Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
TIGR > SEC Filings for TIGR > Form 10-K on 11-Jul-2013All Recent SEC Filings

Show all filings for TIGERLOGIC CORP

Form 10-K for TIGERLOGIC CORP


11-Jul-2013

Annual Report


ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations

The section entitled "Management's Discussion and Analysis" set forth below contains 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 (the "Exchange Act"). These statements may generally be identified by the use of such words as "expect," "anticipate," "believe," "intend," "plan," "will," or "shall," or the negative of those terms. We have based these forward-looking statements on our current expectations and projections about future events. Forward-looking statements involve certain risks and uncertainties and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from such forward-looking statements include the risks described under the heading "Risk Factors" in Item 1A of this Annual Report on Form 10-K and, elsewhere in this Annual Report on Form 10-K. The forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to statements about the following: (1) our future success, (2) our research and development efforts, (3) our future operating results and cash flow, (4) our ability to compete, (5) the markets in which we operate, (6) our revenue, (7) cost of license revenue and cost of service revenue, (8) our selling and marketing costs, (9) our general and administrative expenses
(10) our research and development expenses, (11) the effect of critical accounting policies,(12) the possibility that we may seek to take advantage of opportunities in the equity and capital markets, (13) our belief that our existing cash balances will be sufficient to meet our operating and capital expenditure requirements through the foreseeable future, (14) our focus on the continued development and enhancement of new product lines, including social media content aggregation platform and applications, and identification of new and emerging technology areas and discussions with channel partners for the sale and distribution of new product lines, (15) the effect of recent changes in tax laws on our financial statements, (16) our ability to successfully integrate recent acquisitions, and (17) the possibility that we may seek to take advantage of strategic acquisition or disposition opportunities. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement.

This discussion and analysis of the financial statements and results of operations should be read in conjunction with our audited consolidated financial statements, including the related notes thereto, contained elsewhere in this Annual Report on Form 10-K.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent liabilities.

On an on-going basis, we evaluate our estimates, including those related to revenue recognition and accounting for goodwill and intangible assets. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

We have identified the accounting policies below as the policies critical to our business operations and the understanding of our results of operations. We believe the following critical accounting policies and the related judgments and estimates affect the preparation of our consolidated financial statements:

REVENUE RECOGNITION. We recognize revenue using the residual method. Under the residual method, revenue is recognized in a multiple element arrangement when company-specific objective evidence of fair value exists for all of the undelivered elements in the arrangement, but does not exist for one or more of the delivered elements in the arrangement. At the outset of the arrangement with the customer, we defer revenue for the fair value of our undelivered elements (e.g., maintenance) based on company-specific objective evidence of the amount at which such items are sold individually to our customers and recognize revenue for the remainder of the arrangement fee attributable to the elements initially delivered in the arrangement (e.g., software license) when the basic criteria of revenue recognition has been met.

Revenue attributable to an element in a customer arrangement is recognized when persuasive evidence of an arrangement exists and delivery has occurred, provided the fee is fixed or determinable, collectability is probable and the arrangement does not require significant customization of the software. If, at the outset of the customer arrangement, we determine that the arrangement fee is not fixed or determinable, we defer the revenue and recognize the revenue when the arrangement fee becomes due and payable. Service revenue relates primarily to consulting services, maintenance and training. Maintenance revenue is initially deferred and then recognized ratably over the term of the maintenance contract, typically 12 months. Consulting and training revenue is recognized as the services are performed and is usually calculated on a time and materials basis. Such services primarily consist of implementation services related to the installation of our products and do not include significant customization to, or development of, the underlying software code. We do not have price protection programs, conditional acceptance agreements, and sales of our products are made without right of return. For contracts that require


Table of Contents

significant modification or customization to the software in accordance with customers' specifications, we recognize revenue using the completed-contract method. Under this method, revenue and expenses are deferred until customer acceptance of the finished product occurs. There was no revenue recognized using the completed-contract method for fiscal years 2013, 2012 or 2011.

BUSINESS COMBINATION AND GOODWILL. We have entered into certain acquisitions, and in the future may make further acquisitions. The application of the purchase method of accounting for business combinations requires the use of significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to properly allocate the purchase price consideration between depreciable assets, assumed liabilities, intangibles, and goodwill. Our estimates of the fair values of assets and liabilities acquired are based upon assumptions that we believe to be reasonable and include assistance from independent third-party appraisal firms. When equity instruments are issued as part of the purchase price consideration, we measure them at fair value as of the date of the acquisition.

We assess the impairment of goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable and at least annually during the fourth quarter of each fiscal year. Factors we consider to be important that would trigger an impairment review include the following:

Significant underperformance relative to expected historical or projected future operating results;

Timing of our revenue, significant changes in the manner of use of the acquired assets or the strategy for the overall business;

          Significant negative industry or economic trends;

          Significant decline in our stock price for a sustained period; and

          Our market capitalization falling below our net book value for a
sustained period.

We do not amortize goodwill, but test for goodwill impairment following a two-step process. The first step is used to identify potential impairment by comparing the fair value of a reporting unit with its net book value (or carrying amount), including goodwill. If the fair value exceeds the carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit. Currently, we have one reporting unit for goodwill impairment testing.

Determining the fair value of a reporting unit under the first step of the goodwill impairment test and determining the fair value of individual assets and liabilities of a reporting unit (including unrecognized intangible assets) under the second step of the goodwill impairment test is judgmental in nature and often involves the use of significant estimates and assumptions. These estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and the magnitude of any such charge. Estimates of enterprise fair value are currently based on our stock price as reported by Nasdaq given our single reporting unit structure. No impairment of goodwill has been identified during any of the periods presented as the enterprise fair value significantly exceeded its carrying value. Due to the current adverse global economic conditions, we continue to monitor the fair value of our reporting unit to identify any potential goodwill impairment.

Intangible assets with finite useful life are amortized using the straight-line method over their estimated period of economic benefit. Our intangible assets were acquired in connection with our acquisition of Storycode, Inc. on January 17, 2013. We estimate that our technology intangible asset has a useful life of seven years and our trade and domain names intangible asset has a useful life of ten years. We evaluate our intangible assets for impairment whenever events and change in circumstances occur which may warrant revised estimate of useful lives or recognition of an impairment loss.

EMPLOYEE STOCK-BASED COMPENSATION. Share-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the requisite service period. We estimate the fair value of stock-based awards using a Black-Scholes valuation model. Determining the fair value of share-based awards at the grant date requires judgment, including estimating volatility, expected terms, and forfeitures. Volatility is estimated based on historical experience. Expected terms are based on historical experience and consideration of the awards' contractual terms, vesting schedule and future expectations. Forfeitures are based on our actual forfeiture rate as well as management judgment. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted. See Note 5 in the accompanying consolidated financial statements under the subheading "Stock-Based Compensation".


Table of Contents

INCOME TAXES. Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax bases of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income. Due to uncertainties surrounding the timing of realizing the benefits of the net operating loss carryforwards and tax credits in the future, we carry a full valuation allowance against net deferred tax assets in domestic and foreign jurisdictions, except France and Germany.

We accrue for uncertain tax positions when income tax positions do not meet a more-likely-than-not recognition threshold upon the application of the appropriate tax rules and in subsequent periods. Developments such as case law, changes in tax law, new rulings or regulations issued by taxing authorities, and interactions with the taxing authorities could affect whether a position should be recognized or the amount that should be reported.

RESULTS OF OPERATIONS

The following table sets forth certain Consolidated Statement of Operations data in total dollars, as a percentage of total net revenues and as a percentage change from the same period in the prior year. Cost of license revenues and cost of service revenues are expressed as a percentage of the related revenues. This information should be read in conjunction with the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

                                    Year Ended                          Year Ended                     Year Ended
                                  March 31, 2013                      March 31, 2012                 March 31, 2011
                                        % of Net   Percent                  % of Net   Percent                  % of Net
                           Results      Revenues   Change      Results      Revenues   Change      Results      Revenues
                             (In                                 (In                                 (In
                          thousands)                          thousands)                          thousands)
Net revenues
Licenses                 $      3,881         30 %      -2 % $      3,974         30 %      -9 % $      4,378         32 %
Services                        8,959         70 %      -4 %        9,372         70 %       1 %        9,292         68 %
Total net revenues             12,840        100 %      -4 %       13,346        100 %      -2 %       13,670        100 %
Operating expenses
Cost of revenues:
Cost of license
revenues (as a % of
license revenues)                  23          1 %      77 %           13          0 %     -24 %           17          0 %
Cost of service
revenues (as a % of
service revenues)               1,682         19 %      -8 %        1,823         19 %       6 %        1,714         18 %
Selling and marketing           4,515         35 %     -13 %        5,202         39 %      12 %        4,637         34 %
Research and
development                     5,248         41 %     -11 %        5,887         44 %      -1 %        5,956         44 %
General and
administrative                  3,953         31 %       4 %        3,806         29 %      -9 %        4,175         31 %
Acquisition related
costs                             288        100 %     100 %            -          0 %       0 %            -          0 %
Total operating
expenses                       15,709        122 %      -6 %       16,731        125 %       1 %       16,499        121 %
Operating loss                 (2,869 )      -22 %     -15 %       (3,385 )      -25 %      20 %       (2,829 )      -21 %
Other income
(expense)-net                       4          0 %    -106 %          (64 )        0 %    6300 %           (1 )        0 %
Loss before income
taxes                          (2,865 )      -22 %     -17 %       (3,449 )      -26 %      22 %       (2,830 )      -21 %
Income tax provision
(benefit)                          77          1 %     -21 %           98          1 %     -34 %          149          1 %
Net loss                 $     (2,942 )      -23 %     -17 % $     (3,547 )      -27 %      19 % $     (2,979 )      -22 %

NET REVENUE. Our revenue is derived principally from two sources: fees from software licensing and fees for post contract technical support. We generally license our database and rapid application development software primarily on a per-CPU, per-server, per-port or per-user basis. Therefore, the addition of CPUs, servers, ports or users to existing systems increases our revenue from our installed base of licenses. Similarly, the reduction of CPUs, servers, ports or users from existing systems decreases our revenue from our installed base of customers. The timing of orders and customer ordering patterns has


Table of Contents

resulted in fluctuations in license revenue between quarters and year-to-year. Total revenue decreased by $0.5 million or 4% for fiscal year 2013, and decreased by $0.3 million or 2% for fiscal year 2012 when compared with the same periods in prior years. The decrease in license revenue in fiscal year 2013 of approximately $0.1 million or 2% , and in fiscal year 2012 of $0.4 million or 9% was primarily due to lower orders of licenses and upgrades from our existing customer base as fewer new users were added. Service revenue in fiscal year 2013 decreased $0.4 million or 4% due to lower professional service revenue and non renewal of certain customer contracts this year compared to prior year. The slight increase in service revenue in fiscal year 2012 of approximately $0.1 million or 1% when compared to fiscal year 2011 was primarily due to higher professional services provided.

We have been actively developing and marketing our newer product lines, including our Postano social media visualization platform and yolink technology. Revenue from these new products has not been significant for the fiscal years ended March 31, 2013 and 2012, and no revenue was recognized in fiscal year 2011. While we are committed to research and development efforts that are intended to allow us to penetrate new markets and generate new sources of revenue, such efforts may not result in additional products, services or revenue. We can give no assurances as to customer acceptance of any new products or services, or the ability of the current or any new products and services to generate revenue. On January 17, 2013, we completed our acquisition of Storycode, Inc. Revenue from Storycode for the approximate two and one-half month period was not significant.

OPERATING EXPENSES

COST OF LICENSE REVENUE. Cost of license revenue is comprised of direct costs associated with software license sales including software packaging, documentation, physical media costs, amortization of intangible assets, and royalties. Cost of license revenue increased by $10,000 or 77% for fiscal year ended March 31,2013 mainly due to amortization expense of approximately $15,000 for the technology intangible assets acquired from the Storycode acquisition on January 17, 2013, partially offset by lower royalty costs relating to lower sales of certain Pick products. Cost of license revenue decreased by $4,000 or 24% for fiscal year ended March 31, 2012 when compared with same period in prior year primarily due to lower royalty costs from lower sales of certain Pick products.

COST OF SERVICE REVENUE. Cost of service revenue includes primarily personnel costs relating to consulting, technical support and training services. Cost of service revenue for fiscal year 2013 decreased $0.1 million or 8% from the same period in the prior year due to lower personnel costs relating to the consolidation of our offices in the United Kingdom in the prior year, and lower stock compensation expense due to fully amortized options issued in the previous year. Cost of service revenue for the fiscal year 2012 increased $0.1 million or 6% when compared to the same period in prior year due to higher stock compensation expense for new stock options issued at the beginning of the fiscal year 2012, and higher travel and training expenses.

SELLING AND MARKETING. Selling and marketing expense consists primarily of salaries, benefits, advertising, trade shows, travel and overhead costs for our sales and marketing personnel. Selling and marketing expense for the fiscal year 2013 decreased approximately $0.7 million or 13% mainly due to lower stock compensation expense of approximately $0.2 million for fully amortized options issued in prior years, lower marketing and consulting expense of approximately $0.3 million, and lower personnel expense of approximately $0.2 million. Selling and marketing expense for the fiscal year 2012 increased approximately $0.6 million or 12% when compared to the same period in the prior year. The increase was due to higher personnel cost of approximately $0.4 million from added headcount, higher marketing expenses relating to the Postano product of approximately $0.1 million, and higher lease expense for our office in Portland of approximately $0.1 million due to a new lease which became effective at the beginning of the fiscal year 2012.

We anticipate that selling and marketing costs related to our Postano product lines may increase as we incorporate Storycode's expertise in user experience and design services, further develop the sales channels for these products, and as customer acceptance of these products increases.

RESEARCH AND DEVELOPMENT. Research and development expense consists primarily of salaries and other personnel-related expenses and overhead costs for engineering personnel, including employees in the United States and the United Kingdom and contractors in the United States. Research and development expense for the fiscal year 2013 decreased $0.6 million or 11% when compared to the same period in the prior year mainly due to lower personnel cost of approximately $0.5 million from lower headcount in our US office, lower consulting and outside support expense of approximately $0.1 million as we terminated services for certain products, and lower stock compensation expense of approximately $0.1 million due to fully amortized options issued in prior years, offset by approximately $0.2 million in personnel costs from the acquisition of Storycode, Inc. completed on January 17, 2013. Research and development expense for the fiscal year 2012 decreased slightly by $0.1 million or 1% mainly due to lower depreciation and amortization expense of $0.2 million as purchased software was fully amortized and certain computer equipment was also fully depreciated in the


Table of Contents

preceding year. Consulting expense also decreased by approximately $0.1 million, while personnel expense increased $0.1 million due to new hires in our United Kingdom office. Stock compensation expense also increased approximately $0.1 million due to new options granted to employees at the beginning of the fiscal year 2012.

We are committed to our research and development efforts and expect research and development expenses to increase in future periods as we further enhance our Postano platform, investigate further applications and delivery options for our products, and as we build new technology platforms for our RAD product line and continue enhancing our MDMS product line. Such efforts may not result in additional new products, and new products may not generate sufficient revenue, if any, to offset the research and development expense.

GENERAL AND ADMINISTRATIVE. General and administrative expense consists primarily of costs associated with our finance, human resources, legal and other administrative functions. These costs consist principally of salaries and other personnel-related expenses, professional fees, depreciation and overhead costs. General and administrative expense for the fiscal year ended March 31, 2013 increased $0.1 million or 4% when compared to the same period in the prior year mainly due to higher stock compensation expense of approximately $0.1 million due to new options issued at the end of fiscal year 2012. General and administrative expense for the fiscal year 2012 decreased $0.4 million or 9% when compared to the same period in the prior year mainly due to lower legal expense of approximately $0.5 million as certain litigation matters ended in the prior year. This decrease was offset by an increase in stock option expense of approximately $0.1 million due to new options issued to employees at the beginning of the fiscal year 2012.

Acquisition-related costs of approximately $0.3 million for the fiscal year ended March 31, 2013 consisted of professional services for legal, accounting, valuation and purchase price allocation work done in connection with our acquisition of Storycode. We expect to incur additional acquisition-related costs of approximately $0.2 million during the quarter ending June 30, 2013.

OTHER INCOME (EXPENSE). Other income (expense) consists primarily of interest income (expense) and gains and losses on foreign currency transactions. Other income (expense) increased from approximately $64,000 of expense in fiscal year ended March 31, 2012 to approximately $ 4,000 of income in fiscal year ended March 31, 2013 mainly due to more favorable exchange rates for the Euro and British Pound in the current fiscal year as compared to the prior year. Other income (expense) increased from approximately $1,000 of expense in fiscal year ended March 31, 2011 to approximately $64,000 of expense in fiscal year ended March 31, 2012 due to currency fluctuation of the British Pound and the Euro. Due to the uncertainty in exchange rates, we may experience transaction gains or losses in future periods, the effect of which cannot be predicted at this time.

PROVISION FOR INCOME TAXES. Our effective tax expense rate was (2.6)%, (2.8)%, and (5.3)% for the fiscal years 2013, 2012, and 2011, respectively. The decrease in income tax provision for the fiscal year 2013 when compared to the fiscal year 2012 was due to lower earnings from our foreign subsidiaries. The decrease in income tax provision for fiscal year 2012 when compared to fiscal year 2011 was due to lower earnings from our foreign subsidiaries, and the reduction to zero from $38,000 in the prior year in our uncertain tax position related to our German subsidiary.

Realization of deferred tax assets depends upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, we have offset our net deferred tax assets, which are not more-likely-than-not to be realized, with a valuation allowance. The utilization of our net operating losses could be subject to substantial annual limitation as a result of certain future events, such as acquisition or other significant equity events, which may be deemed as a "change in ownership" under the provisions of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitations could result in the expiration of net operating losses and tax credits before utilization.

During the year ended March 31, 2012, the German tax authorities closed a tax audit of our subsidiary in Germany for the fiscal years 2005 to 2007, which resulted in a net tax expense of approximately $82,000.

  Add TIGR to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for TIGR - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.