10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2015

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From                     to                     

Commission File Number 000-22400

Special Diversified Opportunities Inc.

(Exact name of Registrant as specified in its charter)

Delaware	56-1581761
(State or other jurisdiction of	(I.R.S. employer
incorporation or organization)	identification no.)

1521 Concord Pike, Suite 301
Wilmington, DE	19803
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (302) 824-7062

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: x No: o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: x No: o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes: x No: o

As of July 31, 2015, there were 21,027,640 outstanding shares of the Registrant’s common stock, par value $.01 per share.

SPECIAL DIVERSIFIED OPPORTUNITIES INC.

INDEX

Item	Page
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Consolidated Balance Sheets – June 30, 2015 and December 31, 2014	2
Consolidated Statements of Operations – Three and six months ended June 30, 2015 and 2014	3
Consolidated Statements of Cash Flows – Six months ended June 30, 2015 and 2014	4
Notes to Consolidated Interim Financial Statements	5
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	13
ITEM 4. Controls and Procedures	13
PART II OTHER INFORMATION	14
ITEM 6. Exhibits	14
SIGNATURES	15

1

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SPECIAL DIVIERSIFIED OPPORTUNITIES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

	June 30,			December 31,
	2015			2014
ASSETS
Current Assets :
Cash and cash equivalents	$	24,179		$	24,818
Other current assets	65			22
Total current assets	24,244			24,840
Total assets	$	24,244		$	24,840
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities :
Accrued expenses	$	430		$	486
Total current liabilities	430			486
Stockholders’ Equity:
Preferred stock, $.01 par value, 20,920,648 shares authorized, no shares issued or outstanding	—			—
Common stock, $.01 par value, 50,000,000 shares authorized, 21,434,267 shares issued at June 30, 2015 and December 31, 2014	217			217
Additional paid-in capital	44,150			44,148
Treasury stock, 406,627 common shares at cost at June 30, 2015 and December 31, 2014	(555		)	(555		)
Accumulated deficit	(19,998		)	(19,456		)
Total stockholders’ equity	23,814			24,354
Total liabilities and stockholders’ equity	$	24,244		$	24,840

The accompanying notes are an integral part of these statements.

2

SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Operating expenses:
Selling, general and administrative	$	291		$	345		$	542		$	685
Total operating expenses	291			345			542			685
Operating loss	(291		)	(345		)	(542		)	(685		)
Interest income, net	—			2			—			2
Loss from continuing operations before taxes	(291		)	(343		)	(542		)	(683		)
Income tax expense	—			—			—			—
Loss from continuing operations, net of taxes	$	(291	)	$	(343	)	$	(542	)	$	(683	)
Income from discontinued operations	—			250			—			250
Net loss	$	(291	)	$	(93	)	$	(542	)	$	(433	)
Basic and diluted loss per share from continuing operations	$	(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.03	)
Basic and diluted income per share from discontinued operations	0.00			0.01			0.00			0.01
Basic and diluted net loss per share	$	(0.01	)	$	(0.00	)	$	(0.03	)	$	(0.02	)
Shares used in computing basic and diluted net loss per share	21,027,640			21,027,640			21,027,640			21,027,640

The accompanying notes are an integral part of these statements.

3

SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months
	Ended June 30,
	2015			2014
Cash Flows from Operating Activities :
Net loss	$	(542	)	$	(433	)
Less: Income from discontinued operations	—			250
Loss from continuing operations	(542		)	(683		)
Adjustments to reconcile net loss to net cash used in operating activities :
Share-based compensation expense	2			3
(Increase) in :
Other current assets	(43		)	(28		)
Increase (decrease) in :
Accrued expenses	(56		)	99
Net operating activities from discontinued operations	—			250
Net cash used in operating activities	(639		)	(359		)
Cash Flows from Investing Activities :
Restricted cash	—			1,300
Net cash provided by investing activities	—			1,300
Net cash used in financing activities	—			—
Net increase (decrease) in Cash and Cash Equivalents	(639		)	941
Cash and Cash Equivalents, Beginning of Period	24,818			24,598
Cash and Cash Equivalents, End of Period	$	24,179		$	25,539
Supplemental Cash Flow Disclosure :
Cash paid for taxes, net of tax refunds	$	16		$	6

The accompanying notes are an integral part of these statements.

4

SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(in thousands, except share and per share data)
(unaudited)

1. ASSET SALE

On April 5, 2013, Special Diversified Opportunities Inc. (f/k/a Strategic Diagnostics Inc.) (“SDOI” or the “Company”), SDIX LLC, a Delaware limited liability company (the “Purchaser”) and OriGene Technologies, Inc., a Delaware corporation and the sole equity holder of the Purchaser (“Parent” or “OriGene”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) pursuant to which the Company agreed, subject to certain terms and conditions including approval of the Company’s stockholders, to sell to the Purchaser substantially all of the Company’s rights, title and interest in substantially all of the Company’s non-cash assets related to the Life Sciences Business (the “Asset Sale”).

At a special meeting of the stockholders of the Company held on July 10, 2013, the stockholders approved the Asset Sale as contemplated by the Asset Purchase Agreement.  On July 12, 2013 the Company completed the Asset Sale.

Pursuant to the terms and conditions of the Asset Purchase Agreement, the Purchaser acquired all of the Company’s rights, title, and interest in substantially all of the assets, equipment, inventory, and intellectual property (the “Purchased Assets”) related exclusively to the Company’s Life Sciences Business, the product portfolio in respect of which included a full suite of integrated capabilities, including antibody and assay design, development and production and the Company’s Advanced Technologies Business.  The Purchaser also assumed and agreed to discharge the Assumed Liabilities, as defined in the Asset Purchase Agreement.  The Parent unconditionally guaranteed Purchaser’s obligations in the Asset Purchase Agreement.  The purchase price for the Purchased Assets was $16,000, which was subject to a post-closing working capital adjustment.

The Company and Purchaser each made customary representations, warranties and covenants in the Asset Purchase Agreement.  At closing, $1,300 of the purchase price was placed in escrow to be governed by the terms of a separate escrow agreement.  The Asset Purchase Agreement contained indemnification provisions pursuant to which the Company and the Purchaser have agreed to indemnify the other for certain losses, including with respect to environmental, litigation, tax and other matters.

The Asset Purchase Agreement also included restrictive covenants, including, that SDOI not (i) engage in a competing business for a period of five years after the closing date, (ii) directly or indirectly solicit Purchaser’s employees for a period of two years after the closing date, (iii) directly or indirectly solicit the Purchaser’s customers for a period of five years after the closing date and (iv) disparage the Purchaser at any time.

As a result of the Asset Sale, the Company no longer owns its historical operating assets, and its past business operations have been discontinued.

In May 2014, the Company, the Purchaser and OriGene reached a settlement of various claims by the parties relating to the Asset Sale. The terms of the settlement called for the release of the $1,300 in escrow to the Company, as well as the payment by the Purchaser and OriGene of an additional $250 pursuant to the working capital adjustment provisions of the Asset Purchase Agreement. This payment has been recorded in income from discontinued operations on the Consolidated Statements of Operations for the three and six months ended June 30, 2014.

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SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)

2.DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

The Company is a shell company as defined in Rule 12b-2 of the Securities Exchange Act of 1934. The Company’s board of directors has been exploring strategic alternatives to maximize shareholder value going forward including deploying the proceeds of the Asset Sale in business acquisition opportunities, merging with another company, or other actions to redeploy our capital, including, without limitation, distribution of cash to our shareholders.

Basis of Presentation and Interim Financial Statements

The accompanying unaudited consolidated interim financial statements of the Company have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.  In the opinion of management, the accompanying consolidated interim financial statements include all adjustments (all of which are of a normal recurring nature) necessary for a fair presentation of the results of operations.  The interim operating results are not necessarily indicative of the results to be expected for the entire year.

Use of Estimates

The preparation of the consolidated interim financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated interim financial statements, and the reported amounts of expenses during the period. These estimates include those made in connection with assessing the valuation of deferred tax assets. Actual results could differ from these estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments that have maturities of three months or less when acquired to be cash equivalents. As of June 30, 2015 and December 31, 2014, cash of $24,179 and $24,818, respectively, consisted of bank checking operating accounts.

Stock-Based Compensation

The Company accounts for stock-based compensation using the fair value method, which requires that compensation costs related to employee share based payment transactions are measured in the financial statements at the fair value on the date of grant and are recognized over the vesting period of the award.

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SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)

3.        BASIC AND DILUTED LOSS PER SHARE

Basic loss per share (EPS) is computed by dividing net loss available for common stockholders by the weighted-average number of common shares outstanding during the period. Diluted EPS is similar to basic EPS, except that the dilutive effect of converting or exercising all potentially dilutive securities is also included in the denominator such as stock options and restricted stock units. Basic loss per share excludes potentially dilutive securities.  For the three and six month periods ended June 30, 2015 and 2014, outstanding common stock options representing 1,034,570 and 1,502,570 shares, respectively, and 15,000 and 0 unvested restricted shares, respectively, were excluded from the computation of diluted EPS.

4.SHARE-BASED COMPENSATION

Under various plans, executives, key employees and outside directors receive awards of options to purchase common stock. The Company has a stock option plan (the “2000 Plan”) which authorizes the granting of incentive and nonqualified stock options and restricted stock units. Incentive stock options are granted at not less than 100% of fair market value at the date of grant (110% for stockholders owning more than 10% of the Company’s common stock). Nonqualified stock options are granted at not less than 85% of fair market value at the date of grant. A maximum of 8,000,000 shares of common stock are issuable under the 2000 Plan. Certain additional options have been granted outside the 2000 Plan. These options generally follow the provisions of the 2000 Plan.  The Company issues new shares to satisfy option exercises and the vesting of restricted stock awards.

The Company also has an Employee Stock Purchase Plan (the “ESPP”). The ESPP allows eligible full-time employees to purchase shares of common stock at 90 percent of the lower of the fair market value of a share of common stock on the first or last day of the quarter. Eligible employees are provided the opportunity to acquire Company common stock during each quarter. No more than 661,157 shares of common stock may be issued under the ESPP. Such stock may be unissued shares or treasury shares of the Company or may be outstanding shares purchased in the open market or otherwise on behalf of the ESPP.  The Company’s ESPP is compensatory and therefore, the Company is required to recognize compensation expense related to the discount from market value of shares sold under the ESPP.  The Company issues new shares to satisfy shares purchased under the ESPP.

7

SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)

Share-based compensation expense recorded in the three and six month periods ended June 30, 2015 and 2014 is summarized as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Stock options	$	1	$	3	$	2	$	3
Total share-based compensation expense	$	1	$	3	$	2	$	3

Share-based compensation expense is a component of selling, general and administrative expense, and is recorded as a non-cash expense in the operating activities section of the Company’s consolidated statements of cash flows.

No options were exercised in the six month periods ended June 30, 2015 and 2014.  Information with respect to the activity of outstanding stock options granted under the 2000 Plan and options granted separately from the 2000 Plan for the six months ended June 30, 2015 is summarized as follows:

							Weighted	Aggregate
	Number						Average Remaining	Instrinsic
	of Shares	Price Range					Contractual term	Value
Balance, January 1, 2015	974,570	$	1.25	-	$	3.74
Granted	60,000	$	1.24	-	$	1.24
Cancelled / Forfeited	—			—
Balance, June 30, 2015	1,034,570	$	1.24	-	$	3.74	4.8 years	$	—
Vested and excercisable at June 30, 2015	616,878	$	1.24	-	$	3.74	4.4 years	$	—

8

SPECIAL DIVERSIFIED OPPORTUNITIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(unaudited)

During the six month period ended June 30, 2015, there were 60,000 options granted with a weighted average grant date fair value, based on a Black-Scholes option pricing model, of $0.23 per share.  The assumptions used in the Black-Scholes model are as follows: dividend yield 0%, expected volatility 26.4%, risk-free interest rate 1.71% and expected life of 4.25 years.  The Company uses the Simplified Method for determining the expected life of options granted to employees which is computed using the sum of the average vesting period and the contractual life of the option and dividing by two, for all periods presented.

The following table provides additional information about the Company’s stock options outstanding and exercisable at June 30, 2015:

					Options Outstanding				Options Exercisable
						Weighted Average				Wtd. Average
Range of					Number of	Remaining	Exercise		Number of	Exercise
Exercise Prices					Shares	Contractual Life	Price		Shares	Price
$	1.24	-	$	1.85	827,528	4.8 Years	$	1.46	409,836	$	1.55
$	2.00	-	$	2.25	175,000	5.3 Years	$	2.13	175,000	$	2.13
$	3.69	-	$	3.74	32,042	2.8 Years	$	3.72	32,042	$	3.72
$	1.24	-	$	3.74	1,034,570	4.8 Years	$	1.64	616,878	$	1.83

The Company had 15,000 and 0 shares of unvested restricted stock as of June 30, 2015 and December 31, 2014, respectively.

5.        INCOME TAXES

The Company evaluates its deferred tax assets on a regular basis to determine if a valuation allowance against the net deferred tax assets is required.  The Company had a full valuation allowance offsetting its U.S. federal and state net deferred tax assets which primarily represent net operating loss carryforwards (“NOLs”) at December 31, 2014.  During the six month period ended June 30, 2015, the Company’s management concluded that the full valuation allowance for U.S. federal and state net deferred tax assets is appropriate as the facts and circumstances during the first six months of 2015 did not change management’s conclusion that a full valuation allowance is necessary.

The Company is subject to U.S. federal income tax, as well as income taxes of multiple state jurisdictions.   The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.  At June 30, 2015, the Company had no interest or penalties accrued related to uncertain tax positions due to the available NOLs.

As of June 30, 2015, the Company had approximately $628 of unrecognized tax benefits of which $622 would reduce already existing net operating loss and tax credit carryforwards and therefore require no accrual for interest or penalty. The remaining $6 includes de minimis interest and penalties where required.  For the six months ended June 30, 2015, unrecognized tax benefits did not change. For federal purposes, post-1992 tax years remain open to examination as a result of earlier net operating losses being utilized in recent years. For state purposes, the statute of limitations remains open in a similar manner for states that have generated net operating losses. The Company does not expect that the total amount of unrecognized tax benefits related to positions taken in prior periods will change significantly during the next 12 months.

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Form 10-Q contains certain forward-looking statements reflecting the current expectations of Special Diversified Opportunities Inc. and its subsidiary (the “Company” or “SDOI”). In addition, when used in this quarterly report, the words “anticipate,” “enable,” “estimate,” “intend,” “expect,” “believe,” “potential,” “may,” “will,” “should,” “project” and similar expressions as they relate to the Company are intended to identify said forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties, which may cause actual results to differ from those anticipated at this time. Such risks and uncertainties include factors more fully described in the Company’s public filings with the SEC including, without limitation, the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Introductory Note

On April 5, 2013, Special Diversified Opportunities Inc. (f/k/a Strategic Diagnostics Inc.) (“SDOI” or the “Company”), SDIX LLC, a Delaware limited liability company (the “Purchaser”) and OriGene Technologies, Inc., a Delaware corporation and the sole equity holder of the Purchaser (“Parent” or “OriGene”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) pursuant to which the Company agreed, subject to certain terms and conditions including approval of the Company’s stockholders, to sell to Purchaser substantially all of the Company’s rights, title and interest in substantially all of the Company’s non-cash assets related to the Life Sciences Business (the “Asset Sale”).

At a special meeting of the stockholders of the Company held on July 10, 2013, the stockholders approved the Asset Sale as contemplated by the Asset Purchase Agreement.  On July 12, 2013 the Company completed the Asset Sale.

Pursuant to the terms and conditions of the Asset Purchase Agreement, the Purchaser acquired all of the Company’s right, title, and interest in the Purchased Assets related exclusively to the Company’s Life Sciences Business, the product portfolio in respect of which includes a full suite of integrated capabilities, including antibody and assay design, development and production and the Advanced Technologies Business.  The Purchaser also assumed and agreed to discharge the Assumed Liabilities, as defined in the Asset Purchase Agreement.  Parent unconditionally guaranteed Purchaser’s obligations in the Asset Purchase Agreement.  The purchase price for the Purchased Assets was $16.0 million, which was subject to a post-closing working capital adjustment.

The Company and Purchaser each made customary representations, warranties and covenants in the Asset Purchase Agreement.  At closing, $1.3 million of the purchase price was placed in escrow to be governed by the terms of a separate escrow agreement.  The Asset Purchase Agreement contained indemnification provisions pursuant to which the Company and the Purchaser have agreed to indemnify the other for certain losses, including with respect to environmental, litigation, tax and other matters.

The Asset Purchase Agreement also contained restrictive covenants, including, that the Company not (i) engage in a competing business for a period of five years after the closing date, (ii) directly or indirectly solicit Purchaser’s employees for a period of two years after the closing date, (iii) directly or indirectly solicit the Purchaser’s customers for a period of five years after the closing date and (iv) disparage the Purchaser at any time.

As a result of the Asset Sale, the Company no longer owns its historical operating assets, and its past business operations have been discontinued.

In May 2014, the Company, the Purchaser and OriGene reached a settlement of various claims by the parties related to the Asset Purchase Agreement. The terms of the settlement called for the release of the $1.3 million in escrow to the Company, as well as the payment by the Purchaser and OriGene to the Company of an additional $250,000 pursuant to the working capital adjustment provisions of the Asset Purchase Agreement. This payment has been recorded as gain on sale on the Consolidated Statements of Operations for the three and six months ended June 30, 2014.

10

Overview

Prior to the completion of the Asset Sale, the Company was a biotechnology company with a core mission of developing, commercializing and marketing innovative and proprietary products, services and solutions that preserve and enhance the quality of human health and wellness. The Company is presently a shell company and the Company’s board of directors has been exploring strategic alternatives to maximize shareholder value going forward, including deploying the proceeds of the Asset Sale in business acquisition opportunties, merging with another company, or other actions to redeploy our capital, including, without limitation, distribution of cash to our shareholders.

Results of Operations

Three Months Ended June 30, 2015 versus Three Months Ended June 30, 2014

Selling, general and administrative

Selling, general and administrative expenses were $291,000 for the three month period ended June 30, 2015 and $345,000 for the three month period ended June 30, 2014.  The decrease was primarily attributable to lower professional fees, partially offset by costs associated with the Annual Meeting of Stockholders during the second quarter of 2015. Selling, general and administrative expenses reflect the levels of personnel and professional fees related to the minimal operations that the Company has been conducting following the consummation of the Asset Sale.

Income taxes

The Company recorded no income tax provision for the three month periods ended June 30, 2015 and June 30, 2014.  The Company has full valuation allowances placed against U.S. federal and state deferred tax assets.

Loss from continuing operations

Loss from continuing operations was $291,000, or $0.01 per diluted share, for the three month period ended June 30, 2015, and $343,000, or $0.02 per diluted share, for the three month period ended June 30, 2014.

Income from discontinued operations

Income from discontinued operations of $250,000, or $0.01 per diluted share, in the three months ended June 30, 2014 represents the working capital adjustment for the Asset Sale in accordance with the settlement agreement between the Company, the Purchaser and OriGene.

Net loss

Net loss was $291,000, or $0.01 per diluted share, for the three month period ended June 30, 2015, compared to a net loss of $93,000, or $0.00 per diluted share, for the same period in 2014.

Six Months Ended June 30, 2015 versus Six Months Ended June 30, 2014

Selling, general and administrative

Selling, general and administrative expenses were $542,000 for the six month period ended June 30, 2015 and $685,000 for the six month period ended June 30, 2014.  The decrease was primarily attributable to lower professional fees in the 2015 period, partially offset by costs associated with the Annual Meeting of Shareholders during the second quarter of 2015.

Income taxes

The Company recorded no income tax provision for the six month periods ended June 30, 2015 and June 30, 2014.  The Company has full valuation allowances placed against U.S. federal and state deferred tax assets.

11

Loss from continuing operations

Loss from continuing operations was $542,000, or $0.03 per diluted share, for the six month period ended June 30, 2015, and $683,000, or $0.03 per diluted share, for the six month period ended June 30, 2014.

Income from discontinued operations

Income from the Company’s discontinued operations was $250,000 for the six month period ended June 30, 2014, representing the working capital adjustment on the Asset Sale in accordance with the settlement with the Purchaser and OriGene. Income per share from discontinued operations was $0.01 per diluted share for the six month period ended June 30, 2014.

Net loss

Net loss was $542,000, or $0.03 per diluted share, for the six month period ended June 30, 2015, compared to a net loss of $433,000, or $0.02 per diluted share, for the same period in 2014.

Liquidity and Capital Resources

The net cash used in operating activities was $639,000 for the first six months of 2015 compared to net cash used in operating activities of $359,000 for the first six months of 2014.  Net cash used in operating activities in the 2014 period reflects the receipt of $250,000 pursuant to the working capital adjustment provisions of the Asset Purchase Agreement, which amount is included in income from discontinued operations in that period. The 2015 period reflects no such event. The net cash used in operating activities for the 2015 period was primarily the result of the net loss incurred, combined with an increase in other current assets and a decrease in accrued expenses.  The net cash used in operating activities for the 2014 period was primarily the result of the net loss incurred, partially offset by an increase in accrued expenses.

There was no cash used in investing activities in the six months ended June 30, 2015.  Cash provided by investing activities of $1.3 million for the first six months of 2014 was attributable to the receipt of the Asset Sale proceeds that had been placed in escrow at the closing. These funds were released in connection with the settlement agreement with SDIX LLC and OriGene.

There was no cash used in financing activities in the six months ended June 30, 2015 or 2014.

The Company’s working capital (current assets less current liabilities) was $23.8 million at June 30, 2015 compared to $24.4 million at December 31, 2014.

For the six months ended June 30, 2015, the Company satisfied all of its cash requirements from cash available and on-hand.  Based upon its cash and cash equivalents on hand, the Company believes it has sufficient resources to meet its operating requirements through at least the next 12 months.

The Company’s ability to meet its long-term capital needs will depend on a number of factors, including government regulation, its successful sale of additional common stock and/or the Company successfully locating and obtaining other financing, and the success of the Company’s plan to make future acquisitions. Accordingly, no assurance can be given that the Company will be able to meet the future liquidity requirements that may arise from these inherent and similar uncertainties.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company has limited exposure to changing interest rates, and is currently not engaged in hedging activities.

Item 4. Controls and Procedures

(a)Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of June 30, 2015, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and recorded within the time periods specified in the SEC’s rules and forms, and that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our principal executive and financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

(b)Change in Internal Control over Financial Reporting

No change in the Company’s internal control over financial reporting occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting

13

PART II — OTHER INFORMATION

Item 6. Exhibits

31.1*	Certifications of the Principal Executive Officer of Special Diversified Opportunities Inc. required by Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2*	Certifications of the Principal Financial Officer of Special Diversified Opportunities Inc. required by Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1+	Certification of the Principal Executive Officer of Special Diversified Opportunities Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002
32.2+	Certification of the Principal Financial Officer of Special Diversified Opportunities Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

+ Furnished herewith.

14

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SPECIAL DIVERSIFIED OPPORTUNITIES INC.
Date: August 14, 2015	/s/ Philip Blazek
	Philip Blazek
	President
	(Principal Executive Officer)
Date: August 14, 2015	/s/ Kevin J. Bratton
	Kevin J. Bratton
	Vice President — Finance and Chief Financial Officer
	(Principal Financial and Accounting Officer)

15

EX-31.1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification

I, Philip Blazek, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2015 of Special Diversified Opportunities Inc. (the “registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 14, 2015	/s/ Philip Blazek
		Philip Blazek
		President

EX-31.2

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification

I, Kevin J. Bratton, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2015 of Special Diversified Opportunities Inc. (the “registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 14, 2015	/s/ Kevin J. Bratton
		Kevin J. Bratton
		Chief Financial Officer

EX-32.1

Exhibit 32.1

Section 1350 Certifications

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Special Diversified Opportunities Inc. (the “Company”) hereby certifies, based on such officer’s knowledge, that:

(i)the accompanying Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Date:	August 14, 2015	/s/ Philip Blazek
		Philip Blazek
		President

EX-32.2

Exhibit 32.2

Section 1350 Certifications

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Special Diversified Opportunities Inc. (the “Company”) hereby certifies, based on such officer’s knowledge, that:

(i)the accompanying Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Date:	August 14, 2015	/s/ Kevin J. Bratton
		Kevin J. Bratton
		Chief Financial Officer

XML

SHARE-BASED COMPENSATION

6 Months Ended

Jun. 30, 2015

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

4.SHARE-BASED COMPENSATION

Under various plans, executives, key employees and outside directors receive awards of options to purchase common stock. The Company has a stock option plan (the “2000 Plan”) which authorizes the granting of incentive and nonqualified stock options and restricted stock units. Incentive stock options are granted at not less than 100% of fair market value at the date of grant (110% for stockholders owning more than 10% of the Company’s common stock). Nonqualified stock options are granted at not less than 85% of fair market value at the date of grant. A maximum of 8,000,000 shares of common stock are issuable under the 2000 Plan. Certain additional options have been granted outside the 2000 Plan. These options generally follow the provisions of the 2000 Plan.  The Company issues new shares to satisfy option exercises and the vesting of restricted stock awards.

The Company also has an Employee Stock Purchase Plan (the “ESPP”). The ESPP allows eligible full-time employees to purchase shares of common stock at 90 percent of the lower of the fair market value of a share of common stock on the first or last day of the quarter. Eligible employees are provided the opportunity to acquire Company common stock during each quarter. No more than 661,157 shares of common stock may be issued under the ESPP. Such stock may be unissued shares or treasury shares of the Company or may be outstanding shares purchased in the open market or otherwise on behalf of the ESPP.  The Company’s ESPP is compensatory and therefore, the Company is required to recognize compensation expense related to the discount from market value of shares sold under the ESPP.  The Company issues new shares to satisfy shares purchased under the ESPP.

Share-based compensation expense recorded in the three and six month periods ended June 30, 2015 and 2014 is summarized as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Stock options	$	1	$	3	$	2	$	3
Total share-based compensation expense	$	1	$	3	$	2	$	3

Share-based compensation expense is a component of selling, general and administrative expense, and is recorded as a non-cash expense in the operating activities section of the Company’s consolidated statements of cash flows.

No options were exercised in the six month periods ended June 30, 2015 and 2014.  Information with respect to the activity of outstanding stock options granted under the 2000 Plan and options granted separately from the 2000 Plan for the six months ended June 30, 2015 is summarized as follows:

							Weighted	Aggregate
	Number						Average Remaining	Instrinsic
	of Shares	Price Range					Contractual term	Value
Balance, January 1, 2015	974,570	$	1.25	-	$	3.74
Granted	60,000	$	1.24	-	$	1.24
Cancelled / Forfeited	—			—
Balance, June 30, 2015	1,034,570	$	1.24	-	$	3.74	4.8 years	$	—
Vested and excercisable at June 30, 2015	616,878	$	1.24	-	$	3.74	4.4 years	$	—

During the six month period ended June 30, 2015, there were 60,000 options granted with a weighted average grant date fair value, based on a Black-Scholes option pricing model, of $0.23 per share.  The assumptions used in the Black-Scholes model are as follows: dividend yield 0%, expected volatility 26.4%, risk-free interest rate 1.71% and expected life of 4.25 years.  The Company uses the Simplified Method for determining the expected life of options granted to employees which is computed using the sum of the average vesting period and the contractual life of the option and dividing by two, for all periods presented.

The following table provides additional information about the Company’s stock options outstanding and exercisable at June 30, 2015:

					Options Outstanding				Options Exercisable
						Weighted Average				Wtd. Average
Range of					Number of	Remaining	Exercise		Number of	Exercise
Exercise Prices					Shares	Contractual Life	Price		Shares	Price
$	1.24	-	$	1.85	827,528	4.8 Years	$	1.46	409,836	$	1.55
$	2.00	-	$	2.25	175,000	5.3 Years	$	2.13	175,000	$	2.13
$	3.69	-	$	3.74	32,042	2.8 Years	$	3.72	32,042	$	3.72
$	1.24	-	$	3.74	1,034,570	4.8 Years	$	1.64	616,878	$	1.83

The Company had 15,000 and 0 shares of unvested restricted stock as of June 30, 2015 and December 31, 2014, respectively.

XML

BASIC AND DILUTED LOSS PER SHARE

6 Months Ended

Jun. 30, 2015

BASIC AND DILUTED LOSS PER SHARE

BASIC AND DILUTED LOSS PER SHARE

3.BASIC AND DILUTED LOSS PER SHARE

Basic loss per share (EPS) is computed by dividing net loss available for common stockholders by the weighted-average number of common shares outstanding during the period. Diluted EPS is similar to basic EPS, except that the dilutive effect of converting or exercising all potentially dilutive securities is also included in the denominator such as stock options and restricted stock units. Basic loss per share excludes potentially dilutive securities.  For the three and six month periods ended June 30, 2015 and 2014, outstanding common stock options representing 1,034,570 and 1,502,570 shares, respectively, and 15,000 and 0 unvested restricted shares, respectively, were excluded from the computation of diluted EPS.

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current Assets :
Cash and cash equivalents	$ 24,179	$ 24,818
Other current assets	65	22
Total current assets	24,244	24,840
Total assets	24,244	24,840
Current Liabilities :
Accrued expenses	430	486
Total current liabilities	$ 430	$ 486
Stockholders' Equity:
Preferred stock, $.01 par value, 20,920,648 shares authorized, no shares issued or outstanding
Common stock, $.01 par value, 50,000,000 shares authorized, and 21,434,267 issued at June 30, 2015 and December 31, 2014	$ 217	$ 217
Additional paid-in capital	44,150	44,148
Treasury stock, 406,627 common shares at cost at June 30, 2015 and December 31, 2014	(555)	(555)
Accumulated deficit	(19,998)	(19,456)
Total stockholders' equity	23,814	24,354
Total liabilities and stockholders' equity	$ 24,244	$ 24,840

XML

ASSET SALE

6 Months Ended

Jun. 30, 2015

ASSET SALE

ASSET SALE

1. ASSET SALE

On April 5, 2013, Special Diversified Opportunities Inc. (f/k/a Strategic Diagnostics Inc.) (“SDOI” or the “Company”), SDIX LLC, a Delaware limited liability company (the “Purchaser”) and OriGene Technologies, Inc., a Delaware corporation and the sole equity holder of the Purchaser (“Parent” or “OriGene”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) pursuant to which the Company agreed, subject to certain terms and conditions including approval of the Company’s stockholders, to sell to the Purchaser substantially all of the Company’s rights, title and interest in substantially all of the Company’s non-cash assets related to the Life Sciences Business (the “Asset Sale”).

At a special meeting of the stockholders of the Company held on July 10, 2013, the stockholders approved the Asset Sale as contemplated by the Asset Purchase Agreement.  On July 12, 2013 the Company completed the Asset Sale.

Pursuant to the terms and conditions of the Asset Purchase Agreement, the Purchaser acquired all of the Company’s rights, title, and interest in substantially all of the assets, equipment, inventory, and intellectual property (the “Purchased Assets”) related exclusively to the Company’s Life Sciences Business, the product portfolio in respect of which included a full suite of integrated capabilities, including antibody and assay design, development and production and the Company’s Advanced Technologies Business.  The Purchaser also assumed and agreed to discharge the Assumed Liabilities, as defined in the Asset Purchase Agreement.  The Parent unconditionally guaranteed Purchaser’s obligations in the Asset Purchase Agreement.  The purchase price for the Purchased Assets was $16,000, which was subject to a post-closing working capital adjustment.

The Company and Purchaser each made customary representations, warranties and covenants in the Asset Purchase Agreement.  At closing, $1,300 of the purchase price was placed in escrow to be governed by the terms of a separate escrow agreement.  The Asset Purchase Agreement contained indemnification provisions pursuant to which the Company and the Purchaser have agreed to indemnify the other for certain losses, including with respect to environmental, litigation, tax and other matters.

The Asset Purchase Agreement also included restrictive covenants, including, that SDOI not (i) engage in a competing business for a period of five years after the closing date, (ii) directly or indirectly solicit Purchaser’s employees for a period of two years after the closing date, (iii) directly or indirectly solicit the Purchaser’s customers for a period of five years after the closing date and (iv) disparage the Purchaser at any time.

As a result of the Asset Sale, the Company no longer owns its historical operating assets, and its past business operations have been discontinued.

In May 2014, the Company, the Purchaser and OriGene reached a settlement of various claims by the parties relating to the Asset Sale. The terms of the settlement called for the release of the $1,300 in escrow to the Company, as well as the payment by the Purchaser and OriGene of an additional $250 pursuant to the working capital adjustment provisions of the Asset Purchase Agreement. This payment has been recorded in income from discontinued operations on the Consolidated Statements of Operations for the three and six months ended June 30, 2014.

XML

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2015

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

The Company is a shell company as defined in Rule 12b-2 of the Securities Exchange Act of 1934. The Company’s board of directors has been exploring strategic alternatives to maximize shareholder value going forward including deploying the proceeds of the Asset Sale in business acquisition opportunities, merging with another company, or other actions to redeploy our capital, including, without limitation, distribution of cash to our shareholders.

Basis of Presentation and Interim Financial Statements

The accompanying unaudited consolidated interim financial statements of the Company have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.  In the opinion of management, the accompanying consolidated interim financial statements include all adjustments (all of which are of a normal recurring nature) necessary for a fair presentation of the results of operations.  The interim operating results are not necessarily indicative of the results to be expected for the entire year.

Use of Estimates

The preparation of the consolidated interim financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated interim financial statements, and the reported amounts of expenses during the period. These estimates include those made in connection with assessing the valuation of deferred tax assets. Actual results could differ from these estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments that have maturities of three months or less when acquired to be cash equivalents. As of June 30, 2015 and December 31, 2014, cash of $24,179 and $24,818, respectively, consisted of bank checking operating accounts.

Stock-Based Compensation

The Company accounts for stock-based compensation using the fair value method, which requires that compensation costs related to employee share based payment transactions are measured in the financial statements at the fair value on the date of grant and are recognized over the vesting period of the award.

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Statement Of CONSOLIDATED BALANCE SHEET[Abstract]
Preferred stock par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	20,920,648	20,920,648
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	21,434,267	21,434,267
Treasury stock, common shares	406,627	406,627

XML

SHARE-BASED COMPENSATION (Details 2) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 1	$ 3	$ 2	$ 3
Stock Options
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 1	$ 3	$ 2	$ 3

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 31, 2015
Document And Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Entity Registrant Name	SPECIAL DIVERSIFIED OPPORTUNITIES INC.
Entity Central Index Key	0000911649
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		21,027,640

XML

SHARE-BASED COMPENSATION (Details 3) - $ / shares		6 Months Ended
	Dec. 31, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Exercised		0	0
Number of Shares
Beginning Balance		974,570
Granted		60,000
Ending Balance	974,570	1,034,570
Vested and exercisable at June 30, 2015		616,878
Weighted Average Remaining Contractual term
Outstanding at end of period		4 years 9 months 18 days
Vested and exercisable at June 30, 2015		4 years 4 months 24 days
Balance, January 1, 2015
Number of Shares
Price range, lower limit	$ 1.25
Price range, upper limit	$ 3.74
Balance, June 30, 2015
Number of Shares
Price range, lower limit		$ 1.24
Price range, upper limit		3.74
Vested and exercisable at June 30, 2015
Number of Shares
Price range, lower limit		1.24
Price range, upper limit		3.74
Granted
Number of Shares
Price range, lower limit		1.24
Price range, upper limit		$ 1.24

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Operating expenses:
Selling, general and administrative	$ 291	$ 345	$ 542	$ 685
Total operating expenses	291	345	542	685
Operating loss	(291)	(345)	(542)	(685)
Interest income, net		2		2
Loss from continuing operations before taxes	(291)	(343)	(542)	(683)
Loss from continuing operations, net of taxes	(291)	(343)	(542)	(683)
Income from discontinued operations		250		250
Net loss	$ (291)	$ (93)	$ (542)	$ (433)
Basic and diluted loss per share from continuing operations	$ (0.01)	$ (0.02)	$ (0.03)	$ (0.03)
Basic and diluted income per share from discontinued operations	0.00	0.01	0.00	0.01
Basic and diluted net loss per share	$ (0.01)	$ 0.00	$ (0.03)	$ (0.02)
Shares used in computing basic and diluted net loss per share	21,027,640	21,027,640	21,027,640	21,027,640

XML

SHARE-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2015

SHARE-BASED COMPENSATION

Share Based Compensation Expense

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Stock options	$	1	$	3	$	2	$	3
Total share-based compensation expense	$	1	$	3	$	2	$	3

Activity of Outstanding Stock Options Granted

							Weighted	Aggregate
	Number						Average Remaining	Instrinsic
	of Shares	Price Range					Contractual term	Value
Balance, January 1, 2015	974,570	$	1.25	-	$	3.74
Granted	60,000	$	1.24	-	$	1.24
Cancelled / Forfeited	—			—
Balance, June 30, 2015	1,034,570	$	1.24	-	$	3.74	4.8 years	$	—
Vested and excercisable at June 30, 2015	616,878	$	1.24	-	$	3.74	4.4 years	$	—

Additional Information About Stock Options Outstanding and Exercisable

					Options Outstanding				Options Exercisable
						Weighted Average				Wtd. Average
Range of					Number of	Remaining	Exercise		Number of	Exercise
Exercise Prices					Shares	Contractual Life	Price		Shares	Price
$	1.24	-	$	1.85	827,528	4.8 Years	$	1.46	409,836	$	1.55
$	2.00	-	$	2.25	175,000	5.3 Years	$	2.13	175,000	$	2.13
$	3.69	-	$	3.74	32,042	2.8 Years	$	3.72	32,042	$	3.72
$	1.24	-	$	3.74	1,034,570	4.8 Years	$	1.64	616,878	$	1.83

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CERTAIN BALANCE SHEET INFORMATION (Policies)

6 Months Ended

Jun. 30, 2015

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Business

The Company is a shell company as defined in Rule 12b-2 of the Securities Exchange Act of 1934. The Company’s board of directors has been exploring strategic alternatives to maximize shareholder value going forward including deploying the proceeds of the Asset Sale in business acquisition opportunities, merging with another company, or other actions to redeploy our capital, including, without limitation, distribution of cash to our shareholders.

Basis of Presentation and Interim Financial Statements

Basis of Presentation and Interim Financial Statements

The accompanying unaudited consolidated interim financial statements of the Company have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.  In the opinion of management, the accompanying consolidated interim financial statements include all adjustments (all of which are of a normal recurring nature) necessary for a fair presentation of the results of operations.  The interim operating results are not necessarily indicative of the results to be expected for the entire year.

Use of Estimates

Use of Estimates

The preparation of the consolidated interim financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated interim financial statements, and the reported amounts of expenses during the period. These estimates include those made in connection with assessing the valuation of deferred tax assets. Actual results could differ from these estimates.

Cash and cash equivalents

Cash and Cash Equivalents

The Company considers all highly liquid investments that have maturities of three months or less when acquired to be cash equivalents. As of June 30, 2015 and December 31, 2014, cash of $24,179 and $24,818, respectively, consisted of bank checking operating accounts.

Stock-Based Compensation

Stock-Based Compensation

The Company accounts for stock-based compensation using the fair value method, which requires that compensation costs related to employee share based payment transactions are measured in the financial statements at the fair value on the date of grant and are recognized over the vesting period of the award.

XML

SHARE-BASED COMPENSATION (Details 4) - $ / shares	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Range 1
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Lower Limit	$ 1.24
Upper Limit	$ 1.85
Options Outstanding, Number of Shares	827,528
Options Outstanding, Weighted Average Remaining Contractual Life	4 years 9 months 18 days
Options Outstanding, Weighted Average Exercise Price	$ 1.46
Options Exercisable, Number of Shares	409,836
Options Exercisable, Wtd. Average Exercise Price	$ 1.55
Range 2
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Lower Limit	2.00
Upper Limit	$ 2.25
Options Outstanding, Number of Shares	175,000
Options Outstanding, Weighted Average Remaining Contractual Life	5 years 3 months 18 days
Options Outstanding, Weighted Average Exercise Price	$ 2.13
Options Exercisable, Number of Shares	175,000
Options Exercisable, Wtd. Average Exercise Price	$ 2.13
Range 3
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Lower Limit	3.69
Upper Limit	$ 3.74
Options Outstanding, Number of Shares	32,042
Options Outstanding, Weighted Average Remaining Contractual Life	2 years 9 months 18 days
Options Outstanding, Weighted Average Exercise Price	$ 3.72
Options Exercisable, Number of Shares	32,042
Options Exercisable, Wtd. Average Exercise Price	$ 3.72
Range 4
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Lower Limit	1.24
Upper Limit	$ 3.74
Options Outstanding, Number of Shares	1,034,570
Options Outstanding, Weighted Average Remaining Contractual Life	4 years 9 months 18 days
Options Outstanding, Weighted Average Exercise Price	$ 1.64
Options Exercisable, Number of Shares	616,878
Options Exercisable, Wtd. Average Exercise Price	$ 1.83
Restricted stock awards
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Unvested restricted stock (in shares)	15,000	0

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BASIC AND DILUTED LOSS PER SHARE (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Shares used in computing basic and diluted loss per share	21,027,640	21,027,640	21,027,640	21,027,640
Common Stock Options
Securities excluded from the computation of diluted EPS	1,034,570	1,502,570	1,034,570	1,502,570
Restricted stock awards
Securities excluded from the computation of diluted EPS	15,000	0	15,000	0

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ASSET SALE (Details) - USD ($) $ in Thousands		1 Months Ended
	Jul. 12, 2013	May. 31, 2014
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Purchase price placed in escrow		$ 1,300
Working capital adjustment provisions		$ 250
Divestiture | Life Science
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds from sale of a business	$ 16,000
Asset Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Purchase price placed in escrow	$ 1,300
Period of restriction for engaging in competing business	5 years
Period of restriction for soliciting purchaser's employees	2 years
Period of restriction for soliciting purchaser's customers	5 years

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DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Receivables [Abstract]
Cash and cash equivalents	$ 24,179	$ 24,818	$ 25,539	$ 24,598

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SHARE-BASED COMPENSATION (Details) - Jun. 30, 2015 - $ / shares	Total
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Purchase price as a percentage of fair market value at date of grant	100.00%
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of issuable common stock under the plan	661,157
Employee Stock Purchase Plan, purchase price as percentage of fair market value of a share of common stock on first or last day of quarter	90.00%
2000 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of issuable common stock under the plan	8,000,000
2000 Plan | On a 100% basis matching contributions | stockholders owning more than 10% of common stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Purchase price as a percentage of fair market value at date of grant	110.00%
2000 Plan | Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average fair value at date of grant for options granted	$ 0.23
Share based compensation weighted-average assumptions, dividend yield	0.00%
Share based compensation weighted-average assumptions, expected volatility	26.40%
Share based compensation weighted-average assumptions, risk free interest rate	1.71%
Share based compensation weighted-average assumptions, expected life	4 years 3 months
2000 Plan | Nonqualified Stock Options | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Purchase price as a percentage of fair market value at date of grant	85.00%

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash Flows from Operating Activities :
Net loss	$ (542)	$ (433)
Less: Income from discontinued operations		250
Loss from continuing operations	(542)	(683)
Adjustments to reconcile net loss to net cash used in operating activities :
Share-based compensation expense	2	3
(Increase) in :
Other current assets	(43)	(28)
Increase (decrease) in :
Accrued expenses	(56)	99
Net operating activities from discontinued operations		250
Net cash used in operating activities	(639)	(359)
Cash Flows from Investing Activities :
Restricted cash		1,300
Net cash provided by investing activities		1,300
Net increase (decrease) in Cash and Cash Equivalents	(639)	941
Cash and Cash Equivalents, Beginning of Period	24,818	24,598
Cash and Cash Equivalents, End of Period	24,179	25,539
Supplemental Cash Flow Disclosure :
Cash paid for taxes, net of tax refunds	$ 16	$ 6

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INCOME TAXES

6 Months Ended

Jun. 30, 2015

INCOME TAXES

INCOME TAXES

5.INCOME TAXES

The Company evaluates its deferred tax assets on a regular basis to determine if a valuation allowance against the net deferred tax assets is required.  The Company had a full valuation allowance offsetting its U.S. federal and state net deferred tax assets which primarily represent net operating loss carryforwards (“NOLs”) at December 31, 2014.  During the six month period ended June 30, 2015, the Company’s management concluded that the full valuation allowance for U.S. federal and state net deferred tax assets is appropriate as the facts and circumstances during the first six months of 2015 did not change management’s conclusion that a full valuation allowance is necessary.

The Company is subject to U.S. federal income tax, as well as income taxes of multiple state jurisdictions.   The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.  At June 30, 2015, the Company had no interest or penalties accrued related to uncertain tax positions due to the available NOLs.

As of June 30, 2015, the Company had approximately $628 of unrecognized tax benefits of which $622 would reduce already existing net operating loss and tax credit carryforwards and therefore require no accrual for interest or penalty. The remaining $6 includes de minimis interest and penalties where required.  For the six months ended June 30, 2015, unrecognized tax benefits did not change. For federal purposes, post-1992 tax years remain open to examination as a result of earlier net operating losses being utilized in recent years. For state purposes, the statute of limitations remains open in a similar manner for states that have generated net operating losses. The Company does not expect that the total amount of unrecognized tax benefits related to positions taken in prior periods will change significantly during the next 12 months.

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INCOME TAXES (Details) $ in Thousands	Jun. 30, 2015 USD ($)
INCOME TAXES
Unrecognized tax benefits interest or penalty accrued	$ 0
Unrecognized tax benefits	628
Net operating loss and tax credit carryforwards	622
Balance remaining unrecognized tax benefit included de minimis interest and penalty	$ 6