-----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, ErQN5yxvCDyzenEjFfGMd6jvI0N3bl6dOa1SUGGcqDUTGsrAo7z7H7yzNxwCkvVa dsCwOn/62Yy6QyZKFcvjow== 0000940986-98-000005.txt : 19980817 0000940986-98-000005.hdr.sgml : 19980817 ACCESSION NUMBER: 0000940986-98-000005 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MUSTANG SOFTWARE INC CENTRAL INDEX KEY: 0000940986 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 770204718 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-25678 FILM NUMBER: 98690077 BUSINESS ADDRESS: STREET 1: 6200 LAKE MING RD CITY: BAKERSFIELD STATE: CA ZIP: 93306 BUSINESS PHONE: 8058732500 MAIL ADDRESS: STREET 1: 6200 LAKE MING RD CITY: BAKERSFIELD STATE: CA ZIP: 93306 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended June 30, 1998. OR Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934Commission File Number: 0-25678 MUSTANG SOFTWARE, INC. (Exact name of registrant as specified in its charter) California (State of incorporation) 77-0204718 (I.R.S. employer identification number) 6200 Lake Ming Road Bakersfield, California 93306 (Address of principal executive offices) (805) 873-2500 (Registrant's telephone number, including area code) 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 7, 1998, there were 3,452,365 shares of the Registrant's Common Stock outstanding. =============================================================================== 2 MUSTANG SOFTWARE, INC. FORM 10-QSB INDEX Page PART I. Financial Information: Balance Sheets as of June 30, 1998 and December 31, 1997 3 Statements of Operations for the three and six months ended June 30, 1998 and 1997 4 Statements of Cash Flows for the six months ended June 30, 1998 and 1997 5 Notes to Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. Other Information: Item 2. Changes in Securities and Use of Proceeds 9 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 ============================================================================ 3 MUSTANG SOFTWARE, INC. BALANCE SHEETS ASSETS
June 30, December 31 1998 1997 (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 697,319 $ 1,403,776 Accounts receivable, net of allowance for doubtful 135,349 6,378 accounts of $160,000 December 31, 1997 and June 30,1998 Income taxes receivable -- 97,004 Inventories 31,188 99,915 Other 82,539 28,215 - ------------------------------------------------------------------------------- Total current assets 946,395 1,635,288 - ------------------------------------------------------------------------------- PROPERTY AND EQUIPMENT: Property and equipment 1,251,062 1,238,713 Accumulated depreciation (596,261) (527,279) - ------------------------------------------------------------------------------- Net property and equipment 654,801 711,434 - ------------------------------------------------------------------------------- OTHER ASSETS: Capitalized software development costs, net 3,381 4,083 Other 100 -- - ------------------------------------------------------------------------------- Total other assets 3,481 4,083 - ------------------------------------------------------------------------------- $1,604,677 $2,350,805 =============================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $158,190 $242,451 Accrued payroll and liabilities 167,080 217,318 Income taxes payable 99,776 -- Accrued warranty and support 45,000 45,000 Deferred revenue 80,000 80,000 - ------------------------------------------------------------------------------- Total current liabilities 550,046 584,769 - ------------------------------------------------------------------------------- CAPITAL LEASE OBLIGATION, net of current portion 235,734 269,005 - ------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred stock, no par value: Authorized--10,000,000 shares None issued or outstanding -- -- Common stock, no par value: Authorized--30,000,000 shares Issued and outstanding--3,417,961 and 3,451,365 6,708,948 6,640,045 shares at December 31,1997 and June 30, 1998, respectively Retained earnings (5,890,051) (5,143,014) - ------------------------------------------------------------------------------- Total shareholders' equity 818,897 1,497,031 - ------------------------------------------------------------------------------- $1,604,677 $2,350,805 =============================================================================== The accompanying notes are an integral part of these financial statements.
=============================================================================== 4 MUSTANG SOFTWARE, INC. STATEMENTS OF OPERATIONS
Three Months Ended June 30, Six Months Ended June 30, 1998 1997 1998 1997 REVENUE $ 404,158 $ 458,129 $ 802,638 $ 1,258,050 COSTS OF REVENUE 33,439 92,498 99,848 214,864 - ---------------------------------------------------------------------------------------------- Gross profit 370,719 365,631 702,790 1,043,186 - ---------------------------------------------------------------------------------------------- OPERATING EXPENSES: Research and development 147,524 170,902 301,577 342,109 Selling and marketing 223,075 205,953 470,093 534,393 General and administrative 306,713 363,057 687,523 784,920 - ---------------------------------------------------------------------------------------------- Total operating expenses 677,312 739,912 1,459,193 1,661,422 - ---------------------------------------------------------------------------------------------- Income(loss)from operations (306,593) (374,281) (756,403) (618,236) - ---------------------------------------------------------------------------------------------- OTHER INCOME (EXPENSE): Interest expense (7,766) (9,341) (15,941) (19,051) Interest income 11,674 27,068 26,107 63,721 Gaine/Loss on sale of asset -- -- -- -- - ---------------------------------------------------------------------------------------------- Total other income (exp). 3,908 17,727 10,166 44,670 - ---------------------------------------------------------------------------------------------- Income (loss) before provision for income taxes (302,685) (356,554) (746,237) (573,566) PROVISION (BENEFIT) FOR INCOME TAXES 800 800 800 800 - ---------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ (303,485) $ (357,354) $ (747,037) (574,366) ============================================================================================== NET INCOME (LOSS) PER COMMON SHARE $ (.09) $ (.11) $ (.22) $ (.17) ============================================================================================== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 3,451,365 3,383,694 3,434,663 3,379,330 ============================================================================================== The accompanying notes are an integral part of these financial statements.
=============================================================================== 5 MUSTANG SOFTWARE, INC. STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net income(loss) $ (747,037) $ (574,366) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 69,684 75,342 Net changes in assets and liabilities (52,387) (355,242) - ------------------------------------------------------------------------------- Net cash provided (used) by operating activities (729,740) (854,266) - ------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITES: Purchase of property and equipment (12,349) -- - ------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of stock 68,903 5,564 Payments on capital lease obligation (33,271) (30,161) - ------------------------------------------------------------------------------- Net Cash provided (used) by financing activities 35,632 (24,597) - ------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH (706,457) (878,863) CASH BALANCE, beginning of period 1,403,776 2,920,231 - ------------------------------------------------------------------------------- CASH BALANCE, end of period $ 697,319 $ 2,041,368 =============================================================================== SUPPLEMENTAL DISCLOSURES: Interest paid 15,941 19,051 Taxes paid 800 800 The accompanying notes are an integral part of these financial statements.
=============================================================================== 6 MUSTANG SOFTWARE, INC. NOTES TO FINANCIAL STATEMENTS Note 1. Accounting Policies The accompanying unaudited Condensed Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have either been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations and cash flows for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year. For further information, refer to the financial statements and notes thereto for the year ended December 31, 1997, included in the 1997 Form 10KSB. The condensed Balance Sheet at December 31, 1997 has been taken from the audited financial statements at that date and condensed. =============================================================================== 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In addition to the comments that follow, further information can be obtained by referring to the management's discussion and analysis of financial condition and results of operations section included in the Form 10KSB, filed for the year ended December 31, 1997. Results of Operations: Three Months Ended June 30, 1998 and 1997 Revenues for the three months ended June 30, 1998 were $404,158 a decrease of $53,971 or 11.8% over revenues for the same period in 1997. As a percentage of revenues by product category for the second quarter 1998 vs. 1997 showed the Web Essentials line at 63% and 1%, the QmodemPro line at 7% and 9%, the Wildcat! line at 24% and 86%, and other products at 6% and 4%, respectively. The increase in sales of the Web Essentials line was due to increased acceptance of the Web Essentials products and the increase in products from 1 in 1997 to 3 in 1998. Gross profit for the quarter increased from $365,631 in 1997 to $370,719 in 1998, and increased as a percentage of revenues from 79.8% in 1997 to 91.7% in 1998. Gross profit percentage has averaged approximately 80 to 84% over the last three calendar years. The increase in gross profit percentage is due mainly to the increase in average selling price of the Company's products and maintaining the average cost per unit sold. Research and development expenses decreased $23,378 in the second quarter of 1998 from 1997, and decreased as a percentage of revenues from 37.3% in 1997 to 36.5% in 1998. Research and development is concentrated in Windows NT and Windows 95 and directly targets the expanded use of international networks, including the Internet. The Company has devoted and is devoting a substantial portion of its research and development resources to the Windows 95 and Windows NT environments and now offers a suite of Web server and internet/intranet utility applications for Windows 95 and Windows NT environments. The headcount in this department decreased from 10 at June 30, 1997 to 8 at June 30, 1998. The headcount reduction accounts for the majority of the decrease. Selling and marketing expenses for the quarter were $223,075, an increase of $17,122 over the same quarter the previous year, and they increased as a percentage of revenues from 45.0% in 1997 to 55.2% in 1998. The items primarily accounting for the increase were the advertising and promotional costs for the new Web Essentials line of products and an increase in the number of trade shows attended in 1998 as compared to 1997. General and administrative expenses decreased for the 1998 quarter compared to the previous year, from $363,057 in 1997 to $306,713 in 1998, and decreased as a percentage of revenues, from 79.2% in 1997 to 75.9% in 1998. The items primarily accounting for the decrease were salaries and costs associated with employee benefits. The General and administrative headcount decreased 11% from the prior year. =============================================================================== 8 Six Months Ended June 30, 1997 and 1996 Revenues for the six months ended June 30, 1998 were $802,638, a decrease of $455,412 or 36.2% over revenues for the same period in the prior year. As a percentage of revenues by product category showed the Web Essentials line at 48% and 0%, the QmodemPro line at 8% and 13%, the Wildcat! line at 39% and 84%, and other at 5% and 3% for the first six months of 1998 and 1997, respectively. The increase in sales of the Web Essentials line was due to increased acceptance of the Web Essentials products and the increase in products from 1 in 1997 to 3 in 1998. Gross profit for the first six months decreased from $1,043,186 in 1997 to $702,790 in 1998, but increased as a percentage of revenues from 82.9% in 1997 to 87.6% in 1998. Gross profit percentage has averaged approximately 80 to 84% over the last three calendar years. The increase in Gross Profit percentage from 1997 to 1998 is due mainly to the increase in sales of the Web Essentials line. The Web Essentials line of products has higher average selling prices and gross profit percentages than the Company's previous lines of products. Research and development expenses decreased $40,532 in the first six months of 1998 from 1997, but increased as a percentage of revenues from 27.2% in 1997 to 37.6% in 1998. To maintain its competitive market position, the Company expects to invest a significant amount of its resources for the development of new products and product enhancements. Selling and marketing expenses for the first six months of 1998 decreased $64,300 over the same period the previous year, from $534,393 to $470,093. As a percentage of revenues selling and marketing expenses increased from 42.5% in 1997 to 58.6% in 1998. The items primarily accounting for the increase was the advertising and promotional costs for the new Web Essentials line of products and an increase in the number of trade shows attended in 1998 as compared to 1997. General and administrative expenses decreased $97,397 in the first six months of 1998 from $784,920 in 1997 to $687,523 in 1998, but as a percentage of revenues increased from 62.4% in 1997 to 85.7% in 1998. The items primarily accounting for the decrease in actual dollars spent were due to reduction in salaries and costs associated with employee benefits. =============================================================================== 9 Liquidity and Capital Resources Cash and cash equivalents balance at June 30, 1998 were approximately $697,000, a decrease of approximately $706,000 from December 31, 1997. Accounts receivable increased approximately $129,000 and Accounts Payable decreased approximately $84,000 in 1998. Accounts receivable average days to collect for the quarter ended June 30, 1997 and 1998 were 64 and 48 days, respectively. Average days to collect in 1997 were 64 days. Management's goal is to maintain receivable collection days at or below 50 for 1998. Inventory levels have decreased approximately $69,000 in 1998 from December 31, 1997. As well as accrued liabilities have decreased approximately $50,000. Longer term cash requirements, other than normal operating expenses, are anticipated for development of new software products and enhancements of existing products, launching new products and enhancements, financing anticipated growth and the possible acquisition of businesses, software products or technologies complementary to the Company's business. The Company intends to meet its long-term liquidity needs through available cash and cash flow as well as through financing from outside sources. The Company is actively seeking to raise additional capital and has made arrangements to raise funds through a private placement of securities that will not be registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. However, there can be no assurance that the Company will be successful in completing the private placement or otherwise raising additional capital. Further, there can be no assurance, assuming the Company successfully raises additional funds, that the Company will achieve profitability or positive cash flows. If the Company is not successful in raising additional funds, it appears it will be forced to further curtail the scope of its operations. =============================================================================== 10
Part II. Other Information Item 2. Changes in Securities and Use of Proceeds (d) (1) The effective date of the Securities Act registration statement for which this use of proceeds information is being disclosed and the Commission file number assigned to the registration statement is April 5, 1995 and 2-89900-LA, respectively. (2) The offering date was April 5, 1995. (3) The offering did not terminate before any securities were sold. (i) The offering has terminated but not before the sale of all securities registered. (ii) The name(s) of the managing underwriter(s) is Cruttenden Roth, Incorporated. (iii) The title of each class of securities registered is Common Stock, no par value and Warrants to purchase Common Stock. (iv) For each class of securities the following table provides information for the account of the registrant and the selling security holders with respect to the amount of the securities registered, the aggregate price of the offering amount registered, the amount sold and the aggregate offering price of the amount sold to date: For the account of the registrant For the account(s)of any selling security holder(s) Title Amount Aggregate Amount Aggregate Amount Aggregate Amount Aggregate of registered price of sold offering registered price of Sold offering Security offering price of offering price of amount amount amount amount registered sold registered sold Common 1,250,000 $8,125,000 1,250,000 $8,125,000 187,500 $1,109,063 187,500 $1,109,063 Stock Warrants 125,000 125 125,000 $125 - ------------------------------------------------------------------------------------------------------------ Total 1,375,000 $8,125,125 1,375,000 $8,125,125 187,500 $1,109,063 187,500 $1,109,063 ============================================================================================================ (v) From April 5, 1995 (the effective date of the Securities Act registration statement) to June 30, 1998 the following table provides information as to the amount of expenses incurred for the registrant's account in connection with the issuance and distribution of the securities registered for underwriting discounts and commissions, finders' fees, expenses paid to or for underwriters, other expenses and total expenses were as follows:
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Direct or indirect Direct or indirect payments to directors payment to others officers, general partners of the registrant or their associated; to persons owning ten percent or more of any class of equity securities of the registrant; and to affiliates of the registrant. (A) (B) (01)Underwriting discounts and [ ]$ [ ]$ 731,250 commissions (02)Finder's Fees [ ] [ ] (03)Expenses paid to or for underwriters [ ] [ ] 243,750 (04)Other expenses [ ] [ ] 565,315 (05)Total Expenses [ ] [ ]$ 1,540,315 (vi) The net offering proceeds to the registrant after deducting the total expenses described in paragraph (f)(4)(v) of this Item was $6,584,810.
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(vii) From April 5, 1995 (the effective date of the Securities Act registration statement) to June 30, 1998 the following table provides information with respect to the amount of net offering proceeds to the registrant used for construction of plant, building and facilities; purchase and installation of machinery and equipment; purchases of real estate; acquisition of other business(es); repayment of indebtedness; working capital; temporary investments; and any other purposes for which at least five (5) percent of the registrant's total offering proceeds or $100,000 (whichever is less) has been used: Direct or indirect Direct or indirect payments to directors payment to others officers, general partners of the registrant or their associated; to persons owning ten percent or more of any class of equity securities of the registrant; and to affiliates of the registrant. (A) (B) (01)Construction of plant, building and [ ]$ [ ]$ facilities (02)Purchase and installation of [ ] [ ] machinery and equipment (03)Purchase of real [ ] [ ] estate (04)Acquisition of other business(es) [ ] [ ] (05)Repayment of indebtedness [ ] [ ] (06)Working capital [ ] 41,000 [ ] 767,850 Temporary investment (specify) (07) [ ]$ [ ]$ (08) [ ] [ ] (09) [ ] [ ] (10) [ ] [ ] Other purposes (specify) (11)Advertising [ ]$ [ ]$ 873,787 (12)Marketing & Trade [ ] [ ] 3,086,062 (13)Research & [ ] [ ] 1,854,346 Development (14) [ ] [ ] (viii) The use of proceeds disclosed in paragraph (d)(3)(vii) of this Item did not represent a material change in the use of proceeds described in the prospectus.
Item 4. Submission of Matters to a Vote of Security Holders On June 8, 1998, registrant held its annual meeting of shareholders. Each of thefollowing directors was elected by vote indicated after his name: NAME FOR WITHHELD James A. Harrer 3,046,765 11,100 C. Scott Hunter 2,565,220 462,645 Stanley A. Hirschman 3,045,765 12,100 Michael S. Noling 3,046,765 11,100 Donald M. Leonard 3,045,765 12,100 To approve amendments to the Company's 1994 Incentive and Nonstatutory Stock Option Plan to increase the total number of shares of Common Stock that can be optioned and sold under the Stock Option Plan to 850,000 shares. The following were the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes, as to such matter FOR AGAINST ABSTAIN BROKER NON-VOTES 1,676,369 96,046 14,340 1,271,110 To approve an amendment to the Company's Employee Stock Purchase Plan to increase by 50,000 shares the number of shares of Common Stock that may be sold under the Employee Stock Purchase Plan. The following were the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes, as to such matter FOR AGAINST ABSTAIN BROKER NON-VOTES 1,771,698 82,374 13,235 1,190,558 To ratify the appointment of Arthur Andersen LLP as the Company's independent accountants for the year ending December 31, 1998. The following were the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes, as to such matter FOR AGAINST ABSTAIN 3,044,785 7,065 6,015 Item 5. Other Information Stockholders are hereby notified that if they wish to submit a proposal for consideration at the Company's 1999 annual meeting of stockholders, but do not wish to submit the proposal for inclusion in the Company's proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, they must deliver a written copy of their proposal no later than April 2, 1999. Proposals should be delivered to the Company's principal executive offices, at 6200 Lake Ming Road, Bakersfield, California 93306 to the attention of Mr. James A. Harrer, President. To avoid controversy and establish timely receipt by the Company, it is suggested that stockholders send their proposals by certified mail return receipt requested. Item 6. Exhibits and Reports on Form 8-K (a) Form 8-K. The Company filed one report on Form 8-K during the quarter ended June 30, 1998. The report, dated June 1, 1998, reported information under Item 5. (b) Exhibits. The following exhibit is filed as a part of this Report. Ex. 11 Computation of Earnings Per Share Ex. 27 Financial Data Schedule. =============================================================================== 13 SIGNATURES In accordance with the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Signature Title Date ____________________ James A. Harrer President and Chief Executive August 12, 1998 Officer (Principal Executive Officer) and a Director ____________________ Donald M. Leonard Vice President and Chief August 12, 1998 Financial Officer (Principal Financial and Accounting Officer) and a Director EX-11 2 1 EXHIBIT 11. MUSTANG SOFTWARE, INC. COMPUTATION OF EARNINGS PER SHARE (In thousands, except earnings per share) (Unaudited) - - ----------------------------------------------------------------------------- Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 - - --------------------------------------------------------------------------------------------- Weighted average number of common shares outstanding 3,451 3,384 3,435 3,379 Common stock equivlents from outstanding stock options 0 0 0 0 - - -------------------------------------------------------------------------------------------- Average common and common stock equivalents outstanding 3,451 3,384 3,435 3,379 ============================================================================================== Net Income $(303) $ (357) $ (747) $ (574) ============================================================================================== Earnings per share (1) $(.09) $ (.11) $ (.22) $ (.17) ==============================================================================================
(1) Fully diluted earnings per share have not been presented because the effects are not material. - - ----------------------------------------------------------------------------- EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMETENTS. 6-MOS DEC-31-1998 JUN-30-1998 $ 697,319 0 295,349 160,000 31,188 946,395 1,251,062 596,261 1,604,677 550,046 235,734 0 0 6,708,948 (5,890,051) 1,604,677 802,638 802,638 99,848 99,848 1,459,193 0 15,941 ( 746,237) ( 747,037) ( 747,037) 0 0 0 ( 747,037) (.22) (.22)
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