** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

** **

**FORM 10-Q**

** **
| **x**                                                                                                                                                                                                             | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                                                                        | ** **                                                                                              |
| **For the  quarterly period ended March 31, 2006**                                                                                                                                                           |
|                                                                                                                                                                                                              |                                                                                                    |
| **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**                                                                                                                                                                            |

** **

**SERVICESACQUISITION CORP. INTERNATIONAL**

(Exact name of registrant as specified in its charter)

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

 

Indicate by check markwhether the Registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Exchange Act during the past 12 months (or for suchshorter period that the Registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.   Yes x  No o

Indicate by check markwhether the Registrant is an accelerated filer (as defined in Rule 12b-2of the Exchange Act).    Yes o   No x

Indicated by check markwhether the Registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). Yes x  No o

As of May 5, 2006,21,000,000 shares of the registrant’s common stock, par value $0.001 pershare, were outstanding.

 

 

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**SERVICESACQUISITION CORP. INTERNATIONALTable of Contents**

 
|                                                                                                     | ** ** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|------------|
| **PART I  — FINANCIAL INFORMATION**                                                       |       |       |
|                                                                                                |       |       |
| Item  1. Financial Statements                                                                       |       |       |
|                                                                                                |       |       |
| Balance  Sheets                                                                                     |       |       |
|                                                                                                |       |       |
| Statements  of Operations                                                                           |       |       |
|                                                                                                |       |       |
| Statements of Stockholders’ Equity                                                             |       |       |
|                                                                                                |       |       |
| Statements  of Cash Flows                                                                           |       |       |
|                                                                                                |       |       |
| Notes to Consolidated Financial Statements                                                          |       |       |
|                                                                                                |       |       |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations |       |       |
|                                                                                                |       |       |
| Item 3. Quantitative and Qualitative Disclosures about  Market Risk                                 |       |       |
|                                                                                                |       |       |
| Item 4. Controls and Procedures                                                                     |       |       |
|                                                                                                |       |       |
| **PART II  — OTHER INFORMATION**                                                          |       |       |
|                                                                                                |       |       |
| Item 1. Legal  Proceedings                                                                          |       |       |
|                                                                                                |       |       |
| Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                                |       |       |
|                                                                                                |       |       |
| Item 3. Defaults  upon Senior Securities                                                            |       |       |
|                                                                                                |       |       |
| Item 4. Submission  of Matters to a Vote of Security Holders                                        |       |       |
|                                                                                                |       |       |
| Item 5. Other  Information                                                                          |       |       |
|                                                                                                |       |       |
| Item 6. Exhibits                                                                                    |       |       |
|                                                                                                |       |       |
| SIGNATURES                                                                                          |       |       |

 

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**PART I— FINANCIAL INFORMATION**

**Item 1.   Financial Statements.**

**SERVICESACQUISITION CORP. INTERNATIONAL**(a corporation in the development stage)
| **BALANCE SHEETS**                                                                                                                                                                  | ** ** | ** **                   | ** **  | ** **                      | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|-------------|---------------------------------|------------|
| ** **                                                                                                                                                                          | ** ** | **March 31, 2006** | ** **  | **December 31, 2005** | ** ** |
|                                                                                                                                                                                |       |                         |        |                            |       |
| **ASSETS**                                                                                                                                                                          |       |                         |        |                            |       |
|                                                                                                                                                                                |       |                         |        |                            |       |
| **Current assets**                                                                                                                                                                  |       |                         |        |                            |       |
| Cash                                                                                                                                                                                |       | $                            | 741,417     |                            | $          | 976,915 |   |
| Prepaid expenses  and other assets                                                                                                                                                  |       | 55,126                       |        | 56,772                          |       |
| **Total  current assets**                                                                                                                                                           |       | 796,543                      |        | 1,033,687                       |       |
| Other assets                                                                                                                                                                        |       |                         |        |                            |       |
| Cash held in  trust                                                                                                                                                                 |       | 129,066,348                  |        | 128,174,091                     |       |
| Deferred  transaction costs                                                                                                                                                         |       | 1,009,989                    |        |                            |       |
| **Total  assets**                                                                                                                                                                   |       | $                            | 130,872,880 |                            | $          | 129,207,778 |   |
|                                                                                                                                                                                |       |                         |        |                            |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                                      |       |                         |        |                            |       |
|                                                                                                                                                                                |       |                         |        |                            |       |
| **Current liabilities**                                                                                                                                                             |       |                         |        |                            |       |
| Accounts payable and accrued expenses                                                                                                                                               |       | $                            | 1,139,419   |                            | $          | 169,852 |   |
| **Total  current liabilities**                                                                                                                                                      |       | 1,139,419                    |        | 169,852                         |       |
|                                                                                                                                                                                |       |                         |        |                            |       |
| Common stock,  subject to possible redemption, 3,448,275 shares at redemption value                                                                                            |       | 25,241,373                   |        | 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                       |        | 21,000                          |       |
| Paid-in capital  in excess of par                                                                                                                                                   |       | 102,584,274                  |        | 102,604,274                     |       |
|                                                                                                                                                                                |       |                         |        |                            |       |
| Equity  accumulated during the development stage                                                                                                                                    |       | 1,886,814                    |        | 1,171,279                       |       |
| Total  stockholders’ equity                                                                                                                                                    |       | 104,492,088                  |        | 103,796,553                     |       |
| Total liabilities and  stockholders’ equity                                                                                                                                    |       | $                            | 130,872,880 |                            | $          | 129,207,778 |   |

 

*Seeaccompanying notes to financial statements.*

1

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**SERVICESACQUISITION CORP. INTERNATIONAL**(a corporation in the development stage)

 
| **STATEMENTS OF OPERATIONS**          | ** ** | ** **                                           | ** ** | ** **                       | ** ** | ** **              | ** ** |
|---------------------------------------|------------|------------------------------------------------------|------------|----------------------------------|------------|-------------------------|------------|
| ** **                            | ** ** | ** **                                           | ** ** | ** **                       | ** ** | **From inception** | ** ** |
| ** **                            | ** ** | **Three months ended March 31,** | ** ** | **To March 31, ** | ** ** |
| ** **                            | ** ** | **2006**                                             | ** ** | **2005**                         | ** ** | **2006**                | ** ** |
| Interest income                       |       | $                                                    | 900,786    |                             | $          | —                  |       | $ | 2,354,877 |   |
|                                  |       |                                                 |       |                             |       |                    |       |
| Formation and operating costs         |       | 144,272                                              |       | 966                              |       | 340,886                 |       |
| Interest expense                      |       | —                                               |       | —                           |       | 1,265                   |       |
|                                  |       |                                                 |       |                             |       |                    |       |
| **Income  before taxes**              |       | 756,514                                              |       | (966                             | )          | 2,012,726               |       |
|                                  |       |                                                 |       |                             |       |                    |       |
| Income taxes, state                   |       | 40,979                                               | )          | —                           |       | 125,912                 | )          |
| ** **                            |       |                                                 |       |                             |       |                    |       |
| **Net  income (loss)**                |       | $                                                    | 715,535    |                             | $          | (966                    | )          | $ | 1,886,814 |   |
|                                  |       |                                                 |       |                             |       |                    |       |
| Weighted average shares  outstanding: |       |                                                 |       |                             |       |                    |       |
| Basic                                 |       | 21,000,000                                           |       | 3,750,000                        |       | 13,940,973              |       |
| Diluted                               |       | 25,732,572                                           |       | 3,750,000                        |       | 16,086,105              |       |
|                                  |       |                                                 |       |                             |       |                    |       |
| Net income  (loss) per share, basic   |       | $                                                    | 0.03       |                             | $          | (0.00                   | )          | $ | 0.14 |   |
|                                  |       |                                                 |       |                             |       |                    |       |
| Net income  (loss) per share, basic   |       | $                                                    | 0.03       |                             | $          | (0.00                   | )          | $ | 0.12 |   |

 

*Seeaccompanying notes to financial statements.*

2

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**SERVICESACQUISITION CORP. INTERNATIONAL**(a corporation in the development stage)
| **STATEMENTS OF  STOCKHOLDERS’ EQUITY**                                                                                                                              | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                                                                                                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **For period from January 6, 2005 (inception)  to March 31, 2006**                                                                                              | ** ** |
| ** **                                                                                                                                                                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                                                                                                                | ** ** | **Common Stock  Shares** | ** ** | **Amount** | ** ** | **Paid-in Capital  in  Excess of Par** | ** ** | **Equity  Accumulated  During the  Development  Stage** | ** ** | **Stockholders  Equity** | ** ** |
|                                                                                                                                                                      |       |   |   |   |   |   |   |   |   |   |   |
| Balances at  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 |   |
|                                                                                                                                                                      |       |   |   |   |   |   |   |   |   |   |   |
| Adjustment to  offering expense                                                                                                                                           |       |   |   |   |   | (20,000 | ) |   |   | (20,000 | ) |
|                                                                                                                                                                      |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                                                                                |       |   |   |   |   |   |   | 715,535 |   | 715,535 |   |
|                                                                                                                                                                      |       |   |   |   |   |   |   |   |   |   |   |
| Balances at March 31, 2006                                                                                                                                           |       | 21,000,000 |   | $21,000 |   | $102,584,274 |   | $1,886,814 |   | $104,492,088 |   |

 

*Seeaccompanying notes to financial statements.*

3

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**SERVICESACQUISITION CORP. INTERNATIONAL**(a corporation in the development stage)
| **STATEMENTS OF CASH FLOWS** |
|------------------------------|

 

 

**Forperiod from January 6, 2005 (inception) to March 31, 2006**

 

 
| ** **                                                                        | ** ** | ** **                                           | ** ** | ** **                       | ** ** | **From inception** | ** ** |
|-----------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|----------------------------------|------------|-------------------------|------------|
| ** **                                                                        | ** ** | **Three months ended March 31,** | ** ** | **To March 31, ** | ** ** |
| ** **                                                                        | ** ** | **2006**                                             | ** ** | **2005**                         | ** ** | **2006**                | ** ** |
| **Cash  flows from operating activities**                                         |       |                                                 |       |                             |       |                    |       |
| Net income (loss)                                                                 |       | $                                                    | 715,535    |                             | $          | (966                    | )          | $ | 1,886,814 |   |
| Increase (decrease) in cash attributable to change  in Deferred transaction costs |       | (1,009,989                                           | )          |                             |       | (1,009,989              | )          |
| Prepaid expenses                                                                  |       | 1,646                                                |       |                             |       | (55,126                 | )          |
| Accounts payable and accrued expenses                                             |       | 969,567                                              |       | 750                              |       | 1,139,419               |       |
|                                                                              |       |                                                 |       |                             |       |                    |       |
| **Net  cash provided by (used in) operating activities**                          |       | 676,759                                              |       | (216                             | )          | 1,961,118               |       |
|                                                                              |       |                                                 |       |                             |       |                    |       |
| **Cash  flows from financing activities**                                         |       |                                                 |       |                             |       |                    |       |
|                                                                              |       |                                                 |       |                             |       |                    |       |
| Proceeds from note payable, stockholders                                          |       |                                                 |       | 90,000                           |       | 160,000                 |       |
| Payment of note payable, stockholders                                             |       |                                                 |       |                             |       | (160,000                | )          |
| Proceeds from sale of stock                                                       |       |                                                 |       | 25,000                           |       | 29,179                  |       |
| Gross proceeds of public offering                                                 |       |                                                 |       |                             |       | 120,000,000             |       |
| Payments of costs of public offering                                              |       | (20,000                                              | )          |                             |       | (9,102,632              | )          |
| 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**                                    |       | (20,000                                              | )          | 14,183                           |       | 127,846,647             |       |
|                                                                              |       |                                                 |       |                             |       |                    |       |
| Net cash used in  investing activity, cash held in trust                          |       | (892,257                                             | )          | —                           |       | (129,066,348            | )          |
|                                                                              |       |                                                 |       |                             |       |                    |       |
| **Net  increase in cash**                                                         |       | (235,498                                             | )          | 13,967                           |       | 741,417                 |       |
|                                                                              |       |                                                 |       |                             |       |                    |       |
| **Cash,  beginning of period**                                                    |       | 976,915                                              |       | —                           |       | —                  |       |
|                                                                              |       |                                                 |       |                             |       |                    |       |
| **Cash,  end of period**                                                          |       | $                                                    | 741,417    |                             | $          | 13,967                  |       | $ | 741,417 |   |

* *

*Seeaccompanying notes to financial statements.*

4

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**SERVICESACQUISITION CORP. INTERNATIONAL**

**Notesto Unaudited Condensed Consolidated Financial Statements**

The unauditedcondensed consolidated financial statements include the accounts of ServicesAcquisition Corp. International (the “Company”). The unaudited condensedfinancial statements for the three months ended March 31, 2006 includedherein have been prepared in accordance with the instructions for Form 10-Qunder the Securities Exchange Act of 1934, as amended, and Article 10 ofRegulation S-X under the Securities Act of 1933, as amended. Certaininformation and footnote disclosures normally included in financial statementsprepared in conformity with accounting principles generally accepted in theUnited States of America have been condensed or omitted pursuant to such rules andregulations relating to interim financial statements.

In the opinion ofmanagement, the accompanying unaudited condensed consolidated financialstatements contain all adjustments necessary to present fairly the Company’sfinancial position as of March 31, 2006 and the results of its operationsfor the three months ended March 31, 2006 and 2005 and for the period fromJanuary 6, 2005 (inception) to March 31, 2006 and cash flows for thethree months ended March 31, 2006 and 2005 and for the period from January 6,2005 (inception) to March 31, 2006. The results of operations for thethree months ended March 31, 2006 and 2005 are unaudited and are notnecessarily indicative of the results to be expected for the full year. Theunaudited condensed consolidated financial statements included herein should beread in conjunction with the financial statements and related footnotesincluded in the Company’s 2005 Form 10-K.

1.   Nature ofoperations and summary of significant accounting policies

*Natureof Operations*

The Company wasincorporated 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 with a currently unidentifiedoperating business. The Company selected December 31 as its fiscalyear-end.

The registrationstatement for the Company’s initial public offering (the “Offering”) wasdeclared effective June 29, 2005. The Company consummated the offering on July 6,2005 and received net proceeds of approximately $110,917,000 and executed theover-allotment option offering on July 7, 2005 and received net proceedsof approximately $16,920,000. The Company’s management has broad discretionwith respect to the specific application of the net proceeds of this Offering,although substantially all of the net proceeds of this Offering are intended tobe generally applied toward consummating a business combination with anoperating company. As used herein, a “target business” shall include anoperating business that provides services and a “business combination” shallmean the acquisition by the Company of such a target business.

The Company’sefforts in identifying a prospective business target will not be limited to aparticular industry, although management intends to focus on high marginservice businesses with recurring revenue. The success and ongoingprofitability of such business will not necessarily be predicated oncontinually generating new revenue, but rather on forging a valued bond forwhich switching costs may be high or alternatives of lower value. Within thiscontext, the Company expects to seek companies displaying a number ofcharacteristics: recurring

5

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revenues, focus ona service rather than a product, high gross margns, stable cash flow andopportunities for organic and acquisition growth.

Upon the closingof the Company’s offering, an amount of $126,720,000 was placed in a trustaccount at JP Morgan Chase NY Bank maintained by Continental Stock Transfer &Trust Company to be invested until the earlier of (i) the consummation ofthe Company’s first business combination or (ii) the liquidation of theCompany; as of March 31, 2006 the balance in the trust account is$129,066,348. The remaining proceeds are available to the Company to payfor business, legal and accounting due diligence on prospective acquisitionsand continuing general and administrative expenses.

The Company, aftersigning a definitive agreement for the acquisition of a target business, will submitsuch transaction for stockholder approval. In the event that stockholdersowning 20% or more of the outstanding stock excluding, for this purpose, thosepersons who were stockholders prior to the Offering, vote against the businesscombination, the business combination will not be consummated. All of theCompany’s stockholders prior to the Offering, including all of the officers anddirectors of the Company (“Initial Stockholders”), have agreed to vote their3,750,000 founding shares of common stock in accordance with the vote of themajority in interest of all other stockholders of the Company (“PublicStockholders”) with respect to any business combination. After consummation ofthe Company’s first business combination, none of these voting safeguards willbe applicable.

With respect tothe first business combination, which is approved and consummated, any PublicStockholder who voted against the business combination may demand that theCompany redeem his or her shares. The per share redemption price will equal theamount in the Trust Fund as of the record date for determination ofstockholders entitled to vote on the business combination divided by the numberof shares of common stock held by Public Stockholders at the consummation ofthe Offering. Accordingly, Public Stockholders holding 19.99% of the aggregatenumber of shares owned by all Public Stockholders may seek redemption of theirshares in the event of a business combination. Such Public Stockholders areentitled to receive their pro rata interest in the Trust Fund computed withoutregard to the shares held by Initial Stockholders. As of March 31, 2006,the pro rata interest in the Trust fund was $7.48 per share.

The Company’sCertificate of Incorporation provides for mandatory liquidation of the Company,without stockholder approval, in the event that the Company does not consummatea business combination within 18 months from the date of the consummation ofthe Offering, or 24 months from the consummation of the Offering, if certainextension criteria have been satisfied. In the event of liquidation, it islikely that the per share value of the residual assets remaining available fordistribution (including Trust Fund assets) will be less than the offering priceper share in the Offering (assuming no value is attributed to the Warrantscontained in the Units to be offered in the Offering discussed in Note 2.)

There is noassurance that the Company will be successful to find and consummate a businessacquisition. Therefore, there is a risk of substantial loss to theshareholders.

6

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*Incomeper Common Share*

Basicearnings-per-share is computed by dividing income available to commonshareholders by the weighted-average number of common shares outstanding duringthe period. Diluted earnings per share is computed by dividing income availableto common shareholders by the weighted-average number of common sharesoutstanding during the period, increased to include the number of additionalcommon shares that would have been outstanding if the dilutive potential commonshares had been issued, by application of the treasury stock method.
| ** **        | ** ** | **March 31, 2006** | ** ** | **March 31, 2005** | ** ** |
|-------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **        | ** ** | **Warrant price**       | ** ** | **Warrants**                 | ** ** | **Warrant price** | ** ** | **Warrants** | ** ** |
| ** **        | ** ** | **From**                     | ** ** | **To**                       | ** ** | **outstanding** | ** ** | **From** | ** ** | **To** | ** ** | **outstanding** | ** ** |
| Dilutive warrants |       | 6.00                         |       | 10.00                        |       | 18,000,000 |   | —   |   | — |   | — |   |

 

|                                                | ** ** | **Three Months Ended March 31,** | ** ** |
|------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                     | ** ** | **2006**                                             | ** ** | **2007** | ** ** |
| Weighted average  number of shares outstanding |       |                                                 |       |   |   |
| Basic                                          |       |                                                 |       |   |   |
| Effect of  dilutive securities: Warrants       |       | 21,000,000                                           |       | 3,214,247 |   |
| Diluted                                        |       | 4,732,572                                            |       | — |   |
|                                           |       | 25,732,572                                           |       | 3,214,247 |   |

 

*Use ofEstimates*

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities atthe date of the financial statements and the reported amounts of expensesduring the reporting period. Actual results could differ from those estimates.

*IncomeTaxes*

The Companycomplies with SFAS 109, “Accounting for Income Taxes,” which requires an assetand liability approach to financial accounting and reporting for income taxes. Deferredincome tax assets and liabilities are computed for differences between thefinancial statement and tax basis of assets and liabilities that will result infuture taxable or deductible amounts, based on enacted tax 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.

*Comprehensive Income*

The Company’stotal comprehensive income, comprised of net income for the three months endedMarch 31, 2006 and 2005, respectively, was as follows:

7

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|                             | ** ** | **Three Months Ended March 31,** | ** ** |
|-----------------------------|------------|------------------------------------------------------|------------|
| ** **                  | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
| Net income                  |       | $                                                    | 715,535    |   | $ | (966 | ) |
| Other  comprehensive income |       | —                                               |       | — |   |
| Total  comprehensive income |       | $                                                    | 715,535    |   | $ | (966 | ) |

 

2.   Commitments andcontingencies

The Company agreedto pay up to $7,500 a month in total for office space and general andadministrative expense to a related entity and two stockholders. Uponcompletion of a business combination or liquidation, the Company will no longerbe required to pay these monthly fees. The monthly fee commenced on July 6,2005.

The Company soldto the representative of the underwriter, for $100, an option to purchase up toa total of 750,000 units. The units issuable upon exercise of this option areidentical to those offered by this prospectus except that the warrants includedin the option have an exercise price of $7.50 (125% of the exercise price ofthe warrants included in the units sold in the offering). This option isexercisable at $10.00 per unit commencing on the later of the consummation of abusiness combination and one year from the date of this prospectus and expiringfive years from the date of this prospectus. The option may not be sold,transferred, assigned, pledged or hypothecated for a one-year period followingthe date of the S-1 filing, or not before June 27, 2006. However,the option may be transferred to any underwriter and selected dealerparticipating in the offering and their bona fide officers or partners.

The Company engagedBroadband Capital Management LLC to act as the representative of theunderwriters, on a non-exclusive basis, as our agent for the solicitation ofthe exercise of the warrants. To the extent not inconsistent with theguidelines of the NASD and the rules and regulations of the Securities andExchange Commission, the Company has agreed to pay the representative for bonafide services rendered a commission equal to 5% of the exercise price for eachwarrant exercised after June 29, 2006 if the exercise was solicited by theunderwriters. In addition to soliciting, either orally or in writing, theexercise of the warrants, the representative’s services may also includedisseminating information, either orally or in writing, to warrant holdersabout us or the market for our securities, and assisting in the processing ofthe exercise of the warrants. No compensation will be paid to therepresentative upon the exercise of the warrants if:

·                  themarket price of the underlying shares of common stock is lower than theexercise price;

·                  theholder of the warrants has not confirmed in writing that the underwriterssolicited the exercise;

·                  warrantsare held in a discretionary account;

·                  thewarrants are exercised in an unsolicited transaction; or

·                  thearrangement to pay the commission is not disclosed in the prospectus providedto warrant holders at the time of exercise.

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**Item 2.****           Management’s Discussionand Analysis of Financial Condition and Results of Operations.**

ThisQuarterly Report on Form 10-Q includes forward-looking statementswithin the meaning of Section 27A of the Securities Act of 1933, asamended, and Section 21E of the Securities Exchange Act of 1934, asamended. We have based these forward-looking statements on our currentexpectations and projections about future events. These forward-lookingstatements are subject to known and unknown risks, uncertainties andassumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from anyfuture results, levels of activity, performance or achievements expressed orimplied by such forward-looking statements. In some cases, you can identifyforward-looking statements by terminology such as “may,” “should,” “could,” “would,”“expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or thenegative of such terms or other similar expressions. Factors that might causeor contribute to such a discrepancy include, but are not limited to, thosedescribed in our other Securities and Exchange Commission filings. Thefollowing discussion should be read in conjunction with our FinancialStatements and related Notes thereto included elsewhere in this report.

Wewere formed on January 6, 2005, to serve as a vehicle to effect a merger,capital stock exchange, asset acquisition or other similar business combinationwith an operating business that provides services. Our initial businesscombination must be with a target business or businesses whose fair marketvalue is at least equal to 80% of net assets at the time of such acquisition. Weintend to utilize cash derived from the proceeds of our recently completedpublic offering, our capital stock, debt or a combination of cash, capitalstock and debt, in effecting a business combination.

Sinceour initial public offering, we have been actively engaged in sourcing asuitable business combination candidate. We have met with target companies,service professionals and other intermediaries to discuss with them ourcompany, the background of our management and our combination preferences. Inthe course of these discussions, we have also spent time explaining the capitalstructure of the initial public offering, the combination approval process, andthe timeline under which we are operating before the proceeds of the offeringare returned to investors.

Consistentwith the disclosures in our prospectus, we have focused our search on companiesin Business Services, Healthcare Services, and Consumer Services. Of thesecategories, Business Services and Healthcare Services have represented themajority of the targets we are exploring, with more limited communication withConsumer Service companies. Overall, we would gauge the environment for targetcompanies to be competitive and we believe that private equity firms andstrategic buyers represent 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 findand close a suitable business combination in the allotted time.

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**Forward-Looking Statements**

The PrivateSecurities Litigation Reform Act of 1995 (the Reform Act) provides a safeharbor for forward-looking statements made by or on behalf of the Company. Weand our representatives may, from time to time, make written or verbalforward-looking statements, including statements contained in our filings withthe Securities and Exchange Commission and in its reports to stockholders.Generally, the inclusion of the words “believe,” “expect,” “intend,” “estimate,”“anticipate,” “will,” and similar expressions identify statements thatconstitute “forward-looking statements” within the meaning of Section 27Aof the Securities Act of 1933 and Section 21E of the Securities ExchangeAct of 1934 and that are intended to come within the safe harbor protectionprovided by those sections. All statements addressing operating performance,events, or developments that we expect or anticipate will occur in the future,including statements relating to earnings or earnings per share growth, as wellas statements expressing optimism or pessimism about future operating results,are forward-looking statements within the meaning of the Reform Act.

Theforward-looking statements are and will be based upon our management’sthen-current views and assumptions regarding future events and operatingperformance, and are applicable only as of the dates of such statements. Weundertake no obligation to update or revise any forward-looking statements,whether as a result of new information, future events, or otherwise.

By their nature,all forward-looking statements involve risks and uncertainties. Actual results,expenses, cash flows, financial condition, and net income, as well as factorssuch as our capability in identifying a target business and be able toconsummate the merger transaction may differ materially from those contemplatedby the forward-looking statements or those currently being experienced by theCompany for a number of reasons.

**Excerpts from March 16, 2006 8-K filing**

On March 10,2006, the Company entered into an Agreement and Plan of Merger (“MergerAgreement”) with JJC Acquisition Company (“JJC”), a wholly-owned California corporatesubsidiary of Company, and Jamba Juice Company, a California corporation (“JambaJuice”), pursuant to which JJC will merge into Jamba Juice and Jamba Juice willbecome a wholly-owned subsidiary of Company. Following completion of themerger, it is anticipated that Company will change its name to Jamba, Inc.Because the Company will have no other operating business following the merger,Jamba Juice will effectively become a public company at the conclusion of themerger. Jamba Juice is headquartered in San Francisco, California. Jamba Juicecurrently has 324 locations, in addition, there are 209 franchisee-ownedlocations, operating in 26 states, the District of Columbia and the Bahamas.

TheMerger Agreement provides that at the closing of the merger, the Jamba Juiceshareholders will be paid an aggregate of $265,000,000, less $16,000,000 forcertain existing indebtedness and the amount of certain transaction relatedexpenses, in cash, for all of the outstanding capital stock of Jamba Juice andthe value of all shares of Jamba Juice capital stock issuable upon exercise ofall “in-the-money” vested and unvested options and warrants of Jamba Juice,subject to the option holders and warrant holders, in certain instances, havingthe right to exchange their respective options and warrants into options andwarrants of the Company, as further described below. A portion of the purchaseprice will be funded with cash currently being held in the trust

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fundestablished in connection with the Company’s initial public offering and thebalance of the purchase price will be funded from the proceeds of a privateplacement financing, as discussed herein, that is expected to be completedsimultaneously with the merger with Jamba Juice.

TheMerger Agreement contains representations and warranties of each of the Companyand Jamba Juice, as applicable, relating to, among other things, (a) propercorporate organization and similar corporate matters, (b) capitalization, (c) theauthorization, performance and enforceability of the Merger Agreement, (d) licensesand permits, (e) taxes, (f) absence of undisclosed liabilities, (g) holdingof leases and ownership of other properties, (h) material contracts, (i) titleand condition of assets, (j) absence of certain changes, (k) employeeand employee benefits matters, (l) compliance with applicable laws, (m) absenceof litigation, (n) environmental matters, (o) franchise matters and (p) insurance.

TheCompany and Jamba Juice have each agreed to continue to operate theirrespective businesses in the ordinary course prior to the closing of the mergerand additional material covenants include that (i) each party shall obtainall necessary 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.

TheMerger Agreement also provides that if Jamba Juice terminates the MergerAgreement either because the board of directors of Jamba Juice recommends asuperior Acquisition Proposal (as such term is defined in the MergerAgreement), the stockholders of Jamba Juice vote against the merger or thestockholders of Jamba Juice do not approve the merger by April 30, 2006,and within six months after the date of such termination, Jamba Juice eitherenters into a definitive agreement to consummate, or consummates any of thefollowing transactions (whether in a single transaction or series oftransactions) (i) a sale by Jamba Juice of all or substantially all of itsassets or (ii) a sale of stock, merger, reorganization or othertransaction that results in transfer of ownership of more than fifty percent ofthe capital stock of Jamba Juice outstanding on the date of termination of themerger agreement, then Jamba Juice shall promptly pay to the Company a fee inthe amount of $10,000,000.

Atthe effective time of the merger, Jamba Juice’s obligations with respect toeach outstanding unvested option, unexercised vested option and unexercisedwarrant (if amended in a manner reasonably acceptable to the Company) will beassumed by the Company, and the Company shall thereafter be obligated to issueCompany common stock upon the exercise thereof. Each Jamba Juice option assumedby the Company shall be re-issued so that the option holder will retain thesame as percentage discount the holder has compared to the Company’s sharesfair value at the time of closing, considering exercise price of the option andthe fair value of Jamba Juice’s shares at $6.03 per share. Furthermore, thetotal bargain purchase element will remain the same by adjusting the number ofoptions the holder will receive.

TheMerger Agreement provides for indemnification of the Company with an escrowarrangement. As the sole remedy for Jamba Juice’s indemnity obligations setforth in the Merger Agreement, at the closing the parties shall deposit$19,875,000 in cash, otherwise payable to Jamba Juice’s stockholders, to beheld during the period ending one year from the closing, all in accordance withthe terms and conditions of an escrow agreement to be entered into at the

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closingbetween the Company, a representative of the Jamba Juice stockholders (whoshall be designated by Jamba Juice prior to the closing) and Continental StockTransfer and Trust Company. The terms of such escrow provides that, dependingon the amount of any paid claims, pending claims or claims that have not beenapplied against a $2,000,000 basket, $4,968,750 shall be released to the JambaJuice stockholders on each of the six-month and nine-month periods followingthe closing. The balance of any amounts remaining in escrow against which noclaims have been made shall be distributed to Jamba Juice’s stockholders 12months following the closing.

Theobligations of Company to consummate the merger are subject to closingconditions, including: (i) the Company stockholders shall have approvedthe transactions contemplated by the merger agreement and holders of not more than twenty percent (20%) of Company’sshares issued in Company’s initial public offering and outstanding immediatelybefore the closing shall have exercised their rights to convert their sharesinto a pro rata share of the trust fund rather than approve the merger; (ii) certainof the officers of Jamba Juice shall have entered into employment agreements; (iii) the Jamba Juice stockholders shall have approved the transactions contemplatedby the Merger Agreement; (iv) on or before April 30, 2006, all JambaJuice warrants shall have either been amended in a manner reasonably acceptableto Company or exercised (subject to the occurrence of the closing); (v) holdersof no more than five percent (5%) of the shares of any class of securities ofJamba Juice outstanding immediately before the closing shall have taken actionto exercise their appraisal rights pursuant to Section 1301 of theCalifornia General Corporations Law; (vi) no governmental entity shallhave enacted, issued, promulgated, enforced or entered any statute, rule,regulation, executive order, decree, injunction or other order (whethertemporary, preliminary or permanent) which has the effect of making the mergerillegal or otherwise prohibiting consummation of the merger substantially onthe terms contemplated by the merger agreement; and (vii) the absence ofany action, suit or proceeding challenging or preventing the merger.

Theobligations of Jamba Juice to consummate the merger is subject to closingconditions similar to those of Company, including conditions that Company’scommon stock will be listed for trading on the AMEX or similar exchange andthere will be no action or proceeding pending or threatened against Company toprohibit or terminate the listing of Company common stock on the AMEX.

TheMerger Agreement may be terminated at any time prior to the closing, asfollows: (i) by mutual written consent of Company and Jamba Juice; (ii) byeither Company or Jamba Juice if a governmental entity shall have issued anorder, decree or ruling or taken any other action, in any case having theeffect of permanently restraining, enjoining or otherwise prohibiting themerger, which order, decree, ruling or other action is final and nonappealable;(iii) by either Company or Jamba Juice, if, at the Company 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 Company common stock, or the holders of 20%or more of the number of shares of Company common stock issued in Company’sinitial public offering and outstanding as of the record date exercise theirrights to convert the shares of Company common stock held by them into cash inaccordance with Company’s certificate of incorporation; (iv) by eitherCompany or Jamba Juice if the closing has not occurred by August 15, 2006;or (v) subject to a 30-day cure period, by either Company or JambaJuice if the other party has breached any of its covenants or representationsand warranties in any material respect.

 

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Also,as part of a private placement financing, on March 10, 2006 and March 15,2006, Company entered into Securities Purchase Agreements and RegistrationRights Agreements, with prospective investors (including certain current JambaJuice shareholders and board members) that collectively provide for theissuance, simultaneously with the closing of the merger, of approximately 30.9million shares of Company common stock, at a per share purchase price of $7.50,resulting in aggregate gross proceeds to Company of approximately $231.6million, which funds will be used to fund the merger consideration as well asadditional working and expansion capital.

Inconnection with the private placement financing, Company also granted theinvestors certain registration rights described below. Shareholder approval forthe issuance of the shares of common stock and for the insider participation inthe private placement financing is required pursuant to the rules of theAmerican Stock Exchange and such approval will be sought simultaneously withthe shareholder approval for the merger.

Pursuantto the Registration Rights Agreements, Company has granted the investors in theprivate placement certain rights to register the resale of the shares of commonstock that they will receive. Any costs associated with filing of theregistration statement will be paid by Company. In the event the financing iscompleted, if Company does not timely file the registration statement (thelater of 30 days following the closing of the financing or July 7, 2006),or have it declared effective in a timely manner (within 90 days, unless notreviewed by the Securities and Exchange Commission, of filing of theregistration statement), then Company may be subject to a penalty (an amountequal to 0.5% of the financing amount payable in cash to the investors forevery 30 days such delinquencies are not cured). Company may also be subject tothe same penalty if the registration statement, once effective, ceases to beusable for a period of time.

**Comparison of Three Months Ended March 31,2006 with Three Months Ended March 31, 2005**

Forthe three months ended March 31, 2006, we had net income of approximately$716,000, derived from interest income less operating expenses and taxes, ascompared to a loss of $1,000 derived from formation and operating costs for thesame period the previous year. No interest income was generated in the threemonths ended March 31, 2005 since the proceeds from the offering were notreceived until July 6, 2005.

Forthe period from January 6, 2005 (inception) through March 31, 2006,we had net income of approximately $1.9 million, derived from interest incomeless operating expenses and taxes.

Interestincome is derived primarily from investment of our cash balances held in trust,which aggregated approximately $129 million at March 31, 2006. The cashbalance held in trust is invested primarily in non-taxable securities and otherinvestments.

**Liquidityand Capital Resources**

Our net proceedsfrom the sale of our units were approximately $127,838,200. Of this amount,$126,720,000 was held in trust and interest on this amount is also held in thetrust. The remaining $1,118,200 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.

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TheCompany’s current cash position is approximately $741,000. We have at thispoint outstanding payables, accrued expenses and liabilities of approximately$1.1 million. Our short term liabilities exceed our available cash position byapproximately $398,000.

Wedo not believe we will have sufficient available funds outside of the trustfund to operate through July 6, 2007, assuming that the businesscombination with Jamba Juice is not consummated within its time limits. We haveincurred approximately $1.0 million in expenses for legal, accounting and otherexpenses attendant to the due diligence investigations, structuring andnegotiating of the business combination. We believe that we will be forced toliquidate the Company should the business combination with Jamba Juice not beconsummated.

Aspart of a private placement financing, on March 10, 2006 and March 15,2006, we entered into Securities Purchase Agreements and Registration RightsAgreements, with prospective investors (including certain current Jamba Juiceshareholders and board members) that collectively provide for the issuance,simultaneously with the closing of the merger, of approximately 30.9 millionshares of Company common stock, at a per share purchase price of $7.50,resulting in aggregate gross proceeds to Company of approximately $231.6million, which funds will be used to fund the merger consideration as well asadditional working and expansion capital.

**RelatedParty Transactions**

Commencingon July 6, 2005 and ending upon the acquisition of a target business, webegan incurring a fee of $4,875 per month for office space and certain otheradditional services from SB Management Corp., an affiliate of Steven R.Berrard, our chairman of the board and chief executive officer, and a fee of$2,625 per month for general and administrative services including secretarialsupport from Mercantile Companies, Inc., an affiliate of I. Steven Edelson,our vice chairman and vice president, and Nathaniel Kramer, one of ourdirectors. In addition, in January, March and June 2005, Messrs. Berrard,Edelson, Kramer and Aucamp loaned us an aggregate of $160,000 to us for paymenton our behalf of offering expenses. These loans were repaid following ourinitial public offering from the proceeds of the offering.

Aspart of a private placement financing, on March 10, 2006 and March 15,2006, Company entered into Securities Purchase Agreements and RegistrationRights Agreements, with prospective investors (including certain current JambaJuice shareholders and board members) that collectively provide for theissuance, simultaneously with the closing of the merger, of approximately 30.9million shares of Company common stock, at a per share purchase price of $7.50,resulting in aggregate gross proceeds to Company of approximately $231.6million, which funds will be used to fund the merger consideration as well asadditional working and expansion capital.

Oneof the investors in the private placement, Berrard Holding Limited Partnership,of which Steven R. Berrard, a current director and the Chief Executive Officerof Company is the President, is investing $400,000. In addition, a familymember of I. Steven Edelson, Company’s Vice Chairman and Vice President, hascommitted to investing $50,000 in the private placement financing.

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**Item 3.        Quantitativeand Qualitative Disclosures about Market Risk.**

Marketrisk is the sensitivity of income to changes in interest rates, foreignexchanges, commodity prices, equity prices, and other market-driven rates orprices. We are not presently engaged in and, if a suitable business target isnot identified by us prior to the prescribed liquidation date of the trustfund, we may not engage in, any substantive commercial business. Accordingly,we are not and, until such time as we consummate a business combination, wewill not be, exposed to risks associated with foreign exchange rates, commodityprices, equity prices or other market-driven rates or prices. The net proceedsof our initial public offering held in the trust fund have been invested onlyin money market funds meeting certain conditions under Rule 2a-7promulgated under the Investment Company Act of 1940. Given our limited risk inour exposure to money market funds, we do not view the interest rate risk to besignificant.

**Item 4.        Controlsand Procedures.**

Ourmanagement carried out an evaluation, with the participation of our chiefexecutive officer (principal executive, financial, and accounting officer), ofthe effectiveness of our disclosure controls and procedures as of March 31,2006. Based upon that evaluation, our chief executive officer concluded thatour disclosure controls and procedures were effective to ensure thatinformation required to be disclosed by us in reports that we file or submitunder the Securities Exchange Act of 1934 is recorded, processed, summarized,and reported within the time periods specified in the rules and forms ofthe Securities and Exchange Commission, and include controls and proceduresdesigned to ensure that information required to be disclosed by us in suchreports is accumulated and communicated to our management, including our ChiefExecutive Officer, to allow timely decisions regarding required disclosures.

Therehas not been any change in our internal control over financial reporting inconnection with the evaluation required by Rule 13a-15(d) underthe Exchange Act that occurred during the quarter ended March 31, 2006,that has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.

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**PART II — OTHER INFORMATION**
| Item 1. |   | Legal Proceedings.                                                                                                                              |
|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                            |
|    |   | There are no material legal proceedings pending  against us.                                                                                    |
|    |   |                                                                                                                                            |
| Item 2. |   | Unregistered Sales of Equity Securities and Use of  Proceeds.                                                                                   |
|    |   |                                                                                                                                            |
|    |   | Not applicable                                                                                                                                  |
|    |   |                                                                                                                                            |
| Item 3. |   | Defaults upon Senior Securities.                                                                                                                |
|    |   |                                                                                                                                            |
|    |   | Not applicable.                                                                                                                                 |
|    |   |                                                                                                                                            |
| Item 4. |   | Submission of Matters to a Vote of Security Holders.                                                                                            |
|    |   |                                                                                                                                            |
|    |   | Not applicable.                                                                                                                                 |
|    |   |                                                                                                                                            |
| Item 5. |   | Other Information.                                                                                                                              |
|    |   |                                                                                                                                            |
|    |   | Not applicable.                                                                                                                                 |
|    |   |                                                                                                                                            |
| Item 6. |   | Exhibits and reports on form 8-K                                                                                                                |
|    |   |                                                                                                                                            |   |
| (a)     |   | 31.1                                                                                                                                            | Section 302 Certification of Chief Executive  Officer |
|    |   | 31.2                                                                                                                                            | Section 302  Certification of Chief Financial Officer |
|    |   | 32.1                                                                                                                                            | Section 906  Certification |
|    |   |                                                                                                                                            |
| (b)     |   | Reports on Form 8-K:                                                                                                                       |
|    |   |                                                                                                                                            |
|    |   | The Company filed Form 8-K on  March 16, 2006 giving information about the execution of a merger  agreement with Jamba Juice Company. |

 

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

 
|                          |                                          |                                                 |   |
|--------------------------|-----------------------------------------------|------------------------------------------------------|--------|
|                     | **SERVICES  ACQUISITION CORP. INTERNATIONAL** |                                                 |
|                     |                                          |
| Date:  May 12, 2006 | By:                                           | /s/ Steven R.  Berrard                               |
|                     |                                          | Steven R.  Berrard                                   |   |
|                     | * *                                      | *Chairman  of the Board and Chief Executive Officer* |   |
|                     | * *                                      | *(Principal  Executive Officer,*                     |   |
|                     | * *                                      | *Principal  Financial and Accounting Officer)*       |   |

 

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