UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q/A
Amendment
No. 1
x
|
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934
For
the quarterly period ended September 30,
2007.
|
or
o
|
Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934
For
the transition period from _______ to
_______.
|
Commission
File Number: 001-32685
Energy
Infrastructure Acquisition Corp.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
|
|
20-3521405
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
Suite
1300, 1105 North Market Street
Wilmington,
Delaware 19899
(Address
of Principal Executive Offices including Zip Code)
(302)
655-1771
(Registrant’s
Telephone Number, Including Area Code)
_______________________________________________________
(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate
by check mark whether the Registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90
days. Yes
x
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
Accelerated Filer
o
|
Accelerated
Filer
o
|
Non-Accelerated
Filer
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
x
No
o
There
were 27,221,747 shares of the Registrant’s common stock issued and outstanding
as of November 16, 2007.
EXPLANATORY
NOTE
Energy
Infrastructure Acquisition Corp. (the "Company") is filing this Amendment
No. 1
on Form 10-Q/A (this “Amendment”) to its Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2007, which was originally filed on
November 19, 2007 (the “Original Filing”), to reflect the effect of the
restatement of its unaudited financial statements for the quarters ended
September 30, 2006, March 31, 2007, June 30, 2007 and September 30, 2007
and its
audited financial statements for the year ended December 31, 2006.
On
March
17, 2008, the Board of Directors of the Company determined that in connection
with the preparation and audit of the Company’s financial statements for the
year ended December 31, 2007, it was appropriate to restate its previously
issued unaudited financial statements for the quarters ended September 30,
2006,
and March 31, 2007, June 30, 2007 and September 30, 2007, and its audited
financial statements for the year ended December 31, 2006. The restated audited
financial statements for the year ended December 31, 2006 were included in
the
Company’s December 31, 2007 Annual Report on Form 10-K, which was filed with the
Securities and Exchange Commission on April 1, 2008.
The
Company determined that interest potentially distributable to redeeming
stockholders was incorrectly calculated for the period from July 21, 2006
through June 30, 2007. Accordingly, the related liability was therefore
overstated at September 30, 2006, December 31, 2006, March 31, 2007 and June
30,
2007. At September 30, 2007, the Company had recorded $592,918 of deferred
interest on funds held in trust as a liability payable to stockholders who
vote
against a business combination. Based on the Company’s revised calculations, the
deferred interest on funds held in trust should have been $564,697 at September
30, 2007. At no time did this matter affect the funds held in the trust account
or the rights of the Public Stockholders with respect to their redemption
rights.
The
impact of the restatement is summarized in Note 10. In conjunction with the
restatement, the Company also recorded two additional minor adjustments,
also
described in Note 10.
Although
this Form 10-Q/A sets forth the Original Filing in its entirety, this Form
10-Q/A only amends the financial statements, as described in this explanatory
note, Item 4. Controls and Procedures, and Exhibits 31.1, 31.2, and 32. This
Amendment does not affect any other parts of the Original Filing, and no
other
information in the Original Filing is amended hereby. Except for the amendments
described above, this Form 10-Q/A continues to describe conditions as of
the
date of the Original Filing, and the disclosures contained herein have not
been
updated to reflect events, results or developments that occurred after the
Original Filing, or to modify or update those disclosures affected by subsequent
events. Among other things, forward-looking statements made in the Original
Filing have not been revised to reflect events, results or developments that
occurred or facts that became known to us after the date of the Original
Filing,
and such forward-looking statements should be read in their historical context.
This Form 10-Q/A should also be read in conjunction with our filings made
with
the Securities and Exchange Commission subsequent to the date of the Original
Filing, including any Current Reports on Form 8-K filed subsequent to the
date
of the Original Filing.
Energy
Infrastructure Acquisition Corp. Index to Form 10-Q/A
Part
I.
|
|
Financial
Information
|
|
|
|
|
|
|
|
|
|
Item
1. Condensed Financial Statements (unaudited)
|
|
|
|
|
|
|
|
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Condensed
Balance Sheets
|
|
2
|
|
|
|
|
|
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Condensed
Statements of Operations
|
|
3
|
|
|
|
|
|
|
|
Condensed
Statement of Stockholders’ Equity
|
|
4
|
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|
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Condensed
Statements of Cash Flows
|
|
5
|
|
|
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Notes
to Condensed Financial Statements
|
|
6
|
|
|
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|
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
|
16
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|
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Item
3. Quantitative and Qualitative Disclosures About Market Risk
|
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18
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Item
4. Controls and Procedures
|
|
18
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Part
II.
|
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Other
Information
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|
|
|
|
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|
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
|
19
|
|
|
|
|
|
|
|
Item
6. Exhibits
|
|
20
|
|
|
|
|
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SIGNATURES
|
|
|
ITEM
1. CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
ENERGY
INFRASTRUCTURE ACQUISITION CORP.
(a
corporation in the development stage)
CONDENSED
BALANCE SHEETS
|
|
September
30,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(Restated)
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
|
|
$
|
59,201
|
|
$
|
553,716
|
|
Money
market funds - held in trust
|
|
|
215,529,086
|
|
|
211,414,806
|
|
Prepaid
expenses
|
|
|
122,667
|
|
|
113,960
|
|
Total
assets
|
|
$
|
215,710,954
|
|
$
|
212,082,482
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
486,378
|
|
$
|
202,185
|
|
Amounts
due to underwriter
|
|
|
2,509,642
|
|
|
2,757,186
|
|
Deferred
interest on funds held in trust
|
|
|
564,697
|
|
|
—
|
|
Accrued
interest payable to stockholder
|
|
|
17,583
|
|
|
58,649
|
|
Due
to stockholder
|
|
|
—
|
|
|
193,188
|
|
Term
loan payable to stockholder
|
|
|
—
|
|
|
475,000
|
|
Convertible
loans payable to stockholder
|
|
|
2,685,000
|
|
|
2,685,000
|
|
Total
liabilities
|
|
|
6,263,300
|
|
|
6,371,208
|
|
|
|
|
|
|
|
|
|
Common
stock subject to possible redemption - 6,525,118 shares at
redemption
value
|
|
|
64,619,129
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
Preferred
stock, $0.0001 par value; authorized - 1,000,000 shares;
issued -
none
|
|
|
—
|
|
|
—
|
|
Common
stock, $0.0001 par value; authorized - 89,000,000 shares;
issued and
outstanding - 27,221,747 shares, inclusive of 6,525,118 shares
subject to
possible redemption
|
|
|
2,722
|
|
|
2,722
|
|
Paid-in
capital in excess of par
|
|
|
152,662,078
|
|
|
143,932,603
|
|
Deficit
accumulated during the development stage
|
|
|
(7,836,275
|
)
|
|
(2,843,180
|
)
|
Total
stockholders’ equity
|
|
|
144,828,525
|
|
|
141,092,145
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
215,710,954
|
|
$
|
212,082,482
|
|
See
accompanying notes to condensed financial statements.
ENERGY
INFRASTRUCTURE ACQUISITION CORP.
(a
corporation in the development stage)
CONDENSED
STATEMENTS OF OPERATIONS (Unaudited)
|
|
Three
Months Ended
September
30,
|
|
Nine
Months Ended
September
30,
|
|
Period from
August 11,
2005
(Inception)
to
September
30,
2007
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
(Cumulative)
|
|
|
|
|
|
|
|
|
|
(Restated)
|
|
|
|
Operating
expenses, including stock-based compensation to management
of $2,909,825
and $2,424,854 for the three months ended September 30, 2007
and 2006,
$8,729,475 and $2,424,854 for the nine months ended September
30, 2007 and
2006, respectively, and $14,064,154 for the period from August
11, 2005
(inception) to September 30, 2007 (cumulative)
|
|
$
|
(3,257,857
|
)
|
$
|
(2,617,413
|
)
|
$
|
(9,903,261
|
)
|
$
|
(2,630,499
|
)
|
$
|
(15,829,116
|
)
|
Interest
income
|
|
|
1,326,669
|
|
|
1,353,304
|
|
|
4,989,032
|
|
|
1,354,370
|
|
|
8,130,346
|
|
Interest
expense - stockholder
|
|
|
(24,736
|
)
|
|
(22,291
|
)
|
|
(78,856
|
)
|
|
(28,243
|
)
|
|
(137,505
|
)
|
Net
loss
|
|
$
|
(1,955,924
|
)
|
$
|
(1,286,400
|
)
|
$
|
(4,993,095
|
)
|
$
|
(1,304,372
|
)
|
$
|
(7,836,275
|
)
|
Net loss
per common share - basic and diluted
|
|
$
|
(0.07
|
)
|
$
|
(0.06
|
)
|
$
|
(0.08
|
)
|
$
|
(0.11
|
)
|
$
|
(0.44
|
)
|
Weighted
average number of common shares outstanding - basic and
diluted
|
|
|
27,221,747
|
|
|
22,270,845
|
|
|
27,221,747
|
|
|
11,371,399
|
|
|
17,764,677
|
|
See
accompanying notes to condensed financial statements.
ENERGY
INFRASTRUCTURE ACQUISITION CORP.
(a
corporation in the development stage)
CONDENSED
STATEMENT OF STOCKHOLDERS’ EQUITY
|
|
Common
Stock
|
|
Paid-in
Capital
in
Excess
|
|
Deficit
Accumulated
During
the
Development
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
Amount
|
|
of
Par
|
|
Stage
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
August 11, 2005 (Inception)
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Sale
of shares to founding stockholders at $0.0043 per share
|
|
|
5,831,349
|
|
|
583
|
|
|
24,417
|
|
|
—
|
|
|
25,000
|
|
Net
loss for the period ended December 31, 2005
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,879
|
)
|
|
(1,879
|
)
|
Balance,
December 31, 2005
|
|
|
5,831,349
|
|
|
583
|
|
|
24,417
|
|
|
(1,879
|
)
|
|
23,121
|
|
Shares
surrendered and cancelled
|
|
|
(562,500
|
)
|
|
(56
|
)
|
|
56
|
|
|
—
|
|
|
—
|
|
Shares
issued in private placement and public offering, net of offering
costs
|
|
|
21,750,398
|
|
|
2,175
|
|
|
203,192,600
|
|
|
—
|
|
|
203,194,775
|
|
Shares
issued to underwriter
|
|
|
202,500
|
|
|
20
|
|
|
(20
|
)
|
|
—
|
|
|
—
|
|
Shares
reclassified to “Common stock subject to possible redemption”
(Restated)
|
|
|
—
|
|
|
—
|
|
|
(64,619,129
|
)
|
|
—
|
|
|
(64,619,129
|
)
|
Stock-based
compensation
|
|
|
—
|
|
|
—
|
|
|
5,334,679
|
|
|
—
|
|
|
5,334,679
|
|
Net
loss for the year (Restated)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,841,301
|
)
|
|
(2,841,301
|
)
|
Balance,
December 31, 2006 (Restated)
|
|
|
27,221,747
|
|
|
2,722
|
|
|
143,932,603
|
|
|
(2,843,180
|
)
|
|
141,092,145
|
|
Unaudited:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
—
|
|
|
—
|
|
|
8,729,475
|
|
|
—
|
|
|
8,729,475
|
|
Net
loss for the nine months ended September 30, 2007
(Restated)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,993,095
|
)
|
|
(4,993,095
|
)
|
Balance,
September 30, 2007 (Restated)
|
|
|
27,221,747
|
|
$
|
2,722
|
|
$
|
152,662,078
|
|
$
|
(7,836,275
|
)
|
$
|
144,828,525
|
|
See
accompanying notes to condensed financial statements
.
ENERGY
INFRASTRUCTURE ACQUISITION CORP.
(a
corporation in the development stage)
CONDENSED
STATEMENTS OF CASH FLOWS (Unaudited)
|
|
Nine
Months Ended
September
30,
|
|
Period from
August 11,
2005 (Inception) to
September
30,
2007
|
|
|
|
2007
|
|
2006
|
|
(Cumulative)
|
|
|
|
(Restated)
|
|
(Restated)
|
|
(Restated)
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(4,993,095
|
)
|
$
|
(1,304,372
|
)
|
$
|
(7,836,275
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
8,729,475
|
|
|
2,424,854
|
|
|
14,064,154
|
|
Interest
earned on funds held in trust
|
|
|
(5,552,300
|
)
|
|
(1,347,125
|
)
|
|
(8,682,659
|
)
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
(Increase)
decrease in -
|
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses
|
|
|
(8,707
|
)
|
|
(154,923
|
)
|
|
(122,667
|
)
|
Increase
(decrease) in -
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
284,193
|
|
|
151,186
|
|
|
486,378
|
|
Deferred
interest on funds held in trust
|
|
|
564,697
|
|
|
|
|
|
564,697
|
|
Accrued
interest payable to stockholder
|
|
|
(41,066
|
)
|
|
28,243
|
|
|
17,583
|
|
Net
cash used in operating activities
|
|
|
(1,016,803
|
)
|
|
(202,137
|
)
|
|
(1,508,789
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
Funds
placed in trust account
|
|
|
—
|
|
|
(209,250,000
|
)
|
|
(209,250,000
|
)
|
Withdrawals
from trust account
|
|
|
1,500,000
|
|
|
400,000
|
|
|
2,500,000
|
|
Net
cash provided by (used in) investing activities
|
|
|
1,500,000
|
|
|
(208,850,000
|
)
|
|
(206,750,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from initial sale of common stock
|
|
|
—
|
|
|
—
|
|
|
25,000
|
|
Gross
proceeds from private placement
|
|
|
—
|
|
|
8,253,980
|
|
|
8,253,980
|
|
Gross
proceeds from public offering
|
|
|
—
|
|
|
209,050,000
|
|
|
209,050,000
|
|
Payments
of offering costs
|
|
|
(309,524
|
)
|
|
(11,263,804
|
)
|
|
(11,695,990
|
)
|
Proceeds
from stockholder loans
|
|
|
—
|
|
|
3,160,000
|
|
|
3,460,000
|
|
Repayment
of stockholder loans
|
|
|
(475,000
|
)
|
|
(300,000
|
)
|
|
(775,000
|
)
|
Proceeds
from (repayments of) stockholder advances
|
|
|
(193,188
|
)
|
|
218,188
|
|
|
—
|
|
Net
cash provided by (used in) financing activities
|
|
|
(977,712
|
)
|
|
209,118,364
|
|
|
208,317,990
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
(494,515
|
)
|
|
66,227
|
|
|
59,201
|
|
Cash
at beginning of period
|
|
|
553,716
|
|
|
201,781
|
|
|
—
|
|
Cash
at end of period
|
|
$
|
59,201
|
|
$
|
268,008
|
|
$
|
59,201
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Non-cash
financing activity:
|
|
|
|
|
|
|
|
|
|
|
Increase
in accrued offering costs and placement fees, net
|
|
$
|
—
|
|
$
|
2,972,739
|
|
$
|
2,413,215
|
|
Common
stock subject to possible redemption
|
|
$
|
—
|
|
$
|
64,619,129
|
|
$
|
64,619,129
|
|
Cash
paid during the periods for:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
119,922
|
|
$
|
—
|
|
$
|
119,922
|
|
Income
taxes
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
See
accompanying notes to condensed financial statements.
ENERGY
INFRASTRUCTURE ACQUISITION CORP.
(a
corporation in the development stage)
NOTES
TO
CONDENSED FINANCIAL STATEMENTS (Unaudited)
September
30, 2007
1.
Basis of Presentation
The
financial statements of Energy Infrastructure Acquisition Corp. (the “Company”)
at September 30, 2007, for the three months and nine months ended September
30,
2007 and 2006, and for the period from August 11, 2005 (inception) to September
30, 2007 (cumulative), are unaudited. In the opinion of management, all
adjustments (including normal recurring adjustments) have been made that
are
necessary to present fairly the financial position of the Company as of
September 30, 2007, the results of its operations for the three months and
nine
months ended September 30, 2007 and 2006, and for the period from August
11,
2005 (inception) to September 30, 2007 (cumulative), and its cash flows for
the
nine months ended September 30, 2007 and 2006, and for the period from August
11, 2005 (inception) to September 30, 2007 (cumulative). Operating results
for
the interim periods presented are not necessarily indicative of the results
to
be expected for a full fiscal year. The condensed balance sheet at December
31,
2006 has been derived from the audited financial statements.
The
statements and related notes have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been
omitted pursuant to such rules and regulations. These financial statements
should be read in conjunction with the financial statements and other
information included in the Company’s Annual Report on Form 10-K, as filed with
Securities and Exchange Commission on April 1, 2008.
The
Company restated its September 30, 2007 financial
statements as described in Note 10.
2.
Organization and Proposed Business Operations
The
Company was incorporated in Delaware on August 11, 2005 as a blank check
company
formed to acquire, through a merger, capital stock exchange, asset acquisition
or other similar business combination, one or more businesses in the energy
or
energy-related industries.
At
September 30, 2007, the Company had not yet commenced any business operations
and is therefore considered a “corporation in the development stage”. All
activity through September 30, 2007 relates to the Company’s formation and the
public offering, as described below. The Company has selected December 31
as its
fiscal year-end.
The
Company’s ability to commence operations was contingent upon obtaining adequate
financial resources through a private placement in accordance with Regulation
S
under the Securities Act of 1933, as amended (the “Private Placement”), a public
offering (the “Public Offering”, and together with the Private Placement, the
“Offerings”) and a loan from an off-shore company controlled by the Company’s
President and Chief Operating Officer, all of which were completed by August
31,
2006. The Company’s management has broad discretion with respect to the specific
application of the net proceeds of the Offerings, although substantially
all of
the net proceeds of the Offerings are intended to be generally applied toward
consummating a business combination with an operating company. As used herein,
a
“target business” shall include one or more operating businesses that supports
the process of bringing energy, in the form of crude oil, natural and liquefied
petroleum gas, and refined and specialized products (such as petrochemicals),
from production to final consumption throughout the world, and a “business
combination” shall mean the acquisition by the Company of such a target
business. There can be no assurances that the Company will be able to
successfully effect a business combination.
On
July
21, 2006, the closing date of the Public Offering, $202,500,000 was placed
in a
trust account at Lehman Brothers Inc. maintained by Continental Stock Transfer
& Trust Company, New York, New York, as trustee (“Trust Account”). This
amount includes the net proceeds of the Offerings, a convertible loan in
the
principal amount of $2,550,000 made prior to the consummation of the Public
Offering by Robert Ventures Limited, an off-shore company controlled by the
Company’s President and Chief Operating Officer, a term loan in the principal
amount of $475,000 made prior to the consummation of the Public Offering
by the
Company’s President and Chief Operating Officer, $2,107,540 of contingent
underwriting compensation and placement fees (the “Discount”), to be paid to the
underwriters and Maxim Group LLC (“Maxim”), respectively, if and only if, a
business combination is consummated. The funds in the Trust Account will
be
invested until the earlier of (i) the consummation of the Company’s first
business combination or (ii) the liquidation of the Trust Account as part
of a
plan of dissolution and liquidation approved by the Company’s
stockholders.
In
addition to the contingent and/or deferred underwriting compensation and
placement fees of $2,107,540 held in trust as described above, the Company
was
obligated to pay $412,699 in deferred placement fees to Maxim in connection
with
the Regulation S private placement and an additional underwriting fee of
$500,000 deferred until the consummation of a business combination. Pursuant
to
amendments to the Underwriting Agreement, the underwriters subsequently agreed
to waive the Company’s obligation to pay the underwriters such additional
deferred underwriting fees of $500,000. On February 28, 2007, June 4, 2007
and
September 5, 2007, the Company paid the first three of four quarterly
installments of $103,175 due on the deferred placement fees of $412,699.
At
September 30, 2007, the fourth and final installment of $103,174 was included
in
accrued offering costs and placement fees.
On
August
31, 2006, the underwriters of the Company’s public offering exercised their
option to purchase an additional 675,000 units to cover over-allotments.
An
additional $6,750,000 was placed in the Trust Account, bringing the total
amount
placed into the Trust Account to $209,250,000. This additional amount includes
the net proceeds of the over-allotment of $6,615,000, and an additional
convertible loan made to the Company by Robert Ventures Limited of $135,000.
The
Company incurred an underwriting fee of $337,500 relating to this exercise,
of
which $202,500 is deferred and contingent upon the consummation of a business
combination.
During
the year ended December 31, 2006, the Company
reimbursed certain of its officers and directors for $286,102 of travel and
other similar reimbursable expenses through July 2006 that related directly
to
the Company's Public Offering, and which were therefore recorded as offering
costs and charged directly to stockholders' equity.
The
Company will use substantially all of the net proceeds to acquire a target
business, including identifying and evaluating prospective acquisition
candidates, selecting the target business, and structuring, negotiating and
consummating the business combination. To the extent that the Company’s capital
stock is used in whole or in part as consideration to effect a business
combination, the proceeds held in the Trust Account, as well as any other
net
proceeds not expended, will be used to finance the operations of the target
business. Management believes that the working capital available, in addition
to
the funds available outside of the trust account, will be sufficient to allow
the Company to either complete a business combination or to liquidate.
The
Company, after signing a definitive agreement for the acquisition of a target
business, will submit such transaction for stockholder approval. In the event
that public stockholders owning 30% or more of the outstanding stock sold
in the
Offerings vote against the business combination and elect to have the Company
redeem their shares for cash, the business combination will not be consummated.
All of the Company’s stockholders prior to the Offerings, including all of the
officers and directors of the Company (the “Initial Stockholders”), have agreed
to vote their 5,268,849 founding shares of common stock in accordance with
the
vote of the majority of shares purchased in the Offerings with respect to
any
business combination and to vote any shares they acquire in the Offerings,
or in
the aftermarket, in favor of the business combination. After consummation
of the
Company’s first business combination, all of these voting safeguards will no
longer be applicable.
With
respect to the first business combination that is approved and consummated,
any
holder of shares sold in the Public Offering (the “Public Stockholders”) who
votes against the business combination, may demand that the Company redeem
their
shares. The per share redemption price will equal $10.00 per share (inclusive
of
a pro rata portion of the Discount ($0.10 per share)) and interest earned
thereon, subject to certain reductions. Accordingly, Public Stockholders
holding
one share less than 30% of the aggregate number of shares sold in the Offerings
may seek redemption of their shares in the event of a business
combination.
The
Company’s Amended and Restated Certificate of Incorporation provides for
mandatory liquidation of the Company, without stockholder approval, in the
event
that the Company does not consummate a business combination within 18 months
from the date of the consummation of the Public Offering, or 24 months from
the
consummation of the Public Offering if certain extension criteria have been
satisfied. An off-shore company controlled by the Company’s President and Chief
Operating Officer purchased an aggregate of 825,398 units in the Private
Placement, but has waived its right to liquidation distributions with respect
to
the shares of common stock included in such units. Accordingly, in the event
of
such a liquidation, the amount in the Trust Account will be distributed to
the
holders of the shares sold in the Public Offering.
3.
Summary of Significant Accounting Policies
Cash
Equivalents and Concentrations
The
Company considers all highly liquid investments with an original maturity
of
three months or less when purchased to be cash equivalents. Such cash and
cash
equivalents, at times, may exceed federally insured limits. The Company
maintains its accounts with financial institutions with high credit
ratings.
Income
Taxes
The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes”, which requires the recognition
of deferred tax assets and liabilities for the expected impact of differences
between the financial statements and the tax basis of assets and
liabilities.
For
federal income tax purposes, substantially all expenses, except for interest
and
taxes, are deemed start-up and organization costs and must be deferred until
the
Company commences business operations, at which time they may be written
off
over a 60-month period.
The
Company records a valuation allowance to reduce its deferred tax assets to
the
amount that is more likely than not to be realized. In the event the Company
was
to determine that it would be able to realize its deferred tax assets in
the
future in excess of its recorded amount, an adjustment to the deferred tax
assets would be credited to operations in the period such determination was
made. Likewise, should the Company determine that it would not be able to
realize all or part of its deferred tax assets in the future, an adjustment
to
the deferred tax assets would be charged to operations in the period such
determination was made.
For
federal income tax purposes, net operating losses can be carried forward
for a
period of 20 years until they are either utilized or until they
expire.
Stock-Based
Compensation
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”), a revision to SFAS
No. 123, “Accounting for Stock-Based Compensation”. SFAS No. 123R superseded APB
No. 25 and amended SFAS No. 95, “Statement of Cash Flows”. SFAS No. 123R
requires companies to measure the cost of employee services received in exchange
for equity awards based on the grant date fair value of the awards, with
the
cost to be recognized as compensation expense in a company’s financial
statements over the period of benefit, which is generally the vesting period
of
the awards.
The
Company adopted SFAS No. 123R effective January 1, 2006, and is using the
modified prospective method in which compensation cost is recognized beginning
with the effective date (a) based on the requirements of SFAS No. 123R for
all
share-based payments granted after the effective date and (b) based on the
requirements of SFAS No. 123R for all awards granted to employees prior to
the
effective date of SFAS No. 123R that remained unvested on the effective
date.
Accordingly,
the Company recognizes compensation cost for equity-based compensation for
all
new or modified grants issued after December 31, 2005. The Company did not
have
any modified grants during 2006 or 2007.
In
addition, commencing January 1, 2006, the Company was required to recognize
the
unvested portion of the grant date fair value of awards issued prior to the
adoption of SFAS No. 123R based on the fair values previously calculated
for
disclosure purposes over the remaining vesting period of the outstanding
stock
options and warrants. The Company did not have any unvested outstanding stock
options and warrants at December 31, 2005.
Recent
Accounting Pronouncements
In
June
2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes—an
interpretation of FASB Statement No. 109” (“FIN 48”), which seeks to reduce the
diversity in practice associated with the accounting and reporting for
uncertainty in income tax positions. FIN 48 prescribes a comprehensive model
for
the financial statement recognition, measurement, presentation and disclosure
of
uncertain tax positions taken or expected to be taken in an income tax return.
FIN 48 presents a two-step process for evaluating a tax position. The first
step
is to determine whether it is more-likely-than-not that a tax position will
be
sustained upon examination, based on the technical merits of the position.
The
second step is to measure the benefit to be recorded from tax positions that
meet the more-likely-than-not recognition threshold, by determining the largest
amount of tax benefit that is greater than 50 percent likely of being realized
upon ultimate settlement, and recognizing that amount in the financial
statements. The Company adopted FIN 48 effective January 1, 2007. The adoption
of FIN 48 did not have any impact on the Company’s financial statements. The
Company recognizes interest and penalties related to uncertain tax positions
in
income tax expense. The tax years 2005 and 2006 remain open to examination
by
the major taxing jurisdictions to which it is subject.
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
157, “Fair Value Measurements” (“SFAS No. 157”), which establishes a formal
framework for measuring fair value under generally accepted accounting
principles. SFAS No. 157 defines and codifies the many definitions of fair
value
included among various other authoritative literature, clarifies and, in
some
instances, expands on the guidance for implementing fair value measurements,
and
increases the level of disclosure required for fair value measurements. Although
SFAS No. 157 applies to and amends the provisions of existing FASB and AICPA
pronouncements, it does not, of itself, require any new fair value measurements,
nor does it establish valuation standards. SFAS No. 157 applies to all other
accounting pronouncements requiring or permitting fair value measurements,
except for: SFAS No. 123R, share-based payment and related pronouncements,
the
practicability exceptions to fair value determinations allowed by various
other
authoritative pronouncements, and AICPA Statements of Position 97-2 and 98-9
that deal with software revenue recognition. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15,
2007,
and interim periods within those fiscal years. The Company is currently
assessing the potential effect of SFAS No. 157 on its financial
statements.
In
February 2007, the FASB issued Statement of Financial Accounting Standards
No.
159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(“SFAS No. 159”), which provides companies with an option to report selected
financial assets and liabilities at fair value. SFAS No. 159’s objective is to
reduce both complexity in accounting for financial instruments and the
volatility in earnings caused by measuring related assets and liabilities
differently. Generally accepted accounting principles have required different
measurement attributes for different assets and liabilities that can create
artificial volatility in earnings. SFAS No. 159 helps to mitigate this type
of
accounting-induced volatility by enabling companies to report related assets
and
liabilities at fair value, which would likely reduce the need for companies
to
comply with detailed rules for hedge accounting. SFAS No. 159 also establishes
presentation and disclosure requirements designed to facilitate comparisons
between companies that choose different measurement attributes for similar
types
of assets and liabilities. SFAS No. 159 requires companies to provide additional
information that will help investors and other users of financial statements
to
more easily understand the effect of the company’s choice to use fair value on
its earnings. SFAS No. 159 also requires companies to display the fair value
of
those assets and liabilities for which the company has chosen to use fair
value
on the face of the balance sheet. SFAS No. 159 does not eliminate disclosure
requirements included in other accounting standards, including requirements
for
disclosures about fair value measurements included in SFAS No. 157 and SFAS
No.
107. SFAS No. 159 is effective as of the beginning of a company’s first fiscal
year beginning after November 15, 2007. Early adoption is permitted as of
the
beginning of the previous fiscal year provided that the company makes that
choice in the first 120 days of that fiscal year and also elects to apply
the
provisions of SFAS No. 157. The Company is currently assessing the potential
effect of SFAS No. 159 on its financial statements.
Excluding
the foregoing, management does not believe that any other recently issued,
but
not yet effective, accounting standards, if currently adopted, would have
a
material effect on the Company’s financial statements.
Income
(Loss) per Common Share
Income
(loss) per common share (basic and diluted) is computed by dividing net income
(loss) by the weighted average number of shares of common stock outstanding
during the respective periods. The effect of outstanding warrants, stock
options
and convertible loans was either immaterial or anti-dilutive.
At
September 30, 2007 and December 31, 2006, the Company had the following
securities entitling the holder thereof to acquire shares of common stock
as
follows:
Warrants
|
|
|
21,750,398
|
|
Stock
options
|
|
|
3,585,000
|
|
Convertible
loans
|
|
|
537,000
|
|
Total
|
|
|
25,872,398
|
|
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of
expenses during the reporting period. Actual results could differ from those
estimates.
Fair
Value of Financial Instruments
The
carrying amounts of cash, money market funds, prepaid expenses, accounts
payable, accrued expenses, notes, loans and amounts due to stockholder
approximate their respective fair values due to the short-term nature of
these
items and/or the current interest rates payable in relation to current market
conditions.
4.
Private Placement and Public Offering
Private
Placement
On
January 2, 2006, George Sagredos, the Company’s President and Chief Operating
Officer, entered into a binding firm commitment subscription agreement to
purchase 825,398 units of the Company at $10.00 per unit pursuant to Regulation
S under the Securities Act of 1933, as amended. In June 2006, Mr. Sagredos
assigned such subscription agreement to Energy Corp., an off-shore Company
that
he controls, to purchase such securities on the same terms. On July 17, 2006,
the subscription of $8,253,980 was funded.
Public
Offering
On
July
21, 2006, the Company, pursuant to its Public Offering, sold 20,250,000 units
at
a price of $10.00 per unit. Each unit consists of one share of the Company’s
common stock, $0.0001 par value, and one redeemable common stock purchase
warrant (“warrant”). Each warrant entitles the holder to purchase from the
Company one share of common stock at an exercise price of $8.00 commencing
on
the later of the completion of a business combination with a target business
or
July 17, 2007, one year from the effective date of the Public Offering, and
expires on July 17, 2010, four years from the date of the prospectus. The
warrants will be redeemable at a price of $0.01 per warrant upon 30 days
notice
after the warrants become exercisable, only in the event that the last sale
price of the common stock is at least $14.25 per share for any 20 trading
days
within a 30 trading day period ending on the third day prior to the date
on
which a notice of redemption is given.
On
August
31, 2006, the underwriters of the Public Offering exercised their option
to
purchase an additional 675,000 units to cover over-allotments.
The
common stock and warrants included in the units began to trade separately
on
October 4, 2006, and trading in the units ceased on such date.
The
Company will use its best efforts to cause a registration statement to become
effective on or prior to the commencement of the warrant exercise period
and to
maintain the effectiveness of such registration statement until the expiration
of the warrants. If the Company is unable to maintain the effectiveness of
such
registration statement until the expiration of the warrants, and therefore
is
unable to deliver registered shares, the warrants may become
worthless.
5.
Notes and Advances Payable to Stockholder
On
July
17, 2006, Robert Ventures Limited, an off-shore company controlled by Mr.
Sagredos, loaned $2,550,000 to the Company in the form of a convertible note.
Such loan bears interest at a per annum rate equivalent to the per annum
interest rate applied to funds held in the Trust Account during the quarterly
period covered by such interest payment (average 3.526% from inception to
September 30, 2007). The Company is obligated to make quarterly interest
payments on such loan following the expiration of the first full quarter
after
the date that it has drawn down at least $1,000,000 from accrued interest
on the
Trust Account to fund its working capital requirements. During the quarter
ended
December 31, 2006, the Company had met this requirement. Accordingly, on
March
12, 2007, the Company made its first quarterly interest payment of interest
accrued on this loan through February 28, 2007. Principal on the loan is
due the
earlier of the Company’s liquidation or the consummation of a business
combination. The holder of the loan has the option to convert all of the
principal of such indebtedness into units that are identical to the units
offered in the Public Offering, at a conversion price of $10.00 a unit,
commencing two days following the date the Company files a preliminary proxy
statement with respect to a proposed business combination. In the event that
the
holder of the convertible loan elects to convert the full amount of the loan,
it
will receive 255,000 units which, upon separation of the units would result
in
the holder having an additional 255,000 shares of common stock and 255,000
warrants.
On
August
31, 2006, in connection with the underwriters’ exercise of their option to
purchase an additional 675,000 units to cover over-allotments, Roberts
Ventures
Limited loaned an additional $135,000 to the Company in the form of a
convertible loan under the same terms and conditions as described above.
On
March 12, 2007, the Company made its first quarterly interest payment of
interest accrued on this loan through February 28, 2007. In the event that
the
holder of the additional convertible loan elects to convert the full amount
of
the loan, it will receive an additional 13,500 units which, upon separation
of
the units, would result in the holder having an additional 13,500 shares
of
common stock and 13,500 warrants.
On
July
17, 2006, Mr. Sagredos also loaned $475,000 to the Company. Such loan bears
interest at a per annum interest rate equivalent to the per annum interest
rate
applied to the funds held in the Trust Account during the same period that
such
loan is outstanding (average 3.526% from inception to September 30, 2007).
The
Company is obligated to repay the principal and accrued interest on such
loan
following the earlier of (i) the expiration of the second full quarter
after the
date that it has drawn down at least $1,000,000 from accrued interest on
the
Trust Account to fund its working capital requirements, (ii) the consummation
of
a business combination by the Company, or (iii) the Company’s dissolution and
liquidation. During the quarter ended December 31, 2006, the Company had
met
this requirement. Accordingly, the Company repaid the principal of $475,000
and
accrued interest of $14,437 on this loan on June 4, 2007.
In
addition to the above, the Company was indebted to Mr. Sagredos for non-interest
bearing advances totaling $193,188 as of December 31, 2006. On May 7, 2007,
such
non-interest bearing advances were repaid in full.
6.
Common Stock
The
Company is authorized to issue 89,000,000 shares of common stock. On December
30, 2005, the Company issued 3,956,349 shares of common stock to its founders.
As of April 21, 2006, the Company effected a 0.4739219-for-1 stock dividend,
which resulted in the issuance of an additional 1,875,000 shares to its
founders. The Company’s financial statements give retroactive effect to such
stock dividend.
On
July
18, 2006, certain of the Company’s stockholders surrendered for cancellation an
aggregate 562,500 shares of common stock in order to maintain the percentage
ownership of its stockholders prior to the Public Offering.
On
July
18, 2006, the Company agreed to issue to Maxim, as representative of the
underwriters, 202,500 shares of its common stock to be deposited into escrow,
subject to forfeiture, and released to the representative only upon consummation
of a business combination.
On
July
18, 2006, the founders agreed to surrender, without consideration, up to
an
aggregate of 270,000 of their shares of common stock to the Company for
cancellation upon consummation of a business combination in the event Public
Stockholders exercise their right to have the Company redeem their shares
for
cash. Accordingly, for every 23 shares redeemed by Public Stockholders,
the
founders have agreed to surrender one share for cancellation.
7.
Preferred Stock
The
Company is authorized to issue 1,000,000 shares of preferred stock with such
designations, voting and other rights and preferences, as may be determined
from
time to time by the Board of Directors.
8.
Stock Options
On
July
18, 2006, the Company rescinded all prior agreements to grant stock options
to
Mr. Sagredos and to Mr. Theotokis. Such agreements were to be effective on
the
closing date of the Public Offering. Also on July 18, 2006, the Company
authorized the grant to Mr. Sagredos on the closing date of the Public Offering
of an option to purchase an aggregate of 2,688,750 shares of common stock
at an
exercise price of $0.01 per share, with the option exercisable in four quarterly
installments of 672,187 options on each of the first three quarterly installment
dates and 672,189 options on the fourth quarterly installment date, with
the
first installment vesting on the date of expiration of the three-month period
immediately following the consummation of a business combination, and with
the
vesting of such options contingent upon Mr. Sagredos being an officer of
the
Company on each respective vesting date. The Company also approved the grant
to
Mr. Theotokis on the closing date of the Public Offering of an option to
purchase an aggregate of 896,250 shares of Common Stock at an exercise price
of
$0.01 per share, with such option exercisable in four quarterly installments
of
224,062 options on each of the first three quarterly installment dates and
224,064 options on the fourth quarterly installment date, with the first
installment vesting on the date of expiration of the three-month period
immediately following the consummation of a business combination, subject
to Mr.
Theotokis being an officer the Company on each respective vesting date. The
options granted to Mr. Sagredos and to Mr. Theotokis are exercisable for
a term
of five years after the vesting date.
Because
the grant of the options is deemed to be stock-based compensation, commencing
on
the date of grant (which occurred at the closing of the Public Offering),
pursuant to SFAS No. 123R, the Company is required to record a charge to
operations in an amount equal to the fair value of such options, which the
Company has estimated using the Black-Scholes option-pricing model, to be
an
aggregate of approximately $34,920,000. In valuing the options, the Company
did
not consider it necessary to evaluate possible variations in volatility,
since,
due to the large spread between the strike price and the fair value of the
underlying stock, the Black-Scholes formula yields a value capped at the
fair
value of the underlying common share. In accounting for the options, the
Company
considers the consummation of a business combination to be a performance
condition that is expected to be met. As a result of including the two-year
period that the Company has to effect a business combination and the one-year
vesting period of the options, the Company expects that the charge to earnings
with respect to each quarterly installment will be amortized over a maximum
period of 36 months, which is the implicit service period. Accordingly, on
an
aggregate basis, as a result of the grant of such options, the Company will
recognize the remaining costs as follows, assuming the 36 month amortization
period following the closing of the Public Offering:
Years
Ending December 31,
|
|
Amount
|
|
2007
(three months)
|
|
$
|
2,910,000
|
|
2008
|
|
|
11,640,000
|
|
2009
|
|
|
6,310,000
|
|
|
|
$
|
20,860,000
|
|
In
the
event that the Company consummates a business combination in less than two
years
from the closing date of the Public Offering, the above amortization schedule
would be accelerated and the Company therefore would record an increased
charge
to operations through such date based on the revised estimate of the implicit
service period.
The
aggregate intrinsic value of stock options outstanding at June 30, 2007 was
$35,204,700.
9.
Commitments and Contingencies
The
Company will not proceed with a business combination if Public Stockholders
owning 30% or more of the shares sold in the Private Placement and Public
Offering vote against the business combination and exercise their redemption
rights. Accordingly, the Company may effect a business combination if Public
Stockholders owning up to one share less than 30% of the aggregate shares
sold
in the Private Placement and Public Offering (6,525,118 shares) exercise
their
redemption rights. If this occurred, the Company would be required to redeem
for
cash up to one share less than 30% of the 21,750,398 shares of common stock
included in the units, or 6,525,118 shares of common stock, at an expected
initial per-share redemption price of $10.00, plus a pro rata share of
the
accrued interest earned on the trust account (net of (i) taxes payable
on
interest earned, (ii) up to $3,430,111 of interest income released to the
Company to fund its working capital, (iii) payment of quarterly interest
payments on the convertible loan and repayment of the convertible loan
upon the
earlier to occur of the Company’s dissolution and liquidation or a business
combination, if not converted, and (iv) repayment of the term loan, plus
accrued
interest), including a pro rata share of the accrued interest earned on
the
underwriters’ contingent compensation. However, the ability of stockholders to
receive $10.00 per unit is subject to any valid claims by the Company’s
creditors which are not covered by amounts held in the trust account or
the
indemnities provided by the Company’s officers and directors. The expected
redemption price per share is greater than each stockholder’s initial pro rata
share of the trust account of approximately $9.90. Of the excess redemption
price, approximately $0.10 per share represents a portion of the underwriters’
contingent fee, which they have agreed to forego for each share that is
redeemed. Accordingly, the total contingent underwriting compensation payable
to
the underwriters in the event of a business combination will be reduced
by
approximately $0.10 for each share that is redeemed. The balance will be
paid
from proceeds held in the trust account, which are payable to the Company
upon
consummation of a business combination. In order to partially offset the
resulting dilution to non-redeeming stockholders, management has agreed
to
surrender shares to the Company (at an assumed value of $10.00 per share)
for
cancellation, up to a maximum of 270,000 shares. Even if less than 30%
of the
stockholders exercise their redemption rights, the Company may be unable
to
consummate a business combination if such redemption leaves the Company
with
funds representing less than a fair market value at least equal to 80%
of the
amount in the trust account (excluding any funds held for the benefit of
Maxim
and the other underwriters) at the time of such acquisition, which amount
is
required as a condition to the consummation of the Company’s initial business
combination, and the Company may be forced to find additional financing
to
consummate such a business combination, consummate a different business
combination or liquidate.
On
July
24, 2006, the Company entered into a two-year agreement for investor relations
and financial media support services for a minimum monthly fee of $3,500
before
a business combination, or $6,500 after a business combination.
The
Company has engaged Maxim, the representative of the underwriters of its
Public
Offering, on a non-exclusive basis, as its agent for the solicitation of
the
exercise of the warrants. To the extent not inconsistent with the guidelines
of
the NASD and the rules and regulations of the Securities and Exchange
Commission, the Company has agreed to pay the representative for bona fide
services rendered a commission equal to 5% of the exercise price for each
warrant exercised more than one year after the date of the prospectus if
the
exercise was solicited by the underwriters. In addition to soliciting,
either
orally or in writing, the exercise of the warrants, the representative’s
services may also include disseminating information, either orally or in
writing, to warrant holders about the Company or the market for the Company’s
securities, and assisting in the processing of the exercise of the warrants.
No
compensation will be paid to the representative upon the exercise of the
warrants if:
|
—
|
the
market price of the underlying shares of common stock is lower
than the
exercise price;
|
|
—
|
the
holder of the warrants has not confirmed in writing that the
representative solicited the
exercise;
|
|
—
|
the
warrants are held in a discretionary
account;
|
|
—
|
the
warrants are exercised in an unsolicited transaction;
or
|
|
—
|
the
arrangement to pay the commission is not disclosed in the prospectus
provided to warrant holders at the time of
exercise.
|
As
of
October 1, 2006, the Company terminated its Administrative Services Agreement
with an unaffiliated third party, in connection with which the Company
paid
$7,500 per month commencing July 21, 2006, the closing date of the Public
Offering, for office space and general and administrative expenses, and
entered
into a Consulting Agreement with the same party providing for the same
monthly
fee of $7,500, for a term concluding on the consummation of a business
combination.
In
October 2006, the Company contracted with an unrelated party for the use
of
administrative services, including shared facilities and personnel, for
a term
of one year at a minimum cost of $10,000. This agreement automatically
renewed
in October 2007.
On
December 18, 2006, the Company entered into an agreement with Maxim for
professional services to be rendered in connection with the acquisition
of a
target company. The agreement terminates on July 18, 2008 and requires
the
Company to pay Maxim a financial advisor fee equal to 0.75%, not to exceed
$2,750,000, of the total consideration, as defined in the agreement, paid
in
such acquisition, plus a finder’s fee equal to 0.5% of the consideration for any
target introduced to the Company.
During
2007, the Company entered into various agreements for assistance in identifying,
evaluating, negotiating and arranging funding for potential acquisition
opportunities. Generally, the agreements are terminable upon short notice
by
either party and provide for a success fee of 1% of the transaction value
in the
event the adviser’s efforts lead to a successful business
combination.
10.
Restatement
During
the year ended December 31, 2007, the Company determined that interest
potentially distributable to redeeming stockholders was incorrectly calculated
and the related liability was therefore overstated at September 30, 2006,
December 31, 2006, March 31, 2007 and June 30, 2007. At no time did this
matter
affect the funds held in the trust account or the rights of the Public
Stockholders with respect to their redemption rights. In addition, the
Company
also recorded two additional minor adjustments as further described below.
The
impact of the restatement on the Company’s condensed balance sheet at September
30, 2007, and the related condensed statements of operations for the
periods
then ended, is summarized as shown below. The restatement did not have
any
effect on the Company’s statements of cash flows for the periods ended September
30, 2007.
|
|
As
Originally
Filed
|
|
Adjustments
-
Increase
(Decrease)
|
|
As
Restated
|
|
Condensed
Balance Sheet - September 30, 2007:
|
|
|
|
|
|
|
|
Total
current assets
|
|
$
|
215,710,954
|
|
$
|
|
|
$
|
215,710,954
|
|
Total
assets
|
|
|
215,710,954
|
|
|
|
|
|
215,710,954
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
6,195,094
|
|
|
(28,221)
(1
|
)
|
|
6,263,300
|
|
|
|
|
|
|
|
96,427
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock subject to possible redemption
|
|
|
64,597,399
|
|
|
21,730
(3
|
)
|
|
64,619,129
|
|
Paid-in
capital in excess of par
|
|
|
152,683,808
|
|
|
(21,730)
(3
|
)
|
|
152,662,078
|
|
Deficit
accumulated during the development stage
|
|
|
(7,768,069
|
)
|
|
68,206
|
|
|
(7,836,275
|
)
|
Total
stockholders’ equity
|
|
|
144,918,461
|
|
|
(89,936
|
)
|
|
144,828,525
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Statement of Operations - Three Months Ended September 30,
2007:
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
1,338,928
|
|
|
8,854
(1
|
)
|
|
1,326,669
|
|
|
|
|
|
|
|
(21,113)
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
to deferred interest on funds held in trust
|
|
|
2,099,913
|
|
|
(2,099,913)(1
|
)
|
|
|
|
Net
income (loss)
|
|
|
156,248
|
|
|
(2,112,172
|
)
|
|
(1,955,924
|
)
|
Net
income (loss) per common share - basic and diluted
|
|
|
0.00
|
|
|
(0.07
|
)
|
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Statement of Operations - Nine Months Ended September 30,
2007:
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
3,914,062
|
|
|
1,136,940
(1
|
)
|
|
4,989,022
|
|
|
|
|
|
|
|
(61,980)
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
to deferred interest on funds held in trust
|
|
|
2,099,913
|
|
|
(2,099,913)(1
|
)
|
|
|
|
Net
loss
|
|
|
(3,968,142
|
)
|
|
1,024,953
|
|
|
(4,993,095
|
)
|
Net
loss per common share - basic and diluted
|
|
|
(0.15
|
)
|
|
(0.03
|
)
|
|
(0.18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Statement of Operations - Period from August 11, 2005 (Inception)
to
September 30, 2007 (Cumulative):
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
6,098,639
|
|
|
2,128,134
(1
|
)
|
|
8,130,346
|
|
|
|
|
|
|
|
(96,427)
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
to deferred interest on funds held in trust
|
|
|
2,099,913
|
|
|
(2,099,913)(1
|
)
|
|
|
|
Net
loss
|
|
|
(7,768,069
|
)
|
|
68,206
|
|
|
(7,836,275
|
)
|
Net
loss per common share - basic and diluted
|
|
|
(0.44
|
)
|
|
|
|
|
(0.44
|
)
|
Description
of adjustments:
(1)
|
To
reduce the liability for deferred interest on funds held in
trust.
|
(2)
|
To
accrue for interest due to the underwriter for the portion
of the
underwriter’s fees held in trust.
|
(3)
|
To
increase common shares subject to redemption from 29.99% (6,522,945
shares) to one share less than 30% (6,525,118 shares), an increase
of
2,173
shares, recorded at $10.00 per
share.
|
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward
Looking Statements
This
Quarterly Report on Form 10-Q/A includes forward-looking statements within
the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to known and unknown
risks, uncertainties and assumptions about us that may cause our actual results,
levels of activity, performance or achievements to be materially different
from
any future results, levels of activity, performance or achievements expressed
or
implied by such forward-looking statements. In some cases, 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 to such a discrepancy include, but are not limited to,
those
described under Item 1A “Risk Factors” in our final prospectus dated July 18,
2006, as amended, relating to the Public Offering, and in our other Securities
and Exchange Commission filings. The following discussion should be read in
conjunction with our Financial Statements and related Notes thereto included
elsewhere in this report.
Overview
We
were
formed on August 11, 2005 to acquire, through a merger, capital stock exchange,
asset acquisition or other similar business combination, one or more businesses
that supports the process of bringing energy, in the form of crude oil, natural
and liquefied petroleum gas, and refined and specialized products (such as
petrochemicals), from production to final consumption throughout the world.
Our
initial business combination must be with a target business or businesses whose
fair market value is at least equal to 80% of the amount in the Trust Account
(excluding any funds held for the benefit of Maxim Group LLC and the other
underwriters) at the time of such acquisition. We intend to utilize cash derived
from the proceeds of our recently completed initial public offering, our capital
stock, debt or a combination of cash, capital stock and debt, in effecting
a
business combination.
Results
of operations for the three-month period ended September 30,
2007
We incured
a net loss of $1,955,924 for the three-month period ended September 30,
2007, compared to a net loss of $1,286,400 for the three months ended September
30, 2006. The net loss consisted of
$3,257,857
of operating expenses and $24,736 of interest expense, reduced by interest
income of $1,326,669. Operating expenses of $3,257,857 consisted of consulting
and professional fees of $207,651, stock-based compensation of $2,909,825,
insurance expense of $36,844, travel expense of $34,352, Delaware franchise
fees
of $41,250 and other operating costs of $ 27,935.
The
trust
account earned interest of $1,912,474 during the three months ended September
30, 2007, including $564,697 of interest income attributable to common stock
subject to possible redemption and $21,113 of interest income attributable
to
underwriters’ deferred fees. For the three months ended September 30, 2006, the
trust account earned interest of $1,361,667.
Until
we
enter into a business combination, we will not generate operating revenues.
Results
of operations for the nine-month period ended September 30,
2007
We
incurred a net loss of $4,993,095 for the nine-month period ended September
30,
2007, compared to a net loss of $1,304,372 for the nine months ended September
30, 2006. The net loss consisted of $9,903,261 of operating expenses and
$78,856
of interest expense, reduced by interest income of $4,989,022. Operating
expenses of $9,903,261 consisted of consulting and professional fees of
$711,640, stock-based compensation of $8,729,475, insurance expense of $112,469,
travel expense of $144,821, Delaware franchise fees of $123,750 and other
operating costs of $81,106.
The
trust
account earned interest of $5,614,280 during the nine months ended September
30,
2007, including $564,697 of interest income attributable to common stock
subject
to possible redemption and $61,980 of interest income attributable to
underwriters’ deferred fees. For the nine months ended September 30, 2006, the
trust account earned interest of $1,361,667.
Until
we
enter into a business combination, we will not generate operating revenues.
Liquidity
and Capital Resources
On
July
17, 2006, we sold 825,398 units in a Regulation S private placement to Energy
Corp., a corporation formed under the laws of the Cayman Islands, which is
controlled by our President and Chief Operating Officer. On July 21, 2006,
we
consummated our initial public offering of 20,250,000 units. Each unit in the
private placement and the public offering consists of one share of common stock
and one redeemable common stock purchase warrant. Each warrant entitles the
holder to purchase from us one share of our common stock at an exercise price
of
$8.00. Prior to the closing of the initial public offering Robert Ventures
Limited, an off-shore company controlled by the our President and Chief
Operating Officer made a convertible loan to us in the principal amount of
$2,550,000 and our President and Chief Operating Officer made a term loan to
us
in the principal amount of $475,000.
On
July
21, 2006, the closing date of our public offering, $202,500,000 was placed
in
the Trust Account at Lehman Brothers’ Inc. maintained by Continental Stock
Transfer & Trust Company, New York, New York, as trustee. This amount
includes the net proceeds of the Offerings, the $2,550,000 convertible loan
and
the $475,000 term loan, $2,107,540 of contingent underwriting compensation
and
placement fees, to be paid to the underwriters and Maxim Group LLC,
respectively, if and only if, a business combination is consummated, and
$412,699 in deferred placement fees to be paid to Maxim Group LLC in connection
with the Private Placement. The funds in the Trust Account will be invested
until the earlier of (i) the consummation of the Company’s first business
combination or (ii) the liquidation of the Trust Account as part of a plan
of
dissolution and liquidation approved by the Company’s stockholders.
On
August
31, 2006, the underwriters of our public offering exercised their option to
purchase an additional 675,000 units to cover over-allotments. An additional
$6,750,000 was placed in the Trust Account, bringing the total amount in the
Trust Account to $209,250,000. This additional amount includes, $6,615,000,
representing the net proceeds of the over-allotment, and an additional
convertible loan made to us by Robert Ventures Limited in the amount of
$135,000.
We
will
use substantially all of the net proceeds of this offering to acquire a target
business, including identifying and evaluating prospective acquisition
candidates, selecting the target business, and structuring, negotiating and
consummating the business combination. To the extent that our capital stock
is
used in whole or in part as consideration to effect a business combination,
the
proceeds held in the Trust Account, as well as any other net proceeds not
expended, will be used to finance the operations of the target business. We
have
agreed with Maxim Group, LLC, the representative of the underwriters, that
approximately $3,430,000 of the interest earned on the proceeds being held
in
the trust account for our benefit (net of taxes payable) will be released to
us
upon our request, and in such intervals and in such amounts as we desire and
are
available to fund our working capital. We believe that the working capital
available to us, in addition to the funds available to us outside of the trust
account will be sufficient to allow us to either complete a business
combination or to liquidate. We have estimated that the $3,430,000 shall be
allocated approximately as follows: $1,017,301 for working capital and reserves
(including finders’ fees, consulting fees or other similar compensation,
potential deposits, down payments, franchise taxes or funding of a “no-shop”
provision with respect to a particular business combination and the costs of
dissolution, if any); $7,500 per month in connection with a consulting agreement
we entered into on October 16, 2006; $800,000 for legal, accounting and other
expenses attendant to the structuring and negotiation of a business combination;
$250,000 with respect to legal and accounting fees relating to our SEC reporting
obligations; $620,000 for due diligence, identification and research of
prospective target business and reimbursement of out of pocket due diligence
expenses to management; $150,000 for director and officer liability insurance
premiums; and $412,699 for placement fees to Maxim Group LLC related to the
Regulation S private placement. In addition, additional interest earned on
the
proceeds held in trust will be allocated (i) to make quarterly interest payments
aggregating approximately $215,000 on the $2,550,000 convertible loan and the
$135,000 convertible loan and (ii) to repay the $475,000 term loan. Accrued
interest shall also be applied to repay the principal of the convertible loan
on
the earlier of our dissolution and liquidation or a business combination to
the
extent such loan has not been converted.
In
addition to the above described allocation of interest accrued on the trust
account, at September 30, 2007, we had funds aggregating $59,201 held
outside of the trust account.
Off-Balance
Sheet Arrangements
We
do not
have any off-balance sheet arrangements.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Market
risk is the sensitivity of income to changes in interest rates, foreign
exchanges, commodity prices, equity prices, and other market-driven rates or
prices. We are not presently engaged in and, if a suitable business target
is
not identified by us prior to the prescribed liquidation date of the trust
account, we may not engage in, any substantive commercial business. Accordingly,
we are not and, until such time as we consummate a business combination, we
will
not be, exposed to risks associated with foreign exchange rates, commodity
prices, equity prices or other market-driven rates or prices. The net proceeds
of our initial public offering held in the trust account have been invested
only
in money market funds meeting certain conditions under Rule 2a-7 promulgated
under the Investment Company Act of 1940. Given our limited risk in our exposure
to money market funds, we do not view the interest rate risk to be significant.
ITEM
4. CONTROLS AND PROCEDURES
An
evaluation of the effectiveness of our disclosure controls and procedures
as of
September 30, 2007, was made under the supervision and with the participation
of
our management, including our chief executive officer and chief financial
officer.
On
March
17, 2008, our Board of Directors determined that, in connection with the
preparation and audit of the Company’s financial statements for the year ended
December 31, 2007, it was appropriate to restate our previously issued audited
financial statements for the year ended December 31, 2006 and our unaudited
financial statements for the quarters ended September 30, 2006, and March
31,
June 30 and September 30, 2007.
The
restatements relate to the incorrect calculation of interest potentially
distributable to redeeming stockholders for the period from July 21, 2006
through June 30, 2007. At June 30, 2007, we had recorded $2,119,280 of deferred
interest on funds held in trust as a liability payable to stockholders who
vote
against a business combination. Based on our revised calculations, the deferred
interest on funds held in trust should have been $19,367 at June 30, 2007.
At no
time did this matter affect the funds held in the trust account or the rights
of
the Public Stockholders with respect to their redemption rights.
Based
on
our assessment of this issue when it was originally identified, we initially
recorded an adjustment to our interim financial statements for the three
months
and nine months ended September 30, 2007 to reflect this adjustment as a
gain in
our statement of operations. However, management reviewed this matter in
conjunction with the audit of the 2007 financial statements and, based on
various factors, including the potential business combination with Vanship,
determined that it was appropriate to restate our financial statements to
more
accurately reflect the accounting for the interest potentially distributable
to
redeeming stockholders in the appropriate periods.
Due
to
the restatement of our financial statements, our management determined that
there was a material weakness in the Company’s internal control over financial
reporting as of September 30, 2007. In response, we have implemented expanded
review procedures at each period end to address accounting issues that could
affect our financial reporting. During the most recently completed fiscal
quarter, there has been no significant change in our internal control over
financial reporting that has materially affected, or is reasonably likely
to
materially affect, our internal control over financial reporting.
PART
II - OTHER INFORMATION
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
On
July
17, 2006, we sold 825,398 units in a Private Placement to Energy Corp., a
corporation formed under the laws of the Cayman Islands, which is controlled
by
our President and Chief Operating Officer. The units were sold at a purchase
price of $10.00 per unit, generating gross proceeds of $8,253,980.
On
July
21,
2006
,
we
consummated our initial public offering of 20,250,000 units and on August 31,
2006, the underwriters of our public offering exercised
their
option to purchase an additional 675,000 units to cover
over-allotments
.
Each
unit consists of one share of common stock and one warrant. Each warrant
entitles the holder to purchase from us one share of our common stock at an
exercise price of $8.00. The units were sold at an offering price of $10.00
per
unit, generating total gross proceeds of $209,250,000. Maxim Group LLC acted
as
lead underwriter. The securities sold in the offering were registered under
the
Securities Act of 1933 on a registration statement on Form S-1 (No. 333-131648).
The Securities and Exchange Commission declared the registration statement
effective on
July
17,
2006
.
Prior
to
the closing of the initial public offering Robert Ventures Limited, an off-shore
company controlled by the our President and Chief Operating Officer made a
convertible loan to us in the principal amount of $2,550,000 and our President
and Chief Operating Officer made a term loan to us in the principal amount
of
$475,000. On August 31, 2006, Robert Ventures Limited made an additional
convertible loan to us in the amount of $135,000.
We
incurred a total of $12,035,000 in underwriting discounts and commissions,
$495,239 in placement fees and $1,603,804 of expenses related to the public
offering (including the over-allotment) and private placement.
After
deducting the
underwriting
discounts and commissions, the placement fee and the offering expenses
(excluding $2,972,739 in underwriting discounts, commissions and placement
fees
for which the payment was deferred), the total net proceeds to us from the
offering, the private placement and the loans was $209,300,176.
Of
the
proceeds,
$209,250,000
is being
held in a trust account and invested until the earlier of (i) the consummation
of the first business combination or (ii) the distribution of the trust account
as described below. The amount in the Trust Account includes
$2,025,000
of
contingent underwriting compensation and
$82,540
of
contingent private placement fees which will be paid to the underwriters if
a
business combination is consummated, but which will be forfeited in part if
public stockholders elect to have their shares redeemed for cash if a business
combination is not consummated.
$300,000
of the
net proceeds were used to repay debt to Mr. Sagredos for a loan used to cover
expenses related to the public offering. $12,600 was used to pay accrued
offering costs and fees. The remaining proceeds in the amount of
$109,605
may be
used to pay for business, legal and accounting due diligence on prospective
acquisitions and continuing general and administrative expenses.
The
net
proceeds deposited in the Trust Account remain on deposit in the Trust Account
earning interest. As of September 30, 2007 there was $215,529,086 held in the
Trust Account, including interest income of $6,279,086.
ITEM
6. EXHIBITS
Exhibit
No.
|
|
Description
|
31.1
|
|
Certification
of the Chief Executive Officer (Principal Executive Officer) pursuant
to
Rule 13a-14(a) of
the Securities Exchange Act, as amended
|
|
|
|
31.2
|
|
Certification
of the Chief Financial Officer and (Principal Accounting Officer)
pursuant
to
Rule 13a-14(a) of
the Securities Exchange Act, as amended
|
|
|
|
32.1
|
|
Certification
of the Chief Executive Officer (Principal Executive Officer) and
Chief
Financial Officer (Principal Accounting Officer) pursuant to
18
U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 .
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
ENERGY
INFRASTRUCTURE ACQUISITION CORP.
|
|
|
|
April 30,
2008
|
By:
|
/s/
Arie
Silverberg
|
|
Arie
Silverberg
Chief
Executive Officer
|
Grafico Azioni Energy Infrastructure Acquisition Corp. (AMEX:EII)
Storico
Da Set 2024 a Ott 2024
Grafico Azioni Energy Infrastructure Acquisition Corp. (AMEX:EII)
Storico
Da Ott 2023 a Ott 2024