[√]
|
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.)
|
4902
Eisenhower Blvd., Suite 185, Tampa, FL
|
33634
|
(Address
of principal executive offices)
|
(Zip
code)
|
PART I | FINANCIAL INFORMATION |
PAGE
|
Item
1
|
Financial
Statements
|
F-1
|
Consolidated
Balance Sheets
|
F-2
|
|
As
of March
31,
2007 (unaudited)
|
|
|
F-3
|
||
Consolidated
Statements of Operations
|
||
Three
Months ended March
31,
2007
(unaudited)
|
||
Three
Months ended April
1,
2006
(unaudited)
|
|
|
Consolidated
Statements of Cash Flows
|
F-4
|
|
Three
Months ended March
31,
2007
(unaudited)
|
||
Three
Months ended April
1,
2006
(unaudited)
|
|
|
Notes
to Consolidated Financial Statements (unaudited)
|
F-5 -- F-10
|
|
Item
2
|
Management's
Discussion and Analysis or Plan of Operation
|
3
|
Item
3
|
Controls
and Procedures
|
9
|
PART
II
|
OTHER
INFORMATION
|
|
Item
1
|
Legal
Proceedings
|
9
|
Item
2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
10
|
Item
3
|
Defaults
Upon Senior Securities
|
10
|
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
10
|
Item
5
|
Other
Information
|
10
|
Item
6
|
Exhibits
|
10
|
Contents:
|
|
Consolidated
Balance Sheet as of March 31, 2007 (unaudited)
|
F-2
|
Consolidated
Statements of Operations for the three month period ended March
31, 2007
and April 1, 2006 (unaudited)
|
F-3
|
Consolidated
Statements of Cash Flows for the three month period ended March
31, 2007
and April 1, 2006 (unaudited)
|
F-4
|
Notes
to Condensed Consolidated Financial Statements
(unaudited)
|
F-5
-- F-10
|
ASSETS
|
||||||
March
31,
|
||||||
2007
|
||||||
(unaudited)
|
||||||
Current
Assets:
|
||||||
Cash
|
$
|
5,599,667
|
||||
Accounts
receivable
|
2,834,582
|
|||||
Inventory
|
1,761,823
|
|||||
Prepaid
expenses and other current assets
|
923,558
|
|||||
Total
Current Assets
|
11,119,630
|
|||||
Fixed
Assets:
|
||||||
Property,
plant and equipment, net
|
3,206,301
|
|||||
Other
Assets:
|
||||||
Goodwill
|
5,721,413
|
|||||
Other
assets
|
82,456
|
|||||
Total
Other Assets:
|
5,803,869
|
|||||
Total
Assets
|
$
|
20,129,801
|
||||
LIABILITIES
AND STOCKHOLDERS'EQUITY(DEFICIT)
|
||||||
Current
Liabilities:
|
||||||
Current
maturities on long term debt
|
$
|
1,289,361
|
||||
Accounts
payable and accrued expenses
|
3,145,359
|
|||||
Accrued
warranties
|
2,000,000
|
|||||
Other
current liabilities
|
94,736
|
|||||
Total
Current Liabilities
|
6,529,456
|
|||||
Long
Term Liabilities:
|
||||||
Long-term
debt, net of current maturities
|
3,121,086
|
|||||
Total
Liabilities
|
9,650,541
|
|||||
Stockholders'
Equity (Deficit):
|
||||||
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, 750,000 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.
|
8,608
|
|||||
Additional
paid-in capital
|
43,676,118
|
|||||
Retained
earnings and accumulated deficit
|
(39,600,980
|
)
|
||||
Total
Stockholders Equity (Deficit)
|
10,479,258
|
|||||
Total
Liabilities and Stockholders Equity (Deficit)
|
$
|
20,129,801
|
March
31,
|
April
1,
|
||||||
2007
|
2006
|
||||||
(unaudited)
|
(unaudited)
|
|
|||||
|
|||||||
REVENUE
|
$
|
11,812,342
|
$
|
12,913,079
|
|||
|
|||||||
COST
OF REVENUE
|
10,436,409
|
10,895,389
|
|||||
GROSS
PROFIT
|
1,375,933
|
2,017,690
|
|||||
OPERATING
EXPENSES:
|
|||||||
Depreciation
|
63,091
|
36,065
|
|||||
Selling,
general and administrative
|
1,424,529
|
1,249,327
|
|||||
TOTAL
OPERATING EXPENSES
|
1,487,620
|
1,285,392
|
|||||
OPERATING
INCOME/(LOSS)
|
(111,687
|
)
|
732,298
|
||||
OTHER
INCOME (EXPENSES)
|
|||||||
Other
income
|
-
|
6,243
|
|||||
Interest
income
|
62,634
|
-
|
|||||
Interest
expense
|
(39,664
|
)
|
(13,867
|
)
|
|||
TOTAL
OTHER INCOME/(EXPENSES)
|
22,970
|
(7,624
|
)
|
||||
INCOME/(LOSS)
BEFORE INCOME TAXES
|
(88,717
|
)
|
724,674
|
||||
INCOME
TAX EXPENSE
|
(45,528
|
)
|
(261,173
|
)
|
|||
NET
INCOME/(LOSS)
|
$
|
(134,245
|
)
|
$
|
463,501
|
||
Dividends
to preferred stockholders
|
(91,777
|
)
|
(113,086
|
)
|
|||
Deemed
dividend to preferred stockholders on beneficial conversion
feature
|
-
|
(1,491,243
|
)
|
||||
NET
INCOME/(LOSS)Available to Common Shareholders
|
$
|
(226,023
|
)
|
$
|
(1,140,828
|
)
|
|
Net
Income/(Loss) Per Share (Basic)
|
$
|
(0.03
|
)
|
$
|
(1.14
|
)
|
|
Net
Income/(Loss) Per Share (Fully Diluted)
|
$
|
(0.03
|
)
|
$
|
(1.14
|
)
|
|
Weighted
Average Common Shares Outstanding
|
8,350,510
|
1,000,000
|
|||||
Weighted
Average Common and Common Equivalent Shares Outstanding
|
8,350,510
|
1,000,000
|
For
the three month period ended
|
||||||||||
March
31,
|
April
1,
|
|||||||||
2007
|
2006
|
|||||||||
(unaudited)
|
(unaudited)
|
|
||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||
Net
income (loss)
|
$
|
(134,245
|
)
|
$
|
463,501
|
|||||
Adjustments
to reconcile net income (loss) to net cash provided for/used in
operating
activities:
|
||||||||||
Depreciation
and amortization
|
68,039
|
36,065
|
||||||||
Changes
in assets and liabilities:
|
||||||||||
(Increase)/decrease
in receivables
|
(659,584
|
)
|
(673,910
|
)
|
||||||
(Increase)/decrease
in inventories
|
(464,180
|
)
|
(1,360,783
|
)
|
||||||
(Increase)/decrease
in prepayments and other assets
|
(7,380
|
)
|
(74,342
|
)
|
||||||
Increase/(decrease)
in accounts payable
|
154,244
|
954,070
|
||||||||
Increase/(decrease)
in income taxes payable
|
(304,471
|
)
|
261,173
|
|||||||
Increase/(decrease)
in estimated warranties
|
-
|
110,000
|
||||||||
Increase/(decrease)
in accrued expenses
|
(440,692
|
)
|
275,514
|
|||||||
CASH
FLOW PROVIDED FOR/USED IN OPERATING ACTIVITIES
|
$
|
(1,788,270
|
)
|
$
|
(8,711
|
)
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||
Purchases
of equipment
|
(62,123
|
)
|
(245,771
|
)
|
||||||
Purchase
of Company, net of cash acquired
|
-
|
(2,777,116
|
)
|
|||||||
CASH
FLOW USED IN INVESTING ACTIVITIES
|
$
|
(62,123
|
)
|
$
|
(3,022,887
|
)
|
||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||
Proceeds
from preferred issuances
|
-
|
6,541,014
|
||||||||
Repayment
of notes payable
|
(19,001
|
)
|
-
|
|||||||
Proceeds
from the exercise of warrants
|
37,910
|
-
|
||||||||
Distributions
to former shareholders
|
-
|
(150,000
|
)
|
|||||||
Proceeds
from issuance of common stock
|
-
|
18
|
||||||||
Proceeds
from long-term debt
|
-
|
43,039
|
||||||||
CASH
FLOW PROVIDED BY FINANCING ACTIVITIES
|
$
|
18,909
|
$
|
6,434,071
|
||||||
NET
INCREASE (DECREASE) IN CASH
|
$
|
(1,831,485
|
)
|
$
|
3,402,473
|
|||||
CASH,
Beginning
|
$
|
7,431,152
|
$
|
221
|
||||||
CASH,
Ending
|
$
|
5,599,667
|
$
|
3,402,694
|
||||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||||
Cash
paid during the year for:
|
||||||||||
Interest
|
$
|
39,664
|
$
|
13,867
|
||||||
Taxes
|
$
|
285,000
|
$
|
-
|
||||||
|
||||||||||
SUPPLEMENTAL
DISCLOSURE OF NON CASH INVESTING AND FINANCING
ACTIVITIES:
|
||||||||||
Additional
purchase price accrued under earnout provision
|
$
|
-
|
$
|
496,407
|
||||||
Accrual
of dividends on preferred stock
|
$
|
91,777
|
$
|
113,086
|
||||||
Deemed
dividend on beneficial conversion feature
|
$
|
-
|
$
|
1,491,243
|
Stock
|
|||||||||||||||||||
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
|
-
|
|||||||||||
Exercisable
at March 31, 2007
|
22,481,704
|
-
|
$
|
0.75-3.00
|
-
|
$
|
1.64
|
-
|
For
the three month period ending
|
|||||||||
March
31,
|
April
1,
|
||||||||
2007
|
2006
|
||||||||
Net
loss available to common shareholders
|
($226,023
|
)
|
($1,140,828)
|
||||||
Weighted
average shares outstanding:
|
|||||||||
Basic
|
8,350,510
|
1,000,000
|
|||||||
Loss
per share:
|
|||||||||
Basic
|
($0.03
|
)
|
($1.14)
|
||||||
Diluted*
|
($0.03
|
)
|
($1.14)
|
Common Stock Equivalents as of | |||||||
March
31,
|
April
1,
|
||||||
Securities
|
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
E Preferred
|
750,000
|
-
|
|||||
Warrants:
|
|||||||
Class
A Warrants
|
10,369,351
|
9,941,639
|
|||||
Class
B Warrants
|
4,970,824
|
4,970,824
|
|||||
Class
C Warrants
|
2,000,000
|
2,000,000
|
|||||
Class
D Warrants
|
2,000,000
|
2,000,000
|
|||||
Class
E Warrants
|
880,544
|
-
|
|||||
Class
F Warrants
|
750,000
|
-
|
|||||
Class
BD-1 Warrants
|
-
|
919,162
|
|||||
Class
BD-2 Warrants
|
919,162
|
919,162
|
|||||
Class
BD-3 Warrants
|
459,581
|
459,581
|
|||||
Class
BD-4 Warrants
|
66,121
|
-
|
|||||
Class
BD-5 Warrants
|
66,121
|
-
|
|||||
Total
antidilutive shares
|
34,423,697
|
38,772,088
|
March
31,
|
||||
2007
|
||||
(unaudited)
|
||||
Raw
Materials
|
1,001,494
|
|||
Work-in-Process
|
360,865
|
|||
Finished
Goods
|
399,464
|
|||
Total
Inventory
|
$
|
1,761,823
|
March
31,
|
||||
2007
|
||||
(unaudited)
|
||||
Balance
at beginning of period
|
$
|
2,000,000
|
||
Warranty
charges
|
1,023,972
|
|||
Warranty
payments
|
(1,023,972
|
)
|
||
Balance
at end of period
|
$
|
2,000,000
|
(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)
|
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
April 9, 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 April 9, 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
April 9,
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
April 9, 2007. (4)
|
Deer
Valley Corporation
|
|
(Registrant)
|
|
Dated:
May 14, 2007
|
By:
/s/Charles
G. Masters
|
Charles
G. Masters
|
|
President
& Chief Executive Officer
|