Citadel Security Software Reports 2005 Fourth Quarter and Year-end Financial Results; Company Expects Record First Quarter Revenue of $5.1 to $5.4 Million.DALLAS Dallas, city (1990 pop. 1,006,877), seat of Dallas co., N Tex., on the Trinity River near the junction of its three forks; inc. 1871. The second largest Texas city, after Houston, and the eighth largest U.S. -- Citadel Security Software Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CDSS CDSS California Department of Social Services CDSS Clinical Decision Support Systems CDSS Country Dance and Song Society CDSS Canadian Down Syndrome Society CDSS Community Day Secondary Schools (Malawi) ), a leader in enterprise vulnerability management and policy compliance solutions, today announced financial results for its fourth quarter and year ended December December: see month. 31, 2005. The Company reported 2005 fourth quarter revenue of $3,660,028 versus $1,713,777 for the fourth quarter of 2004. Revenue for the year ended December 31, 2005 was $10,287,095 compared to $15,253,155 for the same period in 2004. For the fourth quarter ended December 31, 2005, the Company reported a net loss to common shareholders of $3,719,751 or $(0.12) loss per share versus a loss to common shareholders of $5,681,362 or $(0.19) loss per share for the year earlier period. For the year ended December 31, 2005, the Company reported a net loss to common shareholders of $19,156,907 or $(0.64) loss per share. This compares to a net loss to common shareholders of $8,719,362, or $(0.30) loss per share, for 2004. The net loss to common shareholders for the year ended December 31, 2005 included net non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. of $325,278 related to the fair value adjustments of the preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. transaction during 2005. This compares to similar non-cash charges for the year ended December 31, 2004 of $215,397. Preferred stock dividends were $268,750 and $664,940 for the years ended December 31, 2005 and 2004, respectively. During the fourth quarter, the Company began to realize cost savings from actions initiated during 2005 resulting in reduced operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . During the fourth quarter of 2005, SG&A declined to $4.7 million from $5.1 million in the year-earlier period. Further cost reductions are expected to reduce annual operating costs operating costs npl → gastos mpl operacionales by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $5 million in fiscal 2006.(1) Total orders for product, Hercules Hercules, in astronomy Hercules (hûr`kyəlēz'), in astronomy, northern constellation located between Lyra and Corona Borealis. It is traditionally depicted as the hero Hercules in a kneeling position. content, subscription, support and services received in 2005 were $11.3 million, with $9.4 million of those orders received in the second half of the Company's fiscal year. Unfilled order backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. was $1.3 million and deferred revenue for renewal content, support and services was $5.1 million. The Company expects $6.0 million of the $6.4 million total of the unfilled order backlog and deferred revenue will be earned and recognized ratably as revenue during fiscal 2006. First Quarter 2006 Business Outlook: The Company has received orders during the first quarter of fiscal 2006 equal to $6.4 million as of the date of this press release. The Company expects to generate record 2006 first quarter revenue of between $5.1 million and $5.4 million. In fiscal 2005, the Company generated revenue of $1.7 million during the first three months of its calendar year. Typically, the first quarter is seasonally a slower quarter for Citadel. Cash operating expenses for the quarter are expected to be between $5.0 million and $5.2 million excluding non-cash items.(1) By comparison, during the first quarter of fiscal 2005, cash operating expenses were $6.8 million excluding non-cash items.(1) The Company continues to see positive results from sales and operational changes implemented in mid 2005, as reflected in strength in its sales pipeline opportunities and a steady flow of requests-for-proposals and technical proofs of concepts in the commercial and government sectors. These are evolving into new orders as evidenced by the recent $5.2 million order from a leading government systems integrator An individual or organization that builds systems from a variety of diverse components. With increasing complexity of technology, more customers want complete solutions to information problems, requiring hardware, software and networking expertise in a multivendor environment. for a major civilian CIVILIAN. A doctor, professor, or student of the civil law. government agency. In addition, the Company is experiencing improved order volume from the commercial sector in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , its international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. and from its reseller An organization that sells hardware and software to the general public. Resellers purchase products from software publishers and hardware manufacturers. partners. Citadel's relationship with CSC (Card Security Code) A three- or four-digit number printed on the back of credit cards for security purposes. Called "Card Verification Value" (CVV) by Visa, "Card Validation Code" (CVC) by MasterCard and "Card Identification (CID) by American Express and Discover, , who offers the Company's flagship This article is about the lead ship, store, or product of a group. For other uses, see Flagship (disambiguation). A flagship is the ship used by the commanding officer of a group of naval ships. Hercules product on a managed services An umbrella term for third-party monitoring and maintaining of computers, networks and software. The actual equipment may be inhouse or at the third-party's facilities, but the "managed" implies an ongoing effort; for example, making sure the equipment is running at a certain quality basis, has also resulted in increased sales pipeline activity. In 2006, Citadel plans on releasing additional products leveraging its recently awarded patent. These products will be a natural extension of the Hercules family and will provide additional sources of revenue. "Our efforts to increase the frequency, number and size of the orders from the commercial and government sectors have resulted in improved order volume since mid 2005," said Steven Ste´ven n. 1. Voice; speech; language. Ye have as merry a steven As any angel hath that is in heaven. - Chaucer. 2. An outcry; a loud call; a clamor. To set steven to make an appointment. B. Solomon Solomon, d. c.930 B.C., king of the ancient Hebrews (c.970–c.930 B.C.), son and successor of David. His mother was Bath-sheba. His accession has been dated to c.970 B.C. According to the Bible. , CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Citadel Security Software Inc. "High customer renewal rates for content and support validates our customers continued satisfaction with our solutions and the value they deliver. "This demonstrates the strength of our recently patented technology and the importance that our customers place on the security of their networks. We are pleased with our customers' continued confidence in our solutions and the positive trend in orders and revenue. We are off to a great start and look forward to strong growth and operating performance in 2006." All of the comments above are based on information available to management as of the date of this press release. Should these expectations not be realized, actual results may differ materially from the expectations expressed above. Mr. Solomon and Richard Ri·chard , Joseph Henri Maurice Known as "Rocket." 1921-2000. Canadian hockey player. A right wing for the Montreal Canadiens (1942-1960), he led his team to eight Stanley Cup championships and was the first player to score 50 goals in a Connelly Con·nel·ly , Marcus Cook Known as "Marc." 1890-1980. American playwright, producer, and director who won a Pulitzer Prize for The Green Pastures (1930), a play based on Southern African-American interpretations of biblical stories. , CFO See Chief Financial Officer. will host a conference call and live Webcast at 4:30 p.m. Eastern Time today. Interested participants may call (800) 901-5259 when calling within the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. or (617) 213-8066 when calling internationally. Please reference Conference I.D. Number 33377396. This call is being webcast by CCBN CCBN Central Coast Bancorp CCBN Charles County Business Network and will be available from the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of the company's corporate website or by going directly to http://www.Citadel.com/4qwebcast.asp and via replay beginning two hours after the completion of the call. The webcast is also being distributed over CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN's individual investor center at www.fulldisclosure.com or by visiting any of the investor sites in CCBN's Individual Investor Network. Institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. can access the call via CCBN's password-protected event management site, StreetEvents (www.streetevents.com). Please refer to the Unaudited Financial Tables following this release for the details and comparisons to prior periods for the numbers reported above. About Citadel Citadel Security Software Inc. delivers security solutions that enable organizations to manage risk, reduce threats and enforce compliance with security policies and regulations. Citadel's proven architecture provides a business process to manage the increasing volume, frequency and complexity of cyber (1) From "cybernetics," it is a prefix attached to everyday words to add a computer, electronic or online connotation. The term is similar to "virtual," but the latter is used more frequently. See virtual. security attacks. Citadel combines the world's largest active library of remediations spanning all classes of vulnerabilities with a proven delivery methodology to dramatically streamline streamline, path of a fluid flowing steadily and without appreciable turbulence. A body is said to be streamlined if its shape offers the least possible resistance to a current of air, water, or other fluid. vulnerability management and security compliance and provide ROI (Return On Investment) The monetary benefits derived from having spent money on developing or revising a system. In the IT world, there are more ways to compute ROI than Carter has liver pills (and for those of you who never heard of that expression, it means a lot). from the first use. Citadel solutions are used across the US Department of Defense, at the US Department of Veterans Affairs Veterans Affairs is a term of the business that deals with the relation between a government and its veteran communities, usually administered by the designated government agency. , MCI (1) (Media Control Interface) A high-level programming interface from Microsoft and IBM for controlling multimedia devices. It provides commands and functions to open, play and close the device. (2) (Microwave Communications Inc. , Raytheon Raytheon Company (NYSE: RTN) is a major American defense contractor and industrial corporation with core manufacturing concentrations in defense systems and defense and commercial electronics. and within other government and commercial organizations. For more information on Citadel, visit http://www.citadel.com, or call 888-8CITADEL. Notes: 1. Operating expenses prior to non cash items including software amortization, depreciation and stock option compensation expense offset by capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. of software development costs. See reconciliation under Non-GAAP Measures in the Unaudited Financial Tables. Safe Harbor/Forward-looking Statements: This press release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that are intended to be subject to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. protection provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or future financial performance and involve known and unknown risks and uncertainties that may cause actual results or performance to be materially different from those indicated by any forward-looking statements. In some cases, you can identify forward-looking statements by terminology The terminology used in the computer and telecommunications field adds tremendous confusion not only for the lay person, but for the technicians themselves. What many do not realize is that terms are made up by anybody and everybody in a nonchalant, casual manner without any regard or such as "forecast," "may," "will," "could," "should," "anticipate," "expect," "plan," "believe," "potential" or other similar words indicating future events or contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. . Some of the things that could cause actual results to differ from expectations are: adjustments to reported revenues based on audit adjustments and revenue recognition accounting requirements; uncertainties related to the issuance of a patent by the United States Patent and Trademark Office The United States Patent and Trademark Office (PTO or USPTO) is an agency in the United States Department of Commerce that provides patent protection to inventors and businesses for their inventions, and trademark registration for product and intellectual property ; the possibility of other intellectual property rights held by third parties related to the technology; uncertainty related to projected cost savings from restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). activities; the economic and geopolitical ge·o·pol·i·tics n. (used with a sing. verb) 1. The study of the relationship among politics and geography, demography, and economics, especially with respect to the foreign policy of a nation. 2. a. environment; changes in the information technology spending trends; the uncertainty of funding of government and corporate information technology security projects; the variability of the product sales cycle, including longer sales cycles for government and large commercial contracts; the uncertainty that the company's prospective deals will result in final contracts; the potential changes in the buying decision makers during a customer purchasing cycle; the complexities in scope and timing for finalization Writing the table of contents (TOC) on a recordable CD or DVD disc. The finalization process ensures that the disc can be played back on most CD and DVD players. See disc-at-once. of contracts; the fluctuations in product delivery schedules; a lack of Citadel operating history; uncertainty of product development and acceptance; uncertainty of ability to compete effectively in a new market; the uncertainty of profitability and cash flow of Citadel; intellectual property rights and dependence on key personnel; economic conditions; the continued impact of terrorist attacks, global instability instability /in·sta·bil·i·ty/ (-stah-bil´i-te) lack of steadiness or stability. detrusor instability and potential U.S. military involvement; the competitive environment and other trends in the company's industry; the effects of inflation; changes in laws and regulations; changes in the company's business plans, including shifts to new pricing models that may cause delays in licenses; interest rates and the availability of financing; liability, legal and other claims asserted against the company; labor disputes; and the company's ability to attract and retain qualified personnel. For a discussion of these and other risk factors, see the company's Annual Report on Form 10-KSB for the year ended December 31, 2004 and the company's Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the quarter ended September September: see month. 30, 2005. All of the forward-looking statements are qualified in their entirety The whole, in contradistinction to a moiety or part only. When land is conveyed to Husband and Wife, they do not take by moieties, but both are seised of the entirety. by reference to the risk factors discussed therein. These risk factors may not be exhaustive. The company operates in a continually con·tin·u·al adj. 1. Recurring regularly or frequently: the continual need to pay the mortgage. 2. changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on the company's business or events described in any forward-looking statements. The company disclaims any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results. Editors Note: Citadel is a trademark and Hercules(R) is a registered trademark of Citadel Security Software.
Unaudited Financial Tables
CITADEL SECURITY SOFTWARE INC.
UNAUDITED BALANCE SHEETS
December 31, December 31,
2005 2004
------------ ------------
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 1,320,376 $ 9,838,154
Accounts receivable-trade, less
allowance of $209,000 at December 31,
2005 and December 31, 2004 2,570,090 615,749
Prepaid expenses and other current
assets 932,591 1,466,354
------------ ------------
Total current assets 4,823,057 11,920,257
PROPERTY AND EQUIPMENT, net of
accumulated depreciation
of $2,483,398 and $726,444 5,126,228 6,356,362
CAPITALIZED SOFTWARE DEVELOPMENT COSTS,
net of accumulated amortization of
$6,625,180 and $4,433,065 4,431,322 4,048,452
OTHER ASSETS 84,812 83,439
------------ ------------
TOTAL ASSETS $ 14,465,419 $ 22,408,510
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Factoring line of credit $ 924,777 $ -
Current portion of long-term debt - 1,327,273
Accounts payable and accrued expenses 3,721,551 3,040,665
Accrued compensation and payroll tax
obligations 1,245,401 1,413,670
Preferred stock dividends payable - 187,500
Current portion of deferred revenue 4,680,328 2,462,851
------------ ------------
Total current liabilities 10,572,057 8,431,959
LONG-TERM DEBT, LESS CURRENT PORTION 3,750,000 1,989,393
DEFERRED REVENUE, LESS CURRENT PORTION 398,342 480,172
OTHER NON-CURRENT LIABILITIES 609,912 714,466
CONVERTIBLE PREFERRED STOCK, $1,000
stated value per share;
1,000,000 shares authorized;
Series A Preferred Stock, 15,000
shares issued and outstanding at
December 31, 2005 and December 31,
2004, liquidation preference of
$15,000,000 10,422,299 10,701,847
Series B Preferred Stock, 7,000
shares issued and outstanding at
December 31, 2005, liquidation
preference of $7,000,000 5,247,688 -
COMMON STOCK, $.01 par value per share;
100,000,000 shares authorized;
30,518,230 and 29,845,730 shares issued
and outstanding at September 30, 2005
and December 31, 2004 305,182 298,457
ADDITIONAL PAID-IN CAPITAL 46,179,211 44,248,609
ACCUMULATED DEFICIT (63,019,272) (44,456,393)
------------ ------------
Total Stockholders' Equity (864,892) 10,792,520
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 14,465,419 $ 22,408,510
============ ============
CITADEL SECURITY SOFTWARE INC.
UNAUDITED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED YEARS ENDED
DECEMBER 31, DECEMBER 31,
2005 2004 2005 2004
----------- ----------- ------------ -----------
Revenue
License fees $ 996,049 $ 548,030 $ 2,568,453 $ 12,361,585
Content
subscription
and customer
support
services
1,426,198 1,125,840 4,867,542 2,786,937
Professional
services 1,237,781 39,907 2,851,100 104,633
----------- ----------- ------------ -----------
Total revenue 3,660,028 1,713,777 10,287,095 15,253,155
Costs of revenue
Software
amortization 593,712 496,515 2,192,115 1,287,927
Content
subscription
and customer
support
services costs 377,917 490,814 1,667,581 1,478,633
Professional
services costs 231,285 - 645,202 29,028
Shipping and
other costs 57,672 18,217 161,805 36,496
----------- ----------- ------------ -----------
Total costs of
revenue 1,260,586 1,005,546 4,666,703 2,832,084
Operating expenses
Selling, general
and
administrative
expense 4,744,122 5,120,790 19,577,780 17,550,485
Product
development
expense 601,244 642,443 2,443,864 1,995,612
Depreciation
expense 452,295 265,399 1,756,955 670,782
Write-off of
fixed assets - 77,786 - 77,786
------------ ----------- ------------- -----------
Total
operating
expenses 5,797,661 6,106,418 23,778,599 20,294,665
----------- ----------- ------------ -----------
Operating loss (3,398,219) (5,398,187) (18,158,207) (7,873,594)
Interest income 2,433 19,767 67,588 107,261
Interest expense (280,739) (53,900) (472,260) (82,612)
Other income
(expense) - - - 9,920
------------ ------------ ------------- -----------
Loss before income
taxes (3,676,525) (5,432,320) (18,562,879) (7,839,025)
Provision for
income taxes - - - -
------------ ------------ ------------- -----------
Net loss (3,676,525) (5,432,320) (18,562,879) (7,839,025)
Preferred stock
dividends - (187,500) (268,750) (664,940)
Non-cash fair
value adjustment
for exchanged
warrants - - (274,800) -
Non-cash fair
value adjustment
for Series A
Preferred Stock
dividend waiver - - 1,826,000 -
Non-cash fair
value adjustment
for change in
Series A
Preferred Stock
conversion price - - (1,064,000) -
Non-cash accretion
of preferred
stock beneficial
conversion
feature - (61,542) (769,252) (215,397)
Non-cash fair
value adjustment
for change in
conversion price
of warrants (43,226) - (43,226) -
----------- ------------ ------------ -----------
Net loss to common
shareholders $(3,719,751) $(5,681,362) $(19,156,907) $(8,719,362)
=========== =========== ============ ===========
Net loss per share
to common
shareholders
- basic and
diluted $ (0.12) $ (0.19) $ (0.64) $ (0.30)
=========== =========== ============ ===========
Weighted average
common shares
outstanding -
- basic and
diluted 30,132,513 29,786,137 29,976,179 29,336,894
=========== =========== ============ ===========
CITADEL SECURITY SOFTWARE INC.
UNAUDITED STATEMENTS OF CASH FLOWS
YEAR ENDED
DECEMBER 31,
2005 2004
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (18,562,879) $ (7,839,025)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 3,949,070 1,958,709
Provision for returns, allowances
and bad debts 46,233 130,500
Stock based compensation 37,000 129,995
Write off of property and equipment - 77,786
Amortization of debt issue costs
recorded as interest expense 130,192 16,052
Amortization of deferred credit for
tenant incentive recorded as
leasehold improvements (104,554) -
Common stock issued for services 88,000 -
Common stock issued for director's
fees 46,500 -
Changes in operating assets and
liabilities:
Accounts receivable-trade (2,000,574) 952,905
Prepaid expenses and other current
assets 533,764 (1,198,994)
Other assets (24,743) (10,014)
Accounts payable and accrued
expenses 1,328,130 898,611
Accrued compensation and payroll
tax obligations (168,269) 645,225
Deferred revenue 2,135,647 137,828
------------ -----------
NET CASH USED IN OPERATING
ACTIVITIES (12,566,483) (4,100,422)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (1,174,067) (5,038,193)
Capitalized software development costs (2,574,984) (3,261,210)
------------ -----------
NET CASH USED IN INVESTING
ACTIVITIES (3,749,051) (8,299,403)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of preferred
stock and warrants 6,902,396 13,797,283
Borrowings on long-term debt 4,500,000 3,500,000
Repayments on long-term debt (4,066,667) (183,334)
Net advances from factoring company 924,777 -
Debt issuance costs (42,500) (26,396)
Net proceeds from the exercise of
warrants - 216,550
Net proceeds from exercise of employee
stock options 36,000 336,057
Payments on notes and advances from
related parties - (16,903)
Preferred stock dividends paid (456,250) (477,439)
------------ -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 7,797,756 17,145,818
------------ -----------
Net increase (decrease) in cash and
cash equivalents (8,517,778) 4,745,993
Cash and cash equivalents at the
beginning of the period 9,838,154 5,092,161
------------ -----------
Cash and cash equivalents at
the end of the period $ 1,320,376 $ 9,838,154
============ ===========
CITADEL SECURITY SOFTWARE INC.
UNAUDITED STATEMENTS OF CASH FLOWS (continued)
YEAR ENDED
DECEMBER 31,
2005 2004
---------- ----------
Supplemental cash flow information:
Interest paid $ 256,417 $ 54,989
========== ==========
Income taxes paid $ - $ -
========== ==========
Non-cash investing items:
Leasehold improvements funded by
landlord $ - $ 836,448
========== ==========
Non-cash financing items:
Preferred stock dividends accrued $ - $ 187,500
========== ==========
Beneficial conversion feature of
convertible preferred stock $ - $ 984,649
========== ==========
Accretion of preferred stock beneficial
conversion feature $ 769,252 $ 215,397
========== ==========
Fair value of warrants issued in
connection with sale of preferred stock $1,623,482 $ 2,326,184
========== ==========
Fair value adjustment for exchanged
warrants $ 274,800 $ -
========== ==========
Fair value adjustment for Series A
Preferred Stock dividend waiver $1,826,000 $ -
========== ==========
Fair value adjustment for change in
Series A Preferred Stock conversion
price $1,064,000 $ -
========== ==========
Fair value adjustment for change in
conversion price of warrants $ 43,226 $ -
========== ==========
Issuance of common stock through exercise
of exchange right by officer $ - $ 15,000
========== ==========
Fair value of warrants issued in
conjunction with bank lines of credit
recorded as deferred financing costs $ 64,321 $ 45,838
========== ==========
Non-GAAP Measures Citadel has elected e·lect v. e·lect·ed, e·lect·ing, e·lects v.tr. 1. To select by vote for an office or for membership. 2. To pick out; select: elect an art course. to provide guidance on a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma non-GAAP basis, including terms used in this press release such as cash operating expenses and non-cash Items, believing that it provides meaningful information for the Company in evaluating operations and managing and benchmarking
Benchmarking (also "best practice benchmarking" or "process benchmarking") is a process used in management and particularly strategic performance. Citadel has chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of the Company's business outlook and to illustrate the effect that future performance could have. The pro forma non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). . A reconciliation of cash operating expenses and non-cash items for the first quarter of 2005 is shown below. Citadel is unable to provide a non-GAAP to GAAP reconciliation of projected amounts for the first quarter of 2006. Among other reasons, such amounts are not known or cannot be reasonably estimated at this time. In addition, due to the adoption of Statement of Financial Accounting Standard 123R, stock-based equity compensation requires many assumptions related to forfeitures, stock prices and future issuances of equity awards.
For the
Three
Months
Ended
March 31,
2005
------------
Revenue $ 1,739,926
Content, subscription, and customer support services
costs 461,181
Professional services costs 124,258
Shipping and other costs 7,351
Selling, general and administrative expense 4,870,596
Product development expense 342,844
Capitalized software development costs 1,002,944
-----------
Total of Cash Operating Expenses 6,809,174
Software amortization 484,559
Depreciation and amortization of property and equipment 418,315
Capitalized software development costs (1,002,944)
-----------
Total of Non Cash items (100,070)
------------
Total Operating Costs 6,709,104
Operating Loss $(4,969,178)
===========
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