GUIDANCE SOFTWARE, INC. FORM 10-K (Annual Report) Filed 02/26/10 for the Period Ending 12/31/09 Address 215 NORTH MARENGO AVENUE PASADENA, CA 91101 Telephone 6262299191 CIK 0001375557 Symbol GUID SIC Code 7372 - Prepackaged Software Industry Software & Programming Sector Technology Fiscal Year 12/31 http://www.edgar-online.com © Copyright 2010, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10–K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009 OR 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 001-33197 GUIDANCE SOFTWARE, INC. (Exact name of registrant as specified in its charter) Delaware 95 -4661210 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 215 North Marengo Avenue Pasadena, California 91101 (626) 229 -9191 (Address of principal executive offices) (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.001 par value per share The NASDAQ Stock Market LLC (Title of each class) (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No 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 No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation of S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non -accelerated filer Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No As of June 30, 2009, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $41,786,000* based on the closing sale price as reported on the Global Market tier of The NASDAQ Stock Market LLC. As of February 24, 2010, there were approximately 24,443,000 shares of the registrant’s Common Stock outstanding, net of treasury shares. * Excludes shares of Common Stock held by executive officers, directors and stockholders whose ownership exceeds 5% of the shares outstanding on that date. This calculation does not reflect a determination that such persons are affiliates for any other purposes. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A in connection with the registrant’s 2010 Annual Meeting of Stockholders (the “Proxy Statement”) or portions of the registrant’s 10-K/A, to be filed subsequent to the date hereof, are incorporated by reference into Part III of this Report. Such Proxy Statement or 10-K/A will be filed with the Commission not later than 120 days after the conclusion of the registrant’s fiscal year ended December 31, 2009. Table of Contents GUIDANCE SOFTWARE, INC. FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009 Table of Contents Page PART I 1 Item 1. Business 1 Item 1A. Risk Factors 12 Item 1B. Unresolved Staff Comments 26 Item 2. Properties 26 Item 3. Legal Proceedings 26 Item 4. Submission of Matters to a Vote of Security Holders 26 PART II 27 Item 5. Market for Registrant ’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 27 Item 6. Selected Consolidated Financial Data 30 Item 7. Management ’s Discussion and Analysis of Financial Condition and Results of Operations 31 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 46 Item 8. Financial Statements and Supplementary Data 46 Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-4 Consolidated Statements of Operations F-5 Consolidated Statements of Stockholders ’ Equity F-6 Consolidated Statements of Cash Flows F-7 Notes to Consolidated Financial Statements F-8 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 46 Item 9A. Controls and Procedures 46 Item 9B. Other Information 47 PART III 48 Item 10. Directors, Executive Officers and Corporate Governance 48 Item 11. Executive Compensation 48 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 48 Item 13. Certain Relationships and Related Transactions, and Director Independence 48 Item 14. Principal Accountant Fees and Services 48 PART IV 49 Item 15. Exhibits and Financial Statement Schedules 49 Signatures S-1 i Table of Contents TRADEMARKS “Guidance Software,” “EnCase ® ,” “EnScript ® ,” “FastBloc ® ,” “CEIC ® ,” “EnCE ® ,” “Neutrino ® ,” “EnCEP ™ ” and other trademarks or service marks of Guidance appearing in this Annual Report are registered trademarks or trademarks of Guidance in the United States and in certain other jurisdictions. This report also contains additional trade names, trademarks and service marks of ours and of other companies. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by these other companies. FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS This Annual Report, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding our vision and business strategy, financial condition, results of operations, products and technologies, expectation of competitive pressures and prospects. Such statements are based upon current expectations that involve risks and uncertainties. For example, words such as “may,” “will,” “should,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements. Additionally, any statements contained herein that are not statements of historical facts or that concern future matters such as the development of new products, sales levels, expense levels and other statements regarding similar matters may be deemed to be forward-looking statements. Although forward-looking statements in this Annual Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those discussed under the heading “Risk Factors” below, as well as those discussed elsewhere in this Annual Report. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report. Readers are urged to carefully review and consider the various disclosures made in this Annual Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects. ii Table of Contents PART I Item 1. Business Overview Guidance Software, Inc. is the leading global provider of software solutions used to conduct digital investigations. Our EnCase ® platform provides an investigative infrastructure that allows our customers the capability to digitally investigate human resources matters, allegations of fraud, suspicious network endpoint activity and defend their organization’s data assets with our forensically sound solutions. EnCase ® Enterprise provides organizations the visibility into user-controlled areas of the network to determine