UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
R
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
For
the quarterly period ended June 30,
2008
|
OR
|
|
£
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
For
the transition period from __________
to __________
|
Commission
file number 001-33370
SANTA
MONICA MEDIA CORPORATION
(Exact
name of Registrant as specified in its charter)
Delaware
|
|
59-3810312
|
(State
or other jurisdiction
|
|
(I.R.S.
Employer
|
of
incorporation or organization)
|
|
Identification
No.)
|
|
|
|
12121
Wilshire Blvd., Suite 1001
|
|
|
Los
Angeles, CA
|
|
90025
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
|
|
|
(310)
515-3222
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the Registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of 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
R
No
£
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.
Large
accelerated filer
£
Accelerated
filer
£
Non-accelerated
filer
R
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12(b)-2 of the Exchange Act).
Yes
R
No
£
Number
of
shares of Santa Monica Media Common Stock, $.001 par value, issued and
outstanding as of August 14
,
2008:
16,038,125.
SANTA
MONICA MEDIA CORPORATION
Form
10-Q
Table
of
Contents
|
|
Page
|
|
PART
I. FINANCIAL INFORMATION
|
|
|
|
Item
1 Financial Statements:
|
|
|
3
|
|
Item
2 Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
|
|
14
|
|
Item
3 Quantitative and Qualitative Disclosures About Market
Risk
|
|
|
18
|
|
Item
4 Controls and Procedures
|
|
|
18
|
|
|
|
|
|
|
PART
II. - OTHER INFORMATION
|
|
|
|
|
Item
1. Legal Proceedings
|
|
|
19
|
|
Item
1A Risk Factors
|
|
|
19
|
|
Item
2 Unregistered Sales of Equity Securities and Use of
Proceeds
|
|
|
19
|
|
Item
3. Defaults upon Senior Securities
|
|
|
20
|
|
Item
4 Submission of Matters to a Vote of Security Holders
|
|
|
20
|
|
Item
5. Other Information
|
|
|
20
|
|
Item
6 Exhibits
|
|
|
20
|
|
SIGNATURES
|
|
|
21
|
|
INDEX
TO EXHIBITS
|
|
|
22
|
|
PART
I — FINANCIAL INFORMATION
Item
1. — Financial Statements
SANTA
MONICA MEDIA CORPORATION
(a
corporation in the development stage)
CONDENSED
BALANCE SHEETS
As
of June 30, 2008 and December 31, 2007
|
|
|
|
December
31,
2007
|
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
Cash
|
|
$
|
217,398
|
|
$
|
41,589
|
|
Cash
and cash equivalents held in trust
|
|
|
100,532,288
|
|
|
101,277,107
|
|
Prepaids
and other current assets
|
|
|
60,882
|
|
|
50,500
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
100,810,568
|
|
|
101,369,196
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
100,810,568
|
|
$
|
101,369,196
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
269,952
|
|
$
|
69,675
|
|
Interest
on funds held in trust subject to common stock conversion
|
|
|
281,000
|
|
|
—
|
|
Income
taxes payable
|
|
|
—
|
|
|
790,500
|
|
Deferred
tax liability
|
|
|
87,000
|
|
|
325,000
|
|
Deferred
underwriting liability
|
|
|
4,000,000
|
|
|
4,000,000
|
|
Total
current liabilities
|
|
|
4,637,952
|
|
|
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
|
|
|
24,358,944
|
|
|
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) and 3,125,000
at June 30, 2008 and December 31, 2007, respectively
|
|
|
16,038
|
|
|
16,038
|
|
Additional
paid-in capital
|
|
|
74,769,944
|
|
|
74,769,944
|
|
Retained
earnings
|
|
|
1,665,642
|
|
|
1,677,047
|
|
Total
stockholders’ equity
|
|
|
76,451,624
|
|
|
76,463,029
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
100,810,568
|
|
$
|
101,369,196
|
|
See
accompanying notes to financial statements.
SANTA
MONICA MEDIA CORPORATION
(a
corporation in the development stage)
CONDENSED
STATEMENTS OF INCOME
For
the three and six months ended June 30, 2008 and 2007 and
for
the period from June 24, 2005 (inception) through June 30,
2008
(Unaudited)
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
For
the period from June 24, 2005 (inception) through
|
|
|
|
June
30, 2008
|
|
June
30, 2007
|
|
June
30, 2008
|
|
June
30, 2007
|
|
June
30, 2008
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
Professional
fees
|
|
$
|
65,149
|
|
$
|
32,506
|
|
$
|
105,588
|
|
$
|
34,698
|
|
$
|
239,100
|
|
Rent
and facilities
|
|
|
22,500
|
|
|
-
|
|
|
45,000
|
|
|
-
|
|
|
112,500
|
|
Formation
and operating costs
|
|
|
180,943
|
|
|
86,780
|
|
|
509,443
|
|
|
91,853
|
|
|
906,543
|
|
Total
operating expenses
|
|
|
268,592
|
|
|
119,286
|
|
|
660,031
|
|
|
126,551
|
|
|
1,258,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
314,711
|
|
|
1,224,172
|
|
|
1,112,741
|
|
|
1,224,172
|
|
|
4,536,876
|
|
Interest
expense
|
|
|
(379
|
)
|
|
(6,231
|
)
|
|
(1,115
|
)
|
|
(10,230
|
)
|
|
(32,191
|
)
|
Total
other income (expense)
|
|
|
314,332
|
|
|
1,217,941
|
|
|
1,111,626
|
|
|
1,213,942
|
|
|
4,504,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before provision for income taxes
|
|
|
45,740
|
|
|
1,098,655
|
|
|
451,595
|
|
|
1,087,391
|
|
|
3,246,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
224,000
|
|
|
390,505
|
|
|
420,000
|
|
|
391,505
|
|
|
1,212,900
|
|
Deferred
|
|
|
(205,000
|
)
|
|
-
|
|
|
(238,000
|
)
|
|
-
|
|
|
87,000
|
|
|
|
|
19,000
|
|
|
390,505
|
|
|
182,000
|
|
|
391,505
|
|
|
1,299,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before allocation of trust fund interest
|
|
|
26,740
|
|
|
708,150
|
|
|
269,595
|
|
|
696,086
|
|
|
1,946,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation
of trust fund interest relating to common stock subject to possible
conversion
|
|
|
107,000
|
|
|
-
|
|
|
281,000
|
|
|
-
|
|
|
281,000
|
|
Net
income (loss) available to common shareholders
|
|
$
|
(80,260
|
)
|
$
|
708,150
|
|
$
|
(11,405
|
)
|
$
|
696,086
|
|
$
|
1,665,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic
|
|
|
16,038,125
|
|
|
15,896,223
|
|
|
16,038,125
|
|
|
9,545,891
|
|
|
9,098,150
|
|
Weighted
average shares outstanding - fully diluted
|
|
|
16,038,125
|
|
|
18,423,457
|
|
|
16,038,125
|
|
|
12,073,125
|
|
|
11,962,150
|
|
Net
Income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.01
|
)
|
$
|
0.04
|
|
$
|
(0.00
|
)
|
$
|
0.07
|
|
$
|
0.18
|
|
Fully
diluted
|
|
$
|
(0.01
|
)
|
$
|
0.04
|
|
$
|
(0.00
|
)
|
$
|
0.06
|
|
$
|
0.14
|
|
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 June 30,
2008
(Unaudited)
|
|
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 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
(11,405
|
)
|
|
(11,405
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2008 (Unaudited)
|
|
|
16,038,125
|
|
$
|
16,038
|
|
$
|
74,769,944
|
|
$
|
1,665,642
|
|
$
|
76,451,624
|
|
See
accompanying notes to financial statements.
SANTA
MONICA MEDIA CORPORATION
(a
corporation in the development stage)
STATEMENTS
OF CASH FLOWS
(Unaudited)
|
|
Six
Months Ended
June
30, 2008
|
|
Six
Months Ended
June
30, 2007
|
|
For
the period from June 24, 2005 (inception) through June 30,
2008
|
|
Cash
flow from operating activities:
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(11,405
|
)
|
$
|
696,086
|
|
$
|
1,665,642
|
|
Adjustments
to reconcile net income (loss) to net cash provided by (used in)
operating
activities
|
|
|
|
|
|
|
|
|
|
|
(Increase)
decrease in accretion in fair market value of Treasury Bills held
in trust
account
|
|
|
653,783
|
|
|
(1,187,384
|
)
|
|
(309,074
|
)
|
Amortization
expense
|
|
|
18,750
|
|
|
25,000
|
|
|
78,125
|
|
Change
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
(Increase)
in other current assets
|
|
|
(29,132
|
)
|
|
(17,301
|
)
|
|
(43,383
|
)
|
Increase
in interest on funds held in trust subject to common stock
conversion
|
|
|
281,000
|
|
|
-
|
|
|
281,000
|
|
Increase
(decrease) in income taxes payable
|
|
|
(790,500
|
)
|
|
390,505
|
|
|
-
|
|
Increase
(decrease) in deferred income tax
|
|
|
(238,000
|
)
|
|
-
|
|
|
87,000
|
|
Increase
(decrease) in accounts payable and accrued expenses
|
|
|
200,276
|
|
|
(489,773
|
)
|
|
196,320
|
|
Net
cash provided by (used in) operating activities
|
|
|
84,772
|
|
|
(582,867
|
)
|
|
1,955,630
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Payment
to trust account
|
|
|
-
|
|
|
(98,605,000
|
)
|
|
(98,605,000
|
)
|
Withdrawals
from trust account
|
|
|
1,857,560
|
|
|
250,676
|
|
|
2,609,588
|
|
Proceeds
into trust account
|
|
|
(1,766,523
|
)
|
|
(36,768
|
)
|
|
(4,227,802
|
)
|
Net
cash provided by (used in) investing activities:
|
|
|
91,037
|
|
|
(98,391,092
|
)
|
|
(100,223,214
|
)
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
-
|
|
|
96,011,044
|
|
|
95,119,982
|
|
Net
cash provided by financing activities
|
|
|
-
|
|
|
99,011,044
|
|
|
98,484,982
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents at end of period
|
|
|
175,809
|
|
|
37,085
|
|
|
217,398
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
41,589
|
|
|
6,732
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
217,398
|
|
$
|
43,817
|
|
$
|
217,398
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for -
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
$
|
1,257,500
|
|
$
|
-
|
|
$
|
1,259,100
|
|
Interest
|
|
$
|
1,115
|
|
$
|
-
|
|
$
|
13,898
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash financing activity:
|
|
|
|
|
|
|
|
|
|
|
For
the period from inception (June 24, 2005) through June 30,
2008
|
|
|
|
|
|
|
|
|
|
|
Accrued
deferred underwriting fees
|
|
|
|
|
$
|
4,000,000
|
|
$
|
4,000,000
|
|
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.
Directors’
and officers’ liability insurance was financed in the amount of
$95,625.
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 CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June
30, 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
June 30, 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 2. 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 may not have sufficient funds to allow it to operate through the
date of consummation of a business combination or date of liquidation. In such
event, it will need to obtain additional funds from its stockholders or another
source. If the Company is unable to obtain additional financing, the Company
may
be forced to limit its activities or liquidate. None of the Company’s officers,
directors or stockholders is required to provide any financing to the Company.
Only in the event the assets held outside the trust account are insufficient
to
pay the costs associated with dissolution and liquidation of the Company will
its three principal executive officers provide additional funds required to
pay
the costs associated with the dissolution and liquidation.
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.
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. The Company, after signing a definitive agreement for the acquisition
of a target business, will submit such transaction for stockholder approval.
In
the event that stockholders owning 20% or more of the shares sold in the Public
Offering vote against the Business Combination and exercise their conversion
rights described below, the Business Combination will not be consummated. 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 Initial Stockholder and the Transferee
Stockholders have agreed to vote all shares of common stock held by them in
accordance with the vote cast by the majority in interest of all other
stockholders of the Company (“Public Stockholders”) with respect to any Business
Combination. After consummation of a Business Combination, these voting
provisions will no longer be applicable.
In
evaluating a prospective target business, the Company will consider, among
other
factors, the financial condition and results of operations; growth potential;
experience and skill of management and availability of additional personnel;
capital requirements; competitive position; barriers to entry into other
industries; stage of development of the products, processes or services; degree
of current or potential market acceptance of the products, processes or
services; proprietary features and degree of intellectual property or other
protection of the products, processes or services; regulatory environment of
the
industry; and costs associated with effecting the business combination. These
criteria are not intended to be exhaustive. Any evaluation relating to the
merits of a particular business combination will be based, to the extent
relevant, on the above factors, as well as other considerations deemed relevant
by the Company in effecting a Business Combination consistent with its business
objective.
If
a
Business Combination is approved, any Public Stockholder who voted against
the
Business Combination may demand that the Company convert his or her shares.
The
per share conversion price will be equal to the amount held in the Trust Account
as of two business days prior to the consummation of the proposed Business
Combination net of taxes payable, divided by the number of shares of common
stock held by Public Stockholders at the consummation of the Public Offering.
Accordingly, Public Stockholders holding up to 2,499,999 shares may seek
conversion of their shares in the event of a Business Combination. Such Public
Stockholders are entitled to receive their pro rata interest, as defined, in
the
Trust Account computed without regard to the shares held by the Initial
Stockholder and Transferee Stockholders immediately prior to the consummation
of
the Public Offering.
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 2).
Cash
Equivalents and Concentrations
The
Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents. Such cash and cash
equivalents, at times, may exceed federally insured limits. The Company
maintains its accounts with financial institutions with high credit
ratings.
Income
Taxes
The
Company accounts for income taxes 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 (loss) per
share are computed by dividing earnings (loss) available to common stockholders
by the weighted-average number of common shares outstanding. Diluted earnings
(loss) per share is computed similarly to basic earnings (loss) 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 three and six
months ended June 30, 2007 and for the period from June 24, 2005 (inception)
through June 30, 2008, there were no anti-dilutive securities excluded from
the
computation. For the three and six months ended June 30, 2008, 12,913,125
securities were excluded from the calculation because they were anti-dilutive.
|
|
|
|
|
|
For
the period from
June
24, 2005
|
|
|
|
Three
months ended
June
30,
|
|
Six
months ended
June
30,
|
|
(inception)
through
June
30, 2008
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable to common stockholders
|
|
$
|
(80,260
|
)
|
$
|
708,150
|
|
$
|
(11,405
|
)
|
$
|
696,086
|
|
$
|
1,665,642
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for basic net income per share—weighted average shares
|
|
|
16,038,125
|
|
|
15,896,223
|
|
|
16,038,125
|
|
|
9,545,891
|
|
|
9,098,150
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
|
|
|
2,527,234
|
|
|
|
|
|
2,527,234
|
|
|
2,864,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for diluted income per share—adjusted weighted average
shares
|
|
|
16,038,125
|
|
|
18,423,457
|
|
|
16,038,125
|
|
|
12,073,125
|
|
|
11,962,150
|
|
Basic
earnings (loss) per share
|
|
$
|
(0.01
|
)
|
$
|
0.04
|
|
$
|
(0.00
|
)
|
$
|
0.07
|
|
$
|
0.18
|
|
Diluted
earnings (loss) per share
|
|
$
|
(0.01
|
)
|
$
|
0.04
|
|
$
|
(0.00
|
)
|
$
|
0.06
|
|
$
|
0.14
|
|
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, cash equivalents, money market funds held in trust,
prepaid expenses, accounts payable and accrued expenses, deferred underwriting
fees payable, and income tax payable approximate their respective fair values,
due to the short-term nature of these items.
Share-Based
Payments
The
Company accounts for share-based payments pursuant to Statement of Financial
Accounting Standards No. 123R, “Share-Based Payments” (“SFAS No. 123R”). SFAS
No. 123R requires all share-based payments, including grants of employee stock
options to employees, to be recognized in the financial statements based on
their fair values. The Company adopted SFAS No. 123R on January 1, 2006 and
expects that it could have a material impact on the Company’s financial
statements to the extent that the Company grants stock-based compensation in
future periods.
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.
2.
Public
Offering
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 commencing the later of the completion of a business combination with
a
target business or one year from the effective date of the Public Offering,
and
expiring 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.
3.
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.
4.
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
June 30, 2008 and December 31, 2007, the Company had incurred and paid an
aggregate of $112,500 and $67,500, respectively, for such services.
5.
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.
6.
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 on the later of the consummation of a Business Combination or one
year from the date of the Public Offering 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 one-year promissory notes 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 7.
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 2 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 June 30, 2008. The warrants have a weighted average exercise price of
$6.00 per share, and a weighted average term of 36 months.
7.
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.
The holders of the majority of these shares can elect to exercise these
registration rights at any time after the consummation of the Company’s initial
business combination, subject to the 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.
8.
Income
Taxes
The
following table presents the current and deferred income tax provision for
federal and state income taxes:
|
|
|
|
|
|
For
the period from June 24, 2005 (inception) through June 30,
2008
|
|
|
|
Three
months ended
June
30,
|
|
Six
months ended
June
30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Current
tax provision:
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
178,000
|
|
$
|
390,505
|
|
$
|
322,000
|
|
$
|
390,505
|
|
$
|
949,500
|
|
State
|
|
|
46,000
|
|
|
-
|
|
|
98,000
|
|
|
800
|
|
|
263,400
|
|
|
|
$
|
224,000
|
|
$
|
390,505
|
|
$
|
420,000
|
|
$
|
391,305
|
|
$
|
1,212,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(163,000
|
)
|
|
-
|
|
|
(188,000
|
)
|
|
-
|
|
|
61,000
|
|
State
|
|
|
(42,000
|
)
|
|
-
|
|
|
(58,000
|
)
|
|
-
|
|
|
26,000
|
|
|
|
|
(205,000
|
)
|
|
-
|
|
|
(238,000
|
)
|
|
-
|
|
|
87,000
|
|
Total
provision for income tax
|
|
$
|
19,000
|
|
$
|
390,505
|
|
$
|
182,000
|
|
$
|
391,305
|
|
$
|
1,299,900
|
|
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 liability at June 30, 2008 and
December 31, 2007 are as follows:
|
|
|
June
30,
2008
|
|
|
December
31,
2007
|
|
Expenses
deductible in future periods
|
|
$
|
42,000
|
|
$
|
85,000
|
|
Accretion
of interest on U.S. Treasury Bills
|
|
|
(129,000
|
)
|
|
(410,000
|
)
|
Total
deferred tax assets (liabilities)
|
|
|
(87,000
|
)
|
|
(325,000
|
)
|
Valuation
allowance
|
|
|
—
|
|
|
—
|
|
Net
deferred tax liability
|
|
$
|
(87,000
|
)
|
$
|
(325,000
|
)
|
In
assessing the realizability of deferred tax assets of $42,000 and $85,000 at
June 30, 2008 and December 31, 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 June 30, 2008 concluded that the asset can be utilized in future
periods. Therefore, there is no valuation allowance against this asset as of
June 30, 2008.
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 three and six months
ended June 30, 2008 and 2007, and the period from June 24, 2005 (inception)
through June 30, 2008 as follows:
|
|
Three
months ended
June
30,
|
|
Six
months ended
June
30,
|
|
2005
(inception)through
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
June
30, 2008
|
|
Expected
tax at 34%
|
|
$
|
16,000
|
|
$
|
373,000
|
|
$
|
154,000
|
|
$
|
369,000
|
|
$
|
1,104,000
|
|
Change
in valuation allowance
|
|
|
-
|
|
|
(49,000
|
)
|
|
-
|
|
|
(43,000
|
)
|
|
-
|
|
State
income tax, net of federal tax benefit
|
|
|
2,000
|
|
|
64,000
|
|
|
26,000
|
|
|
63,000
|
|
|
189,000
|
|
Other
|
|
|
1,000
|
|
|
300
|
|
|
2,000
|
|
|
2,000
|
|
|
6,900
|
|
Provision
for income taxes
|
|
$
|
19,000
|
|
$
|
391,000
|
|
$
|
182,000
|
|
$
|
391,000
|
|
$
|
1,299,900
|
|
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. FIN 48 is effective for fiscal
years beginning after December 15, 2006.
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 June 30, 2008 and December 31, 2007, we have 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 June 30, 2008, we have 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
2007 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.
Item
2. Management’s Discussion and Analysis of Financial Condition And Results of
Operations
Forward
Looking Statements
The
Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for
forward-looking statements so long as those statements are identified as
forward-looking and are accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those projected in such statements. All of the statements
contained in this Report that are not identified as historical should be
considered forward-looking. In connection with certain forward-looking
statements contained in this Report and those that may be made in the future
by
or on behalf of the Company which are identified as forward-looking, the Company
notes that there are various factors that could cause actual results to differ
materially from those set forth in any such forward-looking statements.
Accordingly, there can be no assurance that the forward-looking statements
contained in this Report will be realized or that actual results will not be
significantly higher or lower. Statements regarding policies and procedures
are
not intended, and should not be interpreted, to mean that such policies and
procedures will not be amended, modified or repealed at any time in the future.
The forward-looking statements have not been audited by, examined by or
subjected to agreed-upon procedures by independent accountants, and no third
party has independently verified or reviewed such statements. Readers of this
Report should consider these facts in evaluating the information contained
herein. The inclusion of the forward-looking statements contained in this Report
should not be regarded as a representation by the Company or any other person
that the forward-looking statements contained in this Report will be achieved.
In light of the foregoing, readers of this Report are cautioned not to place
undue reliance on the forward-looking statements contained herein.
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. Although we are currently in discussions with prospective target
businesses, there is no guarantee that we will be able to complete a business
combination by October 2, 2008
or
enter
into a letter of intent by that date, which will extend the period to complete
the business combination until April 2, 2009
.
On
April
2, 2007, we 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 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 “Public
Offering”). 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
$4,000,000 of contingent underwriting compensation that will be paid 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.
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 the later
of
the completion of a business combination with a target business or one year
from
the effective date of the Public Offering and expiring four years from the
effective date of the Public Offering (the “Warrant”). 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.
To
the
extent that our capital stock is used in whole or in part as consideration
to
effect a business combination, the proceeds held in the trust account (other
than the contingent underwriting discount) will be used to finance the
operations of the target business. We may also use the proceeds held in the
trust account (other than the contingent underwriting discount) to pay a
finder’s fee to any unaffiliated party that provides information regarding
prospective targets to us.
As
of
June 30, 2008, approximately $100,532,000 (including approximately $309,000
in
accreted treasury bill interest) was held in trust and we had approximately
$217,000 of unrestricted cash. The trust account balance includes approximately
$248,000 of interest earned on the funds held in the trust account, available
to
us for our activities in connection with identifying and conducting due
diligence of a suitable business combination, and for general corporate matters.
The
initial target business or businesses with which we combine must have a
collective fair market value equal to at least 80% of the balance in the trust
account (excluding deferred underwriters’ discounts and commissions). However,
we may not use all of the proceeds held in the trust account in connection
with
a business combination, either because the consideration for the business
combination is less than the proceeds in trust or because we finance a portion
of the consideration with capital stock or debt securities that we can issue.
In
such event, the remaining proceeds held in the trust account, including any
other net proceeds not expended, will be used to finance the operations of
the
target business or businesses.
We
may
issue additional capital stock or debt securities to finance a business
combination. The issuance of additional capital stock, including stock issuable
upon conversion of any convertible debt securities we may issue, or the
incurrence of debt, could have material consequences on our business and
financial condition. The issuance of additional shares of our capital stock
(including upon conversion of convertible debt securities):
|
·
|
may
significantly reduce the equity interest of our
stockholders;
|
|
·
|
will
likely cause a change in control if a substantial number of our shares
of
common stock or voting preferred stock are issued, which may affect,
among
other things, our ability to use our net operating loss carry forwards,
if
any, and may also result in the resignation or removal of one or
more of
our present officers and directors;
and
|
|
·
|
may
adversely affect prevailing market prices for our common
stock.
|
Similarly,
if we issue debt securities, it could result in:
|
·
|
default
and foreclosure on our assets if our operating revenues after a business
combination are insufficient to pay our debt
obligations;
|
|
·
|
acceleration
of our obligations to repay the indebtedness even if we make all
principal
and interest payments when due if we breach the covenants contained
in any
debt securities, such as covenants that require the satisfaction
or
maintenance of certain financial ratios or reserves, without a waiver
or
renegotiation of such covenants;
|
|
·
|
an
obligation to immediately repay all principal and accrued interest,
if
any, upon demand to the extent any debt securities are payable on
demand;
and
|
|
·
|
our
inability to obtain additional financing, if necessary, to the extent
any
debt securities contain covenants restricting our ability to obtain
additional financing while such security is outstanding, or to the
extent
our existing leverage discourages other potential
investors.
|
Through
June 30, 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 six months ended
June
30, 2008, we earned $1,112,741 in interest income
.
The
following table shows the total funds held in the trust account through June
30,
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
|
|
|
4,227,802
|
|
Less
total interest disbursed to us for working capital
|
|
|
(1,352,088
|
)
|
Less
total taxes paid
|
|
|
(1,257,500
|
)
|
|
|
|
100,223,214
|
|
Treasury
Bill interest accreted
|
|
|
309,074
|
|
Total
funds held in trust account through June 30, 2008
|
|
$
|
100,532,288
|
|
For
the
six months ended June 30, 2008, we paid or incurred an aggregate of $660,031
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 our SEC reporting obligations and
general
corporate matters; and
|
|
·
|
miscellaneous
operations related expenses including administrative fees and franchise
taxes.
|
For
the
period following June 30, 2008 through the date of Business Combination, if
any,
we expect to incur expenses for the following purposes:
|
·
|
payment
of premiums associated with our director’s and officer’s
insurance;
|
|
·
|
payment
of estimated income taxes incurred as a result of interest income
earned
on funds currently held in the trust
account;
|
|
·
|
due
diligence and investigation of prospective target
businesses;
|
|
·
|
legal
and accounting fees relating to our SEC reporting obligations and
general
corporate matters;
|
|
·
|
structuring
and negotiating a business combination, including the making of a
down
payment or the payment of exclusivity or similar fees and expenses;
and
|
|
·
|
other
miscellaneous operations related expenses including administrative
fees
and franchise taxes.
|
We
may
not have sufficient funds to allow us to operate through the date of
consummation of a business combination or date of liquidation. In such event,
we
will need to obtain additional funds from our stockholders or another source.
If
we are unable to obtain additional financing, the Company may be forced to
limit
its activities or liquidate. None of our officers, directors or stockholders
is
required to provide any financing to us. Only in the event the assets held
outside the trust account are insufficient to pay the costs associated with
our
dissolution and liquidation will our three executive officers - David Marshall,
Kurt Brendlinger and Eric Pulier - provide additional funds required to pay
the
costs associated with the dissolution and liquidation.
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 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, or in money market funds meeting certain
conditions under Rule 2a-7 promulgated under the Investment Company Act of
1940.
Given our limited risk in our exposure to U.S. Treasury Bills and such money
market funds, we do not view the interest rate risk to be significant. We do
not
enter into derivatives or other financial instruments for trading or speculative
purposes.
Item
4. Controls and Procedures.
An
evaluation of the effectiveness of our disclosure controls and procedures as
of
June 30, 2008 was made under the supervision and with the participation of
our
management, including our principal executive officer and principal financial
officer. Based on that evaluation, our principal executive officer and principal
financial officer concluded that our disclosure controls and procedures were
not
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. We currently have no employees and all of our accounting and
financial reporting activities are performed by a consultant and a bookkeeping
service. Accordingly, we have been unable to segregate the accounting procedures
over financial activities to provide adequate internal controls over financial
reporting. As a result, our principal executive officer and principal financial
officer have concluded that our internal control over financial reporting are
not effective. During the most recently completed fiscal quarter, there has
been
no significant change in our internal control over financial reporting that
has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
PART
II— OTHER INFORMATION
Item
1.
Legal
Proceedings
We
are
not currently subject to any material legal proceedings, nor, to our knowledge,
is any material legal proceeding threatened against us. From time to time,
we
may be a party to certain legal proceedings incidental to the normal course
of
our business. While the outcome of these legal proceedings cannot be predicted
with certainty, we do not expect that these proceedings will have a material
effect upon our financial condition or results of operations.
Item
1A. Risk Factors
We
may not be able to effect a business combination by October 2, 2008
,
or by
April 2, 2009 if a letter of intent has been entered into by or before October
2, 2008
. In the event that we are not successful in will terminate
business operations, dissolve and liquidate if we do not consummate a business
combination within a specified period after the consummation of this
offering.
We
do not
have any specific merger, asset acquisition or other business combination under
consideration. Although we have had discussions with prospective targets, we
may
not be able to complete a business combination by October 2, 2008, or by April
2, 2009 if the extension criteria described below in this risk factor have
been
satisfied, in which case our purpose and powers will be limited to dissolving,
liquidating and winding up.
If
we
enter into either a letter of intent, an agreement in principle or a definitive
agreement to complete a business combination prior to October 2, 2008, but
are
unable to complete the business combination by then, then we will have an
additional six months in which to complete the business combination contemplated
by the letter of intent, agreement in principle or definitive agreement. If
we
are unable to consummate that transaction within the permitted time period,
our
purpose and powers will be limited to dissolving, liquidating and winding up.
Promptly
after the approval by our stockholders of our plan of dissolution and
liquidation, we will liquidate our assets (including the amount in the trust
account and accrued interest on such amount net of income taxes payable on
such
interest) and, after paying or reserving for payment our liabilities (from
assets outside the trust account and, if necessary, within the trust account)
and the costs of dissolution and liquidation (to be paid from assets outside
the
trust account), we will distribute the remaining assets solely to our public
stockholders, who, for this purpose, include our existing stockholders with
respect to any shares purchased by them in this offering or in the
aftermarket.
Item
2.
Unregistered
Sales of Equity Securities and Use of Proceeds
As
of
June 30, 2008, we paid or incurred offering expenses of approximately
$1,380,018, which have been charged to additional paid in capital.
As
of
June 30, 2008, we have paid or incurred an aggregate of approximately $2,590,234
in expenses, which have been or will be paid out of the proceeds of our initial
public offering held in trust and our withdrawal of interest earned on the
funds
held in the trust account, for the following purposes:
|
·
|
payment
of estimated taxes incurred as a result of interest income earned
on funds
currently held in the trust account;
|
|
·
|
payment
of other state and local taxes and fees;
|
|
·
|
expenses
for due diligence and investigation of prospective target businesses;
|
|
·
|
legal
and accounting fees relating to our SEC reporting obligations and
general
corporate matters; and
|
|
·
|
miscellaneous
expenses, including directors and officers liability insurance.
|
As
of
June 30, 2008, after giving effect to our initial public offering and our
operations subsequent thereto, including our withdrawal of $2,609,588 of the
interest earned on the funds held in the trust account through June 30, 2008,
$100,532,288 was held in trust and we had an aggregate of approximately $465,000
of cash available to us, $217,000 in unrestricted cash and $248,000 available
for withdrawal from the trust, for our activities in connection with identifying
and conducting due diligence of a suitable business combination, and for general
corporate matters.
Item
3.
Defaults
upon Senior Securities.
Not
applicable.
Item
4. Submission of Matters to a Vote of Security Holders.
None.
Item
5.
Other
Information.
None.
Item
6.
Exhibits
The
exhibits listed in the accompanying Index to Exhibits are filed as part of
this
Quarterly Report on Form 10-Q and incorporated herein by reference.
SIGNATURES
Pursuant
to the requirements 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
(Registrant)
|
|
|
|
Date: August
14, 2008
|
By:
|
/s/ KURT
BRENDLINGER
|
|
Kurt
Brendlinger
Chief
Financial Officer
(Principal
Financial Officer)
|
INDEX
TO EXHIBITS
Exhibit
Number
|
|
Description
|
31.1
|
|
Certification
of Chief Executive Officer Pursuant to 17 CFR
240.13a-14(a)
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer Pursuant to 17 CFR
240.13a-14(a)
|
|
|
|
32.1
|
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32.2
|
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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Santa Monica Media Corp. (AMEX:MEJ)
Gráfico Histórico do Ativo
De Mai 2024 até Jun 2024
Santa Monica Media Corp. (AMEX:MEJ)
Gráfico Histórico do Ativo
De Jun 2023 até Jun 2024