ý
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO
________.
|
DELAWARE
|
02-0405716
|
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(I.R.S.
Employer
Identification
No.)
|
Large
accelerated filer o Accelerated
filer o
|
Non-accelerated
filer o
(Do not check if a smaller reporting
company)
|
Smaller
reporting company x
|
3
|
|||
4
|
|||
Three Months Ended December 31, 2009 and
2008
|
5
|
||
6
|
|||
15
|
|||
22
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|||
22
|
|||
23
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|||
23
|
|||
23
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|||
24
|
|||
|
|||
December
31,
|
September
30,
|
|||||||
2009
|
2009
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and equivalents
|
$ | 5,880 | $ | 5,649 | ||||
Accounts
receivable, less allowances for doubtful accounts and
sales returns of $338,000 at December 31, 2009 and $215,000 at
September 30, 2009
|
2,759 | 2,968 | ||||||
Inventories
|
64 | 65 | ||||||
Prepaid
expenses
|
368 | 340 | ||||||
Total
current assets
|
9,071 | 9,022 | ||||||
Property
and equipment, net
|
457 | 498 | ||||||
Intangible
assets, net
|
2,151 | 2,397 | ||||||
Restricted
cash
|
89 | 107 | ||||||
Other
long-term assets
|
19 | 19 | ||||||
Total
assets
|
$ | 11,787 | $ | 12,043 | ||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable
|
$ | 540 | $ | 761 | ||||
Accrued
expenses
|
1,631 | 1,915 | ||||||
Deferred
revenue
|
4,172 | 3,719 | ||||||
Total
current liabilities
|
6,343 | 6,395 | ||||||
LONG-TERM
LIABILITIES:
|
||||||||
Deferred
rent
|
38 | 55 | ||||||
Deferred
revenue - long-term
|
274 | 302 | ||||||
Other
liabilities
|
131 | 125 | ||||||
Total
long-term liabilities
|
443 | 482 | ||||||
COMMITMENTS
AND CONTINGENCIES
|
||||||||
SHAREHOLDERS’
EQUITY:
|
||||||||
Common
stock, par value $.01; 20,000,000 shares authorized;
|
||||||||
issued,
5,940,085 shares for both periods;
|
||||||||
outstanding,
5,925,839 shares for both periods
|
59 | 59 | ||||||
Additional
paid-in capital
|
23,685 | 23,634 | ||||||
Accumulated
deficit
|
(17,569 | ) | (17,370 | ) | ||||
Accumulated
other comprehensive loss
|
(1,034 | ) | (1,017 | ) | ||||
5,141 | 5,306 | |||||||
Less
treasury stock, at cost, 14,246 shares
|
(140 | ) | (140 | ) | ||||
Total
shareholders’ equity
|
5,001 | 5,166 | ||||||
Total
liabilities and shareholders' equity
|
$ | 11,787 | $ | 12,043 |
Three
Months Ended
|
||||||||
December
31,
|
||||||||
2009
|
2008
|
|||||||
REVENUE:
|
||||||||
Software
licenses and subscriptions
|
$ | 2,166 | $ | 2,840 | ||||
Maintenance
and services
|
2,068 | 2,362 | ||||||
Total
revenue
|
4,234 | 5,202 | ||||||
COSTS
AND EXPENSES:
|
||||||||
Cost
of software licenses and subscriptions
|
573 | 530 | ||||||
Cost
of maintenance and services
|
759 | 873 | ||||||
Sales
and marketing
|
1,547 | 1,661 | ||||||
Engineering
and product development
|
708 | 713 | ||||||
General
and administrative
|
836 | 1,166 | ||||||
Total
costs and expenses
|
4,423 | 4,943 | ||||||
(LOSS)
INCOME FROM OPERATIONS
|
(189 | ) | 259 | |||||
Interest
income and other (expense) income, net
|
(2 | ) | 170 | |||||
(LOSS)
INCOME BEFORE INCOME TAXES
|
(191 | ) | 429 | |||||
Provision
for income taxes
|
8 | 44 | ||||||
NET
(LOSS) INCOME
|
$ | (199 | ) | $ | 385 | |||
Net
(loss) income per share—Basic
|
$ | (0.03 | ) | $ | 0.07 | |||
Net
(loss) income per share—Diluted
|
$ | (0.03 | ) | $ | 0.06 | |||
Weighted-Average
Shares Outstanding—Basic
|
5,925,839 | 5,914,358 | ||||||
Weighted-Average
Shares Outstanding—Diluted
|
5,925,839 | 5,943,255 |
Three
Months Ended
|
||||||||
December
31,
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
(loss) income
|
$ | (199 | ) | $ | 385 | |||
Adjustments
to reconcile net (loss) income to cash provided by
|
||||||||
operating
activities:
|
||||||||
Depreciation
and amortization
|
311 | 222 | ||||||
Provision
for doubtful accounts and sales returns
|
123 | 61 | ||||||
Stock-based
compensation
|
51 | 58 | ||||||
Deferred
income taxes
|
— | 29 | ||||||
Changes
in current assets and liabilities:
|
||||||||
Accounts
receivable
|
87 | (208 | ) | |||||
Inventories
|
1 | 11 | ||||||
Prepaid
expenses and other assets
|
(28 | ) | (103 | ) | ||||
Accounts
payable, accrued expenses and other liabilities
|
(517 | ) | (457 | ) | ||||
Deferred
revenue
|
423 | 769 | ||||||
Cash
provided by operating activities
|
252 | 767 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases
of equipment and fixtures
|
(24 | ) | (9 | ) | ||||
Capitalized
software development costs
|
— | (199 | ) | |||||
Decrease
in restricted cash
|
18 | — | ||||||
Decrease
in other assets
|
— | 1 | ||||||
Cash
used in investing activities
|
(6 | ) | (207 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from exercise of stock options
|
— | — | ||||||
Cash
provided by financing activities
|
— | — | ||||||
EFFECT
OF EXCHANGE RATE CHANGES ON CASH AND EQUIVALENTS
|
(15 | ) | (525 | ) | ||||
INCREASE
IN CASH AND EQUIVALENTS
|
231 | 35 | ||||||
CASH
AND EQUIVALENTS, BEGINNING OF PERIOD
|
5,649 | 4,885 | ||||||
CASH
AND EQUIVALENTS, END OF PERIOD
|
$ | 5,880 | $ | 4,920 | ||||
SUPPLEMENTAL
INFORMATION:
|
||||||||
Income
taxes paid
|
$ | 13 | $ | 8 |
Percentage
of total
|
||||||||
revenue
for the three
|
Percentage
of total
|
|||||||
months
ended
|
accounts
receivable at
|
|||||||
December
31,
|
December
31,
|
September
30,
|
||||||
2009
|
2008
|
2009
|
2009
|
|||||
Ingram
Micro, Inc.
|
16%
|
23%
|
17%
|
24%
|
||||
Tech
Data Product Management
|
10%
|
6%
|
12%
|
7%
|
||||
·
|
Level
1 – Observable inputs such as quoted prices in active
markets;
|
·
|
Level
2 – Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly;
and
|
·
|
Level
3 – Unobservable inputs in which there is little or no market data, which
require the reporting entity to develop its own
assumptions.
|
Quoted
Prices
|
||||||||||||||||
in
Active
|
Significant
|
|||||||||||||||
Markets
for
|
Other
|
Significant
|
||||||||||||||
Identical
|
Observable
|
Unobservable
|
||||||||||||||
Assets
|
Inputs
|
Inputs
|
||||||||||||||
Total
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
|||||||||||||
Money
market funds
|
$ | 2,233 | $ | 2,233 | $ | — | $ | — | ||||||||
Weighted
|
December
31, 2009
|
September
30, 2009
|
||||||||||||||||||||||||||
Average
|
Gross
|
Net
|
Gross
|
Net
|
||||||||||||||||||||||||
Identified
Intangible
|
Useful
Life
|
Carrying
|
Accumulated
|
Carrying
|
Carrying
|
Accumulated
|
Carrying
|
|||||||||||||||||||||
Asset
|
in
Years
|
Amount
|
Amortization
|
|
Amount
|
Amount
|
Amortization
|
|
Amount
|
|||||||||||||||||||
(in
thousands)
|
||||||||||||||||||||||||||||
Capitalized
software
|
2 | $ | 2,659 | $ | 1,817 | $ | 842 | $ | 2,659 | $ | 1,673 | $ | 986 | |||||||||||||||
Purchased
software
|
5 | 700 | 604 | 96 | 700 | 580 | 120 | |||||||||||||||||||||
Patents
|
20 | 160 | 43 | 117 | 160 | 41 | 119 | |||||||||||||||||||||
Customer
lists
|
10 | 1,790 | 739 | 1,051 | 1,790 | 697 | 1,093 | |||||||||||||||||||||
Non-compete
agreements
|
4 | 640 | 595 | 45 | 640 | 561 | 79 | |||||||||||||||||||||
Trademark
|
2 | 21 | 21 | — | 21 | 21 | — | |||||||||||||||||||||
Total
|
$ | 5,970 | $ | 3,819 | $ | 2,151 | $ | 5,970 | $ | 3,573 | $ | 2,397 |
Fiscal
Years Ended September 30,
|
(In
thousands)
|
||||
Remainder
of fiscal 2010
|
$ | 707 | |||
2011
|
565 | ||||
2012
|
189 | ||||
2013
|
174 | ||||
2014
|
174 | ||||
2015
|
174 | ||||
Thereafter
|
168 | ||||
Total
estimated future amortization expense
|
$ | 2,151 |
Balance
at October 1, 2009
|
$
|
793
|
||
Additions
for prior year tax positions
|
8
|
|||
Balance
at December 31, 2009
|
$
|
801
|
Three
months Ended
|
||||||||
December
31,
|
||||||||
2009
|
2008
|
|||||||
(In
thousands)
|
||||||||
Sales
and marketing
|
$ | 12 | $ | 13 | ||||
Engineering
and product development
|
3 | 4 | ||||||
General
and administrative
|
36 | 41 | ||||||
$ | 51 | $ | 58 |
2009 | |
Expected
life
|
5
years
|
Expected
volatility
|
75.33%
|
Weighted-average
volatility
|
75.33%
|
Risk
free interest rate
|
1.28%
|
Dividend
yield
|
0.0%
|
Number
of
Options
Outstanding
|
Weighted-
Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
$(000)
|
|||||
Outstanding,
October 1, 2009
|
548,800
|
$
|
3.05
|
|||||
Granted
|
30,500
|
2.35
|
||||||
Canceled
|
11,506
|
2.09
|
||||||
Exercised
|
—
|
—
|
||||||
Outstanding,
December 31, 2009
|
567,794
|
$
|
3.03
|
4.21
|
$
315
|
|||
Vested
or expected to vest December 31, 2009
|
558,996
|
$
|
3.03
|
4.02
|
$
312
|
|||
Exercisable,
December 31, 2009
|
479,812
|
$
|
2.98
|
3.92
|
$
285
|
Number
of
|
||||
RSUs
|
||||
Outstanding
|
||||
Outstanding,
October 1, 2009
|
39,494 | |||
Granted
|
12,000 | |||
Canceled
|
—
|
|||
Vested
|
—
|
|||
Outstanding,
December 31, 2009
|
51,494 |
Three
Months Ended
|
||||||||
December
31,
|
||||||||
2009
|
2008
|
|||||||
(In
thousands)
|
||||||||
Net
(loss) income
|
$ | (199 | ) | $ | 385 | |||
Other
comprehensive loss:
|
||||||||
Foreign
currency translation adjustments
|
(17 | ) | (326 | ) | ||||
Comprehensive
(loss) income
|
$ | (216 | ) | $ | 59 |
Three
Months Ended
|
||||
December
31,
|
||||
2009
|
2008
|
|||
Business
Intelligence Solutions (including Monarch, Monarch
Data Pump, Monarch RMS, Monarch BI Server, Datawatch ES, Datawatch
Dashboards, Datawatch Researcher, Visual Insight, iMergence and
VorteXML)
|
69%
|
70%
|
||
Content
Management Solutions (including Datawatch
BDS)
|
19%
|
18%
|
||
Service
Management Solutions (including Visual QSM and
Visual HD)
|
12%
|
12%
|
||
Total
|
100%
|
100%
|
||
International
|
||||||||||||||||
(Principally
|
Intercompany
|
|||||||||||||||
Domestic
|
(U.K.)
|
Eliminations
|
Total
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Total Revenue
|
||||||||||||||||
Three
months ended December 31, 2009
|
$ | 3,390 | $ | 1,062 | $ | (218 | ) | $ | 4,234 | |||||||
Three
months ended December 31, 2008
|
$ | 4,228 | $ | 1,215 | $ | (241 | ) | $ | 5,202 | |||||||
Total Operating Income
(Loss)
|
||||||||||||||||
Three
months ended December 31, 2009
|
$ | (74 | ) | $ | (115 | ) | $ | — | $ | (189 | ) | |||||
Three
months ended December 31, 2008
|
$ | 235 | $ | 24 | $ | — | $ | 259 | ||||||||
Non-current assets
|
||||||||||||||||
At
December 31, 2009
|
$ | 2,674 | $ | 42 | $ | — | $ | 2,716 | ||||||||
At
September 30, 2009
|
$ | 2,981 | $ | 40 | $ | — | $ | 3,021 | ||||||||
·
|
Monarch,
a desktop report mining and business intelligence application that lets
users extract and manipulate data from ASCII report files, PDF files or
HTML files produced on any mainframe, midrange, client/server or PC
system;
|
·
|
Monarch
Data Pump, a data replication and migration tool that offers a shortcut
for populating and refreshing data marts and data warehouses, for
migrating legacy data into new applications and for providing automated
delivery of reports in a variety of formats via
email;
|
·
|
Monarch
RMS, a web-based report mining and analysis solution that integrates with
any existing Enterprise Report Management document or content management
archiving solution;
|
·
|
Monarch
BI Server, an out-of-the-box web-based Business Intelligence solution
developed specifically for small to mid-sized businesses and
departments;
|
·
|
Datawatch
ES, an enterprise business intelligence system that provides web-enabled
report management, mining and distribution as well as data analysis and MS
Excel integration;
|
·
|
Datawatch
Dashboards, an interactive dashboard solution that provides a visual
overview of operational performance as well as the ability to monitor
specific business processes and
events;
|
·
|
Datawatch
Researcher, a development platform for building performance management,
content and data aggregation and workflow
solutions;
|
·
|
Visual
Insight, a performance management solution that provides web-based
knowledge management and Key Performance Indicator
reporting;
|
·
|
iMergence,
an enterprise report mining system;
|
·
|
VorteXML,
a data transformation product for the emerging XML market that easily and
quickly converts structured text output from any system into valid XML for
web services and more using any DTD or XDR schema without
programming;
|
·
|
Datawatch
BDS, a system for high-volume document capture, archiving, and online
presentation;
|
·
|
Datawatch
MailManager, a highly scalable email management solution that provides
complete lifecycle, compliance and storage management for Microsoft
Exchange environments;
|
·
|
Visual
QSM, a fully internet-enabled IT service management solution that
incorporates workflow and network management capabilities and provides web
access to multiple databases via a standard browser;
and
|
·
|
Visual
Help Desk or Visual HD, a web-based help desk and call center solution
operating on the IBM Lotus Domino
platform.
|
·
|
Revenue
Recognition, Allowance for Bad Debts and Returns
Reserve
|
·
|
Income
Taxes
|
·
|
Capitalized
Software Development Costs
|
·
|
Valuation
of Intangible Assets and Other Long-Lived
Assets
|
·
|
Accounting
for Stock-Based Compensation
|
Three
Months Ended
December
31,
|
||||
2009
|
2008
|
|||
REVENUE:
|
||||
Software
licenses and subscriptions
|
51.2%
|
54.6%
|
||
Maintenance
and services
|
48.8%
|
45.4%
|
||
Total
Revenue
|
100.0%
|
100.0%
|
||
COSTS
AND EXPENSES:
|
||||
Cost
of software licenses and subscriptions
|
13.6%
|
10.2%
|
||
Cost
of maintenance and services
|
17.9%
|
16.8%
|
||
Sales
and marketing
|
36.6%
|
31.9%
|
||
Engineering
and product development
|
16.7%
|
13.7%
|
||
General
and administrative
|
19.7%
|
22.4%
|
||
Total
costs and expenses
|
104.5%
|
95.0%
|
||
(LOSS)
INCOME FROM OPERATIONS
|
-4.5%
|
5.0%
|
||
Interest
income and other income (expense), net
|
0.0%
|
3.2%
|
||
(LOSS)
INCOME BEFORE INCOME TAXES
|
-4.5%
|
8.2%
|
||
Provision
for income taxes
|
0.2%
|
0.8%
|
||
NET
(LOSS) INCOME
|
-4.7%
|
7.4%
|
||
December
31,
|
Increase
|
Percentage
|
||||||||||||||
2009
|
2008
|
(Decrease)
|
Change
|
|||||||||||||
|
(In
thousands)
|
|||||||||||||||
Software
licenses and subscriptions
|
$ | 2,166 | $ | 2,840 | $ | (674) | -23.7% | |||||||||
Maintenance
and services
|
2,068 | 2,362 | (294) | -12.4% | ||||||||||||
Total
revenue
|
$ | 4,234 | $ | 5,202 | $ | (968) | -18.6% | |||||||||
Three
Months Ended
|
||||||||||||||||
December
31,
|
Increase
|
Percentage
|
||||||||||||||
2009
|
2008
|
(Decrease)
|
Change
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Cost
of software licenses and subscriptions
|
$ | 573 | $ | 530 | $ | 43 | 8.1% | |||||||||
Cost
of maintenance and services
|
759 | 873 | (114) | -13.1% | ||||||||||||
Sales
and marketing
|
1,547 | 1,661 | (114) | -6.9% | ||||||||||||
Engineering
and product development
|
708 | 713 | (5) | -0.7% | ||||||||||||
General
and administrative
|
836 | 1,166 | (330) | -28.3% | ||||||||||||
Total
costs and operating expenses
|
$ | 4,423 | $ | 4,943 | $ | (520) | -10.5% |
Contractual
Obligations:
|
Total
|
Less
than 1 Year
|
1-3
Years
|
3-5
Years
|
More
than 5 Years
|
|||||||||||||||
(in
thousands)
|
||||||||||||||||||||
Operating
Lease
|
||||||||||||||||||||
Obligations
|
$ | 478 | $ | 315 | $ | 162 | $ | 1 | $ | — | ||||||||||
Other
Liabilities
|
$ | 131 | $ | — | $ | — | $ | — | $ | 131 | ||||||||||
31.1
|
Certification
of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
32.2
|
Certification
of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
DATAWATCH
CORPORATION
|
||||
/s/
Kenneth P. Bero
|
||||
Kenneth
P. Bero
|
||||
President,
Chief Executive Officer, and
|
||||
Director
(Principal Executive Officer)
|
||||
/s/
Murray P. Fish
|
||||
Murray
P. Fish
|
||||
Chief
Financial Officer
|
||||
(Principal
Financial Officer)
|