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)     July 19, 2016

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.)

4 Crosby Drive Bedford, Massachusetts	01730
(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):

¨ 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 July 20, 2016, Datawatch Corporation issued a press release reporting its financial results for its quarter ended June 30, 2016. A copy of the press release is attached as Exhibit 99.1 to this report and is incorporated herein by reference.

The information contained in this Item 2.02, including in Exhibit 99.1 attached hereto and incorporated herein by reference, is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information contained herein and in the accompanying exhibits shall not be incorporated by reference into any filing with the U.S. Securities and Exchange Commission made by Datawatch, whether made before or after the date hereof, regardless of any general incorporation language in such filings.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(c) Appointment of Ken Tacelli as Senior Vice President of Worldwide Sales

On July 19, 2016, Ken Tacelli was appointed as Datawatch’s Senior Vice President of Worldwide Sales, effective July 19, 2016.

Mr. Tacelli, age 47, has served in a number of capacities in both large and small companies alike. Prior to his appointment as Senior Vice President of Worldwide Sales of Datawatch on July 19, 2016, Mr. Tacelli served as Vice President, North America Sales for Datawatch since April 25, 2016. From 2015 to 2016, Mr. Tacelli served as a Senior Vice President of Content Sales at Skillsoft. From 2013 to 2015, Mr. Tacelli served as a Senior Vice President at OpenText within the World Wide Enterprise Sales Division. From 2011 to 2013, Mr. Tacelli served as a Vice President of CA Technologies, including North American Growth to Market Sales.

The selection of Mr. Tacelli to serve as Senior Vice President of Worldwide Sales was not pursuant to any arrangement or understanding with respect to any other person. In addition, there are no family relationships between Mr. Tacelli and any director or other executive officer of Datawatch and there are no related persons transactions between Datawatch and Mr. Tacelli reportable under Item 404(a) of Regulation S-K.

Mr. Tacelli will be employed by Datawatch on an at-will basis and will receive an annualized salary of $300,000. Mr. Tacelli will additionally be eligible for an annual targeted commission bonus of $200,000 under Datawatch’s fiscal 2016 Corporate Officers Compensation Plan, based on whether Datawatch fiscal 2016 financial plan goals for revenue and net income are met. In connection with his appointment, Datawatch’s Compensation and Stock Committee granted Mr. Tacelli 75,000 restricted stock units for shares of Datawatch’s common stock (“RSUs”), such award to vest in three equal tranches on the first, second and third anniversary of May 1, 2016. In the event of a change in control of Datawatch, the vesting of all of Mr. Tacelli’s RSUs will accelerate in full. As an employee of Datawatch, Mr. Tacelli will continue to be eligible to participate in the benefits offered to Datawatch’s employees generally, including medical and dental coverage, life and long-term disability insurance, and Datawatch’s 401(k) profit sharing plan.

On July 19, 2016, Datawatch entered into an executive severance agreement with Mr. Tacelli (the “Severance Agreement”). The Severance Agreement provides that in the event that Datawatch terminates Mr. Tacelli’s employment for reasons other than for “Cause” (as defined in the Severance Agreement) or Mr. Tacelli elects to terminate his employment with Datawatch for “Good Reason,” Mr. Tacelli is entitled to severance payments equal in the aggregate to his then current annual base salary, payable on a monthly basis for six months following his termination date.

A copy of the Severance Agreement is attached hereto as Exhibit 10.1 and is incorporated herein by reference. The description of the Severance Agreement contained in this Current Report on Form 8-K is qualified in its entirety by reference to such document.

On July 20, 2016, Datawatch issued a press release regarding Mr. Tacelli’s appointment as Senior Vice President of Worldwide Sales. The press release is attached as Exhibit 99.1 to this report and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits

(d)    Exhibits

The following Exhibit is furnished as part of this report:

Exhibit No.	Description
10.1	Severance Agreement, by and between Datawatch Corporation and Ken Tacelli, dated July 19, 2016.
99.1	Press release issued by Datawatch Corporation, dated July 20, 2016.

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

By: /s/ James Eliason

Name: James Eliason

Title: Chief Financial Officer

Date: July 25, 2016

EXHIBIT INDEX

Exhibit No.	Description
10.1	Severance Agreement, by and between Datawatch Corporation and Ken Tacelli, dated July 19, 2016.
99.1	Press release issued by Datawatch Corporation, dated July 20, 2016.

EX-10.1

Exhibit 10.1

July 19, 2016

Ken Tacelli

via Echosign

Dear Ken,

The purpose of this letter is to memorialize the terms of your eligibility for severance with Datawatch Corporation (“the Company”) in the event that you are involuntarily terminated by the Company or a successor to the Company after a Change of Control (as defined in Paragraph 2), in either case without Cause (as defined in Paragraph 4) or if you terminate your employment with the Company for Good Reason (as defined in Paragraph 3).

1. As an at-will employee, either you or the Company may terminate your employment at any time for any or no reason with or without notice. Neither this letter nor its terms constitute a contract for continued employment or a contract for a specific term of employment. Instead, this letter sets forth the terms of our agreement with respect to your eligibility for severance.

2. For purposes of this Agreement, a “Change in Control” means the occurrence of any of the following events:

(a) The Company is merged or consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such surviving, resulting or reorganized corporation or person immediately after such transaction is held in the aggregate by the holders of the then-outstanding securities entitled to vote generally in the election of directors of the Company ("Voting Stock") immediately prior to such transaction;

(b) The Company sells or otherwise transfers all or substantially all of its assets to any other corporation or other legal person, and as a result of such sale or transfer less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale or transfer;

Datawatch Corporation
4 Crosby Drive Bedford MA 01730	info@datawatch.com
T. 978 441 2200   |   F. 978 441 1114	www.datawatch.com

Exhibit 10.1

(c)There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), disclosing that any "person" (as such term is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the "beneficial owner" (as such term is used in Rule 13d-3 under the Exchange Act) of securities representing 50% or more of the Voting Stock of the Company;

(d) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has occurred; or

(e) If during any period of two consecutive years, individuals who at the beginning of any such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company’s stockholders, of each director of the Company first elected during such period was approved by a vote of at least a majority of the directors then still in office who were directors of the Company at the beginning of any such period; provided, however, that a “Change in Control” shall not be deemed to have occurred for purposes of this Agreement solely because (x) the Company, (y) an entity in which the Company directly or indirectly beneficially owns 50% or more of the voting securities, or (z) any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company, either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock or because the Company reports that a change in control of the Company has occurred by reason of such beneficial ownership. “

3. In the event that you voluntarily terminate your employment with the Company at your own election and without Good Reason, you shall be entitled to no severance. For the purpose of this Agreement, “Good Reason” is defined as a material diminution in the nature or scope of your responsibilities, duties or authority; provided, however, that the transfer of certain job responsibilities, or the assignment to others of your duties and responsibilities while you are out of work due to a disability or on a leave of absence for any reason, shall not constitute a material diminution in the nature or scope of the your responsibilities, duties or authority as set forth in this Section. Good reason will also include a reduction in your title, office or reporting requirements, a reduction of your base salary and/or bonus opportunity, any change in benefits which makes them less favorable to you, the Company’s failure to include you in any incentive plans, particularly a plan related to any strategic plan initiative concerning a merger, sale or acquisition, or a relocation of the Company’s principal executive offices to a location more than 50 miles outside of Chelmsford, MA.

Datawatch Corporation
4 Crosby Drive Bedford MA 01730	info@datawatch.com
T. 978 441 2200   |   F. 978 441 1114	www.datawatch.com

Exhibit 10.1

4. In the event that the Company terminates your employment for “Cause,” you shall be entitled to no severance. Termination by the Company shall constitute a termination for Cause under this Paragraph 3 if such termination is for one or more of the following reasons:

(a)           the willful and continuing failure or refusal by you to render services to the Company in accordance with your obligations to the Company;

(b)           gross negligence, dishonesty, breach of fiduciary duty or breach of the terms of any other agreements executed in connection herewith;

(c)           the commission by you of an act of fraud, embezzlement or substantial disregard of the rules or policies of the Company;

(d)           acts which, in the judgment of the Board of Directors, would tend to generate significant adverse publicity toward the Company;

(e)           the commission, or plea of nolo contendere, by you of a felony; or

(f)           a breach by you of the terms of the Proprietary Information, Inventions and Non-Competition Agreement executed by you.

5. In the event that the Company terminates your employment for any reason other than those stated in Paragraph 4 above or if you terminate your employment for Good Reason as defined in Paragraph 3, and you sign a comprehensive release in the form, and of a scope, acceptable to the Company (the “Release”), the Company will pay you severance payments in equal monthly installments at your then monthly base salary for six months following your termination (the “Severance Period”). Such payments shall be made in accordance with the Company’s customary payroll practices and shall be subject to all applicable federal and state withholding, payroll and other taxes.

For the duration of the Severance Period, the Company shall also pay to you a taxable monthly payment (the “Taxable Payments”) in an amount equal to the Company’s share of your monthly premium for group medical and dental coverage that is in effect immediately prior to termination of your employment. For the avoidance of doubt, the Taxable Payments may be used by you for any purpose, including, but not limited to continuation of your medical and dental coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), for which you shall be eligible immediately following termination of your employment, subject to the terms and conditions applicable to COBRA coverage.

If you breach your post-employment obligations under your Proprietary Information Inventions and Non-Competition Agreement, the Company may immediately cease payment of all severance and/or benefits described in this Agreement. This cessation of severance and/or benefits shall be in addition to, and not as an alternative to, any other remedies in law or in equity available to the Company, including the right to seek specific performance or an injunction.

Datawatch Corporation
4 Crosby Drive Bedford MA 01730	info@datawatch.com
T. 978 441 2200   |   F. 978 441 1114	www.datawatch.com

Exhibit 10.1

6.           The terms of this agreement constitute the entire understanding relating to your employment and supersede and cancel all agreements, written or oral, made prior to the date hereof between you and the Company relating to your employment with the Company; provided, however, that nothing herein shall be deemed to limit or terminate the provisions of Proprietary Information, Inventions and Non-Competition Agreement executed by you or in any manner alter the terms of any Restricted Stock Unit Agreement entered into between you and the Company.

7.           This Agreement, the employment relationship contemplated herein and any claim arising from such relationship, whether or not arising under this Agreement, shall be governed by and construed in accordance with the internal laws of Massachusetts, without giving effect to the principles of choice of law or conflicts of law of Massachusetts and this Agreement shall be deemed to be performable in Massachusetts. Any claims or legal actions by one party against the other arising out of the relationship between the parties contemplated herein (whether or not arising under this Agreement) shall be commenced or maintained in any state or federal court located in Massachusetts, and Executive hereby submits to the jurisdiction and venue of any such court.

8.           No waiver by either party of any breach by the other or any provision hereof shall be deemed to be a waiver of any later or other breach thereof or as a waiver of any other provision of this Agreement. This Agreement and its terms may not be waived, changed, discharged or terminated orally or by any course of dealing between the parties, but only by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought. No modification or waiver by the Company shall be effective without the consent of the Board of Directors then in office at the time of such modification or waiver.

9.           You acknowledge that the services to be rendered by you to the Company are unique and personal in nature. Accordingly, you may not assign any of your rights or delegate any of your duties or obligations under this Agreement. The rights and obligations of the Company under this Agreement may be assigned by the Company and shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company.

[Remainder of page intentionally left blank.]

Datawatch Corporation
4 Crosby Drive Bedford MA 01730	info@datawatch.com
T. 978 441 2200   |   F. 978 441 1114	www.datawatch.com

Exhibit 10.1

If this letter correctly states the understanding we have reached, please indicate your acceptance by countersigning the enclosed copy and returning it to me.

Very truly yours,

DATAWATCH CORPORATION

/s/ Brigid MacDonald

Brigid MacDonald

Vice President Human Resources

YOU REPRESENT THAT YOU HAVE READ THE FOREGOING AGREEMENT, THAT YOU FULLY UNDERSTAND THE TERMS AND CONDITIONS OF SUCH AGREEMENT AND THAT YOU ARE VOLUNTARILY EXECUTING THE SAME.

ACCEPTED:

/s/ Ken Tacelli

Ken Tacelli

Datawatch Corporation
4 Crosby Drive Bedford MA 01730	info@datawatch.com
T. 978 441 2200   |   F. 978 441 1114	www.datawatch.com

EX-99.1

Exhibit 99.1

Datawatch Announces Third Quarter Fiscal 2016 Financial Results 

Company Announces Review of Strategic Alternatives

Bedford, Mass.—July 20, 2016—Datawatch Corporation (NASDAQ-CM: DWCH), a leading global provider of self-service data preparation and fast data analytics solutions, today announced that total revenue for its third quarter of fiscal 2016 ended June 30, 2016 was $7.4 million, flat with revenue of $7.42 million in the second quarter of fiscal 2016, and down from total revenue of $7.8 million in the third quarter of fiscal 2015. License revenue for the third quarter of fiscal 2016 was $3.67 million, a 1% increase from the $3.65 million recorded in the prior quarter this fiscal year, and an 11% decline from the $4.12 million recorded in the same quarter a year ago, which was the first quarter to reflect the company’s move to subscription license sales.

Net loss for the third quarter of fiscal 2016 was ($5.37) million, or ($0.45) per diluted share, compared to a net loss of ($4.12) million, or ($0.36) per diluted share, for the year ago period. Included in the 2016 third quarter net loss were charges of approximately $400,000 related to the contested election of directors at the 2016 annual shareholders meeting in April 2016. Excluding the effects of the non-cash amortization associated with the purchase of certain intellectual property and other intangible assets, non-cash stock compensation costs, and non-cash deferred tax valuation allowance, the Company’s non–GAAP net loss for its third quarter of fiscal 2016 was ($2.90) million, or ($0.25) per diluted share, compared to a non-GAAP net loss of ($2.06) million, or ($0.18) per diluted share, for the third quarter of fiscal 2015.

 “During the third fiscal quarter, we added 228 new customers for our market-leading Monarch self-service data preparation solution,” said Michael A. Morrison, president and chief executive officer of Datawatch. “Since we first released this next generation technology one year ago, nearly 600 new name and upgraded heritage customers have adopted this re-invented Monarch self-service data preparation solution. The heritage customers alone that have upgraded, have produced nearly $3 million in incremental subscription license revenue for the Company. Notably, in the fiscal third quarter, we completed a six-figure Monarch upgrade transaction with one of the Big Four public accounting firms. This longstanding customer of our heritage product was able to quickly develop a compelling ROI for the added value of our next generation Monarch offering based on its intuitiveness, ease-of-use and self-service capabilities, and upgraded its existing 3,000 users, while also licensing several thousand additional users. We believe that well over half of our existing heritage Monarch customers are candidates to upgrade to the next generation Monarch self-service data preparation offering, and we are aggressively promoting this opportunity to our large customer base.”

Mr. Morrison continued, “Our partner relationship with IBM achieved an important milestone in mid-May when our Monarch self-service data preparation offering was officially added to IBM’s price list to complement both IBM Watson Analytics and IBM Cognos Analytics, making it available to thousands of IBM sales people and partners for resale. In the ensuing weeks, we have worked with IBM to develop a very healthy pipeline of opportunities, and we are focused on continuing to grow this pipeline of business and convert initial deals as quickly as possible. In addition, we continue to make inroads in the Tableau partner ecosystem as the cost-effective data preparation solution for Tableau’s market-leading self-service analytics. For example, in the Asia-Pacific region alone, we signed up a half dozen new partners that are leading Tableau partners. Several of these new partners selected Datawatch over competing data preparation solutions, due to our tight integration with Tableau, ease-of-use, rich functionality and our attractive price point, which is oftentimes less than half of competing offerings while providing higher value capabilities.”

Exhibit 99.1

Mr. Morrison added, “In the past quarter, we also appointed Ken Tacelli as senior vice president, worldwide sales for Datawatch. Previously, Ken was a Senior Vice President of Content Sales at Skillsoft. He also held a Senior Vice President role at OpenText within the World Wide Enterprise Sales Division and Vice President roles at CA Technologies, including North American Growth to Market Sales, New Enterprise and Routes to Market. Ken has an impressive track record in large and small companies alike, and we look forward to him being a catalyst to drive revenue growth for our market-leading solutions.”

Mr. Morrison concluded, “Lastly, we are very excited about the new enhancements to Monarch and Panopticon products, which we anticipate becoming commercially available later this calendar year. These enhancements will provide greater scalability, broader accessibility and improved ease-of-use, which should all drive customer demand. We are very pleased with the progress we have made with our Monarch self-service data preparation solution in its first year on the market, especially the 100s of new customers and the market and technology validation we received from new partners such as IBM, Fiserv and Vertex.”

James L. Eliason, chief financial officer, commented, “Our deferred license revenue at the end of the third fiscal quarter grew more than 160% year-over-year as we generated more than $1 million in license subscription bookings for the first quarter ever, with gross bookings up approximately 40% or $327,000 sequentially and up more than $600,000 year-over-year. Recognized revenue in the fiscal third quarter from our subscription license business was more than $700,000, representing a $2.5 million annual run rate that continues to build nicely. Our balance sheet remains strong, with $29 million in cash and equivalents. While continuing to appropriately invest in key product development initiatives, we remain disciplined around our use of capital and expect that our Q4 expenses will be well below the expense level for the third fiscal quarter.”

Transition to Subscription Sales

In Q3 of fiscal 2015, Datawatch changed its pricing practice for Monarch, transacting all small volume orders on a subscription basis only, rather than a perpetual license basis. The total value over the life of the subscription is recorded as bookings, but only the ratable portion of the annual subscription fee earned in the quarter sold is treated as revenue in that quarter. The balance is deferred and recorded as revenue over the life of the subscription. This lowers current reported revenue, but builds deferred revenue that will be recorded as revenue over the life of the subscription. Since subscription sales include maintenance, current maintenance revenue will be similarly reduced.

Third Quarter Fiscal 2016 Business Highlights

· Datawatch closed business with all four of the Big Four public accounting firms, as well as dozens of internal audit groups at commercial organizations, further cementing its leading position as the self-service data preparation solution of choice.

· Datawatch and Vertex, Inc. entered into a managed analytics OEM agreement under which Vertex will use Datawatch’s Monarch solution to acquire and prepare data for customers of Vertex’s integrated tax technology solutions.

Exhibit 99.1

· Aetna, whose single vision is to provide improved access to quality health care services for all Americans, selected Datawatch as its self-service data preparation solution to acquire, enrich and blend data for its Tableau self-service analytics users.

· Fiserv, a global provider of technology solutions to the financial world, including banks, credit unions, securities processing organizations and insurance companies, entered into an agreement to resell Monarch for self-service data preparation with Fiserv’s matching and account reconciliation solution.

· Pentagon Federal Credit Union, a longstanding heritage Monarch customer, recognized the ROI from Datawatch’s next generation self-service data preparation solution and upgraded its existing heritage licenses of Monarch for more than 100 users.

Third Quarter Fiscal 2016 Financial Highlights

· Cash and short-term investments were $28.8 million at June 30, 2016, down from $33.02 million at December 31, 2015 and $36.32 million at June 30, 2015.

· Gross margin (excluding IP amortization expense) for the third quarter of fiscal 2016 was 81%, a decrease from 84% for the third quarter of fiscal 2015.

· Days sales outstanding were 69 days at June 30, 2016, compared to 73 days at June 30, 2015.

· There were 3 six-figure deals in the third quarter this fiscal year, down from 10 in the third quarter of fiscal 2015.

· The average deal size in the third quarter of fiscal 2016 was $35,000, a decrease from $56,000 in the third quarter of fiscal 2015.

· Deferred revenue reached $8.9 million at June 30, 2016, the highest in the company’s history, and a 22% increase from $7.3 million at June 30, 2015.

Review of Strategic Alternatives

The company also announced its Board of Directors has initiated a process to explore and evaluate a broad range of strategic alternatives for the company to enhance shareholder value. The Company strongly believes in its current business strategy, but does not believe that its current share price accurately reflects its business prospects and strong balance sheet.

 Strategic alternatives to be considered may include the acquisition or disposition of assets, joint ventures, the sale of the company, alternative operating models or continuing with the current business plan, among other potential alternatives. Canaccord Genuity is serving as financial advisor to the company.

There can be no assurance that this strategic review process will result in the completion of any transaction or other alternative. The Company has not set a timetable for completion of the review process, and it does not intend to comment further regarding the review process unless a specific transaction or other alternative is approved by the Board of Directors, the review process is concluded or it is otherwise determined that further disclosure is appropriate or required by law.

Conference Call

Datawatch’s third quarter of fiscal year 2016 earnings conference call will take place on Thursday, July 21, 2016 at 8:30 a.m. Eastern Time. To access the conference call, the toll-free dial in number is (877) 407-0782. Internationally, the call may be accessed by dialing (201) 689-8567. The conference call will be broadcast live on the Internet at: http://www.investorcalendar.com/IC/CEPage.asp?ID=175106. It is recommended that listeners register to participate and download any necessary audio software from the website 15 minutes prior to the scheduled call. An archived replay of the broadcast will be available for 90 days at the same location.

Exhibit 99.1

About Datawatch Corporation
Datawatch Corporation (NASDAQ-CM: DWCH) enables ordinary users to deliver extraordinary results with all their data.  Only Datawatch can unlock data from the widest variety of sources and prepare it for use with visualization tools or other business processes.  When real-time visibility to rapidly changing data is critical, Datawatch enables you to visualize streaming data for the most demanding business environments such as capital markets. Organizations of every size worldwide use Datawatch products including 93 of the Fortune 100. Datawatch is headquartered in Bedford, Massachusetts with offices in New York, London, Frankfurt, Stockholm, Singapore, and Manila, and with partners and customers in more than 100 countries worldwide.  See how Datawatch can help you by downloading a free version at 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 long sales cycle with enterprise customers and the size and timing of large customer orders; risks associated with acquisitions; the risk that our goodwill resulting from acquisitions may become impaired and require a write-down; limitations on the effectiveness of internal controls; rapid technological change; Datawatch’s dependence on the introduction of new products and product enhancements and possible delays in those introductions; competition in the software industry generally, and in the markets for next generation analytics in particular; Datawatch's dependence on its principal products, proprietary software technology and software licensed from third parties; Datawatch’s concentration of customers in the financial sector; risks associated with international sales and operations; risks associated with indirect distribution channels and co-marketing arrangements, many of which were only recently established; the adequacy of Datawatch’s sales returns reserve; risks associated with a subscription sales model; 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, security breach or other catastrophic event; risks related to actions by activist stockholders, including the amount of related costs incurred by Datawatch and the disruption caused to Datawatch’s business activities by these actions; 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, 2015 and its subsequently filed Form 10-Q reports. Any forward-looking statements should be considered in light of those factors.

Use of Non-GAAP Financial Information

We define non-GAAP net loss as U.S. Generally Accepted Accounting Principles (“GAAP”) net loss plus goodwill and long-lived assets non-cash impairment charges, non-cash amortization associated with the purchase of certain intellectual property and other intangible assets, non-cash stock compensation costs and Sweden non-cash deferred tax valuation allowance. We discuss non-GAAP net loss in our quarterly earnings releases and certain other communications as we believe non-GAAP net loss is an important measure that is not calculated according to GAAP. We use non-GAAP net loss in internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our Board of Directors and evaluating short-term and long-term operating trends in our operations. We believe that non-GAAP net loss assists in providing an enhanced understanding of our underlying operational measures to manage the business, to evaluate performance compared to prior periods and the marketplace, and to establish operational goals. We believe that these non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making.

Exhibit 99.1

Non-GAAP net loss is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. This non-GAAP financial measure may not be computed in the same manner as similarly titled measures used by other companies. We expect to continue to incur expenses similar to the non-GAAP net loss financial adjustments described above, and investors should not infer from our presentation of this non-GAAP financial measure that these costs are unusual, infrequent or non-recurring.

The table below entitled “Non-GAAP Disclosure - Reconciliation of Net Loss to Non-GAAP Net Loss” reconciles the Company’s GAAP net loss to the Company’s non-GAAP net loss.

# # #

Investor Contact:
Datawatch Investor Relations
investor@datawatch.com
Phone: (978) 441-2200 ext. 8323

Media Contact:

Erin Hoesly

Datawatch Corporation

Erin_Hoesly@datawatch.com

Phone: (978) 441-2200 ext. 8322

Twitter: @datawatch

© 2016 Datawatch Corporation. Datawatch and the Datawatch logo 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.

Exhibit 99.1

DATAWATCH CORPORATION

Condensed Consolidated Statements of Operations

Amounts in Thousands (except per share data)

(Unaudited)

	Three Month Ended						Nine Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
REVENUE:
Software licenses	$	3,669		$	4,117		$	10,461		$	11,203
Maintenance		3,335			3,311			10,417			10,016
Professional services		372			348			977			980
Total revenue		7,376			7,776			21,855			22,199
COSTS AND EXPENSES:
Cost of software licenses		879			697			2,067			2,293
Cost of maintenance and services		499			557			1,707			2,519
Sales and marketing		4,773			6,513			15,621			21,303
Engineering and product development		2,196			1,988			6,089			6,698
General and administrative		2,593			2,204			7,453			6,779
Impairment of goodwill and long lived intangible assets		-			-			-			32,009
Total costs and expenses		10,940			11,959			32,937			71,601
LOSS FROM OPERATIONS		(3,564	)		(4,183	)		(11,082	)		(49,402	)
Other income (expense)		(4	)		(36	)		(19	)		(38	)
LOSS BEFORE INCOME TAXES		(3,568	)		(4,219	)		(11,101	)		(49,440	)
Income tax (expense) benefit		(1,806	)		96			(1,599	)		2,632
NET LOSS	$	(5,374	)	$	(4,123	)	$	(12,700	)	$	(46,808	)
Net loss per share - Basic	$	(0.45	)	$	(0.36	)	$	(1.08	)	$	(4.14	)
Net loss per share - Diluted	$	(0.45	)	$	(0.36	)	$	(1.08	)	$	(4.14	)
Weighted Average Shares Outstanding - Basic		11,815			11,448			11,717			11,307
Weighted Average Shares Outstanding - Diluted		11,815			11,448			11,717			11,307
Non-GAAP Disclosure - Reconciliation of Net Loss to Net Loss Excluding the Effects of Certain Items:
GAAP Net Loss	$	(5,374	)	$	(4,123	)	$	(12,700	)	$	(46,808	)
Add-back Impairment of Goodwill & Long-Lived Assets		-			-			-			32,009
Add-back Amortization of Intangibles & IP		533			572			1,673			2,013
Add-back Share-Based Compensation		145			1,486			2,169			4,025
Add-back Swedish Deferred Tax Valuation Allowance		1,794			-			1,794			-
Subtotal of additions		2,472			2,058			5,636			38,047
Net (Loss) Income (non-GAAP)	$	(2,902	)	$	(2,065	)	$	(7,064	)	$	(8,761	)
Net (loss) income per share - Basic	$	(0.25	)	$	(0.18	)	$	(0.60	)	$	(0.77	)
Net (loss) income per share - Diluted	$	(0.25	)	$	(0.18	)	$	(0.60	)	$	(0.77	)
Weighted Average Shares Outstanding - Basic		11,815			11,448			11,717			11,307
Weighted Average Shares Outstanding - Diluted		11,815			11,448			11,717			11,307

Exhibit 99.1

DATAWATCH CORPORATION

Condensed Consolidated Balance Sheets

Amounts in Thousands

(Unaudited)

	June 30,		September 30,
	2016		2015
Cash and cash equivalents	$	28,800	$	35,162
Accounts receivable, net		5,846		7,081
Prepaid expenses and other current assets		1,962		2,013
Total current assets		36,608		44,256
Property and equipment, net		1,245		614
Intangible and other assets, net		10,509		14,061
	$	48,362	$	58,931
Accounts payable and accrued expenses	$	3,723	$	4,202
Deferred revenue - current portion		8,749		8,452
Deferred tax liability- current portion		-		274
Total current liabilities		12,472		12,928
Other long-term liabilities		695		461
Total long-term liabilities		695		461
Total shareholders' equity		35,195		45,542
	$	48,362	$	58,931