Cyalume Technologies (CYLU) 10-Q 2007 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2007.

or

	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                  to                 .

Commission File Number: 000-52247

VECTOR INTERSECT SECURITY ACQUISITION CORP.
(Exact name of registrant as specified in its charter)

Delaware			20-3200738
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

65 Challenger Road, Ridgefield Park, NJ
(Address of Principal Executive Offices including Zip Code)

(201) 708-9801
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange. (Check one):

Large Accelerated Filer                  Accelerated Filer                  Non-Accelerated Filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No

There were 9,375,000 shares of the Registrant’s common stock issued and outstanding as of November 14, 2007.

Vector Intersect Security Acquisition Corp.

Index to Form 10-Q

Part I.

Financial Information

Item 1.

Financial Statements (unaudited)

1

Balance Sheets

1

Statements of Operations

2

Statement of Stockholders’ Equity

3

Statement of Cash Flows

4

Notes to Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

12

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

14

Item 4.

Controls and Procedures

15

Item 4T.

Controls and Procedures

15

Part II.

Other Information

Item 1.

Legal Proceedings

16

Item 1A.

Risk Factors

16

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

16

Item 3.

Defaults Upon Senior Securities

16

Item 4.

Submission of Matters to a Vote of Security Holders

16

Item 5.

Other Information

16

Item 6.

Exhibits

17

SIGNATURES

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED)

Vector Intersect Security Acquisition Corp.
(a corporation in the development stage)
Balance Sheet

			September 30, 2007						December 31, 2006
			(Unaudited)						(Audited)
ASSETS
Current assets:
Cash				$	244,364					$	24,279
Investment in trust account					58,280,433						—
Prepaid Expenses					122,778						—
Total current assets					58,647,575						24,279
Deferred offering costs					—						432,338
Total assets				$	58,647,575					$	456,617
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
Current liabilities:
Deferred underwriting fees					2,340,000						—
Accounts payable and accrued expenses					59,697						182,550
Accrued interest on notes payable, stockholders					17,414						13,157
Income taxes payable					121,500						—
Due to stockholders					8,820						31,769
Notes payable, stockholders					205,000						348,791
Total current liabilities					2,752,432						576,267
Common Stock, subject to possible redemption, 1,462,499 shares, at redemption price of $7.62 per share				$	11,144,242					$	—
Commitments and Contingencies
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock, $0.001 par value
Authorized 1,000,000 shares; none issued					—						—
Common stock, $0.001 par value Authorized 50,000,000 shares Issued and outstanding 1,875,000 shares and 9,375,000 at December 31, 2006 and September 30,, 2007					9,375						1,875
Additional paid-in-capital					44,439,734						23,125
Earning (Deficit) accumulated during the development stage					301,792						(144,650	)
Total stockholders’ equity (deficit)					44,750,901						(119,650	)
Total liabilities and stockholders’ equity (deficit)				$	58,647,575					$	456,617

See notes to financial statements.

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Table of Contents

Vector Intersect Security Acquisition Corp.
(a corporation in the development stage)
Statement of Operations
(Unaudited)

			Nine Months Ended												Three Months Ended												For the period from July 19, 2005 (inception) to September 30, 2007
			September 30, 2007						September 30, 2006						September 30, 2007						September 30, 2006
Interest Income				$	861,202					$	—					$	518,768					$	—					$	861,202
Operating expenses					267,107						46,849						142,832						27,072						398,600
Income (loss) before interest expense and income taxes				$	594,094					$	(46,849	)				$	375,936					$	(27,072	)				$	462,601
Interest expense – related party					26,152						7,253						15,073						4,460						39,309
Income before provision for income taxes				$	567,943					$	(54,102	)				$	360,863					$	(31,532	)				$	423,293
Provision for income taxes				$	121,500											$	—					$	—					$	121,500
Net income (loss) for the period				$	446,443					$	(54,102	)				$	269,763					$	(31,532	)				$	301,793
Weighted average shares outstanding –																							0
basic					6,082,418						1,875,000						9,375,000						1,875,000						2,509,494
diluted					7,411,104						1,875,000						11,759,038						1,875,000						2,961,214
Net income (loss) per share – Basic				$	0.09					$	(0.03	)				$	0.04					$	(0.02	)				$	0.17
Net income (loss) per share – Diluted				$	0.08					$	(0.03	)				$	0.03					$	(0.02	)				$	0.14

See notes to financial statements.

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Table of Contents

Vector Intersect Security Acquisition Corp.
(a corporation in the development stage)
Statement of Stockholders Equity (deficit)

			Common Stock												Additional Paid-in capital						Deficiency Accumulated During the Development Stage						Total Stockholders’ Equity (Deficit)
			Shares						Amount
Balances at December 31, 2005					1,875,000					$	1,875					$	23,125					$	(67,116	)				$	(42,116	)
Net loss for the period					—						—						—						(77,534	)					(77,534	)
Balances at December 31, 2006					1,875,000						1,875						23,125						(144,650	)					(119,650	)
Private placement – April 25, 2007					187,500						187						1,499,814												1,500,000
Common shares issued September 30, 2007 @ $8 per share					7,312,500						7,314						58,492,687												58,500,000
Expenses of the Offering																	(4,431,649	)											(4,431,649	)
Proceeds subject to possible redemption of 1,462,499 shares																	(11,144,242	)											(11,144,242	)
Net income for the period																							446,443						446,443
Balances at September 30, 2007				$	9,375,000					$	9,375					$	44,439,734					$	301,793					$	44,750,902

See notes to financial statements.

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Table of Contents

Vector Intersect Security Acquisition Corp.
(a corporation in the development stage)
Statement of Cash Flows
(Unaudited)

			Nine Months Ended												For the period from July 19, 2005 (inception) to September 30, 2007
			September 30, 2007						September 30, 2006
Cash flows from operating activities:
Net loss				$	446,443					$	(54,102	)				$	301,793
Adjustments to reconcile net loss to net cash provided by operating activities:
Changes in:
Insurance premium refund receivable											18,903
Accounts payable and accrued expenses					(122,853	)					(50,867	)					59,697
Prepaid Expenses					(122,778	)											(122,778	)
Income taxes payable					121,500												121,500
Accrued interest on notes payable, stockholders					4,257						10,259						17,413
Net cash provided by (used in) operating activities					326,569						(75,807	)					377,626
Cash flows from Investment activities:
Payment to trust account					(58,280,433	)					—						(58,280,433	)
Net cash used in investing activities					(58,280,433	)					—						(58,213,919	)
Cash flows from financing activities:
Payment of deferred expenses related to initial public offering					—						—
Proceeds from advances from stockholder					(22,949	)					8,820						8,820
Proceeds from sale of shares of common stock					—												25,000
Proceeds from notes payable, stockholders					(143,791	)					143,791						205,000
Proceeds from private placement					1,500,000												1,500,000
Proceeds from initial public offering					58,500,000												58,500,000
Payment of expenses of offering					(1,659,311	)					(57,291	)					(2,091,648	)
Net cash provided by (used in) financing activities					58,173,949						95,320						58,147,172
Net increase in cash					220,086						19,513						244,364
Cash at the beginning of the period					24,279						9,661						—
Cash at the end of the period				$	244,365					$	29,174					$	244,364
Supplemental Disclosure of non-cash financing activities
Accrual of deferred offering costs				$	2,340,000					$	—					$	2,489,782

See notes to financial statements.

4

Vector Intersect Security Acquisition Corp.
(a development stage company)

Notes to Condensed Financial Statements
September 30, 2007

1.    Organization, Proposed Business Operations and Summary of Significant Accounting Policies		Basis of Presentation The financial statements of Vector Intersect Security Acquisition Corporation (the ‘‘Company’’) at September 30, 2007, for the three and nine months ended September 30, 2007 and 2006, and for the period from July 19, 2005 (inception) to September 30, 2007, are unaudited. In the opinion of management, all adjustments (consisting of normal adjustments) have been made that are necessary to present fairly the financial position of the Company as of September 30, 2007 and the results of its operations and its cash flows for the three and nine months ended September 30, 2007 and 2006, and for the period of from July 19, 2005 (inception) to September 30, 2007. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for the full fiscal year. The balance sheet at December 31, 2006 has been derived from the audited financial statements.

		Vector Intersect Security Acquisition Corporation (the ‘‘Company’’) was incorporated in Delaware on July 19, 2005 as a blank check company. Its objective is to acquire, through merger, capital stock exchange, asset acquisition or other similar Business Combination (as defined below), one or more businesses in the homeland security, national security and/or command and control industries.

		The registration statement for the Company’s initial public offering (the ‘‘Public Offering’’) was declared effective on April 25, 2007. The Company completed a private placement (the ‘‘Private Placement’’) and received gross proceeds of $1,500,000 on April 25, 2007. The Company consummated the Public Offering on May 1, 2007 and received gross proceeds of $58,500,000. The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Private Placement and the Public Offering (collectively the ‘‘Offerings’’) (each as described in Note 2), although substantially all of the net proceeds of the Offerings are intended to be generally applied t oward consummating a business combination with a target company. As used herein, a ‘‘target business’’ shall include an operating business in the homeland security or defense industries, or a combination thereof, and a ‘‘business combination’’ shall mean the acquisition by the Company of such a target business. There is no assurance that the Company will be able to effect a business combination successfully.

		Of the proceeds of the Offerings, $58,030,000 was placed in a trust account (‘‘Trust Account’’) at JP MorganChase,

5

		New York, New York, maintained by American Stock Transfer & Trust Company, the Company’s transfer agent. This amount includes the net proceeds of the Public Offering and the Private Placement, and $2,340,000 of deferred underwriting compensation fees (the ‘‘Discount’’) which will be paid to Rodman & Renshaw, LLC if, and only if, a business combination is consummated. The funds in the Trust Account will be invested until the earlier of (i) the consummation of the Company’s first business combination or (ii) the liquidation of the Trust Account as part of a plan of dissolution and liquidation approved by our stockholders. Up to $1,500,000 of interest income on the Trust Account may be used to fund the Company’s working capital requirements including payments for legal, accounting, due diligence on prospective acquisitions and continuing general and administrative expenses.

		The Company, after signing a definitive agreement for the acquisition of a target business, will submit such transaction for stockholder approval. In the event (i) the Business Combination is not approved by a majority of the shares of common stock or (ii) 20% or more of the shares of common stock held by the public stockholders vote against the Business Combination and exercise their conversion rights described below, the Business Combination will not be consummated.

		With respect to the first Business Combination which is approved and consummated, any Public Stockholder who voted against the Business Combination may demand that the Company redeem its, his or her shares. The per share redemption price will equal the amount in the Trust Fund, plus interest (net of taxes payable and net of up to $1,500,000 of interest income on the Trust Fund that may be used to fund the Company’s working capital) calculated as of two business days prior to the proposed Business Combination, divided by the number of shares of common stock held by Public Stockholders at the consummation of the Public Offering. Accordingly, Public Stockholders holding approximately 19.99% of the aggregate number of shares owned by all Public Stockholders may seek redemption of their shares i n the event of a Business Combination. Such Public Stockholders are entitled to receive their per share interest in the Trust Fund computed without regard to the shares held by the Initial Stockholders.

		Income Taxes

		The Company recorded a deferred tax asset of $49,181 at December 31, 2006 for the tax effect of temporary differences, aggregating $144,650 for the period ending on December 31, 2006. In recognition of the uncertainty regarding the ultimate amount of income tax benefits it will realize, the Company has recorded a valuation allowance equal to 100% of the deferred tax asset at December 31, 2006.

6

		On January 1, 2007 the company adopted, FASB Issue Interpretation No. 48, ‘‘Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109’’ (‘‘FIN 48’’). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS No. 109, ‘‘Accounting for Income Taxes.’’ FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoptions of ‘‘FIN 48’’ had no effect on our f inancial condition or results of operation.

		We recognize interest and penalties related to uncertain tax positions in income tax expense. The tax years 2005 and 2006 remain open to examination by the major taxing jurisdictions to which we are subject.

		The effective tax rate differs from the statutory rate of 34% due to the increase in the valuation allowance.

		Use of estimates

		The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

		Recent Accounting Pronouncements

		Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material affect on the accompanying financial statements.

2.   Offerings		On April 25, 2007 the Company sold 187,500 units in a Private Placement, and on May 1, 2007 the Company sold 7,312,500 units in a Public Offering collectivity (the ‘‘Units’’). Each Unit consists of one share of the Company’s common stock, $0.001 par value, and one common stock purchase warrant (‘‘Warrants’’). Each Warrant entitles the holder to purchase from the Company one share of common stock at an exercise price of $5.00 per share (which Warrant may be exercised on a cashless basis) commencing the later of (a) one year from the effective date of the Public Offering; or (b) the completion of a Business Combination with a target business and expiring four years from the date of the prospectus (unless earlier redeemed). The Warrant is redeemable at a price of $0.01 per Warrant upon 30 days notice after the Warrant becomes exercisable, only in the event that (a) the last sales price of the common stock is at least $11.50 per share for any 20 trading days within a 30-trading-day period

7

		ending on the third business day prior to date on which notice of redemption is given.

		The Company will use its best efforts to cause a registration statement to become effective on or prior to the commencement of the Warrant exercise period and to maintain the effectiveness of such registration statement until the expiration of the Warrants. The Warrants may not be exercised in the absence of an effective registration statement, and, in the event that the Company is unable to maintain the effectiveness of such registration statement until the expiration of the Warrants, and therefore is unable to deliver registered shares, the Warrants may expire unexercised and worthless. In no event will the Company be required to net-cash settle the Warrants. Accordingly, the Company has determined that the Warrants should be classified in stock holders’ equity upon issuance in accordance with the guidance in EITF 00-19, ‘‘Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock’’.

3.   Deferred Offering Costs		Deferred offering costs consist of legal, auditing, regulatory filing, underwriting fees and other costs incurred related to the Proposed Offerings that were charged to stockholders’ equity upon receipt of the capital raised.

4.   Advances from Stockholder		In March 2006 and in September 2006, a stockholder advanced the Company a total of $8,820 and $22,950 respectively for operating expenses. The advance is non-interest bearing and is due on demand.

5.   Notes Payable, Stockholders		In addition to their purchase of the Company’s common stock, two of the Company’s stockholders and officers advanced the Company an aggregate of $205,000 in exchange for unsecured promissory notes. The notes bear interest at a rate of 4% per annum with principal and accrued interest due no later than the first anniversary of the initial public offering of the Company.

		The Company issued two additional notes with an aggregate principal amount of $143,791 to SCP Private Equity Management Company, LLC. The notes bear interest at a rate of 5.5% per annum with principal and accrued interest due no later than the first anniversary of the initial public offering of the Company.

		Due to the short-term nature of the notes, the fair value of the notes approximates their carrying value.

6.    Per Share Information		In accordance with SFAS No. 128, ‘‘Earnings Per Share,’’ basic income per common share (‘‘Basic EPS’’) is computed by dividing the net income by the weighted-average number of shares outstanding. Diluted income per common share (‘‘Diluted EPS’’) is computed by dividing the net income by the weighted-average

8

		number of common shares and dilutive common share equivalents then outstanding. SFAS No. 128 requires the presentation of both Basic EPS and Diluted EPS on the face of the Company’s Condensed Statements of Income.

		The following table sets forth the computation of basic and diluted per share information

			Three Months Ended September 30												Nine Months Ended September 30												For the period from July 19, 2005 (inception) to September 30, 2007
			2007						2006						2007						2006
Numerator:
Net Income (Loss)				$	269,763					$	(31,532	)				$	446,443					$	(54,102	)				$	301,793
Denominator:
Weighted-average common shares outstanding					6,082,418						1,875,000						9,375,000						1,875,000						2,509,494
Dilutive effect of warrants					1,328,686						—						2,384,038						—						451,720
Weighted-average common shares outstanding, assuming dilution					7,411,104						1,875,000						11,759,038						1,875,000						2,961,214
Net Income (Loss) Per Share:
Basic				$	0.03					$	(0.02	)				$	0.07					$	(0.03	)				$	0.12
Diluted				$	0.02					$	(0.02	)				$	0.06					$	(0.03	)				$	0.10

7.   Commitments		In connection with the Public Offering the Company sold to the representative of the underwriter, for $100, an option to purchase up to a total of 731,250 Units. The Units issuable upon exercise of this option are identical to those offered to the public, except that the Warrants underlying this option are exercisable at $5.50 (110% of the exercise price of the Warrants included in the units sold in the Public Offering). This option is exercisable at $8.80 per unit commencing on the later of the consummation of a Business Combination and one year from the date of offerings and expiring five years from the date of offerings. The option and the 731,250 units, the 731,250 shares of common stock and the 731,250 Warrants underlying such units, and the 731,250 sh ares of common stock underlying such Warrants, have been deemed compensation by the National Association of Securities Dealers (‘‘NASD’’) and are therefore subject to a 180-day lock-up pursuant to Rule 2710(g)(1) of the NASD Conduct Rules. Additionally, the option may not be sold, transferred, assigned, pledged or hypothecated for a one-year period (including the foregoing 180-day period) following the date of offerings. However, the option may be transferred to any underwriter and selected dealers participating in the offering and their bona fide officers or partners.

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		The Company accounted for this purchase option as a cost of raising capital and will include the instrument as equity in the financial statements. Accordingly, there will be no net impact on the Company’s financial position or results of operations, except for the recording of the $100 proceeds from the sale. The Company estimated, based upon a Black-Scholes model, that the fair value of the purchase option on the date of sale is approximately $3.40 per unit (or $2,486,250 in the aggregate), using an expected life of 5 years, volatility of 44%, and a risk-free rate of 5%. However, because the Company’s units did not have a trading history, the volatility assumption was based on information then available to management. The volatility e stimate is derived using historical data of public companies in the proposed industry. The Company believes the volatility estimate calculated from these companies is a reasonable benchmark to use in estimating the expected volatility of our units; however, the use of an index to estimate volatility may not necessarily be representative of the volatility of the underlying securities. Although an expected life of five years was used in the calculation, if the Company does not consummate a Business Combination with the prescribed time period and it liquidates, the option will become worthless.

		The Company has engaged the representative of the underwriters, on a non-exclusive basis, as an agent for the solicitation of target for a Business Combination. The Company has agreed to pay the representative of the underwriters a transaction fee in cash equal to 3% of the aggregate consideration paid by the Company in a Business Combination with a target business the representative of the underwriters introduces to the Company, if such Business Combination is consummated within twenty-four months of such introduction.

		The Company has engaged the representative of the underwriters, on a non-exclusive basis, as its agent for the solicitation of the exercise of the Warrants. To the extent not inconsistent with the guidelines of the NASD and the rules and regulations of the Securities and Exchange Commission, the Company has agreed to pay the representative of the underwriter for bona fide services rendered a commission equal to 3% of the exercise price for each Warrant exercised more than one year after the date of this prospectus if the exercise was solicited by the representative. In addition to soliciting, either orally or in writing, the exercise of the Warrants, the representative’s services may also include disseminating information, either orally or i n writing, to Warrant holders about the Company or the market for the Company’s securities, and assisting in the processing of the exercise of the Warrants. No compensation will be paid to the representative upon the exercise of the Warrants if:

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		•	The market price of the underlying shares of common stock is lower than the exercise price;

		•	The holder of the Warrants has not confirmed in writing that the representative solicited the exercise;

		•	The Warrants are held in a discretionary account;

		•	The Warrants are exercised in an unsolicited transaction; or

		•	The representative has not provided to the holder of the Warrants solicited for exercise, a copy of the prospectus with respect to the shares of common stock underlying the Warrants.

		The Company has engaged Selway Partners LLC, an entity with which several of the Company’s officers and directors are affiliated, for an aggregate monthly fee of $7,500 for certain administrative, technology, bookkeeping and secretarial services, as well as the use of limited office space in New Jersey.

		On May 1, 2007, the Company entered into a $500,000 revolving credit agreement with SCP Private Equity Management Company, LLC, of which the Company’s Chief Executive officer and one of its directors are members. Any amounts outstanding under the revolving credit agreement will bear interest at a rate of 5.5% per year. Any funds outstanding under the revolving credit agreement will become due and payable by the Company upon our consummation of a business combination. As of September 30, 2007, the Company has not borrowed any amounts under this facility.

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Table of Contents

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Vector Intersect Security Acquisition Corp. is a blank check company organized under the laws of the State of Delaware on July 19, 2005. We were formed to acquire, through merger, capital stock exchange, asset acquisition or other similar business combination, one or more businesses in the homeland security, national security and/or command and control industries or businesses relating to the manufacture of products for use in such industries. As of September 30, 2007, our efforts had been limited to organizational activities. We intend to utilize our cash derived from the net proceeds of our offering, our authorized and unissued shares of common and preferred stock, debt or a combination thereof to effect a business combination. We do not have any specific business combination under consideration and our officers and directors have agreed that they will not recommend to our shareholders that they approve a business combination with an entity that is affiliated with any of our officers or directors, or that is an entity in which any of our officers or directors, or any of their respective affiliates, has a direct or indirect investment. Our officers and directors have agreed not to recommend to our shareholders a business combination with an entity with which they are affiliated to prevent a conflict of interest from developing that could lead to liability for us in the future.

Forward Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘should,’’ ‘‘could,’’ ‘‘would,’’ ‘‘expect,’’ ‘‘plan,’’ &lsqu o;‘anticipate,’’ ‘‘believe,’’ ‘‘estimate,’’ ‘‘continue,’’ or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission filings. The following discussion should be read in conjunction with our unaudited Financial Statements and related Notes thereto included elsewhere in this report.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from these estimates.

Deferred income taxes are provided for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for tax purposes. Valuation allowances are provided against the deferred tax asset amounts when the realization is uncertain.

Vector purchases U.S. Treasury Bills and money market investments and holds these investments to maturity. The investments are recorded at market value which approximates their carrying amount and includes accrued interest.

Vector must seek stockholder approval to effect any business combination. Vector will proceed with a business combination only if a majority of the shares of common stock voted by the public stockholders are voted in favor of the business combination, and public stockholders owning less than 20% of the shares sold in the offering exercise their redemption rights and vote against the business combination. Public stockholders voting against the combination may demand that Vector redeem his

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or her shares at an initial redemption price of $7.50 per share plus interest earned thereon in the trust account, net of taxes payable and up to $1,500,000 of interest income which may be released from the trust account to fund our working capital. Accordingly, Vector has classified the contingent shares at $7.50 and related deferred interest outside of permanent equity and liabilities in the mezzanine area on the balance sheet.

Results of Operations for the Three Month Period ended September 30, 2007

We reported net income of $269,763 for the three-month period ended September 30, 2007. We incurred a net loss of $31,532 for the three-month period ended September 30, 2006. Until we enter into a business combination, we will not have revenues.

Overall, for the quarter ended September 30, 2007, we incurred $92,235 of consulting and professional fees, $0 franchise taxes, $28,333 of insurance expense, $15,256 of rent expense and other operating costs of $18,453. For the quarter ended September 30, 2006, we incurred $7,500 of consulting and professional fees, $0 of franchise taxes, $0 of insurance expense, $15,000 of rent expense and other operating costs of $106.

Our trust account earned interest of $518,768 for the three months ended September 30, 2007, and our funds outside of the trust account earned interest of $0. No interest was earned in the three months ended September 30, 2006 since we had not yet consummated our initial public offering and private placement.

Results of Operations for the Nine Month Period ended September 30, 2007

We reported net income of $446,443 for the nine month period ended September 30, 2007. We incurred a net loss of $54,102 for the nine month period ended September 30, 2006. Until we enter into a business combination, we will not have revenues.

Overall, for the nine month period ended September 30, 2007, we incurred $151,250 of consulting and professional fees, $750 of franchise tax, $49,942 of insurance expense, $45,256 of rent expense and other operating costs of $31,355. For the nine month period ended September 30, 2006, we incurred $26,131 of consulting and professional fees, $1,500 of franchise taxes, $(119) of insurance expense, $15,000 of rent expense and other operating costs of $(235).

Our trust account earned interest of $861,202 for the nine months ended September 30, 2007, and our funds outside of the trust account earned interest of $0. No interest was earned in the three months ended September 30, 2006 since we had not yet consummated our initial public offering and private placement.

Liquidity and Capital Resources

On April 25, 2007, we completed a private placement of 187,500 units to our Chief Executive Officer and one of our directors and received net proceeds of $1.5 million. On May 1, 2007, we consummated our initial public offering of 7,312,500 units. Each unit in both the private placement and the public offering consisted of one share of common stock and one redeemable common stock purchase warrant. Each warrant entitles the holder to purchase from us one share of our common stock at an exercise price of $5.00.

The net proceeds from the sale of our units, after deducting certain offering expenses of approximately $4.0 million, including underwriting discounts of approximately $3.5 million, were approximately $54.5 million. Approximately $58.0 million of the proceeds from the initial public offering and the private placement was placed in a trust account for our benefit. Except for $1.5 million in interest that is earned on the funds contained in the trust account that may be released to us to be used as working capital, we will not be able to access the amounts held in the trust until we consummate a business combination. The trust account also contains approximately $2.3 million of the underwriter’s compensation which will be paid to them only in the event of a business combination. The amounts held outside of the trust account are available to be used by us to provide

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for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. From July 19, 2005 (the date of our inception) through September 30, 2007, we had operating expenses of approximately $398,600 and deferred offering costs of approximately $0. The net proceeds deposited into the trust fund remain on deposit in the trust account earning interest. As of September 30, 2007, we had approximately $58,280,432 held in the trust account, which includes deferred underwriting fees of approximately $2,300,000. Additionally, as of September 30, 2007, we have approximately $244,364 outside the trust account to fund our working capital requirements.

On May 1, 2007, we entered into a $500,000 revolving credit agreement with SCP Private Equity Management Company, LLC, of which our Chief Executive officer and one of our directors are members. Any amounts outstanding under the revolving credit agreement will bear interest at a rate of 5.5% per year. Any funds outstanding under the revolving credit agreement will become due and payable by us upon our consummation of a business combination. As of September 30, 2007, we not borrowed any amounts under this facility.

We will use substantially all of the net proceeds of the initial public offering to acquire a target business, including identifying and evaluating prospective acquisition candidates, selecting the target business, and structuring, negotiating and consummating the business combination. To the extent that our capital stock is used in whole or in part as consideration to effect a business combination, the proceeds held in the trust account as well as any other net proceeds not expended will be used to finance the operations of the target business.

Assuming the release of the full amount of the interest we are entitled to receive from the trust account, we believe we will have sufficient available funds outside of the trust account to operate through May 1, 2009, assuming that a business combination is not consummated during that time. We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, we may need to raise additional funds through a private offering of debt or equity securities if such funds are required to consummate a business combination that is presented to us. We would only consummate such a financing simultaneously with the consummation of a business combination.

Our accrued expenses, as of September 30, 2007 were $5,000, which includes accruals of approximately $5,000 for professional fees associated with attorneys, accountants and bankers and related expenses.

Commencing on April 25, 2007 we began incurring a fee of approximately $7,500 per month for office space. We pay consultants approximately $12,000 per month for services in connection with Vector’s reporting obligations and in connection with Vector’s search for a target business.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the sensitivity of income to changes in interest rates, foreign exchanges, commodity prices, equity prices, and other market-driven rates or prices. We are not presently engaged in and, if a suitable business target is not identified by us prior to the prescribed liquidation date of the trust fund, we may not engage in, any substantive commercial business. Accordingly, we are not and, until such time as we consummate a business combination, we will not be, exposed to risks associated with foreign exchange rates, commodity prices, equity prices or other market-driven rates or prices. The net proceeds of our initial public offering held in the Trust Account are to be invested only in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940 or United States treasury bills. Given our limited risk in our exposure to money market funds and treasury bills, we do not view the interest rate risk to be significant.

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ITEM 4.    CONTROLS AND PROCEDURES

An evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2007 was made under the supervision and with the participation of our management, including our Chief Executive Officer. Based on that evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. During the most recently completed fiscal quarter, there has been no significant change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 4T.    CONTROLS AND PROCEDURES

Not Applicable.

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PART II — OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

None.

ITEM 1A.    RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in the section titled ‘‘Risk Factors’’ in our Prospectus on Form 424(b)(3), filed on April 26, 2007, which could materially affect our business, financial condition or future results. The risks described in our Prospectus are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On April 25, 2007, we consummated a private placement of 187,500 units. On May 1, 2007, we consummated our initial public offering of 7,312,500 units. Each unit consists of one share of common stock and one redeemable common stock purchase warrant. Each warrant entitles the holder to purchase from us one share of our common stock at an exercise price of $5.00. The units were sold at an offering price of $8.00 per unit, generating total gross proceeds of $60,000,000. Rodman & Renshaw, LLC acted as lead underwriter. The securities sold in our initial public offering were registered under the Securities Act of 1933 on a registration statement on Form S-1 (No. 333-127644). The Securities and Exchange Commission declared the registration statement effective on April 25, 2007.

We incurred a total of $3,510,000 in underwriting discounts and commissions and placement agent fees, of which $2,340,000 has been placed in the trust account. Such portion of the underwriter’s compensation will only be paid to the underwriters in the event that we consummate a business combination. The total expenses in connection with the sale of our units in the private placement and the initial public offering were $1,678,843. No expenses of the offering were paid to any of our directors or officers or any of their respective affiliates. All the funds held in the trust account have been invested in either Treasury Bills or Money Market Accounts.

After deducting the underwriting discounts and commissions, placement agent fees and the offering expenses, the total net proceeds to us from the private placement and the initial public offering were approximately $60,000,000, of which approximately $58,030,000 (or $7.62 per unit sold in the offering) was deposited into a trust account and the remaining proceeds are available to be used to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses. The amounts held in the trust account may only be used by us upon the consummation of a business combination, except that we may use up to $1,500,000 of the interest earned on the trust account to fund our working capital prior to a business combination. As of September 30, 2007, there was approximately $58,280,432 held in the trust account, which includes deferred underwriting fees of $2,340,000 (including deferred intere st).

Overall, for the quarter ended September 30, 2007, we used the following from the proceeds of the offering: $92,235 of consulting and professional fees, $28,333 of insurance expense, $15,256 of rent expense and other operating costs of $18,453.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.    OTHER INFORMATION

None.

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ITEM 6.    EXHIBITS

Exhibit No.			Description
31.1			Certification of the Chief Executive Officer (Principal Executive, Accounting and Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended.
32.1			Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

VECTOR INTERSECT SECURITY ACQUISITION CORP.

November 14, 2007			By:			/s/ Yaron Eitan
						Yaron Eitan Chief Executive Officer (Principal Executive, Accounting and Financial Officer)

Exhibit Index

Exhibit No.			Description
31.1			Certification of the Chief Executive Officer (Principal Executive, Accounting and Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended.
32.1			Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.