8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported)     March 30, 2012

Datawatch Corporation

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

000-19960	02-0405716
(Commission File Number)	(IRS Employer Identification No.)

Quorum Office Park 271 Mill Road Chelmsford, Massachusetts	01824
(Address of Principal Executive Offices)	(Zip Code)

(978) 441-2200

 (Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see  General Instruction A.2. below):

o                Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o                Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o                 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o                 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

On March 30, 2012, Datawatch Corporation (“Datawatch”) completed the previously announced purchase of the intellectual property underlying Datawatch’s Monarch Report Analytics platform pursuant to the Option Purchase Agreement dated as of April 29, 2004 by and among the Company, Personics Corporation, Raymond J. Huger and Math Strategies, as amended (the “Option Agreement”).  Under the formula contained in the Option Agreement, the purchase price paid for the intellectual property assets was $8.541 million.  A copy of the press release announcing the completion of the purchase is attached as Exhibit 99.1 and is incorporated herein by reference.

The purchase was funded in part through the issuance by Datawatch of a $4.0 million subordinated note and warrants for 185,000 shares of Datawatch common stock to Massachusetts Capital Resource Company (“MCRC”), pursuant to a Note and Warrant Purchase Agreement entered into with MCRC as of March 30, 2012, and through the borrowing by Datawatch of $1.5 million under a new $2.0 million revolving credit facility with Silicon Valley Bank (“SVB”), pursuant to a Loan and Security Agreement entered into with SVB as of March 30, 2012.

The subordinated note issued to MCRC has a maturity date of February 28, 2019, with interest due monthly on the unpaid principal amount of the note at the rate of 10% per annum in arrears.  Datawatch is also required under the MCRC agreement to maintain certain interest coverage and leverage ratios.

The warrants issued to MCRC are exercisable at any time prior to the later of the repayment in full of the MCRC note or February 28, 2019 at a purchase price per share of $11.54, which is equal to the average closing price for Datawatch common stock for the 45 trading days prior to the issuance of the warrants on March 30, 2012.  The number of shares issuable upon exercise of the warrants is subject to adjustment in connection with stock splits and other events impacting Datawatch’s common stock generally.

The revolving line of credit under the SVB facility terminates on March 30, 2014.  On that date, the principal amount of all advances under the revolving line and all unpaid interest thereon will become due and payable.  The principal amount outstanding under the revolving line accrues interest at a floating rate per annum equal to 1.5% above the prime rate, with the prime rate having a floor under the SVB agreement of 3.25%.  Datawatch can borrow under the SVB revolving line of credit based on a formula percentage of the Datawatch’s accounts receivable balance.  Additionally, the SVB facility requires that Datawatch maintain certain net asset and net income ratios. 

Item 2.01 Completion of Acquisition or Disposition of Assets

Please see the disclosure above under Item 1.01 regarding the completion of the Math Strategies intellectual property purchase, which is incorporated into this Item 2.01 by reference.

Item 9.01  Financial Statements and Exhibits

(d)           Exhibits

The following Exhibit is furnished as part of this report:

Exhibit No. Description

99.1 Press release issued by Datawatch Corporation, dated March 30, 2012.

 

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 hereunto duly authorized.

	DATAWATCH CORPORATION
Date:  April 5, 2012	By:	/s/ Murray P. Fish
		Name: Murray P. Fish
		Title:   Chief Financial Officer

EXHIBIT INDEX

Exhibit No. Description

99.1 Press release issued by Datawatch Corporation, dated March 30, 2012.

EX-99.1

EXHIBIT 99.1

DATAWATCH COMPLETES PURCHASE OF MONARCH INTELLECTUAL PROPERTY

Chelmsford, Mass. – March 30, 2012 –Datawatch Corporation (NASDAQ-CM:DWCH), the leading global provider of report analytics products and services, today announced that it has completed the previously announced purchase of the intellectual property underlying its Monarch Report Analytics platform from Raymond Huger, d/b/a Math Strategies.

The $8.5 million purchase was funded through the combination of a $4.0 million subordinated note with warrants from Massachusetts Capital Resource Company, $1.5 million of a $2.0 million working capital loan from Silicon Valley Bank and Datawatch's cash balances. The transaction is expected to be accretive from a cash point of view as the savings in royalty payments should exceed the cash interest and additional costs.  From an earnings perspective, the amortization of the intellectual property purchase and the non-cash interest expense from the warrants will result in an annual non-cash charge to earnings of $1.8 million during the 5 year amortization period of the intellectual property..

Michael A. Morrison, president and CEO of Datawatch, said, "We are very pleased to have completed this important transaction, which will provide us with the needed financial, marketing and technological flexibility to pursue our business strategy going forward."

About Datawatch Corporation

Datawatch Corporation (NASDAQ-CM: DWCH) empowers organizations to transform the massive amounts of valuable information that is trapped in static reports, PDF files, HTML and other content-rich, but difficult-to-use data sources, into a dynamic information analytics system that accelerates and improves decision-making throughout their operations. Datawatch’s technology allows its more than 40,000 customers worldwide to leverage the investments they have made in reports from ERP, CRM and other custom applications into a high performance analytic information system at a fraction of the cost and time of traditional approaches. Datawatch is headquartered in Chelmsford, Massachusetts with offices in London, Munich, Sydney and Manila, with partners and customers in more than 100 countries worldwide.  For more information, visit www.datawatch.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Any statements contained in this press release that do not describe historical facts may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Any such statements, including but not limited to those relating to results of operations, contained herein are based on current expectations, but are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. The factors that could cause actual future results to differ materially from current expectations include the following: risks associated with the continuing weak global economy; risks associated with fluctuations in quarterly operating results due, among other factors, to the size and timing of large customer orders; the volatility of Datawatch's stock price; limitations on the effectiveness of internal controls; rapid technological change; Datawatch's dependence on the introduction of new products and possible delays in those introductions; competition in the software industry; Datawatch's dependence on its principal products; proprietary software technology and software license agreements; risks associated with international sales; risks associated with indirect distribution channels; the adequacy of Datawatch's sales returns reserve; risks associated with a subscription sales model; risks associated with acquisitions; Datawatch's dependence on its ability to hire and retain skilled personnel; disruption or failure of Datawatch's technology systems that may result from a natural disaster, cyber-attack or other catastrophic event; and uncertainty and additional costs that may result from evolving regulation of corporate governance and public disclosure. Further information on factors that could cause actual results to differ from those anticipated is detailed in various publicly-available documents, which include, but are not limited to, filings made by Datawatch from time to time with the Securities and Exchange Commission, including but not limited to, those appearing in the Company's Annual Report on Form 10-K for the year ended September 30, 2011 and Form 10-Q for the quarter ended December 31, 2011. Any forward-looking statements should be considered in light of those factors.

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Investor Contact	Media Contact
Datawatch Investor Relations	Kelley Lynn Kassa
Datawatch Corp.	Datawatch Corp.
978-275-8323	978-275-8240
investor@datawatch.com	Kelley_kassa@datawatch.com

© 2012 Datawatch Corporation. Datawatch, Monarch and their respective logos are trademarks or registered trademarks of Datawatch Corporation in the United States and/or other countries. All other names are trademarks or registered trademarks of their respective companies.