UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Amendment No. 1 to Form 10-Q
(Mark One)
x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the quarterly period ended June 30, 2008 |
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o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| 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 |
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(State or other Jurisdiction of |
| (I.R.S. Employer |
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Incorporation or Organization) |
| Identification No.) |
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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 |
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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.
SHERMEN WSC ACQUISITION CORP.
(a development stage enterprise)
Contents
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Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations | 2 |
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Explanatory Note
We are filing this Amendment No. 1 on Form 10-Q/A (this “Amendment No. 1”) to our Quarterly Report on Form 10-Q for the three months ended June 30, 2008 (the “Form 10-Q”) for the purpose of amending Item 2 of Part I of the Form 10-Q. After we filed the Form 10-Q with the U.S. Securities and Exchange Commission (the “SEC”), we reviewed the version of the Form 10-Q that was filed with the SEC to ensure that it contained accurate information. Based on our review, we have determined that the summary table regarding the funds held in our trust account in Item 2 of Part I of the Form 10-Q contained incorrect numbers and needed additional information regarding the fees paid to the trustee for our trust account. In addition, we have determined that such summary table could be expanded to include additional information regarding certain fees relating to our initial public offering, so that it would be more informative to investors. Such summary table has been revised and expanded to state correct numbers and to include additional information regarding the fees paid to the trustee for our trust account and certain fees relating to our initial public offering. Such revision did not have any impact on the rest of the Form 10-Q.
Pursuant to Rule 12b-15 under the Securities and Exchange Act of 1934, as amended, this Amendment No. 1 also contains new certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended. This Amendment No. 1 contains only the sections of and exhibits to the Form 10-Q that are being amended. The sections of and exhibits to the Form 10-Q as originally filed, which are not included herein, are unchanged and continue in full force and effect as originally filed. This Amendment No. 1 speaks as of the date of the original filing of the Form 10-Q and has not been updated to reflect events occurring subsequent to the original filing date.
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:
Gross proceeds from our initial public offering of common stock and financing transaction |
| 138,000,000 |
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Gross proceeds from private placement warrant holders |
| 3,650,000 |
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Underwriters' fee |
| (4,140,000 | ) |
Blue Sky fees |
| (25,000 | ) |
Custodial fees |
| (17,100 | ) |
Funds not placed in trust |
| (607,900 | ) |
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Cash placed in trust on May 31, 2007 |
| 136,860,000 |
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Total investment income earned on assets held in trust, May 31, 2007 through June 30, 2008 |
| 4,310,211 |
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Subtotal |
| 141,170,211 |
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Withdrawals from the trust during the period May 31, 2007 through June 30, 2008: |
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Payments for income taxes |
| (1,790,289 | ) |
Transfers to the Company’s operating account for payment of additional offering costs, general and administrative expenses and for working capital purposes (latter being limited to a maximum of $1,500,000). |
| (1,407,871 | ) |
Custodial transfer fees |
| (245 | ) |
Total transfers from custodial account to checking |
| (3,198,405 | ) |
Total assets held in trust account as of June 30, 2008 |
| 137,971,806 |
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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.
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Exhibit |
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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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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. | |
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| /s/ Francis P. Jenkins, Jr. | |
| Name: | Francis P. Jenkins, Jr. |
| Title: | Chairman, Chief Executive Officer and |
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| Director (Principal Executive Officer) |
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| /s/ John E. Toffolon, Jr. | |
| Name: | John E. Toffolon, Jr. |
| Title: | Chief Financial Officer and |
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| Director (Principal Financial and |
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| Accounting Officer) |
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Dated: September 2, 2008 |
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