**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

 

**FORM 10-Q**

 

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

 

**For the quarterly period ended September 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**

 

 

**SERVICES ACQUISITION CORP.INTERNATIONAL**

(Exactname 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 mark whether the Registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of theExchange Act during the past 12 months (or for such shorter period that theRegistrant was 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 Registrantis an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes o   No ý

 

Indicated by check mark whether theRegistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ý   No o

 

Asof November 13, 2005, 21,000,000 shares of the registrant’s common stock, parvalue $0.001 per share, were outstanding.

 

 

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**SERVICES ACQUISITION CORP.INTERNATIONAL**

**Table of Contents**

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

 

1

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**PART I — FINANCIAL INFORMATION**

 

**Item 1.  FinancialStatements.**

 

Reference is made to our financial statements beginning on page F-1 ofthis report.

 

 

**SERVICESACQUISITION CORP. INTERNATIONAL**

(acorporation in the development stage)

 

| **BALANCE SHEET** |
|-------------------|

** **
| **September  30, 2005**                                                                                                                                                      | ** ** | ** **  | ** **  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|-------------|
|                                                                                                                                                                         |       |        |        |
| **ASSETS**                                                                                                                                                                   |       |        |        |
|                                                                                                                                                                         |       |        |        |
| **Current asset**                                                                                                                                                            |       |        |        |
| Cash                                                                                                                                                                         |       | $           | 1,113,757   |   |
| Cash held in trust                                                                                                                                                           |       | 127,334,883 |        |
| Prepaid expenses                                                                                                                                                             |       | 86,866      |        |
| **Total current assets**                                                                                                                                                     |       | $           | 128,535,506 |   |
|                                                                                                                                                                         |       |        |        |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                |       |        |        |
|                                                                                                                                                                         |       |        |        |
| **Total current liabilities**                                                                                                                                                |       |        |        |
| Accrued expenses                                                                                                                                                             |       | $           | 109,325     |   |
|                                                                                                                                                                         |       |        |        |
| Common stock, subject to possible redemption, 3,448,275  shares at redemption value                                                                                          |       | 25,241,373  |        |
|                                                                                                                                                                         |       |        |        |
| **Stockholders’ equity**                                                                                                                                                |       |        |        |
| Preferred stock, $.001 par  value, authorized 1,000,000 shares; none issued                                                                                                  |       |        |        |
| Common stock, $.001 par value, authorized 70,000,000 shares; issued  and outstanding 21,000,000 shares (which includes the 3,448,275 shares  subject to possible redemption) |       | 21,000      |        |
| Paid-in capital in excess  of par                                                                                                                                            |       | 102,605,107 |        |
|                                                                                                                                                                         |       |        |        |
| Equity accumulated during  the development stage                                                                                                                             |       | 558,701     |        |
| Total stockholders’ equity                                                                                                                                              |       | 103,184,807 |        |
| Total liabilities and  stockholders’ equity                                                                                                                             |       | $           | 128,535,506 |   |
|                                                                                                                                                                              |            |             |             |  |  |

 

 

*See accompanying notes tofinancial statements.*

 

 

F-1

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**SERVICESACQUISITION CORP. INTERNATIONAL**

(acorporation in the development stage)

 

| **STATEMENT  OF OPERATIONS** |
|------------------------------|

 
| ** **                               | ** ** | **Three Months Ended  September 30, 2005** | ** ** | **For the Period January 6, 2005  (inception)  to September 30, 2005** | ** ** |
|------------------------------------------|------------|--------------------------------------------|------------|------------------------------------------------------------------------|------------|
|                                     |       |                                       |       |                                                                   |       |
| **Interest income**                      |       | $                                          | 614,883    |                                                                   | $          | 614,883 |   |
|                                     |       |                                       |       |                                                                   |       |
| **Formation and operating costs**        |       | 53,951                                     |       | 54,917                                                                 |       |
| **Interest expense**                     |       | 162                                        |       | 1,265                                                                  |       |
|                                     |       |                                       |       |                                                                   |       |
| **Net income**                           |       | $                                          | 560,770    |                                                                   | $          | 558,701 |   |
|                                     |       |                                       |       |                                                                   |       |
| **Weighted average shares  outstanding** |       | 20,038,043                                 |       | 9,883,134                                                              |       |
|                                     |       |                                       |       |                                                                   |       |
| **Net income per share**                 |       | $                                          | 0.028      |                                                                   | $          | 0.06 |   |
|                                     |       |                                       |       |                                                                   |       |

 

 

*See accompanying notes tofinancial statements.*

 

F-2

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**SERVICESACQUISITION CORP. INTERNATIONAL**

(acorporation in the development stage)

 

| **STATEMENT  OF STOCKHOLDERS’ EQUITY** |
|---------------------------------------------|

** **

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

 
| ** **                                                                                                                                                          | ** ** | **Common Stock  Shares** | ** ** | **Amount** | ** ** | **Paid-in Capital  in   Excess of Par** | ** ** | **Equity  Accumulated  During the  Development  Stage** | ** ** | **Stockholders  Equity** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|------------|------------|-----------------------------------------|------------|---------------------------------------------------------|------------|--------------------------|------------|
|                                                                                                                                                                |       |                     |       |       |       |                                    |       |                                                    |       |                     |       |
| Balance January 6, 2005  (inception)                                                                                                                                |       | —                   |       | $          | —     |                                    | $          | —                                                  |       | $                        | —     |   | $ | — |   |
|                                                                                                                                                                |       |                     |       |       |       |                                    |       |                                                    |       |                     |       |
| Common shares issued                                                                                                                                                |       | 3,750,000                |       | 3,750      |       | 25,429                                  |       |                                                    |       | 29,179                   |       |
|                                                                                                                                                                |       |                     |       |       |       |                                    |       |                                                    |       |                     |       |
| Sale of 15,000,000 shares,  net of underwriters’ discount and offering expenses (including 2,998,500  shares subject to possible redemption)                   |       | 15,000,000               |       | 15,000     |       | 110,903,201                             |       |                                                    |       | 110,918,201              |       |
|                                                                                                                                                                |       |                     |       |       |       |                                    |       |                                                    |       |                     |       |
| 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                                                                                                                                                          |       |                     |       |       |       |                                    |       | 558,701                                                 |       | 558,701                  |       |
|                                                                                                                                                                |       |                     |       |       |       |                                    |       |                                                    |       |                     |       |
| Balances, at September  30, 2005                                                                                                                                    |       | 21,000,000               |       | $          | 21,000     |                                    | $          | 102,605,107                                             |       | $                        | 558,701    |   | $ | 103,184,807 |   |
|                                                                                                                                                                     |            |                          |            |            |            |                                         |            |                                                         |            |                          |            |  |  |  |  |  |  |

 

 

*See accompanying notes tofinancial statements.*

 

 

F-3

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**SERVICESACQUISITION CORP. INTERNATIONAL**

(acorporation in the development stage)

 

| **STATEMENT  OF CASH FLOWS** |
|------------------------------|

** **

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

 
| **Cash flows from operating activities**                 |   |         |      |
|----------------------------------------------------------|--------|--------------|-----------|
| Net income                                               |   | $            | 558,701   |   |
| Increase (decrease) in cash attributable to change in    |   |         |      |
| Prepaid expenses                                         |   | (86,866      | )         |
| Accrued expenses                                         |   | 109,325      |      |
|                                                     |   |         |      |
| **Net cash provided by operating  activities**           |   | 581,160      |      |
|                                                     |   |         |      |
| **Cash flows from financing  activities**                |   |         |      |
|                                                     |   |         |      |
| Proceeds from sale of stock                              |   | 29,179       |      |
| Gross proceeds of public offering                        |   | 120,000,000  |      |
| Payments of costs of public offering                     |   | (9,081,799   | )         |
| Gross proceeds of over-allotment option offering         |   | 18,000,000   |      |
| Payments of costs of over-allotment option offering      |   | (1,080,000   | )         |
| Proceeds from issuance of option                         |   | 100          |      |
|                                                     |   |         |      |
| **Net cash provided by financing  activities**           |   | 127,867,480  |      |
|                                                     |   |         |      |
| Net cash used in investing  activity, cash held in trust |   | (127,334,883 | )         |
|                                                     |   |         |      |
| **Net increase in cash**                                 |   | 1,113,757    |      |
|                                                     |   |         |      |
| **Cash,****beginning  of period**                        |   | —       |      |
|                                                     |   |         |      |
| **Cash,****end  of period**                              |   | $            | 1,113,757 |   |
|                                                     |   |         |      |

 

*See accompanying notes tofinancial statements.*

 

F-4

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**NOTESTO FINANCIAL STATEMENTS**

** **

**1.     Nature of operations and summary ofsignificant accounting policies**

 

*Nature of Operations*

 

Services Acquisition Corp. International (the“Company”) was incorporated in Delaware on January 6, 2005 as a blank checkcompany whose objective is to acquire through a merger, capital stock exchange,asset acquisition or other similar business combination with a currentlyunidentified operating business. The Company has selected December 31 as itsfiscal year-end.

 

The registration statement for the Company’sinitial public offering (the “Offering”) was declared effective June 29,2005.  The Company consummated theoffering on July 6, 2005 and received net proceeds of approximately$110,918,000 and executed the over-allotment option offering on July 7, 2005and received net proceeds of 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 an operating business that provides servicesand a “business combination” shall mean the acquisition by the Company of sucha target business.

 

The Company’s efforts in identifying aprospective business target will not be limited to a particular industry,although management intends to focus on high margin service businesses withrecurring revenue.  The success andongoing profitability 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 this context, the Company expects toseek companies displaying a number of characteristics: recurring revenues,focus on a service rather than a product, high gross margins, stable cash flowand opportunities for organic and acquisition growth.

 

Upon the closing of the Company’s offering,an amount of $126,720,000 was placed in a trust account at JP Morgan Chase NYBank maintained by Continental Stock Transfer & Trust Company to beinvested until the earlier of (i) the consummation of the Company’s first businesscombination or (ii) the liquidation of the Company; as of September 30, 2005the balance in the trust account is $127,334,883.  The remaining proceeds are available to theCompany  to pay for business, legal andaccounting due diligence on prospective acquisitions and continuing general andadministrative expenses.

 

The Company, after signing a definitiveagreement for the acquisition of a target business, will submit suchtransaction for stockholder approval.  Inthe event that stockholders owning 20% or more of the outstanding stockexcluding, for this purpose, those persons who were stockholders prior to theOffering, vote against the business combination, the business combination willnot be consummated.  All of the Company’sstockholders prior to the Offering, including all of the officers and directorsof the Company (“Initial Stockholders”), have agreed to vote their 3,750,000founding shares of common stock in accordance with the vote of the majority ininterest of all other stockholders of the Company (“Public Stockholders”) withrespect to any business combination. After consummation of the Company’s first business combination, all ofthese voting safeguards will no longer be applicable.

 

With respect to the first businesscombination, which is approved and consummated, any Public Stockholder whovoted against the business combination may demand that the Company redeem hisor her shares.  The per share redemptionprice will equal the amount in the Trust Fund as of the record date fordetermination of stockholders entitled to vote on the business combinationdivided by the number of shares of common stock held by Public Stockholders atthe consummation of the Offering. Accordingly, Public Stockholders holding 19.99% of the aggregate numberof shares owned by all Public Stockholders may seek redemption of their sharesin the event of a business combination. Such Public Stockholders are entitled to receive their per shareinterest in the Trust Fund computed without regard to the shares held by InitialStockholders.

 

The Company’s Certificate of Incorporationprovides for mandatory liquidation of the Company, without stockholderapproval, in the event that the Company does not consummate a businesscombination within 18 months from the date of the consummation of the Offering,or 24 months from the consummation of the Offering if certain extensioncriteria have been satisfied.  In theevent of liquidation, it is likely that the per share value of the residualassets remaining available for distribution (including Trust Fund assets) willbe less than the offering price per share in the Offering (assuming no value isattributed to the Warrants contained in the Units to be offered in the Offeringdiscussed in Note 2.)

 

F-5

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*Income Per Common Share*

 

Income per share is computed by dividing net income bythe weighted-average number of shares of common stock outstanding during theperiod.

 

*Use of Estimates*

 

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

 

*Income Taxes*

 

The Company complies with SFAS 109, “Accounting forIncome Taxes,” which requires an asset and liability approach to financialaccounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differencesbetween the financial statement and tax basis of assets and liabilities thatwill result in future taxable or deductible amounts, based on enacted tax lawsand rates applicable to the periods in which the differences are expected toaffect taxable income.  Valuationallowances are established, when necessary, to reduce deferred tax assets tothe amount expected to be realized.

 

**2.   Initial PublicOffering**

 

On July 6, 2005, the Company sold 15,000,000 units(“Units”) in the Offering.  An additional 2,250,000 Units were issued onJuly 7, 2005 to cover the over-allotment granted to the underwriters. Each Unit consists of one share of the Company’s common stock, $.001 par value,and one Redeemable Common Stock Purchase 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 one year from the effective dateof the Offering and expiring five years from the date of the prospectus. The Warrants will be redeemable at a price of $.01 per Warrant upon 30 daysnotice after the Warrants become exercisable, only in the event that the lastsale price of the common stock is at least $11.50 per share for any 20 tradingdays within a 30 trading day period ending on the third day prior to date onwhich notice of redemption is given.

 

**3.   Commitments andcontingencies**

 

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

 

As part of the Offering, certain stockholders agreedthat after the Offering was completed and within the first twenty trading daysafter separate trading of the warrants has commenced, they or certain of theiraffiliates or designees would collectively purchase up to 1,000,000 warrants inthe public marketplace at prices not to exceed $1.20 per warrant.  They further agreed that any warrants purchased by them or their affiliates ordesignees will not be sold or transferred until the completion of a businesscombination.  In addition, subject to any regulatory restrictions andsubsequent to the completion of the purchase of the 1,000,000 warrantsdescribed above and within the first twenty trading days after separate tradingof the warrants has commenced, the representative of the underwriter, orcertain of its principals, affiliates or designees has to purchase up to500,000 warrants in the public marketplace at prices not to exceed $1.20 perwarrant.  The Units separated on July 28,2005; as per the preceding sentence, management purchased 1,000,000 warrants atan average price of $1.01375 and the underwriter or its affiliated purchased500,000 warrants at an average price of $0.99.

 

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

 

The Company has engaged Broadband Capital ManagementLLC to act as the representative of the underwriters, on a non-exclusive basis,as our agent for the solicitation of the exercise of the warrants.  To theextent not inconsistent with the guidelines of the NASD and the rules andregulations of the Securities and Exchange Commission, the Company have agreedto pay the representative for bona fide services rendered a commission equal to5% of the exercise price for each warrant exercised after June 29, 2006 if theexercise was solicited by the underwriters.  In addition to soliciting,either orally or in writing, the exercise of the warrants, the representative’sservices may also include disseminating information, either orally or inwriting, to warrant holders about us or the market for our securities, andassisting in the processing of the exercise of the warrants.  Nocompensation will be paid to the representative upon the exercise of the warrantsif:

 

•         the market price of the underlying shares of commonstock is lower than the exercise price;

 

•         the holder of the warrants has not confirmed inwriting that the underwriters solicited the exercise;

 

•       warrantsare held in a discretionary account;

 

 

F-6

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•         thewarrants are exercised in an unsolicited transaction; or

 

•         the arrangement to pay the commission is not disclosedin the prospectus provided to warrant holders at the time of exercise.

 

**4.   Preferred Stock**

 

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

 

F-7

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

 

                ThisQuarterly Report on Form 10-Q includes forward-looking statements within themeaning of Section 27A of the Securities Act of 1933, as amended, and Section21E of the Securities Exchange Act of 1934, as amended.  We have based these forward-lookingstatements on our current expectations and projections about future events.These forward-looking statements are subject to known and unknown risks, uncertaintiesand assumptions about us that may cause our actual results, levels of  activity, performance or achievements to bematerially different from any future results, levels of activity, performanceor achievements expressed or implied 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 the negative of suchterms or other similar expressions. Factors that might cause or contribute to such a discrepancy include,but are not limited to, those described in our other Securities and ExchangeCommission  filings. The followingdiscussion should be read in conjunction with our Financial Statements andrelated Notes thereto included elsewhere in this report.

                We were formed on January 6,2005, to serve as a vehicle to effect a merger, capital stock exchange, assetacquisition or other similar business combination with an operating businessthat provides services.  Our initialbusiness combination must be with a target business or businesses whose fairmarket value is at least equal to 80% of net assets at the time of suchacquisition.  We intend to utilize cashderived from the proceeds of our recently completed public offering, ourcapital stock, debt or a combination of cash, capital stock and debt, ineffecting a business combination.

                For the three months endedSeptember 30, 2005, we had net income of approximately $560,770, derived frominterest income less operating expenses.

                For the period from January 6,2005 (inception) through September 30, 2005, we had net income of approximately$558,701, derived from interest income less operating expenses.

                On July 6, 2005, we consummatedour initial public offering of 15,000,000 units.  On July 7, 2005, we consummated the closingof an additional 2,250,000 units that were subject to the underwriters’over-allotment option. Each unit consists of one share of common stock and oneredeemable common stock purchase warrant. Each warrant entitles the holder to purchase from us one share of ourcommon stock at an exercise price of $6.00. Our common stock and warrants started trading separately as of July 28,2005.

 

2

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                Our net proceeds from the saleof our units, after deducting certain offering expenses of approximately$1,881,800, including $1,200,000 evidencing the underwriters’ non-accountableexpense allowance of 1% of the gross proceeds (excluding the proceeds from theunderwriters’ over-allotment), and underwriting discounts of approximately$8,280,000, were approximately $127,838,200—. Of this amount, $126,720,000 isbeing held in trust and the remaining $1,118,200 is being held outside of thetrust. The remaining proceeds are available to be used by us to provide forbusiness, legal and accounting due diligence on prospective acquisitions andcontinuing general and administrative expenses. We will use substantially allof the net proceeds of this offering to acquire a target business, includingidentifying and evaluating prospective acquisition candidates, selecting thetarget business, and structuring, negotiating and consummating the businesscombination. To the extent that our capital stock is used in whole or in partas consideration to effect a business combination, the proceeds held in thetrust fund as well as any other net proceeds not expended will be used tofinance the operations of the target business. We believe we will have sufficientavailable funds outside of the trust fund to operate through July 6, 2007,assuming that a business combination is not consummated during that time. FromJuly 6, 2005 through July 6, 2007, we anticipate approximately $180,000 ofexpenses for legal, accounting and other expenses attendant to the duediligence investigations, structuring and negotiating of a businesscombination, an aggregate of $180,000 for the administrative fees payable to SBManagement Corp. and Mercantile Companies, Inc. (a total of $7,500 per monthfor two years), $100,000 for expenses for the due diligence and investigationof a target business, $50,000 of expenses in legal and accounting fees relatingto our SEC reporting obligations and $608,2000 for general working capital thatwill be used for miscellaneous expenses and reserves, including approximately$200,000 for director and officer liability insurance premiums. We do notbelieve we will need to raise additional funds in order to meet theexpenditures required for operating our business. However, we may need to raiseadditional funds through a private offering of debt or equity securities ifsuch funds are required to consummate a business combination that is presentedto us. We would only consummate such a financing simultaneously with theconsummation of a business combination.

                Commencing on July 6, 2005 andending upon the acquisition of a target business, we began incurring a fee of$4,875 per month for office space and certain other additional services from SBManagement Corp., an affiliate of Steven R. Berrard, our chairman of the boardand chief executive officer, and a fee of $2,625 per month for general andadministrative services including secretarial support from MercantileCompanies, Inc., an affiliate of I. Steven Edelson, our vice chairman and vicepresident, and Nathaniel Kramer, one of our directors. In addition, in January,March and June 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.

                Since our initial publicoffering, we have been actively engaged in sourcing a suitable businesscombination candidate.  We have met withtarget companies, service professionals and other intermediaries to discusswith them our company, the background of our management and our combinationpreferences.  In the course of thesediscussions, we have also spent time explaining the capital structure of theinitial public offering, the combination approval process, and the timelineunder which we are operating before the proceeds of the offering are returnedto investors.

                Consistent with the disclosuresin our prospectus, we have focused our search on companies in BusinessServices, Healthcare Services, and Consumer Services.  Of these categories, Business Services andHealthcare Services have represented the majority of the targets we areexploring, with more limited communication with Consumer Service companies.  Overall, we would gauge the environment fortarget companies 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, therecan be no assurance that we will find a suitable business combination in theallotted time.

 

**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 certainconditions under Rule 2a-7 promulgated under the Investment Company Act of 1940.Given our limited risk in our exposure to money market funds, we do not view the interest rate risk to besignificant.

 

**Item 4.  Controls andProcedures.**

 

                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 September 30,2005. 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 of theSecurities and Exchange Commission.

 

                Therehas not been any change in our internal control over financial reporting inconnection with the evaluation required by Rule 13a-15(d) under the ExchangeAct that occurred during the quarter ended September 30, 2005, that hasmaterially affected, or is reasonably likely to materially affect, our internalcontrol 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.  UnregisteredSales of Equity Securities and Use of Proceeds.**

 

**               **On July 6, 2005, we consummated ourinitial public offering of 15,000,000 units. On July 7, 2005, we consummated the closing of an additional 2,250,000units that were subject to the underwriters’ over-allotment option. Each unitconsists of one share of common stock and one redeemable common stock purchasewarrant.  Each warrant entitles theholder to purchase from us one share of our common stock at an exercise priceof $6.00.  The units were sold at anoffering price of $8.00 per unit, generating total gross proceeds of$138,000,000. Broadband Capital Management LLC acted as lead underwriter.  The securities sold in the offering wereregistered under the Securities Act of 1933 on a registration statement on FormS-1 (No. 333-122812). The Securities and Exchange Commission declared the registrationstatement effective on June 29, 2005.

 

                We paid a total of$8,280,000 in underwriting discounts and commissions, and approximately$1,881,800 has been paid for costs and expenses related to the offering.

 

                After deductingthe underwriting discounts and commissions and the offering expenses, the totalnet proceeds to us from the offering were approximately $127,838,200, of which$126,720,000 was deposited into a trust fund (or $7.35 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.

 

                For a descriptionof the use of the proceeds generated in our initial public offering, see PartI, Item 2 of this Form 10-Q.

 

**Item 3.  Defaults UponSenior Securities.**

 

**               **Not applicable.

 

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

 

**               **Not applicable.

 

**Item 5.  Other Information.**

 

**               **Not applicable.

 

**Item 6.  Exhibits.**

 

31.1         Section302 Certification of Chief Executive Officer

 

31.2         Section 302 Certification of ChiefFinancial Officer

 

32.1         Section 906 Certification

 

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**SIGNATURES**

 

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

 
|                    |                                          |                                                                                                                             |
|-------------------------|-----------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|
|                    | **SERVICES ACQUISITION CORP.  INTERNATIONAL** |
|                    |                                          |                                                                                                                             |
| Date: November 14, 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)* |

 

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