UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended December 31, 2010
OR
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
COMMISSION FILE NUMBER: 000-23043
PERVASIVE
SOFTWARE INC.
(Exact name of registrant as specified in its charter)
|
|
|
DELAWARE
|
|
74-2693793
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification Number)
|
12365 Riata Trace Parkway, Bldg. B
Austin, Texas 78727
(Address of principal executive offices) (Zip code)
(512) 231-6000
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15d 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
þ
No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
¨
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer
or a non-accelerated filer or a smaller reporting company. See definition of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
|
|
|
|
|
|
|
Large Accelerated Filer
|
|
¨
|
|
Accelerated Filer
|
|
þ
|
|
|
|
|
Non-Accelerated Filer
|
|
¨
(Do not check if a smaller reporting company)
|
|
Smaller Reporting Company
|
|
þ
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨
No
þ
As of January 25, 2011 there were 16,044,046 shares of the Registrants common stock
outstanding.
PERVASIVE SOFTWARE INC.
FORM 10-Q
INDEX
2
PART I. FINANCIAL INFORMATION
ITEM 1.
|
FINANCIAL STATEMENTS
|
PERVASIVE SOFTWARE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
December 31,
2010
|
|
|
June 30,
2010
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
8,278
|
|
|
$
|
7,086
|
|
Marketable securities
|
|
|
28,944
|
|
|
|
33,267
|
|
Trade accounts receivable, net
|
|
|
8,580
|
|
|
|
8,051
|
|
Deferred income tax assets
|
|
|
873
|
|
|
|
650
|
|
Prepaid expenses and other current assets
|
|
|
1,031
|
|
|
|
1,443
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
47,706
|
|
|
|
50,497
|
|
Property and equipment, net
|
|
|
1,278
|
|
|
|
1,333
|
|
Purchased intangibles, net
|
|
|
1,877
|
|
|
|
2,140
|
|
Goodwill
|
|
|
38,508
|
|
|
|
38,508
|
|
Deferred income tax assets
|
|
|
1,594
|
|
|
|
1,301
|
|
Other assets
|
|
|
599
|
|
|
|
786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
91,562
|
|
|
$
|
94,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
653
|
|
|
$
|
677
|
|
Accrued payroll and payroll related costs
|
|
|
2,370
|
|
|
|
2,008
|
|
Deferred rent and lease related accruals
|
|
|
338
|
|
|
|
534
|
|
Other accrued expenses
|
|
|
1,560
|
|
|
|
1,089
|
|
Deferred revenues
|
|
|
7,645
|
|
|
|
7,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
12,566
|
|
|
|
11,574
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
63,890
|
|
|
|
68,889
|
|
Retained earnings
|
|
|
15,106
|
|
|
|
14,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
78,996
|
|
|
|
82,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
91,562
|
|
|
$
|
94,565
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
3
PERVASIVE SOFTWARE INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
December 31,
|
|
|
Six months
ended
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product licenses
|
|
$
|
7,119
|
|
|
$
|
7,393
|
|
|
$
|
13,773
|
|
|
$
|
15,728
|
|
Service and other
|
|
|
4,538
|
|
|
|
4,215
|
|
|
|
8,875
|
|
|
|
8,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
11,657
|
|
|
|
11,608
|
|
|
|
22,648
|
|
|
|
23,808
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product license revenues
|
|
|
354
|
|
|
|
308
|
|
|
|
659
|
|
|
|
557
|
|
Cost of service and other revenues
|
|
|
1,242
|
|
|
|
1,209
|
|
|
|
2,444
|
|
|
|
2,382
|
|
Sales and marketing
|
|
|
5,316
|
|
|
|
4,574
|
|
|
|
9,919
|
|
|
|
9,276
|
|
Research and development
|
|
|
2,845
|
|
|
|
2,974
|
|
|
|
5,704
|
|
|
|
5,918
|
|
General and administrative
|
|
|
1,318
|
|
|
|
1,162
|
|
|
|
2,584
|
|
|
|
2,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
11,075
|
|
|
|
10,227
|
|
|
|
21,310
|
|
|
|
20,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
582
|
|
|
|
1,381
|
|
|
|
1,338
|
|
|
|
3,120
|
|
|
|
|
|
|
Interest and other income, net
|
|
|
14
|
|
|
|
47
|
|
|
|
24
|
|
|
|
149
|
|
Income tax provision
|
|
|
(174
|
)
|
|
|
(450
|
)
|
|
|
(437
|
)
|
|
|
(1,028
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
422
|
|
|
$
|
978
|
|
|
$
|
925
|
|
|
$
|
2,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.03
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.03
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
4
PERVASIVE SOFTWARE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six months
ended
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
Cash from operations
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
925
|
|
|
$
|
2,241
|
|
Adjustments to reconcile net income to net cash provided by operations:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
671
|
|
|
|
630
|
|
Stock-based compensation expense
|
|
|
866
|
|
|
|
870
|
|
Bad debt expense and other non-cash adjustments
|
|
|
156
|
|
|
|
|
|
Deferred income taxes
|
|
|
(517
|
)
|
|
|
(186
|
)
|
Changes in current operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
(678
|
)
|
|
|
286
|
|
Prepaid expenses and other current assets
|
|
|
579
|
|
|
|
101
|
|
Accounts payable and accrued liabilities
|
|
|
644
|
|
|
|
(1,118
|
)
|
Deferred revenue
|
|
|
376
|
|
|
|
464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operations
|
|
|
3,022
|
|
|
|
3,288
|
|
|
|
|
Cash from investing activities
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(345
|
)
|
|
|
(170
|
)
|
Sales and purchases of marketable securities, net
|
|
|
4,331
|
|
|
|
(7,193
|
)
|
Business acquisition
|
|
|
|
|
|
|
(2,611
|
)
|
Decrease in other assets
|
|
|
18
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
4,004
|
|
|
|
(9,954
|
)
|
|
|
|
Cash from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
407
|
|
|
|
191
|
|
Purchase of treasury stock
|
|
|
(6,286
|
)
|
|
|
(2,317
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(5,879
|
)
|
|
|
(2,126
|
)
|
|
|
|
Effect of exchange rate on cash and cash equivalents
|
|
|
45
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
1,192
|
|
|
|
(8,795
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
7,086
|
|
|
|
18,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
8,278
|
|
|
$
|
9,234
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
5
PERVASIVE SOFTWARE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(Unaudited)
1. General and Basis of Financial Statements
The condensed balance sheet as of June 30, 2010, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements include the accounts
of Pervasive Software Inc. and its majority-owned subsidiaries (collectively, the Company or Pervasive). All intercompany accounts and transactions have been eliminated in consolidation.
The financial statements included herein reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion
of management are necessary to fairly state the Companys financial position, results of operations and cash flows for the periods presented. These financial statements should be read in conjunction with the Companys consolidated
financial statements and notes thereto for the year ended June 30, 2010, which are contained in the Companys Annual Report filed on Form 10-K on September 13, 2010 (File No. 000-23043). The results of operations for the three and six
month periods ended December 31, 2010 and 2009 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year.
2. Earnings Per Share
The following table sets forth the computation of
basic and diluted earnings per share (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
December 31,
|
|
|
Six months
ended
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
422
|
|
|
$
|
978
|
|
|
$
|
925
|
|
|
$
|
2,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share weighted average shares
|
|
|
14,989
|
|
|
|
16,693
|
|
|
|
15,183
|
|
|
|
16,793
|
|
Effect of dilutive securities
|
|
|
905
|
|
|
|
840
|
|
|
|
841
|
|
|
|
861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per share adjusted weighted average shares and assumed conversions
|
|
|
15,894
|
|
|
|
17,533
|
|
|
|
16,024
|
|
|
|
17,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.03
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.03
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. Cash, Cash Equivalents and Short-term Investments
The Company considers all highly liquid investment securities with an original maturity of three months or less at the date of purchase to
be cash equivalents.
Marketable securities are classified as available for sale, excluding cash equivalents as
described above, and are recorded at estimated fair value with any unrealized gains or losses included in other comprehensive income (loss). Realized gains and losses are computed based on the specific identification method. Realized gains and
losses were not material for the periods presented.
Fair value is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement date. The inputs used to measure fair value are classified into the following hierarchy:
1.
|
Level 1 Inputs quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to obtain at the measurement date.
This level provides the most reliable evidence of fair value.
|
2.
|
Level 2 Inputs inputs other than quoted prices included within Level 1 that are directly or indirectly observable for the asset or liability. Level 2 assets
consist of marketable debt and equity instruments with quoted market prices that are traded in less active markets or priced using a quoted market price for similar instruments. Examples of assets currently utilizing Level 2 inputs are U.S. agency
securities, commercial paper and municipal bonds.
|
3.
|
Level 3 Inputs Used to measure the fair value of assets and liabilities for which little, if any, market activity exists at the measurement date. These inputs
reflect the reporting entitys own assumptions about the assumptions that market participants would use in pricing the asset or liability.
|
Marketable securities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
June 30, 2010
|
|
|
|
Fair
Value
Hierarchy
|
|
|
Cost
|
|
|
Unrealized
Gain
(Loss)
|
|
|
Estimated
Fair
Value
|
|
|
Cost
|
|
|
Unrealized
Gain
(Loss)
|
|
|
Estimated
Fair
Value
|
|
Municipal bonds and U.S. government agencies
|
|
|
Level 2
|
|
|
$
|
28,943
|
|
|
$
|
1
|
|
|
$
|
28,944
|
|
|
$
|
33,274
|
|
|
$
|
(7
|
)
|
|
$
|
33,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,943
|
|
|
$
|
1
|
|
|
$
|
28,944
|
|
|
$
|
33,274
|
|
|
$
|
(7
|
)
|
|
$
|
33,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. Comprehensive Income
The components of comprehensive income are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
December 31,
|
|
|
Six months
ended
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net Income
|
|
$
|
422
|
|
|
$
|
978
|
|
|
$
|
925
|
|
|
$
|
2,241
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(7
|
)
|
|
|
(38
|
)
|
|
|
71
|
|
|
|
(10
|
)
|
|
|
|
|
|
Unrealized gain (loss) on investments
|
|
|
2
|
|
|
|
(32
|
)
|
|
|
8
|
|
|
|
(101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
417
|
|
|
$
|
908
|
|
|
$
|
1,004
|
|
|
$
|
2,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Stock Compensation
Stock-based compensation expense is computed using the fair value of stock-based awards measured at the grant date, recognized over the relevant service period, and is adjusted each period for anticipated
forfeitures. The grant date fair value of stock option awards is estimated using the Black-Scholes option pricing model, assuming no expected dividends and the following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
December 31,
|
|
|
Six months ended
December
31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Expected volatility (based on historical data)
|
|
|
24.2
|
%
|
|
|
30.9
|
%
|
|
|
25.6
|
%
|
|
|
31.4
|
%
|
|
|
|
|
|
Expected life in years
|
|
|
4.75
|
|
|
|
4
|
|
|
|
4.75
|
|
|
|
4
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
2.20
|
%
|
|
|
1.75
|
%
|
|
|
1.89
|
%
|
|
|
1.43
|
%
|
|
|
|
|
|
Fair value per award
|
|
$
|
1.30
|
|
|
$
|
1.29
|
|
|
$
|
1.29
|
|
|
$
|
1.36
|
|
As of
December 31, 2010, $2.4 million of unrecognized compensation costs related to non-vested awards is expected to be recognized over a weighted average period of approximately 1.7 years.
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. Common Stock and Stock Options
The vesting period for restricted stock is generally a three year period. Stock will remain restricted until the full vesting period has
expired. A summary of changes in restricted stock awards during the year ended June 30, 2010 and the six month period ended December 31, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Awards
|
|
Shares
|
|
|
Weighted
Average
Grant
Date
Fair
Value
|
|
|
Weighted
Average
Remaining
Vesting
Period
(in years)
|
|
|
Grant Date
Intrinsic
Value
|
|
Outstanding and unvested at June 30, 2009
|
|
|
1,059,500
|
|
|
$
|
3.85
|
|
|
|
2.03
|
|
|
$
|
4,076,155
|
|
Granted
|
|
|
223,000
|
|
|
|
5.06
|
|
|
|
3.22
|
|
|
|
1,128,720
|
|
Vested
|
|
|
(182,500
|
)
|
|
|
4.22
|
|
|
|
|
|
|
|
(770,831
|
)
|
Forfeited
|
|
|
(60,000
|
)
|
|
|
3.80
|
|
|
|
|
|
|
|
(228,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and unvested at June 30, 2010
|
|
|
1,040,000
|
|
|
|
4.04
|
|
|
|
1.78
|
|
|
|
4,206,044
|
|
Granted
|
|
|
50,000
|
|
|
|
5.18
|
|
|
|
3.92
|
|
|
|
259,000
|
|
Vested
|
|
|
(47,500
|
)
|
|
|
4.46
|
|
|
|
|
|
|
|
(211,625
|
)
|
Forfeited
|
|
|
(16,000
|
)
|
|
|
4.55
|
|
|
|
|
|
|
|
(72,720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and unvested at December 31, 2010
|
|
|
1,026,500
|
|
|
$
|
4.07
|
|
|
|
1.36
|
|
|
$
|
4,180,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The vesting period for stock options is generally a four-year period. Options are generally exercisable by
the holder only for the vested portion of each grant. A summary of changes in common stock options during the year ended June 30, 2010 and the six month period ended December 31, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Range of
Exercise
Prices
|
|
|
Weighted
Average Exercise
Price
|
|
Options outstanding, June 30, 2009
|
|
|
2,450,791
|
|
|
$
|
1.06 11.81
|
|
|
$
|
4.54
|
|
Granted
|
|
|
248,500
|
|
|
$
|
4.79 5.14
|
|
|
$
|
5.11
|
|
Exercised
|
|
|
(146,900
|
)
|
|
$
|
1.06 4.55
|
|
|
$
|
2.52
|
|
Surrendered
|
|
|
(182,875
|
)
|
|
$
|
3.60 11.81
|
|
|
$
|
6.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, June 30, 2010
|
|
|
2,369,516
|
|
|
$
|
1.06 8.37
|
|
|
$
|
4.58
|
|
Granted
|
|
|
79,000
|
|
|
$
|
4.78 5.18
|
|
|
$
|
5.04
|
|
Exercised
|
|
|
(133,578
|
)
|
|
$
|
1.18 4.60
|
|
|
$
|
3.04
|
|
Surrendered
|
|
|
(33,500
|
)
|
|
$
|
3.09 8.15
|
|
|
$
|
4.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, December 31, 2010
|
|
|
2,281,438
|
|
|
$
|
1.06 8.37
|
|
|
$
|
4.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following is additional information relating to outstanding options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of Exercise Price
|
|
December 31, 2010
|
|
|
June 30, 2010
|
|
|
December 31, 2010
|
|
$ 1.06 to $ 1.71
|
|
|
40,975
|
|
|
|
75,975
|
|
|
|
40,975
|
|
$ 2.31 to $ 4.00
|
|
|
966,038
|
|
|
|
1,055,616
|
|
|
|
801,193
|
|
$ 4.03 to $ 6.00
|
|
|
961,925
|
|
|
|
922,425
|
|
|
|
647,300
|
|
$ 6.90 to $ 8.37
|
|
|
312,500
|
|
|
|
315,500
|
|
|
|
312,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 1.06 to $ 8.37
|
|
|
2,281,438
|
|
|
|
2,369,516
|
|
|
|
1,801,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Goodwill and Other Intangible Assets
As of December 31, 2010, Pervasive had goodwill in the amount of $38.5 million associated with the acquisition of Data Junction. The Company evaluates intangible assets for potential impairment
annually in the fourth quarter, or more frequently if other indicators of impairment arise.
On July 31, 2009, the
Company completed the purchase of assets from Greenville, SC-based ChanneLinx, Inc., a Web-based electronic data interchange (Web DI) technology company, for total consideration of approximately $2.6 million in cash.
Other intangible assets, classified as purchased intangibles on the balance sheet, amounted to $1.9 million (net of accumulated
amortization of $7.1 million) as of December 31, 2010. These intangible assets consist of developed technology, including the $6.3 million value assigned to amortizable intangible assets related to developed technology in connection with the
acquisition of Data Junction during the second quarter of fiscal 2004 and $2.6 million related to the acquisition of ChanneLinx in the first quarter of fiscal 2010.
The Company amortizes intangible assets with definite useful lives on a straight-line basis over their estimated useful lives, generally five years. Amortization expense for the three and six months ended
December 31, 2010 was $0.1 million and $0.3 million, respectively. Amortization expense for intangible assets is anticipated to be approximately $0.5 million for each of the years ended June 30, 2011 through June 30, 2014.
8. Recently Issued Accounting Standards
In October 2009, the FASB issued Accounting Standards Update (ASU) 2009-13,
Multiple-Deliverable Revenue Arrangements a consensus of the FASB Emerging Issues Task Force
to amend certain
guidance in
FASB Accounting Standards
Codification
TM
(ASC) 605,
Revenue
Recognition
, 25, Multiple-Element Arrangements. The amended guidance in ASC 605-25 (1) modifies the separation criteria by eliminating the criterion that requires objective and reliable evidence of fair value for the
undelivered item(s), and (2) eliminates the use of the residual method of allocation and instead requires that arrangement consideration be allocated, at the inception of the arrangement, to all deliverables based on their relative selling
price. The amended guidance became effective for the Company on July 1, 2010. This guidance was adopted by the Company on July 1, 2010 and did not have a significant impact on its consolidated financial statements.
10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The FASB also issued ASU 2009-14,
Certain Revenue Arrangements That Include
Software Elements a consensus of the FASB Emerging Issues Task Force
, to amend the scope of arrangements under ASC 985,
Software
, 605, Revenue Recognition to exclude tangible products containing software
components and non-software components that function together to deliver a products essential functionality.
The
amended guidance in ASC 605-25 and ASC 985-605 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early application and retrospective
application permitted. The Company prospectively applied the amended guidance in ASC 985-605, concurrently with the amended guidance in ASC 605-25, beginning on July 1, 2010. This guidance was adopted by the Company on
July 1, 2010 and did not have a significant impact on its consolidated financial statements.
11
PERVASIVE SOFTWARE INC.
ITEM 2.
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The statements contained in this Report on Form 10-Q that are not purely historical statements are forward-looking statements within
the meaning of Section 21E of the Securities and Exchange Act of 1934, including statements regarding the Companys expectations, beliefs, hopes, intentions or strategies regarding the future. In some cases, you can identify
forward-looking statements by terminology such as may, will, should, could, expects, plans, anticipates, believes, estimates,
predicts, potential, or continue or the negative of such terms or other comparable terminology. These forward-looking statements involve risks and uncertainties. See Risk Factors in Part II,
Item 1A of this Report on Form 10-Q for a more detailed discussion of these risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements. We are under no duty to update any
forward-looking statements after the date of this filing on Form 10-Q to conform these statements to actual results, except as required by law.
Our Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) includes the following sections:
|
|
|
Executive Overview that discusses at a high level our business, our operating results and some of the trends that affect our business.
|
|
|
|
Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments underlying our financial
statements.
|
|
|
|
Results of Operations that begins with a table summarizing results of operations expressed as percentages of revenues for the periods presented,
followed by a more detailed discussion of our revenue and expenses.
|
|
|
|
Liquidity and Capital Resources which discusses key aspects of our statements of cash flows, changes in our balance sheets and our financial
commitments.
|
You should read this MD&A in conjunction with the Consolidated Financial Statements and
related Notes.
Executive Overview
Our Business
Pervasive Software (NASDAQ: PVSW) is a global data innovation
leader, delivering software to manage, integrate and analyze data, in the cloud or on-premises, throughout the entire data life cycle. The embeddable Pervasive PSQL database engine provides robust database reliability in a near-zero database
administration environment for packaged business applications. Pervasives multi-purpose data integration platform, available on-premises and in the cloud, accelerates the sharing of information between multiple data stores, applications, and
hosted business systems and allows customers to re-use the same software for diverse integration scenarios.
Our PSQL database
products generated approximately 60% of our revenue during fiscal year 2010. Channel adoption trends for version 10 of our Pervasive PSQL database have been good since its launch in September 2007, along with subsequent updates including Pervasive
PSQL v10.10, which is Microsoft Certified for Windows Server 2008, and Pervasive PSQL v10 SP3 for compatibility with Windows 7. Our most recent version, Pervasive PSQL v11, was released in September 2010. Pervasive PSQL v11 delivers improvements in
performance and increased simplicity of development, deployment and ease of use, including enhanced support for IPv6 and multi-core technologies.
12
Our Integration products generated approximately 35% of our revenue during fiscal year 2010
and are well-received by our existing and new customers, including end users and commercial cloud and on-premises software developers alike. Our solid results in both of our core product lines allow us to continue to fund our commitment to
innovation. We intend to continue to invest in innovation by allocating dedicated funds for research focused on new ways to serve our existing customers and attract new customers. Our innovation efforts in fiscal year 2008, 2009 and 2010 have
resulted in the introduction and further development of various new product and service offerings:
|
|
|
Pervasive
DataCloud
®
a scalable, adaptable platform for hosting Pervasive- or partner-developed services,
|
|
|
|
Pervasive DataSolutions
subscription-based integration as a service delivered on-premises or as a multi-tenant service hosted by
Pervasive and potentially by our ISV customers, and
|
|
|
|
Pervasive DataRush
our high-performance software platform for scalable data-intensive data preparation and analytics, designed to capture
the parallel processing capabilities of multi-core technologies.
|
For more than two decades, Pervasive
products have delivered value with a compelling combination of performance, flexibility, reliability and low total cost of ownership. In addition, significant portions of our database and integration flagship product lines are embeddable into
commercial applications for sale predominantly through a well-developed channel of independent software vendors (ISVs), Software-as-a-Service (SaaS) vendors, value-added resellers (VARs) and system integrators.
On July 31, 2009, we completed the purchase of assets from Greenville, SC-based ChanneLinx, Inc., a Web-based electronic data
interchange (Web DI) technology company, for total consideration of approximately $2.6 million in cash. The acquired business, which now operates as Pervasive Business Xchange, is complementary to the Companys other products and operations.
We develop, market, sell and support our offerings worldwide through our principal office in Austin, Texas and our
Greenville, South Carolina office and through international offices in Brussels, Frankfurt, Paris and London and a joint venture in Japan.
Our Operating Results
Our comparative results for the quarter ended December 31, 2010:
|
|
|
Revenue was $11.7 million, compared to $11.6 million for the second quarter of last fiscal year.
|
|
|
|
Net income was $0.4 million, or $0.03 diluted earnings per share, compared to $1.0 million, or $0.06 diluted earnings per share, for the second quarter
of last fiscal year.
|
|
|
|
We continued to generate positive cash flow from operations with $1.5 and $2.2 million in the second fiscal quarter ending December 31, 2010 and
2009, respectively. We ended the second quarter of fiscal year 2011 with $37.2 million in cash and marketable securities.
|
|
|
|
We acquired approximately 57,000 shares of our common stock, at a cost of approximately $0.3 million in the second fiscal quarter ending
December 31, 2010. Issued and outstanding shares of common stock as of December 31, 2010 totaled approximately 16.0 million.
|
Market Trends
Over the past 25 years, businesses of all sizes have
invested billions of dollars in application software that enabled them to automate and simplify their business processes. As the sales and implementation of these application packages proliferated, including increasingly heterogeneous environments
that use both cloud-based and on-premises software, organizations have faced increasing data and application infrastructure challenges and an entire software market segment
13
emerged to address these challenges. The growth of the infrastructure software market in the United States, we believe, can primarily be traced to the demand for technologies that extend the use
of established systems, enable the rapid deployment of new applications, and improve the ability to collaborate and communicate with customers and suppliers.
At the same time, we believe that the software markets as a whole are going through rapid change. The emergence of cloud-based infrastructure and applications is testament to the increasing demand for the
scalability and rapid deployment provided by the SaaS delivery model. Organizations increasingly demand software that provides ease of use, re-usability, standards compliance, and cost-effective maintenance. In this environment, having a
value orientationdelivering flexibility and performance with high return on investmentbecomes increasingly critical. As these market disruption trends continue, we believe infrastructure software will be a key ingredient for
all businesses as they seek to integrate and streamline their back-end systems and eliminate delays in the management and execution of critical processes. Infrastructure software includes, among other things, application development tools,
integration tools and solutions, business intelligence, database, and security solutions. Additionally, in uncertain economic environments, customers tend to be conservative about investments in new technology and remain loyal to proven
technologies.
In addition, the rapid proliferation of commodity multicore hardware, along with exploding data volumes,
provides opportunities for companies to leverage affordable servers that have multiple cores in a single box to extract value from large volumes of data but only if they have software that can effectively scale on multiple cores. The
inevitable performance gains traditionally delivered by faster processors under Moores Law now must rely on a new generation of infrastructure software that can scale on ever-updating multicore hardware platforms.
We believe these trends will favor Pervasive. We believe the market for data infrastructure software, in particular, is experiencing
significant market disruption due to the high cost of many competing, more labor-intensive solutions. We further believe well-established value leaders tend to prevail in cost-sensitive markets, and Pervasive, with its strengths in scalable data
management and integration solutions, is well-positioned to benefit from the trends in these markets. Pervasive also delivers the Pervasive DataRush platform that powers applications with seamless scalability on multicore servers. Separately,
updates to the flagship Pervasive PSQL database enable applications that embed the database to deliver significant performance improvements on dual-core, 4-core and 8-core servers. In addition, the ability to deliver preconfigured packaged
integration solutions offers the opportunity to attract non-technical users and address unmet market needs. While the global economic condition remains uncertain, we believe our value orientation and reputation as an established vendor with highly
reliable offerings positions Pervasive to continue to prosper.
Risks to our Success
Risks and uncertainties include, among others, our ability to attract and retain existing and/or new customers; our ability to issue new
products or releases of solutions that meet customers needs or achieve acceptance by the Companys customers; changes to current accounting policies which may have a significant, adverse impact upon the Companys financial results;
the introduction of new products by competitors or the entry of new competitors; our ability to preserve our key strategic relationships; our ability to hire and retain key employees; and economic and political conditions in the US and abroad. All
of these factors, as well as those discussed in Item 1A Risk Factors, may result in significant fluctuations in our quarterly operating results and/or our ability to sustain or increase our profitability.
Going Forward
In 2011,
the Company is focused on:
|
|
|
the continued marketing of our embedded database product, Pervasive PSQL v11, which was released in September 2010, and subsequent updates;
|
|
|
|
growing the sales of our integration product line both through direct sales and through highly leverageable indirect channels;
|
14
|
|
|
growing the Pervasive Business Xchange Web-based electronic data interchange business and customer base;
|
|
|
|
continuing the investment in new product and service innovation, including the further advancement of our innovation initiatives: Pervasive DataCloud
(to provide a scalable cloud-based platform for development and deployment of both Pervasive- and partner-developed on-demand services), Pervasive DataSolutions (to take advantage of market trends in Integration-as-a-Service and other on demand data
solutions), and Pervasive DataRush (to serve revolutionary next-generation analytics by capturing the parallel processing capabilities of proliferating multi-core technologies); and,
|
|
|
|
the continued focus on generating profitable results and positive cash flows, while we look for opportunities to reduce our issued and outstanding
shares, putting to work our approved share repurchase program.
|
We remain committed to a strategic balance
of investment in both our flagship and emerging products while also maintaining an intense focus on operating profitability.
Critical
Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and assumptions are reviewed periodically.
Actual results may differ from these estimates under different assumptions or conditions.
We believe the following represent
our critical accounting policies:
|
|
|
Sales Returns and Bad Debt Reserves
|
|
|
|
Goodwill and Other Intangible Assets
|
|
|
|
Stock-Based Compensation Expense
|
Revenue Recognition
We license our software through OEM license agreements with software developers, or ISVs and through
shrink-wrap software licenses, sold through ISVs, VARs, systems integrators and distributors, or direct to end users. Revenues are recognized when persuasive evidence of an agreement exists, delivery of the product has occurred, no significant
Company obligations with regard to implementation remain, the fee is fixed or determinable and collectability is probable. Revenues related to OEM license agreements involving nonrefundable fixed minimum license fees are generally recognized upon
delivery of the product master or first copy if no significant vendor obligations remain. Per copy royalties related to OEM license agreements in excess of a fixed minimum amount are recognized as revenue when such amounts are reported to us.
Revenue from post contract support and the right to receive unspecified upgrades is recognized ratably over the contract term. We generally provide telephone support to customers and end users in the 30 days immediately following the sale at no
additional charge and at a minimal cost per call. We accrue the cost of providing this support. Revenue from consulting services and training is recognized when the related services are performed. We enter into agreements with certain distributors
that provide for certain stock rotation and price protection rights. These rights allow the distributor to return product in a non-cash exchange for other products or for credits against future purchases. Revenue from shipping and handling is
recognized at the shipping date. Shipping and handling costs are included in costs of product license revenues in the Consolidated Statements of Income.
We recognize subscription revenues ratably over the contract terms beginning on the commencement date of each contract. As part of their subscription agreements, customers generally benefit from new
features and functionality with each release and are provided support at no additional cost.
15
Where software licenses are sold with maintenance or other services, we allocate the total
fee to the various elements based on the fair values of the elements. We determine the fair value of each element in the arrangement based on vendor-specific objective evidence (VSOE) of fair value. VSOE of fair value is based upon the
normal pricing and discounting practices for those products and services when sold separately and, for support services, is additionally measured by the renewal rate. If we do not have VSOE for one of the delivered elements of an arrangement, but do
have VSOE for all undelivered elements, we use the residual method to record revenue. Under the residual method, the arrangement fee is first allocated to the undelivered elements based upon their VSOE of fair value; the remaining arrangement fee,
including any discount, is allocated to the delivered element. If the residual method is not used, discounts, if any, are applied proportionately to each element included in the arrangement based on each elements fair value without regard to
the discount.
Sales Returns and Bad Debt Reserves
We reserve the cost of estimated sales returns, stock
rotation and price protection rights as well as uncollectible accounts based on experience. We evaluate quarterly the adequacy of the reserve for sales returns, stock rotation and price protection. Because these reserves are based on our judgments
and estimates, our reserves may not be adequate to cover actual sales returns and other allowances. If our reserves are not adequate, our net sales could be adversely affected.
Goodwill and Other Intangible Assets
We assess whether goodwill and indefinite-lived intangibles are impaired on an annual
basis and review for triggering events on an ongoing basis. Upon determining the existence of goodwill and/or indefinite-lived intangibles impairment, we measure impairment based on the amount by which the book value of goodwill and/or
indefinite-lived intangibles exceeds its fair value. The fair value of an asset is the amount at which that asset could be bought or sold in a current transaction between willing parties in an orderly transaction between market participants.
Additional impairment assessments may be performed on an interim basis if we encounter events or changes in circumstance that would indicate that, more likely than not, the book value of goodwill and/or indefinite-lived intangibles has been
impaired.
Stock-Based Compensation Expense
We account for employee share-based compensation costs, to include
stock options and restricted stock, in accordance with ASC 718 Compensation Stock Compensation. We utilize the Black-Scholes option pricing model to estimate the fair value of employee stock option compensation at the date of grant, which
requires the input of highly subjective assumptions, including expected volatility and expected life. Historical volatility was used in estimating the fair value of our share-based awards rather than implied volatility, while the expected life is
estimated based on historical trends over the past ten years. Further, we estimate forfeitures for options granted, which are not expected to vest. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of
our share-based compensation. The estimated fair value is charged to earnings on a straight-line basis over the vesting period of the underlying awards, which is generally four years. The Black-Scholes option pricing model was developed for use in
estimating the fair value of traded options having no vesting restrictions and being fully transferable. Accordingly, our estimate of fair value may not represent the value assigned by a third-party in an arms-length transaction. While our estimate
of fair value and the associated charge to earnings materially impacts our results of operations, it has no impact on our cash position.
Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
We estimate our income taxes in each of the jurisdictions in which we
operate as part of the process of preparing our consolidated financial statements. This process involves us estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax
and accounting purposes and net operating loss and tax credit carryforwards. These differences result in deferred tax assets and liabilities. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and
to the extent we believe that recovery is not
16
more likely than not, we establish a valuation allowance. The valuation allowance at December 31, 2010 relates to estimated expiration of state tax credit carryforwards prior to utilization.
State tax credit carryforwards are subject to potential expiration if not utilized by certain dates in the future.
We are
subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and recording the related assets and liabilities. In the ordinary course of our
business, there are many transactions and calculations where the ultimate tax determination is uncertain. We are occasionally under audit by tax authorities in various jurisdictions and are presently under audit for our 2009 U.S. Federal tax return.
Although we believe we have appropriate support for the positions taken on our tax returns, we have recorded a liability for our best estimate of the probable loss on certain of these positions. We believe that our accruals for tax liabilities are
adequate for all open years, based on our assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter, which matters result primarily from intercompany transfer pricing. Although we believe
our recorded assets and liabilities are reasonable, tax regulations are subject to interpretation and tax litigation is inherently uncertain; therefore our assessments can involve both a series of complex judgments about future events and rely
heavily on estimates and assumptions. Although we believe the estimates and assumptions supporting our assessments are reasonable, the final determination of tax audits and any related litigation could be materially different than that which is
reflected in historical income tax provisions and recorded assets and liabilities. Based on the results of an audit or litigation, a material effect on our income tax provision, net income, or cash flows in the period or periods for which that
determination is made could result. Due to the complexity involved, we are not able to estimate the range of reasonably possible losses in excess of amounts recorded.
Results of Operations
The following table sets forth for the periods
indicated the percentage of revenues represented by certain lines in our Consolidated Statements of Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
December 31,
|
|
|
Six months ended
December
31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product licenses
|
|
|
61
|
%
|
|
|
64
|
%
|
|
|
61
|
%
|
|
|
66
|
%
|
Services and other
|
|
|
39
|
|
|
|
36
|
|
|
|
39
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product license revenues
|
|
|
3
|
|
|
|
3
|
|
|
|
3
|
|
|
|
2
|
|
Cost of service and other expenses
|
|
|
11
|
|
|
|
10
|
|
|
|
11
|
|
|
|
10
|
|
Sales and marketing
|
|
|
46
|
|
|
|
39
|
|
|
|
44
|
|
|
|
39
|
|
Research and development
|
|
|
24
|
|
|
|
26
|
|
|
|
25
|
|
|
|
25
|
|
General and administrative
|
|
|
11
|
|
|
|
10
|
|
|
|
11
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
95
|
|
|
|
88
|
|
|
|
94
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
5
|
|
|
|
12
|
|
|
|
6
|
|
|
|
13
|
|
Interest and other income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Income tax provision
|
|
|
(1
|
)
|
|
|
(4
|
)
|
|
|
(2
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
4
|
%
|
|
|
8
|
%
|
|
|
4
|
%
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Revenues
Revenue from our embedded database product, Pervasive PSQL, increased in fiscal years 2010 and 2009 relative to fiscal year 2008. We believe the increase in 2010 and 2009 was primarily due to a number of
relatively large transactions with database customers and the release of Pervasive PSQL version 10 in June 2008. Our embedded database and related products represented approximately 60% of our revenue in fiscal year 2010 and 55% of our revenue in
the six months ended December 31, 2010. Our integration products represented approximately 35% of our revenue in fiscal year 2010 and 40% of our revenue in the six months ended December 31, 2010. A reduction in our embedded database
business, or our inability to grow our integration products business, could have a material adverse effect on our business, operating results and financial condition.
Our revenues were $11.7 million in the three months ended December 31, 2010, consistent with the $11.6 million reported for the comparable period in the prior fiscal year. Our revenues for the
six-month period ending December 31, 2010 decreased 5% to $22.6 million as compared to $23.8 million for the comparable period in the prior fiscal year. Our product license revenues were $7.1 million in the three months ended December 31,
2010, a decrease of 4% over the $7.4 million for the comparable period in the prior fiscal year. Our product license revenues for the six-month period ending December 31, 2010 were $13.8 million, a decrease of 12% over the $15.7 million for the
comparable period in the prior fiscal year. Our license revenues in the six-month period ended December 31, 2009 were aided in part by one relatively large transaction representing approximately $2.4 million in revenue in the first quarter of
fiscal year 2010. Our service and other revenues were $4.5 million in the three months ended December 31, 2010, an increase of 8% over the $4.2 million for the comparable period in the prior fiscal year. Our service and other revenues for the
six-month period ending December 31, 2010 were $8.9 million, an increase of 10% over the $8.1 million for the comparable period in the prior fiscal year.
Licenses of our embedded database software operating on Microsoft based operating systems continue to represent more than 90% of our database product license revenues. We expect the percentages of our
revenues attributable to licenses of our software operating on particular platforms will continue to change from time to time. We cannot be certain our revenues attributable to licenses of our software operating on Microsoft based, or any other
operating system platform, will grow in the future.
International revenues, consisting of all revenues from customers located
outside of North America, were $3.8 million and $3.6 million in the three months ended December 31, 2010 and 2009, respectively, representing 33% and 31% of total revenues, respectively. International revenues were $7.9 million and $6.8 million
in the six months ended December 31, 2010 and 2009, representing 35% and 29% of total revenues, respectively. We expect that international revenues will continue to account for a significant portion of our revenues in the future.
Costs and Expenses
Cost of Product License Revenues.
Cost of product license revenues consists primarily of the cost to manufacture and fulfill orders for our shrink-wrap software products, payment of license fees
for third-party technologies embedded in our products and amortization of purchased technology. Cost of product license revenues was $0.4 million and $0.3 million in the three months ended December 31, 2010 and 2009, representing 3% of total
revenues in both periods. Cost of product license revenues was $0.7 million and $0.6 million for the six-month period ending December 31, 2010 and 2009, representing 3% and 2% of total revenues, respectively. We anticipate that cost of product
license revenues in the near term will be consistent with the costs incurred during the quarter ended December 31, 2010.
Cost of Service and Other Revenues.
Cost of service and other revenues consists primarily of the cost to provide technical
support, primarily telephone support, which is typically provided within 30 days of purchase and the costs to deliver professional services and training services to others. Cost of service and other revenues was $1.2 million and $1.2 million in the
three months ended December 31, 2010 and 2009, representing 11% and 10% of total revenues, respectively. Cost of service and other revenues was $2.4 million and $2.4 million for the six-month periods ending December 31, 2010 and 2009,
representing 11% and 10% of total revenues, respectively. We anticipate that cost of service and other revenues in the near term will be consistent with the costs incurred during the three months ended December 31, 2010.
Sales and Marketing.
Sales and marketing expenses consist primarily of salaries, commissions and bonuses earned by sales and
marketing personnel, foreign sales office expense, marketing programs and promotional expense, and travel and entertainment. Sales and marketing expenses were $5.3 million and $4.6 million in the three-month periods ended December 31, 2010 and
2009, respectively, representing 46% and 39% of total revenues, respectively. Sales and marketing expenses were $9.9 million and $9.3 million for the six months ending December 31, 2010 and 2009, representing 44% and 39% of total revenues,
respectively. The increase in sales and marketing expenses is due primarily to an increase in staffing and personnel costs in fiscal year 2011 as compared to fiscal year 2010. We expect sales and marketing expenses in the near term will be
consistent with the costs incurred during the three months ended December 31, 2010.
18
Research and Development.
Research and development expenses consist primarily of
personnel and related costs. Research and development expenses were $2.8 million and $3.0 million in the three months ended December 31, 2010 and 2009, representing 24% and 26% of total revenues, respectively. Research and development expenses
were $5.7 million and $5.9 million for the six months ended December 31, 2010 and 2009, representing 25% of revenues in both periods. We anticipate that research and development expenses in the near term will be consistent with the costs
incurred during the three months ended December 31, 2010.
General and Administrative.
General and administrative
expenses consist primarily of the personnel and other costs associated with our finance, human resources and administrative departments. General and administrative expenses were $1.3 million and $1.2 million in the three-month periods ending
December 31, 2010 and 2009, representing 11% and 10% of total revenues, respectively. General and administrative expenses were $2.6 million for each of the six months ended December 31, 2010 and 2009, representing 11% of total revenues in
both periods. We anticipate that our general and administrative expenses in the near term will be consistent with costs incurred during the three months ended December 31, 2010.
Share-based compensation expense.
Share-based compensation expense reflects non-cash compensation expense associated with
restricted stock purchase rights and employee stock options. Share-based compensation expense is included in costs and expenses as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
December 31,
|
|
|
Six months ended
December
31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Cost of service and other revenues
|
|
$
|
11
|
|
|
$
|
11
|
|
|
$
|
22
|
|
|
$
|
23
|
|
Sales and marketing
|
|
|
132
|
|
|
|
135
|
|
|
|
266
|
|
|
|
263
|
|
Research and development
|
|
|
61
|
|
|
|
58
|
|
|
|
127
|
|
|
|
113
|
|
General and administrative
|
|
|
227
|
|
|
|
231
|
|
|
|
451
|
|
|
|
471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
431
|
|
|
$
|
435
|
|
|
$
|
866
|
|
|
$
|
870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We anticipate our share-based compensation expense in the near term will be consistent with the expense in
the quarter ending December 31, 2010.
Interest and Other Income.
Interest and other income was $14,000 and
$47,000 for the three months ended December 31, 2010 and 2009, respectively. Interest and other income was $24,000 and $0.1 million for the six months ended December 31, 2010 and 2009, respectively. Interest and other income decreased due
to lower market interest rates.
Provision for Income Taxes.
Provision for income taxes was approximately $0.2 million
and $0.5 million in the three months ended December 31, 2010 and 2009, respectively. Provision for income taxes was approximately $0.4 million and $1.0 million in the six months ended December 31, 2010 and 2009, respectively. The
Companys estimated annual effective tax rate and associated provision for income taxes for the six months ended December 31, 2010 is based on an estimate of consolidated earnings before income taxes for fiscal 2011. The estimated annual
effective tax rate is impacted primarily by estimates of non-deductible expenses, deductions related to domestic production activities and tax exempt income, the effects of state and foreign operations, tax legislation and credits generated.
Liquidity and Capital Resources
Cash provided by operations was $3.0 million and $3.3 million for the six months ended December 31, 2010 and 2009, respectively. Cash provided by operations for the six months ended December 31,
2010 resulted primarily from net income as adjusted for non-cash items, a decrease in prepaid expenses and other assets, an increase in accounts payable and accrued liabilities and an increase in deferred revenue, partially offset by an increase in
trade accounts receivable. Cash provided by operations for the six months ended December 31, 2009 resulted primarily from net income as adjusted for non-cash items, a decrease in accounts receivable and an increase in deferred revenue,
partially offset by an increase in prepaid expense and other current assets and a decrease in accounts payable and accrued liabilities.
19
During the six months ending December 31, 2010, we received net proceeds of $4.3
million from the sale or maturity of marketable securities, consisting of taxable and tax advantaged securities. During the six months ending December 31, 2009, we invested $7.2 million, net of investment sales, in marketable securities. In
addition, we purchased property and equipment totaling approximately $0.3 million and $0.2 million in the six months ended December 31, 2010 and 2009, respectively. This property consisted primarily of computer hardware and software. We expect
that our capital expenditures will be consistent with the prior fiscal year.
In July 2010, we announced the authorization of
a new $10.0 million stock repurchase plan which became effective on July 27, 2010. During the six months ended December 31, 2010, we repurchased 1,280,819 shares of common stock at a cost of approximately $6.3 million. Depending on market
conditions and other factors, such purchases may be commenced or suspended at any time without prior notice.
During the six
months ended December 31, 2010 and 2009, we received approximately $407,000 and $191,000, respectively, in proceeds from the exercise of stock options resulting in the issuance of shares of our common stock of approximately 134,000 and 93,000
for the six-month periods ended December 31, 2010 and 2009, respectively.
On December 31, 2010, we had $35.1
million in working capital, including $37.2 million in cash, cash equivalents and marketable securities.
20
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
The majority of our operations are based in the United States and, accordingly, the majority of our transactions are denominated in U.S. Dollars. However, we do have foreign-based operations where
transactions are denominated in foreign currencies and are subject to market risk with respect to fluctuations in the relative value of currencies. Currently, we have operations in Japan, Belgium, Germany, France and England and conduct transactions
in the local currency of each location. If the U.S. dollar to Japanese yen rate had remained unchanged throughout fiscal 2010, the result would have been a decrease in revenue and operating income of approximately $0.2 million. If the U.S. dollar to
euro rate had remained unchanged throughout fiscal 2010, the result would have been a decrease in operating income of approximately $0.1 million. We monitor our foreign currency exposure and, from time to time will attempt to reduce our exposure
through hedging. The impact of fluctuations in the relative value of all currencies was not material for the six months ended December 31, 2010. Although we do not anticipate any material losses in these risk areas, no assurance can be made
that material losses will not be incurred in these areas in the future.
ITEM 4.
|
CONTROLS AND PROCEDURES
|
Our management evaluated, with the participation of our chief executive officer and chief financial officer, disclosure controls and
procedures as of the end of the period covered by this Report on Form 10-Q. Based on this evaluation, our chief executive officer and chief financial officer have concluded that the Companys disclosure controls and procedures were effective to
ensure that information required to be disclosed in the Companys Exchange Act reports is accumulated and communicated to management, including our chief executive officer and chief financial officer, to allow timely decisions regarding
required disclosure and is recorded, processed, summarized and reported within time periods specified in the Securities and Exchange Commission rules and forms.
There have been no changes in the Companys internal controls over financial reporting during the Companys most recent fiscal quarter that have materially affected or are reasonably likely to
materially affect, the Companys internal controls over financial reporting.
21
PART II. OTHER INFORMATION
ITEM 1.
|
LEGAL PROCEEDINGS
|
The
company is not a party to any material legal proceeding.
On January 21, 2010, JuxtaComm-Texas Software, LLC
(JuxtaComm) filed a complaint (as amended April 22, 2010) in the Eastern District of Texas against 20 defendants, including Pervasive, alleging patent infringement. The case is currently in the early discovery phase. We
filed an answer to the complaint on May 5, 2010 (as amended September 13, 2010). On July 15, 2010, JuxtaComm filed its Disclosure of Asserted Claims and Infringement Contentions. We filed our patent Invalidity Contentions on
September 13, 2010. Pervasive and JuxtaComm continue to exchange correspondence and file various documents with the Court. The patent in question, United States Patent number 6,195,662 titled System for Transforming and Exchanging
Data Between Distributed Heterogeneous Computer Systems, was issued on February 27, 2001 with a filing date of June 26, 1998. Data Junction Corporation, acquired by Pervasive in December 2003, has been in the data integration
business since the mid-1980s and sold its data transformation products, which are now being used by Pervasives products, long prior to the filing of the Juxtacomm patent. Additionally, substantial prior art exists relating to
the JuxtaComm patent to point to in our defense. We believe we will prevail either in our contentions that the JuxtaComm patent is invalid or our products do not infringe the patent. Pervasive intends to vigorously defend itself and believes
the outcome of this proceeding will not have a material adverse effect on our business, operating results or financial condition.
On September 14, 2010, UnilocUSA, Inc. and Uniloc Singapore Private Ltd. (Uniloc) filed a complaint in the Eastern District of Texas against 12 defendants, including Pervasive, alleging
patent infringement. The case is currently in the early discovery phase. We filed an answer to the complaint on October 25, 2010. The patent in question, United States Patent number 5,490,216 titled System for Software
Registration, was issued on February 6, 1996. We believe our products do not infringe the patent. Pervasive intends to vigorously defend itself and believes the outcome of this proceeding will not have a material adverse effect on
our business, operating results or financial condition.
You
should carefully consider the risks described below before making an investment decision. The risks and uncertainties described below are not the only ones we face. Any of the following risks could harm our business, financial condition or results
of operations. In such case, trading price of our common stock could decline, and you may lose all or part of your investment.
Our
Financial Results May Vary Significantly from Quarter to Quarter
Our operating results have varied significantly from
quarter to quarter at times in the past and may continue to vary significantly from quarter to quarter in the future, which could make our future operating results difficult to predict and increase the likelihood that future results may fall below
analyst or investor expectations thereby causing our stock price to decline. Such variations are due to a number of factors, many of which are outside our control. These factors include:
|
|
|
fluctuations in demand for our products, upgrades to our products, or our services;
|
|
|
|
fluctuations in the demand for and deployment of client/server applications in which our Pervasive PSQL products are designed to be embedded;
|
|
|
|
fluctuations in demand for our products due to the potential impact of uncertain economic conditions on our customer base;
|
|
|
|
seasonality of purchases and the timing of product sales and shipments;
|
|
|
|
unexpected delays in introducing new products and services or improvements to existing products and services;
|
|
|
|
new product releases, licensing models or pricing policies by our competitors;
|
22
|
|
|
acquisitions or mergers involving us, our competitors or customers;
|
|
|
|
impact of changes to our product distribution strategy and pricing policies;
|
|
|
|
loss of significant customer or distributor;
|
|
|
|
changes in purchasing and/or payment practices by our distributors or other customers;
|
|
|
|
a reduction in the number of ISVs who embed our products or VARs who sell and deploy our products;
|
|
|
|
changes in the mix of domestic and international sales;
|
|
|
|
impact of changes to our geographic investment levels and business models;
|
|
|
|
changes in the cost of routine business activities;
|
|
|
|
gains or losses associated with discontinued operations;
|
|
|
|
changes in our business plan or strategy;
|
|
|
|
impact of severance charges associated with departing employees;
|
|
|
|
write-downs of the recorded book value of assets;
|
|
|
|
changes in generally accepted accounting principles in the United States; and
|
|
|
|
costs associated with the compliance requirements of Section 404 of the Sarbanes-Oxley Act of 2002.
|
We also derive a significant portion of our revenues from relatively large transactions. The sales cycles for these transactions tend to
be longer than the sales cycles on smaller orders. This longer sales cycle for large transactions makes it difficult to predict the quarter in which these sales will occur. Accordingly, our operating results may fluctuate from quarter to quarter
based on the existence and timing of larger transactions. A reduction in large transactions during any quarter could materially impact our revenues.
Additionally, significant portions of our expenses are not variable in the short term and cannot be quickly reduced to respond to decreases in revenues. Therefore, if our revenues are below our
expectations, our operating results are likely to be adversely and disproportionately affected. In addition, we may change our prices, modify our distribution strategy and policies, accelerate our investment in research and development, sales or
marketing efforts in response to competitive pressures or pursue new market opportunities. Any one of these activities may further limit our ability to adjust spending in response to revenue fluctuations.
Seasonality May Contribute to Fluctuations in Our Quarterly Operating Results
Our business has, on occasion, experienced seasonal customer buying patterns. In past years, we have generally experienced relatively
weaker demand in the quarter ending September 30. Demand for our products in Europe and Japan will generally decline in the summer months because of reduced corporate buying patterns during the vacation season. We believe this pattern may occur
in the future and may contribute to fluctuations in our quarterly operating results.
23
Uncertain Economic Conditions May Harm Our Operating Results
Our revenue and profitability depend on the overall demand for our products and services, which in turn depends on general economic and
business conditions. The nature and extent of the effect of the recent adverse economic conditions and the subsequent economic recovery on our ability to sell our products and services is uncertain. A softening of demand for our products and
services caused by uncertain economic conditions may result in decreased revenues. In addition, such uncertain economic conditions may impact our customers ability to pay for the products they have purchased and as a consequence, we may not be
able to collect our accounts receivable balances and our reserves for doubtful accounts and write-offs of accounts receivable may increase. There can be no assurance we will be able to effectively promote revenue growth rates if the current
uncertain economic conditions continue or deteriorate.
We Generally Operate Without a Backlog
We generally operate with virtually no order backlog because our software products are shipped and revenue is recognized shortly after
orders are received. This lack of backlog makes product revenues in any quarter unpredictable and substantially dependent on orders booked and shipped throughout that quarter. Accordingly, a material decrease in orders in any quarter could have a
materially adverse effect on our revenues and operating results.
Our Performance Depends on Market Acceptance of Pervasive PSQL and Our
Integration Products
We derive a substantial portion of our revenues from the license of our Pervasive
PSQL
®
products. Continued market acceptance of Pervasive PSQL may be influenced heavily by factors outside of
our control, such as new product offerings or promotions by competitors, mergers and acquisitions of customers and competitors, the product development and deployment cycles of developers and resellers who embed or bundle our products into packaged
software applications and demand for applications of the type built on our products. Market acceptance of Pervasive PSQL v11 (first released in September 2010), and future upgrades also may be influenced by factors in our control such as product
quality, relative demand for feature and functionality upgrades and any future product announcements or price changes.
Revenue from our embedded database product, Pervasive PSQL, increased in fiscal years 2010 and 2009 relative to fiscal year 2008. We
believe the increase in 2010 and 2009 was primarily due to a number of relatively large transactions with database customers and the release of Pervasive PSQL version 10 in June 2008. Our embedded database and related products represented
approximately 60% of our revenue in fiscal year 2010 and 55% of our revenue in the six months ended December 31, 2010. In addition, we believe the integration products we acquired in fiscal year 2004 as a result of our acquisition of Data
Junction Corporation represent a growth opportunity as we invest in opportunities presented by the acquired business and related innovative initiatives. Our integration products represented approximately 35% of our revenue in fiscal year 2010 and
40% of our revenue in the six months ended December 31, 2010. A reduction in our embedded database business or our integration product business, could have a material adverse effect on our business, operating results and financial condition.
Our Efforts to Develop and Maintain Brand Awareness of Our Products May Not be Successful
Brand awareness is important given competition in the market for data infrastructure software products. We are aware of other companies
that use the word Pervasive either in their marks alone or in combination with other words. We expect that it may be difficult or impossible to prevent third-party usage of the Pervasive name and variations of this name for competing
goods and services. Competitors or others who use marks similar to our brand name may cause confusion among actual and potential customers, which could prevent us from achieving significant brand recognition. If we fail to promote and maintain our
brand or incur significant expenses in an unsuccessful attempt to promote or maintain our brand, our business, operating results and financial condition could be materially adversely affected.
We Must Succeed in the Data Management Software Market as Well as the Data Integration Software Market if We are to be Successful
Our long-term strategic plan depends upon the successful development and introduction of products and solutions that address the needs of
the data management software market as well as the data integration software market. In order for us to succeed in these markets, we must align strategies and objectives and focus a significant portion of our resources toward serving these markets.
24
In addition, our success in these markets will depend on several factors, many of which are
outside our control including:
|
|
|
growth of the data management infrastructure software market;
|
|
|
|
growth of the data integration software market;
|
|
|
|
deployment of our products by enterprises; and
|
|
|
|
emergence of substitute technologies and products.
|
If we are unable to succeed in these markets, our business may be harmed.
Defects or
Disruptions in Our Ability to Deliver Our Products Across Various Platforms Could Diminish Demand for Our Service and Subject Us to Substantial Liability
As we continue to provide more of our products from third party data hosting platforms, there is the potential for there to be defects or disruptions in our ability to deliver our products to our
customers. These potential disruptions could result in unanticipated downtime for our customers and harm our reputation and our business. In addition, our customers may use our service in unanticipated ways that may cause a disruption in
service for other customers attempting to access their data. Since our customers use our service for important aspects of their business, any errors, defects, disruptions in service or other performance problems with our service could hurt our
reputation and may damage our customers businesses. If that occurs, customers could elect not to renew, or delay or withhold payment to us, we could lose future sales or customers may make warranty or other claims against us, which could
result in an increase in our provision for doubtful accounts, an increase in collection cycles for accounts receivable or the expense and risk of litigation.
Interruptions or Delays in Service From Our Third-Party Data Center Hosting Facilities Could Impair the Delivery of Our Service and Harm Our Business
We currently serve some of our customers from third-party data center hosting platforms. Any damage to, or failure of, the third
parties systems generally could result in interruptions in our service. Interruptions in our service may reduce our revenue, cause us to issue credits or pay penalties, cause customers to terminate their subscriptions and adversely affect our
renewal rates and our ability to attract new customers. Our business will also be harmed if our customers and potential customers believe our service is unreliable.
If Our Security Measures Are Breached and Unauthorized Access is Obtained to a Customers Data or Our Data, Our Service May be Perceived as not Being Secure and We May Incur Significant Legal and
Financial Exposure and Liabilities
While we have derived the majority of our historical revenues from on premise delivery
of our products, we are increasingly offering our products on third party hosted platforms. This method of delivery of our products involves the storage and transmission of customers proprietary information, and security breaches could
expose us to a risk of loss of this information, litigation and possible liability. These security measures may be breached as a result of third-party action, employee error, malfeasance or otherwise, during transfer of data to additional data
centers or at any time, and result in someone obtaining unauthorized access to our data or our customers data. If our security measures are breached as a result of third-party action, employee error, malfeasance or otherwise, and someone
obtains unauthorized access to our customers data, we could incur significant liability to our customers or significant fines and sanctions by processing networks or governmental bodies, any of which could result in harm to our business and
damage to our reputation.
25
We May Face Problems in Connection With Past Acquisitions, Joint Ventures or Licensing Arrangements
On July 31, 2009, we announced the completion of our purchase of assets of Greenville, South Carolina-based
ChanneLinx, Inc. for total consideration of approximately $2.6 million in cash. We cannot be certain we will ultimately realize all of the anticipated benefits of this acquisition.
On December 8, 2003 we announced the completion of our acquisition of privately held Data Junction Corporation, a pioneering data
and application integration company based in Austin, Texas, for approximately $16.6 million in cash, net of $6.5 million of cash held by Data Junction at the time of closing of the transaction, and 5 million shares of our common stock. We
cannot be certain we will ultimately realize all of the anticipated benefits of the acquisition. In particular we may not realize the strategic and operational benefits we had anticipated, including greater revenue and market opportunities,
maintaining industry leadership and consistent profitability.
In July 2001, we formed a business venture with AG-TECH
Corporation, a company developing, selling and importing packaged software, to sell and support certain of our products in Japan. AG-TECH has been engaged in the sales and support of Btrieve (predecessor to Pervasive PSQL) and Pervasive PSQL
products since 1986. In conjunction with the joint venture, AG-TECH launched a new operating division staffed with specialists experienced in selling and supporting Pervasive PSQL to assume responsibility for OEM sales, packaged software sales,
technical support and localization and translation of our products into Japanese. In connection with the new business venture, we obtained a less than 20% ownership interest in AG-TECH and the ability to elect one director to the AG-TECH Board of
Directors. While this venture has been successful to date, we cannot be certain that this venture will continue to be successful, which could result in our inability to successfully operate in Japan. In addition, as part of our venture, we executed
a three year master distributor agreement with AG-TECH, the initial term of which expired June 30, 2004. This agreement has been renewed twice, most recently for an additional five-year term which expires June 30, 2012. We cannot be
certain that we will continue to be able to renew our agreement with AG-TECH on terms and conditions at least as favorable to Pervasive as those contained in our present agreement. Further, we may be unable to maintain or increase Japanese market
demand for our products.
We May Face Problems in Connection With Future Acquisitions, Joint Ventures or Licensing Agreements
In the future, we may acquire additional businesses, products and technologies, or enter into joint venture or licensing
arrangements, that could complement, modify or expand our business. Our negotiations of potential acquisitions or joint ventures and our integration of acquired businesses, products or technologies could divert management time and resources. Any
future acquisitions could require us to issue dilutive equity securities, reduce our cash and marketable securities, incur debt or contingent liabilities, amortize intangibles, or write-off purchased research and development and other
acquisition-related expenses. If we are unable to fully integrate acquired businesses, products or technologies with our existing operations, we may not receive the intended benefits of acquisitions. In addition, market reactions to acquisitions are
difficult to predict and if we do announce any future acquisitions, such market reactions may cause our stock price to fluctuate.
If Our
Goodwill or Amortizable Intangible Assets Become Impaired We May Be Required to Record a Significant Charge to Earnings
Under generally accepted accounting principles, we review our amortizable intangible assets for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. Goodwill is tested for impairment at least annually. Factors that may be considered a change in circumstances, indicating that the carrying value of our goodwill or
amortizable intangible assets may not be recoverable, include a decline in stock price and market capitalization, reduced future cash flow estimates, and slower growth rates in our industry. We may be required to record a significant charge in
our financial statements during the period in which any impairment of our goodwill or amortizable intangible assets is determined, negatively impacting our results of operations.
26
We May Face Problems in Connection With Product Line Expansion
In the future, we may acquire, license or develop additional products. Future product line expansion may require us to modify or expand
our business and expend significant time and resources. If we are unable to fully integrate new products with our existing operations, we may not receive the intended benefits of such product line expansion and related expenditures.
A Small Number of Distributors and Sales Related to Accounting Software Applications Account for a Significant Percentage of Our Revenues
The loss of a major distributor, changes in a distributors payment practices, changes in the financial stability of
a major distributor or any reduction in orders by such distributor, including reductions due to market or competitive conditions, combined with the potential inability to replace the distributor on a timely basis, or any modifications to our pricing
or distribution channel strategy could materially adversely affect our business, operating results and financial condition. Many of our ISVs, VARs and end users place their orders through distributors. A relatively small number of distributors have
accounted for a significant percentage of our revenues. In the fiscal year ended June 30, 2010, one distributor (our joint venture partner in Japan, AG-TECH Corporation) accounted for an aggregate of approximately 11% of our revenues, as
compared to 10% in the fiscal year ended June 30, 2009. Additionally, sales related to accounting software applications has, at various times, represented as much as 20% of our revenues. Furthermore, there has been consolidation taking place
among our ISVs that could narrow the number of customers who sell our products. For example, one of our ISVs, The Sage Group plc, has acquired Timberline Software Corporation, Softline Limited, ACCPAC International Inc., Sage Sesame and TAS
Software, five of our ISVs. The Sage Group family of companies has, at various times, represented approximately 10% of our revenues. As a result, we expect we will continue to depend on a limited number of distributors, certain of our ISV customers
and sales related to accounting software applications for a significant portion of our revenues in future periods and the loss of a significant distributor or ISV customer could materially adversely affect our business, operating results and
financial condition. Moreover, we expect that such distributors and sales related to accounting software applications will vary from period to period. Our distributors have not agreed to any minimum order requirements. Although we forecast demand
and plan accordingly, if a distributor purchases excess product, we may be obligated to accept the return of some products.
We Depend on
Our Indirect Sales Channel
Our failure to grow our indirect sales channel or the loss of a significant number of members
of our indirect channel partners would have a material adverse effect on our business, financial condition and operating results. We derive a substantial portion of our revenues from indirect sales through a channel consisting of ISVs, VARs, SIs,
consultants and distributors. Our sales channel could be adversely affected by a number of factors, many of which are outside of our control, including:
|
|
|
the failure of ISVs to develop, and the failure of VARs to sell, products based on emerging platforms supported by us;
|
|
|
|
pressures placed on the sales channel to sell competing products;
|
|
|
|
our failure to adequately support the sales channel;
|
|
|
|
consolidation of certain of our indirect channel partners;
|
|
|
|
competing product lines offered by certain of our indirect channel partners; and
|
|
|
|
business model or licensing model changes of our channel partners or their competitors.
|
We cannot be certain we will be able to continue to attract additional indirect channel partners or retain our current channel partners.
In addition, we cannot be certain our competitors will not attempt to recruit certain of our current or future channel partners. Such competitive actions may have an adverse effect on our ability to attract and retain channel partners, which, in
turn, may have a material adverse effect on our business, financial condition and operating results.
27
We May Not Be Able to Sustain or Develop Strategic Relationships
From time to time, we enter into strategic collaborative relationships with other companies in areas such as product development,
marketing, distribution and implementation, which allow us to realize a variety of benefits. Many of our current strategic relationships are informal, or, if written, terminable with little or no notice. Additionally, many of our current and
potential strategic partners are either actual or potential competitors with us. For these reasons, we may not be able to sustain our current strategic relationships or enter into successful new strategic relationships in the future, which could
have a material adverse effect on our business, operating results and financial condition.
We Depend on Third-Party Technology in Our
Products
We rely upon certain software we license from third parties, including software integrated with our internally
developed software and used in our products to perform key functions. These third-party software licenses may not continue to be available to us on commercially reasonable terms. The loss of, or inability to maintain or obtain any of these software
licenses, could result in product development or shipment delays or the loss or deferral of revenues until we develop, identify, license and integrate equivalent software. Any delay in product development or shipment could damage our business,
operating results and financial condition.
We May be Unable to Protect Our Intellectual Property and Proprietary Rights
Our success depends to a significant degree upon our ability to protect our software and other proprietary technology. We rely primarily
on a combination of copyright, trademark and trade secret laws, confidentiality procedures and contractual provisions to protect our proprietary rights. However, these measures afford us only limited protection. In addition, we rely in part on
shrink wrap and click wrap licenses that are not signed by the end user and, therefore, may be unenforceable under the laws of certain jurisdictions. Therefore, our efforts to protect our intellectual property may not be
adequate. We cannot be certain that others will not develop technologies that are similar or superior to our technology or design around the copyrights and trade secrets owned by us. Unauthorized parties may attempt to copy aspects of our products
or to obtain and use information we regard as proprietary. Although we believe software piracy may be a problem, we are unable to determine the extent to which piracy of our software products occurs. In addition, portions of our source code have
been developed in foreign countries, such as in India where we have used third-party service providers, with laws that do not protect our proprietary rights to the same extent as the laws of the United States.
We may be subjected to claims of intellectual property infringement by third parties as the number of products and competitors in our
industry segment continues to grow and the functionality of products in different industry segments increasingly overlaps. Any infringement claims, with or without merit, could be time-consuming, result in costly litigation, divert management
attention and resources, cause product shipment delays or the loss or deferral of sales or require us to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us,
if at all. In the event of a successful claim of intellectual property infringement against us, should we fail or be unable to either license the technology or similar technology or develop alternative technology on a timely basis, our business,
operating results and financial condition could be materially adversely affected.
We Must Adapt to Rapid Technological Change
Our future success will depend upon our ability to continue to enhance our current products and to develop and introduce
new products on a timely basis that keep pace with technological developments and new industry standards and satisfy increasingly sophisticated customer requirements. Rapid technological change, frequent new product introductions and enhancements,
uncertain product life cycles, changes in customer demands and evolving industry standards characterize the market for our products. The introduction of products embodying new technologies and the emergence of new industry standards can render
existing products obsolete and unmarketable. As a result of the complexities inherent in client/server and Web computing environments and in data and application integration solutions, and the performance demanded by customers for data
infrastructure software products, new products and product enhancements can require long development and testing periods. As a result, significant delays in the general availability of such new releases or significant problems in
28
the installation or implementation of such new releases could have a material adverse effect on our business, operating results and financial condition. We have experienced delays in the past in
the release of new products and new product enhancements. In the future, we may not be successful in developing and marketing, on a timely and cost-effective basis, new products or new product enhancements that respond to technological change,
evolving industry standards or customer requirements, avoiding difficulties that could delay or prevent the successful development, introduction or marketing of these products, or achieving market acceptance for our new products and product
enhancements, any of which could have a material adverse effect on our business, operating results and financial condition.
Our Software
May Contain Errors or Defects
Software products such as ours may contain errors, sometimes called bugs,
particularly when first introduced or when new versions or enhancements are released. From time to time, we discover software errors in certain of our new products after their introduction. Despite our testing, current versions, new versions or
enhancements of our products may still have errors after commencement of commercial shipments. Errors or defects in our products may result in loss of revenues, delay in market acceptance, diversion of development resources or injury to our brand
and reputation and could materially adversely affect our business, operating results and financial condition.
We May Become Subject to
Product or Professional Services Liability Claims
A product or professional services liability claim, whether or not
successful, could damage our reputation and our business, operating results and financial condition. Our license and service agreements with our customers typically contain provisions designed to limit our exposure to potential product or service
liability claims. However, these contract provisions may not preclude all potential claims. Product or professional services liability claims could require us to spend significant time and money in litigation or to pay significant damages.
We Compete with Microsoft while Simultaneously Supporting Microsoft Technologies
We currently compete with Microsoft in the market for data management products while simultaneously maintaining a working relationship
with Microsoft. Microsoft has a longer operating history, a larger installed base of customers and substantially greater financial, distribution, marketing and technical resources than us. As a result, we may not be able to compete effectively with
Microsoft now or in the future, and our business, operating results and financial condition may be materially adversely affected.
We expect that Microsofts commitment to and presence in the data management products market will continue to assert competitive pressure. We believe that Microsoft will continue to incorporate SQL
Server database technology into its operating system software and certain of its server software offerings, possibly at no additional cost to its users. Microsoft currently licenses a royalty-free limited version of its SQL Server database
technology. We believe that Microsoft will also continue to enhance its SQL Server database technology and that Microsoft will continue to invest in various sales and marketing programs involving certain of our channel partners.
In addition, Microsoft has grown its presence in the software applications market. For example, they acquired Great Plains Software, a
former channel partner of Pervasive, and Navision, both of which are accounting software vendors. Microsoft has also entered the customer relationship management software market. We believe that Microsoft will continue to grow its presence in the
software applications market and in doing so, may have a negative impact on the financial stability of other software application vendors who use our products, or may influence other software application vendors to use Microsoft infrastructure
software products instead of those available from us.
We believe we must maintain a working relationship with Microsoft to
achieve success. Many of our customers use Microsoft-based operating platforms. Thus, it is critical to our success that our products be closely integrated with Microsoft technologies. Notwithstanding our historical and current support of Microsoft
platforms, Microsoft may in the future promote technologies and standards more directly competitive with or not compatible with our technology.
29
We Face Significant Competition From Other Companies
We encounter competition for our embedded database products primarily from large, public companies, including Microsoft, Oracle,
Sybase/SAP, IBM and Progress. In particular, Sybases small memory footprint database software product, Adaptive Server Anywhere, and Microsofts product, SQL Server, directly compete with our products.
The market for our integration products is highly competitive and subject to rapidly changing technology. We often compete against custom
code, where potential customers have sufficient internal technical resources to develop solutions in-house. In addition, we face competition from vendors of ETL (extract, transform and load), data warehousing and application integration software
products. Such competitors include IBM, Oracle, Business Objects/SAP, Informatica, and Information Builders, as well as niche vendors in specific verticals and the SaaS marketplace. In addition, we compete or may compete against database vendors
that currently offer, or may develop, products with functionalities that compete with our integration solutions. These products typically operate specifically with these competitors proprietary databases. Such competitors include IBM,
Microsoft, Sybase/SAP and Oracle. And, because there are relatively low barriers to entry in the software market, we may encounter additional competition from other established or emerging companies providing integration products based on existing,
new or open-source technologies.
Open-source software, which is an emerging trend in the software marketplace, may impact our
business as interest, demand and use increases in the database and integration segments and poses a challenge to our business model. Firms adopting the open-source software model typically provide customers software produced by loosely associated
groups of unpaid programmers, make licenses available to end users at nominal cost, and earn revenue on complementary services and products, without having to bear the full costs of research and development for the open-source software. To the
extent competing open-source software products gain increasing market acceptance, sale of our products may decline, we may have to reduce prices we charge for our products, and our revenue and operating margins may decline. Mass adoption of open
source databases in the SME market could have a material adverse impact on our database business.
Software-as-a-Service
(SaaS) vendors have and may continue to enter our market and could cause a change in revenue models from licensing of client/server and Web-based applications to renting applications. Our competitors may be more successful than we are in adopting
these revenue models and capturing related market share.
Most of our competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources, significantly greater name recognition and a larger installed base of customers. In addition, some competitors have demonstrated a willingness to, or may willingly in the
future, incur substantial losses as a result of deeply discounted product offerings or aggressive marketing campaigns. For example, Microsoft, Oracle, IBM and Sybase all currently license royalty-free limited versions of their database technologies.
As a result, our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, promotion and sale of competitive products, than we can. There
is also a substantial risk that changes in licensing models or announcements of competing products by competitors such as Microsoft, Oracle, Sybase/SAP, IBM, Progress, MySQL/Oracle, Ascential/IBM, Cast Iron/IBM, Business Objects/SAP, Informatica,
Information Builders or others could result in the cancellation of customer orders in anticipation of the introduction of such new licensing models or products. In addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase the ability of their products to address customer needs, which may limit our ability to sell our products through particular partners. Accordingly, new competitors or
alliances among, or consolidations of, current and new competitors may emerge and rapidly gain significant market share in our current or anticipated markets. We also expect competition will increase as a result of software industry consolidation.
Increased competition is likely to result in price reductions, fewer customer orders, reduced margins and loss of market share, any of which could materially adversely affect our business, operating results and financial condition. We cannot be
certain we will be able to compete successfully against current and future competitors or that the competitive pressures we face will not materially adversely affect our business, operating results and financial condition.
30
We are Susceptible to a Shift in the Market for Client/Server Applications Toward Web-Based or Hosted
Applications
We have derived substantially all of our historical embedded database product revenues from the use of our
products in client/server applications. We expect to rely on continued market demand for client/server applications indefinitely. However, we believe market demand may shift from client/server applications to Web-based or hosted applications. If so,
we cannot be certain our existing client/server developers will migrate to Web-based or hosted applications and continue to use our products or that other developers of Web-based or hosted applications would select our data management products. In
addition, this shift could result in a change in revenue models from licensing of client/server applications to subscriptions of Web-based or hosted applications from SaaS vendors. A decrease in client/server application sales coupled with an
inability to derive revenues from the Web-based or hosted application market could have a material adverse effect on our business, operating results and financial condition.
We Depend on International Sales and Operations
We anticipate for the
foreseeable future we will derive a significant portion of our revenues from sources outside North America. In the fiscal year ended June 30, 2010, we derived 30% of our revenues outside North America. Our international operations are generally
subject to a number of risks. These risks include:
|
|
|
foreign laws and business practices favoring local competition;
|
|
|
|
dependence on local channel partners;
|
|
|
|
compliance with multiple, conflicting and changing government laws and regulations;
|
|
|
|
greater difficulty or delay in collecting payments from customers;
|
|
|
|
difficulties in staffing and managing foreign operations;
|
|
|
|
foreign currency exchange rate fluctuations and the associated effects on product demand and timing of payment;
|
|
|
|
increased tax rates in certain foreign countries;
|
|
|
|
complexities with financial reporting in foreign countries;
|
|
|
|
quality control of certain development, translation or localization activities;
|
|
|
|
political, social and economic instability; and
|
|
|
|
reduced or different protections for intellectual property rights in some foreign countries.
|
We may expand or modify our operations internationally. Despite our efforts, we may not be able to expand or modify our operations
internationally in a timely and cost-effective manner. Such an outcome would limit or eliminate any sales growth internationally, which in turn would materially adversely affect our business, operating results and financial condition. Even if we
successfully expand or modify our international operations, we may be unable to maintain or increase international market demand for our product.
We expect our international operations will continue to place financial and administrative demands on us, including operational complexity associated with international facilities, administrative burdens
associated with managing relationships with foreign partners, and treasury functions to manage foreign currency risks and collections.
Fluctuations in the Relative Value of Foreign Currencies Can Affect Our Business
To date, the majority of our transactions have been denominated in U.S. dollars. The majority of our international operating expenses and
substantially all of our sales in Japan have been denominated in currencies other than the U.S. dollar. Therefore, our operating results may be adversely affected by changes in the relative value of the U.S. dollar. Certain of our international
sales are denominated in U.S dollars, especially in Europe. Any strengthening of the U.S. dollar against the currencies of countries where we sell products denominated in U.S. dollars will increase the relative cost of our products and could
negatively impact our sales in those countries. To the extent our international operations expand or are modified, our exposure to exchange rate fluctuations may increase. We have, on occasion, entered into limited hedging transactions to mitigate
our exposure to currency fluctuations. Despite these hedging transactions, exchange rate fluctuations have caused,
31
and will continue to cause, currency transaction gains and losses. Although these transactions have not resulted in material gains and losses to date, similar transactions could have a damaging
effect on our business, results of operations or financial condition in future periods.
We Must Continue to Hire and Retain Skilled
Personnel
Our success depends in large part on our ability to attract, motivate and retain highly skilled employees on a
timely basis, particularly executive management, sales and marketing personnel, software engineers and other senior personnel. Our efforts to attract and retain highly skilled employees could be harmed by our past or any future workforce reductions.
Our failure to attract and retain the highly trained technical personnel who are essential to our product development, marketing, service and support teams may limit the rate at which we can generate revenue and develop new products or product
enhancements. This could have a material adverse effect on our business, operating results and financial condition.
We issue
stock options and restricted stock as key components of our overall compensation. There is pressure on public companies from shareholders generally and various organizations to reduce the rate at which companies issue stock options and restricted
stock to employees, which may make it more difficult to obtain shareholder approval of equity compensation plans when required. In addition, we believe expensing stock options and restricted stock will increase shareholder pressure to limit future
grants and could make it more difficult for us to grant stock options and restricted stock to employees in the future. As a result, we may lose top employees to non-public, start-up companies or may generally find it more difficult to attract,
retain and motivate highly skilled employees, either of which could materially and adversely affect our business, results of operations and financial condition.
We Have Anti-Takeover Provisions
Our Restated Certificate of Incorporation
and Amended and Restated Bylaws contain certain provisions that may have the effect of discouraging, delaying or preventing a change in control or unsolicited acquisition proposals that a stockholder might consider favorable. These provisions
include provisions to authorize the issuance of blank check preferred stock, establish advance notice requirements for stockholder nominations for elections to the Board of Directors or for proposing matters that can be acted upon at
stockholders meetings; eliminate the ability of stockholders to act by written consent; require super-majority voting to approve certain amendments to the Restated Certificate of Incorporation; limit the persons who may call special meetings
of stockholders; and provide for a Board of Directors with staggered, three-year terms. In addition, certain provisions of Delaware law and our 1997 Stock Incentive Plan and our 2006 Equity Incentive Plan may also have the effect of discouraging,
delaying or preventing a change in control or unsolicited acquisition proposals.
We May Elect to Raise Additional Capital Which Might Not
Be Available or Which, if Available, May Be on Terms That Are Not Favorable to Us
We may elect to raise additional funds,
and we cannot be certain we will be able to obtain additional financing on favorable terms, if at all. If we issue equity securities, the ownership percentage of our stockholders would be reduced, and the new equity securities may have rights,
preferences or privileges senior to those of existing holders of our common stock. If we borrow money, we may incur significant interest charges, which could harm our profitability. Holders of debt would also have rights, preferences or privileges
senior to those of existing holders of our common stock. If we cannot raise funds on acceptable terms, we may not be able to develop or enhance our product, take advantage of future opportunities or respond to competitive pressures or unanticipated
requirements, which could seriously harm our business, operating results and financial condition.
32
The Price of Our Stock Has Been Volatile and Could Continue to Fluctuate Substantially
Our common stock is traded in the NASDAQ Global Market. The market price of our common stock has been volatile and could fluctuate
substantially based on a variety of factors outside of our control, in addition to our financial performance. Furthermore, stock prices for many companies, including our own, fluctuate widely for reasons that may be unrelated to operating results.
During the nineteen fiscal quarters ending December 31, 2010, the Company has acquired approximately 9.9 million
shares of its common stock on the open market at a total cost of approximately $42.2 million, or approximately $4.25 price per share. The Companys Board of Directors recently approved a new stock repurchase plan effective July 27, 2010,
whereby the Company may repurchase additional shares of its common stock with a value of up to $10 million, of which approximately $5.4 million remains available as of December 31, 2010. Depending on market conditions and other factors, such
purchases may be commenced or suspended at any time without prior notice. There can be no assurance that we will continue to buy any of our common stock under our share repurchase program or that any past or future repurchases will have a positive
impact on our stock price. Important factors that could cause us to discontinue our share repurchases include, among others, unfavorable market conditions, the market price of our common stock, the nature of other investment opportunities presented
to us from time to time, and the availability of funds necessary to continue purchasing common stock.
We May Be Exposed to Potential Risks
if We Do Not Have an Effective System of Disclosure Controls or Internal Controls or Fail on an On-going Basis to Properly Address and Implement Section 404 of Sarbanes-Oxley
We must comply, on an on-going basis, with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (SOX), including those
provisions that establish the requirements for both management and auditors of public companies with respect to reporting on internal control over financial reporting. If we fail to maintain an effective system of disclosure controls or internal
control over financial reporting, including satisfaction of the requirements of Section 404 of SOX, we may not be able to accurately or timely report on our financial results or adequately identify and reduce the likelihood of fraud.
Additionally, if we were to identify any material weakness over our internal control over financial reporting, we also cannot ensure that we could correct any such material weakness to allow our management to conclude that our internal controls over
financial reporting are effective in time to enable our independent registered public accounting firm to attest that such assessment will have been fairly stated in any report to be filed with the SEC or attest that we have maintained effective
internal control over financial reporting. As a result, the financial position of our business could be harmed; current and potential future shareholders could lose confidence in us and/or our reported financial results, which may cause a negative
effect on our trading price; and we could be exposed to litigation or regulatory proceedings, which may be costly or divert management attention.
Our Reported Financial Results May be Adversely Affected by New Accounting Pronouncements or Changes in Existing Accounting Standards and Practices
We prepare our financial statements in conformity with accounting principles generally accepted in the U.S. These accounting principles
are subject to interpretation by the Financial Accounting Standards Board (FASB), the SEC and various organizations formed to interpret and create appropriate accounting standards and practices. New accounting pronouncements and varying
interpretations of accounting standards and practices have occurred and may occur in the future. New accounting pronouncements or a change in the interpretation of existing accounting standards or practices may have a significant effect on our
reported financial results and may even affect our reporting of transactions completed before the change is announced or effective.
33
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Total
Number
of Shares
Purchased
|
|
|
Average
Price
Paid
Per Share
|
|
|
Total Number of
Shares Purchased as
Part of
Publicly
Announced Plans or
Programs
|
|
|
Approximate Dollar
Value of Shares that
May Yet
Be
Purchased Under
the Plans or
Programs
|
|
October 1, 2010 to October 31, 2010
|
|
|
2,000
|
|
|
$
|
5.00
|
|
|
|
11,292,060
|
|
|
$
|
5,712,000
|
|
November 1, 2010 to November 30, 2010
|
|
|
33,565
|
|
|
|
5.08
|
|
|
|
11,325,625
|
|
|
$
|
5,541,000
|
|
December 1, 2010 to December 31, 2010
|
|
|
21,555
|
|
|
|
5.20
|
|
|
|
11,347,180
|
|
|
$
|
5,428,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
57,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In July 2010, we announced the authorization of a new $10.0 million stock repurchase plan which
became effective on July 27, 2010. During the three months ended December 31, 2010, we repurchased 57,120 shares of common stock at a cost of approximately $0.3 million under the stock repurchase plan approved on July 27, 2010. The
transactions occurred in open market purchases. The repurchase program may be suspended or discontinued at any time without prior notice.
ITEM 5.
|
OTHER INFORMATION
|
There
have been no material changes to the procedures by which stockholders may recommend nominees to the Companys Board of Directors.
34
(a) Exhibits
under Item 601 of Regulation S-K
|
|
|
2.1
+
|
|
Merger Agreement dated as of August 8, 2003 among Pervasive Software Inc., Ramal Acquisition Corp, Data Junction Corporation, Michael E. Hoskins, The Hoskins 2003 Charitable
Remainder Unitrust with Makeup, Darrell G. Blandford, The Blandford 2003 Charitable Remainder Trust with Makeup, Gregory E. Grosh, The Gregory E. Grosh Charitable Remainder Unitrust (Gregory E. Grosh Trustee), Ron S. Dougherty and Computershare
Trust Company, Inc., as escrow agent
|
|
|
3.1*
|
|
Restated Certificate of Incorporation
|
|
|
3.2*
|
|
Bylaws of the Company
|
|
|
3.3****
|
|
Amended and Restated Bylaws of the Company
|
|
|
4.1*
|
|
Reference is made to Exhibits 3.1 and 3.2
|
|
|
4.2*
|
|
Specimen Common Stock certificate
|
|
|
4.3***
|
|
Rights Agreement dated October 20, 2000, between the Company and Computershare Trust Company, Inc. as Rights Agent
|
|
|
10.1*
|
|
Form of Indemnification Agreement
|
|
|
10.2
|
|
2006 Equity Incentive Plan Amended and Restated November 15, 2010
|
|
|
10.3*
|
|
1997 Stock Incentive Plan
|
|
|
10.4*
|
|
First Amended and Restated 1994 Incentive Plan
|
|
|
10.5
++
|
|
Lease agreement dated September 24, 2004 between the Company and Carr Texas Op, LP T/A Riata Corporate Park
|
|
|
10.6**
|
|
Form of Restricted Stock Agreement
|
|
|
10.7
+++
|
|
Form of Stock Option Award Agreement for the Pervasive Software Inc. 2006 Equity Incentive Plan
|
|
|
10.8
+++++
|
|
Form of Notice of Restricted Stock Award for the Pervasive Software Inc. 2006 Equity Incentive Plan
|
|
|
10.9
+++++
|
|
Form of Notice of Grant of Restricted Stock Units for the Pervasive Software Inc. 2006 Equity Incentive Plan
|
|
|
10.10
+++++
|
|
Form of Notice of Restricted Stock Award for the Pervasive Software Inc. 1997 Stock Incentive Plan
|
|
|
10.11
++++++
|
|
Form of Amended Notice of Grant of Restricted Stock Award for the Pervasive Software Inc. 2006 Equity Incentive Plan
|
|
|
10.12
++++++
|
|
Form of Amended Notice of Grant of Restricted Stock Units for the Pervasive Software Inc. 2006 Equity Incentive Plan
|
|
|
31.1
|
|
Rule 13a-14(a)/15d-a4(a) Certification executed by John Farr, Chief Executive Officer
|
|
|
31.2
|
|
Rule 13a-14(a)/15d-a4(a) Certification executed by Randall Jonkers, Chief Financial Officer
|
|
|
32.1
|
|
Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) executed by John Farr, Chief
Executive Officer and Randall Jonkers, Chief Financial Officer
|
+
|
Incorporated by reference to the Companys Current Report on Form 8-K filed August 13, 2003.
|
*
|
Incorporated by reference to the Companys Registration Statement on Form S-1 (File No. 333-32199).
|
**
|
Incorporated by reference to the Companys Current Report on Form 8-K filed January 24, 2006.
|
***
|
Incorporated by reference to the Companys Registration Statement on Form 8-A filed on October 24, 2000 (File No. 000-23043).
|
****
|
Incorporated by reference to the Companys Current report on Form 8-K filed September 6, 2007.
|
++
|
Incorporated by reference to the Companys Current Report on Form 8-K filed September 24, 2004.
|
+++
|
Incorporated by reference to the Companys Current Report on Form 8-K filed February 22, 2007.
|
+++++
|
Incorporated by reference to the Companys Current Report on Form 8-K filed July 17, 2007.
|
++++++
|
Incorporated by reference to the Companys Current Report on Form 8-K filed January 13, 2009.
|
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
Date: January 26, 2011
|
|
|
|
|
|
PERVASIVE SOFTWARE INC.
|
|
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Randall G. Jonkers
|
|
|
|
|
|
|
Randall G. Jonkers
|
|
|
|
|
|
|
Chief Financial Officer (Duly Authorized
Officer and Principal Financial Officer)
|
36
EXHIBIT INDEX
|
|
|
EXHIBIT
NUMBER
|
|
DESCRIPTION
|
2.1
+
|
|
Merger Agreement dated as of August 8, 2003 among Pervasive Software Inc., Ramal Acquisition Corp, Data Junction Corporation, Michael E. Hoskins, The Hoskins 2003 Charitable
Remainder Unitrust with Makeup, Darrell G. Blandford, The Blandford 2003 Charitable Remainder Trust with Makeup, Gregory E. Grosh, The Gregory E. Grosh Charitable Remainder Unitrust (Gregory E. Grosh Trustee), Ron S. Dougherty and Computershare
Trust Company, Inc., as escrow agent
|
|
|
3.1*
|
|
Restated Certificate of Incorporation
|
|
|
3.2*
|
|
Bylaws of the Company
|
|
|
3.3****
|
|
Amended and Restated Bylaws of the Company
|
|
|
4.1*
|
|
Reference is made to Exhibits 3.1 and 3.2
|
|
|
4.2*
|
|
Specimen Common Stock certificate
|
|
|
4.3***
|
|
Rights Agreement dated October 20, 2000, between the Company and Computershare Trust Company, Inc. as Rights Agent
|
|
|
10.1*
|
|
Form of Indemnification Agreement
|
|
|
10.2
|
|
2006 Equity Incentive Plan Amended and Restated November 15, 2010
|
|
|
10.3*
|
|
1997 Stock Incentive Plan
|
|
|
10.4*
|
|
First Amended and Restated 1994 Incentive Plan
|
|
|
10.5
++
|
|
Lease agreement dated September 24, 2004 between the Company and Carr Texas Op, LP T/A Riata Corporate Park
|
|
|
10.6**
|
|
Form of Restricted Stock Agreement
|
|
|
10.7
+++
|
|
Form of Stock Option Award Agreement for the Pervasive Software Inc. 2006 Equity Incentive Plan
|
|
|
10.8
+++++
|
|
Form of Notice of Restricted Stock Award for the Pervasive Software Inc. 2006 Equity Incentive Plan
|
|
|
10.9
+++++
|
|
Form of Notice of Grant of Restricted Stock Units for the Pervasive Software Inc. 2006 Equity Incentive Plan
|
|
|
10.10
+++++
|
|
Form of Notice of Restricted Stock Award for the Pervasive Software Inc. 1997 Stock Incentive Plan
|
|
|
10.11
++++++
|
|
Form of Amended Notice of Grant of Restricted Stock Award for the Pervasive Software Inc. 2006 Equity Incentive Plan
|
|
|
10.12
++++++
|
|
Form of Amended Notice of Grant of Restricted Stock Units for the Pervasive Software Inc. 2006 Equity Incentive Plan
|
|
|
31.1
|
|
Rule 13a-14(a)/15d-a4(a) Certification executed by John Farr, Chief Executive Officer
|
|
|
31.2
|
|
Rule 13a-14(a)/15d-a4(a) Certification executed by Randall Jonkers, Chief Financial Officer
|
|
|
32.1
|
|
Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) executed by John Farr, Chief
Executive Officer and Randall Jonkers, Chief Financial Officer
|
+
|
Incorporated by reference to the Companys Current Report on Form 8-K filed August 13, 2003.
|
*
|
Incorporated by reference to the Companys Registration Statement on Form S-1 (File No. 333-32199).
|
**
|
Incorporated by reference to the Companys Current Report on Form 8-K filed January 24, 2006.
|
***
|
Incorporated by reference to the Companys Registration Statement on Form 8-A filed on October 24, 2000 (File No. 000-23043).
|
****
|
Incorporated by reference to the Companys Current report on Form 8-K filed September 6, 2007.
|
++
|
Incorporated by reference to the Companys Current Report on Form 8-K filed September 24, 2004.
|
+++
|
Incorporated by reference to the Companys Current Report on Form 8-K filed February 22, 2007.
|
+++++
|
Incorporated by reference to the Companys Current Report on Form 8-K filed July 17, 2007.
|
++++++
|
Incorporated by reference to the Companys Current Report on Form 8-K filed January 13, 2009.
|
37
Pervasive Software Inc. (MM) (NASDAQ:PVSW)
Historical Stock Chart
From May 2024 to Jun 2024
Pervasive Software Inc. (MM) (NASDAQ:PVSW)
Historical Stock Chart
From Jun 2023 to Jun 2024