##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-QSB
  þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For
the quarterly period ended June 30, 2005
 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
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)
 101 East Kennedy Boulevard, Suite 3300, Tampa, Florida 33602
  (813) 226-8844
 þ o
  o þ




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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
    
    
    8Notes to Financial Statements
    
    
    9Item 2  Managements Discussion and Analysis or Plan of Operation
    
    
    13Item 3  Controls and Procedures
    
    
    14Part II. Other InformationItem 2  Changes in Securities and Small Business Issuer Purchases of
Equity Securities
    
    
    15Item 6  Exhibits and Reports on Form 8-K
    
    
    15Signatures and Certifications
    
    
    16Ex-31.1 Section 302 CEO CertificationEx-31.2 Section 302 CFO CertificationEx-32.1 Section 906 CEO CertificationEx-32.2 Section 906 CFO Certification
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##### Table of Contents



CEA Acquisition Corporation
(a corporation in the development stage)
 
 Balance Sheets
 June 30,
    
    December 31,2005
    
    2004(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    297,474
    
    
    $
    512,299U.S. Government Securities held in Trust Fund (Note 2)
    
    
    20,937,550
    
    
    
    20,694,933Accrued interest receivable, Trust Fund (Note 2)
    
    
    62,901
    
    
    
    51,064Prepaid expenses
    
    
    33,750
    
    
    
    6,750Total current assets
    
    
    21,331,675
    
    
    
    21,265,046Total assets
    
    $
    21,331,675
    
    
    $
    21,265,046Liabilities and Stockholders EquityCurrent liabilities:Accrued expenses
    
    $
    29,561
    
    
    $
    31,827Common stock, subject to possible conversion,
804,598 shares at conversion value (Note 2)
    
    
    4,197,993
    
    
    
    4,147,127Commitment (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 sharesIssued and outstanding 4,900,000 shares
(which includes 804,598 subject to
possible conversion)
    
    
    490
    
    
    
    490Additional paid-in capital
    
    
    17,216,617
    
    
    
    17,267,483Deficit accumulated during development stage
    
    
    (112,986
    )
    
    
    (181,881
    )Total stockholders equity
    
    
    17,104,121
    
    
    
    17,086,092Total liabilities and stockholders equity
    
    $
    21,331,675
    
    
    $
    21,265,046
 See accompanying summary of significant accounting policies and notes to unaudited financial statements.
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##### Table of Contents



CEA Acquisition Corporation
(a corporation in the development stage)
 
 Statements of Operations (Unaudited)
 Period fromThree months
    
    Three months
    
    Six months
    
    Six months
    
    October 14, 2003ended
    
    ended
    
    ended
    
    ended
    
    (inception) toJune 30, 2005
    
    June 30, 2004
    
    June 30, 2005
    
    June 30, 2004
    
    June 30, 2005Expenses:General and administrative expenses (Note 5)
    
    $
    (127,627
    )
    
    $
    (77,229
    )
    
    $
    (185,138
    )
    
    $
    (223,481
    )
    
    $
    (594,106
    )Operating loss
    
    $
    (127,627
    )
    
    $
    (77,229
    )
    
    $
    (185,138
    )
    
    $
    (223,481
    )
    
    $
    (594,106
    )Interest income
    
    $
    134,996
    
    
    $
    72,985
    
    
    $
    254,033
    
    
    $
    95,911
    
    
    $
    481,120Net income (loss)
    
    $
    7,369
    
    
    $
    (4,244
    )
    
    $
    68,895
    
    
    $
    (127,570
    )
    
    $
    (112,986
    )Accretion of Trust Fund relating to common
stock subject to possible conversion
    
    
    26,841
    
    
    
    18,667
    
    
    
    50,866
    
    
    
    23,103Net income (loss) attributable to
common stockholders
    
    $
    (19,472
    )
    
    $
    (22,911
    )
    
    $
    18,029
    
    
    $
    (150,673
    )Basic and fully diluted income (loss) per share
    
    $
    (.00
    )
    
    $
    (.00
    )
    
    $
    .00
    
    
    $
    (.04
    )Weighted average common shares outstanding
    
    
    4,900,000
    
    
    
    4,900,000
    
    
    
    4,900,000
    
    
    
    3,804,306
 See accompanying summary of significant accounting policies and notes to unaudited financial statements.
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##### Table of Contents



CEA Acquisition Corporation
(a corporation in the development stage)
 
 Statements of Stockholders Equity (Unaudited)
 Additional
    
    Deficit accumulatedPreferred Stock
    
    Common Stock
    
    Paid-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 and underwriter
option, net of underwritersdiscount and
offering expenses (includes 804,598 shares
subject to possible conversion)
    
    
    
    
    
    
    
    
    
    
    4,025,000
    
    
    
    403
    
    
    
    17,286,247
    
    
    
    
    
    
    
    17,286,650Accretion of Trust Fund relating to common
stock subject to possible conversion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,677
    )
    
    
    
    
    
    
    (43,677
    )Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (181,734
    )
    
    
    (181,734
    )Balance, December 31, 2004
    
    
    
    
    
    
    
    
    
    
    4,900,000
    
    
    
    490
    
    
    
    17,267,483
    
    
    
    (181,881
    )
    
    
    17,086,092Accretion of Trust Fund relating to common
stock subject to possible conversion
(unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,866
    )
    
    
    
    
    
    
    (50,866
    )Net income for the period (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,895
    
    
    
    68,895Balance, June 30, 2005 (unaudited)
    
    
    
    
    
    $
    
    
    
    
    4,900,000
    
    
    $
    490
    
    
    $
    17,216,617
    
    
    $
    (112,986
    )
    
    $
    17,104,121
 See accompanying summary of significant accounting policies and notes to unaudited financial statements.
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##### Table of Contents



CEA Acquisition Corporation
(a corporation in the development stage)
 
 Statements of Cash Flows (Unaudited)
 Six months
    
    Six months
    
    October 14, 2003ended
    
    ended
    
    (inception) toJune 30, 2005
    
    June 30, 2004
    
    June 30, 2005Cash Flows from Operating ActivitiesNet income (loss)
    
    $
    68,895
    
    
    $
    (127,570
    )
    
    $
    (112,986
    )Adjustments to reconcile net income (loss) to net cash used in
operating activities:Gain on maturity of U.S. Government Securities held in Trust Fund
    
    
    (239,588
    )
    
    
    
    
    
    
    (410,530
    )Changes in operating assets
    
    
    (170,693
    )
    
    
    (127,570
    )
    
    
    (523,516
    )Increase in prepaid expenses
    
    
    (27,000
    )
    
    
    (63,964
    )
    
    
    (33,750
    )Increase in accrued interest receivable
    
    
    (11,837
    )
    
    
    (93,634
    )
    
    
    (62,901
    )Increase (decrease) in accrued expenses
    
    
    (2,266
    )
    
    
    776
    
    
    
    29,561Net cash used in operating activities
    
    
    (211,796
    )
    
    
    (284,392
    )
    
    
    (590,606
    )Cash Flows from Investing ActivitiesPurchase of U.S. Government Securities held in Trust Fund
    
    
    (41,743,029
    )
    
    
    (20,527,250
    )
    
    
    (103,591,020
    )Maturity of U.S. Government Securities held in Trust Fund
    
    
    41,740,000
    
    
    
    
    
    
    
    83,064,000Net cash used in investing activities
    
    
    (3,029
    )
    
    
    (20,527,250
    )
    
    
    (20,527,020
    )Cash Flows from Financing ActivitiesProceeds from public offering of 4,025,000 units, net
    
    
    
    
    
    
    21,487,715
    
    
    
    21,487,815Deferred 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
    
    
    
    21,415,100Net increase (decrease) in cash and cash equivalents
    
    
    (214,825
    )
    
    
    602,973
    
    
    
    297,474Cash and cash equivalents at beginning of the period
    
    
    512,299
    
    
    
    238
    
    
    
    Cash and cash equivalents at end of the period
    
    $
    297,474
    
    
    $
    603,211
    
    
    $
    297,474Supplemental disclosure of non-cash activity:Accretion of Trust Fund relating to common stock subject to possible conversion
    
    $
    50,866
    
    
    $
    23,103
    
    
    $
    94,543
 See accompanying summary of significant accounting policies and notes to unaudited financial statements.
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##### Table of Contents



CEA Acquisition Corporation
(a corporation in the development stage)
 Statements of Cash Flows (Unaudited)  continued
 Three months
    
    Three monthsended
    
    endedJune 30, 2005
    
    June 30, 2004Cash Flows from Operating ActivitiesNet income (loss)
    
    $
    7,369
    
    
    $
    (4,244
    )Adjustments to reconcile net income (loss) to net cash used in
operating activities:Gain on maturity of U.S. Government Securities held in Trust Fund
    
    
    (131,521
    )
    
    
    Changes in operating assets
    
    
    (124,152
    )
    
    
    (4,244
    )Decrease in prepaid expenses
    
    
    13,500
    
    
    
    20,692Increase in accrued interest receivable
    
    
    (2,199
    )
    
    
    (71,443
    )Increase (decrease) in accrued expenses
    
    
    12,273
    
    
    
    (19,130
    )Net cash used in operating activities
    
    
    (100,578
    )
    
    
    (74,125
    )Cash Flows from Investing ActivitiesPurchase of U.S. Government Securities held in Trust Fund
    
    
    (20,937,550
    )
    
    
    Maturity of U.S. Government Securities held in Trust Fund
    
    
    20,937,000
    
    
    
    Net cash used in investing activities
    
    
    (550
    )
    
    
    Cash Flows from Financing ActivitiesProceeds from public offering of 4,025,000 units, net
    
    
    
    
    
    
    Deferred registration costs
    
    
    
    
    
    
    Proceeds from sale of shares of common
stock to initial stockholders
    
    
    
    
    
    
    Proceeds from note payable, stockholder
    
    
    
    
    
    
    Repayment of note payable, stockholder
    
    
    
    
    
    
    Net cash provided by financing activities
    
    
    
    
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    (101,128
    )
    
    
    (74,125
    )Cash and cash equivalents at beginning of the period
    
    
    398,602
    
    
    
    677,336Cash and cash equivalents at end of the period
    
    $
    297,474
    
    
    $
    603,211Supplemental disclosure of non-cash activity:Accretion of Trust Fund relating to common stock subject to possible conversion
    
    $
    26,841
    
    
    $
    18,667
 See accompanying summary of significant accounting policies and notes to unaudited financial statements.
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##### Table of Contents



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 $113,000 available
to reduce any future income taxes.
The tax benefit of this loss,
approximately $44,000, has been
fully offset by a valuation
allowance due to the uncertainty
of its realization.Net Income/(Loss )
Per Share
    
    Basic net income/(loss) per
share is calculated by dividing
net income/(loss) by the weighted
average number of common shares
outstanding during each period.
No effect has been given to
potential issuances of common
stock from warrants or the
underwriter option in the diluted
computation as the effect would
not be dilutive.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.Reclassification
    
    Certain items have been reclassified from prior
periods to conform with the current period
presentation.
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##### Table of Contents



CEA Acquisition Corporation
(a corporation in the development stage)
 
 Notes to Unaudited Financial Statements
 1.
    
    Basis of
Presentation
    
    The accompanying financial
statements are unaudited and
have been prepared in
accordance with accounting
principles generally
accepted in the United
States of America for
interim financial
information and with
instructions to Form 10-QSB.
Accordingly, certain
information and footnote
disclosures normally
included in audited
financial statements
prepared in accordance with
accounting principles
generally accepted in the
United States of America
have been omitted pursuant
to such rules and
regulations. These
financial statements should
be read in conjunction with
the audited financial
statements that were
included in the Companys
Form 10-KSB for the year
ended December 31, 2004.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.
Operating results for the
interim periods presented
are not necessarily
indicative of the results to
be expected for a full year.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 $21,390,100
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
$21,000,451 (which includes
accrued interest of $62,901)
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 (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.
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##### Table of Contents



CEA Acquisition Corporation
(a corporation in the development stage)
 Notes to Unaudited Financial Statements
 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 conversion 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 convert his
shares. The per share
conversion 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
Offering. Accordingly,
Public Stockholders holding
19.99% of the aggregate
number of shares owned by
all Public Stockholders may
seek conversion 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, $4,197,993 and
$4,147,127 (which includes
accretion of Trust Fund) has
been classified as common
stock subject to possible
conversion at June 30, 2005
and December 31, 2004,
respectively.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
(such date would be August
19, 2005), or 24 months from
the consummation of the
Offering (such date would be
February 19, 2006) if
certain extension criteria
have been satisfied. The
Company signed two separate
letters of intent with
companies for a Business
Combination and anticipate
signing a definitive
agreement with one of those
two companies. As a result
of having signed these
letters of intent, the
Company has satisfied the
extension criteria and now
has until February 19, 2006
to complete a Business
Combination. 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
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##### Table of Contents



CEA Acquisition Corporation
(a corporation in the development stage)
 Notes to Unaudited Financial Statements
 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).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. The note
and advance were 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
one of the Initial
Stockholders. 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. Amounts of
$45,000 for the six month
period ended June 30, 2005,
$32,586 for the six months
ended June 30, 2004 and
$122,586 for the period from
October 14, 2003 (inception)
to June 30, 2005 are
included in general and
administrative expenses for
such services.
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##### Table of Contents



CEA Acquisition Corporation
(a corporation in the development stage)
 Notes to Unaudited Financial Statements
 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 June 30, 2005, there were
9,100,000 shares of common
stock reserved for issuance
upon exercise of redeemable
warrants and underwriters
unit purchase option.
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ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
  Forward Looking Statements




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##### Table of Contents



ITEM 3. CONTROLS AND PROCEDURES.
  14




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PART II.
 OTHER INFORMATION
 
 ITEM 2: CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
     
 ITEM 6: EXHIBITS
      15




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##### Table of Contents



SIGNATURES
  CEA ACQUISITION CORPORATIONDated: August 10, 2005/s/ J. Patrick Michaels, Jr.

J. Patrick Michaels, Jr.Chairman of the Board and Chief Executive Officer/s/ Brad Gordon
Brad GordonChief Financial Officer
 16