Attached files
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EX-32.1 - EX-32.1 - STANDARD DIVERSIFIED INC. | a15-18014_1ex32d1.htm |
EX-31.1 - EX-31.1 - STANDARD DIVERSIFIED INC. | a15-18014_1ex31d1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2015
o 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 000-22400
Special Diversified Opportunities Inc.
(Exact name of Registrant as specified in its charter)
Delaware |
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56-1581761 |
(State or other jurisdiction of |
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(I.R.S. employer |
incorporation or organization) |
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identification no.) |
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1521 Concord Pike, Suite 301 |
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Wilmington, DE |
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19803 |
(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone number, including area code: (302) 824-7062
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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: x No: o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes: x No: o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o |
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Accelerated filer o |
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Non-accelerated filer o |
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Smaller reporting company x |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes: x No: o
As of October 31, 2015, there were 21,027,640 outstanding shares of the Registrants common stock, par value $.01 per share.
SPECIAL DIVERSIFIED OPPORTUNITIES INC.
PART I FINANCIAL INFORMATION
SPECIAL DIVIERSIFIED OPPORTUNITIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
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September 30, |
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December 31, |
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2015 |
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2014 |
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ASSETS |
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Current Assets : |
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| ||
Cash and cash equivalents |
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$ |
23,908 |
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$ |
24,818 |
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Other current assets |
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47 |
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22 |
| ||
Total current assets |
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23,955 |
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24,840 |
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Total assets |
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$ |
23,955 |
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$ |
24,840 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current Liabilities : |
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Accrued expenses |
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$ |
405 |
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$ |
486 |
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Total current liabilities |
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405 |
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486 |
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Stockholders Equity: |
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Preferred stock, $.01 par value, 20,920,648 shares authorized, no shares issued or outstanding |
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Common stock, $.01 par value, 50,000,000 shares authorized, 21,434,267 shares issued at September 30, 2015 and December 31, 2014 |
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217 |
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217 |
| ||
Additional paid-in capital |
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44,154 |
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44,148 |
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Treasury stock, 406,627 common shares at cost at September 30, 2015 and December 31, 2014 |
|
(555 |
) |
(555 |
) | ||
Accumulated deficit |
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(20,266 |
) |
(19,456 |
) | ||
Total stockholders equity |
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23,550 |
|
24,354 |
| ||
Total liabilities and stockholders equity |
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$ |
23,955 |
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$ |
24,840 |
|
The accompanying notes are an integral part of these statements.
SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2015 |
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2014 |
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2015 |
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2014 |
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Operating expenses: |
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Selling, general and administrative |
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$ |
268 |
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$ |
261 |
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$ |
810 |
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$ |
946 |
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Total operating expenses |
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268 |
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261 |
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810 |
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946 |
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Operating loss |
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(268 |
) |
(261 |
) |
(810 |
) |
(946 |
) | ||||
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Interest income, net |
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2 |
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Loss from continuing operations before taxes |
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(268 |
) |
(261 |
) |
(810 |
) |
(944 |
) | ||||
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Income tax expense |
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Loss from continuing operations, net of taxes |
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$ |
(268 |
) |
$ |
(261 |
) |
$ |
(810 |
) |
$ |
(944 |
) |
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|
|
|
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Income from discontinued operations |
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250 |
| ||||
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Net loss |
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$ |
(268 |
) |
$ |
(261 |
) |
$ |
(810 |
) |
$ |
(694 |
) |
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Basic and diluted loss per share from continuing operations |
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$ |
(0.01 |
) |
$ |
(0.01 |
) |
$ |
(0.04 |
) |
$ |
(0.04 |
) |
Basic and diluted income per share from discontinued operations |
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0.00 |
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0.00 |
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0.00 |
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0.01 |
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Basic and diluted net loss per share |
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$ |
(0.01 |
) |
$ |
(0.01 |
) |
$ |
(0.04 |
) |
$ |
(0.03 |
) |
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|
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Shares used in computing basic and diluted net loss per share |
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21,027,640 |
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21,027,640 |
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21,027,640 |
|
21,027,640 |
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The accompanying notes are an integral part of these statements.
SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Nine Months |
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Ended September 30, |
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2015 |
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2014 |
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Cash Flows from Operating Activities : |
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Net loss |
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$ |
(810 |
) |
$ |
(694 |
) |
Less: Income from discontinued operations |
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|
|
250 |
| ||
Loss from continuing operations |
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(810 |
) |
(944 |
) | ||
Adjustments to reconcile net loss to net cash used in operating activities : |
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|
|
|
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Share-based compensation expense |
|
6 |
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4 |
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(Increase) decrease in : |
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|
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Other current assets |
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(25 |
) |
23 |
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(Decrease) in : |
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Accrued expenses |
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(81 |
) |
(208 |
) | ||
Net operating activities from discontinued operations |
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250 |
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Net cash used in operating activities |
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(910 |
) |
(875 |
) | ||
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Cash Flows from Investing Activities : |
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Restricted cash |
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1,300 |
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Net cash provided by investing activities |
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1,300 |
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Net cash used in financing activities |
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Net increase (decrease) in Cash and Cash Equivalents |
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(910 |
) |
425 |
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Cash and Cash Equivalents, Beginning of Period |
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24,818 |
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24,598 |
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|
|
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Cash and Cash Equivalents, End of Period |
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$ |
23,908 |
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$ |
25,023 |
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|
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|
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Supplemental Cash Flow Disclosure : |
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Cash paid for taxes, net of tax refunds |
|
$ |
22 |
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$ |
24 |
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The accompanying notes are an integral part of these statements.
SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
1. ASSET SALE
On April 5, 2013, Special Diversified Opportunities Inc. (f/k/a Strategic Diagnostics Inc.) (SDOI or the Company), SDIX LLC, a Delaware limited liability company (the Purchaser) and OriGene Technologies, Inc., a Delaware corporation and the sole equity holder of the Purchaser (Parent or OriGene), entered into an Asset Purchase Agreement (the Asset Purchase Agreement) pursuant to which the Company agreed, subject to certain terms and conditions including approval of the Companys stockholders, to sell to the Purchaser substantially all of the Companys rights, title and interest in substantially all of the Companys non-cash assets related to the Life Sciences Business (the Asset Sale).
At a special meeting of the stockholders of the Company held on July 10, 2013, the stockholders approved the Asset Sale as contemplated by the Asset Purchase Agreement. On July 12, 2013 the Company completed the Asset Sale.
Pursuant to the terms and conditions of the Asset Purchase Agreement, the Purchaser acquired all of the Companys rights, title, and interest in substantially all of the assets, equipment, inventory, and intellectual property (the Purchased Assets) related exclusively to the Companys Life Sciences Business, the product portfolio in respect of which included a full suite of integrated capabilities, including antibody and assay design, development and production and the Companys Advanced Technologies Business. The Purchaser also assumed and agreed to discharge the Assumed Liabilities, as defined in the Asset Purchase Agreement. The Parent unconditionally guaranteed Purchasers obligations in the Asset Purchase Agreement. The purchase price for the Purchased Assets was $16,000, which was subject to a post-closing working capital adjustment.
The Company and Purchaser each made customary representations, warranties and covenants in the Asset Purchase Agreement. At closing, $1,300 of the purchase price was placed in escrow to be governed by the terms of a separate escrow agreement. The Asset Purchase Agreement contained indemnification provisions pursuant to which the Company and the Purchaser have agreed to indemnify the other for certain losses, including with respect to environmental, litigation, tax and other matters.
The Asset Purchase Agreement also included restrictive covenants, including, that SDOI not (i) engage in a competing business for a period of five years after the closing date, (ii) directly or indirectly solicit Purchasers employees for a period of two years after the closing date, (iii) directly or indirectly solicit the Purchasers customers for a period of five years after the closing date and (iv) disparage the Purchaser at any time.
As a result of the Asset Sale, the Company no longer owns its historical operating assets, and its past business operations have been discontinued.
In May 2014, the Company, the Purchaser and OriGene reached a settlement of various claims by the parties relating to the Asset Sale. The terms of the settlement called for the release of the $1,300 in escrow to the Company, as well as the payment by the Purchaser and OriGene of an additional $250 pursuant to the working capital adjustment provisions of the Asset Purchase Agreement. This payment has been recorded in income from discontinued operations on the Consolidated Statements of Operations for the nine months ended September 30, 2014.
SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
2. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
The Company is a shell company as defined in Rule 12b-2 of the Securities Exchange Act of 1934. The Companys board of directors has been exploring strategic alternatives to maximize shareholder value going forward including deploying the proceeds of the Asset Sale in business acquisition opportunities, merging with another company, or other actions to redeploy our capital, including, without limitation, distribution of cash to our shareholders.
Basis of Presentation and Interim Financial Statements
The accompanying unaudited consolidated interim financial statements of the Company have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. Accordingly, they do not include all the information and footnotes required by U.S. generally accepted accounting principles (GAAP) for complete financial statements and should be read in conjunction with the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2014. In the opinion of management, the accompanying consolidated interim financial statements include all adjustments (all of which are of a normal recurring nature) necessary for a fair presentation of the results of operations. The interim operating results are not necessarily indicative of the results to be expected for the entire year.
Use of Estimates
The preparation of the consolidated interim financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated interim financial statements, and the reported amounts of expenses during the period. These estimates include those made in connection with assessing the valuation of deferred tax assets. Actual results could differ from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments that have maturities of three months or less when acquired to be cash equivalents. As of September 30, 2015 and December 31, 2014, cash of $23,908 and $24,818, respectively, consisted of bank checking operating accounts.
Stock-Based Compensation
The Company accounts for stock-based compensation using the fair value method, which requires that compensation costs related to employee share based payment transactions are measured in the financial statements at the fair value on the date of grant and are recognized over the vesting period of the award.
SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
3. BASIC AND DILUTED LOSS PER SHARE
Basic loss per share (EPS) is computed by dividing net loss available for common stockholders by the weighted-average number of common shares outstanding during the period. Diluted EPS is similar to basic EPS, except that the dilutive effect of converting or exercising all potentially dilutive securities is also included in the denominator such as stock options and restricted stock units. Basic loss per share excludes potentially dilutive securities. For the three and nine month periods ended September 30, 2015 and 2014, outstanding common stock options representing 1,034,570 and 974,570 shares, respectively, and 15,000 and 0 unvested restricted shares, respectively, were excluded from the computation of diluted EPS.
4. SHARE-BASED COMPENSATION
Under various plans, executives, key employees and outside directors receive awards of options to purchase common stock. The Company has a stock option plan (the 2000 Plan) which authorizes the granting of incentive and nonqualified stock options and restricted stock units. Incentive stock options are granted at not less than 100% of fair market value at the date of grant (110% for stockholders owning more than 10% of the Companys common stock). Nonqualified stock options are granted at not less than 85% of fair market value at the date of grant. A maximum of 8,000,000 shares of common stock are issuable under the 2000 Plan. Certain additional options have been granted outside the 2000 Plan. These options generally follow the provisions of the 2000 Plan. The Company issues new shares to satisfy option exercises and the vesting of restricted stock awards.
The Company also has an Employee Stock Purchase Plan (the ESPP). The ESPP allows eligible full-time employees to purchase shares of common stock at 90 percent of the lower of the fair market value of a share of common stock on the first or last day of the quarter. Eligible employees are provided the opportunity to acquire Company common stock during each quarter. No more than 661,157 shares of common stock may be issued under the ESPP. Such stock may be unissued shares or treasury shares of the Company or may be outstanding shares purchased in the open market or otherwise on behalf of the ESPP. The Companys ESPP is compensatory and therefore, the Company is required to recognize compensation expense related to the discount from market value of shares sold under the ESPP. The Company issues new shares to satisfy shares purchased under the ESPP.
SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
Share-based compensation expense recorded in the three and nine month periods ended September 30, 2015 and 2014 is summarized as follows:
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2015 |
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2014 |
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2015 |
|
2014 |
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|
|
|
|
|
|
|
|
|
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Stock options |
|
$ |
2 |
|
$ |
1 |
|
$ |
4 |
|
$ |
4 |
|
Restricted stock awards |
|
2 |
|
|
|
2 |
|
|
| ||||
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|
|
|
|
|
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|
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Total share-based compensation expense |
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$ |
4 |
|
$ |
1 |
|
$ |
6 |
|
$ |
4 |
|
Share-based compensation expense is a component of selling, general and administrative expense, and is recorded as a non-cash expense in the operating activities section of the Companys consolidated statements of cash flows.
No options were exercised in the nine month periods ended September 30, 2015 and 2014. Information with respect to the activity of outstanding stock options granted under the 2000 Plan and options granted separately from the 2000 Plan for the nine months ended September 30, 2015 is summarized as follows:
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|
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Weighted |
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Aggregate |
| |||
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Number |
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Average Remaining |
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Instrinsic |
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of Shares |
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Price Range |
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Contractual term |
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Value |
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Balance, January 1, 2015 |
|
974,570 |
|
$ |
1.25 |
|
- |
|
$ |
3.74 |
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|
|
|
| |
|
|
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|
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Granted |
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60,000 |
|
$ |
1.24 |
|
- |
|
$ |
1.24 |
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|
|
|
| |
Cancelled / Forfeited |
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|
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- |
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Balance, September 30, 2015 |
|
1,034,570 |
|
$ |
1.24 |
|
- |
|
$ |
3.74 |
|
4.5 years |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Vested and excercisable at September 30, 2015 |
|
616,878 |
|
$ |
1.24 |
|
- |
|
$ |
3.74 |
|
4.2 years |
|
$ |
|
|
During the nine month period ended September 30, 2015, there were 60,000 options granted with a weighted average grant date fair value, based on a Black-Scholes option pricing model, of $0.23 per share. The assumptions used in the Black-Scholes model are as follows: dividend yield 0%, expected volatility 26.4%, risk-free interest rate 1.71% and expected life of 4.25 years. The Company uses the Simplified Method for determining the expected life of options granted to employees which is computed using the sum of the average vesting period and the contractual life of the option and dividing by two, for all periods presented.
SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)
The following table provides additional information about the Companys stock options outstanding and exercisable at September 30, 2015:
|
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Options Outstanding |
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Options Exercisable |
| ||||||||||||||
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Weighted Average |
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Wtd. Average |
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Range of |
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Number of |
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Remaining |
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Exercise |
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Number of |
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Exercise |
| ||||||||
Exercise Prices |
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Shares |
|
Contractual Life |
|
Price |
|
Shares |
|
Price |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
$ |
1.24 |
|
- |
|
$ |
1.85 |
|
827,528 |
|
4.5 Years |
|
$ |
1.46 |
|
409,836 |
|
$ |
1.55 |
|
$ |
2.00 |
|
- |
|
$ |
2.25 |
|
175,000 |
|
5.0 Years |
|
$ |
2.13 |
|
175,000 |
|
$ |
2.13 |
|
$ |
3.69 |
|
- |
|
$ |
3.74 |
|
32,042 |
|
2.6 Years |
|
$ |
3.72 |
|
32,042 |
|
$ |
3.72 |
|
$ |
1.24 |
|
- |
|
$ |
3.74 |
|
1,034,570 |
|
4.5 Years |
|
$ |
1.64 |
|
616,878 |
|
$ |
1.83 |
|
The Company had 15,000 and 0 shares of unvested restricted stock as of September 30, 2015 and December 31, 2014, respectively.
5. INCOME TAXES
The Company evaluates its deferred tax assets on a regular basis to determine if a valuation allowance against the net deferred tax assets is required. The Company had a full valuation allowance offsetting its U.S. federal and state net deferred tax assets which primarily represent net operating loss carryforwards (NOLs) at December 31, 2014. During the nine month period ended September 30, 2015, the Companys management concluded that the full valuation allowance for U.S. federal and state net deferred tax assets is appropriate as the facts and circumstances during the first nine months of 2015 did not change managements conclusion that a full valuation allowance is necessary.
The Company is subject to U.S. federal income tax, as well as income taxes of multiple state jurisdictions. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. At September 30, 2015, the Company had no interest or penalties accrued related to uncertain tax positions due to the available NOLs.
As of September 30, 2015, the Company had approximately $628 of unrecognized tax benefits of which $622 would reduce already existing net operating loss and tax credit carryforwards and therefore require no accrual for interest or penalty. The remaining $6 includes de minimis interest and penalties where required. For the nine months ended September 30, 2015, unrecognized tax benefits did not change. For federal purposes, post-1992 tax years remain open to examination as a result of earlier net operating losses being utilized in recent years. For state purposes, the statute of limitations remains open in a similar manner for states that have generated net operating losses. The Company does not expect that the total amount of unrecognized tax benefits related to positions taken in prior periods will change significantly during the next 12 months.
6. SUBSEQUENT EVENT
In connection with a Separation Agreement and General Release dated October 19, 2015 between the Company and its president, the presidents employment ended as of that date and the Company agreed to provide him severance pay of $206,250 in the fourth quarter of 2015. In addition, the Company agreed to make payments for the medical insurance of the president for the following nine months. The Company will record an expense of approximately $225,000 related to this agreement during the quarter ending December 31, 2015.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Form 10-Q contains certain forward-looking statements reflecting the current expectations of Special Diversified Opportunities Inc. and its subsidiary (the Company or SDOI). In addition, when used in this quarterly report, the words anticipate, enable, estimate, intend, expect, believe, potential, may, will, should, project and similar expressions as they relate to the Company are intended to identify said forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties, which may cause actual results to differ from those anticipated at this time. Such risks and uncertainties include factors more fully described in the Companys public filings with the SEC including, without limitation, the Companys Annual Report on Form 10-K for the year ended December 31, 2014.
Introductory Note
On April 5, 2013, Special Diversified Opportunities Inc. (f/k/a Strategic Diagnostics Inc.) (SDOI or the Company), SDIX LLC, a Delaware limited liability company (the Purchaser) and OriGene Technologies, Inc., a Delaware corporation and the sole equity holder of the Purchaser (Parent or OriGene), entered into an Asset Purchase Agreement (the Asset Purchase Agreement) pursuant to which the Company agreed, subject to certain terms and conditions including approval of the Companys stockholders, to sell to Purchaser substantially all of the Companys rights, title and interest in substantially all of the Companys non-cash assets related to the Life Sciences Business (the Asset Sale).
At a special meeting of the stockholders of the Company held on July 10, 2013, the stockholders approved the Asset Sale as contemplated by the Asset Purchase Agreement. On July 12, 2013 the Company completed the Asset Sale.
Pursuant to the terms and conditions of the Asset Purchase Agreement, the Purchaser acquired all of the Companys right, title, and interest in the Purchased Assets related exclusively to the Companys Life Sciences Business, the product portfolio in respect of which includes a full suite of integrated capabilities, including antibody and assay design, development and production and the Advanced Technologies Business. The Purchaser also assumed and agreed to discharge the Assumed Liabilities, as defined in the Asset Purchase Agreement. Parent unconditionally guaranteed Purchasers obligations in the Asset Purchase Agreement. The purchase price for the Purchased Assets was $16.0 million, which was subject to a post-closing working capital adjustment.
The Company and Purchaser each made customary representations, warranties and covenants in the Asset Purchase Agreement. At closing, $1.3 million of the purchase price was placed in escrow to be governed by the terms of a separate escrow agreement. The Asset Purchase Agreement contained indemnification provisions pursuant to which the Company and the Purchaser have agreed to indemnify the other for certain losses, including with respect to environmental, litigation, tax and other matters.
The Asset Purchase Agreement also contained restrictive covenants, including, that the Company not (i) engage in a competing business for a period of five years after the closing date, (ii) directly or indirectly solicit Purchasers employees for a period of two years after the closing date, (iii) directly or indirectly solicit the Purchasers customers for a period of five years after the closing date and (iv) disparage the Purchaser at any time.
As a result of the Asset Sale, the Company no longer owns its historical operating assets, and its past business operations have been discontinued.
In May 2014, the Company, the Purchaser and OriGene reached a settlement of various claims by the parties related to the Asset Purchase Agreement. The terms of the settlement called for the release of the $1.3 million in escrow to the Company, as well as the payment by the Purchaser and OriGene to the Company of an additional $250,000 pursuant to the working capital adjustment provisions of the Asset Purchase Agreement. This payment has been recorded as income from discontinued operations on the Consolidated Statements of Operations for the nine months ended September 30, 2014.
Overview
Prior to the completion of the Asset Sale, the Company was a biotechnology company with a core mission of developing, commercializing and marketing innovative and proprietary products, services and solutions that preserve and enhance the quality of human health and wellness. The Company is presently a shell company and the Companys board of directors has been exploring strategic alternatives to maximize shareholder value going forward, including deploying the proceeds of the Asset Sale in business acquisition opportunities, merging with another company, or other actions to redeploy our capital, including, without limitation, distribution of cash to our shareholders.
Results of Operations
Three Months Ended September 30, 2015 versus Three Months Ended September 30, 2014
Selling, general and administrative
Selling, general and administrative expenses were $268,000 for the three month period ended September 30, 2015 and $261,000 for the three month period ended September 30, 2014. Selling, general and administrative expenses reflect the levels of personnel and professional fees related to the minimal operations that the Company has been conducting following the consummation of the Asset Sale.
Income taxes
The Company recorded no income tax provision for the three month periods ended September 30, 2015 and September 30, 2014. The Company has full valuation allowances placed against U.S. federal and state deferred tax assets.
Loss from continuing operations
Loss from continuing operations was $268,000, or $0.01 per diluted share, for the three month period ended September 30, 2015, and $261,000, or $0.01 per diluted share, for the three month period ended September 30, 2014.
Net loss
Net loss was $268,000, or $0.01 per diluted share, for the three month period ended September 30, 2015, compared to a net loss of $261,000, or $0.01 per diluted share, for the same period in 2014.
Nine Months Ended September 30, 2015 versus Nine Months Ended September 30, 2014
Selling, general and administrative
Selling, general and administrative expenses were $810,000 for the nine month period ended September 30, 2015 and $946,000 for the nine month period ended September 30, 2014. The decrease was primarily attributable to lower professional fees in the 2015 period, partially offset by costs associated with the Annual Meeting of Shareholders during the second quarter of 2015.
Income taxes
The Company recorded no income tax provision for the nine month periods ended September 30, 2015 and September 30, 2014. The Company has full valuation allowances placed against U.S. federal and state deferred tax assets.
Loss from continuing operations
Loss from continuing operations was $810,000, or $0.04 per diluted share, for the nine month period ended September 30, 2015, and $944,000, or $0.04 per diluted share, for the nine month period ended September 30, 2014.
Income from discontinued operations
Income from the Companys discontinued operations was $250,000 for the nine month period ended September 30, 2014, representing the working capital adjustment on the Asset Sale in accordance with the settlement with the Purchaser and OriGene. Income per share from discontinued operations was $0.01 per diluted share for the nine month period ended September 30, 2014.
Net loss
Net loss was $810,000, or $0.04 per diluted share, for the nine month period ended September 30, 2015, compared to a net loss of $694,000, or $0.03 per diluted share, for the same period in 2014.
Liquidity and Capital Resources
The net cash used in operating activities was $910,000 for the first nine months of 2015 compared to net cash used in operating activities of $875,000 for the first nine months of 2014. Net cash used in operating activities in the 2014 period reflects the receipt of $250,000 pursuant to the working capital adjustment provisions of the Asset Purchase Agreement, which amount is included in income from discontinued operations in that period. The 2015 period reflects no such event. The net cash used in operating activities for the 2015 period was primarily the result of the net loss incurred, combined with an increase in other current assets and a decrease in accrued expenses. The net cash used in operating activities for the 2014 period was primarily the result of the net loss incurred plus a decrease in accrued expenses.
There was no cash provided by or used in investing activities in the nine months ended June 30, 2015. Cash provided by investing activities of $1.3 million for the first nine months of 2014 was attributable to the receipt of the Asset Sale proceeds that had been placed in escrow at the closing. These funds were released in connection with the settlement agreement with SDIX LLC and OriGene.
There was no cash provided by or used in financing activities in the nine months ended September 30, 2015 or 2014.
The Companys working capital (current assets less current liabilities) was $23.6 million at September 30, 2015 compared to $24.4 million at December 31, 2014.
For the nine months ended September 30, 2015, the Company satisfied all of its cash requirements from cash available and on-hand. Based upon its cash and cash equivalents on hand, the Company believes it has sufficient resources to meet its operating requirements through at least the next 12 months.
The Companys ability to meet its long-term capital needs will depend on a number of factors, including government regulation, its successful sale of additional common stock and/or the Company successfully locating and obtaining other financing, and the success of the Companys plan to make future acquisitions. Accordingly, no assurance can be given that the Company will be able to meet the future liquidity requirements that may arise from these inherent and similar uncertainties.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company has limited exposure to changing interest rates, and is currently not engaged in hedging activities.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Principal Executive and Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive and Financial Officer concluded that, as of September 30, 2015, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and recorded within the time periods specified in the SECs rules and forms, and that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our principal executive and financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(b) Change in Internal Control over Financial Reporting
No change in the Companys internal control over financial reporting occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting
31.1* |
Certification of the Principal Executive Officer and Principal Financial Officer of Special Diversified Opportunities Inc. required by Rule 13a-14(a) under the Securities Exchange Act of 1934 |
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32.1+ |
Certification of the Principal Executive Officer and Principal Financial Officer of Special Diversified Opportunities Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002 |
101.INS* |
XBRL Instance document |
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101.SCH* |
XBRL Taxonomy Extension Schema Document |
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101.CAL* |
XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF* |
XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB* |
XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE* |
XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herewith.
+ Furnished herewith.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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SPECIAL DIVERSIFIED OPPORTUNITIES INC. |
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Date: November 13, 2015 |
/s/ Kevin J. Bratton |
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Kevin J. Bratton Vice President - Finance and Chief Financial Officer |