-- During the year, the Company purchased substantially all of the assets and assumed certain liabilities of Red Condor, Inc., an award-winning provider of fully managed email security solutions. -- Net billings* for the 2010 fourth quarter totaled $5.4 million, an increase of approximately 10% compared to the same period in 2009. -- Net billings* for the twelve months ended December 31, 2010 were $20.8 million, an increase of approximately 11% over the same period last year. -- Cash and cash equivalents increased to $2.6 million as of December 31, 2010 from $2.5 million as of December 31, 2009. -- Generated positive cash flow of $156,000 for YTD 2010 compared to $403,000 positive cash flow for the same period in 2009. Cash flow for the current year includes proceeds of $3.2 million from the issuance of convertible notes. The notes can be converted into shares of Company stock at $1.10 per share. -- Q4 operating expenses increased approximately 52 % from $3.2 million in 2009 to $4.9 million in 2010 as a result of additional expenses resulting from the integration of operations associated with the Red Condor transaction. -- Year to date net loss increased to $3.6 million through December 31, 2010 from a net loss of $273,000 for the same period of 2009 mainly as a result of additional operating expenses and transaction costs associated with the Red Condor transaction. -- The company moved to new corporate offices effective January 1, 2011. The Company's total lease payment is expected to decrease approximately $1.2 million in 2011."We are pleased to exit 2010 cash flow positive with double digit net billings growth," said Lou Ryan, CEO of St. Bernard Software. "We embarked on an aggressive business transformation strategy during the year that will carry into the second quarter of 2011. This transformation required us to spend a considerable amount of operating capital to invest in our business and our future. The successful integration of Red Condor creates a more strategic platform for us to drive future expansion. Once our migration to new internal systems, new products, new delivery platforms and new channels reaches the completion phase in the second quarter of 2011 we are confident in our ability to drive further organic growth." Fourth Quarter and Year-to-Date 2010 Net Billings* Net billings* increased for the quarter ended December 31, 2010 by approximately 10% from $4.9 million in 2009 to $5.4 million in 2010. For the twelve months ended December 31, 2010, net billings* totaled $20.8 million, an 11% increase compared to $18.7 million for the same period in 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 fourth quarter and year ended December 31, 2010 is set forth at the end of this press release Transformation of the Company We embarked on an aggressive year-long business transformation during the second quarter of 2010. This overhaul of our company was focused on creating a sustainable growth platform. Our efforts centered around the following activities:
-- new & expanded senior leadership team
-- new & expanded product portfolio
-- new on-demand & managed services delivery platform
-- new back office and customer support systems infrastructure
-- re-organization of our personnel around expanded technology & market
focus
-- strategic acquisition of Red Condor assets
-- re-tooling of field sales organization around two primary market
segments: larger commercial customers and Managed Service Providers
("MSPs")
-- securing convertible debt financing to fund business expansion
As these initiatives reached substantive maturation, we embarked on the
process of re-branding our company as EdgeWave. This provides us the
opportunity to create a new corporate identity that more adequately
reflects the realities of our new business.
Strategic Product Development
The Company is a more strategic supplier in the SCM arena by providing a
broader array of world-class solutions to a larger cross-section of
customer segments. This expansion is fueled by innovation and acquisition.
Our expanded research and development operation embarked on an aggressive
new product roadmap that features a broader family of solutions. The
acquisition of substantially all the assets of Red Condor provided us with
some critical technological and service capabilities that rounded out this
new product strategy.
We are introducing new products across three primary technology buckets:
web security, messaging security, and data security. Our products foster
improved protection, productivity and business continuity for organizations
in the private and public sectors. We pride ourselves in offering a choice
between on-premises, on-demand and hybrid delivery platforms -- giving our
customers and partners maximum choice to meet their specific needs.
Corporate Facilities Lease Agreement
On January 1, 2011, the Company moved to new corporate offices. The new
facility premises totals approximately 36,000 square feet and will serve as
the Company's headquarters. Per the new lease, total rent to be paid in
2011 will be approximately $477,000, an estimated decrease of $1.2 million
from the prior year.
Business Outlook
Mr. Ryan added, "Entering 2011 the Company is better positioned to
capitalize on the market dynamics that characterize the expanding SCM
landscape. As we work to complete our business transformation during 2011
we expect to pick up steam from our investments. We believe that the
Company has built a more sustainable model with our expanded product set,
market reach and delivery capabilities."
About St. Bernard Software, Inc. dba EdgeWave
St. Bernard Software, Inc. dba EdgeWave (
St. Bernard Software, Inc. (dba EdgeWave)
Condensed Consolidated Balance Sheets
December 31, December 31,
2010 2009
------------ ------------
(Unaudited) (*)
Assets
Current Assets
Cash and cash equivalents $ 2,610,000 $ 2,454,000
Accounts receivable - net of allowance for
doubtful accounts of $30,000 and $13,000 in
2010 and 2009, respectively 3,596,000 2,534,000
Inventories - net 698,000 242,000
Prepaid expenses and other current assets 932,000 335,000
------------ ------------
Total current assets 7,836,000 5,565,000
Fixed Assets - Net 492,000 564,000
Goodwill 8,280,000 7,568,000
Other Intangible Assets - Net 587,000 -
Other Assets 465,000 148,000
------------ ------------
Total Assets $ 17,660,000 $ 13,845,000
============ ============
Liabilities and Stockholders' Deficit
Current Liabilities
Short-term borrowings $ 400,000 $ 2,250,000
Accounts payable 1,133,000 817,000
Accrued compensation 1,526,000 834,000
Accrued expenses and other current
liabilities 749,000 597,000
Warranty liability 210,000 192,000
Capitalized lease obligations - 22,000
Deferred revenue 11,038,000 10,209,000
------------ ------------
Total current liabilities 15,056,000 14,921,000
Convertible Note Payable 3,214,000 -
Long-Term Borrowings 58,000 -
Deferred Revenue 10,617,000 7,708,000
------------ ------------
Total liabilities 28,945,000 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; 16,094,535 and 13,319,991
shares issued and outstanding in 2010 and
2009, respectively 158,000 132,000
Additional paid-in capital 41,818,000 40,774,000
Accumulated deficit (53,261,000) (49,690,000)
------------ ------------
Total stockholders' deficit (11,285,000) (8,784,000)
------------ ------------
Total Liabilities and Stockholders' Deficit $ 17,660,000 $ 13,845,000
============ ============
* Derived from audited financial statements as of and for the year
ended December 31, 2009.
St. Bernard Software, Inc. (dba EdgeWave)
Condensed Consolidated Statements of Operations
Three months ended
December 31, Years ended December 31,
-------------------------- --------------------------
2010 2009 2010 2009
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (*)
Revenues
Subscription $ 3,718,000 $ 3,563,000 $ 14,252,000 $ 14,559,000
Appliance 1,036,000 1,099,000 3,763,000 3,790,000
License - 16,000 56,000 25,000
------------ ------------ ------------ ------------
Total Revenues 4,754,000 4,678,000 18,071,000 18,374,000
------------ ------------ ------------ ------------
Cost of Revenues
Subscription 771,000 404,000 2,259,000 1,720,000
Appliance 688,000 745,000 2,572,000 2,571,000
License 1,000 4,000 14,000 15,000
------------ ------------ ------------ ------------
Total Cost of
Revenues 1,460,000 1,153,000 4,845,000 4,306,000
------------ ------------ ------------ ------------
Gross Profit 3,294,000 3,525,000 13,226,000 14,068,000
Operating Expenses
Sales and
marketing 2,341,000 1,697,000 7,629,000 6,412,000
Research and
development 1,361,000 762,000 4,325,000 3,750,000
General and
administrative 1,204,000 775,000 4,539,000 3,484,000
Impairment
expense - - - 473,000
------------ ------------ ------------ ------------
Total Operating
Expenses 4,906,000 3,234,000 16,493,000 14,119,000
------------ ------------ ------------ ------------
(Loss) Income from
Operations (1,612,000) 291,000 (3,267,000) (51,000)
Other Expense
(Income)
Interest expense
- net 41,000 10,000 174,000 260,000
Loss on sale of
assets 29,000 - 29,000 -
Other expense
(income) 2,000 (14,000) 101,000 (43,000)
Total Other
Expense 72,000 (4,000) 304,000 217,000
------------ ------------ ------------ ------------
Loss (Income)
Before Income
Taxes (1,684,000) 295,000 (3,571,000) (268,000)
Income tax expense - - - (5,000)
------------ ------------ ------------ ------------
Net (Loss) Income $ (1,684,000) $ 295,000 $ (3,571,000) $ (273,000)
============ ============ ============ ============
(Loss) Earnings
Per Common Share
- Basic $ (0.12) $ 0.02 $ (0.25) $ (0.02)
------------ ------------ ------------ ------------
(Loss) Earnings
Per Common Share
- Diluted $ (0.12) $ 0.02 $ (0.25) $ (0.02)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted Average
Shares
Outstanding -
Basic 14,424,615 13,319,991 14,424,615 14,177,996
============ ============ ============ ============
Weighted Average
Shares
Outstanding -
Diluted 14,424,615 13,495,680 14,424,615 14,177,996
============ ============ ============ ============
* Derived from audited financial statements as of and for the year
ended December 31, 2009.
St. Bernard Software, Inc. (dba EdgeWave)
Condensed Consolidated Statements of Cash Flows
Years ended December 31,
--------------------------
2010 2009
------------ ------------
Cash Flows From Operating Activities (Unaudited) (*)
Net loss $ (3,571,000) $ (273,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 479,000 365,000
Allowance for doubtful accounts (9,000) (39,000)
Loss (gain) on change in fair value of
warrant derivative liability 101,000 (22,000)
Loss on sale of assets 29,000 -
Write-off of capitalized software - 473,000
Stock-based compensation expense 174,000 577,000
Noncash interest expense 76,000 98,000
Change in operating assets and liablilities,
net of effect of acquisition:
Accounts receivable (415,000) 675,000
Inventories (407,000) 122,000
Prepaid expenses and other assets (906,000) (392,000)
Accounts payable (104,000) (453,000)
Accrued expenses and other current
liabilities (5,000) (1,112,000)
Accrued compensation 692,000 527,000
Warranty liability 18,000 (3,000)
Deferred revenue 2,761,000 296,000
------------ ------------
Net cash (used) provided by operating
activities (1,087,000) 839,000
------------ ------------
Cash Flows From Investing Activities
Acquisition, net of cash acquired (66,000) -
Purchases of fixed assets (125,000) (101,000)
Net cash used by investing activities (191,000) (101,000)
------------ ------------
Cash Flows From Financing Activities
Proceeds from convertible note payable 3,175,000 -
Proceeds from stock option exercises 48,000 -
Proceeds from the sales of stock under the
employee stock purchase plan 25,000 24,000
Principal payments on capitalized lease
obligations (22,000) (147,000)
Net decrease in short-term borrowings (1,792,000) (212,000)
------------ ------------
Net cash provided (used) by financing
activities 1,434,000 (335,000)
------------ ------------
Net Increase in Cash and Cash Equivalents 156,000 403,000
Cash and Cash Equivalents at Beginning of
Period 2,454,000 2,051,000
------------ ------------
Cash and Cash Equivalents at End of Period $ 2,610,000 $ 2,454,000
============ ============
* Derived from audited financial statements as of and for the year
ended December 31, 2009.
St. Bernard Software, Inc. (dba EdgeWave)
Rollforward of GAAP Deferred Revenue (Unaudited)
Three Months Ended December 31, 2010
GAAP deferred revenue balance at September 30, 2010 $ 20,996
Net billings during fourth quarter 2010 5,413
Less GAAP revenue recognized during fourth quarter 2010 4,754
--------
GAAP deferred revenue balance at December 31, 2010 $ 21,655
========
Twelve Months Ended December 31, 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 20,832
Less GAAP revenue recognized year to date 2010 18,071
--------
GAAP deferred revenue balance at December 31, 2010 $ 21,655
========
Contact Information: Contact: Lorrie Hunsaker St. Bernard Software (dba EdgeWave) Investor and Public Relations Manager (858) 524-2002