**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

 

**FORM 10-Q**

 

**ý****                                ****QUARTERLY REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended June 30,2005**

 

**or**

 

**o****                                ****TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the transition period from            to           **

 

**Commission file number: 001-32552**

 

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**SERVICESACQUISITION CORP. INTERNATIONAL**

(Exact name of registrant as specified in itscharter)

 
| **Delaware**                                                                 | ** ** | **20-2122262**                       |
|------------------------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of  incorporation or organization)              |       | (I.R.S. Employer Identification No.) |
|                                                                         |       |                                 |
| **401 East Olas Boulevard, Suite 1140  Fort Lauderdale, Florida 33301** | ** ** | **33301**                            |
| (Address of principal executive  offices)                                    |       | (Zip Code)                           |

 

**(954) 713-1165**

Registrant’s telephone number, including areacode

 

Indicate by check mark whether the Registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the ExchangeAct during the past 12 months (or for such shorter period that the Registrantwas required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.    Yes ý   No o

 

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

 

As of August 13, 2005, 21,000,000 shares of the registrant’scommon stock, par value $0.001 per share, were outstanding.

 

 

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**SERVICES ACQUISITION CORP. INTERNATIONAL**

**Table of Contents**

 
| **PART I – FINANCIAL INFORMATION**                                                             | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|
| **Item 1. Financial Statements**                                                                         |       |
| Balance Sheets                                                                                           |       |
| Statements of Operations                                                                                 |       |
| Statement of Stockholders’ Equity                                                                   |       |
| Statement 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**                                                                                           | ** ** |

 

1

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**PART I – FINANCIAL INFORMATION**

 

**Item1.  Financial Statements.**

 

Referenceis made to our financial statements beginning on page F-1 of thisreport.

 

**Item 2.  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.**

 

This Quarterly Report on Form 10-Qincludes forward-looking statements within the meaning of Section 27A ofthe Securities Act of 1933, as amended, and Section 21E of the SecuritiesExchange Act of 1934, as amended.  Wehave based these forward-looking statements on our current expectations andprojections about future events. These forward-looking statements are subjectto known and unknown risks, uncertainties and assumptions about us that maycause our actual results, levels of activity, performance or achievements to be materially different fromany future results, levels of activity, performance or achievements expressedor implied by such forward-looking statements. In some cases, you can identify forward-looking statements byterminology such as “may,” “should,” “could,” “would,” “expect,” “plan,”   “anticipate,” “believe,” “estimate,” “continue,”or the negative of such terms or other similar expressions.  Factors that might cause or contribute tosuch a discrepancy include, but are not limited to, those described in ourother Securities and Exchange Commission filings. The following discussion should be read in conjunction with ourFinancial Statements and related Notes thereto included elsewhere in thisreport.

 

We were formed on January 6, 2005, to serve asa vehicle to effect a merger, capital stock exchange, asset acquisition orother similar business combination with an operating business that providesservices.  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.  We intend to utilize cash derived from theproceeds of our recently completed public offering, our capital stock, debt ora combination of cash, capital stock and debt, in effecting a businesscombination.

 

On July 6, 2005, we consummated our initialpublic offering of 15,000,000 units.  On July 7,2005, we consummated the closing of an additional 2,250,000 units that weresubject to the underwriters’ over-allotment option. Each unit consists of oneshare of common stock and one redeemable common stock purchase warrant.  Each warrant entitles the holder to purchasefrom us one share of our common stock at an exercise price of $6.00.  Our common stock and warrants started tradingseparately as of July 28, 2005.

 

Our net proceeds from the sale of our units, afterdeducting certain offering expenses of approximately $1,700,000, including$1,200,000 evidencing the underwriters’ non-accountable expense allowance of 1%of the gross proceeds (excluding the proceeds from the underwriters’over-allotment), and underwriting discounts of approximately $8,280,000, wereapproximately $128,020,000. Of this amount, $126,720,000 is being held in trustand the remaining $1,438,200 is being held outside of the trust. The remainingproceeds are available to be used by us to provide for business, legal andaccounting due diligence on prospective acquisitions and continuing general andadministrative expenses. We will use substantially all of the net proceeds ofthis offering to acquire a target business, including identifying andevaluating prospective acquisition candidates, selecting the target business,and structuring, negotiating and consummating the business combination. To theextent that our capital stock is used in whole or in part as consideration toeffect a business combination, the proceeds held in the trust fund as well asany other net proceeds not expended will be used to finance the operations ofthe target business. We believe we will have sufficient available funds outsideof the trust fund to operate through July 6, 2007, assuming that abusiness combination is not consummated during that time. From July 6,2005 through July 6, 2007, we anticipate approximately $180,000 ofexpenses for legal, accounting and other expenses attendant to the duediligence investigations, structuring and negotiating of a businesscombination, an aggregate of $180,000 for the administrative fees payable to SBManagement Corp. and Mercantile Companies, Inc. (a total of $7,500 permonth for two years), $100,000 for expenses for the due diligence andinvestigation of a target business, $50,000 of expenses in legal and accountingfees relating to our SEC reporting obligations and $790,000 for general workingcapital that will be used for miscellaneous expenses and reserves, includingapproximately $200,000 for director and officer liability insurance premiums.We do not believe

 

2

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we will need to raiseadditional funds in order to meet the expenditures required for operating ourbusiness. However, we may need to raise additional funds through a privateoffering of debt or equity securities if such funds are required to consummatea business combination that is presented to us. We would only consummate such afinancing simultaneously with the consummation of a business combination.

 

Commencing on July 6, 2005 and ending upon theacquisition of a target business, we began incurring a fee of $4,875 per monthfor office space and certain other additional services from SB ManagementCorp., an affiliate of Steven R. Berrard, our chairman of the board and chiefexecutive officer, and a fee of $2,625 per month for general and administrativeservices including secretarial support from Mercantile Companies, Inc., anaffiliate of I. Steven Edelson, our vice chairman and vice president, andNathaniel Kramer, one of our directors. In addition, in January, March andJune 2005, Messrs. Berrard, Edelson, Kramer and Aucamp loaned us anaggregate of $160,000 to us for payment on our behalf of offering expenses.These loans were repaid following our initial public offering from the proceedsof the offering.

 

**Item 3.  Quantitative and Qualitative DisclosuresAbout Market Risk.**

 

Market risk is the sensitivity of income to changesin interest rates, foreign exchanges, commodity prices, equity prices, andother market-driven rates or prices. We are not presently engaged in and, if asuitable business target is not identified by us prior to the prescribedliquidation date of the trust fund, we may not engage in, any substantivecommercial business. Accordingly, we are not and, until such time as weconsummate a business combination, we will not be, exposed to risks associatedwith foreign exchange rates, commodity prices, equity prices or othermarket-driven rates or prices. The net proceeds of our initial public offeringheld in the trust fund have been invested only in money market funds meeting certain conditions under Rule 2a-7promulgated under the Investment Company Act of 1940. Given our limitedrisk in our exposure to money marketfunds, we do not view the interest rate risk to be significant.

 

**Item 4.  Controls and Procedures.**

 

Our management carried out an evaluation, with theparticipation of our chief executive officer (principal executive, financial,and accounting officer), of the effectiveness of our disclosure controls andprocedures as of June 30, 2005. Based upon that evaluation, our chiefexecutive officer concluded that our disclosure controls and procedures wereeffective to ensure that information required to be disclosed by us in reportsthat we file or submit under the Securities Exchange Act of 1934 is recorded,processed, summarized, and reported within the time periods specified in the rules andforms of the Securities and Exchange Commission.

 

There has not been any change in our internalcontrol over financial reporting in connection with the evaluation required by Rule 13a-15(d) underthe Exchange Act that occurred during the quarter ended June 30, 2005,that has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.

 

3

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**PART II – OTHER INFORMATION**

 

**Item 1.  Legal Proceedings.**

 

There are no material legal proceedings pendingagainst us.

 

**Item 2.  Unregistered Sales of Equity Securities andUse of Proceeds.**

 

OnJuly 6, 2005, we consummated our initial public offering of 15,000,000units.  On July 7, 2005, On April 29,we consummated the closing of an additional 2,250,000 units that were subjectto the underwriters’ over-allotment option. Each unit consists of one share ofcommon stock and one redeemable common stock purchase warrant.  Each warrant entitles the holder to purchasefrom us one share of our common stock at an exercise price of $6.00.  The units were sold at an offering price of$8.00 per unit, generating total gross proceeds of $138,000,000. BroadbandCapital Management LLC acted as lead underwriter. The securities sold in theoffering were registered under the Securities Act of 1933 on a registrationstatement on Form S-1 (No. 333-122812). The Securitiesand Exchange Commission declared the registration statement effective on June 29,2005.

 

Wepaid a total of $8,280,000 in underwriting discounts and commissions, andapproximately $1,700,000 has been paid for costs and expenses related to theoffering.

 

After deducting theunderwriting discounts and commissions and the offering expenses, the total netproceeds to us from the offering were approximately $128,020,000, of which$126,720,000 was deposited into a trust fund (or $7.32 per unit sold in theoffering) and the remaining proceeds are available to be used to provide forbusiness, legal and accounting due diligence on prospective businesscombinations and continuing general and administrative expenses.

 

**Item 3.  Defaults Upon Senior Securities.**

 

Notapplicable.

 

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

 

Notapplicable.

 

**Item 5.  Other Information.**

 

Notapplicable.

 

**Item 6.  Exhibits.**

 
| 31.1   | Section 302  Certification of Chief Executive Officer |
|--------|------------------------------------------------------------|
|   |                                                       |
| 31.2   | Section 302  Certification of Chief Financial Officer |
|   |                                                       |
| 32.1   | Section 906  Certification                            |

 

4

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**SIGNATURES**

 

Pursuant to the requirements of Section 13 or15(d) of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 

 
|                        | **SERVICES ACQUISITION CORP. INTERNATIONAL** |
|-----------------------------|----------------------------------------------|
|                        | ** **                                   |
|                        |                                         |   |
| Date:  August 15, 2005 | By:                                          | /s/  Steven R. Berrard |   |
|                        |                                         | Steven R. Berrard |
|                        |                                         | *Chairman  of the Board and Chief Executive  Officer (Principal Executive Officer, Principal  Financial and Accounting Officer)* |
|                             |                                              |  |  |  |

 

5

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**SERVICESACQUISITION CORP. INTERNATIONAL**

(a corporation in thedevelopment stage)

 

**BALANCE SHEET**

 

**June 30, 2005**

 
| **ASSETS**                                                                                            |   |    |    |
|-------------------------------------------------------------------------------------------------------|--------|---------|---------|
| ** **                                                                                            |   |    |    |
| **Current asset**                                                                                     |   |    |    |
| Cash                                                                                                  |   | $       | 11,479  |   |
| Other assets, deferred offering costs                                                                 |   | 250,484 |    |
| Total current assets                                                                                  |   | $       | 261,963 |   |
|                                                                                                  |   |    |    |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                        |   |    |    |
|                                                                                                  |   |    |    |
| **Current liabilities**                                                                               |   |    |    |
| Accrued expenses                                                                                      |   | $       | 74,853  |   |
| Notes payable, stockholders                                                                           |   | 160,000 |    |
| Total current liabilities                                                                             |   | 234,853 |    |
|                                                                                                  |   |    |    |
| **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 3,750,000 shares |   | 3,750   |    |
| Paid-in capital in excess of par                                                                      |   | 25,429  |    |
|                                                                                                  |   |    |    |
| Deficit accumulated during the development  stage                                                     |   | (2,069  | )       |
| Total stockholders’ equity                                                                       |   | 27,110  |    |
| Total liabilities and stockholders’ equity                                                       |   | $       | 261,963 |   |

 

*Seeaccompanying notes to financial statements.*

 

F-1

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**SERVICESACQUISITION CORP. INTERNATIONAL**

(a corporation in thedevelopment stage)

 

**STATEMENTOF OPERATIONS**

 
| **For period from January 6, 2005  (inception) to June 30, 2005** | ** ** | **Three Months Ended  June 30, 2005** | ** ** | **For the Period  January 6, 2005  (inception) to  June 30, 2005** | ** ** |
|-------------------------------------------------------------------|------------|---------------------------------------|------------|--------------------------------------------------------------------|------------|
|                                                              |       |                                  |       |                                                               |       |
| **Formation and operating costs**                                 |       | $                                     | —     |                                                               | $          | 966 |   |
| **Interest expense**                                              |       | 1,103                                 |       | 1,103                                                              |       |
| **Net loss**                                                      |       | $                                     | 1,103      |                                                               | $          | 2,069 |   |
|                                                              |       |                                  |       |                                                               |       |
| **Weighted average shares outstanding**                           |       | 3,750,000                             |       | 3,534,994                                                          |       |
|                                                              |       |                                  |       |                                                               |       |
| **Net loss per share**                                            |       | $                                     | —     |                                                               | $          | — |   |

 

*Seeaccompanying notes to financial statements.*

 

F-2

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**SERVICESACQUISITION CORP. INTERNATIONAL**

(a corporation in thedevelopment stage)

 

**STATEMENT OF STOCKHOLDERS’ EQUITY**

 

**For period from January 6, 2005 (inception) to June 30,2005**

 
| ** **                          | ** ** | **Common Stock  Shares** | ** ** | **Amount** | ** ** | **Paid-in Capital  in  Excess of Par** | ** ** | **Deficit  Accumulated  During the  Development Stage** | ** ** | **Stockholders  Equity** | ** ** |
|-------------------------------------|------------|--------------------------|------------|------------|------------|----------------------------------------|------------|---------------------------------------------------------|------------|--------------------------|------------|
|                                |       |                     |       |       |       |                                   |       |                                                    |       |                     |       |
| Balance January 6, 2005 (inception) |       | —                   |       | $          | —     |                                   | $          | —                                                  |       | $                        | —     |   | $ | — |   |
|                                |       |                     |       |       |       |                                   |       |                                                    |       |                     |       |
| Common shares issued                |       | 3,750,000                |       | 3,750      |       | 25,429                                 |       | 29,179                                                  |       |                     |       |
|                                |       |                     |       |       |       |                                   |       |                                                    |       |                     |       |
| Net loss                            |       | (2,069                   | )          | (2,069     | )          |                                   |       |                                                    |       |                     |       |
|                                |       |                     |       |       |       |                                   |       |                                                    |       |                     |       |
| Balances, at June  30, 2005         |       | 3,750,000                |       | $          | 3,750      |                                   | $          | 25,429                                                  |       | $                        | (2,069     | ) | $ | 27,110 |   |

 

*Seeaccompanying notes to financial statements.*

 

F-3

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**SERVICESACQUISITION CORP. INTERNATIONAL**

(a corporation in thedevelopment stage)

 

**STATEMENTOF CASH FLOWS**

 

**For period from January 6, 2005 (inception) to June30, 2005**

 
| **Cash flows from operating activities**                     |   |     |   |
|--------------------------------------------------------------|--------|----------|--------|
| Net loss                                                     |   | $        | (2,069 | ) |
| Increase (decrease) in cash attributable to  change in       |   |     |   |
| Accrued expenses                                             |   | 1,103    |   |
|                                                         |   |     |   |
| **Net cash used in operating activities**                    |   | (966     | )      |
|                                                         |   |     |   |
| **Cash flows from financing activities**                     |   |     |   |
| Proceeds from notes payable, stockholders                    |   | 160,000  |   |
| Proceeds from sale of stock                                  |   | 29,179   |   |
| Payments made for deferred offering costs                    |   | (176,734 | )      |
|                                                         |   |     |   |
| **Net cash provided by financing activities**                |   | 12,445   |   |
|                                                         |   |     |   |
| **Net increase in cash**                                     |   | 11,479   |   |
|                                                         |   |     |   |
| **Cash,****beginning of period**                             |   | —   |   |
|                                                         |   |     |   |
| **Cash,****end of period**                                   |   | $        | 11,479 |   |
|                                                         |   |     |   |
| **Supplemental schedule of non-cash financing  activities:** |   |     |   |
| Accrual of offering costs                                    |   | $        | 73,750 |   |

 

*Seeaccompanying notes to financial statements.*

 

F-4

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**NOTES TO FINANCIAL STATEMENTS**

 

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

 

*Nature of Operations*

 

ServicesAcquisition Corp. International (the “Company”) was incorporated in Delaware onJanuary 6, 2005 as a blank check company whose objective is to acquirethrough a merger, capital stock exchange, asset acquisition or other similarbusiness combination with a currently unidentified operating business (“targetbusiness”).

 

All activityfrom January 6, 2005 (inception) to June 30, 2005 relates to the Company’sformation and the public offering described below.  The Company hasselected December 31 as its fiscal year-end.

 

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 revenues.  The success and ongoingprofitability of such business will not necessarily be predicated oncontinually generating new sales, but rather on forging a valued bond for whichswitching costs may be high or alternatives of lower value.  Within thiscontext, the Company expects to seek companies displaying a number ofcharacteristics: recurring revenues, focus on a service rather than a product,high gross margins, stable cash flow and opportunities for organic andacquisition growth.

 

The Company,after signing a definitive agreement for the acquisition of a target business,will submit such transaction for stockholder approval.  In the event thatstockholders owning 20% or more of the outstanding stock, excluding, for thispurpose, all current stockholders (“Initial Stockholders”) vote against thebusiness combination, the business combination will not be consummated. Additionally, the Initial Stockholders have agreed to vote their 3,750,000founding shares of common stock in accordance with the vote of the majority ininterest of all other stockholders of the Company (“Public Stockholders”) with respectto any business combination after the Company’s completes it initial publicoffering (“Offering”, please see Subsequent Events for more information on theCompany’s Offering, which was completed on July 6, 2005 and July 7,2005).  After consummation of the Company’s first business combination,all of these voting safeguards will no longer be applicable.

 

With respectto the first business combination, when it is approved and consummated, anyPublic Stockholder who voted against the business combination may demand thatthe Company redeem his or her shares.  The per share redemption price willequal the amount 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 theaggregate number of shares owned by all Public Stockholders may seek redemptionof their shares in the event of a business combination.  Such PublicStockholders are entitled to receive their per share interest in the Trust Fundcomputed without regard to the shares held by Initial Stockholders.

 

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, itis likely that the per share value of the residual assets remaining availablefor distribution (including Trust Fund assets) will be less than the offeringprice per share in the Offering (assuming no value is attributed to theWarrants contained in the Units to be offered in the Offering discussed in Note6.)

 

F-5

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The financialinformation herein is unaudited; however, such information reflects alladjustments (consisting of normal, recurring adjustments) which are, in theopinion of management, necessary for a fair statement of results for theinterim period.  The results ofoperations for the six months ended June 30, 2005, are not necessarilyindicative of the results to be expected for the full year.  Certain financial information and footnotedisclosures normally included in financial statements prepared in accordancewith accounting principles generally accepted in the United States of Americahave been condensed or omitted.  Thereader is referred to the audited financial statements and notes thereto forthe period ended March 31, 2005, filed as part of the Company’s S-1 report.

 

*Common Stock*

 

InMarch 2005, the Board of Directors of the Company approved a three-for-onestock split in the form of a stock dividend, to all shareholders of record onMarch 28, 2005.  All transactions and disclosures in the financialstatements, related to the Company’s common stock, have been adjusted toreflect the effects of the stock split *.*

 

*Loss Per Common Share*

 

Loss per shareis computed by dividing net loss by the weighted-average number of shares ofcommon stock outstanding during the period.

 

*Use of Estimates*

 

Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities at the date of the financial statements and the reported amounts ofexpenses during the reporting period.  Actual results could differ fromthose estimates.

 

**2.     Deferred Offering Costs**

 

Deferredoffering costs consist principally of accounting fees, legal fees and otherfees incurred through the balance sheet date that are related to the ProposedOffering and will be charged to capital upon receipt of the capital raised.

 

**3.****     Notes Payable, Stockholders**

 

The Companyissued an aggregate of $160,000 in unsecured promissory notes to three stockholderson three separate dates January 26, 2005, March 28, 2005 andJune 29, 2005.  The notes bear interest at a rate of 4% peryear.  The notes will be paid following the consummation of the Offeringfrom the net proceeds of such offering.  Due to the short-term nature ofthe notes, the fair value of the notes approximates their carrying amount.

 

**4.****     Commitments and contingencies**

 

The Companyhas agreed to pay up to $7,500 a month in total for office space and generaland administrative 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 has been waivedthrough the completion of the Company’s Initial Public Offering (“Offering”).

 

F-6

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Certainstockholders have agreed that after the Offering is completed and within thefirst twenty trading days after separate trading of the warrants has commenced,they or certain of their affiliates or designees will collectively purchase upto 1,000,000 warrants in the public marketplace at prices not to exceed $1.20per warrant.   They have further agreed that any warrants purchasedby them or their affiliates or designees will not be sold or transferred untilthe completion of a business combination.  In addition, subject to anyregulatory restrictions and subsequent to the completion of the purchase of the1,000,000 warrants described above and within the first twenty trading daysafter separate trading of the warrants has commenced, the representative of theunderwriter, or certain of its principals, affiliates or designees has agreedto purchase up to 500,000 warrants in the public marketplace at prices not toexceed $1.20 per warrant.

 

As part of theunderwriting process, the Company will sell to the representative of theunderwriter, for $100, an option to purchase up to a total of 750,000 units.The units issuable upon exercise of this option will be identical to thoseoffered in the Offering except that the warrants included in the option willhave an exercise price of $7.50 (125% of the exercise price of the warrantsincluded in the units sold in the Offering).  This option will beexercisable at $10.00 per unit commencing on the later of the consummation of abusiness combination or June 29, 2006 and expiring June 29, 2010.  Theoption and the 750,000 units, the 750,000 shares of common stock and the750,000 warrants underlying such units, and the 750,000 shares of common stockunderlying such warrants, have been deemed compensation by the NationalAssociation of Securities Dealers (“NASD”) and will therefore be subject to a180-day lock-up pursuant to Rule 2710(g)(1) of the NASD ConductRules.  Additionally, the option may not be sold, transferred, assigned,pledged or hypothecated for a one-year period (including the foregoing 180-dayperiod) following the Offering.  However, the option may be transferred toany underwriter and selected dealer participating in the offering and theirbona fide officers or partners.

 

The Company has engaged Broadband Capital Management LLC to act as therepresentative of the underwriters, on a non-exclusive basis, as our agent forthe solicitation of the exercise of the warrants.  To the extent not inconsistentwith the guidelines of the NASD and the rules and regulations of theSecurities and Exchange Commission, the Company have agreed to pay therepresentative for bona fide services rendered a commission equal to 5% of theexercise price for each warrant exercised more than one year after the date ofthis prospectus if the exercise was solicited by the underwriters.  Inaddition to soliciting, either orally or in writing, the exercise of thewarrants, the representative’s services may also include disseminatinginformation, either orally or in writing, to warrant holders about us or themarket for our securities, and assisting in the processing of the exercise ofthe warrants.  No compensation will be paid to the representative upon theexercise 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;

 

•              thewarrants are 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.

 

**5.****     Preferred Stock**

 

The Company isauthorized 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 timeby the Board of Directors.

 

F-7

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**6****.        Subsequent Events**

 

Theregistration statement for the Company’s Offering was declared effective June29, 2005.  On July 6, 2005, theCompany sold 15,000,000 units (“Units”) in the Offering and on July 7, theCompany sold an additional 2,250,000 Units pursuant to a 45-day option grantedto the underwriters to cover any over-allotments.  The Company receivednet proceeds from the sale of Units of approximately $128,020,000  Each Unit consists of one share of theCompany’s common stock, $.001 par value, and one Redeemable Common StockPurchase Warrant (“Warrant”).   EachWarrant entitles the holder to purchase from the Company one share of commonstock at an exercise price of $6.00 commencing the later of the completion of abusiness combination with a target business or July 6, 2006 and expiring July6, 2010.  The Warrants will be redeemable at a price of $.01 per Warrantupon 30 days notice after the Warrants become exercisable, only in the eventthat the last sale price of the common stock is at least $11.50 per share for any20 trading days within a 30 trading day period ending on the third day prior todate on which notice of redemption is given.

 

An amount of$126,720,000 is being held in a trust account at JP Morgan Chase NY Bankmaintained by Continental Stock Transfer & Trust Company and investeduntil the earlier of (i) the consummation of the Company’s first businesscombination or (ii) the liquidation of the Company.   Pursuant to the trust agreement, the funds inthe trust are currently invested in short-term money market funds that meetcertain conditions of the Investment Company Act of 1940.  The remaining proceeds will be used by theCompany to pay for business, legal and accounting due diligence on prospectiveacquisitions and continuing general and administrative expenses.

 

F-8

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