-----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, Nyl2QONrr29W54txFJyaHI44rwgvt03sXw/XUuxnL1TymAo6rbN0ggu736a5lICm 1BnXkqh8J7ZKpJ7IfZkshQ== 0000940986-97-000004.txt : 19970814 0000940986-97-000004.hdr.sgml : 19970814 ACCESSION NUMBER: 0000940986-97-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 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: 1934 Act SEC FILE NUMBER: 000-25678 FILM NUMBER: 97657627 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, 1997 OR Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission 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 5, 1997, there were 3,383,694 shares of the Registrant's Common Stock outstanding. Transitional Small Business Disclosure Format (check one); Yes No X =============================================================================== 2 MUSTANG SOFTWARE, INC. FORM 10-QSB INDEX Page PART I. Financial Information: Balance Sheets as of June 30, 1997 and December 31, 1996 3 Statements of Operations for the three and six months ended June 30, 1997 and 1996 4 Statements of Cash Flows for the six months ended June 30, 1997 and 1996 5 Notes to Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. Other Information: Item 4. Submission of Matters to a Vote of Security Holders 9 Item 5. Other Information. 9 Item 6. Exhibits and Reports on Form 8-K 9 Signatures 10 =============================================================================== 3 MUSTANG SOFTWARE, INC. BALANCE SHEETS ASSETS
June 30, December 31, 1997 1996 (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 2,041,368 $ 2,920,231 Accounts receivable, net of allowance for doubtful accounts of $400,000 and $300,000 at December 31, 1996 and June 30, 1997, respectively 13,457 63,529 Income taxes receivable 173,540 173,540 Inventories 182,934 228,136 Other 71,959 55,500 - - - - ------------------------------------------------------------------------ Total current assets 2,483,258 3,440,936 - - - - ------------------------------------------------------------------------ PROPERTY AND EQUIPMENT: Property and equipment 1,256,336 1,256,337 Accumulated depreciation (467,976) (393,337) - - - - ------------------------------------------------------------------------ Net property and equipment 788,360 863,000 - - - - ------------------------------------------------------------------------ OTHER ASSETS: Capitalized software development costs, net 4,773 5,475 Other -- 1,300 - - - - ------------------------------------------------------------------------- Total other assets 4,773 6,775 - - - -------------------------------------------------------------------------- $3,276,391 $4,310,711 = ============================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $482,120 $859,053 Accrued payroll and liabilities 104,632 163,056 Accrued warranty and support 45,000 45,000 Deferred revenue 80,000 80,000 - - - - -------------------------------------------------------------------------- Total current liabilities 711,752 1,147,109 - - - - -------------------------------------------------------------------------- CAPITAL LEASE OBLIGATION, net of current portion 307,060 337,221 - - - - ------------------------------------------------------------------------ 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--3,374,967 and 3,383,694 shares at December 31, 1996 and June 30, 1997, respectively 6,634,286 6,628,722 Retained earnings (4,376,707) (3,802,341) - - - - ------------------------------------------------------------------------ Total shareholders' equity 2,257,579 2,826,381 - - - - ----------------------------------------------------------------------- $3,276,391 $4,310,711 = ============================================================================== The accompanying notes are an integral part of these financial statements.
=============================================================================== 4 MUSTANG SOFTWARE, INC. STATEMENTS OF OPERATIONS
Six Months Ended June 30, Three Months Ended June 30, 1997 1996 1997 1996 REVENUE $ 1,258,050 $ 2,468,998 $ 458,129 $ 1,265,644 COSTS OF REVENUE 214,864 464,219 92,498 246,483 - - - - -------------------------------------------------------------------------------------------------------------------------- Gross profit 1,043,186 2,004,779 365,631 1,019,161 - - - - -------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES: Research and development 342,109 491,048 170,902 292,689 Selling and marketing 534,393 1,751,869 205,953 857,553 General and administrative 784,920 1,197,318 363,057 578,995 - - - - -------------------------------------------------------------------------------------------------------------------------- Total operating expenses 1,661,422 3,440,235 739,912 1,729,237 - - - - -------------------------------------------------------------------------------------------------------------------------- Income(loss)from operations (618,236) (1,435,456) (374,281) (710,076) - - - - -------------------------------------------------------------------------------------------------------------------------- OTHER INCOME (EXPENSE): Interest expense (19,051) (22,167) (9,341) (10,913) Interest income 63,721 156,059 27,068 70,239 Gain/Loss on sale of asset -- 2,000 -- 2,000 - - - - -------------------------------------------------------------------------------------------------------------------------- Total other income (exp.) 44,670 135,892 17,727 61,326 - - - - -------------------------------------------------------------------------------------------------------------------------- Income (loss) before provision for income taxes (573,566) (1,299,564) (356,554) (648,750) PROVISION (BENEFIT) FOR INCOME TAXES 800 -- 800 -- - - - - -------------------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ (574,366) $(1,299,564) $ (357,354) $ (648,750) = ============================================================================================================================== NET INCOME (LOSS) PER COMMON SHARE $(.17) $(.39) $(.11) $(.19) = ============================================================================================================================== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 3,379,330 3,360,570 3,383,694 3,362,940 The accompanying notes are an integral part of these financial statements.
=============================================================================== 5 MUSTANG SOFTWARE, INC. STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income(loss) $ (574,366) $(1,299,564) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 75,342 98,142 Net changes in assets and liabilities (355,242) 211,998 - - - - -------------------------------------------------------------------------------------------------------------------------- Net cash provided (used) by operating activities (854,266) (989,424) - - - - -------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITES: Purchase of property and equipment -- (51,459) - - - - -------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of stock 5,564 4,751 Payments on capital lease obligation (30,161) (27,341) - - - - -------------------------------------------------------------------------------------------------------------------------- Net Cash provided (used) by financing activities (24,597) (22,590) - - - - -------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH (878,863) (1,063,473) CASH BALANCE, beginning of period 2,920,231 5,615,404 - - - - -------------------------------------------------------------------------------------------------------------------------- CASH BALANCE, end of period $ 2,041,368 $ 4,551,931 = ============================================================================================================================== SUPPLEMENTAL DISCLOSURES: Interest paid 19,051 22,167 Taxes paid 800 0 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, 1996, included in the 1996 Form 10KSB. The condensed Balance Sheet at December 31, 1996 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, 1996. Results of Operations: Three Months Ended June 30, 1997 and 1996 Revenues for the three months ended June 30, 1997 were $458,129 a decrease of $807,515 or 63.8% over revenues for the same period in 1996. As a percentage of revenues by product category for the third quarter 1997 vs. 1996 showed the QmodemPro line at 3% and 2%, the Wildcat! line at 95% and 96%, and other products at 2% and 2%, respectively. The greater Wildcat! revenues in 1996 were directly related to the release of Wildcat! version 5 in March 1996. Gross profit for the quarter decreased from $1,019,161 in 1996 to $365,631 in 1997, and decreased as a percentage of revenues from 80.5% in 1996 to 79.8% in 1997. Gross profit percentage has averaged approximately 80 to 84% over the last three calendar years. The decrease in gross profit percentage is due mainly to royalties paid to third party developers for products that the Company sells to compliment the WinServer line of products. Research and development expenses decreased $121,787 in the second quarter of 1997 from 1996, and increased as a percentage of revenues from 23.1% in 1996 to 37.3% in 1997. 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 14 at June 30, 1996 to 10 at June 30, 1997. The headcount reduction accounts for the majority of the decrease. Selling and marketing expenses for the quarter were $205,953, a decrease of $651,600 over the same quarter the previous year, and they decreased as a percentage of revenues from 67.8% in 1996 to 45.0% in 1997. The items primarily accounting for the decrease were a reduction of advertising and promotional costs for existing products, the fact that 1996 expenses associated with the launch of Wildcat! 5 were not repeated in 1997 and a reduction in expenses resulting from a decrease in the number of trade shows attended in 1997. The decrease in headcount from 12 at June 30, 1996 to seven at June 30, 1997 also contributed to the decrease. General and administrative expenses decreased for the 1997 quarter compared to the previous year, from $578,995 in 1996 to $363,057 in 1997, but increased as a percentage of revenues, from 45.7% in 1996 to 79.1% in 1997. The items primarily accounting for the decrease were salaries and costs associated with employee benefits. The General and administrative headcount decreased 36% from the prior year. =============================================================================== 8 Six Months Ended June 30, 1997 and 1996 Revenues for the six months ended June 30, 1997 were $1,258,050, a decrease of $1,210,948 or 49.0% over revenues for the same period in the prior year. As a percentage of revenues by product category showed the QmodemPro line at 13% and 1%, the Wildcat! line at 84% and 97%, and other at 3% and 2% for the first six months of 1997 and 1996, respectively. The greater percentage of revenues in the six months ended June 30, 1996 for the Wildcat! line was due to the launch of Wildcat! v.5 for Win95/NT in March 1996. Gross profit for the first six months decreased from $2,004,779 in 1996 to $1,043,186 in 1997, but increased as a percentage of revenues from 81.2% in 1996 to 82.9% in 1997. Gross profit percentage has averaged approximately 80 to 84% over the last three calendar years. Research and development expenses decreased $148,939 in the first six months of 1997 from 1996, and increased as a percentage of revenues from 19.9% in 1996 to 27.2% in 1997. 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 1997 decreased $1,217,476 over the same period the previous year, from $1,751,869 to $534,393. As a percentage of revenues selling and marketing expenses decreased from 71.0% in 1996 to 42.5% in 1997. The items primarily accounting for the decrease were advertising and promotional costs for existing products and the launch of Wildcat! Version 5 for Windows 95/NT in March 1996 were not incurred in 1997, a reduction in trade shows and the costs associated with them and the decrease in headcount from 12 at June 30, 1996 to 7 at June 30 1997. General and administrative expenses decreased $412,398 in the first six months of 1997 from $1,197,318 in 1996 to $784,920 in 1997, as a percentage of revenues increased from 48.5% in 1996 to 62.4% in 1997. The items primarily accounting for the decrease in actual dollars spent were due to reduction in salaries and costs associated with employee benefits. Liquidity and Capital Resources Cash and cash equivalents balance at June 30, 1997 were approximately $2,041,000, a decrease of approximately $879,000 from December 31, 1996. Accounts receivable decreased approximately $50,000 and Accounts Payable decreased approximately $377,000 in 1997. Accounts receivable average days to collect for the quarter ended June 30, 1996 and 1997 were 55 and 64 days, respectively. Average days to collect in 1996 were 50 days. Management's goal is to maintain receivable collection days at or below 50 for 1997. Inventory levels have decreased $45,200 in 1997 from December 31, 1996. As well as accrued liabilities have decreased approximately $58,000. 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 believes that its existing cash, cash equivalents, marketable securities and cash generated from operations will be sufficient to meet the Company's working capital and capital expenditure requirements for at least the next 12 months. =============================================================================== 9 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders On May 27, 1997, registrant held its annual meeting of shareholders. Each of the following directors was elected by vote indicated after his name: NAME FOR WITHHELD James A. Harrer 3,126,405 38,238 Richard J. Heming 3,125,693 38,950 C. Scott Hunter 3,126,405 38,238 Stanley A. Hirschman 3,126,405 38,238 Michael S. Noling 3,126,405 38,238 Bruce Fredrickson 3,126,405 38,238 Donald M. Leonard 3,126,405 38,238 The only other matter voted upon by shareholders was a proposal to ratify the appointment of Arthur Andersen LLP as the Company's independent accountants for the year ending December 31, 1997. 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 3,148,485 14,113 2,045 Item 5. Other Information The NASDAQ Stock Market has notified the Company that based upon its review of recent price data, the Company's Common Stock has failed to maintain a closing bid price greater than or equal to $1.00 per share and that to be eligible for continued listing, the Company has until September 30, 1997 to regain compliance with the listing requirements. Further, The NASDAQ Stock Market has notified the Company that if the Company's Common Stock doses not maintain a minimum bid price of $1.00 per share for 10 consecutive trading days by September 30, 1997, its Common Stock will be delisted from The Nasdaq Stock Market unless the Company submits to The Nasdaq Stock Market by that date a satisfactory proposal for achieving compliance. At this time the Company is considering its alternatives, which may include making a proposal for achieving compliance to The Nasdaq Stock Market or seeking to include its Common Stock on the OTC Bulletin Board service. If the Company's shares are delisted from The Nasdaq Stock Market, the liquidity of and public market for its Common Stock could be materially adversely affected. Item 6. Exhibits and Reports on Form 8-K The Company filed no reports on Form 8-K during the quarter ended June 30, 1997 =============================================================================== 10 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 _____________________ President and Chief Executive James A. Harrer Officer (Principal Executive Officer) and a Director August 12, 1997 _____________________ Donald M. Leonard Vice President Finance and Chief Financial Officer (Principal Financial and Accounting Officer) August 12, 1997 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, 1996 1997 1996 1997 - - --------------------------------------------------------------------------------------------- Weighted average number of common shares outstanding 3,363 3,384 3,361 3,379 Common stock equivlents from outstanding stock options 0 0 0 0 - - -------------------------------------------------------------------------------------------- Average common and common stock equivalents outstanding 3,363 3,384 3,361 3,379 ============================================================================================== Net Income $(649) $ (357) $ (1,300) $(574) ============================================================================================== Earnings per share (1) $(.19) $ (.11) $ (.39) $(.17) ===============================================================================
(1) Fully diluted earnings per share have not been presented because the effects are not material. - - ------------------------------------------------------------------------------ EX-27 3 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1997 JUN-30-1997 $2,041,368 0 313,457 300,000 182,934 2,483,258 1,256,336 467,976 3,276,391 711,752 307,060 0 0 6,634,286 (4,376,707) 3,276,391 1,258,050 1,258,050 214,864 214,864 1,661,422 0 19,051 ( 573,566) ( 574,366) ( 574,366) 0 0 0 ( 574,366) ( .17) ( .17)
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