##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 or
 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: 000-22693
 Steel Vault Corporation
  DELAWARE
(State or other jurisdiction of incorporation or 
organization)
    
    11-2889809
(I.R.S. Employer Identification No.)1690 South Congress Avenue, Suite 200
Delray Beach, Florida 33445
(Address of principal executive offices, 
including zip code)
    
    (561) 805-8000
(Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if smaller reporting company)
 Yes o No þ
  Class
    
    Number of SharesCommon Stock: $0.01 Par Value
    
    8,696,398




---



##### 



Item
    
    PagePART I FINANCIAL INFORMATION
    
    
    1Item 1. Condensed Consolidated Financial Statements
    
    
    1Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About
Market Risk
    
    
    16Item 4T. Controls and Procedures
    
    
    16Special Note Regarding Forward-Looking Statements
    
    
    16PART II OTHER INFORMATION
    
    
    18Item 1A. Risk Factors
    
    
    18Item 6. Exhibits
    
    
    18Signature
    
    
    19Exhibits
    
    
    20Exhibit 10.1Exhibit 10.2Exhibit 10.3Exhibit 10.4Exhibit 10.5Exhibit 10.6Exhibit 10.7Exhibit 10.8Exhibit 31.1Exhibit 31.2Exhibit 32.1




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    Condensed Consolidated Financial Statements
 Steel Vault Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
 June 30,
    
    
    September 30,2009
    
    
    2008(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    505
    
    
    $
    1,256Marketable equity securities, available for sale
    
    
    
    
    
    
    35Other current assets
    
    
    176
    
    
    
    10Total current assets
    
    
    681
    
    
    
    1,301Fixed assets, net
    
    
    95
    
    
    
    Goodwill
    
    
    538
    
    
    
    Other assets
    
    
    19
    
    
    
    Total assets
    
    $
    1,333
    
    
    $
    1,301Liabilities and Stockholders Equity (Capital Deficiency)LiabilitiesCurrent liabilities:Accounts payable
    
    $
    326
    
    
    $
    2Convertible note payable, net of discount
    
    
    472
    
    
    
    Deferred revenue
    
    
    111
    
    
    
    Accrued expenses and other liabilities
    
    
    483
    
    
    
    100Total current liabilities
    
    
    1,392
    
    
    
    102Convertible note payable, net of discount
    
    
    163
    
    
    
    Total liabilities
    
    
    1,555
    
    
    
    102Commitments and contingenciesStockholders equity (capital deficiency):Preferred shares:Authorized 5,000 shares, no par value; none issued
    
    
    
    
    
    
    Common shares:Authorized 80,000 shares, $.01 par value; 8,696 and 6,007
shares issued; 8,696 and 5,146 shares outstanding
    
    
    87
    
    
    
    60Additional paid-in capital
    
    
    7,268
    
    
    
    7,143Accumulated deficit
    
    
    (7,577
    )
    
    
    (5,086
    )Treasury stock, nil and 861 shares, at cost
    
    
    
    
    
    
    (918
    )Total stockholders equity (capital deficiency)
    
    
    (222
    )
    
    
    1,199Total liabilities and stockholders equity (capital deficiency)
    
    $
    1,333
    
    
    $
    1,301
   1




---



##### Table of Contents



Steel Vault Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
 For the Three Months
    
    
    For the Nine MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue
    
    $
    343
    
    
    $
    
    
    
    $
    418
    
    
    $
    Operating expenses:Cost of revenue
    
    
    149
    
    
    
    
    
    
    
    234
    
    
    
    Sales and marketing
    
    
    681
    
    
    
    
    
    
    
    901
    
    
    
    General and administrative
    
    
    631
    
    
    
    102
    
    
    
    1,738
    
    
    
    574Total operating expenses
    
    
    1,461
    
    
    
    102
    
    
    
    2,873
    
    
    
    574Operating loss
    
    
    (1,118
    )
    
    
    (102
    )
    
    
    (2,455
    )
    
    
    (574
    )Interest and other (expense) income
    
    
    (10
    )
    
    
    3
    
    
    
    (36
    )
    
    
    10Loss from continuing operations
    
    
    (1,128
    )
    
    
    (99
    )
    
    
    (2,491
    )
    
    
    (564
    )Discontinued Operations:Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (274
    )Gain on sale of discontinued operation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    627Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    353Net loss
    
    $
    (1,128
    )
    
    $
    (99
    )
    
    $
    (2,491
    )
    
    $
    (211
    )Net loss per common share from
continuing operations  basic and
diluted
    
    $
    (0.14
    )
    
    $
    (0.02
    )
    
    $
    (0.33
    )
    
    $
    (0.11
    )Net income per common share from
discontinued operations  basic and
diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.07Net loss per common share  basic and
diluted
    
    $
    (0.14
    )
    
    $
    (0.02
    )
    
    $
    (0.33
    )
    
    $
    (0.04
    )Weighted average number of common shares outstanding:Basic and diluted
    
    
    8,256
    
    
    
    5,146
    
    
    
    7,625
    
    
    
    5,104Comprehensive LossNet loss
    
    $
    (1,128
    )
    
    $
    (99
    )
    
    $
    (2,491
    )
    
    $
    (211
    )Other comprehensive loss:Change in unrealized gain (loss) on available for sale
securities
    
    
    
    
    
    
    46
    
    
    
    
    
    
    
    (72
    )Comprehensive loss
    
    $
    (1,128
    )
    
    $
    (53
    )
    
    $
    (2,491
    )
    
    $
    (283
    )
   2




---



##### Table of Contents



Steel Vault Corporation and Subsidiaries
Condensed Consolidated Statement of Stockholders Equity (Capital Deficiency)
 TotalAdditional
    
    
    
    
    
    
    
    
    
    
    StockholdersCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    
    
    
    
    EquityNumber
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Treasury Stock
    
    
    (Capital Deficiency)Balance 
October 1, 2008
    
    
    6,007
    
    
    $
    60
    
    
    $
    7,143
    
    
    $
    (5,086
    )
    
    $
    (918
    )
    
    $
    1,199Share-based
compensation
    
    
    2,300
    
    
    
    23
    
    
    
    501
    
    
    
    
    
    
    
    
    
    
    
    524Shares and
options issued
for purchase of
NCRC
    
    
    1,000
    
    
    
    10
    
    
    
    384
    
    
    
    
    
    
    
    
    
    
    
    394Option exercise
    
    
    250
    
    
    
    2
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    44Retirement of
treasury stock
    
    
    (861
    )
    
    
    (8
    )
    
    
    (910
    )
    
    
    
    
    
    
    918
    
    
    
    Issuance of
common stock
warrants in
connection with
debt financings
    
    
    
    
    
    
    
    
    
    
    108
    
    
    
    
    
    
    
    
    
    
    
    108Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,491
    )
    
    
    
    
    
    
    (2,491
    )Balance  June
30, 2009
    
    
    8,696
    
    
    $
    87
    
    
    $
    7,268
    
    
    $
    (7,577
    )
    
    $
    
    
    
    $
    (222
    )
   3




---



##### Table of Contents



Steel Vault Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
 For the Nine Months EndedJune 30,2009
    
    
    2008Cash flows from operating activitiesNet loss
    
    $
    (2,491
    )
    
    $
    (564
    )Adjustments to reconcile net loss to net cash used in operating activities:Share-based compensation
    
    
    524
    
    
    
    134Depreciation
    
    
    5
    
    
    
    Loss on marketable securities
    
    
    24
    
    
    
    Amortization of debt discount
    
    
    14
    
    
    
    Income from discontinued operations
    
    
    
    
    
    
    (269
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    1
    
    
    
    1,404Inventories
    
    
    
    
    
    
    106Other current assets
    
    
    (111
    )
    
    
    Other assets
    
    
    
    
    
    
    6Accounts payable and accrued expenses and other liabilities
    
    
    681
    
    
    
    (980
    )Net cash used in operating activities
    
    
    (1,353
    )
    
    
    (163
    )Cash flows from investing activitiesAcquisition costs, net of cash acquired
    
    
    (61
    )
    
    
    Purchase of fixed assets and software
    
    
    (82
    )
    
    
    Proceeds from sale of marketable securities
    
    
    11
    
    
    
    Proceeds from sale of discontinued operations
    
    
    
    
    
    
    887Net cash (used in) provided by investing activities
    
    
    (132
    )
    
    
    887Cash flows from financing activitiesProceeds from the issuance of convertible notes
    
    
    690
    
    
    
    Proceeds from option exercise
    
    
    44
    
    
    
    Other
    
    
    
    
    
    
    (5
    )Net cash provided by (used in) financing activities
    
    
    734
    
    
    
    (5
    )Net (decrease) increase in cash and cash equivalents
    
    
    (751
    )
    
    
    719Cash and cash equivalents  beginning of period
    
    
    1,256
    
    
    
    405Cash and cash equivalents  end of period
    
    $
    505
    
    
    $
    1,124Noncash:Retirement of treasury shares
    
    $
    918
    
    
    $
    Issuance of warrant in connection with debt financing
    
    $
    108
    
    
    $
    Contributed intercompany debt
    
    $
    
    
    
    $
    94Issuance of common stock and options for acquisition of NCR
    
    $
    394
    
    
    $
    
   4




---



##### Table of Contents



Steel Vault Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
 1. Basis of Presentation
          5




---



##### Table of Contents



Steel Vault Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
   Accounting Policies
 Revenue Recognition
  Subscriber Acquisition Costs
  Fair Value of Financial Instruments
    6




---



##### Table of Contents



Steel Vault Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
  
    
    Level 1Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities.
    
    Level 2Inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly or indirectly, including quoted prices for
similar assets or liabilities in active markets; quoted prices for identical or similar
assets or liabilities in markets that are not active; inputs other than quoted prices
that are observable for the asset or liability (e.g., interest rates); and inputs that
are derived principally from or corroborated by observable market data by correlation
or other means.
    
    Level 3Inputs that are both significant to the fair value measurement and unobservable.
  Interim
Disclosures about Fair Value of Financial Instruments Disclosures about Fair Value of Financial Instruments Interim Financial Reporting,
   2. Principles of Consolidation
   7




---



##### Table of Contents



Steel Vault Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
 3. Net Income (Loss) Per Common Share
   June 30,2009
    
    
    2008Outstanding stock options
    
    
    7,935
    
    
    
    3,975Warrants (exercisable at an average price of $0.38 per share)
    
    
    1,241
    
    
    
    300Totals
    
    
    9,176
    
    
    
    4,275
  4. Acquisition
   Cash
    
    $
    15Accounts receivable
    
    
    4Equipment
    
    
    17Other assets
    
    
    27Goodwill
    
    
    538Current liabilities
    
    
    (131
    )Total
    
    $
    470
  Nine MonthsEnded June 30,(In thousands, except per share amounts)
    
    2009Net operating revenue
    
    $
    462Net loss from continuing operations attributable to common shareholder
    
    $
    (2,538
    )Net loss from continuing operations per common share  basic and diluted
    
    $
    (0.33
    )
  8




---



##### Table of Contents



Steel Vault Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
 5. Stock-Based Compensation
  WeightedWeighted
    
    
    AverageStock
    
    
    Average
    
    
    Contractual
    
    
    AggregateOptions
    
    
    Exercise Price
    
    
    Term
    
    
    Intrinsic ValueOutstanding October 1, 2008
    
    
    5,570
    
    
    $
    0.35
    
    
    
    4.5Granted
    
    
    2,743
    
    
    
    0.18
    
    
    
    9.4Exercised
    
    
    (250
    )
    
    
    0.18
    
    
    
    Forfeited or Expired
    
    
    (625
    )
    
    
    
    
    
    
    Outstanding at June 30, 2009
    
    
    7,438
    
    
    $
    0.29
    
    
    
    5.6
    
    
    $
    223
    *Exercisable at June 30, 2009
    
    
    5,953
    
    
    $
    0.31
    
    
    
    4.8
    
    
    $
    160
    *
 *
    
    The intrinsic value of a stock option is the amount by which the fair value of the underlying stock exceeds the exercise price of the
option. The market value of the Companys stock was $0.25 at June 30, 2009 based upon its closing price on the OTC Bulletin Board.       9




---



##### Table of Contents



Steel Vault Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
       6. Financing Agreements
 Blue Moon
    10




---



##### Table of Contents



Steel Vault Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
  VeriChip
    7. Related Party Transactions
       11




---



##### Table of Contents



Steel Vault Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
 8. Income Taxes
      9. Treasury Stock
  10. Events Occurring After Reporting Date
   12




---



##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  Business Description
  Recent Developments
  Results of Operations
  Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008
  Revenue
  Cost of Revenue
  Sales and Marketing Expenses
  General and Administrative Expenses
   13




---



##### Table of Contents



Nine Months Ended June 30, 2009 Compared to Nine Months Ended June 30, 2008
  Revenue
  Cost of Revenue
  Sales and Marketing Expenses
  General and Administrative Expenses
  Liquidity and Capital Resources
       14




---



##### Table of Contents



Recent Accounting Pronouncements
   Interim
Disclosures about Fair Value of Financial Instruments Disclosures about Fair Value of Financial Instruments Interim Financial Reporting,
    15




---



##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4T.
    
    Controls and Procedures
 Disclosure Controls and Procedures
 Evaluation of Disclosure Controls
 Objective of Controls.
 Conclusion
 Changes in Internal Control Over Financial Reporting
  
 Special Note Regarding Forward-Looking Statements
   16




---



##### Table of Contents




    
    our expectation that we will incur losses in the future;
    
    declines in consumer spending may reduce demand for our products;
    
    our failure to replace subscribers lost in the ordinary course of business may negatively harm
our results of operations;
    
    marketing laws and regulations can limit our ability and our clients ability to offer products
and services to consumers;
    
    the loss of our ability to purchase data from any of the three major credit reporting
repositories would decrease demand for our services;
    
    our competitors may market products that are more effective and less expensive than our products;
    
    our ability to negotiate additional sources of long-term capital;
    
    our affiliates own a significant percentage of our capital stock, and they may make decisions
that you do not consider to be in the best interests of our stockholders;
    
    conflicts of interest may arise between Blue Moon and us that could be resolved in a manner
unfavorable to us;
    
    if penny stock rules are applicable to our securities, it may be more difficult for investors to
sell shares of our common stock, and the market price of our common stock may be adversely
affected; and
    
    compliance with changing regulations concerning corporate governance and public disclosure may
result in additional expenses.
   17




---



##### Table of Contents



PART II OTHER INFORMATION
 
 Item 1A.
    
    Risk Factors
  
 Item 6.
    
    Exhibits
   18




---



##### Table of Contents



SIGNATURE
  Steel Vault CorporationBy:
    /s/ William J. CaragolWilliam J. CaragolChief Executive Officer, President and Acting Chief Financial
Officer
(Duly Authorized Officer)   19




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    
    
    Amended and Restated
Certificate of
Incorporation dated
April 21, 1997, as amended
(incorporated by reference
to Exhibit 3.1 to the
registrants Quarterly
Report on Form 10-Q filed
with the SEC on May 12,
2009)3.2
    
    
    Second Amended and Restated
By-Laws (incorporated by
reference to Exhibit 3.2 to
the registrants Quarterly
Report on Form 10-Q filed
with the SEC on May 12,
2009)10.1
    *
    
    Secured Convertible
Promissory Note, dated
June 4, 2009, between Steel
Vault Corporation and
VeriChip Corporation10.2
    *
    
    Common Stock Purchase
Warrant, dated June 4,
2009, between Steel Vault
Corporation and VeriChip
Corporation10.3
    *
    
    Convertible Note and
Warrant Subscription
Agreement, dated June 4,
2009, between Steel Vault
Corporation and VeriChip
Corporation10.4
    *
    
    Security Agreement, dated
June 4, 2009, between Steel
Vault Corporation and
VeriChip Corporation10.5
    *
    
    Security Agreement, dated
June 4, 2009, between
National Credit Report.com,
LLC and VeriChip
Corporation10.6
    *
    
    Subordination and
Intercreditor Agreement,
dated June 4, 2009, between
Blue Moon Energy Partners
LLC and VeriChip
Corporation10.7
    *
    
    Common Stock Purchase
Warrant, dated June 4,
2009, between Steel Vault
Corporation and William J.
Caragol10.8
    *
    
    Guaranty of Collection,
dated June 4, 2009, among
Steel Vault Corporation,
William J. Caragol and
VeriChip Corporation31.1
    *
    
    Certification by Chief
Executive Officer of the
registrant pursuant to
Section 302 of the
Sarbanes-Oxley Act of 200231.2
    *
    
    Certification by Chief
Financial Officer of the
registrant Pursuant to
Section 302 of the
Sarbanes-Oxley Act of 200232.1
    *
    
    Certification by Chief
Executive Officer and Chief
Financial Officer of the
registrant pursuant to
Section 906 of the
Sarbanes-Oxley Act of 2002
 *
    
    Filed herewith.  20