SOURCE: St. Bernard

St. Bernard

May 05, 2010 08:00 ET

St. Bernard Software Announces Growth in Cash Flow From Operations and Its Financial Results for the First Quarter Ended March 31, 2010

SAN DIEGO, CA--(Marketwire - May 5, 2010) - St. Bernard Software, Inc. (OTCBB: SBSW), a leader in Web security appliances, today announced unaudited financial results for its first quarter ended March 31, 2010.

First Quarter 2010 Financial Highlights:

-- Cash and cash equivalents increased to $2.8 million as of March 31,
   2010 from $2.5 million as of December 31, 2009 and $930,000 as of
   March 31, 2009

-- Generated positive cash flow of $332,000 for Q1 2010 compared to $1.1
   million negative cash flow for the same period in 2009, an increase of
   130% vs. Q1 2009

-- Cash flow provided by operating activities increased $936,000 to
   $273,000, an increase of 141% for the current quarter

-- Q1 2010 general and administrative expenses decreased $209,000 from
   Q1 2009 or 18%

-- Q1 2010 operating expenses decreased $499,000 from Q1 2009 or 13%

-- Net loss of $149,000 as of March 31, 2010, compared to a net loss of
   $633,000 for the same period in 2009

"The first quarter met our operational expectations," said Lou Ryan, CEO of St. Bernard Software. "In addition to exiting the quarter with greater overall financial strength, we were able to increase our development efforts through a more efficient cost structure compared to 2009 which will help as we execute on our broader product roadmap throughout 2010."

Financial Results

St. Bernard reported revenues of $4.4 million for the three months ended March 31, 2010 compared to revenues of $4.4 million for the same period in 2009; operating expenses of $3.5 million and $4.0 million for the periods ended March 31, 2010 and 2009, respectively, representing a decrease of approximately $499,000, or 13%, quarter over prior year quarter; a net loss for the three months ended March 31, 2010 of $149,000, compared to a net loss of $633,000 for the same period in 2009.

The Company ended the first quarter of 2010 with cash and cash equivalents of $2.8 million compared to $2.5 million at December 31, 2009 and $930,000 at March 31, 2009. Cash provided by operations increased $936,000 to $273,000 for the three months ended March 31, 2010 compared to cash used by operations of $663,000 for the same period in 2009. The Company achieved positive cash flow for the fourth straight quarter in Q1 2010.

During the first quarter of 2010, the Company successfully negotiated with Silicon Valley Bank ("SVB") to enter into a sixth amendment to its Loan and Security Agreement, which was originally executed on May 11, 2007. Pursuant to the terms of the amendment, SVB extended the maturity date to May 2011, increased the available line, and reduced the interest rate. As of March 31, 2010 the balance outstanding under the line was $1.6 million compared to $1.5 million at December 31, 2009 and $1.4 million at March 31, 2009.

Sales and marketing expense consists primarily of salaries, related benefits, commissions, consultant fees, advertising, lead generation and other costs associated with our sales and marketing efforts. For the three months ended March 31, 2010 sales and marketing expense increased 4.2%, or approximately $70,000, over the same period in 2009.

Research and development expense consists primarily of salaries, related benefits, third-party consultant fees and other engineering related costs. Research and development expenses were $788,000 in Q1 2010, which is down from $1.1 million in Q1 2009 resulting in a 31% decrease quarter over prior year quarter. The decrease was primarily the result of a net decrease in compensation costs. During 2009, after making the decision to move research and development in-house, the Company modified its consulting agreement with Softworks Group Pty Ltd. The transition from outside consulting to in-house occurred during the latter half of 2009 and into 2010, resulting in a significant decrease in consulting expenses. Management believes that significant investments in research and development is required to remain competitive, and as such, expects research and development expenses to increase in order to extend the core functionality and features within our products.

General and administrative expenses were $985,000 and $1.2 million for the three months ended March 31, 2010 and 2009, respectively, a $209,000 or 18%, decrease year over prior year. The decreases were primarily a result of the reduction in compensation, consulting, and stock-based compensation expenses. The company's current corporate facility lease expires at the end of 2010. Management is currently exploring alternate office space and expects rent expense to decrease significantly beginning January 2011.

Business Outlook

Mr. Ryan added, "We plan to continue to build on our experience leading the industry with our lower Total Cost of Ownership ("TCO") web security solution as we move through 2010. New customers that joined St. Bernard in the first quarter, many of whom abandoned their older more costly software-only solutions, confirmed that operational efficiency in IT will continue to be a driving force throughout the year. We remain optimistic that our position will be reinforced with this trend as the economy rebuilds and as we deliver on our roadmap throughout the year. Our customers will benefit not only from reduced TCO, but also reduced total cost of IT security acquisition and deployment."

Important Dates

St. Bernard filed its 2010 Proxy on April 30, 2010. It can be viewed / downloaded on http://www.sec.gov/Archives/edgar/data/1288496/000119312510101494/0001193125-10-101494-index.htm.

The Company will hold its 2010 Annual Meeting of Stockholders on Tuesday, June 15, 2010 at 9:00 a.m. local time at 15015 Avenue of Science, San Diego, CA 92128. Meeting objectives include:

1. Elect three directors to hold office until the 2011 Annual Meeting of
   Stockholders.
2. Approve an amendment to the Company's 2005 Stock Option Plan to
   authorize the issuance of an additional 900,000 shares of common stock
   under such plan.
3. Ratify the selection by the Audit Committee of the Board of Directors
   of Squar, Milner, Peterson, Miranda & Williamson, LLP as independent
   auditors of the Company for its fiscal year ending December 31, 2010.
4. Conduct any other business properly brought before the meeting.

These items are described in greater detail in the proxy statement.

The record date for the 2010 Annual Meeting is April 23, 2010. Only stockholders of record at the close of business on that date may vote at the meeting or any adjournment thereof.

About St. Bernard

St. Bernard Software develops and markets Internet security appliances and services that empower IT professionals to effectively, efficiently and intelligently manage their enterprise's Internet-based resources. Incorporated in 1986, the Company has evolved to become a well recognized leader in the SWG market and now recognized for delivering one of the leading Web filtering and security appliances, iPrism®. With millions of end users worldwide in approximately 6,000 enterprises, educational institutions, small and medium businesses, 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 (OTCBB: SBSW) markets its solutions through a network of value added resellers, distributors, system integrators, OEM partners and directly to end users. For more information about St. Bernard Software, visit www.stbernard.com.

©2010 St. Bernard Software, Inc. All rights reserved. The St. Bernard Software logo, LivePrism, iPrism, and iGuard are trademarks of St. Bernard Software, Inc. All other trademarks and registered trademarks are hereby acknowledged.

Forward Looking Statement

This press release may contain forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, among other things, any projections of earnings, revenues (including where the underlying contract has already been signed), expenses (including statements about our expected decrease in our rent expense starting in 2011 and research and development expenses), or other financial items; any statements of the plans, strategies, and objectives of management for future operations (including statements about our ability to execute on our broader product roadmap throughout 2010 and continue to build on our experience to lead in the industry without lower Total Cost of Ownership ("TCO") web security solution) ); any statements concerning proposed new products, services, or developments (including the statement regarding the transitioning of the research and development in house); any statements regarding future economic conditions or performance; statements of belief (such as statements that management believes that significant investments in research and development is required to remain competitive) and any statement of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to above include, among other things, performance of contracts by customers and partners; employee management issues; the timely development, production and acceptance of products and services and their feature sets; the challenge of managing asset levels, including inventory; the flow of products into third-party distribution channels; our ability to maintain a lower Total Cost of Ownership; and the difficulty of keeping expense growth at modest levels while increasing revenues. These and other risks and factors that could cause events or our results to differ from those expressed or implied by such forward-looking statements are described in our most recent annual report on Form 10-K, as well as other subsequent filings with the Securities and Exchange Commission. We assume no obligation and do not intend to update these forward-looking statements.

                                                St. Bernard Software, Inc.

                                                Consolidated Balance Sheets



                                                  March 31,   December 31,
                                                    2010          2009
                                                ------------  ------------
                                                (Unaudited)
Assets

Current Assets
  Cash and cash equivalents                     $  2,786,000  $  2,454,000
  Accounts receivable - net of allowance for
   doubtful accounts of $12,000 and $13,000
   at March 31, 2010 and December 31, 2009,
   respectively                                    2,780,000     2,534,000
  Inventories - net                                  216,000       242,000
  Prepaid expenses and other current assets          322,000       335,000
                                                ------------  ------------

Total current assets                               6,104,000     5,565,000

Fixed Assets - Net                                   510,000       564,000

Other Assets                                         398,000       148,000

Goodwill                                           7,568,000     7,568,000
                                                ------------  ------------
Total Assets                                    $ 14,580,000  $ 13,845,000
                                                ============  ============


Liabilities and Stockholders' Deficit

Current Liabilities
  Short-term borrowings                         $  2,350,000  $  2,250,000
  Accounts payable                                   915,000       817,000
  Accrued compensation                               948,000       834,000
  Accrued expenses and other current
   liabilities                                       748,000       597,000
  Warranty liability                                 193,000       192,000
  Current portion of capitalized lease
   obligations                                             -        22,000
  Deferred revenue                                10,145,000    10,209,000
                                                ------------  ------------
Total current liabilities                         15,299,000    14,921,000

Deferred Revenue                                   8,165,000     7,708,000
                                                ------------  ------------
Total liabilities                                 23,464,000    22,629,000
                                                ------------  ------------
Commitments and Contingencies (Note 10)

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; 13,391,439 and
   13,319,991 shares issued and outstanding
   at March 31, 2010 and December 31, 2009,
   respectively                                      133,000       132,000
  Additional paid-in capital                      40,822,000    40,774,000
  Accumulated deficit                            (49,839,000)  (49,690,000)
                                                ------------  ------------
Total stockholders' deficit                       (8,884,000)   (8,784,000)
                                                ------------  ------------
Total Liabilities and Stockholders' Deficit     $ 14,580,000  $ 13,845,000
                                                ============  ============




                                                 St. Bernard Software, Inc.

                            Unaudited Consolidated Statements of Operations


                                              Three months ended March 31,
                                              ----------------------------
                                                  2010           2009
                                              -------------  -------------

Revenues
  Subscription                                $   3,496,000  $   3,689,000
  Appliance                                         883,000        754,000
  License                                             9,000          6,000
                                              -------------  -------------
Total Revenues                                    4,388,000      4,449,000
                                              -------------  -------------
Cost of Revenues

  Subscription                                      393,000        461,000
  Appliance                                         600,000        536,000
  License                                             2,000          2,000
                                              -------------  -------------
Total Cost of Revenues                              995,000        999,000
                                              -------------  -------------
Gross Profit                                      3,393,000      3,450,000

  Sales and marketing expenses                    1,730,000      1,660,000
  Research and development expenses                 788,000      1,148,000
  General and administrative expenses               985,000      1,194,000
Total Operating Expenses                          3,503,000      4,002,000
                                              -------------  -------------
Loss from Operations                               (110,000)      (552,000)

Other Expense (Income)
  Interest expense - net                             41,000         92,000
  Other income - net                                 (2,000)       (16,000)
Total Other Expense                                  39,000         76,000
                                              -------------  -------------
Loss Before Income Taxes                           (149,000)      (628,000)

Income tax expense                                        -         (5,000)
                                              -------------  -------------
Net Loss                                      $    (149,000) $    (633,000)
                                              =============  =============
Loss Per Common Share - Basic and Diluted     $       (0.01) $       (0.04)
                                              -------------  -------------
Weighted Average Shares Outstanding - Basic
 and Diluted                                     13,388,264     14,837,699
                                              =============  =============



                                                 St. Bernard Software, Inc.

                            Unaudited Consolidated Statements of Cash Flows


                                              Three months ended March 31,
                                              ----------------------------
                                                  2010           2009
                                              -------------  -------------
Cash Flows From Operating Activities
  Net loss                                    $    (149,000) $    (633,000)
  Adjustments to reconcile net loss to net
   Cash used in operating activities:
  Depreciation and amortization                      85,000        104,000
  Allowance for doubtful accounts                    (1,000)        (2,000)
  Gain on change in fair value of warrant
   derivative liability                              (2,000)       (16,000)
  Stock-based compensation expense                   37,000        357,000
  Noncash interest expense                           15,000         38,000
  Increase (decrease) in cash resulting from
   changes in:
    Accounts receivable                            (245,000)       573,000
    Inventories                                      26,000        (73,000)
    Prepaid expenses and other assets              (252,000)      (421,000)
    Accounts payable                                 98,000        267,000
    Accrued expenses and other current
     liabilities                                    153,000         30,000
    Accrued compensation                            114,000       (410,000)
    Warranty liability                                1,000        (16,000)
    Deferred revenue                                393,000       (461,000)
                                              -------------  -------------
Net cash provided (used) by operating
 activities                                         273,000       (663,000)
                                              -------------  -------------

Cash Flows From Investing Activities
  Purchases of fixed assets                         (31,000)       (63,000)
                                              -------------  -------------
Net cash used by investing activities               (31,000)       (63,000)
                                              -------------  -------------
Cash Flows From Financing Activities
  Proceeds from the sales of stock under the
   employee stock purchase plan                      12,000          9,000
  Principal payments on capitalized lease
   obligations                                      (22,000)       (42,000)
  Net increase (decrease) in short-term
   borrowings                                       100,000       (362,000)
                                              -------------  -------------
Net cash (used) provided by financing
 activities                                          90,000       (395,000)
                                              -------------  -------------
Net Increase (Decrease) in Cash and Cash
 Equivalents                                        332,000     (1,121,000)
Cash and Cash Equivalents at Beginning of
 Period                                           2,454,000      2,051,000
                                              -------------  -------------
Cash and Cash Equivalents at End of Period    $   2,786,000  $     930,000
                                              =============  =============

Contact Information

  • Contact:
    Lorrie Hunsaker
    St. Bernard Software
    Investor and Public Relations Manager
    (858) 524-2002
    Email Contact