stoneleighpartners10-k073107.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
[X] Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For
the
fiscal year ended July 31, 2007
[_] 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: 001-33502
_____________________
STONELEIGH
PARTNERS ACQUISITION CORP.
(Exact
name of registrant as specified in its charter)
___________________
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Delaware
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20-3483933
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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20
Marshall Street #104
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South
Norwalk, CT
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06854
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(Address
of principal executive offices)
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(Zip
code)
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Registrant’s
telephone number, including area
code: (203)
663-4200
Securities
registered pursuant to Section 12(b) of the Exchange Act:
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Title
of each class:
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Name
of exchange on which registered:
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Units,
each consisting of common stock, par value $0.0001 per
share
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and
one
warrant
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American
Stock Exchange
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Common
Stock, par value $0.0001 per share
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American
Stock Exchange
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Warrants
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American
Stock Exchange
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Securities
registered pursuant to Section 12(g) of the Exchange Act:
None
(Title
of Class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
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 [ ]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this
Form 10-K. [X ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act. (Check one):
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Large
Accelerated Filer [ ]
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Accelerated
Filer [ ]
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Non-Accelerated
Filer [X]
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [X] No [ ]
As
of
October 10, 2007, the aggregate market value of the
registrant’s voting and non-voting common equity held by non-affiliates of the
registrant was $221.1 million, based on a
closing price of $7.94 at July 31, 2007.
The
number of outstanding shares of the registrant’s Common Stock, $.0001 par value,
as of October 10,
2007 was 34,097,500.
STONELEIGH
PARTNERS ACQUISITION CORP.
ANNUAL
REPORT ON FORM 10-K
FOR
THE FISCAL YEAR ENDED JULY 31, 2007
INDEX
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PART
I:
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ITEM.
1 BUSINESS
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5
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ITEM
1A. RISK FACTORS
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19
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ITEM
1B. UNRESOLVED STAFF COMMENTS
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32
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ITEM
2. PROPERTIES
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32
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ITEM
3. LEGAL PROCEEDINGS
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32
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ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
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32
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PART
II
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33
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ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS
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AND
ISSUER PURCHASES OF EQUITY SECURITIES
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33
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ITEM
6. SELECTED FINANCIAL DATA
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36
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ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
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RESULTS
OF OPERATIONS
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38
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| ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISKS |
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ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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41
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ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND
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FINANCIAL
DISCLOSURE
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41
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ITEM
9A. CONTROLS AND PROCEDURES
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42
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ITEM
9B. OTHER INFORMATION
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42
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PART
III
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43
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ITEM
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
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43
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ITEM
11. EXECUTIVE COMPENSATION
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51
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ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND
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RELATED
STOCKHOLDER MATTERS
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52
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ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR
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INDEPENDENCE
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54
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ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
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60
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ITEM
15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON
FORM 8-K
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61
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1. Financial
Statements
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3. Exhibits
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PART
I
CAUTIONARY
NOTE CONCERNING FORWARD-LOOKING STATEMENTS:
Certain
statements in this Form 10-K constitute forward-looking statements for purposes
of the securities laws. Forward-looking statements include all statements that
do not relate solely to the historical or current facts, and can be identified
by the use of forward looking words such as “may”, “believe”, “will”, “expect”,
“expected”, “project”, “anticipate”, “anticipates”, “estimates”, “plans”,
“strategy”, “target”, “prospects” or “continue”. These forward looking
statements are based on the current plans and expectations of our management
and
are subject to a number of uncertainties and risks that could significantly
affect our current plans and expectations, as well as future results of
operations and financial condition and may cause our actual results,
performances or achievements to be materially different from any future results,
performances or achievements expressed or implied by such forward-looking
statements. This Form 10-K contains important information as to risk factors
above. In making these forward-looking statements, we claim the protection
of
the safe-harbor for forward-looking statements contained in the Private
Securities Reform Act of 1995. Although we believe that the expectations
reflected in such forward-looking statements are reasonable, there can be no
assurance that such expectations will prove to have been correct. We do not
assume any obligation to update these forward-looking statements to reflect
actual results, changes in assumptions, or changes in other factors affecting
such forward-looking statements.
The
term
“public stockholders” means holders of common stock sold in our initial public
offering. The term “initial stockholders” means our officers,
directors and senior administrators and certain of their affiliates who acquired
securities prior to our initial public offering or in the private placement
that
closed simultaneously with our initial public offering.
AVAILABLE
INFORMATION
This
report may be read or copied at the SEC’s Public Reference Room at 100 F Street,
NE, Washington, DC 20549 or at www.sec.gov. Information on the operation
of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330.
Introduction
We
are a
Delaware blank check company incorporated under the laws of the State of
Delaware on September 9, 2005, to serve as a vehicle to effect a merger, capital
stock exchange, asset acquisition or other similar business combination with
an
operating business. Our efforts in identifying a prospective target business
are
not limited to a particular industry, although our management will focus on
businesses having a majority of their assets, based on either a historical
balance sheet valuation or a fair market valuation, represented by real estate
or other physical assets, or which utilize these types of assets to derive
at
least a majority of their revenue.
On
June 5, 2007, we consummated our
initial public offering of 25,000,000 units. Each unit consists of
one share of common stock, $.0001 par value per share and one warrant to
purchase one share of common stock. The units were sold at an
offering price of $8.00 per unit. On June 12, 2007, we consummated
the closing of an additional 2,847,500 units. Our initial public
offering generated gross proceeds of $222,780,000. After deducting
the underwriting discounts and commissions and the offering expenses, the total
net proceeds to us from the initial public offering were approximately $220.7
million of which $220,439,650 was deposited into the trust account and the
remaining proceeds approximately ($300,000) became available to be used to
provide for business, legal and accounting due diligence on prospective business
combinations and continuing general and administrative expenses. Through July
31, 2007, net cash used to pay formation and operating costs was
$141,955. The net proceeds deposited into the trust fund remain on
deposit in the trust fund earning interest. Of the interest earned to date,
$797,259 has been distributed to us in accordance with the terms of our
investment management trust agreement. As of July 31, 2007, there was
$221,416,629 held in the trust fund.
Effecting
a business combination
General
We
are
not presently engaged in, and we will not engage in, any substantive commercial
business until we consummate a business combination. We intend to
utilize our cash, including the funds held in trust, our capital stock, debt
or
a combination of these in effecting a business combination. A business
combination may involve the acquisition of, or merger with, a company which
does
not need substantial additional capital but which desires to establish a public
trading market for its shares, while avoiding what it may deem to be adverse
consequences of undertaking a public offering itself. These transactions include
time delays, significant expense, loss of voting control and compliance with
various federal and state securities laws. In the alternative, we may seek
to
consummate a business combination with a company that may be financially
unstable or in its early stages of development or growth, which would subject
us
to the numerous risks inherent in such companies. We are currently in the
process of identifying and evaluating targets for an initial transaction. We
have not entered into any definitive business combination
agreement.
We
have not identified a target business or target industry
Although
we intend initially to focus on businesses having a majority of their assets,
based on either a historical balance sheet valuation or a fair market valuation,
represented by real estate or other physical assets, or which utilize these
types of assets to derive at least a majority of their revenue, we are not
required to limit our search to any target business or target industry for
a
business combination.
Subject to the limitations that a target business or the controlling interest
(but not less than a majority of the voting interest) therein that we acquire,
have a fair market value of at least 80% of our net assets at the time of the
acquisition, as described below in more detail, we have virtually unrestricted
flexibility in identifying and selecting a prospective acquisition candidate.
We
have not established any other specific attributes or criteria (financial or
otherwise) for prospective target businesses. There is no basis for our
investors to evaluate the possible merits or risks of the particular industry
in
which we may ultimately operate or the target business with which we may
ultimately complete a business combination. To the extent we effect a business
combination with a financially unstable company or an entity in its early stage
of development or growth, including entities without established records of
sales or earnings, we may be affected by numerous risks inherent in the business
and operations of financially unstable and early stage or potential emerging
growth companies. Although our management will endeavor to evaluate the risks
inherent in a particular target business, we cannot assure you that we will
properly ascertain or assess all significant risk factors.
Sources
of target businesses
We
believe that there are numerous acquisition candidates for us to target. We
have
generated a list of potential target opportunities from a host of different
sources. The candidates comprising the list of potential business combinations
will be examined through analysis of available information and general due
diligence to identify inefficiencies or high cost structures within such
enterprises. We plan to narrow our search for potential target opportunities
through this due diligence process, focusing on what we determine are the most
promising businesses that can most readily benefit from efforts to improve
operating efficiencies and cost structures. We anticipate that target business
candidates will be brought to our attention from various unaffiliated sources,
including securities broker-dealers, investment bankers, venture capitalists,
bankers and other members of the financial community. Target businesses may
be
brought to our attention by such unaffiliated sources as a result of being
solicited by us through calls, meetings or mailings. These sources may also
introduce us to target businesses they think we may be interested in on an
unsolicited basis, since many of these sources will have read our public filings
and reports and know the types of businesses we are targeting. Our initial
stockholders, including our officers and directors, and their affiliates may
also bring to our attention target business candidates that they become aware
of
through their business contacts as a result of formal or informal inquiries
or
discussions they may have, as well as attending trade shows or conventions.
While we do not presently anticipate engaging the services of professional
firms
that specialize in business acquisitions on any formal basis (except as
described below), we may engage these firms in the future, in which event we
may
pay a finder’s fee or other compensation to be determined in an arm’s length
negotiation based on the terms of the transaction. In no event, however, will
any of our initial stockholders, including our officers, directors, or senior
advisors or any entity with which they are affiliated, be paid any finder’s fee,
consulting fee or other compensation prior to, or for services they render
in
order to effectuate, the consummation of a business combination. If we determine
to enter into a business combination with a target business that is affiliated
with our initial stockholders, officers, directors or senior advisors or their
affiliates, we would do so only if we obtained an opinion from an independent
investment banking firm indicating that the business combination is fair to
our
unaffiliated stockholders from a financial point of view.
Selection
of a target business and structuring of a business combination
Subject
to the requirement that our initial business combination must be with a target
business, or of
a controlling interest (but not less than a majority of
the voting interest) therein, that has a fair market value that is equal
to at least 80% of our net assets at the time of such acquisition, our
management will have virtually unrestricted flexibility in identifying and
selecting a prospective target business. We have not established any other
specific attributes or criteria (financial or otherwise) for prospective
target
businesses, though we intend to focus on middle market companies with
significant real estate or other physical assets. Moreover, there is no
limitation on our ability to raise additional funds through the sale of our
securities or through loan transactions that would, if we were successful
in
raising such funds, enable us to acquire a target company, or controlling
interest (but not less than a majority of the voting interest) therein, with
a
fair market value significantly in excess of 80% of our net assets.
In
evaluating a prospective target business, our management will consider, among
other factors, the following:
• financial
condition and results of operation;
• growth
potential;
• experience
and skill of management and availability of additional personnel;
• capital
requirements;
• competitive
position;
• barriers
to entry;
• stage
of development of the products, processes or services;
• degree
of current or potential market acceptance of the products, processes or
services;
• proprietary
features and degree of intellectual property or other protection of the
products, processes or services;
• regulatory
environment of the industry; and
• costs
associated with effecting the business combination.
The
above
criteria are not intended to be exhaustive. Any evaluation relating to the
merits of a particular business combination will be based, to the extent
relevant, on the above factors as well as other considerations deemed relevant
by our management in effecting a business combination consistent with our
business objective. In evaluating a prospective target business, we will conduct
an extensive due diligence review which will encompass, among other things,
meetings with incumbent management and inspection of facilities, as well as
review of financial and other information which will be made available to us.
This due diligence review will be conducted either by our management or by
unaffiliated third parties we may engage, although we have no current intent
to
engage any such third parties. We will also seek to have all prospective
target businesses execute agreements with us waiving any
right, title, interest or claim of any kind
in
or to any monies held in the trust. If any prospective target business refuses
to execute such agreement, it is unlikely we would continue negotiations with
such target business.
We
will
endeavor to structure a business combination so as to achieve the most favorable
tax treatment to us, the target business and both companies’ stockholders. We
cannot assure you, however, that the Internal Revenue Service or appropriate
state tax authorities will agree with our tax treatment of the business
combination.
The
time
and costs required to select and evaluate a target business and to structure
and
complete the business combination cannot presently be ascertained with any
degree of certainty. Any costs incurred with respect to the identification
and
evaluation of a prospective target business with which a business combination
is
not ultimately completed will result in a loss to us and reduce the amount
of
capital available to otherwise complete a business combination.
We
have
engaged HCFP/Brenner Securities, the representative of the underwriters of
our
initial public offering, and Pali Capital, one of the underwriters of our
initial public offering, on a non-exclusive basis, to act as our investment
bankers to assist us in obtaining approval of a business combination (but not
for purposes of locating potential target candidates for our business
combination). We will pay a cash fee for these services at the closing of our
business combination of $7,400,000. We believe that the fee is reasonable in
light of the services we expect to be provided to us, the likely size of a
business combination and the fact that these entities may provide services
in
connection with potential business combinations which may not be
completed.
Fair
market value of target business
The
initial target business, or controlling interest (but not less than a majority
of the voting interest) therein, that we acquire must have a fair market value
equal to at least 80% of our net assets at the time of such acquisition,
although we may acquire a target business whose fair market value significantly
exceeds 80% of our net assets. We can also satisfy the requirement that the
business combination have a fair market value at least equal to 80% of our
net
assets in a business combination where we acquire less than a 100% interest
in
the target business, provided that the fair market value of the interest in
such
business or businesses is at least equal to 80% of our net assets at the time
of
such acquisition. We may pay an amount in excess of the proceeds of the trust
fund to acquire a target business. Therefore, we may seek to raise additional
funds through the sale of our securities or through loan arrangements if such
funds are required to consummate such a business combination, although we have
not engaged or retained, had any discussions with, or entered into any
agreements with, any third party regarding any such potential financing
transactions. If we were to seek such additional funds, any such arrangement
would only be consummated simultaneously with our consummation of a business
combination. The fair market value of such business will be determined by our
board of directors based upon standards generally accepted by the financial
community, such as actual and potential sales, earnings and cash flow and book
value. If our board is not able to determine independently that the target
business has a sufficient fair market value, we will obtain an opinion from
an
unaffiliated, independent investment banking firm that is a member of the
National Association of Securities Dealers, Inc. with respect to the
satisfaction of such criteria.
Since any opinion, if obtained, would merely state that the fair market value of
the target business
meets the 80% of net assets threshold, it is not anticipated that copies of
such
opinion would be distributed to our stockholders, although copies will be
provided to stockholders who request it. We will not be required to obtain
an
opinion from an investment banking firm as to the fair market value if our
board
of directors independently determines that the target business has sufficient
fair market value.
In
the
event we acquire a controlling interest in a target business or businesses,
the
portion of such business that we acquire shall represent at least a majority
of
the voting interest and must have a fair market value equal to at least 80%
of
our net assets. Such portion will be calculated based on a valuation of 100%
of
such target business or businesses. The portion of such business or businesses
that we will acquire shall be based on the portion of assets, stock or other
interest we acquire.
Lack
of business diversification
While
we
may seek to effect business combinations
with more than one target business, our initial business combination must
be with a target business which satisfies the minimum valuation standard at
the
time of such acquisition, as discussed above. Consequently, initially we have
the ability to complete only a single business combination, although this may
entail the simultaneous acquisitions of several closely related operating
businesses. If we acquire a single operating business, the prospects for our
success may be entirely dependent upon the future performance of such single
business. Unlike other entities which may have the resources to complete several
business combinations of entities operating in multiple industries or multiple
areas of a single industry, it is probable that we will not have the resources
to diversify our operations or benefit from the possible spreading of risks
or
offsetting of losses. By consummating a business combination with only a single
entity, our lack of diversification may:
• subject
us to numerous economic, competitive and regulatory developments, any or all
of
which may have a substantial adverse impact upon the particular industry in
which we may operate subsequent to a business combination, and
• result
in our dependency upon the development or market acceptance of a single or
limited number of products, processes or services.
Additionally,
in the event our business combination involves the simultaneous acquisition
of
several related businesses and such businesses are owned by different sellers,
we will need for each of such sellers to agree that our purchase of its business
is contingent on the simultaneous closings of the other acquisitions, which
may
make it more difficult for us, and delay our ability, to complete the business
combination. With multiple acquisitions, we could also face additional risks,
including additional burdens and costs with respect to possible multiple
negotiations and due diligence investigations (if there are multiple sellers)
and the additional risks associated with the subsequent assimilation of the
operations and services or products of the acquired companies in a single
operating business.
Limited
ability to evaluate the target business’ management
Although
we intend to scrutinize closely the management of a prospective target business
when evaluating the desirability of effecting a business
combination, we cannot assure you thatour assessment of the target
business’ management will prove to be correct. In addition, we cannot assure you
that the future management will have the necessary skills, qualifications
or
abilities to manage a public company intending to embark on a program of
business development. Furthermore, because there are many factors which can
influence the decision of each member of management’s decision whether to remain
with us following a business combination, some of which may be personal to
each
individual and therefore cannot be anticipated by us, the future role of
our
officers and directors, if any, in the target business cannot presently be
stated with any certainty. Although we expect Messrs. Engle and Coyne, our
executive officers, to remain with us in senior management or advisory positions
following a business combination, it is possible that some of them will not
devote their full efforts to our affairs subsequent to a business combination.
Moreover, they would only be able to remain with the company after the
consummation of a business combination if they are able to negotiate employment
or consulting agreements in connection with the business combination. Such
negotiations would take place simultaneously with the negotiation of the
business combination and could provide for such individuals to receive
compensation in the form of cash payments and/or our securities for services
they would render to our company after the consummation of the business
combination. While the personal and financial interests of such individuals
may
cause them to have a conflict of interest in determining whether a potential
business combination is most appropriate for us and influence their motivation
in identifying and selecting a target business, the ability of such individuals
to remain with our company after the consummation of a business combination
will
not be the determining factor in our decision as to whether or not we will
proceed with any potential business combination. Additionally, we cannot
assure
you that our officers and directors will have significant experience or
knowledge relating to the operations of the particular target
business.
Following
a business combination, we may seek to recruit additional managers to supplement
the incumbent management of the target business. We cannot assure you that
we
will have the ability to recruit additional managers, or that any such
additional managers will have the skills, knowledge or experience necessary
to
enhance the incumbent management.
Provisions
of our charter relating to a business combination
Article
Seventh of our charter provides that certain provisions that apply to a business
combination may not be amended, including those provisions relating to: the
requirement that public stockholders approve the business combination;
conversion rights afforded to public stockholders; our inability to consummate
a
business combination if holders of 30% or more of the shares of common stock
sold in our initial public offering exercise their conversion rights; the
requirement that our initial business combination be a target business, or
a
controlling interest (but not less than a majority of the voting interest)
therein, whose fair market value be at least 80% of our net assets at the time
of the acquisition; and the distribution of the trust fund if a business
combination does not occur within the specified time periods. However, these
restrictions on charter amendments may not be enforceable under Delaware law.
Nevertheless, we view these business combination procedures in our charter
as
obligations to our investors and we will not propose any amendment to these
procedures to our stockholders.
Opportunity
for stockholder approval of business combination
Prior
to
the completion of a business combination, we will submit the transaction to
our
stockholders for approval, even if the nature of the acquisition would not
ordinarily require stockholder approval under applicable state law. The
“completion” of a business combination means the closing of a transaction in
which we acquire, merge or otherwise combine with a target business. The
execution of a definitive agreement does not constitute the “completion” of a
business combination. In connection with any such transaction, we will also
submit to our stockholders for approval a proposal to amend our amended and
restated certificate of incorporation to provide for our corporate life to
continue perpetually following the completion of such business combination.
Any
vote to extend our corporate life to continue perpetually following the
completion of a business combination will be taken only if the business
combination is approved. We will only consummate a business combination if
stockholders vote both in favor of such business combination and our amendment
to extend our corporate life.
In
connection with seeking stockholder approval of a business combination, we
will
furnish our stockholders with proxy solicitation materials prepared in
accordance with the Securities Exchange Act of 1934, which, among other matters,
will include a description of the operations of the target business and audited
historical financial statements of the business.
In
connection with the vote required for any business combination, all of our
initial stockholders, including all of our officers, directors and senior
advisors, have agreed to vote their respective initial shares in accordance
with
the majority of the shares of common stock voted by the public
stockholders. This voting arrangement shall not apply to shares
included in units purchased in our initial public offering or purchased
following our initial public offering in the aftermarket by any of our initial
stockholders, officers, directors or senior advisors, including any shares
included within the units purchased by each of Gary D. Engle, James A. Coyne,
Jonathan Davidson and Brian Kaufman under an agreement with HCFP/Brenner
Securities, pursuant to which such individuals, or entities they control, will
place limit orders for up to an aggregate of $15 million of our units,
commencing 30 calendar days after we file a preliminary proxy statement seeking
approval of our stockholders for a business combination and ending 30 days
thereafter. Accordingly, they may vote the shares included in such units any
way
they choose, including on a business combination.
We
will
not proceed with a business combination if the holders of a majority of the
shares of common stock sold in our initial public offering cast at the meeting
to approve the business combination fail to vote in favor of such business
combination or if stockholders owning 30% or more of the outstanding shares
of
common stock sold in our initial public offering both exercise their conversion
rights and vote against the business combination.
Conversion
rights
At
the
time we seek stockholder approval of any business combination, we will offer
each public stockholder the right to have his, her or its shares of common
stock
converted to cash if he, she or it votes against the business combination and
the business combination is approved and completed. Our initial stockholders
do
not have such conversion rights with respect to any shares of common stock
owned
by them,
directly or indirectly, whether included
in their initial shares or purchased by them in our initial public offering
or
in the aftermarket. The actual per-share conversion price will be equal to
the
amount in the trust fund inclusive of any interest (net of taxes and interest
amounts released to us) calculated as of two business days prior to the proposed
consummation of the business combination, divided by the number of shares sold
in our initial public offering. Without taking into account any interest earned
on the trust fund, the initial per-share conversion price would be approximately
$7.94 (which includes $0.222 per share from the proceeds we received from the
private placements of our initial shares and insider warrants), or $0.06 less
than the per-unit offering price of $8.00.
Public
stockholders wishing to exercise their conversion rights must (i) vote against
the proposed business combination and (ii) demand that we convert their shares
into cash. Additionally, we may require public stockholders to tender their
certificates to our transfer agent prior to the meeting or to deliver their
shares to the transfer agent electronically using Depository Trust Company’s
DWAC (Deposit/Withdrawal At Custodian) System. The proxy solicitation materials
that we will furnish to stockholders in connection with the vote for any
proposed business combination will indicate whether we are requiring
stockholders to satisfy such certification and delivery requirements.
Traditionally, in order to perfect conversion rights in connection with a blank
check company’s business combination, a holder could simply vote no against a
proposed business combination and check a box on the proxy card indicating
such
holder was seeking to convert. After the business combination was approved,
the
company would contact such stockholder to arrange for him to deliver his
certificate to verify ownership. As a result, the stockholder then had an
“option window” after the consummation of the business combination during which
he could monitor the price of the stock in the market. If the price rose above
the conversion price, he could sell his shares in the open market before
actually delivering his shares to the company for cancellation. Thus, the
conversion right, to which stockholders were aware they needed to commit before
the stockholder meeting, would become a “put” right surviving past the
consummation of the business combination until the converting holder delivered
his certificate. The requirement for physical or electronic delivery prior
to
the meeting ensures that a converting holder’s election to convert is
irrevocable once the business combination is approved.
Any
request for conversion, once made, may be withdrawn at any time up to the date
of the meeting. If a stockholder delivered his certificate for conversion and
subsequently decided prior to the meeting not to elect conversion, he may simply
request that the transfer agent return the certificate (physically or
electronically). It is anticipated that the funds to be distributed to
stockholders entitled to convert their shares who elect conversion will be
distributed promptly after completion of a business combination. Any public
stockholder who converts his, her or its stock into his, her or its share of
the
trust fund still has the right to exercise any warrants they still
hold.
If
a vote
on our initial business combination is held and the business combination is
not
approved, we may continue to try to consummate a business combination with
a
different target until May 31, 2009. If the initial business combination is
not
approved or completed for any reason, then public stockholders voting against
our initial business combination who exercised their conversion rights would
not
be entitled to convert their shares of common stock into a pro rata share of
the
aggregate amount then on deposit in the trust account. In such case, if we
have
required public stockholders
to tender their certificates prior to the
meeting, we will promptly return
such certificates to the tendering public stockholder. Public stockholders
would
be entitled to receive their pro rata share of the aggregate amount on deposit
in the trust account only in the event that the initial business combination
they voted against was duly approved and subsequently completed, or in
connection with our liquidation.
We
will
not complete any business combination if public stockholders owning 30% or
more
of the shares sold in our initial public offering, both vote against the
business combination and exercise their conversion rights. Accordingly, it
is
our understanding and intention in every case to structure and consummate a
business combination in which approximately 29.99% of the public stockholders
may exercise their conversion rights and a business combination will still
go
forward. We believe a 30% threshold is appropriate in order to reduce the
likelihood that a small group of investors holding a large block of our stock
will be able to stop us from completing a business combination that is otherwise
approved by a large majority of our public stockholders. As this is unfair
and
detrimental to the vast majority of our public stockholders, we determined
the
higher conversion threshold was appropriate.
Liquidation
if no business combination
Our
amended and restated certificate of incorporation provides that we will continue
in existence only until May 31, 2009. This provision may not be amended except
in connection with the consummation of a business combination. If we have not
completed a business combination by such date, our corporate existence will
cease except for the purposes of winding up our affairs and liquidating,
pursuant to Section 278 of the Delaware General Corporation Law. This has the
same effect as if our board of directors and stockholders had formally voted
to
approve our dissolution pursuant to Section 275 of the Delaware General
Corporation Law. Accordingly, limiting our corporate existence to a
specified date as permitted by Section 102(b)(5) of the Delaware General
Corporation Law removes the necessity to comply with the formal procedures
set
forth in Section 275 (which would have required our board of directors and
stockholders to formally vote to approve our dissolution and liquidation and
to
have filed a certificate of dissolution with the Delaware Secretary of State).
We view this provision terminating our corporate life by May 31, 2009 as an
obligation to our stockholders and will not take any action to amend or waive
this provision to allow us to survive for a longer period of time except in
connection with the consummation of a business combination.
If
we are
unable to complete a business
combination by May 31, 2009, we will distribute to all of our public
stockholders, in proportion to their respective equity interests, an aggregate
sum equal to the amount in the trust account, inclusive of any interest, plus
any remaining net assets (subject to our obligations under Delaware law to
provide for claims of creditors as described below). We anticipate notifying
the
trustee of the trust account to begin liquidating such assets promptly after
such date and anticipate it will take no more than 10 business days to
effectuate such distribution. Our initial stockholders have waived their rights
to participate in any liquidation distribution with respect to their initial
shares. There will be no distribution from the trust account with respect to
our
warrants, which will expire worthless. We will pay the costs of liquidation
from
our remaining assets outside of the trust account. If such funds are
insufficient, our chief executive officer and chief financial officer have
agreed to advance us the funds necessary to complete such liquidation (currently
anticipated to be no more than approximately $15,000) and have agreed not to
seek repayment of such expenses.
If
we
were to expend all of the net proceeds generated by our initial public offering,
other than the proceeds deposited in the trust account, and without taking
into
account interest, if any, earned on the trust account, the initial per-share
liquidation price would be approximately $7.94. The proceeds deposited in the
trust account could, however, become subject to the claims of our creditors
(which could include vendors and service providers we have engaged to assist
us
in any way in connection with our search for a target business and that are
owed
money by us, as well as target businesses themselves) which could have higher
priority than the claims of our public stockholders. Each of Messrs. Engle
and
Coyne have agreed that they will be personally liable to ensure that the
proceeds in the trust fund are not reduced by the claims of target businesses
or
of vendors or other entities that are owed money by us for services rendered
or
contracted for or products sold to us and that have not executed an agreement
waiving any right, title, interest or claim of any kind in or to any monies
held
in the trust. We have questioned these individuals and reviewed their financial
information and believe that each of these individuals has a substantial net
worth. As a result, we believe that these individuals will be able to satisfy
their indemnification obligations. However, we cannot assure you that these
individuals will be able to satisfy those obligations. Accordingly, the
per-share liquidation price could be less than $7.94 due to claims of
creditors.
A
public
stockholder is entitled to receive funds from the trust fund only in the event
we do not complete a business combination within the applicable time period
or
if the public stockholder elected to convert his, her or its shares into cash
upon our completion of a business combination that the public stockholder voted
against and such business combination is actually completed by us. In no other
circumstances shall a public stockholder have any right or interest of any
kind
to or in the trust fund.
Under
the
Delaware General Corporation Law, stockholders may be held liable for claims
by
third parties against a corporation to the extent of distributions received
by
them in a dissolution. If the corporation complies with certain procedures
set
forth in Section 280 of the Delaware General Corporation Law intended to
ensure
that it makes reasonable provision for all claims against it, including a
60-day
notice period during which any third-party claims can be brought against
the
corporation, a 90-day period during which the corporation may reject any
claims
brought, and an additional 150-day waiting period before any liquidating
distributions are made to stockholders,
any liability of stockholders with respect to
a liquidating distribution is limited to the lesser of such stockholder’s pro
rata share of the claim or the amount distributed to the stockholder, and
any
liability of the stockholder would be barred after the third anniversary
of the
dissolution. However, as stated above, it is our intention to make liquidating
distributions to our stockholders as soon as reasonably possible after May
31,
2009 and, therefore, we do not intend to comply with those procedures. As
such,
our stockholders could potentially be liable for any claims to the extent
of
distributions received by them (but no more) and any liability of our
stockholders may extend well beyond the third anniversary of such date. Because
we will not be complying with Section 280, Section 281(b) of the Delaware
General Corporation Law requires us to adopt a plan that will provide for
our
payment, based on facts known to us at such time, of (i) all existing claims,
(ii) all pending claims and (iii) all claims that may be potentially brought
against us within the subsequent 10 years. Accordingly, we would be required
to
provide for any claims of creditors known to us at that time or those that
we
believe could be potentially brought against us within the subsequent 10
years
prior to our distributing the funds in the trust account to our public
stockholders. However, because we are a blank check company, rather than
an
operating company, and our operations are limited to searching for prospective
target businesses to acquire, the only likely claims to arise would be from
our
vendors and service providers (such as accountants, lawyers and investment
bankers) and potential target businesses. As described above, in accordance
with
our obligations contained in our underwriting agreement, we attempt to have
all
vendors, service providers and prospective target businesses execute agreements
with us waiving any right, title, interest or claim of any kind they may
have in
or to any monies held in the trust account. We therefore believe that any
necessary provision for creditors will be reduced and should not have a
significant impact on our ability to distribute the funds in the trust account
to our public stockholders. Nevertheless, we cannot assure you of this fact
as
there is no guarantee that vendors, service providers and prospective target
businesses will execute such agreements. Nor is there any guarantee that,
even
if they execute such agreements with us, they will not seek recourse against
the
trust account. A court could also conclude that such agreements are not legally
enforceable. As a result, if we liquidate, the per-share distribution
from the trust account could be less than approximately $7.94 due to claims
or
potential claims of creditors.
If
we are
forced to file a bankruptcy case or an involuntary bankruptcy case is filed
against us which is not dismissed, any distributions received by stockholders
could be viewed under applicable debtor/creditor and/or bankruptcy laws as
either a “preferential transfer” or a “fraudulent conveyance”. As a result, a
bankruptcy court could seek to recover all amounts received by our stockholders.
Furthermore, because we intend to distribute the proceeds held in the trust
account to our public stockholders promptly after May 31, 2009, this may be
viewed or interpreted as giving preference to our public stockholders over
any
potential creditors with respect to access to or distributions from our assets.
Furthermore, our board may be viewed as having breached their fiduciary duties
to our creditors and/or may have acted in bad faith, and thereby exposing itself
and our company to claims of punitive damages, by paying public stockholders
from the trust account prior to addressing the claims of creditors. We cannot
assure you that claims will not be brought against us for these
reasons.
Competition
In
identifying, evaluating and selecting a target business, we may encounter
intense competition from other entities having
a business objective similar to ours. There are
approximately 79 blank check companies in the United States with more than
$8.4
billion in trust that are seeking to carry out a business plan similar to
our
business plan and there are likely to be more blank check companies filing
registration statements for initial public offerings after we file this report
and prior to the completion of a business combination. Additionally, we are
subject to competition from other companies looking to expand their operations
through the acquisition of a target business. Many of these entities are
well
established and have extensive experience identifying and effecting business
combinations directly or through affiliates. Many of these competitors possess
greater technical, human and other resources than us and our financial resources
are relatively limited when contrasted with those of many of these competitors.
While we believe there are numerous potential target businesses that we could
acquire with the net proceeds of our initial public offering, our ability
to
compete in acquiring certain sizable target businesses are limited by our
available financial resources. This inherent competitive limitation gives
others
an advantage in pursuing the acquisition of a target business.
Further:
• our
obligation to seek stockholder approval of a business combination may delay
the
completion of a transaction;
• our
obligation to convert into cash shares of common stock held by our public
stockholders if such holders both vote against the business combination and
also
seek conversion of their shares may reduce the resources available to us for
a
business combination; and
• our
outstanding warrants and option, and the future dilution they potentially
represent, may not be viewed favorably by certain target
businesses.
Any
of
these factors may place us at a competitive disadvantage in successfully
negotiating a business combination. Our management believes, however, that
our
status as a public entity and potential access to the United States public
equity markets may give us a competitive advantage over privately-held entities
having a similar business objective as ours in acquiring a target business
on
favorable terms.
If
we
succeed in effecting a business combination, there will be, in all likelihood,
intense competition from competitors of the target business. In particular,
certain industries which experience rapid growth frequently attract an
increasingly larger number of competitors, including competitors with
increasingly greater financial, marketing, technical and other resources than
the initial competitors in the industry. The degree of competition
characterizing the industry of any prospective target business cannot presently
be ascertained. We cannot assure you that, subsequent to a business combination,
we will have the resources to compete effectively, especially to the extent
that
the target business is in a high-growth industry.
Facilities
We
maintain our executive offices at 20 Marshall Street, Suite 104, Stamford,
CT
06854. The cost for this space is included in the $7,500 per-month fee PLM
International Inc. charges us for general and administrative services pursuant
to a letter agreement between us and PLM International Inc., an affiliate of
Messrs. Engle and Coyne. We believe, based on rents and fees for similar
services in the Stamford, CT area, that the fee charged by PLM International
Inc. is at least as favorable as we could have obtained from an unaffiliated
person. We consider our current office space adequate for our current
operations.
Employees
We
have
two executive officers, each of whom is also a member of our board of directors.
These individuals are not obligated to contribute any specific number of hours
to our matters and intend to devote only as much time as they deem necessary
to
our affairs. The amount of time they will devote in any time period will vary
based on whether a target business has been selected for a business combination
and the stage of our business combination process. Accordingly, once management
locates a suitable target business to acquire, they will spend more time
investigating such target business and negotiating and processing the business
combination (and consequently more time on our affairs) than they would prior
to
locating a suitable target business. We do not intend to have any full time
employees prior to the consummation of a business combination.
Legal
Proceedings
We
have
not been, and are not currently, a party to any legal proceedings and we are
not
aware that there are any pending legal proceedings against us.
Periodic
Reporting and Audited Financial Statements
We
have
registered our securities under the Securities Exchange Act of 1934, as amended,
and have reporting obligations, including the requirement that we file annual
and quarterly reports with the SEC. In accordance with the requirements of
the
Securities Exchange Act of 1934, our annual reports contain financial statements
audited and reported on by our independent registered public accounting
firm.
We
will
not acquire a target business if audited financial statements cannot be obtained
for the target business. Additionally, our management provides our stockholders
with audited financial statements, prepared in accordance with generally
accepted accounting principles, of the prospective target business as part
of
the proxy solicitation materials sent to stockholders to assist them in
assessing the target business. Our management believes that the requirement
of
having available audited financial statements for the target business will
not
materially limit the pool of potential target businesses available for
acquisition.
ITEM
1A. RISK FACTORS
Future
results of our operations involve a number of known and unknown risks and
uncertainties. Factors that could affect future operating results and cash
flows
and cause actual results to vary materially from historical results include,
but
are not limited to those risks set forth below:
Risks
Associated with our Business
We
are a development stage company with no operating history and very limited
resources.
We
are a
development stage company with no operating results to date. Since we do not
have an operating history, you have no basis upon which to evaluate our ability
to achieve our business objective, which is to acquire an operating business.
We
are currently in the process of identifying and evaluating prospective target
businesses; however, we may be unable to complete a business combination. As
described in this report, we will not generate any revenue until, at the
earliest, after the consummation of a business combination. We cannot assure
you
that a business combination will occur. If we spend all of the proceeds from
our
initial public offering not held in trust and interest income earned up to
$3,000,000 on the balance of the trust account that may be released to us to
fund our working capital requirements in seeking business combination, but
fail
to complete such a combination, we will never generate any operating
revenues.
If
we are forced to liquidate and distribute the trust account before a business
combination, our public stockholders may receive less than $8.00 per share
and
our warrants will expire worthless.
If
we are
unable to complete a business combination within the prescribed time frames
and
are forced to liquidate our assets, the per-share liquidation distribution
may
be less than $8.00 because of the expenses of our initial public offering,
our
general and administrative expenses and the anticipated costs of seeking a
business combination. Furthermore, there will be no distribution with respect
to
our outstanding warrants which will expire worthless if we liquidate before
the
completion of a business combination.
If
we are unable to consummate a business combination, our public stockholders
will
be forced to wait until May 31, 2009 before receiving liquidation
distributions.
We
have
until May 31, 2009 to complete a business combination. We have no
obligation to return funds to investors prior to such date unless we consummate
a business combination prior thereto and only then in cases where investors
have
sought conversion of their shares. Only after the expiration of this full
time period will public stockholders be entitled to liquidation distributions
if
we are unable to complete a business combination. Accordingly, investors’
funds may be unavailable to them until such date.
You
are not entitled to protections normally afforded to investors of blank check
companies.
Since
the
net proceeds of our initial public offering are intended to be used to complete
a business combination with a target business that has not been identified,
we
may be deemed to be a “blank check” company under the United States securities
laws. However, since we have net tangible assets in excess of $5,000,000 and
have filed a Current Report on Form 8-K with the SEC upon consummation of our
initial public offering including audited financial statements demonstrating
this fact, we are exempt from rules promulgated by the SEC to protect investors
of blank check companies such as Rule 419. Accordingly, investors are not
afforded the benefits or protections of those rules, such as completely
restricting the transferability of our securities until the consummation of
a
business combination, requiring us to complete a business combination within
18
months of the effective date of the initial registration statement and
restricting the use of interest earned on the funds held in the trust account.
Because we are not subject to Rule 419, our units are immediately tradable,
we
are entitled to withdraw a certain amount of interest earned on the funds held
in the trust account prior to the completion of a business combination and
we
have a longer period of time to complete such a business combination than we
would if we were subject to such rule.
Because
there are numerous companies with a business plan similar to ours seeking to
effectuate a business combination, it may be more difficult for us to complete
a
business combination.
Based
upon publicly available
information, we have identified 118 blank check companies which have gone public
in the United States since August 2003, of which 34 have completed a business
combination. Of the remaining 84 blank check companies, 79 have more
than $8.4 billion in trust and are seeking to complete business combinations,
while five companies have either dissolved or announced their intention to
dissolve and return funds to investors. Of the 79 companies seeking to complete
a business combination, only 27 companies have announced that they have entered
into either a definitive agreement or a letter of intent for a business
combination but not yet consummated them. Furthermore, there are a number of
additional offerings for blank check companies that are still in the
registration process but have not completed initial public offerings and there
are likely to be more blank check companies filing registration statements
for
initial public offerings after the date of this report and prior to our
completion of a business combination. While some of the blank check companies
must complete their respective business combinations in specific industries,
a
number of them may consummate their business combinations in any industry they
choose. Therefore, we may be subject to competition from these and other
companies seeking to consummate a business combination. We cannot assure you
that we will be able to compete successfully for an attractive business
combination. Additionally, because of this competition, we cannot assure you
that we will be able to effectuate a business combination within the required
time period.
We
depend on interest earned on the trust account to fund our search for target
businesses and to complete our initial business
combination.
As
of
July 31, 2007, we had approximately $1,035,420 of cash. We therefore depend
to a
large degree on sufficient interest being earned on the proceeds held in the
trust account to provide us with additional working capital we need to identify
one or more target businesses and to complete our initial business combination.
While, as of July 31, 2007, we were entitled to have released to us for such
purposes interest income of up to a maximum of $977,201, the timing of the
availability of such interest income may result in our having insufficient
funds
available with which to structure, negotiate or close an initial business
combination. In such event, we would need to borrow funds from our initial
stockholders to operate or may be forced to liquidate.
If
third parties bring claims against us, the proceeds held in trust could be
reduced and the per-share distribution received by stockholders could be less
than $7.94 per share.
Our
placing of funds in trust may not protect those funds from third party claims
against us. Although we attempt to have all vendors, prospective target
businesses or other entities we engage, execute agreements with us waiving
any
right, title, interest or claim of any kind in or to any monies held in the
trust fund for the benefit of the holders of our common stock, there is no
guarantee that they will execute such agreements or that even if they execute
such agreements that they would be prevented from bringing claims against the
trust fund. Nor is there any guarantee that such entities will agree to waive
any claims they may have in the future as a result of, or arising out of, any
negotiations, contracts or agreements with us and will not seek recourse against
the trust fund for any reason. If we are unable to complete a business
combination and are forced to distribute the proceeds held in trust to our
public common stock holders Messrs. Gary D. Engle and James A. Coyne have
agreed that they are personally liable to ensure that the proceeds in the trust
fund are not reduced by the claims, if any, of target businesses or of vendors
or other entities that are owed money by us for services rendered or contracted
for or products sold to us and that have not executed an agreement waiving
any
right, title, interest or claim of any kind in or to any monies held in the
trust. We have questioned these individuals and reviewed their financial
information and believe that each of these individuals has a substantial net
worth. As a result, and because of the significant limitations on their
indemnification obligations described above, we believe that these individuals
will be able to satisfy their indemnification obligations. However, we cannot
assure you that this will be the case. Accordingly, the proceeds held in trust
could be subject to claims which could take priority over the claims of the
holders of our common stock sold in our initial public offering. We cannot
assure you that the per-share distribution from the trust fund will not be
less
than $7.94 due to claims of creditors.
Additionally,
if we are forced to file a bankruptcy case or an involuntary bankruptcy case
is
filed against us which is not dismissed, the proceeds held in the trust fund
could be subject to applicable bankruptcy law, and may be included in our
bankruptcy estate and subject to the claims of third parties with priority
over
the claims of our stockholders. To the extent any bankruptcy claims deplete
the
trust fund, we cannot assure you that we will be able to return to our public
stockholders at least $7.94 per share.
Our
stockholders may be held liable for claims by third parties against us to the
extent of distributions received by them.
Our
amended and restated certificate of incorporation provides that we will continue
in existence only until May 31, 2009. If we have not completed a business
combination by such date and amended this provision in connection thereto,
pursuant to the Delaware General Corporation Law, our corporate existence will
cease except for the purposes of winding up our affairs and liquidating. Under
Sections 280 through 282 of the Delaware General Corporation Law, stockholders
may be held liable for claims by third parties against a corporation to the
extent of distributions received by them in a dissolution. If the corporation
complies with certain procedures set forth in Section 280 of the Delaware
General Corporation Law intended to ensure that it makes reasonable provision
for all claims against it, including a 60-day notice period during which any
third-party claims can be brought against the corporation, a 90-day period
during which the corporation may reject any claims brought, and an additional
150-day waiting period before any liquidating distributions are made to
stockholders, any liability of stockholders with respect to a liquidating
distribution is limited to the lesser of such stockholder’s pro rata share of
the claim or the amount distributed to the stockholder, and any liability of
the
stockholder would be barred after the third anniversary of the dissolution.
However, it is our intention to make liquidating distributions to our
stockholders as soon as reasonably possible after May 31, 2009 and, therefore,
we do not intend to comply with those procedures. Because we will not be
complying with those procedures, we are required, pursuant to Section 281 of
the
Delaware General Corporation Law, to adopt a plan that will provide for our
payment, based on facts known to us at such time, of (i) all existing claims,
(ii) all pending claims and (iii) all claims that may be potentially brought
against us within the subsequent 10 years. Accordingly, we would be required
to
provide for any creditors known to us at that time or those that we believe
could be potentially brought against us within the subsequent 10 years prior
to
distributing the funds held in the trust to stockholders. We cannot assure
you
that we will properly assess all claims that may be potentially brought against
us. As such, our stockholders could potentially be liable for any claims to
the
extent of distributions received by them (but no more) and any liability of
our
stockholders may extend well beyond the third anniversary of the date of
distribution. Accordingly, we cannot assure you that third parties will not
seek
to recover from our stockholders amounts owed to them by us.
If
we are
forced to file a bankruptcy case or an involuntary bankruptcy case is filed
against us which is not dismissed, any distributions received by stockholders
could be viewed under applicable debtor/creditor and/or bankruptcy laws as
either a “preferential transfer” or a “fraudulent conveyance.” As a result, a
bankruptcy court could seek to recover all amounts received by our stockholders.
Furthermore, because we intend to distribute the proceeds held in the trust
account to our public stockholders promptly after May 31, 2009, this may be
viewed or interpreted as giving preference to our public stockholders over
any
potential creditors with respect to access to or distributions from our assets.
Furthermore, our board may be viewed as having breached their fiduciary
duties to our creditors and/or may have acted in bad faith, and thereby exposing
itself and our company to claims of punitive damages, by paying public
stockholders from the trust account prior to addressing the claims of creditors.
We cannot assure you that claims will not be brought against us for these
reasons.
Since
our search and selection of a target business with which to complete a business
combination is not limited to any particular industry, we cannot currently
ascertain the merits or risks of the business which we may ultimately acquire
or
the industry in which we may ultimately operate.
We
may
consummate a business combination with a company in any industry we choose
and
are not limited to any particular industry or type of business. There is no
current basis for you to evaluate the possible merits or risks of the particular
industry in which we may ultimately operate or the target business which we
may
ultimately acquire. If we complete a business combination with an entity with
a
poorly focused business plan or unresolved liabilities, we are subject to the
risks that we will not be able to successfully implement a more beneficial
business plan or improve the target business’ operating results following the
business combination or favorably resolve any unresolved liabilities. To the
extent we complete a business combination with a financially unstable company
or
an entity in its development stage, we may be affected by numerous risks
inherent in the business operations of those entities. If we complete a business
combination with an entity in an industry characterized by a high level of
risk,
we may be affected by the currently unascertainable risks of that industry.
Although our management will endeavor to evaluate the risks inherent in a
particular industry or target business, we cannot assure you that we will
properly ascertain or assess all of the significant risk factors.
We
may issue shares of our capital stock or debt securities to complete a business
combination, which would reduce the equity interest of our stockholders and
likely cause a change in control of our ownership.
Our
certificate of incorporation, as amended, authorizes the issuance of up to
100,000,000 shares of common stock, par value $.0001 per share, and 5,000,000
shares of preferred stock, par value $.0001 per share. As of October 9, 2007
there are 34,580,000 authorized but unissued shares of our common stock
available for issuance (after appropriate reservation for the issuance of shares
upon full exercise of our outstanding warrants and the purchase option granted
to HCFP/Brenner Securities, the representative of the underwriters) and all
of
the 5,000,000 shares of preferred stock available for issuance. Although we
have
no commitments as of the date of this report to issue our securities, we will,
in all likelihood, issue a substantial number of additional shares of our common
stock or preferred stock, or a combination of common and preferred stock, to
the
shareholders of a potential target or in connection with a related simultaneous
financing to complete a business combination. The issuance of additional shares
of our common stock or any number of shares of our preferred stock:
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may
significantly reduce the equity interest of investors in our initial
public offering;
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may
subordinate the rights of holders of common stock if preferred
stock is
issued with rights senior to those afforded to our common stockholders;
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will
likely cause a change in control if a substantial number of our
shares of
common stock are issued, which may affect, among other things,
our ability
to use our net operating loss carryforwards, if any, and most likely
also
result in the resignation or removal of some or all of our present
officers and directors; and
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may
adversely affect prevailing market prices for our common
stock.
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We
may issue debt securities or incur indebtedness to complete a business
combination, which could subject us to risks relating to
leverage.
If
we
issue debt securities or borrow money in connection with a business combination,
it could result in:
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default
and foreclosure on our assets if our operating revenues after a business
combination were insufficient to pay our debt obligations;
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·
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acceleration
of our obligations to repay the indebtedness even if we have made
all
principal and interest payments when due if the debt security contains
covenants that require the maintenance of certain financial ratios
or
reserves and any such covenant is breached without a waiver or
renegotiation of that covenant;
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·
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our
immediate payment of all principal and accrued interest, if any,
if the
debt security is payable on demand; and
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·
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our
inability to obtain additional financing, if necessary, if the debt
security contains covenants restricting our ability to obtain additional
financing while such security is
outstanding.
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Our
ability to effect a business combination successfully and to be successful
afterwards is totally dependent upon the efforts of our key personnel, some
of
whom may join us following a business combination and whom we would have only
a
limited ability to evaluate.
Our
ability to effect a business combination successfully is totally dependent
upon
the efforts of our key personnel. Because there are many factors which can
influence the decision of each member of management whether to remain with
us
following a business combination, some of which may be personal to each
individual and therefore cannot be anticipated by us, the future role of our
key
personnel in the target business cannot presently be ascertained. Although
we
expect Messrs. Engle and Coyne to remain with us in senior management or
advisory positions following a business combination, we may employ other
personnel following the business combination. Moreover, management will only
be
able to remain with the company after the consummation of a business combination
if members of management are able to negotiate employment or consulting
agreements in connection with the business combination. Such negotiations would
take place simultaneously with the negotiation of the business combination
and
could provide for such individuals to receive compensation in the form of cash
payments and/or securities for services they would render to the company after
the consummation of the business combination. While the personal and financial
interests of such individuals may cause them to have a conflict of interest
in
determining whether a potential business combination is appropriate for us
and
influence their motivation in identifying and selecting a target business,
the
ability of such individuals to remain with the company after the consummation
of
a business combination will not be the determining factor in our decision as
to
whether or not we will proceed with any potential business combination. While
we
intend to closely scrutinize any
additional individuals we engage after a business
combination, we cannot assure you that our assessment
of these individuals will prove to be correct. These individuals may be
unfamiliar with the requirements of operating a public company which could
cause
us to have to expend time and resources helping them become familiar with such
requirements. This could be expensive and time-consuming and could lead to
various regulatory issues.
Because
our officers and directors allocate their time to other businesses, it could
interfere with our ability to consummate a business
combination.
Our
officers and directors are not required to commit their full time to our
affairs, which may result in a conflict of interest in allocating their time
between our operations and other businesses. We do not intend to have any full
time employees prior to the consummation of a business combination. All of
our
officers and directors are engaged in several other business endeavors and
are
not obligated to contribute any specific number of hours to our affairs. If
their other business affairs require them to devote more substantial amounts
of
time to such affairs, it could limit their ability to devote time to our affairs
and could interfere with our ability to consummate a business
combination.
Our
officers, directors and senior advisors may in the future become affiliated
with
entities engaged in business activities similar to those intended to be
conducted by us and accordingly, may have conflicts of interest in determining
which entity a particular business opportunity should be presented
to.
While
our
officers and directors do not currently have any obligations to present
potential business combination opportunities to any other “blank check” company,
such individuals are affiliated with other businesses and as a result may have
similar legal obligations for presenting business opportunities to such entities
as well as to our company. Additionally, our officers and directors may in
the
future become affiliated with entities, including other “blank check” companies,
engaged in business activities similar to those intended to be conducted by
us.
Our officers and/or directors may become aware of business opportunities which
may be appropriate for presentation to us as well as the other entities to
which
they have fiduciary obligations. Accordingly, they may have conflicts of
interest in determining to which entity a particular business opportunity should
be presented. Additionally, our senior advisors have fiduciary obligations
to
the other entities with which they serve as directors or officers, and they
have
no fiduciary obligations to us. Therefore, they have no obligation to present
business opportunities to us at all and will only do so if the other entities
decline those opportunities first. We cannot assure you that these conflicts
will be resolved in our favor.
All
of our officers and directors own shares of our common stock and warrants.
These
shares and warrants will not participate in liquidation distributions and,
therefore, our officers and directors may have a conflict of interest in
determining whether a particular target business is appropriate for a business
combination.
All
of
our officers and directors own shares of our common stock and warrants. Such
individuals have waived their right to receive distributions with respect to
their initial shares upon our liquidation if we are unable to consummate a
business combination. Accordingly, the shares of common stock acquired by our
officers and directors prior to our initial public offering, as well as any
warrants owned by our officers or directors will be worthless if we do not
consummate
a business combination. The personal and financial interests of our directors
and officers may influence their motivation in timely identifying and selecting
a target business and completing a business combination. Consequently, our
directors’ and officers’ discretion in identifying and selecting a suitable
target business may result in a conflict of interest when determining whether
the terms, conditions and timing of a particular business combination are
appropriate and in our stockholders’ best interest.
We
will proceed with a business combination only if public stockholders owning
less
than 30% of the shares sold in our initial public offering exercise their
conversion rights.
We
will
proceed with a business combination only if public stockholders owning less
than
30% of the shares sold in our initial public offering exercise their conversion
rights. Accordingly, approximately 29.99% of the public stockholders may
exercise their conversion rights and we could still consummate a proposed
business combination. As a result, this may have the effect of making it more
likely that we could consummate a proposed business combination even when a
significant number of public stockholders have voted against such transaction.
We have set the conversion percentage at 30% in order to reduce the likelihood
that a small group of investors holding a block of our stock will be able to
stop us from completing a business combination that may otherwise be approved
by
a large majority of our public stockholders.
Our
business combination may require us to use substantially all of our cash to
pay
the purchase price. In such a case, because we will not know how many
stockholders may exercise such conversion rights, we may need to arrange third
party financing to help fund our business combination in case a larger
percentage of stockholders exercise their conversion rights than we expect.
Additionally, even if our business combination does not require us to use
substantially all of our cash to pay the purchase price, if a significant number
of stockholders exercise their conversion rights, we will have less cash
available to use in furthering our business plans following a business
combination and may need to arrange third party financing. We have
not taken any steps to secure third party financing for either situation. We
cannot assure you that we will be able to obtain such third party financing
on
terms favorable to us or at all.
The
American Stock Exchange may delist our securities from quotation on its exchange
which could limit our securityholders ability to make transactions in our
securities and subject us to additional trading
restrictions.
Our
securities are listed on the American Stock Exchange, a national securities
exchange. We cannot assure you that our securities will continue to be listed
on
the American Stock Exchange in the future prior to a business combination.
Additionally, in connection with our business combination, it is likely that
the
American Stock Exchange may require us to file a new initial listing application
and meet its initial listing requirements as opposed to its more lenient
continued listing requirements. We cannot assure you that we will be able to
meet those initial listing requirements at that time.
If
the
American Stock Exchange delists our securities from trading on its exchange,
we
could face significant material adverse consequences, including:
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a
limited availability of market quotations for our
securities;
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a
determination that our common stock is a “penny stock” which will require
brokers trading in our common stock to adhere to more stringent rules,
possibly resulting in a reduced level of trading activity in the
secondary
trading market for our common
stock;
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a
limited amount of news and analyst coverage for our company;
and
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a
decreased ability to issue additional securities or obtain additional
financing in the future.
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Initially,
we are able to complete only one business combination, which will cause us
to be
solely dependent on a single business and a limited number of products or
services.
Our
initial business combination must be with a target business, or of a controlling
interest (but not less than a majority of the voting interest) therein, with
a
fair market value of at least 80% of our net assets at the time of such
acquisition. Consequently, currently, we have the ability to complete only
a
single business combination, although this may entail the simultaneous
acquisitions of several closely related operating businesses. By consummating
a
business combination with only a single entity, our lack of diversification
may
subject us to numerous economic, competitive and regulatory developments, any
or
all of which may have a substantial adverse impact upon the particular industry
in which we may operate subsequent to a business combination. Further, we would
not be able to diversify our operations or benefit from the possible spreading
of risks or offsetting of losses, unlike other entities which may have the
resources to complete several business combinations in different industries
or
different areas of a single industry. Accordingly, the prospects for our success
may be:
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solely
dependent upon the performance of a single business; or
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dependent
upon the development or market acceptance of a single or limited
number of
products, processes or services.
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Alternatively,
if our business combination entails the simultaneous acquisitions of several
operating businesses and with different sellers, each seller must agree that
the
purchase of its business is contingent upon simultaneous closings of the other
acquisitions which may make it more difficult for us, and delay our ability,
to
complete the business combination. If we were to consummate a business
combination with several operating businesses, we could also face additional
risks, including burdens and costs with respect to possible multiple
negotiations and due diligence investigations (if there are multiple sellers)
and the additional risks associated with the subsequent assimilation of the
operations and services or products of the acquired companies into a single
operating business. If we are unable to adequately address these risks, we
may
not be able to achieve the optimal result of the merger, including improving
productivity, efficiencies, profitability and operating
results.
Because
of our limited resources and structure, we may not be able to consummate an
attractive business combination.
We
expect
to encounter intense competition from other entities with business objectives
similar to ours, including venture capital funds, leveraged buyout funds and
operating businesses competing for acquisitions. Many of these entities are
well
established and have extensive experience in identifying and effecting business
combinations directly or through affiliates. Many of these competitors possess
greater technical, human and other resources than we do and our financial
resources will be relatively limited when contrasted with those of many of
these
competitors. While we believe that there are numerous potential target
businesses that we could acquire with the net proceeds of our initial public
offering, our ability to compete in acquiring certain sizable target businesses
is limited by our available financial resources. This inherent competitive
limitation gives others an advantage in pursuing the acquisition of certain
target businesses. Further, the obligation we have to seek stockholder approval
of a business combination may delay the consummation of a transaction, and
our
obligation to convert into cash the shares of common stock in certain instances
may reduce the resources available for a business combination. Additionally,
our
outstanding warrants, and the future dilution they potentially represent, may
not be viewed favorably by certain target businesses. Any of these factors
may
place us at a competitive disadvantage in successfully negotiating a business
combination. The fact that only 34 of the 118 blank check companies that have
gone public in the United States since August 2003 have completed a business
combination and 27 of such companies have entered into either a definitive
agreement or a letter of intent for a business combination, while five companies
have either dissolved or announced their intention to dissolve, may indicate
that many privately held target businesses are not inclined to enter into a
business combination with a blank check company. If we are unable to consummate
a business combination with a target business within the prescribed time period,
we will be forced to liquidate.
We
may be unable to obtain additional financing, if required, to complete a
business combination or to fund the operations and growth of the target
business, which could compel us to restructure the transaction or abandon a
particular business combination.
Although
we believe that the net proceeds of our initial public offering are sufficient
to allow us to consummate a business combination, in as much as we have not
yet
identified any prospective target business, we cannot ascertain the capital
requirements for any particular transaction. If the proceeds of our initial
public offering prove to be insufficient, either because of the size of the
business combination or the depletion of the available net proceeds in search
of
a target business, or because we become obligated to convert into cash a
significant number of shares of common stock from dissenting stockholders,
we
will be required to seek additional financing. We cannot assure you that such
financing would be available on acceptable terms, if at all. To the extent
that
additional financing proves to be unavailable when needed to consummate a
particular business combination, we would be compelled to restructure the
transaction or abandon that particular business combination and seek an
alternative target business candidate. In addition, if we consummate a business
combination, we may require additional financing to fund the operations or
growth of the target business. The failure to secure additional financing could
prevent or severely limit the continued development or growth of the target
business. None of our officers, directors or stockholders is required to provide
any financing to us in connection with or after a business
combination.
The
loss of the services of any of our executive officers would make it more
difficult to find a suitable company for a business combination which makes
it
more likely that we will be required to distribute the proceeds of our trust
fund to our public stockholders.
Our
ability to effect a business combination successfully is largely dependent
upon
the efforts of our executive officers. We have not entered into an employment
agreement with any of our executive officers, nor have we obtained any “key man”
life insurance on any of their lives. The loss of any or all of their services
could have a material adverse effect on our ability to successfully achieve
our
business objectives, including seeking a suitable target business to effect
a
business combination.
Our
outstanding warrants and option may have an adverse effect on the market price
of our common stock and warrants and make it more difficult to effect a business
combination.
We
have
issued warrants to purchase 34,822,500 shares of common stock, which includes
the warrants we issued in our initial public offering and our insider warrants.
We have also issued an option to purchase 1,250,000 units to the representative
of the underwriters which, if exercised, will result in the issuance of an
additional 1,250,000 shares of common stock and warrants to purchase 1,250,000
shares of common stock. To the extent we issue shares of common stock to effect
a business combination, the potential for the issuance of substantial numbers
of
additional shares upon exercise of these warrants and option could make us
a
less attractive acquisition vehicle in the eyes of a target business as such
securities, when exercised, will increase the number of issued and outstanding
shares of our common stock and reduce the value of the shares issued to complete
the business combination. Accordingly, our warrants and option may make it
more
difficult to effectuate a business combination or increase the cost of the
target business. Additionally, the sale, or even the possibility of sale, of
the
securities underlying the warrants and option could have an adverse effect
on
the market price for our securities or on our ability to obtain future public
financing. If and to the extent these warrants and option are exercised, you
may
experience dilution to your holdings.
If
our initial stockholders or the purchasers of the insider warrants exercise
their registration rights with respect to their initial shares or insider
warrants and underlying securities, it may have an adverse effect on the market
price of our common stock and the existence of these rights may make it more
difficult to effect a business combination.
Our
initial stockholders are entitled to make a demand that we register the resale
of their initial shares at any time commencing three months prior to the date
on
which their shares are released from escrow. Additionally, the purchasers of
the
insider warrants are entitled to demand that we register the resale of their
insider warrants and underlying shares of common stock at any time after we
consummate a business combination. If such individuals exercise their
registration rights with respect to all of their securities, then there will
be
an additional 6,250,000 shares of common stock and 5,975,000 warrants (as well
as 5,975,000 shares of common stock underlying the warrants) eligible for
trading in the public market. The presence of these additional shares of common
stock trading in the public market may have an adverse effect on the market
price of our
common stock. In addition, the existence of these rights may make it more
difficult to effectuate a business combination or increase the cost of acquiring
the target business, as the stockholders of the target business may be
discouraged from entering into a business combination with us or may request
a
higher price for their securities because of the potential effect the exercise
of such rights may have on the trading market for our common
stock.
An
effective registration statement may not be in place when you desire to exercise
your warrants, thus precluding you from being able to exercise your warrants
and
causing such warrants to be practically worthless.
No
warrant held by public stockholders or issuable upon exercise of the
representative’s purchase option is exercisable and we are not obligated to
issue shares of common stock unless at the time a holder seeks to exercise
such
warrant, a prospectus relating to the common stock issuable upon exercise of
the
warrant is current. Under the terms of the warrant agreement, we have agreed
to
use our best efforts to meet these conditions and to maintain a current
prospectus relating to the common stock issuable upon exercise of the warrants
until the expiration of the warrants. However, we cannot assure you that we
will
be able to do so, and if we do not maintain a current prospectus related to
the
common stock issuable upon exercise of the warrants, holders will be unable
to
exercise their warrants, we will not be required to settle any such warrant
exercise. If the prospectus relating to the common stock issuable upon the
exercise of the warrants is not current, the warrants held by public
stockholders or issuable upon exercise of the representative’s purchase option
may have no value, the market for such warrants may be limited, such warrants
may expire worthless and you have already paid the full purchase price of the
unit solely for the shares included in the unit. In no event are we required
to
net cash settle the exercise of the warrants. Even if the prospectus relating
to
the common stock issuable upon exercise of the warrants is not current, the
warrants issued to our initial stockholders may be exercisable for unregistered
shares of common stock.
You
are able to exercise a warrant only if the issuance of common stock upon such
exercise has been registered or qualified or is deemed exempt under the
securities laws of the state of residence of the holder of the
warrants.
No
warrants will be exercisable and we are not obligated to issue shares of common
stock unless the common stock issuable upon such exercise has been registered
or
qualified or deemed to be exempt under the securities laws of the state of
residence of the holder of the warrants. At the time that the warrants become
exercisable (following our completion of a business combination), we expect
to
continue to be listed on a national securities exchange, which would provide
an
exemption from registration in every state. Accordingly, we believe holders
in
every state will be able to exercise their warrants as long as our prospectus
relating to the common stock issuable upon exercise of the warrants is current.
However, we cannot assure you of this fact. As a result, the warrants may be
deprived of any value, the market for the warrants may be limited and the
holders of warrants may not be able to exercise their warrants if the common
stock issuable upon such exercise is not qualified or exempt from qualification
in the jurisdictions in which the holders of the warrants
reside.
Our
initial stockholders, including our officers, directors and senior advisors,
control a substantial interest in us and thus may influence certain actions
requiring a stockholder vote.
Our
initial stockholders (including all of our officers, directors and senior
advisors) collectively own approximately 17% of our issued and outstanding
shares of common stock. In addition, Gary D. Engle, James A. Coyne, Jonathan
Davidson and Brian Kaufman have entered into an agreement with HCFP/Brenner
Securities pursuant to which such individuals, or entities they control, will
place limit orders for an aggregate of $15 million of units commencing 30
calendar days after we file a preliminary proxy statement seeking approval
of
our holders of common stock for a business combination and ending 30 days
thereafter. Each of Messrs. Engle, Coyne, Davidson and Kaufman may vote the
shares of common stock included in these units on a proposed business
combination in any manner they choose. Accordingly, our officers and directors
may influence actions requiring a stockholder vote, including a business
combination.
Our
board
of directors is divided into three classes, each of which generally serves
for a
term of three years with only one class of directors being elected in each
year.
It is unlikely that there will be an annual meeting of stockholders to elect
new
directors prior to the consummation of a business combination, in which case
all
of the current directors will continue in office until at least the consummation
of the business combination. If there is an annual meeting, as a consequence
of
our “staggered” board of directors, only a minority of the board of directors
will be considered for election and our initial stockholders, because of their
ownership position, will have considerable influence regarding the outcome.
Accordingly, our initial stockholders continue to exert control at least until
the consummation of a business combination.
If
we are deemed to be an investment company, we may be required to institute
burdensome compliance requirements and our activities may be restricted, which
may make it difficult for us to complete a business
combination.
A
company
that, among other things, is or holds itself out as being engaged primarily,
or
proposes to engage primarily, in the business of investing, reinvesting, owning,
trading or holding certain types of securities would be deemed an investment
company under the Investment Company Act of 1940. Since we have invested the
proceeds held in the trust fund, it is possible that we could be deemed an
investment company. Notwithstanding the foregoing, we do not believe that our
principal activities subject us to the Investment Company Act of 1940. To this
end, the proceeds held in trust may be invested by the trustee only in United
States “government securities” as such term is defined in the Investment Company
Act of 1940, and one or more selected by us, which invest principally in either
short-term securities issued or guaranteed by the United States having a rating
in the highest investment category granted thereby by a nationally recognized
credit rating agency at the time of acquisition or short-term exempt municipal
bonds issued by governmental entities located within the United States and
otherwise meeting certain conditions under Rule 2a-7 promulgated under the
Investment Company Act of 1940. By restricting the investment of the proceeds
to
these instruments, we intend to meet the requirements for the exemption provided
in Rule 3a-1 promulgated under the Investment Company Act of
1940.
If,
however, we are deemed to be an investment company under the Investment Company
Act of 1940, we may be subject to certain restrictions that may make it
difficult for us to complete a business combination, including:
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restrictions
on the nature of our investments; and
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restrictions
on our issuance of securities.
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In
addition, we may have imposed upon us burdensome requirements,
including:
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registration
as an investment company;
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adoption
of a specific form of corporate structure;
and
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reporting,
record keeping, voting, proxy and disclosure requirements and other
rules
and regulations.
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Compliance
with these additional regulatory burdens would require additional expenses
for
which we have not allotted.
ITEM
1B. UNRESOLVED STAFF COMMENTS
Not applicable.
We
maintain our executive office at 20 Marshall Street, Suite 104, South Norwalk,
CT 06854 pursuant to an agreement with PLM International, Inc., an affiliate
of
Messrs. Engle and Coyne, our Chairman of the Board and Chief Executive Officer,
and our Vice Chairman and Chief Financial Officer, respectively. We
pay PLM International a monthly fee of $7,500 which is for general and
administrative services, including office space, utilities and secretarial
support. We believe, based on rents and fees for similar services in
the South Norwalk, CT area, that the
fee
charged by PLM International, Inc. is at least as favorable as we could have
obtained from an unaffiliated person. We consider our current office
space adequate for our current operations.
ITEM
3. LEGAL PROCEEDINGS
We
may
from time to time be involved in legal proceedings arising from the normal
course of business. As of the date of this report, we are not
involved in any legal proceedings.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Not
applicable.
PART
II
ITEM
5. MARKET FOR
REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market
Information
Our
units, common stock and warrants are traded on the American Stock Exchange
under
the symbols SOC.U, SOC and SOC.WS, respectively. Each of our units consists
of
one share of common stock and one warrant. The following table sets
forth the range of high and low closing prices for the units, common stock
and
warrants for the periods indicated since the units commenced public trading
on
May 31, 2007 and since the common stock and warrants commenced public trading
on
June 26, 2007. Prior to May 31, 2007, there was no established
trading market for our securities.
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2007:
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Fourth
Quarter (through July 31, 2007)
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$8.44
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$8.06
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$7.54
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$7.45
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$0.94
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$0.80
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Holders
As
of
September 27, 2007, there were 175 holders of record of our units, 233 holders
of record of our common stock and 234 holders of record of our
warrants.
Dividends
We
have
not paid any cash dividends on our common stock to date and do not intend to
pay
cash dividends prior to the completion of a business combination. The payment
of
cash dividends in the future will be contingent upon our revenues and earnings,
if any, capital requirements and general financial condition subsequent to
completion of a business combination. The payment of any dividends subsequent
to
a business combination will be within the discretion of our then board of
directors. It is the present intention of our board of directors to retain
all
earnings, if any, for use in our business operations and, accordingly, our
board
does not anticipate declaring any dividends in the foreseeable
future.
Initial
Public Offering
On
June
5, 2007, we consummated our initial public offering of 25,000,000
units. Each unit consists of one share of common stock, $.0001 par
value per share and one warrant to purchase one share of common
stock. The units were sold at an offering price of $8.00 per
unit. On June 12, 2007, we consummated the closing of an additional
2,847,500 units. Our initial public offering generated $222,780,000
of gross proceeds. After deducting the underwriting discounts and
commissions and the offering expenses, the total net proceeds to us from the
initial public
offering were approximately $221.1 million of which $220,439,650 was deposited
into the trust account and the remaining proceeds ($758,421) became available
to
be used to provide for business, legal and accounting due diligence on
prospective business combinations and continuing general and administrative
expenses. Through July 31, 2007, net cash used to pay general and administrative
expenses was $18,172. The net proceeds deposited into the trust fund
remain on deposit in the trust fund earning interest. All of the $797,259 of
interest earned as of July 31, 2007 has been distributed to us in accordance
with the terms of our investment management trust agreement. As
of July 31, 2007, there was $221,416,629 held in the trust
fund. The securities sold in our initial public offering were
registered under the Securities Act of 1933 on a registration statement on
Form
S-1 (No. 333-133235).
We
paid a
total of $7,240,350 of underwriting discounts and commissions and $872,679
for
other costs and expenses related to our initial public offering. After deducting
the underwriting discounts and commissions and the offering expenses, the total
net proceeds to us from the initial public offering were approximately $220.7
million of which $220,439,650 was deposited into the trust fund and the
remaining proceeds of approximately $300,000 became available to for business,
legal and accounting due diligence on prospective business combinations and
continuing general and administrative expenses. The net proceeds deposited
into
the trust fund remain on deposit in the trust fund and have earned $1,774,460
in
interest through July 31, 2007. An additional $966,276 was
transferred from the trust to us in September 2007.
Recent
Sales of Unregistered Securities and Use of Proceeds
(a) During
the past three years, we sold the following securities without registration
under the Securities Act:
The
shares of common stock and warrants, referred to as the original warrants,
were
issued on October 15, 2005 in connection with our organization as
follows:
|
Name
|
|
Number
of
Shares
of
Common
Stock
|
|
Number
of
Warrants
|
|
|
Milton
J. Walters
|
|
|
100
|
|
|
2,715,000
|
|
|
Gary
D. Engle
|
|
|
—
|
|
|
2,720,000
|
|
|
JAC
Opportunity Fund I, LLC
|
|
|
—
|
|
|
2,715,000
|
|
The
issuances were made pursuant to the exemption from registration contained in
Section 4(2) of the Securities Act as they were sold to sophisticated, wealthy
individuals and an accredited investor. The shares of common stock were sold
at
a purchase price of $0.01 per share for an aggregate price of $1.00 and the
warrants were sold at a purchase price of $0.05 per warrant for an aggregate
price of $407,500. No underwriting discounts or commissions were paid with
respect to such sales.
On
March
15, 2006, we issued an aggregate of 4,075,000 Class W warrants and 4,075,000
Class Z warrants to our three then-existing warrantholders in exchange for
the
return cancellation
of the then outstanding 8,150,000 warrants held by them. The original warrants
were exercisable at a price of $5.00 per share and expired eight years from
the
date of the prospectus related to our initial public offering. The original
warrants were exchanged for Class W warrants and
Class
Z warrants, referred to as the March 2006 Class W warrants and the March 2006
Class Z warrants. The March 2006 Class W warrants and March 2006 Class Z
warrants issued in exchange for the original warrants were exercisable at $5.00
and had expiration dates of five and seven years from the date of the prospectus
related to our initial public offering, respectively. The March 2006 Class
W
warrants and March 2006 Class Z warrants were issued pursuant to the exemption
from registration contained in Section 3(a)(9) of the Securities Act, as no
commission or other remuneration was paid or given directly or indirectly for
soliciting such exchange.
On
March
15, 2006, we issued warrants as follows:
|
|
Name
|
|
Number of
March
2006 Class W
Warrants
|
|
Number of
March
2006 Class Z
Warrants
|
|
| |
Milton
J. Walters
|
|
|
167,500
|
|
|
167,500
|
|
| |
Gary
D. Engle
|
|
|
165,000
|
|
|
165,000
|
|
| |
JAC
Opportunity Fund I, LLC
|
|
|
167,500
|
|
|
167,500
|
|
| |
Geoffrey
A. Thompson
|
|
|
100,000
|
|
|
100,000
|
|
| |
Michael
Clayton
|
|
|
100,000
|
|
|
100,000
|
|
The
March
2006 Class W and March 2006 Class Z warrants were issued pursuant to the
exemption from registration contained in Section 4 (2) of the Securities
Act, as they were sold to sophisticated, wealthy individuals and each recipient
was an accredited investor. The March 2006 Class W and March 2006 Class Z
warrants were sold at a purchase price of $0.05 per warrant for an aggregate
price of $70,000. No underwriting discount or commissions were paid with respect
to such sales.
On
May
25, 2006, we issued additional March 2006 Class W warrants and March 2006 Class
Z warrants as follows:
|
|
Name
|
|
Number of
March
2006 Class W
Warrants
|
|
Number of
March
2006 Class Z
Warrants
|
|
| |
Milton
J. Walters
|
|
|
1,700,000
|
|
|
1,700,000
|
|
| |
Gary
D. Engle
|
|
|
3,400,000
|
|
|
3,400,000
|
|
| |
JAC
Opportunity Fund I, LLC
|
|
|
1,700,000
|
|
|
1,700,000
|
|
| |
Geoffrey
A. Thompson
|
|
|
125,000
|
|
|
125,000
|
|
The
March
2006 Class W and March 2006 Class Z warrants were issued pursuant to the
exemption from registration contained in Section 4 (2) of the Securities
Act, as they were sold to sophisticated, wealthy individuals and an accredited
investor. The March 2006 Class W and March 2006 Class Z warrants were sold
at a
purchase price of $0.05 per warrant for an aggregate price of $692,500. No
underwriting discount or commissions were paid with respect to such
sales.
On
January 23, 2007, we issued an aggregate of 11,700,000 Class W warrants and
11,700,000 Class Z warrants, collectively referred to as the January 2007
Class W warrants and the January 2007 Class Z warrants, to our five
then-existing warrantholders in exchange for the
return for cancellation of the then
outstanding 23,400,000 warrants held by them. The January 2007
Class W warrants and January 2007 Class Z warrants were issued pursuant to
the
exemption from registration contained in Section 3(a)(9) of the Securities
Act,
as no commission or other remuneration was paid or give directly or indirectly
for soliciting such exchange.
On
January 23, 2007, we issued January 2007 Class W warrants and January 2007
Class
Z warrants as follows:
|
|
Name
|
|
Number of
January
2007
Class
W
Warrants
|
|
Number of
January
2007
Class
Z
Warrants
|
|
| |
Milton J. Walters
|
|
|
475,000
|
|
|
475,000
|
|
| |
Gary
D. Engle
|
|
|
950,000
|
|
|
950,000
|
|
| |
JAC
Opportunity Fund I, LLC
|
|
|
475,000
|
|
|
475,000
|
|
| |
Jonathan
Davidson
|
|
|
950,000
|
|
|
950,000
|
|
| |
Brian
Kaufman
|
|
|
950,000
|
|
|
950,000
|
|
The
January 2007 Class W and January 2007 Class Z warrants were issued pursuant
to
the exemption from registration contained in Section 4(2) of the Securities
Act
as they were sold to sophisticated, wealthy individuals and an accredited
investor. The January 2007 Class W and January 2007 Class Z warrants were sold
at a purchase price of $0.05 warrant for an aggregate price of $380,000. No
underwriting discount or commissions were paid with respect to such
sales.
On
April
4, 2007, we issued 6,249,900 shares of common stock in exchange for the return
and cancellation of the 31,000,000 then outstanding warrants. The shares of
common stock were issued pursuant to the exemption from registration contained
in Section 3(a)(9) of the Securities Act, as no commission or other remuneration
was paid or give directly or indirectly for soliciting such
exchange.
On
June
5, 2007, we sold 5,975,000 warrants, referred to as the insider warrants,
generating total proceeds of $4,450,000. These warrants were purchased by Gary
D. Engle, JAC Opportunity Fund I, LLC (an affiliate of James A. Coyne, our
Vice
Chairman and Chief Financial Officer), Brian Kaufman, Jonathan Davidson and
Milton J. Walters, five of our directors, officers and senior advisors. Such
warrants are identical to the warrants included in the units sold in our initial
public offering except that if we call the warrants for redemption, the insider
warrants may be exercisable on a cashless basis so long as such insider warrants
are held by the purchasers or their affiliates. The purchasers of the insider
warrants have agreed that the
insider
warrants will not be sold or transferred by them until after we have completed
a
business combination.
ITEM
6. SELECTED FINANCIAL DATA
The
following tables should be read in conjunction with our financial statements
and
the notes thereto appearing elsewhere in this Annual Report on Form 10-K.
The selected financial data has been derived from our financial statements,
which have been audited by BDO Seidman, LLP, independent registered public
accounting firm, as indicated in their report included elsewhere
herein.
The
following tables should be read in conjunction with our financial statements
and
the notes thereto appearing elsewhere in this Annual Report on Form 10-K.
The selected financial data has been derived from our financial statements,
which have been audited by BDO Seidman, LLP, independent registered public
accounting firm, as indicated in their report included elsewhere
herein.
| |
|
|
|
|
From
inception
|
|
| |
|
Year
ended
|
|
|
(September
30, 2005)
|
|
| |
|
July
31, 2007
|
|
|
to
July 31, 2006
|
|
| |
|
|
|
|
|
|
|
Statement
of Operation Data
|
|
|
|
|
|
|
|
Loss
from operations
|
|
$ |
(126,875 |
) |
|
$ |
(15,080 |
) |
|
Interest
income
|
|
|
1,828,031
|
|
|
|
12,850
|
|
|
Net
income (loss)
|
|
|
1,040,419
|
|
|
|
(2,230 |
) |
|
Accretion
of Trust Fund relating to
|
|
|
|
|
|
|
|
|
|
common
stock subject to possible conversion
|
|
|
(317,741 |
) |
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable to other stockholders
|
|
|
|
|
|
|
|
|
|
and
common stockholders
|
|
|
722,678
|
|
|
|
(2,230 |
) |
| |
|
|
|
|
|
|
|
|
|
Earnings
per share data:
|
|
|
|
|
|
|
|
|
|
Common
shares outstanding
|
|
|
|
|
|
|
|
|
|
subject
to possible conversion
|
|
|
8,351,465
|
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
|
Net
income per common share subject to possible
|
|
|
|
|
|
|
|
|
|
conversion,
basic and diluted
|
|
$ |
0.04
|
|
|
$ |
-
|
|
|
Weighted
average number of shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
9,256,354
|
|
|
|
6,250,000
|
|
|
Net
income (loss) per share
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$ |
0.08
|
|
|
$ |
-
|
|
| |
|
|
|
|
|
|
|
|
|
Other
Financial Data:
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
$ |
761,649
|
|
|
$ |
3,019
|
|
|
Cash
contributed to trust fund
|
|
|
(220,439,650 |
) |
|
|
-
|
|
|
Net
proceeds from public offering allocable to
|
|
|
|
|
|
|
|
|
|
stockholders’
equity
|
|
|
148,605,085
|
|
|
|
-
|
|
|
Portion
of net proceeds from public offering
|
|
|
|
|
|
|
|
|
|
allocable
to Common Stock subject to possible conversion
|
|
|
|
|
|
|
|
|
|
(including
accretion)
|
|
|
66,427,592
|
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
|
Selected
Balance Sheet Data:
|
|
July
31, 2007
|
|
|
July
31, 2006
|
|
|
Cash
and cash equivalents
|
|
$ |
1,035,420
|
|
|
$ |
912,426
|
|
|
Trust
fund
|
|
|
221,416,629
|
|
|
|
-
|
|
|
Net
working capital (a)
|
|
|
311,039
|
|
|
|
777,029
|
|
|
Total
assets
|
|
|
222,665,591
|
|
|
|
1,303,168
|
|
|
Common
stock subject to possible conversion
|
|
|
66,427,592
|
|
|
|
-
|
|
|
Total
stockholders’ equity
|
|
|
155,327,584
|
|
|
|
1,167,771
|
|
| |
|
|
|
|
|
|
|
|
|
(a)
Excludes restricted investments held in Trust
|
|
|
|
|
|
|
|
|
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The
following discussion should be read in conjunction with our financials
statements and footnotes thereto contained in this report.
General
We
were
formed on September 9, 2005 for the purpose of acquiring one or more assets
or
control of one or more operating businesses through a merger, capital stock
exchange, asset acquisition, stock purchase or other similar business
combination. Our initial business combination must be with an acquisition target
or targets whose collective fair market value is at least equal to 80% of our
net assets at the time of such acquisition.
We
completed our initial public offering, referred to as our IPO, on June 5, 2007.
Our entire activity from inception through the consummation of our IPO was
to
prepare for and complete our IPO, and since the consummation of our IPO, our
activity has been limited. We have not yet entered into any letters of intent,
arrangements or agreements with any companies with respect to a business
combination.
We
are
currently continuing the process of evaluating and identifying targets for
a
business combination. We are not presently engaged in, and will not engage
in,
any substantive commercial business until we consummate a business combination.
We intend to utilize cash derived from the proceeds of our IPO, our capital
stock, debt or a combination of cash, capital stock and debt, in effecting
a
business combination.
For
a
description of the proceeds generated in our IPO and a discussion of the use
of
such proceeds, we refer you to Notes 1 and 2 of the financial statements
included in Part II, Item 8 of this Form 10-K.
Results
of Operations
Net
income for the year ended July 31, 2007 was $1,040,419, which consisted of
interest income of the trust fund of $1,774,460, and interest income on cash
and
cash equivalents of $53,571 offset by formation and operating costs of $126,875
which was comprised of general and administrative fees of $18,172, professional
fees of $40,039, $15,000 for a monthly administrative services agreement with
an
affiliate, $18,123 of directors and officers (“D&O”) insurance and $35,541
for Delaware franchise taxes. We also incurred $1,277 of interest
expense for the financing of the D&O insurance and a $659,460 provision for
federal income taxes
Net
(loss) for the period from inception (September 9, 2005) to July 31, 2006 was
($2,230), which was comprised of interest income on cash and cash equivalents
of
$12,850 offset by formation and operating costs of $15,080 which consisted
of
fees of $80 and professional fees of $15,000.
Liquidity
and Capital Resources
Of
the
gross proceeds from our IPO, including the exercise of an over allotment option
on June 12, 2007: (i) we deposited approximately $220.4 million into a trust
account at Morgan Stanley, maintained by Continental Stock Transfer & Trust
Company, as trustee, which amount included $4,450,000 that we
received from the sale of warrants to our initial stockholders in a private
placement on June 5, 2007; (ii) the underwriters received $7,240,350 as
underwriting discount; (iii) we retained $300,000 that will not be held in
the
trust account; and (iv) we used $872,679 for offering expenses.
Our
officers purchased an aggregate of $6,000,000 of our securities, consisting
of
6,250,000 shares purchased in a private placement from us prior to the IPO
for
$1,550,000, and 5,975,000 warrants, purchased for $4,450,000 in a private
placement concurrent with the IPO.
The
proceeds deposited in the trust account will not be released from the trust
account until the earlier of the consummation of a business combination or
the
expiration of the time period during which we may consummate a business
combination. The proceeds held in the trust account may be used as consideration
to pay the sellers of an acquisition target with which we complete a business
combination. To the extent that our capital stock is used in whole or in part
as
consideration to effect a business combination, the proceeds held in the trust
account will be used to finance the operations of the acquisition
target. We may also use the proceeds held in the trust account to pay a finder's
fee to any unaffiliated party that provides information regarding prospective
targets to us.
We
believe that our cash and cash equivalents, in addition to the additional funds
available to us outside of the trust account will be sufficient to allow us
to
operate until May 31, 2009, assuming that a business combination is not
consummated during that time. At the time of our initial public
offering, we estimated that up to $3,300,000 of working capital and reserves
shall be allocated as follows: $800,000 of expenses for legal, accounting and
other expenses attendant to the due diligence investigations, structuring and
negotiating of a business combination; up to $180,000 for the administrative
fee
payable to PLM International Inc. ($7,500 per month for 24 months), an
affiliated third party; $100,000 of expenses in legal and accounting fees
relating to our SEC reporting obligations; and $2,220,000 for general working
capital that can be used for fairness opinions in connection with our
acquisition plans, director and officer liability insurance premiums, and other
miscellaneous expenses and reserves.
As
of
July 31, 2007, we had $1,035,420 in cash and cash
equivalents. Through July 31, 2007, $797,259 of interest income was
released to us from the trust account. In September 2007, we had an
additional $966,276 of interest income release to us from the trust
account.
We
do not
believe we will need to raise additional funds in order to meet the expenditures
required for operating our business, other than for additional funds that may
be
required to complete a business combination. We may need to raise additional
funds through a private offering of debt or equity securities if such funds
are
required to consummate a business combination that is presented to us. We would
only consummate such a fund raising simultaneously with the consummation of
a
business combination.
Off-Balance
Sheet Arrangements
As
of
July 31, 2007 we did not have any off-balance sheet arrangements as defined
in
Item 303(a)(4)(ii) of Regulation S-K.
Contractual
Obligations and Commitments
Our
contractual obligations are set forth in the following table as of July 31,
2007:
| |
|
|
|
|
Less
than 1
|
|
|
|
1-3
|
|
|
|
3-5
|
|
|
More
than
|
|
| |
|
Total
|
|
|
year
|
|
|
years
|
|
|
years
|
|
|
5
years
|
|
|
Contractual
Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative
service agreement (1)
|
|
$ |
165,000
|
|
|
$ |
90,000
|
|
|
$ |
75,000
|
|
|
$ |
-
|
|
|
$ |
-
|
|
|
Insurance
policy (2)
|
|
|
181,228
|
|
|
|
108,736
|
|
|
|
72,492
|
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
$ |
346,228
|
|
|
$ |
198,736
|
|
|
$ |
147,492
|
|
|
$ |
-
|
|
|
$ |
-
|
|
(1)
We
are obligated, through May 31, 2009, to pay an affiliate of our Chairman of
the
Board and Chief Executive Officer and a member of our board of directors, a
monthly fee of $7,500 for office and administrative services. This arrangement
is for our benefit and is not intended to provide compensation in lieu of a
salary. An amount of $15,000 is included in general and administrative expenses
on the accompanying statement of operations for the year ended July 31, 2007,
pursuant to this arrangement.
(2)
We
have financed our director and officer insurance policy for the amount of
$199,350 (the ‘‘Payable’’) due to First Insurance Funding Corp of New
York. This amount is payable in 22 equal monthly installments of
principal and interest of $9,700, commencing June 30, 2007.
If
we do
not complete a business combination by May 31, 2009, if certain extension
criteria have not been satisfied, we will distribute to our stockholders, in
proportion to their respective equity interests in the common stock, an
aggregate sum equal to the amount in the trust fund, inclusive of any interest,
and all then outstanding common stock held by public stockholders will be
automatically cancelled. There will be no distribution from the trust fund
with
respect to common stock held by our initial stockholders. However, any remaining
net assets following the distribution of the trust fund will be available for
our use to pay any creditors and to affect our dissolution and liquidation.
The
distribution per share, taking into account interest earned on the trust fund,
is approximately $7.95 per share based on the value in the trust fund as of
July
31, 2007.
Critical
Accounting Policies
Investments
Held in Trust - The restricted investment held in the Trust Fund at July 31,
2007 is comprised U.S. Government Institutional money market securities with
maturities of up to 30 days. Such securities generate current income which
is
subject to federal income tax and the Company is incorporated in Delaware and
accordingly is subject to franchise taxes.
Fair
Value of Financial Instruments and Derivatives - The fair values of our assets
and liabilities that qualify as financial instruments under SFAS No. 107
approximate their carrying amounts presented in the balance sheet at July 31,
2007.
We
account for derivative instruments in accordance with SFAS No. 133 “Accounting
for Derivative Instruments and Hedging Activities,” as amended, (“SFAS 133”)
which establishes accounting and reporting standards for derivative instruments
and hedging activities, including certain derivative instruments imbedded in
other financial instruments or contracts and requires recognition of all
derivatives on the balance sheet at fair value. Accounting for the changes
in
the fair value of the derivative instruments depends on whether the derivatives
qualify as hedge relationships and the types of the relationships designated
are
based on the exposures hedged. Changes in the fair value of derivative
instruments which are not designated as hedges are recognized in earnings as
other income (loss).
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISKS
To
date,
our efforts have been limited to organizational activities and activities
relating to our initial public offering and the identification of a target
business. We have neither engaged in any operations nor generated any revenues.
As the proceeds from our initial public offering held in trust have been
invested in short term investments, our only market risk exposure relates to
fluctuations in interest.
As
of July 31, 2007, $221,416,629 was held in trust for the purposes of
consummating a business combination. The proceeds held in trust have been
invested in a money market fund which invests in United States Treasury Bills,
commercial paper and other money market instruments. As of July 31,
2007, the effective annualized interest rate payable on our investment was
5.15%.
We
have
not engaged in any hedging activities since our inception on September 9, 2005.
We do not expect to engage in any hedging activities with respect to the market
risk to which we are exposed.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our
financial statements, the related notes, the Independent Auditors’ Report
thereon, Management’s Report on Internal Control Over Financial Reporting and
the Independent Auditors’ Report on internal control over financial reporting
are included in our 2006 Financial Statements and are filed as a part of this
report on page F-1 following the signatures.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There
were no changes in or disagreements with accountants on accounting and financial
disclosure.
ITEM
9A. CONTROLS AND PROCEDURES
Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures as of July 31, 2007. The term “disclosure controls and procedures,”
as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of
1934 (the “Exchange Act”), means controls and other procedures of a company that
are designed to ensure that information required to be disclosed by a company
in
the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
SEC’s rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by a company in the reports that it files or submits under
the
Exchange Act is accumulated and communicated to the company’s management,
including its principal executive and principal financial officers, as
appropriate to allow timely decisions regarding required disclosure. Management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving their objectives
and management necessarily applies its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
As
required by Rules 13a-15 and 15d-15 under the Exchange Act, our chief executive
officer and chief financial officer carried out an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures as of July 31, 2007. Based upon their evaluation, they concluded
that
our disclosure controls and procedures were effective.
Management’s
Annual Report on Internal Control Over Financial Reporting
This
annual report does not include a report of management’s assessment regarding
internal control over financial reporting or an attestation report of the
company’s registered public accounting firm due to a transition period
established by the rules of the Securities and Exchange Commission for newly
public companies.
Changes
In Internal Control Over Financial Reporting
There
has been no change in our internal control over financial reporting during
the
fourth fiscal quarter ended July 31, 2007 that has materially affected, or
is
reasonably likely to materially affect, our internal control over financial
reporting.
ITEM
9B. OTHER INFORMATION:
Not
applicable.
PART
III
ITEM
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
|
Name
|
Age
|
Position
|
| |
|
|
|
Gary
D.
Engle
|
59
|
Chairman
of the Board and Chief Executive Officer
|
|
James
A.
Coyne
|
47
|
Vice
Chairman and Chief Financial Officer
|
|
Michael
Clayton
|
60
|
Director
|
|
Jonathan
Davidson
|
41
|
Director
|
|
Geoffrey
A.
Thompson
|
66
|
Director
|
|
Brian
Kaufman
|
43
|
Senior
Advisor
|
|
Milton
J.
Walters
|
65
|
Senior
Advisor
|
Gary
D. Engle has been our Chief Executive Officer and Chairman since
our inception. From December 1994 until December 2005, Mr. Engle served as
President, Chief Executive Officer and controlling shareholder of Equis
Corporation. Through Equis and other affiliates, Mr. Engle owned and
operated a variety of equipment finance, leasing and real estate companies.
Equis and its affiliates have managed in excess of $1 billion of real estate
assets and equipment leasing assets, have structured and financed more than
$2
billion in lease financing transactions and remarketed over $1 billion in
equipment. Since February 2001, Mr. Engle has been a director of PLM
International Inc., a transportation company that leases marine containers,
shipping vessels, commercial aircraft and other assets. PLM sold its rail
leasing assets to CIT Group in August 2005 and its marine, aviation and other
leasing businesses to an affiliate of AMA Capital Partners in November 2005.
Since August 2003, Mr. Engle has served as a member of the executive
committee of CBI Acquisition, LLC, the holding company of Caneel Bay, a luxury
resort on the island of St. John, U.S.V.I. Since May 2000, Mr. Engle has
served on the Board of Managers of DSC/Purgatory, LLC and, since 1999, he has
served on the Board of Managers of Mountain Springs Kirkwood, LLC. DSC and
Mountain Springs own and operate ski resorts in the western United States.
Since
March 2000, Mr. Engle has been a member of the Board of Managers of Echelon
Development Holdings, LLC, a Florida-based commercial and residential real
estate development company. Since 1997, Mr. Engle has been the Chairman and
Chief Executive Officer of Semele Group Inc., which serves as a holding company
for a number of investments and is a joint venture partner in Rancho Malibu,
a
264-acre residential development in Malibu, California. Semele Group also owns
the general partner of Kettle Valley, a 1,012 unit residential development
in
Kelowna, British Columbia. From 1987 to 1994, Mr. Engle was a principal of
Cobb Partners Development Inc., a mortgage trading and real estate company
which
he co-founded in 1987. From 1980 to 1987, Mr. Engle served in various
capacities with Arvida Disney Company, a large-scale community real estate
company owned by The Walt Disney Company, including Senior Vice President from
April 1980 to 1987; Chief Financial Officer and Senior Vice President –
Acquisitions from May 1984 to 1987; and Chief Executive Officer of Arvida Disney
Financial Services from May 1984 to 1987. Mr. Engle was a founding Director
of Disney Development, the real estate development division of The Walt Disney
Company. Mr. Engle received a B.S. from the University of Massachusetts
(Amherst) and an M.B.A. from Harvard University.
James
A. Coyne has been our Vice Chairman since January 2007 and our
Chief Financial Officer and a member of our Board of Directors since our
inception. He has also served as President and Chief Executive Officer of PLM
International Inc. since August 2002, and has been a member of its Board of
Directors since February 2001. From December 1994 until December 2005,
Mr. Coyne served as the Senior Vice President of Equis Corporation. Since
May 2000, Mr. Coyne has served on the Board of Managers of DSC/Purgatory,
LLC, and, since 1999, has served on the Board of Managers of Mountain Springs
Kirkwood, LLC. Since March 2000, Mr. Coyne has been a member of the Board
of Managers of Echelon Development Holdings, LLC. In January 2007, Mr. Coyne
became a Director of Xybernaut Corporation, a technology company acquired by
East River Capital, a private equity firm that is an affiliate of Mr. Coyne.
Since 1997, Mr. Coyne has served as President and a member of the Board of
Directors of Semele Group, Inc. Mr. Coyne received a B.S. from John Carroll
University, a Master of Accountancy from Case Western Reserve University, and
is
a certified public accountant.
Michael
Clayton has been a member of our Board of Directors since March
2006. Since August 2005, Mr. Clayton has been a Principal and Managing
Director of ACM Capital, an acquisition evaluation, advisory, and private equity
firm. From April 2002 through November 2005, Mr. Clayton served as
President of PLM Transportation Equipment Corp., a former subsidiary of PLM
International. From May 2001 to April 2002, Mr. Clayton was a Principal of
Highland Capital, a financial services and asset management firm. From 1997
to
May 2001, Mr. Clayton served as Senior Vice President, Global Operations
and Development, and was a member of the Executive Committee of GATX
Corporation, a New York Stock Exchange listed lessor of freight and tank cars.
Prior to joining GATX, Mr. Clayton had over 30 years of additional
experience in various capacities. Mr. Clayton was a Senior Vice President –
Original Equipment and International Operations (1992-1995) and Vice President
–
International Operations (1991-1992) of Fel Pro, Inc., a company engaged in
the
manufacturing and distribution of automotive engine components to original
equipment manufacturers and after-market sectors. From 1979-1991,
Mr. Clayton served in several capacities at Navistar International Corp., a
producer of trucks and diesel engines. Mr. Clayton currently serves on the
Board of Directors of Andy Frain and Associates, a commercial security and
crowd
management company and Coreblox Inc., a hosted website IT support company.
He is
a Fellow of Leadership Greater Chicago and recipient of the Urban League’s
annual service award. Mr. Clayton received a B.A. from Illinois Institute
of Technology and an M.B.A. from the University of Chicago.
Jonathan
Davidson has been a member of our Board of Directors since April
2007 and served as our Senior Advisor from January 2007 to April 2007. Since
November 2004, Mr. Davidson has been a Director of Centinela Freeman Holdings,
Inc. In July 2003, Mr. Davidson co-founded Westridge Capital LLC and has served
as a Managing Member since inception. From September 2003 to September 2004,
Mr.
Davidson also served as a Vice President of PLM International. From 1996 to
July
2003, Mr. Davidson served as a Managing Director of Digital Coast Partners
(now
known as Montgomery & Co.) where he managed the Business and Consumer
Services Group. From 1994 to 1996, Mr. Davidson was a founder and the Chief
Financial Officer of Screenz, L.L.C., the developer of ScreenzNet, a private
online service. From 1987 to 1994, Mr. Davidson served as a Vice President
of
Chemical Securities (now known as JPMorgan Chase), where he provided corporate
finance and merger and acquisition advisory services.
Mr. Davidson received a B.A. and an M.B.A. from the University of California
at
Los Angeles.
Geoffrey
A. Thompson has been a member of our Board of Directors since
March 2006. Since September 2003, Mr. Thompson has been a Partner at
Palisades Advisors, LLC, a private equity firm. From 1997 to September 2003,
Mr. Thompson served as an independent business consultant. From 1995 to
1997, Mr. Thompson served as a Principal at Kohlberg & Company, a
private equity firm specializing in middle-market investing. In 1992,
Mr. Thompson retired as Chief Executive Officer of Marine Midland Bank,
Inc. (currently HSBC Bank (USA)). Mr. Thompson is a member of the Board of
Directors of Guardian Trust Company, a Guardian Life Insurance subsidiary.
Mr. Thompson is also lead director of Thor Industries, Inc., a New York
Stock Exchange listed producer and seller of a wide range of recreation vehicles
and small and mid-size buses in the United States and Canada. Mr. Thompson
also serves as trustee of the Woods Hole Oceanographic Institution.
Mr. Thompson received a B.A. from Columbia University and an M.B.A. from
Harvard University.
Brian
Kaufman has been our Senior Advisor since January 2007. Since
November 2004, Mr. Kaufman has been a Director of Centinela Freeman Holdings,
Inc., an owner of three general acute care hospitals in Los Angeles. In July
2003, Mr. Kaufman co-founded Westridge Capital LLC and has served as a Managing
Member since inception. Westridge is a private equity firm specializing in
investments in companies that have significant tangible asset bases. From
September 2003 to September 2004, Mr. Kaufman also served as a Vice President
of
PLM International. From February 2000 to July 2003, Mr. Kaufman served as a
Managing Director of Digital Coast Partners (now known as Montgomery & Co.),
a boutique investment banking firm where he managed activities in both the
Middle Market and Media Groups. From 1998 to 2000, Mr. Kaufman served as a
principal of Imperial Capital LLC, a boutique investment banking firm, where
Mr.
Kaufman worked in both investment banking and the firm’s private investments.
From 1994 to 1998, Mr. Kaufman was a co-founder and principal of Kirkland
Messina LLC, a boutique merchant bank targeting leveraged buy-outs of middle
market companies. From 1992 to 1994, Mr. Kaufman was an associate at the law
firm of Brobeck, Phleger & Harrison. From 1989 to 1992, Mr. Kaufman attended
law school at Georgetown University Law Center. From 1986 to 1989, Mr. Kaufman
was at Drexel Burnham Lambert Incorporated, where he provided corporate finance
and merger and acquisition advisory services to financial institutions.
Mr. Kaufman received a B.B.A. degree from the University of Notre Dame,
with highest honors, and a J.D. degree from Georgetown University Law Center,
cum laude.
Milton
J. Walters has been our Senior Advisor since April 2007 and served
as our President and a member of our Board of Directors from our inception until
April 2007. Mr. Walters has served as the President of MJW Partners, Inc.,
doing business as Tri-River Capital, a boutique investment banking company,
since he founded that company in 1999. Mr. Walters also founded and served
as the President of the predecessor company to Tri-River, Walters & Co.
Incorporated, doing business as Tri-River Capital Group, from 1988 to 1997.
From
1997 to 1999, Mr. Walters served as a Managing Director in the financial
institutions investment banking group of Prudential Securities. From 1984 to
1988, Mr. Walters served as the Manager of the financial institutions
investment banking group of Smith Barney. At AG Becker, and its successor,
Warburg Paribas Becker, Mr. Walters headed investment banking for financial
institutions from 1969 to 1984. Since November 2001, Mr. Walters has served
on the Board
of
Directors and as Chairman of the Audit and Compensation Committee of Sun
Healthcare Group, Inc., a Nasdaq-listed company. Mr. Walters also serves on
the Board of Directors of several private companies. Mr. Walters received a
B.A. from Hamilton College.
Our
board
of directors is divided into three classes with only one class of directors
being elected in each year and each class serving a three-year term. The term
of
office of the first class of directors, consisting of Messrs. Coyne and
Thompson, will expire at our first annual meeting of stockholders. The term
of
office of the second class of directors, consisting of Messrs. Davidson and
Clayton, will expire at the second annual meeting. The term of office of the
third class of directors, consisting of Mr. Engle, will expire at the third
annual meeting.
These
individuals will play a key role in identifying and evaluating prospective
acquisition candidates, selecting the target business, and structuring,
negotiating and consummating its acquisition. None of our officers or directors
have been or currently is a principal of, or affiliated with, a blank check
company. However, we believe that the skills and expertise of these individuals,
their collective access to acquisition opportunities and ideas, their contacts,
and their transactional expertise should enable them to successfully identify
and effect an acquisition.
Audit
Committee
Our
audit
committee of the board of directors consists of Geoffrey A. Thompson, Michael
Clayton and Jonathan Davidson, each of whom is an independent director under
the
American Stock Exchange’s listing standards. The audit committee’s duties, which
are specified in our audit committee charter, include, but are not limited
to:
|
·
|
reviewing
and discussing with management and the independent registered public
accountant the annual audited financial statements, and recommending
to
the board whether the audited financial statements should be included
in
our Form 10-K;
|
|
·
|
discussing
with management and the independent registered public accountant
significant financial reporting issues and judgments made in connection
with the preparation of our financial
statements;
|
|
·
|
discussing
with management major risk assessment and risk management
policies;
|
|
·
|
monitoring
the independence of the independent registered public
accountant;
|
|
·
|
verifying
the rotation of the lead (or coordinating) audit partner having primary
responsibility for the audit and the audit partner responsible for
reviewing the audit as required by
law;
|
|
·
|
reviewing
and approving all related-party
transactions;
|
|
·
|
inquiring
and discussing with management our compliance with applicable laws
and
regulations;
|
|
·
|
pre-approving
all audit services and permitted non-audit services to be performed
by our
independent registered public accountant, including the fees and
terms of
the services to be performed;
|
|
·
|
appointing
or replacing the independent registered public
accountant;
|
|
·
|
determining
the compensation and oversight of the work of the independent registered
public accountant (including resolution of disagreements between
management and the independent auditor regarding financial reporting)
for
the purpose of preparing or issuing an audit report or related work;
and
|
|
·
|
establishing
procedures for the receipt, retention and treatment of complaints
received
by us regarding accounting, internal accounting controls or reports
which
raise material issues regarding our financial statements or accounting
policies.
|
Financial
Experts on Audit Committee
The
audit
committee is comprised exclusively of “independent directors” who are
“financially literate” as defined under the American Stock Exchange listing
standards. The American Stock Exchange listing standards define “financially
literate” as being able to read and understand fundamental financial statements,
including a company’s balance sheet, income statement and cash flow
statement.
In
addition, the board of directors has determined that Jonathan Davidson satisfies
the American Stock Exchange’s definition of financial sophistication and also
qualifies as an “audit committee financial expert,” as defined under rules and
regulations of the SEC.
Nominating
Committee
Our
nominating committee of the board of directors consists of Geoffrey A. Thompson,
Michael Clayton and Jonathan Davidson, each of whom is an independent director
under the American Stock Exchange’s listing standards. The nominating committee
is responsible for overseeing the selection of persons to be nominated to serve
on our board of directors. The nominating committee considers persons identified
by its members, management, shareholders, investment bankers and
others.
Guidelines
for Selecting Director Nominees
The
guidelines for selecting nominees, which are specified in the nominating
committee charter, generally provide that persons to be nominated:
|
·
|
should
have demonstrated notable or significant achievements in business,
education or public service;
|
|
·
|
should
possess the requisite intelligence, education and experience to make
a
significant contribution to the board of directors and bring a range
of
skills, diverse perspectives and backgrounds to its deliberations;
and
|
|
·
|
should
have the highest ethical standards, a strong sense of professionalism
and
intense dedication to serving the interests of the
stockholders.
|
The
nominating committee will consider a number of qualifications relating to
management and leadership experience, background and integrity and
professionalism in evaluating a person’s candidacy for membership on the board
of directors. The nominating committee may require certain skills or attributes,
such as financial or accounting experience, to meet specific board needs that
arise from time to time. The nominating committee does not distinguish among
nominees recommended by stockholders and other persons.
Code
of Ethics
We
have
adopted a code of ethics that applies to all of our executive officers,
directors and employees. The code of ethics codifies the business and ethical
principles that govern all aspects of our business. A copy of our
code ethics is available at no charge upon written request addressed to our
Vice
Chairman at our principal executive offices.
Conflicts
of Interest
Potential
investors should be aware of the following potential conflicts of
interest:
|
·
|
none
of our officers and directors are required to commit their full time
to
our affairs and, accordingly, they may have conflicts of interest
in
allocating management time among various business
activities.
|
|
·
|
in
the course of their other business activities, our officers and directors
may become aware of investment and business opportunities which may
be
appropriate for presentation to us as well as the other entities
with
which they are affiliated. They may have conflicts of interest in
determining to which entity a particular business opportunity should
be
presented. For a complete description of our management’s other
affiliations, see the previous section entitled “— Directors and Executive
Officers.”
|
|
·
|
our
officers and directors may in the future become affiliated with entities,
including other blank check companies, engaged in business activities
similar to those intended to be conducted by
us.
|
|
·
|
the
initial shares owned by our officers, directors and senior advisors
will
be released from escrow only if a business combination is successfully
completed, and the insider warrants purchased by our officers, directors
and senior advisors and any warrants which they may have purchased
in our
initial public offering or in the aftermarket will expire worthless
if a
business combination is not consummated. Additionally, our officers,
directors and senior advisors will not receive liquidation distributions
with respect to any of their initial shares. Furthermore, our officers,
directors and senior advisors have agreed that the insider warrants
will
not be sold or transferred by them until after we have completed
a
business combination. For the foregoing reasons, our board may have
a
conflict of interest in determining whether
a particular target business is appropriate to effect a business
combination with.
|
|
·
|
our
directors and officers may enter into consulting or employment agreements
with the company as part of a business combination pursuant to which
they
may be entitled to compensation for their services following the
business
combination. The personal and financial interests of our directors
and
officers may influence their motivation in identifying and selecting
a
target business, and completing a business combination in a timely
manner.
|
|
·
|
Gary
D. Engle, our Chairman and Chief Executive Officer, James A. Coyne,
our
Vice Chairman and Chief Financial Officer, Jonathan Davidson, a director,
and Brian Kaufman, one of our Senior Advisors, have entered into
an
agreement with HCFP/Brenner Securities pursuant to which such individuals,
or entities they control, will place limit orders for an aggregate
of $15
million of our units commencing 30 calendar days after we file a
preliminary proxy statement seeking approval of our stockholders
for a
business combination and ending 30 days thereafter. Each of Messrs.
Engle,
Coyne, Davidson and Kaufman has agreed that he will not sell or transfer
any units purchased by him pursuant to this agreement (or any of
the
securities included in such units) until the earlier of the completion
of
a business combination or our liquidation. If Messrs. Engle, Coyne,
Davidson and Kaufman purchase units pursuant to that agreement or
if any
of them or any of our other officers, directors or senior advisors
purchased units or common stock as part of our initial public offering
or
in the open market, they are entitled to vote the shares of common
stock
they so acquire on a proposed business combination any way they choose
which may influence whether or not the business combination is
approved.
|
In
general, officers and directors of a corporation incorporated under the laws
of
the State of Delaware are required to present business opportunities to a
corporation if:
|
·
|
the
corporation could financially undertake the opportunity;
|
|
·
|
the
opportunity is within the corporation’s line of business; and
|
|
·
|
it
would not be fair to the corporation and its stockholders for the
opportunity not to be brought to the attention of the
corporation.
|
Accordingly,
as a result of multiple business affiliations, our officers and directors may
have similar legal obligations relating to presenting business opportunities
meeting the above-listed criteria to multiple entities. In addition, conflicts
of interest may arise when our board evaluates a particular business opportunity
with respect to the above-listed criteria. We cannot assure you that any of
the
above mentioned conflicts will be resolved in our favor. If any of these
conflicts are not resolved in our favor, it may diminish our ability to complete
a favorable business combination.
In
order
to minimize potential conflicts of interest which may arise from multiple
corporate affiliations, each of our officers and directors has agreed, until
the
earlier of a business combination or the distribution of the trust fund to
our
public stockholders, or such time as he ceases to be an officer or director,
to
present to our company for our consideration, prior to presentation to any
other
entity, any suitable business opportunity which may reasonably be required
to be
presented to us subject to any pre-existing fiduciary or contractual obligations
he might have. Our management has advised us that the entities with which they
are affiliated do not seek to acquire assets with a purchase price in excess
of
$55 million. Because the initial target business, or the controlling
interest (but not less than a majority of the voting interest) therein, that
we
acquire must have a fair market value equal to at least 80% of our net assets
at
the time of the acquisition, a transaction which could be consummated as a
business combination would not be considered by any entities affiliated with
our
management.
Our
senior advisors have fiduciary obligations to the other entities with which
they
are directors or officers. They have no fiduciary obligations to present to
us
for our consideration any suitable business opportunity.
In
connection with the vote required for any business combination, all of our
initial stockholders, including all of our officers, directors and senior
advisors, have agreed to vote their respective initial shares in accordance
with
the vote of the public stockholders owning a majority of the shares of our
common stock sold in our initial public offering. In addition, they have
agreed to waive their respective rights to participate in any liquidation
distribution with respect to those shares of common stock acquired by them
prior
to our initial public offering. Any common stock acquired by initial
stockholders in our initial public offering or aftermarket are considered part
of the holdings of the public stockholders. Except with respect to the
conversion rights afforded to public stockholders, these initial stockholders
have the same rights as other public stockholders with respect to such shares,
including voting rights in connection with a potential business combination.
Accordingly, they may vote such shares on a proposed business combination any
way they choose.
To
further minimize potential conflicts of interest, we have agreed not to
consummate a business combination with an entity which is affiliated with any
of
our initial stockholders unless we obtain an opinion from an independent
investment banking firm that the business combination is fair to our
stockholders from a financial point of view. Such fairness opinion will be
received by us either prior to the execution of a definitive agreement relating
to the business combination, or such opinion will be a condition to the
consummation of such business combination.
If
we
receive a fairness opinion at the time we enter into a definitive agreement
relating to the business combination, we expect that we would pay all or a
portion of the fee upon delivery of the opinion and the balance, if any, upon
closing of the business combination. If we receive the fairness opinion and
payment is contingent on the consummation of the business combination (which
we
do not anticipate happening), we expect that the fee would not be payable until
the business combination is completed.
Additionally,
in no event will any of our existing officers, directors, stockholders or senior
advisors, or any entity with which they are affiliated, be paid any finder’s
fee, consulting fee
or
other compensation prior to, or for any services they render in order to
effectuate, the consummation of a business combination.
Section
16(A) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires certain officers and
directors of Stoneleigh Partners Acquisition Corp., and any persons who own
more
than ten-percent of the common stock outstanding to file forms reporting their
initial beneficial ownership of shares and subsequent changes in that ownership
with the Securities and Exchange Commission and the NASDAQ Stock Market.
Officers and directors of Stoneleigh Partners Acquisition Corp., and greater
than ten-percent beneficial owners are also required to furnish us with copies
of all such Section 16(a) forms they file. Based solely on a review of the
copies of the forms furnished to us, or written representations from certain
reporting persons that no Forms 5 were required, we believe that during the
2007
fiscal year we complied with all section 16(a) filing requirements.
ITEM
11. EXECUTIVE COMPENSATION
Compensation
Discussion and Analysis
None
of
our executive officers, directors or senior advisors has received any cash
compensation for services rendered. Additionally, we have not entered
into employment agreements with any of our executive officers, directors or
senior advisors. Commencing May 31, 2007, we began paying PLM
International Inc., an affiliate of Messrs. Engle and Coyne, a fee of
$7,500 per month for providing us with office space and certain office and
administrative services. However, this arrangement is solely for our benefit
and
is not intended to provide Messrs. Engle or Coyne compensation in lieu of a
salary. Other than this $7,500 per-month fee, no compensation of any kind,
including finder’s and consulting fees, has been paid to any of our initial
stockholders, officers, directors, senior advisors or any
of their respective affiliates, prior to, or for any services they render in
order to effectuate, the consummation of a business combination. However, they
are reimbursed for any out-of-pocket expenses incurred in connection with
activities on our behalf such as identifying potential target businesses and
performing due diligence on suitable business combinations. There is no limit
on
the amount of these out-of-pocket expenses and there is no review of the
reasonableness of the expenses by anyone other than our board of directors
(which includes persons who may seek reimbursement) or a court of competent
jurisdiction if such reimbursement is challenged. Because of the foregoing,
we
will generally not have the benefit of independent directors examining the
propriety of expenses incurred on our behalf and subject to
reimbursement.
Since
our
formation, we have not granted any stock options or stock appreciation rights
or
any awards under long-term incentive plans.
Other
than the securities described above and in the section appearing below in this
Annual Report on Form 10-K entitled “Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters,” neither our officers nor
our directors have received any of our equity securities.
Compensation
Committee Interlocks and Insider Participation
None.
Compensation
Report
Since
we
do not have a compensation committee, the board of directors has reviewed and
discussed with our management the Compensation Discussion and Analysis. Based
on
this review and these discussions with management, the board of directors has
determined that the Compensation Discussion and Analysis be included in this
Annual Report on Form 10-K.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
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·
|
The
following table sets forth information regarding the beneficial ownership
of our common stock as of October 10, 2007,
by:
|
|
·
|
each
person known by us to be the beneficial owner of more than 5% of
our
outstanding shares of common stock;
|
|
·
|
each
of our officers, directors and senior advisors;
and
|
|
·
|
all
our officers and directors as a
group.
|
|
Name
and Address of Beneficial Owner(1)
|
Amount
and Nature of Beneficial Ownership
|
Approximate
Percentage of
Outstanding
Common Stock
|
|
Gary
D. Engle(2)
|
3,346,244(3)
|
9.8%
|
|
James
A. Coyne(2)
|
2,107,422(4)
|
6.2%
|
|
Brian
Kaufman(5)
|
307,335(6)
|
*
|
|
Jonathan
Davidson(5)
|
307,335(6)
|
*
|
|
Milton
J. Walters
|
125,037(7)
|
*
|
|
Geoffrey
A. Thompson
|
39,203
|
*
|
|
Michael
Clayton(8)
|
17,424
|
*
|
|
Sapling,
LLC(9)
|
1,442,100
|
4.2%
|
|
QVT
Financial LP(10)
|
2,172,700
|
6.4%
|
|
All
directors and executive officers as a group (five
individuals)
|
5,817,628(11)
|
17.1%
|
*
Less
than 1%.
|
(1)
|
Unless
otherwise noted, the business address of each of the following is
20
Marshall Street, South Norwalk, CT
06854.
|
|
(2)
|
The
business address of this individual is c/o Hera East Holdings, LLC,
20
Marshall Street, Suite 104, South Norwalk, CT
06854.
|
|
(3)
|
Does
not include 3,273,434 shares of common stock issuable upon exercise
of
insider warrants held by Mr. Engle which are not currently exercisable
and
will not become exercisable within 60
days.
|
|
(4)
|
These
shares are held by JAC Opportunity Fund I, LLC, a family-held entity
of
which Mr. Coyne is the sole manager. Does not include 2,061,567 shares
of
common stock issuable upon exercise of insider warrants held by JAC
Opportunity Fund I, LLC which are not currently exercisable and will
not
become exercisable within 60 days.
|
|
(5)
|
The
business address of this individual is 11150 Santa Monica Boulevard,
Suite
700, Los Angeles, California 90025.
|
|
(6)
|
Does
not include 300,648 shares of common stock issuable upon exercise
of
insider warrants held by such individual which are not currently
exercisable and will not become exercisable within 60
days.
|
|
(7)
|
Does
not include 38,703 shares of common stock issuable upon exercise
of
insider warrants held by Mr. Walters which are not currently exercisable
and will not become exercisable within 60
days.
|
|
(8)
|
The
business address of this individual is 3030 Blackthorn Road, Riverwoods,
Illinois 60015.
|
|
(9)
|
Based
on a Schedule 13G filed with the Securities and Exchange Commission
on
July 3, 2007 on behalf of Fir Tree Recovery Master Fund, L.P., Fir
Tree,
Inc. and Sapling LLC. The business addresses are as
follows: Fir Tree, Inc. and Sapling, LLC 505 Fifth
Avenue, 23rd Floor, New York, NY 10017 and Fir Tree Recovery
Master Fund, L.P., c/o Admiral Administration Ltd., Admiral Financial
Center, 5th Floor, 90 Fort Street, Box 32021 SMB, Grand Cayman, Cayman
Islands.
|
|
(10)
|
Based
on a Schedule 13G/A filed with the Securities and Exchange Commission
on
August 10, 2007 on behalf of QVT Financial LP, QVT Financial GP,
LLC, QVT
Fund LP and QVT Associates GP LLC. The business addresses are
as follows: QVT Financial LP, QVT Financial GP LLC, QVT
Associates GP LLC, 1177 Avenue of the Americas, 9th Floor, New York,
NY
10036, QVT Fund LP, Walkers SPV, Walkers House, Mary Street, George
Town,
Grand Cayman KY1-9002, Cayman
Islands
|
|
(11)
|
Does
not include 5,635,649 shares of common stock issuable upon exercise
of
insider warrants held by such individuals which are not currently
exercisable and will not become exercisable within 60
days.
|
All
of
the initial stockholders’ initial shares has been placed in escrow with
Continental Stock Transfer & Trust Company, as escrow agent, until one year
after the consummation of our initial business combination. The initial shares
may be released from escrow earlier than this date if, within the first year
after we consummate a business combination, we consummate a subsequent
liquidation, merger, stock exchange or other similar transaction which results
in all of our stockholders having the right to exchange their shares of common
stock for cash, securities or other property. During the escrow period, the
holders of these shares are not able to sell or transfer their securities except
(i) to relatives and trusts for estate planning purposes or (ii) by private
sales made at or prior to the consummation of a business combination to
individuals that the holders believe may bring value to our company, at prices
no greater than the price at which the shares were originally purchased, in
each
case where the transferee agrees to the terms of the escrow agreement, but
retain all other rights as our stockholders, including, without limitation,
the
right to vote their shares of common stock and the right to receive cash
dividends, if declared. Transfers made pursuant to clause (ii) of the previous
sentence may result in our incurring a share-based compensation charge if the
transfer is deemed compensatory in nature. The initial stockholders have no
current intention or plans to make any such transfers. If dividends are declared
and payable in shares of common stock, such dividends will also be placed in
escrow. If we are unable to effect a business combination and liquidate, none
of
our initial stockholders will receive any portion of the liquidation proceeds
with respect to their initial shares.
Our
officers, directors and senior advisors purchased insider warrants on a private
placement basis simultaneously with the consummation of our initial public
offering. The insider warrants are identical to warrants underlying the units
sold in our initial public offering except that if we call the warrants for
redemption, the insider warrants are exercisable on a cashless basis so long
as
they are still held by the purchasers or their affiliates. Our officers,
directors and senior advisors have agreed not to sell or transfer the insider
warrants held by them until after the consummation of our initial business
combination.
In
addition, Gary D. Engle, our Chairman and Chief Executive Officer, James A.
Coyne, our Vice Chairman and Chief Financial Officer, Jonathan Davidson, a
director, and Brian Kaufman, one of our Senior Advisors, have entered into
an
agreement with HCFP/Brenner Securities which is intended to comply with Rule
10b5-1 under the Exchange Act, pursuant to which such individuals, or entities
such individuals control, will place limit orders for an aggregate of $15
million of our units commencing 30 calendar days after we file a preliminary
proxy statement seeking approval of a business combination and ending 30 days
thereafter. If $15 million of units are purchased under this agreement at a
price of $8.65 per unit, these officers, directors and senior advisors would
own, in the aggregate, approximately 22.9% of the outstanding common stock,
in
addition to any common stock they may purchase in the market after our initial
public offering. Each of Messrs. Engle, Coyne, Davidson and Kaufman may vote
the
shares of common stock included in these units on a proposed business
combination in any manner they choose and may influence whether or not the
business combination is approved. They have also agreed that none of them will
sell or transfer any units purchased pursuant to this agreement (or any of
the
securities included in such units) until the earlier of the completion of a
business combination or our liquidation. It is intended that these purchases
will comply with Rule 10b-18 under the Exchange Act and, accordingly, any
purchases that are not in compliance with the safe harbor provisions of Rule
10b-18 will not be made. These purchases will be made at a price not to exceed
$8.65 per unit and will be made by HCFP/Brenner Securities or another
broker-dealer mutually agreed upon by such individuals and HCFP/Brenner
Securities in such amounts and at such times as HCFP/Brenner Securities or
such
other broker-dealer may determine, in its sole discretion, so long as the
purchase price does not exceed the above-referenced per unit purchase price.
Each of Messrs. Engle, Coyne, Davidson and Kaufman has made available, and
has
agreed to make available in the future, to HCFP/Brenner Securities monthly
statements confirming that such individual has sufficient funds to satisfy
these
transactions. Messrs. Engle, Coyne, Davidson and Kaufman have agreed with each
other that, to the extent that one of such individuals does not satisfy his
pro
rata portion of his obligation under that agreement, he will transfer all or
a
portion of his shares to the individual or individuals that are required by
HCFP/Brenner Securities to satisfy his obligation under that
agreement.
Messrs. Engle
and Coyne are deemed to be our “promoters,” as such term is defined under the
Federal securities laws.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
On
October 15, 2005, in connection with our organization, we issued the following
securities:
|
Name
|
Number
of Shares of Common Stock
|
Number
of
Warrants
|
| |
|
|
|
Milton
J. Walters
|
100
|
2,715,000
|
|
Gary
D. Engle
|
-
|
2,720,000
|
|
JAC
Opportunity Fund I, LLC (1)
|
-
|
2,715,000
|
——————
(1) JAC
Opportunity Fund I, LLC is a family-held entity of which Mr. Coyne is the sole
manager.
The
100
shares of common stock were sold at a purchase price of $0.01 per share for
an
aggregate price of $1.00 and the 8,150,000 warrants were sold at a purchase
price of $0.05 per warrant for an aggregate price of $407,500. The
warrants were exercisable at a price of $5.00 per share and expired eight years
from the date of the prospectus related to our initial public
offering.
On
March
15, 2006, we issued an aggregate of 4,075,000 Class W warrants and 4,075,000
Class Z warrants to three existing warrantholders in exchange for the return
and
cancellation of the then outstanding 8,150,000 warrants held by them. On
the same date, we also issued additional Class W warrants and Class Z warrants
as follows:
|
Name
|
Number
of Class W Warrants
|
Number
of
Class
Z Warrants
|
|
Milton
J. Walters
|
167,500
|
167,500
|
|
Gary
D. Engle
|
165,000
|
165,000
|
|
JAC
Opportunity Fund I, LLC (1)
|
167,500
|
167,500
|
|
Geoffrey
A. Thompson
|
100,000
|
100,000
|
|
Michael
Clayton
|
100,000
|
100,000
|
——————
(1) JAC
Opportunity Fund I, LLC is a family-held entity of which Mr. Coyne is the sole
manager.
All
of
these warrants were sold at a purchase price of $0.05 per warrant for an
aggregate purchase price of $70,000. These Class W warrants and Class Z
warrants were exercisable at $5.00 per share and had expiration dates of five
and seven years from the date of the prospectus related to our initial public
offering, respectively.
On
May
25, 2006, we issued additional warrants as follows:
|
Name
|
Number
of Class W Warrants
|
Number
of
Class
Z
Warrants
|
|
Milton
J. Walters
|
1,700,000
|
1,700,000
|
|
Gary
D. Engle
|
3,400,000
|
3,400,000
|
|
JAC
Opportunity Fund I, LLC (1)
|
1,700,000
|
1,700,000
|
|
Geoffrey
A. Thompson
|
125,000
|
125,000
|
——————
(1) JAC
Opportunity Fund I, LLC is a family-held entity of which Mr. Coyne is the sole
manager.
All
of
these warrants were sold at a purchase price of $0.05 per warrant for an
aggregate price of $692,500.
On
January 23, 2007, we issued an aggregate of 11,700,000 Class W warrants and
11,700,000 Class Z warrants to our five existing warrantholders in exchange
for
the return for cancellation of all of the then outstanding warrants. On
the same date, we also issued additional warrants as follows:
|
Name
|
Number
of Class W Warrants
|
Number
of
Class
Z
Warrants
|
|
Milton
J. Walters
|
475,000
|
475,000
|
|
Gary
D. Engle
|
950,000
|
950,000
|
|
JAC
Opportunity Fund I, LLC (1)
|
475,000
|
475,000
|
|
Jonathan
Davidson
|
950,000
|
950,000
|
|
Brian
Kaufman
|
950,000
|
950,000
|
——————
(1) JAC
Opportunity Fund I, LLC is a family-held entity of which Mr. Coyne is the sole
manager.
All
of
these warrants were sold at a purchase price of $0.05 per warrant for an
aggregate price of $380,000. The Class W warrants and Class Z warrants issued
in
January 2007 were exercisable at prices of $1.75 per share and $1.50 per share,
respectively, and expired eight years from the date of the prospectus related
to
our initial public offering.
On
April 4, 2007, we issued 6,249,900 shares of our common stock in exchange
for the return and cancellation of the 31,000,000 then outstanding warrants.
In
May 2007, Brian Kaufman transferred 74,206 shares of common stock to Gary D.
Engle and Jonathan Davidson transferred 16,856 shares of common stock to Mr.
Engle and 57,350 shares of common stock to James A. Coyne. The shares were
transferred at the same price that Messrs. Kaufman and Davidson originally
paid
for them. Accordingly, as of May 31, 2007 we had issued 6,250,000 shares of
common stock for $1,550,000 in cash, or a purchase price of $0.248 per share,
as
follows:
|
Name
|
Number
of
Shares
of
Common
Stock
|
Relationship
to Us
|
|
Gary
D.
Engle
|
3,346,244
|
Chairman
of the Board and Chief Executive Officer
|
|
James
A.
Coyne
|
2,107,422(1)
|
Vice
Chairman and Chief Financial Officer
|
|
Michael
Clayton
|
307,335
|
Director
|
|
Jonathan
Davidson
|
307,335
|
Director
|
|
Geoffrey
A.
Thompson
|
125,037
|
Director
|
|
Brian
Kaufman
|
39,203
|
Senior
Advisor
|
|
Milton
J.
Walters
|
17,424
|
Senior
Advisor
|
——————
|
(1)
|
These
shares are held by JAC Opportunity Fund I, LLC, a family-held entity
of
which Mr. Coyne is the sole
manager.
|
On
June
5, 2007 we sold 5,975,000 insider warrants, generating total proceeds of
$4,450,000. These warrants were purchased by Gary D. Engle, JAC Opportunity
Fund
I, LLC (an affiliate of James A. Coyne, our Vice Chairman and Chief Financial
Officer), Brian Kaufman, Jonathan Davidson and Milton J. Walters, five of our
directors, officers and senior advisors. Such warrants are identical to the
warrants included in the units sold in our initial public offering except that
if we call the warrants for redemption, the insider warrants may be exercisable
on a cashless basis so long as such insider warrants are held by the purchasers
or their affiliates. The purchasers of the insider warrants have agreed that
the
they will not sell or transfer insider warrants held by them until after we
have
completed a business combination.
The
holders of the majority of these securities are entitled to make up to two
demands that we register these securities pursuant to a registration rights
agreement we entered into in connection with our initial public offering. The
holders of the majority of these securities may elect to exercise these
registration rights at any time commencing three months prior to the date on
which these shares of common stock are released from escrow. In addition, these
stockholders have certain “piggy-back” registration rights with respect to
registration statements filed subsequent to the consummation of a business
combination. We will bear the expenses incurred in connection with the filing
of
any such registration statements.
Our
officers, directors and senior advisors have purchased the insider warrants
for
a total purchase price of $4,450,000, or approximately $0.75 per warrant from
us
in a private placement that closed simultaneously with the consummation of
our
initial public offering. The insider warrants were priced at a slight premium
in
relation to what we had anticipated would be the approximate market price for
our warrants at the time the common stock and warrants commenced separate
trading based upon the trading prices of similar warrants of other blank check
companies. The insider warrants are identical to warrants underlying the public
units except that if we call the public warrants for redemption, the insider
warrants are exercisable on a cashless basis so long as they are still held
by
the purchasers or their affiliates. The purchasers have agreed that they will
not sell or transfer the insider warrants until after the consummation of our
initial business combination. The holders of the majority of these insider
warrants (or underlying shares) are entitled to demand that we register these
securities pursuant to a registration rights agreement. The holders of the
majority of these securities may elect to exercise these registration rights
with respect to such securities at any time after we consummate a business
combination. In addition, these holders have certain “piggy-back” registration
rights with respect to registration statements filed subsequent to such date.
We
will bear the expenses incurred in connection with the filing of any such
registration statements.
In
addition, Gary D. Engle, our Chairman and Chief Executive Officer, James A.
Coyne, our Vice Chairman and Chief Financial Officer, Jonathan Davidson, a
director, and Brian Kaufman, one of our Senior Advisors, have entered into
an
agreement with HCFP/Brenner Securities which is intended to comply with Rule
10b5-1 under the Exchange Act pursuant to which such individuals, or entities
such individuals control, will place limit orders for an aggregate of $15
million of our units commencing 30 calendar days after we file a preliminary
proxy statement seeking approval of a business combination and ending 30 days
thereafter. Each of Messrs. Engle, Coyne, Davidson and Kaufman may vote the
shares of common stock included in such units on a proposed business combination
any way they choose. It is intended that these purchases will comply with Rule
10b-18 under the Exchange Act and, accordingly, any purchases that are not
in
compliance with the safe harbor provisions of Rule 10b-18 will not be made.
These purchases will be made at a price not to exceed $8.65 per unit and will
be
made by HCFP/Brenner Securities or another broker dealer mutually agreed upon
by
such individual and HCFP/Brenner Securities in such amounts and at such times
as
HCFP/Brenner Securities or such other broker dealer may determine, in its sole
discretion, so long as the purchase price does not exceed the above-referenced
per unit purchase price. Each of Messrs. Engle, Coyne, Davidson and
Kaufman has agreed to make available to HCFP/Brenner Securities monthly
statements confirming that such individual has sufficient funds to satisfy
these
transactions. If $15 million of units are purchased under this agreement at
a
price of $8.65 per unit, these officers, directors and senior advisors would
own, in the aggregate, approximately 22.9% of the outstanding common stock,
in
addition to any common stock they may purchase in the open market after our
initial public offering which could result in these individuals having the
ability to influence whether or not the business combination is approved. Each
of Messrs. Engle, Coyne, Davidson and Kaufman has agreed that he will not sell
or transfer any units purchased by him pursuant to this agreement (or any of
the
securities included in such units) until the earlier of the completion of a
business combination or our liquidation. Messrs. Engle, Coyne, Davidson and
Kaufman have agreed with each other that, to the extent that one of such
individuals does not satisfy his pro rata portion of his obligation under that
agreement, he will transfer all or a portion of his shares to the individual
or
individuals that are required by HCFP/Brenner Securities to satisfy his
obligation under that agreement.
PLM
International, an affiliate of Messrs. Engle and Coyne, makes available to
us office space and certain office and administrative services, as we may
require from time to time. Commencing on May 31, 2007 through the consummation
of a business combination, we are paying PLM International $7,500 per month
for
these services. Mr. Engle is a director of PLM International and
Mr. Coyne is the President and Chief Executive Officer of PLM
International. Mr. Engle’s and Mr. Coyne’s families own approximately
62% and 33%, respectively, of PLM International through various family entities.
Consequently, each benefits from this transaction to the extent of his interest
in PLM International. However, this arrangement is solely for our benefit and
is
not intended to provide Messrs. Engle or Coyne compensation in lieu of a
salary. We believe, based on rents and fees for similar services in the
Stamford, CT area, that the fees charged by PLM International is at least as
favorable as we could have obtained from an unaffiliated person. However, as
our
directors may not be deemed “independent,” we did not have the benefit of
disinterested directors approving this transaction.
We
will
reimburse our initial stockholders, including our officers and directors, for
any reasonable out-of-pocket business expenses incurred by them in connection
with certain activities on our behalf such as identifying and investigating
possible target businesses and business combinations. There is no limit on
the
amount of accountable out-of-pocket expenses reimbursable by us, which will
be
reviewed only by our board or a court of competent jurisdiction if such
reimbursement is challenged.
Other
than the $7,500 per-month administrative fee payable to PLM International Inc.
and reimbursable out-of-pocket expenses payable to our officers and directors,
no compensation or fees of any kind, including finders and consulting fees,
will
be paid to any of our initial stockholders, officers or directors, or to any
of
their affiliates prior to, or for any services they render in order to
effectuate, the consummation of the business combination.
Any
ongoing or future transactions between us and any of our officers, directors,
senior advisors or their respective affiliates, including loans by our officers,
directors or senior advisors will require prior approval in each instance by
a
majority of our disinterested “independent” directors (to the extent we have
any) or the members of our board who do not have an interest in the transaction.
These directors will, if they determine necessary or appropriate, have access,
at our expense, to our attorneys or independent legal counsel. We will not
enter
into any such transaction unless our disinterested “independent” directors (or,
if there are no “independent” directors, our disinterested directors) determine
that the terms of such transaction are no less favorable to us than those that
would be available to us with respect to such a transaction from unaffiliated
third parties.
The
American Stock Exchange requires that a majority of our board must be composed
of “independent directors,” which is defined generally as a person other than an
officer or employee of the company or its subsidiaries or any other individual
having a relationship, which, in the opinion of our board of directors would
interfere with the director’s exercise of independent judgment in carrying out
the responsibilities of a director.
The
board
has determined that each of Geoffrey A. Thompson, Michael Clayton and Jonathan
Davidson are independent directors as defined under the American Stock
Exchange’s listing standards, constituting a majority of our board.
Any
affiliated transactions will be on terms no less favorable to us than could
be
obtained from independent parties. Any affiliated transactions must be approved
by a majority of our independent and disinterested directors. The
disclosure set forth in this annual report on Form 10-K serves as our written
policy as to the approval of related party transactions.
Unless
otherwise indicated, we believe that all persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned by them.
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND
SERVICES:
The
firm
of BDO Seidman LLP (“BDO”) acts as our independent registered public accounting
firm. The following is a summary of fees paid to BDO for services
rendered:
| |
|
From
September 9,
|
|
| |
|
2005
(inception)
|
|
| |
|
to
July 31, 2007
|
|
|
Audit
fees
|
|
$ |
114,530
|
|
|
Audit-related
|
|
|
-
|
|
|
Tax
fees
|
|
|
-
|
|
|
All
other fees
|
|
|
-
|
|
|
Total
|
|
$ |
114,530
|
|
Audit
fees for the fiscal year ended July 31, 2007 related to professional services
rendered in connection with our initial public offering (comprised of various
financial statements included in our Registration Statement on Form S-1,
including all amendments, and our Current Report on Form 8-K filed with the
SEC
on June 7, 2007), aggregating $86,650, the audit of our financial statements
for
the period from September 9, 2005 (date of inception) to July 31, 2007,
estimated at $20,000, and the quarterly review of financial statements included
in our quarterly report on Form 10-Q for the quarterly period ended April 30,
2007, $7,880.
Pre-Approval
Policy
Since
our
audit committee was not formed until June 2007, the audit committee did not
pre-approve all of the foregoing services, although any services rendered prior
to the formulation of our audit committee were approved by our board of
directors. Since the formation of our audit committee, and on a going-forward
basis, the audit committee has and will continue to pre-approve all auditing
services and permitted non-audit services to be performed for us by BDO,
including the fees and terms thereof (subject to the de minimis exceptions
for
non-audit service described in the Exchange Act which are approved by the audit
committee prior to the completion of the audit). The audit committee may form
and delegate authority to grant pre-approvals of audit and permitted non-audit
services, provided that decisions of such subcommittee to grant pre-approvals
shall be presented to the full audit committee at its next scheduled
meeting.
PART
IV
ITEM
15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM
8-K:
| |
|
|
|
|
|
Page
|
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
65
|
|
|
|
|
|
Financial
Statements:
|
|
|
|
Balance
Sheets, July 31, 2007 and July 31, 2006
|
|
66
|
|
Statements
of Operations, for the year ended July 31, 2007, the period from
September
9, 2005 (inception) to July 31, 2006 and the period from September
9, 2005
(inception) to July 31, 2007
|
|
67
|
|
Statements
of Stockholders’ Equity, from September 9, 2005 (inception) to July 31,
2007
|
|
68
|
|
Statements
of Cash Flows, for the year ended July 31, 2007, the period
from September 9, 2005 (inception) to July 31, 2006 and for the
period September 9, 2005 (inception) to July 31,
2007
|
|
69
|
|
Notes
to Financial Statements
|
|
70
- 79
|
Exhibits
marked with an asterisk (*) are incorporated by reference to documents
previously filed by us with the SEC, as exhibits to our registration statement
on Form S-1 (File No. 333-128335). All other documents listed are filed with
this report.
|
Exhibit
No.
|
Description
|
|
3.1*
|
Form
of Amended and Restated Certificate of Incorporation.
|
|
3.2*
|
By-laws.
|
|
4.1*
|
Specimen
Unit Certificate.
|
|
4.2*
|
Specimen
Common Stock Certificate.
|
|
4.3*
|
Specimen
Warrant Certificate.
|
|
4.4*
|
Form
of Unit Purchase Option to be granted to
Representative.
|
|
4.5*
|
Form
of Warrant Agreement between Continental Stock Transfer & Trust
Company and the Registrant.
|
|
10.1*
|
Letter
Agreement among the Registrant, HCFP/Brenner Securities LLC and
Milton J.
Walters.
|
|
10.2*
|
Letter
Agreement among the Registrant, HCFP/Brenner Securities LLC and
Gary D.
Engle.
|
|
10.3*
|
Letter
Agreement among the Registrant, HCFP/Brenner Securities LLC and
James A.
Coyne.
|
|
10.4*
|
Letter
Agreement among the Registrant, HCFP/Brenner Securities LLC and
Geoffrey
A. Thompson.
|
|
10.5
|
Letter
Agreement among the Registrant, HCFP/Brenner Securities LLC and
Michael
Clayton.
|
|
10.6*
|
Letter
Agreement among the Registrant, HCFP/Brenner Securities LLC and
JAC
Opportunity Fund I, LLC.
|
|
10.7*
|
Form
of Investment Management Trust Agreement between Continental Stock
Transfer & Trust Company and the Registrant.
|
|
10.8*
|
Form
of Registration Rights Agreement among the Registrant and the Initial
Stockholders.
|
|
10.9*
|
Form
of Administrative Services Agreement between the Registrant and
PLM
International Inc.
|
|
10.10*
|
Form
of Letter Agreement among the Registrant, HCFP/Brenner Securities
LLC and
Jonathan Davidson.
|
|
10.11*
|
Form
of Letter Agreement among the Registrant, HCFP/Brenner Securities
LLC and
Brian Kaufman.
|
|
10.12*
|
Form
of Letter Agreement among the Registrant, Gary D. Engle, James
A. Coyne,
Milton J. Walters, Jonathan Davidson, Brian Kaufman and HCFP/Brenner
Securities LLC.
|
|
10.13*
|
Form
of Stock Escrow Agreement between the Registrant, Continental Stock
Transfer & Trust Company and the Initial
Stockholders.
|
|
10.14*
|
Form
of Warrant Subscription Agreement.
|
|
31.1
|
Section
302 Certification by Chief Executive Officer
|
|
31.2
|
Section
302 Certification by Chief Financial Officer
|
|
32.1
|
Section
906 Certification by Chief Executive Officer
|
|
32.2
|
Section
906 Certification by Chief Financial
Officer
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by
the undersigned, thereunto duly authorized on the 10th day of
October,
2007.
STONELEIGH
PARTNERS
ACQUISITION
CORP.
By: /s/
Gary D.
Engle
Gary
D.
Engle
Chairman
of the Board and
Chief
Executive Officer
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been
signed below on the 10th day of October, 2007 by the following persons on behalf
of the registrant and in the capacity indicated.
|
Name
|
Title
|
|
/s/
Gary D.
Engle
Gary
D. Engle
|
Chairman
of the Board and Chief Executive Officer
|
|
/s/
James A.
Coyne
James
A. Coyne
|
Vice
Chairman, Chief Financial Officer, Secretary and
Director
|
|
/s/
Michael
Clayton
Michael
Clayton
|
Director
|
|
/s/
Jonathan
Davidson
Jonathan
Davidson
|
Director
|
|
/s/
Geoffrey
Thompson
Geoffrey
Thompson
|
Director
|
STONELEIGH
PARTNERS ACQUISITION CORP.
(a
corporation in the development stage)
INDEX
TO FINANCIAL STATEMENTS
| |
|
|
|
|
|
Pages
|
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
65
|
|
|
|
|
|
Financial
Statements:
|
|
|
|
Balance
Sheets, July 31, 2007 and 2006
|
|
66
|
|
Statements
of Operations, for the year ended July 31, 2007, the period from
September
9, 2005 (inception) to July 31, 2006 and the period from September
9, 2005
(inception) to July 31, 2007
|
|
67
|
|
Statements
of Stockholders’ Equity, from September 9, 2005 (inception) to July 31,
2007
|
|
68
|
|
Statements
of Cash Flows, for the year ended July 31, 2007, the period
from September 9, 2005 (inception) to July 31, 2006 and for the
period September 9, 2005 (inception) to July 31,
2007
|
|
69
|
|
Notes
to Financial Statements
|
|
70
- 79
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of
Directors and Stockholders
Stoneleigh
Partners Acquisition Corp.
We
have
audited the accompanying balance sheets of Stoneleigh Partners Acquisition
Corp.
(a corporation in the development stage) as of July 31, 2007 and 2006, and
the related statements of operations, stockholders’ equity and cash flows for
the year ended July 31, 2007, for the period from September 9, 2005
(inception) to July 31, 2006 and for the period from September 9, 2005
(inception) to July 31, 2007. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit
also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Stoneleigh Partners Acquisition
Corp. as of July 31, 2007 and 2006, and its results of operations and
its cash flows for to the year ended July 31, 2007, for the period from
September 9, 2005 (inception) to July 31, 2006 and for the period from
September 9, 2005 (inception) to July 31, 2007, in conformity with
accounting principles generally accepted in the United States of
America.
/s/
BDO Seidman, LLP
New
York,
NY
September
27, 2007
STONELEIGH
PARTNERS ACQUISITION CORP.
(a
corporation in the development stage)
BALANCE
SHEETS
| |
July
31, 2007
|
|
July
31, 2006
|
| |
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
$
|
1,035,420
|
|
|
$
|
912,426
|
|
|
Investments
held in Trust (Notes 1 and 3)
|
|
221,416,629
|
|
|
|
-
|
|
|
Prepaid
insurance and other expenses
|
|
213,542
|
|
|
|
-
|
|
|
Total
current assets
|
|
222,665,591
|
|
|
|
912,426
|
|
|
Deferred
registration costs (Note 4)
|
|
-
|
|
|
|
390,742
|
|
| |
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
$
|
222,665,591
|
|
|
$
|
1,303,168
|
|
| |
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
$
|
27,460
|
|
|
$
|
5,249
|
|
|
Accrued
registration costs
|
|
11,538
|
|
|
|
130,148
|
|
|
Taxes
payable
|
|
690,189
|
|
|
|
-
|
|
|
Note
payable, current portion (Note 8)
|
|
108,736
|
|
|
|
-
|
|
|
Total
current liabilities
|
|
837,923
|
|
|
|
135,397
|
|
| |
|
|
|
|
|
|
|
|
LONG
TERM LIABILITIES
|
|
|
|
|
|
|
|
|
Note
payable, long term (Note 8)
|
|
72,492
|
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
COMMON
STOCK SUBJECT TO POSSIBLE CONVERSION
|
|
|
|
|
|
|
|
|
(8,351,465
shares at conversion value) (Note 1)
|
|
66,427,592
|
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
COMMITMENTS
(Note 6)
|
|
-
|
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY (Notes 2, 4, and 7):
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.0001 par value, 5,000,000 shares authorized, 0
issued
|
|
|
|
|
|
|
|
|
and
outstanding
|
|
|
|
|
|
|
|
|
Common
stock, par value $0.0001 per share, 100,000,000 shares
|
|
|
|
|
|
|
|
|
authorized,
25,746,035 shares issued and outstanding (excluding
|
|
|
|
|
|
|
|
|
8,351,465
shares subject to conversion) and 100 shares issued and
|
|
|
|
|
|
|
|
|
outstanding
|
|
2,575
|
|
|
|
-
|
|
|
Additional
paid-in capital
|
|
154,286,820
|
|
|
|
1,170,001
|
|
|
Earnings
(deficit) accumulated in the development stage
|
|
1,038,189
|
|
|
|
(2,230
|
)
|
|
TOTAL
STOCKHOLDERS’ EQUITY
|
|
155,327,584
|
|
|
|
1,167,771
|
|
| |
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
222,665,591
|
|
|
$
|
1,303,168
|
|
| |
|
|
|
|
|
|
|
The
accompanying notes should be read in conjunction with the financial
statements.
STONELEIGH
PARTNERS ACQUISITION CORP.
(a
corporation in the development stage)
STATEMENTS
OF OPERATIONS
| |
|
For
the year
|
|
|
From
September 9,
|
|
|
From
September 9,
|
|
| |
|
ended
|
|
|
2005
(inception)
|
|
|
2005
(inception)
|
|
| |
|
July
31, 2007
|
|
|
to
July 31, 2006
|
|
|
to
July 31, 2007
|
|
| |
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
Formation
and operating costs (Notes 5 and 6)
|
|
$ |
126,875
|
|
|
$ |
15,080
|
|
|
$ |
141,955
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(126,875 |
) |
|
|
(15,080 |
) |
|
|
(141,955 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income (Note 1)
|
|
|
1,828,031
|
|
|
|
12,850
|
|
|
|
1,840,881
|
|
|
Interest
expense (Note 8)
|
|
|
(1,277 |
) |
|
|
-
|
|
|
|
(1,277 |
) |
|
Income
(loss) before provision for income taxes
|
|
|
1,699,879
|
|
|
|
(2,230 |
) |
|
|
1,697,649
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for federal income taxes (Note 5)
|
|
|
659,460
|
|
|
|
-
|
|
|
|
659,460
|
|
|
Net
income (loss) for the period
|
|
|
1,040,419
|
|
|
|
(2,230 |
) |
|
|
1,038,189
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion
of Trust Fund relating to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
stock subject to possible conversion
|
|
|
(317,741 |
) |
|
|
-
|
|
|
|
(317,741 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable to common stockholders
|
|
$ |
722,678
|
|
|
$ |
(2,230 |
) |
|
$ |
720,448
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
outstanding subject to possible conversion
|
|
|
8,351,465
|
|
|
|
-
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share subject to possible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion,
basic and diluted
|
|
$ |
0.04
|
|
|
$ |
-
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding,
|
|
|
9,256,354
|
|
|
|
6,250,000
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$ |
0.08
|
|
|
$ |
(0.00 |
) |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes should be read in conjunction with the financial
statements.
STONELEIGH
PARTNERS ACQUISITION CORP.
(a
corporation in the development stage)
STATEMENTS
OF STOCKHOLDERS’ EQUITY
From
September 9, 2005 (inception) to July 31, 2007
| |
|
|
|
|
|
|
|
|
|
|
(Deficit)
Earnings
|
|
|
|
|
| |
|
Common
stock
|
|
|
Additional
|
|
|
Accumulated
in the
|
|
|
|
|
| |
|
Shares
|
|
|
Amount
|
|
|
Paid-In-Capital
|
|
|
Development
Stage
|
|
|
Total
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 9, 2005 (inception)
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Issuance
of Common Stock to initial stockholder
|
|
|
100
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
|
Issuance
of 8,150,000 warrants at $0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
per
warrant
|
|
|
-
|
|
|
|
-
|
|
|
|
407,500
|
|
|
|
-
|
|
|
|
407,500
|
|
|
Issuance
of 4,075,000 Class Z warrants and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,075,000
Class W warrants with an
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
aggregate
value of $407,500 in exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
the cancellation of 8,150,000 warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with
an aggregate value of $407,500
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Issuance
of 700,000 Class Z warrants and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
700,000
Class W warrants at $0.05 per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
warrant
|
|
|
-
|
|
|
|
-
|
|
|
|
70,000
|
|
|
|
-
|
|
|
|
70,000
|
|
|
Issuance
of 6,925,000 Class Z warrants and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,925,000
Class W warrants at $0.05 per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
warrant
|
|
|
-
|
|
|
|
-
|
|
|
|
692,500
|
|
|
|
-
|
|
|
|
692,500
|
|
|
Net
loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,230 |
) |
|
|
(2,230 |
) |
|
Balance,
July 31, 2006
|
|
|
100
|
|
|
$
|
-
|
|
|
$ |
1,170,001
|
|
|
$ |
(2,230 |
) |
|
$ |
1,167,771
|
|
|
Issuance
of 3,800,000 Class Z warrants and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,800,000
Class W warrants at $0.05 per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
warrant
|
|
|
-
|
|
|
|
-
|
|
|
|
380,000
|
|
|
|
-
|
|
|
|
380,000
|
|
|
Issuance
of common stock to initial stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with
an aggregate value of $1,550,000 in exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
the return and cancellation of 15,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
Z warrants and 15,500,000 Class W warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with
an aggregate value of $1,550,000
|
|
|
6,249,900
|
|
|
|
625
|
|
|
|
(625 |
) |
|
|
-
|
|
|
|
-
|
|
|
Proceeds
from sale of underwriter purchase option
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
100
|
|
|
Proceeds
from issuance of insider warrants
|
|
|
|
|
|
|
|
|
|
|
4,450,000
|
|
|
|
|
|
|
|
4,450,000
|
|
|
Sale
of 27,847,500 units through public
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
offering
net of underwriter discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
offering
expenses and excluding $66,109,851 of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
proceeds
allocable to 8,351,465 shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
common stock subject to possible conversion
|
|
|
19,496,035
|
|
|
|
1,950
|
|
|
|
148,605,085
|
|
|
|
-
|
|
|
|
148,607,035
|
|
|
Accretion
of trust fund relating to common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subject
to possible conversion
|
|
|
|
|
|
|
|
|
|
|
(317,741 |
) |
|
|
|
|
|
|
(317.,741 |
) |
|
Net
income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,040,419
|
|
|
|
1,040,419
|
|
|
Balance,
July 31, 2007
|
|
|
25,746,035
|
|
|
$
|
2,575
|
|
|
$
|
154,286,820
|
|
|
$
|
1,038,189
|
|
|
$
|
155,327,584
|
|
The
accompanying notes should be read in conjunction with the financial
statements.
STONELEIGH
PARTNERS ACQUISITION CORP.
(a
corporation in the development stage)
STATEMENTS
OF CASH FLOWS
| |
|
For
the year
|
|
From
September 9,
|
|
From
September 9,
|
|
| |
|
ended
|
|
2005
(inception) to
|
|
2005
(inception) to
|
|
| |
|
July
31, 2007
|
|
July
31, 2006
|
|
July
31, 2007
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) for the period
|
|
$ |
1,040,419
|
|
|
$ |
(2,230 |
) |
|
$ |
1,038,189
|
|
|
Gains
on investments held in trust fund
|
|
|
(976,979 |
) |
|
|
--
|
|
|
|
(976,979 |
) |
|
Adjustments
to reconcile net income (loss) to net cash provided
|
|
|
|
|
|
|
|
|
|
|
|
|
|
by
operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
insurance and other expenses
|
|
|
(14,191 |
) |
|
|
-
|
|
|
|
(14,191 |
) |
|
Accrued
payable and accrued expenses
|
|
|
22,211
|
|
|
|
5,249
|
|
|
|
27,460
|
|
|
Taxes
payable
|
|
|
690,189
|
|
|
|
-
|
|
|
|
690,189
|
|
|
Net
cash provided by operating activities
|
|
|
761,649
|
|
|
|
3,019
|
|
|
|
764,668
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of investments held in Trust Fund
|
|
|
(441,856,279 |
) |
|
|
-
|
|
|
|
(441,856,279 |
) |
|
Maturities
of investments held in Trust Fund
|
|
|
221,416,629
|
|
|
|
-
|
|
|
|
221,416,629
|
|
|
Net
cash used in investing activities
|
|
|
(220,439,650 |
) |
|
|
-
|
|
|
|
(220,439,650 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock to initial stockholders
|
|
|
-
|
|
|
|
1
|
|
|
|
1
|
|
|
Proceeds
from issuance of insider warrants in private placement
|
|
|
4,450,000
|
|
|
|
-
|
|
|
|
4,450,000
|
|
|
Proceeds
from issuance of underwriter’s purchase option
|
|
|
100
|
|
|
|
-
|
|
|
|
100
|
|
|
Portion
of net proceeds from sale of units through public offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
allocated to shares of common stock subject to possible
conversion
|
|
|
66,109,851
|
|
|
|
-
|
|
|
|
66,109,851
|
|
|
Proceeds
from issuance of warrants to security holders
|
|
|
380,000
|
|
|
|
1,170,000
|
|
|
|
1,550,000
|
|
|
Principal
payment on notes
|
|
|
(18,123 |
) |
|
|
-
|
|
|
|
(18,123 |
) |
|
Payment
of deferred registration costs
|
|
|
-
|
|
|
|
(260,594 |
) |
|
|
(260,594 |
) |
|
Net
proceeds from sale of units through public offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
including the proceeds from underwriter over-allotment
exercise
|
|
|
148,879,167
|
|
|
|
-
|
|
|
|
148,879,167
|
|
|
Net
cash provided by financing activities
|
|
|
219,800,995
|
|
|
|
909,407
|
|
|
|
220,710,402
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
122,994
|
|
|
|
912,426
|
|
|
|
1,035,420
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and Cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
of period
|
|
|
912,426
|
|
|
|
-
|
|
|
|
-
|
|
|
End
of period
|
|
$ |
1,035,420
|
|
|
$ |
912,426
|
|
|
$ |
1,035,420
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of underwriter purchase option included in offering
costs
|
|
$ |
4,372,000
|
|
|
$ |
-
|
|
|
$ |
4,372,000
|
|
|
Accretion
relating to common stock subject to possible conversion
|
|
$ |
(317,741 |
) |
|
$ |
-
|
|
|
$ |
(317,741 |
) |
|
Accrued
registration costs
|
|
$ |
11,538
|
|
|
$ |
130,148
|
|
|
$ |
11,538
|
|
|
Financed
insurance
|
|
$ |
181,228
|
|
|
$ |
-
|
|
|
$ |
181,228
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$ |
1,277
|
|
|
$
|
-
|
|
|
$ |
1,277
|
|
|
Cash
paid for taxes
|
|
$ |
4,812
|
|
|
$ |
-
|
|
|
$ |
4,812
|
|
The
accompanying notes should be read in conjunction with the financial
statements.
STONELEIGH
PARTNERS ACQUISITION CORP.
(a
corporation in the development stage)
NOTES
TO FINANCIAL STATEMENTS
NOTE
1 — DISCUSSION OF THE COMPANY’S ACTIVITIES
Organization
and activities– Stoneleigh Partners Acquisition Corp. (the “Company”)
was incorporated in Delaware on September 9, 2005 to serve as a vehicle to
effect a merger, capital stock exchange, asset acquisition or other similar
business combination with a currently unidentified operating business (a “Target
Business”). All activities from inception (September 9, 2005) through July 31,
2007 relate to the Company’s formation and capital raising
activities.
The
Company is considered to be a development stage company and as such the
financial statements presented herein are presented in accordance with Statement
of Financial Accounting Standards (“SFAS”) No. 7, Accounting and Reporting by
Development Stage Enterprises.
The
registration statement for the Company’s initial public offering (“IPO” or the
“Offering”) was declared effective on May 31, 2007. The Company consummated the
Offering on June 5, 2007 and received net proceeds of approximately
$197.8 million, which includes approximately $4.45 million from the Insider
Warrants sold in a private placement (described in Note 7) and a portion of
the
proceeds of the sale of the Company’s shares of common stock sold to the
Company’s stockholders prior to the Offering (“Initial Stockholders”).
On June 12, 2007 the Company consummated the closing of an additional 2,847,500
Units, which were subject to an underwriter over-allotment option, generating
additional gross proceeds of $22,780,000.
The
Company’s management intends to apply substantially all of the net proceeds of
the Offering toward consummating a Business Combination. The initial Target
Business must have a fair market value equal to at least 80% of the Company’s
net assets at the time of such acquisition. However, there is no assurance
that the Company will be able to successfully effect a Business
Combination.
The
Company’s Certificate of Incorporation provides that the Company’s corporate
existence will cease in the event it does not consummate a Business Combination
by May 31, 2009. If the Company does not effect a Business Combination by May
31, 2009 (the “Target Business Acquisition Period”), the Company will promptly
distribute the amount held in trust (the “Trust Account”), which is
substantially all of the proceeds from the Offering, including any accrued
interest, to its public stockholders.
Management
agreed that approximately $220.4 million (or approximately $7.95 per Unit)
of the net proceeds of the Offering, the sale of the Insider Warrants
(defined in Note 7) and the sale of common stock to the Initial
Stockholders will be held in the Trust Account and invested in permitted
United States government securities and money market funds. The placing of
funds
in the Trust Account may not protect those funds from third party claims against
the Company. Although the Company will seek to have all vendors, prospective
acquisition targets or other entities it engages, execute agreements with the
Company waiving any right, title, interest or claim of any kind in or to any
monies held in the Trust Account, there is no guarantee that they will execute
such agreements. There may be released to the Company from the Trust
Account (i) interest income earned on the Trust Account balance to pay any
tax
obligations of the Company, and (ii) up to an aggregate amount of
$3,000,000 in interest earned on the Trust Account to fund expenses related
to
investigation and selection of a Target Business and the Company’s other working
capital requirements. As of July 31, 2007, the Company has transferred $797,259
of interest income to its operating account (See Note 9).
STONELEIGH
PARTNERS ACQUISITION CORP.
(a
corporation in the development stage)
NOTES
TO FINANCIAL STATEMENTS
NOTE
1 — DISCUSSION OF THE COMPANY’S ACTIVITIES – (CONTINUED)
The
Company, after signing a definitive agreement for a Business Combination, is
obliged to submit such transaction for approval by a majority of the public
stockholders of the Company. Stockholders that vote against such proposed
Business Combination and exercise their conversion rights are, under certain
conditions described below, entitled to convert their shares into a pro-rata
distribution from the Trust Account (the “Conversion Right”). The
actual per share conversion price will be equal to the amount in the Trust
Account (inclusive of any interest thereon), calculated as of two business
days
prior to the proposed Business Combination, divided by the number of shares
sold
in the Offering, or approximately $7.95 per share based on the value of the
Trust Account as of July 31, 2007. As a result of the Conversion
Right, $66,427,592 (including accretion of $317,741) has been classified as
common stock subject to possible conversion. The Initial Stockholders have
agreed to vote their 6,250,000 founding shares of common stock in accordance
with the manner in which the majority of the shares of common stock offered
in
the Offering are voted by the Company’s public stockholders (“Public
Stockholders”) with respect to a Business Combination.
In
the
event that a majority of the outstanding shares of common stock voted by the
Public Stockholders vote for the approval of the Business Combination and
holders owning 30% or more of the outstanding common stock do not vote against
the Business Combination and do not exercise their Conversion Rights, the
Business Combination may then be consummated.
With
respect to a Business Combination which is approved and consummated, any Public
Stockholder who voted against the Business Combination may contemporaneously
with or prior to such vote exercise their Conversion Right and their common
shares would be cancelled and returned to the status of authorized but unissued
shares. The per share conversion price will equal the amount in the Trust
Account, calculated as of two business days prior to the consummation of the
proposed Business Combination, divided by the number of shares of common stock
held by Public Stockholders at the consummation of the Offering. Accordingly,
Public Stockholders holding less than 30% of the aggregate number of shares
owned by all Public Stockholders may convert their shares in the event of a
Business Combination.
NOTE
2 — OFFERING AND PRIVATE PLACEMENT OF INSIDER WARRANTS
In
the
Offering, effective May 31, 2007 (closed on June 5, 2007), the Company sold
to
the public 25,000,000 units (the “Units” or a “Unit”) at a price of $8.00 per
Unit. Net proceeds from the Offering totaled approximately $193.2 million,
which
was net of approximately $6.5 million in underwriting fees and other expenses
paid at closing. Each unit consists of one share of the Company’s common stock
and one warrant (a “Warrant”). The Company sold to HCFB/Brenner Securities LLC
(“HCFP” or “Representative”), the Representative of the underwriters in the
Offering, a purchase option to purchase up to a total of 1,250,000 additional
Units (Note 7). The Company also has granted to the Representative a 45-day
option to purchase up to 3,750,000 Units solely to cover over allotments, if
any.
On
June
12, 2007 the Company consummated the closing of an additional 2,847,500 Units
which were subject to the underwriter’s over-allotment option generating net
proceeds of $22,040,000, which was net of $740,000 in underwriting discount
fees.
Simultaneously
with the Closing of the Offering, the Company sold to certain of the Initial
Stockholders 5,975,000 Insider Warrants for an aggregate purchase price of
$4,450,000. See discussion in Note 7.
STONELEIGH
PARTNERS ACQUISITION CORP.
(a
corporation in the development stage)
NOTES
TO FINANCIAL STATEMENTS
NOTE
3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash
and Cash Equivalents– Included in cash and cash equivalents are
deposits with financial institutions as well as short-term money market
instruments with original maturities of three months or less when
purchased.
Investments
held in trust- The Company’s restricted investment held in the Trust
Fund at July 31, 2007 is invested in U.S. Government Institutional money market
securities. The Company recognized interest income of $1,774,460 on investment
held in trust for the year ended July 31, 2007 and for the period from inception
(September 9, 2005) to July 31, 2007, which is included on the accompanying
statements of operations. No interest was earned on investments held
in trust prior to the Offering.
Concentration
of Credit Risk– Financial instruments that potentially subject the
Company to a significant concentration of credit risk consist primarily of
cash
and cash equivalents and investments held in trust. The Company may
maintain deposits in federally insured financial institutions in excess of
federally insured limits. However, management believes the Company is not
exposed to significant credit risk due to the financial position of the
depository institutions in which those deposits are held.
Net
Income (Loss) Per Share– Net income (loss) per share is computed based
on the weighted average number of shares of common stock
outstanding.
Basic
earnings (loss) per share excludes dilution and is computed by dividing income
(loss) available to common stockholders by the weighted average common shares
outstanding for the period. In addition to the 100 shares purchased by the
Initial Stockholders upon formation, the 6,249,900 shares of the Company’s
common stock issued on April 4, 2007 (Note 7) and shares issued in the
Offering have been included to the weighted average common
shares outstanding for the periods presented. Basic net income per share subject
to possible conversion is calculated by dividing accretion of Trust Fund
relating to common stock subject to possible conversion by 8,351,465 shares
subject to possible conversion. Diluted earnings per share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted
in
the issuance of common stock that then shared in the earnings of the entity.
No
such securities were outstanding as of July 31, 2007 and since the effect
of outstanding warrants to purchase common stock and upo is antidilutive, they
have been excluded from the Company’s computation of diluted net income (loss)
per share for the periods ending July 31, 2007.
Use
of Estimates– The preparation of financial statements in accordance
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect certain
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Income
Taxes– Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax basis of assets and
liabilities that will result in future taxable or deductible amounts and are
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred income tax assets to the amount
expected to be realized. As of July 31, 2007 there were no temporary differences
and therefore no deferred tax has been established.
STONELEIGH
PARTNERS ACQUISITION CORP.
(a
corporation in the development stage)
NOTES
TO FINANCIAL STATEMENTS
NOTE
3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-(CONTINUED)
New
Accounting Pronouncements– In July 2006, the Financial Accounting
Standards Board (“FASB”) issued Interpretation No. 48 (“FIN 48”), “Accounting
for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109.”
FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in a
company's financial statements and prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement
of
a tax position taken or expected to be taken in an income tax return. FIN 48
also provides guidance in derecognition, classification, interest and penalties,
accounting in interim periods, disclosures and transition. FIN 48 is effective
for fiscal years beginning after December 15, 2006. The adoption of FIN 48
is
not expected to have a significant effect on the Company’s balance
sheet or statements of operations.
In
September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements
‘‘SFAS No. 157’’), which defines fair value, establishes a framework for
measuring fair value under GAAP, and expands disclosures about fair value
measurements. SFAS No. 157 applies to other accounting pronouncements that
require or permit fair value measurements. The new guidance is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and for interim periods within those fiscal years. The adoption of SFAS No.
157
is not expected to have a material effect on the Company’s financial
position and results of operations.
In
February 2007, the FASB issued SFAS No. 159, ‘‘The Fair Value Option
for Financial Assets and Financial Liabilities — including an amendment of FASB
Statement No. 115’’ (‘‘SFAS No. 159’’). SFAS No. 159 permits
entities to elect to measure many financial instruments and certain other items
at fair value. Upon adoption of SFAS No. 159, an entity may elect the fair
value option for eligible items that exist at the adoption date. Subsequent
to
the initial adoption, the election of the fair value option should only be
made
at initial recognition of the asset or liability or upon a remeasurement event
that gives rise to new-basis accounting. SFAS No. 159 does not affect any
existing accounting literature that requires certain assets and liabilities
to
be carried at fair value nor does it eliminate disclosure requirements included
in other accounting standards. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007 and may be adopted earlier but only if
the adoption is in the first quarter of the fiscal year. The adoption of SFAS
No. 159 is not expected to have a material effect on the Company’s
financial position and results of operations.
The
Company does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
NOTE
4 — DEFERRED REGISTRATION COSTS
As
of
July 31, 2006, the Company had incurred deferred registration costs of $390,742
relating to expenses incurred in connection to the Offering. Upon consummation
of the Offering, this amount, along with additional registration costs incurred
through June 5, 2007 of $481,937 (aggregating $872,679) was charged to
equity.
STONELEIGH
PARTNERS ACQUISITION CORP.
(a
corporation in the development stage)
NOTES
TO FINANCIAL STATEMENTS
NOTE
5 — TAXES
Provision
for income taxes consists of:
| |
|
For
the year
|
|
|
From
September 9,
|
|
|
From
September 9,
|
|
| |
|
ended
|
|
|
2005
(inception)
|
|
|
2005
(inception)
|
|
| |
|
July
31, 2007
|
|
|
to
July 31, 2006
|
|
|
to
July 31, 2007
|
|
| |
|
|
|
|
|
|
|
|
|
|
Current
Federal & State
|
|
$ |
659,460
|
|
|
$ |
-
|
|
|
$ |
659,460
|
|
| |
|
$ |
659,460
|
|
|
$ |
-
|
|
|
$ |
659,460
|
|
The
Company’s effective tax rate approximates the federal statutory rate. No
provision for state and local income taxes has been made since the Company
was
formed as a vehicle to effect a Business Combination and, as a result does
not
conduct operations and is not engaged in trade or business in any
state. The Company is incorporated in Delaware and accordingly is
subject to franchise taxes. Included as part of formation and operating costs
in
the accompanying statement of operations for the period ended July 31, 2007
is
Delaware franchise tax expense of $35,541.
NOTE
6 — COMMITMENTS
Administrative
Services Agreement
The
Company has agreed to pay an affiliate of two stockholders $7,500 per month
commencing on May 31, 2007 (effective date of the Offering) for office,
secretarial and administrative services. For the period from September 9, 2005
(inception) through July 31, 2007, $15,000 for these services is included in
formation and operating costs in the accompanying statements of
operations.
Underwriting
Agreement
In
connection with the Offering, the Company entered into an underwriting agreement
(the “Underwriting Agreement”) with HCFP/Brenner Securities LLC (“HCFP”), the
representative of the underwriters in the Proposed Offering.
Pursuant
to the Underwriting Agreement, the Company paid to the underwriters certain
fees
and expenses related to the Offering, including underwriting discounts of
$7,240,350.
In
addition, in accordance with the terms of the Underwriting Agreement, the
Company engaged HCFP, on a non-exclusive basis, to act as its agent for the
solicitation of the exercise of the Company’s Warrants. In consideration for
solicitation services, the Company will pay HCFP a commission equal to 5% of
the
exercise price for each Warrant exercised more than one year after June 5,
2007
if the exercise is solicited by HCFP.
HCFP
and
another underwriter were engaged by the Company to act as the Company’s
non-exclusive investment bankers in connection with a proposed Business
Combination (Note 1). For assisting the Company in obtaining approval of a
Business Combination, the Company will pay a cash transaction fee of $7,475,000
upon consummation of a Business Combination.
The
Company has sold to HCFP a purchase option to purchase the Company’s Units (Note
7),
STONELEIGH
PARTNERS ACQUISITION CORP.
(a
corporation in the development stage)
NOTES
TO FINANCIAL STATEMENTS
NOTE
7 — COMMON AND PREFERRED STOCK, WARRANTS AND UNDERWRITER PURCHASE
OPTION
Insider
Purchase Commitment
Gary
D.
Engle, the Company’s Chairman and Chief Executive Officer, James A. Coyne, the
Company’s Vice Chairman and Chief Financial Officer, Jonathan Davidson, a
director, and Brian Kaufman, one of the Company’s Senior Advisors, have entered
into an agreement with HCFP which is intended to comply with Rule 10b5-1 under
the Exchange Act, pursuant to which such individuals, or entities such
individuals control, will place limit orders for an aggregate of $15 million
of
the Company’s Units commencing 30 calendar days after the Company files a
preliminary proxy statement seeking approval of the holders of common stock
for
a Business Combination and ending 30 days thereafter. Each of Messrs. Engle,
Coyne, Davidson and Kaufman has agreed that he will not sell or transfer any
Units purchased by him pursuant to this agreement (or any of the securities
included in such units) until the completion of a Business Combination or the
Company’s liquidation. It is intended that these purchases will comply with Rule
10b-18 under the Exchange Act. These purchases will be made at a price not
to
exceed $8.65 per unit and will be made by HCFP or another broker dealer mutually
agreed upon by such individuals and HCFP in such amounts and at such times
as
HCFP or such other broker dealer may determine, in its sole discretion, so
long
as the purchase price does not exceed the above-referenced per unit purchase
price.
a.
Common and Preferred Stock
On
May
30, 2007, the Company amended and restated its Certificate of Incorporation
authorizing the issuance of up to 100,000,000 shares of common stock, par value
$.0001 per share, and 5,000,000 shares of preferred stock, par value $.0001
per
share. In addition, the May 30, 2007 amendment to the Company’s Certificate of
Incorporation changed the capital stock’s par value from $0.01 to
$0.0001. All of the references in the accompanying financial statements to
the
par value have been retroactively restated to reflect the change in par
value.
b.
Warrants
In
March
2006, the Company issued an aggregate of 4,075,000 Class W warrants and
4,075,000 Class Z warrants to its three existing warrant holders in exchange
for
the return and cancellation of the outstanding 8,150,000 warrants which were
purchased in October 2005, for an aggregate $407,500, or $0.05 per warrant.
On
March 15, 2006, the Company sold and issued additional Class W warrants to
purchase 700,000 shares of the Company’s common stock, and additional Class Z
warrants to purchase 700,000 shares of the Company’s common stock, for an
aggregate purchase price of $70,000, or $0.05 per warrant. On May 25, 2006,
the Company sold and issued additional Class W warrants to purchase 6,925,000
shares of the Company’s common stock, and additional Class Z Warrants to
purchase 6,925,000 shares of the Company’s common stock, to its existing warrant
holders for an aggregate purchase price of $692,500 or $0.05 per
warrant.
On
January 23, 2007, the 11,700,000 old Class Z warrants were exchanged for
11,700,000 new Class Z warrants (the “Class Z Warrants”) and the 11,700,000 old
Class W warrants were exchanged for 11,700,000 new Class W warrants
(the “Class W Warrants”) and the Company sold and issued additional Class W
warrants to purchase 3,800,000 shares of the Company’s common stock and
additional 3,800,000 Class Z warrants to purchase 3,800,000 shares of the
Company’s common stock to its existing warrant holders and to two other
accredited investors for an aggregate purchase price $380,000 or $0.05 per
warrant.
STONELEIGH
PARTNERS ACQUISITION CORP.
(a
corporation in the development stage)
NOTES
TO FINANCIAL STATEMENTS
NOTE
7 — COMMON STOCK, WARRANTS AND UNDERWRITER PURCHASE OPTION –
(CONTINUED)
Each
Class W Warrant was exercisable for one share of common stock. Except as set
forth below, the Class W Warrants entitled the holder to purchase shares at
$1.75 per share, subject to adjustment in the event of stock dividends and
splits, reclassifications, combinations and similar events, for a period
commencing on the later of: (a) completion of the Business Combination and
(b) June 5, 2008, and ending June 5, 2015.
Each
Class Z Warrant was exercisable for one share of common stock. Except as set
forth below, the Class Z Warrants entitled the holder to purchase shares at
$1.50 per share, subject to adjustment in the event of stock dividends and
splits, reclassifications, combinations and similar events, for a period
commencing on the later of: (a) completion of the Business Combination and
(b) June 5, 2008, and ending June 5, 2015.
On
April
4, 2007, 15,500,000 Class W warrants and 15,500,000 Class Z warrants with an
aggregate value of $1,550,000 were returned by the warrant holders and cancelled
by the Company. In exchange for the return of the Class W and Z Warrants, the
Company issued 6,249,900 shares of the Company’s common stock with an aggregate
value of $1,550,000 to such individuals.
Simultaneously
with the consummation of the Offering, certain of the Company’s officers,
directors, and senior advisors purchased 5,975,000 Warrants for an aggregate
purchase price of $4,450,000 (“Insider Warrants”).
Public
Warrants
Each
warrant sold in the Offering (a “Public Warrant”) is exercisable for one share
of common stock. The Public Warrants entitle the holder to purchase shares
at
$5.50 per share, subject to adjustment in the event of stock dividends and
splits, reclassifications, combinations and similar events for a period
commencing on the later of: (a) completion of the Business Combination and
(b) May 31, 2008 and ending May 31, 2011. The Company has the ability
to redeem the Public Warrants, in whole or in part, at a price of $.01 per
Public Warrant, at any time after the Public Warrants become exercisable, upon
a
minimum of 30 days’ prior written notice of redemption, and if, and only if, the
last sale price of the Company’s common stock equals or exceeds $11.50 per
share, for any 20 trading days within a 30 trading day period ending three
business days before the Company sent the notice of redemption.
Insider Warrants
At
the
closing of the Offering (Notes 1 and 2), the Company sold to certain of the
Initial Stockholders 5,975,000 Insider Warrants for an aggregate purchase price
of $4,450,000 (the “Insider Warrants”). All of the proceeds received from these
purchases have been placed in the Trust Account. The Insider
Warrants are identical to the Public Warrants in the Offering except that they
may be exercised on a cashless basis so long as they are held by the original
purchasers, members of their immediate families or their controlled entities,
and may not be sold or transferred, except in limited circumstances, until
after
the consummation of a Business Combination. If the Company dissolves before
the
consummation of a Business Combination, there will be no distribution from
the
Trust Account with respect to such Insider Warrants, which will expire
worthless.
As
the
proceeds from the exercise of the Warrants will not be received until after
the
completion of a Business Combination, the expected proceeds from exercise will
not have any effect on the Company’s financial condition or results of
operations prior to a Business Combination.
STONELEIGH
PARTNERS ACQUISITION CORP.
(a
corporation in the development stage)
NOTES
TO FINANCIAL STATEMENTS
NOTE
7 — COMMON STOCK, WARRANTS AND UNDERWRITER PURCHASE OPTION –
(CONTINUED)
Each
Insider Warrant is exercisable for one share of common stock. The Insider
Warrants entitle the holder to purchase shares at $5.50 per share, subject
to
adjustment in the event of stock dividends and splits, reclassifications,
combinations and similar events, for a period commencing on the later of:
(a) completion of the Business Combination and (b) May 31,
2008 and ending May 31, 2011.
The
Company is only required to use its best efforts to cause the registration
statement to be declared effective and, once effective, the Company will use
its
best efforts to maintain its effectiveness. Accordingly, its obligation is
merely to use its best efforts in connection with the registration rights
agreement and upon exercise of the Warrants. The Company will
satisfy its obligation by delivering unregistered shares of common stock. If
a
registration statement is not effective at the time a warrant is exercised,
the
Company will not be obligated to deliver registered shares of common stock,
and
there are no contracted penalties for its failure to do
so. Consequently, the Warrants may expire worthless.
c.
Underwriter Purchase Option
Upon
closing of the Offering, the Company sold and issued an option (the “UPO”) for
$100 to HCFP, to purchase up to 1,250,000 Units at an exercise price of $10.00
per Unit. The Units underlying the UPO will be exercisable in whole or in part,
solely at holders’ discretion, commencing on the later of (i) the consummation
of a Business Combination and (ii) May 31, 2008, and expire on May 31, 2012.
The
Company accounted for the fair value of the UPO, inclusive of the receipt of
the
$100 cash payment, as an expense of the Offering resulting in a charge
directly to stockholders’ equity, which was offset by an equivalent increase in
stockholder’s equity for the issuance of the UPO. As of June 5, 2007, the
Company calculated, using a Black-Scholes option pricing model, the fair value
of the 1,250,000 Units underlying the UPO to be approximately $4,372,000. The
fair value of the UPO granted was calculated as of the date of grant using
the
following assumptions: (1) expected volatility of 51.12% (2) risk-free
interest rate of 4.86% and (3) contractual life of 5 years. The UPO may be
exercised for cash or on a “cashless” basis, at the holder’s option, such that
the holder may use the appreciated value of the UPO (the difference between
the
exercise prices of the UPO and the underlying warrants and the market price
of
the units and underlying securities) to exercise the UPO without the payment
of
any cash.
The
Company has no obligation to net cash settle the exercise of the UPO or the
warrants underlying the UPO. The holder of the UPO will not be entitled to
exercise the UPO or the warrants underlying the UPO unless a registration
statement covering the securities underlying the UPO is effective or an
exemption from registration is available. If the holder is unable to exercise
the UPO or underlying warrants, the UPO or warrants, as applicable, will expire
worthless.
NOTE
8 — NOTE PAYABLE
The
Company has financed its Directors’ and Officers’ insurance policy for the
amount of $199,350 (the ‘‘Payable’’) due to First Insurance Funding Corp of New
York (secured by the uncovered premium of the policy). The Payable
bears interest at 7.2% per annum with payments commencing June 30, 2007 and
continuing through March 31, 2009. The Company will pay 22 equal installments
of
principal and interest of $9,700. For the year ended July 31, 2007 the Company
recognized $1,277 of interest expense and at July 31, 2007, the note payable
balance was $181,228.
STONELEIGH
PARTNERS ACQUISITION CORP.
(a
corporation in the development stage)
NOTES
TO FINANCIAL STATEMENTS
NOTE
9 — SUBSEQUENT EVENTS
The
Company has transferred $976,979 of interest income on its Trust Account to
its
operating account in August 2007, $966,276 in September 2007 and $259,263 in
October 2007.
STONELEIGH
PARTNERS ACQUISITION CORP.
(a
corporation in the development stage)
NOTES
TO FINANCIAL STATEMENTS
NOTE
10 — SUMMARIZED QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)
The
Company’s unaudited condensed quarterly financial information is as follows for
the interim quarter ended:
| |
|
July
31, 2007
|
|
|
April
30, 2007
|
|
|
January
31, 2007
|
|
|
October
31, 2006
|
|
|
YEAR
ENDED JULY 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$ |
1,784,954
|
|
|
$ |
15,755
|
|
|
$ |
11,920
|
|
|
$ |
15,402
|
|
|
Interest
expense
|
|
|
(1,277
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Formation and
operating costs
|
|
|
(115,334 |
) |
|
|
(3,824 |
) |
|
|
(5,601 |
) |
|
|
(2,116 |
) |
|
Net
income before provision for taxes
|
|
|
1,668,343
|
|
|
|
11,931
|
|
|
|
6,319
|
|
|
|
13,286
|
|
|
Provision
for taxes
|
|
|
(647,476 |
) |
|
|
(4,534 |
) |
|
|
(2,401 |
) |
|
|
(5,049 |
) |
|
Net
income
|
|
|
1,020,867
|
|
|
|
7,397
|
|
|
|
3,918
|
|
|
|
8,237
|
|
|
Accretion
of Trust Fund relating to common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subject
to possible conversion
|
|
|
(317,741 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net
income attributable to common stockholders
|
|
$
|
703,126
|
|
|
$
|
7,397
|
|
|
$
|
3,918
|
|
|
$
|
8,237
|
|
|
Common
shares outstanding subject to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
possible
conversion
|
|
|
8,351,465
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Basic
and diluted net income per share subject to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
possible
conversion
|
|
$
|
0.04
|
|
|
$
|
0.00
|
|
|
$ |
0.00
|
|
|
$ |
0.00
|
|
|
Weighted
average common shares outstanding
|
|
|
9,256,354
|
|
|
|
6,250,000
|
|
|
|
6,250,000
|
|
|
|
6,250,000
|
|
|
Basic
and diluted net income per share
|
|
$
|
0.08
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
| |
|
|
|
September
9, 2005
|
|
| |
|
Quarter
Ended
|
|
(inception)
to
|
|
| |
|
July
31, 2006
|
|
|
April
30, 2006
|
|
|
January
31, 2006
|
|
|
October
31, 2005
|
|
|
FROM
INCEPTION TO JULY 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
5,269
|
|
|
$
|
3,865
|
|
|
$
|
3,649
|
|
|
$
|
67
|
|
|
Formation
and operating costs
|
|
|
(4,520 |
) |
|
|
(2,560 |
) |
|
|
-
|
|
|
|
(8,000 |
) |
|
Net
income (loss) before provision for taxes
|
|
|
749
|
|
|
|
1,305
|
|
|
|
3,649
|
|
|
|
(7,933 |
) |
|
Provision
for taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net
income (loss)
|
|
|
749
|
|
|
|
1,305
|
|
|
|
3,649
|
|
|
|
(7,933 |
) |
|
Accretion
of Trust Fund relating to common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subject
to possible conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net
income (loss) attributable to common stockholders
|
|
$
|
749
|
|
|
$
|
1,305
|
|
|
$
|
3,649
|
|
|
$
|
(7,933 |
) |
|
Common
shares outstanding subject to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
possible
conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Basic
and diluted net income per share subject to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
possible
conversion
|
|
$ |
0.00
|
|
|
$ |
0.00
|
|
|
$ |
0.00
|
|
|
$ |
(0.00
|
) |
|
Weighted
average common shares outstanding
|
|
|
6,250,000
|
|
|
|
6,250,000
|
|
|
|
6,250,000
|
|
|
|
6,250,000
|
|
|
Basic
and diluted net income per share
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
(0.00 |
) |
79