**UNITEDSTATES****SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-K**

 

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| ý | ** ** | **ANNUAL REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                       |
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|   |       |                                                                                                                                                                                                                                                                                                                                            |
|   |       | **For  the fiscal year ended December 31, 2005**                                                                                                                                                                                                                                                                                                |
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|   |       | **OR**                                                                                                                                                                                                                                                                                                                                          |
|   |       |                                                                                                                                                                                                                                                                                                                                            |
| **o**  | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                   |
|   |       |                                                                                                                                                                                                                                                                                                                                            |
|   |       | **For  the transition period from                        to                             ** |

 

**Commission file number: 001-32552**

 

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**SERVICESACQUISITION CORP. INTERNATIONAL**

(Exact name ofregistrant as specified in its charter)

 

| **Delaware**                                                                     | ** ** | **20-2122262**                        |
|----------------------------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization)                 |       | (I.R.S. Employer  Identification No.) |
|                                                                             |       |                                  |
| **401 East Olas Boulevard, Suite 1140**                                          |       |                                  |
| **Fort Lauderdale, Florida 33301**                                               | ** ** | **33301**                             |
| (Address of  principal executive offices)                                        |       | (Zip Code)                            |
|                                                                             |
| Registrant’s telephone number, including area code: **(954) 713-1165** |

 

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

 

| **Title of each class**                                                                 | ** ** | **Name of  each exchange on which registered** |
|-----------------------------------------------------------------------------------------|------------|------------------------------------------------|
|                                                                                    |       |                                           |
| Units, each consisting of one share of Common  Stock, $0.001 par value, and One Warrant |       | American Stock Exchange                        |
|                                                                                    |       |                                           |
| Common Stocks, $0.001 par value                                                         |       | American Stock Exchange                        |
|                                                                                    |       |                                           |
| Warrants to Purchase Common Stock                                                       |       | American Stock Exchange                        |

 

Securities registered pursuant to section 12(g) of the Act:  **NONE**

 

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 of theSecurities Act. Yes o  No ý

 

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 orSection 15(d) of the Act. o

 

Indicateby check mark whether the registrant: (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 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 ý  No o

 

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein, and willnot be contained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K.   o

 

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

 
| Large accelerated filer o |   | Accelerated filer o |   | Non-accelerated filer ý |
|--------------------------------|--------|--------------------------|--------|-----------------------------------|

 

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

 

Theaggregate market value of the registrant’s voting and non-voting common stockheld by non-affiliates of the registrant (without admitting that any personwhose shares are not included in such calculation is an affiliate) computed byreference to the price at which the common stock was last sold on December 30,2005 was $123,165,000.

 

As ofMarch 24, 2006, the registrant had 21,000,000 shares of common stockoutstanding.

 

**APPLICABLEONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY**

**PROCEEDINGSDURING THE PRECEDING FIVE YEARS:**

 

**Indicate by check mark whether theregistrant has filed all documents and reports required to be filed by Sections12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to thedistribution of securities under a plan confirmed by a court.      Yes **o  No o

 

**DOCUMENTS INCORPORATED BY REFERENCE**

 

NONE

 

 

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**PART I**

 

This 10-K was preparedand relates to the Company as of December 31, 2005. Since that date there hasbeen a **Subsequent Event** in which the Companyhas entered into a merger agreement on March 10, 2006 with Jamba Juice Company.An announcement of the merger was made on Monday, March 13, 2006, 2006 and therequired 8-K filing, including all related exhibits, was submitted on March 16,2006. On March 22, 2006 the Company filed an 8-K announcing that Jamba JuiceCompany shareholders had approved the merger. An excerpt of the two 8-K filingsis provided below

 

When reading this 10-K,please note that all references are to the Company as is existed prior to theMarch 10, 2006 merger agreement. Whether or not the merger is consummated mayhave a material impact on the company. Disclosures related to such impact willbe filed in the Company’s proxy filing soliciting shareholder approval.

 

***Excerptsfrom March 16, 2006 8-K filing –***

 

On March 10, 2006, Services Acquisition Corp.International (“SVI”) entered into an Agreement and Plan of Merger (“MergerAgreement”) with JJC Acquisition Company (“JJC”), a wholly-owned Californiacorporate subsidiary of SVI, and Jamba Juice Company, a California corporation(“Jamba Juice”), pursuant to which JJC will merge into Jamba Juice and JambaJuice will become a wholly-owned subsidiary of SVI. Following completion of themerger, it is anticipated that SVI will change its name to Jamba, Inc. BecauseSVI will have no other operating business following the merger, Jamba Juicewill effectively become a public company at the conclusion of the merger. JambaJuice is headquartered in San Francisco, California.  Jamba Juicecurrently has 533 locations, 324 company-owned and 209 franchised, operating in26 states, the District of Columbia and the Bahamas.

 

The Merger Agreementprovides that at the closing of the merger, the Jamba Juice shareholderswill be paid an aggregate of $265,000,000, less $16,000,000 for certainexisting indebtedness and the amount of certain transaction related expenses,in cash, for all of the outstanding capital stock of Jamba Juice and the valueof all shares of Jamba Juice capital stock issuable upon exercise of all “in-the-money”vested and unvested options and warrants of Jamba Juice, subject to the optionholders and warrant holders, in certain instances, having the right to exchangetheir respective options and warrants into options and warrants of SVI, asfurther described below. A portion of the purchase price will be funded withcash currently being held in the trust fund established in connection with SVI’sinitial public offering and the balance of the purchase price will be fundedfrom the proceeds of a private placement financing, as discussed herein, thatis expected to be completed simultaneously with the merger with Jamba Juice.

 

The Merger Agreement contains representations andwarranties of each of SVI and Jamba Juice, as applicable, relating to, amongother things, (a) proper corporate organization and similar corporate matters,(b) capitalization, (c) the authorization, performance and enforceability ofthe Merger Agreement, (d) licenses and permits, (e) taxes, (f) absence ofundisclosed liabilities, (g) holding of leases and ownership of otherproperties, (h) material contracts, (i) title and condition of assets, (j)absence of certain changes, (k) employee and employee benefits matters, (l)compliance with applicable laws, (m) absence of litigation, (n) environmentalmatters, (o) franchise matters and (p) insurance.

 

Each of SVI and Jamba Juice has agreed to continue tooperate its business in the ordinary course prior to the closing of the mergerand additional material covenants include that (i) each party shall obtain allnecessary approvals, including stockholder and governmental approvals; (ii) eachparty shall protect confidential information and maintain the confidentialityof the other’s proprietary information; and (iii) until termination of theMerger Agreement (except as discussed below), not to solicit or accept analternative Acquisition Proposal, as such term is defined in the MergerAgreement.

 

The Merger Agreement also provides that if JambaJuice terminates the Merger Agreement either because the board of directors ofJamba Juice recommends a superior Acquisition Proposal (as such term is definedin the Merger Agreement), the stockholders of Jamba Juice vote against themerger or the stockholders of Jamba Juice do not approve the merger by April30, 2006, and within six months after the date of such termination, Jamba Juiceeither enters into a definitive agreement to consummate, or consummates any ofthe following transactions (whether in a single transaction or series oftransactions) (i) a sale by Jamba Juice of all or substantially all of itsassets or (ii)

 

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a sale of stock, merger,reorganization or other transaction that results in transfer of ownership ofmore than fifty percent of the capital stock of Jamba Juice outstanding on thedate of termination of the merger agreement, then Jamba Juice shall promptlypay to SVI a fee in the amount of $10,000,000.

 

At the effective time of the merger, Jamba Juice’sobligations with respect to each outstanding unvested option (and unexercisedvested option) and unexercised warrant (if amended in a manner reasonablyacceptable to SVI) will be assumed by SVI, and SVI shall thereafter beobligated to issue SVI common stock upon the exercise thereof. Each Jamba Juicewarrant shall be exercisable on the terms, and into the number of shares of SVIcommon stock, as set forth in the warrant agreement as so amended. Each JambaJuice option assumed by SVI shall be subject to the same terms and conditionsset forth in Jamba Juice’s stock option plans as in effect immediately prior tothe merger, and (i) each Jamba Juice option will be exercisable for that numberof shares of SVI common stock equal to the product of the number of shares ofJamba Juice common stock that were purchasable under such Jamba Juice optionimmediately prior to the merger multiplied by the Exchange Ratio, rounded downto the nearest whole number of shares of SVI common stock, and (ii) the pershare exercise price for the shares of SVI common stock issuable upon exerciseof each assumed Jamba Juice option will be equal to the quotient determined bydividing (A) the exercise price per share of Jamba Juice common stock at whichsuch Jamba Juice option was exercisable immediately prior to the merger by (B)the Exchange Ratio, and rounding the resulting exercise price up to the nearestwhole cent. For purposes of the Merger Agreement, the “Exchange Ratio” shall bedetermined such that (a) the aggregate intrinsic value of the new SVI optionsis not greater than the aggregate intrinsic value of the Jamba Juice optionsimmediately prior to the assumption and (b) the ratio of the exercise price peroption to market value per share at the time of the exchange is unchanged. Theparties have agreed that SVI will permit holders of vested Jamba Juice optionsto elect, on an individual basis, either to exercise such Jamba Juice optionsand participate in the merger or to have those Jamba Juice options assumed, onthe same basis as the unvested Jamba Juice options, by SVI, unless there are,in the sole judgment and discretion of SVI, significant tax, accounting orsecurities laws issues (including any requirement of registering on a formother than Form S-8) with treating vested options identically to unvestedoptions. The parties will make such determination on or before April 30, 2006.

 

The Merger Agreementprovides for indemnification of SVI with an escrow arrangement. Asthe sole remedy for Jamba Juice’s indemnity obligations set forth in the MergerAgreement, at the closing the parties shall deposit $19,875,000 in cash,otherwise payable to Jamba Juice’s stockholders, to be held during the periodending one year from the closing, all in accordance with the terms andconditions of an escrow agreement to be entered into at the closing betweenSVI, a representative of the Jamba Juice stockholders (who shall be designatedby Jamba Juice prior to the closing) and Continental Stock Transfer and TrustCompany. The terms of such escrow provides that, depending on the amount of anypaid claims, pending claims or claims that have not been applied against a$2,000,000 basket, $4,968,750 shall be released to the Jamba Juice stockholderson each of the six-month and nine-month periods following the closing. Thebalance of any amounts remaining in escrow against which no claims have beenmade shall be distributed to Jamba Juice’s stockholders 12 months following theclosing.

 

The obligations of SVI to consummate the mergerare subject to closing conditions, including: (i) the SVI stockholders shallhave approved the transactions contemplated by the merger agreement and holdersof not more than twenty percent (20%) of SVI’s shares issued in SVI’s initialpublic offering and outstanding immediately before the closing shall haveexercised their rights to convert their shares into a pro rata share of thetrust fund rather than approve the merger; (ii) certain of the officers ofJamba Juice shall have entered into employment agreements; (iii)  the Jamba Juice stockholders shall haveapproved the transactions contemplated by the Merger Agreement; (iv) on orbefore April 30, 2006, all Jamba Juice warrants shall have either been amendedin a manner reasonably acceptable to SVI or exercised (subject to theoccurrence of the closing); (v) holders of no more than five percent (5%) ofthe shares of any class of securities of Jamba Juice outstanding immediatelybefore the closing shall have taken action to exercise their appraisal rightspursuant to Section 1301 of the California General Corporations Law; (vi) allspecified waiting periods under the Hart-Scott-Rodino Antitrust ImprovementsAct shall have expired and no governmental entity shall have enacted, issued,promulgated, enforced or entered any statute, rule, regulation, executiveorder, decree, injunction or other order (whether temporary, preliminary orpermanent) which has the effect of making the merger illegal or otherwiseprohibiting consummation of the merger substantially on the terms contemplatedby the merger agreement; and (vii) the absence of any action, suit orproceeding challenging or preventing the merger.

 

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The obligations of Jamba Juice to consummate themerger is subject to closing conditions similar to those of SVI, includingconditions that SVI’s common stock will be listed for trading on the AMEX orsimilar exchange and there will be no action or proceeding pending orthreatened against SVI to prohibit or terminate the listing of SVI common stockon the AMEX.

 

The Merger Agreement may be terminated at anytime prior to the closing, as follows: (i) by mutual written consent of SVI andJamba Juice; (ii) by either SVI or Jamba Juice if a governmental entity shallhave issued an order, decree or ruling or taken any other action, in any casehaving the effect of permanently restraining, enjoining or otherwise prohibitingthe merger, which order, decree, ruling or other action is final andnonappealable; (iii) by either SVI or Jamba Juice, if, at the SVI specialmeeting, (including any adjournments thereof), the Merger Agreement and thetransactions contemplated thereby shall fail to be approved and adopted by theaffirmative vote of the holders of SVI common stock, or the holders of 20% ormore of the number of shares of SVI common stock issued in SVI’s initial publicoffering and outstanding as of the record date exercise their rights to convertthe shares of SVI common stock held by them into cash in accordance with SVI’scertificate of incorporation; (iv) by either SVI or Jamba Juice if the closinghas not occurred by August 15, 2006; or (v) subject to a 30-day cure period, byeither SVI or Jamba Juice if the other party has breached any of its covenantsor representations and warranties in any material respect.

 

Also, as part of aprivate placement financing, on March 10, 2006 and March 15, 2006, SVI enteredinto Securities Purchase Agreements and Registration Rights Agreements, withprospective investors (including certain current Jamba Juice shareholders andboard members) that collectively provide for the issuance, simultaneously withthe closing of the merger, of approximately 30.9 million shares of SVI commonstock, at a per share purchase price of $7.50, resulting in aggregate grossproceeds to SVI of approximately $231.6 million, which funds will be used tofund the merger consideration as well as additional working and expansioncapital.

 

One of the investors inthe private placement, Berrard Holding Limited Partnership, of which Steven R.Berrard, a current director and the Chief Executive Officer of SVI is thePresident, is investing $400,000. In addition, a family member of I. StevenEdelson, SVI’s Vice Chairman and Vice President, has committed to investing$50,000 in the private placement financing.

 

In connection with theprivate placement financing, SVI also granted the investors certainregistration rights described below. Shareholder approval for the issuance ofthe shares of common stock and for the insider participation in the privateplacement financing is required pursuant to the rules of the American StockExchange and such approval will be sought simultaneously with the shareholderapproval for the merger.

 

Pursuant to theRegistration Rights Agreements, SVI has granted the investors in the privateplacement certain rights to register the resale of the shares of common stockthat they will receive. Any costs associated with filing of the registrationstatement will be paid by SVI. In the event the financing is completed, if SVIdoes not timely file the registration statement (the later of 30 days followingthe closing of the financing or July 7, 2006), or have it declared effective ina timely manner (within 90 days, unless not reviewed by the Securities andExchange Commission, of filing of the registration statement), then SVI may besubject to a penalty (an amount equal to 0.5% of the financing amount payablein cash to the investors for every 30 days such delinquencies are not cured).SVI may also be subject to the same penalty if the registration statement, onceeffective, ceases to be usable for a period of time.

 

***Excerptsfrom March 22, 2006 8-K filing –***

 

On March 22, 2006,Services Acquisition Corp. International (“SVI”) issued a press releaseannouncing that Jamba Juice Company’s shareholders approved the previouslyannounced merger with SVI. Jamba Juice Company’s Board of Directors hadpreviously approved the merger and recommended that Jamba Juice Company’sshareholders vote in favor of the proposal. No further approval by Jamba JuiceCompany shareholders is required. As a result, Jamba Juice Company has nowsatisfied one of the conditions to closing.

 

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**Item 1.****  ****Business.**

 

**General**

 

We were incorporated inDelaware on January 6, 2005, as a blank check company formed to serve as avehicle for the acquisition, through a merger, capital stock exchange, assetacquisition or other similar business combination of a currently unidentifiedoperating business. While we may seek to effect business combinations with morethan one target business, our initial business combination must be with atarget whose fair market value is at least equal to 80% of our net assets atthe time of such acquisition.

 

A registration statementfor our initial public offering was declared effective on June 29, 2005. OnJuly 6, 2005, we consummated our initial public offering of 15,000,000 units. OnJuly 7, 2005, we consummated the closing of an additional 2,250,000 units thatwere subject to the underwriters’ over-allotment option. Each unit consists ofone share of common stock and one redeemable common stock purchase warrant. Eachwarrant entitles the holder to purchase from us one share of our common stockat an exercise price of $6.00 per share. Our common stock and warrants startedtrading separately as of July 28, 2005.

 

Our net proceeds from thesale of our units were approximately **$**127,837,468.Of this amount, $126,720,000 was deposited in trust and the remaining **$**1,117,468 was held outside of the trust. The remainingproceeds are available to be used by us to provide for business, legal andaccounting due diligence on prospective acquisitions and continuing general andadministrative expenses. We will use substantially all of the net proceeds ofthe initial public offering to acquire a target business, including identifyingand evaluating prospective acquisition candidates, selecting the targetbusiness, and structuring, negotiating and consummating the businesscombination. Given the experience of our management, we expect that ourprincipal target business will be a service business. Within this context, weexpect to seek companies displaying one or more of the followingcharacteristics:

 

•                                          Recurringrevenue, which is revenue that typically is generated from customers on aregular basis as a result of, among other things, contractual obligations ordue to the customers’ need of, and payment for, a particular service at regularintervals;

 

•                                          Stable cashflow, which is cash flow that does not fluctuate dramatically from fiscalperiod to period; and

 

•                                          Opportunitiesfor organic and acquisition growth.

 

We believe that thesecharacteristics provide the best platform through which to drive incrementalrevenue sources or extract increased profitability from the base business. Morespecifically, we intend to focus on opportunities that fall into the followingthree sectors: business services, health care services and consumerservices/brands. As of December 31, 2005, we have not prioritized such segmentsand do not currently have a preference as to in which segment we would preferto consummate a business combination.

 

*BusinessServices*

 

These businesses enableboth large and small companies to conduct their operations more efficiently ormore effectively perform routine non-core value added services for whichcustomers typically have trouble finding qualified alternatives. We will focuson companies that have or seek to build stable cash flow businesses thatleverage scale and a specific expertise to provide better service and value ata cheaper “all-in” cost than customers could provide by themselves. We believethat businesses that leverage scale generally have a fixed cost base,underlying technology platform, brand name, corporate organizational structureor other similar operating characteristic or asset which may be utilized orspread over a larger revenue base or a large number of customers, thereby, intheory, increasing the profitability percentage of the business. Examplesinclude transaction / payment processing, technology services, customerservice/relationship management, warranty management, document management,back-office services (accounting, payroll, human resource administration,benefits processing, etc.), training and compliance services, security servicesand alarm monitoring, facilities services (including waste disposal, pest/lawncontrol, landscaping maintenance services and commercial cleaning), and servicefranchising businesses.

 

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*HealthCare Services*

 

Health care spending inthe United States was nearly $1.7 trillion in 2003 and for the first timeexceeded 15% of the Gross Domestic Product according to recently released datafrom the Center for Medicare & Medicaid Services, Office of theActuary. The total market is comprised of numerous large, often multi-billiondollar niche markets that span all aspects of healthcare, with “services”(payments to physicians, hospitals, and other providers) accounting for morethan $1.0 trillion of total spending. Moreover, according to the same study,health care spending is expected to grow more than $3.3 trillion and representin excess of 18% of GDP by 2013.

 

We believe thatsignificant challenges will continue to confront the health care industry,driven primarily by the changing roles/relationships among physicians, payorsand patients. Thus, we will consider those companies that reduce the cost orimprove the quality of care in traditional settings, such as doctors’ officesor hospitals, or provide quality, low-cost options that are designed toencourage customers to utilize the services because of factors such as costand/or convenience.

 

We are particularlyinterested in companies that will accelerate the movement of care out of thegeneral hospital setting and into more focused, less expensive alternativelocations. Characteristics we find particularly attractive include (i) focuson a defined patient group and their specific clinical needs;(ii) emphasis on delivering care in a high-volume, low-cost, patientfriendly setting; (iii) recognition by providers and payors of the medicalnecessity of the service; and/or (iv) a more convenient, cost-effective,and higher quality setting for clinicians and patients. Examples includespecialty care surgical centers, out-patient triage or urgent care clinics,chronic disease treatment centers and product distribution companies.

 

Additionally, we willconsider those companies that offer non-core support and administrativeservices. These companies, which typically focus on excelling in a narrowlydefined discipline, are typically less expensive yet offer higher qualityservice than providers and payors traditionally procure for themselvesinternally. Examples include billing services, electronic medical records,specialty group practice management, insurance/risk retention, third-partyadministrators, nurse staffing, and health related member benefit programs.

 

*ConsumerServices*

 

This group includesbranded consumer products and services. We believe that certain companies thatare focused on creating a brand (e.g. Nike, Starbucks, etc.) as opposed todelivering services under generic labels will continue to provide attractiveinvestment opportunities. In addition, we believe that companies that canattract and meet the growing needs and desires of the 78 million agingbaby boomers born between 1946 and 1964, as well as the “Gen Y” population bornbetween 1979 and 1994, are attractive, particularly those with an emphasis onproviding “health and wellness” alternatives to the customer. As with BusinessServices, we are focused on those companies that can build a lastingrelationship with the consumer that yields predictable, recurring revenue thatdoes not fluctuate dramatically from fiscal period to period. Examples includehealth clubs, spa services, hair salons, pest control, alarm monitoring, andhome warranty contracts.

 

*TransactionStructures*

 

We believe the majorityof the transactions we will review and consider fall into the followingcategories:

 

*GrowthScenarios*—situations where companies have the opportunity fororganic growth through market development, incremental marketing, or increasesin working capital.

 

*IndustryConsolidations*—opportunities in fragmented industries, or newemerging markets, in which revenue growth is driven, and operating expenses areleveraged, in large part via strategic acquisitions.

 

*DivisionalSpin-outs*—operating units of larger companies that areprofitable but have been neglected by the parent in terms of focus, resourcesor funding.

 

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**Effecting a business combination**

 

*General*

 

We are not presentlyengaged in, and if a suitable business target is not identified by us prior tothe prescribed liquidation of the trust fund we may not engage in, anysubstantive commercial business. We intend to utilize cash derived from theproceeds of our initial public offering, our capital stock, debt or acombination of these in effecting a business combination — the acquisition byus, whether by merger, share exchange, asset or stock acquisition or othersimilar type of transaction or a combination of the foregoing, of anunidentified operating business (a “target business”). Although substantiallyall of the net proceeds of our initial public offering are intended to begenerally applied toward effecting a business combination as described in thisreport, the proceeds have not otherwise been designated for any more specificpurposes. A business combination may involve the acquisition of, or mergerwith, a company which does not need substantial additional capital but whichdesires to establish a public trading market for its shares, while avoidingwhat it may deem to be adverse consequences to undertaking a public offeringitself. While we may seek to effect business combinations with more than onetarget business, we will probably have the ability, as a result of our limitedresources, to effect only a single business combination.

 

*We havenot identified a target business or target industry*

 

We have conducteddiscussions with target businesses regarding potential business combinations.Subject to the limitations that a target business has a fair market value of atleast 80% of our net assets at the time of the acquisition, as described belowin more detail, we will have virtually unrestricted flexibility in identifyingand selecting a prospective acquisition candidate. Accordingly, there is nobasis for investors to evaluate the possible merits or risks of the targetbusiness with which we may ultimately complete a business combination. Weexpect to seek service businesses that have recurring revenue and/or stablecash flow, although neither criteria is a prerequisite for any target businesswe ultimately pursue. To the extent we effect a business combination with afinancially unstable company or an entity in its early stage of development orgrowth, including entities without established records of sales or earnings, wemay be affected by numerous risks inherent in the business and operations offinancially unstable and early stage or potential emerging growth companies.Although our management will endeavor to evaluate the risks inherent in aparticular target business, we cannot assure you that we will properlyascertain or assess all significant risk factors.

 

*Sourcesof target businesses*

 

Target businesscandidates have and will be brought to our attention from various unaffiliatedsources, including investment bankers, venture capital funds, private equityfunds, leveraged buyout funds, management buyout funds and other members of thefinancial community who are aware that we are seeking a business combinationpartner. Our officers and directors as well as their affiliates have alsobrought to our attention potential target business candidates. We have enteredinto four agreements with finders that would compensate such finder in theevent such finder was the source of a business combination partner that wasultimately approved by our shareholders; the Company is not liable for any feesor expenses to any such finders unless a business combination is consummated,and then the company is only liable to the finder that introduced us to suchdeal. While we may pay fees or compensation to third parties for their effortsin introducing us to potential target business, in no event, however, will wepay any of our existing officers, directors or stockholders or any entity withwhich they are affiliated any finder’s fee or other compensation for servicesrendered to us prior to or in connection with the consummation of a businesscombination. In addition, none of our officers, directors, special advisors orinitial stockholders will receive any finder’s fee, consulting fees or anysimilar fees from any person or entity in connection with any businesscombination involving us other than any compensation or fees that may bereceived for any services provided following such business combination.

 

*Selectionof a target business and structuring of a business combination*

 

Subject to therequirement that our initial business combination must be with a targetbusiness with a fair market value that is at least 80% of our net assets at thetime of such acquisition, our management will have virtually unrestrictedflexibility in identifying and selecting a prospective target business. Inevaluating a prospective target business, our management will consider, amongother factors, the following:

 

•                                          financialcondition and results of operation;

 

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•                                          growthpotential;

 

•                                          experienceand skill of management and availability of additional personnel;

 

•                                          capitalrequirements;

 

•                                          competitiveposition;

 

•                                          barriers toentry into other industries;

 

•                                          stage ofdevelopment of the products, processes or services;

 

•                                          degree ofcurrent or potential market acceptance of the products, processes or services;

 

•                                          proprietaryfeatures and degree of intellectual property or other protection of theproducts, processes or services;

 

•                                          regulatoryenvironment of the industry; and

 

•                                          costsassociated with effecting the business combination.

 

These criteria are notintended to be exhaustive. Any evaluation relating to the merits of a particularbusiness combination will be based, to the extent relevant, on the abovefactors as well as other considerations deemed relevant by our management ineffecting a business combination consistent with our business objective. Inevaluating a prospective target business, we will conduct an extensive duediligence review which will encompass, among other things, meetings withincumbent management, where applicable, and inspection of facilities, as wellas review of financial and other information which will be made available tous.

 

The time and costsrequired to select and evaluate a target business and to structure and completethe business combination cannot presently be ascertained with any degree ofcertainty. Any costs incurred with respect to the identification and evaluationof a prospective target business with which a business combination is notultimately completed will result in a loss to us and reduce the amount ofcapital available to otherwise complete a business combination. However, we willnot pay any finders or consulting fees to our officers, directors or initialstockholders, or any of their respective affiliates, for services rendered toor in connection with a business combination.

 

*FairMarket Value of Target Business*

 

The initial targetbusiness or businesses that we acquire must have a collective fair market valueequal to at least 80% of our net assets at the time of such acquisition. Thefair market value of such business will be determined by our board of directorsbased upon standards generally accepted by the financial community, such asactual and potential sales, earnings and cash flow and book value. If our boardis not able to independently determine that the target business has asufficient fair market value, we will obtain an opinion from an unaffiliated,independent investment banking firm which is a member of the NationalAssociation of Securities Dealers, Inc. with respect to the satisfaction ofsuch criteria. Since any opinion, if obtained, would merely state that fairmarket value meets the 80% of net assets threshold, it is not anticipated thatcopies of such opinion would be distributed to our stockholders, althoughcopies will be provided to stockholders who request it. We will not be requiredto obtain an opinion from an investment banking firm as to the fair marketvalue if our board of directors independently determines that the targetbusiness has sufficient fair market value.

 

*Lack ofbusiness diversification*

 

While we may seek toeffect business combinations with more than one target business, our initialbusiness combination must be with one or more target businesses whose fairmarket value, collectively, is at least equal to 80% of our net assets at thetime of such acquisition, as discussed above. Consequently, we expect to havethe ability to effect only a single business combination, although this mayentail the simultaneous acquisitions of several operating businesses. At thetime of our initial business combination, we may not be able to acquire more thanone target business because of various factors, including possible complexaccounting issues, which would include generating pro forma financialstatements reflecting the operations of several target businesses as if theyhad been combined, and numerous logistical issues, which would includeattempting to coordinate the timing of negotiations, proxy statement disclosureand closing with multiple target businesses. In addition, we would also beexposed to the risk that conditions to closings with respect to the acquisitionof one or more of the target businesses would not be satisfied bringing thefair market value of the business combination below the required fair marketvalue of 80% of

 

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our net assets threshold. Accordingly, while it is possible that we mayattempt to effect our initial business combination with more than one targetbusiness, we are more likely to choose a single target business if decidingbetween one target business meeting such 80% threshold and comparable multipletarget business candidates collectively meeting the 80% threshold. Accordingly,for an indefinite period of time, the prospects for our success may be entirelydependent upon the future performance of a single business. Unlike otherentities which may have the resources to complete several business combinationsof entities operating in multiple industries or multiple areas of a singleindustry, it is probable that we will not have the resources to diversify ouroperations or benefit from the possible spreading of risks or offsetting oflosses. By consummating a business combination with only a single entity, ourlack of diversification may:

 

•                                          subject us tonumerous economic, competitive and regulatory developments, any or all of whichmay have a substantial adverse impact upon the particular industry in which wemay operate subsequent to a business combination, and

 

•                                          result in ourdependency upon the development or market acceptance of a single or limitednumber of products, processes or services.

 

If we consummated abusiness combination structured as a merger in which the consideration is ourstock, we would have a significant amount of cash available to make subsequentacquisitions following our initial business combination.

 

*Limitedability to evaluate the target business’ management*

 

Although we intend toclosely scrutinize the management of a prospective target business whenevaluating the desirability of effecting a business combination, we cannotassure you that our assessment of the target business’ management will prove tobe correct. In addition, we cannot assure you that the future management willhave the necessary skills, qualifications or abilities to manage a publiccompany. Furthermore, the future role of our officers and directors, if any, inthe target business cannot presently be stated with any certainty. Moreover,our current management will only be able to remain with the combined companyafter the consummation of a business combination if they are able to negotiatethe same in connection with any such combination. Any such negotiations mayresult in a conflict of interest. While it is possible that one or more of ourdirectors will remain associated in some capacity with us following a businesscombination, it is unlikely that any of them will devote their full efforts toour affairs subsequent to a business combination. Moreover, we cannot assureyou that our officers and directors will have significant experience orknowledge relating to the operations of the particular target business.

 

Following a businesscombination, we may seek to recruit additional managers to supplement theincumbent management of the target business. We cannot assure you that we willhave the ability to recruit additional managers, or that additional managerswill have the requisite skills, knowledge or experience necessary to enhancethe incumbent management.

 

*Opportunityfor stockholder approval of business combination*

 

Prior to the completionof a business combination, we will submit the transaction to our stockholdersfor approval, even if the nature of the acquisition is such as would notordinarily require stockholder approval under applicable state law. Inconnection with seeking stockholder approval of a business combination, we willfurnish our stockholders with proxy solicitation materials prepared inaccordance with the Securities Exchange Act of 1934, which, among othermatters, will include a description of the operations of the target businessand audited historical financial statements of the target business based onUnited States generally accepted accounting principles.

 

In connection with thevote required for any business combination, all of our initial stockholders,including all of our officers and directors, have agreed to vote theirrespective shares of common stock owned by them immediately prior to theinitial public offering in accordance with the majority of the shares of commonstock voted by the public stockholders. This voting arrangement shall not applyto shares included in units purchased in the initial public offering orpurchased following our initial public offering in the open market by any ofour initial stockholders, officers and directors. Accordingly, they may vote ona proposed business combination with respect to shares of common stock acquiredin the aftermarket any way they so choose. We will proceed with the businesscombination only if a majority of the shares of common stock voted by thepublic stockholders are voted in favor of the business combination and publicstockholders owning less than 20% of the shares sold in the initial publicoffering exercise their conversion rights.

 

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*Conversionrights*

 

At the time we seekstockholder approval of any business combination, we will offer each publicstockholder the right to have such stockholder’s shares of common stockconverted to cash if the stockholder votes against the business combination andthe business combination is approved and completed. The actual per-shareconversion price will be equal to the amount in the trust fund, inclusive ofany interest (calculated as of two business days prior to the consummation ofthe proposed business combination), divided by the number of shares sold in ourinitial public offering. Without taking into any account interest earned on thetrust fund, the initial per-share conversion price would be approximately $7.35per share sold in the initial public offering, or $0.65 less than the per-unitoffering price of $8.00. An eligible stockholder may request conversion at anytime after the mailing to our stockholders of the proxy statement and prior tothe vote taken with respect to a proposed business combination at a meetingheld for that purpose, but the request will not be granted unless thestockholder votes against the business combination and the business combinationis approved and completed. If a stockholder votes against the businesscombination but fails to properly exercise its conversion rights, such stockholderwill not have its shares of common stock converted to its pro rata distributionof the trust fund. Any request for conversion, once made, may be withdrawn atany time up to the date of the meeting. It is anticipated that the funds to bedistributed to stockholders entitled to convert their shares who electconversion will be distributed promptly after completion of a businesscombination. Public stockholders who convert their stock into their share ofthe trust fund still have the right to exercise the warrants that they receivedas part of the units. We will not complete any business combination if publicstockholders, owning 20% or more of the shares sold in the initial publicoffering, exercise their conversion rights.

 

*Liquidationif no business combination*

 

If we do not complete abusiness combination within 18 months after July 6, 2005, the date weconsummated our initial public offering, or within 24 months if the extensioncriteria described below have been satisfied, we will be dissolved and willdistribute to all of our public stockholders, in proportion to their respectiveequity interests, an aggregate sum equal to the amount in the trust fund,inclusive of any interest, plus any remaining net assets. Our initialstockholders, including all of our officers and directors, have waived theirrights to participate in any liquidation distribution with respect to shares ofcommon 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 allof the net proceeds of our initial public offering, other than the proceedsdeposited in the trust fund, per-share liquidation price as of December 31,2005 would be approximately $7.43 per share sold in the initial publicoffering, or $0.57 less than the per-unit offering price of $8.00. The proceedsin the trust fund could, however, become subject to the claims of our creditorswhich could be prior to the claims of our public stockholders. Certain membersof our board of directors have agreed pursuant to agreements with us andBroadband Capital Management LLC, if we liquidate prior to the consummation ofa business combination, they will be personally liable to pay debts andobligations to vendors that are owed money by us for services rendered orproducts sold to us in excess of the net proceeds of the initial publicoffering not held in the trust account at that time. We cannot assure you,however, that they would be able to satisfy those obligations. Further, theywill not be personally liable to pay debts and obligations to prospectivetarget businesses if a business combination is not consummated with suchprospective target businesses, or for claims from any other entity other thanvendors. Accordingly, we cannot assure you that the actual per-shareliquidation price will not be less than the $7.43 per share sold in the initialpublic offering held in trust as of December 31, 2005, plus interest, due toclaims of creditors.

 

If we enter into either aletter of intent, an agreement in principle or a definitive agreement tocomplete a business combination prior to January 6, 2007 (18 months after theconsummation of our initial public offering), but are unable to complete thebusiness combination within the 18-month period, then we will have anadditional six months, until July 6, 2007, in which to complete the businesscombination contemplated by the letter of intent, agreement in principle ordefinitive agreement. If we are unable to do so by the expiration of the24-month period from the consummation of our initial public offering, we willthen liquidate. Upon notice from us, the trustee of the trust fund willcommence liquidating the investments constituting the trust fund and will turnover the proceeds to our transfer agent for distribution to our publicstockholders. We anticipate that our instruction to the trustee would be givenpromptly after the expiration of the applicable 18-month or 24-month period.

 

Our public stockholdersshall be entitled to receive funds from the trust fund only in the event of ourliquidation or if the stockholders seek to convert their respective shares intocash upon a business combination

 

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which the stockholder voted against and which is actually completed byus. In no other circumstances shall a stockholder have any right or interest ofany kind to or in the trust fund.

 

**Competition**

 

In identifying,evaluating and selecting a target business, we may encounter intensecompetition from other entities having a business objective similar to ours.Many of these entities are well established and have extensive experienceidentifying and effecting business combinations directly or through affiliates.Many of these competitors possess greater technical, human and other resourcesthan us and our financial resources will be relatively limited when contrastedwith those of many of these competitors. While we believe there are numerouspotential target businesses that we could acquire with the net proceeds of theinitial public offering, our ability to compete in acquiring certain sizabletarget businesses will be limited by our available financial resources. Thisinherent competitive limitation gives others an advantage in pursuing theacquisition of a target business. Further:

 

•                                          ourobligation to seek stockholder approval of a business combination or obtain thenecessary financial information to be included in the proxy statement to besent to stockholders in connection with such business combination may delay orprevent the completion of a transaction;

 

•                                          ourobligation to convert into cash shares of common stock held by our publicstockholders in certain instances may reduce the resources available to us fora business combination; and

 

•                                          ouroutstanding warrants, and the future dilution they potentially represent, maynot be viewed favorably by certain target businesses.

 

Any of these factors mayplace us at a competitive disadvantage in successfully negotiating a businesscombination. Our management believes, however, that to the extent that ourtarget business is a privately held entity, our status as a well-financedpublic entity may give us a competitive advantage over entities having a similarbusiness objective as ours in acquiring a target business with significantgrowth potential on favorable terms.

 

If we succeed ineffecting a business combination, there will be, in all likelihood, intensecompetition from competitors of the target business. We cannot assure you that,subsequent to a business combination, we will have the resources or ability tocompete effectively.

 

**Employees**

 

We have three officers,all of whom are also members of our board of directors. These individuals arenot obligated to contribute any specific number of hours per week and intend todevote only as much time as they deem necessary to our affairs. We do notintend to have any full time employees prior to the consummation of a businesscombination.

 

**Item 1A.   RiskFactors.**

 

Statementsin this Annual Report under the captions “Business” and “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”, aswell as oral statements that may be made by us or by our officers, directors oremployees acting on our behalf, that are not historical fact constitute “forward-lookingstatements” within the meaning of the Private Securities Litigation Reform Actof 1995. Such forward-looking statements involve known and unknown risks,uncertainties and other factors that could cause our actual results to bematerially different from the historical results or from any results expressedor implied by such forward-looking statements. Such factors include, but arenot limited to, the risk factors set forth below.

 

We do not intend toupdate any forward-looking statements to reflect events or circumstances afterthe date of such statements or to reflect the occurrence of anticipated orunanticipated events.

 

***We are adevelopment stage company with no operating history and, accordingly, you willnot have any basis on which to evaluate our ability to achieve our businessobjective.***

 

We are a recentlyincorporated development stage company with no operating results to date. Sincewe do not have an operating history, you will have no basis upon which toevaluate our ability to achieve our business

 

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objective, which is to acquire an operating business. We will notgenerate any revenues until, at the earliest, after the consummation of abusiness combination.

 

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

 

If we are unable tocomplete a business combination and are forced to liquidate our assets, theper-share liquidation will be less than $8.00 because of the expenses of theinitial public offering, our general and administrative expenses and the costsof seeking a business combination. Furthermore, there will be no distributionwith respect to our outstanding warrants and, accordingly, the warrants willexpire worthless if we liquidate before the completion of a businesscombination.

 

***You will not beentitled to protections normally afforded to investors of blank checkcompanies.***

 

Since the net proceeds ofthe initial public offering are intended to be used to complete a businesscombination with a target business that has not been identified, we may bedeemed to be a “blank check” company under the United States securities laws.However, since we have net tangible assets in excess of $5,000,000 receivedfrom the successful consummation of the initial public offering andfiled a Current Report on Form 8-K with the SEC upon consummation ofthe initial public offering including an audited balance sheet demonstratingthis fact, we are exempt from rules promulgated by the SEC to protect investorsof blank check companies such as Rule 419. Accordingly, investors will notbe afforded the benefits or protections of those rules. Because we are notsubject to Rule 419, our units will be immediately tradable and we have alonger period of time to complete a business combination in certaincircumstances.

 

***Because thereare numerous companies with a business plan similar to ours seeking toeffectuate a business combination, it may be more difficult for us to completea business combination.***

 

Based upon publiclyavailable information, at least 38 similarly structured blank check companieshave completed initial public offerings since August 2003 and a number ofothers have filed registration statements for initial public offerings. Ofthese companies, we believe that less than ten companies has consummated abusiness combination, while only a few, at best, have announced they haveentered into a definitive agreement for a business combination, but have notconsummated such business combination. Accordingly***,***webelieve there we compete with a large number of blank check companies that areseeking to carry out a business plan similar to our business plan. While someof those companies have specific industries that they must complete a businesscombination in, a number of them may consummate a business combination in anyindustry they choose. We may therefore be subject to competition from these andother companies seeking to consummate a business plan similar to ours whichwill, as a result, increase demand for privately-held companies to combine withcompanies structured similarly to ours. Further, the fact that only a smallnumber of such companies have completed a business combination or entered intoa definitive agreement for a business combination may be an indication thatthere are only a limited number of attractive target businesses available tosuch entities or that many privately-held target businesses may not be inclinedto enter into business combinations with publicly held blank check companieslike us. We cannot assure you that we will be able to successfully compete foran attractive business combination. Additionally, because of this competition,we cannot assure you that we will be able to effectuate a business combinationwithin the required time periods. If we are unable to find a suitable targetbusiness within such time periods, we will be forced to liquidate.

 

***If third partiesbring claims against us, the proceeds held in trust could be reduced and theper-share liquidation price received by stockholders may be less than theapproximately $7.43 per share sold in the initial public offering in trust asof December 31, 2005.***

 

Our placing of funds intrust may not protect those funds from third party claims against us. Althoughwe have and will seek to have vendors, prospective target businesses or otherentities 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 forthe benefit of our public stockholders, there is no guarantee that they willexecute such agreements or even if they

 

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execute such agreements that they would be prevented from bringingclaims against the trust fund. If any third party refuses to execute anagreement waiving such claims to the monies held in the trust account, we wouldperform an analysis of the alternatives available to us if we chose not toengage such third party and evaluate if such engagement would be in the bestinterest of our stockholders if such third party refused to waive such claims.Examples of possible instances where we may engage a third party that refusedto execute a waiver include the engagement of a third party consultant whoseparticular expertise or skills are believed by management to be significantlysuperior to those of other consultants that would agree to execute a waiver orin cases where management is unable to find a provider of required serviceswilling to provide the waiver. In any event, our management would perform ananalysis of the alternatives available to it and would only enter into anagreement with a third party that did not execute a waiver if managementbelieved that such third party’s engagement would be significantly morebeneficial to us than any alternative. In addition, there is no guarantee thatsuch entities will agree to waive any claims they may have in the future as aresult of, or arising out of, any negotiations, contracts or agreements with usand will not seek recourse against the trust account for any reason.Accordingly, the proceeds held in trust could be subject to claims which couldtake priority over the claims of our public stockholders and the per-shareliquidation price could be less than the approximately $7.43 per share sold inthe initial public offering in trust as of December 31, 2005,  due to claims of such creditors. If we areunable to complete a business combination and are forced to liquidate, certainof our officers and directors, severally, in accordance with their respectivebeneficial ownership interests in us, will be personally liable under certaincircumstances to ensure that the proceeds in the trust fund are not reduced bythe claims of various vendors or other entities that are owed money by us forservices rendered or products sold to us. However, we cannot assure you thatthey will be able to satisfy those obligations.

 

***Since we havenot currently selected a particular industry or prospective target businesswith which to complete a business combination, we are currently unable toascertain the merits or risks of the industry or target business in which wemay ultimately operate.***

 

We may consummate abusiness combination with a company in any industry we choose and are notlimited to any particular industry. Accordingly, there is no current basis foryou to evaluate the possible merits or risks of the particular industry inwhich we may ultimately operate or the target business which we may ultimatelyacquire. To the extent we complete a business combination with a financiallyunstable company or an entity in its development stage, we may be affected bynumerous risks inherent in the business operations of those entities. If wecomplete a business combination with an entity in an industry characterized bya high level of risk, we may be affected by the currently unascertainable risksof that industry. For example, if we complete a business combination with abusiness in the healthcare industry, we may be subject to various regulatoryrisks such as risks relating to reimbursement from third party payors. Althoughour management will endeavor to evaluate the risks inherent in a particularindustry or target business, we cannot assure you that we will properlyascertain or assess all of the significant risk factors. We also cannot assureyou that an investment in our securities will not ultimately prove to be lessfavorable than a direct investment, if an opportunity were available, in atarget business.

 

***We may issueshares of our capital stock or debt securities to complete a businesscombination, which would reduce the equity interest of our stockholders andlikely cause a change in control of our ownership.***

 

Our certificate ofincorporation authorizes the issuance of up to 70,000,000 shares of commonstock, par value $.001 per share, and 1,000,000 shares of preferred stock, parvalue $.001 per share. After the initial public offering and the exercise ofthe underwriters’ over-allotment option, there are 30,250,000 authorized butunissued shares of our common stock available for issuance (after appropriatereservation for the issuance of shares upon full exercise of our outstandingwarrants and the purchase option granted to Broadband Capital Management LLC,the representative of the underwriters) and all of the 1,000,000 shares ofpreferred stock available for issuance. Although we have no commitments as ofyet to issue our securities, we may issue a substantial number of additionalshares of our common stock or preferred stock, or a combination of common andpreferred stock, to complete a business combination. The issuance of additionalshares of our common stock or any number of shares of our preferred stock:

 

• may significantly reduce theequity interest of investors in the initial public offering;

 

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• will likely cause a change incontrol if a substantial number of our shares of common stock are issued, whichmay affect, among other things, our ability to use our net operating loss carryforwards, if any, and most likely also result in the resignation or removal ofour present officers and directors; and

• may adversely affect prevailingmarket prices for our common stock.

 

Similarly, if we issueddebt securities, it could result in:

 

• default and foreclosure on ourassets if our operating cash flow after a business combination wereinsufficient to pay our debt obligations;

• acceleration of our obligationsto repay the indebtedness even if we have made all principal and interestpayments when due if the debt security contained covenants that required themaintenance of certain financial ratios or reserves and any such covenant werebreached without a waiver or renegotiation of that covenant;

• our immediate payment of allprincipal and accrued interest, if any, if the debt security was payable ondemand; and

• our inability to obtainadditional financing, if necessary, if the debt security contained covenantsrestricting our ability to obtain additional financing while such security wasoutstanding.

 

***Our officers anddirectors control a substantial interest in us and thus may influence certainactions requiring stockholder vote.***

 

Our officers anddirectors collectively own 15.8% of our issued and outstanding shares of ourcommon stock. Any shares of common stock acquired by our initial stockholdersin the aftermarket will be considered as part of the holding of the publicstockholders and will have the same rights as other public stockholders,including voting and conversion rights with respect to a potential businesscombination. Accordingly, they may vote on a proposed business combination withrespect to shares acquired in the aftermarket any way they so choose.

 

Our board of directors isdivided into three classes, each of which will generally serve for a term ofthree years with only one class of directors being elected in each year. It isunlikely that there will be an annual meeting of stockholders to elect newdirectors prior to the consummation of a business combination, in which caseall of the current directors will continue in office at least until theconsummation of the business combination. If there is an annual meeting, as aconsequence of our “staggered” board of directors, only a minority of the boardof directors will be considered for election and our initial stockholders,including all of our officers and directors, because of their ownershipposition, will have considerable influence regarding the outcome. Accordingly,our initial stockholders will continue to exert control at least until theconsummation of a business combination. In addition, our initial stockholdersand their affiliates and relatives are not prohibited from purchasing oursecurities in the aftermarket. If they do, we cannot assure you that ourinitial stockholders will not have considerable influence upon the vote inconnection with a business combination.

 

***It is likelythat some of our current officers and directors will resign upon consummationof a business combination and we will have only limited ability to evaluate themanagement of the target business.***

 

Our ability tosuccessfully effect a business combination will be totally dependent upon theefforts of our key personnel. The future role of our key personnel following abusiness combination, however, cannot presently be fully ascertained. Althoughwe expect several of our management and other key personnel, particularly ourchairman of the board and chief executive officer, to remain associated with usfollowing a business combination, we may employ other personnel following thebusiness combination. Moreover, our current management will only be able toremain with the combined company after the consummation of a businesscombination if they are able to negotiate the same as part of any suchcombination. If we acquired a target business in an all-cash transaction, itwould be more likely that current members of management would remain with us ifthey chose to do so. If a business combination were structured as a mergerwhereby the stockholders of the target company were to control the combinedcompany following a business combination, it may be less likely that managementwould remain with the combined company unless it was negotiated as part of thetransaction via the acquisition agreement, an employment agreement or otherarrangement. In making the determination as to whether current managementshould remain with

 

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us following the business combination, management will analyze theexperience and skill set of the target business’ management and negotiate aspart of the business combination that certain members of current managementremain if it is believed that it is in the best interests of the combinedcompany post-business combination. If management negotiates to be retainedpost-business combination as a condition to any potential business combination,such negotiations may result in a conflict of interest. While we intend toclosely scrutinize any additional individuals we engage after a businesscombination, we cannot assure you that our assessment of these individuals willprove to be correct. These individuals may be unfamiliar with the requirementsof operating a public company as well as United States securities laws whichcould cause us to have to expend time and resources helping them becomefamiliar with such laws. This could be expensive and time-consuming and couldlead to various regulatory issues which may adversely affect our operations.

 

***Our officers anddirectors may allocate their time to other businesses thereby causing conflictsof interest in their determination as to how much time to devote to ouraffairs. This could have a negative impact on our ability to consummate abusiness combination.***

 

Our officers anddirectors are not required to commit their full time to our affairs, which mayresult in a conflict of interest in allocating their time between ouroperations and other businesses. We do not intend to have any full timeemployees prior to the consummation of a business combination. All of ourexecutive officers are engaged in several other business endeavors and are notobligated to contribute any specific number of hours per week to our affairs.If our executive officers’ other business affairs require them to devote moresubstantial amounts of time to such affairs, it could limit their ability todevote time to our affairs and could have a negative impact on our ability toconsummate a business combination.

 

***Our officers anddirectors may in the future become affiliated with entities engaged in businessactivities similar to those intended to be conducted by us and accordingly, mayhave conflicts of interest in determining to which entity a particular businessopportunity should be presented.***

 

Our officers anddirectors may in the future become affiliated with entities, including other “blankcheck’ companies, engaged in business activities similar to those intended tobe conducted by us. Additionally, our officers and directors may become awareof business opportunities which may be appropriate for presentation to us aswell as the other entities with which they are or may be affiliated. Further,certain of our officers and directors are currently involved in otherbusinesses that are similar to the business activities that we intend toconduct following a business combination. Due to these existing affiliations,they may have fiduciary obligations to present potential business opportunitiesto those entities prior to presenting them to us which could cause additionalconflicts of interest. Accordingly, they may have conflicts of interest indetermining to which entity a particular business opportunity should bepresented.

 

***All of ourofficers and directors own shares of our common stock which will notparticipate in liquidation distributions and therefore they may have a conflictof interest in determining whether a particular target business is appropriatefor a business combination.***

 

All of our officers anddirectors own shares of stock in our company which were issued prior to theinitial public offering, but have waived their right to receive distributionswith respect to those shares upon our liquidation upon our failure to completea business combination. Additionally, our officers and directors purchasedwarrants in the open market following the initial public offering. The sharesand warrants owned by our officers and directors and their affiliates will beworthless if we do not consummate a business combination. In addition, becauseonly a majority vote is needed to approve the business combination, ourofficers and directors may have a conflict of interest since they could voteagainst the business combination with respect to any shares purchased by themin the aftermarket and could exercise their conversion rights with respect tosuch shares if less than 20% of the public stockholders vote against thebusiness combination and convert their shares. The personal and financialinterests of our directors may influence their motivation in identifying andselecting a target business and completing a business combination timely.Consequently, our directors’ and officers’ discretion in identifying andselecting a suitable target business may result in a conflict of interest whendetermining whether the terms, conditions and timing of a particular businesscombination are appropriate and in our stockholders’ best interest.

 

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

 

If at any time we havenet tangible assets of $5,000,000 or less and our common stock has a marketprice per share of less than $5.00, transactions in our common stock may besubject to the “penny stock” rules promulgated under the Securities ExchangeAct of 1934. Under these rules, broker-dealers who recommend such securities topersons other than institutional accredited investors must:

 

• make a special writtensuitability determination for the purchaser;

• receive the purchaser’s writtenagreement to a transaction prior to sale;

• provide the purchaser with riskdisclosure documents which identify certain risks associated with investing in “pennystocks” and which describe the market for these “penny stocks” as well as apurchaser’s legal remedies; and

• obtain a signed and datedacknowledgment from the purchaser demonstrating that the purchaser has actuallyreceived the required risk disclosure document before a transaction in a “pennystock” can be completed.

 

If our common stockbecomes subject to these rules, broker-dealers may find it difficult toeffectuate customer transactions and trading activity in our securities may beadversely affected. As a result, the market price of our securities may bedepressed, and you may find it more difficult to sell our securities.

 

***It is probablethat we will only be able to complete one business combination with theproceeds of the initial public offering, which will cause us to be solelydependent on a single business and a limited number of services.***

 

Our initial business combinationmust be with a business or businesses with a collective fair market value of atleast 80% of our net assets at the time of such acquisition. We may not be ableto acquire more than one target business because of various factors, includingpossible complex accounting issues, which would include generating pro formafinancial statements reflecting the operations of several target businesses asif they had been combined, and numerous logistical issues, which would includeattempting to coordinate the timing of negotiations, proxy statement disclosureand closing with multiple target businesses. In addition, we would also beexposed to the risk that conditions to closings with respect to the acquisitionof one or more of the target businesses would not be satisfied bringing thefair market value of the business combination below the required fair marketvalue of 80% of our net assets threshold. Accordingly, while it is possiblethat we may attempt to effect our initial business combination with more than onetarget business, we are more likely to choose a single target business ifdeciding between one target business meeting such 80% threshold and comparablemultiple target business candidates collectively meeting the 80% threshold.Consequently, it is probable that, unless the purchase price consistssubstantially of our equity, we will have the ability to complete only theinitial business combination with the proceeds of the initial offering.Accordingly, the prospects for our success may be:

 

•                                          solely dependentupon the performance of a single business, or

•                                          dependentupon the development or market acceptance of a single or limited number ofprocesses   or services.

 

In this case, we will notbe able to diversify our operations or benefit from the possible spreading ofrisks or offsetting of losses, unlike other entities which may have theresources to complete several business combinations in different industries ordifferent areas of a single industry.

 

***Because of ourlimited resources and the significant competition for business combinationopportunities, we may not be able to consummate an attractive businesscombination.***

 

We have encountered andexpect to encounter intense competition from other entities having a businessobjective similar to ours, including venture capital funds, leveraged buyoutfunds and operating businesses competing for acquisitions. Many of theseentities are well established and have extensive experience in identifying andeffecting business combinations directly or through affiliates. Many of thesecompetitors possess greater

 

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technical, human and other resources than we do and our financialresources will be relatively limited when contrasted with those of many ofthese competitors. While we believe that there are numerous potential targetbusinesses that we could acquire with the net proceeds of the initial publicoffering, our ability to compete in acquiring certain sizable target businesseswill be limited by our available financial resources. This inherent competitivelimitation gives others an advantage in pursuing the acquisition of certaintarget businesses. In addition, we may not have enough cash available fromfunds outside of the trust account to make deposits or fund a “no-shop”provision in connection with a particular business combination which may causeus to be at a competitive disadvantage in pursuing the acquisition of targetbusinesses. Further, the obligation we have to seek stockholder approval of abusiness combination may delay the consummation of a transaction, and ourobligation to convert into cash the shares of common stock held by publicstockholders in certain instances may reduce the resources available for abusiness combination. Additionally, our outstanding warrants, and the futuredilution they potentially represent, may not be viewed favorably by certaintarget businesses. Any of these obligations may place us at a competitivedisadvantage in successfully negotiating a business combination.

 

***We may be unableto obtain additional financing, if required, to complete a business combinationor to fund the operations and growth of the target business, which could compelus to restructure the transaction or abandon a particular business combination.***

 

Although we believe thatthe net proceeds of the initial public offering are sufficient to allow us toconsummate a business combination, we cannot currently ascertain the capitalrequirements for any particular transaction. If the net proceeds of the initialpublic offering prove to be insufficient, either because of the size of thebusiness combination or the depletion of the available net proceeds in searchof a target business, or because we become obligated to convert into cash asignificant number of shares from dissenting stockholders, we will be requiredto seek additional financing. We cannot assure you that such financing would beavailable on acceptable terms, if at all. To the extent that additionalfinancing proves to be unavailable when needed to consummate a particularbusiness combination, we would be compelled to restructure the transaction orabandon that particular business combination and seek an alternative targetbusiness candidate. In addition, it is possible that we could use a portion ofthe funds not in the trust account to make a deposit, down payment or fund a “no-shop”provision with respect to a particular proposed business combination, althoughwe do not have any current intention to do so. In the event that we wereultimately required to forfeit such funds (whether as a result of our breach ofthe agreement relating to such payment or otherwise), we may not have asufficient amount of working capital available outside of the trust account toconduct due diligence and pay other expenses related to finding a suitablebusiness combination without securing additional financing. If we were unableto secure additional financing, we would most likely fail to consummate abusiness combination in the allotted time and would be forced to liquidate. Inaddition, if we consummate a business combination, we may require additionalfinancing to fund the operations or growth of the target business. The failureto secure additional financing could have a material adverse effect on thecontinued development or growth of the target business. None of our officers,directors or stockholders is required to provide any financing to us inconnection with or after a business combination.

 

***Our outstandingwarrants may have an adverse effect on the market price of common stock andmake it more difficult to effect a business combination.***

 

In connection with theinitial public offering, as part of the units, we issued warrants to purchase17,250,000 shares of common stock. We will also issue an option to purchase 750,000units to the representative of the underwriters which, if exercised, willresult in the issuance of an additional 750,000 warrants. To the extent weissue shares of common stock to effect a business combination, the potentialfor the issuance of substantial numbers of additional shares upon exercise ofthese warrants could make us a less attractive acquisition vehicle in the eyesof a target business as such securities, when exercised, will increase thenumber of issued and outstanding shares of our common stock and reduce thevalue of the shares issued to complete the business combination. Accordingly,our warrants and options may make it more difficult to effectuate a businesscombination or increase the cost of the target business. Additionally, the sale,or even the possibility of sale, of the shares underlying the warrants couldhave an adverse effect on the market price for our securities or on our abilityto obtain future public financing. If and to the extent these warrants andoptions are exercised, you may experience dilution to your holdings.

 

17

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***If our initialstockholders exercise their registration rights, it may have an adverse effecton the market price our common stock and the existence of these rights may makeit more difficult to effect a business combination.***

 

Our initial stockholdersare entitled to demand that we register the resale of their shares of commonstock at any time after the date on which their shares are released from escrow,which, except in limited circumstances, will not be before June 29, 2008. Ifour initial stockholders exercise their registration rights with respect to allof their shares of common stock, then there will be an additional3,750,000 shares of common stock eligible for trading in the publicmarket. The presence of this additional number of shares of common stockeligible for trading in the public market may have an adverse effect on themarket price of our common stock. In addition, the existence of these rightsmay make it more difficult to effectuate a business combination or increase thecost of the target business, as the stockholders of the target business may bediscouraged from entering into a business combination with us or request ahigher price for their securities as a result of these registration rights andthe potential future effect their exercise may have on the trading market forour common stock.

 

***The AmericanStock Exchange may delist our securities from quotation on its exchange whichcould limit investors’ ability to make transactions in our securities andsubject us to additional trading restrictions.***

 

Our securities are listedon the American Stock Exchange, a national securities exchange, and have beensince the consummation of the initial public offering. We cannot assure youthat our securities will continue to be listed on the American Stock Exchangein the future prior to a business combination. Additionally, in connection withour business combination, it is likely that the American Stock Exchange mayrequire us to file a new initial listing application and meet its initiallisting requirements as opposed to its more lenient continued listingrequirements. We cannot assure you that we will be able to meet those initiallisting requirements at that time.

 

If the American StockExchange delists our securities from trading on its exchange, we could facesignificant material adverse consequences including:

 

•                                          a limitedavailability of market quotations for our securities;

•                                          adetermination that our common stock is a “penny stock” which will requirebrokers trading in our common stock to adhere to more stringent rules andpossibly resulting in a reduced level of trading activity in the secondarytrading market for our common stock;

•                                          a limitedamount of news and analyst coverage for our company; and

•                                          a decreasedability to issue additional securities or obtain additional financing in thefuture.

 

***If we are deemedto be an investment company, we may be required to institute burdensome compliancerequirements and our activities may be restricted, which may make it difficultfor us to complete a business combination.***

 

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

 

• restrictions on the nature ofour investments; and

• restrictions on the issuance ofsecurities,

 

which may make itdifficult for us to complete a business combination.

 

In addition, we may haveimposed upon us burdensome requirements, including:

 

• registration as an investmentcompany;

• adoption of a specific form ofcorporate structure; and

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

 

18

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We do not believe thatour anticipated principal activities will subject us to the Investment CompanyAct of 1940. To this end, the proceeds held in trust may only be invested bythe trust agent only in Treasury Bills issued by the United States with a maturityof 180 days or less or in money market funds meeting certain conditionsunder Rule 2a-7 promulgated under the Investment Company Act of 1940. Byrestricting the investment of the proceeds to these instruments, we intend tomeet the requirements for the exemption provided in Rule 3a-1 promulgatedunder the Investment Company Act of 1940. If we were deemed to be subject tothe act, compliance with these additional regulatory burdens would requireadditional expense that we have not allotted for.

 

***Because we maybe deemed to have no “independent” directors, actions taken and expensesincurred by our officers and directors on our behalf will generally not besubject to “independent” review.***

 

Each of our directorsowns shares of our common stock and, although no salary or other compensationwill be paid to them for services rendered prior to or in connection with abusiness combination, they may receive reimbursement for out-of-pocket expensesincurred by them in connection with activities on our behalf such asidentifying potential target businesses and performing due diligence onsuitable business combinations. There is no limit on the amount of theseout-of-pocket expenses and there will be no review of the reasonableness of theexpenses by anyone other than our board of directors, which includes personswho may seek reimbursement, or a court of competent jurisdiction if suchreimbursement is challenged. Because none of our directors may be deemed “independent,”we will generally not have the benefit of independent directors examining thepropriety of expenses incurred on our behalf and subject to reimbursement.Although we believe that all actions taken by our directors on our behalf willbe in our best interests, we cannot assure you that this will be the case. Ifactions 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 theprice of our stock held by the public stockholders.

 

**Item1B. Unresolved Staff Comments**

 

We have received nowritten comments regarding our periodic or current reports from the staff ofthe Securities and Exchange Commission that were issued 180 days or morepreceding the end of our 2005 fiscal year and that remain unresolved.

 

**Item 2.Properties.**

 

We maintain our executiveoffices at 401 East Las Olas Boulevard, Suite 1140, Fort Lauderdale, Florida33301. The cost for this space provided by SB Management Corp., a corporationsolely owned by Steven Berrard, our Chairman and Chief Executive Officer, isapproximately $4,875 per month and includes certain other additional servicesprovided by SB Management Corp. pursuant to a letter agreement between us andSB Management Corp. We believe that based on rents and fees for similarservices in the Fort Lauderdale area, that the fee charged by SB ManagementCorp. is at least as favorable as we could have obtained from an unaffiliatedperson. We consider our current office space adequate for our currentoperations.

 

**Item 3.Legal Proceedings.**

 

To the knowledge ofmanagement, there is no litigation currently pending or contemplated against usor any of our officers or directors in their capacity as such.

 

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

 

No matter was submittedto a vote of security holders during the fourth quarter of the fiscal yearended December 31, 2005.

 

19

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**PART II**

 

**Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities.**

 

Our common stock andwarrants started trading separately as of July 28, 2005. Each of our unitsconsists of one share of our common stock and one redeemable common stockpurchase warrant and trades on the American Stock Exchange under the symbol “SVI.U.”Our common Stock and warrants trade on the American Stock Exchange under thesymbols “SVI” and “SVI.WS”, respectively. Each warrant entitles the holder topurchase from us one share of our common stock at an exercise price of $6.00commencing the later of the completion of a business combination with a targetbusiness or June 29, 2006. Our warrants will expire at 5:00 p.m., New York Citytime, on June 28, 2009, or earlier upon redemption.

 

In addition, as part ofthe initial public offering, we issued an option to purchase 750,000 units for$10.00 per unit to the representative of the underwriters which, if exercised,will result in the issuance of 750,000 common shares and 750,000 warrants. Thewarrants entitle the holder to purchase from us one share of common stock at anexercise price of $7.50 commencing the later of a business combination with atarget business or June 29, 2006. The warrants issued to underwriters willexpire June 28, 2009.

 

The following table setsforth, for the calendar quarter indicated, the quarterly high and low salesprices of our units, common stock and warrants as reported on the AmericanStock Exchange since our units commenced public trading on June 30, 2005 andsince such common stock and warrants commenced public trading on July 28, 2005.

 
| ** **                  | ** ** | **American Stock Exchange** | ** ** |
|-----------------------------|------------|-----------------------------|------------|
| ** **                  | ** ** | **Common Stock**            | ** ** | **Warrants** | ** ** | **Units** | ** ** |
| ** **                  | ** ** | **High**                    | ** ** | **Low** | ** ** | **High** | ** ** | **Low** | ** ** | **High** | ** ** | **Low** | ** ** |
| **2005  Second Quarter**(1) |       | NA                          |       | NA |   | NA |   | NA |   | $ | 8.05 |   | $ | 7.84 |   |
| **2005  Third Quarter**(2)  |       | $                           | 7.20       |   | $ | 6.99 |   | $ | 1.05 |   | $ | 0.89 |   | $ | 8.09 |   | $ | 7.84 |   |
| **2005  Fourth Quarter**    |       | $                           | 7.16       |   | $ | 7.03 |   | $ | 0.96 |   | $ | 0.73 |   | $ | 8.15 |   | $ | 7.80 |   |

 

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(1) The figures forthe second quarter 2005 are only for June 30, 2005, the date on which our unitsfirst commenced trading on the American Stock Exchange.

 

(2) Our common stockand warrants commenced trading on the American Stock Exchange on July 28, 2005.

 

**Holders**

 

As of March 24, 2006,there was one holder of record of our units, eleven holders of record of ourcommon stock and one holder of record of our warrants.

 

**Dividends**

 

We have not paid anydividends on our common stock to date and do not intend to pay dividends priorto the completion of a business combination. The payment of dividends in thefuture will be contingent upon our revenues and earnings, if any, capitalrequirements and general financial condition subsequent to completion of abusiness combination. The payment of any dividends subsequent to a businesscombination will be within the discretion of our then board of directors. It isthe present intention of our board of directors to retain all earnings, if any,for use in our business operations and, accordingly, our board does notanticipate declaring any dividends in the foreseeable future.

 

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**Recent Sales of UnregisteredSecurities**

 

(a)   Duringthe past three years, we sold the following shares of common stock withoutregistration under the Securities Act:

 
| **Stockholders**          | ** ** | **Number of  Shares** | ** ** |
|---------------------------|------------|-----------------------|------------|
| Steven R.  Berrard        |       | 375,000               |       |
| The Edelson  Family Trust |       | 218,750               |       |
| Thomas E. Aucamp          |       | 218,750               |       |
| Thomas C. Byrne           |       | 218,750               |       |
| Nathaniel Kramer          |       | 218,750               |       |

 

Such shares were issuedon January 28, 2005 in connection with our organization pursuant to theexemption from registration contained in Section 4(2) of the SecuritiesAct as they were sold to sophisticated, wealthy individuals. The shares issuedto the individuals and entities above were sold for an aggregate offering priceof $25,000 at an average purchase price of approximately $0.02 per share.

 

On March 28, 2005,our board of directors authorized a stock dividend of 1.5714 shares of commonstock for each outstanding share of common stock, effectively lowering thepurchase price to approximately $.0078 per share. No underwriting discounts orcommissions were paid with respect to such sales.

 

On March 31, 2005, wesold an aggregate of 535,753 shares of our common stock to the individuals setforth below for $4,179 in cash, at an average purchase price of $.0078 pershare, as follows:

 

| **Name**                  | ** ** | **Number of  Shares** | ** ** |
|---------------------------|------------|-----------------------|------------|
| Cris V. Branden           |       | 133,939               |       |
| Richard L.  Handley       |       | 133,938               |       |
| Robert J.  Henninger, Jr. |       | 133,938               |       |
| Alex Muxo, Jr.            |       | 133,938               |       |

 

Such shares were soldpursuant to an exemption from registration contained in Section 4(2) of theSecurities Act as they were sold to sophisticated, wealthy individuals.

 

**Use of Proceeds from our InitialPublic Offering**

 

On July 6, 2005, weconsummated our initial public offering of 15,000,000 units. On July 7, 2005,we consummated the closing of an additional 2,250,000 units that were subject tothe underwriters’ over-allotment option. Each unit consists of one share ofcommon stock and one redeemable common stock purchase warrant. Each warrantentitles the holder to purchase from us one share of our common stock at anexercise price of $6.00. The managing underwriter in the offering was BroadbandCapital Management LLC. The securities sold in the offering were registeredunder the Securities Act of 1933 on a registration statement on Form S-1 (No.333-122812). The Securities and Exchange Commission declared the registrationstatement effective on June 29, 2005.

 

Our net proceeds from thesale of our units, after deducting certain offering expenses of approximately$1,887,468, including $1,200,000 evidencing the underwriters’ non-accountableexpense allowance of 1% of the gross proceeds (excluding the proceeds from theunderwriters’ over-allotment), were approximately $127,837,468. Of this amount,$126,720,000 was placed in trust and the remaining $1,117,468 was held outsideof the trust. The remaining proceeds are available to be used by us to providefor business, legal and accounting due diligence on prospective acquisitionsand continuing general and administrative expenses. We will use substantiallyall of the net proceeds of the initial public offering to acquire a targetbusiness, including identifying and evaluating prospective acquisitioncandidates, selecting the target business, and structuring, negotiating andconsummating the business combination. To the extent that our capital stock is usedin whole or in part as consideration to effect a business combination, theproceeds held in the trust fund as well as any other net proceeds not expendedwill be used to finance the operations of the target business. The net proceedsdeposited into the trust fund remain on deposit in the trust fund and haveearned $1,454,091in dividends and interest through December 31, 2005.

 

 

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**Item 6.Selected Financial Data.**

 

The following is asummary of selected financial data of the Company for the period from January6, 2005 (inception) to December 31, 2005, which should be read in conjunctionwith the financial statements of the Company and the notes thereto:

 

**SELECTEDFINANCIAL DATA**

 

**Income statement data**

 
| ** **                                                    | ** ** | **Period from  January 6, 2005  (inception) to  December 31, 2005** | ** ** |
|---------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|
| Loss from  operations                                         |       | $                                                                   | (196,614   | ) |
| Interest income  (net of interest paid)                       |       | $                                                                   | 1,452,826  |   |
| Income before  provision for income taxes                     |       | $                                                                   | 1,256,212  |   |
| Provision for state  income taxes                             |       | $                                                                   | 84,933     |   |
| Net income                                                    |       | $                                                                   | 1,171,279  |   |
| Basic weighted  average number of common shares outstanding   |       | 11,777,489                                                          |       |
| Net income per  share - basic                                 |       | $                                                                   | 0.10       |   |
| Diluted weighted  average number of common shares outstanding |       | 13,049,709                                                          |       |
| Net income per  share - diluted                               |       | $                                                                   | 0.09       |   |

 

**Balance sheet data**

 
| ** **                                                                                | ** ** | **December 31, 2005** | ** **  |
|-------------------------------------------------------------------------------------------|------------|-----------------------|-------------|
| Cash                                                                                      |       | $                     | 976,915     |   |
| Investments held  in trust                                                                |       | $                     | 128,174,091 |   |
| Total Assets                                                                              |       | $                     | 129,207,778 |   |
|                                                                                      |       |                  |        |
| Total  liabilities, including $25,241,373 of common stock subject to possible  conversion |       | $                     | 25,411,225  |   |
| Total stockholders’  equity                                                          |       | $                     | 103,796,553 |   |
| Total  Liabilities and Stockholders’ equity                                          |       | $                     | 129,207,778 |   |

 

**Item 7.Management Discussion and Analysis of Financial Condition and Results ofOperations.**

 

We were formed on January6, 2005, to serve as a vehicle to effect a merger, capital stock exchange,asset acquisition or other similar business combination with an operatingbusiness that provides services. Our initial business combination must be witha target business or businesses whose fair market value is at least equal to80% of net assets at the time of such acquisition. We intend to utilize cashderived from the proceeds of our recently completed public offering, ourcapital stock, debt or a combination of cash, capital stock and debt, ineffecting a business combination.

 

From January 2005(inception) until December 31, 2005, we had net income of approximately$1,171,279, derived from dividend and interest income less operating expensesand taxes.

 

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On July 6, 2005, weconsummated our initial public offering of 15,000,000 units. On July 7, 2005,we consummated the closing of an additional 2,250,000 units that were subjectto the underwriters’ over-allotment option. Each unit consists of one share ofcommon stock and one redeemable common stock purchase warrant. Each warrantentitles the holder to purchase from us one share of our common stock at anexercise price of $6.00. Our common stock and warrants started tradingseparately as of July 28, 2005.

 

Our net proceeds from thesale of our units, after deducting certain offering expenses of approximately$1,887,468, including $1,200,000 evidencing the underwriters’ non-accountableexpense allowance of 1% of the gross proceeds (excluding the proceeds from theunderwriters’ over-allotment), and underwriting discounts of approximately$8,280,000, were approximately $127,837,468. Of this amount, $126,720,000 wasplaced in trust and the remaining $1,117,468 was held outside of the trust. Theremaining proceeds are available to be used by us to provide for business,legal and accounting due diligence on prospective acquisitions and continuinggeneral and administrative expenses. We will use substantially all of the netproceeds of the initial public offering to acquire a target business, includingidentifying and evaluating prospective acquisition candidates, selecting thetarget business, and structuring, negotiating and consummating the businesscombination. To the extent that our capital stock is used in whole or in partas consideration to effect a business combination, the proceeds held in thetrust fund as well as any other net proceeds not expended will be used tofinance the operations of the target business. We believe we will havesufficient available funds outside of the trust fund to operate through July 6,2007, assuming that a business combination is not consummated during that time.From July 6, 2005 through July 6, 2007, we anticipate approximately $180,000 ofexpenses for legal, accounting and other expenses attendant to the duediligence investigations, structuring and negotiating of a businesscombination, an aggregate of $180,000 for the administrative fees payable to SBManagement Corp. and Mercantile Companies, Inc. (a total of $7,500 per monthfor two years), $100,000 for expenses for the due diligence and investigationof a target business, $50,000 of expenses in legal and accounting fees relatingto our SEC reporting obligations and $608,200 for general working capital thatwill be used for miscellaneous expenses and reserves, including approximately$200,000 for director and officer liability insurance premiums. We do notbelieve we will need to raise additional funds in order to meet theexpenditures required for operating our business. However, we may need to raiseadditional funds through a private offering of debt or equity securities ifsuch funds are required to consummate a business combination that is presentedto us. We would only consummate such a financing simultaneously with theconsummation of a business combination.

 

Commencing on July 6,2005 and ending upon the acquisition of a target business, we began incurring afee of $4,875 per month for office space and certain other additional servicesfrom SB Management Corp., an affiliate of Steven R. Berrard, our chairman ofthe board and chief executive officer, and a fee of $2,625 per month forgeneral and administrative services including secretarial support fromMercantile Companies, Inc., an affiliate of I. Steven Edelson, our vice chairmanand vice president, and Nathaniel Kramer, one of our directors. In addition, inJanuary, March and June 2005, Messrs. Berrard, Edelson, Kramer and Aucamploaned us an aggregate of $160,000 to us for payment on our behalf of offeringexpenses. These loans were repaid following our initial public offering fromthe proceeds of the offering.

 

Since our initial publicoffering, we have been engaged in sourcing a suitable business combinationcandidate. We have met with target companies, service professionals and otherintermediaries to discuss with them our company, the background of ourmanagement and our combination preferences. In the course of these discussions,we have also spent time explaining the capital structure of the initial publicoffering, the combination approval process, and the timeline under which we areoperating before the proceeds of the offering are returned to investors.

 

**Overall, we would gauge the environment for target companies to becompetitive and we believe that private equity firms and strategic buyersrepresent our biggest competition. Our management believes that many of thefundamental drivers of alternative investment vehicles like our company arebecoming more accepted by investors and potential business combination targets;these include a difficult IPO environment, a cash-rich investment communitylooking for differentiated opportunities for incremental yield, and businessowners seeking new ways to maximize their shareholder value while remaininginvested in the business. However, there can be no assurance that we will finda suitable business combination in the allotted time. Controls andProcedures**

 

**We do notcurrently, and are not required to, maintain an effective system of internalcontrols as defined by Section 404 of the Sarbanes-Oxley Act of 2002. We willbe required to comply with the internal control requirements of theSarbanes-Oxley Act for the fiscal year ending December 31, 2006**.

 

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As of the date of this report, we have not completedan assessment, nor have our auditors tested our systems, of internal control. Weexpect that we will assess the internal controls of our target business orbusinesses preceding the completion of a business combination and will thenimplement a schedule for implementation and testing of such additional controlsas we may determine are required to state that we maintain an effective systemof internal controls. A target business may not be in compliance with theprovisions of the Sarbanes-Oxley Act regarding the adequacy of its internalcontrols. Many small and mid-sized target businesses we consider for a businesscombination may have internal controls that need improvement in areas such as:

 

•                                          staffingfor financial, accounting and external reporting areas, including segregationof duties;

•                                          reconciliationof accounts;

•                                          properrecordation of expenses and liabilities in the period to which they relate;

•                                          proofof internal review and approval of accounting items;

•                                          documentationof key accounting assumptions, estimates and/or conclusions; and

•                                          documentationof accounting policies and procedures.

 

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

 

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

 

**Off-BalanceSheet Arrangements; Commitments and Contractual Obligations**

 

As of December 31, 2005, we did not have anyoff-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-Kand did not have any commitments or contractual obligations other than ourpayments to SB Management Corp. and Mercantile Companies, Inc. as describedabove. No unaudited quarterly operating data is included in this prospectus aswe have conducted no operations to date.

 

**Item7A. Quantitative and Qualitative Disclosures about Market Risk**

 

Market risk is thesensitivity of income to changes in interest rates, foreign exchanges,commodity prices, equity prices, and other market-driven rates or prices. We arenot presently engaged in, and if a suitable business target is not identifiedby us prior to the prescribed liquidation of the trust fund we may not engagein, any substantive commercial business. Accordingly, the risks associated withforeign exchange rates, commodity prices, and equity prices are notsignificant. The net proceeds of our initial public offering not held in thetrust fund and not immediately required for the purposes set forth above havebeen invested only in United States “government securities,” defined as anyTreasury Bill issued by the United States having a maturity of one hundred andeighty days or less, or in money market funds meeting certain conditions underRule 2a-7 promulgated under the Investment Company Act of 1940. Given ourlimited risk in our exposure to U.S. Treasury Bills and such money marketfunds, we do not view the interest rate risk to be significant. We do not enterinto derivatives or other financial instruments for trading or speculativepurposes.

 

**Item 8.Financial Statements and Supplementary Data.**

 

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

 

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**Item 9.Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure.**

 

Not applicable.

 

**Item9A. Controls and Procedures.**

 

Our management carriedout an evaluation, with the participation of our Chief Executive Officer(principal executive, financial, and accounting officer), of the effectivenessof our disclosure controls and procedures as of December 31, 2005. Based uponthat evaluation, our Chief Executive Officer concluded that our disclosurecontrols and procedures were effective to ensure that information required tobe disclosed by us in reports that we file or submit under the SecuritiesExchange Act of 1934 is recorded, processed, summarized and reported, withinthe time periods specified in the rules and forms of the Securities andExchange Commission.

 

There has not been anychange in our internal control over financial reporting in connection with theevaluation required by Rule 13a-15(d) under the Exchange Act that occurredduring the quarter ended December 31, 2005, that has materially affected, or isreasonably likely to materially affect, our internal control over financialreporting.

 

**Item9B. Other Information.**

 

Not applicable.

 

**PART III**

 

**Item10. Directors and Executive Officers of the Registrant**

 

Our current directors andexecutive officers are as follows:

 
| **Name**          | ** ** | **Age** | ** ** | **Position**                                       |
|-------------------|------------|---------|------------|----------------------------------------------------|
| Steven R. Berrard |       | 51      |       | Chairman of the Board  and Chief Executive Officer |
| I. Steven Edelson |       | 46      |       | Vice Chairman and Vice  President                  |
| Thomas E. Aucamp  |       | 39      |       | Director and Vice  President                       |
| Thomas C. Byrne   |       | 43      |       | Director                                           |
| Nathanial Kramer  |       | 45      |       | Director                                           |
| Cris V. Branden   |       | 45      |       | Director                                           |

 

**Steven R.Berrard**has been the chairman of the board and chiefexecutive officer since SACI’s inception. Mr. Berrard has served asManaging Partner of New River Capital Partners, a private equity fund, which heco-founded, since 1997. Prior to co-founding New River Capital Partners, from1996 to 1999, Mr. Berrard was the co-founder and Co-Chief ExecutiveOfficer of AutoNation, Inc., the nation’s leading automotive retailcompany.****

 

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Prior to joiningAutoNation, from 1987 to 1996, Mr. Berrard served as President and ChiefExecutive Officer of the Blockbuster Entertainment Group, the world’s largestvideo store operator, and as a member of the Board of Directors ofViacom, Inc. As President and Chief Executive Officer, Mr. Berrardwas responsible for the direction and operation of more than 70,000 employeesat 4,500 Blockbuster stores located in 20 countries, Showtime Networks,Spelling Entertainment Group, Paramount Parks, and Virgin Interactive Entertainment.

 

Prior to his tenure withBlockbuster, from 1981 to 1987, Mr. Berrard served as President ofHuizenga Holdings, Inc. and served in various positions with subsidiariesof Huizenga Holdings. Prior to joining Huizenga Holdings, Mr. Berrard wasemployed by Coopers & Lybrand from 1976 to 1981.

 

Mr. Berrard earnedhis BS in Accounting from Florida Atlantic University and has been a member ofthe Board of Directors of HealthSouth (Audit Committee and Chairman of theFinance Committee since January 2004), and SwisherInternational, Inc. since November 2004. He has also served on theBoard of Directors of Birmingham Steel from 1999 until its sale in 2002 as wellas the Board of Boca Resorts, Inc. from 1996 until prior to its sale tothe Blackstone Group in December 2004.

 

**I. StevenEdelson** has been the vice chairman of our board of directorsand vice president since inception. Since 1997, Mr. Edelson has been aPrincipal of Mercantile Capital Group and a Managing Director of the ChicagoOffice. Mr. Edelson has been a principal of Mercantile Capital Markets, whichmanages MCG, from 1997 to the present. The firm’s investment activities includeprivate equity, direct investments in public companies, mezzanine investmentsin early stage companies, buyouts, project finance and bridge financings.

 

Mr. Edelson has beeninvolved in finance and real estate for more than 18 years. Prior toMercantile, from 1989 to 1994, Mr. Edelson was Executive Vice President ofTishman Midwest Management Corporation, a real estate development, leasing andmanagement company. From July 1995 to present, Mr. Edelson has also served asManaging Director of International Facilities Group (IFG), a leading facilitiesdevelopment and management company.

 

Mr. Edelson serves on theBusiness Council for the Woodrow Wilson Center and the Supervisory Committee ofUrban America, and holds a number of board seats for private companiesincluding Ligos Corporation, a software company focused on solutions for videocompression, Itracs, an enterprise software company focused on networkinfrastructure management, and MoveOnIn, Inc., a relocation and lifestyleservices company.

 

**Thomas E.Aucamp** has been a member of our board of directors and vicepresident since inception. Mr. Aucamp has served as a Partner of New RiverCapital Partners, a private equity fund, which he co-founded, since 1997. Priorto co-founding New River Capital Partners, from 1995 to 1997, Mr. Aucamp wasVice President of Corporate Development and Strategic Planning for BlockbusterEntertainment Group, the world’s largest video store operator. In thiscapacity, Mr. Aucamp sought to leverage the company’s core assets, membershipbase, brand strength, and operations capabilities; most of these initiativesinvolved developing close working partnership with third parties.

 

Prior to joiningBlockbuster from 1992 to January 1995, Mr. Aucamp was in the mergers andacquisitions department of W.R. Grace & Co., Inc., which at the time was adiversified Fortune 100 company with interests in healthcare, packaging,construction products and specialty chemicals. Mr. Aucamp has additionaltransaction and development experience from his tenure at Ryder System during2001 and Morgan Stanley from 1988 to 1990.

 

Mr. Aucamp has an MBAfrom Duke’s Fuqua School of Business and an undergraduate degree from HarvardUniversity. Mr. Aucamp was the 2002 Chairperson of the Florida Venture Forum.

 

**Thomas C.Byrne**has been a member of SACI’s board of directors sinceits inception. Mr. Byrne has served as Administrative Partner of New RiverCapital Partners, a private equity fund, which he co-founded, since 1997. Priorto co-founding New River Capital Partners, Mr. Byrne was the Vice-Chairmanof Blockbuster Entertainment Group, a division of Viacom, Inc. Additionally,Mr. Byrne was President of the Viacom Retail Group and representedBlockbuster in all cross-Viacom opportunities.

 

 

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Prior to joiningBlockbuster, from 1985 to 1987, Mr. Byrne was employed by KPMG PeatMarwick. Mr. Byrne has a BS and MA in Accounting from the University ofFlorida. Mr. Byrne is a certified public accountant, and has been a memberof the Board of Directors of Certilearn, Inc., Interstate Connections,Intralearn Software Corporation, ITC Learning, SwisherInternational, Inc., Pivotal Fitness, and the Private Equity Committee ofthe University of Florida Foundation.

 

**NathanielKramer** has been a member of our board of directors sinceinception. Since March 2000, Mr. Kramer has been a principal of MercantileCapital Group and Managing Director of the New York office.

 

Mr. Kramer bringsover twenty years of investment experience in both the public and privatecapital markets. He started his career with Allen and Company, a private equityfirm, and recently served as a Vice President from 1997 to 2001. On behalf ofMercantile Capital, Mr. Kramer performed due diligence negotiated andstructured investments in companies operating in the wireless infrastructure,data communications, B2B commerce, Internet infrastructure, telecomtechnologies/infrastructure and entertainment technologies and servicessectors. Mr. Kramer serves on the board of of Genco Shipping and TradingLimited, a drybulk shipping company that recently filed a registrationstatement for an initial public offering, and MoveOnIn, Inc., a relocationand lifestyle services private company.

 

**Cris V.Branden** has been a member of our board of directors sinceSeptember 23, 2005. Mr. Branden is currently the Chief Financial Officer ofHuizenga Holdings, Inc., the personal investment and management vehicle forH. Wayne Huizenga, and has been with the firm since 1996. Mr. Brandenpreviously practiced public accounting for 14 years with Arthur Andersen from1982 to 1984 and with Machen, Powers & Disque, certified publicaccountants, from 1984 to 1996. Mr. Branden is currently a member of theboard of directors of Swisher International, Inc., a restroom hygiene servicesfranchisor. Mr. Branden is a Certified Public Accountant and received his BAfrom Auburn University in 1982.

 

Our board of directors isdivided into three classes with only one class of directors being elected ineach year and each class serving a three-year term. The term of office of thefirst class of directors, consisting of Thomas C. Byrne, will expire at ourfirst annual meeting of stockholders. The term of office of the second class ofdirectors, consisting of Thomas E. Aucamp and Nathaniel Kramer, will expire atthe second annual meeting. The term of office of the third class of directors,consisting of Steven R. Berrard and I. Steven Edelson, will expire at the thirdannual meeting.

 

**Section16(a) Beneficial Ownership Reporting Compliance**

 

Section 16(a) of theSecurities Exchange Act of 1934 requires our directors and executive officersand persons who own more than 10% of a registered class of our equitysecurities, to file with the Securities and Exchange Commission initial reportsof ownership and reports of changes in beneficial ownership of Common Stock andother equity securities of us. Directors, officers and greater than 10%stockholders are required by SEC regulations to furnish us with all Section16(a) forms they file.

 

To our knowledge, basedsolely upon our review of the copies of such reports furnished to us, webelieve that all of our directors, officers and greater than 10% stockholdershave complied with the applicable Section 16(a) reporting requirements exceptthat: an initial report of ownership was filed late by Cris V. Branden.

 

**DirectorIndependence**

 

Our board of directorshas determined that Mr. Byrne, Mr. Kramer and Mr. Branden are “independent directors” as definedin the American Stock Exchange listing standards and Rule 10A-3 of theExchange Act. We

 

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intend to locate and appoint at least one additional independentdirector to serve on the board of directors and to serve on our audit committeeprior to June 29, 2006.

 

## **Board of Directors andCommittees of the Board**

 

Our board of directorshad two meetings during the fiscal year ended December 31, 2005 and acted byunanimous written consent 8 times. During the fiscal year ended December 31,2005, each member of the board participated in at least 75% of all Board andapplicable committee meetings held during the period for which he was adirector.

 

We do not currently havea Compensation Committee. Pursuant to Section 805 of the AMEX Company Guide,compensation of our chief executive officer, if any, will be determined, orrecommended to the Board for determination, by a majority of the independentdirectors on our board of directors. The chief executive officer will not bepresent during voting or deliberations. Compensation for all other officers, ifany, will be determined, or recommended to the board for determination, by amajority of the independent directors on our board of directors. None of ourofficers currently receive compensation. We do not expect to pay anycompensation to any of our officers until following the consummation of abusiness combination.

 

Our board of directorshas established a Nominating and Governance Committee and an Audit Committee todevote attention to specific subjects and to assist the Board in the dischargeof its responsibilities. The functions of these committees and their currentmembers are set forth below.

 

*Nominating and GovernanceCommittee*

 

The Nominating andGovernance Committee is responsible for assisting identifying and recommendingqualified candidates for director nominees to the board, and leading the boardin its annual review of the board’s performance. All members of the NominatingCommittee qualify as independent under the definition promulgated by theAmerican Stock Exchange. The Nominating and Governance Committee had nomeetings during 2005. Nathaniel Kramer and Thomas C. Byrne are the currentmembers of the Nominating and Governance Committee. The Nominating andGovernance Committee may consider candidates recommended by stockholders aswell as from other sources such as other directors or officers, third partysearch firms or other appropriate sources. For all potential candidates, theNominating and Governance Committee may consider all factors is deems relevant,such as a candidate’s personal integrity and sound judgment, business andprofessional skills and experience, independence, knowledge of the industry inwhich we operate, possible conflicts of interest, diversity, the extent towhich the candidate would fill a present need in the board, and concern for thelong-term interests of the stockholders. In general, persons recommended bystockholders will be considered on the same basis as candidates from othersources. If a stockholder wishes to nominate a candidate to be considered forelection as a director at the 2006 Annual Meeting of Stockholders using theprocedures set forth in the Company’s By-laws, it must follow the proceduresdescribed in Article 3.3 entitled “Nominations.”  If a stockholder wishes simply to propose acandidate for consideration as a nominee by the Nominating and GovernanceCommittee, it should submit any pertinent information regarding the candidateto the Nominating and Governance Committee by mail at our address. A copy ofthe Nominating Committee’s written charter is available upon written request

 

*Audit Committee*

 

The Audit Committeerecommends to the board of directors the appointment of the firm selected toserve as our independent auditors and our subsidiaries and monitors theperformance of such firm; reviews and approves the scope of the annual auditand evaluates with the independent auditors our annual audit and annualfinancial statements; reviews with management the status of internal accountingcontrols; evaluates issues having a potential financial impact on us which maybe brought to the Audit Committee’s attention by management, the independentauditors or the board; evaluates our public financial reporting documents;reviews the non-audit services to be performed by the independent auditors, ifany; and considers the effect of such performance on the auditor’s independence.Thomas C. Byrne and Cris V. Branden are the current members of the AuditCommittee. All members of the Audit Committee satisfy the current independencestandards promulgated by the Securities and Exchange Commission and by theAmerican Stock Exchange, as such standards apply specifically to members ofaudit committees. We intend to locate and appoint at least one additionalindependent director to serve on our audit committee prior to June 29, 2006.The board has determined that each of Mr. Byrne and Mr. Branden are “auditcommittee financial experts,” as the Securities and Exchange Commission hasdefined that term in Item 401 of Regulation S-K. The Audit Committeehad four meetings during 2005.

 

 

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**Code ofConduct and Ethics**

 

                We have adopted a code of conduct andethics applicable to our directors, officers and employees in accordance withapplicable federal securities laws and the rules of the American StockExchange.

 

**Item11. Executive Compensation**

 

None of our executiveofficers have received any compensation for services rendered. Commencing onthe effective date of our initial public offering and continuing through theacquisition of a target business, we will pay SB Management Corp., a corporationowned and managed by Steven R. Berrard, our Chairman and Chief ExecutiveOfficer, approximately $4,875 per month for office space and certain otheradditional services. In addition, we have agreed to pay an affiliate of I.Steven Edelson, our Vice Chairman and Vice President, and Nathaniel Kramer, oneof our directors, approximately $2,625 per month for general and administrativeservices including secretarial support. We have agreed to pay up to a monthlymaximum of $7,500 for all of the foregoing services. This arrangement is beingagreed to by SB Management Corp. and the affiliate of Mr. Edelson andMr. Kramer for our benefit and is not intended to provideMessrs. Berrard, Edelson or Kramer compensation in lieu of a salary. Webelieve that such fees are at least as favorable as we could have obtained froman unaffiliated person. No other executive officer or director has arelationship with or interest in SB Management Corp.

 

Other than this $7,500per-month fee, no compensation of any kind, including finder’s and consultingfees, will be paid to any of our officers and directors, or any of theirrespective affiliates, for services rendered prior to or in connection with abusiness combination. However, these individuals will be reimbursed for anyout-of-pocket expenses incurred in connection with activities on our behalfsuch as identifying potential target businesses and performing due diligence onsuitable business combinations. Such individuals may be paid consulting,management or other fees from target businesses as a result of the businesscombination, with any and all amounts being fully disclosed to stockholders, tothe extent then known, in the proxy solicitation materials furnished to thestockholders. There is no limit on the amount of these out-of-pocket expensesand there will be no review of the reasonableness of the expenses by anyoneother than our board of directors, which includes persons who may seekreimbursement, or a court of competent jurisdiction if such reimbursement ischallenged. Because none of our directors may be deemed “independent,” we willgenerally not have the benefit of independent directors examining the proprietyof expenses incurred on our behalf and subject to reimbursement.

 

During the fiscal yearended December 31, 2005, the directors did not receive any cash compensationfor their service as members of the board of directors.

 

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**Item12. Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters**

 

The following table setsforth information regarding the beneficial ownership of our common stock as ofMarch 24, 2006, by:

 

•                  each person known by us, as a resultof such person’s public filings with the SEC and the information contained therein,to be the beneficial owner of more than 5% of its outstanding shares of commonstock; 

•                  each of the Company’s officers anddirectors; and 

•                  all of Company’s officers anddirectors as a group. 

 

Unless otherwiseindicated, we believe that all persons named in the table have sole voting andinvestment power with respect to all shares of common stock beneficially ownedby them.

 
| **Name and Address of  Beneficial Owner (1)** | ** ** | **Amount and Nature of  Beneficial Ownership** | ** ** | **Percentage of Outstanding  Common Stock** | ** ** |
|------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|------------------------------------------------------------|------------|
| Sapling, LLC(2)                                                        |       | 1,111,358                                                          |       | 5.3                                                        | %          |
| Amaranth LLC(3)                                                        |       | 1,423,900                                                          |       | 6.8                                                        | %          |
| John A. Griffin(4)                                                     |       | 1,490,000                                                          |       | 7.1                                                        | %          |
| Steven R. Berrard (5)(6)                                               |       | 937,535                                                            |       | 4.5                                                        | %          |
| Thomas E. Aucamp (6)(7)                                                |       | 562,493                                                            |       | 2.7                                                        | %          |
| Thomas C. Byrne (6)                                                    |       | 562,493                                                            |       | 2.7                                                        | %          |
| I. Steven Edelson (6) (8)                                         |       | 562,493                                                            |       | 2.7                                                        | %          |
| Nathaniel Kramer (6)(9)                                                |       | 562,493                                                            |       | 2.7                                                        | %          |
| Cris V. Branden (6)(10)                                                |       | 140,624                                                            |       | *                                                          |       |
| All directors and executive officers as a group (6  individuals)       |       | 3,328,131                                                          |       | 15.8                                                       | %          |

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*       Less than 1%

(1)    Unless otherwise indicated, the business addressof each of the individuals is 401 East Olas Blvd, Suite 1140, FortLauderdale, Florida 33301.

(2)    Includes 572,517 shares owned by Fir TreeRecovery Master Fund, L.P. the sole member of Sapling, LLC. The businessaddress of Sapling, LLC is Sapling, LLC, c/o Fir Tree Recovery Master Fund LP,535 5th Avenue, 31st Floor, New York, New York 10017.Sapling, LLC has shared voting and dispositive power for the shares listedabove. The foregoing information was derived from a Schedule 13G, as filed withthe Securities and Exchange Commission on July 13, 2005.

(3)    Amaranth Advisors L.L.C. is the tradingadvisor for Amaranth LLC and is granted investment discretion over portfolioinvestments, including the common stock held by it. Nicholas M. Maounis is themanaging member of Amaranth Advisors L.L.C. and may, by virtue of his positionas managing member, be deemed to have the power to direct the vote anddisposition of the common stock held for Amaranth LLC. The business address ofAmaranth LLC is c/o Amaranth Advisors L.L.C., One American Lane, Greenwich,Connecticut 06831. Amaranth LLC has shared voting and dispositive power for theshares listed above. The foregoing information was derived from a Schedule 13G,as filed with the Securities and Exchange Commission on December 2, 2005.

(4)    Includes 923,800 shares owned by Blue RidgeCapital Holdings LLC and 566,200 shares owned by Blue Ridge Capital OffshoreHoldings LLC. Mr. Griffin is the Managing Member of Blue Ridge CapitalHoldings LLC and Blue Ridge Capital Offshore Holdings LLC, and in that capacitydirects their operations. Blue Ridge Capital Holdings LLC is the generalpartner of Blue Ridge Limited Partnership and has the power to direct theaffairs of Blue Ridge Limited Partnership, including decisions respecting thereceipt of dividends from and the proceeds from the sale of common stock. BlueRidge Capital Offshore Holdings LLC is the general partner of Blue RidgeOffshore Master Limited Partnership and has the power to direct the affairs ofBlue Ridge Offshore Master Limited Partnership, including decisions respectingthe receipt of dividends from and the proceeds from the sale of common stock.The business address for this individual is 660 Madison Avenue, 20thFloor, New York, New York 10021. The foregoing information was derived from aSchedule 13G, as filed with the Securities and Exchange Commission onFebruary 3, 2006.

(5)    Mr. Berrard is our Chairman of theBoard and Chief Executive Officer.

(6)    Each of these individuals is a director.

(7)    Mr. Aucamp is our Vice President andSecretary.

(8)    Includes 562,493 shares owned by The EdelsonFamily Trust, which is a trust established by Mr. Edelson for the benefitof his spouse and descendants, of which Mr. Edelson is the trustee.Mr. Edelson is our Vice Chairman and Vice President.

(9)    The business address for this individual isc/o Mercantile Capital Partners, 1372 Shermer Road, Northbrook, Illinois 60062.

(10)  The business address for this individual is450 East Olas Blvd, Suite 1500, Fort Lauderdale, Florida 33301.

 

All of our shares ofcommon stock outstanding prior to the effective date of our initial publicoffering, or the pre-public offering shares, were placed in escrow withContinental Stock Transfer & Trust Company, as escrow agent, and shallremain in escrow until the earliest of (i) June 29, 2008 or (ii) ourliquidation; or (iii) the consummation of a merger, stock exchange or othersimilar transaction which results in all of our stockholders having the rightto exchange their shares of common stock for cash, securities or other propertysubsequent to Company consummating a business combination with a targetbusiness.

 

During the escrow period,the holders of the pre-public offering shares will not be able to sell ortransfer their securities except to their spouses and children or trustsestablished for their benefit, but will retain all other rights as our publicstockholders, including, without limitation, the right to vote their shares ofcommon stock and the right to receive cash dividends, if declared. If dividendsare declared and payable in shares of common stock, such dividends will also beplaced in escrow. If the Company is unable to effect a business combination andliquidate, the holders of the pre-public offering shares will not receive anyportion of the liquidation proceeds with respect to common stock owned by themprior to June 29, 2005.

 

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Messrs. Berrard,Aucamp, Byrne, Edelson and Kramer may be deemed to be our “parents” and are deemedto be “promoters,” as these terms are defined under the Federal securitieslaws.

 

**Item13. Certain Relationships and Transactions**

 

On January 28, 2005, weissued an aggregate of 1,250,000 shares of common stock to the individuals setforth below for $25,000 in cash, at an average purchase price of approximately$0.02 per share, as follows:

 
| **Name**           | ** ** | **Number of Shares** | ** ** | **Relationship to Services Acquisition Corp. International**  | ** ** |
|--------------------|------------|--------------------------------|------------|-------------------------------------------------------------------------|------------|
| Steven R.  Berrard |       | 375,000                        |       | Director, Chairman of the Board, Chief Executive Officer  and President |       |
| Thomas E. Aucamp   |       | 218,750                        |       | Director, Vice President, and Secretary                                 |       |
| Thomas C. Byrne    |       | 218,750                        |       | Director                                                                |       |
| I. Steven  Edelson |       | 218,750                        |       | Director, Vice Chairman and Vice President                              |       |
| Nathaniel Kramer   |       | 218,750                        |       | Director                                                                |       |

 

On March 28, 2005,our board of directors authorized a stock dividend of 1.5714 shares ofcommon stock for each outstanding share of common stock, effectively loweringthe purchase price to $.0078 per share. The sole purpose for such stockdividend authorized by the board of directors was to maintain the initialstockholders’ collective ownership at 20% of our issued and outstanding sharesof common stock immediately after the initial public offering.

 

The holders of themajority of these shares will be entitled to make up to two demands that weregister these shares pursuant to a registration rights agreement previouslyentered into. The holders of the majority of these shares may elect to exercisethese registration rights at any time after the date on which these shares ofcommon stock are released from escrow, which, except in limited circumstances,is not before June 29, 2008. In addition, these stockholders have certain “piggy-back”registration rights on registration statements filed subsequent to the date on whichthese shares of common stock are released from escrow. We will bear theexpenses incurred in connection with the filing of any such registrationstatements.

 

Steven R. Berrard, ourChairman and Chief Executive Officer, and our directors I. Steven Edelson andNathaniel Kramer advanced a total of approximately $90,000 to us as of June 29,2005 to cover expenses related to the initial public offering. Of such loans,$40,000 was payable with 4% annual interest on the earlier of January 26,2006 or the consummation of the initial public offering and $50,000 was payablewith 4% annual interest on the earlier of March 28, 2006 or theconsummation of the initial public offering. In addition, Mr. Edelson andMr. Aucamp loaned us an aggregate of $70,000 on June 29, 2005 thatwas used to pay the fees of the American Stock Exchange. All of such amountswere repaid at the closing of the offering from the proceeds of the initialpublic offering not placed in trust.

 

We will reimburse ourofficers and directors for any reasonable out-of-pocket business expensesincurred by them in connection with certain activities on our behalf such asidentifying and investigating possible target businesses and businesscombinations. There is no limit on the amount of accountable out-of-pocketexpenses reimbursable by us, which will be reviewed only by our board or acourt of competent jurisdiction if such reimbursement is challenged.

 

All ongoing and futuretransactions between us and any of our officers and directors or their respectiveaffiliates, including loans by our officers and directors, will be on termsbelieved by us to be no less favorable than are available from unaffiliatedthird parties and such transactions or loans, including any forgiveness ofloans, will require prior approval in each instance by a majority of ouruninterested “independent” directors (to the extent we have any) or the membersof our board who do not have an interest in the transaction, in either case whohad access, at our expense, to our attorneys or independent legal counsel. Inaddition, our management will gather pricing information, estimates or fairnessopinions from unaffiliated third parties with respect to similar transactionsundertaken by us.

 

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**Item 14. Principal AccountantFees and Services**

 

*Audit Fees*

 

During the fiscal yearended December 31, 2005, we paid, or expect to pay, our principal accountant $68,700for the services they performed throughout the year, including in connectionthrough our initial public offering, including the financial statementsincluded in the Current Reports on Form 8-K filed with the Securities andExchange Commission on July 6 and July 7, 2005, the review of our QuarterlyReports on Form 10-Q for the quarter ended September 30, 2005, and the December31, 2005 audit and Annual Report on Form 10-K.

 

*Audit-Related Fees*

 

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

 

*Tax Fees*

 

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

 

*All Other Fees*

 

During 2005, there were no fees billed for productsand services provided by the principal accountant other than those set forthabove.

 

**Policy on AuditCommittee Pre-Approval of Audit and Permissible Non-audit Services ofIndependent Auditors**

 

Consistent with SECpolicies regarding auditor independence, the Audit Committee has responsibilityfor appointing, setting compensation and overseeing the work of the independentauditor. In recognition of this responsibility, the Audit Committee hasestablished a policy to pre-approve all audit and permissible non-auditservices provided by the independent auditor.

 

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

 

1. ***Audit***services include audit work performedin the preparation of financial statements, as well as work that generally onlythe independent auditor can reasonably be expected to provide, includingcomfort letters, statutory audits, and attest services and consultationregarding financial accounting and/or reporting standards.

 

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

 

3. ***Tax*** services include all services performedby the independent auditor’s tax personnel except those services specificallyrelated to the audit of the financial statements, and includes fees in theareas of tax compliance, tax planning, and tax advice.

 

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

 

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Prior to engagement,the Audit Committee pre-approves these services by category of service. Thefees are budgeted and the Audit Committee requires the independent auditor andmanagement to report actual fees versus the budget periodically throughout theyear by category of service. During the year, circumstances may arise when itmay become necessary to engage the independent auditor for additional servicesnot contemplated in the original pre-approval. In those instances, the AuditCommittee requires specific pre-approval before engaging the independentauditor.

 

The Audit Committeemay delegate pre-approval authority to one or more of its members. The memberto whom such authority is delegated must report, for informational purposesonly, any pre-approval decisions to the Audit Committee at its next scheduledmeeting.

 

**PART IV**

 

**Item15. Exhibits and Financial Statement Schedules.**

 

(a)           Thefollowing 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                                                                       |   |
|   |                                                                                                        |   |
|   | Income Statement – Period from January  6, 2005 (inception) to December 31, 2005                       |   |
|   |                                                                                                        |   |
|   | Statement of Stockholders’  Equity – Period from January 6, 2005 (inception) to December 31, 2005 |   |
|   |                                                                                                        |   |
|   | Statement of Cash Flows – Period from  January 6, 2005 (inception) to December 31, 2005                |   |
|   |                                                                                                        |   |
|   | Notes to Financial Statements                                                                               |   |

 

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

 

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

 

3.             **Exhibits**:

 
| **Exhibit No.** | ** ** | **Description**                                                                                      |
|-----------------|------------|------------------------------------------------------------------------------------------------------|
| 3.1             |       | 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.* |
| 10.1            |       | Letter Agreement among  the Company, Broadband Capital Management LLC and Steven R. Berrand.*        |
| 10.2            |       | Letter Agreement among  the Company, Broadband Capital Management LLC and Thomas E. Aucamp.*         |
| 10.3            |       | Letter Agreement among  the Company, Broadband Capital Management LLC and Thomas C. Byrne.*          |
| 10.4            |       | Letter Agreement among  the Company, Broadband Capital Management LLC and I. Steven Edelson.*        |
| 10.5            |       | Letter Agreement among  the Company, Broadband Capital Management LLC and I. Nathanial Kramer.*      |

 

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| 10.6  |   | Form of Investment  Management Trust Agreement between Continental Stock Transfer & Trust  Company and the Company.*                                                              |
|-------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.7  |   | Form of Stock Escrow  Agreement between the Company, Continental Stock Transfer & Trust Company  and the Initial Stockholders.*                                                   |
| 10.8  |   | Services Agreement with  SB Management Co.*                                                                                                                                           |
| 10.9  |   | Promissory Note, dated  January 26, 2005, issued to Steven R. Berrard in the amount of $26,000.*                                                                                      |
| 10.10 |   | Promissory Note, dated  January 26, 2005, issued to I. Steven Edelson in the amount of $7,000.*                                                                                       |
| 10.11 |   | Promissory Note, dated  January 26, 2005, issued to Nathanial Kramer in the amount of $7,000.*                                                                                        |
| 10.12 |   | Promissory Note, dated  March 28, 2005, issued to Steven R. Berrard in the amount of $32,500.*                                                                                        |
| 10.13 |   | Promissory Note, dated  March 28, 2005, issued to Nathanial Kramer in the amount of $17,500.*                                                                                         |
| 10.14 |   | Form of Registration  Rights Agreement among the Company and the Initial Stockholders.*                                                                                               |
| 10.15 |   | Form of Warrant  Purchase Agreement between the Insiders and Broadband Capital Management LLC*                                                                                        |
| 31    |   | Certification of the  Chief Executive Officer and Chief Financial Officer, as adopted pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                     |
| 32    |   | Certification of the  Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of  2002. |

 

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* Incorporatedby reference to exhibits of the same number filed with the Registrant’sRegistration Statement on Form S-1 or amendments thereto (File No. 333-122812).

 

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**SIGNATURES**

 

Pursuant to the requirementsof Section 13 or 15(d) of the Securities Exchange Act of 1934, the registranthas duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

 
|                 | **SERVICES ACQUISITION CORP.  INTERNATIONAL** |
|----------------------|-----------------------------------------------|
|                 |                                          |
| Date: March 27, 2006 |                                          |
|                 |                                          |
|                 | By:                                           | /s/ Steven R.  Berrard |
|                 |                                          | Steven R.  Berrard |
|                 |                                          | *Chairman  of the Board and Chief Executive Officer* |

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the registrant and in thecapacities and on the dates indicated.

 
| **Name**               | ** ** | **Position**                                                                                                             | ** ** | **Date**       |
|------------------------|------------|--------------------------------------------------------------------------------------------------------------------------|------------|----------------|
|                   |       |                                                                                                                     |       |           |
|                   |       | Chairman of the Board  and Chief Executive Officer (principal executive and principal financial and  accounting officer) |       | March 27, 2006 |
| /s/ Steven R.  Berrard |       |                                                                                                                     |       |           |
| Steven R.  Berrard     |       |                                                                                                                     |       |           |
|                   |       |                                                                                                                     |       |           |
|                   |       |                                                                                                                     |       |           |
|                   |       | Vice Chairman, Vice  President and Director                                                                              |       | March 27, 2006 |
| /s/ I. Steven  Edelson |       |                                                                                                                     |       |           |
| I. Steven  Edelson     |       |                                                                                                                     |       |           |
|                   |       |                                                                                                                     |       |           |
|                   |       |                                                                                                                     |       |           |
|                   |       | Vice President,  Secretary and Director                                                                                  |       | March 27, 2006 |
| /s/ Thomas E.  Aucamp  |       |                                                                                                                     |       |           |
| Thomas E. Aucamp       |       |                                                                                                                     |       |           |
|                   |       |                                                                                                                     |       |           |
|                   |       |                                                                                                                     |       |           |
|                   |       | Director                                                                                                                 |       | March 27, 2006 |
| /s/ Nathaniel  Kramer  |       |                                                                                                                     |       |           |
| Nathaniel Kramer       |       |                                                                                                                     |       |           |
|                   |       |                                                                                                                     |       |           |
|                   |       |                                                                                                                     |       |           |
|                   |       | Director                                                                                                                 |       |           |
| /s/ Thomas C.  Byrne   |       |                                                                                                                     |       | March 27, 2006 |
| Thomas C. Byrne        |       |                                                                                                                     |       |           |
|                   |       |                                                                                                                     |       |           |
|                   |       |                                                                                                                     |       |           |
|                   |       | Director                                                                                                                 |       |           |
| /s/ Cris V.  Branden   |       |                                                                                                                     |       | March 27, 2006 |
| Cris V. Branden        |       |                                                                                                                     |       |           |

 

35

----

 

**INDEX TOFINANCIAL STATEMENTS AND SCHEDULES**

 

**ServicesAcquisition Corp. International**

**(acorporation in the development stage)**

 
| **Report of Independent  Registered Public Accounting Firm**                                                 |   |
|--------------------------------------------------------------------------------------------------------------|--------|
| ** **                                                                                                   |   |
| **Financial statements**                                                                                     |   |
| ** **                                                                                                   |   |
| Balance Sheet as of December 31, 2005                                                                        |   |
| Statement of Operations for the period  from January 6, 2005 (inception) to December 31, 2005                |   |
| Statement of Stockholders’  Equity for the period from January 6, 2005 (inception) to December 31, 2005 |   |
| Statement of Cash Flows for the period  from January 6, 2005 (inception) to December 31, 2005                |   |
|                                                                                                         |   |
| **Notes  to Financial Statements**                                                                           |   |

 

36

----

** **

**Report ofIndependent Registered Public Accounting Firm**

 

To the Board of Directorsand Stockholders of

Services AcquisitionCorp. International

 

We have audited theaccompanying balance sheet of ServicesAcquisition Corp. International (a corporation in the development stage) asof December 31, 2005 and the relatedstatements of operations, stockholders’ equity, and cash flows for the periodfrom January 6, 2005 (inception) to December 31, 2005. These financialstatements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour audit.

 

We conducted our audit in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. The Company is notrequired to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting. Our audit includes consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statements presentation. We believe that our audit provides areasonable basis for our opinion.

** **

In our opinion, thefinancial statements referred to above present fairly, in all materialrespects, the financial position of Services Acquisition Corp. International (acorporation in the development stage) as of December 31, 2005, and the resultsof its operations and its cash flows for the period from January 6, 2005 (inception)to December 31, 2005, in conformity with U.S. generally accepted accountingprinciples.

 

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

 

Roseland, New Jersey

March23, 2006

 

37

----

 

**SERVICES ACQUISITION CORP. INTERNATIONAL**

**(a corporation in the development stage)**

**BALANCESHEET**

 

**December31, 2005**

 
| **ASSETS**                                                                                                                                                                    | ** ** | ** **  | ** **  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|-------------|
|                                                                                                                                                                          |       |        |        |
| **Current  assets**                                                                                                                                                           |       |        |        |
| Cash                                                                                                                                                                          |       | $           | 976,915     |   |
| Prepaid expenses                                                                                                                                                              |       | 56,772      |        |
| **Total  current assets**                                                                                                                                                     |       | 1,033,687   |        |
|                                                                                                                                                                          |       |        |        |
| Other assets                                                                                                                                                                  |       |        |        |
| Cash held in  trust                                                                                                                                                           |       | 128,174,091 |        |
|                                                                                                                                                                          |       |        |        |
| Total assets                                                                                                                                                                  |       | $           | 129,207,778 |   |
|                                                                                                                                                                          |       |        |        |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                 |       |        |        |
|                                                                                                                                                                          |       |        |        |
| **Current  liabilities**                                                                                                                                                      |       |        |        |
| Accounts payable                                                                                                                                                              |       | $           | 1,234       |   |
| Accrued  accounting                                                                                                                                                           |       | 30,000      |        |
| Accrued  franchise taxes                                                                                                                                                      |       | 53,685      |        |
| Income taxes  payable                                                                                                                                                         |       | 84,933      |        |
| Total current  liabilities                                                                                                                                                    |       | 169,852     |        |
|                                                                                                                                                                          |       |        |        |
| Common stock,  subject to possible redemption, 3,448,275 shares at redemption value                                                                                           |       | 25,241,373  |        |
|                                                                                                                                                                          |       |        |        |
| **Stockholders’  equity**                                                                                                                                                |       |        |        |
| Preferred stock,  $.001 par value, authorized 1,000,000 shares; none issued                                                                                                   |       |        |        |
| Common stock,  $.001 par value, authorized 70,000,000 shares; issued and outstanding  21,000,000 shares (which includes the 3,448,275 shares subject to possible  redemption) |       | 21,000      |        |
| Additional  Paid-in Capital                                                                                                                                                   |       | 102,604,274 |        |
|                                                                                                                                                                          |       |        |        |
| Equity  accumulated during the development stage                                                                                                                              |       | 1,171,279   |        |
| Total  stockholders’ equity                                                                                                                                              |       | 103,796,553 |        |
| Total  liabilities and stockholders’ equity                                                                                                                              |       | $           | 129,207,778 |   |

 

*See accompanying notes tofinancial statements.*

 

F-2

----

 

**SERVICES ACQUISITION CORP. INTERNATIONAL**

**(a corporation in the development stage)**

**STATEMENT OF OPERATIONS**

 
| ** **                                       | ** ** | **For the Period  January 6, 2005  (inception) to  December 31, 2005** | ** ** |
|--------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------|------------|
|                                             |       |                                                                                                      |       |
| **Interest  income**                             |       | $                                                                                                         | 1,454,091  |   |
|                                             |       |                                                                                                      |       |
| **Formation  and operating costs**               |       | 196,614                                                                                                   |       |
| **Interest  expense**                            |       | 1,265                                                                                                     |       |
|                                             |       |                                                                                                      |       |
| **Net  income before income taxes**              |       | 1,256,212                                                                                                 |       |
|                                             |       |                                                                                                      |       |
| **Provision  for state income taxes**            |       | 84,933                                                                                                    |       |
|                                             |       |                                                                                                      |       |
| **Net  income**                                  |       | $                                                                                                         | 1,171,279  |   |
|                                             |       |                                                                                                      |       |
| **Basic  weighted average shares outstanding**   |       | 11,777,489                                                                                                |       |
|                                             |       |                                                                                                      |       |
| **Basic  earnings per share**                    |       | $                                                                                                         | 0.10       |   |
|                                             |       |                                                                                                      |       |
| **Diluted  weighted average shares outstanding** |       | 13,049,709                                                                                                |       |
|                                             |       |                                                                                                      |       |
| **Diluted  earnings per share**                  |       | $                                                                                                         | 0.09       |   |

 

*See accompanying notes tofinancial statements.*

 

F-3

----

 

**SERVICES ACQUISITION CORP. INTERNATIONAL**

**(a corporation in the development stage)**

**STATEMENTOF STOCKHOLDERS’ EQUITY**

**Forperiod from January 6, 2005 (inception) to December 31, 2005**

 
| ** **                                                                                                                                                           | ** ** | **Common Stock** | ** ** | **Additional  Paid-in Capital** | ** ** | **Equity  Accumulated  During the  Development Stage** | ** ** | **Stockholders’  Equity** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------|------------|--------------------------------------|------------|------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                                                                                           | **Shares** | ** **       | **Amount** | ** **                           | ** ** | ** **                                                       | ** ** |
|                                                                                                                                                                 |       |             |       |                                 |       |                                                             |       |                           |       |   |   |
| Balance January  6, 2005 (inception)                                                                                                                                 |       | —           |       | $                                    | —     |                                                             | $          | —                         |       | $ | — |   | $ | — |   |
|                                                                                                                                                                 |       |             |       |                                 |       |                                                             |       |                           |       |   |   |
| Common shares  issued                                                                                                                                                |       | 3,750,000        |       | 3,750                                |       | 25,429                                                           |       |                           |       | 29,179 |   |
|                                                                                                                                                                 |       |             |       |                                 |       |                                                             |       |                           |       |   |   |
| Sale of  15,000,000 shares, net of underwriters’ discount and offering expenses  (including 2,998,500 shares subject to possible redemption)                    |       | 15,000,000       |       | 15,000                               |       | 110,902,368                                                      |       |                           |       | 110,917,368 |   |
|                                                                                                                                                                 |       |             |       |                                 |       |                                                             |       |                           |       |   |   |
| Sale of  2,250,000 shares through the over-allotment option offering, net of  underwriters’ discount (including 449,775 shares subject to possible  redemption) |       | 2,250,000        |       | 2,250                                |       | 16,917,750                                                       |       |                           |       | 16,920,000 |   |
|                                                                                                                                                                 |       |             |       |                                 |       |                                                             |       |                           |       |   |   |
| Proceeds subject  to possible redemption (3,448,275 shares)                                                                                                          |       |             |       |                                 |       | (25,241,373                                                      | )          |                           |       | (25,241,373 | ) |
|                                                                                                                                                                 |       |             |       |                                 |       |                                                             |       |                           |       |   |   |
| Proceeds from  issuance of option                                                                                                                                    |       |             |       |                                 |       | 100                                                              |       |                           |       | 100 |   |
|                                                                                                                                                                 |       |             |       |                                 |       |                                                             |       |                           |       |   |   |
| Net income                                                                                                                                                           |       |             |       |                                 |       |                                                             |       | 1,171,279                      |       | 1,171,279 |   |
|                                                                                                                                                                 |       |             |       |                                 |       |                                                             |       |                           |       |   |   |
| Balances, at December 31, 2005                                                                                                                                       |       | 21,000,000       |       | $                                    | 21,000     |                                                             | $          | 102,604,274                    |       | $ | 1,171,279 |   | $ | 103,796,553 |   |

 

*See accompanying notes tofinancial statements.*

 

F-4

----

 

**SERVICES ACQUISITION CORP. INTERNATIONAL**

**(a corporation in the development stage)**

**STATEMENT OF CASH FLOWS**

** **

**For period from January 6, 2005(inception) to December 31, 2005**

 
| **Cash  flows from operating activities**              |   |         |      |
|--------------------------------------------------------|--------|--------------|-----------|
| Net income                                             |   | $            | 1,171,279 |   |
| Increase  (decrease) in cash attributable to change in |   |         |      |
| Prepaid expenses                                       |   | (56,772      | )         |
| Accounts payable                                       |   | 1,234        |      |
| Accrued  accounting                                    |   | 30,000       |      |
| Accrued  franchise tax                                 |   | 53,685       |      |
| Income taxes  payable                                  |   | 84,933       |      |
|                                                   |   |         |      |
| **Net  cash provided by operating activities**         |   | 1,284,359    |      |
|                                                   |   |         |      |
| **Cash  flows from financing activities**              |   |         |      |
|                                                   |   |         |      |
| Proceeds from  notes payable, stockholders             |   | 160,000      |      |
| Payment of notes  payable, stockholders                |   | (160,000     | )         |
| Proceeds from  sale of stock                           |   | 29,179       |      |
| Gross proceeds  of public offering                     |   | 120,000,000  |      |
| Payments of  costs of public offering                  |   | (9,082,632   | )         |
| Gross proceeds  of over-allotment option offering      |   | 18,000,000   |      |
| Payments of  costs of over-allotment option offering   |   | (1,080,000   | )         |
| Proceeds from  issuance of option                      |   | 100          |      |
|                                                   |   |         |      |
| **Net  cash provided by financing activities**         |   | 127,866,647  |      |
|                                                   |   |         |      |
| **Net cash  used in investing activity**               |   |         |      |
| cash held in  trust                                    |   | (128,174,091 | )         |
|                                                   |   |         |      |
| **Net  increase in cash**                              |   | 976,915      |      |
|                                                   |   |         |      |
| **Cash,** beginning of period                     |   | —       |      |
|                                                   |   |         |      |
| **Cash,** end of period                           |   | $            | 976,915   |   |

 

*See accompanying notes tofinancial statements.*

 

F-5

----

 

**NOTES TO FINANCIAL STATEMENTS**

 

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

 

*Nature of Operations*

 

Services Acquisition Corp. International (the “Company”)was incorporated in Delaware on January 6, 2005 as a blank check company whoseobjective is to acquire through a merger, capital stock exchange, assetacquisition or other similar business combination a currently unidentifiedoperating business. The Company has selected December 31 as its fiscalyear-end.

 

The registration statement for the Company’s initialpublic offering (the “Offering”) was declared effective June 29, 2005. The Company consummated the offering on July 6, 2005 and received net proceedsof approximately $110,917,368 and executed the over-allotment option offeringon July 7, 2005 and received net proceeds of approximately $16,920,000. The Company’s management has broad discretion with respect to the specificapplication of the net proceeds of the Offering, although substantially all ofthe net proceeds of the Offering are intended to be generally applied towardconsummating a business combination with an operating company.  As usedherein, a “target business” shall include an operating business that providesservices and a “business combination” shall mean the acquisition by the Companyof such a target business.

 

The Company’s efforts in identifying a prospectivebusiness target are not limited to a particular industry, although managementintends to focus on high margin service businesses with recurringrevenue.  The success and ongoing profitability of such business will notnecessarily be predicated on continually generating new revenue, but rather onforging a valued bond for which switching costs may be high or alternatives oflower value.  Within this context, the Company expects to seek companiesdisplaying a number of characteristics: recurring revenues, focus on a servicerather than a product, high gross margins, stable cash flow and opportunitiesfor organic and acquisition growth.

 

Upon the closing of the Company’s offering,$126,720,000 was placed in a trust account at JP Morgan Chase NY Bank maintainedby Continental Stock Transfer & Trust Company to be invested until theearlier of (i) the consummation of the Company’s first business combination or(ii) the liquidation of the Company. As of December 31, 2005, the balance inthe trust account was $128,174,091.  The remaining proceeds are availableto the Company to pay for business, legal and accounting due diligence onprospective acquisitions and continuing general and administrative expenses.

 

The Company, after signing a definitive agreement forthe acquisition of a target business, will submit such transaction forstockholder approval.  In the event that stockholders owning 20% or moreof the outstanding stock excluding, for this purpose, those persons who werestockholders prior to the Offering, vote against the business combination, thebusiness combination will not be consummated.  All of the Company’sstockholders prior to the Offering, including all of the officers and directorsof the Company (“Initial Stockholders”), have agreed to vote their 3,750,000founding shares of common stock in accordance with the vote of the majority ininterest of all other stockholders of the Company (“Public Stockholders”) withrespect to any business combination.  After consummation of the Company’sfirst business combination, all of these voting safeguards will no longer beapplicable.

 

With respect to the first business combination, whichis approved and consummated, any Public Stockholder who voted against thebusiness combination may demand that the Company redeem his or hershares.  The per share redemption price will equal the amount in the TrustFund as of the record date for determination of stockholders entitled to voteon the business combination divided by the number of shares of common stock heldby Public Stockholders at the consummation of the Offering.  Accordingly,Public Stockholders holding 19.99% of the aggregate number of shares owned byall Public Stockholders may seek redemption of their shares in the event of abusiness combination.  Such Public Stockholders are entitled to receivetheir per share interest in the Trust Fund computed without regard to theshares held by Initial Stockholders. Accordingly the Company has set up aliability on the balance sheet for the possible redemption of 3,448,275 sharesof common stock in the amount of $25,241,373

 

F-6

----

 

The Company’s Certificate of Incorporation providesfor mandatory liquidation of the Company, without stockholder approval, in theevent that the Company does not consummate a business combination within 18months from the date of the consummation of the Offering, or 24 months from theconsummation of the Offering if certain extension criteria have beensatisfied.  In the event of liquidation, it is likely that the per sharevalue of the residual assets remaining available for distribution (includingTrust Fund assets) will be less than the offering price per share in theOffering (assuming no value is attributed to the Warrants contained in theUnits to be offered in the Offering discussed in Note 3.)

 

*Cash Equivalents*

 

The Company considers allhighly liquid money market investments to be cash equivalents.

 

*Common Stock*

 

In March 2005, the Board ofDirectors of the Company approved a stock dividend of 1.5714 shares of commonstock for each outstanding share of common stock to all shareholders of recordon March 28, 2005. The sole purpose for such dividend was to maintain theexisting shareholders’ collective ownership at 20% of issued and outstandingshares immediately after the Company’s initial offering of 15.0 million unitsat $8.00 per unit. Subsequent to the initial offering, the underwritersexercised their over-allotment option of 2.25 million units effectivelylowering the founder’s ownership to approximately 17.86%. All transactions anddisclosures in the financial statements, related to the Company’s common stock,have been adjusted to reflect the results of the stock dividend.

 

*Income Per Common Share*

 

The Company complies withSFAS No. 128, “Earnings Per Share” which requires dual presentation of basicand diluted income per share for all periods presented. Basic income per shareexcludes dilution and is computed by dividing income available to commonstockholders by the weighted average number of common shares outstanding forthe period. Diluted income per share reflects the potential dilution that couldoccur if securities or other contracts to issue common stock were exercised orconverted into common stock or resulted in the issuance of common stock thatthen share in the income of the Company.

 

*Use of Estimates*

 

The preparation of financial statements in conformitywith accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities at the date of the financial statements andthe reported amounts of expenses during the reporting period.  Actualresults could differ from those estimates.

 

*Income Taxes*

 

The Company complies withSFAS No. 109, “Accounting for Income Taxes,” which requires an asset andliability approach to financial accounting and reporting for income taxes.Deferred income tax assets and liabilities are computed for differences betweenthe financial statement and tax bases of assets and liabilities that willresult in future taxable or deductible amounts, based on enacted laws and ratesapplicable to the periods in which the differences are expected to affecttaxable income. Valuation allowances are established, when necessary, to reducedeferred tax assets to the amount expected to be realized.

 

*RecentlyIssued Accounting Standards*

 

In December 2004, theFinancial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), “Accountingfor Stock-Based Compensation (Revised).” SFAS 123(R) supersedes APB No. 25 andits related implementation guidance. SFAS No. 123(R) establishes standards forthe accounting for transactions in which an entity exchanges

 

F-7

----

 

its equity instrumentsfor goods or services. It also addresses transactions in which an entity incursliabilities in exchange for goods or services that are based on the fair valueof the entity’s equity instruments or that may be settled by the issuance ofthose equity instruments. SFAS No. 123(R) focuses primarily on accounting fortransactions in which an entity obtains employee services in share-basedpayment transactions. SFAS No. 123(R) requires a public entity to measure thecost of employee services received in exchange for an award of equityinstruments based on the grant-date fair value of the award (with limitedexceptions). That cost will be recognized over the period during which anemployee is required to provide service in exchange for the award the requisiteservice period (usually the vesting period). No compensation costs arerecognized for equity instruments for which employees do not render therequisite service. The grant-date fair value of employee share options andsimilar instruments will be estimated using option-pricing models adjusted forthe unique characteristics of those instruments (unless observable marketprices for the same or similar instruments are available). If an equity awardis modified after the grant date, incremental compensation cost will berecognized in an amount equal to the excess of the fair value of the modifiedaward over the fair value of the original award immediately before themodification. SFAS No. 123(R) is effective as of the beginning of the fiscalyear that begins after June 15, 2005.

 

**2.   Investments held inTrust**

 

Investments held in trust as of December 31, 2005 werein cash, not cash equivalents. During 2005 the Company invested in variousshort-term tax free money market funds promulgated under the Investment CompanyAct of 1940. Dividend and interest income earned on such investments was theCompany’s sole source of income during the year.

 

**3.   Initial PublicOffering**

 

On July 6, 2005, the Company sold 15,000,000 units (“Units”)in the Offering.  An additional 2,250,000 Units were issued on July 7,2005 to cover the over-allotment granted to the underwriters.  Each Unitconsists of one share of the Company’s common stock, $.001 par value, and oneRedeemable Common Stock Purchase Warrant (“Warrant”).  Each Warrantentitles the holder to purchase from the Company one share of common stock atan exercise price of $6.00 commencing the later of the completion of a businesscombination with a target business or one year from the effective date of theOffering and expiring at 5:00 PM on June 28, 2009.  The Warrants will beredeemable at a price of $.01 per Warrant upon 30 days notice after theWarrants become exercisable, only in the event that the last sale price of thecommon stock is at least $11.50 per share for any 20 trading days within a 30trading day period ending on the third day prior to date on which notice ofredemption is given.

 

**4.****              Income Taxes**

 

**Income Taxes**

 

The components of the provision for income taxes forthe year ended December 31, 2005 are as follows:

 
| Current:       |   |    |   |
|----------------|--------|---------|--------|
| Federal        |   | $— |   |
| State          |   | 84,933  |   |
| Foreign        |   | —  |   |
| Total current  |   | $84,933 |   |
|           |   |    |   |
| Deferred:      |   |    |   |
| Federal        |   | $— |   |
| State          |   | —  |   |
| Foreign        |   | —  |   |
|           |   |    |   |
| Total deferred |   | $— |   |

 

The differences between the statutory rate and the Company’s effectiveincome tax rate are as follows:

 
| ** **                                 | ** ** | **2005**  | ** ** |
|--------------------------------------------|------------|-----------|------------|
| Federal tax benefit at the statutory rate  |       | $(427,112 | )          | (34.0% | ) |
| State income taxes, net of federal benefit |       | (45,600   | )          | (3.6 | ) |
| Non-taxable interest income                |       | 490,392   |       | 39.0 |   |
| Permanent differences                      |       | (6,863    | )          | (0.5 | ) |
| Change in valuation allowance              |       | 95,134    |       | 7.6 |   |
| Other                                      |       | (21,018   | )     | (1.7 | )  |
|                                       |       |      |       |   |   |
| Effective income tax rate                  |       | $84,933   |       | 6.8 | % |

 

Deferred income taxes reflect the net tax effects of temporarydifferences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for income tax purposes,together with net operating loss and tax credit carry-forwards. Significantcomponents of the Company’s deferred tax assets and liabilities at December 31,2005 are as follows:

 
| ** **                         | ** ** | **2005** | ** ** |
|------------------------------------|------------|----------|------------|
| Deferred tax assets (liabilities): |       |     |       |
| Net operating loss carryforwards   |       | $56,916  |       |
| Organizational costs               |       | 38,218   |       |
|                               |       | 95,134   |       |
| Valuation allowance                |       | (95,134  | )          |
| Net deferred taxes                 |       | $—  |       |

 

The valuation allowance for deferred taxes increased by approximately$95,134 during 2005, respectively, providing a full valuation allowance againstthe Company’s net deferred tax assets as a result of the uncertainty as towhether the Company will acquire an operating entity and utilize these taxbenefits.

 

F-8

----

 

**5.   Commitments andcontingencies**

 

The Company has agreed to pay up to $7,500 a month intotal for office space and general and administrative expense to a relatedentity and two stockholders.  Upon completion of a business combination orliquidation, the Company will no longer be required to pay these monthlyfees.  The monthly fee started on July 6, 2005.

 

As part of the Offering, the stockholders prior to theinitial public offering agreed that after the Offering was completed and withinthe first twenty trading days after separate trading of the warrants hascommenced, they or certain of their affiliates or designees would collectivelypurchase up to 1,000,000 warrants in the public marketplace at prices not toexceed $1.20 per warrant.   They further agreed that any warrantspurchased by them or their affiliates or designees will not be sold ortransferred until the completion of a business combination.  In addition,subject to any regulatory restrictions and subsequent to the completion of thepurchase of the 1,000,000 warrants described above and within the first twentytrading days after separate trading of the warrants has commenced, therepresentative of the underwriter, or certain of its principals, affiliates ordesignees has to purchase up to 500,000 warrants in the public marketplace atprices not to exceed $1.20 per warrant. The Units separated on July 28, 2005;as per the preceding sentence, the shareholders prior to the initial publicoffering purchased 1,000,000 warrants at an average price of $1.01375 and theunderwriter or its affiliates purchased 500,000 warrants at an average price of$0.99.

 

The Company has sold to the representative of theunderwriter, for $100, an option to purchase up to a total of 750,000 units.The units issuable upon exercise of this option are identical to those offeredby this prospectus except that the warrants included in the option have anexercise price of $7.50 (125% of the exercise price of the warrants included inthe units sold in the offering).  This option is exercisable at $10.00 perunit commencing on the later of the consummation of a business combination andone year from the date of this prospectus and expiring five years from the dateof this prospectus.  The option and the 750,000 units, the 750,000 sharesof common stock and the 750,000 warrants underlying such units, and the 750,000shares of common stock underlying such warrants, have been deemed compensationby the National Association of Securities Dealers (“NASD”) and are thereforesubject to a 180-day lock-up pursuant to Rule 2710(g)(1) of the NASD ConductRules.  Additionally, the option may not be sold, transferred, assigned,pledged or hypothecated for a one-year period (including the foregoing 180-dayperiod) following the date of this prospectus.  However, the option may betransferred to any underwriter and selected dealer participating in theoffering and their bona fide officers or partners. The aggregate fair value ofthese units is approximately $2,800,000. Such amount was included in deferredoffering costs and charged to additional paid-in capital upon completion of theOffering.

 

The Company has engaged Broadband Capital ManagementLLC to act as the representative of the underwriters, on a non-exclusive basis,as our agent for the solicitation of the exercise of the warrants.  To theextent not inconsistent with the guidelines of the NASD and the rules andregulations of the Securities and Exchange Commission, we have agreed to paythe representative for bona fide services rendered a commission equal to 5% ofthe exercise price for each warrant exercised after June 29, 2006 if theexercise was solicited by the underwriters.  In addition to soliciting,either orally or in writing, the exercise of the warrants, the representative’sservices may also include disseminating information, either orally or inwriting, to warrant holders about us or the market for our securities, andassisting in the processing of the exercise of the warrants.  Nocompensation will be paid to the representative upon the exercise of thewarrants if:

 

•         the market price of theunderlying shares of common stock is lower than the exercise price;

 

•         the holder of the warrants hasnot confirmed in writing that the underwriters solicited the exercise;

 

•         the warrants are held in adiscretionary account;

 

•         the warrants are exercised inan unsolicited transaction; or

 

•         the arrangement to pay thecommission is not disclosed in the prospectus provided to warrant holders atthe time of exercise.

 

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**6.   Preferred Stock**

 

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

 

**7.Subsequent Events**

 

On March 13, 2006, the Company, Services AcquisitionCorp. International (“SVI”) and JJC Acquisition Company (“JJC”), a wholly-ownedCalifornia corporate subsidiary of SVI, and Jamba Juice Company, a California corporation(“Jamba Juice”), entered into an Agreement and Plan of Merger (the “MergerAgreement”), pursuant to which JJC will merge into Jamba Juice and Jamba Juice willbecome a wholly-owned subsidiary of SVI. Following completion of the merger, itis anticipated that SVI will change its name to Jamba, Inc. Because SVI willhave no other operating business following the merger, Jamba Juice willeffectively become a public company at the conclusion of the merger. The Boardof Directors will have representation from both entities. Jamba Juice isheadquartered in San Francisco, California and as of March 7, 2006currently had 532 locations, 323 company-owned and 209 franchised, operating in24 states, the District of Columbia and the Bahamas.

 

Under the terms of theagreement, Jamba Juice shareholders will be paid an aggregate of $265,000,000,less $16,000,000 for certain existing indebtedness and the amount of certain transactionrelated expenses, in cash, for all of the outstanding capital stock of JambaJuice and the value of all shares of Jamba Juice capital stock issuable uponexercise of all “in-the-money” vested and unvested options and warrants ofJamba Juice, subject to the option holders and warrant holders, in certaininstances, having the right to exchange their respective options and warrants intooptions and warrants of SVI.

 

To fund the transactionand provide additional capital for growth and expansion, various institutionalinvestors have agreed to purchase 30,879,999 shares of SVI common stock at$7.50 per share in a private placement, which will be funded at the closing ofthe merger. The gross proceeds from this placement, estimated at $231,600,000,will be combined with the approximately $128,174,091 of cash currently held intrust by SVI to fund the transaction and provide growth capital.

 

The closings of themerger and SVI financing are subject to customary closing conditions, includingapproval of the merger agreement by the stockholders of both Jamba JuiceCompany (which occurred on March 22, 2006) and SVI and the expiration ofany waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of1976 as amended. In addition, the closing is conditioned on holders of not morethan 20% of the shares of SVI voting against the merger and electing to converttheir SVI shares into cash, as permitted by the SVI certificate ofincorporation.

 

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