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Table of Contents

 

 

 

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 March 31, 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
(State or other jurisdiction of
incorporation or organization)

 

56-1581761
(I.R.S. employer
identification no.)

 

1521 Concord Pike, Suite 301
Wilmington, Delaware

 

19803

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s 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

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company x

(Do not check if a smaller reporting company)

 

 

 

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 April 30, 2015, there were 21,027,640 outstanding shares of the Registrant’s common stock, par value $.01 per share.

 

 

 




Table of Contents

 

PART I — FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARY

 

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)
(unaudited)

 

 

 

March 31,

 

December 31,

 

 

 

2015

 

2014

 

ASSETS

 

 

 

 

 

Current Assets :

 

 

 

 

 

Cash and cash equivalents

 

$

24,423

 

$

24,818

 

Other current assets

 

90

 

22

 

 

 

 

 

 

 

Total current assets

 

24,513

 

24,840

 

 

 

 

 

 

 

Total assets

 

$

24,513

 

$

24,840

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities :

 

 

 

 

 

Accrued expenses

 

$

409

 

$

486

 

 

 

 

 

 

 

Total current liabilities

 

409

 

486

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

Preferred stock, $.01 par value, 20,920,648 shares authorized, no shares issued or outstanding

 

 

 

Common stock, $.01 par value, 50,000,000 shares authorized, 21,434,267 issued at March 31, 2015 and December 31, 2014, respectively

 

217

 

217

 

Additional paid-in capital

 

44,149

 

44,148

 

Treasury stock, 406,627 common shares at cost at March 31, 2015 and December 31, 2014, respectively

 

(555

)

(555

)

Accumulated deficit

 

(19,707

)

(19,456

)

 

 

 

 

 

 

Total stockholders’ equity

 

24,104

 

24,354

 

Total liabilities and stockholders’ equity

 

$

24,513

 

$

24,840

 

 

The accompanying notes are an integral part of these statements.

 

2



Table of Contents

 

SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARY

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)
(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Selling, general and administrative

 

$

251

 

$

340

 

Total operating expenses

 

251

 

340

 

 

 

 

 

 

 

Operating loss

 

(251

)

(340

)

 

 

 

 

 

 

Interest income (expense), net

 

 

 

 

 

 

 

 

 

Loss before taxes

 

(251

)

(340

)

 

 

 

 

 

 

Income tax expense (benefit)

 

 

 

 

 

 

 

 

 

Net loss

 

$

(251

)

$

(340

)

 

 

 

 

 

 

Basic and diluted loss per share

 

$

(0.01

)

$

(0.02

)

 

 

 

 

 

 

Shares used in computing basic and diluted net loss per share

 

21,027,640

 

21,027,640

 

 

The accompanying notes are an integral part of these statements.

 

3



Table of Contents

 

SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARY

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)
(unaudited)

 

 

 

Three Months

 

 

 

Ended March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Cash Flows from Operating Activities :

 

 

 

 

 

Net loss

 

$

(251

)

$

(340

)

Adjustments to reconcile net loss to net cash used in operating activities :

 

 

 

 

 

Stock-based compensation expense

 

1

 

 

(Increase) in :

 

 

 

 

 

Other current assets

 

(68

)

(55

)

Increase (Decrease) in :

 

 

 

 

 

Accrued expenses

 

(77

)

118

 

Net cash used in operating activities

 

(395

)

(277

)

 

 

 

 

 

 

Net cash used in investing activities

 

 

 

 

 

 

 

 

 

Net cash used in financing activities

 

 

 

 

 

 

 

 

 

Net decrease in Cash and Cash Equivalents

 

(395

)

(277

)

 

 

 

 

 

 

Cash and Cash Equivalents, Beginning of Period

 

24,818

 

24,598

 

 

 

 

 

 

 

Cash and Cash Equivalents, End of Period

 

$

24,423

 

$

24,321

 

 

 

 

 

 

 

Supplemental Cash Flow Disclosure :

 

 

 

 

 

 

 

 

 

 

 

Cash paid for taxes, net of tax refunds

 

$

5

 

$

10

 

 

The accompanying notes are an integral part of these statements.

 

4



Table of Contents

 

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 Company’s stockholders, to sell to the Purchaser substantially all of the Company’s rights, title and interest in substantially all of the Company’s 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 Company’s rights, title, and interest in substantially all of the assets, equipment, inventory, and intellectual property (the “Purchased Assets”) related exclusively to the Company’s 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 Company’s 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 Purchaser’s 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 Purchaser’s employees for a period of two years after the closing date, (iii) directly or indirectly solicit the Purchaser’s 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.

 

5



Table of Contents

 

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 Company’s 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.

 

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 supplied products, custom services and critical reagents used across the life science research and development markets. The Company’s Genomic Antibody Technology® (“GAT”) was used in proteomic research, disease understanding and drug/biomarker discovery among academic, biotech, in-vitro diagnostic and large pharmaceutical customers.

 

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 Company’s 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 March 31, 2015 and December 31, 2014, cash of $24,423 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.

 

6



Table of Contents

 

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 months ended March 31, 2015 and 2014, outstanding common stock options representing 974,570 and 1,479,494 shares, respectively, were excluded from the computation of diluted EPS.

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

21,027,640

 

21,027,640

 

 

 

 

 

 

 

Shares used in computing basic and diluted loss per share per share

 

21,027,640

 

21,027,640

 

 

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 Company’s 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 Company’s 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.

 

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Table of Contents

 

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 month periods ended March 31, 2015 and 2014 is summarized as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Stock options

 

$

1

 

$

 

 

 

 

 

 

 

Total share-based compensation expense

 

$

1

 

$

 

 

Share-based compensation expense of $1 and $0 in 2015 and 2014, respectively, is a component of selling, general and administrative expense, and is recorded as a non-cash expense in the operating activities section of the consolidated statement of cash flows.

 

No options were exercised in the three month periods ended March 31, 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 three months ended March 31, 2015 is summarized as follows:

 

 

 

 

 

 

 

 

 

Weighted

 

Aggregate

 

 

 

Number

 

 

 

 

 

Average Remaining

 

Instrinsic

 

 

 

of Shares

 

Price Range

 

Contractual term

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2015

 

974,570

 

$

1.25

-

$

3.74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

 

 

 

 

 

 

 

 

Cancelled / Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2015

 

974,570

 

$

1.25

-

$

3.74

 

4.9 years

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Vested and excercisable at March 31, 2015

 

609,186

 

$

1.25

-

$

3.74

 

4.6 years

 

$

 

 

8



Table of Contents

 

SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)

 

The following table provides additional information about the Company’s stock options outstanding and exercisable at March 31, 2015:

 

 

 

Options Outstanding

 

Options Exercisable

 

 

 

 

 

Weighted Average

 

 

 

Wtd. Average

 

Range of

 

Number of

 

Remaining

 

Exercise

 

Number of

 

Exercise

 

Exercise Prices

 

Shares

 

Contractual Life

 

Price

 

Shares

 

Price

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1.25

 -

$

1.85

 

767,528

 

4.8 Years

 

$

1.48

 

402,144

 

$

1.55

 

$

2.00

 -

$

2.25

 

175,000

 

5.5 Years

 

$

2.13

 

175,000

 

$

2.13

 

$

3.69

 -

$

3.74

 

32,042

 

3.1 Years

 

$

3.72

 

32,042

 

$

3.72

 

$

1.25

 -

$

3.74

 

974,570

 

4.9 Years

 

$

1.67

 

609,186

 

$

1.83

 

 

The Company had no unvested restricted stock as of December 31, 2014 and March 31, 2015.

 

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 three month period ended March 31, 2015, the Company’s 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 three months of 2015 did not change management’s 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 March 31, 2015, the Company had no interest or penalties accrued related to uncertain tax positions due to the available NOLs.

 

As of March 31, 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 three months ended March 31, 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.

 

9



Table of Contents

 

Item 2. Management’s 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 subsidiaries (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 Company’s public filings with the SEC including, without limitation, the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

 

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 Company’s stockholders, to sell to Purchaser substantially all of the Company’s rights, title and interest in substantially all of the Company’s 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 Company’s right, title, and interest in the Purchased Assets related exclusively to the Company’s 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 Company’s 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 Purchaser’s 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 included 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 the Company not (i) engage in a competing business for a period of five years after the closing date, (ii) directly or indirectly solicit Purchaser’s employees for a period of two years after the closing date, (iii) directly or indirectly solicit the Purchaser’s 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 of an additional $250,000 pursuant to the working capital adjustment provisions of the Asset Purchase Agreement.

 

10



Table of Contents

 

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 Company’s 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 March 31, 2015 versus Three Months Ended March 31, 2014

 

Selling, general and administrative

 

Selling, general and administrative expenses include personnel costs, professional fees and other expenses related to the Company’s current level of activity while the Company explores its future direction and opportunities. Selling, general and administrative expenses decreased from $340,000 for the three months ended March 31, 2014 to  $251,000 for the three months ended March 31, 2015. The decrease is primarily attributable to lower professional fees  in the 2015 period.

 

Income taxes

 

The Company recorded no income tax provision for the three-month periods ended March 31, 2015 and March 31, 2014.  The Company has full valuation allowances placed against U.S. federal and state deferred tax assets.

 

Net Loss

 

Net loss was $251,000, or $0.01 per diluted share, for the three-month period ended March 31, 2015, and $340,000, or $0.02 per diluted share, for the three-month period ended March 31, 2014.

 

Liquidity and Capital Resources

 

The net cash used in operating activities was $395,000 for the first three months of 2015 compared to net cash used in operating activities of $277,000 for the first three months of 2014.  The net cash used in operating activities in 2015 was the result of the net loss coupled with an increase in prepaid expenses and a decrease in accrued expenses. The net cash used in operating activities in 2014 was primarily the result of the net loss incurred partially offset by an increase in accrued expenses.

 

There was no cash used in investing activities in the three months ended March 31, 2015 and 2014.

 

There was no cash used in financing activities in the three months ended March 31, 2015 and 2014.  The Company’s working capital (current assets less current liabilities) was $24.1 million at March 31, 2015 compared to $24.4 million at December 31, 2014.

 

For the three months ended March 31, 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 Company’s 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 Company’s 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.

 

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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 Officer and Principal 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 Officer and Principal Financial Officer concluded that, as of March 31, 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 reported within the time periods specified in the SEC’s 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 Company’s 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

 

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PART II — OTHER INFORMATION

 

Item 6. Exhibits

 

31.1

 

Certifications of the Principal Executive Officer of Special Diversified Opportunities Inc. required by Rule 13a-14(a) under the Securities Exchange Act of 1934

 

 

 

31.2

 

Certifications of the Principal Financial Officer of Special Diversified Opportunities Inc. required by Rule 13a-14(a) under the Securities Exchange Act of 1934

 

 

 

32.1

 

Certification of the Principal Executive 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

 

 

 

32.2

 

Certification of the 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

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

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SIGNATURES

 

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.

 

 

SPECIAL DIVERSIFIED OPPORTUNTIES INC.

 

 

 Date: May 15, 2015

/s/ Philip T. Blazek

 

Philip T. Blazek

President

(Principal Executive Officer)

 

 

 

 

Date: May 15, 2015

/s/ Kevin J. Bratton

 

Kevin J. Bratton

Vice President — Finance and Chief Financial Officer

(Principal Financial and Accounting Officer)

 

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