The section entitled "Management's Discussion and Analysis" set forth below contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements may generally be identified by the use of such words as "expect," "anticipate," "believe," "intend," "plan," "will," or "shall," or the negative of those terms. We have based these forward-looking statements on our current expectations and projections about future events. Forward-looking statements involve certain risks and uncertainties and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from such forward-looking statements include the risks described under the heading "Risk Factors" in Item 1A of this quarterly report on Form 10-Q and, elsewhere in this Form 10-Q. The forward-looking statements contained in this Form 10-Q include, but are not limited to statements about the following: (1) our future success, (2) our research and development efforts,
(3) our future operating results and cash flow, (4) our ability to compete,
(5) the markets in which we operate, (6) our revenue, (7) cost of license revenue and cost of service revenue, (8) our selling and marketing costs,
(9) our backlog, (10) our research and development

expenses, (11) the effect of critical accounting policies, (12) our belief that our existing cash balances will be sufficient to meet our operating and capital expenditure requirements through the foreseeable future, (13) our focus on the continued development and enhancement of the TigerLogic product line, and identification of new and emerging technology areas and discussions with channel partners for the sale and distribution of the TigerLogic product line, (14) the effect of recent changes in tax laws on our financial statements and (15) the possibility that we may seek to take advantage of strategic acquisition opportunities. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement.

Overview

We were incorporated in the State of Delaware in August 1987. We were originally incorporated as Blyth Holdings, Inc. and our name was changed to Omnis Technology Corporation in September 1997. Effective December 1, 2000, we completed the acquisition of PickAx, Inc., a Delaware corporation ("PickAx"). Concurrent with the acquisition, we changed our name to Raining Data Corporation. On April 17, 2008, we changed our name to TigerLogic Corporation. Reference to "we," "our," "us" or the "Company" in this Form 10-Q mean TigerLogic Corporation and our subsidiaries.

Products

Our principal business is the design, development, sale and support of software infrastructure. Our products allow customers to create and enhance flexible software applications for their own needs. Our software may be categorized into the following product lines: Yolink, XML data management servers ("XDMS"), Multidimensional Database Management Systems ("MDMS"), and Rapid Application Development ("RAD") software tools. All of our revenue to date has been principally derived from MDMS and RAD software products.

Many of our products are based on the proprietary Pick Universal Data Model ("Pick UDM") and are capable of handling data from many sources. The Pick UDM is a core component across the XDMS and MDMS product lines.

Beginning in 2001, we began an extensive effort to leverage our Pick UDM and core intellectual property to create the TigerLogic technology product line, which includes an internet browser-based search application called Yolink (formerly known as ChunkIt!) designed to enhance the search experience and productivity of any Web user, and an enterprise class XML Database Management Server for the emerging XML market to address the growing need for managing and querying native XML data and the ability to handle structured and unstructured data. We are focused on the continued development and enhancement of these product lines, identification of new and emerging technology areas and discussions with channel partners for the sale and distribution of the TigerLogic product line.

In addition, one of the elements of our business strategy involves expansion through the acquisitions of businesses, assets, products or technologies that allow us to complement our existing product offerings, expand our market coverage, or enhance our technological capabilities. We continually evaluate and explore strategic opportunities as they arise, including business combination transactions, strategic partnerships, and the purchase or sale of assets, including tangible and intangible assets such as intellectual property.

In May 2009, we released Yolink 2.0, a replacement for ChunkIt! 1.0 which was released in October 2008. Yolink is a simple and easy to use browser-based search enhancement tool. This application is designed to enhance the search experience and productivity of any Web user. As an application that sits inside a Web browser, its function is to identify and display information containing keywords in the user's search query from embedded hyperlinks that are commonly found on Web pages. To facilitate the user's review, each keyword is highlighted with a unique color. This capability is especially useful for reviewing and searching through the many Web pages that contain hundreds, if not thousands of embedded hyperlinks. Yolink delivers users the benefit of being able to quickly search through and preview links that contain information pertinent to their interest. Yolink can save users the time of having to click through a multitude of irrelevant links, and from having to manage multiple windows and tabs.

Yolink is available for download at www.yolink.com. To date, we have not recognized any revenue from the Yolink product.

Competition

The application development tools software market is rapidly changing and intensely competitive. Our MDMS products compete with products developed by companies such as Oracle, Microsoft and IBM. Our RAD products currently encounter competition from several direct competitors, including Microsoft, and competing development environments, including JAVA. Competition is developing and evolving in the XML market for which our XDMS products are intended. Companies that do or are expected to compete in this market include Oracle, IBM, Microsoft and Sybase, as well as a number of smaller companies with products that directly and indirectly compete with our XDMS products. Our Yolink search application will encounter competition from several direct competitors including Google, Yahoo, Microsoft, AOL and Ask, as well as a number of smaller companies with products that directly and indirectly compete with our Yolink product. Most of our competitors have significantly more financial, technical, marketing and other resources than we do. As a result, these competitors may be able to respond more quickly to new or emerging technologies, evolving markets and changes in customer requirements, and may devote greater resources to the development, promotion and sale of their products.

We believe that our ability to compete in the various product markets depends on factors both within and outside our control, including the timing of release, performance and price of new products developed by both us and our competitors. Although we believe that we currently compete favorably with respect to most of these factors, we may not be able to maintain our competitive position against current and potential competitors, especially those with greater resources.

We continue to focus on preparing the Company for growth in new market opportunities, such as the Yolink and XDMS product lines, while also continuing to meet the needs of our loyal customer base by investing in the development of new updates and releases for our existing MDMS and RAD product lines. While the current adverse worldwide economic conditions have resulted in lower revenue, we believe that our relatively stable services revenue and lower expenditures will continue to result in sufficient working capital balances to fund growth initiatives aimed at increasing stockholder value.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent liabilities.

On an on-going basis, we evaluate our estimates, including those related to revenue recognition and accounting for goodwill. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

We have identified the accounting policies below as the policies critical to our business operations and the understanding of our results of operations and how the related judgments and estimates affect the preparation of our consolidated financial statements:

• Revenue Recognition

• Goodwill

• Employee Stock-Based Compensation

• Income Taxes

These critical accounting policies are described in our Form 10-K for the fiscal year ended March 31, 2009 and there have been no changes in our application of these policies during the quarter ended June 30, 2009.

Results of Operations

The following table sets forth certain unaudited Condensed Consolidated Statement of Operations data in total dollars, as a percentage of total net revenues and as a percentage change from the same period in the prior year. Cost of license revenues and cost of service revenues are expressed as a percentage of the related revenues. This information should be read in conjunction with the unaudited Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

                                                 Three Months Ended                            Three Months Ended
                                                    June 30, 2009                                June 30, 2008
                                                          % of Net        Percent                              % of Net
                                        Results           Revenues        Change             Results           Revenues
                                    (In thousands)                                       (In thousands)
Net revenues
Licenses                            $         1,092             30 %          (33 )%     $         1,636             36 %
Services                                      2,495             70 %          (15 )%               2,919             64 %

Total net revenues                            3,587            100 %          (21 )%               4,555            100 %
Operating expenses
Cost of revenues:
Cost of license revenues (as a %
of license revenues)                             21              2 %          425 %                    4              0 %
Cost of service revenues (as a %
of service revenues)                            398             16 %          (11 )%                 448             15 %
Selling and marketing                           926             26 %          (49 )%               1,827             40 %
Research and development                      1,578             44 %          (29 )%               2,232             49 %
General and administrative                    1,156             32 %          (25 )%               1,543             34 %

Total operating expenses                      4,079            114 %          (33 )%               6,054            133 %

Operating loss                                 (492 )          (14 )%         (67 )%              (1,499 )          (33 )%
Other income-net                                792             22 %        1,660 %                   45              1 %

Income (loss) before income
taxes                                           300              8 %         (121 )%              (1,454 )          (32 )%
Income tax provision                              3              0 %          (73 )%                  11              0 %

Net income (loss)                   $           297              8 %         (120 )%     $        (1,465 )          (32 )%

REVENUE

NET REVENUE. Our revenue is derived principally from two sources: fees from software licensing and fees for post contract technical support. We license our software primarily on a per-CPU, per-server, per-port or per-user basis. Therefore, the addition of CPU's, servers, ports or users to existing systems increases our revenue from our installed base of licenses. Similarly, the reduction of CPU's, servers, ports or users to existing systems decreases our revenue from our installed base of licenses. The timing of orders and customer ordering patterns have resulted in fluctuations in license revenue between quarters and year-to-year. Total revenue decreased $1.0 million or 21% for the three month periods ended June 30, 2009, as compared to the same periods in the prior year, primarily due to lower orders of licenses and reduction or non-renewal of support services from our existing customer base as a result of the current adverse global economic conditions. We anticipate that revenue will continue to be adversely affected until global economic conditions improve.

We have been actively developing and marketing our TigerLogic product line. Should our development efforts and the adoption of these product lines be successful, we anticipate additional revenues in future periods related to these products. However, we can give no assurances as to customer acceptance of any new products or services, or the ability of the current or any new products and services to generate revenue. While we are committed to research and development efforts that are intended to allow us to penetrate new markets and generate new sources of revenue, such efforts may not result in additional products, services or revenue.

OPERATING EXPENSES

COST OF LICENSE REVENUE. Cost of license revenue is comprised of direct costs associated with software license sales including software packaging, documentation, physical media costs and royalties. Cost of license revenue as a percentage of license revenue for the three month period ended June 30, 2009 remained consistent with the three month period ended June 30, 2008.

COST OF SERVICE REVENUE. Cost of service revenue includes primarily personnel costs relating to providing consulting, technical support and training services. Cost of service revenue as a percentage of service revenue for the three month period ended June 30, 2009 remained consistent with the three month period ended June 30, 2008. The slight decrease in absolute dollar value was mainly due to foreign currency translation effect from British Pound into US Dollar.

SELLING AND MARKETING. Selling and marketing expense consists primarily of salaries, benefits, advertising, tradeshows, travel and overhead costs for our sales and marketing personnel. Selling and marketing expense for the three month period ended June 30, 2009 decreased $0.9 million or 49% when compared to the same period in the prior year. This decrease was mainly due to lower headcount and consulting and marketing expense. Prior period's expenses included expenses relating to the introduction of our Tigerlogic Yolink (formerly ChunkIt!) product. We anticipate that selling and marketing costs related to the TigerLogic product line may increase as we further develop the sales channel for these products and if customer acceptance of these products increases. In addition, if our continued research and development efforts are successful, including with respect to our TigerLogic product line, and new products or services are created, we may incur increased sales and marketing expense to promote those new products in future periods.

RESEARCH AND DEVELOPMENT. Research and development expense consists primarily of salaries and other personnel-related expenses and overhead costs for engineering personnel including employees in the US and the UK and contractors in the US. Research and development expense for the three month period ended June 30, 2009 decreased $0.7 million or 29% when compared to the same period in the prior year mainly due to lower headcount and consulting expense related to our Yolink product. We are committed to our research and development efforts and expect research and development expense will remain at the current level in future periods or increase if we believe that additional spending is warranted. Such efforts may not result in additional new products and any new products, including the TigerLogic product line, may not generate sufficient revenue, if any, to offset the research and development expense.

GENERAL AND ADMINISTRATIVE. General and administrative expense consists primarily of costs associated with our finance, human resources, legal and other administrative functions. These costs consist principally of salaries and other personnel-related expenses, professional fees, depreciation and overhead costs. General and administrative expense for the three month period ended June 30, 2009 decreased $0.4 million or 25% over the same period in the prior year. The decrease in general and administrative expense was mainly due to: lower legal costs related to pending litigation matters; higher prior year expense for Yolink product patent and trademark registrations; lower stock-based compensation expense as fewer new options were granted this quarter as compared to same period in prior year; and the termination of stock-based compensation expense related to the former CEO's outstanding options upon his departure in the fourth quarter of fiscal year 2009.

OTHER INCOME (EXPENSE). Other income (expense) consists primarily of net interest expense and gains and losses on foreign currency transactions. The change in other income (expense) during the three month period ended June 30, as compared to the same periods in the prior year, was mainly due to a foreign exchange gain from a significant intercompany balance outstanding denominated in British Pound, which has gained significantly against the U.S. Dollar in the current quarter when compared to same quarter in prior year. The Company has been recording the intercompany transaction gains and losses in accordance with SFAS No. 52 ("SFAS No. 52"), "Foreign Currency Translation", which states that gains and losses on foreign currency transactions are generally included in determining net income for the period in which exchange rates change. However, intercompany transactions and balances for which settlement is not planned or anticipated in the foreseeable future are considered to be part of the net investment and related gains or losses are to be accumulated in a separate component of equity.

Due to the uncertainty in exchange rates, we may experience transaction gains or losses in future periods, the effect of which can not be predicted at this time.

PROVISION FOR INCOME TAXES. Our effective tax rate was 1.0% and (0.8%) for the three month periods ended June 30, 2009 and 2008, respectively. The provision for income taxes reflects income tax on net earnings from foreign subsidiaries, net of the refundable research and development credit, as further discussed below. Due to uncertainties surrounding the timing of realizing the benefits of the net operating loss carryforwards in the future, we continue to carry a full valuation allowance against net deferred tax assets in domestic and foreign jurisdictions, except France due to its profitability in the past few years.

In July 2008, the Housing Assistance Act of 2008 introduced a refundable research and development credit refund that could be claimed in lieu of special bonus depreciation as enacted by the Economic Stimulus Act of 2008. Based on our analysis for the three months ended June 30, 2009, we expect an additional cash refund of approximately $8,000. This amount has been included in the provision for income taxes for the three month period ended June 30, 2009. Since our initial adoption of the Housing Assistance Act of 2008 on April 1, 2008 total cash refund expected to date is approximately $33,000, which represents $25,000 of estimated cash refunds through fiscal year ended March 31, 2009 and an additional $8,000 of estimated cash refunds for the three months ended June 30, 2009.

The Company expects to generate U.S. federal research and development credits for the period beginning April 1, 2009 through December 31, 2009 resulting in additional carryovers. The Company does not expect an income tax impact for the first quarter ended June 30, 2009 nor for the year ending March 31, 2010, due to the full valuation allowance applied to the Company's deferred tax assets (including the Company's research and development credit carryovers). The refundable research and development credits claimed and ultimately refunded would reduce the research and development credit carry forward amount related to the deferred tax asset and related valuation allowance.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2009, we had $11.8 million in cash. We believe that our existing cash balances will be sufficient to meet our operating and capital expenditure requirements for the remainder of the fiscal year ending March 31, 2010 and through the foreseeable future. We are committed to research and development and marketing efforts that are intended to allow us to penetrate new markets and generate new sources of revenue and improve operating results. However, our research and development and marketing efforts have required, and will continue to require, cash outlays without the immediate or short-term receipt of related revenue. Our ability to meet our expenditure requirements is dependent upon our future financial performance, which will be affected by, among other things, prevailing economic conditions, our ability to penetrate new markets and attract new customers, market acceptance of our new and existing products and services, the success of research and development efforts and other factors beyond our control.

On November 9, 2004, we entered into a lease agreement with The Irvine Company whereby we leased one building in Irvine, California, comprising approximately 29,000 square feet, to replace our then headquarters facility. The lease commenced in November 2005 and has a five-year term. If certain conditions are met, we have the option to extend the term of the lease for an additional thirty-six months. The annual basic rent during the five-year term ranges from approximately $475,000 during the first year to approximately $545,000 during the fifth year. The rent expense is being recognized on a straight line basis over the lease term. The Company is currently exploring its options before the current lease term expires in October 2010 for the purpose of consolidating space and reducing future lease expense.

We had no material commitments for capital expenditures as of June 30, 2009.

Net cash used in operating activities was $0.5 million and $1.6 million for the three month periods ended June 30, 2009 and 2008, respectively. The decrease in net cash used in operating activities for the three month period ended June 30, 2009 as compared to the same period in prior year was primarily due to lower operating expenses as a result of lower headcount, and lower marketing and legal expenses. Net cash used in investing activities was $0.1 million and $0.5 million for the three month periods ended June 30, 2009 and 2008, respectively. Prior year's cash used in investing activities was due to expenditures related to equipment purchased for the introduction of our Yolink product. Net cash provided by financing activities was $0.0 million and $0.1 million for the three month periods ended June 30, 2009 and 2008, respectively. Net cash provided by financing activities was primarily due to proceeds derived from the exercise of stock options and corresponding issuance of common stock.

There was no outstanding line of credit during the three months ending June 30, 2009 and 2008, respectively.

OFF-BALANCE SHEET ARRANGEMENTS

We did not have any off-balance sheet liabilities or transactions as of June 30, 2009.

NON-GAAP FINANCIAL INFORMATION

EBITDA (as defined below) should not be construed as a substitute for net income
(loss) or as a better measure of liquidity than cash flow from operating activities, which are determined in accordance with United States generally accepted accounting principles ("GAAP"). EBITDA excludes components that are significant in understanding and assessing our results of operations and cash flows. EBITDA does not represent funds available for management's discretionary use and is not intended to represent cash flow from operations. In addition, EBITDA is not a term defined by GAAP and as a result our measure of EBITDA might not be comparable to similarly titled measures used by other companies.

However, EBITDA is used by management to evaluate, assess and benchmark our operational results and we believe that EBITDA is relevant and useful information, which is often reported and widely used by analysts, investors and other interested parties in our industry. Accordingly, we are disclosing this information to permit a more comprehensive analysis of our operating performance, to provide an additional measure of performance and liquidity and to provide additional information with respect to our ability to meet future debt service, capital expenditure and working capital requirements.

Our EBITDA was negative $0.2 million for the three month period ended June 30, 2009 or negative 5%, and negative $0.9 million, or negative 21% of total net revenue for the three month period ended June 30, 2008. The improvement in EBITDA for the three month period ended June 30, 2009, compared to the same period in the prior year was a result of lower operating expenses due to lower headcount and lower legal and marketing expense, partially offset by lower revenues.

EBITDA is defined as net income (loss) with an add-back for depreciation and amortization, non-cash stock-based compensation expense, interest income (expense)-net, other income (expense)-net, and income taxes. The following table reconciles EBITDA to the GAAP reported net income (loss):

                 RECONCILIATION OF EBITDA TO NET INCOME (LOSS)

                                 (In thousands)



                                             For the Three Months Ended
                                                      June 30,
                                             2009                 2008
          Reported net income (loss)      $      297         $       (1,465 )
. . .