Forward
Looking Statements
This
Quarterly Report on Form 10-Q includes forward-looking statements within
the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. We have
based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are subject
to
known and unknown risks, uncertainties and assumptions about us that may
cause
our actual results, levels of activity, performance or achievements to
be
materially different from any future results, levels of activity, performance
or
achievements expressed or implied by such forward-looking statements. In
some
cases, you can identify forward-looking statements by terminology such
as “may,”
“should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “continue,” or the negative of such terms or other similar
expressions. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those described in our other Securities
and
Exchange Commission filings.
The
following discussion should be read in conjunction with our unaudited Financial
Statements and related Notes thereto included elsewhere in this
report.
Critical
Accounting Policies
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.
Overview
We
were
formed on June 18, 2007 as a blank check company for the purpose of
acquiring, through a merger, stock exchange, asset acquisition, reorganization
or similar business combination, one or more operating businesses. We intend
to
use cash derived from the net proceeds of our initial public offering,
together
with any additional financing arrangements that we undertake, to effect
a
business combination.
On
January 17, 2008, the Company sold 15,000,000 units (“Units”) at an offering
price of $10.00 per Unit. Each Unit consists of one share of the Company’s
common stock, $0.0001 par value, and one redeemable common stock purchase
warrant (each, a “Warrant”). Each Warrant will entitle the holder to purchase
from the Company one share of common stock at an exercise price of $7.00
commencing on the later of (a) January 11, 2009 and expiring January
10, 2012 or (b) the consummation of an initial Business Combination with a
target business.
As
of
September 30, 2008, approximately $150,579,000 was held in trust and we
had
approximately $104,000 of unrestricted cash available to us for our activities
in connection with identifying and conducting due diligence of a suitable
business combination, and for general corporate matters.
Through
September 30, 2008, our efforts have been limited to organizational activities,
activities relating to our initial public offering, activities relating
to
identifying, evaluating, and negotiating with 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 nine months ended September 30, 2008, we earned
approximately $1,987,000 in interest income.
The
following table shows the total funds held in the trust account as of September
30, 2008:
On
June
13, 2008, the Company entered into an Agreement and Plan of Merger pursuant
to
which it has agreed to merge (the “Merger”) with Hughes Telematics, Inc.
(“HTI”). The Company and HTI amended and restated that agreement on November
10,
2008 (such agreement, as amended and restated, the “Merger
Agreement”).
We
have
filed, on August 27, 2008 and October 15, 2008, preliminary proxy statements
with the SEC with respect to this proposed merger with HTI. On November
12,
2008, we filed a current report on Form 8-K disclosing the terms of the
Merger
Agreement entered into on November 10, 2008. We have summarized the terms
of the
amended and restated transaction below. Investors are urged to review the
preliminary proxy statements and definitive proxy statement, when completed,
in
their entirety. A more complete description of the transactions described
below,
including exhibits related thereto such as the Merger Agreement, is included
in
a Form 8-K filed on November 12, 2008. We intend to schedule a special
meeting
of stockholders following completion of the proxy statement.
The
parties to the Merger Agreement are Polaris, HTI and Communications Investors
LLC, an affiliate of Apollo Management, L.P. (as escrow
representative).
The
Merger Agreement specifies that, at the closing of the Merger, all the
outstanding shares of HTI common stock shall be converted into the right
to
receive, in the aggregate, approximately 15 million shares of Polaris common
stock. In addition, holders of HTI common stock shall be entitled to receive
an
aggregate of approximately 59 million “earnout” shares of Polaris common stock,
in three tranches, which will be issued into escrow at the closing of the
Merger
and released to HTI shareholders upon the achievement of certain share
price
targets over the five-year period following closing. Outstanding options
exercisable for shares of HTI common stock will roll over in the Merger
to
become options exercisable for shares of Polaris common stock. In connection
with the Merger Agreement the company will amend and restate its certificate
of
incorporation to increase the number of shares of both common and preferred
stock.
The
Merger Agreement also requires that the Founders deposit 1.25 million shares
of
their Polaris common stock into an escrow, to be released upon the achievement
of the first stock price target between the first and fifth anniversaries
of
closing
The
number of shares of Polaris common stock received by HTI shareholders at
the
closing will be subject to possible adjustments, including the issuance
of
additional shares of Polaris common stock for the value of equity raised
by HTI
prior to closing, if any, and for a cash shortfall in the trust account
of
Polaris below an agreed upon amount.
The
obligations of HTI and Polaris to complete the Merger are subject to the
satisfaction or waiver by the other party at or prior to the closing date
of
various customary conditions, including (i) the receipt of all required
regulatory approvals and consents, (ii) the approval of the Merger by Polaris’
stockholders, (iii) subject to certain exceptions and materiality thresholds,
the accuracy of the representations and warranties of the other party and
(iv)
compliance of the other party with its covenants, subject to specified
materiality thresholds.
Results
of Operations
For
The Three Month Period Ended September 30, 2008
Net
income of $138,626 reported for the three months ended September 30, 2008
consisted primarily of investment income primarily on the trust account
of
$661,886 offset by $69,146 expense for professional fees, $22,833 expense
for
director and officer liability insurance, $22,500 expense for a monthly
administrative services agreement, $29,763 expense for travel and entertainment,
$26,387 for franchise tax, $188,364 for due diligence costs, $35,506 for
other
expenses and $128,761 of income taxes. At September 30, 2008, we had cash
outside of the trust fund of $103,550, prepaid expenses of $76,257 and
accounts
payable and accrued costs of $238,812 and income taxes payable of $253,757.
Until we enter into a business combination, we will not have revenues other
than
interest income, and will continue to incur expenses relating to identifying
a
target business to acquire.
For
The Nine Month Period Ended September 30, 2008
Net
income of $461,266 reported for the nine months ended September 30, 2008
consisted primarily of investment income primarily on the trust account
of
$1,987,041 offset by $120,254 expense for professional fees, $65,799 expense
for
director and officer liability insurance, $67,500 expense for a monthly
administrative services agreement, $78,245 expense for travel and entertainment,
$85,742 for franchise tax, $599,564 for due diligence costs, $98,187 for
other
expenses and $410,484 for income taxes.
We
presently occupy office space provided by Trivergance, LLC, an affiliate
of our
initial stockholders. Trivergance, LLC has agreed that, until the earlier
of
when (i) we consummate the acquisition of a target business or (ii) liquidate,
it will make such office space, as well as certain office and secretarial
services, available to us, as we may require from time to time. We have
agreed
to pay Trivergance, LLC $7,500 per month for such services commencing on
January
1, 2008. The statement of operations for the period ended September 30,
2008
includes $67,500 related to this agreement.
Liquidity
and Capital Resources
As
of
September 30, 2008, we had cash in our operating account of $103,550 and
an
additional $579,302 in our trust account which is available for working
capital
and taxes. Until our initial public offering, as described above, our only
source of liquidity was the proceeds from the initial private sale of our
stock.
Since our initial public offering, our only source of revenue has been
from the
interest and dividends earned on our cash accounts. The proceeds from our
initial public offering that were placed in a trust account were invested
in
United States “government securities” within the meaning of Section (a) (16) of
the Investment Company Act of 1940 having a maturity of 180 days or less
or in
money market funds meeting certain conditions under Rule 2a-7 promulgated
under
the Investment Company Act of 1940. As of September 30, 2008 the funds
placed in
trust are earning interest at the rate of approximately 2.1%.
Subject
to our stockholders’ approval of the proposed business combination with HTI, we
will use substantially all of the net proceeds of our initial public offering
in
connection with the proposed business combination with HTI, including
structuring, negotiating and consummating the initial business combination.
To
the extent we use our capital stock in whole or in part as consideration
for an
initial business combination, the proceeds held in the trust account (less
amounts paid to any public stockholders who exercise their conversion rights
and
deferred underwriting discounts and commissions paid to the underwriters)
as
well as any other net proceeds not expended prior to that time will be
used to
finance the operations of the target business or businesses. Such working
capital funds could be used in a variety of ways including continuing or
expanding the target business’ operations and for strategic acquisitions. Such
funds could also be used to repay any operating expenses or finders’ fees which
we had incurred prior to the completion of our initial business combination
if
the funds available to us outside of the trust account were insufficient
to
cover such expenses.
Assuming
the release of the full amount of the interest we are entitled to receive
from
the trust account, we believe we will have sufficient available funds outside
of
the trust account to operate through January 17, 2010, assuming that a
business
combination is not consummated during that time. We do not believe we will
need
to raise additional funds in order to meet the expenditures required for
operating our business. However, if our estimate of the costs of completing
an
initial business combination is less than the actual amount necessary to
do so,
or if interest payments are not available to fund the expenses at the time
we
incur them, we may be required to raise additional capital, the amount,
availability and cost of which is currently unascertainable. Moreover,
we may
need to obtain additional financing either to consummate our initial business
combination or because we become obligated to convert into cash a significant
number of shares of public stockholders voting against our initial business
combination, in which case we may issue additional securities or incur
debt in
connection with such business
combination.
Following our initial business combination, if cash on hand is insufficient,
we
may need to obtain additional financing in order to meet our
obligations.
Liquidity
and Capital Resources-Continued
As
of
September 30, 2008, we had withdrawn $1,405,600 of the interest and dividends
earned on the funds held in our trust account. Pursuant to the terms of
our
trust agreement governing our trust account, we are entitled to use up
to
$1,800,000 of the earnings for working capital (other than for tax obligations
of Polaris), provided, however, that the aggregate amount of all such
distributions of working capital and income shall not exceed the total
earnings.
Up to $900,000 (excluding amounts required to cover any tax obligations
owned by
Polaris) is still to be remitted, for working capital purposes, to our
operating
account which had a balance of $103,550 as of September 30, 2008. Once
the
$900,000 is distributed, only distributions to pay tax liabilities will
be
allowed.
Our
liabilities are all related to costs associated with operating as a public
company, searching for an acquisition target, our due diligence review
and
negotiation of agreements related to the proposed business combination
and
activities relating to the consummation of the proposed business combination.
We
believe our working capital will continue to be sufficient to fund our
operations until a target is acquired.
Off-Balance
Sheet Arrangements
Warrants
issued in conjunction with our initial public offering are equity linked
derivatives and accordingly represent off-balance sheet arrangements. The
warrants meet the scope exception in paragraph 11(a) of Financial Accounting
Standards (FAS) 133 and are accordingly not accounted for as derivatives
for
purposes of FAS 133, but instead are accounted for as equity.
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Market
risk is the sensitivity of income to changes in interest rates, foreign
exchanges, commodity prices, equity prices, and other market-driven rates
or
prices. We are not presently engaged in and, if a suitable business target
is
not identified by us prior to the prescribed liquidation date of the trust
fund,
we may not engage in, any substantive commercial business. Accordingly,
we are
not and, until such time as we consummate a business combination, we will
not
be, exposed to risks associated with foreign exchange rates, commodity
prices,
equity prices or other market-driven rates or prices. The net proceeds
of our
initial public offering held in the trust account are to be invested only
in
money market funds meeting certain conditions under Rule 2a-7 promulgated
under
the Investment Company Act of 1940 or United States treasury bills. Given
our
limited risk in our exposure to money market funds and treasury bills,
we do not
view the interest rate risk to be significant.
ITEM
4.
|
CONTROLS
AND PROCEDURES
|
An
evaluation of the effectiveness of our disclosure controls and procedures
as of
September 30, 2008 was made under the supervision and with the participation
of
our management. Based on that evaluation, our management concluded that
our
disclosure controls and procedures are effective as of the end of the period
covered by this report to ensure that information required to be disclosed
by us
in reports that we file or submit under the Securities Exchange Act of
1934 is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms. During the most
recently
completed fiscal quarter, there has not been any change in our internal
control
over financial reporting in connection with the evaluation required by
Rule
13a-15(d) under the Securities Exchange Act of 1934 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
PART
II - OTHER INFORMATION
ITEM
1.
|
LEGAL
PROCEEDINGS
|
None.
In
addition to the other information set forth in this report, you should
carefully
consider the factors discussed in the section titled “Risk Factors” in our
Prospectus as filed with the Securities and Exchange Commission dated January
17, 2008, which could materially affect our business, financial condition
or
future results. There have been no material updates or changes to such
Risk
Factors that are required to be disclosed in this Item 1A.
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
None.
ITEM
3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
None.
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
None.
ITEM
5.
|
OTHER
INFORMATION
|
None.
31.1
|
Section 302
Certification of Chief Executive
Officer
|
32.1
|
Section
906 Certification of Chief Executive Officer and Chief Financial
Officer
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
POLARIS
ACQUISITION CORP.
November
14, 2008
Marc
Byron
Chairman
and Chief Executive Officer
(Principal
Executive Officer and Principal
Accounting
and Financial Officer)
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17
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