##### 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 December 31, 2008
 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: 0-22693
 IFTH ACQUISITION CORP.
  DELAWARE
(State or other jurisdiction of incorporation or 
organization)
    
    11-2889809
(I.R.S. Employer Identification No.)1690 South Congress Avenue, Suite 200Delray Beach, Florida 33445
    
    (561) 805-8000(Address of principal executive offices,
    
    (Registrants telephone number, including area code)including zip code)
 þ o
  Large accelerated
filer o
    
    Accelerated filer o
    
    Non-accelerated
filer o (Do
not check if
smaller reporting
company)
    
    Smaller reporting company þ
 o þ
  Class
    
    Number of SharesCommon Stock: $0.01 Par Value
    
    8,146,398




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##### 



IFTH Acquisition Corp.
 Table of Contents
 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
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    14Item 4T. Controls and Procedures
    
    
    14Part II Other Information
    
    
    15Item 1A. Risk Factors
    
    
    15Item 5. Other Information
    
    
    15Item 6. Exhibits
    
    
    15Signature
    
    
    16Exhibits
    
    
    17Exhibit 10.1Exhibit 31.1Exhibit 31.2Exhibit 32.1




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PART I  FINANCIAL INFORMATION
 
 Item 1. Condensed Consolidated Financial Statements
 IFTH Acquisition Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
 December 31,
    
    
    September 30,2008
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    840
    
    
    $
    1,256Accounts receivable
    
    
    5
    
    
    
    Marketable equity securities, available for sale
    
    
    47
    
    
    
    35Other current assets
    
    
    88
    
    
    
    10Total current assets
    
    
    980
    
    
    
    1,301Fixed assets, net
    
    
    82
    
    
    
    Goodwill
    
    
    473
    
    
    
    Other assets
    
    
    24
    
    
    
    Total assets
    
    $
    1,559
    
    
    $
    1,301Liabilities and Stockholders EquityLiabilitiesCurrent liabilities:Accounts payable
    
    $
    68
    
    
    $
    2Accrued expenses and other liabilities
    
    
    86
    
    
    
    100Total current liabilities
    
    
    154
    
    
    
    102Total liabilities
    
    
    154
    
    
    
    102Commitments and contingenciesStockholders equity:Preferred shares:Authorized 5,000 shares, no par value; none issued
    
    
    
    
    
    
    Common shares:Authorized 80,000 shares, $.01 par value; 9,007
and 6,007 shares issued; 8,146 and 5,146 shares
outstanding
    
    
    90
    
    
    
    60Additional paid-in capital
    
    
    7,881
    
    
    
    7,143Accumulated deficit
    
    
    (5,660
    )
    
    
    (5,086
    )Accumulated
other comprehensive income
    
    
    12
    
    
    
    Treasury stock, 861 shares, carried at cost
    
    
    (918
    )
    
    
    (918
    )Total stockholders equity
    
    
    1,405
    
    
    
    1,199Total liabilities and stockholders equity
    
    $
    1,559
    
    
    $
    1,301
   2




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IFTH Acquisition Corp. and Subsidiaries
Condensed Consolidated Statements of Operations
 For the Three MonthsEnded December 31,2008
    
    
    2007Revenue
    
    $
    16
    
    
    $
    Cost of sales
    
    
    7
    
    
    
    Gross profit
    
    
    9
    
    
    
    Operating expenses:Selling, general and administrative
    
    
    585
    
    
    
    205Operating loss
    
    
    (576
    )
    
    
    (205
    )Interest and other income
    
    
    2
    
    
    
    3Loss from
continuing operations
    
    
    (574
    )
    
    
    (202
    )Discontinued
Operations:Loss from
discontinued operations
    
    
    
    
    
    
    (261
    )Gain on sale
of discontinued operation
    
    
    
    
    
    
    540Income from
discontinued operations
    
    
    
    
    
    
    279Net (loss) income
    
    $
    (574
    )
    
    $
    77Net loss per common share from continuing
operations  basic and diluted
    
    $
    (0.09
    )
    
    $
    (0.04
    )Net income per common share from
discontinued operations  basic and diluted
    
    
    
    
    
    
    0.06Net (loss) income per common share  basic and
diluted
    
    $
    (0.09
    )
    
    $
    0.02Weighted average number of common shares
outstanding:Basic and diluted
    
    
    6,459
    
    
    
    5,046Comprehensive (Loss) IncomeNet (loss) income
    
    $
    (574
    )
    
    $
    77Other comprehensive loss:Unrealized
gain (loss) on available for sale securities
    
    
    12
    
    
    
    (227
    )Comprehensive loss
    
    $
    (562
    )
    
    $
    (150
    )
   3




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IFTH Acquisition Corp. and Subsidiaries
Condensed Consolidated Statement of Stockholders Equity
 AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    
    
    
    
    TotalNumber
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    Treasury Stock
    
    
    StockholdersEquityBalance October 1, 2008
    
    
    6,007
    
    
    $
    60
    
    
    $
    7,143
    
    
    $
    (5,086
    )
    
    $
    
    
    
    $
    (918
    )
    
    $
    1,199Share-based compensation
    
    
    2,000
    
    
    
    20
    
    
    
    354
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    374Shares and
options issued for
purchase of NCRC
    
    
    1,000
    
    
    
    10
    
    
    
    384
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    394Unrealized gain on
available for sale
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    12Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (574
    )
    
    
    
    
    
    
    
    
    
    
    (574
    )Balance December 31,
2008
    
    
    9,007
    
    
    $
    90
    
    
    $
    7,881
    
    
    $
    (5,660
    )
    
    $
    12
    
    
    $
    (918
    )
    
    $
    1,405
   4




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IFTH Acquisition Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
 For the three months endedDecember 31,2008
    
    
    2007Cash flows from operating activitiesNet (loss) income
    
    $
    (574
    )
    
    $
    77Adjustments to reconcile net income to net cash
used in operating activities:Share-based compensation
    
    
    374
    
    
    
    13Income from discontinued operations:
    
    
    
    
    
    
    (279
    )Changes in operating assets and liabilitiesDecrease in accounts receivable
    
    
    
    
    
    
    561Decrease in inventories
    
    
    
    
    
    
    62Increase in other current assets
    
    
    (76
    )
    
    
    (802
    )Decrease in other assets
    
    
    
    
    
    
    6Decrease in accounts payable and
accrued expenses and other liabilities
    
    
    (78
    )
    
    
    (148
    )Net cash used in discontinued operations
    
    
    
    
    
    
    (256
    )Net cash used in operating activities
    
    
    (354
    )
    
    
    (766
    )Cash flows from investing activitiesAcquisition costs, net of cash acquired
    
    
    (62
    )
    
    
    Net cash
provided by discontinued operations
    
    
    
    
    
    
    800Net cash (used in) provided by investing activities
    
    
    (62
    )
    
    
    800Cash flows from financing activitiesNet payments on line of credit
    
    
    
    
    
    
    (2
    )Net payments to former parent company
    
    
    
    
    
    
    (3
    )Net cash
used in financing activities
    
    
    
    
    
    
    (5
    )Net (decrease) increase in cash and cash equivalents
    
    
    (416
    )
    
    
    29Cash and cash equivalents  beginning of period
    
    
    1,256
    
    
    
    405Cash and cash equivalents  end of period
    
    $
    840
    
    
    $
    434
   5




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IFTH Acquisition Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
 1. Basis of Presentation
         6




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IFTH Acquisition Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
   Accounting Policies
 Revenue Recognition
 [a]
    
    Revenue from the sale
of credit
report is recognized
when the credit report
is delivered to the
customer. Revenue from
the sale of annual
subscriptions for
credit monitoring and
credit protection is
recognized ratably over
each subscribers
annual subscription
period. The Company
also offers credit
monitoring and credit
protection on a
month-to month basis.
In certain
circumstances, the
Company sells a bundled
offer whereby a
customer receives a
single credit report
and monitoring. In such
circumstances, the
Company allocates a
portion of the
associated revenue to
the credit report with
the balance recognized
ratably over the
subscription period.[b]
    
    Commission
revenue is comprised of
commissions earned by
the Company for the
credit reports, credit
monitoring, and credit
protection services
provided to a third party customer on that customers website. Commission
revenue is recognized
when the credit
reports, credit
monitoring, and credit
protection services
have been provided to
the customer.
Generally, the Company
invoiced its customers
on a monthly basis for
costs incurred from
their credit reporting
vendor plus a commission. For the
three months ended
December 31, 2008,
gross commission
revenue was
approximately $5.
 Subscriber Acquisition Costs
  Fair Value Of Financial Instruments The carrying values of financial instruments including

cash and cash equivalents, accounts receivable and accounts
payable approximate fair value due to the relatively short maturity of these instruments. In September 2006, the Financial Accounting Standards Board (FASB) issued

Statement of Financial Accounting Standards
(SFAS) No. 157, Fair Value Measurements. SFAS 157 defines fair

value and establishes a framework for measuring fair
value in accordance with GAAP. The statement also expands the disclosures related to the fair

value measurements used
to value assets and liabilities. SFAS 157 is effective for fiscal years beginning after

November 15, 2007 and interim
periods within those fiscal years. The Company adopted SFAS 157 October 1, 2008. SFAS 157

defines fair value as the
price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market
participants at the measurement date. This standard is now the single source in generally

accepted accounting
principles for the definition of fair value, except for the fair value of leased property as

defined in SFAS 13. SFAS
157 establishes a fair value hierarchy that distinguishes between (1) market participant

assumptions developed based on
market data obtained from independent sources (observable inputs), (2) assumptions that

are other than quoted prices
which are either directly or indirectly observable for the asset or liability through

correlation with market data and
(3) an entitys own assumptions about market participant assumptions developed based

on the best information available
in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad

levels, which gives the
highest priority to unadjusted quoted prices in active markets for identical assets or

liabilities (Level 1) and the
lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under SFAS

157 are described below:  
    
    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. At December 31, 2008, the Company had Level 1

investments of approximately $47 for which quoted prices in active
markets were used to value the underlying securities. 2. Principles of Consolidation
  3. Net Income (Loss) Per Common Share
   7




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IFTH Acquisition Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
  December 31,2008
    
    
    2007Outstanding stock options
    
    
    8,435
    
    
    
    3,975Warrants (exercisable at $.5775 per share)
    
    
    300
    
    
    
    300Totals
    
    
    8,735
    
    
    
    4,275
  4. Acquisition
   Cash
    
    $
    15Accounts receivable
    
    
    4Equipment
    
    
    82Other assets
    
    
    27Current liabilities
    
    
    (131
    )Total
    
    $
    (3
    )
   Three MonthsEnded December 31,(In thousands, except per share amounts)
    
    2008Net operating revenue
    
    $
    61Net loss from continuing operations
attributable to common shareholder  basic and diluted
    
    $
    (364
    )Net loss from continuing operations per common share
 basic and diluted
    
    $
    (.05
    )
  8




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IFTH Acquisition Corp. and Subsidiaries
Notes to Consolidated Condensed 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
    
    
    
    9.9Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited or Expired
    
    
    (375
    )
    
    
    
    
    
    
    Outstanding at December 31, 2008
    
    
    7,938
    
    
    $
    0.28
    
    
    
    6.6
    
    
    $
    1,617
    *Exercisable at December 31, 2008
    
    
    6,253
    
    
    $
    0.30
    
    
    
    4.7
    
    
    $
    1,188
    *
 
 *
    
    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 fair value of the Companys stock
was $0.46 at December 31, 2008 based upon its closing price on the OTC Bulletin Board.         9




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IFTH Acquisition Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
 6. Related Party Transactions
     7. Income Taxes
   10




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IFTH Acquisition Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
     11




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Business Description
  Recent Developments
      Forward-Looking Statements and Associated Risk
  Results of Operations
 .
  12




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Three Months Ended December 31, 2008 Compared to Three Months Ended December 31, 2007
  Revenue
  Gross Profit and Gross Profit Margin
   Selling, General and Administrative Expenses
  Liquidity and Capital Resources
      Recent Accounting Pronouncements
      13




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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
   14




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PART II OTHER INFORMATION
 
 Item 1A. Risk Factors
  
 Item 5. Other Information
  
 Item 6. Exhibits
   15




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SIGNATURE
  IFTH Acquisition Corp.By:
    /s/ William J. CaragolWilliam J. CaragolChief Executive Officer, President, Acting Chief Financial
Officer and Director
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)Date: February 17, 2009  16




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EXHIBITS
 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 Annual Report on Form
10-K filed with the SEC on December 24, 2008)3.2
    
    
    Amended and Restated By-Laws (incorporated by reference
to Exhibit 3.4 to the registrants Quarterly Report on
Form 10-Q filed with the SEC on May 14, 2003)10.1
    *
    
    Letter Agreement, dated February 13, 2009, by and between
IFTH Acquisition Corp. d/b/a Steel Vault and William J.
Caragol31.1
    
    
    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 2002.32.1
    
    
    Certification by Chief Executive Officer and Chief
Financial Officer of the registrant pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Management contract or compensatory plan.  17