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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 SEPTEMBER 30,
2005
 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)
 
 þ o
 þ o
 o þ




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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 6. EXHIBITSSIGNATUREEXHIBIT INDEXCertification of CEO pursuant to Section 302Certification of CFO pursuant to Section 302Certifications of CEO pursuant to Section 906    Table of Contents  
  
 ITEM 1. FINANCIAL STATEMENTS
 BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)
 SEPTEMBER 30,
    
    
    DECEMBER 31,2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    25,300
    
    
    $
    25,666Cash  restricted
    
    
    2,250
    
    
    
    2,250Short-term investments
    
    
    3,315
    
    
    
    6,974Accounts receivable, net of allowance of $639 and $671
    
    
    8,655
    
    
    
    14,657Other
    
    
    2,263
    
    
    
    1,634Total current assets
    
    
    41,783
    
    
    
    51,181Property and equipment, net
    
    
    6,279
    
    
    
    6,664Other
    
    
    577
    
    
    
    709Total assets
    
    $
    48,639
    
    
    $
    58,554LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,323
    
    
    $
    3,023Accrued liabilities
    
    
    3,784
    
    
    
    5,307Accrued compensation
    
    
    3,526
    
    
    
    3,603Deferred revenues
    
    
    13,405
    
    
    
    11,963Total current liabilities
    
    
    23,038
    
    
    
    23,896Deferred revenues
    
    
    1,864
    
    
    
    2,707Other
    
    
    1,141
    
    
    
    1,824Commitments and contingenciesShareholders equity:Preferred stock, $0.01 par value, 20,000 shares authorized, none
issued
    
    
    
    
    
    
    Common stock, no par value, 100,000 shares authorized, 48,666 and
47,849 shares issued and outstanding
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    106,827
    
    
    
    106,244Accumulated deficit
    
    
    (82,919
    )
    
    
    (77,316
    )Deferred stock compensation and other
    
    
    (2,507
    )
    
    
    (920
    )Accumulated other comprehensive income
    
    
    1,194
    
    
    
    2,118Total shareholders equity
    
    
    22,596
    
    
    
    30,127Total liabilities and shareholders equity
    
    $
    48,639
    
    
    $
    58,554
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BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS (Unaudited)
(in thousands, except per share amounts)
 THREE MONTHS
    
    
    NINE MONTHSENDED
    
    
    ENDEDSEPTEMBER 30,
    
    
    SEPTEMBER 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:Licenses
    
    $
    8,479
    
    
    $
    7,849
    
    
    $
    21,950
    
    
    $
    22,409Services
    
    
    9,173
    
    
    
    9,377
    
    
    
    27,860
    
    
    
    27,52917,652
    
    
    
    17,226
    
    
    
    49,810
    
    
    
    49,938Cost of revenues:Licenses
    
    
    219
    
    
    
    393
    
    
    
    573
    
    
    
    723Services
    
    
    1,689
    
    
    
    2,251
    
    
    
    5,807
    
    
    
    5,9921,908
    
    
    
    2,644
    
    
    
    6,380
    
    
    
    6,715Gross profit
    
    
    15,744
    
    
    
    14,582
    
    
    
    43,430
    
    
    
    43,223Operating costs and expenses:Sales and marketing
    
    
    9,670
    
    
    
    9,621
    
    
    
    28,658
    
    
    
    28,540Research and development
    
    
    4,294
    
    
    
    5,647
    
    
    
    13,488
    
    
    
    15,619General and administrative
    
    
    2,131
    
    
    
    1,922
    
    
    
    6,465
    
    
    
    5,844Restructuring
    
    
    (433
    )
    
    
    
    
    
    
    709
    
    
    
    149Merger
    
    
    383
    
    
    
    
    
    
    
    383
    
    
    
    16,045
    
    
    
    17,190
    
    
    
    49,703
    
    
    
    50,152Operating loss
    
    
    (301
    )
    
    
    (2,608
    )
    
    
    (6,273
    )
    
    
    (6,929
    )Other income, net
    
    
    310
    
    
    
    151
    
    
    
    832
    
    
    
    357Income (loss) before income taxes
    
    
    9
    
    
    
    (2,457
    )
    
    
    (5,441
    )
    
    
    (6,572
    )Provision for income taxes
    
    
    69
    
    
    
    129
    
    
    
    162
    
    
    
    273Net loss
    
    $
    (60
    )
    
    $
    (2,586
    )
    
    $
    (5,603
    )
    
    $
    (6,845
    )Loss per common share  basic and
diluted
    
    $
    (0.00
    )
    
    $
    (0.05
    )
    
    $
    (0.12
    )
    
    $
    (0.14
    )Number of shares used to calculate per
share amounts, basic and diluted
    
    
    47,486
    
    
    
    47,274
    
    
    
    47,660
    
    
    
    47,345Reconciliation of net loss to comprehensive loss:Net loss
    
    $
    (60
    )
    
    $
    (2,586
    )
    
    $
    (5,603
    )
    
    $
    (6,845
    )Unrealized gain (loss) from currency translation
    
    
    (44
    )
    
    
    58
    
    
    
    (924
    )
    
    
    (72
    )Comprehensive loss
    
    $
    (104
    )
    
    $
    (2,528
    )
    
    $
    (6,527
    )
    
    $
    (6,917
    )
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BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
 NINE MONTHS ENDEDSEPTEMBER 30,2005
    
    
    2004Cash flows from operating activities:Net loss
    
    $
    (5,603
    )
    
    $
    (6,845
    )Adjustments to reconcile net loss to net cash from operating
activities:Depreciation and amortization
    
    
    2,085
    
    
    
    2,146Stock compensation expense
    
    
    133
    
    
    
    189Changes in operating assets and liabilities:Accounts receivable
    
    
    5,928
    
    
    
    5,435Other assets
    
    
    (462
    )
    
    
    (321
    )Accounts payable
    
    
    (667
    )
    
    
    (382
    )Accrued liabilities
    
    
    (1,836
    )
    
    
    (2,160
    )Deferred revenues
    
    
    603
    
    
    
    (96
    )Net cash provided by (used in) operating activities
    
    
    181
    
    
    
    (2,034
    )Cash flows from investing activities:Capital expenditures
    
    
    (2,457
    )
    
    
    (2,429
    )Reimbursement of tenant improvements
    
    
    705
    
    
    
    284Purchases of short term investments
    
    
    (3,496
    )
    
    
    (9,166
    )Proceeds from maturity of investments
    
    
    7,155
    
    
    
    625Restrictions on cash
    
    
    
    
    
    
    (194
    )Net cash provided by (used in) investing activities
    
    
    1,907
    
    
    
    (10,880
    )Cash flows from financing activities:Repurchase of common stock
    
    
    (4,068
    )
    
    
    (2,313
    )Net proceeds from sale of common stock
    
    
    2,509
    
    
    
    2,060Net cash used in financing activities
    
    
    (1,559
    )
    
    
    (253
    )Effect of exchange rate changes on cash
    
    
    (895
    )
    
    
    (32
    )Net decrease in cash and cash equivalents
    
    
    (366
    )
    
    
    (13,199
    )Cash and cash equivalents at beginning of year
    
    
    25,666
    
    
    
    35,449Cash and cash equivalents at end of period
    
    $
    25,300
    
    
    $
    22,250
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BINDVIEW DEVELOPMENT CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. GENERAL
   2. LOSS PER SHARE
  3. STOCK-BASED COMPENSATION
   THREE MONTHS
    
    
    NINE MONTHSENDED SEPTEMBER 30,
    
    
    ENDED SEPTEMBER 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss as reported
    
    $
    (60
    )
    
    $
    (2,586
    )
    
    $
    (5,603
    )
    
    $
    (6,845
    )Add: Stock-based
employee compensation
expense included in
reported net loss
    
    
    369
    
    
    
    7
    
    
    
    133
    
    
    
    189Deduct: Total
stock-based employee
compensation expense
determined under fair
value method for all
awards
    
    
    (1,294
    )
    
    
    (1,549
    )
    
    
    (3,231
    )
    
    
    (4,291
    )Pro forma net loss
    
    $
    (985
    )
    
    $
    (4,128
    )
    
    $
    (8,701
    )
    
    $
    (10,947
    )
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THREE MONTHS
    
    
    NINE MONTHSENDED SEPTEMBER 30,
    
    
    ENDED SEPTEMBER 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Loss per common share
(basic and diluted): As reported
    
    $
    (0.00
    )
    
    $
    (0.05
    )
    
    $
    (0.12
    )
    
    $
    (0.14
    ) Pro forma
    
    $
    (0.02
    )
    
    $
    (0.09
    )
    
    $
    (0.18
    )
    
    $
    (0.23
    )
 4. RESTRUCTURING EXPENSES
   RemainingRestructuring
    
    Cash
    
    
    
    
    
    AccrualCharges
    
    Expenditures
    
    Adjustments
    
    9/30/2005Employee
severance
    
    $
    1,142
    
    
    $
    (631
    )
    
    $
    (413
    )
    
    $
    98
    Remaining
    
    
    
    
    
    
    
    
    
    
    RemainingAccrual
    
    
    Cash
    
    
    
    
    
    
    Accrual12/31/2004
    
    
    Expenditures
    
    
    Adjustments
    
    
    9/30/2005Employee severance
    
    $
    306
    
    
    $
    (298
    )
    
    $
    (8
    )
    
    $
    Other
    
    
    20
    
    
    
    (8
    )
    
    
    (12
    )
    
    
    $
    326
    
    
    $
    (306
    )
    
    $
    (20
    )
    
    $
    
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Remaining
    
    
    
    
    
    RemainingAccrual
    
    Cash
    
    Accrual12/31/2004
    
    Expenditures
    
    9/30/2005Lease commitments
    
    $
    1,117
    
    
    $
    (301
    )
    
    $
    816
 5. INCOME TAXES
  6. RECENT ACCOUNTING PRONOUNCEMENTS
  7. SHAREHOLDERS EQUITY
  8. ASSET ACQUISITION
  9. AGREEMENT AND PLAN OF MERGER
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ITEM
2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
  Overview
  Critical Accounting Policies
  Results of Operations
 Three Months Ended September 30, 2005 Compared with the Three Months Ended September 30, 2004
 Revenues.
   9




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Gross Profit.
  .
 Operating Costs and Expenses.
    10




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RemainingRestructuring
    
    Cash
    
    
    
    
    
    AccrualCharges
    
    Expenditures
    
    Adjustments
    
    9/30/2005Employee
severance
    
    $
    1,142
    
    
    $
    (631
    )
    
    $
    (413
    )
    
    $
    98
    Remaining
    
    
    
    
    
    
    
    
    
    
    RemainingAccrual
    
    
    Cash
    
    
    
    
    
    
    Accrual12/31/2004
    
    
    Expenditures
    
    
    Adjustments
    
    
    9/30/2005Employee severance
    
    $
    306
    
    
    $
    (298
    )
    
    $
    (8
    )
    
    $
    Other
    
    
    20
    
    
    
    (8
    )
    
    
    (12
    )
    
    
    $
    326
    
    
    $
    (306
    )
    
    $
    (20
    )
    
    $
    
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Remaining
    
    
    
    
    
    RemainingAccrual
    
    Cash
    
    Accrual12/31/2004
    
    Expenditures
    
    9/30/2005Lease commitments
    
    $
    1,117
    
    
    $
    (301
    )
    
    $
    816
 Provision for Income Taxes.
 Net Loss.
 Nine Months Ended September 30, 2005 Compared with the Nine Months Ended September 30, 2004
 Revenues.
    12




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Gross Profit.
  .
 Operating Costs and Expenses.
    13




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Provision for Income Taxes.
 Net Loss.
 Liquidity and Capital Resources
       14




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CONTRACTUAL
    
    
    
    
    
    REMAINDEROBLIGATION
    
    TOTAL
    
    
    OF 2005
    
    

2006  2008
    
    

2009  2011
    
    

2012  2015Operating leases
    
    $
    19,309
    
    
    $
    1,069
    
    
    $
    11,285
    
    
    $
    6,440
    
    
    $
    515Sub-leasing
arrangements*
    
    
    (1,723
    )
    
    
    (35
    )
    
    
    (918
    )
    
    
    (770
    )
    
    
    $
    17,586
    
    
    $
    1,034
    
    
    $
    10,367
    
    
    $
    5,670
    
    
    $
    515
 
 *
    
    We have sub-leased portions of these facilities under operating leases. Anticipated cash
receipts from these sub-leasearrangements have been taken into account when deriving expected cash
outflow on operating lease commitments in the preceding table.  Competition
  
    
    security analysis and audit products;
    
    Windows NT management and migration tools;
    
    network security scanning technology;
    
    security-policy products and services;
    
    shareware/freeware software products that perform some of the same functions as our software;
    
    enterprise resource planning application add-ons for SAP security administration and
vulnerability assessment;
    
    LAN desktop management suites; and
    
    stand-alone inventory and asset management products.
   
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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ITEM 4. CONTROLS AND PROCEDURES
   
  
 ITEM 6. EXHIBITS
  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 and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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BINDVIEW DEVELOPMENT CORPORATIONNovember 4, 2005
    
    By:
    
    /s/ Kevin P. CohnKevin P. CohnVice President, Controller and Chief AccountingOfficer (Principal Accounting Officer)
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EXHIBIT INDEX
 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 and 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