Table of Contents
SECURITIES AND EXCHANGE COMMISSION
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
DELAWARE (State or other jurisdiction of incorporation or organization) | 11-2889809 (I.R.S. Employer Identification No.) | |
1690 South Congress Avenue, Suite 200 | ||
Delray Beach, Florida 33445 | (561) 805-8000 | |
(Address of principal executive offices, | (Registrant’s telephone number, including area code) | |
including zip code) |
Large accelerated filero | Accelerated filero | Non-accelerated filero (Do not check if smaller reporting company) | Smaller reporting companyþ |
Yeso Noþ
Class | Number of Shares | |
Common Stock: $0.01 Par Value | 8,146,398 |
Item | Page | |||||||
1 | ||||||||
1 | ||||||||
12 | ||||||||
14 | ||||||||
14 | ||||||||
15 | ||||||||
15 | ||||||||
15 | ||||||||
15 | ||||||||
16 | ||||||||
17 | ||||||||
Exhibit 10.1 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 |
Table of Contents
Condensed Consolidated Balance Sheets
(in thousands, except par value)
(Unaudited)
December 31, | September 30, | |||||||||
2008 | 2008 | |||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 840 | $ | 1,256 | ||||||
Accounts receivable | 5 | — | ||||||||
Marketable equity securities, available for sale | 47 | 35 | ||||||||
Other current assets | 88 | 10 | ||||||||
Total current assets | 980 | 1,301 | ||||||||
Fixed assets, net | 82 | — | ||||||||
Goodwill | 473 | — | ||||||||
Other assets | 24 | — | ||||||||
Total assets | $ | 1,559 | $ | 1,301 | ||||||
Liabilities and Stockholders’ Equity | ||||||||||
Liabilities | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 68 | $ | 2 | ||||||
Accrued expenses and other liabilities | 86 | 100 | ||||||||
Total current liabilities | 154 | 102 | ||||||||
Total liabilities | 154 | 102 | ||||||||
Commitments and contingencies | ||||||||||
Stockholders’ equity: | ||||||||||
Preferred shares: | ||||||||||
Authorized 5,000 shares, no par value; none issued | — | — | ||||||||
Common shares: | ||||||||||
Authorized 80,000 shares, $.01 par value; 9,007 and 6,007 shares issued; 8,146 and 5,146 shares outstanding | 90 | 60 | ||||||||
Additional paid-in capital | 7,881 | 7,143 | ||||||||
Accumulated deficit | (5,660 | ) | (5,086 | ) | ||||||
Accumulated other comprehensive income | 12 | — | ||||||||
Treasury stock, 861 shares, carried at cost | (918 | ) | (918 | ) | ||||||
Total stockholders’ equity | 1,405 | 1,199 | ||||||||
Total liabilities and stockholders’ equity | $ | 1,559 | $ | 1,301 | ||||||
2
Table of Contents
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
For the Three Months | ||||||||
Ended December 31, | ||||||||
2008 | 2007 | |||||||
Revenue | $ | 16 | $ | — | ||||
Cost of sales | 7 | — | ||||||
Gross profit | 9 | — | ||||||
Operating expenses: | ||||||||
Selling, general and administrative | 585 | 205 | ||||||
Operating loss | (576 | ) | (205 | ) | ||||
Interest and other income | 2 | 3 | ||||||
Loss from continuing operations | (574 | ) | (202 | ) | ||||
Discontinued Operations: | ||||||||
Loss from discontinued operations | — | (261 | ) | |||||
Gain on sale of discontinued operation | — | 540 | ||||||
Income from discontinued operations | — | 279 | ||||||
Net (loss) income | $ | (574 | ) | $ | 77 | |||
Net loss per common share from continuing operations — basic and diluted | $ | (0.09 | ) | $ | (0.04 | ) | ||
Net income per common share from discontinued operations — basic and diluted | — | 0.06 | ||||||
Net (loss) income per common share — basic and diluted | $ | (0.09 | ) | $ | 0.02 | |||
Weighted average number of common shares outstanding: | ||||||||
Basic and diluted | 6,459 | 5,046 | ||||||
Comprehensive (Loss) Income | ||||||||
Net (loss) income | $ | (574 | ) | $ | 77 | |||
Other comprehensive loss: | ||||||||
Unrealized gain (loss) on available for sale securities | 12 | (227 | ) | |||||
Comprehensive loss | $ | (562 | ) | $ | (150 | ) | ||
3
Table of Contents
Condensed Consolidated Statement of Stockholders’ Equity
(in thousands)
(unaudited)
Accumulated | ||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||
Common Stock | Paid-in | Accumulated | Comprehensive | Total | ||||||||||||||||||||||||
Number | Amount | Capital | Deficit | Income | Treasury Stock | Stockholders’Equity | ||||||||||||||||||||||
Balance— October 1, 2008 | 6,007 | $ | 60 | $ | 7,143 | $ | (5,086 | ) | $ | — | $ | (918 | ) | $ | 1,199 | |||||||||||||
Share-based compensation | 2,000 | 20 | 354 | — | — | 374 | ||||||||||||||||||||||
Shares and options issued for purchase of NCRC | 1,000 | 10 | 384 | — | — | 394 | ||||||||||||||||||||||
Unrealized gain on available for sale securities | — | — | — | — | 12 | — | 12 | |||||||||||||||||||||
Net loss | — | — | (574 | ) | — | (574 | ) | |||||||||||||||||||||
Balance— December 31, 2008 | 9,007 | $ | 90 | $ | 7,881 | $ | (5,660 | ) | $ | 12 | $ | (918 | ) | $ | 1,405 | |||||||||||||
4
Table of Contents
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
For the three months ended | ||||||||
December 31, | ||||||||
2008 | 2007 | |||||||
Cash flows from operating activities | ||||||||
Net (loss) income | $ | (574 | ) | $ | 77 | |||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Share-based compensation | 374 | 13 | ||||||
Income from discontinued operations: | — | (279 | ) | |||||
Changes in operating assets and liabilities | ||||||||
Decrease in accounts receivable | — | 561 | ||||||
Decrease in inventories | — | 62 | ||||||
Increase in other current assets | (76 | ) | (802 | ) | ||||
Decrease in other assets | — | 6 | ||||||
Decrease in accounts payable and accrued expenses and other liabilities | (78 | ) | (148 | ) | ||||
Net cash used in discontinued operations | — | (256 | ) | |||||
Net cash used in operating activities | (354 | ) | (766 | ) | ||||
Cash flows from investing activities | ||||||||
Acquisition costs, net of cash acquired | (62 | ) | — | |||||
Net cash provided by discontinued operations | — | 800 | ||||||
Net cash (used in) provided by investing activities | (62 | ) | 800 | |||||
Cash flows from financing activities | ||||||||
Net payments on line of credit | — | (2 | ) | |||||
Net payments to former parent company | — | (3 | ) | |||||
Net cash used in financing activities | — | (5 | ) | |||||
Net (decrease) increase in cash and cash equivalents | (416 | ) | 29 | |||||
Cash and cash equivalents — beginning of period | 1,256 | 405 | ||||||
Cash and cash equivalents — end of period | $ | 840 | $ | 434 | ||||
5
Table of Contents
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share data)
(unaudited)
6
Table of Contents
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share data)
(unaudited)
[a] | Revenue from the sale of credit report is recognized when the credit report is delivered to the customer. Revenue from the sale of annual subscriptions for credit monitoring and credit protection is recognized ratably over each subscriber’s annual subscription period. The Company also offers credit monitoring and credit protection on a month-to month basis. In certain circumstances, the Company sells a bundled offer whereby a customer receives a single credit report and monitoring. In such circumstances, the Company allocates a portion of the associated revenue to the credit report with the balance recognized ratably over the subscription period. | ||
[b] | Commission revenue is comprised of commissions earned by the Company for the credit reports, credit monitoring, and credit protection services provided to a third party customer on that customer’s website. Commission revenue is recognized when the credit reports, credit monitoring, and credit protection services have been provided to the customer. Generally, the Company invoiced its customers on a monthly basis for costs incurred from their credit reporting vendor plus a commission. For the three months ended December 31, 2008, gross commission revenue was approximately $5. |
Fair Value Of Financial Instruments
The carrying values of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the relatively short maturity of these instruments.
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements.” SFAS 157 defines fair value and establishes a framework for measuring fair value in accordance with GAAP. The statement also expands the disclosures related to the fair value measurements used to value assets and liabilities. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company adopted SFAS 157 October 1, 2008. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard is now the single source in generally accepted accounting principles for the definition of fair value, except for the fair value of leased property as defined in SFAS 13. SFAS 157 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs), (2) assumptions that are other than quoted prices which are either directly or indirectly observable for the asset or liability through correlation with market data and (3) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The three levels of the fair value hierarchy under SFAS 157 are described below:
• | Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
• | Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
• | Level 3—Inputs that are both significant to the fair value measurement and unobservable. |
At December 31, 2008, the Company had Level 1 investments of approximately $47 for which quoted prices in active markets were used to value the underlying securities.
7
Table of Contents
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share data)
(unaudited)
December 31, | ||||||||
2008 | 2007 | |||||||
Outstanding stock options | 8,435 | 3,975 | ||||||
Warrants (exercisable at $.5775 per share) | 300 | 300 | ||||||
Totals | 8,735 | 4,275 | ||||||
Cash | $ | 15 | ||
Accounts receivable | 4 | |||
Equipment | 82 | |||
Other assets | 27 | |||
Current liabilities | (131 | ) | ||
Total | $ | (3 | ) | |
Three Months | ||||
Ended December 31, | ||||
(In thousands, except per share amounts) | 2008 | |||
Net operating revenue | $ | 61 | ||
Net loss from continuing operations attributable to common shareholder — basic and diluted | $ | (364 | ) | |
Net loss from continuing operations per common share — basic and diluted | $ | (.05 | ) |
8
Table of Contents
Notes to Consolidated Condensed Financial Statements
(in thousands, except per share data)
(unaudited)
Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Stock | Average | Contractual | Aggregate | |||||||||||||
Options | Exercise Price | Term | Intrinsic Value | |||||||||||||
Outstanding October 1, 2008 | 5,570 | $ | 0.35 | 4.5 | ||||||||||||
Granted | 2,743 | 0.18 | 9.9 | |||||||||||||
Exercised | — | — | — | |||||||||||||
Forfeited or Expired | (375 | ) | — | — | ||||||||||||
Outstanding at December 31, 2008 | 7,938 | $ | 0.28 | 6.6 | $ | 1,617 | * | |||||||||
Exercisable at December 31, 2008 | 6,253 | $ | 0.30 | 4.7 | $ | 1,188 | * | |||||||||
* | The intrinsic value of a stock option is the amount by which the fair value of the underlying stock exceeds the exercise price of the option. The fair value of the Company’s stock was $0.46 at December 31, 2008 based upon its closing price on the OTC Bulletin Board. |
9
Table of Contents
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share data)
(unaudited)
10
Table of Contents
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share data)
(unaudited)
11
Table of Contents
12
Table of Contents
13
Table of Contents
14
Table of Contents
15
Table of Contents
IFTH Acquisition Corp. | ||||
By: | /s/ William J. Caragol | |||
William J. Caragol | ||||
Chief Executive Officer, President, Acting Chief Financial Officer and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | ||||
Date: February 17, 2009 |
16
Table of Contents
Exhibit | ||||
Number | Description | |||
3.1 | Amended and Restated Certificate of Incorporation dated April 21, 1997, as amended (incorporated by reference to Exhibit 3.1 to the registrant’s Annual Report on Form 10-K filed with the SEC on December 24, 2008) | |||
3.2 | Amended and Restated By-Laws (incorporated by reference to Exhibit 3.4 to the registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 14, 2003) | |||
10.1 | * | Letter Agreement, dated February 13, 2009, by and between IFTH Acquisition Corp. d/b/a Steel Vault and William J. Caragol | ||
31.1 | Certification by Chief Executive Officer of the registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
31.2 | Certification by Chief Financial Officer of the registrant Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
32.1 | Certification by Chief Executive Officer and Chief Financial Officer of the registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
* | Management contract or compensatory plan. |
17