-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PGnVnIn66PUP+SEEETyUv1mN9WMsc8YW1iOdUAjAvYoASf0eUnx4xBNueqgT+WWH /rTeMjWGNh2/DwIWOk1NLA== 0001157523-06-005294.txt : 20060516 0001157523-06-005294.hdr.sgml : 20060516 20060516173023 ACCESSION NUMBER: 0001157523-06-005294 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060510 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060516 DATE AS OF CHANGE: 20060516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIGITAL FUSION INC/NJ/ CENTRAL INDEX KEY: 0001057257 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 133817344 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-24073 FILM NUMBER: 06847127 BUSINESS ADDRESS: STREET 1: 5030 BRADFORD DRIVE NW STREET 2: SUITE 210 CITY: HUNTSVILLE STATE: AL ZIP: 35805 BUSINESS PHONE: 2568372620 MAIL ADDRESS: STREET 1: 5030 BRADFORD DRIVE NW STREET 2: SUITE 210 CITY: HUNTSVILLE STATE: AL ZIP: 35805 FORMER COMPANY: FORMER CONFORMED NAME: IBS INTERACTIVE INC DATE OF NAME CHANGE: 19980306 8-K 1 a5150759.txt DIGITAL FUSION INC. 8K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------- FORM 8-K ------------- CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 May 10, 2006 Date of report (date of earliest event reported) ------------- DIGITAL FUSION, INC. (Exact Name of Registrant as Specified in its Charter) ------------- Delaware 0-24073 13-3817344 (State or Other Jurisdiction (Commission File Number) (IRS Employer of Incorporation) Identification No.) 5030 Bradford NW, Suite 210, Huntsville, AL 35805 (Address of Principal Executive Offices) (256) 837-2620 (Registrant's telephone number, including area code) 4940-A Corporate Drive, Huntsville, AL 35805 (Former Name or Former address, if Changed Since Last Report) ------------- Check the appropriate box below if the Form 8-K filing in intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14D-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Section 1 - Registrant's Business and Operations Item 1.01 Entry into a Material Definitive Agreement. On May 10, 2006, the Company entered into a $4.5 million line of credit with First Commercial Bank in Huntsville, Alabama, an affiliate of Synovus Financial Corporation. The line which matures on May 5, 2007, is to be used primarily for working capital and to finance the performance of government contracts. Under the terms of the agreement, the Company may borrow up to $4.5 million under the revolving line of credit, if certain conditions are met. The loan agreement, note and security agreements, each dated May 10, 2006 among First Commercial Bank of Huntsville and the Company, for a $4.5 million revolving line of credit, a form of which were filed with the Commission on May 15, 2006 as exhibit 10.3 to the Company's quarterly report on Form 10-QSB (File No. 0-24073), are incorporated herein by reference. On May 12, 2006, the Company issued a press release announcing the signing of the $4.5 million line of credit. A copy of the press release is attached hereto as Exhibit 99.2. Section 2 - Financial Information Item 2.02 Results of Operations and Financial Condition. On May 10, 2006, the Company issued a press release containing information regarding its operations and financial condition for the first quarter period ended March 31, 2006. A copy of the press release is attached hereto as Exhibit 99.1. Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.. See Item 1.01 which is incorporated herein by reference. Section 9 - Financial Statements Exhibits Item 9.01 Financial Statements and Exhibits (c) Exhibits Exhibit No. Description 10.3* Loan Agreement, note and security agreements, each dated May 10, 2006 among First Commercial Bank of Huntsville and the Company, for a $4.5 million revolving line of credit. 99.1** Press release dated May 10, 2006, issued by Digital Fusion, Inc. 99.2** Press release dated May 12, 2006, issued by Digital Fusion, Inc. - --------------- * Incorporated by reference. ** Filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: May 16, 2006 DIGITAL FUSION, INC. By: /s/ Elena I. Crosby ------------------------------------ Elena I. Crosby, Corporate Secretary EXHIBIT INDEX 10.3* Loan Agreement, note and security agreements, each dated May 10, 2006 among First Commercial Bank of Huntsville and the Company, for a $4.5 million revolving line of credit. 99.1** Press release dated May 10, 2006, issued by Digital Fusion, Inc. 99.2** Press release dated May 12, 2006, issued by Digital Fusion, Inc. - --------------- * Incorporated by reference. ** Filed herewith. EX-99.1 2 a5150759ex991.txt EXHIBIT 99.1 Exhibit 99.1 Digital Fusion Releases First Quarter 2006 Results HUNTSVILLE, Ala.--(BUSINESS WIRE)--May 10, 2006--Digital Fusion, Inc. (OTCBB:DIGF), an information technology ("IT"), research and engineering, and acquisition and business support services provider, today announced financial results for the first quarter ended March 31, 2006. First Quarter 2006 Highlights -- Revenue of $7.1 million, an increase of $2.7 million over same quarter in the previous year -- Earnings before interest, taxes, share-based compensation, depreciation and amortization (EBITDA) of $480,000, an increase of $200,000 or 71% over same quarter in the previous year Financial Comparisons For the quarter ended March 31, 2006, revenues increased to $7.1 million for the quarter compared to $4.4 million for the first quarter of 2005. Non-GAAP net income which does not include stock option expense increased 107.5% to $193,000 for the quarter compared to net income of $93,000 for the first quarter of 2005. Non-GAAP earnings per share, assuming dilution, remained unchanged at $0.01 for the quarter compared to earnings per share, assuming dilution, for the first quarter of 2005. For the quarter, GAAP net loss was $164,000 and GAAP loss per share was $0.01 compared to GAAP net income of $93,000 and earnings per share of $0.01 for the first quarter of 2005. Non-GAAP net income and non-GAAP earnings per share for the first quarter exclude the effect of stock-based compensation expense resulting from the application of Statement of Financial Accounting Standards No. 123R, Share-Based Payment ("SFAS 123R"). SFAS 123R was adopted on a modified prospective basis effective January 1, 2006. See the table below for reconciliation between non-GAAP and GAAP net income. Business Discussion Service revenue increased approximately $2.9 million in the first quarter of 2006 compared to the same quarter in the previous year. The increase in service revenues during the first quarter of 2006 compared to the same quarter in the previous year was primarily related to the increase in the number of billable employees, the NASA Marshall Space Flight Center contract, and growth in engineering services. Reimbursed costs revenue increased $100,000 in the first quarter of 2006 compared to the first quarter of 2005. The increase in reimbursed cost revenue is primarily related to an increase in purchases made for customers. Product revenue decreased approximately $319,000 in the first quarter of 2006 compared to the same quarter of the previous year. The decrease in product revenue resulted from a reduction of software re-sales to governmental organizations. Management Comments "We are pleased with our financial performance this quarter and expect continued improvement throughout 2006," said Lt. Gen. (Ret.) Frank Libutti, chairman of the board and chief executive officer of Digital Fusion. "We announced our move into the northeast region and we continue to expand our customer base. We grew revenue $2.7 million and EBITDA 71% over of the same quarter in the previous year." "We are off to a great start, revenue for the first quarter of 2006 was up sequentially and we are positioned for continued growth," said Gary Ryan, Digital Fusion's president. "Our service revenues were up 84% from the same quarter in the previous year and we continue to add billable employees. We ended the first quarter of 2006 with over 215 employees and expect to have 300 employees at the end of the year." About Digital Fusion Digital Fusion, Inc., headquartered in Huntsville, Alabama, is an information technology, research and engineering, and acquisition and business support services company that helps its customers make the most of technology to meet their business needs. Digital Fusion provides state-of-the-art solutions to both government and commercial customers. Digital Fusion's core competencies are focused in the following broad areas: Application Development, Architecture and Security; Network Security; Data Management and Business Intelligence; System Migration and Integration; Sensor Systems Development and Analysis; Aerodynamic Design, Analysis, and Support; Thermal-Structural Modeling; Test and Evaluation; Systems Engineering; Modeling and Simulation; Control System Design and Analysis; Mechanical Design and Analysis; and Program Management Support. For additional information about Digital Fusion visit http://www.digitalfusion.com. Forward Looking Statements. All statements other than statements of historical fact included in this release are forward-looking statements. When used in this release, words such as "project," "anticipate," "believe," "estimate," "expect," "plan", "intend" and similar expressions, as they relate to the Company or its management, as well as assumptions made by and information currently available to the Company's management, identify forward-looking statements. Similarly, statements herein that describe the Company's business strategy, outlook, objectives, plans, intentions or goals are also forward-looking statements. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors including, but not limited to: the effect of business and economic conditions; the impact of competitive products and pricing; capacity and supply constraints or difficulties, the Company's dependence on continued funding of U.S. government programs; contract procurement and termination risks; competitive factors such as pricing pressures and/or competition to hire and retain employees, and material changes in laws or regulations applicable to the Company's businesses. Such statements reflect the current views of the Company with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy and liquidity of the Company. These statements reflect the Company's current beliefs and are based upon information currently available to it. Be advised that developments subsequent to this release are likely to cause these statements to become outdated with the passage of time. This press release includes non-GAAP net income, non-GAAP earnings per share data, and other non-GAAP line items from the Non-GAAP Information table in this release. These measures exclude the effect of stock compensation expense for employee stock options associated with the application of SFAS 123R, which Digital Fusion, Inc. adopted effective January 1, 2006. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. Digital Fusion, Inc. believes that the presentation of the non-GAAP measures, when shown in conjunction with the corresponding GAAP measures, provides useful information to management and investors regarding financial and business trends relating to its financial condition and results of operations. In particular, as Digital Fusion, Inc. begins to apply SFAS 123R, it believes that it is useful to investors to understand how the expense associated with the application of SFAS 123R are reflected in its results of operations. The presentation of these non-GAAP measures permits both investors and management to more readily compare past results, which do not include the impact of SFAS 123R, with future results, and to better understand Digital Fusion's performance over the periods presented. DIGITAL FUSION, INC. Condensed Consolidated Balance Sheets (in thousands, except per share data) March 31, Dec. 31, 2006 2005 (Unaudited) ------------ -------- ASSETS Current Assets: Cash and cash equivalents 1 1 Short-term investment $ - $ 66 Accounts receivable (net of allowance for doubtful accounts of $26 for 2006 and 2005) 4,885 5,277 Unbilled receivables 261 256 Prepaid expenses and other current assets 137 70 -------- -------- Total current assets 5,284 5,670 Property and equipment, net of accumulated depreciation of $1,158 for 2006 and $1,111 for 2005 503 492 Goodwill 5,861 5,861 Purchased intangible assets, net 1,528 1,634 Other assets 22 18 -------- -------- Total assets $ 13,198 $ 13,675 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 2,541 $ 3,041 Accounts payable 725 1,121 Deferred revenue 37 212 Accrued compensation and related expenses 1,714 1,470 Other current liabilities 72 72 -------- -------- Total current liabilities 5,089 5,916 Long-term debt, less current maturities 1,732 1,685 Pension obligation 341 341 -------- -------- Total liabilities 7,162 7,942 -------- -------- Stockholders' Equity: Preferred Stock - $.01 par value; authorized 1,000 shares, no shares issued and outstanding - - Common Stock - $.01 par value; authorized 30,000 shares; 11,425 and 11,247 shares issued and outstanding at March 31, 2006 and December 31, 2005, respectively 114 112 Additional paid in capital 44,857 44,393 Accumulated deficit (38,935) (38,772) -------- -------- Total stockholders' equity 6,036 5,733 -------- -------- Total liabilities and stockholders' equity $ 13,198 $ 13,675 ======== ======== DIGITAL FUSION, INC. Condensed Consolidated Statements of Operations For the three months ended March 31, 2006 and 2005 (unaudited, in thousands except per share data) 2006 2005 ------------- ---------------- Revenues Services and fees $ 6,377 $ 3,495 Reimbursed costs 609 509 Product 118 437 ------------- --------------- Total Revenues 7,104 4,441 ------------- --------------- Cost of services and goods sold Services 5,179 2,663 Reimbursed costs 593 476 Product 110 422 ------------- --------------- Total cost of services and goods sold 5,882 3,561 ------------- --------------- Gross profit 1,222 880 Selling, general and administrative 1,144 638 ------------- --------------- Operating income 78 242 ------------- --------------- Other expenses: Interest expense, net 48 47 Amortization of discount on debt and intrinsic value of convertible debt 87 102 ------------- -------------- Total interest expense 135 149 Other income - - Amortization of intangible assets 107 - ------------- --------------- Total other expenses 242 149 ------------- --------------- Net income (loss) before income taxes $ (164) $ 93 Income tax benefit - - ------------- --------------- Net income (loss) $ (164) $ 93 ============= =============== Basic earnings (loss) per share $ (0.01) $ 0.01 ============= =============== Basic weighted average common shares outstanding 11,315 10,446 ============= =============== Diluted earnings (loss) per share $ (0.01) $ 0.01 ============= =============== Diluted weighted average common shares outstanding 11,315 12,758 ============= =============== Earnings before interest, income taxes, share-based compensation, depreciation, and amortization (EBITDA) (unaudited in thousands) EBITDA (which we define as earnings before interest, income taxes, share-based compensation, depreciation, and amortization) is not a measure of financial performance under United States generally accepted accounting principles ("US GAAP") and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with US GAAP or as an alternative to cash flow from operating activities as a measure of liquidity. Management believes EBITDA provides additional, useful information regarding Digital Fusion's ability to meet our debt service, capital expenditure and working capital requirements. EBITDA is a traditional measure of a business' ability to generate cash flows irrespective of financing costs and is presented as a supplemental financial measurement in the evaluation of our business. For the three months ended March 31, -------------------------- 2006 2005 --------- ------------- Net income (loss) $ (164) $ 93 Interest expense 48 47 Income tax expense - - Share-based compensation 357 - Depreciation and amortization 45 38 Amortization of intangible assets 107 - Amortization of discount on debt and intrinsic value of convertible debt 87 102 --------- ------------- EBITDA $ 480 $ 280 ========= ============= Non-GAAP Information (1) (2) For the three months ended March 31, 2006 and 2005 (unaudited, in thousands) Non-GAAP (excludes effects of GAAP GAAP SFAS 123R) Three Three Three Months Months Effects of Months Ended Ended SFAS 123R Ended March March 31, March 31, March 31, 31, 2006 2006 2006 2005 --------- ---------- ----------- ------- Revenues $ 7,104 $ - $ 7,104 $ 4,441 Cost of Sales 5,882 106 5,776 3,561 --------- ---------- ----------- ------- Gross profit (loss) 1,222 (106) 1,328 880 --------- ---------- ----------- ------- Selling, general and administrative expenses 1,144 251 893 638 --------- ---------- ----------- ------- Operating income (loss) 78 (357) 435 242 --------- ---------- ----------- ------- Interest expense 48 - 48 47 Other expense 194 - 194 102 --------- ---------- ----------- ------- Net income (loss) before income taxes (164) (357) 193 93 Income tax benefit - - - - --------- ---------- ----------- ------- Net income (loss) $ (164) $ (357) $ 193 $ 93 ========= ========== =========== ======== (1) A reconciliation between net income on a GAAP basis and non-GAAP net income including items (a) through (b) is provided in the table below. (2) There was no stock-based compensation expense recorded in fiscal 2005, as we had adopted the footnote disclosure only provision of SFAS 123. Reconciliation of GAAP to Non-GAAP Net Income and Earnings per Share (unaudited, in thousands except per share data) Quarter Quarter Ended Ended March 31, March 31, 2006 2005 ---------- ---------- GAAP Net Income (Loss) $ (164) $ 93 (a) Stock-based compensation expense related to employee stock options (1) 357 - (b) Income tax effect of stock-based compensation expense - - ---------- ---------- Non-GAAP Net Income $ 193 $ 93 ========== ========== GAAP Earnings per common share - $ (0.01) $ 0.01 Per share effect of stock-based compensation expense 0.03 - ---------- ---------- Non-GAAP Earnings per common share - Basic $ 0.02 $ 0.01 ========== ========== Non-GAAP Earnings per common share - Diluted $ 0.01 $ 0.01 ========== ========== (1) For the first quarter of 2006, stock-based compensation expense was allocated as follows: $106 to cost of sales expense and $251 to selling, general and administrative expense. CONTACT: Digital Fusion, Inc., Huntsville Investor Relations Elena Crosby, 256-837-2620 ir@digitalfusion.com EX-99.2 3 a5150759ex992.txt EXHIBIT 99.2 Exhibit 99.2 Digital Fusion Renews Line of Credit HUNTSVILLE, Ala.--(BUSINESS WIRE)--May 12, 2006--Digital Fusion, Inc. (OTCBB:DIGF), an information technology ("IT"), research and engineering, and acquisition and business support services provider today announced the signing of a $4.5 million line of credit with First Commercial Bank in Huntsville, Alabama, an affiliate of Synovus Financial Corp (NYSE:SNV). The line which matures on May 5, 2007, is to be used primarily for working capital and to finance the performance of government contracts. Under the terms of the agreement, Digital Fusion may borrow up to $4.5 million under the revolving line of credit, if certain conditions are met. "We are please to be continuing our banking relationship with First Commercial Bank in Huntsville," stated Frank Libutti, chairman and chief executive officer of Digital Fusion. "This line of credit combined with our cash flow from operations enables us to move forward with our growth plans and enhance shareholder value," added Libutti. "First Commercial Bank of Huntsville has been our banking partner for two years and we are delighted to renew our line of credit and add $1 million to the line," stated Gary Ryan, president of Digital Fusion. "We are generating cash from operations and with the renewal of this line of credit, we will have the financial ability to grow our business in the future," said Ryan. About Digital Fusion Digital Fusion, Inc., headquartered in Huntsville, Alabama, is an information technology, research and engineering, and acquisition and business support services company that helps its customers make the most of technology to meet their business needs. Digital Fusion provides state-of-the-art solutions to both government and commercial customers. Digital Fusion's core competencies are focused in the following broad areas: Application Development, Architecture and Security; Network Security; Data Management and Business Intelligence; System Migration and Integration; Sensor Systems Development and Analysis; Aerodynamic Design, Analysis, and Support; Thermal-Structural Modeling; Test and Evaluation; Systems Engineering; Modeling and Simulation; Control System Design and Analysis; Mechanical Design and Analysis; and Program Management Support. For additional information about Digital Fusion visit http://www.digitalfusion.com. Forward Looking Statements. All statements other than statements of historical fact included in this release are forward-looking statements. When used in this release, words such as "project", "anticipate," "believe," "estimate," "expect," "plan", "intend" and similar expressions, as they relate to the Company or its management, as well as assumptions made by and information currently available to the Company's management, identify forward-looking statements. Similarly, statements herein that describe the Company's business strategy, outlook, objectives, plans, intentions or goals are also forward-looking statements. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors including, but not limited to: the effect of business and economic conditions; the impact of competitive products and pricing; capacity and supply constraints or difficulties, the Company's dependence on continued funding of U.S. government programs; contract procurement and termination risks; competitive factors such as pricing pressures and/or competition to hire and retain employees, and material changes in laws or regulations applicable to the Company's businesses. Such statements reflect the current views of the Company with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy and liquidity of the Company. These statements reflect the Company's current beliefs and are based upon information currently available to it. Be advised that developments subsequent to this release are likely to cause these statements to become outdated with the passage of time. CONTACT: Digital Fusion, Inc., Huntsville Elena Crosby, 256-837-2620 ir@digitalfusion.com -----END PRIVACY-ENHANCED MESSAGE-----