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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
[ ] 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 000-24677
BINDVIEW DEVELOPMENT CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 76-0306721
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5151 SAN FELIPE, 21st FLOOR, HOUSTON, TX 77056
(Address of principal executive offices) (Zip code)
(713) 561-4000
(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 [ ]
The number of shares of the registrant's Common Stock, no par value, outstanding
as of March 31, 2000, was 51,392,302.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BINDVIEW DEVELOPMENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PAR VALUE)
ASSETS MARCH 31, DECEMBER 31,
2000 (Unaudited) 1999
---------------- --------------
Current assets:
Cash and cash equivalents $ 79,055 $ 72,150
Short-term investments 547 4,834
Accounts receivable, net of allowance of $714 and $623 10,431 15,701
Deferred tax asset 8,639 3,069
Other current assets 783 1,142
------------ ------------
Total current assets 99,455 96,896
Property and equipment, net 10,221 8,485
Purchased software and related assets, net 1,128 1,177
Long-term investments 4,268 6,120
Other assets 699 564
------------ ------------
Total assets $ 115,771 $ 113,242
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,714 $ 3,077
Accrued liabilities 5,117 2,721
Accrued compensation 1,106 3,757
Deferred revenue 11,515 10,311
Current maturities of indebtedness -- 176
------------ ------------
Total current liabilities 22,452 20,042
------------ ------------
Long-term liabilities:
Indebtedness and other long-term liabilities -- 144
------------ ------------
Total long-term liabilities -- 144
------------ ------------
Shareholders' equity:
Convertible preferred stock, $0.01 par value, 20,000 shares authorized,
0 and 2,525 shares issued & outstanding, respectively -- --
Convertible preferred stock, $0.025 par value, 520 shares
authorized, 0 and 7 shares issued and outstanding, respectively -- --
Series A convertible preferred stock, $0.0001 par value, 5,000 shares
Authorized, 0 and 5,000 shares issued & outstanding, respectively -- 5
Series B convertible preferred stock, no par value, 8,000 shares
Authorized, 0 and 7,689 shares issued & outstanding, respectively -- 8
Series C convertible preferred stock, no par value, 10,030 shares
Authorized, 0 and 10,000 shares issued & outstanding -- 10
Common stock, no par value, 100,000 shares authorized,
51,392 and 47,535 shares issued and outstanding, respectively 1 1
Additional paid-in capital 116,438 109,471
Accumulated deficit (22,650) (15,975)
Notes receivable, shareholders (202) (202)
Accumulated other comprehensive loss (268) (262)
------------ ------------
Total shareholders' equity 93,319 93,056
------------ ------------
Total liabilities and shareholders' equity $ 115,771 $ 113,242
============ ============
See notes to unaudited condensed consolidated financial statements.
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BINDVIEW DEVELOPMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
QUARTER
ENDED MARCH 31,
-------------------------------
2000 1999
------------ ------------
Revenues:
Licenses $ 10,161 $ 9,097
Services 5,864 3,614
------------ ------------
Total revenues 16,025 12,711
------------ ------------
Cost of revenues:
Cost of licenses 553 261
Cost of services 635 531
------------ ------------
Total cost of revenues 1,188 792
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Gross profit 14,837 11,919
------------ ------------
Costs and expenses:
Sales and marketing 9,359 6,449
Research and development 6,260 3,857
General and administrative 2,427 1,526
Transaction and restructuring 5,581 2,286
------------ ------------
Operating loss (8,790) (2,199)
Other income, net 1,082 645
------------ ------------
Loss before income tax provision (7,708) (1,554)
Provision (benefit) for income tax (1,033) 1,057
------------ ------------
Net loss (6,675) (2,611)
Other comprehensive loss, net of tax:
Loss from foreign currency translation (6) (75)
------------ ------------
Comprehensive loss $ (6,681) $ (2,686)
============ ============
Loss per common share:
Basic $ (0.13) $ (0.06)
Diluted $ (0.13) $ (0.06)
Shares used in computing loss per common share:
Basic 50,519 45,805
Diluted 50,519 45,805
See notes to unaudited condensed consolidated financial statements.
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BINDVIEW DEVELOPMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
-------------------------------
2000 1999
------------ ------------
Cash flows from operating activities:
Net loss $ (6,675) $ (2,611)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization expense 1,288 704
Deferred income taxes (1,033) 1,109
Changes in assets and liabilities:
Decrease in accounts receivable 5,208 174
Decrease in other assets 339 496
Increase in accounts payable 1,867 1,409
Increase (decrease) in accrued liabilities (327) 1,489
Increase in deferred revenues 1,227 1,033
------------ ------------
Net cash provided by operating activities 1,894 3,803
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (2,982) (3,349)
(Purchase) maturity of investments, net 6,139 (10,600)
Other (98) 136
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Net cash provided by (used in)
investing activities 3,059 (13,813)
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Cash flows from financing activities:
Interest accrued on convertible debentures -- 86
Notes payable and long-term debt (320) 129
Payment of capital lease obligation (390) (13)
Proceeds from issuance of stock for employee stock purchase plan 462 --
Proceeds from exercise of stock options & warrant 1,945 924
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Net cash provided by financing activities 2,087 1,126
Effect of exchange rate changes on cash (135) (14)
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Net decrease in cash and cash equivalents (6,905) (8,898)
Cash and cash equivalents at beginning of period 72,150 51,718
------------ ------------
Cash and cash equivalents at end of period $ 79,055 $ 42,820
============ ============
Noncash financing and investing activities
Conversion of preferred stock to common stock 23
Tax benefit related to the exercise of employee stock options 4,537
Issuance of 350 shares of common stock related to the
acquisition of Curasoft 3,352
Conversion of convertible debentures and preferred stock into
common stock 7,658
See notes to unaudited condensed consolidated financial statements.
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BINDVIEW DEVELOPMENT CORPORATION
STATEMENT OF SHAREHOLDERS' EQUITY
COMBINED FINANCIAL RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONVERTIBLE
PREFERRED
COMMON STOCK SERIES A
--------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
-------- -------- -------- --------
Balance at December 31, 1999 47,535 $ 1 5,000 $ 5
Exercise of stock options & warrants 508 -- -- --
Tax benefit related to exercise -- -- -- --
of employee stock options
ESPP 48 -- -- --
Conversion of preferred A, B and C stock 3,251 -- (5,000) (5)
into common stock
Foreign currency translation adjustment -- -- -- --
Net (loss) for the three months ended -- -- -- --
March 31, 2000
-------- -------- -------- --------
Balance at March 31, 2000 51,342 $ 1 -- $ --
CONVERTIBLE CONVERTIBLE
PREFERRED PREFERRED
SERIES B SERIES C
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
-------- -------- -------- --------
Balance at December 31, 1999 7,689 $ 8 10,000 $ 10
Exercise of stock options & warrants -- -- -- --
Tax benefit related to exercise -- -- -- --
of employee stock options
ESPP -- -- -- --
Conversion of preferred A, B and C stock (7,689) (8) (10,000) (10)
into common stock
Foreign currency translation adjustment -- -- -- --
Net (loss) for the three months ended
March 31, 2000 -- -- -- --
-------- -------- -------- --------
Balance at March 31, 2000 -- $ -- -- $ --
CUMULATIVE
ADDITIONAL COMMON NOTES OTHER TOTAL
PAID-IN STOCK ACCUMULATED RECEIVABLE COMPREHENSIVE SHAREHOLDERS'
CAPITAL TO BE ISSUED DEFICIT SHAREHOLDERS INCOME (LOSS) EQUITY
---------- ------------ ----------- ------------ ------------- -------------
Balance at December 31, 1999 $109,471 $ -- $(15,975) $ (202) $ (262) $ 93,056
Exercise of stock options & warrants 1,944 -- -- -- -- 1,944
Tax benefit related to exercise
of employee stock options 4,538 -- -- -- -- 4,538
ESPP 462 -- -- -- -- 462
Conversion of preferred A, B and C stock
into common stock 23 -- -- -- -- --
Foreign currency translation adjustment -- -- -- -- (6) (6)
Net (loss) for the three months ended
March 31, 2000 -- -- (6,675) -- -- (6,675)
-------- -------- -------- -------- -------- --------
Balance at March 31, 2000 $116,438 $ -- $(22,650) $ (202) $ (268) $ 93,319
See notes to unaudited consolidated financial statements
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BINDVIEW DEVELOPMENT CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
BindView Development Corporation, a Texas corporation (the "Company" or
"BindView"), reflect all adjustments (consisting of normal recurring accruals)
which, in the opinion of management, are necessary for a fair presentation of
the results for the interim periods presented. These financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
These financial statements should be read in conjunction with Item 5 of this
report and the Company's annual audited financial statements and the
supplemental financial statements for the year ended December 31, 1999, which
are included in the Annual Report on Form 10-K and Amendment No. 1 to the
Company's Form 8-K.
Operating results for the three month period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 2000 or for other periods.
NOTE 2 - DESCRIPTION OF BUSINESS
The Company was incorporated in May 1990. Prior to 1995, the Company was known
as The LAN Support Group, Inc. The Company develops, markets and supports a
suite of IT risk management software products that manage the
security and integrity of complex, distributed client/server networks operating
on Microsoft Windows NT and Novell NetWare environments.
NOTE 3 - RECENT PRONOUNCEMENTS
In June 1998, the Financial Account Standards Board("FASB") issued Statement of
Financial Accounting Standards No. 133 ("FAS 133"), Accounting for Derivative
Instruments and Hedging Activities. FAS 133, as amended, is effective for all
fiscal years beginning after June 15, 2000. The Company will adopt FAS 133
effective January 1, 2001 and is evaluating the effect that such adoption may
have on its consolidated results of operations and financial position.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in
Financial Statements. SAB 101 provides guidance on applying generally accepted
accounting principles to revenue recognition issues in financial statements. In
March 2000, the SEC issued Staff Accounting Bulletin No. 101A ("SAB 101A"),
Amendment: Revenue Recognition in Financial Statements. SAB 101A delays the
implementation date of SAB 101 for registrants with fiscal years that begin
between December 16, 1999 and March 15, 2000. The Company will adopt SAB 101
as required in the second quarter of 2000 and is evaluating the effect that such
adoption may have on its consolidated results of operations and financial
position.
NOTE 4 - EARNINGS PER SHARE
Basic earnings per common share is computed using the weighted average number of
shares outstanding. As the Company reported a net loss for the three months
ended March 31, 1999, and March 31, 2000, diluted earnings per common share does
not differ from basic earnings per common share.
NOTE 5 - SHORT-TERM AND LONG-TERM INVESTMENTS
Short-term investments have original maturities of more than three months and a
remaining maturity of less than one year. Long-term investments have original
maturities of more than twelve months. These investments are stated at cost,
which approximates market, and it is the intent of the Company to hold these
securities until maturity.
NOTE 6 - RECENT ACQUISITIONS/TRANSACTION AND RESTRUCTURING EXPENSES
Acquisition of Netect, Ltd
- --------------------------
On March 1, 1999, the Company merged with Netect, Ltd. ("Netect") in a
stock-for-stock transaction accounted for as a pooling of interests. Netect
develops and markets corporate security solutions for Internet/Intranet
networks. In connection with the merger, the Company issued 2,322 shares of
common stock, based upon an exchange ratio of 0.800044202 shares of BindView
common stock for each share of Netect common stock. As a result of this merger,
all of the outstanding convertible preferred stock and convertible debentures of
Netect were exchanged for the Company's common stock. Transaction costs of
$1,533 and restructuring costs of $991 were incurred as a result of this merger
of which $238 was incurred in the second quarter of 1999.
At the time of the merger, management approved restructuring plans to eliminate
duplicate senior management positions and to close the Israeli operations of
Netect. The restructuring plans were based on management's best estimate of
those costs based on the information available at that time. The restructuring
expenses related to this plan include involuntary employee separation expenses
for approximately 15 former Netect employees, the costs to close Netect's
Israeli operations and other miscellaneous restructuring expenses. The
restructuring expense adjustment presented below of $238 occurred in the second
quarter of 1999 and relates to additional costs to close Netect's Israeli
operations that exceeded management's initial estimate. The transaction costs
related to the acquisition include investment banking fees of $590, accounting
and legal expenses of $565, transfer fees of $138, and other miscellaneous
transaction expenses of $240.
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The accrued restructuring expenses and amounts charged against the provision as
of March 31, 2000, were as follows:
(IN THOUSANDS) BEGINNING CASH ACCRUED EXPENSES AT
ACCRUAL EXPENDITURES ADJUSTMENT MARCH 31, 2000
---------- ------------ ---------- -------------------
Restructuring Expenses
Employee severance and 575 (813) 238 --
Related costs
Israeli office closing 119 (119) -- --
Other restructuring costs 59 (59) -- --
---------- ------------ ---------- -------------------
TOTAL $ 753 $ (991) $ 238 $ --
========== ============ ========== ===================
The historical financial data included herein has been restated to reflect the
merger with Netect by combining the historical results for the Company and
Netect for all periods presented. There were no material transactions between
BindView and Netect during the periods prior to the merger.
Acquisition of Entevo Corporation
- ---------------------------------
On February 9, 2000 the Company merged with Entevo Corporation ("Entevo") in a
stock-for-stock transaction accounted for as a pooling of interests, Entevo
provides directory management solutions that help organizations deploy,
integrate, administer and maintain enterprise directory services, in Windows NT
and Windows 2000 environments. In connection with the merger, the Company issued
4,181 shares of common stock, based upon an exchange ratio of 0.1205909 shares
of BindView common stock for each share of Entevo common stock and 0.17210298
shares of BindView common stock for each share of Entevo Series C Preferred
Stock. As a result of this merger, all of the outstanding convertible preferred
stock of Entevo were exchanged for the Company's common stock. Transaction costs
of $3,800 and restructuring costs of $1,781 were incurred as a result of this
merger.
At the time of the merger, management approved restructuring plans to eliminate
duplicate positions and integrate Entevo's and BindView's worldwide operations.
The restructuring plans were based on management's best estimate of those costs
based on the information available at that time. The restructuring expenses
related to this plan include involuntary employee separation and relocation
expenses, contract cancellation provisions, product reorganization, integration
related expenses and other miscellaneous restructuring expenses. The transaction
costs related to the acquisition include investment banking fees of $2,473,
professional expenses of $929, product due diligence and transfer fees of $181,
and other miscellaneous transaction expenses of $217. The Company believes the
remaining reserve is sufficient to complete these remaining actions under the
plan.
The accrued restructuring expenses and amounts charged against the provision as
of March 31, 2000, were as follows:
(IN THOUSANDS) BEGINNING CASH ACCRUED EXPENSES AT
ACCRUAL EXPENDITURES MARCH 31, 2000
---------- ------------ -------------------
Employee severance and 1,520 (186) 1,334
Relocation costs
Contract cancellation
provisions 93 -- 93
Product reorganization 82 -- 82
Integration and other
restructuring costs 86 (18) 68
---------- ------------ -------------------
TOTAL $ 1,781 $ (204) $ 1,577
========== ============ ===================
The historical financial data included herein has been restated to reflect the
merger with Entevo by combining the historical results for the Company and
Entevo for all periods presented. There were no material transactions between
BindView and Entevo during the periods prior to the merger.
NOTE 7 - INCOME TAX
For the period ended March 31, 1999, the Company recognized a tax expense
for its income generated in the U.S. A tax benefit has not been recognized for
certain losses of the Company generated by Netect due to limitations on the
Company's ability to realize such benefits given the former structure of Netect
and the Company's plans for Netect's future operations. These factors, and the
non-deductibility of the transaction expenses incurred in connection with the
company's merger with Netect have resulted in the Company's effective tax rate
for this period exceeding 35%.
For the period ended March 31, 2000, a portion of the transaction and
restructuring expenses related to the acquisition of Entevo are non-deductible
for income tax purposes. In addition, the Company will generate a research
and development tax credit for federal income tax purposes during 2000. These
factors have resulted in the Company's effective tax benefit approximating 13%
for the current period.
The Company has net operating loss carryforwards at March 31, 2000 of
approximately $41,378 available to offset future taxable income that expire
between 2003 and 2020 resulting in a deferred tax asset of approximately
$14,313. Based on the historical earnings generated by the Company and certain
limitations that may limit the utilization of net operating loss carryforwards,
management has provided a valuation allowance of $9,492 at March 31, 2000
against the net operating loss carryforwards. The valuation allowance is
primarily related to pre-acquisition net operating losses of Netect and Entevo.
NOTE 8 - SEGMENT REPORTING
During 1999, the Company adopted Statement of Financial Accounting Standard No.
131 "Disclosures About Segments of an Enterprise and Related Information". The
Company currently operates in one segment as defined by this standard. The
adoption of this standard did not have a material impact on disclosures with
respect to the Company's financial condition or results of operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include those discussed in the "Risk Factors" set forth in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999 and
those discussed herein under the heading "Cautionary Statements". The following
discussion should be read in conjunction with the unaudited condensed
consolidated financial statements and the accompanying notes.
The mergers with Netect on March 1, 1999, and with Entevo Corporation on
February 9, 2000, have been accounted for as pooling of interests. The
historical financial data included herein has been restated to reflect these
mergers.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
selected items in the Condensed Consolidated Statement of Operations and
Comprehensive Loss to total revenues:
PERCENT OF TOTAL NET REVENUES
QUARTER ENDED MARCH 31,
--------------------------
2000 1999
---------- ----------
Revenues:
Licenses 63.4 71.6
Services 36.6 28.4
---------- ----------
Total revenues 100.0 100.0
---------- ----------
Cost of revenues:
Cost of licenses 3.4 2.0
Cost of services 4.0 4.2
---------- ----------
Total cost of revenues 7.4 6.2
---------- ----------
Gross profit 92.6 93.8
---------- ----------
Costs and expenses
Sales and Marketing 58.5 50.8
Research and Development 39.1 30.3
General and Administrative 15.1 12.0
Transaction and Restructuring(1) 34.8 18.0
---------- ----------
Operating loss (54.9) (17.3)
Other income,net 6.8 5.1
---------- ----------
Loss before income tax provision (48.1) (12.2)
Provision (benefit) for income tax (6.4) 8.3
---------- ----------
Net loss (41.7) (20.5)
========== ==========
Notes: (1) 1999 amount represents a $2,286 non-recurring charge related to costs
associated with the Netect merger and restructuring. 2000 amount represents
a $5,581 non-recurring charge related to costs associated with the Entevo merger
and restructuring.
REVENUES
The Company's revenues are derived from the sale of software products and
related services including subscription contracts. The Company's revenues
increased $3.3 million or 26% in the first quarter of 2000 over the comparable
quarter of the prior year.
The Company's license revenues increased $1.1 million or 12% in the first
quarter of 2000 over the comparable quarter of the prior year. The increase in
the Company's license revenues over these periods is a result of continued
market acceptance of the BindView EMS product family and revenues generated from
new product acquisitions and introductions. The results of the quarter may not
be indicative of results for the full year. No assurances can be made that
revenues will continue to increase at the rates reflected in quarter-to-quarter
and year-to-year comparisons.
The Company's service revenues increased $2.3 million or 62% in the first
quarter of 2000 over the comparable quarter of the prior
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year. The increase in the Company's service revenues over these periods is a
result of an increase in purchases and renewals of subscription contracts by the
Company's growing installed customer base. Because revenues from subscription
contracts are recognized ratably over the contract term, this increase in these
revenues as a percentage of total revenues results in greater deferred revenue
recognition. The costs associated with these services, are recognized as they
are incurred. This may negatively impact the Company's operating margins during
periods in which the Company incurs infrastructure ramp-up costs in response to
increases in purchases and renewals of subscription contacts.
COST OF REVENUES
Cost of licenses includes product manuals, packaging, distribution and media
costs for the Company's software products. The Company's cost of licenses
increased $292,000 or 112% in the first quarter of 2000 over the comparable
quarter of the prior year. The cost of licenses has increased primarily due to
increases in product shipments and the cost of product packaging and
documentation. The Company believes these costs will remain relatively constant
as a percentage of total revenue, although there will continue to be quarterly
fluctuations due to the timing of certain expenses.
Cost of services includes personnel and other costs related to technical support
and professional services. The Company's cost of services increased $104,000 or
20% in the first quarter of 2000 over the comparable quarter of the prior year.
The cost of services has increased primarily due to increases in the cost of
technical support staff providing support to the Company's growing customer base
and increases in the cost of professional services staff providing customer
training and implementation services.
COSTS AND EXPENSES
Sales and marketing expenses consist primarily of salaries, commissions and
bonuses earned by sales and marketing personnel, general office expenses, travel
and entertainment and promotional expenses. The Company's sales and marketing
expenses increased $2.9 million or 45% in the first quarter of 2000 over the
comparable quarter of the prior year. The increase in the sales and marketing
expenses is related to the hiring of additional personnel in connection with the
building of the Company's telesales and field sales force and the additional
facilities and computer systems required by these additional personnel. Sales
and marketing expenses increased to 58% of revenues in the first quarter of 2000
compared to 51% of revenue in the corresponding period of 1999. The increase in
sales and marketing expenses as a percentage of revenues is related to 1) the
ramp up of sales and marketing expenses associated with Entevo over these
periods and 2) additional costs related to the integration of sales territories
and the sales commission structure as a result of the acquisition of Entevo's
telesales and field sales operations. Due to the seasonal nature of revenues,
the Company anticipates that for the remaining fiscal quarters of 2000, sales
and marketing expenses will decrease as a percentage of revenues but increase in
absolute dollars as the Company continues to invest in marketing campaigns
relative to the sales growth and continue to expand its domestic and
international sales efforts.
Research and development expenses consist primarily of salaries and benefits for
product development, product management and quality assurance personnel,
payments to contract programmers and expendable equipment purchases. The
Company's research and development expenses increased $2.4 million or 62% in the
first quarter of 2000 over the comparable quarter of the prior year. The
increase in the research and development expenses is related to increased
personnel, additional facilities and an increase in the computer systems and
software development tools required by the additional personnel. Research and
development expenses increased to 39% of revenues in the first quarter of 2000
compared to 30% in the corresponding period of 1999. This increase in research
and development expenses as a percentage of revenue is related to 1) the ramp up
of research and development expenses associated with Entevo over these periods
and 2) the development of new product lines requiring additional research and
development effort relative to the respective license revenue generated by these
products. The Company believes that a significant research and development
investment is essential for it to maintain and grow its market position and
continue to expand its product line. Accordingly, the Company anticipates it
will continue to devote substantial resources to product research and
development for the foreseeable future, and that research and development
expenses will increase in absolute dollars.
General and administrative expenses consist primarily of salaries, personnel and
related costs for the Company's executive, administrative, finance and
information services staff. The Company's general and administrative expenses
increased $901,000 or 59% in the first quarter of 2000 over the comparable
quarter of the prior year. The increase in the general and administrative
expenses is related to an increase in the bad debts expense, increased
staffing, increased facilities costs and associated expenses necessary to manage
and support the Company's increased scale of operations. General and
administrative expenses increased to 15% of revenues in the first quarter of
2000 compared to 12% in the corresponding period of 1999. This increase in
general and administrative expenses as a percentage of revenue is a result of
duplicative staff associated with the Entevo acquisition. The Company expects
that for the remainder of 2000 general and administrative expenses will decline
as a percentage of total revenue.
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TRANSACTION AND RESTRUCTURING EXPENSES
Acquisition of Netect, Ltd
- --------------------------
On March 1, 1999, the Company merged with Netect, Ltd. ("Netect") in a
stock-for-stock transaction accounted for as a pooling of interests. Netect
develops and markets corporate security solutions for Internet/Intranet
networks. In connection with the merger, the Company issued 2,322 shares of
common stock, based upon an exchange ratio of 0.800044202 shares of BindView
common stock for each share of Netect common stock. As a result of this merger,
all of the outstanding convertible preferred stock and convertible debentures of
Netect were exchanged for the Company's common stock. Transaction costs of
$1,533 and restructuring costs of $991 were incurred as a result of this merger
of which $238K was incurred in the second quarter of 1999.
At the time of the merger, management approved restructuring plans to eliminate
duplicate senior management positions and to close the Israeli operations of
Netect. The restructuring plans were based on management's best estimate of
those costs based on the information available at that time. The restructuring
expenses related to this plan include involuntary employee separation expenses
for approximately 15 former Netect employees, the costs to close Netect's
Israeli operations and other miscellaneous restructuring expenses. The
restructuring expense adjustment presented below of $238 was incurred in the
second quarter of 1999 and relates to additional costs to close Netect's
Israeli operations that exceeded management's initial estimate. The transaction
costs related to the acquisition include investment banking fees of $590,
accounting and legal expenses of $565, transfer fees of $138, and other
miscellaneous transaction expenses of $240.
The accrued restructuring expenses and amounts charged against the provision as
of March 31, 2000, were as follows:
(IN THOUSANDS) BEGINNING CASH ACCRUED EXPENSES AT
ACCRUAL EXPENDITURES ADJUSTMENT MARCH 31, 2000
---------- ------------ ---------- -------------------
Restructuring Expenses
Employee severance and 575 (813) 238 --
Related costs
Israeli office closing 119 (119) -- --
Other restructuring costs 59 (59) -- --
---------- ------------ ---------- -------------------
TOTAL $ 753 $ (991) $ 238 $ --
========== ============ ========== ===================
The historical financial data included herein has been restated to reflect the
merger with Netect by combining the historical results for the Company and
Netect for all periods presented. There were no material transactions between
BindView and Netect during the periods prior to the merger.
Acquisition of Entevo Corporation
- ---------------------------------
On February 9, 2000 the Company merged with Entevo Corporation ("Entevo") in a
stock-for-stock transaction accounted for as a pooling of interests. Entevo
provides directory management solutions that help organizations deploy,
integrate, administer and maintain enterprise directory services, in Windows NT
and Windows 2000 environments. In connection with the merger, the Company issued
4,181 shares of common stock, based upon an exchange ratio of 0.1205909 shares
of BindView common stock for each share of Entevo common stock and 0.17210298
shares of BindView common stock for each share of Entevo Series C Preferred
Stock. As a result of this merger, all of the outstanding convertible preferred
stock of Entevo were exchanged for the Company's common stock. Transaction costs
of $3,800 and restructuring costs of $1,781 were incurred as a result of this
merger.
At the time of the merger, management approved restructuring plans to eliminate
duplicate positions and integrate Entevo's and BindView's worldwide operations.
The restructuring plans were based on management's best estimate of those costs
based on the information available at that time. The restructuring expenses
related to this plan include involuntary employee separation and relocation
expenses, contract cancellation provisions, product reorganization, integration
related expenses and other miscellaneous restructuring expenses. The transaction
costs related to the acquisition include investment banking fees of $2,473,
professional expenses of $929, product due diligence and transfer fees of $181,
and other miscellaneous transaction expenses of $217. The Company believes the
remaining reserve is sufficient to complete these remaining actions under the
plan.
The accrued restructuring expenses and amounts charged against the provision as
of March 31, 2000, were as follows:
(IN THOUSANDS) BEGINNING CASH ACCRUED EXPENSES AT
ACCRUAL EXPENDITURES MARCH 31, 2000
------------ ------------ -------------------
Employee severance and
Relocation costs 1,520 (186) 1,334
Contract cancellation
provisions 93 -- 93
Product reorganization 82 -- 82
Integration and other
restructuring costs 86 (18) 68
------------ ------------ ------------
TOTAL $ 1,781 $ (204) $ 1,577
============ ============ ============
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The historical financial data included herein has been restated to reflect the
merger with Entevo by combining the historical results for the Company and
Entevo for all periods presented. There were no material transactions between
BindView and Entevo during the periods prior to the merger.
OTHER INCOME, NET
The Company had other income of $1.1 million in the first quarter of 2000
compared to $645,000 in the corresponding period of 1999. This increase is
primarily due to an increase in interest income related to higher interest rates
over the periods presented and positive cash flow from operating activities.
PROVISION FOR INCOME TAXES
The effective tax rate was approximately 13% for the period ended March 31,
2000 loss and exceeded 35% for the period ended March 31, 1999 loss. Certain
transaction expenses recorded in connection with the Company's mergers with
Netect and with Entevo are not deductible for federal income tax purposes and
adversely impacted both periods' rates. The Company's generation of a research
and development tax credit positively impacted both periods' rates. Valuation
allowances booked on net operating losses adversely impacted the period ended
March 31, 1999's effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased to $77.0 million at March 31, 2000 from
$76.9 million at December 31, 1999. The Company's cash, cash equivalents,
short-term and long-term investments balance increased to $83.9 million at March
31, 2000 from $83.1 million at December 31, 1999.
The Company believes that the net proceeds of its initial and secondary
offerings completed in 1998, together with existing cash, cash equivalents,
short-term investments and cash flow from operations will be sufficient to meet
its normal working capital requirements for at least the next 12 months.
Thereafter, the Company may require additional funds to support its working
capital requirements or for other purposes and may seek to raise such additional
funds through public or private equity financing or from other sources. There
can be no assurance that additional financing will be available at all or that,
if available, such financing will be obtainable on terms favorable to the
Company or that any additional financing would not be dilutive.
The Company currently intends to use the net proceeds of its initial and
secondary public offerings for working capital and general corporate purposes,
including financing accounts receivable and capital expenditures made in the
ordinary course of business, as well as for possible acquisitions of businesses,
products and technologies that are complementary to those of the Company. There
can be no assurance that the Company will be able to identify any acquisitions
of businesses, products or technology that are complimentary to those of the
Company or are on terms that are acceptable to the Company. Possible
acquisitions of businesses, products and technologies could require the use of
substantial amounts of capital, some of which might require the issuance of
additional equity or debt securities. Pending such uses, the net proceeds will
continue to be invested in government securities and other short-term,
investment-grade, interest-bearing instruments.
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PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical facts included in this Report, including
without limitation, statements regarding the Company's future financial
position, business strategy, planned products, products under development,
markets, budgets and plans and objectives of management for future operations,
are forward-looking statements. Although we believe that the expectations
reflected in these forward-looking statements are reasonable, we cannot assure
you that those expectations will prove to have been correct. Important factors
that could cause actual results to differ materially from the Company's
expectations are disclosed in statements set forth under "Cautionary Statements"
and elsewhere in this Report, including, without limitation, in conjunction with
the forward-looking statements included in this Report. All subsequent written
and oral forward-looking statements attributable to us, or persons acting on our
behalf, are expressly qualified in their entirety by the Cautionary Statements
and such other statements. For purposes of this Item 5, references to the
"Company", "BindView", "we", "us" and "our" refer to BindView Development
Corporation and its subsidiaries.
OUR QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS
Our quarterly revenues, expenses and operating results may fluctuate
significantly due to a number of factors, including:
o demand for our products;
o size and timing of significant orders and their fulfillment;
o our ability to develop and upgrade our technology;
o changes in our level of operating expenses;
o our ability to compete in a highly competitive market;
o undetected software errors and other product quality problems;
o changes in our sales incentive plans and staffing of sales
territories; and
o changes in the mix of domestic and international revenues and the
level of international expansion.
Generally, we do not operate with a backlog because we ship our products and
recognize revenue shortly after orders are received. At the time we ship our
products we have satisfied all of the criteria of Statement of Position No. 97-2
"Software Revenue Recognition," or Statement of Position No. 98-9 "Modification
of SOP97-2 Software Revenue Recognition," and therefore we recognize the related
license revenue. As a result, orders booked throughout a quarter substantially
impact product revenues in that quarter. Our sales also fluctuate throughout the
quarter as a result of customer buying patterns. We base our expenses to a
significant extent on our expectations of future revenues. Most of our expenses
are fixed in the short term and we may not be able to quickly reduce spending if
our revenues are lower than we had projected. If our revenue levels do not meet
our projections, we expect our operating results to be adversely and
disproportionately affected.
Our quarterly operating results also are subject to certain seasonal
fluctuations. Year-end customer buying patterns and compensation policies based
on annual revenue quotas have caused our revenues to be strongest in the fourth
quarter of the year and to decrease in the first quarter of the following year.
In future periods, we expect that these seasonal trends may cause first quarter
revenues to be significantly lower than the level achieved in the preceding
fourth quarter.
Prior to January 1, 1998, we provided telephone support free of charge and sold
product upgrades separately or through subscription contracts. We now require
our customers to purchase a subscription policy in order to receive product
upgrades and technical support. Unlike software license revenues that we
generally recognize upon shipment of the product, we recognize subscription
contract revenues ratably over the life of the contract term. As a result, if we
derive a larger percentage of our revenues from subscription contracts, we will
experience an increase in deferred revenue that is likely to decrease our
operating margins. Decreased operating margins may materially adversely affect
our business, operating results and financial condition.
As a result, we believe quarter-to-quarter comparisons of our revenues, expenses
and results of operations are not necessarily meaningful. You should not rely on
our quarterly revenues, expenses and results of operations to predict our future
performance.
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CAUTIONARY STATEMENTS
In addition to the other information in this Quarterly Report on Form 10-Q,
the following factors should be considered carefully in evaluating the Company.
Our quarterly and annual revenues, expenses and operating results may
fluctuate significantly. These fluctuations may be due to a number of factors,
including:
o demand for our products;
o size and timing of significant orders and their fulfillment;
o our ability to develop and upgrade our technology;
o changes in our level of operating expenses;
o our ability to compete in a highly competitive market;
o undetected software errors and other product quality problems;
o changes in our sales incentive plans and staffing of sales
territories; and
o changes in the mix of domestic and international revenues and the
level of international expansion.
Generally, we do not operate with a backlog because we ship our products and
recognize revenue shortly after orders are received. The Company recognizes
revenue in accordance with the Statement of Position No. 97-2 "Software Revenue
Recognition" (SOP 97-2) or Statement of Position No. 98-9 "Modification of SOP
97-2, Software Revenue Recognition, with respect to certain transactions" (SOP
98-9), as applicable. As the Company's sales transactions and product mix
becomes more complex, revenue recognition under SOP 97-2 or SOP 98-9 could
require the Company to defer a significant portion of the total contract and
recognize this deferred revenue in future periods.
Orders booked throughout a quarter may substantially impact product revenues
in that quarter. Our sales also fluctuate throughout the quarter as a result of
customer buying patterns. We base our expenses to a significant extent on our
expectations of future revenues. Most of our expenses are fixed in the short
term, and we may not be able to reduce spending quickly if our revenues are
lower than we had projected. If our revenue levels do not meet our projections,
we expect our operating results to be adversely and disproportionately affected.
Our quarterly operating results also are subject to certain seasonal
fluctuations. Year-end customer buying patterns and compensation policies based
on annual revenue quotas have caused our revenues to be strongest in the fourth
quarter of the year and to decrease in the first quarter of the following year.
In future periods, we expect that these seasonal trends may cause first quarter
revenues to be significantly lower than the level achieved in the preceding
fourth quarter. However, first quarter revenues in any given fiscal year are not
necessarily indicative of, and should not be used as a basis for prediction of
higher revenues in any future quarter.
Before January 1, 1998, we provided telephone support free of charge and
sold product upgrades separately or through subscription contracts. We now
require our customers to purchase a subscription to receive product upgrades and
technical support. Unlike software license revenues, which we generally
recognize upon shipment of the product, we recognize subscription contract
revenues ratably over the life of the contract term. As a result, if we derive a
larger percentage of our revenues from subscription contracts, we will
experience an increase in deferred revenue that is likely to decrease our
operating margins. Decreased operating margins may materially adversely affect
our operating results and financial condition.
We believe quarter-to-quarter comparisons of our revenues, expenses and
results of operations are not necessarily meaningful. You should not rely on our
quarterly revenues, expenses and results of operations to predict our future
performance.
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We have a limited operating history. We have a limited operating history
based on our primary products and an even more limited operating history with
new and acquired products. An investor in our Company must consider the risks
and uncertainties frequently encountered by software companies in the early
stages of development, particularly those faced by companies in the highly
competitive and rapidly evolving systems management software market. To compete
in this market, we believe that we must devote substantial resources to
expanding our sales and marketing organization and to continue product
development. As a result, we will need to recognize significant quarterly
revenues to remain profitable. Our revenues have increased in recent years, and
revenues for recent quarters have exceeded revenues for the same quarter for the
prior year. However, we cannot be certain that we can sustain these growth rates
or that we will remain profitable on a quarterly or annual basis in the future.
Our markets are highly competitive. We face competition from different
sources. Currently, our products compete with products from the following
organizations:
o providers of security analysis and audit products, such as Axent
Technologies, Inc., ODS Networks, Inc., ISS Group, Inc.,
PentaSafe, Inc. and Network Associates Inc.;
o providers of stand-alone inventory and asset management products, such
as Tally Systems Corp.;
o providers of LAN desktop management suites, such as Intel Corporation,
Hewlett-Packard Company and Microsoft Corporation;
o providers of event notification and response technology, such as
Attention Software, Inc.;
o providers of Windows NT management and migration tools, such as
Mission Critical Software, FastLane Technologies Inc., and NetIQ
Corporation;
o certain management features included in our products compete with the
native tools from Novell, Inc. and third-party tools from certain
vendors, such as Computer Associates, Inc. and other companies;
o providers of enterprise resource planning application add-ons for SAP
security administration and vulnerability assessment, such as BMC
Software, Insite Objects, Inc. and Envive Corp.; and
o providers of network security scanning technology, such as Network
Associates, ISS Group, Inc. and Axent Technologies.
We expect competition in the network management software market to increase
significantly as new companies enter the market and current competitors expand
their product lines and services. Many of these potential competitors are likely
to enjoy substantial competitive advantages, including:
o greater resources that can be devoted to the development, promotion
and sale of their products;
o more established sales channels;
o greater software development experience; and
o greater name recognition.
We also believe that operating system software vendors, particularly
Microsoft and Novell, could enhance their products to include functionality that
we currently provide in our products. If these vendors include our software
functionality as standard features of their operating system software, our
products could become obsolete. Even if the functionality of the standard
software features of these vendors is more limited than ours, there is a
substantial risk that a significant number of customers would elect to keep this
limited functionality rather than purchase additional software.
To be competitive, we must respond promptly and effectively to the
challenges of technological change, evolving standards and our competitors'
innovations by continuing to enhance our products, services and sales channels.
In addition, we have and may continue to bundle and offer discounts to our
customers. Bundling or discounting our products may result in reduced operating
margins, reduced profitability and increase the complexity of revenue
recognition. Any pricing pressures, reduced margins or loss of market share
resulting from our failure to compete effectively could materially adversely
affect our business.
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Our products are subject to rapid technological change. The market for our
products is characterized by rapid technological change, frequent new product
introductions and enhancements, uncertain product life cycles, changes in
customer demands and evolving industry standards. Our products could be rendered
obsolete if new products based on new technologies are introduced or new
industry standards emerge. We rely heavily on our relationships with Microsoft
and Novell and attempt to coordinate our product offerings with the future
releases of their operating systems. These companies may not notify us of
feature enhancements prior to new releases of their operating systems in the
future. In that case, we may not be able to introduce products on a timely basis
that capitalize on new operating system releases and feature enhancements.
Client/server computing environments are inherently complex. As a result, we
cannot accurately estimate our software product life cycles. New products and
product enhancements can require long development and testing periods, which
depend significantly on our ability to hire and retain increasingly scarce and
technically competent personnel. Significant delays in new product releases or
significant problems in installing or implementing new product releases could
seriously damage our business. We have, on occasion, experienced delays in the
scheduled introduction of new and enhanced products and cannot be certain that
such delays will not occur again.
Our future success will depend, in part, upon our ability to enhance
existing products, develop and introduce new products, satisfy customer
requirements and achieve market acceptance. We cannot be certain that we will
successfully identify new product opportunities and develop and bring new
products to market in a timely and cost-effective manner. Further, the products,
capabilities or technologies developed by others may render our products or
technologies obsolete or shorten their life cycles.
We are dependent upon continued growth of the market for Windows NT and
Novell NetWare operating systems. We depend upon the success of Microsoft's
Windows NT and Novell's NetWare operating systems. In particular, market
acceptance of our products depends on the increasing complexity of these
operating systems and the lack of effective tools to simplify system
administration and security management for these environments. Although demand
for Windows NT and NetWare operating systems has grown in recent years, we
cannot be certain that it will continue to grow. If the market does continue to
grow, we cannot be certain that the market for our products will continue to
develop or that our products will be widely accepted. If the markets for our
products fail to develop or develop more slowly than we anticipate, our business
could be materially adversely affected.
The percentages of our revenues attributable to software licenses for
particular operating system platforms can change from time to time. A number of
factors outside our control can cause these changes, including changing market
acceptance and penetration of the various operating system platforms which we
support and the relative mix of development and installation by value-added
resellers ("VARs") of application software operating on such platforms.
Product concentration. A majority of our revenues are from the sale of our
NOSadmin and NETinventory products. We anticipate that these products, along
with product additions as a result of the Curasoft, Netect and Entevo
acquisitions, will account for majority or all of all of our revenues for the
foreseeable future. Our future operating results will depend on continued market
acceptance of NOSadmin and NETinventory, introduction of new products from the
Curasoft, Netect and Entevo acquisitions, enhancements to these products and the
continued development of additional snap-in modules for our Enterprise Console
product. Competition, technological change or other factors could reduce demand
for, or market acceptance of any or all of our products and could substantially
damage our business. Although we currently plan to broaden our product line, we
cannot be certain that we will be able to reduce our product concentration or
that we will be able to generate material revenues from products acquired as a
result of the Curasoft, Netect and Entevo acquisitions.
Risks associated with length of sales cycle. We have sold our products to
customer workgroups and corporate divisions. As a result, our sales cycle has
ranged from three to six months. Recently, we have increased our product
offerings and have also focused more of our selling effort on products for the
customer's entire enterprise and as a result, have found that our sales cycle to
enterprises has ranged from six to twelve months. In addition, we are currently
transitioning our telesales force into a direct sales model. Our ability to
effectively transition our sales force to this model can directly impact the
length of our sales cycle. The sales cycle to enterprises is typically longer
for a number of reasons, including:
o the significant resources committed to an evaluation of network
management software by an enterprise require us to expend substantial
time, effort and money educating them on the value of our products and
services; and
o decisions to license and deploy enterprise-wide software generally
involve an evaluation of our software by a significant number of
personnel of the enterprise in various functional and geographic
areas, each often having specific and conflicting requirements.
14
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As a result, we cannot predict the timing and amount of specific sales. Our
inability to complete one or more enterprise-wide sales in a particular quarter
or calendar year could materially adversely affect our business and could cause
our operating results to vary significantly from quarter to quarter. For more
information, see "-- Our Quarterly Financial Results are Subject to Significant
Fluctuations".
Need to manage changing operations. We have expanded our operations rapidly
in recent years. We intend to continue to expand in the foreseeable future to
pursue existing and potential market opportunities. This rapid growth places a
significant demand on management and operational resources. In order to manage
growth effectively, we must implement and improve our operational systems,
procedures and controls on a timely basis. If we fail to implement and improve
these systems, our business, operating results and financial condition will be
materially adversely affected.
Dependence on key personnel. Our success depends largely on the efforts of
our executive officers, particularly Eric J. Pulaski, the President and Chief
Technology Officer of BindView. We do not have an employment contract requiring
Mr. Pulaski to continue his employment for any period of time. We do not
maintain key man life insurance policies on any of our executive officers.
We believe that our future success will depend in large part upon our
ability to attract and retain highly skilled research and development, technical
support and sales and marketing personnel. We face intense competition for
qualified personnel, and we cannot be certain that we will successfully attract
and retain additional qualified personnel in the future. The loss of the
services of one or more of our key individuals or the failure to attract and
retain additional qualified personnel could substantially damage our business.
Risks associated with international sales and operations. During 1999, 1998
and 1997, we derived approximately 16%, 10% and 13% of our revenues,
respectively, from sales outside North America. We only recently opened direct
telesales offices outside the United States. We have historically generated
revenues outside North America through indirect channels, including VARs and
other distributors. We are in the early stages of developing our indirect
distribution channels in certain markets outside the United States. We cannot be
certain that we will be able to attract third parties that will be able to
market our products effectively or to provide timely and cost-effective customer
support and service. Our reseller arrangements generally provide that resellers
may carry competing product offerings. We cannot be certain that any distributor
or reseller will continue to represent our products. The inability to recruit,
or the loss of, important sales personnel, distributors or resellers could
materially and adversely affect our business.
As we expand our sales and support operations internationally, we anticipate
that international revenues will grow as a percentage of our total revenues. To
successfully expand international sales, we must:
o establish additional international direct telesales offices;
o expand the management and support organizations for our international
sales channel;
o hire additional personnel;
o customize our products for local markets;
o recruit additional international resellers where appropriate; and
o expand the use of our direct telesales model.
If we are unable to generate increased sales through a direct telesales
model, we will incur higher personnel costs without corresponding increases in
revenue, resulting in lower operating margins for our international operations.
In addition, employment policies vary among countries outside the United States,
which may reduce our flexibility in managing headcount and, in turn, managing
personnel-related expenses. If we do not address the risks associated with
international sales in a cost-effective and timely manner, our international
sales growth will be limited, operating margins could be reduced and our
business could be materially adversely affected. However, even if we are able to
successfully expand our international operations, we cannot be certain that we
will be able to maintain or increase international market demand for our
products.
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Limited protection of proprietary technology; risks of infringement. Our
success depends to a significant degree upon our software and other proprietary
technology. The software industry has experienced widespread unauthorized
reproduction of software products. We rely on a combination of trademark, trade
secret, and copyright law and contractual restrictions to protect our
technology. These legal protections provide only limited protection. The steps
we have taken may deter competitors from misappropriating our proprietary
information. However, we may not be able to detect unauthorized use or take
appropriate steps to enforce our intellectual property rights. If we litigated
to enforce our rights, litigation would be expensive, would divert management
resources and may not be adequate to protect our business. We also could be
subject to claims alleging infringement of third-party intellectual property
rights. In addition, we may be required to indemnify our distribution partners
and end-users for similar claims made against them. Any claims against us could
require us to spend significant time and money in litigation, pay damages,
develop non-infringing intellectual property or acquire licenses to intellectual
property that is the subject of the infringement claims. As a result, claims
against us could materially adversely affect our business.
Risks associated with completed and potential acquisitions. We have made and
may continue to make investments in complementary companies, technologies,
services or products if we find appropriate opportunities. If we buy a company,
we could have difficulty assimilating the personnel and operations of the
acquired company. If we make other types of acquisitions, assimilating the
technology, services or products into our operations could be difficult.
Acquisitions can disrupt our ongoing business, distract management and other
resources and make it difficult to maintain our standards, controls and
procedures. We may not succeed in overcoming these risks or in any other
problems we might encounter in connection with any future acquisitions. We may
be required to incur debt or issue equity securities to pay for any future
acquisitions. In addition, there can be no assurance that we will be able to
successfully integrate our recent acquisitions of Curasoft, Netect and Entevo or
that we will be able to integrate the products and technology we acquired into
our sales model or product offerings.
Risks of undetected software errors. Our software products are complex and
may contain certain undetected errors, particularly when first introduced or
when new versions or enhancements are released. We have previously discovered
software errors in certain of our new products after their introduction. We
cannot be certain that, despite our testing, such errors will not be found in
current versions, new versions or enhancements of our products after
commencement of commercial shipments. Such undetected errors could result in
adverse publicity, loss of revenues, delay in market acceptance or claims
against us by customers, all of which could materially adversely affect our
business.
Risk of product liability claims. Because our product design provides
important network management services, we may receive significant liability
claims. Our agreements with customers typically contain provisions intended to
limit our exposure to liability claims. These limitations may not, however,
preclude all potential claims. Liability claims could require us to spend
significant time and money in litigation or to pay significant damages. As a
result, any such claims, whether or not successful, could seriously damage our
reputation and our business.
Anti-takeover provisions. Incumbent management and our Board of Directors
could use certain provisions of our certificate of incorporation to make it more
difficult for a third party to acquire control of our company, even if the
change in control might be beneficial to our stockholders. This could discourage
potential takeover attempts and could adversely affect the market price of our
common stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The following exhibits are filed with this Quarterly Report.
10 -- Employment Agreement between BindView and Richard P. Gardner
11 -- Statement Regarding Computation of Loss Per Common Share
27 -- Financial Data Schedule.
(b) Reports on Form 8-K:
The Company filed a Form 8-K dated February 23, 2000 and Form 8-K/A dated
April 21, 2000 to report its merger with Entevo Corporation.
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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.
BINDVIEW DEVELOPMENT CORPORATION
By: /s/ RICHARD P. GARDNER
------------------------------------------
Richard P. Gardner
President and Chief Executive Officer
(duly authorized officer)
May 15, 2000
By: /s/ SCOTT R. PLANTOWSKY
------------------------------------------
Scott R. Plantowsky
Vice-President and Chief Financial Officer
(principal financial officer)
May 15, 2000
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INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10 -- Employment Agreement between BindView and Richard P. Gardner
11 -- Statement Regarding Computation of Loss Per Common Share
27 -- Financial Data Schedule.
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