(Mark
One)
|
ý
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
For
the quarterly period ended September 30,
2009
|
OR
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
For
the transition period
from to
|
Delaware
|
20-3200738
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
96
Windsor Street, West Springfield, Massachusetts
|
01089
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
(Do
not check if a smaller reporting company)
|
Smaller
reporting company ý
|
PART
I—FINANCIAL INFORMATION
|
||||
Item 1.
|
Financial
Statements
|
|||
Condensed
Consolidated Statements of Operations (unaudited) for the three months
ended September 30, 2009 and 2008
|
4
|
|||
Condensed
Consolidated Statements of Operations (unaudited) for the nine months
ended September 30, 2009 and 2008
|
5
|
|||
Condensed
Consolidated Balance Sheets as of September 30, 2009 (unaudited) and
December 31, 2008
|
6
|
|||
Condensed
Consolidated Statements of Changes in Stockholders' Equity and
Comprehensive Loss for the nine months ended September 30, 2009
(unaudited)
|
7
|
|||
Condensed
Consolidated Statements of Cash Flows (unaudited) for the nine months
ended September 30, 2009 and 2008
|
8
|
|||
Notes
to Condensed Consolidated Financial Statements (unaudited)
|
9
|
|||
Item 2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
18
|
||
Item 3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
22
|
||
Item 4T.
|
Controls
and Procedures
|
22
|
||
PART
II—OTHER INFORMATION
|
||||
Item 1.
|
Legal
Proceedings
|
22
|
||
Item 1A.
|
Risk
Factors
|
22
|
||
Item 2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
23
|
||
Item 3.
|
Defaults
Upon Senior Securities
|
23
|
||
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
24
|
||
Item 5.
|
Other
Information
|
24
|
||
Item 6.
|
Exhibits
|
24
|
||
Signatures
|
25
|
Predecessor
|
||||||||||||
For the
Three
|
For
the Three
|
For
the Three
|
||||||||||
Months
Ended
|
Months
Ended
|
Months
Ended
|
||||||||||
September
30,
|
September
30,
|
September
30,
|
||||||||||
2009
|
2008
|
2008
|
||||||||||
Revenues
|
$ | 9,860 | $ | — | $ | 10,833 | ||||||
Cost
of goods sold
|
5,938 | — | 5,411 | |||||||||
Gross
profit
|
3,922 | — | 5,422 | |||||||||
Other
expenses (income):
|
||||||||||||
Sales
and marketing
|
791 | — | 738 | |||||||||
General
and administrative
|
887 | 225 | 1,210 | |||||||||
Research
and development
|
487 | — | 306 | |||||||||
Interest,
net
|
673 | (287 | ) | 1,221 | ||||||||
Interest
– related party
|
16 | 2 | — | |||||||||
Amortization
of intangible assets
|
878 | — | 659 | |||||||||
Other,
net
|
16 | — | 59 | |||||||||
Total
other expenses (income)
|
3,748 | (60 | ) | 4,193 | ||||||||
Income
before income taxes
|
174 | 60 | 1,229 | |||||||||
Provision
for (benefit from) income taxes
|
(151 | ) | 2 | 517 | ||||||||
Net
income
|
$ | 325 | $ | 58 | $ | 712 | ||||||
Net
income per common share:
|
||||||||||||
Basic
|
$ | 0.02 | $ | 0.01 | ||||||||
Diluted
|
$ | 0.02 | $ | — | ||||||||
Weighted
average shares used to compute net income per common
share:
|
||||||||||||
Basic
|
15,352,478 | 9,375,000 | ||||||||||
Diluted
|
15,418,949 | 11,944,844 |
Predecessor
|
||||||||||||
For the
Nine
|
For
the Nine
|
For
the Nine
|
||||||||||
Months
Ended
|
Months
Ended
|
Months
Ended
|
||||||||||
September
30,
|
September
30,
|
September
30,
|
||||||||||
2009
|
2008
|
2008
|
||||||||||
Revenues
|
$ | 24,443 | $ | — | $ | 31,686 | ||||||
Cost
of goods sold
|
14,374 | — | 15,201 | |||||||||
Gross
profit
|
10,069 | — | 16,485 | |||||||||
Other
expenses (income):
|
||||||||||||
Sales
and marketing
|
2,322 | — | 2,532 | |||||||||
General
and administrative
|
3,489 | 637 | 3,520 | |||||||||
Research
and development
|
1,295 | — | 984 | |||||||||
Interest,
net
|
1,925 | (899 | ) | 3,715 | ||||||||
Interest
– related party
|
45 | 4 | — | |||||||||
Amortization
of intangible assets
|
2,612 | — | 1,968 | |||||||||
Other,
net
|
79 | — | (1,038 | ) | ||||||||
Total
other expenses (income)
|
11,767 | (258 | ) | 11,681 | ||||||||
Income
(loss) before income taxes
|
(1,698 | ) | 258 | 4,804 | ||||||||
Provision
for (benefit from) income taxes
|
(755 | ) | (18 | ) | 1,754 | |||||||
Net
income (loss)
|
$ | (943 | ) | $ | 276 | $ | 3,050 | |||||
Net
income (loss) per common share:
|
||||||||||||
Basic
|
$ | (0.06 | ) | $ | 0.03 | |||||||
Diluted
|
$ | (0.06 | ) | $ | 0.02 | |||||||
Weighted
average shares used to compute net income (loss) per common
share:
|
||||||||||||
Basic
|
15,089,909 | 9,375,000 | ||||||||||
Diluted
|
15,089,909 | 11,896,460 |
September
30, 2009(unaudited)
|
December 31,
2008
|
|||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
|
$ | 1,831 | $ | 3,952 | ||||
Accounts
receivable, net of allowance for doubtful accounts of $217 and $452 at
September 30, 2009 and December 31, 2008, respectively
|
4,542 | 3,508 | ||||||
Inventories,
net
|
9,734 | 11,447 | ||||||
Income
taxes refundable
|
377 | 701 | ||||||
Deferred
income taxes
|
425 | 317 | ||||||
Prepaid
expenses and other current assets
|
204 | 195 | ||||||
Total
current assets
|
17,113 | 20,120 | ||||||
Property,
plant and equipment, net
|
8,250 | 7,882 | ||||||
Goodwill
|
58,452 | 60,896 | ||||||
Other
intangible assets, net
|
49,908 | 49,426 | ||||||
Other
noncurrent assets
|
138 | 188 | ||||||
Total
assets
|
$ | 132,861 | $ | 138,512 | ||||
Liabilities
and Stockholders’ Equity
|
||||||||
Current
liabilities:
|
||||||||
Lines
of credit
|
$ | 3,300 | $ | 3,500 | ||||
Current
portion of notes payable
|
4,120 | 3,621 | ||||||
Accounts
payable
|
3,450 | 3,230 | ||||||
Accrued
expenses and other current liabilities
|
2,451 | 2,550 | ||||||
Common
stock subject to mandatory redemption
|
— | 1,123 | ||||||
Notes
payable and advance due to related parties
|
9 | 64 | ||||||
Income
taxes payable
|
7 | 5 | ||||||
Total
current liabilities
|
13,337 | 14,093 | ||||||
Notes
payable, net of current portion
|
22,626 | 25,581 | ||||||
Notes
payable due to related parties, net of current portion
|
1,048 | 1,000 | ||||||
Deferred
income taxes
|
7,801 | 9,237 | ||||||
Derivatives
|
127 | 163 | ||||||
Asset
retirement obligation, net of current portion
|
156 | 128 | ||||||
Total
liabilities
|
45,095 | 50,202 | ||||||
Commitments
and contingencies
|
— | — | ||||||
Stockholders'
equity:
|
||||||||
Preferred
stock, $0.001 par value; 1,000,000 shares authorized, no shares issued or
outstanding
|
— | — | ||||||
Common
stock, $0.001 par value; 50,000,000 shares authorized; 15,360,925 and
13,719,035 shares issued and outstanding at September 30, 2009 and
December 31, 2008, respectively
|
15 | 14 | ||||||
Additional
paid-in capital
|
87,410 | 87,348 | ||||||
Retained
earnings
|
286 | 1,229 | ||||||
Accumulated
other comprehensive income (loss)
|
55 | (281 | ) | |||||
Total
stockholders’ equity
|
87,766 | 88,310 | ||||||
Total
liabilities and stockholders' equity
|
$ | 132,861 | $ | 138,512 |
Common
Stock
|
Additional
|
Accumulated
Other
|
Total
|
|||||||||||||||||||||||||
Number
of Shares
|
Amount
|
Paid-In
Capital
|
Retained
Earnings
|
Comprehensive
Income (Loss)
|
Stockholders’
Equity
|
Comprehensive
Income (Loss)
|
||||||||||||||||||||||
Balance
at December 31, 2008
|
13,719,035 | $ | 14 | $ | 87,348 | $ | 1,229 | $ | (281 | ) | $ | 88,310 | $ | — | ||||||||||||||
Exercise
of warrants
|
5,500 | — | 27 | — | — | 27 | — | |||||||||||||||||||||
Exercise
of warrants - cashless
|
1,630,143 | 1 | (1 | ) | — | — | — | — | ||||||||||||||||||||
Common
stock repurchased
|
(32,903 | ) | — | (263 | ) | — | — | (263 | ) | — | ||||||||||||||||||
Common
stock awarded (not yet issued) for acquisition-related
services
|
— | — | 180 | — | — | 180 | — | |||||||||||||||||||||
Common
stock issued for acquisition-related services
|
15,000 | — | 45 | — | — | 45 | — | |||||||||||||||||||||
Common
stock issued to extinguish notes payable
|
17,150 | — | 82 | — | — | 82 | — | |||||||||||||||||||||
Share-based
compensation expense - warrants awarded to director
|
— | — | 110 | — | — | 110 | — | |||||||||||||||||||||
Share-based
compensation expense - options awarded under the 2009 Omnibus Securities
and Incentive Plan
|
— | — | 98 | — | — | 98 | — | |||||||||||||||||||||
Share-based
compensation expense - common stock issued to non-employee
consultant
|
7,000 | — | 25 | — | — | 25 | — | |||||||||||||||||||||
Share-based
compensation expense - common stock awarded (not yet issued) under the
2009 Omnibus Securities and Incentive Plan
|
— | — | 38 | — | — | 38 | — | |||||||||||||||||||||
Stock
registration costs
|
— | — | (279 | ) | — | — | (279 | ) | — | |||||||||||||||||||
Foreign
currency translation adjustments
|
— | — | — | — | 314 | 314 | 314 | |||||||||||||||||||||
Unrealized
gain on cash flow hedges, net of taxes of $14
|
— | — | — | — | 22 | 22 | 22 | |||||||||||||||||||||
Net
loss
|
— | — | — | (943 | ) | — | (943 | ) | (943 | ) | ||||||||||||||||||
Comprehensive
loss
|
— | — | — | — | — | — | $ | (607 | ) | |||||||||||||||||||
Balance
at September 30, 2009
|
15,360,925 | $ | 15 | $ | 87,410 | $ | 286 | $ | 55 | $ | 87,766 |
|
For
the Nine
Months
Ended
September
30,
2009
|
For
the Nine
Months
Ended
September
30,
2008
|
Predecessor
For
the Nine
Months
Ended
September
30,
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||||
Net
income (loss)
|
$
|
(943
|
)
|
$
|
276
|
$
|
3,050
|
|||
Adjustments
to reconcile net income (loss) to net cash provided
by operating activities:
|
||||||||||
Depreciation
of property, plant and equipment
|
479
|
—
|
651
|
|||||||
Amortization
|
3,446
|
—
|
2,216
|
|||||||
Provision
for deferred income taxes
|
(1,009
|
)
|
—
|
1,056
|
||||||
Expense
associated with share-based awards
|
271
|
—
|
—
|
|||||||
Other
non-cash expenses
|
357
|
—
|
254
|
|||||||
Changes
in operating assets and liabilities:
|
||||||||||
Accounts
receivable
|
(1,024
|
)
|
—
|
(1,091
|
)
|
|||||
Inventories
|
953
|
—
|
(2,183
|
)
|
||||||
Prepaid
expenses and other current assets
|
(9
|
)
|
85
|
304
|
||||||
Deferred
acquisition costs
|
—
|
(275
|
)
|
—
|
||||||
Accounts
payable and accrued liabilities
|
(22
|
)
|
51
|
(620
|
)
|
|||||
Income
taxes payable, net
|
329
|
(85
|
)
|
(2,270
|
)
|
|||||
Accrued
interest on notes payable to related parties
|
—
|
14
|
—
|
|||||||
Net
cash provided by operating activities
|
2,828
|
66
|
1,367
|
|||||||
Cash
flows from investing activities:
|
||||||||||
Payments
to trust account
|
—
|
(399
|
)
|
—
|
||||||
Purchases
of long-lived assets
|
(449
|
)
|
—
|
(1,212
|
)
|
|||||
Net
cash used in investing activities
|
(449
|
)
|
(399
|
)
|
(1,212
|
)
|
||||
Cash
flows from financing activities:
|
||||||||||
Repayment
of advances from and notes payable to related parties
|
—
|
(150
|
)
|
—
|
||||||
Payments
for common stock subject to redemption
|
(1,123
|
)
|
—
|
—
|
||||||
Net
repayment of line of credit
|
(200
|
)
|
—
|
—
|
||||||
Payments
of Predecessor notes payable
|
—
|
—
|
(2,428
|
)
|
||||||
Repayment
of long-term notes payable
|
(2,633
|
)
|
—
|
—
|
||||||
Payments
to reacquire and retire common stock
|
(263
|
)
|
—
|
—
|
||||||
Payment
of stock registration costs
|
(279
|
)
|
—
|
—
|
||||||
Payment
of deferred financing costs
|
(75
|
)
|
—
|
—
|
||||||
Refund
of debt issue costs
|
10
|
—
|
—
|
|||||||
Proceeds
from exercises of warrants
|
27
|
—
|
—
|
|||||||
Net
cash used in financing activities
|
(4,536
|
)
|
(150
|
)
|
(2,428
|
)
|
||||
Effect
of exchange rate changes on cash
|
36
|
—
|
30
|
|||||||
Net
decrease in cash
|
(2,121
|
)
|
(483
|
)
|
(2,243
|
)
|
||||
Cash,
beginning of period
|
3,952
|
570
|
5,743
|
|||||||
Cash,
end of period
|
$
|
1,831
|
$
|
87
|
$
|
3,500
|
BASIS
OF PRESENTATION
|
2.
|
BACKGROUND
AND DESCRIPTION OF BUSINESS
|
3.
|
NEW
ACCOUNTING PRONOUNCEMENTS
|
4.
|
INVENTORIES
|
September
30,
2009
|
December
31,
2008
|
|||||||
Raw
materials
|
$ | 4,945 | $ | 5,822 | ||||
Work-in-process
|
2,874 | 3,484 | ||||||
Finished
goods
|
1,915 | 2,141 | ||||||
$ | 9,734 | $ | 11,447 |
5.
|
GOODWILL
|
Balance
on December 31, 2008
|
$
|
60,896
|
||
Finalization
of the fair value of intangible assets
|
(2,024
|
)
|
||
Finalization
of the fair value of property, plant & equipment
|
(372
|
)
|
||
Additional
Acquisition costs recognized
|
435
|
|||
Adjustments
to deferred taxes associated with tangible and intangible asset
valuations
|
(549
|
)
|
||
Changes
due to foreign currency translation adjustments
|
66
|
|||
Balance
on September 30, 2009
|
$
|
58,452
|
6.
|
NOTES
PAYABLE
|
|
·
|
Waived
the requirement that CTI be in compliance as of June 30, 2009 with certain
financial covenants contained in the Original Credit
Agreement;
|
|
·
|
Changed
the maturity date of the line of credit from December 19, 2011 to December
31, 2010;
|
|
·
|
Increased
the Base Rate charged on the line of credit by an Applicable Margin, which
is defined in the Loan Amendment;
|
|
·
|
Reduced
the maximum management fee that CTI may pay to Cyalume from $125,000 per
quarter to $21,000 per month;
|
|
·
|
Increased
the maximum allowable Leverage Ratios for the months of September 2009
through December 2009 and
|
|
·
|
Added
a minimum quarterly EBITDA
covenant.
|
|
·
|
Waived the requirement that CTI be
in compliance as of September 30, 2009 with the service coverage and leverage
ratio covenants
contained in the Original Credit Agreement, as amended by the Loan
Amendment;
|
|
·
|
Requires that all net proceeds
from any new subordinated debt or equity offerings be used to pay-down
senior debt;
|
|
·
|
Requires the Company to receive at
least $3.0 million in new subordinated debt or equity offering before
April 30, 2010;
|
|
·
|
Set new schedules of required
ratios for maximum senior leverage, minimum fixed charge coverage and
minimum total debt service coverage ratios and set new quarterly EBITDA
targets to take effective December 31, 2009 and
|
|
·
|
Requires the Company to maintain
$1.0 million cash on the consolidated balance
sheet.
|
7.
|
NOTES
PAYABLE AND ADVANCE DUE TO RELATED
PARTIES
|
8.
|
DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES
|
Derivative
Instrument
|
Balance
Sheet Location
|
Fair
Value
|
||||
Currency
forward contract
|
Accrued
expenses and other current liabilities (current
liabilities)
|
$
|
(3
|
)
|
||
Interest
rate swaps
|
Derivatives
(noncurrent liabilities)
|
(127
|
)
|
Gain
(Loss)
|
Gain
(Loss)
|
Gain
(Loss)
|
||||||||||
In
AOCI (1)
|
Reclassified
(2)
|
in
Earnings (3)
|
||||||||||
Derivatives
designated as cash flow hedges:
|
||||||||||||
Interest
rate swaps
|
$ | (96 | ) | $ | — | $ | — | |||||
Derivatives
not designated as hedging instruments:
|
||||||||||||
Currency
forward contracts
|
$ | — | $ | — | $ | (3 | ) |
(1)
|
Amount
recognized in accumulated other comprehensive income (loss) (AOCI)
(effective portion and net of taxes) during the three months ended
September 30, 2009.
|
(2)
|
Amount
of gain (loss) originally recorded in AOCI but reclassified from AOCI into
earnings during the three months ended September 30,
2009.
|
(3)
|
Amount
of gain (loss) recognized in earnings on the derivative (ineffective
portion and amount excluded from effectiveness testing) reported in other
expenses (income) on the condensed consolidated statement of operations
for the three months ended September 30,
2009.
|
Gain
(Loss)
|
Gain
(Loss)
|
Gain
(Loss)
|
||||||||||
In
AOCI (1)
|
Reclassified
(2)
|
in
Earnings (3)
|
||||||||||
Derivatives
designated as cash flow hedges: relationships:
|
||||||||||||
Interest
rate swaps
|
$ | 22 | $ | — | $ | — | ||||||
Derivatives
not designated as hedging instruments:
|
||||||||||||
Currency
forward contracts
|
$ | — | $ | — | $ | (3 | ) |
(1)
|
Amount
recognized in accumulated other comprehensive income (loss) (AOCI)
(effective portion and net of taxes) during the nine months ended
September 30, 2009.
|
(2)
|
Amount
of gain (loss) originally recorded in AOCI but reclassified from AOCI into
earnings during the nine months ended September 30,
2009.
|
(3)
|
Amount
of gain (loss) recognized in earnings on the derivative (ineffective
portion and amount excluded from effectiveness testing) reported in other
expenses (income) on the condensed consolidated statement of operations
for the nine months ended September 30,
2009.
|
9.
|
SHARE-BASED
AWARDS
|
|
·
|
The
75,000 restricted common shares to non-employee consultants (including
45,000 earned by our current Chief Executive Officer as a consultant to
Vector prior to becoming our Chief Executive Officer) are to be issued as
payment for services rendered in conjunction with the Acquisition. The
fair value of this award was determined to be $225,000 using the quoted
market price of the common stock on March 3, 2009 of $3. This is recorded
as an increase to goodwill related to the Acquisition on the accompanying
condensed consolidated balance sheet as of September 30, 2009. These
restricted shares will vest over a 3-year period with no provision
requiring continued employment or
service.
|
|
·
|
The
100,333 restricted common shares to officers and other management are (i)
compensation for their services in 2009, (ii) earned based on meeting
board-determined performance goals and (iii) require continued employment
over the 3-year vesting period. The fair value of the award was determined
to be $151,000 using the quoted market price of the common stock on March
3, 2009 of $3 and applying appropriate estimated forfeiture
rates.
|
|
·
|
The
9,000 restricted common shares to our executive officers and other
management are (i) compensation for their services during 2008, (ii) were
earned based on meeting board-determined goals and (iii) require continued
employment over the 3-year vesting period. The fair value of the award was
determined to be $27,000, using the quoted market price of the common
stock on March 3, 2009 of $3.
|
|
·
|
Remaining
restricted common shares totaling 10,000 have been reserved for future
awards.
|
|
·
|
The
200,000 restricted options to our Chief Executive Officer are (i)
compensation for his services in 2009, (ii) earned based on meeting
board-determined performance goals and (iii) require continued employment
over the 3-year vesting period. The 82,500 options to directors are
compensation for their services as directors that will vest immediately.
The award’s fair value of $386,000 was determined using the Black-Scholes
pricing model. The following assumptions were used to value the
award:
|
Risk-free
interest rate
|
2.93
|
%
|
||
Expected
term
|
10
years
|
|||
Expected
volatility (1)
|
34.11
|
%
|
||
Expected
forfeitures for options to our chief executive officer
|
50
|
%
|
||
Expected
forfeitures for options to our directors
|
0
|
%
|
||
Dividend
yield
|
0
|
%
|
Risk-free
interest rate
|
1.87
|
%
|
||
Expected
term
|
5
years
|
|||
Expected
volatility (1)
|
25.98
|
%
|
||
Expected
forfeitures for options to our directors
|
0
|
%
|
||
Dividend
yield
|
0
|
%
|
Risk-free
interest rate
|
3.67
|
%
|
||
Expected
term
|
10
years
|
|||
Expected
volatility (1)
|
33.99
|
%
|
||
Expected
forfeitures
|
50
|
%
|
||
Dividend
yield
|
0
|
%
|
|
(1)
|
Because
our common stock did not have a trading history that was representative of
an operating company as of the date of the award, the expected volatility
assumption was derived using historical data of another public company
operating in our industry. We believe the volatility estimate calculated
from that company is a reasonable benchmark to use in estimating the
expected volatility of our common stock; however, that estimated
volatility may not necessarily be representative of the volatility of the
underlying securities in the
future.
|
10.
|
RESTRUCTURING
COSTS
|
Balance
on December 31, 2008
|
$
|
229
|
||
Cash
payments
|
(229
|
)
|
||
Balance
on September 30, 2009
|
$
|
—
|
11.
|
INCOME
TAXES
|
12.
|
NET
INCOME (LOSS) PER COMMON SHARE
|
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
|||||||||||||||
Basic:
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Net
income (loss) (in thousands)
|
$ | 325 | $ | 58 | $ | (943 | ) | $ | 276 | |||||||
Weighted
average shares
|
15,352,478 | 9,375,000 | 15,089,909 | 9,375,000 | ||||||||||||
Basic
income (loss) per common share
|
$ | 0.02 | $ | 0.01 | $ | (0.06 | ) | $ | 0.03 | |||||||
Diluted:
|
||||||||||||||||
Net
income (loss) (in thousands)
|
$ | 325 | $ | 58 | $ | (943 | ) | $ | 276 | |||||||
Weighted
average shares
|
15,352,478 | 9,375,000 | 15,089,909 | 9,375,000 | ||||||||||||
Effect
of dilutive securities
|
66,471 | 2,569,844 | — | (1) | 2,521,460 | |||||||||||
Weighted
average shares, as adjusted
|
15,418,949 | 11,944,844 | 15,089,909 | 11,896,460 | ||||||||||||
Diluted
income (loss) per common share
|
$ | 0.02 | $ | — | $ | (0.06 | ) | $ | 0.02 |
(1)
|
Since
we experienced a loss during this period, common shares issuable upon
exercise of convertible securities were excluded from the loss per share
calculation because the effect would be
antidilutive.
|
For
The Periods Ended September 30,
|
||||||||
2009
|
2008
|
|||||||
Warrants
|
4,370,256 | — | ||||||
Options
|
1,855,000 | 1,462,500 |
13.
|
COMMITMENTS
AND CONTINGENCIES
|
14.
|
FAIR
VALUE
|
Level
1
|
Quoted
prices for identical assets or liabilities in active markets to which we
have access at the measurement date.
|
Level
2
|
Inputs
other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly or indirectly.
|
Level
3
|
Unobservable
inputs for the asset or liability.
|
15.
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
Nine
Months Ended September 30,
|
Predecessor
For
the Nine Months Ended September 30,
|
|||||||||||
2009
|
2008
|
2008
|
||||||||||
Interest
|
$ | 1,495 | $ | — | $ | 3,207 | ||||||
Income
taxes
|
608 | — | 2,046 |
Nine
Months Ended September 30,
|
Predecessor
For
the Nine Months Ended September 30,
|
|||||||||||
2009
|
2008
|
2008
|
||||||||||
Increase
in the Acquisition date fair value of intangible assets (a reduction of
goodwill)
|
$ | 2,024 | $ | — | $ | — | ||||||
Increase
in the Acquisition date fair value of property, plant & equipment (a
reduction of goodwill)
|
372 | — | — | |||||||||
Accrual
of costs directly related to the Acquisition (an increase to
goodwill)
|
435 | — | — | |||||||||
Reduction
of goodwill resulting from subsequent recognition of deferred
taxes
|
549 | — | — | |||||||||
Remeasurement
of asset retirement obligation
|
26 | — | — | |||||||||
Extinguishment
of notes payable due to related parties by issuing common
stock
|
82 | — | — |
16.
|
SUBSEQUENT
EVENTS
|
|
1)
|
Strategic
development and implementation as well as consultation to our chief
executive officer on a regular basis as per his reasonable
requests;
|
|
2)
|
Identifying
strategic partners with companies with which Selway has relationships and
access. In this connection, Selway will focus on building partnerships
with companies in Israel, Singapore, India and Europe. The focus will be
on the expansion of our munitions
business;
|
|
3)
|
Advise
and support us on our investor relations
strategy;
|
|
4)
|
Advise
and support our future fund raising, including identifying sources of
capital in the United States; and
|
|
5)
|
Support
our mergers and acquisitions strategy and play an active role in our due
diligence and analysis.
|
ITEM 2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
|
·
|
Waived
the requirement that CTI be in compliance as of June 30, 2009 with certain
financial covenants contained in the Original Credit
Agreement;
|
|
·
|
Changed
the maturity date of the line of credit from December 19, 2011 to December
31, 2010;
|
|
·
|
Increased
the Base Rate charged on the line of credit by an Applicable Margin, which
is defined in the Loan Amendment;
|
|
·
|
Reduced
the maximum management fee that CTI may pay to Cyalume from $125,000 per
quarter to $21,000 per month;
|
|
·
|
Increased
the maximum allowable Leverage Ratios for the months of September 2009
through December 2009 and
|
|
·
|
Added
a minimum quarterly EBITDA
covenant.
|
|
·
|
Waived the requirement that CTI be
in compliance as of September 30, 2009 with the service coverage and leverage
ratio covenants
contained in the Original Credit Agreement, as amended by the Loan
Amendment;
|
|
·
|
Requires that all net proceeds
from any new subordinated debt or equity offerings be used to pay-down
senior debt;
|
|
·
|
Requires the Company to receive at
least $3.0 million in new subordinated debt or equity offering before
April 30, 2010;
|
|
·
|
Set new schedules of required
ratios for maximum senior leverage, minimum fixed charge coverage and
minimum total debt service coverage ratios and set new quarterly EBITDA
targets to take effective December 31, 2009 and
|
|
·
|
Requires the Company to maintain
$1.0 million cash on the consolidated balance
sheet.
|
ITEM 3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
ITEM 4T.
|
CONTROLS
AND PROCEDURES
|
ITEM 1.
|
LEGAL
PROCEEDINGS
|
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
Period
|
Total
Number of Shares Purchased
|
Average
Price Paid per Share
|
Total
Number of Shares Purchased as Part of Publicly Announced Plans or
Programs
|
Maximum
Number (or Approximate Dollar Value) of Shares that May yet be
Purchased under the Plans or Programs
|
||||||||||||
January
1 to January 31
|
32,903 |
(1)
|
$ | 7.97 | — | $ | — | |||||||||
February
1 to February 28
|
— | — | — | — | ||||||||||||
March
1 to March 31
|
— | — | — | — | ||||||||||||
April
1 to April 30
|
— | — | — | — | ||||||||||||
May
1 to May 31
|
— | — | — | — | ||||||||||||
June
1 to June 30
|
— | — | — | — | ||||||||||||
July
1 to July 31
|
— | — | — | — | ||||||||||||
August
1 to August 31
|
— | — | — | — | ||||||||||||
September
1 to September 30
|
— | — | — | — |
(1)
|
The
shares were repurchased from members of management. These shares were a
portion of the shares that certain members of CTI’s management received
relating to the December 19, 2008 acquisition of CTI. Our Board of
Directors voted at its January 13, 2009 meeting to honor a pre-Acquisition
verbal commitment to repurchase 20% (or 32,903) of such shares to provide
the holders of those shares with cash to pay personal income taxes arising
from exchanging their shares of GMS Acquisition Partners for Cyalume
common stock during the acquisition of
CTI.
|
ITEM 3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
|
·
|
Waived
the requirement that CTI be in compliance as of June 30, 2009 with certain
financial covenants contained in the Original Credit
Agreement;
|
|
·
|
Changed
the maturity date of the line of credit from December 19, 2011 to December
31, 2010;
|
|
·
|
Increased
the Base Rate charged on the line of credit by an Applicable Margin, which
is defined in the Loan Amendment;
|
|
·
|
Reduced
the maximum management fee that CTI may pay to Cyalume from $125,000 per
quarter to $21,000 per month;
|
|
·
|
Increased
the maximum allowable Leverage Ratios for the months of September 2009
through December 2009 and
|
|
·
|
Added
a minimum quarterly EBITDA
covenant.
|
|
·
|
Waived the requirement that CTI be
in compliance as of September 30, 2009 with the service coverage and leverage
ratio covenants
contained in the Original Credit Agreement, as amended by the Loan
Amendment;
|
|
·
|
Requires that all net proceeds
from any new subordinated debt or equity offerings be used to pay-down
senior debt;
|
|
·
|
Requires the Company to receive at
least $3.0 million in new subordinated debt or equity offering before
April 30, 2010;
|
|
·
|
Set new schedules of required
ratios for maximum senior leverage, minimum fixed charge coverage and
minimum total debt service coverage ratios and set new quarterly EBITDA
targets to take effective December 31, 2009 and
|
|
·
|
Requires the Company to maintain
$1.0 million cash on the consolidated balance
sheet.
|
ITEM 4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
ITEM 5.
|
OTHER
INFORMATION
|
|
1)
|
Strategic
development and implementation as well as consultation to our chief
executive officer on a regular basis as per his reasonable
requests;
|
|
2)
|
Identifying
strategic partners with companies with which Selway has relationships and
access. In this connection, Selway will focus on building partnerships
with companies in Israel, Singapore, India and Europe. The focus will be
on the expansion of our munitions
business;
|
|
3)
|
Advise
and support us on our investor relations
strategy;
|
|
4)
|
Advise
and support our future fund raising, including identifying sources of
capital in the United States; and
|
|
5)
|
Support
our mergers and acquisitions strategy and play an active role in our due
diligence and analysis.
|
Exhibit
Number
|
Description
|
|
10.1
|
Employment
agreement of Edgar Cranor, Technology Vice President, Cyalume
Technologies, Inc. (1)
|
|
10.2
|
First
Amendment to Credit Agreement and Limited Waiver, effective September 1,
2009, among CTI, Cyalume and TD Bank, N.A. under the Revolving Credit and
Term Loan Agreement dated as of December 19, 2008. (2)
|
|
10.3
|
*
|
Management Agreement between Cyalume
Technologies Holdings, Inc. and Selway Capital,
LLC.
|
31.1
|
*
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2
|
*
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32.1
|
*
|
Certification
of Principal Executive Officer and Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
|
*
|
Filed
herewith.
|
(1)
|
Incorporated
by reference to the Current Report on Form 8-K dated July 17, 2009 and
filed with the Commission July 22, 2009.
|
(2)
|
Incorporated
by reference to the Current Report on Form 8-K dated September 11, 2009
and filed with the Commission September 23,
2009.
|
Cyalume
Technologies Holdings, Inc.
|
|||
Date:
November 23, 2009
|
By:
|
/s/ DEREK
DUNAWAY
|
|
Derek
Dunaway, Chief Executive Officer
|
|||
(Principal
Executive Officer)
|
Date:
November 23, 2009
|
By:
|
/s/ MICHAEL
BIELONKO
|
|
Michael
Bielonko, Chief Financial Officer
|
|||
(Principal
Financial Officer)
|