UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K/A
Amendment
No. 1
(Mark
One)
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
fiscal year ended December 31, 2008
OR
¨
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
OF 1934
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For the
transition period
from ___________________to ___________________
Commission
file number: 001- 33370
SANTA
MONICA MEDIA CORPORATION
(Exact
name of registrant as specified in its charter)
Delaware
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59-3810312
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(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification No.)
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11845
West Olympic Blvd., Suite 1125W
Los
Angeles, CA 90064
(Address
of Principal Executive Offices, including ZIP Code)
(310)
526-3222
Registrant’s
Telephone Number, including Area Code
Securities
Registered Pursuant to Section 12(b) of the Act:
Title of each Class
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Name of each Exchange on which Registered
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Units, each consisting of one share of Common
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NYSE Alternext
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Stock, $0.001 par value, and One Warrant
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Common Stock, $0.001 par value
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Warrants to Purchase Common Stock
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NYSE Alternext
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Securities
Registered Pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes
¨
No
ý
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Yes
¨
No
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Indicate
by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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
ý
No
¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
ý
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of
“
large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act. (Check one):
Large
accelerated filer
¨
Accelerated
filer
ý
Non-accelerated
filer
¨
Smaller
reporting company
¨
Indicate
by check mark if whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes
ý
No
¨
Based on
the closing price as reported on NYSE Alternext, the aggregate market value of
the Registrant’s common stock held by non-affiliates on June 30, 2008 (the last
business day of the registrant’s most recently completed second fiscal quarter)
was approximately $98,750,000. Shares of common stock held by each
executive officer and director and by each shareholder affiliated with a
director or an executive officer have been excluded from this calculation
because such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
The
number of outstanding shares of the Registrant’s common stock as of March 13,
2009
was
16,038,125.
Documents
incorporated by reference: None.
EXPLANATORY
NOTE
We are
filing Amendment No. 1 (this “Amendment”) to the Santa Monica Media Corporation
(“we” or the “Company”) Annual Report on Form 10-K for the year ended December
31, 2008, which was originally filed on April 2, 2009 (the “Original
Filing”).
The
following revisions to the Original Filing have been made in this
Amendment:
1.
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ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
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The
unsigned Report of Independent Registered Public Accounting Firm has been
replaced in its entirety by an updated, signed report expressing an unqualified
opinion on the effectiveness of the Company’s internal control over financial
reporting.
The
Balance Sheets at December 31, 2008 and 2007 (page 20) have been modified to
reflect the following:
The
single line item of “Prepaids and other current assets” has been
revised to reflect a separate line item for “Refundable income taxes” which was
previously included therein as follow:
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December
31,
2008
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December
31,
2007
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Refundable
income taxes
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$
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180,000
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$
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--
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Prepaids
and other current assets
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87,770
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50,500
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Prepaids
and other current assets as previously reported
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$
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267,770
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$
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50,500
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The
single line item of “Accounts payable and accrued expenses” has been revised to
reflect a separate line item for “Reserve for state franchise tax” which was
previously included therein as follows:
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December
31,
2008
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December
31,
2007
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Accounts
payable and accrued expenses
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$
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302,399
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$
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69,675
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Reserve
for state franchise tax
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390,844
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--
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Accounts
payable and accrued expenses as previously reported
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$
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693,243
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$
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69,675
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The
Statements of Cash Flows for the years ended December 31, 2008, 2007 and
for the period from June 24, 2005 (inception) through December 31, 2008 (page
23) has been modified to reflect the cash flow effect of the separate line item
changes in the Balance Sheets identified above.
2.
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ITEM
9A. CONTROLS AND
PROCEDURES
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Replaced
in its entirety to revised management’s conclusions that as of December 31, 2008
disclosure controls and procedures were not effective, and that internal control
over financial reporting was effective. The Report of Independent
Registered Public Accounting Firm has been revised to reflect those changes in
management’s assessment.
3.
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The
following typographical errors in the Original Filing are corrected in
this 10-K/A:
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a.
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The
Quarter ended “September 30, 2007” date reflected in both the Units and
Common Stock price schedules on page 12 is corrected from “September 31,
2007”,
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b.
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The
third paragraph of the section entitled “Lack of Funds” on page 17 has
been corrected to “March 13, 2009” from “March 13,
2008”, and
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c.
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The
page numbers in the Index to Financial Statements under ITEM 8 – FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA on page 18 have been revised to reflect
the correct page
references.
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For
the convenience of the reader, this Amendment restates the Original
Filing. This Amendment does not otherwise amend or update any exhibit
to or disclosures set forth in the Original Filing. Pursuant to Rule
12b-15, under the Securities and Exchange Act of 1934, as amended, this
Amendment contains new certifications pursuant to the Sarbanes-Oxley Act of
2002.
Except
as stated herein, this Form 10−K/A does not reflect events occurring after the
filing of the 2008 Form 10-K on April 2, 2009 and no attempt has been made in
this Annual Report on Form 10-K/A to modify or update other disclosures as
presented in the 2008 10-K. Accordingly, this Form 10−K/A should be read in
conjunction with our filings with the SEC subsequent to the filing of the Form
10−K.
SANTA
MONICA MEDIA CORPORATION
2008
ANNUAL REPORT ON FORM 10-K
TABLE
OF CONTENTS
SAFE
HARBOR STATEMENT
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1
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PART
I
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2
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ITEM
1.
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BUSINESS
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2
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ITEM
1A.
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RISK
FACTORS
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8
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ITEM
1B.
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UNRESOLVED
STAFF COMMENTS
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11
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ITEM
2.
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PROPERTIES
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11
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ITEM
3.
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LEGAL
PROCEEDINGS
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11
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ITEM
4.
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
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11
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PART
II
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12
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ITEM
5.
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MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
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12
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ITEM
6.
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SELECTED
FINANCIAL DATA
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13
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ITEM
7.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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15
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ITEM
7A.
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QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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18
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ITEM
8.
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FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
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18
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ITEM
9.
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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33
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ITEM
9A.
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CONTROLS
AND PROCEDURES
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33
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ITEM
9B.
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OTHER
INFORMATION
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36
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PART
III
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37
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ITEM
10.
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DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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37
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ITEM 11.
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EXECUTIVE
COMPENSATION
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41
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ITEM 12.
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
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42
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ITEM 13.
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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44
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ITEM 14.
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES.
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45
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PART
IV
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47
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ITEM
15.
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EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
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47
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SIGNATURES
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48
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INTRODUCTORY
COMMENT
Throughout
this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “our company,”
“Company” and “the Registrant” refer to Santa Monica Media Corporation, a
Delaware corporation.
SAFE
HARBOR STATEMENT
From time
to time, we make oral and written statements that may constitute
“forward-looking statements” (rather than historical facts) as defined in the
Private Securities Litigation Reform Act of 1995 or by the Securities and
Exchange Commission (the ”SEC”) in its rules, regulations and releases,
including Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We
desire to take advantage of the “safe harbor” provisions in the Private
Securities Litigation Reform Act of 1995 for forward-looking statements made
from time to time, including the forward-looking statements made in this Annual
Report, as well as those made in our other filings with the SEC.
All
statements in this Annual Report, including under the captions “Business,” “Risk
Factors,” and “ Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” other than statements of historical fact are
forward-looking statements for purposes of these provisions, including
statements of our current views with respect to our business strategy, business
plan, our future financial results, and other future events. In some
cases, forward-looking statements can be identified by the use of terminology
such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,”
“potential” or “could ” or the negative thereof or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements contained herein are reasonable, there can be no assurance that such
expectations or any of the forward-looking statements will prove to be correct,
and actual results could differ materially from those projected or assumed in
the forward-looking statements.
All
forward-looking statements involve inherent risks and uncertainties, and there
are or will be important factors that could cause actual results to differ
materially from those indicated in these statements. We believe that
these factors include, but are not limited to, those factors set forth in this
Annual Report under the captions “Business,” “Risk Factors,” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” all
of which you should review carefully. If one or more of these or
other risks or uncertainties materialize, or if our underlying assumptions prove
to be incorrect, actual results may vary materially from what we
anticipate. Please consider our forward-looking statements in light
of those risks as you read this Annual Report. We undertake no
obligation to publicly update or review any forward-looking statement, whether
as a result of new information, future developments or otherwise.
PART
I
General
development of the business
We are a
Delaware blank check company incorporated on June 24, 2005 in order to serve as
a vehicle for the acquisition of an operating business in the communications,
media, gaming and/or entertainment industries. These industries
encompass those companies that create, produce, deliver, distribute and market
entertainment and information products, communication services, as well as
companies that enable voice, video and data transmission. We focused on
opportunities where we could combine management and board member knowledge of
these sectors with our operational experience in identifying and applying new
technologies, including experience in developing online businesses and products
to enhance shareholder value.
On April
2, 2007, we completed: (i) a private placement of 413,125 units at $8.00 per
unit for $3,000,000 cash and cancellation of the $305,000 loan made to the
Company by Santa Monica Capital Partners, LLC, and (ii) a public offering of
12,500,000 units for net proceeds of $95,119,982 pursuant to a registration
statement on Form S-1 declared effective by the Securities and Exchange
Commission on March 27, 2007. The proceeds of the private placement
and a portion of the proceeds of the public offering together totaling
$98,605,000 were placed in a trust account. The amount in the trust
account includes $4,000,000 of contingent underwriting compensation that will be
paid to the underwriter if a business combination with an operating business
that has a fair market value of at least 80% of the balance of the trust account
at the time of the business combination (which assets shall include the amount
in the trust account other than the deferred underwriting discount, less our
liabilities) is consummated by or before April 2, 2009 (or December 15, 2009, if
the amendment to extend the business combination deadline is approved, as
described in further detail below). The proceeds from the public offering are to
be held in the trust account until the earlier of (i) the consummation of a
business combination or (ii) liquidation of the Company. The remaining net
proceeds not held in the trust account of $100,000 and up to $1,600,000 of
interest earned on the Trust Account (net of taxes payable) were used to pay for
business, legal and accounting due diligence on prospective acquisitions and
continuing general and administrative expenses.
We had
identified and reviewed information with respect to over 130 possible target
companies, 16 of which were provided with a detailed term sheet and/or
preliminary term sheet . Our search for potential target businesses
involved making contacts with candidates through members of our management team,
board of directors and advisory board; seeking referrals from our professional
network of contacts including consultants, investment bankers, and business
brokers; and contacting owners of media, digital media and technology
businesses.
General
We
intended to utilize the cash proceeds of our initial public offering and the
concurrent private placement of sponsor units held in trust, our capital
stock,
debt or a combination of these as consideration to be paid in a business
combination. The target business was required to have a fair market value of at
least 80% of the balance of the trust account atthe time of the business
combination (which assets shall include the amount in the trust account other
than the deferred underwriting discount, less our liabilities).
We have
and will continue to seek to have all vendors, prospective target businesses or
other entities, which we refer to as potential contracted parties or a potential
contracted party, that we engage execute agreements with us waiving any right,
title, interest or claim of any kind in or to any monies held in the trust
account established in connection with our initial public offering for the
benefit of our public stockholders. In the event that a potential
contracted party were to refuse to execute such a waiver, we will execute an
agreement with that entity only if our management first determines that we would
be unable to obtain, on a reasonable basis, substantially similar services or
opportunities from another entity willing to execute such a waiver. Examples of
instances where we may engage a third party that refuses to execute a waiver
would be the engagement of a third party consultant whose particular expertise
or skills are
believed
by management to be superior to those of other consultants that would agree to
execute a waiver or a situation in which management does not believe it would be
able to find a provider of required services willing to provide the waiver. If a
potential contracted party refuses to execute such a waiver, then our Chief
Executive Officer, David Marshall, and our other two executive officers, Kurt
Brendlinger and Eric Pulier, will be personally liable to cover the potential
claims made by such party for services rendered and goods sold, in each case to
us, but only if, and to the extent, that the claims would otherwise reduce the
trust
account proceeds payable to our public stockholders in the event of a
liquidation. However, if a potential contracted party executes a
waiver, then Messrs. Brendlinger, Marshall and Pulier will have no personal
liability as to any claimed amounts owed to a contracted party.
On
September 26, 2008, we entered into a preliminary non-binding letter of intent
with NUI to continue discussions regarding a potential merger with NUI and NUI’s
potential acquisition candidate from all related members and shareholders of all
entities. We believed the business combination with NUI was in the
best interests of our stockholders. However, because there was no
guarantee that we would be able to conclude the business combination with NUI by
April 2, 2009, we filed a preliminary proxy statement with the Securities and
Exchange Commission to seek stockholder approval to extend the time for closing
the business combination beyond April 2, 2009 to December 15,
2009. We did not mail the proxy related to the extension to the
shareholders and therefore are now working towards a plan of
liquidation. As of the date of this report, we plan to distribute to
our stockholders a proxy statement seeking approval (a) for a plan of
liquidation to distribute the amount in our trust account to the holders of
shares of our common stock acquired in our initial public offering and (b) to
amend and restate our certificate of incorporation to permit the Company to
continue as a corporation currently specified in our certificate without the
limitations relating to our initial public offering.
Sources
of target businesses
Target
businesses were brought to our attention from various unaffiliated parties such
as investment banking firms, venture capital funds, private equity funds,
leveraged buyout funds, management buyout funds and similar
sources. We also identified target businesses through management’s
contacts within the private equity industry. Since the completion of
our initial public offering, we have searched for potential business combination
targets. During the process, we relied on numerous business
relationships and contacted investment bankers, private equity funds, consulting
firms, and legal and accounting firms. As a result of these efforts, we
identified and reviewed information with respect to over 130 possible target
companies, 15 of which (not including NUI) were provided with a detailed term
sheet and/or a preliminary letter of intent.
The
initial discussion between Company and NUI management commenced in August 2008.
From September 2008 until the present, Company, while also involved in due
diligence activities, engaged in negotiations with NUI and their respective
members on the terms of the agreement to govern the business
combination.
Selection
of a target business and structuring of a business combination
Shortly
after our initial public offering in April 2007, our management began an
intensive process to seek a target business for a business combination. The
focus of this effort was to find a suitable acquisition candidate that was
engaged in one or more segments of the communications, media, gaming and/or
entertainment industries.
The team
had continuous conversations with the Board of Directors regarding their
strategy and work plan. This plan provided for contacting a variety of
unaffiliated sources to identify potential targets, including investment
bankers, venture capital funds, private equity funds, reinsurance brokers and
other members of the financial community. Professional firms that specialized in
media and entertainment industry acquisitions were engaged on the basis that
they would only receive compensation if we completed a business combination
identified by them. Among the factors to be considered were the
following:
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financial
condition and results of
operations;
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·
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brand
recognition and potential;
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·
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experience
and skill of management and availability of additional
personnel;
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·
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stage
of development of the business and its products or
services;
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existing
distribution arrangements and the potential for
expansion;
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degree
of current or potential market acceptance of the products or
services;
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·
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proprietary
aspects of products and the extent of intellectual property or other
protection for products or
formulas;
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·
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impact
of regulation on the business;
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·
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seasonal
sales fluctuations and the ability to offset these fluctuations through
other business combinations, introduction of new products, or product line
extensions; and
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·
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costs
associated with effecting the business
combination.
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The
target company search and evaluation process, which identified, investigated and
analyzed companies in North America, Europe, Africa and Asia, included: reviews
of industry research, published trade and corporate information, and attendance
at industry meetings. Our management was also in frequent contact with
representatives from Citigroup, one of the co-underwriters of our public
offering.
Messrs.
Marshall, Brendlinger and Pulier identified over 130 possible target companies
and signed Non-Disclosure Agreements or Confidentiality Agreements with over
60. The search primarily focused on mid-sized communications, media,
gaming or entertainment companies who were well positioned within their
industry, had strong growth potential and a high quality management
team.
Liquidation
if no business combination
We were
not able to complete a business combination by April 2, 2009 or to extend the
business combination deadline to December 15, 2009 as was proposed in our
preliminary proxy filed on March 5, 2009. Therefore we will
distribute to all of our public stockholders, in proportion to their respective
equity interests, an aggregate sum equal to the amount in the trust account,
inclusive of any interest and net of any income taxes due on such interest that
will be paid from the trust account and interest income on the trust account
balance released to us to fund working capital requirements including the costs
of our liquidation, plus any remaining assets, on a per share basis the
Liquidation Price. The Liquidation Price includes approximately $4.0
million in deferred underwriting discounts and commissions that would also be
distributable to our public stockholders. As of December 31, 2008,
the Liquidation Price that the public shareholders would receive is estimated to
be approximately $8.05 per share
The
proceeds deposited in the trust account could, however, become subject to the
claims of our creditors which could be prior to the claims of our public
stockholders. Messrs. Brendlinger, Marshall and Pulier have agreed
that, if we liquidate prior to the consummation of a business combination, they
will be personally liable for ensuring that the proceeds in the trust account
are not reduced by the claims of various vendors that are owed money by us for
services rendered or contracted for or products sold to us, or claims of other
parties with which we have contracted, including the claims of any prospective
target with which we have entered into a written letter of intent,
confidentiality or non-disclosure agreement with respect to a failed business
combination with such prospective target. Messrs. Brendlinger,
Marshall and Pulier will have such obligations only if such vendor or contracted
party does not execute a waiver of its rights, title, interest or claim of any
kind in or to the trust account, but only to the extent any claims made against
the trust account and the payment of such
debts or
obligations actually reduces the amount in the trust
account. However, we cannot assure you that Messrs. Brendlinger,
Marshall and Pulier will be able to satisfy those obligations.
Messrs.
Brendlinger, Marshall and Pulier are not personally liable to pay any of our
debts and obligations except as provided above. Accordingly, we
cannot assure you that due to claims of creditors the actual Liquidation Price
will not be less than the expected Liquidation Price. If such funds
are insufficient to cover the costs of our dissolution and liquidation, Messrs.
Brendlinger, Marshall and Pulier have agreed to indemnify us for our
out-of-pocket costs associated with such dissolution and liquidation, excluding
any special, indirect or consequential costs, such as litigation, pertaining to
such dissolution and liquidation.
Under our
Amended and Restated Certificate of Incorporation, if we have entered into
either a letter of intent, an agreement in principle or a definitive agreement
to complete a business combination prior to the expiration of 18 months after
the consummation of our initial public offering, then we may take up to an
additional six months to complete a business combination. As we had
successfully entered into letters of intent, the deadline had been extended by
an additional six months to April 2, 2009. However, as we were not
able to extend the applicable deadline through an amendment to our Amended and
Restated Certificate of Incorporation, we will take all necessary actions to
liquidate as expeditiously as possibly. As required under Delaware law, we will
seek stockholder approval for such plan of liquidation. We will also
seek stockholder approval to permit the Company to continue as a corporation
without the limitations related to our initial public offering. If we
do not receive stockholder approval to continue the corporation then corporate
existence will cease by operation of law and, in any event, we will distribute
to our public stockholders the amount in our trust account. Upon the approval by
our stockholders of our plan
of
liquidation, we will liquidate our assets, including the trust account, and
after reserving amounts from the interest earned on the trust account available
to us as working capital requirements to cover the costs of liquidation,
distribute those assets solely to our public
stockholders. Agreements
with the initial stockholders do not permit them to participate in any
liquidation distribution occurring upon our failure to consummate a business
combination with respect to those shares of common stock acquired by them before
our initial public offering. They will participate in any liquidation
distribution with respect to any shares of common stock acquired in connection
with or following our initial public offering. There will be no
distribution from our trust account with respect to our warrants, and, if we do
not receive approval for continuing the Company in existence, all rights with
respect to our warrants will effectively cease upon our
liquidation. Upon notice from us, the trustee of the trust account
will commence liquidating the investments constituting the trust account and
will turn over the proceeds to our
transfer
agent for distribution to our public stockholders.
Under
Delaware law, creditors of a corporation have a superior right to stockholders
in the distribution of assets upon dissolution. Consequently, if the
trust account is liquidated and paid out prior to all creditors being paid on
their claims, stockholders may be held liable for claims by third parties
against us to the extent of distributions received by them in a
liquidation.
We have
depleted the funds from the interest on the trust account available to us, and
do not believe we have sufficient funds for all costs associated with
implementing our plan of dissolution and liquidation as well as payments to any
creditors. Although we had issued a promissory note of up to $500,000 to Santa
Monica Capital Partners II, LLC, a limited liability company owned by Messrs.
Brendlinger, Marshall and Pulier, on January 15, 2009, the loan advances are at
the sole discretion of the lender.
If such
funds are insufficient to cover the costs of our liquidation, Messrs.
Brendlinger, Marshall and Pulier have agreed to indemnify us for our
out-of-pocket costs associated with such liquidation, excluding any special,
indirect or consequential costs, such as litigation, pertaining to such
liquidation. We estimate that our total costs and expenses for implementing and
completing our stockholder-approved plan of liquidation will be in the range of
$50,000 to $75,000. This amount includes all costs and expenses
relating to filing of a proxy statement and meeting relating to the approval by
our stockholders of our plan of liquidation.
At this
point, our public stockholders shall be entitled to receive funds from the trust
account only through our liquidation. In no other circumstances shall
a stockholder have any right or interest of any kind to or in the trust
account. Prior to our liquidating, we are currently permitted only to
release from the trust account interest income of up to $1.6 million to fund our
working capital requirements, subject to the tax holdback, all of which has been
released.
Upon our
liquidation we will be required to pay or make reasonable provision to pay all
of our claims and obligations, including all contingent, conditional, or
unmatured claims. These amounts must be paid or provided for before
we make any distributions to our stockholders. As we no longer have
any funds from the interest on the trust account available to us for working
capital, and have since then issued an unsecured promissory note to Santa Monica
Capital Partners II for up to $500,000, we cannot assure you the funds from the
promissory note will be sufficient to cover such claims and
obligations. Although we have sought and continue to seek to have all
vendors, prospective target businesses or other entities we engage execute
agreements with us waiving any right, title, interest or claim of any kind in or
to any monies held in the trust account, there is no guarantee that they will
execute such agreements, or if executed, that such waivers will be enforceable
or otherwise prevent potential contracted parties from making claims against the
trust account. Nor is there any guarantee that such entities will
agree to waive any claims they may have in the future as a result of,
or
arising out of, any negotiations, contracts or agreements with us and will not
seek recourse against the trust account for any reason. Accordingly,
the proceeds held in trust could be subject to claims which could take priority
over the claims of our public stockholders and, as a result, the actual
Liquidation Price could be less than the Liquidation Price based upon the
proceeds of our initial public offering and the concurrent private placement of
the sponsor units placed in the trust account, without taking into account
interest earned on the trust account subsequent to our initial public offering,
due to claims of such
creditors. Messrs.
Brendlinger, Marshall and Pulier will be personally liable for ensuring that the
proceeds in the trust account are not reduced by the claims of any third party
if such third party does not execute a waiver of its rights, title,
interest
or claim of any kind in or to the trust account, but only to the extent any
claims made against the trust account and the payment of such debts or
obligations actually reduces the amount in the trust
account. However, we cannot assure you that Messrs. Brendlinger,
Marshall and Pulier will be able to satisfy those obligations.
Furthermore,
creditors may seek to interfere with the distribution of the trust account
pursuant to federal or state creditor and bankruptcy laws, which could delay the
actual distribution of such funds or reduce the amount ultimately available for
distribution to our public stockholders. If we are forced to file a
bankruptcy case or an involuntary bankruptcy case is filed against us which is
not dismissed, the funds held in our trust account will be subject to applicable
bankruptcy law, and may be included in our bankruptcy estate and subject to the
claims of third parties with priority over the claims of our
stockholders. To the extent any bankruptcy claims deplete the trust
account we cannot assure you we will be able to return to our public
stockholders the liquidation amounts due them. Accordingly, the
actual per share amount distributed from the trust account to our public
stockholders could be significantly less than Liquidation Price based upon the
proceeds of our initial public offering and the concurrent private placement of
the sponsor units placed in the trust account, without taking into account
interest earned on the trust account subsequent to our initial public
offering. Any claims by creditors could cause additional delays in
the distribution of trust funds to the public stockholders beyond the time
periods required to comply with Delaware General Corporation Law procedures and
federal securities laws and regulations.
Competition
In
identifying, evaluating and selecting a target business for a business
combination, we encountered intense competition from other entities having a
business objective similar to ours including other blank check companies,
private equity groups and leveraged buyout funds, and operating businesses
seeking strategic acquisitions. Furthermore:
|
·
|
our
obligation to seek stockholder approval of our initial business
combination or obtain necessary financial information could have delayed
the completion of a transaction;
|
|
·
|
our
obligation to convert into cash up to 19.99% of our shares of common stock
held by our public stockholders who vote against the extension amendment
and exercise their conversion rights could have reduced the resources
available to us for a business
combination;
|
|
·
|
our
obligation to convert into cash up to 19.99% of our shares of common stock
held by our public stockholders who vote against the business combination
and exercise their conversion rights could have reduced the
resources available to us for a business combination;
and
|
|
·
|
our
outstanding warrants, and the future dilution they potentially represent,
may not have been viewed favorably by certain target
businesses.
|
We
believe that some or all of these factors placed us at a competitive
disadvantage in successfully negotiating a business combination.
Administrative
Services Agreement
We have
agreed to pay Santa Monica Capital Corp., an entity owned and controlled by
Mr. Marshall, a total of $7,500 per month for office space, administrative
services and secretarial support, not to exceed $180,000 in the
aggregate. As of October 1, 2007, this agreement was assigned to
Santa Monica Capital Partners, LLC, an entity owned and controlled by Mr.
Marshall, Mr. Brendlinger, Mr. Pulier and Mr.Baradaran, all of whom are
directors of the Company. Mr. Marshall is our chairman and chief
executive officer, Mr. Brendlinger is our Chief Financial Officer and Mr. Pulier
is our Chief Technology Officer. This arrangement was agreed to by us
and Santa Monica Capital Corp. for our benefit and is not intended to provide
Messrs. Brendlinger, Marshall, Pulier or the other directors compensation
in lieu of a salary or other remuneration because it is anticipated that the
expenses to be paid will approximate the monthly reimbursement. We
believe that such fees are at least as favorable as we could have obtained from
an unaffiliated person. Upon completion of our liquidation, we will
cease paying these monthly fees.
When
we liquidate, our public stockholders will receive less than $8.00 per share on
distribution of trust account funds and our warrants will expire
worthless.
When we
liquidate our assets, the Liquidation Price will be less than $8.00 because of
the expenses of our initial public offering, our general and administrative
expenses and the historical costs of seeking a business
combination. Furthermore, our outstanding warrants are not entitled to
participate in a liquidating distribution and the warrants will therefore expire
worthless when we liquidate if the Company does not continue in
existence.
You
will not receive protections normally afforded to investors in blank check
companies.
Since the
net proceeds of our initial public offering are designated for completing a
business combination with a target business that had not been identified at the
time of the offering, we may be deemed a “blank check” company under the United
States securities laws. However, because we had net tangible assets
in excess of $98,000,000 and filed a Form 8-K with the SEC that included an
audited balance sheet demonstrating this fact, we are exempt from SEC rules such
as Rule 419 that are designed to protect investors in blank check
companies. Accordingly, our stockholders will not receive the
benefits or protections of that rule..
If
third parties bring claims against us, the proceeds held in trust could be
reduced and the Liquidation Price received by you could be reduced.
Our
placing of funds in trust may not protect those funds from third party claims
against us. Pursuant to Delaware General Corporation Law Sections
280 and
281, upon our liquidation we will be required to pay or make reasonable
provision to pay all of our claims and obligations, including all contingent,
conditional, or unmatured claims. These amounts must be paid or provided for
before we make any distributions to our stockholders. We have
expended all of
the
interest on the trust account available to us for working
capital. Although we have sought and continue to seek to have all
vendors, prospective target businesses or other entities we engage execute
agreements with us waiving any right, title, interest or claim of any kind in or
to any monies held in the trust account, there is no guarantee that they will
execute such agreements, or if executed, that such waivers will be enforceable
or otherwise prevent potential contracted parties from making claims against the
trust account. Nor is there any guarantee that such entities will
agree to waive any claims they may have in the future as a result of, or arising
out of, any negotiations, contracts or agreements with us and will not seek
recourse against the trust account for any reason. Accordingly, the
proceeds held in trust could be subject to claims which could take priority over
the claims of our public stockholders and, as a result, the actual Liquidation
Price could be less than the
expected
Liquidation Price based upon the proceeds of our initial public offering and the
concurrent private placement of the sponsor units placed in the trust account,
without taking into account interest earned on the trust account subsequent to
our initial public offering, due to claims of such
creditors. Considering we are forced to liquidate, Messrs.
Brendlinger, Marshall and Pulier will be personally liable for ensuring that the
proceeds in the trust account are not reduced by the claims of any third party
if such third party does not execute a waiver of its rights, title, interest or
claim of any kind in or to the trust account, but only to the extent any claims
made against the trust account and the payment of such debts or obligations
actually reduces the amount in the trust account. However, we cannot
assure you that Messrs. Brendlinger, Marshall and Pulier will be able to satisfy
those
obligations. Based
on the information in their director and officer questionnaires provided to us
in connection with our initial public offering as well as the representations as
to each of their accredited investor status (as such term is defined in
Regulation D under the Securities Act), we currently believe that
Messrs.
Brendlinger, Marshall and Pulier are of substantial means and capable of funding
their indemnity obligations, even though we have not asked them to reserve for
such an eventuality. However, we cannot assure you Messrs.
Brendlinger, Marshall and Pulier will be able to satisfy those
obligations. We believe the likelihood of Messrs. Brendlinger,
Marshall and Pulier having to indemnify the trust account is limited because we
have thus far had all vendors and prospective target businesses as well as other
entities execute agreements with us waive any right, title, interest or claims
of any kind in or to monies held in the trust account.
We have
depleted the funds from the interest on the trust account available to us, and
do not believe we have sufficient funds for all costs associated with
implementing our plan of liquidation as well as payments to any creditors.
Although we had issued a promissory note of up to $500,000 to Santa Monica
Capital Partners II, LLC, a limited liability company owned by Messrs.
Brendlinger, Marshall and Pulier, on January 15, 2009, the loan advances are at
the sole discretion of the lender. If there are insufficient funds,
creditors will be unpaid, and to the extent that they have not agreed to waive
their rights against the assets held in our trust account, may proceed against
the trust assets.
If such
funds are insufficient to cover the costs of our liquidation, Messrs.
Brendlinger, Marshall and Pulier have agreed to indemnify us for our
out-of-pocket costs associated with such liquidation, excluding any special,
indirect or consequential costs, such as litigation, pertaining to such
liquidation. We estimate that our total costs and expenses for implementing and
completing our stockholder-approved plan of liquidation will be in the range of
$50,000 to $75,000. This amount includes all costs and expenses
relating to filing of a proxy statement and meeting relating to the approval by
our stockholders of our plan of liquidation.
Furthermore,
creditors may seek to interfere with the distribution of the trust account
pursuant to federal or state creditor and bankruptcy laws, which could delay the
actual distribution of such funds or reduce the amount ultimately available for
distribution to our public stockholders. If we are forced to file a
bankruptcy case or an involuntary bankruptcy case is filed against us which is
not dismissed, the funds held in our trust account will be subject to applicable
bankruptcy law, and may be included in our bankruptcy estate and subject to the
claims of third parties with priority over the claims of our
stockholders. To the extent any bankruptcy claims deplete the trust
account we cannot assure you we will be able to return to our public
stockholders the liquidation amounts due them. Accordingly, the
actual per share amount distributed from the trust account to our public
stockholders could be significantly less than the expected Liquidation Price,
without taking into account interest earned on the trust account subsequent to
our initial public offering (net of taxes payable on interest income on the
funds in the trust account and interest income of up to $1.6 million on the
trust account balance previously released to us to fund our working capital
requirements, including the costs of our liquidation). Any claims by
creditors could cause additional delays in the distribution of trust funds to
the public stockholders beyond the time periods required to comply with Delaware
General Corporation Law procedures and federal securities laws and
regulations.
Stockholders
may be held liable for claims by third parties against us to the extent of
distributions received by them in a liquidation.
We were
not able to complete a business combination within 24 months after the
consummation of our initial public offering, or to extend the business
combination deadline as proposed in our preliminary proxy filed on March 5,
2009, therefore we will distribute to our public stockholders an amount equal to
the amount in the trust account, including (i) all accrued interest, net of
income taxes payable on such interest, and (ii) all deferred underwriting
discounts and commissions plus any remaining assets. Under Delaware
law, creditors of a corporation have a superior right to stockholders in the
distribution of assets upon
liquidation. Consequently,
if the trust account is paid out prior to all creditors being paid on their
claims, stockholders may be held liable for claims by third parties against us
to the extent of distributions received by them in a dissolution.
Under
Delaware law, the distribution of the trust requires the approval of the holders
of a majority of our outstanding stock, without which we will not be able to
liquidate, and distribute our assets to our public stockholders.
We are
currently working on adopting a plan of liquidation and initiating procedures
for liquidation. However, pursuant to
Delaware
law, our liquidation requires the affirmative vote of stockholders owning a
majority of our then outstanding common stock. Soliciting the vote of
our stockholders will require the preparation of preliminary and definitive
proxy statements, which will need to be filed with the SEC and could be subject
to its review. This process could take a substantial amount of time
ranging from 40 days to several months.
As a
result, the distribution of our assets to the public stockholders could be
subject to a considerable delay. Furthermore, we may need to postpone
the stockholders’ meeting, resolicit our stockholders, or amend our plan of
liquidation to obtain the required stockholder approval, all of which would
further delay the distribution of our assets and result in increased costs. If
we are not able to obtain approval from a majority of our stockholders, we will
not be able to liquidate and we will not be able to distribute funds from our
trust account to holders of our common stock sold in our initial public
offering, and these funds will not be available for any other corporate
purpose. In the event we seek stockholder approval for a plan of
liquidation and do not obtain such approval, we will nonetheless continue to
pursue stockholder approval for our liquidation. However, we cannot
assure you that our stockholders will approve our liquidation in a timely manner
or will ever approve our dissolution. As a result, we cannot provide
investors with assurances of a specific timeframe for the
distribution.
Our
initial stockholders currently control us and may influence certain actions
requiring a stockholder vote.
The
holders of shares of our common stock issued prior to the consummation of our
initial public offering, whom we refer to as our initial
stockholders,
own approximately 22% of our issued and outstanding shares of common
stock. Our initial stockholders and Santa Monica Capital Partners,
LLC have agreed that any common stock they acquire in or after our initial
public offering will be voted in favor of a business combination that is
presented to our public stockholders. Accordingly, shares of common
stock acquired by the initial stockholders and Santa Monica Capital Partners,
LLC in or after our initial public offering will not have the same voting or
conversion rights as our public stockholders with respect to a potential
business combination.
We
may not have sufficient funds to complete our liquidation. As we had depleted
the offering proceeds not in trust or available to us from interest earned on
the trust account balance, we issued an unsecured promissory note to Santa
Monica Capital Partners II, LLC, a limited liability company owned by Messrs.
Marshall, Brendlinger and Pulier on January 15, 2009.
We may
not have sufficient funds to complete our liquidation. On January 15, 2009, we
issued an unsecured promissory note to Santa Monica Capital Partners II, LLC,
for up to $500,000 at a simple rate of interest equal to 10%. Funds
advanced are at the sole discretion of the lender. In the event these funds
cannot sustain us through the liquidation, we would need to borrow funds from
our management team to operate. If we do not have
sufficient funds to cover the costs of our liquidation, Messrs. Brendlinger,
Marshall and Pulier have agreed to indemnify us for our out-of-pocket costs
associated with such liquidation, excluding any special, indirect or
consequential costs, such as litigation, pertaining to such
liquidation.
Vendors
who have not waived their right to funds held in the trust account could seek to
recover their expenses from the trust account, which could ultimately deplete
the trust account and reduce a public stockholder’s current pro rata portion of
the trust account upon liquidation.
We do not
have sufficient funds outside of the trust account to pay our obligations and do
not believe we have sufficient funds for all costs associated with implementing
our plan of liquidation as well as payments to any creditors. Although we had
issued a promissory note of up to $500,000 to Santa Monica Capital Partners II,
LLC, a limited liability company owned by Messrs. Brendlinger, Marshall and
Pulier, on January 15, 2009, the loan advances are at the sole discretion of the
lender.
Considering
our plan to liquidate, it is possible that vendors that have not waived their
right to
funds held in the trust account could seek to recover these expenses from the
trust account, which could ultimately deplete the trust account and reduce a
public stockholder’s current pro rata portion of the trust account upon
liquidation. In connection with the IPO, Messrs. Marshall, Brendlinger and
Pulier agreed to indemnify us for debts and obligations to vendors that are owed
money by us, but only to the extent necessary to ensure that certain liabilities
do not reduce funds in the trust account. Therefore, if vendors that have not
signed waivers sue the trust account and win their cases, the trust account
could be reduced by the amount of the claims and such officers would be required
to fulfill his indemnification obligations. To the extent any of such officers
fail to fulfill his indemnification obligations, the trust account may be
depleted.
If
we are deemed to be an investment company, we must meet burdensome compliance
requirements and restrictions on our activities may increase the difficulty of
completing a business combination.
If we are
deemed to be an investment company under the Investment Company Act of 1940, the
nature of our investments and the issuance of our securities may be subject to
various restrictions. In addition, we may be subject to burdensome
compliance requirements and may have to:
|
·
|
register
as an investment company;
|
|
·
|
adopt
a specific form of corporate structure;
and
|
|
·
|
report,
maintain records and adhere to voting, proxy, disclosure and other
requirements.
|
We do not
believe that our present principal activities will subject us to the Investment
Company Act of 1940. In this regard, our agreement with the trustee
states that proceeds in the trust account will only be invested in “government
securities” (as such term is defined in the Investment Company Act of
1940) and
one or more money market funds, selected by us, which invest principally in
either short-term securities issued or guaranteed by the United States having a
rating in the highest investment category granted thereby by a recognized credit
rating agency at the time of acquisition or tax exempt municipal bonds issued by
governmental entities located within the United States and otherwise meeting the
conditions under Rule 2a-7 promulgated under the Investment Company Act of
1940. This investment restriction is intended to facilitate our not
being considered an investment company under the Investment Company Act of
1940. If we are deemed to be subject to that Act, compliance with
these additional regulatory burdens would increase our operating
expenses.
The
NYSE Alternext will delist our securities which could limit investors’ ability
to make transactions in our securities and subject us to additional trading
restrictions.
Our
securities are listed on NYSE Alternext, and we have received a notice from the
exchange indicating that we are below certain additional continued listing
standards. Additionally, if the stockholders approve the continuation in
existence of the Company, the Company’s stock will be delisted, in which case it
is expected that the securities will be traded on the OTC Bulletin on the Pink
Sheets. In response, we had submitted our plan of compliance to NYSE
Alternext on March 9, 2009, which set forth our plan to hold an annual
shareholder meeting on or about May 15, 2009. We cannot assure you
that our securities will continue to be listed on NYSE Alternext.
If NYSE
Alternext delists our securities from trading, we could face significant
consequences including:
|
·
|
a
limited availability of market quotations for our
securities;
|
|
·
|
reduced liquidity with respect to our
securities;
|
|
·
|
a
determination that our common stock is a “penny stock” which will require
brokers trading in our common stock to adhere to more stringent rules and
possibly result in a reduced level of trading activity in the secondary
trading market for our common
stock;
|
|
·
|
limited
amount of news and analyst coverage for our company;
and
|
|
·
|
a
decreased ability to issue additional securities or obtain additional
financing in the future.
|
ITEM
1B.
|
UNRESOLVED
STAFF COMMENTS
|
Inapplicable.
We
maintain our executive offices at 12121 Wilshire Blvd., Suite 1001, Los Angeles,
California 90025. We consider our current office space adequate for
our current operations.
ITEM
3.
|
LEGAL
PROCEEDINGS
|
None.
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
No
matters were submitted to a vote of our shareholders during the quarter ended
December 31, 2008.
PART
II
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
|
Use
of Proceeds from our Initial Public Offering
See Part
II, Item 7, Management’s Discussion and Analysis of Financial Condition and
Results of Operations, of this Annual Report on Form 10-K for information
regarding the use of proceeds from the Company’s initial public offering as
disclosed on the Company’s Registration Statement on Form S-1 (File No.
333-128384) filed with the Securities and Exchange Commission, which was
declared effective as of March 27, 2007.
Market
Information
Our
units, which consist of one share of our common stock, par value $.001 per
share, and one warrant, each to purchase an additional share of our common
stock, trade on the NYSE Alternext (formerly American Stock Exchange) under the
symbol “MEJ-U” Our common stock and warrants have traded separately on the NYSE
Alternext (formerly the American Stock Exchange) under the symbols “MEJ” and
“MEJ-WT”, respectively, since April 18, 2007. Each warrant entitles the holder
to purchase from us one share of our common stock at an exercise price of $6.00
commencing the completion of a business combination. Our warrants will expire at
5:00 p.m., Los Angeles time, on March 27, 2011, or earlier upon
redemption.
The
following tables set forth, for the calendar quarter indicated, the quarterly
high and low sale prices for the Company’s units, common stock and warrants,
respectively, as reported on NYSE Alternext (formerly the American Stock
Exchange).
Units
Quarter
ended
|
|
High
|
|
|
Low
|
|
December
31, 2008
|
|
$
|
7.75
|
|
|
$
|
6.91
|
|
September
30, 2008
|
|
$
|
8.15
|
|
|
$
|
7.80
|
|
June
30, 2008
|
|
$
|
8.00
|
|
|
$
|
7.68
|
|
March
31, 2008
|
|
$
|
8.08
|
|
|
$
|
7.74
|
|
December
31, 2007
|
|
$
|
8.18
|
|
|
$
|
7.85
|
|
September
30, 2007
|
|
$
|
8.25
|
|
|
$
|
7.94
|
|
June
30, 2007
(1)
|
|
$
|
8.20
|
|
|
$
|
7.90
|
|
(1)
|
Represents
the high and low sale prices for our units from our initial public
offering on April 2, 2007 through June 30,
2007.
|
Common
Stock
Quarter
ended
|
|
High
|
|
|
Low
|
|
December
31, 2008
|
|
$
|
7.80
|
|
|
$
|
7.45
|
|
September
30, 2008
|
|
$
|
7.97
|
|
|
$
|
7.55
|
|
June
30, 2008
|
|
$
|
7.75
|
|
|
$
|
7.55
|
|
March
31, 2008
|
|
$
|
7.65
|
|
|
$
|
7.45
|
|
December
31, 2007
|
|
$
|
7.46
|
|
|
$
|
7.29
|
|
September
30, 2007
|
|
$
|
7.70
|
|
|
$
|
7.41
|
|
June
30, 2007
(1)
|
|
$
|
7.62
|
|
|
$
|
7.42
|
|
(1)
|
Represents
the high and low sale prices for our shares of common stock from April 18,
2007, the date that our common stock first became separately tradable,
through June 30, 2007.
|
Warrants
Quarter
ended
|
|
High
|
|
|
Low
|
|
December
31, 2008
|
|
$
|
0.14
|
|
|
$
|
0.00
|
|
September
30, 2008
|
|
$
|
0.15
|
|
|
$
|
0.05
|
|
June
30, 2008
|
|
$
|
0.30
|
|
|
$
|
0.13
|
|
March
31, 2008
|
|
$
|
0.52
|
|
|
$
|
0.20
|
|
December
31, 2007
|
|
$
|
0.80
|
|
|
$
|
0.64
|
|
September
30, 2007
|
|
$
|
0.79
|
|
|
$
|
0.55
|
|
June
30, 2007
(1)
|
|
$
|
0.72
|
|
|
$
|
0.50
|
|
(1)
|
Represents
the high and low sale prices for our warrants from April 18, 2007, the
date that our warrants first became separately tradable, through June 30,
2007.
|
During
the years ended December 31, 2008 and 2007, we did not issue any shares of
common stock that were not registered under the Securities Act of
1933.
Stockholders
As of
March 13, 2009, there were approximately 19 holders of record of our common
stock, not including any persons who hold their stock in “street
name.”
Dividend
Policy
We have
not paid any dividends on our common stock to date and do not intend to pay
dividends prior to the completion of a business combination. The payment of
dividends in the future will be contingent upon our revenues and earnings, if
any, capital requirements and general financial condition subsequent to
completion of a business combination. The payment of any dividends subsequent to
a business combination will be within the discretion of our board of directors.
It is the present intention of our board of directors to retain all earnings, if
any, for use in our business operations and, accordingly, our board does not
anticipate declaring any dividends in the foreseeable future.
Issuances
of Unregistered Securities; Purchases of Securities
We did
not issue any unregistered securities during the three-month period ended
December 31, 2008 that were not previously reported in a Current Report on Form
8-K, and we did not repurchase any securities during that period.
ITEM
6.
|
SELECTED
FINANCIAL DATA
|
Results
of Operations
The
following table sets forth selected historical financial information derived
from our audited financial statements for the period from June 24, 2005
(inception) to December 31, 2005, and for the years ended December 31, 2006,
2007 and 2008. The following data should be read in conjunction with Part II,
Item 7, Management’s Discussion and Analysis of Financial Condition and Results
of Operations and our financial statements including the notes thereto, included
elsewhere in this Annual Report on Form 10-K.
Statement
of Operations Information:
|
|
Year Ended
December 31,
2008
|
|
|
Year Ended
December 31,
2007
|
|
|
Year Ended
December 31,
2006
|
|
|
June 24, 2005
(inception) to
December 31,
2005
|
|
General and administrative expenses
|
|
$
|
1,494,740
|
|
|
$
|
507,351
|
|
|
$
|
37,057
|
|
|
$
|
53,704
|
|
Operating
(loss)
|
|
|
(1,494,740
|
)
|
|
|
(507,351
|
)
|
|
|
(37,057
|
)
|
|
|
(53,704
|
)
|
Other
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
(expense)
|
|
|
(2,024
|
)
|
|
|
(12,783
|
)
|
|
|
(12,293
|
)
|
|
|
(6,000
|
)
|
Interest
income
|
|
|
1,677,196
|
|
|
|
3,424,135
|
|
|
|
—
|
|
|
|
—
|
|
Net
income (loss) attributable to common stockholders
|
|
|
(357,568
|
)
|
|
|
1,787,701
|
|
|
|
(50,150
|
)
|
|
|
(60,504
|
)
|
Net
income (loss) attributable to common stockholders per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.02
|
)
|
|
$
|
0.14
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
Diluted
|
|
$
|
(0.02
|
)
|
|
$
|
0.12
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
16,038,125
|
|
|
|
12,818,688
|
|
|
|
4,225,171
|
|
|
|
4,687,500
|
|
Diluted
|
|
|
16,038,125
|
|
|
|
15,345,922
|
|
|
|
4,225,171
|
|
|
|
4,687,500
|
|
Balance
Sheet Information:
|
|
December 31,
2008
|
|
|
December 31,
2007
|
|
|
December 31,
2006
|
|
|
December 31,
2005
|
|
Cash
|
|
$
|
15,236
|
|
|
$
|
41,589
|
|
|
$
|
6,732
|
|
|
$
|
129,434
|
|
Cash
equivalents held in trust - restricted
|
|
|
100,698,690
|
|
|
|
101,277,107
|
|
|
|
—
|
|
|
|
—
|
|
Total
assets
|
|
|
100,981,696
|
|
|
|
101,369,196
|
|
|
|
964,378
|
|
|
|
442,279
|
|
Deferred
underwriting liability
|
|
|
4,000,000
|
|
|
|
4,000,000
|
|
|
|
—
|
|
|
|
—
|
|
Total
liabilities
|
|
|
24,876,235
|
|
|
|
24,906,167
|
|
|
|
1,015,032
|
|
|
|
442,783
|
|
Common
stock subject to possible conversion
|
|
|
19,720,992
|
|
|
|
19,720,992
|
|
|
|
—
|
|
|
|
—
|
|
Stockholders’
equity (deficiency)
|
|
|
76,105,461
|
|
|
|
76,463,029
|
|
|
|
(50,654
|
)
|
|
|
(504
|
)
|
Quarterly
Results of Operations
The
following table sets forth unaudited operating data for each of the quarters of
the years ended December 31, 2008 and 2007. This quarterly information has been
prepared on the same basis as the annual financial statements of the Company
and, in the opinion of management, reflects all significant adjustments
(consisting primarily of normal recurring adjustments) necessary for a fair
presentation of results of operations for the periods presented.
For the year ended December 31, 2008
|
|
First Quarter
(unaudited)
|
|
|
Second Quarter
(unaudited)
|
|
|
Third Quarter
(unaudited)
|
|
|
Fourth Quarter
(unaudited)
|
|
Net
income (loss) attributable to common stockholders
|
|
$
|
68,855
|
|
|
$
|
(80,260
|
)
|
|
$
|
54,987
|
|
|
$
|
(401,150
|
)
|
Net
income (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.03
|
)
|
Diluted
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2007
|
|
First Quarter
(unaudited)
|
|
|
Second Quarter
(unaudited)
|
|
|
Third Quarter
(unaudited)
|
|
|
Fourth Quarter
(unaudited)
|
|
Net
income (loss)
|
|
$
|
(12,064
|
)
|
|
$
|
708,150
|
|
|
$
|
641,186
|
|
|
$
|
450,429
|
|
Basic
income (loss) per share
|
|
$
|
(0.00
|
)
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.03
|
|
Diluted
income (loss) per share
|
|
$
|
(0.00
|
)
|
|
$
|
0.04
|
|
|
$
|
0.03
|
|
|
$
|
0.02
|
|
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Overview
We were
formed on June 24, 2005 for the purpose of effecting a merger, capital stock
exchange, asset acquisition or other similar business combination with one or
more operating businesses. Our efforts in identifying a prospective target
business have been focused on acquiring an operating business in the
communications, media, gaming and/or entertainment industry. Our initial
business combination must be with a business or businesses whose collective fair
market value is at least equal to 80% of our net assets at the time of the
acquisition.
On April
2, 2007, we completed: (i) a private placement of 413,125 units at $8.00 per
unit for $3,000,000 cash and cancellation of the $305,000 loan made to the
Company by Santa Monica Capital Partners, LLC, and (ii) a public offering of
12,500,000 units for net proceeds of $95,119,982 pursuant to a registration
statement on Form S-1, which was declared effective by the Securities and
Exchange Commission on March 27, 2007. The proceeds of the private placement and
a portion of the proceeds of the public offering, together totaling $98,605,000,
were placed in a trust account, which are to be held until the earlier of (i)
the consummation of a business combination or (ii) liquidation of the company.
The amount in the trust account includes $4,000,000 of contingent underwriting
compensation that will be paid to the underwriter if a business combination is
consummated. The remaining net proceeds not held in the trust account of
$100,000, together with up to $1,600,000 of interest earned on the trust account
(net of taxes payable), were used to pay for business, legal and accounting due
diligence on prospective acquisitions and continuing general and administrative
expenses. Each unit consists of one share of the Company’s common
stock, and one warrant to purchase one share of common stock at an exercise
price of $6.00 commencing upon the completion of a business
combination
with a target business and expiring four years from the effective date of the
public offering. In the event that the last sale price of the common stock is at
least $11.50 per share (subject to proportionate adjustment of the warrant price
pursuant to the warrant agreement) for any 20 trading days within a 30 trading
day period ending on the third day prior to the date on which notice of
redemption is given the warrants will be redeemable at a price of $.01 per
warrant
upon 30
days’ notice after the warrants become exercisable. In addition, we
granted the underwriters an option to purchase up to an additional 1,875,000
units at the public offering price less the underwriters’ discount and
commission, within 30 days of the date of the prospectus, to cover any
over-allotments for public sale. The underwriters did not exercise any portion
of this option.
The
proceeds deposited in the trust account will not be released from the trust
account until the earlier of the completion of a business combination or the
expiration of the time period during which we may complete a business
combination. The proceeds held in the trust account (other than the contingent
underwriting discount) may be used as consideration to pay the sellers of a
target business with which we complete a business combination.
While we
have identified and reviewed information with respect to over 130 possible
target companies, 16 of which were provided with a detailed term sheet and/or
preliminary term sheet, there is no guarantee that we will be able to engage in
a business combination with a target business on favorable terms by April 2,
2009. Our search for potential target businesses involved making
contacts with candidates through members of our management team, board of
directors and advisory board; seeking referrals from our professional network of
contacts including consultants, investment bankers, and business brokers; and
contacting owners of media, digital media and technology
businesses.
As
discussed in the preliminary proxy statement we filed with the Securities and
Exchange Commission on Schedule 14A on March 5, 2009, we entered into a letter
of intent with NUI, a “healthy kids lifestyle” company, and were negotiating the
terms of the definitive agreement. NUI is controlled indirectly by
David Marshall, our Chief Executive Officer, Chairman and director. We believed
the business combination with NUI was in the best interests of our
stockholders. However, because we did not believe the business
combination with NUI would be completed by April 2, 2009, we had filed a proxy
statement to seek an extension for closing the business combination beyond April
2, 2009 to December 15, 2009. We did not mail the proxy related
to the extension to the shareholders and therefore are now working towards a
plan of liquidation. As of the date of this report, we plan to
distribute to our stockholders a proxy statement seeking approval (a) for a plan
of liquidation to distribute the amount in our trust account to the holders of
shares of our common stock acquired in our initial public offering and (b) to
amend and restate our certificate of incorporation to permit the Company to
continue as a corporation currently specified in our certificate without the
limitations relating to our initial public offering.
Results
of Operations
As of
December 31, 2008, approximately $100,699,000 (including approximately $2,000 in
accreted treasury bill interest) was held in trust and we had approximately
$15,000 of unrestricted cash. As of December 31, 2008, the Company has withdrawn
$1,600,000 in interest earned on the funds held in the trust account, the
maximum permitted for our activities in connection with identifying and
conducting due diligence of a suitable business combination, and for general
corporate matters.
Through
December 31, 2008, our efforts have been limited to organizational activities,
activities relating to our initial public offering, activities relating to
identifying and evaluating prospective acquisition candidates, and activities
relating to general corporate matters; we have neither engaged in any operations
nor generated any revenues, other than interest income earned on the proceeds of
our private placement and initial public offering. For the year ended December
31, 2008, we earned $1,675,172 in interest income, net of interest expense.
Consistent with the overall market for U.S. Treasury's, the Company has received
markedly lower yields on its Treasury Bill investment in the year ended December
31, 2008 compared to the year ended December 31, 2007, and is currently
receiving historically low yields of near zero.
The
following table shows the total funds held in the trust account through December
31, 2008:
Net
proceeds from our initial public offering and private placement of units
placed in trust
|
|
$
|
94,605,000
|
|
Deferred
underwriters’ discounts and compensation
|
|
|
4,000,000
|
|
Total
interest received to date
|
|
|
5,099,166
|
|
Less
total interest disbursed to us for working capital
|
|
|
(1,600,000
|
)
|
Less
total taxes paid
|
|
|
(1,407,642
|
)
|
|
|
|
100,696,524
|
|
Treasury
Bill interest accreted
|
|
|
2,166
|
|
Total
funds held in trust account through December 31, 2008
|
|
$
|
100,698,690
|
|
For the
year ended December 31, 2008, we paid or incurred an aggregate of $1,494,740 in
expenses for the following purposes:
|
·
|
Premiums
associated with our directors and officers liability
insurance;
|
|
·
|
expenses
for due diligence and investigation of prospective target
businesses;
|
|
·
|
legal
and accounting fees relating to potential acquisitions, SEC reporting
obligations and general corporate matters;
and
|
|
·
|
miscellaneous
operations related expenses including administrative fees and franchise
taxes.
|
For the
period following December 31, 2008 through the date of liquidation, if any, we
expect to incur expenses for the following purposes:
|
·
|
payment
of premiums associated with our directors’ and officers’
insurance;
|
|
·
|
payment
of estimated income taxes incurred as a result of interest income earned
on funds currently held in the trust
account;
|
|
·
|
legal
and accounting fees relating to our SEC reporting obligations and general
corporate matters;
|
|
·
|
costs
related to our liquidation including, filing of a proxy statement and
meeting relating to the approval by our stockholders of our plan of
liquidation
|
|
·
|
other
miscellaneous operations related expenses including administrative fees
and franchise taxes.
|
Lack
of Funds
We may
not have sufficient funds to allow us to operate through the date of
liquidation. We had depleted all the funds available to us from the trust
account. As a result, on January 15, 2009, the Company entered into
an unsecured loan facility with Santa Monica Capital Partners II, LLC, an entity
owned by Messrs. Marshall, Brendlinger and Pulier (“SMCPII”) to provide up to
$500,000 in funds at the discretion of SMCPII. The promissory note
provides for interest at the rate of 10% per annum, and that the principal along
with all accrued and unpaid interest is due on the earlier of (i) the closing of
a business combination, or (ii) the date the Company liquidates its
assets. In the event the Company is required to and does liquidate
pursuant to its Amended and Restated Certificate of Incorporation, unless
counsel to the Company delivers an opinion that the amounts due under the note
may be paid from the trust account, no amounts may be paid from such account, it
being understood that upon liquidation, SMCPII’s sole recourse shall be against
assets of the Company not held in the trust account.
If
additional funds are required above this amount, or if SMCPII does not make the
discretionary advances contemplated under the promissory note,
the
Company will need to obtain additional funds from its stockholders or another
source. In the event the assets held outside the trust account are insufficient
to pay the costs associated with liquidation of the Company, its three
principal executive officers David Marshall, Kurt Brendlinger and Eric Pulier
are obligated to provide additional funds required to pay the costs associated
with the liquidation.
As of
March 13, 2009, the Company has received $310,000 in loan advances under this
promissory note. The accompanying financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America, which contemplate continuation of the Company as a
going concern. As a result of the foregoing, the Company’s independent
registered public accounting firm, in its report on the Company’s 2008 financial
statements, expressed substantial doubt about the Company’s ability to continue
as a going concern. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that could result from the outcome
of this uncertainty.
ITEM
7A.
|
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 any substantive commercial business. To
date, our efforts have been limited to organizational activities and activities
relating to our initial public offering and the identification of a target
business; we have neither engaged in any operations nor generated any revenues.
Accordingly, the risks associated with foreign exchange rates, commodity prices,
and equity prices are not significant. The net proceeds of our IPO held in the
trust fund have been invested only in United States "government securities,"
defined as any Treasury Bill issued by the United States having a maturity of
one hundred and eighty days or less. Given our limited risk to principal in our
exposure to U.S. Treasury Bills and such money market funds, we do not view the
interest rate risk to be significant. Consistent with the overall market for
U.S. Treasury's, the Company is receiving historically low yields on its
Treasury Bill investments. We do not enter into derivatives or other financial
instruments for trading or speculative purposes.
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
Index to
Financial Statements:
|
Page
|
|
|
Report
of Independent Registered Public Accounting Firm:
|
19
|
Balance
Sheets
|
20
|
Statements
of Operations
|
21
|
Statement
of Stockholders’ Equity
|
22
|
Statement
of Cash Flows
|
23
|
Notes
to Audited Financial Statements
|
24
|
Schedules
have been omitted since they are either not required, are not applicable or the
required information is shown in the financial statements or the related
notes.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The
Board of Directors and Shareholders of
Santa
Monica Media Corporation
We
have audited the accompanying balance sheets of Santa Monica Media Corporation
(a corporation in the development stage) (the “Company”) as of December 31, 2008
and 2007, the related statements of operations and cash flows for the years
ended December 31, 2008 and 2007, and the period from June 24, 2005 (inception)
through December 31, 2008, and the statement of stockholders’ equity for the
period from June 24, 2005 (inception) through December 31,
2008. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Santa Monica Media Corporation as
of December 31, 2008 and 2007, and the results of its operations and its cash
flows for the years ended December 31, 2008 and 2007, and the period from June
24, 2005 (inception) through December 31, 2008, in conformity with United States
generally accepted accounting principles.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As more fully described in Note 2
to the financial statements, the Company has incurred a net loss for the year
ended December 31, 2008 and does not have sufficient working capital or outside
financing available to meet its planned operating activities. The
Company has been forced to liquidate because a business combination had not been
completed by April 2, 2009. These conditions raise substantial doubt
about the Company’s ability to continue as a going
concern. Management’s plans regarding these matters are described in
Note 2. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
We
have also audited, in accordance with the standards of the Public Accounting
Oversight Board (United States), the effectiveness of the Company’s internal
control over financial reporting as of December 31, 2008, based on criteria
established in “Internal Control – Integrated Framework” issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) and our report
dated August 25, 2009 expressed an unqualified opinion on the effectiveness of
the Company’s internal control over financial reporting.
/S/
Gumbiner Savett Inc.
Gumbiner
Savett Inc.
Santa
Monica, CA
March
11, 2009, except for Notes 1, 2 and 11 as to which the date is April 2, 2009,
and except for our report on the effectiveness of the Company’s internal control
over financial reporting as to which the date is August 25,
2009
SANTA
MONICA MEDIA CORPORATION
(a
corporation in the development stage)
BALANCE
SHEETS
December
31, 2008 and 2007
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash
|
|
$
|
15,236
|
|
|
$
|
41,589
|
|
Cash
and cash equivalents held in trust
|
|
|
100,698,690
|
|
|
|
101,277,107
|
|
Prepaids
and other current assets
|
|
|
87,770
|
|
|
|
50,500
|
|
Refundable
income taxes
|
|
|
180,000
|
|
|
|
-
|
|
Total
current assets
|
|
|
100,981,696
|
|
|
|
101,369,196
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
100,981,696
|
|
|
$
|
101,369,196
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
302,399
|
|
|
$
|
69,675
|
|
Reserve
for state franchise tax
|
|
|
390,844
|
|
|
|
-
|
|
Deferred
interest on funds held in trust
|
|
|
462,000
|
|
|
|
-
|
|
Income
taxes payable
|
|
|
-
|
|
|
|
790,500
|
|
Deferred
tax liability
|
|
|
-
|
|
|
|
325,000
|
|
Deferred
underwriting liability
|
|
|
4,000,000
|
|
|
|
4,000,000
|
|
Total
current liabilities
|
|
|
5,155,243
|
|
|
|
5,185,175
|
|
|
|
|
|
|
|
|
|
|
NONCURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Common
stock subject to conversion, 2,499,999 shares at conversion
value
|
|
|
19,720,992
|
|
|
|
19,720,992
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
24,876,235
|
|
|
|
24,906,167
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY:
|
|
|
|
|
|
|
|
|
Preferred
Stock, $.001 par value, 25,000,000 shares authorized; none issued or
outstanding
|
|
|
-
|
|
|
|
-
|
|
Common
stock, $.001 par value, 200,000,000 shares authorized; 16,038,125 issued
and outstanding (including 2,499,999 subject to conversion) at December
31, 2008 and 2007
|
|
|
16,038
|
|
|
|
16,038
|
|
Additional
paid-in capital
|
|
|
74,769,944
|
|
|
|
74,769,944
|
|
Retained
earnings
|
|
|
1,319,479
|
|
|
|
1,677,047
|
|
Total
stockholders’ equity
|
|
|
76,105,461
|
|
|
|
76,463,029
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
100,981,696
|
|
|
$
|
101,369,196
|
|
See
accompanying notes to financial statements.
SANTA
MONICA MEDIA CORPORATION
(a
corporation in the development stage)
STATEMENTS
OF INCOME
For
the years ended December 31, 2008 and 2007 and for the period from June 24, 2005
(inception) through December 31, 2008
|
|
|
|
|
For the period from
June 24, 2005
(inception) through
|
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
December 31, 2008
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
Professional
fees
|
|
$
|
417,907
|
|
|
$
|
119,974
|
|
|
$
|
551,419
|
|
Rent
and facilities
|
|
|
90,000
|
|
|
|
22,500
|
|
|
|
157,500
|
|
Formation
and operating costs
|
|
|
986,833
|
|
|
|
364,877
|
|
|
|
1,383,933
|
|
Total
operating expenses
|
|
|
1,494,740
|
|
|
|
507,351
|
|
|
|
2,092,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
1,677,196
|
|
|
|
3,424,135
|
|
|
|
5,101,331
|
|
Interest
expense
|
|
|
(2,024
|
)
|
|
|
(12,783
|
)
|
|
|
(33,100
|
)
|
Total
other income (expense)
|
|
|
1,675,172
|
|
|
|
3,411,352
|
|
|
|
5,068,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before provision for income taxes
|
|
|
180,432
|
|
|
|
2,904,001
|
|
|
|
2,975,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
437,000
|
|
|
|
791,300
|
|
|
|
1,229,900
|
|
Deferred
|
|
|
(361,000
|
)
|
|
|
325,000
|
|
|
|
(36,000
|
)
|
|
|
|
76,000
|
|
|
|
1,116,300
|
|
|
|
1,193,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before allocation of trust fund interest
|
|
|
104,432
|
|
|
|
1,787,701
|
|
|
|
1,781,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation
of trust fund intererst relating to common stock subject to possible
conversion
|
|
|
462,000
|
|
|
|
-
|
|
|
|
462,000
|
|
Net
income (loss) available to common stockholders
|
|
$
|
(357,568
|
)
|
|
$
|
1,787,701
|
|
|
$
|
1,319,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic
|
|
|
16,038,125
|
|
|
|
12,818,688
|
|
|
|
10,090,346
|
|
Weighted
average shares outstanding - fully diluted
|
|
|
16,038,125
|
|
|
|
15,345,922
|
|
|
|
13,070,298
|
|
Net
income (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.02
|
)
|
|
$
|
0.14
|
|
|
$
|
0.13
|
|
Fully
diluted
|
|
$
|
(0.02
|
)
|
|
$
|
0.12
|
|
|
$
|
0.10
|
|
See
accompanying notes to financial statements
SANTA
MONICA MEDIA CORPORATION
(a
corporation in the development stage)
STATEMENT
OF STOCKHOLDERS' EQUITY
For
the period from June 24, 2005 (inception) through December 31, 2008
|
|
Common
Shares
|
|
|
Amount
|
|
|
Additional Paid
in Capital
|
|
|
Retained
Earnings
(Accumulated
Deficit)
|
|
|
Total
|
|
Common shares issued
June 24, 2005
at
$.0128 per share
|
|
|
4,687,500
|
|
|
$
|
4,688
|
|
|
$
|
55,312
|
|
|
$
|
-
|
|
|
$
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(60,504
|
)
|
|
|
(60,504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2005
|
|
|
4,687,500
|
|
|
|
4,688
|
|
|
|
55,312
|
|
|
|
(60,504
|
)
|
|
|
(504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
reacquired
|
|
|
(1,562,500
|
)
|
|
|
(1,563
|
)
|
|
|
1,563
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50,150
|
)
|
|
|
(50,150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2006
|
|
|
3,125,000
|
|
|
|
3,125
|
|
|
|
56,875
|
|
|
|
(110,654
|
)
|
|
|
(50,654
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of units in private placement, including conversion of notes
payable
|
|
|
413,125
|
|
|
|
413
|
|
|
|
3,304,587
|
|
|
|
|
|
|
|
3,305,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of units, net of underwriters' discount and offering costs
|
|
|
12,500,000
|
|
|
|
12,500
|
|
|
|
91,107,482
|
|
|
|
|
|
|
|
91,119,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness
of interest by a related party
|
|
|
|
|
|
|
|
|
|
|
21,992
|
|
|
|
|
|
|
|
21,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
subject to possible conversion of 2,499,999 shares
|
|
|
|
|
|
|
|
|
|
|
(19,720,992
|
)
|
|
|
|
|
|
|
(19,720,992
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,787,701
|
|
|
|
1,787,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2007
|
|
|
16,038,125
|
|
|
|
16,038
|
|
|
|
74,769,944
|
|
|
|
1,677,047
|
|
|
|
76,463,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss available to common stockholders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(357,568
|
)
|
|
|
(357,568
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2008
|
|
|
16,038,125
|
|
|
$
|
16,038
|
|
|
$
|
74,769,944
|
|
|
$
|
1,319,479
|
|
|
$
|
76,105,461
|
|
See
accompanying notes to financial statements
SANTA
MONICA MEDIA CORPORATION
(a
corporation in the development stage)
STATEMENTS
OF CASH FLOWS
|
|
|
|
|
|
|
|
For the period from June
24, 2005 (inception)
through
|
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
December 31, 2008
|
|
Cash flow from
operating activities:
|
|
|
|
|
|
|
|
|
|
Net
income (loss) available to common shareholders
|
|
$
|
(357,568
|
)
|
|
$
|
1,787,701
|
|
|
$
|
1,319,479
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)
decrease in accretion in fair market value of Treasury Bills held in trust
account
|
|
|
960,691
|
|
|
|
(962,857
|
)
|
|
|
(2,166
|
)
|
Amortization
expense
|
|
|
74,887
|
|
|
|
59,375
|
|
|
|
134,262
|
|
Increase
in other current assets
|
|
|
(48,697
|
)
|
|
|
(14,250
|
)
|
|
|
(338,572
|
)
|
Increase
in refundable income taxes
|
|
|
(180,000
|
)
|
|
|
-
|
|
|
|
-
|
|
Increase
in deferred interest on funds held in trust
|
|
|
462,000
|
|
|
|
-
|
|
|
|
462,000
|
|
Increase
(decrease) in income taxes payable
|
|
|
(790,500
|
)
|
|
|
790,500
|
|
|
|
-
|
|
Increase
(decrease) in deferred income tax
|
|
|
(325,000
|
)
|
|
|
325,000
|
|
|
|
-
|
|
Increase
in reserve for state franchise tax
|
|
|
390,844
|
|
|
|
-
|
|
|
|
-
|
|
Increase
(decrease) in accounts payable and accrued expenses
|
|
|
169,264
|
|
|
|
(563,355
|
)
|
|
|
651,775
|
|
Net
cash provided by operating activities
|
|
|
355,921
|
|
|
|
1,422,114
|
|
|
|
2,226,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment
to trust account
|
|
|
-
|
|
|
|
(98,605,000
|
)
|
|
|
(98,605,000
|
)
|
Withdrawals
from trust account
|
|
|
2,255,614
|
|
|
|
752,028
|
|
|
|
3,007,642
|
|
Proceeds
into trust account
|
|
|
(2,637,888
|
)
|
|
|
(2,461,278
|
)
|
|
|
(5,099,166
|
)
|
Net
cash used in investing activities:
|
|
|
(382,274
|
)
|
|
|
(100,314,250
|
)
|
|
|
(100,696,524
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from notes payable, related party
|
|
|
-
|
|
|
|
30,000
|
|
|
|
335,000
|
|
Payment
on notes payable, related party
|
|
|
-
|
|
|
|
(30,000
|
)
|
|
|
(30,000
|
)
|
Proceeds
from sale of shares of common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
60,000
|
|
Proceeds
from private placement
|
|
|
-
|
|
|
|
3,000,000
|
|
|
|
3,000,000
|
|
Proceeds
from sale of units, net of offering costs
|
|
|
-
|
|
|
|
95,926,993
|
|
|
|
95,119,982
|
|
Net
cash provided by financing activities
|
|
|
-
|
|
|
|
98,926,993
|
|
|
|
98,484,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents at end of
period
|
|
|
(26,353
|
)
|
|
|
34,857
|
|
|
|
15,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
41,589
|
|
|
|
6,732
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
15,236
|
|
|
$
|
41,589
|
|
|
$
|
15,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for -
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
$
|
1,407,500
|
|
|
$
|
-
|
|
|
$
|
1,409,100
|
|
Interest
|
|
$
|
2,024
|
|
|
$
|
-
|
|
|
$
|
14,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash financing activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the period from inception (June 24, 2005) through December 31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
deferred underwriting fees
|
|
$
|
-
|
|
|
$
|
4,000,000
|
|
|
$
|
4,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors'
and officers' liability insurance financed
|
|
$
|
63,460
|
|
|
$
|
95,625
|
|
|
$
|
63,460
|
|
In
connection with the public offering, $305,000 of related party debt was
converted to units and interest in the amount of $21,992 was
forgiven.
Shares
subject to conversion in the amount of $19,720,992 were recorded as a liability
and reduced the additional paid in capital associated with the public
offering.
There was
a reduction of the accrual for offering cost in the amount of
$150,635.
Deferred
offering costs in the amount of $1,380,018 were charged against additional paid
in capital at the time of the offering.
See
accompanying notes to financial statements
SANTA
MONICA MEDIA CORPORATION
(a
corporation in its development stage)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2008
1.
|
Organization,
Business Operations and Significant Accounting
Policies
|
Organization
and Business Operations
Santa
Monica Media Corporation (the “Company”) was incorporated in Delaware on June
24, 2005. The Company is a blank check company formed for the purpose of
effecting a merger, capital stock exchange, asset acquisition or other similar
business combination with an unidentified operating business.
As of
December 31, 2008, the Company had not commenced any business operations. All
activity through April 2, 2007 relates to the Company’s formation and a public
offering (“Public Offering”) described below and in Note 3. Subsequent to that
date, the Company commenced its research and investigation of suitable business
combination opportunities. The Company is considered to be in its development
stage and is subject to the risks associated with development stage
companies.
The
Company’s management has broad discretion with respect to the specific
application of the net proceeds of the Public Offering, although substantially
all of the net proceeds of the Public Offering are intended to be generally
applied toward consummating a business combination with an operating business
(“Business Combination”). Furthermore, there is no assurance that the Company
will be able to successfully effect a Business Combination. If a
Business Combination is not completed by April 2, 2009, the Company will be
forced to liquidate. On March 5, 2009, the Company filed a preliminary proxy
with the Securities and Exchange Commission with respect to a proposed business
combination transaction with NUI, LLC requesting among other corporate charter
revisions, an extension to December 15, 2009 of the April 2, 2009 deadline to
complete the proposed transaction. This proxy, requesting
the extension, was not mailed to the shareholders and therefore the Company is
now working towards a plan of liquidation. As of the date of this
report, the Company plans to distribute to its stockholders a proxy statement
seeking approval (a) for a plan of liquidation to distribute the amount in the
Company’s trust account to the holders of shares of its common stock acquired in
its initial public offering and (b) to amend and restate its certificate of
incorporation to permit the Company to continue as a corporation currently
specified in its certificate without the limitations relating to its initial
public offering.
On April
2, 2007, the Company completed: (i) a private placement of 413,125 units at
$8.00 per unit (the “Private Placement”) for $3,000,000 cash and cancellation of
a $305,000 loan made to the Company by Santa Monica Capital Partners, LLC, and
(ii) the Public Offering of 12,500,000 units for net proceeds of $95,119,982
pursuant to a registration statement declared effective by the Securities and
Exchange Commission on March 27, 2007. The proceeds of the Private Placement and
a portion of the proceeds of the Public Offering, together totaling $98,605,000,
were placed in a trust account (the “Trust Account”). The amount in the Trust
Account includes a $4,000,000 contingent underwriting compensation payable to
the underwriter if a Business Combination is consummated. The Underwriting
Agreement calls for the proceeds to be held in the Trust Account until the
earlier of (i) the consummation of a Business Combination or (ii) liquidation of
the Company. The remaining net proceeds (not held in the Trust Account) of
$100,000 and up to $1,600,000 of interest
earned on
the Trust Account (net of taxes payable) may be used to pay for business, legal
and accounting due diligence on prospective acquisitions and continuing general
and administrative expenses. As of December 31, 2008, these amounts have been
expended. (See Note 11). The Company had one stockholder
as of July 31, 2005, Santa Monica Capital Partners LLC (“Initial Stockholder”).
During August 2005 and April 2006, Santa Monica Capital Partners, LLC
transferred an aggregate of 458,232 units to various parties including the
outside directors and advisory board members (“Transferee Stockholders”). (See
Note 6.)
The
Company’s Certificate of Incorporation, as amended, provides for mandatory
liquidation of the Company if 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. In the event of liquidation, it is
likely that the per share value of the residual assets remaining available for
distribution (including Trust Account assets) will be less than the initial
public offering price per share in the Public Offering (assuming no value is
attributed to the Warrants contained in the Units offered in the Public Offering
discussed in Note 3). As of December 31, 2008, the Company had satisfied the
conditions for extension of time to complete the Business Combination to 24
months (April 2, 2009).
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. Trust assets are invested principally in U.S. Treasury
Bills.
Income
Taxes
The
Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, or SFAS No. 109 “Accounting for Income Taxes.” As
such, deferred income taxes are recognized for the tax consequences in future
years of differences between the tax basis of assets and liabilities and their
financial report amounts at each period end, based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be realized.
The provision for income taxes represents the tax payable for the period, if
any, and the change during the period in deferred tax assets and
liabilities.
In July
2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement No. 109” (“FIN 48”), which provides criteria
for the recognition, measurement, presentation and disclosure of uncertain tax
positions. A tax benefit from an uncertain position may be recognized only if it
is “more likely than not” that the position is sustainable based on its
technical merit. The Company has adopted FIN 48 as of January 1,
2007.
Earnings
(loss) per Share
The
Company utilizes SFAS No. 128, “Earnings per Share.” Basic earnings per share
are computed by dividing earnings available to common stockholders by the
weighted-average number of common shares outstanding. Diluted earnings per share
is computed similarly to basic earnings per share except that the denominator is
increased to include additional common shares available upon exercise of stock
options and warrants using the treasury stock method, except for periods of
operating loss for which no common share equivalents are included because their
effect would be anti-dilutive. For the year ended December 31,
2008, 12,913,125 securities were excluded from the computation because they were
anti-dilutive. For the period ended December 31, 2007 and for the
period from June 24, 2005 (inception) through December 31, 2008, there were no
securities excluded from the computation because they were
anti-dilutive.
|
|
|
|
|
|
|
|
For the
period from
June 24,
2005
(inception)
through
|
|
|
|
2008
|
|
|
2007
|
|
|
December 31,
2008
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable to common stockholders
|
|
$
|
(357,568
|
)
|
|
$
|
1,787,701
|
|
|
$
|
1,319,479
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for basic net income per share—weighted average shares
|
|
|
16,038,125
|
|
|
|
12,818,688
|
|
|
|
10,090,346
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
—
|
|
|
|
2,527,234
|
|
|
|
2,979,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for diluted income per share—adjusted weighted average
shares
|
|
|
16,038,125
|
|
|
|
15,345,922
|
|
|
|
13,070,298
|
|
Basic
earnings (loss) per share
|
|
$
|
(0.02
|
)
|
|
$
|
0.14
|
|
|
$
|
0.13
|
|
Diluted
earnings (loss) per share
|
|
$
|
(0.02
|
)
|
|
$
|
0.12
|
|
|
$
|
0.10
|
|
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 equivalents, money market funds held in trust, prepaid
expenses, accounts payable and accrued expenses, deferred underwriting fees
payable, and income taxes payable approximate their respective fair values, due
to the short-term nature of these items.
Interest
on Funds Held In Trust Subject to Common Stock Conversion
Deferred
interest on funds held in trust consists of the 20% less one share portion of
the interest earned on the funds held in trust, which is the maximum amount, net
of permitted withdrawals by the Company and related income taxes, that the
Company would be obligated to pay to stockholders who elect to have their stock
redeemed by the Company without resulting in a rejection of a business
combination.
Recent
Accounting Pronouncements
In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS
No. 141(R)”), which requires an acquirer to recognize in its financial
statements as of the acquisition date (i) the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree, measured
at their fair values on the acquisition date, and (ii) goodwill as the excess of
the consideration transferred plus the fair value of any non-controlling
interest in the acquiree at the acquisition date over the fair values of the
identifiable net assets acquired. SFAS No. 141(R) makes significant amendments
to other FASB statements and other authoritative guidance to provide additional
guidance or to conform the guidance in that literature to that provided in SFAS
No. 141(R). SFAS No. 141(R) also provides guidance as to what information is to
be disclosed to enable users of financial statements to evaluate the nature and
financial effects of a business combination. SFAS No. 141(R) is effective for
financial statements issued for fiscal years beginning on or after December 15,
2008. Early adoption is prohibited. The adoption of SFAS No. 141(R) will affect
how the Company accounts for the acquisition of a business after December 31,
2008.
Except
for the aforementioned accounting standard, 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.
The
Company does not have sufficient funds to allow it to operate through the date
of consummation of a business combination or date of liquidation. As
a result, the Company has entered into an unsecured loan facility with Santa
Monica Capital Partners II, LLC, an affiliate (“SMCPII”) to provide up to
$500,000 in advances at the sole discretion of SMCPII. (See Note
11). If additional funds are required above this amount, or if SMCPII
does not make the discretionary advances contemplated under the promissory note,
the Company will need to obtain additional funds from its stockholders or
another source. If the Company is unable to obtain additional financing, the
Company will be forced to limit its activities or liquidate. None of the
Company’s officers, directors or stockholders are required to provide any
financing to the Company. In the event the assets held outside the trust account
are insufficient to pay the costs associated with dissolution and liquidation of
the Company, its three principal executive officers are obligated to provide
additional funds required to pay the costs associated with the dissolution and
liquidation.
As set
forth in Note 11, on March 5, 2009, the Company filed a preliminary proxy with
the Securities and Exchange Commission with respect to a proposed business
combination transaction requesting among other corporate charter revisions, an
extension to December 15, 2009 of the April 2, 2009 transaction
deadline. This proxy, requesting the extension, was not
mailed to the shareholders and therefore the Company is now working towards a
plan of liquidation. As of the date of this report, the Company plans
to distribute to its stockholders a proxy statement seeking approval (a) for a
plan of liquidation to distribute the amount in the Company’s trust account to
the holders of shares of its common stock acquired in its initial public
offering and (b) to amend and restate its certificate of incorporation to permit
the Company to continue as a corporation currently specified in its certificate
without the limitations relating to its initial public offering.
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. As a result of the
foregoing, the Company’s independent registered public accounting firm, in its
report on the Company’s 2008 financial statements, expressed substantial doubt
about the Company’s ability to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that could result from the outcome of this
uncertainty.
In the
Public Offering, the Company issued and sold 12,500,000 units (“Units”) at $8.00
per Unit. The underwriters were paid fees equal to 3.5% of the gross proceeds of
the Public Offering, or $3,500,000, at the closing of the Public Offering and
have agreed to defer an additional $4,000,000 of their underwriting fees until
the consummation of a Business Combination. Upon the consummation of a Business
Combination, the Company will pay such fees out of the proceeds of the Public
Offering held in the Trust Account.
Each Unit
consists of one share of the Company’s common stock, and one Redeemable Common
Stock Purchase Warrant (“Warrant”). Each Warrant will entitle the holder to
purchase from the Company one share of common stock at an exercise price of
$6.00 upon the completion of a business combination with a target business, and
will expire four years from the effective date of the Public Offering. The
Warrants will be redeemable at a price of $.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 $11.50 per share (subject to proportionate
adjustment of the warrant price pursuant to the warrant agreement) for any 20
trading days within a 30 trading day period ending on the third day prior to the
date on which notice of redemption is given.
In
addition, the Company granted the underwriters an option to purchase up to an
additional 1,875,000 Units at the public offering price less the underwriters’
discount and commission to cover any over-allotments for public sale. The
underwriters did not exercise any portion of this option.
4.
Note Payable - Related
Party
The
Company issued an amended and restated $305,000 unsecured promissory note to its
Initial Stockholder on February 1, 2007. This note was cancelled and converted
into units on April 2, 2007 in connection with the Public Offering. The note was
originally issued on June 24, 2005 for the amount of $240,000, and in December
2006, the Initial Stockholder loaned an additional $65,000 to the Company. The
note (as amended) bore interest at 5%. In connection with the Public Offering on
April 2, 2007, accrued interest in the amount of $21,992 was forgiven and shown
as an increase to additional paid-in capital.
5.
Commitments - Related
Party
The
Company utilizes certain administrative, technology and secretarial services, as
well as certain limited office space provided by Santa Monica Capital Corp, and
subsequently, Santa Monica Capital Partners II, LLC, an affiliate of Santa
Monica Capital Corp. Such affiliate has agreed that it will make such services
available to the Company, as may be required by the Company from time to time.
The Company agreed to pay such affiliate $7,500 per month for such services
commencing as of July 1, 2005 through January 5, 2006. Under the agreement as
amended, the Company did not pay or accrue additional fees until October 2,
2007, six months after consummation of the Public Offering of the Company’s
securities, upon which the Company began to pay $7,500 per month. The Company
will continue to pay such fees until the Company has paid aggregate fees of
$180,000, or, if earlier, upon the completion of a Business Combination. As of
December 31, 2008 and 2007, the Company had incurred an aggregate of $90,000 and
$67,500, respectively, for such services. As of December 31, 2008,
$7,500 was unpaid and included in accrued expenses.
6.
Preferred Stock
The
Company is authorized to issue 25,000,000 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.
7.
Common Stock and
Warrants
In July
2005, the Company issued 4,687,500 Units to Santa Monica Capital Partners, LLC
for $60,000 in cash, at a purchase price of approximately $0.01 per unit. Mr.
Marshall, the Company’s Chairman of the Board and Chief Executive Officer, Mr.
Brendlinger, the Company’s Chief Financial Officer and Director, Mr. Pulier, the
Company’s Secretary and Director, and Mr. Baradaran, the Company’s Director, are
the beneficial owners of Santa Monica Capital Partners, LLC. Each unit consisted
of one share of the Company’s common stock and one warrant to purchase one share
of the Company’s common stock at an exercise price of $6.00 per share,
exercisable upon the consummation of a Business Combination and expiring
four years from the consummation of the Public Offering.
During
August 2005 and April 2006, Santa Monica Capital Partners, LLC transferred an
aggregate of 458,232 units to the Transferee Stockholders, including 217,848
units to persons who are not directors or members of the Company’s advisory
board for an aggregate price of $6,625, or $0.03 per unit, and 240,384 units to
members of the Company’s board of directors and advisory board for an aggregate
price of $4,500, or $0.02 per unit.
These
units were not transferred to settle any obligations of the Company or in
exchange for services for the Company. Future services provided by any of the
transferees will be compensated pursuant to separate agreements.
All units
transferred by Santa Monica Capital Partners, LLC were paid for pursuant to the
delivery of promissory notes due August 2009 issued to Santa Monica Capital
Partners, LLC with interest of 8% per annum payable upon maturity
thereof.
In
September 2006, in conjunction with the Company’s public offering, the Company’s
Board of Directors authorized the Company to enter into an agreement with its
shareholders, other than Santa Monica Capital Partners, LLC, to exchange their
units for an equal number of shares of the Company’s common stock, and this
exchange subsequently was completed in September 2006. Additionally, Santa
Monica Capital Partners, LLC exchanged its 4,229,268 units for 2,666,768 shares
of the Company’s common stock. As a result, there are no outstanding warrants
relating to the originally issued shares. See Note 8.
In April
2006 and March 2007, the Company and Santa Monica Capital Partners, LLC agreed
to a private placement of units in connection with the Public Offering. In
connection with this agreement Santa Monica Capital Partners, LLC purchased
413,125 units at $8.00 per unit for $3,305,000, which included the cancellation
of the $305,000 loan made to the Company by Santa Monica Capital Partners, LLC,
prior to the Public Offering. The proceeds of this Private Placement are held in
the Trust Account established for the Public Offering (Note 1).
In
connection with the Public Offering described in Note 3 and the private
placement of Units described above, the Company issued warrants to purchase an
aggregate 12,913,125 shares of its common stock, all of which were outstanding
as of December 31, 2008. The warrants have a weighted average exercise price of
$6.00 per share, and a weighted average remaining term of 27
months.
8.
Registration
Rights
The
holders of the Company’s 3,538,125 issued and outstanding shares immediately
prior to the completion of the offering, including the Initial Shareholder, are
entitled to registration rights covering the resale of their shares and the
resale of their warrants and shares acquired upon exercise of their warrants.
The holders of the majority of these shares are entitled to make up to two
demands that the Company register their shares, warrants and shares underlying
the warrants any time after the consummation of the initial business
combination, subject to transfer restrictions imposed by the lock up agreements.
In addition, these stockholders have certain “piggy-back” registration rights on
registration statements filed subsequent to the date on which these securities
are released from the restrictions imposed by the lock-up agreements. The
Company will bear the expenses incurred in connection with the filing of any
such registration statements. Pursuant to the registration rights agreement,
these stockholders waive any claims to monetary damages for any failure by the
Company to comply with the requirements of the registration rights agreement,
provided the Company has used its best efforts to do so.
In
accordance with the Warrant Agreement related to the warrants, the Company will
not be obligated to deliver securities, and there are no contractual penalties
for failure to deliver securities, if a registration statement is not effective
at the time of exercise. Additionally, in the event that a registration
statement is not effective at the time of exercise, the holder of such warrant
shall not be entitled to exercise such warrant and in no event will the Company
be required to net cash settle the warrant exercise. Consequently, the warrants
may expire unexercised.
9.
Income
Taxes
The
following table presents the current and deferred income tax provision for
federal and state income taxes:
|
|
2008
|
|
|
2007
|
|
|
For the
period from
June 24, 2005
(inception)
through
December 31,
2008
|
|
Current
tax provision:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
335,000
|
|
|
$
|
627,500
|
|
|
$
|
962,500
|
|
State
|
|
|
102,000
|
|
|
|
163,800
|
|
|
|
267,400
|
|
|
|
$
|
437,000
|
|
|
$
|
791,300
|
|
|
$
|
1,229,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(276,000
|
)
|
|
|
241,000
|
|
|
|
(35,000
|
)
|
State
|
|
|
(85,000
|
)
|
|
|
84,000
|
|
|
|
(1,000
|
)
|
|
|
|
(361,000
|
)
|
|
|
325,000
|
|
|
|
(36,000
|
)
|
Total
provision for income tax
|
|
$
|
76,000
|
|
|
$
|
1,116,300
|
|
|
$
|
1,193,900
|
|
Current
income taxes are based upon the year’s income taxable for federal and state tax
reporting purposes. Deferred income taxes (benefits) are provided for certain
income and expenses, which are recognized in different periods for tax and
financial reporting purposes.
Deferred
tax assets and liabilities are computed for differences between the financial
statements and tax bases of assets and liabilities that will result in taxable
or deductible amounts in the future based on enacted tax laws and rates
applicable to the period in which the differences are expected to affect taxable
income.
Significant
components of the Company’s net deferred tax asset (liability) at December 31,
2008 and 2007 are as follows:
|
|
2008
|
|
|
2007
|
|
Expenses
deductible in future periods
|
|
$
|
37,000
|
|
|
$
|
85,000
|
|
Accretion
of interest on U.S. Treasury Bills
|
|
|
(1,000
|
)
|
|
|
(410,000
|
)
|
Total
deferred tax assets (liabilities)
|
|
|
36,000
|
|
|
|
(325,000
|
)
|
Valuation
allowance
|
|
|
—
|
|
|
|
—
|
|
Net
deferred tax asset (liability)
|
|
$
|
36,000
|
|
|
$
|
(325,000
|
)
|
In
assessing the realizability of deferred tax assets of $36,000 and $85,000 at
December 31, 2008 and 2007, respectively, management considered whether it is
more likely than not that some portion or all of the deferred tax assets will be
realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which these assets
become deductible. Management considers the scheduled reversal of deferred tax
liabilities, the projected future taxable income and tax planning strategies in
making this assessment. Management's analysis of the deferred tax asset at
December 31, 2008 and 2007 concluded that the asset can be utilized in future
periods. Therefore, there is no valuation allowance against this asset as of
December 31, 2008 and 2007.
A
reconciliation of the expected tax computed at the U.S. statutory federal income
tax rate to the total benefit for income taxes for the year ended December 31,
2008 and 2007, and the period from June 24, 2005 (inception) through December
31, 2008 as follows:
|
|
|
|
|
|
|
|
For the period
from June 24,
2005
(inception) through
|
|
|
|
2008
|
|
|
2007
|
|
|
December 31,
2008
|
|
Expected
tax at 34%
|
|
$
|
61,000
|
|
|
$
|
987,000
|
|
|
$
|
1,012,000
|
|
Change
in valuation allowance
|
|
|
-
|
|
|
|
(43,000
|
)
|
|
|
-
|
|
State
income tax, net of federal tax benefit
|
|
|
11,000
|
|
|
|
169,000
|
|
|
|
174,000
|
|
Other
|
|
|
4,000
|
|
|
|
3,000
|
|
|
|
8,000
|
|
Provision
for income taxes
|
|
$
|
76,000
|
|
|
$
|
1,116,000
|
|
|
$
|
1,194,000
|
|
On July
13, 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in
Income Taxes - An Interpretation of FASB Statement No. 109 (“FIN 48”), which
clarifies the accounting for uncertainty in income taxes recognized in an
entity’s financial statements in accordance with SFAS No. 109, Accounting for
Income Taxes, and prescribes a recognition threshold and measurement attributes
for financial statement disclosure of tax positions taken or expected to be
taken on a tax return. Under FIN 48, the impact of an uncertain income tax
position on the income tax return must be recognized at the largest amount that
is more-likely-than-not to be sustained upon audit by the relevant taxing
authority. An uncertain income tax position will not be recognized if it has
less than a 50% likelihood of being sustained.
The
Company adopted FIN 48, Accounting for Uncertainty in Income Taxes on January 1,
2007. The Company recognized no cumulative effect adjustment as a result of
adopting FIN 48. At December 31, 2008 and 2007, the Company has no unrecognized
tax benefits.
The
Company’s continuing practice is to recognize interest and/or penalties related
to income tax matters in income tax expense. As of December 31, 2008, the
Company has no accrued interest and penalties related to uncertain tax
positions.
The
Company is subject to taxation in the U.S. and California. The tax years 2005 to
2008 remain open to examination by the major taxing jurisdictions to which the
Company is subject. The Company currently is not under examination by any tax
authority.
10. Summarized
Quarterly Data (unaudited)
The
following is a summary of the quarterly results of operations for the year ended
December 31, 2008.
|
|
December
31,
2008
|
|
|
September
30,
2008
|
|
|
June
30,
2008
|
|
|
March
31,
2008
|
|
Net
income (loss) attributable to common stockholders
|
|
$
|
(401,150
|
)
|
|
$
|
54,987
|
|
|
$
|
(80,260
|
)
|
|
$
|
68,855
|
|
Net
income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.03
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
Diluted
|
|
$
|
(0.03
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
11.
Subsequent Events
On
January 15, 2009, the Company entered into an unsecured loan facility with Santa
Monica Capital Partners II, LLC, an affiliate (“Lender”), to provide up to
$500,000 in funds at the discretion of the Lender. The promissory
note provides for interest at the rate of 10% per annum, and that the principal
along with all accrued and unpaid interest is due on the earlier of (i) the
closing of a business combination, as such term is defined in the Company’s
prospectus dated March 27, 2007 as filed with the Securities and Exchange
Commission on March 28, 2007, or (ii) the date that the Company
liquidates its assets. In the event that the Company is required to
and does dissolve and liquidate pursuant to its Certificate of Incorporation,
the Lender’s sole recourse shall be against the assets of the Company not held
in the trust account, unless the Company’s counsel delivers an opinion that the
amounts due under the note may be paid from the trust account. As of
April 2, 2009, $310,000 had been advanced to the Company pursuant to this
promissory note.
On March
5, 2009, the Company filed a preliminary proxy with the Securities and Exchange
Commission with respect to a proposed business combination transaction with NUI,
LLC (“NUI”) requesting among other corporate charter revisions, an extension to
December 15, 2009 of the April 2, 2009 deadline to complete the proposed
transaction. This proxy, requesting the extension, was
not mailed to the shareholders and therefore the Company is now working towards
a plan of liquidation. As of the date of this report, the Company
plans to distribute to its stockholders a proxy statement seeking approval (a)
for a plan of liquidation to distribute the amount in the Company’s trust
account to the holders of shares of its common stock acquired in its initial
public offering and (b) to amend and restate its certificate of incorporation to
permit the Company to continue as a corporation currently specified in its
certificate without the limitations relating to its initial public
offering.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM
9A. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
During
2009, management of Santa Monica Media Corporation (the "Company") determined
that it had not completed its evaluation, which included certain documentation
and testing, of the Company’s disclosure controls and procedures as of December
31, 2008 for the reasons discussed below under the caption “Results of
Management’s Assessment”. The incomplete evaluation was made by
management, including the Chief Executive and Chief Financial Officers, pursuant
to Rule 13a-15(b) of the Securities Exchange Act. Since the
evaluation was not completed at December 31, 2008, the Company's Chief Executive
and Chief Financial Officers concluded that the Company's disclosure controls
and procedures were not effective.
Management’s
Report on Internal Control over Financial Reporting
Management
Acknowledgment
Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting. The Company’s internal control system is
designed to provide reasonable assurance to the Company's management and board
of directors regarding the preparation and fair presentation of published
financial statements. All internal control systems, no matter how well designed,
have inherent limitations. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.
A
Company's internal control over financial reporting includes policies and
procedures that: (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company, (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the United States,
and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company, and
(iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the company's assets that could
have a material effect on the financial statements.
Management
Assessment
During
2009, management of the Company determined that it had not completed its
evaluation, which included certain documentation and testing, of the Company’s
internal control over financial reporting as of December 31,
2008.
As of
December 31, 2008, the Company's management was in the process of assessing the
effectiveness of the Company's internal control over financial
reporting. In making this assessment, the Company was using the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework. The COSO
framework summarizes each of the components of a company's internal control
system, including the: (i) control environment, (ii) risk assessment, (iii)
information and communication, and (iv) monitoring (collectively, the
"entity-level controls"), as well as a company's control activities ("process
level controls").
Oversight
of the internal control over financial reporting compliance activities is under
the direction of the CEO and CFO in coordination with the Company’s outside
financial consultant who is responsible for the preparation of the Company’s
financial statements. Since the Company is a Blank Check Company with
no current business operations, it has no employees, and only three corporate
officers, two of which, the CEO and CFO, are responsible for the day-to-day
operations. All of the activities of the Company take place in a
single office where the executive and financial officers and the consultant work
together. There is regular communication among this small group of
personnel, and all events that may have an impact on the Company’s internal
controls over financial reporting are made known to the CEO and CFO so that
action, if required, is implemented.
The
CEO, CFO and consultant meet at least on a quarterly basis in connection with
the preparation of published financial statements to review activities for the
period. The quarterly and annual regulatory filings are then reviewed
in detail by the Audit Committee of the Board prior to filing with the
Commission. The Audit Committee is comprised of independent board
members, and the chairman is a financial expert. The Audit Committee
is the forum within the Company to address internal control over financial
reporting, and any weaknesses that may be identified during the
quarter.
Management
believes the above activities are effective controls.
Results of Management’s
Assessment
At
December 31, 2008, management believed, as discussed above, in so far as it had
completed its assessment, that appropriate internal controls were in place to
maintain an adequate system of internal control over financial reporting which
should result in the fair presentation of published financial
statements. However, due to the fact that the Company has limited
personnel resources, there was a lack of segregation of duties, which management
identified as a material weakness. Such determination was made
notwithstanding the fact that management had not completed its documentation and
testing of its internal control systems, primarily in the areas of financial
reporting systems and processing controls. Therefore, management concluded
that there was a reasonable possibility that a material misstatement of the
annual or interim financial statements may not be prevented or detected on a
timely basis. As a result of this situation, which constituted a
material weakness in internal control as of December 31, 2008, the Company's
Chief Executive and Chief Financial Officers concluded that the Company’s
internal control over financial reporting was not effective. A
“material weakness” is defined as a significant deficiency or combination of
significant deficiencies that results in more than a remote likelihood that a
material misstatement of the annual or interim financial statements will not be
prevented or detected in a timely manner.
Subsequent
to December 31, 2008 and filing of Form 10-K, the Company completed the
documentation of the financial reporting systems and processing controls and
testing of those areas. As a result, management has determined that
sufficient compensating controls were in existence such that lack of segregation
of duties was not a material weakness at that time, but a significant
deficiency. Management believes that such significant deficiency does
not constitute a material weakness in the Company’s system of internal control
over financial reporting. The Company's Chief Executive and Chief Financial
Officers have therefore determined that the Company's internal control over
financial reporting was effective as of December 31, 2008.
Changes in Internal Control
over Financial Reporting
During
the most recently completed fiscal quarter, there has been no change
in the Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to affect, the Company’s internal control over
financial reporting.
Our
independent registered public accounting firm, Gumbiner Savett Inc., who also
audited the financial statements, independently assessed the effectiveness of
the Company’s internal control over financial reporting as of December 31, 2008,
as stated in their report below.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of Santa Monica Media Corporation
We
have previously audited and reported on management’s annual assessment of Santa
Monica Media Corporation’s (the “Company”) internal control over financial
reporting as of December 31, 2008, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Our report, dated March 11, 2009,
identified the following material weakness in the Company’s internal control
over financial reporting: Because the Company has no employees, the
Company is unable to segregate the accounting procedures over financial
activities to provide adequate internal controls. As of December 31, 2008,
management had not completed its assessment of internal control over financial
reporting, which included certain documentation and testing, of the Company’s
internal control over financial reporting. At that time, management believed, in
so far as it had completed its assessment, that appropriate internal controls
were in place to maintain an adequate system of internal control over financial
reporting which should result in the fair presentation of published financial
statements. As a result of completing the assessment, management became aware
that there were sufficient compensating controls in the Company’s internal
control systems to mitigate the apparent lack of segregation of
duties.
Accordingly,
the Company’s Chief Executive and Chief Financial Officers were then able to
conclude that the Company’s internal control over financial reporting was
effective as of December 31, 2008.
We
have applied auditing procedures to management’s assertion, included in the
accompanying Management’s Report on Internal Control over Financial Reporting,
that the weakness in internal control over financial reporting identified above
does not constitute a material weakness, but a significant deficiency, due to
the compensating controls in the Company’s internal control
systems.
The
Company’s management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management’s
Report on Internal Controls over Financial Reporting. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting
based on our audit.
Our
engagement was conducted in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the engagement to obtain reasonable assurance about whether a
previously reported material weakness continues to exist at the
Company. Our engagement included examining evidence supporting
management’s assertion and performing such other procedures as we considered
necessary in the circumstances. We obtained an understanding of the
Company’s internal control over financial reporting as part of our previous
audit of management’s annual assessment of the Company’s internal control over
financial reporting as of December 31, 2008, and updated that understanding as
it specifically relates to the Company’s completion of its evaluation, which
included certain documentation and testing. We believe that our audit
provides a reasonable basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2008, based on criteria
established in Internal Control – Integrated Framework issued by
COSO.
We
have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the balance sheets and the related
statements of operations, stockholders’ equity, and cash flows of Santa Monica
Media Corporation, and our report dated March 11, 2009 expressed an unqualified
opinion.
/S/
Gumbiner Savett Inc.
Gumbiner
Savett Inc.
Santa
Monica, CA
August
25, 2009.
ITEM
9B.
|
OTHER
INFORMATION
|
Not
applicable.
PART
III
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
|
Directors
and Executive Officers
The
directors and executive officers of the Company are as follows:
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
David
Marshall
|
|
45
|
|
Chairman
of the Board and Chief Executive Officer
|
Kurt
Brendlinger
|
|
47
|
|
Chief
Financial Officer and Director
|
Eric
Pulier
|
|
42
|
|
Chief
Technology Officer, Secretary and Director
|
Dallas
Clement
|
|
44
|
|
Director
|
Robert
Schultz
|
|
78
|
|
Director
|
Sharyar
Baradaran
|
|
41
|
|
Director
|
David
Marshall
has
served as our Chairman of the Board and Chief Executive Officer since our
inception. Mr. Marshall is co-founder of Youbet.com, Inc. (NASDAQ:UBET),
the largest legal online gaming company in the U.S. based on total wagers.
Since December 1999, Mr. Marshall has been a financial principal and/or
consultant to various emerging growth companies providing finance, acquisition
and operational expertise including participation in numerous equity and debt
fundings of InterMetro Communications Inc, a Voice-Over-Internet-Protocol
company beginning in
2006. In September 2005,
Mr. Marshall founded NUI, LLC, a food & beverage, media &
entertainment company focused solely on encouraging children to be smart, fit
and happy. From October 2006 through June 2008, Mr. Marshall served as
Chairman of the Board of Pro Elite, Inc. (PELE.PK), a company that conducts a
mixed martial arts business both live and on line.
Kurt
Brendlinger
has served as our Chief
Financial Officer and a director since our inception. From January 2002 to June
2004, Mr. Brendlinger was Chief Executive Officer and President of
Rainmakers, Inc., an Internet marketing services company for the entertainment
industry. Rainmakers has service agreements with Sony Pictures, Revolution
Studios, 20th Century Fox, Dreamworks, Walden/AFG, and Initial
Entertainment. Since July 2004, Mr. Brendlinger has been the Managing
Director of Aaron Fleck & Associates, LLC, a registered investment
advisor where he is responsible for deal sourcing, capital raising, venture
capital and private equity investments and asset management. From October 2006
to June 2008, Mr. Brendlinger was a director of ProElite, Inc. (PELE.PK), a
company that conducts a mixed martial arts business both live and on line. Mr.
Brendlinger is also a director of NuRx Pharmaceuticals, Inc. (NURX.OB), a
clinical stage biotechnology company focusing on retinoid and rexinoid
therapeutics for applications in oncology and other highly prevalent
diseases.
Eric
Pulier
has been our Secretary and a director since our inception and also
holds the position of Chief Technology Officer. Mr. Pulier was founder and,
since January 2001, has served as the Executive Chairman of SOA Software, Inc.,
a developer of enterprise software products for SOA governance, security and
management. The company’s recent growth has been driven by the addition of some
of the largest Fortune 500 companies. SOA Software products now run well over 4
Billion transactions/month around the world. In January 2003,
Mr. Pulier was appointed as a board member of the Center for
Telecommunications Management (CTM) at the Marshall School of Business at USC, a
global organization dedicated to thought leadership for the networked digital
economy.
Dallas Clement
has served as a director since August 2005. Since August 2000, Mr.
Clement has been the Senior Vice President of Strategy and Product Management
for Cox Communications, Inc., a multi-service broadband communications company.
Mr. Clement oversees development and growth strategies related to the Cox
Communications, Inc.’s video, voice, high-speed Internet and wireless services.
Mr. Clement is a member of our Audit Committee.
Robert
Schultz
has served as a
director since August 2005. From June 2002 to October 2005, Mr. Schultz served
as chairman of Advanced Electron Beams, Inc. a company that utilizes its
proprietary electron beam technology to build and market unique electron beam
systems for advanced manufacturing processes and environmental control. He
resigned from the AEB board in October 2005. He was a member of the
board of directors of MCT Corporation, which built and operated cellular phone
systems in Russia and Central Asia, from April 2000, until its merger with
TeliaSonera in July 2007. He was elected to the National Academy of Engineering
in 1992. Mr. Schultz is a member of our Audit
Committee.
Sharyar Baradaran
has served as a director since April 2006. Since January 2001
Mr. Baradaran has served as Chief Executive Officer and chairman of
BaradaranVentures, a privately held investment fund located in Los Angeles,
California. Since November 2003, Mr. Baradaran has served on the board of
directors of InnerWorkings Inc., (NASDAQ- INWK) a leading provider of print and
related procurement services. From August 2006 to the present Mr. Baradaran
has been on the advisory board of Echo Global Logistics Inc., a transportation
management firm providing superior cost savings technology and services for
companies ranging from small enterprises to the Fortune 100. From June 2002
until December 2004 and then from September 2005 until the present
Mr. Baradaran served on the board of ISENSIX Inc., a propriety wireless and
web-based system providing safety/quality management solutions for vital systems
in hospital, blood bank, and clinical laboratories. Mr. Baradaran has been
on the board of NuRx Pharmaceuticals since May 2007, an emerging biotech
company with focus on the development of retinoid and rexinoid compounds
.
Mr.
Baradaran is a member of our Audit Committee.
Our board
of directors consists of only one class of directors with each director elected
for a one-year term. These individuals will play a key role in identifying and
evaluating prospective acquisition candidates, selecting the target business,
and structuring, negotiating and consummating its acquisition.
Advisory
Board
We also
may consult, from time to time, with certain individuals who have experience in
the communications, media, gaming and/or entertainment/industries, which we call
our special advisors, each of whom is also a stockholder of our company, who may
assist us in our search for and evaluation of our target business and other
matters relating to our operations. The members of the advisory board do not owe
us any fiduciary duties with respect to the execution of their duties. No
compensation of any kind, including finder’s and consulting fees, will be paid
by us to any of our advisory board members, or any of their affiliates, for
services rendered to us prior to or in connection with the consummation of our
initial business combination. These advisors are as follows:
Stan
Golden
has
over 26 years of experience in international television programming
co-production, merchandising, distribution, broadcasting and cable/network
development. In April 1988, Mr. Golden joined Saban International, a
division of Saban Entertainment, as President in charge of launching a global
television programming distribution business. In September 1994, during
Mr. Golden’s tenure, Saban Entertainment, now BVS Entertainment, an
independent television production company, created Saban International Paris,
Saban Entertainment’s French animation studio. From October 1999 to June 2002,
Mr. Golden also served as President of Program Distribution for Fox Kids
Europe (a division of Fox Family Worldwide), supervising all of its program
distribution, co-production and acquisitions. Since June 2002, Mr. Golden
has been the Managing Partner for Golden Touch Media LLC, a consulting firm in
the media and entertainment industries.
Cary
Granat
is
the Chief Executive Officer and Co-founder with Michael Flaherty of Walden
Media, a diversified media company which was founded in September 2000. In
addition to his duties as Chief Executive Officer of Walden Media,
Mr. Granat was appointed as President of Anschutz Film Group, or AFG, a
diversified entertainment company, in April 2004. As President, he oversees
creative, production and marketing activities for AFG subsidiaries Walden Media
and Bristol Bay Productions. Mr. Granat currently serves on the board of
directors of the World Information Transfer, a non-governmental organization in
general consultative status with the United Nations.
James R.
Miller
has
been the Chairman of Midwood Media & Communications, Inc., a
media-consulting firm, since February 2000. Mr. Miller held the following
positions at Warner Bros. Entertainment, Inc., a producer of film and television
entertainment: he was the President of Worldwide Theatrical business operations
from December 1998 to January 2000; from January 1990 to December 1997; he was
the Executive Vice President of Business Acquisitions; from January 1987 to
December of 1989, he was the Senior Vice President Worldwide Business Affairs;
from January 1983 to December 1986 he was Vice President of Business Affairs;
and from September 1979 to December 1982, he was the Vice President of Studio
Business Affairs.
Director
Independence
Our board
of directors has determined that Messrs. Clement, Baradaran and Schultz are
“independent directors” as defined in Rule 10A-3 of the Securities Exchange
Act of 1934, as amended, and as defined by the rules of NYSE
Alternext. Scott Sassa, who resigned as director effective January
15, 2009, was also an “independent director.”
Audit
Committee
Our audit
committee currently consists of Messrs. Clement, Baradaran and
Schultz.
The audit
committee reviews the professional services and independence of our independent
registered public accounting firm and our accounts, procedures and internal
controls. The audit committee also selects the firm that will serve as our
independent registered public accounting firm, reviews and approves the scope of
the annual audit, reviews and evaluates with the independent public accounting
firm our annual audit and annual financial statements, reviews with management
the status of internal accounting controls, evaluates problem areas having a
potential financial impact on us that may be brought to the committee’s
attention by management, the independent registered public accounting firm or
the board of directors, and evaluates all of our public financial reporting
documents.
We have
agreed with the underwriters that our audit committee will review and approve
all expense reimbursements made to our officers, directors or senior advisors
and that any expense reimbursement payable to members of our audit committee
will be reviewed and approved by our board of directors, with the interested
director or directors abstaining from such review and approval.
Financial
Experts on Audit Committee
The audit
committee will at all times be composed exclusively of “independent directors”
who are “financially literate” as defined under NYSE Alternext’s listing
standards. The NYSE Alternext listing standards define “financially literate” as
being able to read and understand fundamental financial statements, including a
company’s balance sheet, income statement and cash flow statement.
In
addition, we must certify to NYSE Alternext that the committee has, and will
continue to have, at least one member who has past employment experience in
finance or accounting, requisite professional certification in accounting, or
other comparable experience or background that results in the individual’s
financial sophistication. The board of directors has determined that
Mr. Clement satisfies the NYSE Alternext’s definition of financial
sophistication and also qualifies as an “audit committee financial expert,” as
defined under rules and regulations of the Securities and Exchange
Commission.
Nominating
Committee
Our
nominating committee is responsible for overseeing the selection of persons to
be nominated to serve on our board of directors. There have been no material
changes to our procedures by which stockholders may recommend nominees to our
board of directors. The nominating committee and compensation
committee each consists of Dallas Clement, as chairman, and Sharyar Baradaran,
each of whom is an independent director under the NYSE Alternext listing
standards.
Guidelines
for Selecting Director Nominees
We have
established guidelines for selecting nominees that generally provide that
persons to be nominated should be actively engaged in business endeavors, have
an understanding of financial statements, corporate budgeting and capital
structure, be familiar with the requirements of a publicly traded company, be
familiar with industries relevant to our business endeavors, be willing to
devote significant time to the oversight duties of the board of directors of a
public company, and be able to promote a diversity of views based on the
person’s education, experience and professional employment.
Code
of Conduct and Ethics; Related Party Transactions
We have
adopted a code of conduct and ethics applicable to our directors, officers and
employees in accordance with applicable federal securities laws. We have filed
the code of conduct and ethics with the SEC. Our board of directors has adopted
a general policy that related party transactions, including determination of
executive compensation, should be on terms no less favorable to the Company than
terms available in bona fide third party transactions. A copy of the code can be
obtained free-of-charge upon written request to:
Corporate
Secretary
Santa
Monica Media Corporation
12121
Wilshire Blvd., Suite 1001
Los
Angeles, CA 90025
|
Conflicts
of Interest
Potential
investors should be aware of the following potential conflicts of
interest:
|
·
|
None
of our officers and directors is required to commit his full time to our
business and, accordingly, our officers and directors may have conflicts
of interest in allocating management time among various business
activities.
|
|
·
|
In
the course of their other business activities, our officers and directors
may become aware of investment and business opportunities which may be
appropriate for presentation to us as well as the other entities with
which they are affiliated. They may have conflicts of interest in
determining to which entity a particular business opportunity should be
presented.
|
|
·
|
Our
officers and directors are currently affiliated with, and may in the
future become affiliated with, entities, including other blank check
companies, engaged in business activities similar to those intended to be
conducted by us.
|
|
·
|
We
are currently in discussions to acquire NUI, a business that is affiliated
with David Marshall, our Chairman of the Board and Chief Executive
Officer, which may create conflicts of interest affecting Mr. Marshall and
which may result in a transaction that is not as favorable to our public
stockholders as a transaction that lacks such conflicts of
interest.
|
|
·
|
Since
our officers and directors own shares of our common stock that will become
transferable only if a business combination is completed and certain of
our officers and directors will beneficially own warrants purchased in the
private placement that will expire worthless if a business combination is
not consummated, our officers and directors may have a conflict of
interest in determining whether a particular target business is
appropriate to effect a business combination. Additionally they may enter
into consulting or employment agreements with NUI as part of a business
combination.
|
In
general, officers and directors of a corporation incorporated under the laws of
the State of Delaware are required to present business opportunities to a
corporation if:
|
·
|
the
corporation could financially undertake the
opportunity;
|
|
·
|
the
opportunity is within the corporation’s line of
business; and
|
|
·
|
it
would not be fair to the corporation and its stockholders for the
opportunity not to be brought to the attention of the
corporation.
|
Accordingly,
as a result of multiple business affiliations, our officers and directors may
have similar legal obligations relating to presenting business opportunities
meeting the above-listed criteria to multiple entities. In addition, conflicts
of interest may arise when our board of directors evaluates a particular
business opportunity with respect to the above-listed criteria. We cannot assure
you that any of the above-mentioned conflicts will be resolved in our
favor.
Each of
our officers and directors has certain pre-existing fiduciary obligations to
other entities that may cause him to have conflicts of interest in determining
to which entity he presents a specific business opportunity. To the extent that
one of our officers or directors identifies a business opportunity that may be
suitable for an entity that he has a pre-existing fiduciary obligation to, he
may honor his pre-existing fiduciary obligation to that entity. Accordingly, he
may not present opportunities to us that otherwise may be attractive to such
entity unless it has declined to accept such opportunities.
In
connection with the vote required for any business combination, all of our
existing stockholders (including our officers and directors) have agreed to vote
their respective shares of common stock then-owned by them (including shares
acquired in this offering and in the aftermarket) in accordance with the vote of
the public stockholders owning a majority of the shares of our common stock sold
in this offering and voted in connection with our initial business combination.
In addition, they have agreed to waive their respective rights to conversion of
their shares in connection with the vote on our initial business combination and
to participate in any liquidation distribution, but only with respect to those
shares of common stock acquired by them prior to this offering including shares
underlying the units acquired in the private placement.
To
further minimize potential conflicts of interest, we have agreed not to
consummate a business combination with an entity that is affiliated with any of
our existing stockholders (including our officers, directors or advisory board
members) unless we obtain an opinion from an independent investment banking firm
that the business combination is fair to our stockholders from a financial point
of view. In connection with the possible business combination with
NUI, we intend to obtain an opinion from an independent investment banking firm
that the business combination is fair to our stockholders from a financial point
of view.
Section 16(a)
Beneficial Ownership Reporting Compliance
Pursuant
to Section 16(a) of the Securities Act of 1934, the Company’s directors and
executive officers, and any persons holding 10% or more of its common stock, are
required to report their beneficial ownership and any changes therein to the
Commission and the Company. Specific due dates for those reports have been
established, and the Company is required to report herein any failure to file
such reports by those due dates. Based on the Company’s review of Forms 3, 4 and
5 filed by such persons, the Company believes that during the fiscal year ended
December 31, 2008 all Section 16(a) filing requirements applicable to
such persons were met in a timely manner.
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
Executive
Officer and Director Compensation
Members
of our management team, including our directors, have not received any cash or
other compensation for services rendered to us to date. Commencing on July 5,
2005 through the acquisition of a target business, we have agreed to pay Santa
Monica Capital Corp, an entity owned and controlled by Mr. Marshall, a
total of $7,500 per month for office space and administrative services,
including secretarial support. On October 1, 2007, this agreement was assigned
to Santa Monica Capital Partners II, LLC, and entity owned and controlled by
Messrs. Marshall, Brendlinger and Pulier. This arrangement was agreed to by
Santa Monica Capital Corp. for our benefit and is not intended to provide
Messrs. Marshall, Brendlinger and Pulier compensation in lieu of a salary. We
believe that such fees are at least as favorable as we could have obtained from
an unaffiliated third party. For the year ended December 31, 2008, we paid
an aggregate of $82,500 for such services.
For the
year ended December 31, 2007, we paid an aggregate of
$90,000,
including $67,500 for services accrued from July 1,
2005 through January 5, 2006, and $22,500 for services rendered from October 1,
2007 through December 31, 2007 pursuant to the arrangement.
Other
than this $7,500 per month fee, no compensation of any kind, including finder’s
and consulting fees, will be paid to any members of our management team, or any
of their respective affiliates, for services rendered prior to or in connection
with a business combination. However, these individuals will be reimbursed for
any out-of-pocket expenses incurred in connection with activities on our behalf
such as identifying potential target businesses and performing due diligence on
suitable business combinations. After a business combination, members of our
management team, including our directors, who remain with us may be paid
consulting, management or other fees from the combined company with any and all
amounts being fully disclosed to stockholders, to the extent then known, in the
proxy solicitation materials furnished to our stockholders. It is unlikely the
amount of such compensation will be known at the time of a stockholder meeting
held to consider a business combination, as it will be up to the directors of
the post-combination business to determine executive and director
compensation.
Compensation
Committee
Our
compensation committee is responsible for recommending the compensation of our
executive officers. The nominating committee and compensation committee each
consists of Dallas Clement, as chairman, and Sharyar Baradaran, each of whom is
an independent director under the NYSE Alternext listing standards. Neither Mr.
Clement nor Mr. Baradaran have been an officer or employee of the
Company.
Compensation
Discussion and Analysis; Compensation Committee Report
We have
not included a Compensation Discussion and Analysis, as members of our
management team, including our directors, have not received any cash or other
compensation for services rendered to us during the years ended
December 31, 2008 or 2007. As no compensation had been provided
to any of our officers or directors, the Compensation Committee has not reviewed
a Compensation Discussion and Analysis of the Company.
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
The
following table sets forth information regarding the beneficial ownership of our
common stock as of March 13, 2009, by:
|
·
|
each
person known by us, as a result of such person’s public filings with the
SEC and the information contained therein, to be the beneficial owner of
more than 5% of our outstanding shares of common
stock;
|
|
·
|
each
of our officers and directors; and
|
|
·
|
all
of our officers and directors as a
group.
|
Unless
otherwise indicated, we believe that all persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned by them. The following table does not reflect record or
beneficial ownership of the sponsor units or our other outstanding warrants, as
we do not believe that these warrants will become exercisable within 60 days of
March 13, 2009.
Name
|
|
Number of Shares
|
|
|
Percentage
of
Class
(1)
|
|
Relationship
to Us
|
David
Marshall
(2)
(3)
12121
Wilshire Boulevard
Suite
1001
Los
Angeles, CA 90025
|
|
|
3,079,893
|
|
|
|
19.2
|
%
|
Chairman
of the Board, Chief Executive Officer
|
Kurt
Brendlinger (2) (4)
12121
Wilshire Boulevard
Suite
1001
Los
Angeles, CA 90025
|
|
|
3,079,893
|
|
|
|
19.2
|
%
|
Director,
Chief Financial Officer
|
Eric
Pulier (2) (5)
12121
Wilshire Boulevard
Suite
1001
Los
Angeles, CA 90025
|
|
|
3,079,893
|
|
|
|
19.2
|
%
|
Director,
Chief Technology Officer, Secretary
|
Dallas
Clement
1400
Lake Hearn Drive
Atlanta,
GA 90319
|
|
|
37,560
|
|
|
|
*
|
%
|
Director
|
Robert
Schultz
1140
Black Birch Drive
Aspen,
CO 81611
|
|
|
37,560
|
|
|
|
*
|
%
|
Director
|
Sharyar
Baradaran (6)
414
North Camden Drive
Beverly
Hills, CA 90210
|
|
|
3,117,453
|
|
|
|
19.4
|
%
|
Director
|
Santa
Monica Capital Partners, LLC (7)
12121
Wilshire Boulevard
Suite
1001
Los
Angeles, CA 90025
|
|
|
3,079,893
|
|
|
|
19.2
|
%
|
Stockholder
|
All
directors and executive officers as a group (6 individuals)
|
|
|
3,192,573
|
|
|
|
19.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Fir
Tree, Inc. (8)
505
5
th
Avenue 23
rd
Floor
New
York, New York 10017
|
|
|
1,587,300
|
|
|
|
9.9
|
%
|
Stockholder
|
QVT
Financial LP (9)
1177
Avenue of the Americas
9
th
Floor
New
York, New York 10036
|
|
|
1,388,851
|
|
|
|
8.7
|
%
|
Stockholder
|
Millenium
Management, LLC (10)
666
Fifth Avenue
New
York, New York 10103
|
|
|
992,800
|
|
|
|
6.2
|
%
|
Stockholder
|
Aldebaran
Investments, LLC (11)
500
Park Avenue
5
th
Floor
New
York, New York 10022
|
|
|
950,900
|
|
|
|
5.9
|
%
|
Stockholder
|
HBK
Investments, LP (12)
2101
Cedar Springs Road
Suite
700
Dallas,
Texas 75201
|
|
|
860,450
|
|
|
|
5.4
|
%
|
Stockholder
|
(1)
|
Based
on a total of 16,038,125 shares of the Company’s common stock issued and
outstanding on March 13, 2009.
|
(2)
|
These
shares are owned of record by Santa Monica Capital Partners, LLC.
Messrs. Marshall, Brendlinger, Pulier and Baradaran beneficially own
28.8%, 28.8%, 28.8% and 13.6%, respectively. Each of
Messrs. Marshall, Brendlinger, Pulier and Baradaran disclaims
beneficial ownership of shares of our common stock in excess of his
percentage ownership of Santa Monica Capital Partners, LLC. Santa Monica
Capital Partners, LLC does not conduct any business other than serving as
a holding company for our securities that are beneficially owned by these
four individuals.
|
(3)
|
Mr. Marshall’s
interest in Santa Monica Capital Partners, LLC is held indirectly by Santa
Monica Capital LLC, of which he is the sole
member.
|
(4)
|
Mr. Brendlinger’s
interest in Santa Monica Capital Partners, LLC is held indirectly by E’s
Holdings, Inc. of which he is the sole
shareholder.
|
(5)
|
Mr. Pulier’s
interest in Santa Monica Capital Partners, LLC is held indirectly by New
Vision Ventures LLC of which he is
Manager.
|
(6)
|
Mr. Baradaran
is the record owner of 37,560 shares of our common stock and the
beneficial owner of the shares of Santa Monica Media Corporation that
are owned by Santa Monica Capital Partners, LLC, as described in note (2).
Mr. Baradaran possesses sole voting and dispositive authority over
550,150 shares of our common stock owned by Santa Monica Capital Partners,
LLC.
|
(7)
|
Santa
Monica Capital Partners, LLC is the record owner of the shares of our
common stock listed opposite its name in the above table. As described
above in notes (2) and (6), Messrs. Marshall, Brendlinger,
Pulier and Baradaran beneficially own shares of our common stock by reason
of their ownership of Santa Monica Capital Partners,
LLC.
|
(8)
|
Based
on the Schedule 13G/A filed with the Securities and Exchange Commission by
Fir Tree, Inc. on February 10,
2009.
|
(9)
|
Based
on the Schedule 13G/A filed with the Securities and Exchange Commission by
QVT Financial LP on February 2,
2009.
|
(10)
|
Based
on the Schedule 13G/A filed with the Securities and Exchange Commission by
Millenium Management, LLC on February 3,
2009.
|
(11)
|
Based
on the Schedule 13G filed with the Securities and Exchange Commission by
Aldebaran Investments, LLC on February 17,
2009.
|
(12)
|
Based
on the Schedule 13G/A filed with the Securities and Exchange Commission by
HBK Investments, LP on February 3,
2009.
|
Equity
Compensation Plan Information
Company
does not currently have an equity compensation plan.
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
Transactions
Between Us and Our Affiliates
We have
agreed to pay to Santa Monica Capital Corp., an affiliate of our Chief Executive
Officer, David Marshall, a monthly fee of $7,500 for general and administrative
services including office space, utilities and secretarial support. We have
accrued an aggregate fee of $45,000 for the six-month period from July 5,
2005 to January 5, 2006. We agreed with Santa Monica Capital Corp. that no
monthly fee will accrue for the period from January 5, 2006 to October 2,
2007, at which point we paid to Santa Monica Capital Corp. the entire accrued
amount of $45,000 for the period prior to January 5, 2006. During each
month following October 2, 2007, we paid a fee of $7,500 to Santa Monica Capital
Corp. Our obligation to pay such fees will terminate as soon as we have paid
aggregate fees of $180,000 to Santa Monica Capital Corp. or, if earlier, upon
the completion of our initial business combination. This agreement was assigned
to Santa Monica Capital Partners II, LLC, an entity owned and controlled by
Messrs. Marshall, Brendlinger and Pulier, on October 1, 2007. As of December 31,
2008, the Company had incurred $157,500 for such services, $7,500 which was
accrued but unpaid at December 31, 2008.
The
arrangement with Santa Monica Capital Corp. is solely for our benefit and is not
intended to provide any of our officers or directors with compensation in lieu
of a salary. We believe, based on rents and fees for similar services in the Los
Angeles metropolitan area, that the fee charged by Santa Monica Capital Corp. is
at least as favorable as we could have obtained from an unaffiliated
person.
Santa
Monica Capital Partners, LLC had advanced an aggregate of $305,000 to us to
cover expenses related to the Public Offering and our operating expenses. The
loan bore interest of 5% per annum. The note along with accrued interest of
$21,992 was converted into 38,125 units on April 2, 2007 in connection with the
Public Offering.
We will
reimburse our officers, directors, members of our advisory board and their
respective affiliates for any reasonable out-of-pocket business expenses
incurred by them in connection with certain activities on our behalf such as
identifying and investigating possible target businesses and business
combinations. There is no limit on the amount of such out-of-pocket expenses
that are reimbursable by us in the event we consummate a business combination,
which will be reviewed only by our audit committee or a court of competent
jurisdiction if such reimbursement is challenged.
Other
than the $7,500 per-month administrative fee described above and reimbursable
out-of-pocket expenses payable to our officers, directors and advisory board
members, no compensation or fees of any kind, including finders and consulting
fees, has been paid by us to any of our officers, directors or advisory board
members, or their affiliated entities since January 1, 2006.
On
January 15, 2009, we entered into an unsecured loan facility with Santa Monica
Capital Partners II, LLC, an entity owned by Messrs. Marshall, Brendlinger and
Pulier, to provide up to $500,000 in funds at the discretion of the lender. The
promissory note provides for interest at the rate of 10% per annum. All amounts
advanced under the promissory note are due upon the earlier to occur of (i) the
closing of a business combination and (ii) the liquidation of our
assets. In the event we dissolve and liquidate pursuant to our
Amended and Restated Certificate of Incorporation, except as set forth in the
promissory note, the lender’s sole recourse will be against our assets not held
in the trust account. As of the date of this report, the outstanding
principal balance on this promissory note was $310,000.
Review,
Approval or Ratification of Transactions with Related Persons
As
provided in our audit committee charter, all related party transactions must be
reviewed and approved by our audit committee. As such, we conduct a
review of all related party transactions for potential conflicts of interest on
an ongoing basis. All such transactions relating to executive
officers and directors must be approved by our audit committee.
Director
Independence
Information
regarding our independent directors is set forth above in Item 10 under the
caption
“Director
Independence.
”
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES.
|
Gumbiner
Savett, Inc. (“Gumbiner”) is exclusively responsible for the opinion rendered in
connection with its examination.
|
|
Fiscal Year Ended
December 31, 2008
|
|
|
Fiscal
Year Ended
December 31, 2007
|
|
Audit
fees
|
|
$
|
75,020
|
|
|
$
|
98,675
|
|
Audit-related
fees
|
|
|
22,715
|
|
|
|
—
|
|
Tax
fees
|
|
|
7,070
|
|
|
|
—
|
|
All
other fees
|
|
|
—
|
|
|
|
—
|
|
Total
fees
|
|
$
|
104,805
|
|
|
$
|
98,675
|
|
Audit Fees
. Audit fees
consist of fees billed for professional services rendered for the audit of our
year-end financial statements and services that are normally provided by
Gumbiner in connection with statutory and regulatory filings.
Audit-Related
Fees
. Audit-related services consist of fees billed for assurance
and related services that are reasonably related to the performance of the audit
or review of our financial statements and are not reported under “Audit Fees.”
These services include attest services that are not required by statute or
regulation and consultations concerning financial accounting and reporting
standards.
Tax Fees
. Tax fees
consist of fees billed for professional services for tax compliance. These
services include assistance regarding federal, state, and local tax
compliance.
All Other Fees
. All
other fees would include fees for products and services other than the services
reported above.
Policy
on Board Pre-Approval of Audit and Permissible Non-audit Services of Independent
Auditors
The audit
committee is responsible for appointing, setting compensation, and overseeing
the work of the independent auditor. In recognition of this responsibility, the
audit committee has established a policy to pre-approve all audit and
permissible non-audit services provided by the independent auditor.
In
addition to retaining Gumbiner to audit our financial statements for the year
ended December 31, 2008, we retained Gumbiner to provide tax preparation
work to us for our 2008 fiscal year, and audit-related services in connection
with financial accounting matters related to proposed business combination
transaction. We understand the need for Gumbiner to maintain objectivity and
independence in its audit of our financial statements.
PART
IV
ITEM
15.
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
|
(1) Financial
Statements
See Part
II, Item 8, Financial Statements and Supplementary Data.
(2) Financial
Statement Schedules
All
supplemental schedules have been omitted since the required information is not
present in amounts sufficient to require submission of the schedule, or because
the required information is included in the financial statements or notes
thereto.
(3) Exhibits
See
Exhibit Index.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized. .
Santa
Monica Media Corporation
|
|
|
By:
|
/s/ David M. Marshall
|
|
Name: David
M. Marshall
|
|
Title: Chief
Executive Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
Signature
|
|
Title
|
Date
|
/s/
David M. Marshall
|
|
Chief
Executive Officer, Chairman and Director
(Principal
Executive Officer)
|
August
25, 2009
|
David
M. Marshall
|
|
|
|
|
|
|
|
/s/
Kurt Brendlinger
|
|
Chief
Financial Officer and Director
(Principal
Accounting and Financial Officer)
|
|
Kurt
Brendlinger
|
|
|
|
|
|
Chief
Technology Officer, Secretary and Director
|
|
/s/
Eric Pulier
|
Eric
Pulier
|
|
|
|
|
|
|
|
|
|
Director
|
|
/s/
Dallas Clement
|
Dallas
Clement
|
|
|
|
|
|
Director
|
|
/s/
Sharyar Baradaran
|
Sharyar
Baradaran
|
|
|
|
|
|
Director
|
|
/s/
Robert Schultz
|
Robert
Schultz
|
|
|
|
EXHIBIT
INDEX
INDEX TO
EXHIBITS
Exhibit
Number
|
|
Description
|
|
|
|
10.1
|
|
Form
of Letter Agreement between Santa Monica Media Corporation and its
officers, directors and stockholders.
(1)
|
|
|
|
10.2
|
|
Form
of Investment Management Trust Agreement between Continental Stock
Transfer & Trust Company and the Registrant.
(1)
|
|
|
|
10.3
|
|
Letter
Agreement between Santa Monica Capital Corp., and the Registrant regarding
administrative support.
(3)
|
|
|
|
10.4
|
|
Amended
and Restated Promissory Note dated March 8, 2007 issued by the
Registrant to Santa Monica Capital Partners, LLC.
(1)
|
|
|
|
10.5
|
|
Form
of Registration Rights Agreement among the Registrant and its existing
stockholders.
(2)
|
|
|
|
10.6
|
|
Securities
Purchase Agreement dated April 19, 2006 between the Registrant and
Santa Monica Capital Partners, LLC.
(3)
|
|
|
|
10.7
|
|
Form
of Letter Agreement between the Representative and the Registrant’s
officers, directors and stockholders.
(2)
|
|
|
|
10.8
|
|
Form
of Letter Agreement between the Representative and Santa Monica Capital
Partners, LLC.
(2)
|
|
|
|
10.9
|
|
Amendment
to Securities Purchase Agreement dated February 13, 2007 between the
Registrant and Santa Monica Capital Partners, LLC.
(2)
|
|
|
|
10.10
|
|
Securities
Purchase Agreement dated March 8, 2007 between the Registrant and
Santa Monica Capital Partners, LLC.
(1)
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act
|
|
|
|
32.1
|
|
Certification
of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act
|
|
|
|
32.2
|
|
Certification
of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act
|
(1)
Incorporated
by reference to Form S-1
filed March 12, 2007.
(2)
Incorporated
by
reference to Form S-1 filed February 16, 2007.
(3)
Incorporated by reference to Form S-1 filed April 21, 2006.
Grafico Azioni Santa Monica Media Corp. (AMEX:MEJ)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni Santa Monica Media Corp. (AMEX:MEJ)
Storico
Da Giu 2023 a Giu 2024