Citadel Security Software Reports Quarter over Quarter Revenue Growth; Hercules, Citadel's Vulnerability Remediation Solution, Commences Shipment in the Second Quarter of 2002.

Business & Technology Editors

DALLAS--(BUSINESS WIRE)--Aug. 8, 2002

Company to Voluntarily Adopt SEC Certification Rule for CEO and CFO

Citadel Security Software Inc. (OTCBB:CDSS), a leading provider of vulnerability remediation and security software solutions, announced improved financial results for the second quarter ended June 30, 2002.

The second quarter results are the first results reported following the completion of the spin out from CT Holdings, Inc.

Revenue was $457,000 for the second quarter of 2002, a sequential increase compared with first quarter 2002 revenue of $89,000 and also an increase compared with revenue of $81,000 for the corresponding period of 2001. The net loss for the quarter was $498,000, a $0.04 loss per share, which is down from the net loss of $570,000, a $0.05 loss per share for the first quarter of 2002, and also down from the net loss of $519,000, a $0.06 loss per share in the corresponding quarter of 2001.

"We are very pleased with what we achieved in the second quarter demonstrating that our Company is well positioned to change and lead the way vulnerability remediation is done now and in the future," said Steven B. Solomon, CEO and President of Citadel. "We commenced shipment of Hercules release 1.5 in the quarter and were engaged in numerous evaluations of the product. In the first five weeks of the third quarter we have seen more interest in product demonstrations and evaluations than in all of the second quarter and anticipate this trend to continue."

Revenue for the six months ended June 30, 2002 was $547,000, an increase over the $181,000 for comparable six months of 2001. The reported net loss on a year-to-date basis was $1,067,000, an $0.08 loss per share in the six months ended June 30, 2002 as compared to a net loss of $1,028,750, or a $0.09 loss per share for the comparable six-month period of 2001.

"For the first six months of 2002 we made investments in our technology and our people and we expect to add additional sales and engineering personnel throughout the rest of the year to support expected future demand. In addition, we entered into marketing and technology relationships with several vulnerability assessment scanning companies to broaden market awareness and provide the only complete technology solution for assessment and remediation of security vulnerabilities available today."

Other Citadel highlights include:

-- The endorsement of Citadel's security solutions by the Texas Hospital Association to its member hospitals and healthcare facilities;

-- The release of Hercules version 1.5 in June including support of additional scanners, an Internet remediation signature delivery system and expanded reporting capabilities;

-- The launch of Citadel's Technology Partner and Channel Partner Programs;

-- The signing of marketing and technology agreements with eEye Technologies Inc., Harris Corporation and Qualys, Inc.

In connection with this announcement of financial results for the second quarter, the Company has determined to voluntarily adopt the recent SEC financial statement certifications by the Chief Executive Officer and Chief Financial Officer (Commission Order No. 4-460). The certifications will be provided with Citadel Security Software Inc.'s report on Form 10-QSB for the second quarter ended June 30, 2002, in advance of the date required by the rule. Mr. Solomon stated that "We are pleased to see the SEC and Congress adopt these rules to enhance investor confidence and improve corporate governance and accountability."

About Citadel Security Software Inc.

Citadel Security Software Inc. (OTCBB:CDSS) develops, markets and licenses computer security and privacy software for one of the fastest growing software industry segments today -- security inside the firewall. Citadel's products enable companies to enforce security policies from a single point of control across all Windows and NetWare platforms. These products remediate vulnerabilities and secure confidential information, applications and systems from the five classes of security vulnerabilities: insecure accounts, unnecessary services, mis-configurations, back doors and software bugs. Hercules' open architecture design allows the import and aggregation of assessment data from many sources. Citadel is interoperable with industry leading vulnerability assessment tools allowing customers to address the real world issues of vulnerability assessment and remediation. The products also address the mandates of HIPAA and Gramm-Leach-Bliley legislation for the health care and financial industries.

Further information about Citadel Security Software and its products can be accessed at its website, www.citadel.com.

Safe Harbor/Forward-looking Statements:

Except for the historical information contained herein, this news release contains forward looking statements that are subject to risks and uncertainties, including lack of Citadel operating history, uncertainty of product acceptance and the uncertainty of profitability and cash flow of Citadel. These and other risks are detailed from time to time in CT Holdings' and Citadel's SEC reports, including CT's report on Form 1O-KSB for the year ended December 31, 2001 and most recent Form 10-QSBs, as well as Citadel's Registration Statement on Form 10-SB and amendments and most recent Form 10-QSBs.