Table of Contents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

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**FORM 10-Q**

 

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**(****Mark One)**

**x****                   ****QUARTERLY REPORT UNDERSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended March 31, 2009**

 

**o****                       TRANSITIONREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

 

**For the transition periodfrom                   to                   **

 

**Commission File Number 000-52642**

 

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**ShermenWSC Acquisition Corp.**

(Exact Name of Registrant as Specified in Its Charter)

 

| **Delaware**                    | ** ** | **20-4755936**      |
|---------------------------------|------------|---------------------|
| (State or other Jurisdiction of |       | (I.R.S. Employer    |
| Incorporation or Organization)  |       | Identification No.) |

 

| **c/o The Shermen Group, 230 Park Avenue,  Suite 1000, New York, NY** | ** ** | **10169**  |
|----------------------------------------------------------------------------|------------|------------|
| (Address of Principal Executive Offices)                                   |       | (Zip Code) |

 

**(212) 332-2858**

(Registrant’s Telephone Number, Including Area Code)

 

**Not Applicable**

(Former Name, Former Address and Former Fiscal Year, if Changed SinceLast Report)

 

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Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.  Yes  x    No  o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).  Yes  o    No  x

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reportingcompany.  See definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act (Check one).

 
| Large  accelerated filer o                                              | Accelerated  filer x         |
|-------------------------------------------------------------------------|------------------------------|
|                                                                    |                         |
| Non-accelerated  filer o (Do not check if a smaller  reporting company) | Smaller  reporting company o |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).  Yes  x    No  o.

 

Asof April 27, 2009, 28,750,000 shares of common stock, par value $ 0.0001per share, were issued and outstanding.

 

 

 

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Table of Contents

 

**TABLE OF CONTENTS**

 

ShermenAcquisition Corp.

(a developmentstage enterprise)

 

**Contents**

 
| Part I:  FINANCIAL INFORMATION:                                                                           |   |
|----------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                           |   |
| Item 1 –  Financial Statements:                                                                      | 1      |
|                                                                                                           |   |
| Condensed Balance  Sheets                                                                                      | 1      |
|                                                                                                           |   |
| Condensed  Statements of Operations (Unaudited)                                                                | 2      |
|                                                                                                           |   |
| Condensed  Statements of Stockholders’ Equity (Unaudited)                                                 | 3      |
|                                                                                                           |   |
| Condensed  Statements of Cash Flows (Unaudited)                                                                | 4      |
|                                                                                                           |   |
| Notes to  Condensed Unaudited Interim Financial Statements                                                     | 5      |
|                                                                                                           |   |
| Item 2 – Management’s Discussion  and Analysis of Financial Condition and Results of Operations | 15     |
|                                                                                                           |   |
| Item 3  – Quantitative and Qualitative Disclosures About Market Risk                                 | 18     |
|                                                                                                           |   |
| Item 4 –  Controls and Procedures                                                                    | 18     |
|                                                                                                           |   |
| Part II. OTHER  INFORMATION:                                                                              | 19     |
|                                                                                                           |   |
| Item 1 – Legal  Proceedings                                                                          | 19     |
|                                                                                                           |   |
| Item 1A – Risk  Factors                                                                              | 19     |
|                                                                                                           |   |
| Item 2  – Unregistered Sales of Equity Securities and Use of Proceeds                                | 19     |
|                                                                                                           |   |
| Item 3  – Defaults Upon Senior Securities                                                            | 19     |
|                                                                                                           |   |
| Item 4  – Submission of Matters to a Vote of Security Holders                                        | 19     |
|                                                                                                           |   |
| Item 5 – Other  Information                                                                          | 19     |
|                                                                                                           |   |
| Item 6 – Exhibits                                                                                    | 19     |
|                                                                                                           |   |
| Signatures                                                                                                     | 20     |
|                                                                                                           |   |
| Certifications                                                                                                 |   |

 

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Table of Contents

 

**PART I — FINANCIAL INFORMATION**

 

**ITEM 1.****                ****FINANCIALSTATEMENTS**

 

**SHERMENWSC ACQUISITION CORP.**

**(acorporation in the development stage)**

 

**CONDENSED BALANCE SHEETS**

 
| ** **                                                                                                                                                                                                                                | ** ** | **March 31, 2009** | ** **  | **December 31, 2008** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|-------------|---------------------------------|------------|
| ** **                                                                                                                                                                                                                                | ** ** | **(unaudited)**              | ** **  | ** **                      | ** ** |
| **ASSETS**                                                                                                                                                                                                                                |       |                         |        |                            |       |
| **Current  assets**                                                                                                                                                                                                                       |       |                         |        |                            |       |
| Cash                                                                                                                                                                                                                                      |       | $                            | 65,566      |                            | $          | 190,455 |   |
| Prepaid expenses                                                                                                                                                                                                                          |       | 154,136                      |        | 28,767                          |       |
| **Total  current assets**                                                                                                                                                                                                                 |       | 219,702                      |        | 219,222                         |       |
|                                                                                                                                                                                                                                      |       |                         |        |                            |       |
| **Other  assets**                                                                                                                                                                                                                         |       |                         |        |                            |       |
| Deferred taxes                                                                                                                                                                                                                            |       | 860,000                      |        | 712,000                         |       |
| Investments held  in Trust Account                                                                                                                                                                                                        |       | 137,973,055                  |        | 138,445,809                     |       |
| **Total  Assets**                                                                                                                                                                                                                         |       | $                            | 139,052,757 |                            | $          | 139,377,031 |   |
|                                                                                                                                                                                                                                      |       |                         |        |                            |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                             |       |                         |        |                            |       |
|                                                                                                                                                                                                                                      |       |                         |        |                            |       |
| **Current  liabilities**                                                                                                                                                                                                                  |       |                         |        |                            |       |
| Accounts payable  and accrued expenses                                                                                                                                                                                                    |       | $                            | 278,331     |                            | $          | 199,659 |   |
| Income taxes  payable                                                                                                                                                                                                                     |       | —                       |        | 286,000                         |       |
| **Total  current liabilities**                                                                                                                                                                                                            |       | 278,331                      |        | 485,659                         |       |
|                                                                                                                                                                                                                                      |       |                         |        |                            |       |
| **Long-term  liability,**                                                                                                                                                                                                                 |       |                         |        |                            |       |
| deferred  underwriters’ fee                                                                                                                                                                                                          |       | 3,312,000                    |        | 3,312,000                       |       |
| **Total  liabilities**                                                                                                                                                                                                                    |       | 3,590,331                    |        | 3,797,659                       |       |
|                                                                                                                                                                                                                                      |       |                         |        |                            |       |
| **Commitments**                                                                                                                                                                                                                           |       |                         |        |                            |       |
|                                                                                                                                                                                                                                      |       |                         |        |                            |       |
| **Common  stock subject to redemption, (9,199,999 shares at redemption value, $5.95 per  share)**                                                                                                                                         |       | 54,743,994                   |        | 54,743,994                      |       |
| **Deferred  interest related to common stock subject to possible redemption, net of taxes**                                                                                                                                               |       | 227,278                      |        | 323,305                         |       |
|                                                                                                                                                                                                                                      |       |                         |        |                            |       |
| **Stockholders’  equity**                                                                                                                                                                                                            |       |                         |        |                            |       |
| Preferred stock,  $.0001 par value; 1,000,000 shares authorized; none issued                                                                                                                                                              |       |                         |        |                            |       |
| Common stock,  $.0001 par value; 100,000,000 shares authorized; 28,750,000 shares issued and  outstanding as of March 31, 2009 and December 31, 2008 (including  9,199,999 shares subject to possible redemption), respectively |       | 2,875                        |        | 2,875                           |       |
| Additional  paid-in capital                                                                                                                                                                                                               |       | 78,941,231                   |        | 78,941,231                      |       |
| Retained  earnings                                                                                                                                                                                                                        |       | 1,547,048                    |        | 1,567,967                       |       |
| **Total  stockholders’ equity**                                                                                                                                                                                                      |       | 80,491,154                   |        | 80,512,073                      |       |
| **Total  liabilities and stockholders’ equity**                                                                                                                                                                                      |       | $                            | 139,052,757 |                            | $          | 139,377,031 |   |

 

The accompanyingnotes are an integral part of these condensed interim financial statements.

 

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Table of Contents

 

**SHERMEN WSC ACQUISITION CORP.**

**(acorporation in the development stage)**

 

**CONDENSEDSTATEMENTS OF OPERATIONS**

**(unaudited)**

 
| ** **                                                                                          | ** ** | **Three Months  Ended  March 31, 2009** | ** ** | **Three Months  Ended  March 31, 2008** | ** ** | **Period from  April 18, 2006  (inception) to  March 31, 2009** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|---------------------------------------------------------------------------|------------|
| ** **                                                                                          | ** ** | ** **                                   | ** ** | ** **                                   | ** ** | ** **                                                                | ** ** |
| Revenue                                                                                             |       | $                                            | —     |                                         | $          | —                                                                    |       | $ | — |   |
| Interest income                                                                                     |       | 77,316                                       |       | 1,016,441                                    |       | 5,461,635                                                                 |       |
| Formation and  operating costs                                                                      |       | (321,396                                     | )          | (187,189                                     | )          | (2,076,977                                                                | )          |
| Income (loss)  before provision for income taxes                                                    |       | (244,080                                     | )          | 829,252                                      |       | 3,384,658                                                                 |       |
|                                                                                                |       |                                         |       |                                         |       |                                                                      |       |
| Provision for  (income taxes) benefit                                                               |       |                                         | 127,134    |                                         | (412,259   | )                                                                         | (1,610,332 | ) |
| Net income  (loss) applicable to common stockholders                                                |       | $                                            | (116,946   | )                                            | $          | 416,993                                                                   |       | $ | 1,774,326 |   |
|                                                                                                |       |                                         |       |                                         |       |                                                                      |       |
| Weighted average  number of common shares subject to possible redemption, basic &  diluted |       | 9,199,999                                    |       | 9,199,999                                    |       | 5,729,749                                                                 |       |
|                                                                                                |       |                                         |       |                                         |       |                                                                      |       |
| Income (loss) per  share subject to possible redemption, basic & diluted                   |       | $                                            | (0.01      | )                                            | $          | 0.04                                                                      |       | $ | 0.04 |   |
|                                                                                                |       |                                         |       |                                         |       |                                                                      |       |
| Weighted average  number of common shares outstanding not subject to possible redemption, basic     |       | 19,550,001                                   |       | 19,550,001                                   |       | 14,344,625                                                                |       |
|                                                                                                |       |                                         |       |                                         |       |                                                                      |       |
| Net income  (loss) per common share, basic                                                          |       | $                                            | (0.01      | )                                            | $          | 0.02                                                                      |       | $ | 0.11 |   |
|                                                                                                |       |                                         |       |                                         |       |                                                                      |       |
| Weighted average  number of common shares outstanding not subject to possible redemption, diluted   |       | 19,550,001                                   |       | 30,136,039                                   |       | 16,807,128                                                                |       |
|                                                                                                |       |                                         |       |                                         |       |                                                                      |       |
| Net income per  common share, diluted                                                               |       | $                                            | (0.01      | )                                            | $          | 0.01                                                                      |       | $ | 0.09 |   |
|                                                                                                     |            |                                              |            |                                              |            |                                                                           |            |  |  |  |  |

 

The accompanyingnotes are an integral part of these condensed interim financial statements.

 

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Table of Contents

 

**SHERMENWSC ACQUISITION CORP.**

**(acorporation in the development stage)**

 

**STATEMENTSOF STOCKHOLDERS’ EQUITY**

 

**For theperiod from April 18, 2006 (date of inception) to March 31, 2009**

** **
| ** **                                                                                                                         | ** ** | **Common  Shares** | ** ** | **Amount** | ** ** | **Additional  Paid-  in  Capital** | ** ** | **(Deficit  Accumulated  During the  Development  Stage) Retained  earnings** | ** ** | **Total  Stockholders’  Equity** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|------------|------------|------------------------------------|------------|-------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| Sale of shares  issued to Founders on May 1, 2006 at $0.005 per unit                                                          |       | 5,750,000          |       | $          | 575        |                               | $          | 24,425                                                                        |       | $                                     |       | $ | 25,000 |   |
|                                                                                                                               |       |               |       |       |       |                               |       |                                                                          |       |                                  |       |
| Net loss  applicable to common stockholders                                                                                        |       |               |       |       |       |                               |       | (16,031                                                                       | )          | (16,031                               | )          |
|                                                                                                                               |       |               |       |       |       |                               |       |                                                                          |       |                                  |       |
| Balances as of  December 31, 2006                                                                                             |       | 5,750,000          |       | $          | 575        |                               | $          | 24,425                                                                        |       | $                                     | (16,031    | ) | $ | 8,969 |   |
|                                                                                                                               |       |               |       |       |       |                               |       |                                                                          |       |                                  |       |
| Sale of  23,000,000 units on May 30, 2007 at $6 per unit in the public offering                                               |       | 23,000,000         |       | 2,300      |       | 137,997,700                        |       |                                                                          |       | 138,000,000                           |       |
|                                                                                                                               |       |               |       |       |       |                               |       |                                                                          |       |                                  |       |
| Sale of warrants  issued to Founders on May 30, 2007 at $0.70 per warrant                                                     |       |               |       |       |       | 3,650,000                          |       |                                                                          |       | 3,650,000                             |       |
|                                                                                                                               |       |               |       |       |       |                               |       |                                                                          |       |                                  |       |
| Underwriting and  offering fees and expenses                                                                                       |       |               |       |       |       | (4,790,000                         | )          |                                                                          |       | (4,790,000                            | )          |
|                                                                                                                               |       |               |       |       |       |                               |       |                                                                          |       |                                  |       |
| Proceeds from  public offering of common stock subject to possible redemption (9,199,999  shares common stock at redemption value) |       |               |       |       |       | (54,743,994                        | )          |                                                                          |       | (54,743,994                           | )          |
|                                                                                                                               |       |               |       |       |       |                               |       |                                                                          |       |                                  |       |
| Underwriters’  discount and offering costs related to public offering and over-allotment  option                              |       |               |       |       |       | (3,196,900                         | )          |                                                                          |       | (3,196,900                            | )          |
|                                                                                                                               |       |               |       |       |       |                               |       |                                                                          |       |                                  |       |
| Accretion of  Trust Account relating to common stock subject to possible redemption, net of  tax                                   |       |               |       |       |       |                               |       | (323,305                                                                      | )          | (323,305                              | )          |
|                                                                                                                               |       |               |       |       |       |                               |       |                                                                          |       |                                  |       |
| Net income  applicable to common stockholders                                                                                      |       |               |       |       |       |                               |       | 1,907,303                                                                     |       | 1,907,303                             |       |
|                                                                                                                               |       |               |       |       |       |                               |       |                                                                          |       |                                  |       |
| Balances at  December 31, 2008                                                                                                |       | 28,750,000         |       | $          | 2,875      |                               | $          | 78,941,231                                                                    |       | $                                     | 1,567,967  |   | $ | 80,512,073 |   |
|                                                                                                                               |       |               |       |       |       |                               |       |                                                                          |       |                                  |       |
| Accretion of  Trust Account relating to common stock subject to possible redemption, net of  tax (unaudited)                       |       |               |       |       |       |                               |       | 96,027                                                                        |       | 96,027                                |       |
|                                                                                                                               |       |               |       |       |       |                               |       |                                                                          |       |                                  |       |
| Net (loss)  applicable to common stockholders (unaudited)                                                                          |       |               |       |       |       |                               |       | (116,946                                                                      | )          | (116,946                              | )          |
|                                                                                                                               |       |               |       |       |       |                               |       |                                                                          |       |                                  |       |
| Balances at  March 31, 2009 (unaudited)                                                                                       |       | 28,750,000         |       | $          | 2,875      |                               | $          | 78,941,231                                                                    |       | $                                     | 1,547,048  |   | $ | 80,491,154 |   |

 

The accompanyingnotes are an integral part of these condensed interim financial statements.

 

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**SHERMENWSC ACQUISITION CORP.**

**(acorporation in the development stage)**

 

**UNAUDITED CONDENSED STATEMENTS OFCASH FLOWS**

 
| ** **                                                                                           | ** ** | **Three Months  Ended  March 31, 2009** | ** ** | **Three Months  Ended  March 31, 2008** | ** ** | **April 18, 2006  (date of inception)  through  March 31, 2009** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------------------------------------|------------|
| ** **                                                                                           | ** ** | ** **                                   | ** ** | ** **                                   | ** ** | ** **                                                                 | ** ** |
| **Cash  flows from operating activities**                                                            | ** ** | ** **                                   | ** ** | ** **                                   | ** ** | ** **                                                                 | ** ** |
| Net income  (loss)                                                                                   |       | $                                            | (116,946   | )                                            | $          | 416,993                                                                    |       | $ | 1,774,326 |   |
| Adjustments to  reconcile net income (loss) to net cash provided by (used in) operating  activities: |       |                                         |       |                                         |       |                                                                       |       |
| Deferred tax  benefit                                                                                |       | (148,000                                     | )          | (93,060                                      | )          | (860,000                                                                   | )          |
| Changes in  operating assets and liabilities:                                                        |       |                                         |       |                                         |       |                                                                       |       |
| Prepaid expenses                                                                                     |       | (125,369                                     | )          | 19,125                                       |       | (154,136                                                                   | )          |
| Accounts payable  and accrued expenses                                                               |       | 78,672                                       |       | (45,751                                      | )          | 278,331                                                                    |       |
| Income taxes                                                                                         |       | (286,000                                     | )          | (541,850                                     | )          | —                                                                     |       |
| **Cash  provided by (used in) operating activities**                                                 |       | (597,643                                     | )          | (244,543                                     | )          | 1,038,521                                                                  |       |
|                                                                                                 |       |                                         |       |                                         |       |                                                                       |       |
| **Cash  provided by (used in) investing activities**                                                 | ** ** | ** **                                   | ** ** | ** **                                   | ** ** | ** **                                                                 | ** ** |
| Investments held  in Trust Account                                                                   |       | 472,754                                      |       | 83,594                                       |       | (137,973,055                                                               | )          |
|                                                                                                 |       |                                         |       |                                         |       |                                                                       |       |
| **Cash  flows from financing activities:**                                                           | ** ** | ** **                                   | ** ** | ** **                                   | ** ** | ** **                                                                 | ** ** |
| Proceeds from  note payable, stockholder                                                             |       | —                                       |       | —                                       |       | 150,000                                                                    |       |
| Payments for  note payable, stockholder                                                              |       | —                                       |       | —                                       |       | (150,000                                                                   | )          |
| Payments of  offering costs                                                                          |       | —                                       |       | —                                       |       | (4,675,000                                                                 | )          |
| Proceeds from  sale of stock options from the offering                                               |       | —                                       |       | —                                       |       | 100                                                                        |       |
| Proceeds from  issuance of common stock from the offering                                            |       | —                                       |       | —                                       |       | 141,675,000                                                                |       |
| **Net  cash provided by financing activities**                                                       |       | —                                       |       | —                                       |       | 137,000,100                                                                |       |
|                                                                                                 |       |                                         |       |                                         |       |                                                                       |       |
| **Net  decrease in cash**                                                                            |       | (124,889                                     | )          | (160,949                                     | )          | —                                                                     |       |
|                                                                                                 |       |                                         |       |                                         |       |                                                                       |       |
| **Cash,**beginning of the period                                                                     |       | 190,455                                      |       | 160,959                                      |       | —                                                                     |       |
|                                                                                                 |       |                                         |       |                                         |       |                                                                       |       |
| **Cash,**end of the period                                                                           |       | $                                            | 65,566     |                                         | $          | —                                                                     |       | $ | 65,566 |   |
|                                                                                                 |       |                                         |       |                                         |       |                                                                       |       |
| **Supplemental  schedule of :**                                                                      |       |                                         |       |                                         |       |                                                                       |       |
| **Non-cash  financing activity:**                                                                    |       |                                         |       |                                         |       |                                                                       |       |
| Deferred  underwriters’ fees                                                                    |       | $                                            | —     |                                         | $          | —                                                                     |       | $ | 3,312,000 |   |
| **Cash  used for:**                                                                                  |       |                                         |       |                                         |       |                                                                       |       |
| Taxes paid                                                                                           |       | $                                            | 578,931    |                                         | $          | 1,159,670                                                                  |       | $ | 2,816,489 |   |

 

The accompanyingnotes are an integral part of these condensed interim financial statements.

 

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**SHERMENWSC ACQUISITION CORP.**

**(acorporation in the development stage)**

**(Unaudited)**

**NOTES TOCONDENSED INTERIM FINANCIAL STATEMENTS**

 

**NOTE A—DESCRIPTION OFORGANIZATION AND BUSINESS OPERATIONS**

** **

ShermenWSC Acquisition Corp. (a corporation in the development stage) (the “Company”)was incorporated in Delaware on April 18, 2006. The Company was formed toacquire an operating business in the agriculture industry through a merger,capital stock exchange, asset acquisition, stock purchase or other similarbusiness combination. The Company has neither engaged in any operations norgenerated significant revenue to date, with the exception of interest incomeearned on cash held in the trust account as described below. The Company isconsidered to be in the development stage as defined in Statement of FinancialAccounting Standards (“SFAS”) No. 7, “Accounting and Reporting ByDevelopment Stage Enterprises,” and is subject to the risks associated withactivities of development stage companies. The Company has selected December 31stas its fiscal year end.

 

The Company’s managementhas broad discretion with respect to the specific application of the netproceeds of the Offering of Units (as defined in Note F below), althoughsubstantially all of the net proceeds of the Offering are intended to begenerally applied toward consummating a business combination with (oracquisition of) an operating business in the agriculture industry (“BusinessCombination”). Furthermore, there is no assurance that the Company will be ableto successfully effect a Business Combination. Since the closing of theOffering, at least 99.5% of the gross proceeds, after the payment of certainamounts to the underwriters for the Offering, are held in a trust account (“TrustAccount”) and invested in U.S. “government debt securities,” defined as anyTreasury Bill issued by the United States government having a maturity of onehundred and eighty  (180) days or less orany open ended investment company registered under the Investment Company Actof 1940 that holds itself out as a money market fund and bears the highestcredit rating issued by a United States nationally recognized rating agency,until the earlier of (i) the consummation of its first BusinessCombination or (ii) the distribution of the Trust Account as describedbelow. The remaining proceeds will be used to pay for business, legal andaccounting due diligence on prospective acquisitions and continuing general andadministrative expenses. The Company, after signing a definitive agreement forthe acquisition of a target business, will submit such transaction forstockholder approval. In the event that 40% or more of the outstanding commonstock of the Company (excluding, for this purpose, those shares of common stockof the Company issued prior to the Offering) vote against the BusinessCombination and exercise their conversion rights described below, the BusinessCombination will not be consummated. The stockholders who purchased Units inthe Offering (the “Public Stockholders”) and vote against a BusinessCombination will be entitled to convert their common stock into a pro ratashare of the Trust Account (including the additional 4% fee of the gross proceedsof the Offering payable to the underwriters for the Offering upon the Company’sconsummation of a Business Combination), including any interest earned (net oftaxes payable and the amount distributed to the Company to fund its workingcapital requirements) on their pro rata share, if the Business Combination isapproved and consummated. However, voting against the Business Combinationalone will not result in an election to exercise a Public Stockholder’sconversion rights. A Public Stockholder must also affirmatively exercise suchconversion rights at or prior to the time the Business Combination is votedupon by the stockholders.   If holders ofno more than approximately 39.99% of the shares sold in the Offering voteagainst a Business Combination and seek to exercise their conversion rights andsuch Business Combination is consummated, the stockholders who held shares ofcommon stock of the Company (the “Founding Stockholders”) have agreed toforfeit and return to the Company for cancellation a number of shares so thatthey will collectively own no more than 23.0% of the Company’s outstandingcommon stock upon consummation of such Business Combination (without givingeffect to any shares that may be issued in such Business Combination).  If the Company is unable to effect a BusinessCombination and liquidates, none of the Founding Stockholders will receive anyportion of the proceeds of the Offering held in the Trust Account to bedistributed to the Company’s stockholders with respect to common stock owned bythem immediately before the Offering.  Asof March 31, 2009, after giving effect to a 1.15 for 1 stock split whichwas effected immediately prior to the Offering, all of the FoundingStockholders, including all of the directors and officers of the Company, haveagreed to vote all of the shares of common stock of the Company held by them inaccordance with the vote of the majority in interest of all other stockholdersof the Company.

 

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Table of Contents

 

**SHERMENWSC ACQUISITION CORP.**

**(acorporation in the development stage)**

**(Unaudited)**

**NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS**

 

**NOTE A—DESCRIPTION OFORGANIZATION AND BUSINESS OPERATIONS (continued)**

** **

In theevent that the Company does not consummate a Business Combination within 18months from the date of the consummation of the Offering, or 24 months from theconsummation of the Offering (May 27, 2007) if certain extension criteriahave been satisfied, the proceeds held in the Trust Account will be distributedto the Public Stockholders, excluding the Founding Stockholders to the extentof their initial stock holdings. In the event of such distribution, it islikely that the per share value of the residual assets remaining available fordistribution (including Trust Account assets) will be less than the initialpublic offering price per Unit in the Offering (assuming no value is attributedto the Warrants contained in the Units offered in the Offering discussed inNote F).

 

**NOTE B — BASIS OFPRESENTATION**

** **

Theaccompanying  condensed interim financialstatements have been prepared by the Company and reflect all adjustments,consisting only of normal recurring adjustments, which are, in the opinion ofmanagement, necessary for a fair presentation of the financial position as of March 31,2009 and the financial results for the three months ended March 31, 2009and 2008 and from April 18, 2006 (date of inception) to March 31, 2009,in accordance with accounting principles generally accepted in the UnitedStates of America for interim financial statements and pursuant to theinstructions to the Quarterly Report on Form 10-Q and Article 10 ofRegulation S-X of the U.S. Securities and Exchange Commission (“SEC”).   Certain information and footnote disclosuresnormally included in the Company’s annual audited financial statements havebeen condensed or omitted pursuant to such rules and regulations.

 

The results ofoperations for the three months ended March 31, 2009 are not necessarilyindicative of the results of operations to be expected for a full fiscalyear.  These unaudited condensed interimfinancial statements should be read in conjunction with the audited financialstatements for the fiscal year ended December 31, 2008, which are includedin the Company’s Annual Report on Form 10-K for the year ended December 31,2008 filed with the SEC.

 

**NOTE C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

** **

**Developmentstage company:**

 

The Companycomplies with the reporting requirements of SFAS No. 7, “Accounting andReporting by Development Stage Enterprises.”

 

**Earnings percommon share:**

** **

The Company complies with the accounting and disclosure provision ofSFAS No. 128, “Earnings Per Share.” SFAS No. 128 requires dualpresentation of basic and diluted income per common share for all periodspresented. Basic income per common share excludes dilution and is computed bydividing net income by the weighted average number of common shares outstandingfor the period. Diluted income per common share reflects the potential dilutionthat could occur if securities or other contracts to issue common stock wereexercised or converted into common stock or resulted in the issuance of commonstock that then share in the income of the Company. The difference between thenumber of shares used to compute basic income per common share and dilutedincome per common share relates to additional shares to be issued upon theassumed exercise of stock options and warrants, net of shares hypotheticallyrepurchased at the average market price with the proceeds of exercise.  The Company used treasury stock method tocalculate the diluted earnings per share based on the outstanding warrantsissued in the private placement, the initial public offering and the overallotment. As a result, the Company added 4,825,832, 10,586,038 and2,462,503 shares as of the three months ended March 31, 2009 and 2008, andthe period from April 18, 2006 (date of inception) to March 31, 2009,respectively to its basic weighted average number of shares to arrive at thediluted shares used in its calculation of weighted average diluted earnings pershare.

 

6

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Table of Contents

 

**SHERMENWSC ACQUISITION CORP.**

**(acorporation in the development stage)**

**(Unaudited)**

**NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS**

 

**NOTE C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)**

** **

**Earnings per commonshare: (continued)**

** **

The Company’s statementof operations includes a presentation of earnings per share for common stocksubject to possible redemption in a manner similar to the two-class method ofearnings per share. Basic and diluted net income per share amount for themaximum number of shares subject to possible redemption is calculated bydividing the net interest attributable to common shares subject to possibleredemption by the weighted average number of shares subject to possibleredemption.  Basic and dilutednet loss per share amount for the common shares outstanding not subject topossible redemption is calculated by dividing the net loss exclusive of the netinterest income attributable to common shares subject to redemption by theweighted average number of common shares not subject to possible redemption.

 

**Concentration of credit risk:**

 

Financialinstruments that potentially subject the Company to concentrations of creditrisk consist of cash accounts in a financial institution, which potentiallymay, in the future, exceed the Federal depository insurance coverage of$250,000.  The Company has notexperienced losses on these accounts and management believes the Company is notexposed to significant risks on such accounts.

 

**Fair value of financial instruments:**

 

The fair value of theCompany’s assets and liabilities, which qualify as financial instruments underSFAS No. 107, “*Disclosure About FairValue of Financial Instruments*,” approximates the carrying amountsrepresented in the accompanying condensed balance sheets.

 

**Income Taxes:**

 

The Company complies withSFAS 109, “Accounting for Income Taxes,” which requires an asset and liabilityapproach to financial accounting and reporting for income taxes. Deferredincome tax assets and liabilities are computed for differences between thefinancial statement and tax bases 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.

 

Effective January 1,2007, the Company adopted the provisions of the Financial Accounting StandardsBoard (“FASB”) Interpretation No. 48, “Accounting for Uncertainty inIncome Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”).  There were no unrecognized tax benefits as ofMarch 31, 2009.  FIN 48 prescribes arecognition threshold and a measurement attribute for the financial statementrecognition and measurement of tax positions taken or expected to be taken in atax return.  For those benefits to berecognized, a tax position must be more-likely-than-not to be sustained uponexamination by taxing authorities.  TheCompany recognizes accrued interest and penalties related to unrecognized taxbenefits as income tax expense.  Noamounts were accrued for the payment of interest and penalties at March 31,2009.  Management is currently unaware ofany issues under review that could result in significant payments, accruals ormaterial deviation from its position.

 

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Table of Contents

 

**SHERMENWSC ACQUISITION CORP.**

**(acorporation in the development stage)**

**(Unaudited)**

**NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS**

 

**NOTE C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)**

** **

**Securities held intrust**

** **

Investment securitiesconsist of United States Treasury securities. The Company classifies itssecurities as held-to-maturity in accordance with SFAS No. 115, “Accountingfor Certain Debt and Equity Securities.”  Held-to-maturity securities arethose securities which the Company has the ability and intent to hold untilmaturity.  Held-to-maturity treasury securities are recorded at amortizedcost and adjusted for the amortization or accretion of premiums or discounts.

 

A decline in the marketvalue of held-to-maturity securities below cost that is deemed to be other thantemporary, results in an impairment that reduces the carrying costs to suchsecurities’ fair value.  The impairment is charged to earnings and a newcost basis for the security is established.  To determine whether animpairment is other than temporary, the Company considers whether it has theability and intent to hold the investment until a market price recovery andconsiders whether evidence indicating the cost of the investment is recoverableoutweighs evidence to the contrary.  Evidence considered in thisassessment includes the reasons for the impairment, the severity and theduration of the impairment, changes in value subsequent to year-end, forecastedperformance of the investee, and the general market condition in the geographicarea or industry the investee operates in.

 

Premiums and discountsare amortized or accreted over the life of the related held-to-maturitysecurity as an adjustment to yield using the effective-interest method. Such amortization and accretion is included in the “interest Income” line itemin the statement of operations. Interest income is recognized when earned.

 

**Recently issuedaccounting pronouncements:**

** **

In December 2007,the FASB issued SFAS 141(R), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) providescompanies with principles and requirements on how an acquirer recognizes andmeasures in its financial statements the identifiable assets acquired,liabilities assumed, and any non-controlling interest in the acquiree as wellas the recognition and measurement of goodwill acquired in a businesscombination. SFAS 141(R) also requires certain disclosures to enable usersof the financial statements to evaluate the nature and financial effects of thebusiness combination. Acquisition costs associated with the businesscombination will generally be expensed as incurred. SFAS 141(R) iseffective for business combinations occurring in fiscal years beginning after December 15,2008, which will require the Company to adopt these provisions for businesscombinations occurring in fiscal 2009 and thereafter. Early adoption of SFAS141(R) is not permitted.

 

In December 2007, the FASB issued SFAS No. 160,“*Noncontrolling Interests in ConsolidatedFinancial statements — An Amendment of ARB No. 51*” (“SFAS 160”).SFAS 160 requires reporting entities to present noncontrolling (minority)interests as equity as opposed to as a liability or mezzanine equity andprovides guidance on the accounting for transactions between an entity andnoncontrolling interests. SFAS 160 is effective the first fiscal year beginningafter December 15, 2008. SFAS 160 applies prospectively as of thebeginning of the fiscal year SFAS 160 is initially applied, except for thepresentation and disclosure requirements which are applied retrospectively forall periods presented subsequent to adoption. The adoption of SFAS 160 will nothave a material impact on the Company’s results of operations or financialposition; however, it could impact future transactions entered into by the Company.

 

In March 2008, the Financial Accounting StandardsBoard (“FASB”) issued SFAS No. 161, “Disclosures about DerivativeInstruments and Hedging Activities — an amendment to FASB Statement No. 133”.SFAS No. 161 is intended to improve financial standards for derivativeinstruments and hedging activities by requiring enhanced disclosures to enableinvestors to better understand their effects on an entity’s financial position,financial performance, and cash flows. Entities are required to provide enhanceddisclosures about: (a) how and why an entity uses derivative instruments; (b) howderivative instruments and related hedged items are accounted for underStatement 133 and its related interpretations; and (c) how derivativeinstruments and related hedged items affect an entity’s financial position,financial performance, and cash flows. It is effective for financial statementsissued for

 

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Table of Contents

 

**SHERMENWSC ACQUISITION CORP.**

**(acorporation in the development stage)**

**(Unaudited)**

**NOTES TO CONDENSED INTERIMFINANCIAL STATEMENTS**

 

**NOTE C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)**

 

fiscal years beginning after November 15, 2008,with early adoption encouraged. The adoption of this statement is not expectedto have a material effect on the Company’s financial statements.

 

In May 2008,the FASB issued SFAS No. 162, “The Hierarchy of Generally AcceptedAccounting Principles”. SFAS 162 identifies the sources of accountingprinciples and the framework for selecting the principles to be used in thepreparation of financial statements of nongovernmental entities that arepresented in conformity with generally accepted accounting principles in theUnited States. It is effective 60 days following the SEC’s approval of thePublic Company Accounting Oversight Board amendments to AU Section 411, “TheMeaning of Present Fairly in Conformity With Generally Accepted AccountingPrinciples”. The adoption of this statement is not expected to have a materialeffect on the Company’s financial statements.

 

Management does not believe that any other recentlyissued, but not yet effective, accounting pronouncements, if currently adopted,would have a material effect on the Company’s financial statements.

 

**NOTE D—INCOME TAXES**

** **

The Company’s provision for income taxes reflects theapplication of Federal, State and City statutory rates to the Company’sincome before taxes. For the three months ended March 31, 2009 and 2008,and for the period from April 18, 2006 (inception) to March 31, 2009,the effective income tax rate differs from the federal statutory rate of 34%principally due to the effect of state and city income taxes.

 

Component of theprovision for income taxes consists of:

 
| ** **                      | ** ** | **For three months  ended  March 31, 2009** | ** ** | **For three months  ended  March 31, 2008** | ** ** | **April 18, 2006  (inception) to  March 31, 2009** | ** ** |
|---------------------------------|------------|-----------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|-----------------------------------------------------------------------------|------------|
| **Current  Expense (Benefit)**  |       |                                                            |       |                                                            |       |                                                                        |       |
| Federal                         |       | $                                                               | —     |                                                            | $          | 263,306                                                                     |       | $ | 1,453,500 |   |
| State and City                  |       | 20,866                                                          |       | 242,013                                                         |       | 1,016,832                                                                   |       |
| Total current  expense          |       | 20,866                                                          |       | 505,319                                                         |       | 2,470,332                                                                   |       |
|                            |       |                                                            |       |                                                            |       |                                                                        |       |
| **Deferred  Expense (Benefit)** |       |                                                            |       |                                                            |       |                                                                        |       |
| Federal                         |       | (29,758                                                         | )          | (92,157                                                         | )          | (508,725                                                                    | )          |
| State and City                  |       | (118,242                                                        | )          | (903                                                            | )          | (351,275                                                                    | )          |
| Total deferred  benefit         |       | (148,000                                                        | )          | (93,060                                                         | )          | (860,000                                                                    | )          |
| **Provision  for income taxes** |       | $                                                               | (127,134   | )                                                               | $          | 412,259                                                                     |       | $ | 1,610,332 |   |

 

**NOTE E—INVESTMENT INTRUST ACCOUNT; MARKETABLE SECURITIES**

** **

Since the closing of theOffering, net proceeds from the offering have been held in a trust account (“TrustAccount”).  The Trust Account may beinvested in U.S. “government debt securities,” defined as any Treasury Bill orequivalent securities issued by the United States government having a maturityof one hundred eighty (180) days or less or money market funds meeting theconditions specified in Rule 2a-7 under the Investment Company Act of1940, until the earlier of (i) the consummation of its first BusinessCombination or (ii) the distribution of the Trust Account as describedbelow.

 

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**SHERMENWSC ACQUISITION CORP.**

**(acorporation in the development stage)**

**(Unaudited)**

**NOTES TOCONDENSED INTERIM FINANCIAL STATEMENTS**

 

**NOTE E—INVESTMENT IN TRUSTACCOUNT; MARKETABLE SECURITIES (continued)**

 

As of March 31, 2009investment securities in the Company’s Trust Account consist of (a) approximately$137,959,193 in Treasury Bills and (b) approximately $1,000 in a mutual fundthat invests in U.S. Treasury securities. The Company classifies its U.S. Treasury securities as held-to-maturityin accordance with SFAS No. 115, “Accounting for Certain Debt and EquitySecurities.”  Held-to-maturity securitiesare those securities which the Company has the ability and intent to hold untilmaturity.  Held-to-maturity treasurysecurities are recorded at amortized cost on the accompanying balance sheetsand adjusted for the amortization or accretion of premiums or discounts.  The Company’s investment in the U.S. Treasurymutual fund account (approximately $1,000 at March 31, 2009) is recordedat fair value.

 

*Thecarrying amount, including accrued interest, gross unrealized holding gains,and fair value of held-to-maturity securities at March 31, 2009 were asfollows:*

 
| ** **                      | ** ** | **Carrying  amount** | ** **  | **Gross  unrealized  holding  gains** | ** ** | **Fair value** | ** ** |
|---------------------------------|------------|----------------------|-------------|---------------------------------------|------------|---------------------|------------|
| Held-to-maturity:               |       |                 |        |                                  |       |                |       |
| U. S. Treasury  securities |       | $                    | 137,959,193 |                                  | $          | 13,195              |       | $ | 137,972,388 |   |
|                                 |            |                      |             |                                       |            |                     |            |  |  |  |

 

**NOTE F—OFFERING ANDOVER-ALLOTMENT**

** **

The Company offered 20,000,000units (“Units”) for public sale (the “Offering”) in May 2007. Each Unitconsists of one share of the Company’s common stock, $0.0001 par value (“CommonStock”), and two redeemable common stock purchase warrants (“Warrants”). EachWarrant entitles the holder to purchase from the Company one share of CommonStock at an exercise price of $5.00 commencing on the later of (a) oneyear from the date of the final prospectus for the Offering or (b) thecompletion of a Business Combination with a target business or the distributionof the Trust Account, and will expire four years from the date of such finalprospectus. The Warrants will be redeemable at a price of $0.01 per Warrantupon 30 days prior notice after the Warrants become exercisable, only in the eventthat the last sale price of Common Stock is at least $8.50 per share for any 20trading days within a 30 trading day period ending on the third business dayprior to the date on which notice of redemption is given.

 

No Warrants will beexercisable and the Company will not be obligated to issue shares of CommonStock unless at the time a holder seeks to exercise such Warrant, a prospectusrelating to Common Stock issuable upon exercise of the Warrants is current andCommon Stock has been registered or qualified or deemed to be exempt under thesecurities laws of the state of residence of the holder of the Warrants.  Under the terms of the warrant agreement, theCompany has agreed to use its best efforts to meet these conditions and tomaintain a current prospectus relating to Common Stock issuable upon exerciseof the Warrants until the expiration of the Warrants.  However, if the Company does not maintain acurrent prospectus relating to Common Stock issuable upon exercise of theWarrants, holders will be unable to exercise their Warrants.  In no circumstance will the Company berequired to settle any such Warrant exercise for cash.  If the prospectus relating to Common Stockissuable upon the exercise of the Warrants is not current or if Common Stock isnot qualified or exempt from qualification in the jurisdiction in which theholders of the Warrants reside, the Warrants may have no value, the market forthe Warrants may be limited and the Warrants may expire worthless.

 

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**SHERMENWSC ACQUISITION CORP.**

**(acorporation in the development stage)**

**(Unaudited)**

**NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS**

 

**NOTE F—OFFERING ANDOVER-ALLOTMENT (continued)**

** **

Shermen WSC Holding (“ShermenWSC Holding”) has purchased 5,214,286 Warrants (“Founder Warrants”) at $0.70per Founder Warrant (for an aggregate purchase price of approximately$3,650,000) from the Company in a private placement exempt from registrationunder Securities Act of 1933, as amended. These purchases took placesimultaneously with the consummation of the Offering. All of the proceedsreceived from these purchases were placed in the Trust Account. The Founder Warrantspurchased by Shermen WSC Holding are identical to the Warrants underlying theUnits sold in the Offering except that (i) the Company has no obligationto register the sale of the Warrants and the underlying shares of Common Stockand their exercise is not limited by the absence of an effective registrationstatement and current prospectus relating to the resale of the underlyingshares of Common Stock and (ii) the Founder Warrants may be exercisable ona “cashless basis” if the Company calls the Warrants for redemption. ShermenWSC Holding agreed that the Founder Warrants would not be transferable orsalable by it or such directors or officers or their respective affiliatesuntil after the Company completed a Business Combination, except it may distributethem to its members.  Immediately afterthe purchase of the Founder Warrants, Shermen WSC Holding distributed them toits members.

 

All shares of Common Stock owned by the FoundingStockholders prior to the closing of the Offering (the “Initial Shares”) wereplaced into an escrow account maintained by Continental Stock Transfer &Trust Company, acting as escrow agent. The Initial Shares will not be released from escrow until six monthsfollowing the completion of a Business Combination.

 

The foregoing restriction is subject to certainlimited exceptions such as transfers to family members and trusts for estateplanning purposes, upon death of an escrow depositor, transfers to an estate orbeneficiaries, or other specified transfers. Even if transferred under these circumstances, the Initial Shares willremain in the escrow account.

 

On May 30, 2007, the underwriters’ for theOffering exercised the full over-allotment of 3,000,000 units.  As a result, the deferred underwriters’ feewas increased approximately $432,000.

 

**NOTE G**—**COMMON STOCK**

 

On May 23, 2007, the Company effected a 1.15 for1 forward stock split of the Initial Shares and issued 750,000 shares of CommonStock to the Founding Stockholders prior to the closing of both the Offeringand the over-allotment. All transaction and disclosures in the financialstatements relating to Common Stock, have been adjusted to reflect the effectsof the stock split.

 

**NOTE H—RELATED PARTY TRANSACTIONS**

 

TheCompany presently occupies office space provided by an affiliate of a certainstockholder of the Company. Such affiliate has agreed that, until theconsummation of a Business Combination, it will make such office space, as wellas certain office and secretarial services, available to the Company, as may berequired by the Company from time to time. The Company has agreed to pay suchaffiliate $9,950 per month for such services.

 

Certain of the directors and officers of the Companyhave purchased through Shermen WSC Holding, in a private placement, 5,214,286Founder Warrants immediately prior to the Offering at a price of $0.70 perFounder Warrant (an aggregate purchase price of approximately $3,650,000) fromthe Company and not as part of the Offering. They have also agreed that theseFounder Warrants purchased by them will not be sold or transferred until thecompletion of a Business Combination.

 

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**SHERMENWSC ACQUISITION CORP.**

**(acorporation in the development stage)**

**(Unaudited)**

**NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS**

 

**NOTE I—COMMITMENTS**

** **

The Company is committedto paying an underwriting discount of 4% of the Unit Offering price to theunderwriters for the Offering (less $0.21 for each share of common stockconverted to cash in connection with a Business Combination) payable upon theCompany’s consummation of a Business Combination.

 

The Company has sold tothe underwriters, for $100, as additional compensation, an option to purchase upto a total of 700,000 Units in the aggregate (350,000 Units to eachunderwriter) at a per-unit price of $7.50. The Units issuable upon exercise of this option are also identical tothose offered in the Offering, except that each Warrant underlying such Unitsentitles the holder to purchase one share of Common Stock at a price of$6.25.  In no circumstance will theCompany be required to settle any such option exercise for cash.

 

The sale of this optionwas accounted for as an equity transaction. Accordingly, there will be no net impact on the Company’s financialposition or results of operations, except for the recording of the $100proceeds from the sale of such option.

 

The Company hasdetermined, based upon a Black-Scholes model, that the fair value of thisoption on the date of sale would be approximately $0.60 per unit, or $420,000in total, using an expected life of four years, volatility of 52.13% and arisk-free interest rate of 4.92%.

 

The volatilitycalculation of 52.13% is based on the average 90-day Bloomberg volatility of aportfolio of nine publicly traded U.S. agricultural companies with marketcapitalizations between $50,000,000 and $500,000,000. Because the Company doesnot have a trading history, the Company needed to estimate the potentialvolatility of Common Stock price, which will depend on a number of factorswhich cannot be ascertained at this time. The Company referred to the Index because management believes that the averagevolatility is a reasonable benchmark to use in estimating the expectedvolatility of Common Stock post-business combination.  Although an expected life of four years wastaken into account for purposes of assigning a fair value to the option, if theCompany does not consummate a Business Combination within the prescribed timeperiod and liquidates, this option would become worthless.  Although this option and its underlyingsecurities have been registered under the registration statement of which theprospectus forms a part of, this option will provide for registration rightsthat will permit the holder of this option to demand that a registrationstatement will be filed with respect to all or any part of the securitiesunderlying this option within five years of the completion of the Offering.  Further, the holders of this option will beentitled to piggy-back registration rights in the event the Company undertakesa subsequent registered offering within seven years of the completion of theOffering.

 

**NOTE J—PREFERRED STOCK**

 

The Company is authorizedto issue 1,000,000 shares of preferred stock with such designations, voting andother rights and preferences as may be determined from time to time by theBoard of Directors of the Company.  As ofMarch 31, 2009, the Company has not issued any shares of its preferredstock.

 

**NOTE K—THE PROPOSED BUSINESS COMBINATION WITH WESTWAY**

 

On November 25,2008, the Company entered into a Transaction Agreement with Terminal MergerSub, LLC, Feed Merger Sub, LLC, ED&F Man Holdings Limited (“ED&F Man”),Westway Holdings Corporation, Westway Terminal Company Inc. and Westway FeedProducts, Inc. (the “Transaction Agreement”) pursuant to which the Companywill acquire ED&F Man’s bulk liquid storage and liquid feed supplementsbusinesses in exchange for shares of the Company’s common and preferred stockand cash (such transaction, the “Business Combination”).  The BusinessCombination will be effected by mergers between wholly-owned subsidiaries ofED&F Man and wholly-owned subsidiaries of the Company and by the Company’spurchase of the equity securities of ED&F Man’s other subsidiaries thatengage in the bulk liquid storage and liquid feed supplements businesses. The Company refers to ED&F Man’s bulk liquid storage business and liquidfeed

 

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**SHERMENWSC ACQUISITION CORP.**

**(acorporation in the development stage)**

**(Unaudited)**

**NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS**

 

**NOTE K—**THE PROPOSED BUSINESS COMBINATION WITHWESTWAY (continued)

** **

supplements businesscollectively as “Westway” or the “Westway business.”  If the Business Combinationis approved by the Company’s stockholders, all of the direct and indirectsubsidiaries of ED&F Man that currently engage in the Westway business willbecome the Company’s wholly-owned subsidiaries, ED&F Man and its affiliateswill be the Company’s largest stockholder, owning 49.5% of the Company’soutstanding common stock and over 99% of the Company’s Series A PreferredStock, and the Company will change its name to “Westway Group, Inc.”

 

Consummationof the Business Combination is subject to customary closing conditions,including (a) approval by the Company’s stockholders of the TransactionAgreement; (b) approval by the Company’s stockholders of the amendment andrestatement of the Company’s certificate of incorporation; and (c) fewerthan 40% of the holders of the shares of the Company’s common stock issued inthe Offering (“IPO shares”) vote against the Transaction Agreement and electthat the Company convert their shares into cash.  The Business Combinationwill be terminated under certain circumstances, including (a) if the BusinessCombination is not consummated by May 30, 2009; (b) the Company’sstockholders do not approve the Transaction Agreement; or (c) holders of40% or more of the IPO shares vote against the Transaction Agreement and electthat the Company convert their shares into cash.

 

Underthe terms of the Transaction Agreement, as consideration for the Business Combination,ED&F Man and its affiliates will receive at the closing cash and securitiesvalued at approximately $267.8 million, based on the $138.4 million in theCompany’s trust account as of November 25, 2008, the date of theTransaction Agreement (assuming a value of $5.02 per share of common stock,based on the trust value of $6.02 per IPO share (as of that date), less aspecial dividend of $1.00 per share to be paid to holders of the IPO shares).Specifically, as consideration for the acquisition, the Company will:

 

·                  pay to ED&F Man approximately $103.0 million incash, subject to adjustments described below;

 

·                  issue to ED&F Man approximately 7.4 millionnewly-issued shares of the Company’s Series A Preferred Stock; and

 

·                  issue to ED&F Man up to 24.3 million newly-issuedshares of the Company’s common stock.

 

However, if the holdersof some, but less than 40%, of the IPO shares elect that the Company converttheir shares into cash, the number of shares of common stock the Company willissue will decrease and the number of shares of preferred stock the Companywill issue will increase pursuant to a formula described in the Company’s proxystatement.  If the holders of 39.99% of the IPO shares exercise theirconversion rights, the consideration would consist of approximately 15.3million shares of the Company’s common stock, approximately 16.0 million sharesof the Company’s preferred stock and $103.0 million in cash. In this case, theCompany estimates that the aggregate value of the consideration would be $272.1million (assuming the values per share set forth above).

 

The consideration payableto ED&F Man described above will be subject to pre-closing and post-closingadjustments relating to Westway’s closing date net indebtedness and net workingcapital and to aggregate capital expenditures made by Westway prior to theclosing.

 

Upon consummation of the BusinessCombination, the holders of the Company’s common stock, warrants and units willcontinue to own their existing common stock, warrants and units, and theCompany will change its name to “Westway Group, Inc.”  Shares ofcommon stock currently held by the Company’s stockholders will be designated asClass A Common Stock.

 

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**SHERMENWSC ACQUISITION CORP.**

**(acorporation in the development stage)**

**(Unaudited)**

**NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS**

 

**NOTE K—**THE PROPOSED BUSINESS COMBINATION WITHWESTWAY (continued)

 

Upon the consummation ofthe Business Combination, the Company will be delivering to an escrow agent fordeposit into an escrow account approximately 12.2 million shares of theCompany’s Series A Preferred Stock, issued to ED&F Man, as part of theconsideration for the Business Combination.  These shares will be releasedto ED&F Man only upon the achievement by the combined company of certainearnings or share price targets described in the Company’s proxy statement(generally, one-third of these shares will be released upon the achievement ofearnings or share price targets of $52.0 million or $6.50 per share, $57.0million or $7.00 per share and $62.0 million or $7.50 per share,respectively).  Assuming the release to ED&F Man of all of theseescrowed shares, the value of the consideration to be paid in connection withthe Business Combination would increase by $70.1 million, and would total$337.9 million assuming no exercise of conversion rights by the Company’sstockholders or $342.2 million assuming that holders of 39.99% of the IPOshares exercise their conversion rights.

 

TheBusiness Combination will be accounted for under the purchase method ofaccounting.  The purchase priceallocation has not been finalized and is subject to change based upon recordingactual transaction costs, finalization of working capital adjustments, andcompletion of appraisals of tangible and intangible assets of the acquiredWestway business.  The final allocationof the purchase price will be determined after the Business Combination iscomplete and after completion of a final analysis to determine the fair valuesof the tangible and identifiable intangible assets and liabilities as of theclosing date of the Business Combination.

 

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| **ITEM 2.** | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|-------------|-------------------------------------------------------------------------------------------------|

 

Thefollowing discussion should be read in conjunction with our Condensed UnauditedInterim Financial Statements and notes thereto contained in this QuarterlyReport on Form 10-Q.

 

**Forward LookingStatements**

** **

ThisQuarterly Report on Form 10-Q includes forward-looking statements withinthe meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21Eof the Securities Exchange Act of 1934, as amended.  We have based these forward-lookingstatements on our current expectations and projections about futureevents.  These forward-looking statementsare subject to known and unknown risks, uncertainties and assumptions about usthat may cause our actual results, levels of activity, performance orachievements to be materially different from any future results, levels ofactivity, performance or achievements expressed or implied by suchforward-looking statements.  In somecases, you can identify forward-looking statements by terminology 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 (“SEC”) filings.

 

**Overview**

** **

Wewere formed on April 18, 2006 for the purpose of acquiring, through amerger, capital stock exchange, asset acquisition, stock purchase or othersimilar business combination, an operating business in the agricultureindustry.

 

On May 30,2007, we completed our initial public offering (“IPO”) of 23,000,000 units (“Units”).  Each Unit consists of one share of our commonstock, $0.0001 par value per share (“Common Stock”), and two warrants (“Warrants”),each to purchase one share of Common Stock at $5.00 per share.  The public offering price of each Unit was$6.00, and we generated gross proceeds of $138,000,000 in the IPO (includingproceeds from the exercise of the underwriters’ over-allotment option).  Of the gross proceeds: (i) we deposited$133,210,000 into a trust account (the “Trust Account”) at JP Morgan Chase NYBank, maintained by Continental Stock Transfer & Trust Company astrustee, which included $5,520,000 of deferred underwriting fees; (ii) theunderwriters received $4,140,000 as underwriting fees (excluding the deferredunderwriting fees); and (iii) we retained $607,900 for offeringexpenses.  In addition, we deposited intothe Trust Account $3,650,000.20 that we received from the issuance and sale of5,214,286 warrants (the “Founder Warrants”) to Shermen WSC Holding LLC, whosemanaging member is Shermen Capital Partners, LLC, an entity controlled byFrancis P. Jenkins, Jr., our chairman and chief executive officer, on May 30,2007 in a private placement exempt from registration under Securities Act of1933, as amended.

 

Aftercompletion of the IPO, we began contacting investment bankers, private equityfirms and other business contacts in order to generate ideas about a suitablebusiness combination. We also received unsolicited inquiries from severalinvestment banking firms, private equity firms and other businessintermediaries. We informed these contacts that we were seeking an operatingbusiness for our initial business combination.  We did not retain aninvestment banking firm or fairness or valuation advisor to conduct a formalsearch for a business combination. Criteria for suitability included ourmanagement’s assessment of the competitive strengths and weaknesses of thepotential business targets, the strength of the management team, and thequality of the assets to be acquired.

 

Weintend to utilize cash derived from the proceeds of the IPO, our capital stock,debt or a combination of such cash, capital stock and debt, in effecting abusiness combination.  The issuance ofadditional shares of our capital stock:

 

·                                          maysignificantly reduce the equity interest of our stockholders;

 

·                                          maysubordinate the rights of holders of Common Stock if we issue preferred stockwith rights senior to those afforded to Common Stock;

 

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·                                          willlikely cause a change in control if a substantial number of shares of CommonStock are issued, which may affect, among other things, our ability to use ournet operating loss carry forwards, if any, and most likely will also result inthe resignation or removal of our present officers and directors; and

 

·                                          mayadversely affect prevailing market prices for our common stock.

 

Similarly,if we issue debt securities, it could result in:

 

·                                          defaultand foreclosure on our assets if our operating revenues after a businesscombination are insufficient to pay our debt obligations;

 

·                                          accelerationof our obligations to repay the indebtedness even if we have made all principaland interest payments when due if the debt security contains covenants thatrequired the maintenance of certain financial ratios or reserves and we breachany such covenant without a waiver or renegotiation of that covenant;

 

·                                          ourimmediate payment of all principal and accrued interest, if any, if the debtsecurity is payable on demand; and

 

·                                          ourinability to obtain additional financing, if necessary, if the debt securitycontains covenants restricting our ability to obtain additional financing whilesuch security is outstanding.

 

Weintend to use substantially all of the net proceeds of the IPO and the issuanceand sale of the Founder Warrants, including the funds held in the trust account(excluding deferred underwriting discounts and commissions), to acquire atarget business.  To the extent that ourcapital stock is used in whole or in part as consideration to effect a businesscombination, the remaining proceeds held in the trust account as well as anyother net proceeds not expended will be used as working capital to finance theoperations of the target business.  Suchworking capital funds could be used in a variety of ways including continuingor expanding the target business operations, for strategic acquisitions and formarketing, research and development of existing or new products.  Such funds could also be used to repay anyoperating expenses or finders’ fees which we had incurred prior to thecompletion of our business combination if the funds available to us outside ofthe trust fund were insufficient to cover such expenses.

 

On November 25,2008, our board of directors approved a business combination with ED&F ManHoldings Limited (“ED&F Man”), and we entered into a transaction agreementwith ED&F Man (the “Transaction Agreement”) pursuant to which we willacquire ED&F Man’s bulk liquid storage and liquid feed supplements business(such business, “Westway” or the “Westway Business”) in exchange for our commonand preferred stock and cash.  ED&FMan is a leading global supplier of a broad range of commodity products,including sugar, molasses, animal feed, tropical oils, biofuels and coffee tomulti-national and industrial consumers.

 

Underthe terms of the Transaction Agreement, our acquisition of Westway (the “BusinessCombination”) will be effected by mergers between Westway Holdings Corporation(“ED&F Sub”), Westway Terminal Company Inc. and Westway Feed Products, Inc.,which are wholly-owned subsidiaries of ED&F Man, and us, which mergers willbe implemented by our wholly-owned subsidiaries, Terminal Merger Sub LLC andFeed Merger Sub LLC, and by our purchase of the equity securities of ED&FMan’s other subsidiaries that engage in the Westway Business.  If the Business Combination is approved byour stockholders, all of the direct and indirect subsidiaries of ED&F Manthat currently engage in the Westway Business will become our wholly-ownedsubsidiaries, ED&F Man and its affiliates will be our largest stockholder,owning 49.5% of our outstanding common stock and over 99% of our Series APreferred Stock, and we will change our name to “Westway Group, Inc.”

 

**Results of Operations,Financial Condition and Liquidity**

** **

ThroughMarch 31, 2009, our efforts have been limited to organizationalactivities, activities relating to the IPO, activities relating to identifyingand evaluating prospective acquisition candidates, and activities relating togeneral 

 

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corporate matters; we have neither engaged in anyoperations nor generated any revenues, other than interest income earned on theproceeds of the IPO and our private placement of the Founder Warrants.

 

Netloss totaled $116,946, which consisted of $77,316 of interest income from theTrust Account offset by $321,396 of formation and operating expenses and$(127,134) of provision for income taxes, for the three months ended March 31,2009.  Net income totaled $416,993, whichconsisted of $1,016,441of interest income from the Trust Account offset by$187,189 of formation and operating expenses and $412,259 of provision forincome taxes, for the three months ended March 31, 2008.  From inception, net income totaled$1,774,326, which consisted of $5,461,635 of interest income from the TrustAccount offset by $2,076,977 of formation and operating expenses and $1,610,332of provision for income taxes.

 

Interestincome from the Trust Account excludes earnings on funds held in the TrustAccount associated with Common Stock subject to possible conversion, and,except for amounts equal to any taxes payable by us relating to such interestearned and one half of such interest earned, net of taxes, up to $1,500,000which may be released to us on a monthly basis to cover our operating expenses,will not be released to us from the Trust Account until the earlier of thecompletion of a business combination or the expiration of the time periodduring which we may complete a business combination (May 31, 2009).

 

We haveprovided for only an effective tax rate of slightly over 46% on a year andinception-to-date basis primarily because substantially all of the fundsdeposited in the Trust Account are exempt from federal, state and local taxes.  For the three months ended March 31,2009 and for the period from inception to March 31, 2009, our income tax (benefits)expenses were approximately $(127,134) and $1,610,332, respectively.

 

As of March 31,2009, we had approximately no unrestricted cash available to us for our activitiesin connection with identifying and conducting due diligence of a suitablebusiness combination, and for general corporate matters.  The following table shows the total fundsheld in the Trust Account through March 31, 2009:

 
| Gross proceeds  from our initial public offering of common stock and financing transaction                                                                         |       | $           | 138,000,000     |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|-----------------|------------|
| Gross proceeds  from private placement warrant holders                                                                                                             |       | 3,650,000   |            |
| Underwriters’  fee                                                                                                                                            |       | (4,140,000  | )               |
| Blue Sky fees                                                                                                                                                      |       | (25,000     | )               |
| Custodial fees                                                                                                                                                     |       | (17,100     | )               |
| Funds not placed  in trust                                                                                                                                         |       | (607,900    | )               |
|                                                                                                                                                               |       |        |            |
| Cash placed in  trust on May 31, 2007                                                                                                                         |       | 136,860,000 |            |
| Total investment  income earned on assets held in trust, May 31, 2007 through  March 31, 2009:                                                           |       | 5,461,635   |            |
| Subtotal                                                                                                                                                           |       | 142,321,635 |            |
|                                                                                                                                                               |       |        |            |
| Withdrawals from  the trust during the period May 31, 2007 through March 31, 2009:                                                                       |       |        |            |
| Payments for all  taxes and SEC filing fees                                                                                                                        |       | (2,789,166  | )               |
| Transfers to the  Company’s operating account for payment of additional offering costs, general  and administrative expenses and for working capital purposes |       | (1,493,428  | )               |
| Unspent monies  in checking                                                                                                                                        |       | (65,566     | )               |
| Custodial  transfer fees                                                                                                                                           |       | (420        | )               |
| Total transfers  from custodial accounting to checking                                                                                                             |       | (4,348,580  | )               |
| Total assets  held in trust account as of March 31, 2009                                                                                                      | ** ** | **$**       | **137,973,055** | ** ** |

 

Webelieve that we will have sufficient funds to allow us to operate through May 24,2009, assuming that a business combination is not consummated during thattime.  Approximately $1,500,000 ofworking capital over this time period will be funded from the interest earnedfrom the funds held in the Trust Account. Over this time period, we anticipate incurring expenses for thefollowing purposes:

 

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·                                          paymentof premiums associated with our director’s and officer’s insurance;

 

·                                          paymentof estimated taxes incurred as a result of interest income earned on fundscurrently held in the Trust Account;

 

·                                          duediligence and investigation of prospective target businesses;

 

·                                          legaland accounting fees relating to our SEC reporting obligations and generalcorporate matters;

 

·                                          structuringand negotiating a business combination, including the making of a down paymentor the payment of exclusivity or similar fees and expenses; and

 

·                                          othermiscellaneous expenses including the $9,950 per month to Shermen CapitalPartners, LLC.

 

**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 inand, if we do not consummate a suitable business combination prior to theprescribed liquidation date of the Trust Account (May 31, 2009), we maynot engage in, any substantive commercial business.  Accordingly, we are not and, until such timeas we consummate a business combination, we will not be, exposed to risksassociated with foreign exchange rates, commodity prices, equity prices orother market-driven rates or prices.  Thenet proceeds of the IPO held in the Trust Account may be invested by thetrustee only in U.S. “government securities,” defined as any Treasury Billissued by the United States government having a maturity of one hundred andeighty days or less, or any open ended investment company registered under theInvestment Company Act of 1940, as amended, that holds itself out as a moneymarket fund and bears the highest credit rating issued by a United Statesnationally recognized rating agency. Given our limited risk in our exposure to government securities andmoney market funds, we do not view the interest rate risk to be significant.

 

**ITEM 4.****                ****CONTROLSAND PROCEDURES**

 

Wemaintain disclosure controls and procedures that are designed to ensure thatinformation required to be disclosed in its reports filed pursuant to theSecurities Exchange Act of 1934, as amended, is recorded, processed,summarized, and reported within the time periods specified in the SEC’s rules andforms, and that such information is accumulated and communicated to ourmanagement, including our chief executive officer and our chief financialofficer (who is also the principal financial officer) as appropriate, to allowtimely decisions regarding required disclosure.

 

Ourdisclosure controls and procedures are designed to provide reasonable assuranceof achieving their objectives.  Wecarried out an evaluation, under the supervision and with the participation ofour management, including our chief executive officer and our chief financialofficer (who is also the principal financial officer), of the effectiveness ofthe design and operation of our disclosure control and procedures.  Our chief executive officer and our chieffinancial officer (who is also the principal financial officer) concluded thatour disclosure controls and procedures are effective at such reasonableassurance level as of the end of the quarterly period ended March 31,2009.

 

Therehave been no changes in our internal control over financial reporting duringthe quarterly period ended March 31, 2009 that have materially affected,or are reasonably likely to materially affect our internal control overfinancial reporting.

 

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**PART II:OTHER INFORMATION**

 

**ITEM 1.  LEGAL PROCEEDINGS**

** **

None.

 

**ITEM 1A.  RISK FACTORS**

** **

Therehave been no material changes to the risk factors disclosed under the caption “RiskFactors” beginning on page 29 of our Annual Report on Form 10-K filedwith the SEC on March 13, 2009.

 

**ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES ANDUSE OF PROCEEDS**

** **

None.

 

**ITEM 3.  DEFAULTS UPON SENIOR SECURITIES**

** **

None.

 

**ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS**

** **

None.

 

**ITEM 5.  OTHER INFORMATION**

** **

None.

 

**ITEM 6.  EXHIBITS**

 
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                              | ** ** |
|---------------------|------------|-----------------------------------------------------------------------------------------------------------|------------|
|                |       |                                                                                                      |       |
| 31.1                |       | Certification of Chief Executive Officer, pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002 |       |
|                |       |                                                                                                      |       |
| 31.2                |       | Certification of Chief Financial Officer, pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002 |       |
|                |       |                                                                                                      |       |
| 32.1                |       | Certification of Chief Executive Officer, pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002 |       |
|                |       |                                                                                                      |       |
| 32.2                |       | Certification of Chief Financial Officer, pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002 |       |

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrantcaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 

 
|                        | **SHERMEN WSC ACQUISITION  CORP.** |
|-----------------------------|------------------------------------|
|                        | ** **                         |
|                        |                               |
|                        | /s/ Francis P.  Jenkins, Jr.  |
|                        | Name:                              | Francis P.  Jenkins, Jr. |
|                        | Title:                             | Chairman, Chief  Executive Officer and |
|                        |                               | Director  (Principal Executive Officer) |
|                        |                               |
|                        |                               |
|                        | /s/ John E.  Toffolon, Jr.    |
|                        | Name:                              | John E.  Toffolon, Jr. |
|                        | Title:                             | Chief Financial  Officer and |
|                        |                               | Director  (Principal Financial and |
|                        |                               | Accounting  Officer) |
|                        |                               |
| Dated: April 28,  2009 |                               |

 

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