Bitstream Inc. today reported that total revenue increased by $826,000 or 14% to $6,808,000 for the three months ended September 30, 2011 as compared to total revenue of $5,982,000 for the three months ended September 30, 2010. The Company’s aggregate cash, cash equivalents, and investments at September 30, 2011 totaled $10,505,000, an increase of $103,000 from a balance of $10,402,000 at June 30, 2011.
Our loss from operations increased $720,000 to $1,811,000 for the three months ended September 30, 2011, as compared to $1,091,000 for the three months ended September 30, 2010. Our net loss increased $776,000 to $1,950,000 or $0.19 per share for the three months ended September 30, 2011 as compared to $1,174,000 or $0.12 per share for the three months ended September 30, 2010.
Our non-GAAP results exclude stock-based compensation expense, the amortization of intangible assets primarily acquired from Press-Sense Ltd., acquisition costs for certain assets of Press-Sense Ltd., the cost of the resignation agreement with our former CEO, and transaction costs associated with merger and separation activities. Our non-GAAP loss from operations increased $184,000 to $771,000 for the three months ended September 30, 2011, as compared to $587,000 for the three months ended September 30, 2010. Our non-GAAP net loss increased $240,000 to $910,000 or $0.09 per share for the three months ended September 30, 2011, as compared to $670,000 or $0.07 per share for the three months ended September 30, 2010. A reconciliation between GAAP and non-GAAP results is provided at the end of this press release.
“We are pleased to report that revenues across all of our product lines increased in the third quarter as compared to the same quarter in 2010,” said Amos Kaminski, Executive Chairman and Chief Executive Officer. “Revenue for our Pageflex product line increased 28% as compared to the third quarter of 2010 and the addition of Elly Perets as Vice President of Sales and Marketing last quarter has been a strong addition in our effort to drive our marketing strategy and expand the reach of Pageflex products into new regions. During the quarter we released our first mobile application through the Apple App Store and announced a partnership and OEM agreement with Heidelberg Druckmaschinen AG for Pageflex Storefront.”
“As a result of our ongoing exploration of strategic alternatives, we announced on November 10, 2011 that we entered into a definitive agreement to sell our font business to Monotype Imaging Holdings Inc. (NASDAQ: TYPE) in a cash merger valued at $50 million, subject to closing adjustments. Prior to the closing of the merger, we will distribute to Bitstream shareholders shares of a newly-formed company, Marlborough Software Development Holdings Inc. that was formed to hold all of Bitstream's non-font assets, including the Pageflex business and Bolt browser technology.”
The Merger Transaction
The merger between Bitstream and Monotype Imaging will be effected as a cash merger of a subsidiary of Monotype Imaging into Bitstream. Prior to the closing of the merger, Bitstream will distribute to Bitstream shareholders shares of a newly-formed company, Marlborough Software Development Holdings Inc. (“MSDH”), that was formed to hold all of Bitstream’s non-font assets, including the Pageflex business and Bolt browser technology. MSDH will also assume certain liabilities from Bitstream, primarily those related to the non-font assets.
Bitstream anticipates that the merger and the spin-off of MSDH will be taxable transactions to Bitstream’s shareholders. These and other considerations will be set forth in greater detail in a proxy statement to be filed with the Securities and Exchange Commission in connection with the special meeting to approve the merger transaction. The merger transaction is subject to the completion of customary closing conditions, including the consummation of the spin-off transaction, and the approval of Bitstream’s shareholders.
The spin-off transaction is subject to the effectiveness of the registration statement on Form S-1 filed by MSDH on November 10, 2011 with the Securities Exchange Commission with respect to the spin-off transaction. The merger and spin-off transactions are expected to close in the first quarter of 2012.
Additional information regarding MSDH and the proposed spin-off is contained in the registration statement filed by MSDH regarding the spin-off transaction. The registration statement relating to the MSDH securities has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective.
This news release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the MSDH securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
Additional Information about the Merger and Where to Find it
In connection with the transactions contemplated by the merger agreement, Bitstream will file a proxy statement with the SEC. Additionally, Monotype Imaging and Bitstream will file other relevant materials in connection with the proposed acquisition of Bitstream by Monotype Imaging pursuant to the terms of the merger agreement. The materials to be filed by Monotype Imaging and Bitstream with the SEC may be obtained free of charge at the SEC’s web site at www.sec.gov. Investors and security holders of Bitstream are urged to read the proxy statement and the other relevant materials when they become available before making any voting or investment decision with respect to the proposed merger because they will contain important information about the merger and the parties to the merger.
Bitstream and its executive officers and directors may be deemed to be participants in the solicitation of proxies from the security holders of Bitstream in connection with the merger. Information about executive officers and directors of Bitstream and their ownership of Bitstream common stock is set forth in Bitstream’s proxy statement, which was filed with the SEC on May 2, 2011 and is supplemented by other public filings made, and to be made, with the SEC. Investors and security holders may obtain additional information regarding the direct and indirect interests of Bitstream and its executive officers and directors in the merger by reading the proxy statement and the other filings and documents referred to above.