Westway (WWAY) 10-Q 2008 Q2 Quarterly report

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, 2008
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 000-52642

Shermen WSC Acquisition Corp.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	20-4755936
(State or other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

c/o The Shermen Group, 1251 Avenue of the Americas, Suite 900, New York, NY	10020
(Address of Principal Executive Offices)	(Zip Code)

(212) 300-0020

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant:  (1) 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  x    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 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 x (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  x    No  o.

As of August 12, 2008, 28,750,000 shares of common stock, par value $0.0001 per share, were issued and outstanding.

TABLE OF CONTENTS

SHERMEN WSC ACQUISITION CORP.

(a development stage enterprise)

Contents

	Page  No.
Part I: FINANCIAL INFORMATION:
Item 1 – Financial Statements	1
Condensed Balance Sheets	1
Condensed Statements of Operations (Unaudited)	2
Condensed Statements of Stockholders’ Equity (Unaudited)	3
Condensed Statements of Cash Flows (unaudited)	4
Notes to Condensed Interim Financial Statements	5
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3 – Quantitative and Qualitative Disclosures About Market Risk	15
Item 4 – Controls and Procedures	15
Part II. OTHER INFORMATION
Item 1 – Legal Proceedings	17
Item 1A – Risk Factors	17
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3 – Defaults Upon Senior Securities	17
Item 4 – Submission of Matters to a Vote of Security Holders	17
Item 5 – Other Information	17
Item 6 – Exhibits	17
Signatures	18

PART I – FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

SHERMEN WSC ACQUISITION CORP

(a corporation in the development stage)

CONDENSED BALANCE SHEETS

	June 30, 2008		December 31, 2007
	(Unaudited)
ASSETS
Current assets
Cash	$	12,907	$	160,949
Prepaid expenses	65,109		30,286
Prepaid income taxes	52,907		—
Total current assets	130,923		191,235
Other assets
Deferred taxes	584,453		401,120
Cash held in Trust Account	137,971,806		138,589,757
	$	138,687,182	$	139,182,112
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	47,279	$	86,817
Income tax payable	—		945,000
Total current liabilities	47,279		1,031,817
Long-term liabilities
Deferred underwriters’ fee	3,312,000		3,312,000
Total liabilities	3,359,279		4,343,817
Commitments
Common stock subject to redemption, 9,199,999 shares at redemption value	54,743,994		54,743,994
Deferred interest related to common stock subject to possible redemption, net of taxes	226,709		352,985
Stockholders’ equity
Preferred stock, $.0001 par value; 1,000,000 shares authorized; none issued
Common stock, $.0001 par value; 100,000,000 shares authorized; 28,750,000 shares issued and outstanding as of June 30, 2008 and December 31, 2007 (including 9,199,999 shares subject to possible redemption), respectively	2,875		2,875
Additional paid-in capital	78,941,231		78,941,231
Retained earnings	1,413,094		797,210
Total stockholders’ equity	80,357,200		79,741,316
Total liabilities and stockholders’ equity	$	138,687,182	$	139,182,112

The accompanying notes are an integral part of these condensed financial statements.

SHERMEN WSC ACQUISITION CORP

(a corporation in the development stage)

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended June 30, 2008			Three Months Ended June 30, 2007			Six Months Ended June 30, 2008			Six Months Ended June 30, 2007			Period from April 18, 2006  (inception) to June 30, 2008
Revenue	$			$			$			$			$
Interest income	305,713			541,278			1,322,154			541,278			4,310,211
Formation and operating costs	(203,829		)	(457,818		)	(391,018		)	(462,264		)	(1,277,569		)
Income before provision for income taxes	101,884			83,460			931,136			79,014			3,032,642
Provision for income taxes	(29,269		)	(36,000		)	(441,528		)	(36,000		)	(1,392,839		)
Net income applicable to common stockholders	$	72,615		$	47,460		$	489,608		$	43,014		$	1,639,803
Number of shares subject to possible redemption, basic & diluted	9,199,999			9,199,999			9,199,999			9,199,999			3,955,742
Income per share subject to possible redemption, basic & diluted	$	0.008		$	0.005		$	0.053		$	0.005		$	0.400
Weighted average number of common shares outstanding, basic	19,550,001			13,351,648			19,550,001			9,198,895			12,572,858
Net income per common share, basic	$	0.004		$	0.0036		$	0.025		$	0.0047		$	0.1304
Weighted average number of common shares outstanding, diluted	23,596,464			18,732,494			23,385,967			14,579,741			16,291,384
Net income per common share, diluted	$	0.003		$	0.0025		$	0.021		$	0.0030		$	0.101

The accompanying notes are an integral part of these condensed financial statements.

2

SHERMEN WSC ACQUISITION CORP

(a corporation in the development stage)

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the period from April 18, 2006 (date of inception) to June 30, 2008

	Common Shares	Amount		Additional paid- in capital			(Deficit Accumulated During the Development Stage) Retained earnings			Total Stockholders’ Equity
Sale of units issued to Founders on May 1, 2006 at $0.005 per unit	5,750,000	$	575	$	24,425		$			$	25,000
Net loss applicable to common stockholders							(16,031		)	(16,031		)
Balance as of December 31, 2006	5,750,000	$	575	$	24,425		$	(16,031	)	$	8,969
Sale of 23,000,000 units on May 30, 2007 at $6 per unit in the public offering	23,000,000	2,300		137,997,700						138,000,000
Sale of warrants issued to Founders on May 30, 2007 at $0.70 per warrant				3,650,000						3,650,000
Underwriting and offering fees and expenses				(4,790,000		)				(4,790,000		)
Proceeds from public offering of common stock subject to possible redemption (9,199,999 shares common stock at redemption value)				(54,743,994		)				(54,743,994		)
Underwriters’ discount and offering costs related to public offering and over-allotment option				(3,196,900		)				(3,196,900		)
Accretion of Trust Account relating to common stock subject to possible redemption, net of tax							(352,985		)	(352,985		)
Net income applicable to common stockholder							1,166,226			1,166,226
Balance at December 31, 2007	28,750,000	$	2,875	$	78,941,231		$	797,210		$	79,741,316
Accretion of Trust Account relating to common stock subject to possible redemption, net of tax (unaudited)							126,276			126,276
Net income applicable to common stockholder (unaudited)							489,608			489,608
Balance at June 30, 2008 (unaudited)	28,750,000	$	2,875	$	78,941,231		$	1,413,094		$	80,357,200

The accompanying notes are an integral part of these condensed financial statements.

3

SHERMEN WSC ACQUISITION CORP

(a corporation in the development stage)

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30, 2008			Six Months Ended June 30, 2007			April 18, 2006 (date of inception) through June 30, 2008
Cash flows from operating activities
Net income	$	489,608		$	43,014		$	1,639,803
Deferred tax benefit	(183,333		)	(191,000		)	(584,453		)
Adjustments to reconcile net income to net cash used in operating activities:
Changes in operating assets and liabilities:
Prepaid expenses	(87,730		)	(68,536		)	(118,016		)
Accounts payable and accrued expenses	(39,538		)	(37,430		)	47,279
Income tax payable	(945,000		)	227,000			—
Cash provided by (used in) operating activities	(765,993		)	(26,952		)	984,613
Cash provided by (used in) investing activities
Cash held in Trust Account	617,951			(137,151,278		)	(137,971,806		)
Cash flows from financing activities:
Proceeds from note payable, stockholder	—			—			150,000
Payments for note payable, stockholder	—			—			(150,000		)
Payments of offering costs	—			(4,226,116		)	(4,675,000		)
Proceeds from sale of stock options from the offering	—			100			100
Proceeds from issuance of warrants	—			3,650,000			141,675,000
Proceeds from issuance of common stock	—			138,000,000			—
Net cash provided by financing activities	—			137,423,984			137,000,100
Net increase (decrease) in cash	(148,042		)	245,754			12,907
Cash, beginning of the period	160,949			21,354			—
Cash, end of the period	$	12,907		$	267,108		$	12,907
Supplemental schedule of non-cash financing activities:
Deferred underwriters’ fees	$	—		$	3,312,000		$	3,312,000

The accompanying notes are an integral part of these condensed financial statements.

4

SHERMEN WSC ACQUISITION CORP.

(a corporation in the development stage)

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

NOTE A—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Shermen WSC Acquisition Corp. (a corporation in the development stage) (the “Company”) was incorporated in Delaware on April 18, 2006. The Company was formed to acquire an operating business in the agriculture industry through a merger, capital stock exchange, asset acquisition, stock purchase or other similar business combination. The Company has neither engaged in any operations nor generated significant revenue to date, with the exception of interest income earned on cash held in the trust account as described below. The Company is considered to be in the development stage as defined in Statement of Financial Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting By Development Stage Enterprises,” and is subject to the risks associated with activities of development stage companies. The Company has selected December 31st as its fiscal year end.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Offering (as defined in Note D below) of Units (as defined in Note D below), although substantially all of the net proceeds of the Offering are intended to be generally applied toward consummating a business combination with (or acquisition of) an operating business in the agriculture industry (“Business Combination”). Furthermore, there is no assurance that the Company will be able to successfully effect a Business Combination. Since the closing of the Offering, at least 99.5% of the gross proceeds, after the payment of certain amounts to the underwriters for the Offering, are held in a trust account (“Trust Account”) and invested in U.S. “government debt securities,” defined as any Treasury Bill issued by the United States government having a maturity of one hundred and eighty  (180) days or less or any open ended investment company registered under the Investment Company Act of 1940 that holds itself out as a money market fund and bears the highest credit rating issued by a United States nationally recognized rating agency, until the earlier of (i) the consummation of its first Business Combination or (ii) the distribution of the Trust Account as described below. The remaining proceeds will 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 40% or more of the outstanding common stock of the Company (excluding, for this purpose, those shares of common stock of the Company issued prior to the Offering) vote against the Business Combination and exercise their conversion rights described below, the Business Combination will not be consummated. The stockholders who purchased Units in the Offering (the “Public Stockholders”) and vote against a Business Combination will be entitled to convert their common stock into a pro rata share of the Trust Account (including the additional 4% fee of the gross proceeds of the Offering payable to the underwriters for the Offering upon the Company’s consummation of a Business Combination), including any interest earned (net of taxes payable and the amount distributed to the Company to fund its working capital requirements) on their pro rata share, if the Business Combination is approved and consummated. However, voting against the Business Combination alone will not result in an election to exercise a Public Stockholder’s conversion rights. A Public Stockholder must also affirmatively exercise such conversion rights at or prior to the time the Business Combination is voted upon by the stockholders.   If holders of no more than approximately 39.99% of the shares sold in the Offering vote against a Business Combination and seek to exercise their conversion rights and such Business Combination is consummated, the stockholders who held shares of common stock of the Company (the “Founding Stockholders”) have agreed to forfeit and return to the Company for cancellation a number of shares so that they will collectively own no more than 23.0% of the Company’s outstanding common stock upon consummation of such Business Combination (without giving effect to any shares that may be issued in such Business Combination).  If the Company is unable to effect a Business Combination and liquidates, none of the Founding Stockholders will receive any portion of the proceeds of the Offering held in the Trust Account to be distributed to the Company’s stockholders with respect to common stock owned by them immediately before the Offering.  As of June 30, 2008, after giving effect to a 1.15 for 1 stock split which was effected immediately prior to the Offering, all of the Founding Stockholders, including all of the directors and officers of the Company, have agreed to vote all of the shares of common stock of the Company held by them in accordance with the vote of the majority in interest of all other stockholders of the Company.

5

SHERMEN WSC ACQUISITION CORP

(a corporation in the development stage)

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

NOTE A—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (continued)

In the event that the Company does not consummate a Business Combination within 18 months from the date of the consummation of the Offering, or 24 months from the consummation of the Offering if certain extension criteria have been satisfied, the proceeds held in the Trust Account will be distributed to the Public Stockholders, excluding the Founding Stockholders to the extent of their initial stock holdings. In the event of such distribution, 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 Unit in the Offering (assuming no value is attributed to the Warrants contained in the Units offered in the Offering discussed in Note C).

NOTE B — BASIS OF PRESENTATION

The accompanying condensed interim financial statements have been prepared by the Company and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as of June 30, 2008 and the financial results for the three and six months ended June 30, 2008 and June 30, 2007 and from April 18, 2006 (date of inception) to June 30, 2008, in accordance with accounting principles generally accepted in the United States of America for interim financial statements and pursuant to the instructions to the Quarterly Report on Form 10-Q and Article 8 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”).  Certain information and footnote disclosures normally included in the Company’s annual audited financial statements have been condensed or omitted pursuant to such rules and regulations.

The results of operations for the three months ended June 30, 2008 are not necessarily indicative of the results of operations to be expected for a full fiscal year.  These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements for the fiscal year ended December 31, 2007, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the SEC.

NOTE C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Development stage company:

The Company complies with the reporting requirements of SFAS No. 7, “Accounting and Reporting by Development Stage Enterprises.”

Earnings per common share:

The Company complies with the accounting and disclosure provision of SFAS No. 128, “Earnings Per Share.” SFAS No. 128 requires dual presentation of basic and diluted income per common share for all periods presented. Basic income per common share excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then share in the income of the Company. The difference between the number of shares used to compute basic income per common share and diluted income per common share relates to additional shares to be issued upon the assumed exercise of stock options and warrants, net of shares hypothetically repurchased at the average market price with the proceeds of exercise.

The Company’s statement of operations includes a presentation of earnings per share for common stock subject to possible redemption in a manner similar to the two-class method of earnings per share. Basic and diluted net income per share amount for the maximum number of shares subject to possible redemption is calculated by dividing the net interest attributable to common shares subject to possible redemption by the weighted average number of shares subject to possible redemption.

6

SHERMEN WSC ACQUISITION CORP

(a corporation in the development stage)

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

NOTE C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentration of credit risk:

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which potentially may, in the future, exceed the Federal depository insurance coverage of $100,000.  The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

Income taxes:

The Company complies with SFAS 109, “Accounting for Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and 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.

Effective January 1, 2007, the Company adopted the provisions of the Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”).  There were no unrecognized tax benefits as of June 30, 2008.  FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.  For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.  The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.  No amounts were accrued for the payment of interest and penalties at June 30, 2008.  Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviation from its position.  The adoption of the provisions of FIN 48 did not have a material impact on the Company’s financial position and results of operation and cash flow.

Income tax expense for the three and six months ended June 30, 2008 was approximately $29,000 and $442,000, respectively.  The expense is comprised of current federal, state and city income taxes of $625,000 and deferred federal, state and city income taxes benefit of $183,000.  The effective tax rate of 49% for the three months ended June 30, 2008, differs from the federal statutory rate of approximately 35% as a result of state and city income taxes.

Deferred income taxes are provided for the differences between the bases of assets and liabilities for financial reporting and income tax purposes.  As of June 30, 2008, the Company has a deferred tax asset of approximately $584,000 primarily attributable to deferred Offering costs.

Recently issued accounting pronouncements:

In December 2007, the FASB issued SFAS 141(R), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) provides companies with principles and requirements on how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any non-controlling interest in the acquiree as well as the recognition and measurement of goodwill acquired in a business combination. SFAS 141(R) also requires certain disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Acquisition costs associated with the business combination will generally be expensed as incurred. SFAS 141(R) is effective for business combinations occurring in fiscal years beginning after December 15, 2008, which will require the Company to adopt these provisions for business combinations occurring in fiscal 2009 and thereafter. Early adoption of SFAS 141(R) is not permitted.

7

SHERMEN WSC ACQUISITION CORP

(a corporation in the development stage)

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

NOTE C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial statements – An Amendment of ARB No. 51” (“SFAS 160”). SFAS 160 requires reporting entities to present noncontrolling (minority) interests as equity as opposed to as a liability or mezzanine equity and provides guidance on the accounting for transactions between an entity and noncontrolling interests. SFAS 160 is effective the first fiscal year beginning after December 15, 2008, and interim periods within that fiscal year. SFAS 160 applies prospectively as of the beginning of the fiscal year SFAS 160 is initially applied, except for the presentation and disclosure requirements which are applied retrospectively for all periods presented subsequent to adoption. The adoption of SFAS 160 will not have a material impact on the Company’s results of operations or financial position; however, it could impact future transactions entered into by the Company.

In March 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment to FASB Statement No. 133”. SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cashflows. It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. It is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

Recently adopted accounting standards:

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  SFAS 157 applies to other accounting pronouncements where the FASB requires or permits fair value measurements but does not require any new fair value measurements.  In February 2008, FASB issued FASB Staff Position No. 157-2, “Effective Date of FASB Statement No. 157” (“FSP No. 157-2”), which delayed the effective date of SFAS 157 for certain non-financial assets and non-financial liabilities to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company adopted SFAS 157 for financial assets and liabilities on January 1, 2008.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities- Including an amendment of FASB Statement No. 155” (“SFAS 159”). This statement permits entities to choose to measure selected assets and liabilities at fair value. The Company adopted SFAS 159 on January 1, 2008 resulting in no impact to the Company’s financial condition, results of operations or cash flows.

In December 2007, the SEC issued SAB No. 110, “Share-Based Payment” (“SAB 110”). SAB 110 establishes the continued use of the simplified method for estimating the expected term of equity based compensation. The simplified method was intended to be eliminated for any equity based compensation arrangements granted after December 31, 2007. SAB 110 is being published to help companies that may not have adequate exercise history to estimate expected terms for future grants. The Company does not expect the adoption of SAB 110 to have a material effect on its financial statements.

8

SHERMEN WSC ACQUISITION CORP

(a corporation in the development stage)

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

NOTE C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts – An interpretation of FASB Statement No. 60”. SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprise’s risk-management activities. SFAS 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.

NOTE D—OFFERING AND OVER-ALLOTMENT

The Company offered 20,000,000 units (“Units”) for public sale (the “Offering”) in May 2007. Each Unit consists of one share of the Company’s common stock, $0.0001 par value (“Common Stock”), and two redeemable common stock purchase warrants (“Warrants”). Each Warrant entitles the holder to purchase from the Company one share of Common Stock at an exercise price of $5.00 commencing on the later of (a) one year from the date of the final prospectus for the Offering or (b) the completion of a Business Combination with a target business or the distribution of the Trust Account, and will expire four years from the date of such final prospectus. The Warrants will be redeemable at a price of $0.01 per Warrant upon 30 days prior notice after the Warrants become exercisable, only in the event that the last sale price of Common Stock is at least $8.50 per share for any 20 trading days within a 30 trading day period ending on the third business day prior to the date on which notice of redemption is given.

No Warrants will be exercisable and the Company will not be obligated to issue shares of Common Stock unless at the time a holder seeks to exercise such Warrant, a prospectus relating to Common Stock issuable upon exercise of the Warrants is current and Common Stock has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the Warrants.  Under the terms of the warrant agreement, the Company has agreed to use its best efforts to meet these conditions and to maintain a current prospectus relating to Common Stock issuable upon exercise of the Warrants until the expiration of the Warrants.  However, if the Company does not maintain a current prospectus relating to Common Stock issuable upon exercise of the Warrants, holders will be unable to exercise their Warrants.  In no circumstance will the Company be required to settle any such Warrant exercise for cash.  If the prospectus relating to Common Stock issuable upon the exercise of the Warrants is not current or if Common Stock is not qualified or exempt from qualification in the jurisdiction in which the holders of the Warrants reside, the Warrants may have no value, the market for the Warrants may be limited and the Warrants may expire worthless.

Shermen WSC Holding (“Shermen WSC Holding”) has purchased 5,214,286 Warrants (“Founder Warrants”) at $0.70 per Founder Warrant (for an aggregate purchase price of approximately $3,650,000) from the Company in a private placement exempt from registration under Securities Act of 1933, as amended. These purchases took place simultaneously with the consummation of the Offering. All of the proceeds received from these purchases were placed in the Trust Account. The Founder Warrants purchased by Shermen WSC Holding are identical to the Warrants underlying the Units sold in the Offering except that (i) the Company has no obligation to register the sale of the Warrants and the underlying shares of Common Stock and their exercise is not limited by the absence of an effective registration statement and current prospectus relating to the resale of the underlying shares of Common Stock and (ii) the Founder Warrants may be exercisable on a “cashless basis” if the Company calls the Warrants

9

SHERMEN WSC ACQUISITION CORP

(a corporation in the development stage)

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

NOTE D—OFFERING AND OVER-ALLOTMENT (continued)

for redemption. Shermen WSC Holding agreed that the Founder Warrants would not be transferable or salable by it or such directors or officers or their respective affiliates until after the Company completed a Business Combination, except it may distribute them to its members.  Immediately after the purchase of the Founder Warrants, Shermen WSC Holding distributed them to its members.

All shares of Common Stock owned by the Founding Stockholders prior to the closing of the Offering (the “Initial Shares”) were placed into an escrow account maintained by Continental Stock Transfer & Trust Company, acting as escrow agent.  The Initial Shares will not be released from escrow until six months following the completion of a Business Combination.

The foregoing restriction is subject to certain limited exceptions such as transfers to family members and trusts for estate planning purposes, upon death of an escrow depositor, transfers to an estate or beneficiaries, or other specified transfers.  Even if transferred under these circumstances, the Initial Shares will remain in the escrow account.

On May 30, 2007, the underwriters’ for the Offering exercised the full over-allotment of 3,000,000 units.  As a result, the deferred underwriters’ fee was increased approximately $432,000.

NOTE E—COMMON STOCK

On May 23, 2007, the Company effected a 1.15 for 1 forward stock split of the Initial Shares and issued 750,000 shares of Common Stock to the Founding Stockholders prior to the closing of both the Offering and the over-allotment. All transaction and disclosures in the financial statements relating to Common Stock, have been adjusted to reflect the effects of the stock split.

NOTE F—RELATED PARTY TRANSACTIONS

The Company presently occupies office space provided by an affiliate of a certain stockholder of the Company. Such affiliate has agreed that, until the consummation of a Business Combination, it will make such office space, as well as certain office and secretarial services, available to the Company, as may be required by the Company from time to time. The Company has agreed to pay such affiliate $9,950 per month for such services.

Certain of the directors and officers of the Company have purchased through Shermen WSC Holding, in a private placement, 5,214,286 Founder Warrants immediately prior to the Offering at a price of $0.70 per Founder Warrant (an aggregate purchase price of approximately $3,650,000) from the Company and not as part of the Offering. They have also agreed that these Founder Warrants purchased by them will not be sold or transferred until the completion of a Business Combination.

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SHERMEN WSC ACQUISITION CORP

(a corporation in the development stage)

NOTES TO CONDENSED INTERIN FINANCIAL STATEMENTS

(UNAUDITED)

NOTE G—FAIR VALUE MEASUREMENTS

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standard No. 157, Fair Value Measurement, or SFAS 157, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. In accordance with the provisions of FSP No. FAS 157-2, Effective Date of FASB Statement No. 157, the Company has elected to defer implementation of SFAS 157 as it relates to its non-financial assets and non-financial liabilities that are recognized and disclosed at fair value in the financial statements on a nonrecurring basis until January 1, 2009. The Company is evaluating the impact, if any, this standard will have on its non-financial assets and liabilities. The adoption of SFAS 157 to the Company’s financial assets and liabilities and non-financial assets and liabilities that are re-measured and reported at fair value at least annually did not have an impact on the Company’s financial results.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2008, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability (in millions):

Description	June 30, 2008		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash held in Trust Account	$	137.97	$	137.97	$	—	$	—
Total	$	137.97	$	137.97	$	—	$	—

The fair values of the Company’s cash held in the Trust Account is determined through market, observable and corroborated sources. The carrying amounts reflected in the condensed balance sheets for other current assets and accrued expenses approximate fair value due to their short-term maturities.

NOTE H—COMMITMENTS

The Company is committed to paying an underwriting discount of 4% of the Unit Offering price to the underwriters for the Offering (less $0.21 for each share of common stock converted to cash in connection with a Business Combination) payable upon the Company’s consummation of a Business Combination.

The Company has sold to the underwriters, for $100, as additional compensation, an option to purchase up to a total of 700,000 Units in the aggregate (350,000 Units to each underwriter) at a per-unit price of $7.50.  The Units issuable upon exercise of this option are also identical to those offered in the Offering, except that each Warrant underlying such Units entitles the holder to purchase one share of Common Stock at a price of $6.25.  In no circumstance will the Company be required to settle any such option exercise for cash.

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SHERMEN WSC ACQUISITION CORP

(a corporation in the development stage)

NOTES TO CONDENSED INTERIM  FINANCIAL STATEMENTS

(UNAUDITED)

NOTE H—COMMITMENTS (continued)

The sale of this option was accounted for as an equity transaction.  Accordingly, there will be no net impact on the Company’s financial position or results of operations, except for the recording of the $100 proceeds from the sale of such option.

The Company has determined, based upon a Black-Scholes model, that the fair value of this option on the date of sale would be approximately $0.60 per unit, or $420,000 in total, using an expected life of four years, volatility of 52.13% and a risk-free interest rate of 4.92%.

The volatility calculation of 52.13% is based on the average 90-day Bloomberg volatility of a portfolio of nine publicly traded U.S. agricultural companies with market capitalizations between $50,000,000 and $500,000,000. Because the Company does not have a trading history, the Company needed to estimate the potential volatility of Common Stock price, which will depend on a number of factors which cannot be ascertained at this time.  The Company referred to the Index because management believes that the average volatility is a reasonable benchmark to use in estimating the expected volatility of Common Stock post-business combination.  Although an expected life of four years was taken into account for purposes of assigning a fair value to the option, if the Company does not consummate a Business Combination within the prescribed time period and liquidates, this option would become worthless.  Although this option and its underlying securities have been registered under the registration statement of which the prospectus forms a part of, this option will provide for registration rights that will permit the holder of this option to demand that a registration statement will be filed with respect to all or any part of the securities underlying this option within five years of the completion of the Offering.  Further, the holders of this option will be entitled to piggy-back registration rights in the event the Company undertakes a subsequent registered offering within seven years of the completion of the Offering.

NOTE I—PREFERRED STOCK

The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors of the Company.  As of June 30, 2008, the Company has not issued any shares of its preferred stock.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our Condensed Unaudited Interim Financial Statements and notes thereto contained in this Quarterly Report on Form 10-Q.

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 (“SEC”) filings.

Overview

We were formed on April 18, 2006 for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase or other similar business combination, an operating business in the agriculture industry.

On May 30, 2007, we completed our initial public offering (“IPO”) of 23,000,000 units (“Units”).  Each Unit consists of one share of our common stock, $0.0001 par value per share (“Common Stock”), and two warrants (“Warrants”), each to purchase one share of Common Stock at $5.00 per share.  The public offering price of each Unit was $6.00, and we generated gross proceeds of $138,000,000 in the IPO (including proceeds from the exercise of the underwriters’ over-allotment option).  Of the gross proceeds: (i) we deposited $133,210,000 into a trust account (the “Trust Account”) at JP Morgan Chase NY Bank, maintained by Continental Stock Transfer & Trust Company as trustee, which included $5,520,000 of deferred underwriting fees; (ii) the underwriters received $4,140,000 as underwriting fees (excluding the deferred underwriting fees); and (iii) we retained $607,900 for offering expenses.  In addition, we deposited into the Trust Account $3,650,000.20 that we received from the issuance and sale of 5,214,286 warrants (the “Founder Warrants”) to Shermen WSC Holding LLC, whose managing member is Shermen Capital Partners, LLC, an entity controlled by Francis P. Jenkins, Jr., our chairman and chief executive officer, on May 30, 2007 in a private placement exempt from registration under Securities Act of 1933, as amended.

After completion of the IPO, we began contacting investment bankers, private equity firms and other business contacts in order to generate ideas about a suitable business combination. We also received unsolicited inquiries from several investment banking firms, private equity firms and other business intermediaries. We informed these contacts that we were seeking an operating business for our initial business combination.  We did not retain an investment banking firm or fairness or valuation advisor to conduct a formal search for a business combination. Criteria for suitability included our management’s assessment of the competitive strengths and weaknesses of the potential business targets, the strength of the management team, and the quality of the assets to be acquired.  Certain targets were considered by management to have too great a level of business risk due to poor asset quality or poor or erratic financial results.

We intend to utilize cash derived from the proceeds of the IPO, our capital stock, debt or a combination of such cash, capital stock and debt, in effecting a business combination.  The issuance of additional shares of our capital stock:

·may significantly reduce the equity interest of our stockholders;

·may subordinate the rights of holders of Common Stock if we issue preferred stock with rights senior to those afforded to Common Stock;

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·will likely cause a change in control if a substantial number of shares of Common Stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and most likely will also result in the resignation or removal of our present officers and directors; and

·may adversely affect prevailing market prices for 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 have made all principal and interest payments when due if the debt security contains covenants that required the maintenance of certain financial ratios or reserves and we breach any such covenant without a waiver or renegotiation of that covenant;

·our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and

·our inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding.

We intend to use substantially all of the net proceeds of the IPO and the issuance and sale of the Founder Warrants, including the funds held in the trust account (excluding deferred underwriting discounts and commissions), to acquire a target business.  To the extent that our capital stock is used in whole or in part as consideration to effect a business combination, the remaining proceeds held in the trust account as well as any other net proceeds not expended will be used as working capital to finance the operations of the target business.  Such working capital funds could be used in a variety of ways including continuing or expanding the target business operations, for strategic acquisitions and for marketing, research and development of existing or new products.  Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the completion of our business combination if the funds available to us outside of the trust fund were insufficient to cover such expenses.

Results of Operations, Financial Condition and Liquidity

Through June 30, 2008, our efforts have been limited to organizational activities, activities relating to the IPO, 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 the IPO and our private placement of the Founder Warrants.

Net income totaled $72,615, which consisted of $305,713 of interest income from the Trust Account offset by $203,829 of formation and operating expenses and $29,269 of provision for income taxes, and $47,460, which consisted of $541,278 of interest income from the Trust Account offset by $457,818 of formation and operating expenses and $36,000 of provision for income taxes, for the three months ended June 30, 2008 and June 30, 2007, respectively.  Net income totaled $489,608, which consisted of $1,322,154 of interest income from the Trust Account offset by $391,018 of formation and operating expenses and $441,528 of provision for income taxes, and $43,014, which consisted of $541,278 of interest income from the Trust Account offset by $462,264 of formation and operating expenses and $36,000 of provision for income taxes, for the six months ended June 30, 2008 and June 30, 2007, respectively.  Net income for the period from inception (April 18, 2006) to June 30, 2008, totaled $1,639,803, which consisted of $4,310,211 of interest income from the Trust Account offset by $1,277,569 of formation and operating expenses and $1,392,839 of provision for income taxes.

Interest income from the Trust Account excludes earnings on funds held in the Trust Account associated with Common Stock subject to possible conversion, and, except for amounts equal to any taxes payable by us relating to such interest earned and one half of such interest earned, net of taxes, up to $1,500,000 which may be released to us on a monthly basis to cover our operating expenses, will not be released to us 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.

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We have provided for only an effective tax rate of slightly over 49% on a year and inception-to-date basis primarily because substantially all of the funds deposited in the Trust Account are exempt from federal, state and local taxes.  For the six months ended June 30, 2008 and for the period from inception to June 30, 2008, our income tax liabilities were approximately $441,528 and $1,392,839, respectively.

As of June 30, 2008, we had approximately $12,907 of unrestricted cash available to us for our activities in connection with identifying and conducting due diligence of a suitable business combination, and for general corporate matters.  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 the Founder Warrants placed in trust	$	136,860,000
Total interest received to date	4,310,211
Less: total interest disbursed to us for working capital through June 30, 2008	1,805,566
Less: total taxes paid through June 30, 2008	1,392,839
Total funds held in trust through June 30, 2008	137,971,806

We believe that we will have sufficient funds to allow us to operate through May 24, 2009, assuming that a business combination is not consummated during that time.  Approximately $1,500,000 of working capital over this time period will be funded from the interest earned from the funds held in the Trust Account.  Over this time period, we anticipate incurring expenses for the following purposes:

·payment of premiums associated with our director’s and officer’s insurance;

·payment of estimated 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 expenses including the $9,950 per month to Shermen Capital Partners, LLC.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the sensitivity of income to changes in interest rates, foreign exchanges, commodity prices, equity prices, and other market-driven rates or prices.  We are not presently engaged in and, if we do not consummate a suitable business combination prior to the prescribed liquidation date of the Trust Account, we may not engage in, any substantive commercial business. Accordingly, we are not and, until such time as we consummate a business combination, we will not be, exposed to risks associated with foreign exchange rates, commodity prices, equity prices or other market-driven rates or prices.  The net proceeds of the IPO held in the Trust Account may be invested by the trustee only in U.S. “government securities,” defined as any Treasury Bill issued by the United States government having a maturity of one hundred and eighty days or less, or any open ended investment company registered under the Investment Company Act of 1940, as amended, that holds itself out as a money market fund and bears the highest credit rating issued by a United States nationally recognized rating agency.  Given our limited risk in our exposure to government securities and money market funds, we do not view the interest rate risk to be significant.

ITEM 4.CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended, is recorded, processed,

15

summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on the foregoing, our chief executive officer and chief financial officer, concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act) were effective as of the end of the fiscal quarter ended June 30, 2008.

There have been no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

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PART II: OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None.

ITEM 1A.  RISK FACTORS

There have been no material changes to the risk factors disclosed under the caption “Risk Factors” beginning on page 14 of our Annual Report on Form 10-K filed with the SEC on March 31, 2008.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Concurrently with the consummation of the IPO, on May 30, 2007, we consummated a private sale of the Founder Warrants at a purchase price of $0.70 per Founder Warrant, generating total proceeds of $3,650,000.20.  The Founder Warrants were purchased by certain of our directors and officers through Shermen WSC Holding LLC whose managing member is Shermen Capital Partners, LLC, an entity controlled by Francis P. Jenkins, Jr., our chairman and chief executive officer.  The Founder Warrants are identical to the Warrants except that (i) if we call the Warrants for redemption, the Founder Warrants will be exercisable on a cashless basis; (ii) the Founder Warrants will not be transferable or salable by Shermen WSC Holding LLC or such directors or officers or their respective affiliates until after we have completed our initial business combination, except Sherman WSC Holding LLC may distribute them to its members; and (iii) the holders of the Founder Warrants and the Common Stock underlying such Founder Warrants are entitled to registration rights with respect to such securities under an agreement signed on May 30, 2007.  Immediately after the purchase of the Founder Warrants, Shermen WSC Holding LLC distributed them to its members.

For a description of the use of the proceeds of the private sale of the Founder Warrants, see Part I, Item 2 of this Quarterly Report on Form 10-Q.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS

Exhibit Number	Exhibit Description
31.1	Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SHERMEN WSC ACQUISITION CORP.
	/s/ Francis P. Jenkins, Jr.
	Name:	Francis P. Jenkins, Jr.
	Title:	Chairman, Chief Executive Officer and
		Director (Principal Executive Officer)
	/s/ John E. Toffolon, Jr.
	Name:	John E. Toffolon, Jr.
	Title:	Chief Financial Officer and
		Director (Principal Financial and
		Accounting Officer)
Dated: August 13, 2008

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