operating activities (2,930,000) (1,356,000) ------------ ------------ Cash flows from investing activities: Purchases of property, furniture and equipment (342,000) (49,000) Proceeds from sale of fixed assets 30,000 - ------------ ------------ Net cash used for investing activities (312,000) (49,000) ------------ ------------ Cash flows from financing activities: Exercise of stock options - 121,000 Net proceeds from issuance of long-term debt - 6,835,000 Repayments of debt (83,000) (54,000) ------------ ------------ Net cash (used for) provided by financing activities (83,000) 6,902,000 ------------ ------------ Effect of exchange rate changes on cash 58,000 4,000 Net increase (decrease) in cash and equivalents (3,267,000) 5,501,000 Cash and equivalents at beginning of period 6,150,000 5,129,000 ------------ ------------ Cash and equivalents at end of period $ 2,883,000 $ 10,630,000 ------------ ------------ ------------ ------------ NON CASH INVESTING AND FINANCING ACTIVITIES Conversion of convertible subordinated debentures into common stock $ 1,810,000 $ - ------------ ------------ ------------ ------------
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, 1997. The results of operations for the period ended June 30, 1997 are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending March 31, 1998. 2. Net loss per share for the three months ended June 30, 1997 is based on the weighted average number of common shares outstanding during the period. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE (SFAS 128). The Company is required to adopt SFAS 128 in the second quarter of fiscal 1998 and will restate at that time earnings per share (EPS) data for prior periods to conform with SFAS 128. Earlier application is not permitted. The Company has determined that adoption of SFAS 128 will not have a material affect on losses per share which have been previously reported. 3. In June 1996 the Company closed an offering of $7,350,000 of 8% Convertible Debentures due June 3, 1999, (net proceeds of $6,836,000). As of June 2, 1997 all of the outstanding 8% Convertible Debentures due June 3, 1999 had been either converted or redeemed: of the $7,350,000 of 8% Convertible Debentures due June 3, 1999, $6,352,667 was converted into 11,202,213 shares of common stock and $997,333 of the aggregate principal amount of the 8% Convertible Debentures was redeemed for $1,430,499 of cash. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Other Income (Expense). 4. Now Accounting Pronouncements. In June 1997, the Financial Accounting Standards Board adopted Statements of Financial Accounting Standards No. 130 (REPORTING COMPREHENSIVE INCOME), which requires that an enterprise report, by major components and as a single total, the change in its net assets during the period from nonowner sources; and No. 131 (DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION), which establishes annual and interim reporting standards for an enterprise's business segments and related disclosures about its products, services, geographic areas, and major customers. Adoption of these statements will not impact the Company's consolidated financial position, results of operations or cash flows. Both statements are effective for fiscal years beginning after December 15, 1997, with earlier application permitted. 6 BLYTH HOLDINGS INC. AND SUBSIDIARIES THIS REPORT ON FORM 10-Q INCLUDES A NUMBER OF FORWARD-LOOKING STATEMENTS THAT REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, INCLUDING THOSE DISCUSSED IN "MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANIAL PERFORMANCE AND RESULTS OF OPERATIONS," BELOW THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR ANTICIPATED RESULTS. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW The Company has operated at a loss for the last four years. In fiscal year 1997, operations of the Company generated a negative cash flow. Although the Company's new management team has taken steps to improve the Company's cash flow through (i) more effective marketing of its products; (ii) focusing research and development expenditures on products that have a shorter payback period; (ii) improving operational efficiencies; and (iv) converting the Convertible Debentures into common stock of the Company. With these improvements, the Company continues to generate a negative cash flow and does not expect to become profitable until late fiscal year 1998 or later. There can be no assurance that the Company will be able to significantly reduce its cash used by operations or achieve profitability in the near future or at all. Accordingly, the Company may need to raise significant additional funds to support operations. The Company does not currently have an established line of credit with a commercial bank. Such a credit facility may be difficult to obtain with the Company's historical operating results. Accordingly, in order to obtain additional funds in the future, the Company is exploring various options to raise additional capital to support management's current efforts to improve the Company's operating performance but has not finalized any plans. There can be no assurance that the Company will be able to raise additional capital on commercially reasonable terms, if at all. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996 REVENUES Total net revenues declined 20% to $2,409,000 for the three months ended June 30, 1997 from $3,001,000 for the three months ended June 30, 1996. The decline in total net revenues for the three months ended June 30, 1997 as compared to the three months ended June 30, 1996 was due to a decline in service revenues during this period offset in part by increases in product revenues during this same period. Product revenues increased 18% to $1,270,000 for the three months ended June 30, 1997 from $1,073,000 for the three months ended June 30, 1996. The higher product revenues for the three months ended June 30, 1997 as compared to the three months ended June 30, 1996 is attributable to the introduction of the Company's new OMNIS studio product line products as well as a result of increased marketing efforts by the Company. Service revenues for the three months ended June 30, 1997 decreased 41% to $1,139,000 from $1,928,000 from the three months ended June 30, 1996. The decrease in service revenues for the three months ended June 30, 1997 as compared to the three months ended June 30, 1996 was a result of the completion of two large non-recuring consulting engagements that represented approximately $700,000 of the Company's service revenues for the three months ended June 30, 1996. COST OF SALES Cost of product revenues is comprised of direct costs associated with software product sales including software packaging, documentation and physical media costs. Cost of service revenues is comprised of customer support (maintenance), including technical support salaries and related expenses, and consulting related costs including salaries and related costs incurred in delivering the consulting and training services. Cost of product revenues as a percentage of product revenues decreased from 35.6% in the three months ended June 30, 1996 to 11.3% in the three months ended June 30, 1997 due to the absence of amortization of software development costs in the three months ended June 30, 1997 as compared to the three months ended June 30, 1996. The Company no longer capitalizes research and development costs. Cost of service revenues increased from 74.7% in the three months ended June 30, 1996 to 91.8% in the three months ended June 30, 1997, primarily due to lower billing rates and lower utilization rates for the Company's consulting staff as well as costs associated with the development of training tools for the Company's new products. SELLING EXPENSE Selling expense decreased from $968,000 for the three months ended June 30, 1996 to $921,000 for the three months ended June 30, 1997 primarily due the Company having several unfilled sales positions during the three months ended June 30, 1997. MARKETING EXPENSE Marketing expense increased from $353,000 for the three months ended June 30, 1996 to $1.5 million for the three months ended June 30, 1997 primarily due to costs associated with the Company's lead generation effort, including trade shows and advertising, as well a as costs associated with the introduction of new products and public relations costs. RESEARCH AND DEVELOPMENT EXPENSE Research and development costs increased to $899,000 for the three months ended June 30, 1997 from $591,000 for the three months ended June 30, 1996, representing 37% and 20% of total net revenues during those periods, respectively. The increase in research and development costs for the three months ended June 30, 1997 as compared to the three months ended June 30, 1996 is primarily due to increased investment in the Company's new products. The Company continues to invest in the development of new products aimed at sales opportunities that the Company believes will expand its markets. GENERAL AND ADMINISTRATIVE EXPENSE General and administrative expenses increased to $760,000 for the three months ended June 30, 1997 from $653,000 for the three months ended June 30, 1996, representing an increase of 16.4%. The increase in general and administrative expense was primarily due to expenses associated with the move of the Company's headquarters to new facilities in San Bruno, California. The lease on the Company's previous facilities, which was at a below-market rate, terminated on May 31, 1997. The rent for the Company's new facilities is at a market rate and will result in the Company recognizing slightly higher general and administrative expense in the future. OTHER INCOME (EXPENSE) Other income (expense) is comprised primarily of interest income earned on cash and equivalents, interest expense, and any gain or loss on foreign currency transactions. Interest income decreased to $60,000 for the three months ended June 30, 1997 from $75,000 for the 7 three months ended June 30, 1996, primarily due to lower average balances of cash and equivalents. Interest expense decreased to $49,000 for the three months ended June 30, 1997 from $593,000 for the three months ended June 30, 1996 due primarily to the lower outstanding balance on the 8% Convertible Debentures. As of June 2, 1997 all of the Company's 8% Convertible Debentures due June 3, 1999 had been converted or redeemed: of the $7,350,000 of 8% Convertible Debentures due June 3, 1999, $6,352,667 were converted into 11,202,213 shares of common stock and $997,333 of the aggregate principal amount of the 8% Convertible Debentures were redeemed for $1,430,499 in cash. 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 8 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 1998, the Company plans to continue to make 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, 1997, the Company's principal sources of liquidity consisted of cash and equivalents of $2.9 million. The Company's working capital position decreased to $2.6 million at June 30, 1997 from $5.5 million at March 31, 1997. This decrease in working capital during the first quarter of fiscal 1998 was primarily due to the Company's net loss during the three months ended June 30, 1997. 9 BLYTH HOLDINGS INC. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. 10 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27.1 Financial Data 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: August 14, 1997 BLYTH HOLDINGS INC. (Registrant) /s/ Timothy P. Negris -------------------------- Timothy P. Negris President and Chief Executive Officer /s/ William M. Glynn ------------------------- William M. Glynn Vice President, Finance 12 EX-27.1 2 EXHIBIT 27.1
5 3-MOS MAR-31-1998 APR-01-1997 JUN-30-1997 289,000 2,594,000 3,346,000 681,000 102,000 6,645,000 4,149,000 2,577,000 8,217,000 4,023,000 0 0 0 211,000 3,983,000 8,217,000 1,270,000 2,409,000 1,190,000 5,270,000 (18,000) 681,000 49,000 (2,843,000) 5,000 (2,848,000) 0 0 0 (2,848,000) (0.14) (0.14)
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