**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549




**FORM
      10-KSB/A**




x ANNUAL
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF


THE
      SECURITIES EXCHANGE ACT OF 1934




**For
      the fiscal year ended** **December
      31, 2005**




o TRANSITION
      REPORT
      PURSUANT TO SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934




**For
      the transition period from ______**  **to
      _________**




Commission
      file number 000-51545




**KEY
      HOSPITALITY ACQUISITION CORPORATION**




(Name
      of
      small business issuer in its charter)




**Delaware**
            
            **20-2742464**(State
                or other jurisdiction of
            
            (I.R.S.
                Employer Identification
                No.)incorporation
                or organization)




**4
                Becker Farm Road, Roseland, New Jersey
                07068**




(Address
      of principal executive offices)


(Zip
      Code)




**(973)
                992-3707**(Registrant's
                telephone number, including area
                code)




Securities
      registered pursuant to Section 12(b) of the Act:


NONE




Securities
      registered pursuant to Section 12(g) of the Act:




Units,
      each consisting of on share of Common Stock, $0.001 par value and One
      Warrant


Common
      Stock, par value $0.001 per share


Warrant
      to purchase Common Stock




Indicate
      by checkmark whether the registrant is not required to file reports pursuant
      to
      Section 13 or 15(d) of the Exchange Act:


Yes o  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 Exchange Act during the past 12 months
      (or
      for such shorter period that the Registrant was required to file such reports),
      and (2) has been subject to such filing requirements for the past 90 days.
      Yes x  No o




Indicate
      by check mark if there is no disclosure of delinquent filers in response to
      Item
      405 of Regulation S-B is not contained herein, and no disclosure will 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-KSB
      or any amendment to this Form 10-KSB. o




Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes xNo o




The
      Registrant’s revenues for the most recent fiscal year are $306,292.









The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common stock
      was
      sold, on the average bid and asked price of such common stock, as of December
      31, 2005 was $0.00.




On
      December 31, 2005, 7,949,995 shares of the Registrant’s common stock, par value
      $0.001 per share, were outstanding.




(APPLICABLE
      ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS IN THE PAST FIVE
      YEARS)




Check
      whether the registrant has filed all documents and reports required to be filed
      by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
      securities under a plan confirmed by a court. Yes o  No o




**DOCUMENTS
      INCORPORATED BY REFERENCE**




NONE




Transitional
      Small Business Disclosure Format: Yes oNo x







**Explanatory
      Note**




This
      Annual Report on Form 10-KSB/A is being filed as Amendment No. 1 to our Annual
      Report on Form 10-KSB which was originally filed with the Securities and
      Exchange Commission (“SEC”) on March 21, 2006. In connection with the
      preparation of our Current Report on Form 10-QSB for the quarter ended June
      30,
      2006, and after consulting with our independent registered accounting firm,
      Rothstein, Kass & Company, PC (“Rothstein Kass”), we determined, based on
      recent interpretations of the accounting for warrants under Emerging Issues
      Task
      Force No. 00-19 “Accounting for Derivative Financial Instruments Indexed to, and
      Potentially Settled in, a Company’s Own Stock” (“EITF 00-19”), that the fair
      value of the warrants issued as part of the units sold in our initial public
      offering (the “public warrants”) and the warrants issuable upon the exercise of
      the unit purchase option (the “embedded warrants”) issued to the underwriters in
      our initial public offering should be reported as a derivative liability rather
      than as equity as had been our practice. We are filing this Form 10-KSB/A to
      restate our financial statements to reflect the classification of these warrants
      as derivative liabilities and the non-operating gains and losses relating to
      such classification. For information concerning the background of the
      restatements, the specific adjustments made, and management’s discussion and
      analysis of our results of operations giving effect to the restated information,
      see “Restatement of Financial Statements” at Item 6. “Management’s
      Discussion and Analysis of Financial Condition and Results of Operations” and
      Note 2 to our Financial Statements.




This
      Form
      10-KSB/A amends and restates only certain information in the following sections
      as a result of the current restatements described above:




Part
      II  —
      Item 6. Management’s Discussion and Analysis or Plan of Operation;




Part
      II  —
      Item 7. Financial Statements; and





Part
      III
— Item 13. Exhibits.




In
      addition, we are also including currently dated Sarbanes Oxley Act
      Section 302 and Section 906 certifications of the Chief Executive
      Officer and Chief Financial Officer that are attached to this Form 10-K/A as
      Exhibits 31.1, 31.2 and 32.1.




For
      the
      convenience of the reader, this Form 10-KSB/A sets forth the entire Form 10-KSB
      which was prepared and relates to the Company as of December 31, 2005.
      However, this Form 10-KSB/A only amends and restates the Items described above
      to reflect the effects of the restatement and no attempt has been made to modify
      or update other disclosures presented in our Form 10-KSB. Accordingly, except
      for the foregoing amended information, this Form 10-KSB/A continues to speak
      as
      of March 21, 2006 (the original filing date of the Form 10-KSB), and does not
      reflect events occurring after the filing of our Form 10-KSB and does not modify
      or update those disclosures affected by subsequent events. Unless otherwise
      stated, the information in this Form 10-KSB/A not affected by such current
      restatements is unchanged and reflects the disclosures made at the time of
      the
      original filing.







**TABLE
      OF CONTENTS**


**Page**


PART
                  I
              
              
              1Item
                  1
              Description
                  of Business
              
              1Item
                  2
              Description
                  of Property
              
              19Item
                  3
              Legal
                  Proceedings
              
              19Item
                  4
              Submission
                  of Matters to a Vote of Security Holders
              
              19PART
                  II
              
              
              19Item
                  5
              Market
                  for Common Equity and Related Stockholder Matters
              
              19Item
                  6
              Management’s
                  Discussion and Analysis or Plan of Operation
              
              21Item
                  7
              Financial
                  Statements
              
              23Item
                  8
              Changes
                  In and Disagreements With Accountants on Accounting and FinancialDisclosure
              
              23Item
                  8A
              Controls
                  and Procedures
              
              23Item
                  8B
              Other
                  Information
              
              23PART
                  III
              
              
              23Item
                  9
              Directors
                  and Executive Officers of the Registrant
              
              23Item
                  10
              Executive
                  Compensation
              
              27Item
                  11
              Security
                  Ownership of Certain Beneficial Owners and Management and RelatedStockholder
                  Matters
              
              27Item
                  12
              Certain
                  Relationships and Related Transactions
              
              28Item
                  13
              Exhibits
              
              30Item
                  14
              Principal
                  Accountant Fees and Services
              
              32SIGNATURE
                PAGE
              
              32





i




**PART
      I**




**Item
      1.**  **Description
      of Business**




**General**




We
      were
      incorporated in the State of Delaware on April 25, 2005, as a blank check
      company formed to serve as a vehicle to acquire, through a merger, capital
      stock
      exchange, asset acquisition or other similar business combination, an operating
      business in the hospitality industry and/or other related businesses. While
      we
      may seek to effect business combinations with more than one target business,
      our
      initial business combination must be with a target business in the hospitality
      industry and have a collective fair market value that is at least 80% of our
      net
      assets at the time of such acquisition. We have conducted extensive discussions
      with target businesses regarding potential business combinations. In connection
      with these discussions, we have performed due diligence and incurred consulting,
      legal, accounting and other costs. To date, however, we have not selected a
      target business with which to enter into a business combination.




A
      registration statement for our initial public offering was declared effective
      on
      October 20, 2005. On October 28, 2005, we consummated our initial public
      offering of 6,000,000 units. On November 16, 2005, we consummated the closing
      of
      an additional 450,000 units that were subject to the underwriter’s
      over-allotment option. Each unit consists of one share of common stock and
      one
      redeemable common stock purchase warrant. Each warrant entitles the holder
      to
      the purchase from us one share of our common stock at an exercise price of
      $6.00
      per share. Our common stock and warrants started trading separately on January
      18, 2006.




Our
      net
      proceeds from the sale of our units were approximately $47,897,000 .
      Of this
      amount, $46,942,000
      was deposited in trust and the remaining $955,000 was held outside of the trust.
      The remaining proceeds are available to be used by us to provide for business,
      legal and accounting due diligence on prospective acquisition and continuing
      general and administrative expenses. We will use substantially all of the net
      proceeds of the initial public offering to acquire a target business, including
      identifying and evaluating prospective acquisition candidates, selecting the
      target business, and structuring, negotiating and consummating the business
      combination.




We
      believe that the hospitality industry in the U.S. and internationally is an
      attractive area in which to seek a merger or acquisition, as well as to operate
      and grow a business. Although our acquisition strategy is not limited to one
      sector within the hospitality industry, we intend to focus on target businesses
      in the following sectors in both U.S. and international markets: hotels,
      condo-hotels/fractional time-shares/destination clubs, golf, spa and gaming
      and/or related amenity or service businesses.




Our
      strategy is to acquire small to medium sized business(es) and/or asset(s) that
      may have certain of the following characteristics:




·  Growth
      and/or development opportunities;


·  Repositioning
      and/or rebranding opportunities;


·  Select
      balance sheet turnaround situations; and


·  Brand
      strength and expansion potential.




Our
      management, board of directors and advisors have extensive experience in various
      sectors within the hospitality industry. Our team has worked for many of the
      largest hospitality management companies, hotel owners and venture capital
      firms
      with hospitality industry experience. In addition, we believe our expertise
      in
      consummating deals makes our team well-suited to effect a business combination
      in the hospitality industry. Collectively, we have more than 100 years
      experience in sourcing, negotiating and structuring transactions.




**Hospitality
      Industry Ownership/Operator Segments**




More
      specifically, we intend to focus on opportunities that fall into the following
      three major ownership/operator segments: asset owners, brand owners/operators
      and independent operators.




·
            *Asset
                Owners*own direct (or, more typically, through holding entities, indirect)
                interests in actual real estate and related assets. Asset owners
                are
                typically private equity firms, private or public real estate investment
                trusts or companies, and individual investors whose primary business
                is to
                own real estate assets in various segments of the hospitality
                industry.









·
            *Brand
                Owners/Operators*are owners, managers and/or franchisors of hotel brands. They typically
                manage the assets themselves for a fee, or franchise the assets to
                independent operators. Occasionally, like asset owners, brand owners
                own
                actual interests in the real estate and related
                assets.




·
            *Independent
                Operators*typically combine the operations of both asset owners and brand
                owners/operators. They are companies that manage diverse assets under
                different brands, which they typically franchise. In some cases,
                they also
                own direct or indirect interests in actual real estate and related
                assets.




We
      have
      not prioritized such segments and do not currently have a preference as to
      into
      which segment we would prefer to consummate a business combination.




**Hospitality
      Industry Overview**




Over
      the
      past several years, the U.S. and international hospitality industry have
      rebounded from the September 11th attacks, a sluggish U.S. economy and
      uncertainty in the Middle East. We believe that this current growth creates
      attractive opportunities to effect one or more business combinations in the
      industry and to thereafter operate such businesses. Because our acquisition
      strategy does not limit us to any one specific sector of the hospitality
      industry, and are actively exploring all possible combinations across sectors
      which we have determined present attractive investment
      opportunities.




***The
      Hotel Industry***




Hotel
      assets can be generally subdivided into one of the categories listed below
      and
      may be owned on a stand-alone basis or as part of regional, national or
      international chains:




*·*
            *Luxury/Resort.*Hotels
                that offer the highest quality services, combined with luxury amenities,
                such as concierge service, high quality restaurants and resort facilities.
                These facilities typically charge the highest room
                rates.




*·*
            *Full
                Service.*Hotels
                that offer quality services combined with full service amenities,
                such as
                meeting facilities, food and beverage outlets, pool and exercise
                rooms and
                which often include spa or recreation
                facilities.




*·*
            *Limited
                Service.*Hotels
                that have limited service combined with quality rooms but have minimal
                meeting facilities (if any), have limited food and beverage outlets;
                may
                have a pool and exercise
                facilities.




*·*
            *Extended
                Stay.*Hotels
                that have limited services combined with larger rooms and suites
                with
                kitchens, limited meeting facilities (if any), typically serve breakfast
                only and may have a pool and exercise facilities. These hotels are
                designed for guests staying on average 3-4 nights or more and are
                mini-apartments.




*·*
            *Budget
                Hotels/Motels.*Hotels
                that offer no services, combined with small rooms and very few facilities,
                such as food and beverage facilities, pools, exercise facilities
                or
                meeting rooms. These facilities typically charge the lowest room
                rates.




In
      addition to the segments set forth above, we are evaluating hybrid opportunities
      including: condo/hotel conversions, timeshare units and fractional destination
      clubs, either alone or in tandem with a hotel.




We
      believe that hotels are generally considered a hedge against inflation because
      room rates can be adjusted on a daily basis. In most other types of real estate
      asset classes, leases are typically fixed: 1-2 years in duration for
      residential, 3-5 years for office, and 5-20 years for retail. The hotel industry
      is continuing to show strong growth. According to Price Waterhouse Coopers
      data:




·
            U.S.
                lodging industry ended 2005 with RevPAR growth of 8.4%, the highest
                since
                1981;




·
            Occupancy
                in 2005 reached 63.1%, the highest since
                2000;




·
            ADR
                increased by 5.3%;




·
            Supply
                growth was 0.4%, the lowest since 2000;
                and




·
            Demand
                grew by 3.3%.




According
      to the Hotel Research Group & PKF Consulting’s 2005 U.S. Lodging Industry
      Report, revenue growth in 2005 is expected to exceed 7.2%, to an average of
      approximately $44,000 per available room, a volume approximately equal to that
      last achieved in the year 2000. Accordingly, we believe that the hospitality
      industry is an attractive industry in which to make an acquisition and operate
      a
      target business.




2




***Hospitality
      Amenities and Services***




In
      addition to merger and acquisition opportunities in the hotel sector, we believe
      there are prospective acquisitions in the various hospitality amenity and
      related services sectors. These include, but are not limited to, those involving
      golf facilities, health clubs, spas and casinos. Compelling opportunities may
      exist in services related to the hospitality industry including, but not limited
      to, those involving management services, reservation services, maintenance
      services, security services, food and beverage-related services and
      hospitality-related technology services. In a study released by the
      International Spa Association, the U.S. spa industry generated an estimated
      $11.2 billion in revenue in 2003, up from $5 billion in 1999. Resort
      hotel spas accounted for 41% of 2003 total revenue, approximately
      $4.5 billion. In addition, there were:




·
            12,100
                (2004) vs. 5,300 (1999) spa locations in
                U.S;


·
            Cumulative
                Growth rates in 2002 to 2004 of 26% overall, 44% in the resort/hotel
                sector; and


·
            Annual
                rates in revenue since 2002 of about 6.5%.




The
      timeshare industry has also experienced dramatic growth. Resort Timesharing
      Worldwide has reported that the international timeshare industry reached
      $9.4 billion in sales in 2002 (up from $3.2 billion in 1990) with over
      5,400 resorts in more than 100 countries, a growth rate of approximately 12%
      annually.




**Effecting
      a business combination**




*General*




We
      are
      not presently engaged in, and we may not engage in, any substantive commercial
      business for an indefinite period of time. We intend to utilize cash derived
      from the proceeds of the initial offering, our capital stock, debt or a
      combination of these in effecting a business combination. Although substantially
      all of the net proceeds of our initial public offering are intended to be
      generally applied toward effecting a business combination as described in this
      report, the proceeds have not otherwise been designated for any more specific
      purposes. 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
      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. While we may seek
      to
      effect business combinations with more than one target business, we will
      probably have the ability, as a result of our limited resources, to effect
      only
      a single business combination with the proceeds of the initial public
      offering.




*We
      have not identified a target business*




We
      have
      conducted extensive discussions with target business regarding potential
      business combinations. In connection with these discussions, we have performed
      due diligence and incurred consulting, legal, accounting and other costs. To
      date, however, we have not selected a target business with which to enter into
      a
      business combination.




Subject
      to the limitations that a target business or businesses be within the
      hospitality industry and have a collective fair market value of at least 80%
      of
      our net assets at the time of the acquisition, as described below in more
      detail, we will have virtually unrestricted flexibility in identifying and
      selecting a prospective acquisition candidate. Accordingly, there is no basis
      for investors to evaluate the possible merits or risks of 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*




Target
      business candidates have and will be brought to our attention from various
      unaffiliated sources, including investment bankers, attorneys, accountants,
      venture capital funds, private equity funds, leveraged buyout funds, management
      buyout funds, hotel brokers and other members of the financial community, who
      are aware that we are seeking a business combination partner. Our initial
      stockholders, officers and directors as well as their affiliates have also
      brought to our attention target business candidates.






3


Any
      finders or brokers that we use will be paid a fee only upon the consummation
      of
      a business combination with a target identified by such finder or broker. We
      expect that any such fees paid to such persons will be a percentage of the
      fair
      market value of the transaction, with the percentage to be determined on an
      arm’s length basis based on market conditions at the time we enter into an
      agreement with such finder or broker. While we do not presently anticipate
      engaging the services of non-professional or professional firms that specialize
      in business acquisitions on any formal basis, we may engage these firms in
      the
      future or we may be approached with proposals on an unsolicited basis, in which
      event we may pay a finder’s fee or other compensation equal to a percentage of
      the fair market value of the transaction as agreed upon at the time of such
      engagement or agreement with a party that brings us an unsolicited proposal,
      as
      the case may be. The terms of any such arrangements will be disclosed to our
      stockholders in the proxy materials we provide in connection with any proposed
      business combination. In no event, however, will we pay any of our existing
      officers, directors or stockholders or any entity with which they are affiliated
      any finder’s fee or other compensation for services rendered to us prior to or
      in connection with the consummation of a business combination. In addition,
      none
      of our officers, directors or initial stockholders will receive any finder’s
      fee, consulting fees or any similar fees or other compensation from any other
      person or entity in connection with any business combination other than any
      compensation or fees to be received for any services provided following such
      business combination.




*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 businesses in the hospitality industry and have a collective fair
      market value that is 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 conducted
      specific research on the hospitality industry and have conducted research with
      respect to identifying the number and characteristics of potential acquisition
      candidates and the likelihood or probability of success of any proposed business
      combination. In evaluating a prospective target business, our management will
      consider, among other factors, the following:




·  financial
      condition and results of operations;




·  growth
      potential;




·  experience
      and skill of management and availability of additional personnel;




·  capital
      requirements;




·  competitive
      position and customer base;




·  barriers
      to entry into the hospitality industry;




·  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.




These
      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, where applicable, and inspection of
      facilities, as well as review of financial, legal and other information which
      will be made available to us. We expect that our chief executive officer and
      president will allocate a significant amount of their time, as necessary, for
      meetings with management and/or other representatives of target business
      candidates, site visits, due diligence, interviews with incumbent management,
      negotiations and any other activities necessary to complete a business
      combination. We may also engage an independent third party consultant or expert
      to assist us in the due diligence process although we have not identified or
      engaged any such consultants or experts as of the date of this
      prospectus.




4




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. However, we
      will
      not pay any finders or consulting fees to our officers, directors or initial
      stockholders, or any of their respective affiliates, for services rendered
      to or
      in connection with a business combination.




*Fair
      market value of target business*




The
      initial target business or businesses that we acquire must have a collective
      fair market value equal to at least 80% of our net assets at the time of such
      acquisition. There is no limitation on our ability to raise funds privately
      or
      through loans that would allow us to acquire a target business or businesses
      with a fair market value in an amount considerably greater than 80% of our
      net
      assets at the time of acquisition.




The
      fair
      market value of any such business or businesses will be determined by our board
      of directors and management based upon standards generally accepted by the
      financial community, such as actual and potential sales, earnings and cash
      flow
      and book value. In the event that we acquire assets, the fair market value
      of
      such assets will be determined by our management and board of directors based
      in
      large part upon an independent third party appraisal of such assets. If such
      assets include real property, only the value of the real property would be
      considered in our valuation analysis. Proposed construction costs or any other
      contingent costs or contemplated capital improvements would not be included
      in
      the valuation analysis. Additionally, if our board is not able to independently
      determine that the target business has a sufficient fair market value (for
      example, if the financial analysis is too complicated for our board of directors
      to perform on its own or if our board of directors determine that outside
      expertise is necessary or helpful in conducting such analysis), we will obtain
      an opinion from an unaffiliated, independent investment banking firm which
      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 fair market value meets the 80% of net assets threshold, it is not
      anticipated that copies of such opinion would be distributed to our initial
      stockholders, although copies will be provided to initial stockholders or
      potential investors that request it. If we do obtain such an opinion, we will
      provide details with respect to how such opinion may be obtained from us in
      the
      Current Report on Form 8-K which we file to disclose our entering into the
      acquisition agreement. 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.




*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 one or more target businesses or
      assets whose fair market value, collectively, is at least equal to 80% of our
      net assets at the time of such acquisition, as discussed above. It is possible
      that we could acquire assets such as real property and build structures or
      acquire real property with existing structures. If we were to acquire real
      or
      other property instead of an operating business, we would most likely evaluate
      such acquisitions based on customary real estate valuation metrics, and such
      evaluation would include obtaining an appraisal from an independent real estate
      appraiser. In addition, if we were to acquire solely assets instead of an
      operating business, we would expect that our current management would be
      retained and/or new management may be hired. Consequently, we expect to have
      the
      ability to effect only a single business combination, although this may entail
      or simultaneous acquisitions of several operating businesses. We may not be
      able
      to acquire more than one target business because of various factors, including
      possible complex domestic or international accounting issues, which would
      include generating pro forma financial statements reflecting the operations
      of
      several target businesses as if they had been combined, and numerous logistical
      issues, which could include attempting to coordinate the timing of negotiations,
      proxy statement disclosure and other legal issues and closings with multiple
      target businesses. In addition, we would also be exposed to the risks that
      conditions to closings with respect to the acquisition of one or more of the
      target businesses would not be satisfied bringing the fair market value of
      the
      initial business combination below the required fair market value of 80% of
      net
      assets threshold. Accordingly, for an indefinite period of time, the prospects
      for our future viability may be entirely dependent upon the future performance
      of a 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:




5




·  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 or dependency on a limited customer
      base.




*Limited
      ability to evaluate the target business management*




Although
      we intend to closely scrutinize the management of a prospective target business
      when evaluating the desirability of effecting a business combination, we cannot
      assure you that our 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. Furthermore, the future role of our officers and directors, if any,
      in
      the target business cannot presently be stated with any certainty. Moreover,
      our
      current management will only be able to remain with the combined company after
      the consummation of a business combination if they are able to negotiate and
      agree to mutually acceptable employment terms as part of any such combination,
      which terms would be disclosed to stockholders in any proxy statement relating
      to such transaction. Any such negotiations may result in a conflict of interest.
      While it is possible that one or more of our directors will remain associated
      in
      some capacity with us following a business combination, it is unlikely that
      any
      of them will devote their full efforts to our affairs subsequent to a business
      combination.




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 additional
      managers will have the requisite skills, knowledge or experience necessary
      to
      enhance the incumbent management.




*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 is such as
      would not ordinarily require stockholder approval under applicable state law.
      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 and directors, have agreed
      to vote their respective shares of common stock owned by them immediately prior
      to the initial public offering in accordance with the majority of the shares
      of
      common stock voted by the public stockholders. In addition, our initial
      stockholders have agreed to vote any shares of common stock acquired following
      the initial public offering in favor of the business combination submitted
      to
      our stockholders for approval. Accordingly, they will not be able to exercise
      conversion rights with respect to a potential business combination. We will
      proceed with the business combination only if a majority of the shares of common
      stock voted by the public stockholders are voted in favor of the business
      combination and public stockholders owning less than 20% of the shares sold
      in
      the initial public offering exercise their conversion rights.




*Conversion
      rights*




At
      the
      time we seek stockholder approval of any business combination, we will offer
      each public stockholder the right to have such stockholder’s shares of common
      stock converted to cash if the stockholder votes against the business
      combination and the business combination is approved and completed. The actual
      per-share conversion price will be equal to the amount in the trust fund,
      inclusive of any interest (net of any taxes due on such interest, which taxes,
      if any, shall be paid from the trust fund, and calculated as of two business
      days prior to the consummation of the proposed business combination), divided
      by
      the number of shares sold in the initial public offering. Without taking into
      any account interest earned on the trust fund or taxes payable on such interest,
      the initial per-share conversion price would be $7.25, or $0.75 less than the
      per-unit offering price of $8.00. Because the initial per share conversion
      price
      is $7.25 per share (plus any interest net of taxes payable), which is lower
      than
      the $8.00 per unit price paid in the offering and, which may be lower then
      the
      market price of the common stock on the date of the conversion, there may be
      a
      disincentive on the part of public stockholders to exercise their conversion
      rights.




6




An
      eligible stockholder may request conversion at any time after the mailing to
      our
      stockholders of the proxy statement and prior to the vote taken with respect
      to
      a proposed business combination at a meeting held for that purpose, but the
      request will not be granted unless the stockholder votes against the business
      combination and the business combination is approved and completed. If a
      stockholder votes against the business combination but fails to properly
      exercise its conversion rights, such stockholder will not have its shares of
      common stock converted to its pro rata distribution of the trust fund. Any
      request for conversion, once made, may be withdrawn at any time up to the date
      of the meeting. 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. Public
      stockholders who convert their stock into their share of the trust fund still
      have the right to exercise the warrants that they received as part of the units.
      We will not complete any business combination if public stockholders, owning
      20%
      or more of the shares sold in the initial public offering, exercise their
      conversion rights.




*Liquidation
      if no business combination*




If
      we do
      not complete a business combination within 18 months after October 28, 2005,
      the
      date we consummated our initial public offering, or within 24 months if the
      extension criteria described below have been satisfied, we will be dissolved
      and
      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
      fund, inclusive of any interest (net of taxes payable), plus any remaining
      net
      assets. Our initial stockholders, including all of our officers and directors,
      have waived their rights to participate in any liquidation distribution with
      respect to shares of common stock owned by them immediately prior to the initial
      public offering. There will be no distribution from the trust fund with respect
      to our warrants, which will expire worthless.




If
      we
      were to expend all of the net proceeds of our initial public offering, other
      than the proceeds deposited in the trust fund, and without taking into account
      interest, if any, earned on the trust fund (and any taxes payable thereon),
      the
      initial per-share liquidation price would be $7.25 or $0.75 less than the
      per-unit offering price of $8.00. The proceeds deposited in the trust account
      could, however, become subject to the claims of our creditors which could be
      prior to the claims of our public stockholders. Although we seek 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 account for the benefit of our public
      stockholders, there is no guarantee that they all will execute such agreements
      or even if they execute such agreements that they would be prevented from
      bringing claims against the trust fund. If any third party refused to execute
      an
      agreement waiving such claims to the monies held in the trust account, we would
      perform an analysis of the alternatives available to us if we chose not to
      engage such third party and evaluate if such engagement would be in the best
      interest of our stockholders if such third party refused to waive such claims.
      Examples of possible instances where we may engage a third party that refused
      to
      execute a waiver include the engagement of a third party consultant whose
      particular expertise or skills are believed by management to be significantly
      superior to those of other consultants that would agree to execute a waiver
      or
      in cases where management is unable to find a provider of required services
      willing to provide the waiver. In any event, our management would perform an
      analysis of the alternatives available to it and would only enter into an
      agreement with a third party that did not execute a waiver if management
      believed that such third party’s engagement would be significantly more
      beneficial to us than any alternative. In addition, there is no 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 account for any
      reason.




Messrs. Davidson
      and Toledano, severally, and pro rata in proportion to their stock ownership,
      have agreed pursuant to agreements with us and Maxim Group LLC that if we
      liquidate prior to the consummation of a business combination, they will be
      personally liable to pay debts and obligations to vendors that are owed money
      by
      us for services rendered or products sold to us in excess of the net proceeds
      of
      the initial public offering not held in the trust account. We cannot assure
      you,
      however, that they will be able to satisfy these obligations. Further, they
      will
      not be personally liable to pay debts and obligations to prospective target
      businesses if a business combination is not consummated with such prospective
      target businesses, or for claims from any other entity other than vendors and
      service providers in the ordinary course. Accordingly, we cannot assure you
      that
      the actual per-share liquidation price will not be less than $7.25, plus
      interest (net of taxes payable, which taxes, if any, shall be paid from the
      trust fund), due to claims of creditors.




If
      we
      enter into either a letter of intent, an agreement in principle or a definitive
      agreement to complete a business combination prior to April 27, 2007 (18 months
      after the consummation of our initial public offering), but are unable to
      complete the business combination within the 18-month period, then we will
      have
      an additional six months, until October 28, 2007, in which to complete the
      business combination contemplated by the letter of intent, agreement in
      principle or definitive agreement. If we are unable to do so by the expiration
      of the 24-month period from the consummation of our initial public offering,
      we
      will then liquidate. Upon notice from us, the trustee of the trust fund will
      commence liquidating the investments constituting the trust fund and will turn
      over the proceeds to our transfer agent for distribution to our public
      stockholders. We anticipate that our instruction to the trustee would be given
      promptly after the expiration of the applicable 18-month or 24-month
      period.




7




Our
      public stockholders shall be entitled to receive funds from the trust fund
      only
      in the event of our liquidation or if the stockholders seek to convert their
      respective shares into cash upon a business combination which the stockholder
      voted against and which is actually completed by us. In no other circumstances
      shall a stockholder have any right or interest of any kind to or in the trust
      fund.




**Competition**




In
      identifying, evaluating and selecting a target business, we may encounter
      intense competition from other entities having a business objective similar
      to
      ours. 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 will be 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
      the
      initial public offering, our ability to compete in acquiring certain sizable
      target businesses will be 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 or obtain
      the
      necessary financial information to be included in the proxy statement to be
      sent
      to stockholders in connection with such business combination may delay or
      prevent the completion of a transaction;




·  our
      obligation to convert into cash shares of common stock held by our public
      stockholders in certain instances may reduce the resources available to us
      for a
      business combination; and




·  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. Our management believes, however, that
      to
      the extent that our target business is a privately held entity, our status
      as a
      well-financed public entity and potential access to the United States public
      equity markets may give us a competitive advantage over entities having a
      similar business objective as ours in acquiring a target business with growth
      potential 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 the hospitality
      industry. We cannot assure you that, subsequent to a business combination,
      we
      will have the resources or ability to compete effectively.




**Employees**




We
      have
      three officers, all of whom are also members of our board of directors. These
      individuals are not obligated to contribute any specific number of hours per
      week 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 the availability of suitable target businesses to investigate. We do not
      intend to have any full time employees prior to the consummation of a business
      combination.




**Risk
      Factors**




Statements
      in this Annual Report under the captions “Business” and “Management’s Discussion
      and Analysis or Plan of Operation”, as well as oral statements that may be made
      by us or by our officers, directors or employees acting on our behalf, that
      are
      not historical fact constitute “forward-looking statements” within the meaning
      of the Private Securities Litigation Reform Act of 1995. Such forward-looking
      statements involve known and unknown risks, uncertainties and other factors
      that
      could cause our actual results to be materially different from the historical
      results or from any results expressed or implied by such forward-looking
      statements. Such factors include, but are not limited to, the risk factors
      set
      forth below.




We
      do not
      intend to update any forward-looking statements to reflect events or
      circumstances after the date of such sta tements
      or to reflect the occurrence of anticipated or unanticipated
      events.




*We
      are a development stage company with no operating history and, accordingly,
      you
      will not have any basis on which to evaluate our ability to achieve our business
      objective.*




We
      are a
      recently incorporated development stage company with no operating results to
      date. Since we do not have an operating history, you will have no basis upon
      which to evaluate our ability to achieve our business objective, which is to
      acquire an operating business in the hospitality industry. We will not generate
      any revenues until, at the earliest, after the consummation of a business
      combination.




8




*If
      we
      are forced to liquidate before a business combination, our public stockholders
      will receive less than $8.00 per share upon distribution of the trust fund
      and
      our warrants will expire worthless.*




If
      we are
      unable to complete a business combination and are forced to liquidate our
      assets, the per-share liquidation will be less than $8.00 because of the
      expenses of the initial public offering, our general and administrative expenses
      and the costs of seeking a business combination. Furthermore, there will be
      no
      distribution with respect to our outstanding warrants and, accordingly, the
      warrants will expire worthless if we liquidate before the completion of a
      business combination.




*You
      will not be entitled to protections normally afforded to investors of blank
      check companies.*




Since
      the
      net proceeds of the 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 will have net tangible assets in excess of $5,000,000
      upon the successful consummation of the initial public offering and will file
      a
      Current Report on Form 8-K with the U.S. Securities and Exchange Commission,
      which we refer to herein as the SEC, upon consummation of the initial public
      offering including an audited balance sheet 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 will not be afforded the
      benefits or protections of those rules. Because we are not subject to Rule
      419,
      our units will be immediately tradable and we have a longer period of time
      to
      complete a business combination in certain circumstances.




*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, approximately 43 similarly structured
      blank
      check companies have completed initial public offerings since August 2003 and
      approximately 41 others have filed registration statements for initial public
      offerings. Of these companies, only four companies have consummated a business
      combination, while nine other companies have announced they have entered into
      a
      definitive agreement for a business combination, but have not consummated such
      business combination. Accordingly, there are approximately 39 blank check
      companies with more than $2.3 billion in trust, and maybe at least 40 additional
      blank check companies with more than $2.6 billion in trust that are seeking
      to
      carry out a business plan similar to our business plan. Furthermore, there
      are a
      number of additional offerings 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 October 20, 2005, our effective date, and prior to our
      completion of a business combination. While some of those companies have
      specific industries that they must complete a business combination in, a number
      of them may consummate a business combination in any industry they choose.
      We
      may therefore be subject to competition from these and other companies
      (including large private equity and similar firms) seeking to consummate a
      business plan similar to ours which will, as a result, increase demand for
      privately-held companies to combine with companies structured similarly to
      ours.
      Further, the fact that only four of such companies have completed a business
      combination and nine of such companies have entered into a definitive agreement
      for a business combination may be an indication that there are only a limited
      number of attractive target businesses available to such entities or that many
      privately-held target businesses may not be inclined to enter into business
      combinations with publicly held blank check companies like us. We cannot assure
      you that we will be able to successfully compete 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 periods. If we are unable to find a suitable target business within such
      time periods, we will be forced to liquidate.




*If
      third parties bring claims against us, the proceeds held in trust could be
      reduced and the per-share liquidation price received by stockholders will be
      less than $7.25 per share.*




Our
      placing of funds in trust may not protect those funds from third party claims
      against us. Although we have and will seek 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 account for the benefit of our public stockholders, there is no guarantee
      that they will execute such agreements or even if they execute such agreements
      that they would be prevented from bringing claims against the trust fund. If
      any
      third party refused to execute an agreement waiving such claims to the monies
      held in the trust account, we would perform an analysis of the alternatives
      available to us if we chose not to engage such third party and evaluate if
      such
      engagement would be in the best interest of our stockholders if such third
      party
      refused to waive such claims. Examples of possible instances where we may engage
      a third party that refused to execute a waiver include the engagement of a
      third
      party consultant whose particular expertise or skills are believed by management
      to be significantly superior to those of other consultants that would agree
      to
      execute a waiver or in cases where management is unable to find a provider
      of
      required services willing to provide the waiver. In any event, our management
      would perform an analysis of the alternatives available to it and would only
      enter into an agreement with a third party that did not execute a waiver if
      management believed that such third party’s engagement would be significantly
      more beneficial to us than any alternative. In addition, there is no 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 account for any reason.
      Accordingly, the proceeds held in trust could be subject to claims which could
      take priority over the claims of our public stockholders and the per-share
      liquidation price could be less than $7.25, plus interest (net of any taxes
      due
      on such interest, which taxes, if any, shall be paid from the trust fund),
      due
      to claims of such creditors. If we are unable to complete a business combination
      and are forced to liquidate, Jeffrey S. Davidson, our chief executive officer
      and a member of our board of directors, and Udi Toledano, our president and
      a
      member of our board of directors, severally, in accordance with their respective
      beneficial ownership interests in us, are personally liable to ensure that
      the
      proceeds in the trust fund are not reduced by the claims of various vendors
      or
      other entities that are owed money by us for services rendered or products
      sold
      to us. However, we cannot assure you that they will be able to satisfy those
      obligations. Further, they will not be personally liable to pay debts and
      obligations to prospective target businesses if a business combination is not
      consummated with such prospective target businesses, or for claims from any
      other entity other than vendors. Accordingly, we cannot assure you that the
      actual per share liquidation price will not be less than $7.25 plus interest,
      due to claims of creditors.




9




*Since
      we have not currently selected a prospective target business with which to
      complete a business combination, we are currently unable to ascertain the merits
      or risks of the target business’ operations.*




Since
      we
      have not yet identified a prospective target business, there is no current
      basis
      for you to evaluate the possible merits or risks of the target business’
operations. 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. 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 of the significant risk factors. We also cannot assure you that an
      investment in our securities will not ultimately prove to be less favorable
      to
      investors than a direct investment, if an opportunity were available, in a
      target business.




*We
      may issue shares of our capital stock 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
      amended and restated certificate of incorporation authorizes the issuance of
      up
      to 50,000,000 shares of common stock, par value $.001 per share, and 1,000,000
      shares of preferred stock, par value $.001 per share. After the initial public
      offering and the exercise of the underwriters’ over-allotment option), there
      were 34,400,000 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 Maxim
      Group LLC, the representative of the underwriters) and all of the 1,000,000
      shares of preferred stock available for issuance. Although we have no
      commitments as of yet to issue our securities, we may issue a substantial number
      of additional shares of our common stock or preferred stock, or a combination
      of
      common and preferred stock, to complete a business combination. The issuance
      of
      additional shares of our common stock or any number of shares of our preferred
      stock:




·
            may
                significantly reduce the equity interest of investors in the initial
                public offering;




·
            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 carry forwards, if any, and most likely
                also
                result in the resignation or removal of our present officers and
                directors; and




·
            may
                adversely affect prevailing market prices for our common
                stock.




10




*We
      may issue notes or other debt securities, or otherwise incur substantial debt,
      to complete a business combination, which may adversely affect our balance
      sheet
      and general financial condition.*




Although
      we have no commitments to issue any notes or other debt securities, or to
      otherwise incur debt (including mortgage or other secured debt), we may choose
      to incur substantial debt to complete a business combination. The incurrence
      of
      debt could result in:




·
            default
                and foreclosure on our assets if our operating cash flow after a
                business
                combination were insufficient to pay our debt
                obligations;




·
            acceleration
                of our obligations to repay the indebtedness even if we have made
                all
                principal and interest payments when due if the debt security contained
                covenants that required the maintenance of certain financial ratios
                or
                reserves and any such covenant were breached without a waiver or
                renegotiation of that covenant;




·
            our
                immediate payment of all principal and accrued interest, if any,
                if the
                debt security was payable on
                demand;




·
            covenants
                that limit our ability to acquire capital assets or make additional
                acquisitions; and




·
            our
                inability to obtain additional financing, if necessary, if the debt
                security contained covenants restricting our ability to obtain additional
                financing while such security was
                outstanding.




*It
      is
      likely that some of our current officers and directors will resign upon
      consummation of a business combination and we will have only a limited ability
      to evaluate the management of the target business.*




Our
      ability to effect a business combination will be totally dependent upon the
      efforts of our key personnel. The future role of our key personnel following
      a
      business combination, however, cannot presently be fully ascertained. Although
      we expect several of our management and other key personnel, particularly our
      chief executive officer and president, to remain associated with us following
      a
      business combination, we may employ other personnel following the business
      combination. Moreover, our current management will only be able to remain with
      the combined company after the consummation of a business combination if they
      are able to negotiate mutually agreeable employment terms as part of any such
      combination, which terms would be disclosed to stockholders in any proxy
      statement relating to such transaction. If we acquire a target business in
      an
      all-cash transaction, it would be more likely that current members of management
      would remain with the combined company if they chose to do so. If a business
      combination were to be structured as a merger whereby the stockholders of the
      target company were to control the combined company following a business
      combination, it may be less likely that our current management would remain
      with
      the combined company unless it was negotiated as part of the transaction via
      the
      acquisition agreement, an employment agreement or other arrangement. In making
      the determination as to whether current management should remain with us
      following the business combination, management will analyze the experience
      and
      skill set of the target business’ management and negotiate as part of the
      business combination that certain members of current management remain if it
      is
      believed that it is in the best interests of the combined company post-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 as well as United States
      securities laws which could cause us to have to expend time and resources
      helping them become familiar with such laws. This could be expensive and
      time-consuming and could lead to various regulatory issues which may adversely
      affect our operations.




*If
      our current management were to negotiate to be retained by our company following
      a business combination as a condition to any potential business combination,
      such negotiations may result in a conflict of interest.*




Our
      current management will only be able to remain with the combined company after
      the consummation of a business combination if they are able to negotiate
      mutually agreeable employment terms as part of any such combination, which
      terms
      would be disclosed to stockholders in any proxy statement relating to such
      transaction. The financial interest of our officers and directors could
      influence their motivation in selecting a target business and thus, there may
      be
      a conflict of interest when determining whether a particular business
      combination is in the stockholders’ best interest.




*Our
      officers and directors may allocate their time to other businesses thereby
      causing conflicts of interest in their determination as to how much time to
      devote to our affairs. This could have a negative impact on 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
      executive officers are engaged in several other business endeavors and are
      not
      obligated to contribute any specific number of hours per week to our affairs.
      If
      our executive officers’ 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 have a negative impact on our ability
      to
      consummate a business combination.




11




*Our
      officers and directors 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 to which entity
      a
      particular business opportunity should be presented.*




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. Additionally, our officers and
      directors may become aware of business opportunities which may be appropriate
      for presentation to us as well as the other entities with which they are or
      may
      be affiliated. Further, certain of our officers and directors are currently
      involved in other businesses that are similar to the business activities that
      we
      intend to conduct following a business combination. Due to these existing
      affiliations, they may have fiduciary or contractual obligations to present
      potential business opportunities to those entities prior to presenting them
      to
      us which could cause additional conflicts of interest. Accordingly, they may
      have conflicts of interest in determining to which entity a particular business
      opportunity should be presented.




*Certain
      of our officers and directors are currently 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.*




Certain
      of our officers and directors are currently involved in other businesses that
      are similar to the business activities that we intend to conduct following
      a
      business combination. Due to these existing affiliations, they have prior
      fiduciary obligations to present potential business opportunities to those
      entities prior to presenting them to us which could cause additional conflicts
      of interest. Accordingly, they have conflicts of interest in determining to
      which entity a particular business opportunity should be presented. We cannot
      assure you that these conflicts will be resolved in our favor.




*If
      we
      seek to effect a business combination with an entity that is directly or
      indirectly affiliated with one or more of our initial stockholders, conflicts
      of
      interest could arise.*




Our
      initial stockholders either currently have or may in the future have
      affiliations with companies in the hospitality and related industries. Although
      we have no current plans to do so, if we were to seek a business combination
      with a target business with which one or more of our initial stockholders may
      be
      affiliated, conflicts of interest could arise in connection with negotiating
      the
      terms of and completing the business combination. Conflicts that may arise
      may
      not be resolved in our favor.




*All
      of our officers and directors own shares of our common stock which will not
      participate in liquidation distributions and therefore they 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 stock in our company which were issued
      prior to the initial public offering, but have waived their right to receive
      distributions with respect to those shares upon our liquidation. Additionally,
      all of our officers and directors purchased warrants in the open market
      following the initial public offering. The shares and warrants owned by our
      officers and directors and their affiliates will be worthless if we do not
      consummate a business combination. The personal and financial interests of
      our
      directors may influence their motivation in identifying and selecting a target
      business and completing a business combination timely. 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.




*Our
      initial stockholders will not receive reimbursement for any out-of-pocket
      expenses incurred by them to the extent that such expenses exceed the amount
      in
      the trust fund unless the business combination is consummated and therefore
      they
      may have a conflict of interest in determining whether a particular target
      business is appropriate for a business combination and in the public
      stockholders’ best interest.*




Our
      initial stockholders, including all of our officers and directors, will not
      receive reimbursement for any out-of-pocket expenses incurred by them to the
      extent that such expenses exceed the amount in the trust fund unless the
      business combination is consummated. In such event, our initial stockholders
      may, as part of any such combination, negotiate the repayment of some or all
      of
      any such expenses, without interest or other compensation, which if not agreed
      to by the target business’ owners, could cause our management to view such
      potential business combination unfavorably, thereby resulting in a conflict
      of
      interest. The financial interest of our officers and directors could influence
      their motivation in selecting a target business and thus, there may be a
      conflict of interest when determining whether a particular business combination
      is in the stockholders’ best interest. We note, however, that such expenses are
      likely to be insignificant compared to the value of the shares of common stock
      purchased by the initial stockholders for an aggregate purchase price of
      $25,000, or the nominal amount of $.017 per share.




12




*If
      our common stock becomes subject to the SEC’s penny stock rules, broker-dealers
      may experience difficulty in completing customer transactions and trading
      activity in our securities may be adversely affected.*




If
      at any
      time we have net tangible assets of $5,000,000 or less and our common stock
      has
      a market price per share of less than $5.00, transactions in our common stock
      may be subject to the “penny stock” rules promulgated under the Securities
      Exchange Act of 1934. Under these rules, broker-dealers who recommend such
      securities to persons other than institutional accredited investors
      must:




·
            make
                a special written suitability determination for the
                purchaser;




·
            receive
                the purchaser’s written agreement to a transaction prior to
                sale;




·
            provide
                the purchaser with risk disclosure documents which identify certain
                risks
                associated with investing in “penny stocks” and which describe the market
                for these “penny stocks” as well as a purchaser’s legal remedies;
                and




·
            obtain
                a signed and dated acknowledgment from the purchaser demonstrating
                that
                the purchaser has actually received the required risk disclosure
                document
                before a transaction in a “penny stock” can be
                completed.






If
      our
      common stock becomes subject to these rules, broker-dealers may find it
      difficult to effectuate customer transactions and trading activity in our
      securities may be adversely affected. As a result, the market price of our
      securities may be depressed, and you may find it more difficult to sell our
      securities.




*It
      is
      probable that we will only be able to complete one business combination with
      the
      proceeds of the initial public offering, which will cause us to be solely
      dependent on a single business and a limited number of products or
      services.*




The
      net
      proceeds from the initial public offering provided us with approximately
      $47,897,000 which we may use to complete a business combination. Our initial
      business combination must be with a business or businesses with a collective
      fair market value of at least 80% of our net assets at the time of such
      acquisition. We may further seek to acquire a target business that has a fair
      market value significantly in excess of 80% of our net assets. Although we
      have
      not engaged or retained, or entered into any agreements with, any third party
      regarding any such potential financing transactions, we could seek to fund
      such
      a business combination by raising additional funds through the sale of our
      securities or through loan arrangements. However, if we were to seek such
      additional funds, any such arrangement would only be consummated simultaneously
      with our consummation of a business combination.




We
      may
      not be able to acquire more than one target business because of various factors,
      including possible complex domestic or international accounting issues, which
      would include generating pro forma financial statements reflecting the
      operations of several target businesses as if they had been combined, and
      numerous logistical issues, which could include attempting to coordinate the
      timing of negotiations, proxy statement disclosure and closings with multiple
      target businesses. In addition, we would also be exposed to the risks that
      conditions to closings with respect to the acquisition of one or more of the
      target businesses would not be satisfied bringing the fair market value of
      the
      initial business combination below the required fair market value of 80% of
      net
      assets threshold. Consequently, it is probable that, unless the purchase price
      consists substantially of our equity, we will have the ability to complete
      only
      the initial business combination with the proceeds of the initial public
      offering. Accordingly, the prospects for our success may be:




·
            solely
                dependent upon the performance of a single business;
                or




·
            dependent
                upon the development or market acceptance of a single or limited
                number of
                products, processes or services.




In
      this
      case, we will 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.




13




*Because
      of our limited resources and the significant competition for business
      combination opportunities, we may not be able to consummate an attractive
      business combination.*




We
      have
      encountered and expect to encounter intense competition from other entities
      having a business objective 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 the initial public offering, our ability to compete in acquiring
      certain sizable target businesses will be 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 held by public stockholders 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 obligations
      may place us at a competitive disadvantage in successfully negotiating a
      business combination.




*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 the initial public offering are sufficient
      to allow us to consummate a business combination, we cannot currently ascertain
      the capital requirements for any particular transaction. If the net proceeds
      of
      the 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 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, it is possible, as is common in acquisitions
      of
      hospitality assets or companies, that we could use a portion of the funds not
      in
      the trust account to make a deposit, down payment or fund a “no-shop” provision
      with respect to a proposed business combination. In the event that we were
      ultimately required to forfeit such funds (whether as a result of our breach
      of
      the agreement relating to such payment or otherwise), we may not have a
      sufficient amount of working capital available outside of the trust account
      to
      conduct due diligence and pay other expenses related to finding a suitable
      business combination without securing additional financing. In such a case,
      if
      we were ultimately required to forfeit such funds and were unable to secure
      additional financing (which could be provided by our initial stockholders,
      though they are under no obligation to do so), we would most likely fail to
      consummate a business combination in the allotted time and would be forced
      to
      liquidate, resulting in a loss of a portion of your investment. 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 have a material adverse effect on 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.




*Our
      outstanding warrants may have an adverse effect on the market price of common
      stock and make it more difficult to effect a business
      combination.*




In
      connection with the initial public offering, as part of the units, we issued
      warrants to purchase 6,450,000 shares of common stock. We also issued an option
      to purchase 300,000 units to the representative of the underwriters which,
      if
      exercised, will result in the issuance of an additional 300,000 warrants. 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 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 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 shares underlying the warrants 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 are
      exercised, you may experience dilution to your holdings.




14




*If
      our initial stockholders exercise their registration rights, it may have an
      adverse effect on the market price 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 demand that we register the resale of
      their
      shares of common stock at any time after the date on which their shares are
      released from escrow, which, except in limited circumstances, will not be before
      October 20, 2008. If our initial stockholders exercise their registration rights
      with respect to all of their shares of common stock, then there will be an
      additional 1,499,995 shares of common stock eligible for trading in the public
      market. The presence of this additional number of shares of common stock
      eligible for 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 the target business, as the stockholders of the target business may be
      discouraged from entering into a business combination with us or request a
      higher price for their securities as a result of these registration rights
      and
      the potential future effect their exercise may have on the trading market for
      our common stock.




*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.*




If
      we are
      deemed to be an investment company under the Investment Company Act of 1940,
      our
      activities may be restricted, including:




·
            restrictions
                on the nature of our investments;
                and




·
            restrictions
                on the issuance of securities, which may make it difficult for us
                to
                complete a business combination.




In
      addition, we may have imposed upon us burdensome requirements,
      including:




·
            registration
                as an investment company;




·
            adoption
                of a specific form of corporate structure;
                and




·
            reporting,
                record keeping, voting, proxy and disclosure requirements and other
                rules
                and regulations.




We
      do not
      believe that our anticipated principal activities will subject us to the
      Investment Company Act of 1940. To this end, the proceeds held in trust may
      only
      be invested by the trust agent only in Treasury Bills issued by the United
      States with maturity dates of 180 days or less or in money market funds 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 we were deemed to
      be
      subject to the act, compliance with these additional regulatory burdens would
      require additional expense that we have not allotted for.




*Because
      we may be deemed to have no “independent” directors, actions taken and expenses
      incurred by our officers and directors on our behalf will generally not be
      subject to “independent” review.*




Each
      of
      our directors owns shares of our common stock and, although no compensation
      will
      be paid to them for services rendered prior to or in connection with a business
      combination, they may receive reimbursement for out-of-pocket expenses incurred
      by them 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 will be 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 none of our directors may be deemed “independent,” we will
      generally not have the benefit of independent directors examining the propriety
      of expenses incurred on our behalf and subject to reimbursement. Although we
      believe that all actions taken by our directors on our behalf will be in our
      best interests, we cannot assure you that this will be the case. If actions
      are
      taken, or expenses are incurred that are not in our best interests, it could
      have a material adverse effect on our business and operations and the price
      of
      our stock held by the public stockholders.




15




*The
      inability of the sellers of companies we may acquire to fulfill their
      indemnification obligations to us under our acquisition agreements could
      increase our liabilities and adversely affect our results of operations and
      financial position.*




We
      intend
      to negotiate as a term in our acquisition agreements that the respective sellers
      will agree to retain responsibility for and indemnify us against damages
      resulting from certain third-party claims or other liabilities. However, there
      may be instances in which we determine to ultimately enter into an acquisition
      agreement without such seller indemnification obligations, such as in purchases
      of assets out of bankruptcy or purchases of certain hospitality-related assets.
      The lack of seller indemnification obligations or the failure of any seller
      to
      satisfy its obligations with respect to claims and retained liabilities covered
      by the acquisition agreements could have an adverse effect on our results of
      operations and financial position because claimants may successfully assert
      that
      we are liable for those claims and/or retained liabilities. In addition, we
      expect that certain obligations of the sellers to indemnify us will terminate
      upon expiration of the applicable indemnification period and will not cover
      damages in excess of the applicable coverage limit. The assertion of third-party
      claims after the expiration of the applicable indemnification period or in
      excess of the applicable coverage limit, or the failure of any seller to satisfy
      its indemnification obligations with respect to breaches of its representations
      and warranties, could have an adverse effect on our results of operations and
      financial position.




**Risks
      Related to the Hospitality and Related Industries**




*We
      will be subject to all the operating risks common to the hospitality
      industry.*




Operating
      risks common to the hospitality industry include:




·
            changes
                in general economic conditions, including the timing and robustness
                of the
                apparent recovery in the United States from the recent economic downturn
                and the prospects for improved performance in other parts of the
                world;




·
            consumers’
                fears of exposures to contagious diseases or the occurrence of natural
                disasters;




·
            consumer
                reluctance to spend on luxury
                items;




·
            decreases
                in the demand for transient rooms and related lodging services, including
                a reduction in business and vacation travel as a result of general
                economic conditions;




·
            cyclical
                over-building in the hotel and vacation ownership
                industries;




·
            restrictive
                changes in zoning and similar land use laws and regulations or in
                health,
                safety and environmental laws, rules and regulations and other
                governmental and regulatory action;




·
            changes
                in operating costs including, but not limited to, energy, labor costs
                (including the impact of unionization), workers’ compensation and
                health-care related costs, insurance and unanticipated costs such
                as acts
                of nature and their consequences;
                and




·
            disputes
                with owners of properties and franchisees which may result in
                litigation;




*The
      hospitality industry is highly competitive, both for acquisitions of new hotels
      and other properties, for related amenity and service companies and for
      customers.*




We
      will
      be competing for hotel and related property or business acquisition
      opportunities with others who have substantially greater financial resources
      than we do. These competitors may be prepared to accept a higher level of
      financial risk than we can prudently manage. This competition may have the
      effect of reducing the number of suitable investment opportunities offered
      to us
      and increasing our acquisition costs by enhancing the bargaining power of
      property owners seeking to sell or to enter into management agreements.
      Competitive factors in the hospitality industry include convenience of location,
      the quality of the property, room rates, the range and quality of food services
      and amenities offered and name recognition. Demographic, geographic or other
      changes in one or more markets of our target business could impact the
      convenience or desirability of its hotels, amenities or services and so could
      adversely affect their operations. Also, new or existing competitors could
      significantly lower rates or offer greater conveniences, services or amenities,
      or significantly expand, improve or introduce new facilities in the markets
      in
      which our target business’ hotels compete.




16




*We
      may be subject to risks relating to real estate investments.*




We
      could
      be subject to the risks that generally relate to investments in real property
      because we may enter into a business combination with a target business that
      owns and leases hotels, resorts and other properties. The investment returns
      available from equity investments in real estate depend in large part on the
      amount of income earned and capital appreciation generated by the related
      properties, and the expenses incurred. In addition, a variety of other factors
      affect income from properties and real estate values, including governmental
      regulations, real estate, insurance, zoning, tax and eminent domain laws,
      interest rate levels and the availability of financing. For example, new or
      existing real estate zoning or tax laws can make it more expensive and/or
      time-consuming to develop real property or expand, modify or renovate hotels.
      When interest rates increase, the cost of acquiring, developing, expanding
      or
      renovating real property increases and real property values may decrease as
      the
      number of potential buyers decreases. Similarly, as financing becomes less
      available, it becomes more difficult both to acquire and to sell real property.
      Finally, under eminent domain laws, governments can take real property.
      Sometimes this taking is for less compensation than the owner believes the
      property is worth. Any of these factors could have a material adverse impact
      on
      our results of operations or financial condition. In addition, if our properties
      do not generate revenue sufficient to meet operating expenses, including debt
      service and capital expenditures, our income will be adversely
      affected.




*Our
      operations could be negatively affected if we are unable to manage the timing,
      budgeting and other risks associated with hotel, resort or golf course
      development or conversion of properties.*




Our
      target business may develop hotel, resort or golf course properties or convert
      properties to different uses, as suitable opportunities arise, taking into
      consideration the general economic climate. New project development and
      conversion of properties have a number of risks, including risks associated
      with:




·
            construction
                delays or cost overruns that may increase project
                costs;




·
            receipt
                of zoning, occupancy and other required governmental permits and
                authorizations;




·
            environmental
                issues with respect to development or conversion of properties such
                as
                golf courses;




·
            development
                costs incurred for projects that are not pursued to
                completion;




·
            so-called
                acts of God such as earthquakes, hurricanes, floods or fires that
                could
                adversely impact a project;




·
            defects
                in design or construction that may result in additional costs to
                remedy or
                require all or a portion of a property to be closed during the period
                required to rectify the situation;
                and




·
            governmental
                restrictions on the nature or size of a project or timing of
                completion.




We
      cannot
      assure you that any development project will be completed on time or within
      budget.




*If
      we
      acquire a target business in the gaming industry and are unable to comply with
      governmental regulations affecting the gaming industry, it could negatively
      affect our operations.*




We
      may
      acquire a target business in an industry related to hospitality such as the
      gaming industry. The gaming industry is highly regulated, and we would need
      to
      maintain licenses and pay gaming taxes to conduct such operations. Casinos
      are
      subject to extensive regulation under the laws, rules and regulations of the
      jurisdiction where they are located. These laws, rules and regulations generally
      concern the responsibility, financial stability and character of the owners,
      managers, and persons with financial interests in the gaming operations.
      Violations of laws in one jurisdiction could result in disciplinary action
      in
      other jurisdictions.




In
      addition to gaming regulations, our businesses may be subject to various
      federal, state and local laws and regulations. These laws and regulations
      include, but are not limited to, restrictions and conditions concerning treasury
      regulations, environmental matters and taxation. Such laws and regulations
      could
      change or could be interpreted differently in the future, or new laws and
      regulations could be enacted. Material changes, new laws or regulations or
      material difference in interpretations by courts or governmental authorities
      could adversely affect our operating results.




17




*Our
      financial condition could be negatively affected if we fail to maintain
      satisfactory labor relations.*




There
      will be costs associated with operations which are staffed by organized labor.
      Because of the higher labor costs and the increased risk of strikes and other
      work-related stoppages that may be associated with union or other organized
      operations in the hospitality sector, non-unionized competitors may have a
      competitive advantage in areas where they compete with unionized operations.
      To
      the extent we acquire non-union operations which subsequently become unionized,
      we could incur an increased risk of work stoppages, reduced productivity and
      higher labor costs. Work stoppages or strikes could adversely affect our
      operations or increase our costs.




*We
      will be subject to the risks associated with trends in consumer and business
      travel.*




If
      we
      affect a business combination in the hospitality industry, we will likely rely
      in large part on trends in U.S. and international business and consumer travel.
      Travel is highly sensitive to business and personal discretionary spending
      levels and tends to decline during general economic downturns. In addition,
      other adverse trends or events that tend to reduce travel could reduce our
      revenues or otherwise negatively affect our results of operations. These may
      include:




·
            price
                escalation in the airline industry or other travel-related industries
                due
                to increased fuel costs or other
                factors;




·
            occurrence
                of travel-related accidents and concerns about passenger convenience
                and
                safety;




·
            advances
                in business technology and communication, such as videoconferencing
                and
                online teleconferencing;




·
            health-related
                fears; and




·
            bad
                weather.




*Acts
      of terrorism and war could have an adverse effect on our target industry, which
      in turn could adversely affect our business.*




The
      hospitality industry is sensitive to safety and security concerns, and thus
      declines after occurrences of and fears of future incidents of terrorism and
      hostilities that affect the safety, security and confidence of travelers and
      users of hotels and related amenities and services. For example, the start
      of
      the war in Iraq in March 2003 and the terrorist attacks of September 11, 2001,
      which included attacks on the World Trade Center and the Pentagon using hijacked
      commercial aircraft, resulted in the cancellation of a significant number of
      flights and travel bookings and a decrease in new travel bookings. Our future
      revenues and results of operations may be reduced or otherwise negatively
      affected by similar and/or other acts of terrorism or war. The effects of these
      events could include, among other things, a protracted decrease in demand for
      air travel due to fears regarding additional acts of terrorism, military and
      governmental responses to acts of terrorism and a perceived inconvenience in
      traveling by air and increased costs and reduced operations by airlines due,
      in
      part, to new safety and security directives adopted by the Federal Aviation
      Administration or other governmental agencies all of which, among other
      possibilities, could affect the hospitality industry. In addition, we cannot
      assure you that we will be able to insure against the risk associated with
      acts
      of terrorism.




*Since
      we may acquire a company located outside of the United States, we may be subject
      to various risks of the foreign jurisdiction in which we ultimately
      operate.*




If
      we
      acquire a company that has operations outside the United States, we will be
      exposed to risks that could negatively impact our future revenues or results
      of
      operations following a business combination. Additionally, if the acquired
      company is in a developing country or a country that is not fully
      market-oriented, our operations may not develop in the same way or at the same
      rate as might be expected in the United States or another country with an
      economy similar to the market-oriented economies of member countries of the
      Organization for Economic Cooperation and Development, or OECD. The OECD is
      an
      international organization helping governments tackle the economic, social
      and
      governance challenges of a globalized economy. The additional risks we may
      be
      exposed to in these cases include but are not limited to:




·
            tariffs
                and trade barriers;




·
            regulations
                related to customs and import/export
                matters;




·
            tax
                issues, such as tax law changes and variations in tax laws as compared
                to
                the United States;




·
            cultural
                and language differences;




18




·
            an
                inadequate banking system;




·
            restrictions
                on the repatriation of profits or payment of
                dividends;




·
            accounting
                issues, such as reconciling foreign accounting rules with US generally
                accepted accounting principles;




·
            nationalization
                or expropriation of property;




·
            law
                enforcement authorities and courts that are inexperienced in commercial
                matters; and




·
            deterioration
                of political relations with the United
                States.




*Foreign
      currency fluctuations could adversely affect our business and financial
      results.*




We
      may do
      business and generate revenue in other countries. Foreign currency fluctuations
      may affect the costs that we incur in our operations. Some or all of our
      operating expenses may be incurred in non-U.S. dollar currencies. The
      appreciation of non-U.S. dollar currencies in those countries where we have
      operations against the U.S. dollar would increase our cost of doing business
      and
      could hurt our results of operations and financial condition.




*Exchange
      controls and withholding taxes may restrict our ability to utilize our cash
      flow.*




If
      we
      acquire a company that has operations outside the United States, we may be
      subject to existing or future rules and regulations on currency conversion
      or
      corporate withholding taxes on dividends which may affect our ability to utilize
      our cash flow effectively, repatriate profits or pay dividends.




**Item
      2.** **Description
      of Property** **.**




We
      maintain our executive offices at 4 Becker Farm Road, Roseland, New Jersey
      07068. The cost for this space is included in the $7,500 per-month of our
      expenses for general and administrative services which is paid to Millennium
      3
      Capital, Inc., an affiliate of Udi Toledano, our president and a member of
      our
      board of directors. We consider our current office space adequate for our
      current operations.




**Item
      3.** **Legal
      Proceedings** **.**




To
      the
      knowledge of management, there if no litigation currently pending or
      contemplated against us or any of our officers or directors in their capacity
      as
      such.




**Item
      4.** **Submission
      of Matters to a Vote of Security Holders.**




No
      matters were submitted to a vote of our security holders during the fourth
      quarter of the year ended December 31, 2005.




**PART
      II**




**Item
      5.** **Market
      for Common Equity and Related Stockholder Matters.**




Our
      common stock and warrants started trading separately as of January 18, 2006.
      Each of our units consists of one share of our common stock and one redeemable
      common stock purchase warrant and trades on the OTC Bulletin Board under the
      symbol “KHPAU”. Our common stock and warrants trade on the OTC Bulletin Board
      under the symbols “KHPA” and “KHPAW”, respectively. Each warrant entitles the
      holder to purchase from us one share of our common stock at an exercise price
      of
      $6.00 commencing the later of the completion of a business combination with
      a
      target business or October 20, 2006. Our warrants will expire at 5:00 p.m.,
      New
      York City time, on October 19, 2009, or earlier upon redemption.




The
      following table sets forth, for the calendar quarter indicated, the quarterly
      high and low closing bid prices of our units as reported on the OTC Bulletin
      Board since our units commenced public trading on October 21, 2005. The
      over-the-counter market quotations reflect inter-dealer prices, without retail
      mark-up, mark-down or commission and may not necessarily reflect actual
      transactions.




19




**OTC
                Bulletin Board****Common
                Stock**
            
            
            **Warrants**
            
            
            **Units****High**
            
            
            **Low**
            
            
            **High**
            
            
            **Low**
            
            
            **High**
            
            
            **Low****2005
                Fourth Quarter**
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            7.95
            
            
            7.40




**Holders**




As
      of
      February 17 ,
      2006,
      there were 230 holders of record of our units, 32 holders of record of our
      common stock and 50 h olders
      of
      record of our warrants.




**Dividends**




We
      have
      not paid any dividends on our common stock to date and do not intend to pay
      dividends prior to the completion of a business combination .
      The
      payment of 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.




**Recent
      Sales of Unregistered Securities**




(a)  During
      the past three years, we sold the following shares of common stock without
      registration under the Securities Act:




On
      April 27, 2005, we issued an aggregate of 3,000,000 shares of our common
      stock to the individuals set forth below for $25,000 in cash, at an average
      purchase price of approximately $0.0083 per share, as follows:




**Name**
            ****
            **Number
                of Shares**
            ****
            **Relationship
                to Us**Jeffrey
                S. Davidson
            
            1,197,500
            
            
            Co-Chairman,
                Chief Executive Officer and StockholderUdi
                Toledano
            
            500,000
            
            
            Director,
                President and StockholderJanet
                Toledano
            
            300,000
            
            
            StockholderTrust
                F/B/O Alexander & Anna Toledano DTD 9/2/93
            
            160,000
            
            
            StockholderW.
                Thomas Parrington
            
            150,000
            
            
            Co-Chairman
                and StockholderGlyn
                F. Aeppel
            
            150,000
            
            
            Director,
                Secretary and StockholderStephen
                B. Siegel
            
            150,000
            
            
            Director
                and StockholderRobert
                and Laurie Chefitz
            
            150,000
            
            
            Advisor
                and StockholderDr. Michael
                J. Signorelli
            
            100,000
            
            
            Advisor
                and StockholderBurton
                Koffman
            
            80,000
            
            
            Advisor
                and StockholderRick
                Davidson
            
            62,500
            
            
            Stockholder







Such
      shares were issued on April 27,
      2005, in
      connection with our organization pursuant to the exemption from registration
      contained in Section 4(2) of the Securities Act as they were sold to
      sophisticated, wealthy individuals. The shares issued to the individuals and
      entities above were sold for an aggregate offering price of $25,000 at an average purchase
      price of approximately $ 0.0083 per
      share. No underwriting discounts or commissions were paid with respect to such
      sales.




On
      August
      22, 2005, we effected a five-for-six reverse stock split, effectively raising
      the purchase price to $0.01 per share.  The sole purpose for such reverse
      stock split authorized by the board of directors was to maintain the existing
      stockholders’ collective ownership at 20% of our issued and outstanding shares
      of common stock immediately after the offering.




On
      October 12, 2005, we effected a six-for-ten reverse stock split, effectively
      raising the purchase price to $0.0167 per share. The sole purpose for such
      reverse stock split authorized by the board of directors was to maintain the
      existing stockholders’ collective ownership at 20% of our issued and outstanding
      shares of common stock immediately after the offering.




20




**Use
      of Proceeds from our Initial Public Offering**




On
      October 28, 2005, we consummated our initial public offering of 6,000,000 units.
      On November 16, 2005, we consummated the closing of an additional 450,000 units
      that were subject to the underwriters’ over-allotment option. Each unit consists
      of one share of common stock and one redeemable common stock purchase warrant.
      Each warrant entitles the holder to purchase from us one share of our common
      stock at an exercise price of $6.00. The 6,450,000 units we re
      sold
      at an offering price of $8.00 per unit, generating total gross proceeds of
      $51,600,000. The managing underwriter in the offering was Maxim Group LLC.
      The
      securities sold in the offering were registered under the Securities Act of
      1933
      on a registration statement on Form S-1 (No. 333-125009). The Securities and
      Exchange Commission declared the registration statement effective on October
      20,
      2005.




Our
      net
      proceeds from the sale of our units, after deducting certain offering expenses
      of approximately $1,117,000, including $600,000 evidencing the underwriters’
non-accountable expense allowance of 1.25% of the gross proceeds (excluding
      the
      proceeds from the underwriters’ over-allotment), and underwriting discounts of
      approximately $2,400,000, were approximately $47,897,000. Of this amount,
      $46,942,000 was placed in trust and the remaining $955,000 was held outside
      of the trust. The remaining proceeds are available to be used by us to provide
      for business, legal and accounting due diligence on prospective acquisitions
      and
      continuing general and administrative expenses. We will use substantially all
      of
      the net proceeds of the initial public offering to acquire a target business,
      including identifying and evaluating prospective acquisition candidates,
      selecting the target business, and structuring, negotiating and consummating
      the
      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 fund as well as any other net proceeds not expended will be used
      to
      finance the operations of the target business. Through December 31, 2005, we
      have used $20,133 of the net proceeds that were not deposited into the trust
      fund to pay general and administrative expenses. The net proceeds deposited
      into
      the trust fund remain on deposit in the trust fund and have earned $303,215
      in
      interest through December 31, 2005.




**Item
      6.** **Management’s
      Discussion and Analysis or Plan of Operation**




The
      following discussion and analysis of our financial condition and results of
      operations should be read in conjunction with our historical consolidated
      financial statements and related notes thereto to Item 7. “Financial
      Statements.”




**Restatement
      of Financial Statements**




We
      have restated our annual financial statements for the period ended December
      31,
      2005 to reflect the classification of and accounting for the warrants to
      purchase common stock associated with the units sold in our initial public
      offering and adjustment of the warrant liabilities to the fair value, and the
      resulting change is reported as gain or loss on the derivative liability. We
      had
      previously classified the value of these warrants to purchase common stock
      as
      equity. After further review, we determined that these instruments should have
      been classified as liabilities and, therefore, the fair value of such
      instruments must be recorded as a liability on our balance sheet. Changes in
      the
      fair values of these instruments will result in adjustments to the amount of
      the
      recorded liabilities and the corresponding gain or loss will be recorded in
      our
      statement of operations. At the date of the conversion of each warrant or
      portion thereof (or exercise of the warrants or portion thereof, as the case
      may
      be), the corresponding liability will be reclassified as equity.




The
      accompanying financial statements for the period ended December 31, 2005 have
      been restated to effect the changes described above. The impact of the
      adjustments related to the classification of and accounting for the warrants
      for
      the period ended December 31, 2005 are summarized below. See Note 2 to our
      Financial Statements for an explanation of these restatements. The following
      table shows the net impact of the restatements on our balance
      sheet.




21




**Balance
      Sheet Impact**


**BALANCE
                  SHEET****ASSETS**31-Dec-05
              
              
              
              31-Dec-05As
                  previouslyReported
              
              Adjustment
              
              (Restated)**Current
                  assets**Cash
              
              $
              930,836
              
              $
              -
              
              $
              930,83699,208
              
              
              0
              
              
              99,208Prepaid
                  expensesTotal
                  current assets
              
              
              1,030,044
              
              
              0
              
              
              1,030,044**Other
                  assets,**cash
                  and cash equivalents held in trust fund
              
              
              47,180,715
              
              
              -
              
              
              47,180,715Total
                  assets
              
              $
              48,210,759
              
              $
              -
              
              $
              48,210,759**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY****Current
                  liabilities**Accrued
                  legal fees
              
              $
              25,000
              
              $
              -
              
              $
              25,000Accrued
                  accounting fees
              
              
              24,000
              
              
              -
              
              
              24,000Accrued
                  franchise taxes
              
              
              52,700
              
              
              -
              
              
              52,700Income taxes payable******
              
              
              60,000
              
              
              -
              
              
              60,000Derivative
                  liabilty
              
              
              
              
              
              5,482,500
              
              
              5,482,500Total
                  current liabilities
              
              
              161,700
              
              
              5,482,500
              
              
              5,644,200Common
                stock, subject to possible redemption, 1,289,355 shares atredemption
                    value plus interest income of $47,611 (net of
                    taxes)
              
              
              9,370,812
              
              
              47,611
              
              
              9,418,423**Stockholders’
                  equity**Preferred
                  stock, $.001 par value, authorized 1,000,000 shares; none
                  issuedCommon
                  stock, $.001 par value, authorized 50,000,000 shares; issued
                  and outstanding 7,949,995shares
                  (which includes the 1,289,355 shares subject to possible
                  redemption)
              
              
              7,950
              
              
              
              
              
              7,950Paid-in
                  capital in excess of par
              
              
              38,542,855
              
              
              (5,482,500
              )
              
              33,060,3550Retained
                  earnings
              
              
              127,442
              
              
              (47,611
              )
              
              79,831Total
                  stockholders’ equity
              
              
              38,678,247
              
              
              (5,530,111
              )
              
              33,148,136$
              48,210,759
              
              $
              -
              
              $
              48,210,759




**Overview**




We
      were
      formed on April 25, 2005, to serve as a vehicle to effect a merger, capital
      stock exchange, asset acquisition or other similar business combination with
      an
      operating business in the hospitality industry. Our initial business combination
      must be with a target business or businesses whose fair market value is at
      least
      equal to 80% of net assets at the time of such acquisition. We intend to utilize
      cash derived from the proceeds of our recently completed public offering, our
      capital stock, debt or a combination of cash, capital stock and debt, in
      effecting a business combination.




**Results
      of Operations and Liquidity and Capital Resources**




For
      the
      period from April 25, 2005 (inception) through December 31, 2005, we had net
      income of $127,442, attributable to interest income less organization and
      formation expenses, operating expenses, income taxes and expenses in connection
      with the initial public offering.




On
      October 28, 2005, we consummated our initial public offering of 6,000,000 units.
      On November 16, 2005, we consummated the closing of an additional 450,000 units
      that were subject to the underwriters’ over-allotment option. Each unit consists
      of one share of common stock and one redeemable common stock purchase warrant.
      Each warrant entitles the holder to purchase from us one share of our common
      stock at an exercise price of $6.00.




22




Our
      net
      proceeds from the sale of the 6,450,000 units, after deducting certain offering
      expenses of approximately $1,117,000, including $600,000 evidencing the
      underwriters’ non-accountable expense allowance of 1.25% of the gross proceeds
      (excluding the proceeds from the underwriters’ over-allotment), and underwriting
      discounts of approximately $2,400,000, were approximately $47,897,000. Of this
      amount, $46,942,000 is being held in trust and the remaining $955,000 is being
      held outside of the trust. The remaining proceeds are available to be used
      by us
      to provide for business, legal and accounting due diligence on prospective
      acquisitions and continuing general and administrative expenses. We will use
      substantially all of the net proceeds of the initial public offering to acquire
      a target business, including identifying and evaluating prospective acquisition
      candidates, selecting the target business, and structuring, negotiating and
      consummating the 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 fund as well as any other net proceeds not expended
      will be used to finance the operations of the target business. We believe we
      have sufficient available funds outside of the trust fund to operate through
      October 28, 2007, assuming that a business combination is not consummated during
      that time. From October 28, 2005 through October 28, 2007, we anticipate
      approximately $300,000 of expenses for legal, accounting and other expenses
      attendant to the due diligence investigations, structuring and negotiating
      of a
      business combination, an aggregate of $180,000 for the administrative services
      and support payable to an affiliate of our president (a total of $7,500 per
      month for two years), $50,000 of expenses in legal and accounting fees relating
      to our SEC reporting obligations, and $470,000 for general working capital
      that
      will be used for miscellaneous expenses and reserves, including approximately
      $120,000 for director and officer liability insurance premiums. We do not
      believe we will need to raise additional funds in order to meet the expenditures
      required for operating our business. However, 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 financing simultaneously with the consummation of a
      business combination.




Commencing
      on October 28, 2005 and ending upon the acquisition of a target business, we
      began incurring a fee of $7,500 per month for office space and certain other
      additional administrative services from Millennium 3 Capital, Inc., an affiliate
      of Udi Toledano, our president and member of the board. In addition, Messrs.
      Davidson and Toledano loaned us an aggregate of $145,000 for payment, on our
      behalf, of offering expenses. These loans were repaid following our initial
      public offering from the proceeds of the offering.




**Item
      7.** **Financial
      Statements** **.**




Reference
      is made to our financial statements beginning on page F-1 of this
      report.




**Item
      8.** **Changes
      In and Disagreements With Accountants on Accounting and Financial
      Disclosure** **.**




None.




**Item
      8A.** **Controls
      and Procedures.**




Our
      management carried out an evaluation, with the participation of our principal
      executive, financial, and accounting officers, of the effectiveness of our
      disclosure controls and procedures as of December 31, 2005. Based upon that
      evaluation, our Chief Executive Officer and President concluded that our
      disclosure controls and procedures were effective to ensure that information
      required to be disclosed by us in reports that we file or submit under the
      Securities Exchange Act of 1934 is recorded, processed, summarized and reported,
      within the time periods specified in the rules and forms of the Securities
      and
      Exchange Commission.




There
      has
      not been any change in our internal control over financial reporting in
      connection with the evaluation required by Rule 13a-15(d) under the Exchange
      Act
      that occurred during the quarter ended December 31, 2005, that has materially
      affected, or is reasonably likely to materially affect, our internal control
      over financial reporting.




**Item
      8B.**  **Other
      Information.**




None.




**PART
      III**




**Item
      9.** **Directors
      and Executive Officers of the Registrant.**




Our
      current directors and executive officers are as follows:




**Name**
            ****
            **Age**
            ****
            **Position**W.
                Thomas Parrington
            
            60
            
            Co-ChairmanJeffrey
                S. Davidson
            
            46
            
            Co-Chairman
                and Chief Executive OfficerUdi
                Toledano
            
            55
            
            Director
                and PresidentStephen
                B. Siegel
            
            61
            
            DirectorGlyn
                F. Aeppel
            
            46
            
            Director
                and Secretary




23


*W.
      Thomas Parrington* has been
      co-chairman of our board of directors since our inception. Mr. Parrington
      has been involved in the lodging industry for over 30 years. From May 2003
      until
      September 2005, Mr. Parrington served in senior executive capacities at
      Lodgian, Inc. (AMEX:LGN), one of the largest independent owners and operators
      of
      full-service hotels in the United States. From November 2002 until September
      2005 he served as director of the company. From May until June 2003, Mr.
      Parrington served as interim chief executive officer of Lodgian, and then served
      as president and chief executive officer until July 2005, when he relinquished
      the position of president. He resigned as chief executive officer and director of Lodgian on September 12, 2005 as part of
      a
      planned transition. Lodgian currently owns and manages a portfolio in excess
      of
      70 hotels with over 13,000 rooms located throughout the United States and Canada
      and generated in excess of $300 million in revenue for fiscal 2005. Lodgian
      manages hotels with nationally recognized hospitality brands from companies
      such
      as Intercontinental Hotels Group, Marriot and Hilton. From January 1999 until
      May 2003, Mr. Parrington focused on real estate investments (primarily
      hotels) and hotel consulting. During such time, he was not associated with
      any
      particular entity. From June 1981 until December 1998,
      Mr. Parrington was employed by Interstate Hotels a publicly traded NYSE
      company that merged with Patriot American/Wyndham Hotels in June 1998,
      where he ultimately served as president and chief executive officer. During
      his
      17-year tenure with Interstate, Mr. Parrington also served as chief
      financial officer and chief operating officer. Mr. Parrington received a
      bachelor’s degree in business administration from Georgetown
      University.




*Jeffrey
      S. Davidson* has been
      our chief executive officer and co-chairman of our board of directors since
      our
      inception. From January 2003 until March 2005, Mr. Davidson
      served as chief executive officer and director of Orange Hospitality Inc.,
      a
      real estate investment trust, and has served as a principal and managing
      director of Coqui Capital Partners since 2000. Coqui Capital Partners is a
      Small
      Business Investment Company (SBIC) venture capital fund. As managing director
      of
      Coqui Capital Partners, M r. Davidson
      has invested in various early stage companies, including real estate related
      opportunities. From 1997 through 1999, Mr. Davidson was a private investor
      and was not associated with any particular entity. From 1991 until 1997,
      Mr. Davidson was the chief executive officer and president of Magic
      Cinemas, LLC, a chain of motion pictures theaters with approximately
      $30 million of annual revenue. At Magic Cinemas, he developed over
      $100 million of real estate and was responsible for over 200 employees. In
      May 1997, he successfully negotiated the sale of the company to Regal
      Cinemas, Inc. From 1987 to 1991, Mr. Davidson founded and served as
      president of Mary Beth Associates, Inc., a $10 million chain of Taco Bell
      restaurants, where he was also responsible for establishing sales/marketing
      strategies and developing operating infrastructure. From 1984 to 1987,
      Mr. Davidson was the national sales manager of Grants Broadcasting,
      WGBS-TV, which was an owner and operator of independent television stations
      in
      Philadelphia, Miami and Chicago. Mr. Davidson received his undergraduate
      degree from Ohio University, where he received a BSJ in Journalism.




*Udi
      Toledano* has been
      our president and a member of our board of directors since our inception. Since
      January 2000, he has managed Millennium 3 Opportunity Fund, a venture
      capital fund, and since 1999, he has been the president of Millennium 3 Capital,
      Inc., a private investment company. From December 1993 until
      December 1999, Mr. Toledano was the president of Andromeda
      Enterprises, Inc., a private investment company. From 1983 to 1993,
      Mr. Toledano was the president of CR Capital Inc., where he made
      investments and completed financings in excess of $500 million in real
      estate, hotels, and in the shipping industry. Mr. Toledano was a partner in
      several hotel ventures, including as a co-developer of Hotel Nikko at Beverly
      Hills (now Le Meridien at Beverly Hills), a 304-room luxury hotel which opened
      in December 1991. Since 1994, Mr. Toledano has been a director of
      Universal Stainless & Alloy Products Inc. (NMS:USAP), a public company with
      year 2005 revenue of $170 million. Mr. Toledano has served on boards
      of both public and private companies in various fields, including technology,
      software and healthcare. Mr. Toledano holds a BSc in Physics and
      Mathematics and an MBA, both from the Hebrew University of
      Jerusalem.




*Stephen
      B. Siegel* has been
      a member of our board of directors since our inception. Mr. Siegel is
      chairman of Global Brokerage Services of CB Richard Ellis, a full service real
      estate company. Prior to its merger with CB Richard Ellis, Mr. Siegel was
      the chairman and chief executive officer of Insignia/ESG, Inc., a commercial
      real estate company in the United States, with significant international
      operations in the United Kingdom, Europe, Asia and Latin America.
      Mr. Siegel became the president and chief executive officer of
      Insignia/ESG, Inc.’s predecessor company, Edward S. Gordon Company, or ESG, in
      1992. Prior to joining ESG, Mr. Siegel spent more than 27 years at Cushman
& Wakefield, ascending to chief executive officer. Mr. Siegel left
      Cushman & Wakefield in late 1988 and entered a joint venture with the Chubb
      Corporation where he worked for several years to develop and acquire
      investment-grade office buildings throughout the United States. Since
      May 1995, Mr. Siegel has served as a trustee of the Liberty Property
      Trust (NYSE:LRY), a self-administered and self-managed real estate investment
      trust. Mr. Siegel is also involved in a number of charitable and civic
      affairs. He is the general chairman of the Association for the Help of Retarded
      Children. He is also chairman of the YMCA’s Capital Campaign. In addition,
      Mr. Siegel is a board member for both the City Center 55th Street Theater
      Foundation and the Greater New York Council of the Boy Scouts of America, and
      he
      serves as vice chairman of the board of the Benjamin N. Cardozo School of
      Law.




24




*Glyn
      F. Aeppel* has been
      our secretary and a member of our board of directors since inception.
      Ms. Aeppel has over 18 years of hotel acquisition and development
      experience, financing in excess of $1 billion in hotel properties. Since
      April 2004, Ms. Aeppel has been, and currently is, a principal of
      Aeppel and Associates, a hospitality advisory development company. From
      July 2002 to April 2004, Ms. Aeppel served as the executive vice
      president of business development for the Americas at Le Meridien Hotels and
      Resorts. From April 2001 to July 2002, Ms. Aeppel was the
      executive vice president of business development and acquisitions at Interstate
      Hotels & Resorts, Inc. (NYSE:IHR) and from 1995 to 1998 the vice president
      of development at Interstate. From 1998 to 2001, she was senior vice president
      of acquisitions and development for FFC Hospitality, LLC, a pri vate
      equity fund founded by the co-founder and former chairman of Interstate. From
      1993 to 1995, she was a partner in Lodging Evaluation Group, a hotel development
      and finance consulting company she co-founded. From 1990 to 1993, she was the
      director of development for Germany and Austria at Holiday Inn Worldwide
      (NYSE:IHC) in Wiesbaden, Germany. From 1988 to 1989, she was an international
      management consultant to Marriott International (NYSE:MAR) in Bonn, West
      Germany. From 1986 to 1988 she was a senior project finance analyst, treasury
      department for Marriott. Ms. Aeppel received an M.B.A. from the Harvard
      Graduate School of Business Administration and a B.A. from Principia
      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 Glyn F. Aeppel, will
      expire at our first annual meeting of stockholders. The term of office of the
      second class of directors, consisting of W. Thomas Parrington and Stephen B.
      Siegel, will expire at the second annual meeting. The term of office of the
      third class of directors, consisting of Jeffrey S. Davidson and Udi Toledano,
      will expire at the third annual meeting.




During
      the fiscal year ended December 31, 2005, the directors did not receive any
      cash
      compensation for their service as members of the board of directors.




**Controls
      and Procedures**




We
      do not
      currently, and are not required to, maintain an effective system of internal
      controls as defined by Section 404 of the Sarbanes-Oxley Act of 2002. We will
      be
      required to comply with the internal control requirements of the Sarbanes-Oxley
      Act for the fiscal year ending December 31, 2006. As of the date of this report,
      we have not completed an assessment ,
      nor
      have our auditors tested our system, of internal control. We expect that we
      will
      assess the internal controls of our target business or businesses preceding
      the
      completion of a business combination and will then implement a schedule for
      implementation and testing of such additional controls as we may determine
      are
      required to state that we maintain an effective system of internal controls. A
      target business may not be in compliance with the provisions of the
      Sarbanes-Oxley Act regarding the adequacy of its internal controls. Many small
      and mid-sized target businesses we consider for a business combination may
      have
      internal controls that need improvement in areas such as:




·
            Staffing
                for financial, accounting and external reporting areas, including
                segregation of duties;




·
            Reconciliation
                of accounts;




·
            Proper
                recordation of expenses and liabilities in the period to which they
                relate;




·
            Proof
                of internal review and approval of accounting
                items;




·
            Documentation
                of key accounting assumptions, estimates and/or conclusions;
                and




·
            Documentation
                of accounting policies and
                procedures.




Because
      it will take time, management involvement and perhaps outside resources to
      determine what internal control improvements are necessary for us to meet
      regulatory requirements and market expectations for our operation of a target
      business, we may incur significant expense in meeting our public reporting
      responsibilities, particularly in the areas of designing, enhancing, or
      remediating internal and disclosure controls. Doing so effectively may also
      take
      longer than we expect, thus increasing our exposure to financial fraud or
      erroneous financial reporting.




Once
      our
      management’s report on internal controls is complete, we will retain our
      independent auditors to assess management’s report on internal controls and to
      render an opinion on such report when required by Section 404. Additional
      matters concerning a target business’s internal controls may be identified in
      the future when the assessment and testing is performed.




25




**Section
      16(a) Beneficial Ownership Reporting Compliance**




Section
      16(a) of the Securities and Exchange Act of 1931, requires our directors and
      executive officers and persons who own more than 10% of a registered class
      of
      our equity securities, to file with the Securities and Exchange Commission
      initial reports of ownership and reports of changes in beneficial ownership
      of
      common stock and other equity securities to us. Directors, officers and greater
      than 10% stockholders are required by SEC regulations to furnish us with all
      Section 16(a) forms they file.




To
      our
      knowledge, based solely upon our review of the copies of such reports furnished
      to us, we believe that all of our directors, officers and greater than 10%
      stockholders have complied with the applicable Section 16(a) reporting
      requirements.




**Board
      of Directors and Committees of the Board**




Our
      board
      of directors had one (1) meeting during the fiscal year ended December 31,
      2005
      and acted by unanimous written consent five times. During the fiscal year ended
      December 31, 2005, each member of the board participated in at least 75% of
      all
      Board and applicable committee meetings held during the period for which he
      was
      a director.




We
      do not
      currently have a Compensation Committee. Compensation of our chief executive
      officer, if any, will be determined, or recommended to the Board for
      determination, by a majority of the independent directors on our board of
      directors. The chief executive officer will not be present during voting or
      deliberations. Compensation for all other officers, if any, will be determined,
      or recommended to the board for determination, by a majority of the independent
      directors on our board of directors. None of our officers currently receive
      compensation. We will not pay any compensation to any of our officers or
      directors until following the consummation of a business combination.




Our
      board
      of directors has established a Nominating and Governance Committee and an Audit
      Committee to devote attention to specific subjects and to assist the Board
      in
      the discharge of its responsibilities. The functions of these committees and
      their current members are set forth below.




*Nominating
      and Governance Committee*




The
      Nominating and Governance Committee is responsible for assisting identifying
      and
      recommending qualified candidates for director nominees to the board, and
      leading the board in its annual review of the board’s performance. All members
      of the Nominating Committee qualify as independent. The Nominating and
      Governance Committee had no meetings during 2005. W. Thomas Parrington and
      Stephen B. Siegel are the current members of the Nominating and Governance
      Committee. The Nominating and Governance Committee may consider candidates
      recommended by stockholders as well as from other sources such as other
      directors or officers, third party search firms or other appropriate sources.
      For all potential candidates, the Nominating and Governance Committee may
      consider all factors it deems relevant, such as a candidate’s personal integrity
      and sound judgment, business and professional skills and experience,
      independence, knowledge of the industry in which we operate, possible conflicts
      of interest, diversity, the extent to which the candidate would fill a present
      need in the board, and concern for the long-term interests of the stockholders.
      In general, persons recommended by stockholders will be considered on the same
      basis as candidates from other sources. If a stockholder wishes to nominate
      a
      candidate to be considered for election as a director at the 2006 Annual Meeting
      of Stockholders using the procedures set forth in the Company’s By-laws, it must
      follow the procedures described in Article 3.3 entitled “Nominations.” If a
      stockholder wishes simply to propose a candidate for consideration as a nominee
      by the Nominating and Governance Committee, it should submit any pertinent
      information regarding the candidate to the Nominating and Governance Committee
      by mail at our address. A copy of the Nominating Committee’s written charter is
      available upon written request.




*Audit
      Committee*




The
      Audit
      Committee recommends to the board of directors the appointment of the firm
      selected to serve as our independent auditors and our subsidiaries and monitors
      the performance of such firm; reviews and approves the scope of the annual
      audit
      and evaluates with the independent auditors our annual audit and annual
      financial statements; reviews with management the status of internal accounting
      controls; evaluates issues having a potential financial impact on us which
      may
      be brought to the Audit Committee’s attention by management, the independent
      auditors or the board; evaluates our public financial reporting documents;
      reviews the non-audit services to be performed by the independent auditors,
      if
      any; and considers the effect of such performance on the auditor's independence.
      W. Thomas Parrington and Stephen B. Siegel are the current members of the Audit
      Committee. All members of the Audit Committee satisfy the current independence
      standards promulgated by the Securities and Exchange Commission and by the
      American Stock Exchange, as such standards apply specifically to members of
      audit committees. The board has determined that each of Mr. Parrington and
      Mr.
      Siegel are “audit committee financial experts,” as the Securities and Exchange
      Commission has defined that term in Item 401 of Regulation S-K. The
      Audit Committee had no meetings during 2005.




26




**Code
      of Conduct and Ethics**




We
      have
      adopted a code of conduct and ethics applicable to our directors, officers
      and
      employees in accordance with applicable federal securities laws. A copy of
      the
      code of conduct and ethics is available, without charge, upon written
      request.




**Item
      10.** **Executive
      Compensation.**




None
      of
      our executive officers have received any compensation for services rendered.
      Commencing on October 20, 2005 and continuing through the acquisition of a
      target business, we will pay monthly fees of $7,500 for general and
      administrative services, including office space, utilities and secretarial
      support, to Millennium 3 Capital, Inc., an affiliate of Mr. Toledano. This
      arrangement is solely for our benefit and is not intended to provide
      compensation in lieu of a salary. Upon completion of a business combination
      or
      our liquidation, we will no longer be required to pay these monthly fees.




Other
      than this $7,500 per-month fee, no compensation of any kind, including finder’s
      and consulting fees, will be paid to any of our directors, or any of their
      respective affiliates, for services rendered prior to or in connection with
      a
      business combination. However, our existing stockholders will be 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. Such individuals may be paid consulting,
      management or other fees from target businesses as a result of the business
      combination, with any and all amounts being fully disclosed to stockholders,
      to
      the extent then known, in the proxy solicitation materials furnished to the
      stockholders. There is no limit on the amount of these out-of-pocket expenses
      and there will be 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 none of our directors may be deemed “independent,” we will
      generally not have the benefit of independent directors examining the propriety
      of expenses incurred on our behalf and subject to reimbursement.




During
      the fiscal year ended December 31, 2005, the directors did not receive any
      cash
      compensation for their service as members of the board of
      directors.




**Item
      11.** **Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters** **.**




The
      following table sets forth information regarding the beneficial ownership of
      our
      common stock as of February 27, 2006, by:




·
            each
                person known by us, as a result of such person’s public filings with the
                SEC and the information contained therein, to be the beneficial owner
                of
                more than 5% of our outstanding shares of common
                stock;




·
            each
                of our officers and directors; and




·
            all
                our officers and directors as a
                group.




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.




27




**Amount and**
            
            
            **Percentage
                of Outstanding****Nature
                of Beneficial**
            
            
            **Common
                  Stock****Name
                and Address of Beneficial Owner**
            
            **Ownership**Amaranth
                LLC(1)
            
            
            762,000
            
            
            
            
            9.6
            %Millenco,
                L.P.(2)
            
            
            1,000,000
            
            
            
            
            12.6
            %Sapling,
                LLC(3)
            
            
            500,488
            
            
            
            
            5.8
            %Jeffrey
                S. Davidson(4)
            
            
            460,555
            
            (5
            )
            
            6.1
            %Udi
                Toledano(4)
            
            
            376,127
            
            (6
            )
            
            4.7
            %W.
                Thomas Parrington(4)
            
            
            166,666
            
            
            
            
            2.1
            %Stephen
                B. Siegel(4)
            
            
            100,000
            
            
            
            
            1.3
            %Glyn
                F. Aeppel(4)
            
            
            125,000
            
            
            
            
            1.6
            %All
                directors and executive officers as a group
                (five individuals)
            
            
            1,228,348
            
            
            
            
            15.4
            %




——————


(1)
            
            The
                business address of Amaranth LLC is One American Lane, Greenwich,
                Connecticut 06831. Amaranth LLC has shared voting and dispositive
                power
                for the shares listed above. The foregoing information was derived
                from a
                Schedule 13G/A, as filed with the Securities and Exchange Commission
                on
                February 3, 2006.


(2)
            
            Thebusiness
                address of Millenco, L.P. is c/o Millennium Management, L.L.C., 666
                5thAvenue, New York, New York 10103. Millennium Management, L.L.C. is the
                general partner of Millenco, L.P. and consequently may be deemed
                to have
                voting control and investment discretion over securities owned by
                Millenco, L.P. Israel A. Englander is the managing member of Millennium
                Management. As a result, Mr. Englander may be deemed to be the beneficial
                owner of any shares deemed to be beneficially owned by Millennium
                Management, L.L.C. The foregoing information was derived from a Schedule
                13G, as filed with the Securities and Exchange Commission on November
                4,
                2005. (3)
            
            The business address of Sapling, LLC
              is
              Sapling, LLC, c/o Fir Tree Recovery Master Fund LP, 535 5thAvenue, 31stFloor, New York, New York 10017. Sapling, LLC has shared voting and
              dispositive power for the shares listed above. The foregoing information
              was derived from a Schedule 13G, as filed with the Securities and Exchange
              Commission on November 3, 2005. (4)
            
            The business address of each of these
              individuals is 4 Becker Farm Road, Roseland, New Jersey
              07068. (5)
            
            Shares held jointly with his
              wife. (6)
            
            Includes: (i) 127,000 shares held by
              his wife
              Janet Toledano and (ii) 66,666 shares held in trust for the benefit
              of his
              children.




All
      of
      the shares of our common stock outstanding prior to our initial public offering,
      or the pre-public offering shares, were placed in escrow with Continental Stock
      Transfer & Trust Company, as escrow agent, and shall remain in escrow until
      the earliest of (i) October 20, 2008 or (ii) our liquidation; or (iii) the
      consummation of a 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 subsequent to the Company
      consummating a business combination.




During
      the escrow period, the holders of these shares will not be able to sell or
      transfer their securities except to their spouses and children or trusts
      established for their benefit, but will retain all other rights as our public
      stockholders, including, without limitation, the right to vote their shares
      of
      common stock and the right to receive cash dividends, if declared. If dividends
      are declared and payable in shares of common stock, such dividends will also
      be
      placed in escrow. If the Company is unable to effect a business combination
      and
      liquidate, the holders of the pre-public offering shares will not receive any
      portion of the liquidation proceeds with respect to common stock owned by them
      prior to October 20, 2005.




**Item
      12.**  **Certain
      Relationships and Related Transactions.**




On
      April 27, 2005, we issued an aggregate of 3,000,000 shares of our common
      stock to the individuals set forth below for $25,000 in cash, at an average
      purchase price of approximately $0.0083 per share, as follows:




28




**Name**
            ****
            **Number
                of Shares**
            ****
            **Relationship
                to Us**Jeffrey
                S. Davidson
            
            1,197,500
            
            
            Co-Chairman,
                Chief Executive Officer and StockholderUdi
                Toledano
            
            500,000
            
            
            Director,
                President and StockholderJanet
                Toledano
            
            300,000
            
            
            StockholderTrust
                F/B/O Alexander & Anna Toledano DTD 9/2/93
            
            160,000
            
            
            StockholderW.
                Thomas Parrington
            
            150,000
            
            
            Co-Chairman
                and StockholderGlyn
                F. Aeppel
            
            150,000
            
            
            Director,
                Secretary and StockholderStephen
                B. Siegel
            
            150,000
            
            
            Director
                and StockholderRobert
                and Laurie Chefitz
            
            150,000
            
            
            Advisor
                and StockholderDr. Michael
                J. Signorelli
            
            100,000
            
            
            Advisor
                and StockholderBurton
                Koffman
            
            80,000
            
            
            Advisor
                and StockholderRick
                Davidson
            
            62,500
            
            
            Stockholder




On
      June 16, 2005, Jeffrey S. Davidson and Udi Toledano each transferred 50,000
      shares (for a total of 100,000) to W. Thomas Parrington, our co-chairman, at
      a
purchase price of $0.0083 per share.




On
      August
      12, 2005, Jeffrey S. Davidson and Udi Toledano each transferred 15,000 shares
      (for a total of 30,000) to Glyn F. Aeppel, our secretary and a member of our
      board of directors, at a purchase price of $0.0083 per share.




On
      August
      22, 2005, we effected a five-for-six reverse stock split, effectively raising
      the purchase price to $0.01 per share.  The sole purpose for such reverse
      stock split authorized by the board of directors was to maintain the existing
      stockholders’ collective ownership at 20% of our issued and outstanding shares
      of common stock immediately after the offering.




On
      October 12, 2005, we effected a six-for-ten reverse stock split, effectively
      raising the purchase price to $0.0167 per share. The sole purpose for such
      reverse stock split authorized by the board of directors was to maintain the
      existing stockholders’ collective ownership at 20% of our issued and outstanding
      shares of common stock immediately after the offering.




On
      October 13, 2005, Jeffrey S. Davidson transferred:  41,667 shares to W.
      Thomas Parrington, 30,000 shares to Glyn F. Aeppel, 23,628 shares to Stephen
      B.
      Siegel and 10,400 shares to Rick Davidson, each at a purchase price of $0.0167
      per share.




On
      October 13, 2005, Udi Toledano transferred:  25,000 shares to Robert and
      Laurie Chefitz, 8,667 shares to Dr. Michael J. Signorelli and 1,372 shares
      to
      Stephen B. Siegel, each at a purchase price of $0.0167 per share.




On
      October 13, 2005, Janet Toledano transferred:  15,000 shares to Elkhorn
      Partners Limited Partnership, an affiliate of Alan S. Parsow, and 8,000 shares
      to Dr. Michael J. Signorelli, each at a purchase price of $0.0167 per
      share.




On
      October 13, 2005, Trust F/B/O Alexander & Anna Toledano DTD 9/2/93
      transferred 13,333 shares to Burton Koffman at a purchase price of $0.0167
      per
      share.




29




Following
      the reverse stock splits and transfers described above, there are 1,499,995
      shares of common stock outstanding, as follows:







**Name**
            ****
            **Number
                of Shares**Jeffrey
                S. Davidson
            
            460,555Udi
                Toledano
            
            182,461Janet
                Toledano
            
            127,000Trust
                F/B/O Alexander & Anna Toledano DTD 9/2/93
            
            66,666W.
                Thomas Parrington
            
            166,666Glyn
                F. Aeppel
            
            120,000Stephen
                B. Siegel
            
            100,000Robert
                and Laurie Chefitz
            
            100,000Dr.
                Michael J. Signorelli
            
            66,666Burton
                Koffman
            
            53,332Rick
                Davidson
            
            41,649Elkhorn
                Partners Limited Partnership
            
            15,000




The
      holders of the majority of these shares are entitled to make up to two demands
      that we register these shares pursuant to a registration rights agreement we
      previously entered into. The holders of the majority of these shares may elect
      to exercise these registration rights at any time after the date on which these
      shares of common stock are released from escrow, which, except in limited
      circumstances, is not before October 20, 2008. In addition, these stockholders
      have certain “piggy-back” registration rights on registration statements filed
      subsequent to the date on which these shares of common stock are released from
      escrow. We will bear the expenses incurred in connection with the filing of
      any
      such registration statements.




Messrs. Davidson
      and Toledano advanced a total of approximately $145,000 to us on October 20,
      2005 to cover expenses related to the initial public offering. Of such loans,
      $115,000 was payable without interest on the earlier of May 2, 2006 or the
      consummation of the initial public offering and $30,000 was payable without
      interest on the earlier of August 3, 2006 or the consummation of the
      initial public offering. All such amounts were repaid from the proceeds of
      the
      initial public offering not placed in trust.




We
      will
      reimburse 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.




All
      ongoing and future transactions between us and any of our officers and directors
      or their respective affiliates, including loans by our officers and directors,
      will be on terms believed by us to be no less favorable than are available
      from
      unaffiliated third parties and such transactions or loans, including any
      forgiveness of loans, will require prior approval in each instance by a majority
      of our uninterested “independent” directors (to the extent we have any) or the
      members of our board who do not have an interest in the transaction, in either
      case who had access, at our expense, to our attorneys or independent legal
      counsel. In addition, our management will gather pricing information, estimates
      or fairness opinions from unaffiliated third parties with respect to similar
      transactions undertaken by us to ascertain whether such transactions with
      affiliates are on terms that are no less favorable to us than are otherwise
      available from such unaffiliated third parties. If a transaction with an
      affiliated third party were found to be on terms less favorable to us than
      with
      an unaffiliated third party, we would not engage in such
      transaction.




**Item
      13.**  **** **** **Exhibits.** ****




(a)  The
      following documents are filed as a part of this Report:




1.  **Financial
      Statements** :




Index
      to
      Financial Statements and Schedules




Report
      of
      Independent Registered Public Accounting Firm




Balance
      Sheet as of December 31, 2005




30




Income
      Statement - Period from April 25, 2005 (inception) to December 31,
      2005




Statement
      of Stockholders’ Equity - Period from April 25, 2005 (inception) to December 31,
      2005




Statement
      of Cash Flows - Period from April 25, 20055 (inception) to December 31,
      2005




Notes
      to
      Financial Statements




2.  **Financial
      Statement Schedule(s)** :




All
      schedules are omitted for the reason that the information is included in the
      financial statements or the notes thereto or that they are not required or
      are
      not applicable.




3.  **Exhibits** :




Exhibit
                No.
            
            Description3.1
            
            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 Warrant Agreement between Continental Stock Transfer & Trust
                Company and the Company.*4.5
            
            Form
                of Unit Purchase Option to be granted to Representative. *10.1
            
            Letter
                Agreement among the Registrant, Maxim Group LLC and Jeffrey S.
                Davidson.*10.2
            
            Letter
                Agreement among the Registrant, Maxim Group LLC and Udi
                Toledano.*10.3
            
            Letter
                Agreement among the Registrant, Maxim Group LLC and W. Thomas
                Parrington.*10.4
            
            Letter
                Agreement among the Registrant, Maxim Group LLC and Stephen B.
                Siegel.*10.5
            
            Letter
                Agreement among the Registrant, Maxim Group LLC and Glyn F.
                Aeppel.*10.6
            
            Letter
                Agreement among the Registrant, Maxim Group LLC and Robert
                Chefitz.*10.7
            
            Letter
                Agreement among the Registrant, Maxim Group LLC and Burton
                Koffman.*10.8
            
            Letter
                Agreement among the Registrant, Maxim Group LLC and Michael
                Signorelli.*10.9
            
            Letter
                Agreement among the Registrant, Maxim Group LLC and Janet
                Toledano.*10.10
            
            Letter
                Agreement among the Registrant, Maxim Group LLC and Trust F/B/O Alexander
                and Anna Toledano DTD 9/2/93.*10.11
            
            Letter
                Agreement among the Registrant, Maxim Group LLC and Rick
                Davidson.*10.12
            
            Form
                of Investment Management Trust Agreement between Continental Stock
                Transfer & Trust Company and the Company.*10.13
            
            Form
                of Stock Escrow Agreement between the Company, Continental Stock
                Transfer
                & Trust Company and the Initial Stockholders.*10.14
            
            Promissory
                Note, dated May 2, 2005, issued to Jeffrey S.
                Davidson.*10.15
            
            Promissory
                Note, dated May 2, 2005, issued to Udi Toledano.*10.16
            
            Form
                of Registration Rights Agreement among the Company and the Initial
                Stockholders.*10.17
            
            Form
                of Warrant Purchase Agreement between the Insiders and Maxim Group
                LLC*10.18
            
            Services
                Agreement between Millennium 3 Capital, Inc. and the
                Registrant.*10.19
            
            Letter
                Agreement among the Registrant, Maxim Group LLC, Alan S. Parsow and
                Elkhorn Partners Limited Partnership *






31




14
            
            Code
                of Business Conduct and Ethics*23.1
            
            Consent
                of Rothstein, Kass and Company, P.C.*24
            
            Power
                of Attorney.*31.1
            
            Certification
                of the Chief Executive Officer, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.1
            
            Certification
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections
                (a)
                and (b) of Section 1350, Chapter 63 of Title 18, United States
                Code)________________________*
                Incorporated by reference to exhibits of the same number filed with
                the
                Registrant’s Registration Statement on Form S-1 or amendments thereto
                (File No.333-125009).




**Item
      14.**  **** **** **Principal
      Accountant Fees and Services.**




*Audit
      Fees*




During
      the fiscal year ended December 31, 2005, we paid, or expect to pay, our
      principal accountant $38,000 for the services they performed in connection
      with
      our initial public offering, including the financial statements included in
      the
      Current Reports on Form 8-K and Form 8-K/A filed with the Securities and
      Exchange Commission on October 28, 2005 and November 17, 2005, $5,000 in
      connection with the review of our Quarterly Report on Form 10-QSB for the
      quarter ended September 30, 2005, and approximately $7,500 in connection with
      the December 31, 2005 audit and Annual Report on Form 10-KSB.




*Audit-Related
      Fees*




During
      2005, our principal accountant did not render assurance and related services
      reasonably related to the performance of the audit or review of financial
      statements.




*Tax
      Fees*




During
      2005, our principal accountant did not render services to us for tax compliance,
      tax advice and tax planning.




*All
      Other Fees*




During
      2005, there were no fees billed for products and services provided by the
      principal accountant other than those set forth above.




**Policy
      on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services
      of
      Independent Auditors**




Consistent
      with SEC policies regarding auditor independence, the Audit Committee has
      responsibility for appointing, setting compensation and overseeing the work
      of
      the independent auditor. In recognition of this responsibility, the Audit
      Committee has established a policy to pre-approve all audit and permissible
      non-audit services provided by the independent auditor.




Prior
      to
      engagement of the independent auditor for the next year’s audit, management will
      submit an aggregate of services expected to be rendered during that year for
      each of four categories of services to the Audit Committee for
      approval.




1. ***Audit*** services
      include audit work performed in the preparation of financial statements, as
      well
      as work that generally only the independent auditor can reasonably be expected
      to provide, including comfort letters, statutory audits, and attest services
      and
      consultation regarding financial accounting and/or reporting
      standards.




2. ***Audit-Related*** services
      are for assurance and related services that are traditionally performed by
      the
      independent auditor, including due diligence related to mergers and
      acquisitions, employee benefit plan audits, and special procedures required
      to
      meet certain regulatory requirements.




32




3. ***Tax*** services
      include all services performed by the independent auditor’s tax personnel except
      those services specifically related to the audit of the financial statements,
      and includes fees in the areas of tax compliance, tax planning, and tax
      advice.




4. ***Other
      Fees*** are
      those associated with services not captured in the other categories. We
      generally do not request such services from the independent
      auditor.




Prior
      to
      engagement, the Audit Committee pre-approves these services by category of
      service. The fees are budgeted and the Audit Committee requires the independent
      auditor and management to report actual fees versus the budget periodically
      throughout the year by category of service. During the year, circumstances
      may
      arise when it may become necessary to engage the independent auditor for
      additional services not contemplated in the original pre-approval. In those
      instances, the Audit Committee requires specific pre-approval before engaging
      the independent auditor.




The
      Audit
      Committee may delegate pre-approval authority to one or more of its members.
      The
      member to whom such authority is delegated must report, for informational
      purposes only, any pre-approval decisions to the Audit Committee at its next
      scheduled meeting.




33




**SIGNATURE
      PAGE**




In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on our behalf by the undersigned, thereunto duly
      authorized.




**KEY
              HOSPITALITY ACQUISITION CORPORATION**Date: December
              22, 2006
            By:
            /s/ Jeffrey
              S. DavidsonJeffrey
              S. Davidson*Co-Chairman
              of
              the Board and Chief Executive
              Officer*






In
      accordance with the Exchange Act of 1934, this report has been signed below
      by
      the following persons on behalf of the registrant in the capacities and on
      the
      dates indicated.




**Signature**
            
            **Title**
            
            **Date**/s/
                Jeffrey S.
                Davidson
            
            Chief
                Executive Officer and Co-Chairman
            
            December
                22, 2006Jeffrey S.
              Davidson
            
            (principal
                executive officer)/s/
                Udi
                Toledano
            
            President
                and Director (principal financial and accounting officer)
            
            December
                22, 2006Udi
                Toledano/s/
                W. Thomas
                Parrington
            
            Co-Chairman
            
            December
                22, 2006W.
                Thomas Parrington/s/
                Glyn F.
                Aeppel
            
            Secretary
                and Director
            
            December
                22, 2006Glyn
                F. Aeppel/s/
                Stephen B.
                Siegel
            
            Director
            
            December
                22, 2006Stephen
                B. Siegel




34


KEY
      HOSPITALITY ACQUISITION CORPORATION


(a
      corporation in the development stage)




Report
                of
                Independent Registered Public Accounting Firm
              F-1Financial
                Statements:Balance
                Sheet
              F-2Statement
                  of Operations
              F-3Statement
                  of Stockholders’ Equity
              F-4Statement
                of Cash
                Flows
              F-5Notes
                to Financial
                Statements
              F-6 -
                F-10











**Report
      of Independent Registered Public Accounting Firm**








To
      the
      Board of Directors and Stockholders of


Key
      Hospitality Acquisition Corporation





We
      have
      audited the accompanying balance sheet of Key Hospitality Acquisition
      Corporation (a corporation in the development stage) as of December 31, 2005
      and
      the related statements of operations, stockholders’ equity, and cash flows for
      the period from April 25, 2005 (inception) to December 31, 2005. 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 audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit 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 audit 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 audit provides 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 Key Hospitality Acquisition
      Corporation (a corporation in the development stage) as of December 31, 2005,
      and the results of its operations and its cash flows for the period from April
      25, 2005 (inception) to December 31, 2005, in conformity with U.S. generally
      accepted accounting principles.





As
      discussed in Note 2 to the accompanying financial statements, the Company has
      restated its financial
      statements as of December 31, 2005 to reflect the accounting for: (1) the
      warrants to purchase common
      stock associated with the units sold at the initial public offering of the
      Company and (2) warrants
      to purchase common stock embedded in an option to purchase units consisting
      of
      one share
      and
      one warrant to purchase one additional share, issued in connection with the
      initial public offering





/s/ Rothstein, Kass & Company,
              P.C.





Roseland,
      New Jersey


January
      20, 2006, except Note 2 dated September 7, 2006





F-1




**KEY
        HOSPITALITY ACQUISITION CORPORATION**
 (a
        corporation in the development stage)


**BALANCE
                  SHEET****ASSETS****12/31/05****Current
                  assets**Cash
              
              $
              930,836Prepaid
                    expenses
              
              
              99,208Total
                  current assets
              
              
              1,030,044**Other
                  assets,**cash
                  and cash equivalents held in trust fund
              
              
              47,180,715Total
                  assets
              
              $
              48,210,759**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY****Current
                  liabilities**Accrued
                  legal fees
              
              $
              25,000Accrued
                  accounting fees
              
              
              24,000Accrued
                  franchise taxes
              
              
              52,700Income
                  taxes payable******
              
              
              60,000Derivative
                  liabilty
              
              
              5,482,500Total
                  current liabilities
              
              
              5,644,200Common
                stock, subject to possible redemption, 1,289,355 shares atredemption
                    value plus interest income of $47,611 (net of
                    taxes)
              
              
              9,418,423**Stockholders’
                  equity**Preferred
                  stock, $.001 par value, authorized 1,000,000 shares; none
                  issuedCommon
                  stock, $.001 par value, authorized 50,000,000 shares; issued
                  and outstanding 7,949,995 shares (which includes the 1,289,355
                  shares
                  subject topossible
                  redemption)
              
              
              7,950Paid-in
                  capital in excess of par
              
              
              33,060,355Retained
                  earnings
              
              
              79,831Total
                  stockholders’ equity
              
              
              33,148,136$
              48,210,759




*See
      accompanying notes to financial statements*




F-2


**KEY
        HOSPITALITY ACQUISITION CORPORATION**
 (a
        corporation in the development stage)




**STATEMENT
      OF OPERATIONS (RESTATED)**





**For
                  period from April 25, 2005 (inception) to December 31,
                  2005****Interest
                  income**
              
              $
              306,292**Operating
                  costs**
              
              
              118,850**Income
                  before income taxes**
              
              
              187,442**Income
                  taxes**
              
              
              60,000**Net
                  income**
              
              $
              127,442**Weighted
                  average shares outstanding basic and diluted**
              
              
              1,662,647**Net
                  income per share basic and diluted**
              
              $
              0.08**Interest
                  income attributable to common stock subject to possible
                  conversion**
              
              $
              47,611Net
                  income allocable to common shareholders not subject to possible
                  conversion
              
              **$**
              **79,831**





*See
      accompanying notes to financial statements*




F-3


**KEY
        HOSPITALITY ACQUISITION CORPORATION**
 (a
        corporation in the development stage)
  **STATEMENT
        OF STOCKHOLDERS’ EQUITY (Restated)**





**For
        period from April 25, 2005 (inception) to December 31, 2005**




**Common
                Stock Shares**
            
            
            **Amount**
            
            
            **Paid-in
                  Capital in**
                **Excess
                  of Par**
            
            
            **Retained
                Earnings**
            
            
            **Stockholders’
                Equity**Common
                shares issued on April 27, 2005 at a price of $.017 per
                share
            
            
            1,499,995
            
            $
            1,500
            
            $
            23,500
            
            $
            -
            
            $
            25,000Sale
                of 6,000,000 shares on October 28, 2005 at a price of $8 per share,
                net of
                underwriters’ discount and offering expenses (includes 1,199,400 shares
                subject to possible redemption)
            
            
            6,000,000
            
            
            6,000
            
            
            44,514,514
            
            
            
            
            
            44,520,514Sale
                of an option on October 28, 2005 at a price of $100 for 300,000
                units
            
            
            
            
            
            
            
            
            100
            
            
            
            
            
            100Sale
                of 450,000 shares on November 16, 2005 at a price of $8 per share,
                net of
                underwriters’ discount and offering expenses (includes 89,955 shares
                subject to possible redemption)
            
            
            450,000
            
            
            450
            
            
            3,375,553
            
            
            
            
            
            3,376,003Proceeds
                subject to possible redemption 1,289,355 shares
            
            
            
            
            
            
            
            
            (9,370,812
            )
            
            
            
            
            (9,370,812
            )Adjustment
                for derivative liability
            
            
            
            
            
            
            
            
            (5,482,500
            )
            
            
            
            
            (5,482,500
            )Net
                income allocable to common shareholders not subject to possible
                conversion
            
            
            
            
            
            
            
            
            
            
            
            79,831
            
            
            79,831Balances,
                at December 31, 2005
            
            
            7,949,995
            
            
            $7,950
            
            $
            33,060,355
            
            $
            79,831
            
            $
            33,148,136











*See
      accompanying notes to financial statements*





F-4


**KEY
        HOSPITALITY ACQUISITION CORPORATION**
 (a
        corporation in the development stage)


**STATEMENT
      OF CASH FLOWS (RESTATED** ***)***


**For
                period from April 25, 2005 (inception) to December 31,
                2005****Cash
                flows from operating activities**Net
                income
            
            $
            127,442Increase
                (decrease) in cash attributable to change inPrepaid
                expenses
            
            
            (99,208
            )Accrued
                legal fees
            
            
            25,000Accrued
                accounting fees
            
            
            24,000Accrued
                franchise taxes
            
            
            52,700Income
                taxes payable
            
            
            60,000**Net
                cash provided by operating activities**
            
            
            189,934**Net
                cash used in investing activity,**cash
                and cash equivalents held in trust fund
            
            
            (47,180,715
            )**Cash
                flows from financing activities**Proceeds
                from sale of common stock
            
            
            25,000Proceeds
                from notes payable, stockholders
            
            
            145,000Payments
                of notes payable, stockholders
            
            
            (145,000
            )Gross
                proceeds of public offering
            
            
            51,600,000Payments
                of costs of public offering
            
            
            (3,703,483
            )Sale
                of option
            
            
            100**Net
                cash provided by financing activities**
            
            
            47,921,617**Net
                increase in cash**
            
            
            930,836**Cash,**beginning
                of period**Cash,**end
                of period
            
            $
            930,836





Supplemental
      schedule of non-cash financing activity:





Derivative
      liability         $5,482,500





Interest
      income attributable to common stock subject to possible conversion
      $47,611








*See
      accompanying notes to financial statements*




F-5





**1.** **Nature
        of operations and summary of significant accounting
        policies**





*Nature
      of Operations*





Key
      Hospitality Acquisition Corporation (the “Company”) was incorporated in Delaware
      on April 25, 2005 as a blank check company whose objective is to acquire through
      a merger, capital stock exchange, asset acquisition or other similar business
      combination, an unidentified operating business in the hospitality
      industry.





All
      activity from April 25, 2005 (inception) to December 31, 2005 relates to the
      Company’s formation and public offering described below.





The
      registration statement for the Company’s initial public offering (the
“Offering”) was declared effective on October 25, 2005. The Company consummated
      two separate offerings on October 28, 2005 and then on November 16, 2005 and
      received cumulative net proceeds of approximately $47,897,000. The Company’s
      management has broad discretion with respect to the specific application of
      the
      net proceeds of this Offering, although substantially all of the net proceeds
      of
      this Offering are intended to be generally applied toward consummating a
      business combination with an operating company. As used herein, a “target
      business” shall include an operating business that provides services and a
“business combination” shall mean the acquisition by the Company of such a
      target business.





The
      Company’s efforts in identifying a prospective target business will not be
      limited to a particular industry, although management intends to focus on
      operating business in the hospitality industry. The Company believes that
      current and anticipated growth in hotels, gaming and hospitality services should
      create attractive opportunities with significant potential for capital
      appreciation.





An
      amount
      of $47,180,715 is being held in a trust account at JP Morgan Chase NY Bank
      maintained by Continental Stock Transfer & Trust Company acting as trustee
      and invested until the earlier of (i) the consummation of the Company’s first
      business combination or (ii) the liquidation of the Company. The remaining
      proceeds may be used to pay for business, legal and accounting due diligence
      on
      prospective acquisitions and continuing general and administrative
      expenses.





The
      Company will seek stockholder approval before it will effect any business
      combination, even if the nature of the acquisition would not ordinarily require
      stockholder approval under applicable state law. In connection with the vote
      required for any business combination, all of the Company’s founding
      stockholders, including all of its officers and directors, have agreed to vote
      the shares of common stock owned by them immediately before this offering in
      accordance with the majority of the shares of common stock voted by the public
      stockholders. The Company will proceed with a business combination only if
      a
      majority of the shares of common stock voted by the public stockholders are
      vote
      in favor of the business combination and public stockholders owning less than
      20% of the shares sold in the offering exercise their conversion
      rights.





Public
      stockholders voting against a business combination will be entitled to convert
      their stock into a pro rata share of the trust fund, including any interest
      earned on their portion of the trust fund, if the business combination is
      approved and completed. Public stockholders who convert their stock into their
      share of the trust fund will continue to have the right to exercise any warrants
      they may hold.





The
      Company will dissolve and promptly distribute only to our public stockholders
      the amount in our trust fund plus any remaining net assets if the Company does
      not effect a business combination within 18 months from the date of the
      consummation of the offering (or within 24 months from the consummation of
      the
      offering if a letter of intent, agreement in principle or definitive agreement
      has been executed within 18.




F-6





**1.** **Nature
        of operations and summary of significant accounting policies
        (continued)**





months
      after consummation of the offering and the business combination has not yet
      been
      consummated within such 18 month period).





*Cash
      and Cash Equivalents*





Cash
      equivalents consist of money market and other high quality instruments with
      an
      initial maturity of three months or less. Such investments are stated at cost,
      which approximates market value.





*Income
      Taxes*





The
      Company complies with SFAS No. 109, “Accounting for Income Taxes,” which
      requires an asset and liability approach to financial accounting and reporting
      for income taxes. Deferred income tax assets and liabilities are computed for
      differences between the financial statement and tax bases of assets and
      liabilities that will result in future taxable or deductible amounts, based
      on
      enacted 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 tax assets to the amount expected to be
      realized.





*Common
      Stock*





In
      August
      2005, the Board of Directors of the Company approved a five-for-six reverse
      stock split to all shareholders of record on August 22, 2005 and in October
      2005, the Board of Directors approved a second, six-for-ten stock split to
      all
      shareholders of record on October 12, 2005. All transactions and disclosures
      in
      the financial statements, related to the Company’s common stock, have been
      adjusted to reflect the effects of the stock splits.





*Net
      Income Per Common Share*





The
      Company complies with SFAS No. 128, "Earnings Per Share." SFAS No. 128 requires
      dual presentation of basic and diluted income per share for all periods
      presented. Basic income per share excludes dilution and is computed by dividing
      income available to common stockholders by the weighted average number of common
      shares outstanding for the period. Diluted income 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 share in the income of the
      Company.





*Use
      of Estimates*





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the 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 revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.





*Recently
      issued accounting standards*





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      123(R), “Accounting for Stock-Based Compensation (Revised).” SFAR supersedes APB
      No. 25 and its related implementation guidance. SFAS No. 123(R) establishes
      standards for the accounting for transactions in which an entity exchanges
      its
      equity instruments for goods or services. It also addresses transactions in
      which an entity incurs liabilities in exchange for goods or services that are
      based on the fair value of the entity’s equity instruments or that may be
      settled by the issuance of those equity instruments.


SFAS
      No.
      123(R) focuses primarily on accounting for transactions in which an entity
      obtains employee services in share-based payment transactions. SFAS No. 123(R)
      requires a public entity to measure the cost of employee services received
      in
      exchange for an award of equity instruments based on the grant-date fair value
      of the award (with limited exceptions). That cost will be recognized over the
      period during which an employee is required to provide service in exchange
      for
      the award the requisite service period (usually the vesting period). No
      compensation costs are recognized for equity instruments for which employees
      do
      not render the requisite service. The grant-date fair value of employee share
      options and similar instruments will be estimated using option-pricing models
      adjusted for the unique characteristics of those instruments (unless observable
      market prices for the same or similar instruments are available). If an equity
      award is modified after the grant date, incremental compensation cost will
      be
      recognized in an amount equal to the excess of the fair value of the modified
      award over the fair value of the original award immediately before the
      modification.




F-7





**2.    Restatement
      and reclassifications of previously issued financial
      statements**




*Summary
      of Restatement Items* ****


In
      August, 2006, the Company concluded that it was necessary to restate its
      financial results for the fiscal year ended December 31, 2005 to reflect
      additional non-operating gains and losses related to the classification of
      and
      accounting for: (1) the warrants to purchase common stock associated with the
      units sold at the initial public offering of the Company and (2) warrants to
      purchase common stock embedded in a option to purchase units consisting of
      one
      share and one warrant to purchase one additional share, issued to in connection
      with the initial public offering. The Company had previously classified the
      value of these warrants to purchase common stock, when applicable, as equity.
      After further review, the Company has determined that these instruments should
      have been classified as derivative liabilities and therefore, the fair value
      of
      each instrument must be recorded as a derivative liability on the Company's
      balance sheet. Changes in the fair values of these instruments will result
      in
      adjustments to the amount of the recorded derivative liabilities and the
      corresponding gain or loss will be recorded in the Company’s statement of
      operations. At the date of the conversion of each respective instrument or
      portion thereof (or exercise of the options or warrants or portion thereof,
      as the case may be), the corresponding derivative liability will be reclassified
      as equity.





The
      accompanying balance sheet for the year ended December 31, 2005 has been
      restated to effect the changes described above. The impact of the adjustments
      related to the classification of and accounting for the warrants for the year
      ended December 31, 2005 are limited to balance sheet for this period and are
      summarized below.





***Balance
      Sheet Impact*** ****


The
      following table sets forth the effects of the restatement adjustments on the
      Company’s balance sheet as of December 31, 2005:




F-8


**BALANCE
                SHEET****ASSETS**31-Dec-05
            
            
            
            31-Dec-05As
                previouslyReported
            
            Adjustment
            
            (Restated)**Current
                assets**Cash
            
            $
            930,836
            
            $
            -
            
            $
            930,83699,208
            
            
            0
            
            
            99,208Prepaid
                expensesTotal
                current assets
            
            
            1,030,044
            
            
            0
            
            
            1,030,044**Other
                assets,**cash
                and cash equivalents held in trust fund
            
            
            47,180,715
            
            
            -
            
            
            47,180,715Total
                assets
            
            $
            48,210,759
            
            $
            -
            
            $
            48,210,759**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****Current
                liabilities**Accrued
                legal fees
            
            $
            25,000
            
            $
            -
            
            $
            25,000Accrued
                accounting fees
            
            
            24,000
            
            
            -
            
            
            24,000Accrued
                franchise taxes
            
            
            52,700
            
            
            -
            
            
            52,700Income taxes payable******
            
            
            60,000
            
            
            -
            
            
            60,000Derivative
                liabilty
            
            
            
            
            
            5,482,500
            
            
            5,482,500Total
                current liabilities
            
            
            161,700
            
            
            5,482,500
            
            
            5,644,200Common
              stock, subject to possible redemption, 1,289,355 shares atredemption
                  value plus interest income of $47,611 (net of
                  taxes)
            
            
            9,370,812
            
            
            47,611
            
            
            9,418,423**Stockholders’
                equity**Preferred
                stock, $.001 par value, authorized 1,000,000 shares; none
                issuedCommon
                stock, $.001 par value, authorized 50,000,000 shares; issued
                and outstanding 7,949,995shares
                (which includes the 1,289,355 shares subject to possible
                redemption)
            
            
            7,950
            
            
            
            
            
            7,950Paid-in
                capital in excess of par
            
            
            38,542,855
            
            
            (5,482,500
            )
            
            33,060,3550Retained
                earnings
            
            
            127,442
            
            
            (47,611
            )
            
            79,831Total
                stockholders’ equity
            
            
            38,678,247
            
            
            (5,530,111
            )
            
            33,148,136$
            48,210,759
            
            $
            -
            
            $
            48,210,759




**3
      Initial public offering**





On
      October 28, 2005, the Company sold 6,000,000 units (“Units”) at a price of $8
      per share in the Offering. On November 16, 2005, the Company sold an additional
      450,000 Units at a price of $8 per share to cover the over-allotment granted
      to
      the underwriters. Each Unit consists of one share of the Company’s common stock,
      $.001 par value, and one Redeemable common Stock Purchase Warrant (“Warrant”).
      Each Warrant will entitle the holder to purchase from the Company one share
      of
      common stock at an exercise price of $6.00 commencing the later of the
      completion of a business combination with a target business or one year from
      the
      effective date of the Offering and expiring four years from the date of the
      prospectus.





**4
      Income taxes**





Income
      tax expense for the year ended December 31, 2005 was $60,000. The expense is
      for
      current federal income taxes.





**5
      Commitments and contingencies**





The
      Company has agreed to pay up to $7,500 a month in total for office space and
      general and administrative expenses to related entities of two stockholders.
      Upon completion of a business combination or liquidation, the Company will
      no
      longer be required to pay these monthly fees.




F-9





The
      Company has also agreed to sell Maxim Group LLC, the representative of the
      underwriters, for $100, as additional compensation, an option to purchase up
      to
      a total of 300,000 units at a per-unit price of $8.80. The units issuable upon
      exercise of this option are also identical to those offered in the Offering
      except that the warrants included in the option have an exercise price of $7.50
      (125% of the exercise price of the warrants included in the units sold in the
      offering.)





The
      sale
      of the option was accounted for as an equity transaction. Accordingly, there
      was
      no net impact on the Company’s financial position or results of operations,
      except for the recording of the $100 proceeds from the sale.




The
      Company has determined, based upon a Black-Scholes model, that the fair value
      of
      the option on the date of sale would be approximately $3.28 per unit, or $
      984,000 total, using an expected life of five years, volatility of 44.23% and
      a
      risk-free interest rate of 3.85%.





The
      volatility calculation of 44.23% is based on the 365-day average volatility
      of a
      representative sample of eight (8) companies with market capitalizations under
      $500 million that management believes to be engaged in the business of hotels,
      gaming or hospitality services industry (the “Sample Companies”). Because the
      Company does not have a trading history, the Company needed to estimate the
      potential volatility of its common stock price, which will depend on a number
      of
      factors which cannot be ascertained at this time. The Company referred to the
      365-day average volatility of the Sample Companies because management believes
      that the average volatility of such companies is a reasonable benchmark to
      use
      in estimating the expected volatility of the Company’s common stock
      post-business combination. Although an expected life of five years was taken
      into account for purposes of assigning a fair value to the option, if the
      Company does not consummate a business combination within the prescribed time
      period and liquidates, the option would become worthless.





Although
      the purchase option and its underlying securities have been registered under
      the
      registration statement of which the prospectus forms a part, the purchase option
      grants to holders demand and “piggy back” rights for periods of five and seven
      years, respectively, from the date of the prospectus with respect to the
      issuable upon exercise of the purchase option. The Company will bear all fees
      and expenses attendant to registering the securities, other than underwriting
      commissions which will be paid for by the holders themselves. The exercise
      price
      and number of units issuable upon exercise of the purchase option may be
      adjusted in certain circumstances including in the event of a stock dividend,
      or
      the Company’s recapitalization, reorganization, merger or consolidation.
      However, the purchase option will not be adjusted for issuances of common stock
      at prices below its exercise price.




The
      Company’s officers and directors have agreed, pursuant to agreements with Maxim
      Group LLC in accordance with guidelines specified by Rule 10b5-1 under the
      Securities Exchange Act of 1934, to purchase up to $1,350,000 of our warrants
      at
      market prices not to exceed $1.20 per warrant during the forty-trading day
      period commencing on the later of the date separate trading of the warrants
      commences or sixty calendar days after the end of the “restricted period” under
      Regulation M.




**6
      Preferred stock**




The
      Company is authorized to issue 1,000,000 shares of preferred stock with such
      designations, voting and other rights and preferences, as may be determined
      from
      time to time by the Board of Directors.




F-10