UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2009
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 000-51840
ASCEND ACQUISITION CORP. | |
(Exact Name of Registrant as Specified in Its Charter) | |
Delaware | 20-3881465 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
435 Devon Park Drive, Bldg. 700, Wayne, PA 19087
(Address of principal executive offices)
(610) 977-7531
(Issuer’s telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).
Large accelerated filer o Accelerated filer o
Non-accelerated filer o Smaller reporting company ý
(Do not check if smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ý No ¨
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 856,675 common shares as of August 13, 2009
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ASCEND ACQUISITION CORP.
(a corporation in the development stage)
CONDENSED BALANCE SHEETS
(UNAUDITED)
June 30, 2009 | December 31, 2008 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 3,474 | $ | 2,606 | ||||
Prepaid expenses | 1,982 | 1,982 | ||||||
Total assets | $ | 5,456 | $ | 4,588 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities Accounts payable and accrued expenses | $ | 4,889 | $ | 5,773 | ||||
Related party advance | 40,000 | - | ||||||
Notes payable to related party | 195,000 | 195,000 | ||||||
Accrued interest on note payable to related party | 5,986 | 1,151 | ||||||
Total liabilities | 245,875 | 201,924 | ||||||
Commitments | ||||||||
Stockholders’ Deficit: | ||||||||
Preferred stock, $.0001 par value, authorized 1,000,000 shares; none issued | - | - | ||||||
Common stock, $.0001 par value, authorized 300,000,000 shares and issued and outstanding 856,675 shares | 86 | 86 | ||||||
Additional paid-in capital | 148,976 | 148,976 | ||||||
Accumulated deficit during the development stage | (389,481 | ) | (346,398 | ) | ||||
Total stockholders’ deficit | (240,419 | ) | (197,336 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 5,456 | $ | 4,588 |
See accompanying notes to unaudited condensed financial statements.
ASCEND ACQUISITION CORP.
(a corporation in the development stage)
CONDENSED STATEMENTS OF EXPENSES
(UNAUDITED)
Three Months Ended | Six Months Ended | December 5, 2005 (Inception) to | ||||||||||||||||||
June30, | June 30, | June 30, | ||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | ||||||||||||||||
General and administrative expenses | $ | 15,331 | $ | (84,995 | ) | $ | 38,248 | $ | 161,398 | $ | 1,885,753 | |||||||||
Operating (loss) income | (15,331 | ) | 84,995 | (38,248 | ) | (161,398 | ) | (1,885,753 | ) | |||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | - | - | - | - | 12,689 | |||||||||||||||
Interest on trust fund investment | - | 141,229 | - | 335,119 | 2,052,557 | |||||||||||||||
Interest expense | (2,431 | ) | - | (4,835 | ) | - | (154,359 | ) | ||||||||||||
Gain on extinguishment of debt | - | - | - | - | 892,597 | |||||||||||||||
Total other income (expense) | (2,431 | ) | 141,229 | (4,835 | ) | 335,119 | 2,803,484 | |||||||||||||
(Loss) income before income taxes | (17,762 | ) | 226,224 | (43,083 | ) | 173,721 | 917,731 | |||||||||||||
Income tax benefit | - | - | - | - | - | |||||||||||||||
Net (loss) income | $ | (17,762 | ) | $ | 226,224 | $ | (43,083 | ) | $ | 173,721 | $ | 917,731 | ||||||||
Weighted average shares of common | ||||||||||||||||
stock outstanding | ||||||||||||||||
Basic | 856,675 | 856,675 | 856,675 | 856,675 | ||||||||||||
Diluted | 856,675 | 856,675 | 856,675 | 856,675 | ||||||||||||
(Loss) earnings per common share Basic | $ | (0.02 | ) | $ | 0.26 | $ | (0.05 | ) | $ | 0.20 | ||||||
Diluted | $ | (0.02 | ) | $ | 0.26 | $ | (0.05 | ) | $ | 0.20 | ||||||
See accompanying notes to unaudited condensed financial statements.
ASCEND ACQUISITION CORP.
(a corporation in the development stage)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30, | December 5, 2005 (Inception) to June 30, | |||||||||||
2009 | 2008 | 2009 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net (loss) income | $ | (43,083 | ) | $ | 173,721 | $ | 917,731 | |||||
Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||||||
Interest income on investments held in trust | - | (418,847 | ) | (2,693,473 | ) | |||||||
Amortization of debt discount | - | - | 146,250 | |||||||||
Shares issued for service | - | - | 2,726 | |||||||||
Change in operating assets and liabilities: | ||||||||||||
Decrease in prepaid expenses and other receivables | - | (2,838 | ) | (1,982 | ) | |||||||
(Decrease) increase in accounts payable and accrued expenses | (884 | ) | 161,941 | 4,889 | ||||||||
Increase in accrued interest due to related party | 4,835 | - | 5,986 | |||||||||
Increase in deferred interest | - | 83,727 | 640,916 | |||||||||
Net cash used in operating activities | (39,132 | ) | (2,296 | ) | (976,957 | ) | ||||||
Cash flows from investing activities: | ||||||||||||
Purchase of treasury bills held in trust | - | - | (15,485,695 | ) | ||||||||
Purchase of municipal securities held in trust | - | - | (30,809,507 | ) | ||||||||
Sale/maturity of treasury bills held in trust | - | - | 15,613,788 | |||||||||
Sale of municipal securities held in trust | - | - | 31,176,329 | |||||||||
Purchase of Pennsylvania municipal securities held in trust | - | - | (39,005,118 | ) | ||||||||
Redemption of Pennsylvania municipal securities held in trust | - | - | 41,203,675 | |||||||||
Distribution of trust assets to public shareholders | - | - | (41,128,675 | ) | ||||||||
Net cash used in investing activities | - | - | (38,435,203 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||
Related party advance | 40,000 | - | 40,000 | |||||||||
Gross proceeds from initial public offering | - | - | 41,400,000 | |||||||||
Proceeds from note payable to stockholder | - | - | 275,000 | |||||||||
Repayment of note payable to stockholder | - | - | (80,000 | ) | ||||||||
Proceeds from sale of shares of common stock to founding stockholders | - | - | 25,000 | |||||||||
Proceeds from issuance of option | - | - | 100 | |||||||||
Proceeds from sale of insider units | - | - | 1,000,002 | |||||||||
Payment of costs of public offering | - | - | (3,244,468 | ) | ||||||||
Net cash provided by financing activities | 40,000 | �� | - | 39,415,634 | ||||||||
Net increase (decrease) in cash and cash equivalents | 868 | (2,296 | ) | 3,474 | ||||||||
Cash and cash equivalents at beginning of period | 2,606 | 10,508 | - | |||||||||
Cash and cash equivalents at end of period | $ | 3,474 | $ | 8,212 | $ | 3,474 |
Supplemental schedule of non-cash financing activity: | ||||||||||||
Reversal of costs of public offering | $ | - | $ | (952,200 | ) | $ | - |
See accompanying notes to unaudited condensed financial statements.
ASCEND ACQUISITION CORP.
(a corporation in the development stage)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
The condensed financial statements at June 30, 2009 and for the three and six month periods ended June 30, 2009 and 2008 and for the period from December 5, 2005 (inception) to June 30, 2009 are unaudited and include the accounts of Ascend Acquisition Corp. (a corporation in the development stage) (“the Company”). The condensed balance sheet at December 31, 2008 has been derived from the audited financial statements included in the Company’s 10-K filed on March 31, 2009.
In the opinion of management, all adjustments (consisting of normal accruals) have been made that are necessary to present fairly the financial position of the Company as of June 30, 2009 and the results of its operations and its cash flows for the six months ended June 30, 2009 and 2008. Operating results for the interim period presented are not necessarily indicative of the results to be expected for a full year.
The statements and related notes have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations.
The Company will adopt FASB Statement No. 165, Subsequent Events, beginning July 1, 2009.
2. Organization and Business Operations
The Company was incorporated in Delaware on December 5, 2005 as a blank check company whose objective is to acquire an operating business.
The current primary activity of the Company involves seeking a company or companies that it can acquire or with which it can merge. The Company has not selected any company as an acquisition target or merger partner, and does not currently intend to limit potential candidates to any particular field or industry. However, in the future if it so chooses, the Company could limit candidates to a particular field or industry. The Company’s plans are now only in an early stage.
These financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. Realization value may be substantially different from carrying values as shown and these financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. As of June 30, 2009, the Company has a working capital deficiency, has not generated operating revenues and has accumulated losses since inception. The continuation of the Company as a going concern is dependent upon the continued financial support from the largest beneficial owner of the Company’s outstanding stock (who also is one of the Company’s officers and directors), the ability of the Company to obtain necessary debt or equity financing to continue operations, or the acquisition of profitable operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
ASCEND ACQUISITION CORP.
(a corporation in the development stage)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
3. Note payable to related party
On November 12, 2008, the Company issued a convertible promissory note (the “Note”) to Don K. Rice, with a principal amount of $195,000. The principal balance of the Note includes the principal balance of an earlier promissory note executed on June 16, 2008 note plus accrued interest and additional advances made by Mr. Rice thereafter. The Note is due and payable in full on demand, and bears interest at the rate of 5% per annum. At any time prior to the payment in full of the entire balance of the Notes, Mr. Rice has the option of converting all or any portion of the unpaid balance of the Note into shares of Ascend common stock at a conversion price equal to $0.04 per share, subject to adjustment upon certain events. The conversion price was based on the then recent market prices and near non-liquidity of our common stock, the number of shares that would be issued and the effect that the sale of such shares would have on the market for our common stock, and the legal constraints on the sale of such shares. Assuming no adjustment to the conversion price, if Mr. Rice converts the entire principal balance of the Note, he would receive 4,875,000 shares of Ascend common stock.
4. Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share. The shares outstanding and the earnings per share have been adjusted retroactively for the 1 for 10 reverse stock split which occurred on September 23, 2008:
Quarter Ended June 30, 2009 | Quarter Ended June 30, 2008 | Six Months Ended June 30, 2009 | Six Month Ended June 30, 2008 | December 5, 2005 (Inception) to June 30, 2009 | ||||||||||||||||
Numerator: Net ( loss) income, basic | $ | (17,762 | ) | $ | 226,224 | $ | (43,083 | ) | $ | 173,721 | $ | 917,731 | ||||||||
Numerator: Adjusted net (loss) income, Diluted | $ | (17,762 | ) | $ | 226,224 | $ | (43,083 | ) | $ | 173,721 | $ | 923,717 | ||||||||
Denominator: Average common shares outstanding – basic | 856,675 | 856,675 | 856,675 | 856,675 | 770,629 | |||||||||||||||
Denominator: Average common shares outstanding – basic | 856,675 | 856,675 | 856,675 | 856,675 | 1,608,052 | |||||||||||||||
Basic (loss) earnings per share | $ | (0.02 | ) | $ | 0.26 | $ | (0.05 | ) | $ | 0.20 | $ | 1.19 | ||||||||
Diluted (loss) earnings per share | $ | (0.02 | ) | $ | 0.26 | $ | (0.05 | ) | $ | 0.20 | $ | 0.57 |
The inception to date diluted earnings per share includes the effect of the convertible note payable to related party (see Note 3) that may be converted to 4,875,000 common shares; since the note payable was issued on November 18, 2008, interest expense related to the note payable for the period from
December 5, 2005 (inception) to June 30, 2009 of $5,986 was added back to net income for purposes of the calculation of diluted earnings per share.
No computation for diluted earnings per share was prepared for the Redeemable Common Stock Purchase Warrants to purchase an aggregate of 1,413,334 shares of common stock at $50.00 per share and the underwriters’ option to purchase 300,000 Units at an exercise price of $7.50 per Unit, respectively, that were outstanding because the exercise price for the shares underlying the conversion of the warrants and units are in excess of the related market value.
In periods where losses are reported, the weighted average number of shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.
5. Related party advance
On June 1, 2009, Don K. Rice, an officer and a director of the Company, advanced $20,000 to the Company in order for it to meet its operating expenses. During the first quarter of 2009, Don K. Rice advanced $20,000 to the Company in order for it to meet its operating expenses. The total amount is unsecured, non interest bearing and has no specific terms for repayment.
6. Subsequent event
On August 5, 2009, Don K. Rice, an officer and a director of the Company, advanced $10,000 to the Company in order for it to meet its operating expenses. On August 5, 2009, the Company executed a convertible note (the “Note”) to Don K. Rice, with a principal amount of $50,000. The principal balance of the Note includes the additional advances made by Mr. Rice during 2009. The Note is due and payable in full on demand, and bears interest at the rate of five percent (5.0%) per annum. At any time prior to the payment in full of the entire balance of the Notes, Mr. Rice has the option of converting all or any portion of the unpaid balance of the Note into shares of the Company’s common stock at a conversion price equal to $0.05 per share, subject to adjustment upon certain events. The conversion price was based on the recent market price. Assuming no adjustment to the conversion price, if Mr. Rice converts the entire principal balance of the Note, he would receive 1,000,000 shares of Ascend common stock.
Item 2. Management’s Discussion and Analysis.
CAUTIONARY STATEMENT FOR 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 Financial Statements and related Notes thereto included elsewhere in this report.
General
We were formed on December 5, 2005 to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with a currently unidentified operating business. The registration statement for our initial public offering ("the Offering") was declared effective May 11, 2006. On May 17, 2006, we sold 6,000,000 units in the Offering and on May 22, 2006, we sold 900,000 units in the Offering. The total units sold of 6,900,000 include all of the 900,000 units subject to the underwriters’ overallotment option. Each of our units originally consisted of one share of our common stock, $.0001 par value per share, and two redeemable common stock purchase warrants. Each warrant originally entitled the holder to purchase from us one share of common stock at an exercise price of $5.00. We received net proceeds of approximately $37,203,000 from the Offering. All activity from December 5, 2005 through May 17, 2006 related to our formation and initial public offering.
On July 31, 2007, we announced that we had signed a definitive agreement to acquire e.PAK Resources (S) Pte. Ltd. (“ePAK”), a privately held, full-service supplier of semiconductor transfer and handling products. On April 28, 2008, we announced that we had abandoned our proposed business combination with ePAK. We were required to complete our business combination with ePAK by May 17, 2008. Because we did not consummate a qualifying Business Combination prior to May 17, 2008, the board of directors contemplated alternatives for preserving value for stockholders. Ultimately, the board of directors proposed to amend our certificate of incorporation:
* | to permit the continuance of our company as a corporation beyond the time currently specified in our certificate of incorporation without the limitations related to the Offering; |
* | to increase the authorized shares of common stock from 30,000,000 shares to 300,000,000 shares of common stock; and |
* | to effect a one-for-ten reverse stock split of our common stock, in which every 10 shares of Common Stock outstanding as of the effective date of the amendment will be converted into one share of Common Stock. |
Our stockholders approved all of these amendments at a special meeting held on September 4, 2008. In addition to these amendments, on September 18, 2008 we distributed the amounts in the Trust Fund established by us at the consummation of the Offering and into which a certain amount of the net proceeds of the Offering were deposited (the “Trust Fund”). The aggregate amount in the Trust Fund was approximately $41,128,676 or approximately $5.96 per original share of common stock issued in the Offering (“IPO Shares”). Only holders of our IPO Shares received proceeds from the distribution of the Trust Fund, after establishing a reserve for Delaware franchise taxes expected to be paid in the amount of approximately $75,000.
As a result of the preceding, our current primary activity involves seeking a company or companies that we can acquire or with which we can merge. We have not selected any company as an acquisition target or merger partner, and do not currently intend to limit potential candidates to any particular field or industry. However, in the future if we so choose, we could limit candidates to a particular field or industry. Our plans are now only in an early stage. In our company’s present state, it can be defined as a "shell" company, whose sole purpose at this time is to locate and consummate a merger or acquisition with a private entity.
Results of Operations
Quarter Ended June 30, 2009 Compared to the Quarter Ended June 30, 2008
During the second quarter of 2008, management negotiated reduced rates with several vendors as a result of the business failure of the business combination. The reduction in the amounts due gives rise to negative general and administrative expenses for the quarter. General and administrative expenses for the quarter ended June 30, 2009 were $15,331. General and administrative expenses for the quarter ended June 30, 2008 would have been $163,331 but for a credit in the amount of $97,500 for the management fee and several credits totaling $150,826 for legal and professional expenses, which resulted in a net credit of $84,995 for the quarter ended June 30, 2008. Accordingly, general and administrative expenses for the quarter ended June 30, 2009 increased by $100,326 compared to the quarter ended June 30, 2008. Moreover, our business activities were fairly minimal in the quarter ended June 30, 2009. As a result, legal and professional fees were $7,344 for the quarter ended June 30, 2009. Legal and professional fees for the quarter ended June 30, 2008 would have been $94,841 but for a credit in the amount of $150,826, which resulted in a net credit of $55,985 for the quarter ended June 30, 2008. Accordingly, legal and professional fees for the quarter ended June 30, 2009 increased by $63,329 compared to the quarter ended June 30, 2008 In addition, there was a credit of $97,500 for a monthly administrative services agreement, which represented a waiver of the unpaid balance. Other operating expenses decreased $60,503 the quarter ended June 30, 2009 compared to the quarter ended June 30, 2008.
With the abandonment of our proposed business acquisition, we were required to repay the trust fund assets to our public shareholders. For the quarter ended June 30, 2008, the trust fund assets and other interest bearing bank deposits earned $141,229, net of deferred interest of $35,285. Because of their distribution in September 2008, no income was earned on the trust fund assets, nor on any other interest bearing bank deposits or other funds in the second quarter of 2009. In the second quarter of 2008, we entered into loans with our CEO, Don K. Rice. In the second quarter of 2009, $2,431 of interest expense was recorded on these loans. No interest expense was recorded in the second quarter of 2008.
Net loss for the quarter ended June 30, 2009 was $17,762, compared to net income of $226,224 for the quarter ended June 30, 2008, as a result of the items mentioned above.
Six Months Ended June 30, 2009 Compared to the Six Months Ended June 30, 2008
During the second quarter of 2008, management negotiated reduced rates with several vendors as a result of the business failure of the business combination. The reduction in the amounts due gives rise to negative general and administrative expenses for the quarter. General and administrative expenses for the six months ended June 30, 2009 were $38,248. General and administrative expenses for the six months ended June 30, 2008 would have been $387,224 but for a net credit in the amount of $75,000 for the management fee and several credits totaling $150,826 for legal and professional expenses received in the second quarter, which resulted in a net expenses of $161,398 for the six months ended June 30, 2008. Accordingly, general and administrative expenses for the six months ended June 30, 2009 decreased by $123,150 compared to the six months ended June 30, 2008. Moreover, our business activities were fairly minimal in the six month period ended June 30, 2009. As a result, legal and professional fees were $20,444 for the six months ended June 30, 2009. Legal and professional fees for the six months ended June 30, 2008 would have been $277,033 but for a credit in the amount of $150,826, which resulted in net expenses of $126,207 for the six months ended June 30, 2008. Accordingly, legal and professional fees for the quarter ended June 30, 2009 decreased by $105,763 compared to the six months ended June 30, 2008 In addition, there was a net credit of $75,000 for a monthly administrative services agreement, which represented a waiver of the unpaid balance. SEC expenses for the six months ended June 30, 2009 were $2,422 compared to $53,228 for the six months ended June 30, 2008. Delaware franchise tax was $18,625 for the six months ended June 30, 2008. There was no Delaware franchise tax for the six months ended June 30, 2009. Other expenses decreased by $18,120 from the six months ended June 30, 2009 compared to the six months ended June 30, 2008.
With the abandonment of our proposed business acquisition, we were required to repay the trust fund assets to our public shareholders. For the six months ended June 30, 2008, the trust fund assets and other interest bearing bank deposits earned $335,119, net of deferred interest of $83,728. Because of their distribution in September 2008, no income was earned on the trust fund assets, nor on any other interest bearing bank deposits or other funds in the second quarter of 2009. In the second quarter of 2008, we entered into loans with our CEO, Don K. Rice. For the six months of 2009, $4,835 of interest expense was recorded on these loans. No interest expense was recorded in the second quarter of 2008.
Net loss for the six months ended June 30, 2009 was $43,083, compared to net income of $173,721 for the six months ended June 30, 2008, as a result of the items mentioned above.
Liquidity and Capital Resources
Currently, we have only a minimal amount of cash on hand and we have no form of committed financing available to us. At the present, we can finance only the limited activity related to our seeking a company or companies that we can acquire or with which it can merge. We have insufficient capital with which to make us attractive to prospective merger candidates who may be in need of immediate funds as an inducement to a possible transaction between them and us. We may in the future be required to undertake certain financing activities to consummate a merger transaction or to continue our current business activities. We cannot assure anyone that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonably terms. If we do not obtain additional financing if needed, it may not be able to consummate a merger and acquisition transaction or even stay in business for that matter. Under certain circumstances, we could be forced to cease our efforts to find a suitable acquisition target or merger partner.
Off-balance Sheet Arrangements
Options and warrants issued in conjunction with our initial public offering are equity-linked financial instruments and, accordingly, represent off-balance sheet arrangements. The options and warrants meet the scope exception in paragraph 11(a) of FAS 133 and are accordingly not accounted for as derivatives for purposes of FAS 133, but instead are accounted for as equity in accordance with EITF 00-19.
Item 4T. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2009. The evaluation was conducted under the supervision and with the participation of management, including our chief executive officer. Disclosure controls and procedures mean our controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures are also designed to provide reasonable assurance that such information is accumulated and communicated to our management, including the chief executive officer, as appropriate to allow timely decisions regarding required disclosure. Our quarterly evaluation of disclosure controls and procedures includes an evaluation of some components of our internal control over financial reporting, and internal control over financial reporting is also separately evaluated on an annual basis for purposes of providing the management report that is set forth in our Annual Report on Form 10-K.
The evaluation of our disclosure controls and procedures included a review of their objectives and design, our implementation of the controls, and the effect of the controls on the information generated for use in this Form 10-Q. In the course of the controls evaluation, we sought to identify any past instances of data errors, control problems or acts of fraud and sought to confirm that appropriate corrective actions, including process improvements, were being undertaken. This evaluation is performed on a quarterly basis so that the conclusions of management, including the chief executive officer, concerning the effectiveness of our disclosure controls and procedures can be reported in our periodic reports.
Our chief executive officer has concluded, based on the evaluation of the effectiveness of the disclosure controls and procedures by our management required by Rules 13a-15 and 15d-15 under the Exchange Act, that as of June 30, 2009, our disclosure controls and procedures were not effective due to the material weaknesses described in Management's Report on Internal Control over Financial Reporting contained in the Company’s 2008 Annual Report on Form 10-K.
Limitations on Effectiveness of Controls and Procedures
Our management, including our chief executive officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
Our internal control over financial reporting is a process designed by, or under the supervision of, our chief executive officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles (United States). Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles (United States), and that our receipts and expenditures are being made only in accordance with the authorization of our board of directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
There have not been any changes in the Company's internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during its second fiscal quarter of 2009 that have materially affected, or are reasonably likely to materially affect its internal control over financial reporting.
PART II - OTHER INFORMATION
Item 6. Exhibits.
EXHIBITS
Exhibit No. Description
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.
ASCEND ACQUISITION CORP. | |
By: /s/ Don K. Rice | |
Don K. Rice | |
Chairman of the Board, Chief Executive Officer, | |
President and Treasurer | |
(Principal executive officer and principal financial and accounting officer) | |
Date: August 13, 2009