[√]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
[
]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Florida
|
20-5256635
|
(State
or other jurisdiction of
|
(I.R.S.
employer
|
incorporation
or organization)
|
identification
no.)
|
4218
W. Linebaugh Avenue, Tampa, FL
|
33624
|
(Address
of principal executive offices)
|
(Zip
code)
|
PART
I
|
FINANCIAL
INFORMATION
|
PAGE
|
Item
1
|
Financial
Statements
|
|
Consolidated
Balance Sheets
|
||
As
of June 30, 2007 (unaudited)
|
F-2
|
|
Consolidated
Statements of Operations
|
||
Three
and Six Months ended June
30, 2007
(unaudited)
|
||
Three
and Six Months ended July
1, 2006
(unaudited)
|
F-3
|
|
Consolidated
Statements of Cash Flows
|
||
Six
Months ended June
30, 2007
(unaudited)
|
||
Six
Months ended July 1,
2006
(unaudited)
|
F-4
|
|
Notes
to Consolidated Financial Statements (unaudited)
|
F-5
|
|
Item
2
|
Management's
Discussion and Analysis or Plan of Operation
|
1
|
Item
3
|
Controls
and Procedures
|
8
|
PART
II
|
OTHER
INFORMATION
|
|
Item
1
|
Legal
Proceedings
|
8
|
Item
2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
9
|
Item
3
|
Defaults
Upon Senior Securities
|
9
|
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
9
|
Item
5
|
Other
Information
|
9
|
Item
6
|
Exhibits
|
10
|
Contents:
|
|
|
|
Consolidated
Balance Sheet as of June 30, 2007 (unaudited)
|
F-2
|
|
|
Consolidated
Statements of Operations for the three and six month periods ended
June
30, 2007 and July 1, 2006 (unaudited)
|
F-3
|
|
|
Consolidated
Statements of Cash Flows for the six month periods ended June 30,
2007 and
July 1, 2006 (unaudited)
|
F-4
|
|
|
|
ASSETS
|
||||
|
|
|||
|
|
|||
|
June
30,
|
|||
|
2007
|
|||
|
(unaudited)
|
|||
Current
Assets:
|
|
|||
Cash
|
$ |
5,119,993
|
||
Accounts
receivable
|
3,827,124
|
|||
Inventory
|
2,159,562
|
|||
Other
current assets
|
1,090,161
|
|||
Total
Current Assets
|
12,196,840
|
|||
Fixed
Assets:
|
||||
Property,
plant and equipment, net
|
3,147,677
|
|||
Other
Assets:
|
||||
Goodwill
|
5,784,340
|
|||
Other
assets
|
77,509
|
|||
Total
Other Assets:
|
5,861,849
|
|||
Total
Assets
|
$ |
21,206,366
|
||
|
||||
LIABILITIES
AND STOCKHOLDERS'EQUITY
|
||||
|
||||
Current
Liabilities:
|
||||
Current
maturities on long term debt
|
$ |
39,051
|
||
Accounts
payable & accrued expenses
|
4,599,246
|
|||
Accrued
warranties
|
2,065,000
|
|||
Accrued
preferred dividends
|
203,257
|
|||
Total
Current Liabilities
|
6,906,552
|
|||
Long
Term Liabilities:
|
||||
Accrued
earnout, net of current maturities
|
1,295,149
|
|||
Long-term
debt, net of current maturities
|
1,888,810
|
|||
Deferred
tax liability
|
248,543
|
|||
Total
Liabilities
|
10,339,054
|
|||
Stockholders'
Equity:
|
||||
Series
A Preferred stock, $0.01 par value, 750,000 shares authorized,
638,775
shares issued and outstanding
|
6,387,745
|
|||
|
||||
Series
B Preferred stock, $0.01 par value, 49,451 shares authorized, 0
shares
issued and outstanding
|
-
|
|||
|
||||
Series
C Preferred stock, $0.01 par value, 26,750 shares authorized, 26,750
shares issued and outstanding
|
267
|
|||
|
||||
Series
D Preferred stock, $0.01 par value, 132,081 shares authorized,
0 shares
issued and outstanding
|
-
|
|||
|
||||
Series
E Preferred stock, $0.01 par value, 1,000,000 shares authorized,
750,000
shares issued and outstanding
|
7,500
|
|||
|
||||
Common
stock, $0.001 par value, 100,000,000 shares authorized, 8,609,063
shares
issued and outstanding
|
8,609
|
|||
|
||||
Additional
paid-in capital
|
34,899,091
|
|||
|
||||
Accumulated
deficit
|
(30,435,901 | ) | ||
Total
Stockholders Equity
|
10,867,311
|
|||
Total
Liabilities and Stockholders Equity
|
$ |
21,206,366
|
|
For
the three month period ended
|
For
the six month period ended
|
||||||||||||||
|
June
30,
|
July
1,
|
June
30,
|
July
1,
|
||||||||||||
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
||||||||||||
|
|
|
|
|
||||||||||||
REVENUE
|
$ |
15,888,025
|
$ |
18,952,394
|
$ |
27,700,367
|
$ |
31,865,474
|
||||||||
|
||||||||||||||||
COST
OF REVENUE
|
13,292,427
|
15,705,760
|
23,728,837
|
26,601,150
|
||||||||||||
|
||||||||||||||||
GROSS
PROFIT
|
2,595,598
|
3,246,634
|
3,971,530
|
5,264,324
|
||||||||||||
|
||||||||||||||||
OPERATING
EXPENSES:
|
||||||||||||||||
Depreciation
|
10,169
|
8,797
|
20,249
|
16,054
|
||||||||||||
Selling,
general and administrative
|
1,766,884
|
1,693,154
|
3,244,424
|
2,966,950
|
||||||||||||
|
||||||||||||||||
TOTAL
OPERATING EXPENSES
|
1,777,053
|
1,701,951
|
3,264,673
|
2,983,004
|
||||||||||||
|
||||||||||||||||
OPERATING
INCOME
|
818,545
|
1,544,683
|
706,857
|
2,281,320
|
||||||||||||
|
||||||||||||||||
OTHER
INCOME (EXPENSES)
|
||||||||||||||||
Other
income
|
-
|
25,002
|
-
|
31,245
|
||||||||||||
Interest
income
|
51,935
|
-
|
114,569
|
-
|
||||||||||||
Interest
expense
|
(37,629 | ) | (21,798 | ) | (77,293 | ) | (35,664 | ) | ||||||||
|
||||||||||||||||
TOTAL
OTHER INCOME/(EXPENSES)
|
14,306
|
3,204
|
37,276
|
(4,419 | ) | |||||||||||
|
||||||||||||||||
INCOME
BEFORE INCOME TAXES
|
832,851
|
1,547,887
|
744,133
|
2,276,901
|
||||||||||||
|
||||||||||||||||
INCOME
TAX EXPENSE
|
(333,318 | )* | (559,422 | ) | (378,845 | )* | (820,596 | ) | ||||||||
|
||||||||||||||||
NET
INCOME
|
$ |
499,533
|
$ |
988,465
|
$ |
365,288
|
$ |
1,456,305
|
||||||||
|
||||||||||||||||
Dividends
to preferred stockholders
|
(111,479 | ) | (128,696 | ) | (203,257 | ) | (241,782 | ) | ||||||||
Deemed
dividend to preferred stockholders on beneficial conversion
feature
|
-
|
(2,079,488 | ) |
-
|
(3,570,731 | ) | ||||||||||
|
||||||||||||||||
Net
Income Available to Common Shareholders
|
$ |
388,054
|
$ | (1,219,719 | ) | $ |
162,031
|
$ | (2,356,208 | ) | ||||||
|
||||||||||||||||
|
||||||||||||||||
Net
Income/(Loss) Per Share (Basic)
|
$ |
0.05
|
$ | (1.22 | ) | $ |
0.02
|
$ | (2.36 | ) | ||||||
Net
Income/(Loss) Per Share (Fully Diluted)
|
$ |
0.02
|
$ | (1.22 | ) | $ |
0.02
|
$ | (2.36 | ) | ||||||
|
||||||||||||||||
Weighted
Average Common Shares Outstanding
|
8,609,054
|
1,000,000
|
8,483,359
|
1,000,000
|
||||||||||||
Weighted
Average Common and Common Equivalent Shares
Outstanding
|
22,291,010
|
1,000,000
|
22,540,191
|
1,000,000
|
||||||||||||
|
||||||||||||||||
*Includes
additional charge-See Note 7.
|
||||||||||||||||
|
|
|
|
|
|||||
|
For
the six month period ended
|
|||||||
|
June
30,
|
|
July
1,
|
|||||
|
2007
|
|
2006
|
|||||
|
(unaudited)
|
|
(unaudited)
|
|||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|||||
Net
income (loss)
|
$ |
365,288
|
|
$ |
1,456,305
|
|||
Adjustments
to reconcile net income (loss) to net cash provided for/used in
operating
activities:
|
|
|||||||
Depreciation
and amortization
|
136,748
|
|
85,372
|
|||||
Stock
based compensation
|
-
|
|
8,651
|
|||||
(Gain)/Loss
on sale of property and equipment
|
-
|
|
(14,624 | ) | ||||
Changes
in assets and liabilities:
|
|
|||||||
(Increase)/decrease
in receivables
|
(1,652,126 | ) |
|
(1,068,239 | ) | |||
(Increase)/decrease
in inventories
|
(861,919 | ) |
|
(1,401,267 | ) | |||
(Increase)/decrease
in other current assets
|
(236,909 | ) |
|
(103,343 | ) | |||
Increase/(decrease)
in accounts payable
|
985,380
|
|
1,537,668
|
|||||
Increase/(decrease)
in income taxes payable
|
170,109
|
|
820,595
|
|||||
Increase/(decrease)
in estimated warranties
|
65,000
|
|
400,000
|
|||||
Increase/(decrease)
in accrued expenses
|
(295,483 | ) |
|
(884,232 | ) | |||
Increase/(decrease)
in deferred tax liability
|
248,543
|
|
-
|
|||||
CASH
FLOW PROVIDED FOR/USED IN OPERATING ACTIVITIES
|
$ | (1,075,369 | ) |
|
$ |
836,886
|
||
|
|
|||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|||||||
Purchases
of equipment
|
(67,261 | ) |
|
(990,338 | ) | |||
Purchase
of Company, net of cash acquired
|
-
|
|
(3,543,737 | ) | ||||
Proceeds
from sales of marketable securities
|
-
|
|
(2,829 | ) | ||||
CASH
FLOW USED IN INVESTING ACTIVITIES
|
$ | (67,261 | ) |
|
$ | (4,536,904 | ) | |
|
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|||||||
Proceeds
from preferred issuances
|
-
|
|
7,728,780
|
|||||
Accrual
of Earnout
|
62,873
|
|
-
|
|||||
Repayment
of notes payable
|
(37,036 | ) |
|
495,886
|
||||
Payment
of earnout
|
(1,232,275 | ) |
|
|||||
Proceeds
from the exercise of warrants
|
37,910
|
|
-
|
|||||
Loan
costs
|
-
|
|
(98,950 | ) | ||||
CASH
FLOW PROVIDED BY FINANCING ACTIVITIES
|
$ | (1,168,528 | ) |
|
$ |
8,125,716
|
||
|
|
|||||||
NET
INCREASE (DECREASE) IN CASH
|
$ | (2,311,159 | ) |
|
$ |
4,425,698
|
||
CASH,
Beginning
|
$ |
7,431,152
|
|
$ |
221
|
|||
CASH,
Ending
|
$ |
5,119,993
|
|
$ |
4,425,919
|
|||
|
|
|||||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|||||||
Cash
paid during the year for:
|
|
|||||||
Interest
|
$ |
64,467
|
|
$ |
47,262
|
|||
Taxes
|
$ |
375,000
|
|
$ |
615,200
|
|||
|
|
|||||||
SUPPLEMENTAL
DISCLOSURE OF NON CASH INVESTING AND FINANCING
ACTIVITIES:
|
|
|||||||
Additional
purchase price accrued under earnout provision
|
$ |
-
|
|
$ |
1,319,705
|
|||
Accrual
of dividends on preferred stock
|
$ |
203,257
|
|
$ |
241,782
|
|||
Deemed
dividend on beneficial conversion feature
|
$ |
-
|
|
$ |
3,570,731
|
|
|
|
|
|
|
Weighted
Average
|
||||||||||||||||||||
|
|
|
Exercise
Price
|
Exercise
Price
|
||||||||||||||||||||||
|
|
Stock
|
Per
Share
|
Per
Share
|
||||||||||||||||||||||
|
Warrants
|
Options
|
Warrants
|
|
Options
|
Warrants
|
|
Options
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Outstanding
at December 31, 2006
|
22,506,977
|
-
|
$ |
0.75-3.00
|
|
-
|
$ |
1.64
|
|
-
|
||||||||||||||||
Granted
|
-
|
-
|
-
|
|
-
|
-
|
|
-
|
||||||||||||||||||
Exercised
|
(25,273 | ) |
-
|
$ |
1.50
|
|
-
|
$ |
1.50
|
|
-
|
|||||||||||||||
Cancelled
or expired
|
-
|
-
|
-
|
|
-
|
-
|
|
-
|
||||||||||||||||||
Outstanding
at March 31, 2007
|
22,481,704
|
-
|
$ |
0.75-3.00
|
|
-
|
$ |
1.64
|
|
-
|
||||||||||||||||
Granted
|
-
|
-
|
-
|
|
-
|
-
|
|
-
|
||||||||||||||||||
Exercised
|
-
|
-
|
$ |
-
|
|
-
|
$ |
-
|
|
-
|
||||||||||||||||
Cancelled
or expired
|
-
|
-
|
-
|
|
-
|
-
|
|
-
|
||||||||||||||||||
Exercisable
at June 30, 2007
|
22,481,704
|
-
|
$ |
0.75-3.00
|
|
-
|
$ |
1.64
|
|
-
|
||||||||||||||||
|
|
|
For
the three month periods
ending
|
For
the six month periods ending
|
|||||||||||||||
|
June
30,
|
July
1,
|
June
30,
|
July
1,
|
||||||||||||
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
|
|
|
|
|
||||||||||||
Net
income/( loss) available to common shareholders
|
$ |
388,054
|
$ | (1,219,719 | ) | $ |
162,031
|
$ | (2,356,208 | ) | ||||||
|
||||||||||||||||
Weighted
average shares outstanding:
|
||||||||||||||||
Basic
|
8,609,054
|
1,000,000
|
8,483,359
|
1,000,000
|
||||||||||||
Diluted
|
22,291,010
|
1,000,000
|
22,540,191
|
1,000,000
|
||||||||||||
Income/Loss
per share:
|
||||||||||||||||
Basic
|
$ |
0.05
|
$ | (1.22 | ) | $ |
0.02
|
$ | (2.36 | ) | ||||||
Diluted*
|
$ |
0.02
|
$ | (1.22 | ) | $ |
0.02
|
$ | (2.36 | ) | ||||||
|
|
|
Common
Stock Equivalents
as
of
|
||||||||||
|
Exercise
|
June
30,
|
July
1,
|
|||||||||
Securities
|
Price
|
2007
|
2006
|
|||||||||
|
|
|
|
|||||||||
Preferred:
|
|
|
|
|||||||||
|
|
|
|
|||||||||
Series
A Preferred
|
|
8,516,993
|
9,941,620
|
|||||||||
Series
B Preferred
|
|
-
|
4,945,100
|
|||||||||
Series
C Preferred
|
|
2,675,000
|
2,675,000
|
|||||||||
Series
D Preferred
|
|
-
|
880,540
|
|||||||||
Series
E Preferred
|
|
750,000
|
-
|
|||||||||
|
|
|||||||||||
Warrants:
|
|
|||||||||||
|
|
|||||||||||
Class
A Warrants
|
$ |
1.50
|
10,369,351
|
10,538,137
|
||||||||
Class
B Warrants
|
$ |
2.25
|
4,970,824
|
4,970,824
|
||||||||
Class
C Warrants
|
$ |
0.75
|
2,000,000
|
2,000,000
|
||||||||
Class
D Warrants
|
$ |
0.75
|
2,000,000
|
2,000,000
|
||||||||
Class
E Warrants
|
$ |
3.00
|
880,544
|
880,540
|
||||||||
Class
F Warrants
|
$ |
2.25
|
750,000
|
-
|
||||||||
Class
BD-1 Warrants
|
$ |
0.75
|
-
|
919,162
|
||||||||
Class
BD-2 Warrants
|
$ |
1.50
|
919,162
|
919,162
|
||||||||
Class
BD-3 Warrants
|
$ |
2.25
|
459,581
|
459,581
|
||||||||
Class
BD-4 Warrants
|
$ |
1.50
|
66,121
|
66,121
|
||||||||
Class
BD-5 Warrants
|
$ |
3.00
|
66,121
|
66,121
|
||||||||
|
||||||||||||
Total
common stock equivalents
|
34,423,697
|
41,261,908
|
June
30,
|
|||||
2007
|
|||||
(unaudited)
|
|||||
Raw
Materials
|
1,024,078
|
||||
Work-in-Process
|
433,971
|
||||
Finished
Goods
|
701,513
|
||||
Total
Inventory
|
$ |
2,159,562
|
June
30,
|
||||
2007
|
||||
(unaudited)
|
||||
Balance
at beginning of period
|
$ |
2,000,000
|
||
Warranty
charges
|
1,108,301
|
|||
Warranty
payments
|
(1,043,301 | ) | ||
Balance
at end of period
|
$ |
2,065,000
|
(i) | the sales of our products are spread over a number of independent dealers, |
(ii) | we have had only isolated instances where we have incurred a repurchase obligation, |
|
(iii)
|
the
price we are obligated to pay under such repurchase agreements
declines
based upon a predetermined amount over a period which usually does
not
exceed 24 months, and
|
|
(iv)
|
we
have been able to resell homes repurchased from lenders at current
market
prices, although there is no guarantee that we will continue to
be able to
do so.
|
Exhibit
No.
|
Description
|
3.01
|
Articles of Incorporation of Deer
Valley Corporation. (1)
|
3.02
|
Bylaws of Deer
Valley Corporation. (1)
|
4.01
|
Certificate
of Designation, Rights, and Preferences of Series A Convertible
Preferred
Stock. (1)
|
4.02
|
Certificate
of Designation, Rights, and Preferences of Series B Convertible
Preferred
Stock. (1)
|
4.03
|
Certificate
of Designation, Rights, and Preferences of Series C Convertible
Preferred
Stock. (1)
|
4.04
|
Certificate
of Designation, Rights, and Preferences of Series D Convertible
Preferred
Stock. (1)
|
4.05
|
Certificate
of Designation, Rights, and Preferences of Series E Convertible
Preferred
Stock. (2)
|
10.01
|
Amendment
to Loan Agreement (3)
|
10.02
|
Form
of Renewal Revolving Credit Note (3)
|
10.03
|
Revolving
Credit Loan and Security Agreement (3)
|
10.04
|
Form
of Revolving Credit Note (3)
|
10.05
|
Continuing
Guaranty of Deer Valley Homebuilders, Inc. (3)
|
10.06
|
Continuing
Guaranty of Deer Valley Corporation (3)
|
10.07
|
Form
of Series F Warrant (4)
|
10.08
|
Revolving
Bridge Loan and Security Agreement (4)
|
10.09
|
Revolving
Bridge Note (4)
|
10.10
|
Continuing
Guaranty of Deer Valley Corporation (4)
|
31.01
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a)
as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
dated
August __, 2007. (4)
|
31.02
|
Certification
of Acting Chief Financial Officer pursuant to Rule 13a-14(a) and
15d-14(a)
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002,
dated August __, 2007. (4)
|
32.01
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated
August
__, 2007. (4)
|
32.02
|
Certification
of Acting Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
dated
August __, 2007. (4)
|
Deer
Valley Corporation
|
|
(Registrant)
|
|
Dated: August
__, 2007
|
By: /s/
Charles G. Masters
|
Charles
G. Masters
|
|
President
& Chief Executive Officer
|