Attached files
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| 8-K - FORM 8-K - EdgeWave, Inc. | edgewave_8k-040412.htm |
Exhibit 99.1
SAN DIEGO, CA, April 4, 2011 – EdgeWave, Inc. (“EdgeWave”, “we”, or the “Company”) (OTCBB/OTCQB: EWVE), a leading provider in Secure Content Management (“SCM”) solutions, announced financial results for its fourth quarter and year ended December 31, 2011.
Fourth Quarter and Year to Date 2011 Financial and Operational Summary
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Net billings* for the 2011 fourth quarter totaled $4.0 million, a decrease of approximately 26% compared to the same period in 2010.
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Net billings* for the twelve months ended December 31, 2011 totaled $18.6 million, a decrease of approximately 11% compared to the same period in 2010.
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Revenue for the three months ended December 31, 2011 decreased to $4.5 million as compared to $4.8 million for the comparable period in 2010.
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Cash and cash equivalents as of December 31, 2011 and 2010 were $2.6 million.
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Cash used by operating activities for the three months ended December 31, 2011 was $756,000 compared to $127,000 for the same period in 2010, a 495% increase. Cash used by operating activities for the twelve months ended December 31, 2011 was approximately $3.0 million, an increase of approximately 176% from $1.1 million for the same period in 2010.
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Q4 2011 operating expenses decreased 18% from $4.9 million in 2010 to $4.0 million in the same period in 2011, as the result of changes to our cost structure put in place at the end of June 2011.
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Loss from operations for the three months ended December 31, 2011 was $961,000, a 40% improvement over the same period in 2010. Year to date net loss increased to $4.6 million through December 31, 2011 from a net loss of $3.6 million for the same period in 2010, mainly a result of additional operating expenses associated with the Red Condor transaction in 2010 offset by changes to our cost structure put in place at the end of June 2011.
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“What a difference a year makes. In late 2010 we purchased Red Condor’s (“RC”) business and assets because we had a vision of moving our products and services into the cloud and felt that adding RC’s technology and expertise would significantly enhance and accelerate this initiative” said Mr. Ryan, CEO of EdgeWave. “RC helped us realize our product and company vision rapidly, by moving our web and email security technology into the cloud on their proprietary and state-of-the-art SaaS platform. Today, we have a comprehensive, multi-format product offering that our customers appreciate and we are clearly seeing the strategy behind our technology fusion of RC and iPrism begin to pay off. Though some work remains, 15 months later, the company transformation we started in late 2010 is largely complete,” he added.
“Our current sales related activity is strong,” continued Mr. Ryan. “Our investments in sales, marketing and product development are tracking according to plan. We believe our decision to restructure our sales team with an emphasis on inside sales is being validated daily with new business and pipeline growth. Our marketing organization is bringing in record amounts of new leads for our prospecting team. Our product development team has also been very busy working on exciting new releases for 2012. I remain very confident that we will achieve our internal sales and expense plan in 2012”, stated Mr. Ryan.
Financial Results and Net Billings*
Net billings* for the quarter ended December 31, 2011 were $4.0 million as compared to $5.4 million for the same period in 2010, a decrease of 26%. For the twelve months ended December 31, 2011, net billings* totaled $18.6 million, an 11% decrease compared to $20.8 million for the same period in 2010.
EdgeWave reported revenues of $4.5 million and $4.8 million for the three months ended December 31, 2011 and 2010, respectively; a decrease of approximately $293,000, or 6%. For the twelve months ended December 31, 2011 and 2010, the Company reported revenues of $18.0 million and $18.1 million, respectively.
Operating expenses for the quarter ended December 31, 2011 were $4.0 million compared to $4.9 million for the fourth quarter of 2010. This decrease of 18% is the result of changes made to our cost structure at the end of June 2011.
Loss from operations for the three months ended December 31, 2011 was $961,000, a 40% improvement over the same period in 2010. Year to date net loss increased to $4.6 million through December 31, 2011 from a net loss of $3.6 million for the same period in 2010, mainly a result of additional operating expenses associated with the Red Condor transaction in 2010 offset by changes to our cost structure put in place at the end of June 2011.
Cash used by operating activities for the three months ended December 31, 2011 increased 495% from $756,000 compared to $127,000 for the same period in 2010. Cash used by operating activities for the twelve months ended December 31, 2011 was approximately $3.0 million, an increase of approximately 176% from $1.1 million for the same period in 2010. Year to date operating activities as of December 2011 includes twelve months of assumed operating expenses as a result of the Red Condor transaction that was effective August 2010, while year to date December 2010 operating activities only included Red Condor operations for five months.
* 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 ended December 31, 2011 is set forth at the end of this press release.
Financing
In December 2011 and January 2012, the Company raised approximately $3.1 million of net proceeds in convertible notes and debt.
Awards
In December 2011 EdgeWave was named Innovator of The Year for SCM by SC Magazine, one of the world's most respected security publications. EdgeWave was the only company selected for the SCM category and one of only 10 companies recognized by SC Magazine as Innovators for 2011.
In March 2012 iPrism Web Security and ePrism Email Security were named winners of the 2012 Global Excellence Awards by Info Security Products Guide, the industry's leading information security research and advisory guide. iPrism won for Social Media, Web Filtering, and Content Security, and ePrism won in the Managed Security Services category.
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New Additions to Key Positions of the Company
On February 2, 2012, EdgeWave named Dave Maquera as President of the Company. Mr. Maquera reports directly to Lou Ryan, the Chief Executive Officer of the Company and brings over 25 years of executive leadership experience, most recently as Chief Strategy Officer and Senior Vice President of Clearwire, where he led corporate initiatives that produced strategic partnerships and funding opportunities. Earlier in his career, Mr. Maquera also led and performed strategic analysis and planning for senior management of large international clients at McKinsey & Company. Mr. Maquera holds a B.A. from the University of Pennsylvania and an M.B.A. from Harvard.
The Company named Steve Kelley as Senior Vice President of Corporate Development and Product Strategy on February 2, 2012. Steve Kelley is a security software veteran with over 15 years of experience in technology strategy, product management, and business development roles in the enterprise information technology industry. Mr. Kelley has a B.B.A. from the University of Notre Dame and an M.B.A. from the Kellogg School of Management at Northwestern University.
About EdgeWave, Inc™
EdgeWave Inc. (OTC.BB: EWVE.OB - News) (OTCQB: EWVE.OB - News) develops and markets on demand, on-premises, and hybrid Secure Content Management (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. EdgeWave products and services include iPrism Web Security, a comprehensive Secure Web Gateway solution and the ePrism Messaging Security Suite, a fully-hosted solution for Email Filtering, Email Data Loss Protection, Email Encryption, Email Continuity, and Email Archiving, which can be accessed from a single user interface. With thousands of customers and over 200 partners worldwide, EdgeWave strives to deliver simple, high performance solutions that offer excellent value.
Based in San Diego, California, EdgeWave 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 EdgeWave, visit www.edgewave.com
©2011 EdgeWave, Inc. All rights reserved. The EdgeWave logo, iPrism, and the Red Condor Logo, are trademarks of EdgeWave, 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 statements of the plans, strategies, and objectives of management (including statements about our business transformation strategy); any statements concerning proposed new products, services, or developments; statements of belief (such as our belief regarding the reception of our products, the success of our efforts to transform our business and the fusion of the Red Condor and iPrism technologies and the belief that the Company will achieve its internal sales and expense plan in 2012) 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 customers; 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; our ability to convert leads into customers; our ability to raise capital, 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.
Contact:
EdgeWave, Inc.
15333 Avenue of Science
San Diego, CA 92128
Investor and Public Relations
(858) 524-2061
IR@edgewave.com
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EdgeWave, Inc.
Consolidated Balance Sheets
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December 31, 2011
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December 31, 2010
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Assets
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Current Assets
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Cash and cash equivalents
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$ | 2,609,000 | $ | 2,610,000 | ||||
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Accounts receivable - net of allowance for doubtful accounts of $25,000 and $30,000 at December 31, 2011 and 2010, respectively
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4,097,000 | 3,669,000 | ||||||
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Inventories - net
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647,000 | 698,000 | ||||||
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Prepaid expenses and other current assets
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755,000 | 932,000 | ||||||
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Total current assets
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8,108,000 | 7,909,000 | ||||||
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Fixed Assets - Net
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660,000 | 492,000 | ||||||
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Goodwill
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8,279,000 | 8,279,000 | ||||||
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Other Intangible Assets - Net
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459,000 | 587,000 | ||||||
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Other Assets
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97,000 | 393,000 | ||||||
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Total Assets
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$ | 17,603,000 | $ | 17,660,000 | ||||
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Liabilities and Stockholders’ Deficit
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Current Liabilities
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Line of credit
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$ | 1,700,000 | $ | - | ||||
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Term loan, current portion
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158,000 | 400,000 | ||||||
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Accounts payable
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1,370,000 | 1,133,000 | ||||||
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Accrued compensation
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1,169,000 | 1,526,000 | ||||||
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Accrued expenses and other current liabilities
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560,000 | 752,000 | ||||||
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Warranty liability
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186,000 | 210,000 | ||||||
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Capitalized lease obligations, current portion
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37,000 | - | ||||||
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Deferred revenue, current portion
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10,547,000 | 11,038,000 | ||||||
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Total current liabilities
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15,727,000 | 15,059,000 | ||||||
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Convertible Notes Payable
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4,836,000 | 3,214,000 | ||||||
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Term Loan, Net of Current Portion
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400,000 | 58,000 | ||||||
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Deferred Rent
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302,000 | - | ||||||
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Capitalized Lease Obligations, Less Current Portion
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146,000 | - | ||||||
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Deferred Revenue
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11,651,000 | 10,617,000 | ||||||
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Total liabilities
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33,062,000 | 28,948,000 | ||||||
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Stockholders’ Deficit
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Preferred stock, $0.01 par value; 5,000,000 shares authorized; no shares issued and outstanding
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- | - | ||||||
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Common stock, $0.01 par value; 50,000,000 shares authorized; 17,019,736 and 16,093,135 shares issued and outstanding at December 31, 2011 and 2010, respectively
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166,000 | 158,000 | ||||||
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Additional paid-in capital
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42,228,000 | 41,818,000 | ||||||
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Accumulated deficit
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(57,853,000 | ) | (53,264,000 | ) | ||||
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Total stockholders’ deficit
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(15,459,000 | ) | (11,288,000 | ) | ||||
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Total Liabilities and Stockholders’ Deficit
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$ | 17,603,000 | $ | 17,660,000 | ||||
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EdgeWave, Inc.
Consolidated Statements of Operations
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Three months ended December 31,
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Years Ended December 31,
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2011
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2010
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2011
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2010
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(Unaudited)
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(Unaudited)
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(*) | (*) | |||||||||||||
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Revenues
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Subscription
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$ | 3,515,000 | $ | 3,718,000 | $ | 14,418,000 | $ | 14,252,000 | ||||||||
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Appliance
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946,000 | 1,036,000 | 3,623,000 | 3,763,000 | ||||||||||||
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License
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- | - | 4,000 | 56,000 | ||||||||||||
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Total Revenues
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4,461,000 | 4,754,000 | 18,045,000 | 18,071,000 | ||||||||||||
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Cost of Revenues
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Subscription
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766,000 | 771,000 | 2,971,000 | 2,259,000 | ||||||||||||
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Appliance
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618,000 | 688,000 | 2,370,000 | 2,572,000 | ||||||||||||
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License
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- | 1,000 | 2,000 | 14,000 | ||||||||||||
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Total Cost of Revenues
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1,384,000 | 1,460,000 | 5,343,000 | 4,845,000 | ||||||||||||
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Gross Profit
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3,077,000 | 3,294,000 | 12,702,000 | 13,226,000 | ||||||||||||
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Operating Expenses
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Sales and marketing
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1,950,000 | 2,341,000 | 8,525,000 | 7,629,000 | ||||||||||||
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Research and development
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1,166,000 | 1,361,000 | 5,040,000 | 4,325,000 | ||||||||||||
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General and administrative
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922,000 | 1,204,000 | 3,649,000 | 4,539,000 | ||||||||||||
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Total Operating Expenses
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4,038,000 | 4,906,000 | 17,214,000 | 16,493,000 | ||||||||||||
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Loss from Operations
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(961,000 | ) | (1,612,000 | ) | (4,512,000 | ) | (3,267,000 | ) | ||||||||
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Other Expense (Income)
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Interest expense - net
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92,000 | 41,000 | 263,000 | 174,000 | ||||||||||||
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Loss on sale of assets
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- | 29,000 | - | 29,000 | ||||||||||||
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Other expense (income)
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(148,000 | ) | 2,000 | (193,000 | ) | 101,000 | ||||||||||
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Total Other Expense
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(56,000 | ) | 72,000 | 70,000 | 304,000 | |||||||||||
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Loss Before Income Taxes
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(905,000 | ) | (1,684,000 | ) | (4,582,000 | ) | (3,571,000 | ) | ||||||||
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Income tax expense
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1,000 | 3,000 | 7,000 | 3,000 | ||||||||||||
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Net Loss
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$ | (906,000 | ) | $ | (1,687,000 | ) | $ | (4,589,000 | ) | $ | (3,574,000 | ) | ||||
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Loss Per Common Share - Basic and Diluted
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$ | (0.05 | ) | $ | (0.12 | ) | $ | (0.28 | ) | $ | (0.25 | ) | ||||
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Weighted Average Shares Outstanding - Basic and Diluted
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16,607,093 | 14,423,295 | 16,607,093 | 14,423,295 | ||||||||||||
* Derived from audited financial statements as of and for the years ended December 31, 2011 and 2010.
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EdgeWave, Inc.
Consolidated Statements of Cash Flows
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Three Months Ended December 31,
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Years Ended December 31,
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2011
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2010
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2011
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2010
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(Unaudited)
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(Unaudited)
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(*) | (*) | ||||||||||||
| Cash Flows From Operating Activities | ||||||||||||||||
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Net loss
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$ | (906,000 | ) | $ | (1,687,000 | ) | $ | (4,589,000 | ) | $ | (3,574,000 | ) | ||||
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Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
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Depreciation and amortization
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106,000 | 162,000 | 625,000 | 476,000 | ||||||||||||
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Allowance for doubtful accounts
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5,000 | 26,000 | (5,000 | ) | 17,000 | |||||||||||
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Loss (gain) on change in fair value of warrant derivative liability
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(13,000 | ) | (1,000 | ) | (58,000 | ) | 101,000 | |||||||||
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Loss on sale of assets
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- | 29,000 | - | 29,000 | ||||||||||||
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Stock-based compensation expense
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50,000 | 39,000 | 244,000 | 174,000 | ||||||||||||
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Noncash interest expense
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42,000 | 28,000 | 113,000 | 76,000 | ||||||||||||
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Change in operating assets and liabilities, net of effect of acquisition:
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Accounts receivable
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111,000 | 824,000 | (423,000 | ) | (441,000 | ) | ||||||||||
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Inventories
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(274,000 | ) | (252,000 | ) | 51,000 | (408,000 | ) | |||||||||
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Prepaid expenses and other assets
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43,000 | (254,000 | ) | 473,000 | (904,000 | ) | ||||||||||
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Accounts payable
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632,000 | 152,000 | 237,000 | (104,000 | ) | |||||||||||
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Accrued expenses and other current liabilities
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(345,000 | ) | (49,000 | ) | (132,000 | ) | (2,000 | ) | ||||||||
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Accrued compensation
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(7,000 | ) | 177,000 | (357,000 | ) | 692,000 | ||||||||||
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Warranty liability
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(9,000 | ) | 20,000 | (25,000 | ) | 18,000 | ||||||||||
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Deferred rent
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302,000 | - | 302,000 | - | ||||||||||||
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Deferred revenue
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(493,000 | ) | 659,000 | 542,000 | 2,761,000 | |||||||||||
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Net cash used in operating activities
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(756,000 | ) | (127,000 | ) | (3,002,000 | ) | (1,089,000 | ) | ||||||||
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Cash Flows From Investing Activities
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Acquisition, net of cash acquired
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- | - | - | (66,000 | ) | |||||||||||
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Purchases of fixed assets
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(118,000 | ) | (66,000 | ) | (448,000 | ) | (125,000 | ) | ||||||||
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Net cash used by investing activities
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(118,000 | ) | (66,000 | ) | (448,000 | ) | (191,000 | ) | ||||||||
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Cash Flows From Financing Activities
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Proceeds from issuance of convertible notes payable
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4,500,000 | - | 4,500,000 | 3,175,000 | ||||||||||||
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Repayment of convertible notes payable
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(2,991,000 | ) | - | (2,991,000 | ) | - | ||||||||||
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Proceeds from stock option exercises
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3,000 | 37,000 | 107,000 | 49,000 | ||||||||||||
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Proceeds from the sales of stock under the employee stock purchase plan
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- | 2,000 | 67,000 | 26,000 | ||||||||||||
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Principal payments on capitalized lease obligations
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(9,000 | ) | - | (34,000 | ) | (22,000 | ) | |||||||||
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Principal payments on term loans
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(25,000 | ) | (42,000 | ) | (100,000 | ) | (42,000 | ) | ||||||||
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Proceeds from term loans
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- | - | 200,000 | 500,000 | ||||||||||||
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Net increase (decrease) on line of credit
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(300,000 | ) | 17,000 | 1,700,000 | (2,250,000 | ) | ||||||||||
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Net cash provided by financing activities
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1,178,000 | 14,000 | 3,449,000 | 1,436,000 | ||||||||||||
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Net (Decrease) Increase in Cash and Cash Equivalents
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304,000 | (179,000 | ) | (1,000 | ) | 156,000 | ||||||||||
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Cash and Cash Equivalents at Beginning of Period
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2,305,000 | 2,789,000 | 2,610,000 | 2,454,000 | ||||||||||||
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Cash and Cash Equivalents at End of Period
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$ | 2,609,000 | $ | 2,610,000 | $ | 2,609,000 | $ | 2,610,000 | ||||||||
* Derived from audited financial statements as of and for the years ended December 31, 2011 and 2010.
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EdgeWave, Inc.
Rollforward of GAAP Deferred Revenue (Unaudited)
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Three Months Ended December 31, 2011
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GAAP deferred revenue balance at September 30, 2011
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$ | 22,690 | ||
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Net billings during fourth quarter 2011
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3,969 | |||
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Less GAAP revenue recognized during fourth quarter 2011
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(4,461 | ) | ||
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GAAP deferred revenue balance at December 31, 2011
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$ | 22,198 | ||
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Tweleve Months Ended December 31, 2011
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GAAP deferred revenue balance at January 1, 2011
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$ | 21,655 | ||
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Net billings year to date 2011
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18,588 | |||
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Less GAAP revenue recognized year to date 2011
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(18,045 | ) | ||
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GAAP deferred revenue balance at December 31, 2011
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$ | 22,198 | ||
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