|
|
|
|
|
Delaware
|
|
7372
|
|
52-2263942
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(Primary
Standard Industrial
Classification
Code Number)
|
|
(IRS
Employer
Identification
Number)
|
|
|
|
Carl
F. Barnes, Esq.
Joseph
C. Marrow, Esq.
Morse,
Barnes-Brown & Pendleton, P.C.
1601
Trapelo Road
Waltham,
Massachusetts 02451
(781)
622-5930
(781)
622-5933 (fax)
|
|
Ralph
V. De Martino, Esq.
F.
Alec Orudjev, Esq.
Cozen
O’Connor
1627
I Street, N.W., Suite 1100
Washington,
D.C. 20006
(202) 912-4800
(202) 912-4830
(fax)
|
Title
of Each Class of Securities to be Registered
|
Amount
to be
Registered(1)
|
Proposed
Maximum
Offering
Price
Per
Share(2)
|
Proposed
Maximum
Aggregate
Offering
Price(2)
|
Amount
of
Registration
Fee
|
Common
stock(3):
|
3,450,000
shares
|
$
6.00
|
$
20,700,000.00
|
$
2,214.90
|
Warrants
issued to the Underwriters (“Underwriters’ Warrants”)(4):
|
300,000
warrants
|
$
—
|
$
—
|
$
—
|
Shares
of common stock underlying the Underwriters’ Warrants
|
300,000
shares
|
$
6.00
|
$ 1,800,000.00
|
$
192.60
|
Warrants
for resale by existing warrant holders(4):
|
392,000
warrants
|
$
—
|
$
—
|
$
—
|
Common
stock for resale by existing warrant holders after
exercise
|
392,000
shares
|
$
6.00
|
$
2,352,000.00
|
$
251.66
|
Total
Amount of Registration Fees:
|
$
2,660.00
|
(1) |
In
accordance with Rule 416 under the Securities Act of 1933, as amended
(the
“Securities Act”), in order to prevent dilution, a presently
indeterminable number of shares of common stock are registered hereunder
which may be issued in the event of stock splits, stock dividends,
triggering of any anti-dilution provisions in the warrants and the
Underwriters’ warrants for the purchase of common stock or similar
transactions involving the common stock of the Registrant. No additional
registration fee has been paid for these shares of common
stock.
|
(2) |
Estimated
solely for the purposes of calculating the registration fee pursuant
to
Section 6(b) of the Securities Act, and computed pursuant to Rule
457(a)
promulgated under the Securities
Act.
|
(3) |
Includes
450,000 shares which the Underwriters have the option to purchase
from the
Registrant to cover over-allotments, if
any.
|
(4) |
No
fee pursuant to Rule 457(g).
|
The
information in this prospectus is not complete and may be changed.
We may
not sell these securities until the registration statement filed
with the
Securities and Exchange Commission is effective. The prospectus is
not an
offer to sell these securities and it is not soliciting an offer
to buy
these securities in any state where the offer or sale is not
permitted.
|
|
|
Price
to the Public
|
|
Underwriting
Discounts
and
Commissions
|
|
Proceeds,
Before
Expenses,
to
the Company
|
||||||||||
|
|
|
|
|
|
|
||||||||||
Per
Share
|
|
|
|
|
|
|
||||||||||
Total
|
|
|
|
|
|
|
· |
Increased
sales
|
· |
Improved
customer service and customer
loyalty
|
· |
Enhanced
employee communication and training
|
· |
Reduced
administrative and operational
expenses
|
· |
Information
architecture and usability
engineering
|
· |
Web
application development
|
· |
Rich
media development
|
· |
e-Commerce
applications
|
· |
e-Training
applications
|
· |
Search
engine optimization
|
(1)
|
the
complementary technical ability to market, sell and install Web-based
software tools in their particular metropolitan market areas; and
|
(2)
|
an
established base of customers with local market presence that can
potentially accelerate our time to market in geographic areas where
we do
not currently operate.
|
· |
In
December 2000, we acquired Streamline Communications, a Boston,
Massachusetts-based company.
|
· |
In
February 2002, we acquired Lead Dog Digital, Inc., a New York, New
York-based company.
|
· |
In
December 2004, we acquired Interactive Applications Group, Inc. (“iapps”),
a Washington, D.C.-based company.
|
· |
In
April 2006, we acquired New Tilt, Inc., a Cambridge, Massachusetts-based
company.
|
· |
our
limited operating history on which to evaluate our operations and
we have
suffered losses since inception which may recur in the future as
we
expand;
|
· |
our
licenses are renewable on a monthly basis and a reduction in our
license
renewal rate could significantly reduce our revenues;
|
· |
our
inability to manage our future growth efficiently or
profitably;
|
· |
our
inability to complete the Objectware acquisition or to effeciently
integrate Objectware into our operations;
|
· |
if
our products fail to perform properly due to undetected errors or
similar
problems, our business could suffer, and we could face product liability
exposure;
|
· |
if
the security of our software, in particular the hosted Internet solutions
products we have developed, is breached, our business and reputation
could
suffer;
|
· |
if
we undertake future business combinations and acquisitions, they
may be
difficult to integrate into our existing operations, may disrupt
our
business, dilute stockholder value or divert management’s attention;
|
· |
our
dependence on our management team and key personnel and the loss
or
inability to retain these individuals could harm our business;
and
|
· |
intense
and growing competition, which could result in price reductions,
reduced
operating margins and loss of market
share.
|
Securities
Offered
|
3,000,000
shares of our common stock.
|
|
Over-Allotment
Option
|
450,000
shares of our common stock.
|
|
Common
Stock to be Outstanding After This Offering
|
7,273,833
shares
(7,723,833
shares
if the over-allotment option is exercised in full by the underwriters),
of
which 3,000,000 shares or approximately 41.2% would be held by persons
purchasing in this offering (3,450,000 shares or approximately 44.7%,
if
the over-allotment option is exercised in full by the
underwriters).
|
|
Use
of Proceeds
|
We
intend to use the net proceeds from this offering as follows:
· Approximately
$2,800,000 to repay all of our indebtedness;
· Approximately
$2,955,000 to pay the cash portion of the acquisition of Objectware,
together with expenses associated with that acquisition; and
· $8,380,000
for general corporate purposes, including working capital and to
complete
future acquisitions. See “Use of Proceeds” for additional
information.
|
|
Trading
Symbols
|
We
have applied for listing of our common stock on the Nasdaq Capital
Market
and the Boston Stock Exchange under the symbols “BLSW” and “BLS,”
respectively.
|
|
Risk
Factors
|
You
should consider carefully all of the information set forth in this
prospectus, and, in particular, the specific factors set forth under
“Risk
Factors” beginning at page 9, before deciding whether to invest in our
shares.
|
· |
490,909
shares issuable upon the acquisition of Objectware;
|
· |
925,832
shares issuable upon the exercise of outstanding options at a weighted
average price of $2.96 per share;
|
· |
618,269
shares issuable upon the exercise of outstanding warrants;
and
|
· |
300,000
shares issuable upon exercise of underwriters’ warrants at a price equal
to 125% of the offering price of the
shares.
|
|
|||||||||||||
Ten
Months Ended July 31,
|
Year
Ended September 30,
|
||||||||||||
2006
(c)
|
2005
(a)
|
2005
(a)
|
2004
|
||||||||||
Historical
Statements of Operations Data:
|
|||||||||||||
Revenues
|
$
|
6,603
|
$
|
4,645
|
$
|
5,769
|
$
|
4,888
|
|||||
Cost
of revenue
|
2,924
|
2,527
|
3,113
|
2,290
|
|||||||||
Gross
profit
|
3,679
|
2,118
|
2,656
|
2,598
|
|||||||||
Operating
loss
|
(115
|
)
|
(373
|
)
|
(461
|
)
|
(132
|
)
|
|||||
Net
loss
|
(698
|
)
|
(413
|
)
|
(517
|
)
|
(178
|
)
|
|||||
Basic
and diluted loss per share
|
$
|
(0.17
|
)
|
$
|
(0.11
|
)
|
$
|
(0.14
|
)
|
$
|
(0.05
|
)
|
|
Weighted
average shares
|
4,007,499
|
3,786,255
|
3,804,527
|
3,026,163
|
|||||||||
Unaudited
|
|||||||||||||
Ten
Months Ended July 31,
|
Year
Ended September 30,
|
||||||||||||
Other
Financial Data:
|
2006
(c)
|
2005
(a)
|
2005
(a)
|
2004
|
|||||||||
Net loss
|
$
|
(698
|
)
|
$
|
(413
|
)
|
$
|
(517
|
)
|
$
|
(178
|
)
|
|
Interest
expense
|
583
|
40
|
56
|
46
|
|||||||||
Depreciation
|
141
|
86
|
107
|
78
|
|||||||||
Amortization
of intangibles
|
97
|
75
|
94
|
30
|
|||||||||
EBITDA
(b)
|
$
|
123
|
$
|
(212
|
)
|
$
|
(260
|
)
|
$
|
(24
|
)
|
||
Capital
expenditures
|
$
|
242
|
$
|
119
|
$
|
161
|
$
|
134
|
Ten
Months Ended July
31, 2006 (d) |
Year
Ended September
30, 2005 (d) |
||||||
Unaudited
Proforma Statements of Operations Data:
|
|||||||
Revenues
|
10,658
|
$
|
11,111
|
||||
Cost
of revenue
|
5,275
|
6,305
|
|||||
Gross
profit
|
5,383
|
4,806
|
|||||
Operating
income
|
366
|
182
|
|||||
Net
income
|
339
|
154
|
|||||
Earnings
per
share:
Basic
|
$
|
0.05
|
$
|
0.02
|
|||
Diluted
|
$
|
0.04
|
$
|
0.02
|
|||
Weighted
average shares: Basic
|
7,134,998
|
7,614,527
|
|||||
Diluted
|
7,705,893
|
7,978,917
|
Other
Unaudited Proforma Financial Data:
|
Ten
Months Ended July
31, 2006 (d) |
Year
Ended September
30, 2005 (d) |
|||||
Net
income
|
$
|
339
|
$
|
154
|
|||
Income
tax provision
|
46
|
27
|
|||||
Interest
expense
|
13
|
3
|
|||||
Depreciation
|
106
|
166
|
|||||
Amortization
of intangibles
|
176
|
228
|
|||||
EBITDA
(b)
|
$
|
680
|
$
|
578
|
As
of July 31, 2006 Historical
|
As
of July 31, 2006 Pro
Forma (d) |
||||||
Balance
Sheet Data:
|
|||||||
Working
capital
|
$
|
(1,092
|
)
|
$
|
10,713
|
||
Total
assets
|
$
|
9,977
|
$
|
24,556
|
|||
Total
liabilities
|
$
|
3,596
|
$
|
1,604
|
|||
Total
shareholders’ equity
|
$
|
6,381
|
$
|
22,952
|
(a) |
On
December 15, 2004 we acquired iapps. The results of operations of
iapps
are included in our consolidated financial statements from the date
of
acquisition.
|
(b) |
“EBITDA”
is defined as net income (loss), plus provision for income taxes,
interest
expense, depreciation and amortization of intangibles. EBITDA is
a
non-Generally Accepted Accounting Principle (“GAAP”) financial measure and
is a numeric measure of our financial performance, financial position
or
cash flows. EBITDA is used here because we believe it is an effective
indicator of our ability to fund growth and measure cash flows from
operations. However, EBITDA should not be considered as an alternative
to
net income as a measure of operating results or cash flow as a measure
of
liquidity in accordance with GAAP. Similarly adjusted, our computation
of
EBITDA may not be comparable to comparable measures of other companies.
|
(c) |
On
April 24, 2006 we acquired New Tilt. The results of operations of
New Tilt
are included in our consolidated financial statements from the date
of the
acquisition.
|
(d) |
On
April 24, 2006 and December 15, 2004 we acquired New Tilt and iapps,
respectively. The results of operations of New Tilt and iapps are
included in our consolidated financial statements from the dates
of the
acquisitions. Subsequent to the sale of 3,000,000 shares of our common
stock in this offering, we intend to acquire Objectware. A portion
of the
proceeds of this offering will be used to retire indebtedness. The
accompanying summary financial data reflect the effect of these
transactions as if they occurred at the beginning of the most recent
fiscal year on October 1, 2004 and as of the beginning of the interim
period as of October 1, 2005.
|
· |
harm
to our reputation;
|
· |
lost
sales;
|
· |
delays
in commercial release;
|
· |
product
liability claims;
|
· |
contractual
disputes;
|
· |
negative
publicity;
|
· |
delays
in or loss of market acceptance of our products;
|
· |
license
terminations or renegotiations; or
|
· |
unexpected
expenses and diversion of resources to remedy errors.
|
· |
be
expensive and time consuming to defend;
|
· |
result
in negative publicity;
|
· |
force
us to stop licensing our products that incorporate the challenged
intellectual property;
|
· |
require
us to redesign our products;
|
· |
divert
management’s attention and our other resources; or
|
· |
require
us to enter into royalty or licensing agreements in order to obtain
the
right to use necessary technologies, which may not be available on
terms
acceptable to us, if at all.
|
· |
user
privacy;
|
· |
the
pricing and taxation of goods and services offered over the
Internet;
|
· |
the
content of Websites;
|
· |
copyrights;
|
· |
consumer
protection, including the potential application of “do not call” registry
requirements on customers and consumer backlash in general to direct
marketing efforts of customers;
|
· |
the
online distribution of specific material or content over the Internet;
or
|
· |
the
characteristics and quality of products and services offered over
the
Internet.
|
· |
variations
in our operating results;
|
· |
changes
in the general economy and in the local economies in which we
operate;
|
· |
the
departure of any of our key executive officers and
directors;
|
· |
the
level and quality of securities analysts’ coverage for our common
stock;
|
· |
announcements
by us or our competitors of significant acquisitions, strategic
partnerships, joint ventures or
|
capital commitments; |
· |
changes
in the federal, state, and local laws and regulations to which we
are
subject; and
|
· |
future
sales of our common stock.
|
· |
Our
inability to attract new customers at a steady or increasing
rate;
|
· |
Our
inability to provide and maintain customer
satisfaction;
|
· |
Price
competition or higher prices in the
industry;
|
· |
Higher
than expected costs of operating our
business;
|
· |
The
amount and timing of operating costs and capital expenditures relating
to
the expansion of our business, operations and infrastructure are
greater
and higher than expected;
|
· |
Technical,
legal and regulatory difficulties with respect to our business
occur; and
|
· |
General
downturn in economic conditions that are specific to our market,
such as a
decline in
information technology spending.
|
· |
authorizing
the issuance of preferred stock that can be created and issued by
our
Board of Directors without prior shareholder approval, commonly referred
to as “blank check” preferred stock, with rights senior to those of our
common stock;
|
· |
limiting
the persons who can call special shareholder
meetings;
|
· |
establishing
advance notice requirements to nominate persons for election to our
Board
of Directors or to propose matters that can be acted on by shareholders
at
shareholder meetings;
|
· |
the
lack of cumulative voting in the election of
directors;
|
· |
requiring
an advance notice of any shareholder business before the annual meeting
of
our shareholders;
|
· |
filling
vacancies on our Board of Directors by action of a majority of the
directors and not by the
shareholders, and
|
· |
the
division of our Board of Directors into three classes with each class
of
directors elected for a staggered three year term. In addition, our
organizational documents will contain a supermajority voting requirement
for any amendments of the staggered board
provisions.
|
Use
|
Amount
(in
thousands)
|
Percent
|
|||||
Repayment
of indebtedness (approximate)
|
$
|
2,800
|
19.8
|
%
|
|||
Payment
of cash portion in connection with the acquisition of Objectware,
together
with expenses associated with that acquisition
|
2,955
|
20.9
|
%
|
||||
General
corporate purposes, including working capital
|
8,380
|
59.3
|
%
|
||||
Total
|
$
|
14,135
|
100.0
|
%
|
· |
“Actual”
is based on our unaudited financial statements as of July 31,
2006.
|
· |
“Adjustments”
gives the effect of the sale of shares in this offering and the
application of the net proceeds from this offering as described under
“Use
of Proceeds” on page 18 and assumes that the underwriters do not exercise
their over-allotment option and is further adjusted for issuances
of
shares and options pursuant to the completion of the acquisition
of
Objectware.
|
· |
“As
Adjusted” gives the net effect of the adjustments to actual for the sale
of shares in this offering and the application of the net proceeds
from
this offering as described under “Use of Proceeds” on page
18 assuming that the underwriters do not exercise their
over-allotment option, and the effect for issuances of shares and
options
pursuant to the completion of the acquisition of
Objectware.
|
July
31, 2006
(Amounts
in thousands)
|
||||||||||
|
Actual
|
Adjustments
(a)
|
As
Adjusted
|
|||||||
Long-term
obligations, including current maturities
|
$
|
2,715
|
$
|
(2,546
|
)
|
$
|
169
|
|||
Shareholders’
equity:
|
||||||||||
Common
stock $.001 par value: 15,000,000 shares authorized, 4,233,833 shares
issued and outstanding (actual) and 20,000,000 shares authorized,
7,233,833
shares
issued and outstanding (as adjusted)
|
4
|
3
|
7
|
|||||||
Preferred
stock, $.001 par value: 1,000,000 shares authorized, no shares issued
and
outstanding
|
—
|
—
|
—
|
|||||||
Paid-in
capital
|
9,790
|
17,015
|
26,805
|
|||||||
Accumulated
deficit
|
(3,413
|
)
|
(612
|
)(b)
|
(4,025
|
)
|
||||
Total
equity
|
6,381
|
16,406
|
22,787
|
|||||||
|
||||||||||
Total
capitalization
|
$
|
9,096
|
$
|
13,860
|
$
|
22,956
|
||||
|
(a) |
Gives
effect to the sale of an aggregate 3,000,000 shares of common stock
in
this offering resulting in net proceeds of $14,135,000
to
us, assuming no exercise of the underwriters’ over-allotment option, and
issuance of an additional 490,909 contingent shares of common stock
upon
the completion of the acquisition of Objectware at an assumed price
of
$5.50 per share combined with $180 representing conversion of Objectware
options to Bridgeline options.
|
(b) |
Includes
expensing the unamortized debt discount of $254, unamortized values
of
Underwriter Debt Warrants, as defined, of $53, unamortized financing
fees
of $263, and deferred offering costs of
$42.
|
Bridgeline
Software, Inc. Unaudited Condensed Pro Forma Financial Data
|
|||||||||||||||||||
Unaudited
Ten Months Ended July 31,
|
Year
Ended September 30,
|
||||||||||||||||||
Unaudited
|
|||||||||||||||||||
Historical
|
Pro
Forma
|
Historical
|
Historical
|
Pro
Forma
|
Historical
|
||||||||||||||
2006
|
2006
(b)
|
2005
|
2005
|
2005
(a)
|
2004
|
||||||||||||||
Income
Statement Data:
|
|||||||||||||||||||
Revenues
|
$
|
6,603
|
$
|
10,658
|
$
|
4,645
|
$
|
5,769
|
$
|
11,111
|
$
|
4,888
|
|||||||
Cost
of revenue
|
2,924
|
5,275
|
2,527
|
3,113
|
6,305
|
2,290
|
|||||||||||||
Gross
profit
|
3,679
|
5,383
|
2,118
|
2,656
|
4,806
|
2,598
|
|||||||||||||
Income
(loss) from operations
|
$
|
(115
|
)
|
$
|
366
|
$
|
(373
|
)
|
$
|
(461
|
)
|
$
|
182
|
$
|
(132
|
)
|
|||
Net
income (loss)
|
$
|
(698
|
)
|
$
|
339
|
$
|
(413
|
)
|
$
|
(517
|
)
|
$
|
154
|
$
|
(178
|
)
|
|||
Net
income (loss) per share:
|
|||||||||||||||||||
Basic
|
$
|
(0.17
|
)
|
$
|
0.05
|
$
|
(0.11
|
)
|
$
|
(0.14
|
)
|
$
|
0.03
|
$
|
(0.06
|
)
|
|||
Diluted
|
$
|
(0.17
|
)
|
$
|
0.04
|
$
|
(0.11
|
)
|
$
|
(0.14
|
)
|
$
|
0.02
|
$
|
(0.06
|
)
|
|||
Balance
Sheet Data:
|
|||||||||||||||||||
Current
assets
|
$
|
2,379
|
$
|
12,173
|
$
|
1,269
|
$
|
935
|
$
|
2,030
|
$
|
1,878
|
|||||||
Total
assets
|
$
|
9,977
|
$
|
24,556
|
$
|
7,119
|
$
|
6,739
|
$
|
14,820
|
$
|
4,959
|
|||||||
Current
liabilities
|
$
|
3,471
|
$
|
1,460
|
$
|
1,393
|
$
|
1,114
|
$
|
1,122
|
$
|
980
|
|||||||
Total
liabilities
|
$
|
3,596
|
$
|
1,604
|
$
|
1,424
|
$
|
1,147
|
$
|
1,423
|
$
|
1,085
|
|||||||
Total
shareholders’ equity
|
$
|
6,381
|
$
|
22,972
|
$
|
5,695
|
$
|
5,592
|
$
|
13,020
|
$
|
3,874
|
|||||||
Total
liabilities and shareholders’ equity
|
$
|
9,977
|
$
|
24,556
|
$
|
7,119
|
$
|
6,739
|
$
|
14,820
|
$
|
4,959
|
|||||||
Cash
Flow Data:
|
|||||||||||||||||||
Net
cash used in operating activities
|
$
|
(493
|
)
|
$
|
(661
|
)
|
$
|
(432
|
)
|
$
|
(378
|
)
|
|||||||
Acquisitions,
net of cash acquired
|
$
|
(554
|
)
|
$
|
(308
|
)
|
$
|
(308
|
)
|
$
|
—
|
||||||||
Net
cash used in investing activities
|
$
|
(754
|
)
|
$
|
(540
|
)
|
$
|
(543
|
)
|
$
|
(226
|
)
|
|||||||
Proceeds
from issuance of stock
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
1,640
|
|||||||||||
Proceeds
from issuance of short-term debt
|
$
|
2,433
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||||||||
Net
increase (decrease) in cash for the period
|
$
|
833
|
$
|
(863
|
)
|
$
|
(818
|
)
|
$
|
858
|
(a) |
Reflects
the April 24, 2006 and December 15, 2005 acquisitions of New Tilt
and
iapps, respectively, and the probable acquisition
of Objectware, and this offering.
|
(b) |
Reflects
the April 24, 2006 acquisition of New Tilt, the probable acquisition
of
Objectware and this offering.
|
Without
giving effect
to
the release of the
closing
escrow in
connection
with the
acquisition
of
Objectware
|
After
giving effect
to
the release of the
closing
escrow in
connection
with the
acquisition
of
Objectware
|
||||||
Assumed
initial public offering price per share
|
$
|
5.50
|
$
|
5.50
|
|||
Net
tangible book value (deficit) per share before the
offering
|
(0.20
|
)
|
(0.20
|
)
|
|||
Reduction
in deficit in net tangible book value per share attributable to the
offering
|
2.04
|
2.04
|
|||||
Reduction
in deficit in net tangible book value per share attributable to the
acquisition of Objectware
|
—
|
0.07
|
|||||
Pro
forma net tangible book value per share after the offering
|
1.84
|
1.91
|
|||||
Dilution
per share to new investors
|
$
|
3.66
|
$
|
3.59
|
Consideration
|
||||||||||||||||
Shares
|
Purchased
|
Total
|
Price/Share
|
|||||||||||||
Number
|
Percent
|
Amount
|
Percent
|
Average
|
||||||||||||
Officers,
directors, promoters and affiliated persons
|
1,523,863
|
20.95
|
%
|
$
|
1,549,675
|
8.59
|
%
|
$
|
1.02
|
|||||||
Other
existing shareholders
|
2,749,970
|
37.81
|
%
|
9,293,409
|
33.99
|
%
|
$
|
3.38
|
||||||||
New
Investors
|
3,000,000
|
41.24
|
%
|
16,500,000
|
91.41
|
%
|
$
|
5.50
|
||||||||
Total
|
7,273,833
|
100.0
|
%
|
$
|
27,343,084
|
100.0
|
%
|
$
|
3.76
|
|||||||
|
Unaudited
Ten Months
Ended
July 31,
|
Year
Ended September 30,
|
||||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||
2006
(a)
|
2005
|
2005
|
2004
|
||||||||||
Income
Statement Data:
|
|||||||||||||
Revenues
|
$
|
6,603
|
$
|
4,645
|
$
|
5,769
|
$
|
4,888
|
|||||
Cost
of revenue
|
2,924
|
2,527
|
3,113
|
2,290
|
|||||||||
Gross
profit
|
3,679
|
2,118
|
2,656
|
2,598
|
|||||||||
Loss
from operations
|
$
|
(115
|
)
|
$
|
(373
|
)
|
$
|
(461
|
)
|
$
|
(132
|
)
|
|
Net
loss
|
$
|
(698
|
)
|
$
|
(413
|
)
|
$
|
(517
|
)
|
$
|
(178
|
)
|
|
Net
loss per share:
|
|||||||||||||
Basic
and diluted
|
$
|
(0.17
|
)
|
$
|
(0.11
|
)
|
$
|
(0.14
|
)
|
$
|
(0.06
|
)
|
|
Balance
Sheet Data:
|
|||||||||||||
Current
assets
|
$
|
2,379
|
$
|
1,269
|
$
|
935
|
$
|
1,878
|
|||||
Definite-lived
intangible aseets, net
|
$
|
325
|
$
|
349
|
$
|
331
|
$
|
72
|
|||||
Goodwill
|
$
|
6,310
|
$
|
5,097
|
$
|
5,097
|
$
|
2,740
|
|||||
Total
assets
|
$
|
9,977
|
$
|
7,119
|
$
|
6,739
|
$
|
4,959
|
|||||
Senior
notes payable, net of discount
|
$
|
2,546
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||
Current
liabilities
|
$
|
3,471
|
$
|
1,393
|
$
|
1,114
|
$
|
980
|
|||||
Total
liabilities
|
$
|
3,596
|
$
|
1,424
|
$
|
1,147
|
$
|
1,085
|
|||||
Total
shareholders’ equity
|
$
|
6,381
|
$
|
5,695
|
$
|
5,592
|
$
|
3,874
|
|||||
Total
liabilities and shareholders’ equity
|
$
|
9,977
|
$
|
7,119
|
$
|
6,739
|
$
|
4,959
|
Unaudited
|
|||||||
Unaudited
Ten
|
Year
Ended
|
||||||
Months
Ended
|
September
30,
|
||||||
July
31, 2006 (b)
|
2005
(c)
|
||||||
Pro
Forma
|
Pro
Forma
|
||||||
(in
thousands)
|
(in
thousands)
|
||||||
Income
Statement Data:
|
|||||||
Revenues
|
$
|
10,658
|
$
|
11,111
|
|||
Cost
of revenue
|
5,275
|
6,305
|
|||||
Gross
profit
|
5,383
|
4,806
|
|||||
Sales
and marketing expense
|
2,270
|
2,197
|
|||||
Technology
development
|
140
|
43
|
|||||
General
and administrative expense
|
2,607
|
2,384
|
|||||
Income from
operations
|
$
|
366
|
$
|
182
|
|||
Net
income
|
$
|
339
|
$
|
154
|
|||
Net
income per share:
|
|||||||
Basic
|
$
|
0.05
|
$
|
0.02
|
|||
Diluted
|
$
|
0.04
|
$
|
0.02
|
|||
Balance
Sheet Data:
|
|||||||
Current
assets
|
$
|
12,173
|
$
|
2,030
|
|||
Definite-lived
intangible aseets, net
|
$
|
734
|
$
|
831
|
|||
Goodwill
|
$
|
10,440
|
$
|
11,003
|
|||
Total
assets
|
$
|
24,556
|
$
|
14,638
|
|||
Short-term
debt, net of discount
|
$
|
—
|
$
|
151
|
|||
Current
liabilities
|
$
|
1,460
|
$
|
1,499
|
|||
Total
liabilities
|
$
|
1,604
|
$
|
1,800
|
|||
Total
shareholders’ equity
|
$
|
22,952
|
$
|
12,838
|
|||
Total
liabilities and shareholders’ equity
|
$
|
24,556
|
$
|
14,638
|
(a) |
On
April 25, 2006, we acquired New Tilt. The operations of New Tilt
have been
included in our consolidated financial statements from the date of
acquisition.
|
(b) |
Reflects
the probable acquisition of Objectware and the
offering.
|
(c) |
On
December 15, 2004, we acquired iapps, on April 24, 2006, we acquired
New
Tilt and, subsequent to the sale of 3,000,000 shares of our common
stock
in this offering, we intend to acquire Objectware. A portion of the
proceeds will be used to retire indebtedness. The accompanying pro
forma
adjustments reflect these transactions as if they occurred at the
beginning of the most recent fiscal year on October 1, 2004 and as
of the
beginning of the interim period as of October 1,
2005.
|
Fiscal
Ten Months Ended July 31
|
Fiscal
Year Ended September 30,
|
|||||||
2006
|
2005
|
2005
|
2004
|
|||||
Web Services |
81.1%
|
72.7%
|
72.5%
|
78.2%
|
||||
Managed Services |
13.6
|
21.3
|
21.6
|
21.8
|
||||
Subscription Revenue |
5.3
|
6.0
|
5.9
|
—
|
||||
100.0%
|
100.0%
|
100.0%
|
100.0%
|
· |
economic
conditions affecting the budget priorities of our
customers;
|
· |
the
acquisition or cancellation of significant clients;
|
· |
worldwide
acts of terrorism effecting U.S. markets;
and
|
· |
seasonality.
|
· |
Allowance
for doubtful accounts;
|
· |
Revenue
recognition;
|
· |
Accounting
for goodwill and other intangible assets;
and
|
· |
Accounting
for stock-based compensation.
|
Fiscal
Ten Months
Ended
July 31,
|
|||||||
2006
|
2005
|
||||||
Revenue
|
100
|
%
|
100
|
%
|
|||
Cost
of revenue
|
44
|
54
|
|||||
Gross
profit
|
56
|
46
|
|||||
Operating
expenses:
|
|||||||
Sales
and marketing
|
34
|
35
|
|||||
General
and administrative
|
22
|
18
|
|||||
Technology
development
|
2
|
1
|
|||||
Loss
from operations
|
(2
|
)
|
(8
|
)
|
|||
Interest
income (expense), net
|
(9
|
)
|
(1
|
)
|
|||
Net
loss
|
(11
|
%)
|
(9
|
%)
|
|
|
|
Net
change
2006
vs. 2005
|
||||||||||
Fiscal
Ten Months Ended July 31,
|
2006
|
2005
|
$
|
%
|
|||||||||
Total
revenue
|
$
|
6,603
|
$
|
4,645
|
$
|
1,958
|
42
|
%
|
|||||
Cost
of revenue
|
2,924
|
2,527
|
397
|
16
|
|||||||||
Gross
profit
|
$
|
3,679
|
$
|
2,118
|
$
|
1,561
|
74
|
Net
change
2006 vs. 2005
|
|||||||||||||
Fiscal
Ten Months Ended July 31,
|
2006
|
2005
|
$
|
%
|
|||||||||
Web
Services
|
$
|
5,355
|
$
|
3,377
|
$
|
1,978
|
59
|
%
|
|||||
Managed
Services
|
898
|
989
|
(91
|
)
|
(9
|
)
|
|||||||
Subscription
Revenue
|
350
|
279
|
71
|
25
|
|||||||||
Revenue
|
$
|
6,603
|
$
|
4,645
|
$
|
1,958
|
42
|
%
|
Fiscal
Years
Ended
September. 30,
|
|||||||
|
2005
|
2004
|
|||||
Revenue
|
100
|
%
|
100
|
%
|
|||
Cost
of revenue
|
54
|
47
|
|||||
Gross
profit
|
46
|
53
|
|||||
Operating
expenses:
|
|||||||
Sales
and marketing
|
36
|
38
|
|||||
General
and administrative
|
17
|
17
|
|||||
Technology
development
|
1
|
1
|
|||||
Loss
from operations
|
(8
|
)
|
(3
|
)
|
|||
Interest
income (expense), net
|
(1
|
)
|
(1
|
)
|
|||
Net
loss
|
(9
|
%)
|
(4
|
%)
|
|
Net
change
2005
vs. 2004
|
||||||||||||
Fiscal
Year Ended September 30,
|
2005
|
2004
|
$
|
%
|
|||||||||
Total
revenue
|
$
|
5,769
|
$
|
4,888
|
$
|
881
|
18
|
%
|
|||||
Cost
of revenue
|
3,113
|
2,290
|
823
|
36
|
|||||||||
Gross
profit
|
$
|
2,656
|
$
|
2,598
|
$
|
58
|
2
|
%
|
|||||
Net
change
2005
vs. 2004
|
|||||||||||||
Fiscal
Year Ended
September 30,
|
2005
|
2004
|
$
|
%
|
|||||||||
Web
Services
|
$
|
4,182
|
$
|
3,820
|
$
|
362
|
9
|
%
|
|||||
Managed
Services
|
1,244
|
1,068
|
176
|
16
|
|||||||||
Subscription
Revenue
|
343
|
—
|
343
|
343
|
|||||||||
Revenue
|
$
|
5,769
|
$
|
4,888
|
$
|
881
|
18
|
%
|
Payment
Obligations by Year
|
Remainder
FY
2006
|
FY
07
|
FY
08
|
FY
09
|
FY
10
|
FY
11
|
Totals
|
|||||||||||||||||||
Operating
leases
|
|
$
|
80
|
$
|
259
|
|
$
|
234
|
|
$
|
237
|
|
$
|
239
|
$
|
230
|
|
$
|
1,279
|
|||||||
Capital
lease obligations
|
|
|
11
|
|
66
|
|
|
67
|
|
|
40
|
|
|
13
|
|
1
|
|
|
198
|
|||||||
Short-term
debt (including interest)
|
|
|
47
|
|
2,991
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
3,038
|
|||||||
Total
|
|
$
|
138
|
$
|
3,316
|
|
$
|
301
|
|
$
|
277
|
|
$
|
252
|
$
|
231
|
|
$
|
4,515
|
· |
a
Standard of Excellence Award and Outstanding Website Awards in the
Web
Marking Association’s WebAward Competition, an annual competition that
names the best Web applications in 96 industries;
|
· |
being
selected as a finalist for numerous MITX Awards from the Massachusetts
Innovation & Technology Exchange, which acknowledge the best creative
and technological accomplishments in interactive technology emerging
from
New England;
|
· |
being
among the winners of several Axiem Awards, an international
award program created to honor those who produce the best in all
forms of
interactive
technology; and
|
· |
winning
Bronze and Merit Awards at the One Show Interactive Awards from The
One
Club for Art and Copy, Inc., which honor creativity and effectiveness
in
global communications in the area of interactive technology.
|
(1)
|
the
complementary technical ability to market, sell, and install Web-based
software tools in their particular metropolitan market areas;
and
|
(2)
|
an
established base of customers with local market presence that can
potentially accelerate our time to market in geographic areas where
we do
not currently operate.
|
· |
In
December 2000, we acquired Streamline Communications, a Boston,
Massachusetts-based company.
|
· |
In
February 2002, we acquired Lead Dog Digital, Inc., a New York, New
York-based company.
|
· |
In
December 2004, we acquired Interactive Applications, Inc., a Washington,
D.C.-based company.
|
· |
In
April 2006, we acquired New Tilt, Inc., a Cambridge, Massachusetts-based
company.
|
· |
Many
of the existing Web applications were developed from 1999 to 2003,
utilizing older Web development technologies such as HTML. The Web
applications developed were limited and did not provide significant
operational efficiencies. Since 1999, there have been technological
advancements in dynamic Web logic, open source standards, and broadband
technologies. We believe these technological advancements combined
with a
resurgence in information technology spending will fuel strong investments
towards redeveloping legacy Web
applications.
|
· |
Many
organizations will likely continue to experiment and expand their
use of
Web services by utilizing their existing base of technologies until
volume
and levels of complexity force review and investment, in particular
for
service-oriented management
solutions.
|
· |
A
heavy influence on the timing and amounts of when organizations may
determine to invest relates to the waves of major versions released
by key
vendors. For example, organizations may determine to wait until Microsoft
meets market commitments on its Longhorn releases, and SAP customers
may
be interested in investing as prior versions of software are retired
from
support.
|
· |
The
conversion of software pricing models from traditional license models
to
more subscription-oriented methods will influence the rate of growth
and
overall size of the market, especially in the context of hosted
applications and service, creating a normalizing
effect.
|
|
Source:
IDC,
May 2006
|
Source: IDC, June 2006 |
· |
Usability
audits
|
· |
Information
architecture
|
· |
Process
analysis and optimization
|
· |
Interface
design
|
· | User testing |
· |
Internet
sites
|
· |
Intranet
sites
|
· |
Extranet
sites
|
· |
eCommerce
|
· |
Database
development
|