Citadel Security Software Reports Year-end and Fourth Quarter 2004 Results; Record Orders of $19.4 Million More Than Doubles Year-Over-Year Revenue to $15.3 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 enforcement solutions, today announced financial results for its year and fourth quarter ended December December: see month. 31, 2004. Revenue for the year ended December 31, 2004 was $15,253,000 versus the year-earlier period revenue of $5,856,000. The company reported 2004 fourth quarter revenue of $1,714,000 versus $4,073,000 for the fourth quarter of 2003. Total orders for product, maintenance and professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. received in 2004 was a record $19.4 million, compared to orders of $8.6 million for 2003. 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 December 31, 2004 was $2.2 million and deferred revenue for renewal maintenance and professional services was $2.9 million. The company expects that $4.7 million of the $5.1 million total of the unfilled order backlog plus the deferred revenue will be earned and recognized as revenue during 2005. For the twelve months ended December 31, 2004, the company reported a net loss to common shareholders of $8,719,000, or $(0.30) loss per share, versus a net loss to common shareholders of $5,249,000, or $(0.24) loss per share, for the previous year. For the fourth quarter ended December 31, 2004, the company reported a net loss to common shareholders of $5,681,000, or $(0.19) loss per share, versus a loss to common shareholders of $196,000, or $(.01) loss per share, for the year-earlier period. The net loss to common shareholders in 2004 was impacted by the planned hiring of sales, marketing and development personnel and the build out of the technology infrastructure to support the company's growth in 2004 and beyond. "2004 was a breakout year for the company as demonstrated by the more than doubling of our year-over-year revenue and the recent recognition by SC Magazine of 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. as the best security management product in both the government and commercial space," 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. "The decisions by nine government organizations and twenty-three commercial enterprises to select Hercules as their security management solution for their very diverse networks demonstrates a high level of confidence in the performance, scalability How much a system can be expanded. See scalable. scalability - How well a solution to some problem will work when the size of the problem increases. For example, a central server of some kind with ten clients may perform adequately but with a thousand clients it and adaptability a·dapt·a·ble adj. Capable of adapting or of being adapted. a·dapt  a·bil of Citadel's security
solutions to secure enterprise-wide cybersecurity The protection of data and systems in networks that are connected to the Internet. See information security. infrastructures. We
look forward to continued revenue growth in 2005 from the expected
closure of more commercial accounts supplemented by the anticipated
additional revenue from the recently announced second quarter 2005
launch of the Hercules Security-On-Demand appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. and the usage-based
pricing model."Some of the highlights for fiscal 2004 included: --Strong Sales Growth. The company received $19.4 million in orders for products, maintenance and professional services during 2004. Of that amount, $3.4 million represented orders from commercial enterprises and $16.0 million represented orders from government organizations. The new orders booked translated into recognized revenue of $15.3 million for the year that was more than double the 2003 full year revenue of $5.9 million. --Strengthened Balance Sheet. The company completed a private placement of 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. in February February: see month. 2004 generating gross proceeds of $15 million. In addition, the company entered into a bank line of credit of $3.5 million that partially funded capital expenditures in 2004. Cash 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. 2004 was $9.8 million. --Further Penetration of Government Sector. The momentum that began in the public sector in 2003 and continued into 2004 was highlighted by the selection of Hercules as part of a $10.3 million task order award for automated au·to·mate v. au·to·mat·ed, au·to·mat·ing, au·to·mates v.tr. 1. To convert to automatic operation: automate a factory. 2. vulnerability management covering the worldwide systems of the Department of Defense. In addition, 2004 saw repeat orders from the Department of Veteran Affairs for worldwide licensing of Hercules as well as software maintenance and training services. --Growing Commercial Sector Revenue. The largest commercial contract in the company's history to date was a $1.7 million enterprise-wide contract, which included professional services and the licensing of Hercules to a global communications and services provider. Other commercial sector customers include Bank of Alameda Alameda (ăləmē`də, –mā`də), city (1990 pop. 76,459), Alameda co., W central Calif., on an island just off the eastern shore of San Francisco Bay; settled 1850, inc. as a city 1884. , Citizens Business Bank, Hart InterCivic Hart InterCivic Inc. is a privately held United States company that provides elections, geospatial system integration, and print solutions to jurisdictions nationwide. While headquartered in Austin, Texas, Hart products are used by over 300 jurisdictions nationwide. , Providence Providence, city (1990 pop. 160,728), state capital and seat of Providence co., NE R.I., a port at the head of Providence Bay; founded by Roger Williams 1636, inc. as a city 1832. Health System, 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. Company, Sonnenschein Sonnenschein is a German surname meaning "sunshine" and may refer to:
--Geographic Expansion. The company opened an office in the Washington Washington, town, England Washington, town (1991 pop. 48,856), Sunderland metropolitan district, NE England. Washington was designated one of the new towns in 1964 to alleviate overpopulation in the Tyneside-Wearside area. D.C. area to provide full-service full-ser·vice adj. Associated with or offering complete service: full-service gasoline pumps; full-service banks. sales, marketing, contract management and pre-sales engineering support to the federal government. In late 2004, the company expanded the focus of this office to cover state and local governments in all 50 states. The company's headquarters also moved to new high-tech high-tech also hi-tech adj. Informal Of, relating to, or resembling high technology. high-tech Adjective same as hi-tech Adj. 1. facilities in Dallas to showcase the company's security solutions. Finally, field sales personnel were hired in strategic geographic territories throughout 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. to address the commercial market. --NASDAQ Listing. The company's common stock was approved for listing on the NASDAQ Small Cap Market, and began trading in April 2004 under the company's ticker symbol Ticker Symbol An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors "CDSS". --Product Innovation. During 2004 the company released three new versions and updates to Hercules including the new functionality of ConnectGuard and AssetGuard. Also during 2004, Hercules attained at·tain v. at·tained, at·tain·ing, at·tains v.tr. 1. To gain as an objective; achieve: attain a diploma by hard work. 2. Common Criteria (Common Criteria for Information Technology Security) An international standard process for defining security objectives and for evaluating compliance with those objectives. The Common Criteria have largely replaced the Trusted Computer Security Evaluation Criteria (TCSEC), the Canadian certification, Microsoft Windows See Windows. (operating system) Microsoft Windows - Microsoft's proprietary window system and user interface software released in 1985 to run on top of MS-DOS. Widely criticised for being too slow (hence "Windoze", "Microsloth Windows") on the machines available then. Server 2003 certification, OVAL OVAL Open Vulnerability Assessment Language OVAL Orlando Visual Artists League OVAL Object Based Virtual Application Language certification and full compatibility with CVE (Common Vulnerabilities and Exposures) A list of information security exposures and vulnerabilities sponsored by US-CERT and maintained by the MITRE Corporation. compliance. In addition, in February 2005, Hercules 3.0, released in 2004, won two SC Magazine Global Awards for "Best Security Management Solution" and "Best Security Solution for Government." Citadel also recently announced participation in the Cisco NAC See network access control. and Microsoft NAP (1) See network access protection. (2) (Network Access Point) The first public Internet exchange points (IXPs). Established by the National Science Foundation in the early 1990s, they were set up to provide a standard way to exchange packets for programs. --Hercules Security-On-Demand. This solution, available in late second quarter of 2005, is in addition to Citadel's existing Enterprise Vulnerability Management (EVM EVM Earned Value Management EVM Evaluation Module EVM Error Vector Magnitude EVM Electronic Voting Machine EVM Expert Group on Vitamins and Minerals EVM Economic Value Management EVM Extraneous Vegetable Matter EVM Extra-Value Meal EVM Electronic Voltmeter ) solutions. Hercules Security-On-Demand will utilize a pay-as-you-go pricing model that provides customers flexible and ratable That which can be appraised, assessed, or adjusted through the application of a formula or percentage. Ratable property is that which is taxable or capable of being appraised or assessed. ratable adj. pricing and complete access to Citadel's EVM solution through an appliance. Business Outlook: Revenue for fiscal 2005 is expected to be between $24.0 million and $25.0 million. The company continues to work toward closing the several large deals that were originally anticipated during the fourth quarter of 2004. Revenue for 2005 is still expected to be concentrated in several large transactions creating variability in the sales cycle. Therefore the company does not expect to provide quarterly guidance. The expected 2005 revenue does not include any estimate of the revenue associated with the Hercules Security-On-Demand appliance or the usage based pricing model which are expected to be available in late second quarter of 2005. The company remains committed to its investment in experienced sales and marketing personnel and strategic marketing activities targeted at growing its corporate customer base in the commercial sector and building on the gains made in the public sector. Citadel's product offerings, along with professional services, training and educational opportunities, are expected to position the company to continue to grow its customer base and capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. increased revenue opportunities. The company anticipates continuing investment in new product development activities and expects to release Hercules 4.0 along with the Hercules Security-On-Demand appliance in late second quarter of 2005. The company believes that the development process and planned projects will continue to enhance both the delivery and functionality of the products. The company currently expects that the employee base of 140 to 150 employees will be sufficient to support its planned business activities. Mr. Solomon and Richard Connelly, 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 or 617-786-4514 when calling internationally. Please reference Conference I.D. Number 78898123. 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., a leader in enterprise vulnerability management solutions powered by AVR (Automatic Voltage Regulation) See voltage regulator. technology, helps enterprises effectively neutralize neutralize to render neutral. security vulnerabilities. Citadel's patent-pending, Common Criteria EAL EAL English as an Additional Language EAL Evaluation Assurance Level EAL Eastern Airlines EAL Emergency Action Level EAL Environmental Analysis Laboratory EAL Evidence Analysis Library (American Dietetic Association) 3 certified See certification. Hercules(R) technology provides users with full control over the automated remediation process, enabling efficient aggregation, prioritization and resolution of vulnerabilities detected by industry-standard vulnerability assessment A Department of Defense, command, or unit-level evaluation (assessment) to determine the vulnerability of a terrorist attack against an installation, unit, exercise, port, ship, residence, facility, or other site. tools. SecurePC(TM) and NetOFF(TM) products enable companies to enforce security policies from a single point of control. Citadel's solutions enable organizations to ensure the confidentiality of information, reduce the time and costs associated with the inefficient manual remediation process, and facilitate compliance with organizational security policies and government mandates such as FISMA FISMA Federal Information Security Management Act of 2002 FISMA Federal Information System Management Act , HIPAA (Health Insurance Portability & Accountability Act of 1996, Public Law 104-191) Also known as the "Kennedy-Kassebaum Act," this U.S. law protects employees' health insurance coverage when they change or lose their jobs (Title I) and provides standards for patient health, and Gramm-Leach-Bliley legislation. For more information on Citadel, visit www.citadel.com, or contact the company at (214) 520-9292. 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 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: 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; the company's ability to attract and retain qualified personnel; and adjustments to the amounts presented in the unaudited financial tables as a result of the completion of the audit process. 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, 2003 and its Quarterly Report on Form 10-QSB for the quarter ended September 30, 2004. 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
UNAUDITED BALANCE SHEETS
DECEMBER 31,
2004 2003
------------ -----------
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $9,838,154 $5,092,161
Accounts receivable-trade, less allowance
of $209,000 and $78,500 615,749 1,699,154
Prepaid expenses and other current assets 1,466,354 214,655
------------ -----------
Total current assets 11,920,257 7,005,970
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $726,444 and $1,213,427 6,356,362 635,748
CAPITALIZED SOFTWARE DEVELOPMENT COSTS,
net of accumulated amortization of
$4,433,065 and $3,145,138 4,048,452 2,075,169
OTHER ASSETS 83,439 17,243
------------ -----------
TOTAL ASSETS $22,408,510 $9,734,130
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current portion of long-term debt $1,327,273 $-
Accounts payable and accrued expenses 3,040,665 1,372,826
Payroll tax obligations 350,093 252,317
Accrued compensation 1,063,577 516,128
Accrued preferred stock dividends payable 187,500 -
Current portion of deferred revenue 2,462,851 2,805,195
Notes and advances payable to related
parties - 16,903
------------ -----------
Total current liabilities 8,431,959 4,963,369
Long-term debt, less current portion 1,989,393 -
Deferred revenue, less current portion 480,172 -
Other non-current liabilities 714,466 -
PREFERRED STOCK, $1,000 stated value per
share; 1,000,000 shares authorized; 15,000
and 0 shares issued and outstanding at
December 31, 2004 and 2003, liquidation
preference of $15,187,500 10,701,847 -
COMMON STOCK, $.01 par value per share;
50,000,000 shares authorized; 29,845,730
and 27,830,511 shares issued and outstanding
at December 31, 2004 and 2003 298,457 278,305
ADDITIONAL PAID-IN CAPITAL 44,248,609 41,109,824
ACCUMULATED DEFICIT (44,456,393)(36,617,368)
------------ -----------
STOCKHOLDERS' EQUITY 10,792,520 4,770,761
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $22,408,510 $9,734,130
============ ===========
Unaudited Financial Tables
UNAUDITED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED YEARS ENDED
DECEMBER 31, DECEMBER 31,
2004 2003 2004 2003
---------- ---------- ----------- ----------
Revenue
License fees $548,031 $3,705,372 $12,361,585 $5,198,010
Customer support
and services 1,165,746 367,999 2,891,570 658,286
---------- ---------- ----------- ----------
Total revenue 1,713,777 4,073,371 15,253,155 5,856,296
Costs of revenue
Software
amortization 496,515 203,863 1,287,927 473,881
Customer support
and services
costs 490,814 101,818 1,507,661 288,323
Shipping and
other costs 18,217 21,255 36,496 56,544
---------- ---------- ----------- ----------
Total costs of
revenue 1,005,546 326,936 2,832,084 818,748
Operating expenses
Selling, general
and
administrative
expense 5,120,790 1,943,955 17,550,485 6,388,396
Product
development
expense 642,443 181,361 1,995,612 392,967
Depreciation
expense 265,399 70,182 670,782 207,924
Write-off of
fixed assets 77,786 - 77,786 -
---------- ---------- ----------- ----------
Total operating
expenses 6,106,418 2,195,498 20,294,665 6,989,287
---------- ---------- ----------- ----------
Operating
income (loss) (5,398,187) 1,550,937 (7,873,594) (1,951,739)
Interest income 19,767 - 107,261 -
Interest expense (53,900) (1,746,472) (82,612) (3,036,342)
Other income
(expense) - - 9,920 (35,500)
Write-off of note
receivable from
related party - - - (225,000)
---------- ---------- ----------- ----------
Loss before income
taxes (5,432,320) (195,535) (7,839,025) (5,248,581)
Provision for
income taxes - - - -
---------- ---------- ----------- ----------
Net loss (5,432,320) (195,535) (7,839,025) (5,248,581)
Preferred stock
dividends (187,500) - (664,940) -
Accretion of
preferred stock
beneficial
conversion feature (61,542) - (215,397) -
---------- ---------- ----------- ----------
Net loss to common
shareholders $(5,681,362) $(195,535) $(8,719,362)$(5,248,581)
========== ========== =========== ==========
Net loss per share
to common
shareholders
- basic and
diluted $(0.19) $(0.01) $(0.30) $(0.24)
========== ========== =========== ==========
Weighted average
common shares
outstanding -
- basic and
diluted 29,786,137 26,314,562 29,336,894 22,134,040
========== ========== =========== ==========
Unaudited Financial Tables
UNAUDITED STATEMENTS OF CASH FLOWS
YEARS ENDED
DECEMBER 31,
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(7,839,025) $(5,248,581)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 1,958,709 681,806
Write-off of fixed assets 77,786 -
Provision for returns,
allowances and bad debts 130,500 58,500
Stock compensation expense 129,995 -
Amortization of debt issuance
costs recognized as interest
expense 16,052 333,725
Beneficial conversion feature
of convertible debt
recognized as interest
expense - 1,543,310
Common stock issued in
conjunction with convertible
debt recognized as interest
expense - 1,067,928
Common stock issued to an
officer as compensation
expense - 82,500
Common stock, warrants and
stock options issued for
services - 265,210
Write-off of note receivable
from related party - 225,000
Changes in operating assets and
liabilities
Accounts receivable - trade 952,905 (1,590,989)
Prepaid expenses and other
current assets (1,198,994) (158,458)
Other assets (10,014) -
Accounts payable and accrued
expenses 898,611 98,511
Payroll tax obligations 97,776 (536,245)
Accrued compensation 547,449 250,688
Deferred revenue 137,828 2,655,002
----------- -----------
NET CASH USED IN OPERATING
ACTIVITIES (4,100,422) (272,093)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and
equipment (5,038,193) (411,211)
Capitalized software development
costs (3,261,210) (1,897,497)
Issuance of note receivable to CT
Holdings - (225,000)
----------- -----------
NET CASH USED IN INVESTING
ACTIVITIES (8,299,403) (2,533,708)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of
preferred stock 13,797,283 -
Borrowings on bank lines of
credit 3,500,000 -
Payments on bank lines of credit (183,334) -
Debt issue costs (26,396) -
Payment of preferred stock
dividends (477,439) -
Proceeds of notes and advances
from related parties - 888,522
Payments on notes and advances
from related parties (16,903) (1,463,160)
Proceeds from notes payable to
shareholders - 2,570,000
Payments on notes payable to
shareholders - (537,000)
Proceeds from issuance of common
stock - 2,397,467
Proceeds from exercise of
warrants 216,550 3,629,244
Proceeds from exercise of stock
options 336,057 199,060
Proceeds on notes receivable from
issuance of common stock - 201,000
----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 17,145,818 7,885,133
----------- -----------
Net increase in cash and cash
equivalents 4,745,993 5,079,332
Cash and cash equivalents at the
beginning of the year 5,092,161 12,829
----------- -----------
Cash and cash equivalents at the
end of the year $9,838,154 $5,092,161
=========== ===========
Unaudited Financial Tables
UNAUDITED STATEMENTS OF CASH FLOWS continued
YEARS ENDED
DECEMBER 31,
2004 2003
----------- -----------
Supplemental cash flow information:
Interest paid $54,989 $38,252
=========== ===========
Income taxes paid $- $-
=========== ===========
Non-cash investing item:
Note payable issued as settlement of
accounts payable $- $50,000
=========== ===========
Leasehold improvements funded by
landlord $836,448 $-
=========== ===========
Non-cash financing items:
Preferred stock dividend accrued $187,500 $-
=========== ===========
Beneficial conversion feature of
convertible preferred stock $984,649 $-
=========== ===========
Accretion of beneficial conversion
feature of convertible preferred
stock $215,397 $-
=========== ===========
Fair value of warrants issued in
connection with sale of preferred
stock $2,326,184 $-
=========== ===========
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 $45,838 $-
=========== ===========
Exercise of stock options in exchange
for note payable plus accrued
interest due former director $- $276,000
=========== ===========
Conversion of note payable plus
accrued interest into shares of
common stock $- $2,810,881
=========== ===========
Note payable issued for financing
fees recorded as debt issuance costs $- $212,000
=========== ===========
Warrants to purchase common stock
issued with convertible note payable
recorded as debt issuance cost $- $121,725
=========== ===========
Beneficial conversion feature of
convertible notes payable recorded
as debt discount $- $1,543,310
=========== ===========
Common stock issued with convertible
notes payable recorded as debt
discount $- $1,020,845
=========== ===========
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