Citadel Security Software Reports Second Quarter 2006 Results; Revenue Rises 10% and Net Loss Decreases 52% Versus Year Earlier Period.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. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). :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 second quarter ended June June: see month. 30, 2006. Revenue for the three months ended June 30, 2006 was $2,956,530 compared to $2,693,301 for the three months ending June 30, 2005. For the quarter ended June 30, 2006, the Company reported a net loss to common shareholders of $2,406,565 or $(0.08) loss per share, compared to a net loss to common shareholders of $5,465,394, or $(0.18) loss per share in the 2005 second quarter. The net loss for the second quarter declined from the year-earlier period as a result of the Company's cost reduction initiatives which commenced in the third quarter of 2005. Cash 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. (1), a Non-GAAP measure, declined approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2.9 million in the second quarter of 2006 versus the same quarter of 2005. Non-cash expenses Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) (i.e. depreciation, software amortization and stock based compensation expense) increased approximately $400,000 primarily due to approximately $366,000 of stock based compensation expense recognized during the quarter ended June 30, 2006. Selling, general and administrative expenses of $3.4 million for the three months ended June 30, 2006 were approximately $2 million lower than the comparable three months of 2005. For the six months ended June 30, 2006, the Company had revenue of $8,382,579 versus $4,433,227 for the first six months of 2005, and a net loss to common shareholders of $3,298,496 or $(0.11) loss per share, which compares to a net loss to common shareholders of $10,718,612, or $(0.36) loss per share, for the first six months of 2005. The increase in revenue was a result of an increase in the number and size of orders for 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. (R) from customers in the commercial and government sectors primarily in first quarter of 2006. The net loss for the second quarter declined from the year-earlier period as a result of higher revenue and the Company's cost reduction initiatives. Cash operating expenses(1), a Non-GAAP measure, declined approximately $4.5 million in the six months ended June 30, 2006 versus the similar period in 2005. Non-cash expenses (i.e. depreciation, software amortization and stock based compensation expense) increased approximately $900,000, of which nearly $800,000 was related to stock based compensation expense. Selling, general and administrative expenses for the six months ended June 30, 2006 were $7.5 million compared $10.3 million in the first six months of fiscal 2005. During the second quarter, the Company received orders for Hercules, its 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. security solution, for software, content, support and services from the Department of Treasury, Fairfax Fairfax, city (1990 pop. 19,622), historic seat of Fairfax co., NE Va., a residential suburb of Washington, D.C.; inc. 1892, as a city 1961 (at which time it became independent and no longer included in a county). There is some light manufacturing. County(Virginia Virginia, state, United States Virginia, state of the south-central United States. It is bordered by the Atlantic Ocean (E), North Carolina and Tennessee (S), Kentucky and West Virginia (W), and Maryland and the District of Columbia (N and NE). ), State Street Bank, Verizon, DemandTec DemandTec (NASDAQ: DMAN) is a publicly traded company that provides pricing, promotion, and demand optimization solutions for retailers and consumer product (CP) manufacturers. They deliver their products as a Software as a Service (SaaS). , and First Horizon, among others. In addition, 20 Hercules(R) FlashBox appliances were shipped to two agencies within the Department of Defense. Hercules(R) FlashBox, which was first available for shipment in May 2006, is a plug-and-play For the specific branded ISA add-on technology marketed by Intel and Microsoft, see . Plug and play is a computer feature that allows the addition of a new device, normally a peripheral, without requiring reconfiguration or manual installation of device drivers. appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. designed and developed to assist with the simplification sim·pli·fy tr.v. sim·pli·fied, sim·pli·fy·ing, sim·pli·fies To make simple or simpler, as: a. To reduce in complexity or extent. b. To reduce to fundamental parts. c. of managing security content across widely distributed Adj. 1. widely distributed - growing or occurring in many parts of the world; "a cosmopolitan herb"; "cosmopolitan in distribution" cosmopolitan bionomics, environmental science, ecology - the branch of biology concerned with the relations between organisms and disconnected networks. "We continue to make steady progress with our new sales strategy, as demonstrated by new customers in the financial, telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. , healthcare and government sectors," said Mr. 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. "We remain focused on ways we can drive near-term near-term adj. Of, for, or involving a short period of time in the near future. revenue through multiple smaller purchases from enterprise customers. The recent introduction of the Hercules appliance and Flashbox 2.5 has generated interest from small and mid-sized businesses, while still offering a unique value proposition to our largest customers. We believe that our sales strategy, as it matures, will result in a more predictable base of revenue. In addition, while we remain highly focused on tight cost control, and will continue to manage our expenses conservatively throughout the year, we are committed to offering superior vulnerability management and policy compliance solutions. During the second quarter, we released Hercules 4.1 and Flashbox 2.5. New features and enhancements in Hercules 4.1 include patch management The installation of patches from a software vendor onto an organization's computers. Patching thousands of PCs and servers is a major issue. A patch should be applied to test machines first before deployment, and the testing environments must represent all the users' PCs with their unique , improved UNIX UNIX Operating system for digital computers, developed by Ken Thompson of Bell Laboratories in 1969. It was initially designed for a single user (the name was a pun on the earlier operating system Multics). support, scanner (1) See also antivirus program. (2) An optical device that reads a printed page or transparency and converts it into a graphics image for the computer. The scanner does not recognize or differentiate in any manner the content of the material it is scanning. import filtering, reboot To reload the operating system, which restarts the computer. See boot. (operating system) reboot - (From boot) A boot with the implication that the computer has not been down for long, or that the boot is a bounce intended to clear some state of wedgitude. See warm boot. deferral deferral - Waiting for quiet on the Ethernet. , and improved performance of the Hercules Administrator console (1) The physical control panel on a computer or electronic device. (2) A terminal or desktop computer used to monitor and control a network. (3) Any display terminal. . The main focus for Flashbox 2.5 was integration with Hercules 4.0 Service Pack 2, V-Flash improvements, and defect defect - bug resolution. We are already receiving a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. response from customers to these initiatives." Business Outlook: The Company expects sales of Hercules(R) to increase throughout the second half of the year. Historically, Citadel has received the largest portion of its annual sales order The sales order, sometimes abbreviated as SO, is an order received by a business from a customer. A sales order may be for products and/or services. Given the wide variety of businesses, this means that the orders can be fulfilled in several ways. value during the second half of the year. 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. of orders and unrecognized deferred revenue was $5.9 million at the end of the second quarter. The sales pipeline remains strong and the Company continues to see a steady flow of requests-for-proposals and technical proofs of concepts. The Company continues to make constructive (mathematics) constructive - A proof that something exists is "constructive" if it provides a method for actually constructing it. Cantor's proof that the real numbers are uncountable can be thought of as a *non-constructive* proof that irrational numbers exist. changes in its sales organization aimed at shortening the sales cycle. In addition, it remains focused on tight expense control. During the second half of 2006, the Company expects to add new products which improve and complement its core Hercules technology. The Company believes that improved sales effectiveness, new product offerings, and disciplined cost control will enable it to post improved results in the second half of 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. 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. , the US Department of Energy, 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-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2005 and its Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the quarter ended March 31, 2006. 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 CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2006 2005
----------- -----------
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 176,808 $ 1,320,376
Accounts receivable-trade, less allowance
of $163,843 at June 30, 2006 and 1,949,306 2,570,090
$209,000 at December 31, 2005
Prepaid expenses and other current assets 1,260,324 932,591
----------- -----------
Total current assets 3,386,438 4,823,057
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $3,303,519 and $2,483,398 4,306,108 5,126,228
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, net
of accumulated amortization of
$7,824,219 and $6,625,180 4,381,359 4,431,322
OTHER ASSETS 75,438 84,812
----------- -----------
TOTAL ASSETS $12,149,343 $14,465,419
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES
Factoring line of credit $ 634,014 $ 924,777
Accounts payable and accrued expenses
(including $628,790 and $80,725 payable to
an officer at June 30, 2006 and December
31, 2005, respectively) 4,128,005 3,721,551
Accrued compensation and payroll tax
obligations 1,333,005 1,245,401
Current portion of deferred revenue 4,472,380 4,680,328
----------- -----------
Total current liabilities 10,567,404 10,572,057
LONG-TERM DEBT 3,750,000 3,750,000
DEFERRED REVENUE, LESS CURRENT PORTION 665,835 398,342
OTHER NON-CURRENT LIABILITIES 557,633 609,912
COMMITMENTS AND CONTINGENCIES
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 June 30, 2006
and December 31, 2005, liquidation
preference of $15,000,000 10,422,299 10,422,299
Series B Preferred Stock, 7,000 shares
issued and outstanding at June 30, 2006
and December 31, 2005, liquidation
preference of $7,000,000 5,247,688 5,247,688
COMMON STOCK, $.01 par value per share;
100,000,000 shares authorized; 30,518,230
shares issued and outstanding at June 30,
2006 and December 31, 2005 305,182 305,182
ADDITIONAL PAID-IN CAPITAL 46,951,070 46,179,211
ACCUMULATED DEFICIT (66,317,768) (63,019,272)
----------- -----------
Total Stockholders' Deficit (3,391,529) (864,892)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $12,149,343 $14,465,419
=========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
CITADEL SECURITY SOFTWARE INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2006 2005 2006 2005
----------- ----------- ----------- ------------
Revenue
License fees $ 899,029 $ 613,418 $ 4,577,677 $ 807,276
Content,
subscription, and
customer support
services 1,695,224 1,201,350 3,155,457 2,361,861
Professional
services 362,277 878,533 649,445 1,264,090
----------- ----------- ----------- ------------
Total revenue 2,956,530 2,693,301 8,382,579 4,433,227
Costs of revenue
Software
amortization 584,387 520,717 1,199,040 1,005,276
Content,
subscription, and
customer support
services costs 293,507 421,077 663,507 882,259
Professional
services costs 109,364 188,875 202,922 313,134
Shipping and other
costs 94,747 26,970 152,993 34,320
----------- ----------- ----------- ------------
Total costs of
revenue 1,082,005 1,157,639 2,218,462 2,234,989
Operating expenses
Selling, general and
administrative
expense 3,393,998 5,401,818 7,469,047 10,272,412
Product development
expense 348,782 701,216 868,107 1,044,060
Depreciation and
amortization of
property and
equipment 407,969 438,559 820,120 856,874
----------- ----------- ----------- ------------
Total operating
expenses 4,150,749 6,541,593 9,157,274 12,173,346
----------- ----------- ----------- ------------
Operating loss (2,276,224) (5,005,931) (2,993,157) (9,975,108)
Interest income 9,318 21,698 12,843 47,125
Interest expense (139,659) (63,569) (318,182) (123,995)
----------- ----------- ----------- ------------
Loss before income
taxes (2,406,565) (5,047,802) (3,298,496) (10,051,978)
Provision for income
taxes - - - -
----------- ----------- ----------- ------------
Net loss (2,406,565) (5,047,802) (3,298,496) (10,051,978)
Preferred stock
dividends - (81,250) - (268,750)
Fair value adjustment
for exchanged
warrants - (274,800) - (274,800)
Non-cash accretion of
preferred stock
beneficial
conversion feature - (61,542) - (123,084)
----------- ----------- ----------- ------------
Net loss to common
shareholders $(2,406,565)$(5,465,394)$(3,298,496)$(10,718,612)
=========== =========== =========== ============
Net loss per share to
common shareholders
- basic and diluted $ (0.08)$ (0.18)$ (0.11)$ (0.36)
=========== =========== =========== ============
Weighted average
common shares
outstanding
- basic and diluted 30,518,230 29,877,708 30,518,230 29,861,807
=========== =========== =========== ============
The accompanying notes are an integral part of these consolidated
financial statements.
CITADEL SECURITY SOFTWARE INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30,
2006 2005
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(3,298,496)$(10,051,978)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 2,019,160 1,862,150
Provision for returns, allowances, and
bad debts 825 -
Write-off of trade account receivable
against revenue reserve (45,157) -
Stock-based compensation expense 771,859 88,000
Amortization of deferred credit for
tenant incentive recorded as leasehold
improvements (52,279) -
Amortization of debt issuance costs
recorded as interest expense 9,374 13,659
Changes in operating assets and
liabilities:
Accounts receivable - trade 665,116 (506,902)
Prepaid expenses and other current
assets (327,733) 361,759
Accounts payable and accrued expenses (141,611) 276
Accrued compensation and payroll tax
obligations 87,604 (372,517)
Deferred revenue 59,545 (459,332)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (251,793) (9,064,885)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment - (1,203,583)
Capitalized software development costs (1,149,077) (1,706,818)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (1,149,077) (2,910,401)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of preferred
stock and warrants - 6,902,396
Net payments of long-term debt - (640,909)
Payment of preferred stock dividends - (375,000)
Net payments made on factoring accounts
receivable (290,763) -
Advances from an officer 1,110,408 -
Repayment of advances from an officer (562,343) -
Net proceeds from the exercise of employee
stock options - 16,000
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 257,302 5,902,487
----------- -----------
Net decrease in cash and cash equivalents (1,143,568) (6,072,799)
Cash and cash equivalents at the beginning
of the period 1,320,376 9,838,154
----------- -----------
Cash and cash equivalents at the end of
the period $ 176,808 $ 3,765,355
=========== ===========
Supplemental cash flow information:
Interest paid $ 196,310 $ 110,336
=========== ===========
Income taxes paid $ - $ -
=========== ===========
Non-cash financing items:
Accretion of convertible preferred stock
beneficial conversion feature $ - $ 123,084
=========== ===========
Fair value of warrants issued in
conjunction with sale of preferred stock $ - $ 1,204,060
=========== ===========
Fair value adjustment of exchanged
warrants $ - $ 274,800
=========== ===========
Fair value of warrants issued in
conjunction with bank lines of credit
recorded as deferred financing costs $ - $ 31,317
=========== ===========
Preferred stock dividend accrued $ - $ 81,250
=========== ===========
Non GAAP Measures
Citadel has elected to provide guidance on a pro forma non-GAAP basis,
including terms used in this press release such as cash operating
expenses and non-cash expenses, believing that it provides meaningful
information for the Company in evaluating operations and managing and
benchmarking 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 with
GAAP. A reconciliation of cash operating expenses and non-cash
expenses for the three and six months ended June 30, 2006 and 2005,
respectively is shown below.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2006 2005 2006 2005
----------- ---------- ---------- ----------
Revenue $2,956,530 $2,693,301 $8,832,579 $4,433,227
Content, subscription,
and customer support
services costs 293,507 421,077 663,507 882,259
Professional services
costs 109,364 188,875 202,922 313,314
Shipping and other
costs 94,747 26,970 152,993 34,320
Selling, general and
administrative
expense 3,393,998 5,401,818 7,469,047 10,272,412
Product development
expense, net of
capitalized software
development costs 348,782 701,216 868,107 1,044,060
Plus: Capitalized
software development
costs 629,507 703,874 1,149,077 1,706,818
Less: Stock based
employee compensation
expense (365,910) - (771,859) -
----------- ---------- ---------- ----------
Total of cash
operating expenses 4,503,995 7,443,830 9,733,794 14,253,003
Software amortization 584,387 520,717 1,199,040 1,005,276
Depreciation and
amortization of
property and
equipment 407,969 438,559 820,120 856,874
Plus: Stock based
compensation
expense 365,910 - 771,859 -
----------- ---------- ---------- ----------
Total of non-cash
operating expenses 1,358,266 959,276 2,791,019 1,862,150
Less: Capitalized
software development
costs (629,507) (703,874) (1,149,077) (1,706,818)
----------- ---------- ---------- ----------
Total Operating
Costs 5,232,754 7,699,232 11,375,736 14,408,335
----------- ---------- ---------- ----------
GAAP Operating Loss $(2,276,224)$(5,005,931)$(2,993,157)$(9,975,108)
=========== ========== ========== ==========
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