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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[x]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1997
Commission file number 0-19960
DATAWATCH CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 02-0405716
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
number)
234 Ballardvale St., Wilmington, Massachusetts 01887
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (978) 988-9700
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Title of Class: Common Stock $.01 par value
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec.229.405 of this chapter) is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X]
Aggregate market value of voting stock held by non-affiliates:
$20,743,977 (computed by reference to the last sales price of such
common stock on December 19, 1997 as reported in the National
Association of Security Dealers consolidated trading index).
Number of shares of common stock outstanding at December 19, 1997 : 9,111,227
Documents Incorporated By Reference
Registrant intends to file a definitive Proxy Statement pursuant to
Regulation 14A within 120 days of the end of the fiscal year ended
September 30, 1997. Portions of such Proxy Statement are incorporated
by reference in Part III of this report.
PART I
Item 1. BUSINESS
GENERAL
DATAWATCH CORPORATION (the "Company" or "Datawatch") is a provider
of innovative, knowledge-based software solutions for the business
enterprise.
The Company was founded in 1985 to design, manufacture, test and
market computer workstations and peripherals which conformed to the
U.S. government's TEMPEST security standard. A precipitous decline in
the market for TEMPEST products led the Company to completely
transition its business based on a strategy of acquiring and growing
personal computer software companies and the subsequent divestiture of
its hardware operation.
DATAWATCH's two principal products are:
Monarch(TM), a leader in an emerging software category called Report
Mining Systems and a powerful Windows-based report mining tool
that lets users easily access, extract, and manipulate live data
from virtually any existing computer-generated report.
Q-Support(TM) (in the United States)/Quetzal (internationally), a
widely-used, leading edge Help Desk product, is a comprehensive
Windows-based help desk and asset management software package
which features an easy-to-use graphical user interface designed
specifically for the busy support center.
During fiscal 1997, DATAWATCH decided that its future direction
should be based on and limited to these two principal products. In
order to provide the financial resources and management focus on this
strategic direction, the Company divested itself of its software
products for the Macintosh operating system, VIREX(R) and netOctopus(TM)
which generated approximately 19% of fiscal 1997 revenues.
Accordingly, the Company sold these products to Dr Solomon's Software
for $16,750,000 on October 9, 1997. DATAWATCH acquired VIREX in fiscal
1993 for approximately $1,500,000 and netOctopus in fiscal 1996 for
approximately $1,400,000.
The Company is a Delaware corporation, with its executive offices
located at 234 Ballardvale Street, Wilmington, Massachusetts 01887 and
the Company's telephone number is (978) 988-9700.
PRINCIPAL PRODUCTS
REPORT MINING PRODUCTS
- ----------------------
Monarch/ES
Introduced in the summer of 1997, Monarch/ES(TM) is a scaleable
report storage and delivery solution that leverages investments in
existing applications and reporting systems to provide online report
viewing, distributed printing, and advanced analytical processing
throughout the business enterprise.
At every level in the business enterprise, people rely on reports
to get information. Monarch/ES lets users store, manage, and deliver
those reports electronically via a network or intranet, saving paper,
reducing storage costs, and empowering users with information needed to
do their jobs. Monarch/ES combines state-of-the-art document
management technology with powerful analytical processing technology.
The result is a hybrid solution that turns report archives into a
business intelligence system. Report data is accessible for online
queries and analyses. Users can look things up, boil things down, and
create their own custom reports with data extracted from existing
reports. Client/server architecture makes Monarch/ES highly
scaleable. It can be configured for a small department, or rolled out
across an entire enterprise. Reports produced in any host environment
can be brought into Monarch/ES which automatically identifies, indexes,
compresses and stores them, in a report warehouse subsystem. Users can
access the reports from any Windows 95 desktop running the Monarch/ES
client. Monarch/ES works with industry-standard SQL databases which
are compliant with the Open Database Connectivity (ODBC-2) standard.
Database servers can be chosen based on report volume and existing
network architecture. The initial release of Monarch/ES includes a
Sybase SQL Anywhere database.
Monarch/ES provides comprehensive, configurable security to define
privileges for individual users and groups of users. A user ID and
password are required to begin a Monarch/ES session. Access to reports
and report segments, as well as to certain program functions, is
available only with the proper authorization. Once a report has been
stored in the system, it is available for online viewing. Softcopy
reports (those delivered electronically) look just like hardcopy
reports, but they respond to electronic commands such as zoom, scroll,
page and jump.
Consulting services from experienced DATAWATCH professionals
complement the Monarch/ES package by providing valuable assistance for
all phases of implementation.
Monarch
Introduced in 1991, Monarch is one of DATAWATCH's principal
products and represented approximately 40% of the Company's net sales
in fiscal 1997, 41% of net sales for fiscal 1996 and 46% for fiscal
1995. Monarch is a PC-compatible business intelligence software tool
which allows users to access, manipulate and translate data held in
report files. Monarch is a multi-function data access tool that uses
computer-generated legacy reports as a source for data. Monarch
accepts a report file as input, extracts the data, and delivers the
data to users in a variety of formats. Monarch is marketed as "an
electronic alternative to hard copy printouts."
Corporate and government MIS departments have invested substantial
resources in designing reports and delivering them into the hands of
managers and their staffs. With Monarch, users can gain instant access
to the reports used in their workplace. When the chosen report appears
on screen, Monarch offers the user a variety of tools for rapid lookup
and navigation. Users can view a full report, or apply filters to view
only information that is relevant to their needs. With Monarch, users
can create custom reports and summaries, produce local hard copy,
create graphs and export data to popular PC applications such as Lotus
1-2-3 or Excel. With the September 1996 introduction of Monarch
Version 3.0, users can create a Portable Report Format (PRF) which
enables electronic distribution of reports via the intranet thus
reducing hardcopy print and delivery costs.
Redwing
Introduced in December 1997, Redwing(TM) is the new Adobe(R)
Acrobat(R) plug-in from DATAWATCH, which is designed to precisely extract
text and tables from even the most complex, compound Portable Document
Format (PDF) documents. Adobe(R) Acrobat(R) is becoming the standard for
publishing, distributing and archiving electronic documents. The number
of documents created in Adobe's PDF is growing exponentially. Redwing
extracts data with high degrees of character and feature accuracy,
which is especially important for companies where any mistake can
become very costly. Tables can be edited before export with a
customized table editor. Cells can be edited, merged, split and
deleted. All text exported by Redwing is fully editable. Text is
converted according to the user's specified rules such as line length,
word spacing, case conversion, font maps, paragraph detection, etc. A
user can simply use the text-optimized default settings. Redwing has
the capability to automatically export data from PDF files into a
format that Monarch can read - making possible sophisticated data
analysis and validation over data held in PDF files.
HELP DESK PRODUCTS
Q-Support (U.S.)/Quetzal (Internationally)
Q-Support, marketed internationally under the name Quetzal, is a
Windows-based, comprehensive help desk automation and asset management
software package. Q-Support/Quetzal ("Q-Support") is one of
DATAWATCH's principal products and represented approximately 34% of the
Company's net sales in fiscal 1997, 39% for fiscal 1996 and 33% for
fiscal 1995. The program provides IS support centers with a wide-range
set of PC software tools for use in a multi-user, networked
environment.
Featuring an easy-to-use graphical user interface, Q-Support logs,
routes and tracks calls from initiation through resolution. With Q-
Support, users have IS inventory control, the ability to monitor
performance levels, access to third-party knowledge providers, e-mail
and extensive management reporting options. Flexibility is built in -
system administrators can customize the program to suit organizational
needs.
Q-Support automates five key functions for the corporate
support center:
* Asset Management - addresses the increasing needs by
corporations for microcomputer asset management by providing
an accurate record of every item of equipment or service,
tracing of equipment movement and change, and full
maintenance and warranty information.
* Help Call Management - automates the receiving and
resolving of problem calls from the end-user by providing a
fast logging process, allocation to groups or individuals,
and monitoring screens to track progress, priority and
status.
* User Access via the Internet - provides support staff and
enduser interaction via the Internet providing remote users
easier access.
* Support Facilities - provides the database of resources
and reference sources that are required to find the solution
to end-user problems.
* Management Analysis - satisfies the Information Center
manager's need to provide accurate management reports on the
status of either the inventory of equipment or the amount of
support activity taking place.
Consulting services from experienced DATAWATCH professionals
complement the Q-Support package by providing valuable assistance for
all phases of implementation. Q-Support offers a complete set of tools
to satisfy end-users, lower support costs and optimize asset
utilization.
PRICING
The Company's products are sold as individual units or under LAN
or site licenses for multiple users. Monarch/ES typically has a
minimum 10 concurrent user license for $20,000. Monarch licenses list
for $499 for an individual unit with LAN licenses listing for a
minimum of $1,100. Redwing licenses list for $695 for an individual unit
with LAN licenses listing for a minimum of $1,995. A minimum three user
license for Q-Support is $7,995.
MARKETING AND DISTRIBUTION
DATAWATCH markets its products through a variety of channels in
order to gain broad market exposure and to satisfy the needs of its end-
user customers, no matter what their buying behavior. DATAWATCH
believes that some customers prefer to purchase products through
service-oriented resellers, while others buy on the basis of price,
purchase convenience, and/or immediate delivery.
The Company is engaged in active direct sales of its products to
end-user customers, including repeat and add-on sales to existing
customers and sales to new customers. DATAWATCH utilizes direct mail,
telemarketing and direct personal selling to generate its sales.
A variety of marketing programs are used by DATAWATCH to create
demand for its products. These programs include advertising,
cooperative advertising with reseller partners, direct mail, exhibitor
participation in industry shows, executive participation in press
briefings and on-going communication with the trade press.
The Company offers its resellers the ability to return obsolete
versions of its products and slow-moving products for credit against
purchases of other DATAWATCH products on a dollar-for-dollar basis.
Defective products may also be returned for credit or exchange. Based
on its historical experience, the Company believes that its exposure to
such returns is minimal.
DATAWATCH warrants the physical disk media and printed
documentation for its products to be free of defects in material and
workmanship for a period of 90 days from the date of purchase.
DATAWATCH also offers a 30-60 day money-back guarantee on certain of
its products sold directly to end-users. Under the guarantee,
customers may return purchased products within the 60 days for a full
refund if they are not completely satisfied. To date, the Company has
not experienced any significant product returns under its money-back
guarantee.
During fiscal 1997, one distributor represented approximately 14%
of DATAWATCH's net sales. No other customer accounted for more than
10% of DATAWATCH's net sales in 1997. DATAWATCH sells its products
outside of the U.S. directly through WorkGroup's sales force and
through international resellers. Such international sales represented
approximately 47%, 47% and 45% of DATAWATCH'S net sales for fiscal
1997, 1996 and 1995, respectively. See Note 11 to Consolidated
Financial Statements which appears elsewhere in this Report on Form 10-
K.
RESEARCH AND DEVELOPMENT
The Company's product strategy necessitates the timely development
of new products. DATAWATCH's product development efforts are conducted
through in-house software development engineers or by external
developers, who are compensated either through royalty payments based
on product sales levels achieved or under contracts based on services
provided.
DATAWATCH's product managers work closely with developers, whether
independent or in-house, to define product specifications. The initial
concept for a product originates from this cooperative effort. The
developer is generally responsible for coding the development project.
The product managers and their staff work in parallel with the
developers to produce printed documentation, on-line help files,
tutorials and installation software. In some cases, DATAWATCH may
choose to subcontract a portion of this work on a project basis to
third-party suppliers under contracts. DATAWATCH personnel also
perform extensive quality assurance testing for all products and
coordinate external beta test programs.
DATAWATCH has contractual agreements with the independent
developers of Monarch and Monarch/ES which require that source codes be
placed into escrow. The principal developers for the products are also
bound by contractual commitments which require their continuing
involvement in product maintenance and enhancement. Under the
agreements, the Company has been granted manufacturing, marketing and
sales rights under license agreements which provide for royalty
payments based on net revenues. The Company has also been granted
exclusive worldwide rights to Monarch with a stated term expiring in
the year 2009, and to Monarch/ES with a stated term expiring in the
year 2001. The Monarch/ES license automatically renews for successive
annual periods unless termination by either party prior to the regular
termination date.
BACKLOG
The Company's software products are generally shipped within seven
days of receipt of an order. Accordingly, the Company does not believe
that backlog for its products is a meaningful indicator of future
business.
COMPETITION
The software industry is highly competitive and is characterized
by rapidly changing technology and evolving industry standards.
DATAWATCH competes with a number of companies including IBM, McAfee
Associates, Inc., Remedy, Astea, Applix and others which have
substantially greater research and development, marketing and financial
resources than DATAWATCH. Competition in the industry is likely to
intensify as current competitors expand their product lines and as new
competitors enter the market.
PRODUCT PROTECTION
Although DATAWATCH does not generally own patents on its software
technologies, it relies on a combination of trade secret, copyright and
trademark laws, nondisclosure and other contractual agreements and
technical measures to protect its rights in its products. Despite
these precautions, unauthorized parties may attempt to copy aspects of
DATAWATCH's products or to obtain and use information that DATAWATCH
regards as proprietary. Patent protection is not considered crucial to
DATAWATCH's success. DATAWATCH believes that, because of the rapid
pace of technological change in the software industry, the legal
protections for its products are less significant than the knowledge,
ability and experience of its employees and developers, the frequency
of product enhancements and the timeliness and quality of its support
services. DATAWATCH believes that none of its products, trademarks and
other proprietary rights infringe on the proprietary rights of third
parties, but there can be no assurance that third parties will not
assert infringement claims against it or its developers in the future.
PRODUCTION
Production of DATAWATCH's products involves the duplication of
master disks and the printing of user manuals, packaging and other
related materials. Disk duplication is performed in-house with high-
capacity disk duplication equipment, and is occasionally supplemented
with duplication services performed by non-affiliated subcontractors.
Printing work is also performed by non-affiliated subcontractors. To
date, DATAWATCH has not experienced any material difficulties or delays
in production of its software and related documentation and believes
that, if necessary, alternative production sources could be secured at
commercially reasonable cost.
EMPLOYEES
As of September 30, 1997, DATAWATCH had 261 full-time employees,
including 79 engaged in marketing and sales, 48 engaged in product
management, development and quality assurance, 76 engaged in providing
administrative, accounting and production functions and 58 in technical
support services. Subsequent to the sale of Virex and netOctopus to Dr
Solomon's Software at October 9, 1997, DATAWATCH had 222 full-time
employees, including 65 engaged in marketing and sales, 29 engaged in
product management, development and quality assurance, 75 engaged in
providing administrative, accounting and production functions and 53 in
technical support services.
The Company believes that its future success may depend on its
ability to continue to attract and retain highly-skilled technical,
marketing and management personnel, who are in great demand. The
Company currently has written agreements with each of its employees
prohibiting disclosure of confidential information to anyone outside of
the Company, both during and subsequent to employment. These
agreements also require disclosure to the Company of ideas, discoveries
or inventions relating to or resulting from the employee's work for the
Company, and assignment to the Company of all proprietary rights to
such matters.
Item 2. PROPERTIES
The Company is currently headquartered in a 51,650 square foot
leased facility in Wilmington, Massachusetts. The lease expires in May
1999, with an option to renew for an additional five years. The
Company uses approximately 65% of this facility and the other 35% is
subleased to Secure Systems Group.
The Company also leases approximately 6,200 square feet in Potters
Bar, Hertsfordshire, England, which expires in January 2005,
approximately 3,500 square feet in Raleigh, North Carolina, which
expires in January 1998, approximately 16,000 square feet in Plymouth,
Devon, England, which expires in December 2017, and maintains small
offices in Germany, France and Australia.
The Company believes its facilities are suitable for its current
needs.
Item 3. LEGAL PROCEEDINGS
At the current time, the Registrant does not have any material
legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Registrant's security
holders during the last quarter of the fiscal year covered by this
report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and titles of the executive officers of the
Company are as follows:
Thomas R. Foley 58 Former President, Chief Executive Officer and Director
Bruce R. Gardner 54 President, Chief Executive Officer and Director
Andrew W. Mathews 55 Former Vice President of Sales
Marco D. Peterson 42 Senior Vice President of North American Operations
Robert Hagger 49 Senior Vice President of International Operations,
Managing Director of WorkGroup Systems Limited
Betsy J. Hartwell 50 Vice President of Finance, Chief Financial Officer
and Treasurer
Scott Crenshaw 32 Vice President of Product Development
John Loring 47 Vice President of Information Technology
Officers are elected by, and serve at the discretion of, the Board of
Directors.
THOMAS R. FOLEY, Former President, Chief Executive Officer and
Director. Mr. Foley resigned from the Company on October 31, 1997.
Mr. Foley, a founder and director of DATAWATCH, had been its President
and Chief Executive Officer since the Company was founded in 1985.
BRUCE R. GARDNER, President, Chief Executive Officer and Director.
Mr. Gardner, a founder and director of DATAWATCH, was the Chief
Financial Officer and Treasurer since the Company was founded in 1985
until November 1, 1997. Mr. Gardner was a Senior Vice President until
June 1993 when he became Executive Vice President. Mr. Gardner assumed
his current position on November 1, 1997.
ANDREW W. MATHEWS, Former Vice President of Sales. Mr. Mathews
resigned his position from the Company on October 31, 1997. Mr.
Mathews had been a Vice President since March 1986 serving in various
capacities in the areas of marketing, sales and as a division general
manager.
MARCO D. PETERSON, Senior Vice President of North American
Operations. Mr. Peterson was the founder of PERSONICS and has been its
President since its founding in 1984. Mr. Peterson took on the
additional role of Vice President of Marketing and Product Development
of the Company in October 1994 until he became Senior Vice President on
November 1, 1997.
ROBERT HAGGER, Senior Vice President of International Operations,
Managing Director of WorkGroup Systems Limited. Mr. Hagger joined
DATAWATCH as Managing Director of WorkGroup Systems on March 4, 1997
and assumed the title of Senior Vice President of International
Operations on November 1, 1997. Mr. Hagger, since 1993, was founder
and Managing Director of Insight Strategy Management Ltd. Prior to
that he was Managing Director of Byrne Fleming Ltd.
BETSY J. HARTWELL, Vice President of Finance, Chief Financial
Officer and Treasurer. Ms. Hartwell assumed the positions of Vice
President of Finance, Chief Financial Officer and Treasurer on November
1, 1997. Prior to that and since July, 1990, Ms. Hartwell was
DATAWATCH's Corporate Controller.
SCOTT CRENSHAW, Vice President of Product Development. Mr.
Crenshaw assumed the position of Vice President of Product Development
on November 1, 1997. Prior to that and since joining DATAWATCH in
1992, Mr. Crenshaw has held various management positions, most recently
as Director of Business Development and International Marketing and
prior to that as Business Segment Manager and Director of Product
Development.
JOHN LORING, Vice President of Information Technology. Mr. Loring
assumed the position of Vice President of Information Technology on
November 1, 1997. Prior thereto and since November, 1993, Mr. Loring
was the Company's Director of Business Development/Information Systems.
Prior to that, Mr. Loring was DATAWATCH's Manager of Systems
Engineering.
Part II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The Registrant's common stock is listed and traded on the Nasdaq
National Market under the symbol DWCH. The range of high and low prices
during each fiscal quarter for the last two fiscal years is set forth
below:
For the Year Ended Common Stock
September 30, 1997 High Low
------------------ ---------------------
4th Quarter 2 7/8 1 7/16
3rd Quarter 4 5/16 1 5/8
2nd Quarter 6 5/8 3 5/8
1st Quarter 8 3/4 5
For the Year Ended Common Stock
September 30, 1996 High Low
------------------ --------------------
4th Quarter 11 5/8 6 3/8
3rd Quarter 11 5/8 4 3/4
2nd Quarter 5 1/4 3 3/8
1st Quarter 5 7/8 3 3/4
There are approximately 213 shareholders of record as of December 19,
1997.
The Company has not paid any cash dividends and it is anticipated
that none will be declared in the foreseeable future. The Company
intends to retain future earnings, if any, to provide funds for the
operation, development and expansion of its business.
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data
of the Company for the periods indicated. The selected consolidated
financial data for and as of the end of the years in the five year
period ended September 30, 1997 are derived from the Consolidated
Financial Statements of the Company. The information set forth below
should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and notes appearing elsewhere in this
report.
Statements of Operations Data
Years Ended September 30, 1997 1996 1995 1994 1993
---------------------------------------------------------------
Net Sales -
IBM PC-based
Products $25,995,197 $24,216,794 $18,839,265 $13,027,232 $10,360,927
Net Sales -
Macintosh-based
Products 6,052,298 5,805,328 4,520,716 3,854,910 3,580,975
----------------------------------------------------------------
Net Sales 32,047,495 30,022,122 23,359,981 16,882,142 13,941,902
Costs and Expenses 33,929,460 28,894,600 23,678,935 19,956,576 17,883,679
Income (Loss) from
Continuing Operations (1,881,965) 1,127,522 (318,954) (3,074,434) (3,941,777)
Loss from Discontinued
Operation - - - - (741,145)
Loss on Disposal of
Discontinued Operation - - - - (1,478,082)
Net Income (Loss) ($1,995,433) $1,125,360 ($331,423) ($3,042,767) ($6,125,104)
Income (Loss) from
Continuing Operations
per Common Share ($.22) $0.13 ($0.04) ($0.41) ($0.54)
Loss from Discontinued
Operation per Common
Share 0.00 0.00 0.00 0.00 (0.10)
Loss on Disposal of
Discontinued Operation
per Common Share 0.00 0.00 0.00 0.00 (0.20)
Net Income (Loss) per
Common Share ($.22) $0.13 ($0.04) ($0.41) ($0.84)
Balance Sheet Data
September 30, 1997 1996 1995 1994 1993
----------------------------------------------------------
Total Assets $16,146,645 $15,240,571 $12,358,132 $9,646,324 $12,108,270
Working Capital 4,451,821 5,210,457 2,631,759 1,547,706 3,920,512
Long-Term Obligations 1,399,089 209,824 163,868 137,324 152,484
Shareholders' Equity $6,924,849 $8,238,886 $ 6,062,170 $5,266,588 $ 8,086,154
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is qualified by reference
to, and should be read in conjunction with, the consolidated financial
statements of DATAWATCH and its subsidiaries.
GENERAL
DATAWATCH CORPORATION (the "Company" or "DATAWATCH"), is engaged
in the design, development, manufacture, marketing, consulting services
and support of personal computer software.
On November 7, 1996 the Company acquired all the outstanding
shares of capital stock of Guildsoft Holdings Limited ("Guildsoft"),
located in Plymouth, England, which provides software companies with
multi-lingual telesales, support and fulfillment services throughout
Europe, in exchange for 125,000 shares of DATAWATCH common stock. This
acquisition was accounted for as a purchase.
On October 9, 1997 (subsequent to the end of the 1997 fiscal year)
the Company sold its Virex and netOctopus product lines to Dr Solomon's
Software for $16,750,000 in cash.
DATAWATCH's principal products are: Monarch, a report mining solution
that leverages legacy reports and reporting systems to provide business
intelligence on the Windows desktop; Monarch/ES, a client/server version
of Monarch with an integrated report warehouse subsystem; Redwing, a plug-in
for Abode(R) Acrobat(R) that accurately extracts text and tables from PDF
files; Q-Support (in the United States), and Quetzal (internationally),
an integrated help desk and asset management solution for multi-user,
networked support centers.
RESULTS OF OPERATIONS
Fiscal Year Ended September 30, 1997 as Compared to
Fiscal Year Ended September 30, 1996
Net sales for the fiscal year ended September 30, 1997 were
$32,047,000 which represents an increase of $2,025,000 or 7% from the
net sales of $30,022,000 for the fiscal year ended September 30, 1996.
Sales have been segregated on the statements of operations so as to
highlight the product lines which remain after the disposal of the
Macintosh based products. Monarch, which amounted to approximately 40%
of sales, increased by 5%; Q-Support, which amounted to approximately
34% of sales, decreased by 6%; Virex, which amounted to approximately
15% of sales and netOctopus, which amounted to approximately 4% of
sales, did not change as a percentage of sales from fiscal year ended
September 30, 1996. Guildsoft, acquired in November 1997, had net
sales for fiscal 1997 which amounted to $1,876,000 or 6% of total net
sales. For the fiscal year ended September 30, 1997, the Company's
products for the IBM compatible PC accounted for approximately 81% of
sales while the Company's products for the Macintosh PC accounted for
approximately 19%.
The Company's cost of sales for the fiscal year ended September 30,
1997 were $5,900,000 or approximately 18% of net sales. Cost of sales
for the fiscal year ended September 30, 1996 were $4,516,000 or
approximately 15% of net sales. The increase in cost of sales, as a
percentage of net sales, results from the inclusion of Guildsoft's
product sales which bear lower gross margins than the Company's other
products. Cost of sales, as a percentage of net sales for the fiscal
year ended September 30, 1997, excluding Guildsoft, would have been
16%, which is relatively consistent with the prior period.
Engineering and product development expenses were $2,804,000 for the
fiscal year ended September 30, 1997, an increase of $465,000 or
approximately 20% from $2,339,000 for the fiscal year ended September
30, 1996. This increase (net of approximately $80,000 of expenses
associated with organizational changes) is primarily attributable to
the increase in personnel costs and expenses necessary for continued
development of the Q-Support product and quality assurance for the
Monarch product. Product development costs related to the Virex and
netOctopus products were approximately $1,296,000 in 1997 and
$1,104,000 in 1996.
Selling, general and administrative expenses were $25,225,000 for
fiscal year ended September 30, 1997, an increase of $3,186,000 or
approximately 14% from $22,039,000 for the fiscal year ended September
30, 1996. Included in the expenses were $608,000 of one-time expenses
principally associated with organizational changes within WorkGroup
during the third fiscal quarter. Included in the expenses for the
fiscal year ended September 30, 1996 were $450,000 of expenses
associated with the acquisition of WorkGroup in March 1996. Excluding
these expenses, selling, general and administrative expenses were
$24,617,000 for the 1997 fiscal year and were $21,589,000 for the 1996
fiscal year resulting in an increase of $3,028,000 or approximately
14%. This increase is primarily attributable to increases in personnel
within the sales and marketing organizations, principally for Q-Support
and Monarch, and the inclusion of Guildsoft operating expenses
amounting to approximately $912,000 for the period or approximately 30%
of the increase.
As a result of the foregoing, the net loss from operations for the
fiscal year ended September 30, 1997 was $1,995,000, which compares to
the net income of $1,125,000 for the fiscal year ended September 30,
1996. The Company recorded only de minimis tax provisions, both
domestically and internationally, during the periods because of its
ability to utilize net operating loss ("NOL") carryforwards during
fiscal 1996 and because of its ability to utilize domestic NOL
carryforwards and foreign losses during fiscal 1997.
Fiscal Year Ended September 30, 1996 as Compared to
Fiscal Year Ended September 30, 1995
Net sales for the fiscal year ended September 30, 1996 were
$30,022,000 which represents an increase of $6,662,000 or 29% from the
net sales of $23,360,000 for the fiscal year ended September 30, 1995.
Sales have been segregated on the statements of operations so as to
highlight the product lines which remain after the disposal of the
Macintosh based products. This increase results from growth in sales
of all of DATAWATCH's products. Monarch, which amounted to
approximately 41% of sales, increased by 14%; Q-Support, which amounted
to approximately 39% of sales, increased by 51%; Virex, which amounted
to approximately 15% of sales, increased by 14%; and netOctopus, which
amounted to approximately 4% of sales, increased by 143%. For the
fiscal year ended September 30, 1996, the Company's products for the
IBM compatible PC accounted for approximately 80% of sales while the
Company's products for the Macintosh PC accounted for approximately 20%.
Revenues were reduced by approximately $400,000 for the fourth quarter,
and consequently for the year, as a result of consultancy revenue
deferrals. See Note 1 (Revenue Recognition - Services and Other) to
Notes to Consolidated Financial Statements which appear elsewhere in
this Report on Form 10-K.
The Company's cost of sales for the fiscal year ended September 30,
1996 were $4,516,000 or approximately 15% of net sales. Cost of sales
for the fiscal year ended September 30, 1995 were $3,809,000 or
approximately 16% of net sales. These costs remained reasonably
constant as a percentage of net sales for the two periods.
Engineering and product development expenses were $2,339,000 for the
fiscal year ended September 30, 1996, an increase of $119,000 or
approximately 5% from $2,220,000 for the fiscal year ended September
30, 1995. This increase is primarily attributable to the increase in
personnel costs associated with the development and quality assurance
for its products. Product development costs related to the Virex and
netOctopus products were approximately $1,104,000 in 1996 and
$1,072,000 in 1995.
Selling, general and administrative expenses were $22,039,000 for
fiscal year ended September 30, 1996. Included in these expenses were
non-recurring expenses associated with the acquisition of WorkGroup
amounting to $450,000. Excluding these non-recurring expenses,
selling, general and administrative expenses were $21,589,000 for the
1996 fiscal year resulting in an increase of $3,939,000 or
approximately 22% from $17,650,000 for the fiscal year ended September
30, 1996. This increase is primarily attributable to increases in
personnel within the sales and marketing organizations and in
promotional expenses principally for Q-Support and Monarch.
As a result of the foregoing, the net income for the fiscal year
ended September 30, 1996 was $1,125,000, an increase of $1,457,000 when
compared to the net loss of $331,000 for the fiscal year ended
September 30, 1995. The Company recorded only de minimis tax
provisions, both domestically and internationally, during the fiscal
year ended September 30, 1996 because of its ability to utilize NOL
loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
In October 1997, the Company received $16,750,000 from Dr
Solomon's Software for its Virex and netOctopus product lines.
The Company's management believes that its currently anticipated
capital needs for future operations of the Company will be satisfied
through at least September 30, 1998 by funds currently available from
the above mentioned sale. The Company also has its unused $3,000,000
bank lines of credit. Working capital decreased by approximately
$759,000 during fiscal 1997 primarily as a result of unprofitable
operations of and cash flow required by the Company's international
subsidiaries.
Management believes that the Company's current operations are not
materially impacted by the effects of inflation.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company does not provide forecasts of its future financial
performance. However, time to time, information provided by the
Company or statements made by its employees may contain "forward
looking" information that involves risks and uncertainties. In
particular, statements contained in this Form 10-K that are not
historical facts (including, but not limited to statements contained in
"Item 7: Management's Discussion and Analysis of Financial Condition
and Results of Operations" relating to liquidity and capital resources)
may constitute forward looking statements and are made under the safe
harbor provisions of The Private Securities Litigation Reform Act of
1995. The Company's actual results of operations and financial
condition have varied and may in the future vary significantly from
those stated in any forward looking statements. Factors that may cause
such differences include, without limitation, the risks, uncertainties
and other information discussed below and within this Form 10-K, as
well as the accuracy of the Company's internal estimates of revenue and
operating expense levels. The following discussion of the Company's
risk factors should be read in conjunction with the financial
statements and related notes thereto. Such factors, among others, may
have a material adverse effect upon the Company's business, results of
operations and financial condition.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's future operating results could vary substantially
from quarter to quarter because of uncertainties and/or risks
associated with such things as technological change, competition,
delays in the introduction of products or product enhancements and
general market trends. Historically, the Company has operated with
little backlog of orders because its software products are generally
shipped as orders are received. As a result, net sales in any quarter
are substantially dependent on orders booked and shipped in that
quarter. Because the Company's staffing and operating expenses are
based on anticipated revenue levels and a high percentage of the
Company's costs are fixed in the short-term, small variations in the
timing of revenues can cause significant variations in operating
results from quarter to quarter. Because of these factors, the Company
believes that period-to-period comparisons of its results of operations
are not necessarily meaningful and should not be relied upon as
indications of future performance. There can be no assurance that the
Company will not experience such variations in operating results in the
future or that such variations will not have a material adverse effect
on the Company's business, financial condition or results of operation.
DEPENDENCE ON PRINCIPAL PRODUCTS
In fiscal 1997, Monarch and Q-Support accounted for approximately
40% and 34%, respectively, of the Company's net sales. Subsequent to
year end with the disposal of the Virex and netOctopus products, the
Company is wholly dependent on such principal products. As a result,
any factor adversely affecting sales of either of these products could
have a material adverse effect on the Company. The Company's future
financial performance will depend in part on the successful
introduction of its new and enhanced versions of these products and
development of new versions of these and other products and subsequent
acceptance of such new and enhanced products. In addition, competitive
pressures or other factors may result in significant price erosion that
could have a material adverse effect on the Company's business,
financial condition or results of operations.
INTERNATIONAL SALES
In 1997, 1996 and 1995, international sales accounted for
approximately 47%, 47% and 45%, respectively, of the Company's net
sales. The Company anticipates that international sales will continue
to account for a significant percentage of its revenues. A significant
portion of the Company's net sales will therefore be subject to risks
associated with international sales, including unexpected changes in
legal and regulatory requirements, changes in tariffs, exchange rates
and other barriers, political and economic instability, difficulties in
account receivable collection, difficulties in managing distributors or
representatives, difficulties in staffing and managing international
operations, difficulties in protecting the Company's intellectual
property overseas, seasonality of sales and potentially adverse tax
consequences.
ACQUISITION STRATEGY
The Company has addressed and may continue to address the need to
develop new products, in part, through the acquisition of other
companies. Acquisitions involve numerous risks including difficulties
in the assimilation of the operations, technologies and products of the
acquired companies, the diversion of management's attention from other
business concerns, risks of entering markets in which the Company has
no or limited direct prior experience and where competitors in such
markets have stronger market positions, and the potential loss of key
employees of the acquired company. Achieving and maintaining the
anticipated benefits of an acquisition will depend in part upon whether
the integration of the companies' business is accomplished in an
efficient and effective manner, and there can be no assurance that this
will occur. The successful combination of companies in the high
technology industry may be more difficult to accomplish than in other
industries.
DEPENDENCE ON NEW INTRODUCTIONS; NEW PRODUCT DELAYS
Growth in the Company's business depends in substantial part on
the continuing introduction of new products. The length of product
life cycles depends in part on end-user demand for new or additional
functionality in the Company's products. If the Company fails to
accurately anticipate the demand for, or encounters any significant
delays in developing or introducing, new products or additional
functionality on its products, there could be a material adverse effect
on the Company's business. Product life cycles can also be affected by
the introduction by suppliers of operating systems of comparable
functionality within their products. The failure of the Company to
anticipate the introduction of additional functionality in products
developed by such suppliers could have a material adverse effect on the
Company's business. In addition, the Company's competitors may
introduce products with more features and lower prices than the
Company's products. Such increase in competition could adversely
affect the life cycles of the Company's products, which in turn could
have a material adverse effect on the Company's business.
Software products may contain undetected errors or failures when
first introduced or as new versions are released. There can be no
assurance that, despite testing by the Company and by current and
potential end-users, errors will not be found in new products after
commencement of commercial shipments, resulting in loss of or delay in
market acceptance. Any failure by the Company to anticipate or respond
adequately to changes in technology and customer preferences, or any
significant delays in product development or introduction, could have a
material adverse effect on the Company's business.
RAPID TECHNOLOGICAL CHANGE
The markets in which the Company competes have undergone, and can
be expected to continue to undergo, rapid and significant technological
change. The ability of the Company to grow will depend on its ability
to successfully update and improve its existing products and market and
license new products to meet the changing demands of the marketplace
and that can compete successfully with the existing and new products of
the Company's competitors. There can be no assurance that the Company
will be able to successfully anticipate and satisfy the changing
demands of the personal computer software marketplace, that the Company
will be able to continue to enhance its product offerings, or that
technological changes in hardware platforms or software operating
systems, or the introduction of a new product by a competitor, will not
render the Company's products obsolete.
COMPETITION IN THE PC SOFTWARE INDUSTRY
The software market for personal computers is highly competitive
and characterized by continual change and improvement in technology.
Several of the Company's existing and potential competitors (including
IBM, McAfee Associates, Inc., Remedy, Astea and Applix) have
substantially greater financial, marketing and technological resources
than the Company. No assurance can be given that the Company will have
the resources required to compete successfully in the future.
YEAR 2000 ISSUE
Although the Company does not expect that Year 2000 issues will
have a material effect on the Company's results of operations or financial
condition, the Company is exposed to Year 2000 issues with respect to
internal software and external product offerings. Should this issue
not be addressed properly, there may be an event that would cause
reported financial information not to be necessarily indicative of
future operating results. The Company continues to undertake an
evaluation of these issues.
DEPENDENCE ON PROPRIETARY SOFTWARE TECHNOLOGY
The Company's success is dependent upon proprietary software
technology. Although the Company does not own any patents on any such
technology, it does hold exclusive licenses to such technology and
relies principally on a combination of trade secret, copyright and
trademark laws, nondisclosure and other contractual agreements and
technical measures to protect its rights to such proprietary
technology. Despite such precautions, there can be no assurance that
such steps will be adequate to deter misappropriation of such
technology.
RELIANCE ON SOFTWARE LICENSE AGREEMENTS
Substantially all of the Company's products incorporate third
party proprietary technology which is generally licensed to the Company
on an exclusive, worldwide basis. Failure by such third parties to
continue to develop technology for the Company and license such
technology to the Company could have a material adverse effect on the
Company's business and results of operations.
INDIRECT DISTRIBUTION CHANNELS
During 1997, 1996 and 1995, the Company derived approximately 20%,
17% and 19%, respectively, of its net sales through resellers, none of
which are under the direct control of the Company. The loss of major
resellers of the Company's products, or a significant decline in their
sales, could have a material adverse effect on the Company's operating
results. Other than Ingram Micro Inc., which accounted for
approximately 14%, 13%, and 10% of the Company's 1997, 1996 and 1995
net sales, respectively, no reseller or other customer accounted for
more than 10% of the Company's revenues in 1997, 1996 or 1995. There
can be no assurance that the Company will be able to attract or retain
additional qualified resellers or that any such resellers will be able
to effectively sell the Company's products. The Company seeks to
select and retain resellers on the basis of their business credentials
and their ability to add value through expertise in specific vertical
markets or application programming expertise. In addition, the Company
relies on resellers to provide post-sales service and support, and any
deficiencies in such service and support could adversely affect the
Company's business.
VOLATILITY OF STOCK PRICE
As is frequently the case with the stocks of high technology
companies, the market price of the Company's common stock has been, and
may continue to be, volatile. Factors such as quarterly fluctuations
in results of operations, increased competition, the introduction of
new products by the Company or its competitors, expenses or other
difficulties associated with assimilating companies acquired by the
Company, changes in the mix of sales channels, the timing of
significant customer orders, and macroeconomics conditions generally,
may have a significant impact on the market price of the stock of the
Company. Any shortfall in revenue or earnings from the levels
anticipated by securities analysts could have an immediate and
significant adverse effect on the market price of the Company's common
stock in any given period. In addition, the stock market has from time
to time experienced extreme price and volume fluctuations, which have
particularly affected the market price for many high technology
companies and which, on occasion, have appeared to be unrelated to the
operating performance of such companies.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth in Item 14(a)
under the captions "Consolidated Financial Statements" and
"Consolidated Financial Statement Schedule" as a part of this report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors may be found under the
caption "Election of Directors" appearing in the Company's definitive
Proxy Statement for the Annual Meeting of Shareholders for the fiscal
year ended September 30, 1997. Such information is incorporated herein
by reference. Information with respect to the Company's executive
officers may be found under the caption "Executive Officers of the
Registrant" appearing in Part I of this Annual Report on Form 10-K.
Item 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Compensation and
Other Information Concerning Directors and Officers" appearing in the
Company's definitive Proxy Statement for the Annual Meeting of
Shareholders for the fiscal year ended September 30, 1997 is
incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information set forth under the caption "Principal Holders of
Voting Securities" appearing in the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders for the fiscal year
ended September 30, 1997 is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information set forth under the caption "Certain Transactions"
appearing in the Company's definitive Proxy Statement for the Annual
Meeting of Shareholders for the fiscal year ended September 30, 1997 is
incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-
K
The following documents are filed as part of this report:
(a) 1. Consolidated Financial Statements
Independent Auditors' Report
Consolidated Balance Sheets as of September 30, 1997 and 1996
Consolidated Statements of Operations for the Years Ended
September 30, 1997, 1996 and 1995.
Consolidated Statements of Changes in Shareholders' Equity for
the Years Ended September 30, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements
2. Consolidated Financial Statement Schedule
Schedule VIII Valuation and Qualifying Accounts
All other schedules are omitted as the required information is
not applicable or is included in the financial statements or
related notes.
The Independent Auditors' Report included with the Consolidated
Financial Statements under Item 14(a)1 above contains the
Independent Auditors' Report on the Consolidated Financial
Statement Schedule.
3. Exhibits
The exhibits listed in the Exhibit Index immediately preceding
the Exhibits are filed as a part of this Annual Report on Form 10-
K.
(b) Reports on Form 8-K
No current report on Form 8-K was filed during the quarterly
period ended September 30, 1997.
(c) EXHIBIT INDEX
(6) 2.1 Asset Purchase Agreement, dated October 9, 1997, among
DATAWATCH CORPORATION, Pole Position Software GmbH and Dr
Solomon's Software, Inc. (Exhibit 2.1)
(6) 2.2 Escrow Agreement, dated October 9, 1997, among DATAWATCH
CORPORATION, Dr Solomon's Software, Inc. and State Street
Bank and Trust Company. (Exhibit 2.2)
(1) 3.1 Restated Certificate of Incorporation of the Registrant
(Exhibit 3.2)
(1) 3.2 By-Laws, as amended, of the Registrant (Exhibit 3.3)
(1) 4.1 Specimen certificate representing the Common Stock
(Exhibit 4.4)
(1)10.1 Lease by and between the Registrant and CBOB Fund Corp.,
as Trustee of Ballardvale Building D Nominee Trust, dated
February 17, 1992 (Exhibit 10.2)
(1)10.2 1987 Stock Plan (Exhibit 10.7)
(1)10.3 Form of Incentive Stock Option Agreement of the
Registrant (Exhibit 10.8)
(1)10.4 Form of Nonqualified Stock Option Agreement of the
Registrant (Exhibit 10.9)
(1)10.5 Software Development and Marketing Agreement by and
between PERSONICS CORPORATION and Raymond Huger, dated January
19, 1989 (Exhibit 10.12)
(2)10.6 Asset Purchase Agreement by and between the Registrant
and Secure Systems Group, dated as of May 14, 1993 (Exhibit
2.1)
(2)10.7 Promissory Note of Secure Systems Group to the Registrant
in the original principal amount of $968,782, dated May 14,
1993 (Exhibit 10.1)
(2)10.8 Promissory Note of Secure Systems Group to the Registrant
in the original principal amount of $1,821,018, dated May 14,
1993 (Exhibit 10.2)
(2)10.9 Security Agreement dated as of May 14, 1993 between
Secure Systems Group as debtor and the Registrant as secured
party (Exhibit 10.3)
(2)10.10 Sublease dated as of May 14, 1993 between the
Registrant as sublandlord and Secure Systems Group as
subtenant (Exhibit 10.4)
(3)10.11 Marketing Agreement dated May 1, 1994 between
WorkGroup Systems Ltd. and DATAWATCH CORPORATION (Exhibit
10.1)
(4)10.12 Commercial Security Agreement between DATAWATCH
CORPORATION and Silicon Valley Bank doing business as Silicon
Valley East dated November 1, 1994 (Exhibit 10.23)
(4)10.13 Commercial Security Agreement between PERSONICS CORPORATION
and Silicon Valley Bank doing business as Silicon Valley East
dated November 1, 1994 (Exhibit 10.24)
(5)10.14 Executive Agreement between the Company and Andrew
W. Mathews dated April 11, 1996 (Exhibit 10.1)
(5)10.15 Executive Agreement between the Company and Marco D.
Peterson dated April 11, 1996 (Exhibit 10.2)
(5)10.16 Executive Agreement between the Company and Bruce R.
Gardner dated April 11, 1996 (Exhibit 10.3)
(5)10.17 Executive Agreement between the Company and Thomas
R. Foley dated April 11, 1996 (Exhibit 10.4)
(7)10.18 Loan Modification Agreement dated October 31, 1996 between
DATAWATCH CORPORATION, Personics Corporation and Silicon
Valley Bank (Exhibit 10.29)
(7)10.19 1996 Non-Employee Director Stock Option Plan, as amended on
December 10, 1996 (Exhibit 10.30)
(7)10.20 1996 International Employee Non-Qualified Stock Option
Plan (Exhibit 10.31)
(8)10.21 Amended and Restated Letter Agreement, dated February 12,
1997, by and between DATAWATCH CORPORATION, Personics
Corporation and Silicon Valley Bank (Exhibit 10.1)
(8)10.22 Promissory Note, dated February 12, 1997, by and between
DATAWATCH CORPORATION, Personics Corporation and Silicon
Valley Bank (Exhibit 10.21).
(8)10.23 Loan Modification Agreement, dated October 30, 1997, by and
between DATAWATCH CORPORATION, Personics Corporation and
Silicon Valley Bank (filed herewith)
(9)10.24 1996 Stock Plan (Appendix A)
11.1 Statement re: computation of per share earnings (filed herewith)
21.1 Subsidiaries of the Registrant (filed herewith)
23.1 Consent of Independent Auditors (filed herewith)
27 Financial Data Schedule (filed herewith)
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(1) Previously filed as exhibits to Registration Statement 33-46290 on
Form S-1 and incorporated herein by reference (the number given in
parenthesis indicates the corresponding exhibit in such Form S-1).
(2) Previously filed as exhibits to Registrant's Current Report on
Form 8-K dated May 14, 1993, filed May 28, 1993 and incorporated
herein by reference (the number given in parenthesis indicates the
corresponding exhibit in such Form 8-K).
(3) Previously filed as an exhibit to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994 and incorporated
herein by reference (the number given in parenthesis indicates the
corresponding exhibit in such Form 10-Q).
(4) Previously filed as an exhibit to Registrant's Annual Report on
Form 10-K for the Fiscal Year ended September 30, 1994 and
incorporated herein by reference (the number given in parenthesis
indicates the corresponding exhibit in such Form 10-K).
(5) Previously filed as an exhibit to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996 and incorporated
herein by reference (the number given in parenthesis indicates the
corresponding exhibit in such Form 10-Q).
(6) Previously filed as exhibits to Registrant's Current Report on
Form 8-K dated October 9, 1997 and incorporated herein by reference
(the number given in parenthesis indicates the corresponding exhibit in
such Form 8-K).
(7) Previously filed as an exhibit to Registrant's Annual Report on
Form 10-K for the Fiscal Year ended September 30, 1996 and incorporated
herein by reference (the number given in parenthesis indicates the
corresponding exhibit in such for 10-K).
(8) Previously filed as exhibits to Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997 and incorporated herein
by reference (the number in parenthesis indicates the corresponding
exhibit in such Form 10-Q).
(9) Previously filed as appendix A to the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders held on March 19, 1997
and incorporated herein by reference (the number given in parenthesis
indicates the corresponding appendix in such definitive Proxy
Statement).
(d) Financial Statement Schedules
The Company hereby files as financial statement schedules to this
Form 10-K the Consolidated Financial Statement Schedules listed in Item
14(a)2 above which are attached hereto.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DATAWATCH CORPORATION
Date: December 29, 1997 By: /s/ Bruce R. Gardner
Bruce R. Gardner
President, Chief Executive Officer
and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Signature Title Date
/s/ Bruce R. Gardner President, Chief Executive December 29, 1997
Bruce R. Gardner Officer and Director
/s/ Betsy J. Hartwell Vice President Finance, December 29, 1997
Betsy J. Hartwell Chief Financial Officer
(Principal Financial and Treasurer
and Accounting Officer)
/s/ Jerome Jacobson Director December 29, 1997
Jerome Jacobson
/s/ David Riddiford Director December 29, 1997
David Riddiford