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TIGR > SEC Filings for TIGR > Form 10-Q on 8-Nov-2013All Recent SEC Filings

Show all filings for TIGERLOGIC CORP



Quarterly Report


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 (the "Securities Act"), 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 Form 10-Q and elsewhere in this Form 10-Q. The forward-looking statements contained in this Form 10-Q 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 costs, (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 combined with our cash flow from operating activities will be sufficient to meet our operating and capital expenditure requirements for the remainder of the fiscal year ending March 31, 2014 and 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.


We were incorporated in the State of Delaware in August 1987. We were originally incorporated as Blyth Holdings, Inc. and our name was changed to Omnis Technology Corporation in September 1997. Effective December 1, 2000, we completed the acquisition of PickAx, Inc., a Delaware corporation ("PickAx"). Concurrent with the acquisition, we changed our name to Raining Data Corporation. On April 17, 2008, we changed our name to TigerLogic Corporation. Reference to "we," "our," "us" or the "Company" in this Quarterly Report on Form 10-Q means TigerLogic Corporation and our subsidiaries.

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On January 17, 2013, we completed our acquisition of Storycode, Inc, a privately held mobile application publishing company. Pursuant to the terms of the Agreement and Plan of Merger dated December 27, 2012, as amended (the "Merger Agreement"), Storycode became a wholly-owned subsidiary of ours. Since the closing of the acquisition, we began incorporating Storycode's expertise in mobile application development, user experience, and design into our Postano social media visualization platform to create, what we believe, will be a new kind of social platform with unique mobile distribution capabilities. This new platform is being designed to allow brands to use original and fan-generated content to develop engaging experiences across the worldwide web, live events, and mobile environment.

On October 16, 2013, we entered into an Asset Purchase Agreement (the "Purchase Agreement") with Rocket Software, Inc. (the "Buyer"). Pursuant to the terms of the Purchase Agreement, the Buyer will purchase our MDMS family of products, including D3, mvBase, mvEnterprise and the Pick connectivity products (the "MDMS Business"), and the related ERP platform required to support the MDMS Business, for a total purchase price of approximately $22 million in cash. The Purchase Agreement further provides that $2.2 million of the purchase price will be deposited at closing of the sale with a third party escrow agent for 18 months to serve as security for our indemnification obligations pursuant to the Purchase Agreement.

Consummation of the sale is subject to various closing conditions, including:
(i) the absence of any order, decree, injunction, or law enjoining or prohibiting the sale, (ii) the accuracy of the representations and warranties made by the parties and (iii) the performance by the parties in all material respects of their covenants, obligations and agreements under the Purchase Agreement, including obtaining certain third party consents to assignment, including consent to the assignment of the lease for our facilities in Irvine, California, among others. Subject to certain exceptions and limitations, either party may terminate the Purchase Agreement if the sale is not consummated by November 30, 2013.

In connection with the sale, the parties also agreed to enter, at closing, into several ancillary and related agreements, including a transition services agreement designed to facilitate the transition of the MDMS Business to the Buyer and minimize disruptions to our retained businesses, and an intellectual property license agreement, which will permit Buyer to use certain intellectual property owned by us and will permit us to use certain intellectual property to be owned by the Buyer following the sale.


Our principal business currently consists of: 1) the design, development, sale, and support of software infrastructure; and 2) a social and mobile platform, which includes a social media content aggregation and visualization platform, Internet search enhancement tools, and the design and development of mobile applications and digital publications. Our products allow customers to create and enhance flexible software applications for their own needs. Our database and rapid application development software may be categorized into the following product lines: Multidimensional Database Management Systems ("MDMS") and Rapid Application Development ("RAD") software. Many of our database software products are based on the proprietary Pick Universal Data Model ("Pick UDM") and are capable of handling data from many sources. Our Postano product is a real-time social media content aggregation and visualization platform. Our Internet search enhancement tools include the yolink browser plug-in, yolink API for web sites, and yolink search plug-in for WordPress sites. Our mobile solutions include the design and hosting of mobile applications, and digital publishing solutions such as interactive catalogs and retail applications.

Pending the completion of the transactions contemplated by the Purchase Agreement described above, our business will no longer include the design, development, sale, and support of MDMS software.

We primarily sell our database and rapid application development software products through established distribution channels consisting of original equipment manufacturers ("OEMs"), system integrators, specialized vertical application software developers and consulting organizations, as well as through our sales personnel. Our Internet search enhancement tools and social media content aggregation platform are generally sold through our sales personnel and web sites, as well as

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through co-marketing arrangements with third parties. Our mobile applications and digital publishing solutions are generally sold through our sales personnel. Outside the United States, we maintain direct sales offices in the United Kingdom, France and Germany. We generally license our database and rapid application development software on a per-CPU, per-server, per-port or per-user basis. We license our yolink products at prices based on usage measured in a variety of ways. We generally license our Postano platform on a time-based subscription basis. We may make both our yolink and Postano products available to users for free under certain circumstances. We generally sell our mobile application design and digital publishing services on a project fee basis, and charge monthly fees for hosting mobile applications. We also provide continuing software maintenance and support, and other professional services relating to our products, including consulting and training services. The majority of our revenue to date has been principally derived from MDMS and RAD software products. Approximately 25% and 28% of our revenue came from sales through our offices located outside the United States for the three and six month periods ended September 30, 2013, respectively.

In addition, one of the elements of our business strategy involves expansion through the acquisition of businesses, assets, products or technologies that allow us to complement our existing product offerings, expand our market coverage, or enhance our technological capabilities, such as the recent acquisition of Storycode. We continually evaluate and explore strategic opportunities as they arise, including business combination transactions, strategic partnerships, and the purchase or sale of assets, such as the transactions contemplated by the Purchase Agreement, including tangible and intangible assets such as intellectual property.

TigerLogic Postano

Postano is a real-time social content aggregation and visualization platform, bringing together social media conversations and content streams from around the web. The Postano platform includes Postano Mobile, Postano Events, Postano Retail, Postano Social Hub, and the built-in Postano Monitoring dashboard capabilities. Postano aggregates social content across Twitter, Tumblr, Facebook, Instagram, Pinterest, and other social platforms. Within Postano, these content streams can be moderated, curated, analyzed, and then displayed in physical store locations, at events to increase brand awareness, on website social hubs to amplify engagement, and on hashtag campaign landing pages to create brand conversation and increase participation. Postano is designed primarily for commercial use, with pricing based on a number of factors, including the type of Postano, the number of Postanos, features, and support levels desired.

TigerLogic Yolink

Yolink is a next-generation search enhancement technology that increases the effectiveness of search functionality across web sites and services. Yolink can search both structured markup, such as HTML, and binary code documents as well as unstructured, raw text documents by layering a common semantic model across them, and using this to organize and effect full-text searches across documents. Yolink searches behind links and through web sites to retrieve content based on keyword search terms. To facilitate the user's review of search results, each keyword is highlighted with a unique color. This capability is especially useful for reviewing and searching through the many web pages that contain hundreds, if not thousands, of embedded hyperlinks. Yolink technology can be applied to many platforms and Internet delivery methodologies. Yolink application programming interfaces (known as APIs) allow developers to integrate yolink search technologies with their web sites, services or applications. Yolink is available for download at

Multi-dimensional Databases (MDMS)

Our MDMS products deliver a powerful development environment for today's business-critical transactional applications. The MDMS product line consists of the D3 Database Management System ("D3"), which runs on popular operating systems, including IBM AIX, Linux and Windows, with data and applications being fully portable from one environment to another, and mvBase, a Multidimensional Database Management system that runs on Windows.

Built on the Multidimensional Database Model, our MDMS products are simplistic in structure but allow for complex definitions of data structures and program logic. This helps developers meet ever-changing business needs by providing the ability to rapidly build critical business applications in a fraction of the time as compared to other database environments. Our MDMS products are used by direct users and value added resellers who have developed various applications that serve a large variety of vertical markets, including manufacturing, distribution, healthcare, government, retail and transportation.

Version 9.1 of D3, released in February 2013, and version 3.1 of mvBase, released in March 2012, added enhanced security, licensing and additional enhancements to the .NET and Java APIs, providing developers a cost effective solution for developing applications utilizing Microsoft Visual Studio; and bundled support for Java, allowing development of applications utilizing Java. Version 9.1 of D3 for AIX, released to beta in January 2013, introduced the first 64-bit version of our MDMS products.

The MVS Toolkit, released in February 2012, enables developers to easily create and deploy Web Services for D3 and mvBase, exposing data stored in the MDMS via Web Services. The MVS Toolkit allows interaction with other applications in a Service Oriented Architecture (SOA) environment.

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Rapid Application Development (RAD) Tools

Our RAD products support the full life cycle of software application development and are designed for rapid prototyping, development and deployment of graphical user interface ("GUI") client/server and web applications. The RAD products - Omnis Studio and Omnis Classic - are object-oriented and component-based, providing the ability to deploy cross-platform applications on operating system platforms and database environments.

In June 2013, we released version 6.0 of Omnis Studio featuring major new enhancements to its JavaScript Client platform that enables developers to create and deploy highly interactive web and mobile enterprise applications for Android, iOS, BlackBerry, and Windows based devices, all from one code base. The JavaScript Client technology in Omnis Studio 6.0 achieves tighter integration with native device functionality, resulting in a richer and more engaging mobile experience for end users. Omnis Studio 6.0 uses scripting compatible with HTML5 and CSS3 to enable support for all popular browsers and devices, including tablets, smartphones, desktops, and web-enabled TVs. Omnis-based applications are developed once and deployed to any device, on any platform, with no plug-in installation required.

Technical Support

Many of our products are used by our customers to build and deploy applications that may become a critical component of their business operations. As a result, continuing to provide customers with technical support services is an important element of our business strategy. Customers who participate in our support programs receive periodic maintenance and upgrade releases on a when-and-if available basis and direct technical support when required.

Research and Development

We have devoted significant resources to the research and development of our products and technology. We believe that our future success will depend largely on strong development efforts with respect to both our existing and new products. These development efforts have resulted in updates and upgrades to existing MDMS and RAD products and the launch of new products including the Postano social media and yolink search technology product lines. New product updates and upgrades in our RAD and Postano product lines are currently in progress and we expect to continue our research and development efforts in these product lines for the foreseeable future. We intend for these efforts to improve our future operating results and increase cash flows. However, such efforts may not result in additional new products or revenue, and we can make no assurances that any announced products or future products will be successful. We spent approximately $1.5 million and $3.0 million on research and development during the three and six months ended September 30, 2013, respectively. Pending the completion of the asset sale of the MDMS Business, we expect research and development expenses to decrease significantly in the near term due to the reduction of engineering personnel for the MDMS Business.


The application development tools software market is rapidly changing and intensely competitive. Our MDMS products compete with products developed by companies such as Oracle, Microsoft, and Rocket Software. Our RAD products currently encounter competition from several direct competitors, including Microsoft, and competing development environments, including JAVA. Our Postano social media visualization product competes with products developed by companies such as Facebook and Twitter, as well as a number of smaller companies in the emerging social media marketplace. Direct competitors of our yolink search technology include Google, Yahoo, Microsoft, AOL, and Ask, as well as a number of smaller companies with products that directly and indirectly compete with our yolink search technology. Direct competitors of our Storycode technology include companies such as Salesforce and Oracle. Most of our competitors have significantly more financial, technical, marketing, and other resources than we do. As a result, our competitors may be able to respond more quickly to new or emerging technologies, evolving markets and changes in customer requirements, and may devote greater resources to the development, promotion, and sale of their products. We believe that our ability to compete in the various product markets depends on factors both within and outside our control, including the timing of release, performance and price of new products developed by both us and our competitors. Although we believe that we currently compete favorably with respect to most of these factors, we may not be able to maintain our competitive position against current and potential competitors, especially those with greater resources.

We continue to focus on growth in new market opportunities, such as the mobile applications for our Postano platform, while also continuing to meet the needs of our loyal customer base by investing in the development of new upgrades and updates for our existing product lines. While we have experienced lower license revenue for our MDMS and RAD product lines in past periods, we believe that, pending the completion of the transactions contemplated by the Purchase Agreement, our relatively stable services revenue and prudent management of expenditures will continue to provide sufficient working capital balances to fund new product initiatives aimed at increasing stockholder value.

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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

          Business Combination and Goodwill

          Employee Stock-Based Compensation

          Income Taxes

These critical accounting policies are described in our Form 10-K for the fiscal year ended March 31, 2013 and there have been no changes in our application of these policies during the period ended September 30, 2013.

Results of Operations

The following table sets forth certain unaudited Condensed Consolidated Statement of Operations data in total dollars, as a percentage of total net revenues and as a percentage change from the same periods 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 unaudited Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

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                                  Three Months Ended                  Three Months Ended                 Six Months Ended               Six Months Ended
                                  September 30, 2013                  September 30, 2012                September 30, 2013             September 30, 2012
                                           % of Net   Percent                        % of Net                  % of Net   Percent                  % of Net
                             Results       Revenues    Change        Results         Revenues     Results      Revenues    Change      Results     Revenues
                                                                                                    (In                                 (In
                         (In thousands)                           (In thousands)                 thousands)                          thousands)
Net revenues
Licenses                 $         1,357     35%        49%      $            910      29%      $      2,655     35%        39%      $     1,905     30%
Services                           2,482     65%        11%                 2,246      71%             4,909     65%         8%            4,535     70%
Total net revenues                 3,839     100%       22%                 3,156      100%            7,564     100%       17%            6,440     100%
Operating expenses
Cost of revenues:
Cost of license
revenues (as a % of
license revenues)                     85      6%       4150%                    2       0%               122      5%       2950%               4      0%
Cost of service
revenues (as a % of
service revenues)                    524     21%        31%                   400      18%             1,013     21%        23%              824     18%
Selling and marketing              1,505     39%        43%                 1,056      33%             3,103     41%        47%            2,113     33%
Research and
development                        1,528     40%        21%                 1,264      40%             2,976     39%        19%            2,499     39%
General and
administrative                     1,279     33%        40%                   915      29%             2,625     35%        34%            1,952     30%
Total operating
expenses                           4,921     128%       35%                 3,637      115%            9,839     130%       33%            7,392     115%
Operating loss                    (1,082 )   -28%       125%                 (481 )    -15%           (2,275 )   -30%       139%            (952 )   -15%
Other expense-net                    (30 )   -1%        150%                  (12 )     0%               (23 )    0%        -26%             (31 )    0%
Loss before income
taxes                             (1,112 )   -29%       126%                 (493 )    -16%           (2,298 )   -30%       134%            (983 )   -15%
Income tax provision                  66      2%        247%                   19       1%               118      2%        436%              22      0%
Net loss                 $        (1,178 )   -31%       130%     $           (512 )    -16%     $     (2,416 )   -32%       140%     $    (1,005 )   -16%


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 resulted in fluctuations in license revenue between quarters and year-to-year. Total revenue increased by $0.7 million or 22% and $1.1 million or 17% for the three and six month periods ended September 30, 2013, respectively, when compared to the

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same periods in the prior year mainly due to higher license revenues from Postano subscriptions. License revenue for the three and six month periods ended September 30, 2013 increased approximately $0.4 million or 49% and $0.8 million or 39%, respectively, when compared to the same periods in the prior year primarily due to higher Postano subscription revenue. Services revenue for the three and six month periods ended September 30, 2013 increased by $0.2 million or 11% and $0.4 million or 8%, respectively, when compared to the same periods in the prior year primarily due to higher professional services for creating, customizing, and monitoring Postanos and for digital publishing projects.

The MDMS Business represents a significant portion of our historical revenues, and as a result, net revenue is expected to decrease significantly in the near term after the close of the pending sale of the MDMS Business. We have been actively developing and marketing our newer product lines, including our Postano social media visualization platform, Storycode mobile applications and digital publication solutions, and yolink technology. 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. While sales of our retained and newer product lines have increased in the current quarter ended September 30, 2013, there can be no assurances that we will be able to fully replace the MDMS revenue from our retained or newly developed products quickly, or at all.

Operating Expenses

COST OF LICENSE REVENUE. Cost of license revenue is comprised of direct costs . . .

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