FILED BY SSP SOLUTIONS, INC. PURSUANT TO RULE 425
UNDER THE SECURITIES ACT OF 1933 AND DEEMED FILED
PURSUANT TO RULE 14A-12 OF THE SECURITIES
EXCHANGE ACT OF 1934
SUBJECT CORPORATION: SSP SOLUTIONS, INC.
REGISTRATION STATEMENT NO.: 333-115552
COMMISSION FILE NO.: 000-26227
SSP Solutions, Inc. SSP Solutions, Inc.
Editorial Contact: Investor Contact:
Press Relations Thomas E. Schiff, Chief Financial Officer
SSP-Litronic SSP-Litronic
(949) 851-1085 (949) 851-1085
pr@ssplitronic.com tom.schiff@ssplitronic.com
SSP SOLUTIONS, INC. ANNOUNCES FIRST QUARTER 2004 RESULTS
IRVINE, Calif., May 21, 2004 - SSP Solutions, Inc. (Nasdaq: SSPX), a leading
provider of identity and information assurance products and services, today
announced financial results for the first quarter ended March 31, 2004.
The Company reported total revenues of $1.9 million for the first
quarter ended March 31, 2004, versus $3.3 million in the same quarter last year,
which represents a 43% decrease in core business revenues. The Company reported
an operating loss of $1.6 million for the quarter ended March 31, 2004, versus
an operating loss of $451,000 in the same quarter of 2003. The loss from
continuing operations for the quarter was $2.0 million, or $0.06 per basic and
diluted share, versus a loss from continuing operations of $1.5 million, or
$0.06 per basic and diluted share, in the same quarter of 2003. The net loss for
the quarter was $2.0 million, or $0.06 per basic and diluted share, versus a net
loss of $1.6 million, or $0.06 per basic and diluted share, in the same quarter
last year.
Service revenues decreased 37.1% from $1.1 million to $667,000, and
license revenues decreased by 16.7% from $1.2 million to $1.0 million for the
quarter ended March 31, 2004 versus the same quarter in 2003. Product revenues
decreased 79.8% from $1.0 million to $208,000 during the quarters ended March
31, 2004 and March 31, 2003, respectively. The large decrease in product
revenues was partly due to the re-engineering and re-certification of the Argus
300 product that interrupted the shipment of product orders on hand. The company
resumed shipping Argus 300 in May 2004. Product revenues were also impacted by
SSP Solutions, Inc. Announces First Quarter 2004 Results
the delay of government purchase commitments due to diversion of funding for
many programs resulting from increased government expenditures to support
current military actions overseas, which also impacted service and license
revenues.
Total gross margin dollars decreased from $2.2 million to 1.3 million,
a decrease of 40.0% for the quarter ended March 31, 2004 from the same quarter
in 2003. Gross margin percentage, however, increased to 71.3% for the quarter
ended March 31, 2004 from 67.8% during the same quarter in 2003. During the same
time periods, the Company increased operating expenses by $244,000 or 9.1%, with
a $216,000, or 14.0%, increase in selling, general and administrative (SG&A)
expenses and a $28,000, or 2.5%, increase in research and development expenses.
Included in the SG&A expenses were $517,000 of costs related to the previously
announced merger with SAFLINK Corporation (SAFLINK, Nasdaq: SFLK), and a
$373,000 benefit from the reduction in charges accrued relative to the
previously recorded settlement of facility leases.
In March 2004, the Company announced the signing of a definitive merger
agreement with SAFLINK. Pending stockholder and regulatory approval, SAFLINK
will acquire all outstanding shares of the Company in a stock-for-stock
transaction. Under terms of the merger agreement, the Company's security holders
would receive approximately 49% of the combined company's fully-converted shares
at closing and the security holders of SAFLINK would continue to hold shares
that constitute the remaining 51% of the combined company's fully-converted
shares at closing. The merger agreement approved by the boards of directors of
each company calls for each share of the Company's common stock to be exchanged
for 0.60 shares of SAFLINK common stock.
The shares outstanding increased in 2004 versus 2003 due to the
issuance of approximately: 7.3 million shares for conversion of Series A
Preferred stock into common stock and payment of related dividends; the issuance
of 2.8 million shares for the conversion of various notes into common stock; 2.4
million shares for the exercise of warrants related to various financings;
710,000 shares for the payment of interest and financing costs; and the issuance
of 472,000 shares related to the settlement of facility leases; and 123,000
shares for employee stock purchases and the exercise of stock options. Each of
these transactions occurred after the first quarter of 2003.
SSP Solutions, Inc. Announces First Quarter 2004 Results
RULE 425 LEGEND REGARDING JOINT PROXY STATEMENT/PROSPECTUS
----------------------------------------------------------
SAFLINK and the Company have filed a Joint Proxy Statement/Prospectus
with the Securities and Exchange Commission (SEC) in connection with the pending
merger. In addition, SAFLINK and the Company have filed and will file other
information and documents concerning the merger and their respective businesses
with the SEC. THE COMPANY URGES INVESTORS TO REVIEW THE JOINT PROXY
STATEMENT/PROSPECTUS AND OTHER INFORMATION FILED AND TO BE FILED WITH THE SEC
BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER. Any offer of
securities will only be made pursuant to the Joint Proxy Statement/Prospectus.
These documents will be available without charge on the SEC's web site at
www.sec.gov and may be obtained without charge from the SEC at telephone number
800-SEC-0330. A free copy of the Joint Proxy Statement/Prospectus may also be
obtained from SAFLINK and the Company. INVESTORS SHOULD READ THE JOINT PROXY
STATEMENT/PROSPECTUS CAREFULLY BEFORE MAKING ANY VOTING OR INVESTMENT DECISIONS.
ABOUT THE COMPANY
-----------------
The Company designs and develops innovative data and communication
security solutions for both corporate and government institutions. The Company
provides network security, desktop protection, and high assurance messaging
systems for many organizations of the U.S. Government. NetSign CAC is currently
deployed by all U.S. Armed Services and various DoD Agencies. For more
information, visit http://www.ssplitronic.com/ or call SSP-Litronic (949)
851-1085. SSP-Litronic is a trademark and dba of SSP Solutions, Inc. (Nasdaq:
SSPX).
SSP Solutions, Inc. Announces First Quarter 2004 Results
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
--------------------------------------------------------------------------------
With the exception of historical information, matters discussed in this
news release including, in particular references to the success of certain
initiatives building momentum for the future, are forward-looking statements
involving a number of risks and uncertainties and may not be achieved due to
factors beyond our control, including changing regulatory and technological
environments, our ability to obtain key components from suppliers, technological
difficulties, increased competition, and changing customer demands. Other risks
inherent in our business are described in Securities and Exchange Commission
filings. SSP Solutions, Inc. undertakes no obligation to revise or update any
forward-looking statements to reflect events or circumstances after the date of
this release.
SSP Solutions, Inc. Announces First Quarter 2004 Results
SSP SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31
2003 2004
-------------- --------------
Revenues:
Product 1,030 208
License 1,209 1,007
Service 1,061 667
-------------- --------------
TOTAL REVENUES 3,300 1,882
-------------- --------------
Cost of Sales
Product 297 68
License 429 4
Service 336 468
-------------- --------------
TOTAL COST OF SALES 1,062 540
-------------- --------------
Gross margin 2,238 1,342
Operating Expenses:
Selling, general and administrative 1,547 1,763
Research and development 1,142 1,170
-------------- --------------
TOTAL OPERATING EXPENSES 2,689 2,933
-------------- --------------
Operating loss (451) (1,591)
Non-operating Expenses (Income):
Realized and unrealized loss (gain) on trading securities 15 (2)
Interest expense, net 277 6
Non-cash interest and financing expense 500 113
Loss on conversion of debt -- 371
Equity loss from Affiliate 269 --
Other (income) expense, net -- (103)
-------------- --------------
TOTAL NON-OPERATING EXPENSES 1,061 385
-------------- --------------
Operating loss before income taxes (1,512) (1,976)
Provision for income taxes -- 3
-------------- --------------
Loss from continuing operations ($ 1,512) ($ 1,979)
============== ==============
Loss from discontinued operations ($ 106) --
============== ==============
NET LOSS ($ 1,618) ($ 1,979)
============== ==============
Loss per share of common stock, basic and diluted $ (.06) $ (.06)
============== ==============
Loss per share from discontinued operations, basic and diluted -- --
============== ==============
Loss per share from continuing operations, basic and diluted $ (.06) $ (.06)
============== ==============
Shares used in per share computations--basic and diluted 25,056 33,792
============== ==============
SSP SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
December 31, 2003 March 31, 2004
----------------- --------------
(Unaudited)
Total Current Assets $ 8,602 $ 6,523
Property, Plant & Equipment, Net 83 90
Goodwill 25,930 25,930
Other Assets 202 148
-------------- --------------
TOTAL ASSETS $ 34,817 $ 32,691
============== ==============
Total Current Liabilities $ 3,131 $ 2,347
Long-Term Debt 915 719
Shareholders' Equity 30,771 29,625
-------------- --------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 34,817 $ 32,691
============== ==============
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