root9B Technologies Chairman and CEO Joseph J. Grano, Jr. Issues 2014 Letter to Shareholders

NEW YORK, March 31, 2015 /PRNewswire/ -- Joseph J. Grano, Jr.,  Chairman and Chief Executive Officer of root9B Technologies, Inc. (OTCBB: RTNB), today issued a Letter to Shareholders in connection with the filing of the Company's Annual Report on Form 10-K with the Securities and Exchange Commission on March 30, 2015.  Investors may access these documents, free of charge, at www.sec.gov or via the "Investors Relations" section of the Company's web site at www.root9btechnologies.com.    

In his letter, Mr. Grano updates investors on the progress associated with the Company's continued evolution into a premier provider of cybersecurity and regulatory risk mitigation services, discusses 2014 operating results, and provides an outlook for 2015.  

The complete text of the letter follows:

March 30, 2015

Dear Shareholder,

It's been five months since my last letter to you.  During that time, root9B Technologies has continued with the plan of reorganization outlined in our last communication in preparation for the execution phase of our growth strategy.   

We have made substantial progress in enhancing the game-changing capabilities of our wholly-owned cybersecurity subsidiary, root9B, and narrowing our focus by concentrating on cybersecurity and regulatory risk mitigation.  Consistent with these objectives, we commenced a rebranding initiative and, effective December 1, 2014, changed our name and stock symbol to root9B Technologies, Inc. and "RTNB," respectively.  

A successful growth strategy requires a strong foundation built on organizational strength and solid economics.  We enhanced both critical areas with our February 2015 acquisition of IPSA International, now a wholly owned subsidiary of root9B Technologies.  IPSA, with 2014 revenues of approximately $41 million (up 24% from 2013), provides anti-money laundering solutions, investigative due diligence, litigation support, anti-bribery/corruption training, investigative services, and extensive background verification on behalf of several sovereign nations to support the issuance of International Passports.  IPSA's risk mitigation services provide a proven and reliable complement to our Business Advisory Solutions unit and significantly increases our suite of client service offerings, financial scale, and geographic reach.  In addition, IPSA provides us with an excellent opportunity to introduce root9B's innovative cybersecurity services to IPSA's current and future client base.  We welcomed some very talented executives to the team as a result of this acquisition, including Dan Wachtler, who will continue as CEO of IPSA and has joined root9B Technologies' Executive Management Committee and the Board of Directors Jillian Pap, IPSA's CAO and Kim Marsh, EVP of International Business.

The integration of IPSA will continue over the next 9-12 months.  As part of this process we will merge Business Advisory Solutions and IPSA into one Regulatory Risk Mitigation unit that will operate as IPSA International, a root9B Technologies Company.  We believe that combining the businesses is consistent with our organizational commitment to serve the needs of our three most important constituencies: our clients, our shareholders, and our employees. Graeme Booth who ran Business Advisory Solutions has been appointed President and Chief Operating Officer of IPSA and will continue to serve on the Executive Management Committee of root9B Technologies. 

Our wholly owned cybersecurity subsidiary root9B has continued to enhance its capabilities as a dynamic provider of cybersecurity and advanced training, operational support, and developer of game changing technology innovations and solutions.  We have continued to attract and hire some of the most accomplished, experienced and highly regarded cybersecurity specialists in the country, and now employ 45 uniquely qualified subject matter experts.  In the last 5 months, we have further refined and verified through Proof of Concepts (POC's) our proprietary Orion HUNT platform, and a newly introduced mobile version of Orion.  root9B has also developed a new proprietary service offering that identifies unauthorized use of credentials at an enterprise level. Matt Weeks, root9B Director of Emerging Technologies, recently presented this new service offering at this year's Applied Security Conference in Vancouver, CanSecWest 2015.  This, along with several more products will deliver unique innovative solutions when released later this year.  We believe root9B's team, operational and subject matter expertise and game changing solutions are unique in the industry.  We believe that we are positioned to take a leading role in facilitating cooperation and the exchange of information between public and private entities now required to adequately address the cybersecurity threat facing our nation. The recent hires of John Harbaugh one of the small number of NSA Certified Master-Level Operators, former intelligence community senior executive and member of the NSA Advisory Board(NSAAB) Emerging Technologies Panel; Leslie Clark, recipient of the National Intelligence Exceptional Achievement Medal and former NSA Cyber Portfolio Lead to the Department of Homeland Security (DHS);  Hank Bond former Director of Cyberspace Operations and Chief Information Office at the North American Aerospace Defense Command (NORAD) and the United States Command (NORTHCOM);   Aaron Shaha, former Technical Director for the NSA/CSS Threat Operations Center (NTOC) and recipient of the National Intelligence Award-Exceptional Achievement Medal; Eric Stride former Regional Chief of Cyber Operations for NSA NTOC, GA;  and Scott Myers, former Navy Information Warfare Officer and  NSA veteran all add the cybersecurity expertise, strong leadership, and managerial depth to significantly improve our operational services and product development.

Finally, to address the vulnerabilities that have damaged several of our nation's largest corporations, we have begun building an Adversary Pursuit Center in Colorado Springs which is expected to be fully operational in 90 days.  The Center will operate 24/7 and allow us to remotely access our client's proprietary network space with our trained operators.  The center will provide our clients with actionable threat intelligence, improve the efficacy of their existing passive capabilities and fuse internal client information with commercial data feeds to provide a more complete and accurate picture of the operational landscape. 

Our investments in root9B are starting to yield tangible results.  Recently we announced a $1.7 million government contract with Northcom and we are about to ink our first commercial contract for remote access through our HUNT platform with a Fortune 100 retail client.  However, the sales cycle has turned out to be longer than originally anticipated and many of our potential clients are requesting POC's to validate our paradigm changing approach to cybersecurity. This has added additional time to the sales cycle delaying the process by 90 to 120 days. We remain confident that our approach is correct, and we will receive continued recognition as a solution provider. We expect significant sales growth in 2015 in both the commercial and government sectors.  The commercial sector is beginning to realize that the traditional passive approach does not adequately protect against today's sophisticated state sponsored attacks and the increasing importance of Knowing Your Attacker (KYA) that root9B delivers.

We also shored up our balance sheet with the completion of $7.3 million in financing with a leading financial institution and a $4 million PIPE.  A portion of the proceeds was used to fund the IPSA transaction, with the remaining funds earmarked for working capital and capital expenditures required to support growth.  With these foundational improvements, we are ready to focus our efforts on executing our vision and delivering the strategic growth plan.  We view 2015 as a turnaround year for the company.

These restructuring and acquisition events were time consuming, and their associated costs had a negative impact on our operating performance for the 2014 year, and will similarly impact results for the first quarter of 2015.  As disclosed in our Form 10K, revenues for the year were $20.2 million as compared to $26.4 million in 2013, the result of an $8.8 million sales decline at our Energy Solutions business and a $1.5 million sales decline at our Business Advisory segment.  Conversely, our Cyber Solutions business generated $4.1 million in revenue during 2014, almost all of which was incremental to 2013 as a result of the acquisition of root9B.  Our loss from operations rose to $7.6 million in 2014 from $4.0 million in 2013, due to a combination of lower revenues and expansion costs associated with the ramp up of our Cyber Solutions business.   In conjunction with our decision to de-emphasize the Energy Solutions business we incurred a charge for the full impairment of the remaining goodwill and intangible assets of $6.4 million.  I encourage you to review our Form 10-K for a more thorough discussion of our initiatives and results.

I am, however, pleased to say that today we are better positioned operationally and financially, and that our branding and business development activities, especially with respect to root9B, are beginning to gain traction.  With the acquisition of IPSA, the ongoing build-out of our cybersecurity business, and the complete recognition of one time transaction costs, we believe our growth strategies will begin to bear fruit in the second half of this year.  We expect Q1 results from operations to reflect a loss followed by a smaller loss in Q2 and and we anticipate profitable operations commencing during the second half of the year.  2014 was the year we made some tough decisions that cleared the way for the reorganization and restructuring that will support our future growth efforts.  We haven't turned the corner quite yet but we are confident that the plan is sound and that we are positioned properly. The markets have thus far responded favorably.  The management team and I believe that the first half of 2015 will further the transition and we are optimistic that we will achieve profitability this year.  We will continue to provide you with updates throughout this turnaround year and appreciate your continued support and belief in our efforts, vision and leadership. 

Respectfully,

Joseph J Grano, Jr.
Chairman & Chief Executive Officer

About root9B Technologies, Inc.

root9B Technologies, Inc. (RTNB) is a leading Cybersecurity, Regulatory and Risk Mitigation Company. Headquartered in New York City, root9B Technologies (formerly Premier Alliance) has been helping its clients deliver results that improve productivity, mitigate risk and maximize profit since 1995. Its clients range in size from Fortune 100 companies to mid-sized and owner-managed businesses across a range of industries, including local, state and federal government agencies. For more information, visit www.root9Btechnologies.com.

Forward Looking Statements

This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding future financial performance, future growth and future acquisitions. These statements are based on root9B's current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive and/or regulatory factors, and other risks and uncertainties affecting the operation of root9B's business. These risks, uncertainties and contingencies are indicated from time to time in root9B's filings with the Securities and Exchange Commission. The information set forth herein should be read in light of such risks. Further, investors should keep in mind that root9B's financial results in any particular period may not be indicative of future results.  root9B is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.

SOURCE root9B Technologies, Inc.

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