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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 | 11-2889809 | |
(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.) | |
organization) | ||
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 | Smaller reporting companyþ | |||
(Do not check if smaller reporting company) |
Yeso Noþ
Class | Number of Shares | |
Common Stock: $0.01 Par Value | 8,496,398 |
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Exhibit 3.1 | ||||||||
Exhibit 3.2 | ||||||||
Exhibit 10.1 | ||||||||
Exhibit 10.2 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 |
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(in thousands, except par value)
March 31, | September 30, | |||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 559 | $ | 1,256 | ||||
Accounts receivable | 3 | — | ||||||
Marketable equity securities, available for sale | 8 | 35 | ||||||
Other current assets | 73 | 10 | ||||||
Total current assets | 643 | 1,301 | ||||||
Fixed assets, net | 74 | — | ||||||
Goodwill | 538 | — | ||||||
Other assets | 19 | — | ||||||
Total assets | $ | 1,274 | $ | 1,301 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 175 | $ | 2 | ||||
Deferred revenue | 35 | — | ||||||
Accrued expenses and other liabilities | 182 | 100 | ||||||
Total current liabilities | 392 | 102 | ||||||
Convertible notes payable, net of discount | 158 | — | ||||||
Total liabilities | 550 | 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; 8,609 and 6,007 shares issued; 8,496 and 5,146 shares outstanding | 86 | 60 | ||||||
Additional paid-in capital | 7,253 | 7,143 | ||||||
Accumulated deficit | (6,449 | ) | (5,086 | ) | ||||
Treasury stock, 113 and 861 shares, at cost | (166 | ) | (918 | ) | ||||
Total stockholders’ equity | 724 | 1,199 | ||||||
Total liabilities and stockholders’ equity | $ | 1,274 | $ | 1,301 | ||||
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Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
For the Three Months | For the Six Months | |||||||||||||||
Ended March 31, | Ended March 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Revenue | $ | 58 | $ | — | $ | 74 | $ | — | ||||||||
Operating expenses: | ||||||||||||||||
Cost of revenue | 78 | — | 85 | — | ||||||||||||
Sales and marketing | 219 | — | 220 | — | ||||||||||||
General and administrative | 523 | 267 | 1,107 | 472 | ||||||||||||
Total operating expenses | 820 | 267 | 1,412 | 472 | ||||||||||||
Operating loss | (762 | ) | (267 | ) | (1,338 | ) | (472 | ) | ||||||||
Interest and other (expense) income | (27 | ) | 4 | (25 | ) | 7 | ||||||||||
Loss from continuing operations | (789 | ) | (263 | ) | (1,363 | ) | (465 | ) | ||||||||
Discontinued Operations: | ||||||||||||||||
Loss from discontinued operations | — | (12 | ) | — | (274 | ) | ||||||||||
Gain on sale of discontinued operation | — | 87 | — | 627 | ||||||||||||
Income from discontinued operations | — | 75 | — | 353 | ||||||||||||
Net loss | $ | (789 | ) | $ | (188 | ) | $ | (1,363 | ) | $ | (112 | ) | ||||
Net loss per common share from continuing operations — basic and diluted | $ | (0.10 | ) | $ | (0.05 | ) | $ | (0.19 | ) | $ | (0.09 | ) | ||||
Net income per common share from discontinued operations — basic and diluted | ��� | 0.01 | — | 0.07 | ||||||||||||
Net loss per common share — basic and diluted | $ | (0.10 | ) | $ | (0.04 | ) | $ | (0.19 | ) | $ | (0.02 | ) | ||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic and diluted | 8,154 | 5,119 | 7,308 | 5,082 | ||||||||||||
Comprehensive Loss | ||||||||||||||||
Net loss | $ | (789 | ) | $ | (188 | ) | $ | (1,363 | ) | $ | (112 | ) | ||||
Other comprehensive loss: | ||||||||||||||||
Change in unrealized gain (loss) on available for sale securities | (12 | ) | 109 | — | (118 | ) | ||||||||||
Comprehensive loss | $ | (801 | ) | $ | (79 | ) | $ | (1,363 | ) | $ | (230 | ) | ||||
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Condensed Consolidated Statement of Stockholders’ Equity
(in thousands)
(unaudited)
Additional | Total | |||||||||||||||||||||||
Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||||||
Number | Amount | Capital | Deficit | Treasury Stock | Equity | |||||||||||||||||||
Balance— October 1, 2008 | 6,007 | $ | 60 | $ | 7,143 | $ | (5,086 | ) | $ | (918 | ) | $ | 1,199 | |||||||||||
Share-based compensation | 2,300 | 23 | 431 | — | — | 454 | ||||||||||||||||||
Shares and options issued for purchase of NCRC | 1,000 | 10 | 384 | — | — | 394 | ||||||||||||||||||
Option exercise | 50 | — | 8 | — | — | 8 | ||||||||||||||||||
Retirement of treasury stock | (748 | ) | (7 | ) | (745 | ) | — | 752 | — | |||||||||||||||
Issuance of common stock warrant in connection with debt financing | — | — | 32 | — | — | 32 | ||||||||||||||||||
Net loss | — | — | — | (1,363 | ) | — | (1,363 | ) | ||||||||||||||||
Balance— March 31, 2009 | 8,609 | $ | 86 | $ | 7,253 | $ | (6,449 | ) | $ | (166 | ) | $ | 724 | |||||||||||
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Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
For the six months ended | ||||||||
March 31, | ||||||||
2009 | 2008 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (1,363 | ) | $ | (465 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Share-based compensation | 454 | 134 | ||||||
Depreciation | 2 | — | ||||||
Loss on marketable securities | 27 | — | ||||||
Income from discontinued operations | — | (269 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Decrease in accounts receivable | 1 | 1,291 | ||||||
Decrease in inventories | — | 106 | ||||||
Increase in other current assets | (55 | ) | (97 | ) | ||||
Decrease in other assets | — | 6 | ||||||
Increase (decrease) in accounts payable and accrued expenses and other liabilities | 159 | (874 | ) | |||||
Net cash used in operating activities | (775 | ) | (168 | ) | ||||
Cash flows from investing activities | ||||||||
Acquisition costs, net of cash acquired | (61 | ) | — | |||||
Purchase of fixed assets and software | (59 | ) | — | |||||
Net cash provided by discontinued operations | — | 800 | ||||||
Net cash (used in) provided by investing activities | (120 | ) | 800 | |||||
Cash flows from financing activities | ||||||||
Proceeds from the issuance of long term notes | 190 | — | ||||||
Issuance of common stock from option exercise | 8 | — | ||||||
Other | — | (5 | ) | |||||
Net cash provided by (used in) financing activities | 198 | (5 | ) | |||||
Net (decrease) increase in cash and cash equivalents | (697 | ) | 627 | |||||
Cash and cash equivalents — beginning of period | 1,256 | 405 | ||||||
Cash and cash equivalents — end of period | $ | 559 | $ | 1,032 | ||||
Noncash: | ||||||||
Retirement of treasury shares | $ | 452 | $ | — | ||||
Issuance of warrant in connection with debt financing | $ | 32 | $ | — |
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Notes to Condensed Consolidated Financial Statements
(in thousands, except per share data)
(unaudited)
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Notes to Condensed Consolidated Financial Statements
(in thousands, except per share data)
(unaudited)
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Notes to Condensed Consolidated Financial Statements
(in thousands, except per share data)
(unaudited)
• | 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. |
March 31, | ||||||||
2009 | 2008 | |||||||
Outstanding stock options | 8,285 | 3,975 | ||||||
Warrants (exercisable at an average price of $0.54 per share) | 408 | 300 | ||||||
Totals | 8,693 | 4,275 | ||||||
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Notes to Condensed Consolidated Financial Statements
(in thousands, except per share data)
(unaudited)
Cash | $ | 15 | ||
Accounts receivable | 4 | |||
Equipment | 17 | |||
Other assets | 27 | |||
Goodwill | 538 | |||
Current liabilities | (131 | ) | ||
Total | $ | 470 | ||
Six Months | ||||
Ended March 31, | ||||
(In thousands, except per share amounts) | 2009 | |||
Net operating revenue | 119 | |||
Net loss from continuing operations attributable to common shareholder — basic and diluted | (1,410 | ) | ||
Net loss from continuing operations per common share — basic and diluted | (0.17 | ) |
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Notes to Condensed Consolidated 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 | 9.7 | |||||||||||||
Exercised | (50 | ) | 0.18 | — | ||||||||||||
Forfeited or Expired | (475 | ) | — | — | ||||||||||||
Outstanding at March 31, 2009 | 7,788 | $ | 0.28 | 6.1 | $ | 1,084 | * | |||||||||
Exercisable at March 31, 2009 | 6,203 | $ | 0.30 | 5.2 | $ | 792 | * | |||||||||
* | 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 market value of the Company’s stock was $0.39 at March 31, 2009 based upon its closing price on the OTC Bulletin Board. |
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Notes to Condensed Consolidated Financial Statements
(in thousands, except per share data)
(unaudited)
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Notes to Condensed Consolidated Financial Statements
(in thousands, except per share data)
(unaudited)
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• | our expectation that we will incur losses in the future; | ||
• | declines in consumer spending may reduce demand for our products; | ||
• | our failure to replace subscribers lost in the ordinary course of business may negatively harm our results of operations; | ||
• | marketing laws and regulations can limit our ability and our client’s ability to offer products and services to consumers; | ||
• | the loss of our ability to purchase data from any of the three major credit reporting repositories would decrease demand for our services; | ||
• | our competitors may market products that are more effective and less expensive than our products; | ||
• | our ability to negotiate additional sources of long-term capital; | ||
• | our affiliates own a significant percentage of our capital stock, and they may make decisions that you do not consider to be in the best interests of our stockholders; | ||
• | conflicts of interest may arise between Blue Moon and us that could be resolved in a manner unfavorable to us; | ||
• | if penny stock rules are applicable to our securities, it may be more difficult for investors to sell shares of our common stock, and the market price of our common stock may be adversely affected; and | ||
• | compliance with changing regulations concerning corporate governance and public disclosure may result in additional expenses. |
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On May 11, 2009, NCRC entered into a Joint Marketing Agreement with First Advantage Membership Services, Inc. (“FAMS”) pursuant to which we will market FAMS’s consumer reports, credit reporting monitoring services and credit scores. See the section entitled “Other Information” below for more information regarding this Joint Marketing Agreement.
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Name of Director | For | Withheld | ||||||
Charles E. Baker (election) | 6,705,360 | 15,026 | ||||||
William J. Caragol (ratification) | 6,705,360 | 15,026 | ||||||
Kevin H. McLaughlin (election) | 6,705,382 | 15,004 | ||||||
Michael E. Krawitz (ratification) | 6,705,382 | 15,004 |
Item 5. Other Information
Joint Marketing Agreement
On May 11, 2009, NCRC entered into a Joint Marketing Agreement (“JMA”) with FAMS, pursuant to which we will market FAMS’s consumer reports, credit reporting monitoring services and credit scores. The initial term of the JMA is two years with automatic renewal for one year terms unless written notice of termination is provided 60 days before the end of a term. FAMS can terminate the JMA if NCRC does not meet minimum purchase requirements.
The foregoing description of the JMA does not purport to be complete and is qualified in its entirety by the JMA that is filed as Exhibit 10.2 to this Quarterly Report.
Board of Director Approval of Second Amended and Restated Bylaws (the “Bylaws”)
On May 11, 2009, our Board of Directors unanimously approved amendments to, and restated, our Amended and Restated Bylaws. The following amendments were made so that our Bylaws are consistent with our Amended and Restated Certificate of Incorporation, as amended:
(i) provide that special meetings may also be called by a majority of the outstanding shares of common stock;
(ii) require that, if the date of the annual meeting is advanced by more than thirty days or delayed by more than sixty days from the anniversary date of the preceding year’s annual meeting, notice by the stockholder to be timely must be received not earlier than the ninetieth day prior to such annual meeting and not later than the close of business on the later of (1) the sixtieth day prior to such annual meeting or (2) the tenth day following the date on which notice of the date of the annual meeting is mailed or public disclosure thereof is made, whichever first occurs;
(iii) require that stockholder nominations for directors at a special meeting called for that purpose must be made not earlier than the ninetieth day prior to such special meeting and not later than the close of business on the later of (x) the sixtieth day prior to such meeting or (y) the tenth day following the day on which notice of the date of the special meeting is mailed or public disclosure thereof is made, whichever comes first; and
(iv) clarify that, unless provided otherwise by the Amended and Restated Certificate of Incorporation, as amended, or the Bylaws, all matters are decided by the holders of a majority in voting power of the shares present in person or by proxy at the meeting and entitled to vote on the subject matter.
The following additional amendments were also made to our Bylaws:
(i) allow notice of meeting to be given in different forms;
(ii) clarify that a stockholder who desires to submit a proposal must be the stockholder of record on the date of the stockholder’s notice and on the record date for the determination of stockholders to vote at the annual or special meeting and that the applicable stockholder proposal provisions in the Bylaws are the exclusive means for a stockholder to submit business before a stockholders’ meeting;
(iii) add information requirements regarding the stockholder submitting a proposals, including, the text of the proposal or business, the name and address of the beneficial owner, if any, on whose behalf the proposal is made, specific information regarding ownership of our shares, including any derivative instruments or short interest in our securities, any rights to dividends on our shares, and any performance-related fees that the stockholder or beneficial owner is entitled to based on an increase or decrease in the value of our securities;
(iv) add information requirements regarding the candidate a stockholder is nominating for election of directors, including, a complete resume, his or her compensation and other material monetary agreements during the past three years, any material relationships between the stockholder or beneficial owner and their affiliates on the one hand and the candidate and his or her affiliates on the other hand, and the information described in section (iii) immediately preceding;
(v) add advance notice requirements for a stockholder seeking to nominate a director as a result of an increase in board size;
(vi) clarify that voting at stockholders’ meetings may be by electronic transmission and that any vote not required to be taken by written ballot or electronic transmission may be conducted in any manner approved by our board of directors;
(vii) permit our board of directors to set one record date for stockholders required to receive notice of a stockholders’ meeting and a separate record date for stockholders who may vote at such meeting;
(viii) provide that notice must be given to the directors if a meeting of the directors is adjourned and the time or place of the adjourned meeting is not announced at the time of adjournment;
(ix) add that directors may consent in writing by facsimile or other electronic transmission;
(x) add provisions regarding the resignation, removal and vacancy procedures for committees of the board of directors;
(xi) provide that stock may be uncertificated and signatures on our stock certificates may be by facsimile;
(xii) clarify that a dividend may be paid in cash, property or shares of our capital stock;
(xiii) provide that we are not obligated to indemnify a director or officer in a proceeding instituted by such person unless appropriate approval is obtained;
(xiv) provide that any alteration, repeal or amendment to the indemnification provision of the Bylaws cannot eliminate a right to indemnification that occurred before such change;
(xv) repeal a provision requiring, for interested director transactions, the affirmative vote of at least two-thirds of the votes entitled to be cast by holders of all the then outstanding voting stock, excluding stock owned by the interested person; and
(xvi) add a provision regarding our board of director’s ability to authorize officers to enter into contracts.
The Board of Directors also made certain technical and conforming amendments to the Bylaws. The foregoing description of our Bylaws does not purport to be complete and is qualified in its entirety by the Bylaws filed as Exhibit 3.2 to this Quarterly Report.
Changes to Stockholder Nominations for Directors
As a result of the amendment and restatement of our Bylaws, effective May 11, 2009, certain material changes to the procedures by which our stockholders may recommend nominees to our board of directors occurred. For more information, see the section entitled “Board of Director Approval of Second Amended and Restated Bylaws” above and Exhibit 3.2 to this Quarterly Report.
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Steel Vault Corporation | ||||
By: | /s/ William J. Caragol | |||
William J. Caragol | ||||
Chief Executive Officer, President and Acting Chief Financial Officer (Duly Authorized Officer) |
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Exhibit | ||||
Number | Description | |||
3.1 | * | Amended and Restated Certificate of Incorporation dated April 21, 1997, as amended | ||
3.2 | * | Second Amended and Restated By-Laws | ||
10.1 | * | Steel Vault Corporation 2009 Stock Incentive Plan | ||
10.2 | *† | Joint Marketing Agreement, dated May 11, 2009, between National Credit Report.com, LLC and First Advantage Membership Services, Inc. | ||
10.3 | Letter Agreement, dated February 13, 2009, by and between Steel Vault Corporation and William J. Caragol (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q filed with the SEC on February 17, 2009) | |||
10.4 | Secured Convertible Promissory Note, dated March 20, 2009, between Steel Vault Corporation and Blue Moon Energy Partners LLC (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on March 24, 2009) | |||
10.5 | Security Agreement, dated March 20, 2009, between Steel Vault Corporation and Blue Moon Energy Partners LLC (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on March 24, 2009) | |||
10.6 | Warrant to Purchase Common Stock of Steel Vault Corporation, dated March 20, 2009, given to Blue Moon Energy Partners LLC (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on March 24, 2009) | |||
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 |
* | Filed herewith. | |
† | Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission. |
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