8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 22, 2010

BITSTREAM INC.

(Exact name of registrant as specified in its charter)

Delaware	0-21541	04-2744890
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

500 Nickerson Road, Marlborough, Massachusetts	01752
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (617) 497-6222

(Former name or former address, if changed since last report.)

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):

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

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

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

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

Item 2.02 Results of Operations and Financial Condition.

On March 22, 2010, Bitstream Inc. announced its financial results for the fourth quarter ended December 31, 2009. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Form 8-K and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Number	Title
99.1	Press release issued March 22, 2010

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.

	BITSTREAM INC.
	(Registrant)
Date : March 22, 2010
		By:	/s/ James P. Dore
			James P. Dore
			Vice President and Chief Financial Officer

EX-99.1

Exhibit 99.1

Bitstream Inc. Reports Fourth Quarter Results for 2009

The Company reported fourth quarter revenue of $5,579,000 and net income of $167,000 or $0.02 diluted earnings per share.

MARLBOROUGH, MA—(Business Wire)—March 22, 2010—Bitstream Inc. (Nasdaq: BITS) today reported that total revenue decreased by $59,000 or 1% to $5,579,000 for the three months ended December 31, 2009 as compared to total revenue of $5,638,000 for the three months ended December 31, 2008. The Company’s cash and cash equivalents at December 31, 2009 totaled $17,915,000, an increase of $242,000 from a balance of $17,673,000 at September 30, 2009 and an increase of $1,753,000 from $16,162,000 at December 31, 2008.

GAAP Results

We increased e-commerce sales during the three months ended December 31, 2009, which led to an increase in direct third party cost of revenue, consisting primarily of royalty expenses, of $268,000 or approximately 19%, as compared to third party cost of revenue for the three months ended December 31, 2008. Total operating expenses for the three months ended December 31, 2009 increased $231,000 or approximately 8%, to $3,036,000 as compared to $2,805,000 for the three months ended December 31, 2008. This increase was primarily attributable to a $130,000 increase in research and development salary and other compensation expense associated with our BOLT Web browsing and publishing product lines, an approximately $57,000 increase in accounting, tax, and legal professional services associated with year-end audit and Sarbanes-Oxley related expenses, and a $112,000 increase in bad debt expense. As a result of the foregoing, our operating income decreased $471,000 or 63% to $273,000 for the three months ended December 31, 2009 as compared to $744,000 for the three months ended December 31, 2008. Net income decreased $542,000 or 76% to $167,000 or $0.02 per diluted share for the three months ended December 31, 2009 as compared to net income of $709,000 or $0.07 per diluted share for the three months ended December 31, 2008. Net income for the three months ended December 31, 2009 includes $80,000 from foreign taxes withheld by customers in countries having tax treaties with the United States.

“During the fourth quarter, we continued to generate momentum in building our Web browsing product line as we entered into three new OEM deals for our BOLT Web browsing product”, said Anna Magliocco-Chagnon, President and Chief Executive Officer. “Although these deals did not impact revenue during 2009, they are expected to contribute to revenue beginning in the second quarter of 2010. We continued to invest heavily in BOLT during the fourth quarter of 2009 and we have developed an aggressive plan to grow our Web browsing product line substantially in the next year. Given our recent success with BOLT and the increase in our e-commerce revenue in the fourth quarter, we anticipate being able to resume our revenue growth in the near future.”

Non-GAAP Results

Our income from operations, not including the effect of stock-based compensation expense, decreased $445,000 or 49% to $466,000 for the three months ended December 31, 2009 as compared to $911,000 for the three months ended December 31, 2008. Net income, not including the effect of stock-based compensation expense, decreased $516,000 or 59% to $360,000 or $0.03 per diluted share for the three months ended December 31, 2009 as compared to net income of $876,000 or $0.09 per diluted share for the three months ended December 31, 2008.

A reconciliation between GAAP and non-GAAP results is provided at the end of this press release.

CONFERENCE CALL REMINDER

Today, March 22, 2010 at 4:30 p.m. EST, Bitstream will host a conference call with the financial community to discuss its results for the quarter ended December 31, 2009:

• Domestic Dial-in number: 1-866-253-6505

• International Dial-in number: 1-703-639-1207

Call into the conference number 5-10 minutes prior to the start time. An operator will request that you provide your name and organization and ask you to wait until the call begins. If you have any difficulty connecting with the conference call number, please contact Bitstream at (617) 497-6222.

A replay of the conference call will be available through April 1, 2010 (access code): 1443455

• Domestic Replay number: 1-888-266-2081

• International Replay number: 1-703-925-2533

Forward Looking Statements Disclosure

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on management’s current expectations. Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, including, without limitation, market acceptance of the Company’s products, competition and the timely introduction of new products. Additional information concerning certain risks and uncertainties that would cause actual results to differ materially from those projected or suggested in the forward-looking statements is contained in the Company’s filings with the Securities and Exchange Commission, including Bitstream’s Annual Report on Form 10-K for the year ended December 31, 2008.

Use of Non-GAAP Financial Information

To supplement the financial measures presented in the Company’s press release in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company also presents non-GAAP measures relating to income from operations, net income and net income per diluted share which were adjusted from amounts determined based on GAAP to exclude share-based compensation expenses, as well as the related income tax effects.

The Company believes these non-GAAP financial measures will enhance the reader’s overall understanding of Bitstream’s current financial performance and the Company’s prospects for the future by providing a higher degree of transparency for certain financial measures and providing a level of disclosure that helps investors understand how the Company plans and measures its own business.

These non-GAAP measures are not in accordance with GAAP, should not be considered an alternative for measures prepared in accordance with GAAP, and may have limitations in that they do not reflect all of Bitstream’s results of operations as determined in accordance with GAAP.

These non-GAAP measures should only be used to evaluate Bitstream’s results of operations in conjunction with the corresponding GAAP measures. The presentation of non-GAAP information is not meant to be considered superior to, in isolation from or as a substitute for results prepared in accordance with GAAP.

About Bitstream

Bitstream Inc. (NASDAQ: BITS) is a software development company that makes communications compelling. Bitstream enables customers worldwide to render high-quality text, browse the Web on wireless devices, select from the largest collection of fonts online, and customize documents over the Internet. Its core competencies include fonts and font technology, browsing technology, and publishing technology. For more information about Bitstream, please visit www.bitstream.com.

Bitstream and MyFonts.com are registered trademarks, and Pageflex, the Bitstream logo, BOLT and ThunderHawk are trademarks of the Company. Other technologies and brand names are used for information only and remain trademarks or registered trademarks of their respective companies.

Bitstream Inc. and Subsidiaries

Consolidated Statements of Operations

(In Thousands, Except Per Share Data)

(unaudited)

	Three Months Ended December 31,				Year Ended December 31,
	2009		2008		2009		2008
Revenue:
Software license	$	4,443	$	4,305	$	16,804	$	18,868
Services		1,136		1,333		4,685		5,140
Total revenue		5,579		5,638		21,489		24,008
Cost of revenue:
Software license		1,832		1,463		6,778		7,018
Services		438		626		2,060		2,408
Total cost of revenue		2,270		2,089		8,838		9,426
Gross profit		3,309		3,549		12,651		14,582
Operating expenses:
Marketing and selling		827		1,031		3,605		4,389
Research and development		1,351		1,133		4,992		5,181
General and administrative		858		641		3,053		2,713
Total operating expenses		3,036		2,805		11,650		12,283
Operating income		273		744		1,001		2,299
Interest and other income, net		6		17		59		177
Income before provision for income taxes		279		761		1,060		2,476
Provision for income taxes		112		52		208		108
Net income	$	167	$	709	$	852	$	2,368
Basic net income per share	$	0.02	$	0.07	$	0.09	$	0.25
Diluted net income per share	$	0.02	$	0.07	$	0.08	$	0.23
Basic weighted average shares outstanding		9,817		9,522		9,782		9,596
Diluted weighted average shares outstanding		10,399		10,003		10,249		10,254

Bitstream Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands)

(unaudited)

	December 31,
	2009		2008
ASSETS
Current assets:
Cash and cash equivalents	$	17,915	$	16,162
Accounts receivable, net		1,689		1,827
Prepaid expenses and other current assets		916		527
Restricted cash		—		150
Total current assets		20,520		18,666
Property and equipment, net		643		427
Other assets:
Goodwill		727		727
Restricted cash, long-term		136		—
Intangible assets		78		81
Total other assets		941		808
Total assets	$	22,104	$	19,901
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,091	$	832
Accrued payroll and other compensation		261		1,057
Other accrued expenses		808		583
Deferred revenue		1,762		1,937
Total current liabilities		3,922		4,409
Long-term deferred rent		536		—
Total liabilities		4,458		4,409
Total stockholders’ equity		17,646		15,492
Total liabilities and stockholders’ equity	$	22,104	$	19,901

Bitstream Inc. and Subsidiaries

Non-GAAP Results

(In Thousands, Except Per Share Data)

(unaudited)

The following table shows Bitstream’s non-GAAP results reconciled to GAAP results included in this release.

	Three Months Ended December 31,
	2009		2008
GAAP operating income	$	273	$	744
Stock-based compensation		193		167
Non-GAAP operating income	$	466	$	911
GAAP net income	$	167	$	709
Stock -based compensation		193		167
Non-GAAP net income	$	360	$	876
Diluted net income per share:
GAAP net income	$	0.02	$	0.07
Stock -based compensation		0.01		0.02
Non-GAAP net income	$	0.03	$	0.09
Shares used to compute diluted GAAP and Non-GAAP net income per share		10,399		10,003