-----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, RPUWi/iQVolGQlEoiQHU12Anm9Iv+1gRUJqZmkkWGixdA8ul0JHTOtCnuw88nubi EcE2V1ioVXY2gTvILLEe/g== 0001157523-06-008267.txt : 20060810 0001157523-06-008267.hdr.sgml : 20060810 20060810101437 ACCESSION NUMBER: 0001157523-06-008267 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060809 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060810 DATE AS OF CHANGE: 20060810 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: 061019777 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 a5205710.txt DIGITAL FUSION 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 August 9, 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 (IRS Employer of Incorporation) Number) Identification No.) New Address 5030 Bradford Drive, Building 1, Suite 210 Old Address 4940-A Corporate Drive, Huntsville, AL 35805 (Address of Principal Executive Offices) (256) 837-2620 (Registrant's telephone number, including area code) Not Applicable (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 2 - Financial Information Item 2.02 Results of Operations and Financial Condition. On August 9, 2006, Digital Fusion, Inc. issued a press release containing information regarding its operations and financial condition for the second quarter ended June 30, 2006. A copy of the press release is attached hereto as Exhibit 99.1. Section 9 - Financial Statements Exhibits Item 9.01 Financial Statements and Exhibits (c) Exhibits Exhibit No. Description ----------- ----------- 99.1* Press release dated August 9, 2006, issued by Digital Fusion, Inc. * 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: August 9, 2006 DIGITAL FUSION, INC. By: /s/ Christopher L. Brunhoeber -------------------------------------------------- Christopher L. Brunhoeber, Chief Financial Officer EXHIBIT INDEX Exhibit No. Description ----------- ----------- 99.1* Press release dated August 9, 2006, issued by Digital Fusion, Inc. * Filed herewith. EX-99.1 2 a5205710ex991.txt EXHIBIT 99.1 Exhibit 99.1 Digital Fusion Releases Second Quarter 2006 Results HUNTSVILLE, Ala.--(BUSINESS WIRE)--Aug. 9, 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 second quarter ended June 30, 2006. Second Quarter 2006 Highlights -- Revenue of $8.5 million, an increase of $4.0 million over same quarter in the previous year -- Earnings before interest, taxes, share-based compensation, depreciation and amortization (EBITDA) of $422,000, an increase of $111,000 or 36% over same quarter in the previous year Financial Comparisons For the quarter ended June 30, 2006, revenues increased to $8.5 million compared to $4.5 million for the second quarter of 2005. Non-GAAP net income which does not include stock option expense increased to $126,000 for the quarter compared to net income of $14,000 for the second quarter of 2005. Non-GAAP earnings per share, assuming dilution, increased to $0.01 for the quarter compared to earnings per share, assuming dilution, of $0.00 for the second quarter of 2005. For the quarter, GAAP net loss was $305,000 and GAAP loss per share was $0.03 compared to GAAP net income of $14,000 and earnings per share of $0.00 for the second quarter of 2005. For the six months ended June 30, 2006, revenues increased to $15.7 million compared to $9.0 million for the six months ended June 30, 2005. Non-GAAP net income which does not include stock option expense increased to $319,000 for the six months ended June 30, 2006 compared to net income of $107,000 for the six months ended June 30, 2005. Non-GAAP earnings per share, assuming dilution, increased to $0.02 for the six months ended June 30, 2006 compared to earnings per share, assuming dilution, of $0.01 for the six months ended 2005. For the six months ended June 30, 2006, GAAP net loss was $468,000 and GAAP loss per share was $0.04 compared to GAAP net income of $107,000 and earnings per share of $0.01 for the six months ended June 30, 2005. Non-GAAP net income and non-GAAP earnings per share for the second quarter and six months ended June 30, 2006 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 $3.3 million in the second quarter of 2006 compared to the same quarter in the previous year. The increase in service revenues during the second 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 $922,000 in the second quarter of 2006 compared to the second quarter of 2005. The increase in reimbursed cost revenue is primarily related to an increase in purchases made for customers. Product revenue decreased approximately $263,000 in the second 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 "Our financial performance is on target and we are continuing to refine and execute our strategic plans," said Lt. Gen. (Ret.) Frank Libutti, Chairman of the Board and Chief Executive Officer of Digital Fusion. "We opened our Washington D.C. office and continue to expand our customer base. We grew top line revenue $4.0 million and EBITDA $111,000 over of the same quarter in the previous year." "In an effort to increase efficiency and improve our support functions we moved our corporate headquarters and consolidated some operations," said Gary Ryan, Digital Fusion's President. "The move of our corporate headquarters impacted our second quarter financial results but it will provide for our anticipated future growth." 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 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) June 30, 2006 December 31, (Unaudited) 2005 ------------- -------------- ASSETS Current Assets: Cash $ 2 $ 1 Marketable equity securities - 66 Accounts receivable (net of allowance for doubtful accounts of $26 for 2006 and 2005) 5,317 5,277 Unbilled receivables 443 256 Prepaid expenses and other current assets 183 70 ------------- -------------- Total current assets 5,945 5,670 Property and equipment, net of accumulated depreciation of $1,215 for 2006 and $1,111 for 2005 897 492 Goodwill 5,861 5,861 Purchased intangible assets, net 1,421 1,634 Other assets 24 18 ------------- -------------- Total assets $ 14,148 $ 13,675 ============= ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 2,894 $ 3,041 Accounts payable 1,133 1,121 Deferred revenue 13 212 Accrued compensation and related expenses 2,100 1,470 Other current liabilities 88 72 ------------- -------------- Total current liabilities 6,228 5,916 Long-term debt, less current maturities 1,404 1,685 Pension obligation 341 341 ------------- -------------- Total liabilities 7,973 7,942 ------------- -------------- Stockholders' Equity: Preferred Stock - $.01 par value; authorized 1,000 shares, no share issued and outstanding - - Common Stock - $.01 par value; authorized 30,000 shares; 11,460 and 11,247 shares issued and outstanding at June 30, 2006 and December 31, 2005, respectively 115 112 Additional paid in capital 45,300 44,393 Accumulated deficit (39,240) (38,772) ------------- -------------- Total stockholders' equity 6,175 5,733 ------------- -------------- Total liabilities and stockholders' equity $ 14,148 $ 13,675 ============= ============== DIGITAL FUSION, INC. Condensed Consolidated Statements of Operations For the three and six months ended June 30, 2006 and 2005 (Unaudited) (In thousands, except per share data) Three months Six months ended June 30, ended June 30, ---------------- ---------------- 2006 2005 2006 2005 ------- ------- ------- ------- Revenues: Services and fees $ 6,929 $ 3,587 $13,305 $ 7,082 Reimbursed costs 1,557 635 2,166 1,144 Product 64 327 183 764 ------- ------- ------- ------- Total Revenue 8,550 4,549 15,654 8,990 ------- ------- ------- ------- Cost of services and goods sold: Services 5,822 2,779 11,001 5,442 Reimbursed costs 1,515 600 2,108 1,076 Product 51 309 161 731 ------- ------- ------- ------- Total cost of services and goods sold 7,388 3,688 13,270 7,249 ------- ------- ------- ------- Gross profit 1,162 861 2,384 1,741 Amortization of intangible assets 107 100 214 100 Selling, general and administrative 1,232 609 2,375 1,247 ------- ------- ------- ------- Operating (loss) income (177) 152 (205) 394 ------- ------- ------- ------- Other income (expenses): Interest expense, net (44) (36) (92) (83) Amortization of discount on debt and intrinsic value of convertible debt (88) (122) (175) (224) ------- ------- ------- ------- Total interest expense (132) (158) (267) (307) Other income 4 20 4 20 ------- ------- ------- ------- Total other expenses, net (128) (138) (263) (287) ------- ------- ------- ------- Net Income (loss) before income taxes (305) 14 (468) 107 Income tax benefit - - - - ------- ------- ------- ------- Net (loss) income (1) $ (305) $ 14 $ (468) $ 107 ======= ======= ======= ======= Basic earnings (loss) per share $ (0.03) $ 0.00 $ (0.04) $ 0.01 ======= ======= ======= ======= Basic weighted average common stock shares outstanding 11,441 10,873 11,378 10,661 ======= ======= ======= ======= Diluted earnings (loss) per share $ (0.03) $ 0.00 $ (0.04) $ 0.01 ======= ======= ======= ======= Diluted weighted average common stock shares outstanding 11,441 12,938 11,378 12,764 ======= ======= ======= ======= (1) Net income for the three and six-month periods ended June 30, 2006 included stock-based compensation expense under Statement of Financial Accounting Standards No. 123R of $431,000 and $787,000, respectively, related to stock options. There was no stock-based compensation expense recorded in the three and six-month periods ended June 30, 2005. DIGITAL FUSION, INC. Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2006 and 2005 (Unaudited) (In thousands) 2006 2005 -------- -------- Cash flows provided by operating activities: Net (loss) income $ (468) $ 107 Adjustments to reconcile net (loss) income to net cash used in operating activities, net of effect of acquisition: Depreciation and amortization 104 77 Amortization of beneficial interest 126 161 Amortization of discount on debt 49 63 Amortization of intangible assets 214 100 Stock-based compensation expense 787 - Proceeds from sale of trading securities 66 - Changes in assets and liabilities 121 (217) ------- ------- Net cash provided by operating activities 999 291 ------- ------- Cash flows used in investing activities: Capital expenditures - property and equipment (509) (98) Acquisition of Summit - (1,118) ------- ------- Net cash used in investing activities (509) (1,216) ------- ------- Cash flows provided by (used in) financing activities: Proceeds from exercise of options and warrants 115 676 Repayments of notes payable - (423) Net proceeds from line of credit (604) 421 ------- ------- Net cash (used in) provided by financing activities (489) 674 ------- ------- Net increase (decrease) in cash and cash equivalents 1 (251) Cash and cash equivalents, beginning of periods 1 252 ------- ------- Cash and cash equivalents, end of periods $ 2 $ 1 ======= ======= 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. Three months Six months ended June 30, ended June 30, --------------- -------------- 2006 2005 2006 2005 ------- ------ ------ ------ Net income (loss) $ (305) $ 14 $ (468) $ 107 Interest expense 44 36 92 83 Income tax expense - - - - Share-based compensation 431 - 787 - Depreciation 57 39 104 77 Amortization of intangible assets 107 100 214 100 Amortization of discount on debt and intrinsic value of convertible debt 88 122 175 224 ------- ------ ------ ------ EBITDA $ 422 $ 311 $ 904 $ 591 ======= ====== ====== ====== Non-GAAP Information (1) (2) For the three and six months ended June 30, 2006 and 2005 (unaudited, in thousands) Non-GAAP (excludes effects of GAAP SFAS 123R) GAAP Three Three Three Months Effects of Months Months Ended SFAS 123R Ended Ended June 30, June 30, June 30, June 30, 2006 2006 2006 2005 ---------- ----------- --------- ---------- Revenues $ 8,550 $ - $ 8,550 $ 4,549 Cost of Sales 7,388 148 7,240 3,688 -------- -------- -------- -------- Gross profit (loss) 1,162 (148) 1,310 861 -------- -------- -------- -------- Selling, general and administrative expenses 1,339 283 1,056 709 -------- -------- -------- -------- Operating income (loss) (177) (431) 254 152 -------- -------- -------- -------- Interest expense 44 - 44 36 Other expense 84 - 84 102 -------- -------- -------- -------- Net income (loss) before income taxes (305) (431) 126 14 Income tax benefit - - - - -------- -------- -------- -------- Net income (loss) $ (305) $ (431) $ 126 $ 14 ======== ======== ======== ======== (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. Non-GAAP (excludes effects of SFAS 123R) GAAP Six Six GAAP Six Months Effects of Months Months Ended SFAS 123R Ended Ended June 30, June 30, June 30, June 30, 2006 2006 2006 2005 (4) ---------- ----------- --------- ---------- Revenues $ 15,654 $ - $ 15,654 $ 8,990 Cost of Sales 13,270 254 13,016 7,249 -------- ------- -------- -------- Gross profit (loss) 2,384 (254) 2,638 1,741 -------- ------- -------- -------- Selling, general and administrative expenses 2,589 533 2,056 1,347 -------- ------- -------- -------- Operating income (loss) (205) (787) 582 394 -------- ------- -------- -------- Interest expense 92 - 92 83 Other expense 171 - 171 204 -------- ------- -------- -------- Net income (loss) before income taxes (468) (787) 319 107 Income tax benefit - - - - -------- ------- -------- -------- Net income (loss) (3) $ (468) $ (787) $ 319 $ 107 ======== ======= ======== ======== (3) 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. (4) 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 Ended Quarter Ended June 30, June 30, 2006 2005 ------------- ------------- GAAP Net Income (Loss) $ (305) $ 14 (a) Stock-based compensation expense related to employee stock options (1) 431 - (b) Income tax effect of stock-based compensation expense - - ------------- ------------- Non-GAAP Net Income $ 126 $ 14 ============= ============= GAAP Earnings per common share - $ (0.03) $ 0.00 Per share effect of stock-based compensation expense 0.04 - ------------- ------------- Non-GAAP Earnings per common share - Basic $ 0.01 $ 0.00 ============= ============= Non-GAAP Earnings per common share - Diluted (2) $ 0.01 $ 0.00 ============= ============= (1) For the second quarter of 2006, stock-based compensation expense was allocated as follows: $148 to cost of sales expense and $283 to selling, general and administrative expense. (2) Common stock equivalents in the three months ended June 30, 2006, were anti-dilutive due to the net losses sustained by the Company during this period. Therefore, the diluted weighted average common stock shares outstanding in this period are the same as the basic weighted average common stock shares outstanding. However, if the Company had net income the diluted weighted average number of shares would have been 13,789,377 for the three months ended June 30, 2006. Six Months Six Months Ended June 30, Ended June 30, 2006 2005 --------------- --------------- GAAP Net Income (Loss) $ (468) $ 107 (a) Stock-based compensation expense related to employee stock options (3) 787 - (b) Income tax effect of stock-based compensation expense - - --------------- --------------- Non-GAAP Net Income $ 319 $ 107 =============== =============== GAAP Earnings per common share - $ (0.04) $ 0.01 Per share effect of stock- based compensation expense 0.07 - --------------- --------------- Non-GAAP Earnings per common share - Basic $ 0.03 $ 0.01 =============== =============== Non-GAAP Earnings per common share - Diluted (4) $ 0.02 $ 0.01 =============== =============== (3) For the six months ended June 30, 2006, stock-based compensation expense was allocated as follows: $254 to cost of sales expense and $533 to selling, general and administrative expense. (4) Common stock equivalents in the six months ended June 30, 2006, were anti-dilutive due to the net losses sustained by the Company during this period. Therefore, the diluted weighted average common stock shares outstanding in this period are the same as the basic weighted average common stock shares outstanding. However, if the Company had net income the diluted weighted average number of shares would have been 13,784,701 for the six months ended June 30, 2006. CONTACT: Digital Fusion, Inc., Huntsville Investor Relations Chris Brunhoeber, 256-327-8103 ir@digitalfusion.com -----END PRIVACY-ENHANCED MESSAGE-----