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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
    FORM 10-Q/A
(Amendment No.1) x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM  TO
 COMMISSION FILE NUMBER 000-24677 BINDVIEW DEVELOPMENT CORPORATION  TEXAS
    
    76-0306721(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)5151 SAN FELIPE, 25th FLOOR, HOUSTON, TX
    
    77056(Address of principal executive offices)
    
    (Zip code)
 (713) 561-4000
(Registrants telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes o No x Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2). Yes o No x As of May 07, 2004, the Company had 47,602,013 shares of Common Stock, no par value, outstanding.    1




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TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 5. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSITEM 6. EXHIBITSSIGNATURESEXHIBIT INDEXCertification of Company's CEO pursuant to Section 302Certification of Company's CFO pursuant to Section 302Certifications of CEO pursuant to Section 906Certifications of CFO pursuant to Section 906    Table of Contents  EXPLANATORY NOTE BindView Development Corporation, Inc. (BindView or the Company) is filing this Amendment
No. 1 to its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2004, which was
originally filed on May 14, 2004 (the Form 10-Q), to restate the consolidated financial
statements and related footnote disclosures for the three months ended March 31, 2004 to correct a
$131,000 overstatement of revenues in our Latin America operations.
As more fully described in Note 7 to the consolidated financial
statements, this
overstatement was comprised of (i) two separate transactions with a single reseller and an
end-user customer for which professional services revenues were overstated by $122,000; and (ii)
maintenance revenue of $9,000 associated with a December 2003 transaction. The overstatement of
professional services revenues resulted from the recording of revenues based on invalid documents
that had been submitted to the Companys accounting department by certain personnel in Latin
America. In addition, the Company has revised Part I Item 4 to include information about the impact
of the restatements on its internal controls. This Amendment No. 1 amends only the portions of the
Form 10-Q listed in the next paragraph below; the remainder of the Form 10-Q is substantively
unchanged but is reproduced in this Amendment No. 1 for convenient reference. This Amendment No. 1
does not reflect events occurring after the original filing date of the Form 10-Q except as
otherwise indicated. This Amendment No. 1 contains changes to the following disclosures:  
    
    Part I  Item 1. Financial Statements (Unaudited)
    
    Part I  Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    Part I  Item 4. Controls and Procedures
    
    Part II  Item 6. Exhibits 2




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PART I. FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands) MARCH 31,
    
    DECEMBER 31,2004
    
    2003(As Restated)
    
    (As Restated)Note 7ASSETSCurrent assets:Cash and cash equivalents
    
    $
    39,244
    
    
    $
    35,449Cash  restricted
    
    
    2,250
    
    
    
    2,250Accounts receivable, net of allowance of $1,040
    
    
    7,029
    
    
    
    14,066Other
    
    
    1,978
    
    
    
    2,180Total current assets
    
    
    50,501
    
    
    
    53,945Property and equipment, net
    
    
    5,726
    
    
    
    6,564Investments and other assets
    
    
    2,795
    
    
    
    2,498Total assets
    
    $
    59,022
    
    
    $
    63,007LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,396
    
    
    $
    2,066Accrued liabilities
    
    
    4,262
    
    
    
    4,879Accrued compensation
    
    
    2,518
    
    
    
    5,275Deferred revenue
    
    
    15,050
    
    
    
    13,253Total current liabilities
    
    
    23,226
    
    
    
    25,473Deferred revenue
    
    
    1,522
    
    
    
    1,477Other
    
    
    1,977
    
    
    
    2,087Commitments and contingenciesShareholders equity:Preferred stock, $0.01 par value, 20,000 shares
authorized, none issued
    
    
    
    
    
    
    Common stock, no par value, 100,000 shares
authorized, 47,562 and
47,034 shares issued and outstanding
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    106,168
    
    
    
    105,176Note receivable from shareholder
    
    
    (326
    )
    
    
    (392
    )Accumulated deficit
    
    
    (74,975
    )
    
    
    (72,207
    )Accumulated other comprehensive income
    
    
    1,429
    
    
    
    1,392Total shareholders equity
    
    
    32,297
    
    
    
    33,970Total liabilities and shareholders equity
    
    $
    59,022
    
    
    $
    63,007
 See notes to unaudited consolidated financial statements. 3




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BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS (Unaudited)
(in thousands, except per share amounts) THREE MONTHS ENDEDMARCH 31,2004
    
    2003(As Restated)Note 7Revenues:Licenses
    
    $
    5,912
    
    
    $
    5,196Services
    
    
    8,921
    
    
    
    7,85114,833
    
    
    
    13,047Cost of revenues:Cost of licenses
    
    
    140
    
    
    
    116Cost of services
    
    
    1,831
    
    
    
    1,4321,971
    
    
    
    1,548Gross profit
    
    
    12,862
    
    
    
    11,499Operating costs and expenses:Sales and marketing
    
    
    9,180
    
    
    
    7,758Research and development
    
    
    4,576
    
    
    
    4,235General and administrative
    
    
    1,898
    
    
    
    1,777Restructuring
    
    
    
    
    
    
    549Operating loss
    
    
    (2,792
    )
    
    
    (2,820
    )Other income
    
    
    94
    
    
    
    119Loss before income taxes
    
    
    (2,698
    )
    
    
    (2,701
    )Provision for income taxes
    
    
    70
    
    
    
    Net loss
    
    $
    (2,768
    )
    
    $
    (2,701
    )Loss per common share  basic and
diluted
    
    $
    (0.06
    )
    
    $
    (0.06
    )Number of shares used to calculate per share
amounts, basic and diluted
    
    
    47,329
    
    
    
    46,342Reconciliation of net loss to comprehensive loss:Net loss
    
    $
    (2,768
    )
    
    $
    (2,701
    )Unrealized gain from foreign currency translation
    
    
    37
    
    
    
    189Comprehensive loss
    
    $
    (2,731
    )
    
    $
    (2,512
    )
 See notes to unaudited consolidated financial statements. 4




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BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands) THREE MONTHS ENDEDMARCH 31,2004
    
    2003(As Restated)Note 7Cash flows from operating activities:Net loss
    
    $
    (2,768
    )
    
    $
    (2,701
    )Adjustments
to reconcile net loss to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    740
    
    
    
    969Stock compensation expense
    
    
    56
    
    
    
    Other
    
    
    (2
    )
    
    
    74Changes in operating assets and liabilities:Accounts receivable
    
    
    7,003
    
    
    
    3,747Other assets
    
    
    114
    
    
    
    570Accounts payable
    
    
    (666
    )
    
    
    (999
    )Accrued liabilities
    
    
    (3,494
    )
    
    
    (2,682
    )Deferred revenues
    
    
    1,849
    
    
    
    499Net cash provided by (used in) operating activities
    
    
    2,832
    
    
    
    (523
    )Cash flows from investing activities:Capital expenditures
    
    
    (194
    )
    
    
    (299
    )Reimbursement of tenant improvements
    
    
    284
    
    
    
    Restrictions on cash
    
    
    (194
    )
    
    
    Other
    
    
    10
    
    
    
    Net cash used in investing activities
    
    
    (94
    )
    
    
    (299
    )Cash flows from financing activities:Net proceeds from sale of common stock
    
    
    992
    
    
    
    248Net cash provided by financing activities
    
    
    992
    
    
    
    248Effect of exchange rate changes on cash
    
    
    65
    
    
    
    196Net increase (decrease) in cash and cash equivalents
    
    
    3,795
    
    
    
    (378
    )Cash and cash equivalents at beginning of year
    
    
    35,449
    
    
    
    37,760Cash and cash equivalents at end of period
    
    $
    39,244
    
    
    $
    37,382Non-cash financing and investing activities:Reduction of shareholder note in lieu of guaranteed bonus
    
    $
    66
    
    
    $
    161
 See notes to unaudited consolidated financial statements. 5




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BINDVIEW DEVELOPMENT CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL The accompanying consolidated financial statements of BindView Development Corporation, a
Texas corporation (the Company or BindView), included herein have been prepared without audit
pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly,
certain information and disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted. The Company believes
that the presentations and disclosures herein are adequate to make the information not misleading.
The consolidated financial statements reflect all adjustments (consisting of normal recurring
adjustments) necessary for a fair statement of the interim periods. Certain reclassifications have
been made to the prior years consolidated financial statements to conform with the current year
presentation. The results of operations for the interim periods are not necessarily indicative of the
results of operations to be expected for the full year. These consolidated financial statements
should be read in conjunction with the Companys audited consolidated financial statements included
in its Annual Report on Form 10-K/A, Amendment No. 1 for the year ended December 31, 2003. 2. LOSS PER SHARE The following table sets forth the computation of basic and diluted loss per share (in
thousands, except per share amounts): THREE MONTHS ENDEDMARCH 31,2004
    
    2003(As Restated)Note 7Numerator:Net loss  numerator for
loss per share  basic and
diluted
    
    $
    (2,768
    )
    
    $
    (2,701
    )Denominator:Weighted-average shares -
denominator for basic loss per
share
    
    
    47,329
    
    
    
    46,342Effect of dilutive securities
    
    
    
    
    
    
    Total diluted shares
    
    
    47,329
    
    
    
    46,342Loss per common share  basic and
diluted
    
    $
    (0.06
    )
    
    $
    (0.06
    )
 Options to purchase 9.2 million and 7.0 million shares of common stock for the three
months ended March 31, 2004 and 2003, respectively, were outstanding, but were not included in the
computation of diluted loss per share as their inclusion would have been anti-dilutive. 3. STOCK BASED COMPENSATION The Company accounts for all stock-based employee compensation plans under the recognition and
measurement provisions of APB Opinion 25, Accounting for Stock Issued to Employees, (APB 25)
and related interpretations. Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Companys common shares at the date of the grant
over the amount an employee must pay to 6




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acquire the common shares. The Company generally grants options at prices equal to the market
price of common shares on the date of the grant. However, if options are granted at a price below
fair market value, compensation expense is recorded in accordance with the provisions of APB 25.
Compensation expense may also be recognized for certain options which are considered variable
option grants. Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for
Stock-Based Compensation  an Amendment to FAS 123, requires companies that continue to account
for stock-based compensation in accordance with APB 25 to disclose certain information using
tabular presentation as presented below. This table illustrates the effect on net loss and loss
per share as if the Company had applied the fair value recognition provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, to stock-based employee compensation (in thousands,
except per share amounts): THREE MONTHSENDED MARCH 31,2004
    
    2003(As Restated)Note 7Net loss as reported
    
    $
    (2,768
    )
    
    $
    (2,701
    )Add: Stock-based employee
compensation expense included in
reported net loss
    
    
    56
    
    
    
    Deduct: Total stock-based employee
compensation expense determined under
fair value method for all awards
    
    
    (1,232
    )
    
    
    (1,440
    )Pro forma net loss
    
    $
    (3,944
    )
    
    $
    (4,141
    )Loss per common share (basic and
diluted): As reported
    
    $
    (0.06
    )
    
    $
    (0.06
    ) Pro forma
    
    $
    (0.08
    )
    
    $
    (0.09
    )
 4. RESTRUCTURING EXPENSES AND ASSET IMPAIRMENTS In January 2003, the Company approved a sales and marketing reorganization plan (the 2003
Restructuring Plan). The cost of this plan totaled approximately $0.5 million and consisted
primarily of (i) involuntary employee separation for approximately 20 employees (a reduction in
workforce of approximately 4 percent), (ii) closing the Companys Netherlands sales office, and
(iii) reserves for leasehold abandonment. All actions under the 2003 Restructuring Plan were
completed by December 31, 2003. In July 2002, the Company approved a restructuring plan to improve operating efficiency and
improve sales and marketing productivity (the 2002 Restructuring Plan). The cost of this plan
totaled approximately $1.9 million and consisted primarily of (i) involuntary employee separation
for approximately 30 employees (a reduction in workforce of approximately 5 percent), (ii) closing
the Companys Boston development center and certain European sales offices, (iii) reserves for
leasehold abandonment, and (iv) various non-personnel related cuts. The 2002 Restructuring Plan activity from December 31, 2003 to March 31, 2004 was as follows
(in thousands): REMAINING
    
    
    
    
    
    REMAININGACCRUAL
    
    CASH
    
    ACCRUAL12/31/2003
    
    EXPENDITURES
    
    3/31/2004Lease commitments
    
    $
    1,538
    
    
    $
    (128
    )
    
    $
    1,410
 The remaining accrual for the 2002 Restructuring Plan at March 31, 2004 is comprised of
the estimated carrying costs for our remaining excess space in Houston, Texas. Adjustments to this
accrual could be required in 7




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future periods if there are significant changes in the commercial real estate sublease market
in Houston, Texas. In 2001, the Company completed a corporate reorganization and implemented a number of
cost-cutting measures to improve operating efficiency and to accelerate our return to profitability
(the 2001 Restructuring Plan). The cost of this plan totaled approximately $6.6 million and
consisted primarily of: (i) involuntary employee separation expenses for approximately 160
employees (a reduction in workforce of approximately 21 percent), (ii) downsizing or closing of the
Companys Boston and Arlington development centers and certain European sales offices, (iii)
reserves for leasehold abandonment, and (iv) various non-personnel related costs. The restructuring
costs included a $1.2 million charge related to asset impairments of leasehold improvements,
equipment and other assets of the closed or downsized offices. The 2001 Restructuring Plan activity from December 31, 2003 to March 31, 2004 was as follows
(in thousands): REMAINING
    
    
    
    
    
    REMAININGACCRUAL
    
    CASH
    
    ACCRUAL12/31/2003
    
    EXPENDITURES
    
    3/31/2004Lease commitments
    
    $
    453
    
    
    $
    (58
    )
    
    $
    395
 The remaining accrual for the 2001 Restructuring Plan consists of excess carrying costs
until the lease cancellation for the Companys two floors abandoned as part of said Plan is
effective in September of 2004. 5. INCOME TAXES The
Company continues to provide a full valuation allowance against its
deferred tax assets in accordance with Financial Accounting Standard No. 109, Accounting for Income
Taxes. As in its prior assessments, the Company considered current and previous performance and
other relevant factors in determining the sufficiency of its valuation allowance. Objective
factors, such as current and previous operating losses, were given substantially more weight than
managements outlook for future profitability. Until such time as a consistent pattern of
sufficient profitability is established, no tax benefit will be recognized associated with the
Companys pre-tax accounting losses and a full income tax provision will not be provided on any
future pre-tax accounting income. 6. SUBSEQUENT EVENT In May 2004, the Companys Board of Directors approved a stock repurchase program for the
second quarter of 2004. Under this program, management of the Company may, at its discretion,
spend up to $2.5 million for the repurchase of the Companys common stock in the open market,
subject to Securities and Exchange Commission guidelines and restrictions set forth in Rule 10b-18. 7. RESTATEMENT OF FINANCIALS In October 2004, as a result of information obtained by the Company in its efforts to collect
certain receivables from Latin America resellers, the Companys Audit Committee commenced an
investigation of the Companys Latin American operations. The Audit Committee retained independent
legal counsel and consultants to assist with the investigation. On December 6, 2004 with the
investigation substantially complete, the Audit Committee concluded
that the Company had
inappropriately recognized approximately $1.0 million in revenues, involving six transactions in
Latin America. The Companys reported revenues were
overstated by $173,000 in the
fourth quarter of 2003; $131,000 in the first quarter of 2004; and
$698,000 in the second quarter
of 2004. As a result of the overstatement of revenues, the Audit
Committee concluded the Company would restate its financial
statements for the year ended December 31, 2003 and the first
two quarters of 2004, and also concluded that previously issued
financial statements for those periods
should no longer be relied upon. These conclusions were set forth in the Form 8-K dated December
6, 2004. The Audit Committee investigation was completed on December 8, 2004. Revenues
for the fourth quarter of 2003 were overstated by $173,000 related to a product return,
which certain Company personnel in Latin America knew to have occurred within the contractually
allowable return period, but which they did not report to the Companys accounting department. If
this return had been reported in a timely manner to the Companys accounting department, revenues
from this transaction would not have been recognized in the fourth quarter of 2003. Certain
personnel in Latin America who knew of the product return also made inaccurate representations as
to status of the receivable in response to the on-going collection efforts of the Companys
accounting department. Revenues
for the first quarter of 2004 were overstated by $131,000. This was comprised of (i) two
separate transactions with a single reseller and an end-user customer for which professional
services revenues were overstated by $122,000; and
(ii) maintenance revenue of $9,000 on the
fourth quarter 2003 transaction referred to above. The overstatement of professional services revenues
resulted from the recording of revenues based on invalid contracts and statements of work that had been
submitted to the Companys accounting department by certain personnel in Latin America. These
documents, certain of which the Company now believes were falsified prior to being submitted to its
accounting department, purported to show that the Company had entered into an arrangement with a
subsidiary of the reseller to provide services to the end-user customer on behalf of the Company. For
the three months ended March 31, 2004, total revenue decreased
$130,000 to $14.8 million, gross profit decreased $130,000 to $12.9
million and net loss increased $130,000 to $2.8 million, each as compared to the amounts previously reported by the Company on
its Form 10-Q on May 14, 2004. There was no effect on basic and diluted loss per share as a result
of the adjustments. Consequently, the consolidated financial statements for the three months ended March 31, 2004 are
restated in this Quarterly Report on Form 10-Q/A, Amendment
No. 1. The following table summarizes the impact of these adjustments on the Companys previously reported
quarterly results filed on Form 10-Q (in thousands): 8




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Consolidated Balance
Sheet: As of March 31, 2004As Reported
    
    Adjustments
    
    As AdjustedASSETSCurrent assets:Cash and cash equivalents
    
    $
    39,244
    
    
    $
    
    
    
    $
    39,244Cash  restricted
    
    
    2,250
    
    
    
    
    
    
    
    2,250Accounts receivable
    
    
    7,430
    
    
    
    (401
    )
    
    
    7,029Other
    
    
    1,978
    
    
    
    
    
    
    
    1,978Total current assets
    
    
    50,902
    
    
    
    (401
    )
    
    
    50,501Property and equipment, net
    
    
    5,726
    
    
    
    
    
    
    
    5,726Investments and other assets
    
    
    2,795
    
    
    
    
    
    
    
    2,795Total assets
    
    $
    59,423
    
    
    $
    (401
    )
    
    $
    59,022LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,396
    
    
    $
    
    
    
    $
    1,396Accrued liabilities
    
    
    4,262
    
    
    
    
    
    
    
    4,262Accrued compensation
    
    
    2,518
    
    
    
    
    
    
    
    2,518Deferred revenue
    
    
    15,148
    
    
    
    (98
    )
    
    
    15,050Total current liabilities
    
    
    23,324
    
    
    
    (98
    )
    
    
    23,226Deferred revenue
    
    
    1,522
    
    
    
    
    
    
    
    1,522Other
    
    
    1,977
    
    
    
    
    
    
    
    1,977Shareholders equity:Preferred stock
    
    
    
    
    
    
    
    
    
    
    Common stock
    
    
    1
    
    
    
    
    
    
    
    1Additional paid-in capital
    
    
    106,168
    
    
    
    
    
    
    
    106,168Notes receivable from shareholder
    
    
    (326
    )
    
    
    
    
    
    
    (326
    )Accumulated deficit
    
    
    (74,672
    )
    
    
    (303
    )
    
    
    (74,975
    )Accumulated other comprehensive income
    
    
    1,429
    
    
    
    
    
    
    
    1,429Total shareholders equity
    
    
    32,600
    
    
    
    (303
    )
    
    
    32,297Total liabilities and shareholders equity
    
    $
    59,423
    
    
    $
    (401
    )
    
    $
    59,022
 Statement of Operations and Comprehensive Loss: For the Three Months Ended March 31, 2004As Reported
    
    Adjustments
    
    As AdjustedRevenues:Licenses
    
    $
    5,912
    
    
    $
    
    
    
    $
    5,912Services
    
    
    9,051
    
    
    
    (130
    )
    
    
    8,92114,963
    
    
    
    (130
    )
    
    
    14,833Cost of revenues:Cost of licenses
    
    
    140
    
    
    
    
    
    
    
    140Cost of services
    
    
    1,831
    
    
    
    
    
    
    
    1,8311,971
    
    
    
    
    
    
    
    1,971Gross profit
    
    
    12,992
    
    
    
    (130
    )
    
    
    12,862Operating costs and expenses:Sales and marketing
    
    
    9,180
    
    
    
    
    
    
    
    9,180Research and development
    
    
    4,576
    
    
    
    
    
    
    
    4,576General and administrative
    
    
    1,898
    
    
    
    
    
    
    
    1,898Operating loss
    
    
    (2,662
    )
    
    
    (130
    )
    
    
    (2,792
    )Other income, net
    
    
    94
    
    
    
    
    
    
    
    94Loss before income taxes
    
    
    (2,568
    )
    
    
    (130
    )
    
    
    (2,698
    )Provision for income taxes
    
    
    70
    
    
    
    
    
    
    
    70Net loss
    
    $
    (2,638
    )
    
    $
    (130
    )
    
    $
    (2,768
    )
 9




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For the Three Months Ended March 31, 2004As Reported
    
    Adjustments
    
    As AdjustedLoss per common share  basic and diluted
    
    $
    (0.06
    )
    
    $
    
    
    
    $
    (0.06
    )Number of shares used to calculate per share amounts, basic and diluted
    
    
    47,329
    
    
    
    
    
    
    
    47,329Reconciliation of net loss to comprehensive loss:Net loss
    
    $
    (2,638
    )
    
    $
    (130
    )
    
    $
    (2,768
    )Unrealized gain from foreign currency translation
    
    
    37
    
    
    
    
    
    
    
    37Comprehensive loss
    
    $
    (2,601
    )
    
    $
    (130
    )
    
    $
    (2,731
    )
 Consolidated Cash Flows: None of the adjustments described above has any impact on cash balances for any period. However,
our consolidated statements of cash flows have been restated to reflect the restated net loss and
the effect revisions to certain balance sheet accounts has on changes in operating assets and
liabilities. For the Three Months Ended March 31, 2004As Reported
    
    Adjustments
    
    As AdjustedCash flows from operating activities:Net loss
    
    $
    (2,638
    )
    
    $
    (130
    )
    
    $
    (2,768
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    740
    
    
    
    
    
    
    
    740Stock compensation expense
    
    
    56
    
    
    
    
    
    
    
    56Other
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    6,873
    
    
    
    130
    
    
    
    7,003Other assets
    
    
    114
    
    
    
    
    
    
    
    114Accounts payable
    
    
    (666
    )
    
    
    
    
    
    
    (666
    )Accrued liabilities
    
    
    (3,494
    )
    
    
    
    
    
    
    (3,494
    )Deferred revenues
    
    
    1,849
    
    
    
    
    
    
    
    1,849Net cash used in operating activities
    
    
    2,832
    
    
    
    
    
    
    
    2,832Cash flows from investing activities:Capital expenditures
    
    
    (194
    )
    
    
    
    
    
    
    (194
    )Reimbursement of tenant improvements
    
    
    284
    
    
    
    
    
    
    
    284Restrictions on cash
    
    
    (194
    )
    
    
    
    
    
    
    (194
    )Other
    
    
    10
    
    
    
    
    
    
    
    10Net cash used in investing activities
    
    
    (94
    )
    
    
    
    
    
    
    (94
    )Cash flows from financing activities:Net proceeds from sale of common stock
    
    
    992
    
    
    
    
    
    
    
    992Net cash provided by used in financing activities
    
    
    992
    
    
    
    
    
    
    
    992Effect of exchange rate changes on cash
    
    
    65
    
    
    
    
    
    
    
    65Net decrease in cash and cash equivalents
    
    
    3,795
    
    
    
    
    
    
    
    3,795Cash and cash equivalents at beginning of year
    
    
    35,449
    
    
    
    
    
    
    
    35,449Cash and cash equivalents at end of year
    
    $
    39,244
    
    
    $
    
    
    
    $
    39,244
 Pro Forma Stock-Based Compensation: For the Three Months
Ended March 31, 2004As Reported
    
    Adjustments
    
    As AdjustedNet loss as reported
    
    $
    (2,638
    )
    
    $
    (130
    )
    
    $
    (2,768
    )Add: Stock-based employee compensation expense included in reported net loss
    
    
    56
    
    
    
    
    
    
    
    56Deduct: Total stock-based employee compensation expense determined under
fair value method for all awards
    
    
    (1,232
    )
    
    
    
    
    
    
    (1,232
    )Pro forma net loss
    
    $
    (3,814
    )
    
    $
    (130
    )
    
    $
    (3,944
    )Loss per common share (basic and diluted): As reported
    
    $
    (0.06
    )
    
    $
    
    
    
    $
    (0.06
    ) Pro forma
    
    $
    (0.08
    )
    
    $
    
    
    
    $
    (0.08
    )
 10




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Managements Discussion and Analysis of Financial Condition and Results of Operations contain
forward-looking statements which involve risks and uncertainties. The Companys actual results may
differ significantly from the results discussed in the forward-looking statements. Factors that
might cause such a difference include those discussed in the Cautionary Statements set forth in
the Companys Annual Report on Form 10-K/A, Amendment No. 1, for the year ended December 31, 2003. The
following discussion should be read in conjunction with the Companys consolidated financial
statements included with this report and our consolidated financial statements and related
Managements Discussion and Analysis of Financial Condition and Results of Operations for the year
ended December 31, 2003 included in our Annual Report on
Form 10-K/A, Amendment No. 1. In October 2004, as a result of information obtained by the Company in its efforts to collect
certain receivables from Latin America resellers, the Companys Audit Committee commenced an
investigation of the Companys Latin American operations. The Audit Committee retained independent
legal counsel and consultants to assist with the investigation. On December 6, 2004 with the
investigation substantially complete, the Audit Committee concluded that the Company had
inappropriately recognized approximately $1.0 million in revenues involving six transactions in
Latin America. The Companys reported revenues were overstated by $173,000 in the
fourth quarter of 2003; $131,000 in the first quarter for 2004; and $698,000 in the second quarter
of 2004. As a result of the overstatement of revenues, the Audit
Committee concluded the Company would restate its financial
statements for the year ended December 31, 2003 and the first two
quarters of 2004 and also concluded that previously issued financial statements for
those periods should no longer be relied upon. These conclusions were set forth in the Form 8-K dated December
6, 2004. The Audit Committee investigation was completed on December 8, 2004. Revenues for the fourth quarter of 2003 were overstated by $173,000 related to a product return,
which certain Company personnel in Latin America knew to have occurred within the contractually
allowable return period, but which they did not report to the Companys accounting department. If
this return had been reported in a timely manner to the Companys accounting department, revenues
from this transaction would not have been recognized in the fourth quarter of 2003. Certain
personnel in Latin America who knew of the product return also made inaccurate representations as
to status of the receivable in response to the on-going collection efforts of the Companys
accounting department. Revenues for the first quarter of 2004 were overstated by $131,000. This was comprised of (i) two
separate transactions with a single reseller and an end-user customer for which professional
services revenues were overstated by $122,000; and (ii) maintenance revenue of $9,000 on the
fourth quarter 2003 transaction referred to above. The overstatement of professional services revenues
resulted from the recording of revenues based on invalid contracts and statements of work that had been
submitted to the Companys accounting department by certain personnel in Latin America. These
documents, certain of which the Company now believes were falsified prior to being submitted to its
accounting department, purported to show that the Company had entered into an arrangement with a
subsidiary of the reseller to provide services to the end-user customer on behalf of the Company. Consequently, the effects of the restatement have been reflected in the discussion of Managements
Discussion and Analysis of Financial Condition and Results of Operations in this Amendment No. 1 to
the Form 10-Q. This Amendment No. 1 to the Form 10-Q does not reflect any other events occurring
after the original filing of the Form 10-Q. Overview See discussion under Item 1, General in our Annual Report on Form 10-K/A, Amendment No. 1 for the
year ended December 31, 2003 for an overview of our business. Critical Accounting
Policies and Estimates There were no significant changes to our critical accounting policies and estimates during the
three months ended March 31, 2004 compared with those disclosed in Item 7, Managements Discussion
and Analysis of Financial Condition and Results of Operations included in our Annual Report
on Form 10-K/A, Amendment No. 1 for the year ended December 31, 2003. Results of Operations Three Months Ended March 31, 2004 Compared with the Three Months Ended March 31, 2003 Revenues.Revenues for the current quarter were $14.8 million compared with $13.0 million for
the first quarter of 2003. License revenues for the first quarter of 2004 were $5.9 million, or
39.6 percent of total revenues, up from $5.2 million, or 39.8 percent of total revenues, in the
first quarter of 2003. Services revenues for the first quarter of 2004 were $8.9 million, or
60.1 percent of total revenues, up from $7.9 million, or 60.2 percent of total revenues, in the
first quarter of 2003. Services revenues for the first quarter of 2004 were comprised of
maintenance revenues of $7.5 million and professional services revenues of $1.4 million, up from
$7.0 million in maintenance revenues and $0.9 million in professional services revenues in the
first quarter of 2003. The increase in services revenues was primarily due to an increase in our
installed customer base and a higher focus on selling value-added consulting services. During the first quarter of 2004, revenues from our products for Microsoft-based platforms
totaled $10.1 million, an increase of 15.7 percent over 2003. Revenues from these products
accounted for approximately 68 percent of 11




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##### Table of Contents



total revenues in the first quarter of 2004, up from 67 percent of total revenues for the
first quarter of 2003. License revenues for our Microsoft-related products for the first quarter
of 2004 were $5.1 million compared with $4.5 million in the first quarter of 2003. Maintenance
revenues for our Microsoft-related products in the first quarter of 2004 were $5.0 million compared
with $4.2 million in the first quarter of 2003. We expect revenues from our products and
maintenance for Microsoft-based platforms will continue to grow as a percentage of total revenues. Revenues from our products for Novell-based platforms for the first quarter of 2004 were $2.5
million, or 17 percent of total revenues, compared with $2.7 million in first quarter of 2003, or
21 percent of total revenues. Consistent with the trend seen in past quarters, total revenues from
these products were down year-over-year, reflecting both the maturity and our penetration of the
Novell market. License revenues for Novell-based platforms for the first quarter of 2004 were
$0.6 million compared with $0.5 million in the first quarter of 2003. Maintenance revenues for
Novell-based platforms in the first quarter of 2004 were $1.8 million compared with $2.2 million in
the first quarter of 2003. While we expect our Novell revenues will continue to decline in the
future, we expect the revenue decline will be modest relative to the declines over the past two
years and expect the decline will be offset by higher revenues from our products and maintenance
for other platforms. Sales of our security focused bv-Control product line accounted for approximately 84 percent
of our license revenue in the first quarter of 2004 compared with 78 percent in the first quarter
of 2003. Sales of our system administration focused bv-Admin product line accounted for
approximately 16 percent of our license revenue in the first quarter of 2004 compared with 22
percent in the first quarter of 2003. No customer accounted for more than 10 percent of our revenues during the first quarter of
2004 or 2003. Revenues recognized from sales to customers outside North America, primarily in
Europe, accounted for approximately 10 percent of total revenues in the first quarter of 2004
compared with 9 percent in the first quarter of 2003. Gross Profit.Gross profit for the current quarter totaled $12.9 million, up 12 percent from
the first quarter of 2003, due to the increase in revenues. Gross margin for the current quarter
was 86.7 percent, down from 88.1 percent in the first quarter of 2003. The decline in gross margin
related to the increase in professional services revenues, which have a lower gross margin than the
Companys license and maintenance revenues. Gross profit generated from license revenue for the first quarter of 2004 was $5.8 million,
compared with $5.1 million for the first quarter of 2003. The gross margin from license revenue
for the first quarter of 2004 was 97.6 percent, compared with 97.8 percent for the first quarter of
2003. Gross profit from services revenue for the first quarter of 2004 was $7.1 million, compared
with $6.4 million for the first quarter of 2003. Gross margin from services revenue for the first
quarter of 2004 was 79.5 percent compared with 81.8 percent for the first quarter of 2003. The
decline in gross margin reflected higher personnel costs associated with our technical-support and
professional-services units. While we do not track and measure costs of performing
services (technical support, professional services) by product platform (i.e., Microsoft, Novell,
etc), we do not believe there is a material difference in the gross margin by product line. Operating Costs and Expenses.Operating costs and expenses for the first quarter of 2004
totaled $15.7 million, up from $14.3 million for the first quarter of 2003, which included a
restructuring charge of $0.5 million. Excluding the $0.5 million charge in the first quarter of
2003, operating costs and expenses were approximately $1.9 million, or 13.7 percent, higher in the
first quarter of 2004 due to significant investments in sales and marketing since the first quarter
of 2003, costs related to our planned expansion of our R&D operations in India, higher wage and
health care costs and expenses associated with Sarbanes-Oxley compliance. Sales and marketing expenses for the first quarter of 2004 were $9.2 million (61.9 percent of
revenues), up from $7.8 million (59.5 percent of revenues) for the first quarter of 2003. The
increase in sales and marketing expenses primarily related to investments in areas where we see
long-term growth opportunities, specifically our Federal, Latin American and European operations.
We also added personnel to our inside sales force and increased spending on marketing programs to
grow our working sales pipeline. We expect sales and marketing expenses as a percentage of
revenues to be lower in the second quarter of 2004 as a result of anticipated revenue growth. 12




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Research and development expenses for the first quarter of 2004 were $4.6 million (30.9
percent of revenues), up from $4.2 million (32.5 percent of revenues) for the first quarter of
2003. This increase primarily related to our actions taken to affect the planned expansion of our
R&D operations in India to better execute on our product strategy, as well as increased personnel
costs in our Houston location. Primarily as a result of the expansion in India, we expect R&D
expenses in 2004 will be up $2.0 to $2.5 million over 2003. Approximately $1.0 million of this
increase relates to one-time expenses; we therefore expect R&D expenses in 2005 will be below the
expense level for 2004. We also expect that this initiative coupled with anticipated revenue
growth will result in a decrease in research and development expenses as a percentage of revenues. General and administrative expenses for the first quarter of 2004 were $1.9 million (12.8
percent of revenues), up from $1.8 million (13.6 percent of revenues) for the first quarter of
2003. We expect future general and administrative expenses to decrease as a percentage of revenues
as a result of our restructuring initiatives to date to improve operating efficiencies, as well as
anticipated revenue growth. In January 2003, we approved a sales and marketing reorganization plan (the 2003
Restructuring Plan). The cost of this plan totaled approximately $0.5 million and consisted
primarily of (i) involuntary employee separation for approximately 20 employees (a reduction in
workforce of approximately 4 percent), (ii) closing our Netherlands sales office, and (iii)
reserves for leasehold abandonment. All actions under the 2003 Restructuring Plan were completed
by December 31, 2003. The 2003 Restructuring Plan resulted in an estimated reduction in annual
operating expenses of approximately $1.4 million. In July 2002, we approved a restructuring plan to improve operating efficiency and improve
sales and marketing productivity (the 2002 Restructuring Plan). The cost of this plan totaled
approximately $1.9 million and consisted primarily of (i) involuntary employee separation for
approximately 30 employees (a reduction in workforce of approximately 5 percent), (ii) closing our
Boston development center and certain European sales offices, (iii) reserves for leasehold
abandonment, and (iv) various non-personnel related cuts. The 2002 Restructuring Plan activity from December 31, 2003 to March 31, 2004 was as follows
(in thousands): REMAINING
    
    
    
    
    
    REMAININGACCRUAL
    
    CASH
    
    ACCRUAL12/31/2003
    
    EXPENDITURES
    
    3/31/2004Lease commitments
    
    $
    1,538
    
    
    $
    (128
    )
    
    $
    1,410
 The remaining accrual for the 2002 Restructuring Plan at March 31, 2004 is comprised of
the estimated carrying costs for our remaining excess space in Houston, Texas. Adjustments to this
balance could be required in future periods based on the economic outlook of the real estate market
in Houston, Texas. The 2002 Restructuring Plan resulted in an estimated reduction in annual
operating expenses of approximately $2.9 million. In 2001, we completed a corporate reorganization and implemented a number of cost-cutting
measures to improve operating efficiency and to accelerate our return to profitability (the 2001
Restructuring Plan). The cost of this plan totaled approximately $6.6 million and consisted
primarily of: (i) involuntary employee separation expenses for approximately 160 employees (a
reduction in workforce of approximately 21 percent), (ii) downsizing or closing of our Boston and
Arlington development centers and certain of our European sales offices, (iii) reserves for
leasehold abandonment, and (iv) various non-personnel related costs. The restructuring costs
included a $1.2 million charge related to asset impairments of leasehold improvements, equipment
and other assets of the closed or downsized offices. The 2001 Restructuring Plan activity from December 31, 2003 to March 31, 2004 was as follows
(in thousands): REMAINING
    
    
    
    
    
    REMAININGACCRUAL
    
    CASH
    
    ACCRUAL12/31/2003
    
    EXPENDITURES
    
    3/31/2004Lease commitments
    
    $
    453
    
    
    $
    (58
    )
    
    $
    395
 13




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##### Table of Contents



The remaining accrual for the 2001 Restructuring Plan consists of excess carrying costs
until the lease cancellation for our two floors abandoned as part of said Plan is effective in
September of 2004. The 2001 Restructuring Plan resulted in an estimated reduction in annual
operating expenses of approximately $11.8 million. Provision for Income Taxes.We did not record an income tax provision for our domestic
operations in either the first quarter of 2004 or 2003, as we continue to provide a full valuation
allowance against our deferred tax assets in accordance with Financial Accounting Standards No.
109, Accounting for Income Taxes. As in our prior assessments, we considered current and previous
performance and other relevant factors in determining the sufficiency of our valuation allowance.
Objective factors, such as current and previous operating losses, were given substantially more
weight than our outlook for future profitability. Until such time as a consistent pattern of
sufficient profitability is established, no tax benefit will be recognized associated with the
Companys pre-tax accounting losses and a full income tax provision will not be provided on any
future pre-tax accounting income. A provision of $0.1 million was recorded for taxes related to
our foreign operations during the first quarter of 2004. Net Loss.Due to the factors described above, net loss for the quarter ended March 31, 2004
was $2.8 million compared with $2.7 million for the quarter ended March 31, 2003. Liquidity and Capital Resources Our capital requirements have principally related to working capital needs and capital
expenditures. These requirements have been met through a combination of issuances of securities
and internally generated funds. We had cash, cash equivalents and short-term investments of $39.2 million at March 31, 2004
compared with $35.4 million at December 31, 2003. Our working capital has decreased approximately
$1.2 million since December 31, 2003 to $27.3 million at March 31, 2004 primarily due to an
increase in our deferred revenues and the effects of accruals for incentive based compensation. At
March 31, 2004, we had no outstanding debt. Cash flows provided by (used in) operating activities were $2.8 million in the first quarter
of 2004 compared with $(0.5) million in the first quarter of 2003. The increase in cash provided
by operating activities in 2004 was primarily the result of an increase in our cash collections on
accounts receivables of approximately $3.1 million over the first quarter of 2003. Cash flows provided by (used in) investing activities were $(0.1) million in the first quarter
of 2004 compared with $(0.3) million in the first quarter of 2003. The increase in cash generated
from investing activities was the result of (i) a $0.3 million reimbursement received from our
landlord for tenant improvements during the first quarter of 2004 and (ii) a $0.1 million reduction
in capital expenditures. This increase was partially offset by a $0.2 million cash deposit made to
a financial institution in order to issue performance guaranties. Cash flows provided by financing activities were $1.0 million in the first quarter of 2004
compared with $0.2 million in the first quarter of 2003. Cash provided by financing activities
during the first quarter of 2004 was the result of (i) $0.7 million in cash provided by the
issuance of common stock for employee stock options and (ii) $0.3 million in cash provided by the
issuance of common stock under our Employee Stock Purchase Plan. Cash provided by financing activities
during the first quarter of 2003 was primarily attributable to cash provided by the issuance of
common stock under our Employee Stock Purchase Plan. We conduct operations in leased facilities under operating leases expiring at various dates
through 2011. The contractual obligations under these lease commitments were comprised of the
following as of March 31, 2004 (in thousands): CONTRACTUAL
    
    
    
    
    
    Remainder ofOBLIGATION
    
    TOTAL
    
    2004
    
    2005  2007
    
    2008  2009
    
    2010  2011Operating leases
    
    $
    23,828
    
    
    $
    3,743
    
    
    $
    10,586
    
    
    $
    7,100
    
    
    $
    2,399Sub-leasing arrangements*
    
    
    (308
    )
    
    
    (308
    )
    
    
    
    
    
    
    
    
    
    
    $
    23,520
    
    
    $
    3,435
    
    
    $
    10,586
    
    
    $
    7,100
    
    
    $
    2,399
 14




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##### Table of Contents



* We have sub-leased portions of these facilities under operating leases. Anticipated cash
receipts from these executed sub-lease arrangements have been taken into account when deriving
expected cash outflow on operating lease commitments in the preceding table. Our expected principal cash requirements for the remainder of 2004 are: (i) capital
expenditures between $2.3 and $2.7 million, primarily for computer and software equipment, (ii)
working capital requirements, (iii) net payments on operating leases of approximately $3.4 million,
and (iv) stock repurchases up to $2.5 million. We believe there is sufficient cash on hand to meet
these cash requirements, as well as our cash requirements for the foreseeable future. Stock Repurchase Program In May 2004, our Board of Directors approved a stock repurchase program for the second quarter
of 2004. Under this program, management may, at its discretion, spend up to $2.5 million for the
repurchase of our common stock in the open market, subject to Securities and Exchange Commission
guidelines and restrictions set forth in Rule 10b-18. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes since December 31, 2003. See the Companys Annual
Report on Form 10-K/A, Amendment No. 1. 
 ITEM 4. CONTROLS AND PROCEDURES The management of the Company, including the Chief Executive Officer and the Chief Financial
Officer, conducted an evaluation of the effectiveness of the Companys disclosure controls and
procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 as of March 31, 2004
(the Evaluation Date). Based on that evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that, as of the Evaluation Date, the Companys disclosure controls and
procedures were effective in ensuring that all material information relating to the Company,
including its consolidated subsidiaries, required to be filed in this quarterly report have been
made known to them in a timely manner. However, as more fully described below in Revenue
Recognition Issues in BindViews Latin American Operations, management later determined that the
Companys disclosure controls and procedures were not effective as of March 31, 2004, because the
Company had a material weakness in revenue reporting for its Latin American operations. There
have been no significant changes made during the period covered by
this Report in the Companys internal controls over financial reporting or in other factors that could
significantly affect internal controls over financial reporting. As discussed below, however, we
have implemented additional measures to improve our internal controls over financial reporting.
These measures took effect after the period covered by this report. Revenue Recognition Issues in BindViews Latin American Operations In October 2004, as a result of information obtained by the Company in its efforts to collect
certain receivables from Latin American resellers, the Companys Audit Committee commenced an
investigation of the Companys Latin American operations. The Audit Committee retained independent
legal counsel and consultants to assist with the investigation. On December 6, 2004, with the
investigation substantially complete, the Audit Committee concluded that due to errors with the
transactions described below, the Company would restate its financial statements for the year ended
December 31, 2003 and the first two quarters of 2004, and also concluded that previously issued
financial statements for those periods should no longer be relied upon. These conclusions were set
forth in the Form 8-K dated December 6, 2004, and were also discussed with the Companys
independent registered public accounting firm. The Audit Committee investigation was completed on
December 8, 2004. 15




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##### Table of Contents



The Companys previously issued financial statements for the periods referenced above have
been restated to correct for an overstatement of approximately $1.0 million in revenues, involving
six transactions in Latin America. As a result, the Companys reported revenues were overstated by
$173,000 in the fourth quarter of 2003; $131,000 in the first quarter
of 2004; and $698,000 in the
second quarter of 2004. Revenues
for the fourth quarter of 2003 were overstated by $173,000 related to a product
return, which certain Company personnel in Latin America knew to have occurred within the
contractually allowable return period, but which they did not report to the Companys accounting
department. If this return had been reported in a timely manner to the Companys accounting
department, revenues from this transaction would not have been recognized in the fourth quarter of
2003. Certain personnel in Latin America who knew of the product return also made inaccurate
representations as to the status of the receivable in response to the on-going collection efforts of
the Companys accounting department. Revenues
for the first quarter of 2004 were overstated by $131,000. This was comprised of (i)
two separate transactions with a single reseller and an end-user customer for which professional
services revenues were overstated by $122,000; and
(ii) maintenance revenue of $9,000 on the
fourth quarter 2003 transaction referred to above. The overstatement of professional services revenues
resulted from the recording of revenues based on invalid contracts and statements of work that had
been submitted to the Companys accounting department by certain personnel in Latin America. These
documents, certain of which the Company believes were falsified prior to being submitted to its
accounting department, purported to show that the Company had entered into an arrangement with a
subsidiary of the reseller to provide services to the end-user customer on behalf of the Company. Revenues
for the second quarter of 2004 were overstated by $698,000, resulting from the
recording of three transactions based on invalid documents that had been submitted to the Companys
accounting department by certain personnel in its Latin American operations. These documents,
certain of which the Company believes were falsified prior to being submitted to its accounting department,
included contracts and professional services statements of work and time sheets that purported to
show that valid arrangements supporting the underlying transactions had been entered into with
third parties. Certain personnel in Latin America also made inaccurate representations as to
status of these receivables in response to the on-going collection efforts of the Companys
accounting department. Individuals who the Company believes were culpably involved in these transactions are no
longer employed by the Company. The Company has terminated relationships with resellers that it
believes may have been culpably involved in these transactions. As a result of the investigation into the above matters, the Company has determined that it
has a material weakness with respect to the reporting of revenues from its Latin American
operations. In addition to the actions taken with respect to personnel and resellers, as mentioned
above, the Company has also designed and implemented new procedures to improve controls to better
ensure that revenues are recognized only on transactions that are based on valid arrangements,
which meet the Companys revenue recognition criteria. The significant enhancements to our
procedures and controls that have been implemented include:  
    
    We will obtain signed written representations from each sales and professional services
representative, manager, director and vice president prior to finalizing results for a quarterly or
annual period and prior to payment of sales commissions or any incentive-based compensation for
that period. Generally speaking, these representations state that to the best of the individuals
knowledge, (i) he or she has complied with the Companys Code of Conduct, (ii) the documentation
supporting the sales transactions with which he or she was involved is valid, appropriately
authorized and complete and (iii) no conditions to any sales transaction have been agreed to with
the customer that have not been explicitly stated in the documentation supporting that sales
transaction.
    
    In geographies where the Company has a limited operating history (e.g. Latin
America or any other new geography the Company may enter), payment of commissions
will be deferred until collection of accounts receivable has occurred. 16




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##### Table of Contents




    
    We are assigning non-sales personnel to communicate directly with foreign
resellers and end-user customers regarding past due accounts receivable.
    
    We have made changes to our reporting structure to provide for more direct communication. These changes include sales operations now reports to
our chief operating officer and the head of professional services now reports
directly to non-sales management.
    
    We have implemented more extensive background and reference checks to be
performed on all prospective employees.
    
    We have expanded the Companys disclosure committee to include representations
from a broader cross section of departments.
    
    We are implementing enhanced pre-close analytical review procedures to identify
emerging changes in our business. By implementing its planned internal control improvements, the Company expects to remediate
this material weakness. However, if the Company is unable
to (i) demonstrate that its internal
controls over financial reporting are designed appropriately and operating effectively for a
sufficient period of time, (ii) assert that its internal controls over financial reporting are
effective as of December 31, 2004, and (iii) complete its evaluation on a timely enough basis for its
independent registered public accounting firm to complete their assessment of the Companys
internal controls over financial reporting by the due date for the Companys 2004 Annual Report on
Form 10-K, the Company will have to report the material weakness in such Form 10-K. 17




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PART II. OTHER INFORMATION 
 ITEM 5. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q/A, Amendment No. 1 includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. All statements other than statements of historical facts included in this
Report, including without limitation, statements regarding the Companys future financial position,
revenue and expense projections, business strategy, planned products, products under development,
markets, budgets and plans and objectives of management for future operations, are forward-looking
statements. Although we believe that the expectations reflected in these forward-looking statements
are reasonable, we cannot assure you that those expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from the Companys
expectations are disclosed in statements set forth under Cautionary Statements in our Annual Report on Form 10-K/A, Amendment No. 1. 
 ITEM 6. EXHIBITS  (a)
    
    Exhibits: The following exhibits are filed with this Quarterly Report on Form 10-Q/A, Amendment No. 1.  Exhibit 31.1*
    
    Certification of the Companys Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002Exhibit 31.2*
    
    Certification of the Companys Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002Exhibit 32.1*
    
    Certifications of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Exhibit 32.2*
    
    Certifications of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 18




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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. BINDVIEW DEVELOPMENT CORPORATIONDecember 20, 2004
    By:
    /s/      KEVIN P. COHNKevin P. CohnVice President, Controller and Chief
Accounting Officer    (Principal Accounting
Officer) 19




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EXHIBIT INDEX EXHIBITNUMBER
    
    DESCRIPTION31.1*
    
    Certification of the Companys Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 200231.2*
    
    Certification of the Companys Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 200232.1*
    
    Certifications of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2*
    
    Certifications of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002