SOURCE: St. Bernard

August 14, 2007 16:09 ET

St. Bernard Software Reports Second Quarter 2007 Financial Results

SAN DIEGO, CA--(Marketwire - August 14, 2007) - St. Bernard Software, Inc. (OTCBB: SBSW), a global provider of security appliances and on-demand solutions, including secure content management, archiving and collaboration, today announced its financial results for the second quarter ended June 30, 2007.

Second Quarter Summary

The second quarter was very difficult as we continued to execute our new strategy and associated transition plan. Although we had better than industry average growth in our core iPrism product line, we experienced a several month delay in preparing our new LivePrism product line to effectively compete in medium and large customer opportunities. This delay negatively impacted our sales plan and caused the company to be cash constrained. We also experienced disruption in employee productivity as we implemented the next phase in our company restructuring and expense reduction plans. The cumulative result was a weaker than expected second quarter, a very low cash balance to operate the company, and a slow start to our third quarter.

Through this difficult period in the company's transition we did continue to execute to our new strategy and made progress towards our new goals. Following are a few positive highlights for the quarter:

--  iPrism experienced 13.5% year-over-year billings growth
--  LivePrism acquired 202 new customers in the first six months of 2007
--  Hired new VP Marketing to spearhead global marketing efforts
--  Joined Jamcracker Delivery Network
--  Secured new $4 Million credit facility with Silicon Valley Bank
--  iPrism® and LivePrism™ named Winners of the 2007 Global Product
    Excellence Awards by Info Security Products Guide
    

Financial Results

Revenue in the second quarter was $5.0 million, in line with the $4.6 to $5.2 million guidance previously provided. Subscription revenue from iPrism and LivePrism was $3.6 million in the second quarter. GAAP net loss was $(4.7) million, or $(0.32) per share for the second quarter compared to $(1.2) million, or $(0.12) loss per share reported for the second quarter of 2006. The company cautioned that the review by the company's independent auditors of the second quarter financial statements contained in this release was not completed at the time of this release, and so, the financial statements that will be filed with the company's Quarterly Report on Form 10-QSB may differ.

Divestiture of Legacy Open File Manager™ Product

In conjunction with our new strategy to focus the company on network based secure content management solutions, the company signed a definitive agreement on August 13th to sell our legacy Open File Manager product line to EVault. The value of the transaction is $6.875M in cash and is expected to close in August 2007. The proceeds of this sale will provide critically important funding for St. Bernard to support growth of our core iPrism and LivePrism products and continue the execution of our company strategy. We believe that Seagate is an excellent organization that will provide great value to our Open File Manager customers and partners.

Third Quarter Business Outlook

Mr. Rossi said, "We believe that we will continue to achieve solid sales growth and excellent customer retention in our iPrism and LivePrism product lines. In combination with our sales growth, the expense restructuring in Q2'07 will move our business toward a cash flow positive position. We currently expect our Q3 2007 revenue to range from $4.2 to $4.8 million. As a reminder, the company divested its UpdateEXPERT product line early in the first quarter of 2007 and also divested the Open File Manager product line in August 2007. Our guidance reflects the impact of these divestitures."

Conference Call Information

What: St. Bernard's Second Quarter 2007 Financial Results Conference Call

When: Tuesday, August 14th at 1:30pm PT (4:30 pm ET)

Dial In Number: 800-257-3401 (US and Canada) 303-205-0033 (International) Company name, 'St. Bernard'

Webcast: To listen to the live Webcast, use the following link: http://www.vcall.com/IC/CEPage.asp?ID=119614

Or, log onto www.stbernard.com under the Investor Relations section.

Web Replay: 30 days

Call Replay: A replay of the conference call will be available at www.stbernard.com in the Investor Relations area of the site starting two hours after the call through Tuesday, May 22, 2007 at 11:59 pm PT

Replay Number: 800-405-2236 or 303-590-3000 (International) and enter the pass code: 11094529#

For the conference call, please dial-in five minutes in advance to ensure a proper connection. Questions and answers will be taken only from participants on the line. For the Webcast, please allow 15 minutes to register, download and install any necessary software.

About St. Bernard

St. Bernard Software, Inc. (OTCBB: SBSW) is a global provider of security appliances and hosted solutions, including secure content management, archiving and collaboration. The company's award-winning products deliver innovative security solutions that offer the best combination of ease-of-use, performance and value. Established in 1995 with headquarters in San Diego, CA and international offices in the United Kingdom and the Netherlands, St. Bernard sells and supports its products directly and through solution partners worldwide. For more information, please visit www.stbernard.com.

©2007 St. Bernard Software, Inc. All rights reserved. The St. Bernard Software logo, LivePrism, iPrism, iGuard and Open File Manager are trademarks of St. Bernard Software, Inc. All other trademarks and registered trademarks are hereby acknowledged.

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, or other financial items; any statements of the plans, strategies, and objectives of management for future operations; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief 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; 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-KSB, 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


                                     June 30, 2007      December 31, 2006
                                   ------------------   ------------------
                                       (Unaudited)
 Assets

 Current Assets
  Cash and cash equivalents        $          336,686   $        4,841,871
  Accounts receivable - net of
   allowance for doubtful
   accounts of $646,000 and
   $678,000 at June 30, 2007, and
   December 31, 2006, respectively          4,087,960            3,964,403
  Inventories                                 725,911              729,739
  Prepaid expenses and other
   current assets                             492,000              483,840
                                   ------------------   ------------------

 Total current assets                       5,642,557           10,019,853

 Fixed Assets - Net                         1,857,772            1,726,050

 Other Assets                               3,540,610            3,937,848

 Goodwill                                   7,542,664            7,709,212
                                   ------------------   ------------------
                                   $       18,583,603   $       23,392,963
                                   ==================   ==================


 Liabilities and Stockholders' Deficit

 Current Liabilities
  Line of credit                   $        2,338,408   $          296,410
  Accounts payable                          3,995,139            4,559,323
  Accrued compensation expenses             1,413,962            1,525,821
  Accrued expenses and other
   current liabilities                        386,267              291,718
  Current portion of capitalized
   lease obligations                          144,846               75,087
  Deferred revenue                         10,878,632           11,873,376
                                   ------------------   ------------------
 Total current liabilities                 19,157,254           18,621,735

 Capitalized Lease Obligations,
  Less Current Portion                        249,526              141,617

 Deferred Revenue                           5,604,670            5,842,809
                                   ------------------   ------------------
 Total liabilities                         25,011,450           24,606,161
                                   ------------------   ------------------

 Commitments and Contingencies

 Stockholders' Deficit
  Preferred stock, $0.01 par
   value; 5,000,000 shares
   authorized and 0 shares issued
   and outstanding                                  -                    -
  Common stock, $0.01 par value;
   50,000,000 shares authorized
   and 14,742,534 and
   14,764,251 shares issued
   and outstanding in 2007 and
   2006, respectively                         147,425              147,643
  Additional paid-in capital               38,757,731           38,304,771
  Accumulated deficit                     (45,333,003)         (39,665,612)
                                   ------------------   ------------------
 Total stockholders' deficit               (6,427,847)          (1,213,198)
                                   ------------------   ------------------
                                   $       18,583,603   $       23,392,963
                                   ==================   ==================




                                                St. Bernard Software, Inc.

                           Unaudited Consolidated Statements of Operations


                    Three months ended June 30,  Six months ended June 30,
                    --------------------------  --------------------------
                        2007          2006          2007          2006
                    ------------  ------------  ------------  ------------
Sales
  License           $    559,478  $    975,987  $  1,415,123  $  1,860,382
  Appliance              881,969       804,729     1,627,239     1,427,929
  Subscription         3,600,039     3,831,228     7,372,356     7,592,236
                    ------------  ------------  ------------  ------------
Total Sales            5,041,486     5,611,944    10,414,718    10,880,547
                    ------------  ------------  ------------  ------------
Cost of Sales

  License                 17,936        20,505        50,253        29,891
  Appliance              778,583       600,950     1,336,592       979,717
  Subscription         1,007,742       957,438     2,065,381     1,921,327
                    ------------  ------------  ------------  ------------
Total Cost of Sales    1,804,261     1,578,893     3,452,226     2,930,935
                    ------------  ------------  ------------  ------------

Gross Profit           3,237,225     4,033,051     6,962,492     7,949,612

Sales and
 marketing
 expenses              3,414,415     2,712,357     7,474,019     5,276,687
Research and
 development
 expenses              1,805,270     1,432,447     3,682,872     3,027,811
General and
 administrative
 expenses              2,440,123       984,429     4,860,114     1,912,204
                    ------------  ------------  ------------  ------------
Total Operating
 Expenses              7,659,808     5,129,233    16,017,005    10,216,702
                    ------------  ------------  ------------  ------------

Loss from Operations  (4,422,583)   (1,096,182)   (9,054,513)   (2,267,090)

Other Expense (Income)
  Interest expense
   - net                  59,162        87,837        72,061       168,301
  Loss (Gain) on
   sale of
   UpdateExpert          251,007             -    (3,463,418)            -
                    ------------  ------------  ------------  ------------
Total Other
 Expense (Income)        310,169        87,837    (3,391,357)      168,301
                    ------------  ------------  ------------  ------------
Loss Before Income
 Taxes                (4,732,752)   (1,184,019)   (5,663,156)   (2,435,391)

Income tax expense             -             -        (4,235)            -
                    ------------  ------------  ------------  ------------
Net Loss            $ (4,732,752) $ (1,184,019) $ (5,667,391) $ (2,435,391)
                    ============  ============  ============  ============
Basic and Diluted
 Loss Per Common
 Share              $      (0.32) $      (0.12) $      (0.38) $      (0.25)
                    ------------  ------------  ------------  ------------
Weighted Average
 Shares
 Outstanding          14,764,512     9,756,433    14,779,434     9,752,043
                    ============  ============  ============  ============



                                                St. Bernard Software, Inc.

                           Unaudited Consolidated Statements of Cash Flows


                                              Six months ended June 30,
                                           -------------------------------
                                                2007             2006
                                           --------------   --------------
Cash Flows From Operating Activities
 Net loss                                  $   (5,667,391)  $   (2,435,391)
 Adjustments to reconcile net loss to net
  cash used in operating activities:
   Depreciation and amortization                  740,156          294,526
   Provision for bad debts                        (31,654)          20,071
   Gain on sale of UpdateExpert                (3,463,418)               -
   Compensation expense                           580,959                -
   Noncash interest expense                         2,318                -
   Increase (decrease) in cash resulting
    from changes in:
    Accounts receivable                           (91,903)         486,045
    Inventories                                     3,828           96,077
    Prepaid expenses and other current
     assets                                       (24,169)          16,869
    Accounts payable                             (564,184)       1,296,606
    Accrued expenses and other current
     liabilities                                   72,113           34,480
    Deferred revenue                            1,030,535          211,107
                                           --------------   --------------
Net cash provided by (used in) operating
 activities                                    (7,412,810)          20,390
                                           --------------   --------------

Cash Flows From Investing Activities
  Additional costs related to purchase of
   business                                       (83,453)               -
  Purchases of fixed assets                      (230,573)         (30,932)
  Proceeds from the sale of UpdateExpert        1,200,000                -
                                           --------------   --------------
Net cash provided by (used in) investing
 activities                                       885,974          (30,932)
                                           --------------   --------------

Cash Flows From Financing Activities
  Merger costs                                          -         (464,941)
  Proceeds from stock option and warrant
   exercises                                       30,044           14,066
  Principal payments on capitalized lease
   obligations                                    (50,391)         (23,488)
  Proceeds from note payable                            -          395,833
  Net increase in line of credit                2,041,998          540,890
                                           --------------   --------------
Net cash provided by financing activities       2,021,651          462,360
                                           --------------   --------------
Net Increase (Decrease) in Cash and Cash
 Equivalents                                   (4,505,185)         451,818
Cash and Cash Equivalents at Beginning of
 Period                                         4,841,871            9,211
                                           --------------   --------------
Cash and Cash Equivalents at End of Period $      336,686   $      461,029
                                           ==============   ==============

Cash paid during the period for:
   Interest                                $      125,386   $      150,608
   Income taxes                            $        1,677   $            -

  During the six months ended June 30, 2007, the Company entered into
capitalized lease obligations for the purchase of $218,542 in fixed assets.

  In April 2007, the shares issued in conjunction with the purchase
AgaveOne were reduced by 66,667 shares or $250,000 as a result of
indemnification claims.

  In May 2007, the Company issued 100,000 warrants in conjunction with a
loan agreement with a bank. See Note 4.

Contact Information

  • Contact:

    St Bernard Software:
    Al Riedler
    Chief Financial Officer
    (858) 524-2050

    or

    MKR Group, Inc.
    Marie Dagresto or Todd Kehrli
    (323) 468-2300
    Email Contact