-- Company gained approximately 2,000 customers as a result of the recent
purchase of substantially all of the assets of Red Condor, Inc., an
award-winning provider of email security.
-- Net billings* for the 2010 third quarter totaled $5.6 million, an
increase of approximately 29% compared to the same period in 2009.
-- Net billings* for the nine months ended September 30, 2010 were $15.4
million, an increase of approximately 16% over the same period last
year.
-- Cash and cash equivalents increased to $2.8 million as of September 30,
2010 from $2.5 million as of December 31, 2009 and $1.4 million as of
September 30, 2009.
-- Generated positive cash flow of $335,000 for YTD 2010 compared to
$630,000 negative cash flow for the same period in 2009, an increase
of 153%. Cash flow for the period includes $3.2 million of convertible
notes issued by the company in connection with a Security Purchase
Agreement. The notes can be converted into shares of Company stock at
$1.10 per share.
-- Q3 operating expenses increased approximately 36 % from $3.3 million in
2009 to $4.4 million in 2010 as a result of additional operating
expenses and transaction costs associated with the Red Condor
Transaction.
-- Year to date net loss increased to $1.9 million through September 30,
2010 from $600,000 for the same period of 2009 mainly a result of
additional operating expenses and transaction costs associated with the
Red Condor Transaction.
-- In August 2010, the company entered into a lease agreement for new
corporate offices effective January 1, 2011. The Company's lease
payment is expected to decrease approximately $1 million per year
starting in 2011.
"Our third quarter met operational expectations and we are optimistic about
the substantial growth in billings that we saw compared to 2009," said Lou
Ryan, CEO of St. Bernard Software. "Additionally, we were fully prepared
for the integration of Red Condor Inc. and are pleased with the results.
Our expense line continues to be within expectations."
Third Quarter and Year-to-Date 2010 Net Billings*
Net billings* increased for the quarter ended September 30, 2010 by
approximately 29% from $4.4 million in 2009 to $5.6 million in 2010. Year
to date, for the nine months ending September 30, 2010, net billings
totaled $15.4 million, a 16% increase compared to $13.3 million for the
same period ending September 30, 2009.
* Net billings represent the amount of subscription contracts billed to
customers net of discounts and are not numerical measurements that can be
calculated in accordance with GAAP. The Company provides this measurement
in its financial performance because this measurement provides a consistent
basis for understanding the company's sales activities for the current
period. The Company believes the billing measurement is useful to investors
because the GAAP measurements of revenue and deferred revenue in the
current period include subscription contracts commenced in the prior
periods. The rollforward of deferred revenue (which includes net billings
and revenue) for the third quarter of 2010 is set forth at the end of this
press release.
Asset Purchase Agreement
On July 28, 2010, the Company entered into an Asset Purchase Agreement
("APA") with Red Condor, Inc., an award-winning provider of fully managed
email security solutions, pursuant to which St. Bernard purchased
substantially all of the assets and assumed certain liabilities of Red
Condor in return for restricted shares of Common Stock of St. Bernard. The
acquisition builds upon the success of St. Bernard's existing hybrid
platform as Red Condor's managed security solutions is a natural extension
of St. Bernard's product portfolio and business strategy. As a result of
the acquisition, the Company gained approximately 2,000 new customers, a
highly scalable on-demand platform, a sophisticated Threat Analysis Center,
and a world class provisioning engine.
During the third quarter, we focused on and completed a significant portion
of the transition of the Red Condor product on to our current hybrid
platform. We have integrated Red Condor's 24x7x365 messaging Threat
Analysis Center into our Unified Threat Intelligence Center.
Financing/Credit Facilities
On August 2, 2010, the Company issued convertible notes (the "Notes") in
the amount of $3.2 million pursuant to a Securities Purchase Agreement
("SPA") with certain Noteholders (the "Investors"). Pursuant to the terms
of the SPA, St. Bernard issued to the Investors Notes and Warrants
("Warrants") to purchase up to 210,111 shares of Common Stock in the
aggregate. Under the terms of the Notes, the Notes mature on August 2,
2014. Interest on the outstanding principal balance accrues at a rate of
three percent (3.0%) per annum and accrued interest is added to the balance
of the Notes. All unpaid principal and interest on the Notes is due and
payable at maturity. The Investors may convert the Notes at any time into
shares of Common Stock of St. Bernard at a fixed conversion price of $1.10.
At any time after the issuance date of the Notes and prior to the Maturity
Date, following the occurrence of any period of 60 consecutive trading days
where the average closing price of the Common Stock of St. Bernard for such
period is equal to or greater than $1.25 per share, the entire unpaid
principal amount of the Notes together with any unpaid interest shall be
converted into Common Stock of St. Bernard at a conversion price of $1.10.
The Warrants have an exercise price equal to $1.10 per share, are
immediately exercisable and expire on August 2, 2014. The Company expects
to use the additional funding to improve the Company's market leadership
position through accelerated hybrid platform development and the delivery
of new and innovative offerings to its global customers.
The Company has an existing credit facility with Silicon Valley Bank under
which there was a borrowing availability of $1.9 million with no balance
outstanding as of September 30, 2010.
Corporate Facilities Lease Agreement
On August 2, 2010, the Company entered into a lease agreement (the "New
Lease") for approximately 28,633 square feet. The premises will serve as
the Company's new headquarters when its current lease expires on December
31, 2010. The New Lease has a term of sixty-five (65) months. Beginning
January 1, 2011, the Company will only be required to pay a monthly Base
Rent in the amount of $46,000. The Company currently leases approximately
56,000 square feet for its corporate office space. The current facility
lease calls for monthly rent of approximately $142,000 per month.
Business Outlook
Mr. Ryan added, "In addition to strong current quarterly billings and
operational execution, we anticipate significant expense savings as we move
to our new Company Headquarters in Q1 2011. The move enables us to
significantly improve our space creating long term operational benefits
while reducing annual cost by approximately $1 million. We expect that
this savings will be reinvested in our overall growth strategy.
"We are also excited about this quarter's new product offering; iPrism RF.
iPrism RF, our Remote Filtering Client, has been well received and sales
are meeting expectations. We have an ambitious new product schedule and
that we will continue to invest in our engineering and product development
efforts to differentiate our offerings.
"Year to date we have executed well against our growth plan. We began this
year with an aggressive strategy which outlined new products, new
experienced executives and the acquisition of additional working capital.
We have met all of our goals to and are poised to exit 2010 from a position
of strength."
About St. Bernard
St. Bernard Software develops and markets on demand, on-premises, and
hybrid Secure Content Management (SCM) solutions to the mid-enterprise and
small to medium business (SMB) markets. The company recently expanded its
product portfolio with the acquisition of substantially all of the assets
of Red Condor, a leading provider of messaging security solutions. With an
extensive ISP and MSP partner network and millions of end users worldwide
in more than 8,000 enterprises, educational institutions, SMB, and
government agencies, St. Bernard strives to deliver simple, high
performance solutions that offer excellent value to our customers.
Based in San Diego, California, St. Bernard (
St. Bernard Software, Inc.
Condensed Consolidated Balance Sheets
September 30, December 31,
2010 2009
------------- -------------
(Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 2,789,000 $ 2,454,000
Accounts receivable - net of allowance for
doubtful accounts of $30,000 and $13,000
at September 30, 2010 and December 31,
2009, respectively 4,446,000 2,534,000
Inventories - net 447,000 242,000
Prepaid expenses and other current assets 409,000 335,000
------------- -------------
Total current assets 8,091,000 5,565,000
Fixed Assets - Net 588,000 564,000
Goodwill 8,280,000 7,568,000
Intangible Assets - Net 619,000 -
Other Assets 737,000 148,000
------------- -------------
Total Assets $ 18,315,000 $ 13,845,000
============= =============
Liabilities and Stockholders' Deficit
Current Liabilities
Short-term borrowings $ 483,000 $ 2,250,000
Accounts payable 981,000 817,000
Accrued compensation 1,349,000 834,000
Accrued expenses and other current
liabilities 819,000 597,000
Warranty liability 190,000 192,000
Capitalized lease obligations - 22,000
Deferred revenue 10,942,000 10,209,000
------------- -------------
Total current liabilities 14,764,000 14,921,000
Convertible Note Payable 3,175,000 -
Deferred Revenue 10,054,000 7,708,000
------------- -------------
Total liabilities 27,993,000 22,629,000
------------- -------------
Stockholders' Deficit
Preferred stock, $0.01 par value; 5,000,000
shares authorized; no shares issued and
outstanding - -
Common stock, $0.01 par value; 50,000,000
shares authorized; 15,922,696 and
13,319,991 shares issued and outstanding at
September 30, 2010 and December 31, 2009,
respectively 157,000 132,000
Additional paid-in capital 41,742,000 40,774,000
Accumulated deficit (51,577,000) (49,690,000)
------------- -------------
Total stockholders' deficit (9,678,000) (8,784,000)
------------- -------------
Total Liabilities and Stockholders' Deficit $ 18,315,000 $ 13,845,000
============= =============
St. Bernard Software, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
2010 2009 2010 2009
------------ ------------- ------------ ------------
Revenues
Subscription $ 3,623,000 $ 3,615,000 $ 10,534,000 $ 10,996,000
Appliance 961,000 875,000 2,727,000 2,691,000
License 3,000 3,000 56,000 9,000
------------ ------------- ------------ ------------
Total Revenues 4,587,000 4,493,000 13,317,000 13,696,000
------------ ------------- ------------ ------------
Cost of Revenues
Subscription 678,000 416,000 1,488,000 1,316,000
Appliance 651,000 594,000 1,884,000 1,826,000
License 1,000 9,000 13,000 11,000
------------ ------------- ------------ ------------
Total Cost of
Revenues 1,330,000 1,019,000 3,385,000 3,153,000
------------ ------------- ------------ ------------
Gross Profit 3,257,000 3,474,000 9,932,000 10,543,000
Operating Expenses
Sales and
marketing 1,868,000 1,474,000 5,288,000 4,715,000
Research and
development 1,249,000 860,000 2,964,000 2,988,000
General and
administrative 1,330,000 462,000 3,335,000 2,709,000
Impairment
expense - 473,000 - 473,000
------------ ------------- ------------ ------------
Total Operating
Expenses 4,447,000 3,269,000 11,587,000 10,885,000
------------ ------------- ------------ ------------
(Loss) Income from
Operations (1,190,000) 205,000 (1,655,000) (342,000)
Other Expense
(Income)
Interest expense
- net 37,000 79,000 133,000 250,000
Other expense
(income) 79,000 9,000 99,000 (29,000)
Total Other Expense 116,000 88,000 232,000 221,000
------------ ------------- ------------ ------------
Loss (Income)
Before Income
Taxes (1,306,000) 117,000 (1,887,000) (563,000)
Income tax expense - - - (5,000)
------------ ------------- ------------ ------------
Net (Loss) Income $ (1,306,000) $ 117,000 $ (1,887,000) $ (568,000)
============ ============= ============ ============
(Loss) Income Per
Common Share -
Basic $ (0.09) $ 0.01 $ (0.14) $ (0.04)
------------ ------------- ------------ ------------
(Loss) Income Per
Common Share -
Diluted $ (0.09) $ 0.01 $ (0.14) $ (0.04)
------------ ------------- ------------ ------------
------------ ------------- ------------ ------------
Weighted Average
Shares
Outstanding -
Basic 15,069,595 13,720,371 13,956,331 14,467,141
============ ============= ============ ============
Weighted Average
Shares
Outstanding -
Diluted 15,069,595 13,873,815 13,956,331 14,467,141
============ ============= ============ ============
St. Bernard Software, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine months ended
September 30,
--------------------------
2010 2009
------------ ------------
Cash Flows From Operating Activities
Net loss $ (1,887,000) $ (568,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 314,000 281,000
Allowance for doubtful accounts (9,000) (32,000)
Loss on change in fair value of warrant
derivative liability 102,000 8,000
Write-off of capitalized software - 473,000
Stock-based compensation expense 135,000 486,000
Noncash interest expense 48,000 116,000
Change in operating assets and liablilities,
net of effect of acquisition:
Accounts receivable (1,265,000) 495,000
Inventories (156,000) (10,000)
Prepaid expenses and other assets (650,000) (418,000)
Accounts payable (256,000) (376,000)
Accrued expenses and other current
liabilities 47,000 (1,165,000)
Accrued compensation 515,000 543,000
Warranty liability (2,000) -
Deferred revenue 2,102,000 67,000
------------ ------------
Net cash used by operating activities (962,000) (100,000)
------------ ------------
Cash Flows From Investing Activities
Acquisition, net of cash acquired (66,000) -
Purchases of fixed assets (59,000) (75,000)
------------ ------------
Net cash used by investing activities (125,000) (75,000)
------------ ------------
Cash Flows From Financing Activities
Proceeds from convertible note payable 3,175,000 -
Proceeds from stock option exercises 12,000 -
Proceeds from the sales of stock under the
employee stock purchase plan 24,000 24,000
Principal payments on capitalized lease
obligations (22,000) (117,000)
Net decrease in short-term borrowings (1,767,000) (362,000)
------------ ------------
Net cash provided (used) by financing
activities 1,422,000 (455,000)
------------ ------------
Net Increase (Decrease) in Cash and Cash
Equivalents 335,000 (630,000)
Cash and Cash Equivalents at Beginning of
Period 2,454,000 2,051,000
------------ ------------
Cash and Cash Equivalents at End of Period $ 2,789,000 $ 1,421,000
============ ============
St. Bernard Software, Inc.
Rollforward of GAAP Deferred Revenue (Unaudited)
Three Months Ended September 30, 2010
GAAP deferred revenue balance at June 30, 2010 $ 19,000
Assumed deferred revenue of Red Condor, Inc 977
Net billings during third quarter 2010 5,606
Less GAAP revenue recognized during third quarter 2010 (4,587)
-----------
GAAP deferred revenue balance at September 30, 2010 $ 20,996
===========
Rollforward of GAAP Deferred Revenue (Unaudited)
Nine Months Ended September 30, 2010
GAAP deferred revenue balance at January 1, 2010 $ 17,917
Assumed deferred revenue of Red Condor, Inc 977
Net billings year to date 2010 15,419
Less GAAP revenue recognized year to date 2010 (13,317)
-----------
GAAP deferred revenue balance at September 30, 2010 $ 20,996
===========
Contact Information: Contact: Lorrie Hunsaker St. Bernard Software Investor and Public Relations Manager (858) 524-2002