SOURCE: EdgeWave

EdgeWave

March 04, 2011 08:00 ET

St. Bernard Software (dba EdgeWave) Announces Its Financial Results for the Fourth Quarter and Year Ended December 31, 2010

SAN DIEGO, CA--(Marketwire - March 4, 2011) - St. Bernard Software, Inc. (dba EdgeWave) (OTCBB: EWVE), a leader in Secure Content Management ("SCM") solutions, today announced unaudited financial results for its fourth quarter and year ended December 31, 2010.

Fourth Quarter and Year to Date 2010 Financial and Operational Highlights

-- 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 (OTCBB: EWVE) develops and markets on demand, on-premises, and hybrid SCM solutions to the mid-enterprise and service provider markets. The EdgeWave portfolio of web, email and data protection technologies delivers comprehensive secure content management with unrivalled ease of deployment and the lowest Total Cost of Ownership on the market. The Company's award winning iPrism Web Security and Red Condor Email Security products are now complemented by new e-reputation, email archiving and data leakage protection solutions, and can be delivered as hosted, on-premises, and hybrid services. With 6,500 customers and over 200 MSP partners worldwide, the Company strives to deliver simple, high performance solutions that offer excellent value.

Based in San Diego, California, the Company markets its solutions through a network of value added resellers, ISPs and MSPs, distributors, system integrators, OEM partners and directly to end users. For more information about the Company, visit www.edgewave.com.

©2011 St. Bernard Software, Inc. All rights reserved. The EdgeWave logo, iPrism, iGuard, the Red Condor Logo, and Vx Technology are trademarks of St. Bernard Software, Inc., DBA EdgeWave. 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 statements of the plans, strategies, and objectives of management (including statements about our business transformation strategy, plans for future expansion, plans to migrate to new internal systems, and statements about new delivery platforms and new channels); any statements concerning proposed new products, services, or developments; statements of belief (such as our belief to be able to drive further organic growth) 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; the ability to retain the customers obtained through the recent Red Condor transaction; 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 integrate our acquisitions in accordance to plan; our ability to properly execute our strategies, 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. (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
    Email Contact