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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION  FORM 10-QSB (Mark One)  x
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934  For the quarterly period ended September 30, 2004  o
    Transition report under Section 13 or 15(d) of the Exchange Act  For the transition period from  to Commission File Number 000-50531 CEA Acquisition Corporation 
  Delaware
    
    20-0308891(State or other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 101 East Kennedy Boulevard, Suite 3300, Tampa, Florida 33602 
  (813) 226-8844 
  Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes x No o As of November 9, 2004, 4,900,000 shares of common stock, par value $.0001
per share, were issued and outstanding. Transitional Small Business Disclosure Format (check one):     Yes o No x




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PagePart I: Financial Information:Item 1 Financial Statements (Unaudited):Balance Sheets
    
    
    3Statements of Operations
    
    
    4Statements of Stockholders Equity
    
    
    5Statements of Cash Flows
    
    
    6Summary of Significant Accounting Policies
    
    
    7Notes to Financial Statements
    
    
    8Item 2  Managements Discussion and Analysis or Plan of Operation
    
    
    11Item 3  Controls and Procedures
    
    
    12Part II. Other InformationItem 2  Changes in Securities and Small Business Issuer Purchases of Equity Securities
    
    
    13Item 6  Exhibits and Reports on Form 8-K
    
    
    13Signatures and Certifications
    
    
    14Ex-31.1: Section 302 Certification of CEOEx-31.2: Section 302 Certification of CFOEx-32.1: Section 906 Certification of CEOEx-32.2: Section 906 Certification of CFO
  2




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CEA Acquisition Corporation(a corporation in the development stage) 
 Financial Statements (Unaudited) Balance Sheets
    
    
    3Statements of Operations
    
    
    4Statements of Stockholders Equity
    
    
    5Statements of Cash Flows
    
    
    6Summary of Significant Accounting Policies
    
    
    7Notes to Financial Statements
    
    
    8-10




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CEA Acquisition Corporation(a corporation in the development stage) 
 Balance Sheets September 30,
    
    December 31,2004
    
    2003(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    538,398
    
    
    $
    238U.S. Government Securities held in Trust Fund (Note 2)
    
    
    20,625,755
    
    
    
    Accrued interest receivable, Trust Fund (Note 2)
    
    
    33,433
    
    
    
    Prepaid expenses
    
    
    48,780
    
    
    
    Total current assets
    
    
    21,246,366
    
    
    
    238Deferred registration costs
    
    
    
    
    
    
    97,715Total assets
    
    $
    21,246,366
    
    
    $
    97,953Liabilities and Stockholders EquityCurrent liabilities:Accrued expenses
    
    $
    1,499
    
    
    $
    Note payable, stockholder (Note 4)
    
    
    
    
    
    
    73,100Total current liabilities
    
    
    1,499
    
    
    
    73,100Common stock, subject to possible redemption,
804,598 shares at redemption value (Note 2)
    
    
    4,103,450
    
    
    
    Commitment (Note 5)Stockholders equity (Notes 2, 3, 6 and 7)Preferred stock, $.0001 par value, Authorized
1,000,000 shares; none issuedCommon stock, $.0001 par value
Authorized 20,000,000 shares
Issued and outstanding 4,900,000 shares
(which includes 804,598 subject to
possible redemption), and
875,000, respectively
    
    
    490
    
    
    
    87Additional paid-in capital
    
    
    17,311,060
    
    
    
    24,913Deficit accumulated during development stage
    
    
    (170,133
    )
    
    
    (147
    )Total stockholders equity
    
    
    17,141,417
    
    
    
    24,853Total liabilities and stockholders equity
    
    $
    21,246,366
    
    
    $
    97,953
 See accompanying summary of significant accounting policies and notes to unaudited financial statements. -3-




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CEA Acquisition Corporation(a corporation in the development stage) 
 Statements of Operations (Unaudited) Period fromThree months
    
    Nine months
    
    October 14, 2003ended
    
    ended
    
    (inception) toSeptember 30, 2004
    
    September 30, 2004
    
    September 30, 2004Expenses:General and administrative expenses
    
    $
    (82,162
    )
    
    $
    (305,644
    )
    
    $
    (305,791
    )Operating loss
    
    $
    (82,162
    )
    
    $
    (305,644
    )
    
    $
    (305,791
    )Other income:Interest income
    
    $
    39,747
    
    
    $
    135,658
    
    
    $
    135,658Net loss
    
    $
    (42,415
    )
    
    $
    (169,986
    )
    
    $
    (170,133
    )Basic and fully diluted net loss per share
    
    $
    (.01
    )
    
    $
    (.04
    )Weighted average common shares outstanding
    
    
    4,900,000
    
    
    
    4,166,822
 See accompanying summary of significant accounting policies and notes to unaudited financial statements. -4-




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CEA Acquisition Corporation(a corporation in the development stage) 
 Statements of Stockholders Equity (Unaudited) Preferred Stock
    
    Common Stock
    
    Additional
    
    Deficit accumulatedPaid-In
    
    during theShares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    development stage
    
    TotalBalance, October 14, 2003 (inception)
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Sale of 875,000 shares of common stock to
initial stockholders
    
    
    
    
    
    
    
    
    
    
    875,000
    
    
    
    87
    
    
    
    24,913
    
    
    
    
    
    
    
    25,000Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (147
    )
    
    
    (147
    )Balance, December 31, 2003
    
    
    
    
    
    
    
    
    
    
    875,000
    
    
    
    87
    
    
    
    24,913
    
    
    
    (147
    )
    
    
    24,853Sale of 4,025,000 units, net of underwriters
discount and offering expenses (includes
804,598 shares subject to possible redemption)
    
    
    
    
    
    
    
    
    
    
    4,025,000
    
    
    
    403
    
    
    
    17,286,147
    
    
    
    
    
    
    
    17,286,550Net loss for the period (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (169,986
    )
    
    
    (169,986
    )Balance, September 30, 2004 (Unaudited)
    
    
    
    
    
    
    
    
    
    
    4,900,000
    
    
    $
    490
    
    
    $
    17,311,060
    
    
    $
    (170,133
    )
    
    $
    17,141,417
 See accompanying summary of significant accounting policies and notes to unaudited financial statements. -5-




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CEA Acquisition Corporation (a corporation in the development stage) 
 Statements of Cash Flows (Unaudited)
 Nine months
    
    October 14, 2003ended
    
    (inception) toSeptember 30, 2004
    
    September 30, 2004Cash Flows from Operating ActivitiesNet loss
    
    $
    (169,986
    )
    
    $
    (170,133
    )Adjustments to reconcile net loss to net cash used in
operating activities:Gain on maturity of U.S. Government Securities held in Trust Fund
    
    
    (98,750
    )
    
    
    (98,750
    )Increase in prepaid expenses
    
    
    (48,780
    )
    
    
    (48,780
    )Increase in accrued expenses
    
    
    1,499
    
    
    
    1,499Net cash used in operating activities
    
    
    (316,017
    )
    
    
    (316,164
    )Cash Flows from Investing ActivitiesPurchase of U.S. Government Securities held in Trust Fund
    
    
    (41,153,005
    )
    
    
    (41,153,005
    )Increase in accrued interest receivable
    
    
    (33,433
    )
    
    
    (33,433
    )Maturity of U.S. Government Securities held in Trust Fund
    
    
    20,626,000
    
    
    
    20,626,000Net cash used in investing activities
    
    
    (20,560,438
    )
    
    
    (20,560,438
    )Cash Flows from Financing ActivitiesProceeds from public offering of 4,025,000 units, net
    
    
    21,487,715
    
    
    
    21,487,715Deferred registration costs
    
    
    
    
    
    
    (97,715
    )Proceeds from sale of shares of common
stock to initial stockholders
    
    
    
    
    
    
    25,000Proceeds from note payable, stockholder
    
    
    21,200
    
    
    
    94,300Repayment of note payable, stockholder
    
    
    (94,300
    )
    
    
    (94,300
    )Net cash provided by financing activities
    
    
    21,414,615
    
    
    
    21,415,000Net increase in cash
    
    
    538,160
    
    
    
    538,398Cash and cash equivalents at beginning of the period
    
    
    238
    
    
    
    Cash and cash equivalents at end of the period
    
    $
    538,398
    
    
    $
    538,398
 See accompanying summary of significant accounting policies and notes to unaudited financial statements. -6-




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CEA Acquisition Corporation(a corporation in the development stage) 
 Summary of Significant Accounting Policies Cash & Cash
Equivalents
    
    The Company considers all highly liquid
investments with original maturities of three
months or less to be cash equivalents.Income Taxes
    
    The Company follows Statement of Financial
Accounting Standards No. 109 (SFAS No. 109),
Accounting for Income Taxes which is an asset
and liability approach that requires the
recognition of deferred tax assets and
liabilities for the expected future tax
consequences of events that have been recognized
in the Companys financial statements or tax
returns. The Company has a net operating loss
carryforward of approximately $170,000 available
to reduce any future income taxes. The tax
benefit of this loss, approximately $66,000, has
been fully offset by a valuation allowance due
to the uncertainty of its realization.Net Loss Per
Share
    
    Net loss per share is computed on the basis of
the weighted average number of common shares
outstanding during the period, including common
stock equivalents (unless anti-dilutive) which
would arise from the exercise of stock warrants.Use of Estimates
    
    The preparation of financial statements in
conformity with accounting principles generally
accepted in the United States of America
requires management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities at the date of the
financial statements and the reported amounts of
expenses during the reporting period. Actual
results could differ from those estimates.
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CEA Acquisition Corporation(a corporation in the development stage) 
 Notes to Unaudited Financial Statements 1.
    
    Basis of Presentation
    
    The financial statements are
unaudited and include the
accounts of CEA Acquisition
Corporation (a corporation in
the development stage)
(Company).In the opinion of management,
all adjustments (consisting
primarily of normal accruals)
have been made that are
necessary to present fairly the
financial position of the
Company as of September 30,
2004 and the results of its
operations and its cash flows
for the period from January 1,
2004 through September 30,
2004. Operating results for
the interim period presented
are not necessarily indicative
of the results to be expected
for a full year.The statements and related
notes have been prepared
pursuant to the rules and
regulations of the U.S.
Securities and Exchange
Commission. Accordingly,
certain information and
footnote disclosures normally
included in financial
statements prepared in
accordance with generally
accepted accounting principles
have been omitted pursuant to
such rules and regulations.
These financial statements
should be read in conjunction
with the financial statements
that were included in the
Companys Form 10-KSB for the
period ended December 31, 2003.2.
    
    Organization and
Business Operations
    
    The Company was incorporated in
Delaware on October 14, 2003 as
a blank check company, the
objective of which is to
acquire an operating business
in the entertainment, media and
communications industry. The
Companys initial stockholders
purchased 875,000 common
shares, $.0001 par value, for
$25,000 on October 23, 2003.On February 19, 2004, the
Company consummated an Initial
Public Offering (Offering)
and raised net proceeds of
$21,390,000 which is discussed
in Note 3. The Companys
management has broad discretion
with respect to the specific
application of the net proceeds
of this Offering, although
substantially all of the net
proceeds of this Offering are
intended to be generally
applied toward consummating a
business combination with a
operating business in the
entertainment, media and
communications industry
(Business Combination).
Furthermore, there is no
assurance that the Company will
be able to successfully effect
a Business Combination. An
amount of $20,659,188 (which
includes accrued interest of
$33,433) is being held in an
interest bearing trust account
(Trust Fund) until the
earlier of (i) the consummation
of its first Business
Combination or (ii) liquidation
of the Company. Under the
agreement governing the Trust
Fund, funds will only be
invested in United Stated
government securities
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CEA Acquisition Corporation(a corporation in the development stage) Notes to Unaudited Financial Statements (treasury bills) with a
maturity of 180 days or less.
The remaining net proceeds (not
held in trust) may be used to
pay for business, legal and
accounting due diligence on
prospective acquisitions and
continuing general and
administrative expenses.The Company, after signing a
definitive agreement for the
acquisition of a target
business, will submit such
transaction for stockholder
approval. In the event that
public stockholders owning 20%
or more of the shares sold in
the Offering vote against the
Business Combination and
exercise their redemption
rights described below, the
Business Combination will not
be consummated. All of the
Companys stockholders prior to
the Offering, including all of
the officers and directors of
the Company (Initial
Stockholders), have agreed to
vote their 875,000 founding
shares of common stock in
accordance with the vote of the
majority in interest of all
other stockholders of the
Company (Public Stockholders)
with respect to any Business
Combination. After
consummation of the Companys
Business Combination, these
voting safeguards will no
longer be applicable.With respect to a Business
Combination which is approved
and consummated, any Public
Stockholder who voted against
the Business Combination may
demand that the Company redeem
his shares. The per share
redemption price will equal the
amount in the Trust Fund as of
the record date for
determination of stockholders
entitled to vote on the
Business Combination divided by
the number of shares of common
stock held by Public
Stockholders at the
consummation of the Proposed
Offering. Accordingly, Public
Stockholders holding 19.99% of
the aggregate number of shares
owned by all Public
Stockholders may seek
redemption of their shares in
the event of a Business
Combination. Such Public
Stockholders are entitled to
receive their per share
interest in the
Trust Fund computed without
regard to the shares held by
Initial Stockholders. In this
respect, $4,103,450 has been
classified as common stock
subject to possible redemption.The Companys Certificate of
Incorporation provides for
mandatory liquidation of the
Company, without stockholder
approval, in the event that the
Company does not consummate a
Business Combination within 18
months from the date of the
consummation of the Offering,
or 24 months from the
consummation of the Offering if
certain extension criteria have
been satisfied. In the event
of liquidation, it is likely
that the per share value of the
residual assets remaining
available for distribution
(including Trust Fund assets)
will be less than the Offering
price per share in the Offering
due to costs related to the
Offering (assuming no value is
attributed to the warrants
contained in the Units in the
Offering discussed in Note 3).
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CEA Acquisition Corporation(a corporation in the development stage) Notes to Unaudited Financial Statements 3.
    
    Offering
    
    The Company sold 4,025,000
units (Units) in the
offering, which includes all of
the 525,000 Units subject to
the underwriters over
allotment option. Each Unit
consists of one share of the
Companys common stock, $.0001
par value, and two Redeemable
Common Stock Purchase Warrants
(Warrants). Each Warrant
will entitle the holder to
purchase from the Company one
share of common stock at an
exercise price of $5.00
commencing the later of the
completion of a Business
Combination with a target
business or one year from the
effective date of the Offering
and expiring four years from
the effective date of the
Offering. The Warrants will be
redeemable at a price of $.01
per Warrant upon 30 days notice
after the Warrants become
exercisable, only in the event
that the last sale price of the
common stock is at least $8.50
per share for any 20 trading
days within a 30 trading day
period ending on the third day
prior to date on which notice
of redemption is given. In
connection with this Offering,
the Company issued an option
for $100 to the representative
of the underwriters to purchase
350,000 units at an exercise
price of $9.90 per Unit. In
addition, the warrants
underlying such Units are
exercisable at $6.40 per share.4.
    
    Note Payable, Stockholder
    
    The Company issued a $60,000
unsecured non-interest bearing
promissory note to a
stockholder on October 22,
2003. The stockholder advanced
additional amounts aggregating
$34,300 through January 31,
2004. This note was paid in
full on March 3, 2004 from the
net proceeds of the Offering.5.
    
    Commitment
    
    The Company presently occupies
office space provided by an
affiliate of an Initial
Stockholder. Such affiliate
has agreed that, until the
acquisition of a target
business by the Company, it
will make such office space, as
well as certain office and
secretarial services, available
to the Company, as may be
required by the Company from
time to time. The Company pays
such affiliate $7,500 per month
for such services commencing
from February 19, 2004, the
effective date of the Offering.6.
    
    Preferred Stock
    
    The Company is authorized to
issue 1,000,000 shares of
preferred stock with such
designations, voting and other
rights and preferences as may
be determined from time to time
by the Board of Directors.7.
    
    Common Stock
    
    In January 2004, the Companys
Board of Directors authorized
1.666666 to one forward stock
split of its common stock. All
references in the accompanying
financial statements to the
numbers of shares have been
retroactively restated to
reflect the transaction.At September 30, 2004, there
were 9,100,000 shares of common
stock reserved for issuance
upon exercise of redeemable
warrants and underwriters unit
purchase option.
 -10-




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CEA Acquisition Corporation(a corporation in the development stage) Unaudited Financial StatementsNine months ended September 30, 2004 andFor the Period from October 14, 2003 (inception) to September 30, 2004




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ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS AND PLAN OF OPERATION The following discussion should be read in conjunction with the Companys
Consolidated Financial Statements and footnotes thereto contained in this
report. Forward Looking Statements The statements discussed in this Report include forward looking statements
that involve risks and uncertainties, including the timely delivery and
acceptance of the Companys products and the other risks detailed from time to
time in the Companys reports filed with the Securities and Exchange
Commission. We were formed on October 14, 2003 to serve as a vehicle to effect a
merger, capital stock exchange, asset acquisition or other similar business
combination with a company in the entertainment, media and communications
industry. We intend to utilize cash derived from the proceeds of our recently
completed public offering, our capital stock, debt or a combination of cash,
capital stock and debt, in effecting a business combination. Net loss of $42,415 for the three months ended September 30, 2004 consists
of $22,500 expense for a monthly administrative services agreement, $35,029 for
professional fees, $13,500 expense for officer liability insurance, $4,763 for
travel expenses and $6,370 for other expenses. Interest income on the Trust
Fund investment was $38,304 along with $1,443 of other interest income. Net loss of $169,986 for the nine months ended September 30, 2004 consists
of $55,086 expense for a monthly administrative services agreement, $91,276 for
professional fees, $33,750 expense for officer liability insurance, $20,061 for
travel expenses and $105,471 for other expenses. Interest income on the Trust
Fund investment was $131,938 along with $3,720 of other interest income. We consummated our initial public offering on February 19, 2004. Gross
proceeds from our initial public offering, including the full exercise of the
underwriters over-allotment option, were $24,150,000. After deducting
offering expenses of $1,069,500 including $724,500 evidencing the underwriters
non-accountable expense allowance of 3% of the gross proceeds, and underwriting
discounts of $1,690,500, net proceeds were $21,390,000. Of this amount,
$20,659,188 (which includes accrued interest of $33,433 and interest collected
of $98,750) is being held in trust and the remaining proceeds are available to
be used to provide for business, legal and accounting due diligence on
prospective acquisitions and continuing general and administrative expenses.
We will use substantially all of the net proceeds of this offering to acquire a
target business, including identifying and evaluating prospective acquisition
candidates, selecting the target business, and structuring, negotiating and
consummating the business combination. To the extent that our capital stock is
used in whole or in part as consideration to effect a business combination, the
proceeds held in the trust fund as well as any other net proceeds not expended
will be used to finance the operations of the target business. We believe that
we have sufficient available funds outside of the trust fund to operate through
February 18, 2006, assuming that a business combination is not consummated
during that time. Over this time period, we anticipate $180,000 for the
administrative fee payable to CEA Group LLC ($7,500 per month for two years),
approximately $150,000 of expenses for legal, accounting and other expenses
related to the due diligence investigations, structuring and negotiating of a
business combination, $50,000 of expenses for the due diligence and
investigation of a target business, $40,000 of expenses in legal and accounting
fees relating to our SEC reporting obligations and $285,000 for general working
capital that will be used for miscellaneous expenses and reserves, including
approximately $60,000 for director and officer liability insurance premiums. We
do not believe we will need to raise additional funds following this offering
in order to meet the expenditures required for operating our business. However,
we may need to raise additional funds through a private offering of debt or
equity securities if such funds are required to 11




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consummate a business combination that is presented to us. We would only
consummate such a fund raising simultaneously with the consummation of a
business combination. Commencing February 12, 2004, we pay CEA Group, one of our initial
stockholders and an affiliate of J. Patrick Michaels, Jr., a monthly fee of
$7,500 for general and administrative services. In addition, in October 2003
and January 2004, CEA Group, LLC advanced an aggregate of $94,300 to us, on a
non-interest bearing basis, for payment of offering expenses on our behalf.
This amount was repaid in March 2004 out of proceeds of our initial public
offering. 
 ITEM 3. CONTROLS AND PROCEDURES. An evaluation of the effectiveness of our disclosure controls and
procedures as of September 30, 2004 was made under the supervision and with the
participation of our management, including our chief executive officer and
chief financial officer. Based on that evaluation, they concluded that our
disclosure controls and procedures are effective as of the end of the period
covered by this report to ensure that information required to be disclosed by
us in reports that we file or submit under the Securities Exchange Act of 1934
is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms. During the
most recently completed fiscal quarter, there has been no significant change in
our internal control over financial reporting that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting. 12




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PART II. OTHER INFORMATION 
 ITEM 2: CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES On February 19, 2004, we closed our initial public offering of 3,500,000
Units, with each unit consisting of one share of our common stock and two
warrants, each to purchase one share of our common stock at an exercise price
of $5.00 per share. The managing underwriter in the offering was
EarlyBirdCapital, Inc. The securities sold in the offering were registered
under the Securities Act of 1933 on a registration statement on Form S-1 (No.
333-110365). The Securities and Exchange Commission declared the registration
statement effective on February 12, 2004. On February 12, 2004, the underwriters exercised their over-allotment
option to purchase 525,000 Units at the initial public offering price of $6.00
per share. With the over-allotment option, the aggregate initial offering
proceeds totaled $24,150,000. We paid a total of $1,690,500 in underwriting discounts and commissions,
and approximately $1,069,500 has been paid for costs and expenses related to
the offering, including $724,500 for the underwriters non-accountable expense
allowance of 3% of the gross proceeds. After deducting the underwriting discounts and commissions and the
offering expenses, the total net proceeds to us from the offering were
$21,390,000, of which $20,527,500 was deposited into a trust fund and the
remaining proceeds are available to be used to provide for business, legal and
accounting due diligence on prospective business combinations and continuing
general and administrative expenses. Through September 30, 2004, we have used
approximately $229,802 of cash for operating expenses and $94,300 to repay
advances made to us by one of our initial stockholders. 
 ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K  (a)
    
    Exhibits:  31.1
    
     Section 302 Certification by CEO31.2
    
     Section 302 Certification by CFO32.1
    
     Section 906 Certification by CEO32.2
    
     Section 906 Certification by CFO  (b)
    
    Reports on Form 8-K:None 13




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SIGNATURES In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. CEA ACQUISITION CORPORATIONDated: November 9, 2004/s/ J. Patrick Michaels, Jr.J. Patrick Michaels, Jr.Chairman of the Board and Chief Executive Officer/s/ Brad GordonBrad GordonChief Financial Officer
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