UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
x | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2008
¨ | Transition report under Section 13 or 15(d) of the Exchange Act |
For the transition period from _____________ to _____________
Commission File Number 001-33814
Tremisis Energy Acquisition Corporation II
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware | 30-0485452 | |
(State or other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
2925 Briarpark, Suite 150-A, Houston, Texas 77042 |
(Address of Principal Executive Office) |
(713) 954-3665
(Issuer’s Telephone Number, Including Area Code)
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 xNo ¨
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 ¨ | Accelerated filer ¨ |
Non-accelerated filer x | Smaller reporting company ¨ |
(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 xNo ¨
As of November 13, 2008, 12,165,837 shares of common stock, par value $.0001 per share, were issued and outstanding.
Explanatory Note:
This amendment is being filed to correct certain typographical errors in the notes to the unaudited condensed financial statements included herein.
Page | ||
Part I: Financial Information: | ||
Item 1 –Financial Statements: | ||
Condensed Balance Sheet | 3 | |
Condensed Statements of Operations | 4 | |
Condensed Statement of Stockholders’ Equity | 5 | |
Condensed Statements of Cash Flows | 6 | |
Notes to Unaudited Condensed Financial Statements | 7 | |
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations | 15 | |
Item 4 – Controls and Procedures | 17 | |
Part II. Other Information | ||
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds | 18 | |
Item 6 – Exhibits | 19 | |
Signatures | 20 |
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage)
Condensed Balance Sheet
September 30, 2008 | December 31, 2007 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash | $ | 183,927 | $ | 101,836 | |||
Cash equivalents held in trust (Note 1) | 77,715,416 | 75,595,000 | |||||
Interest receivable on cash equivalents held in trust | 90,588 | 152,990 | |||||
Prepaid expenses | 14,037 | 90,786 | |||||
Total current assets | 78,003,968 | 75,940,612 | |||||
Deferred acquisition costs | 472,668 | - | |||||
Total assets | $ | 78,476,636 | $ | 75,940,612 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accrued registration costs | $ | - | $ | 12,880 | |||
Accrued expenses | 46,515 | 7,763 | |||||
Accrued acquisition costs | 222,005 | - | |||||
Income and franchise taxes payable | 53,287 | 51,054 | |||||
Deferred underwriting fee (Note 3) | 3,114,454 | 3,040,000 | |||||
Total current liabilities | 3,436,261 | 3,111,697 | |||||
Common stock subject to possible conversion (2,918,827 and 2,849,050 shares at conversion value) (Note 1) | 23,621,625 | 22,716,822 | |||||
Commitments (Note 5) | |||||||
STOCKHOLDERS' EQUITY (Note 6) | |||||||
Common stock, $.0001 par value per share, authorized 35,000,000 shares, issued and outstanding 9,247,010 and 9,382,200 (excluding 2,918,827 and 2,849,950 shares subject to possible conversion, respectively) | 925 | 938 | |||||
Additional paid in capital | 50,860,825 | 50,034,535 | |||||
Retained earnings accumulated during the development stage | 557,000 | 76,620 | |||||
Total stockholders' equity | 51,418,750 | 50,112,093 | |||||
Total liabilities and stockholders' equity | $ | 78,476,636 | $ | 75,940,612 |
See notes to unaudited financial statements
3
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage)
Unaudited Condensed Statements of Operations
For the period | |||||||||||||
For the three | For the nine | From July 3, 2007 | from July 3, 2007 | ||||||||||
months ended | months ended | (inception) to | (inception) to | ||||||||||
September 30, 2008 | September 30, 2008 | September 30, 2007* | September 30, 2008 | ||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||
Interest income | $ | 386,522 | $ | 1,211,481 | $ | - | $ | 1,364,471 | |||||
Expenses: | |||||||||||||
General and administrative | 108,301 | 399,351 | - | 415,803 | |||||||||
Franchise tax (Note 4) | 7,000 | 43,000 | - | 69,054 | |||||||||
Insurance | 17,250 | 51,750 | - | 54,964 | |||||||||
Formation costs | - | - | 2,775 | 5,650 | |||||||||
Total expenses | 132,551 | 494,101 | 2,775 | 545,471 | |||||||||
Net income (loss) before taxes | 253,971 | 717,380 | (2,775 | ) | 819,000 | ||||||||
Provision for income taxes (Note 4) | 79,000 | 237,000 | - | 262,000 | |||||||||
Net income (loss) for the period | 174,971 | 480,380 | (2,775 | ) | 557,000 | ||||||||
Accretion of trust account relating to common stock subject to possible conversion | (115,918 | ) | (363,323 | ) | - | (409,205 | ) | ||||||
Net income (loss) attributable to common stockholders | $ | 59,053 | $ | 117,057 | $ | (2,775 | ) | $ | 147,795 | ||||
Weighted average number of shares outstanding - basic and diluted | 9,247,010 | 9,233,337 | 2,731,250 | ||||||||||
Net income (loss) per share, basic and diluted | $ | 0.01 | $ | 0.01 | $ | (0.00 | ) | ||||||
Number of shares outstanding subject to possible conversion - basic and diluted | 2,918,827 | 2,918,827 | - | ||||||||||
Net income per share subject to possible conversion - basic and diluted | $ | 0.04 | $ | 0.12 | $ | - |
* Since inception was July 3 2007, this column represents the comparative period for both the three and nine month periods ended September 30, 2008.
See notes to unaudited financial statements
4
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage)
Unaudited Condensed Statement of Stockholders’ Equity
Retained earnings | Total | |||||||||||||||
Common Stock | Additional | accumulated during | stockholders' | |||||||||||||
Shares | Amount | paid-in capital | the development stage | equity | ||||||||||||
Issuance of common stock to initial stockholders | 2,731,250 | $ | 273 | $ | 24,727 | $ | - | $ | 25,000 | |||||||
Proceeds from sale of 9,500,000 units through public | 6,650,950 | 665 | 47,405,690 | - | 47,406,355 | |||||||||||
offering net of underwriter's discount and offering expenses and | ||||||||||||||||
excluding $22,670,940 allocable to 2,849,050 shares of common | ||||||||||||||||
stock subject to possible conversion | ||||||||||||||||
Proceeds from issuance of 2,650,000 warrants | - | - | 2,650,000 | - | 2,650,000 | |||||||||||
Accretion of trust account relating to common stock subject to possible conversion | - | - | (45,882 | ) | - | (45,882 | ) | |||||||||
Net income for the period | - | - | - | 76,620 | 76,620 | |||||||||||
Balance at December 31, 2007 | 9,382,200 | $ | 938 | $ | 50,034,535 | $ | 76,620 | $ | 50,112,093 | |||||||
Forfeiture and cancellation of common stock received from intial stockholders (unaudited) | (298,082 | ) | (29 | ) | 29 | - | - | |||||||||
Proceeds from sale of 232,669 units through over-allotment option, net of underwriter's discount and offering expenses and excluding $541,480 allocable to 69,777 shares of common stock subject to possible conversion (unaudited) | 162,892 | 16 | 1,189,584 | - | 1,189,600 | |||||||||||
Net income for the period (unaudited) | - | - | - | 480,380 | 480,380 | |||||||||||
Accretion of trust account relating to common stock subject to possible conversion (unaudited) | - | - | (363,323 | ) | - | (363,323 | ) | |||||||||
Balance at September 30, 2008 (unaudited) | 9,247,010 | $ | 925 | $ | 50,860,825 | $ | 557,000 | $ | 51,418,750 |
See notes to unaudited financial statements
5
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage)
Unaudited Condensed Statements of Cash Flows
For the period | For the period | |||||||||
For the nine | from July 3, 2007 | from July 3, 2007 | ||||||||
months ended | (inception) to | (inception) to | ||||||||
September 30, 2008 | September 30, 2007 | September 30, 2008 | ||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||
Net income (loss) | $ | 480,380 | $ | (2,775 | ) | $ | 557,000 | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) | ||||||||||
operating activities: | ||||||||||
(Increase) / decrease in interest receivable | 62,402 | (90,588 | ) | |||||||
(Increase) / decrease in prepaid expenses | 76,749 | (14,037 | ) | |||||||
Increase in accrued expenses | 38,752 | 2,500 | 46,515 | |||||||
Increase in income and franchise taxes payable | 2,233 | 53,287 | ||||||||
Net cash provided by (used in) operating activities | 660,516 | (275 | ) | 552,177 | ||||||
CASH FLOW FROM INVESTING ACTIVITIES | ||||||||||
Cash equivalents held in trust | (2,120,416 | ) | (77,715,416 | ) | ||||||
Acquisition costs | (250,663 | ) | (250,663 | ) | ||||||
Net cash used in investing activities | (2,371,079 | ) | (77,966,079 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||
Proceeds from issuance of shares of common stock | ||||||||||
to initial stockholders | - | 25,000 | 25,000 | |||||||
Net proceeds from sale of units through public offering | 1,264,054 | 51,723,290 | ||||||||
Proceeds from issuance of insider warrants to initial stockholders | - | 2,650,000 | ||||||||
Portion of proceeds from sale of units through public offering allocable to shares | ||||||||||
of common stock subject to possible conversion | 541,480 | 23,212,419 | ||||||||
Registration costs paid | (12,880 | ) | (115,491 | ) | (12,880 | ) | ||||
Proceeds from notes payable, stockholders | - | 132,990 | 132,990 | |||||||
Repayment of notes payable, stockholders | - | (132,990 | ) | |||||||
Net cash provided by financing activities | 1,792,654 | 42,499 | 77,597,829 | |||||||
NET INCREASE (DECREASE) IN CASH | 82,091 | 42,224 | 183,927 | |||||||
Cash at beginning of period | 101,836 | - | - | |||||||
Cash at end of period | $ | 183,927 | $ | 42,224 | $ | 183,927 | ||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||||
Deferred underwriting fee | $ | 74,454 | $ | - | $ | 3,114,454 | ||||
Accretion of trust account relating to common stock subject to possible conversion | $ | 363,323 | $ | - | $ | 409,205 | ||||
Accrued acquisition costs | $ | 222,005 | $ | - | $ | 222,005 | ||||
Income taxes paid | $ | 236,000 | $ | - | $ | 236,000 |
See notes to unaudited financial statements
6
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage)
Notes to Unaudited Condensed Financial Statement
NOTE 1 - Organization and Business Operations
Tremisis Energy Acquisition Corporation II (the "Company”) was incorporated in Delaware on July 3, 2007 for the purpose of effecting a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business.
The Company is considered to be a development stage company and as such the financial statements presented herein are presented in accordance with Statement of Financial Accounting Standards ("SFAS") No. 7 - Accounting and Reporting by Development Stage Enterprises.
At September 30, 2008, the Company had not yet commenced any operations. All activity from July 3, 2007 (date of inception) to September 30, 2008 relates to the Company’s formation and the public offering described below.
The registration statement for the Company's initial public offering ("Offering") was declared effective December 6, 2007. The Company consummated the Offering on December 12, 2007 and the over-allotment on January 24, 2008 and received net proceeds of approximately $77,861,352. The Company’s management has broad discretion with respect to the specific application of the net proceeds of this Offering and over-allotment, although substantially all of the net proceeds of this Offering are intended to be generally applied toward consummating a business combination with an operating business (“Business Combination”). Furthermore, there is no assurance that the Company will be able to successfully effect a Business Combination. Upon the closing of the Offering and the over-allotment of January 24, 2008 an aggregate of $77,400,511 including the $2,650,000 proceeds of the Private Placement described in Note 5 and the $3,114,454 of deferred underwriters discount described in Note 3, was placed in a trust account ("Trust Account") which is to be invested in United States "government securities" within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940 until the earlier of (i) the consummation of its first Business Combination and (ii) liquidation of the Company. The placing of funds in the Trust Account may not protect those funds from third party claims against the Company. Although the Company will seek to have all vendors and service providers (which would include any third parties engaged to assist the Company in any way in connection with the search for a target business) and prospective target businesses execute agreements with the Company waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account, there is no guarantee they will execute such agreements. Nor is there any guarantee that, even if such entities execute such agreements with the Company, they will not seek recourse against the trust account or that a court would not conclude that such agreements are not legally enforceable.
7
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage)
Notes to Unaudited Condensed Financial Statement
The Company's Chairman of the Board and the Company's President have agreed that they will be liable under certain circumstances to ensure that the proceeds in the Trust Account are not reduced for the claims of target businesses or claims of vendors or other entities that are owed money by the Company for services rendered or contracted for or products sold to the Company. However, there can be no assurance that they will be able to satisfy those obligations. As of September 30, 2008, the per share liquidation amount was approximately $7.99. The remaining net proceeds (not held in the Trust Account) may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. Additionally, up to an aggregate of $1,200,000 of interest earned on the Trust Account balance may be released to the Company to fund working capital requirements and any additional amounts may be released as necessary to satisfy tax obligations. As of September 30, 2008, an amount of $681,233 has been released for the Company's working capital requirements and an amount of $277,776 has been released to pay the Company's tax obligations.
The Company, after signing a definitive agreement for the acquisition of a target business, is required to submit such transaction for stockholders' approval. Stockholders that vote against such proposed Business Combination and exercise their conversion rights are, under certain conditions described below, entitled to convert their share into a pro-rata distribution from the Trust Account (the "Conversion Right"). The actual per share conversion price will be equal to the amount in the Trust Account (inclusive of any interest thereon), calculated as of two business days prior to the proposed Business Combination, divided by the number of shares sold in the Offering. As a result of the Conversion Right, $23,212,420 (representing 29.99% of net proceeds of the public offering) plus accretion of $409,205 (representing 29.99% of interest earned on the trust account) aggregating $23,621,625 has been classified as common stock, subject to possible conversion on the accompanying balance sheet as of September 30, 2008. The Initial Stockholders have agreed to vote their 2,433,168 founding shares (after forfeiture of 298,082 shares disclosed in Note 3) of common stock in accordance with the manner in which the majority of the shares of common stock offered in the Offering are voted by the Company's public stockholders ("Public Stockholders") with respect to a Business Combination.
In the event that a majority of the outstanding shares of common stock voted by the Public Stockholders vote for the approval of a Business Combination and holders owning 30% or more of the outstanding common stock do not vote against the Business Combination and do not exercise their Conversion Rights, the Business Combination may then be consummated.
8
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage)
Notes to Unaudited Condensed Financial Statement
The Company’s Amended and Restated Certificate of Incorporation provides that the Company will continue in existence up to 24 months from the Effective Date of the Offering. If the Company has not completed a Business Combination by such date, its corporate existence will cease and it will dissolve and liquidate for the purposes of winding up its affairs. In the event of liquidation, it is likely that the per share value of the residual assets remaining available for distribution (including Trust Fund assets) will be less than the initial public offering price per share in the Offering (assuming no value is attributed to the Warrants contained in the Units sold in the Offering).
NOTE 2 - Summary of Significant Accounting Policies
Interim financial statements - The accompanying unaudited financial statements have been prepared pursuant to the rules and regulations of the SEC and should be read in conjunction with the Company's audited financial statements and footnotes thereto for the period from inception (July 3, 2007) to December 31, 2007 included in the Company's Annual Report on Form 10-K. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the Unites States of America have been omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. The financial statements reflect all adjustments (consisting primarily of normal recurring adjustments) that are, in the opinion of management necessary for a fair presentation of the Company's financial position, results of operations and cash flows. The operating results for the period ended September 30, 2008 are not necessarily indicative of the results to be expected for the full year.
Cash Equivalents - The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
Deferred Acquisition Costs - Costs related to proposed acquisitions are capitalized in accordance with SFAS 141 and in the event the acquisition does not occur, the costs are expensed. (See New Accounting Pronouncements below)
Concentration of Credit Risk- The Company maintains cash in a bank deposit account which, at times, exceeds federally insured (FDIC) limits. The Company has not experienced any losses on this account.
Income Taxes- Deferred income tax assets and liabilities are computed for differences between the financial statements and tax basis of assets and liabilities that will result in future taxable or deductible amounts and are based on enacted tax laws and rates applicable to the periods in which the differences are expected to effect taxable income. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. Deferred income taxes are not material to the Company's financial position and results of operations.
9
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage)
Notes to Unaudited Condensed Financial Statement
In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting For Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 ("FIN 48"). FIN 48 establishes new evaluation and measurement processes for all income tax positions taken. FIN 48 also requires expanded disclosure of income tax matters. The adoption of this standard had no effect on the Company's financial statements.
Net Income Per Share- Basic net income per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common shares outstanding for the period. Calculation of the weighted average common shares outstanding during the period is based on 2,731,250 initial shares outstanding throughout the period from July 3, 2007 (inception) to September 30, 2008, less 298,082 initial shares cancelled by the Company on January 24, 2008 (retroactively restated for this calculation to July 3, 2007), 6,650,950 common shares (excluding 2,849,050 shares subject to possible conversion) issued at the completion of the Offering on December 12, 2007 and 162,892 shares (excluding 69,777 shares subject to possible conversion) from the January 24, 2008 over-allotment option exercised. Basic net income per share subject to possible conversion is calculated by dividing accretion of Trust Account relating to common stock subject to possible conversion by 2,918,827 common shares subject to possible conversion. Diluted earnings per 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 shared in the earnings of the entity. The shares issuable upon exercise of the Warrants have been excluded from the calculation of diluted net income per share since the Warrants are exercisable commencing the later of one year or the completion of a Business Combination and this contingency has not been resolved.
Use of Estimates- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Fair Value Measurements- In September 2006, the FASB issued Statement No. 157, Fair Value Measurements ("SFAS No. 157"). SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability. SFAS No. 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS No. 157 applies whenever other standards require assets or liabilities to be measured at fair value.
10
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage)
Notes to Unaudited Condensed Financial Statement
Effective January 1, 2008, the Company implemented SFAS Statement No. 157, which did not have an impact on the Company's financial results.
The following table presents certain of the Company's assets that are measured at fair value as of September 30, 2008. In general, fair values determined by Level I inputs utilize quoted prices in active markets and the fair values described below were determined through market, observable and corroborated sources.
Description | September 30, 2008 | Quoted Prices in Active Markets (Level 1) | |||||
Cash equivalents held in trust account | $ | 77,715,416 | $ | 77,715,416 |
In accordance with 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 until January 1, 2009 and is evaluating the impact, if any, this standard will have on its financial statements.
New Accounting Pronouncements- In December 2007, the FASB issued SFAS No. 141R, revised December 2007, "Business Combinations" ("SFAS 141R") which replaces SFAS 141 “Business Combinations” and establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquirer and the goodwill acquired. SFAS 141R also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. This standard is effective for fiscal years beginning after December 15, 2008. Under the revised standard, direct costs related to proposed acquisitions are not considered to increase the fair value of the business acquired and therefore will be charged to expense. Thus, in the event the proposed acquisition to which the deferred expenses at September 30, 2008 relate does not close by year end, such costs will be charged to operations in the quarter ended December 31, 2008.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
11
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage)
Notes to Unaudited Condensed Financial Statement
NOTE 3 - Public Offering
In December 2007, the Company completed its Offering in which it sold to the public 9,500,000 units (“Units”), at a price of $8.00 per Unit. Each Unit consists of one share of the Company’s common stock and one Redeemable Common Stock Purchase Warrant (“Warrants”). Each Warrant will entitle the holder to purchase from the Company one share of common stock at an exercise price of $5.00 commencing the later of the completion of a Business Combination and one year from the effective date of the Offering and expiring four years from the effective date of the Offering. The Company may redeem the Warrants, at a price of $.01 per Warrant upon 30 days’ notice while the Warrants are exercisable, only in the event that the last sale price of the common stock is at least $12.00 per share for any 20 trading days within a 30 trading day period ending on the third day prior to the date on which notice of redemption is given. In accordance with the warrant agreement relating to the Warrants sold and issued in the Offering, the Company is only required to use its best efforts to maintain the effectiveness of the registration statement covering the Warrants. The Company will not be obligated to deliver securities, and there are no contractual penalties for failure to deliver securities, if a registration statement is not effective at the time of exercise. Additionally, in the event that a registration is not effective at the time of exercise, the holder of such Warrant shall not be entitled to exercise such Warrant and in no event (whether in the case of a registration statement not being effective or otherwise) will the Company be required to net cash settle the warrant exercise. Consequently, the Warrants may expire unexercised and unredeemed.
The Company paid the underwriters in the Offering an underwriting discount of $2,280,000 of the gross proceeds of the Offering and $55,841 of the gross proceeds of the January 24, 2008 over-allotment. The Company and the underwriters have agreed that payment of the balance of the underwriting discount of $3,040,000, from the offering and $74,454 from the over-allotment will not be payable unless and until the Company completes a Business Combination and have waived their right to receive such payment upon the Company’s liquidation if it is unable to complete a Business Combination.
On January 24, 2008, the Company consummated the closing of the sale of 232,669 Units which were sold subject to the over-allotment option. Each Unit sold in the Offering and pursuant to the over-allotment option consisted of one share of common stock, $.0001 par value per share, and one Warrant, each to purchase one share of the Company’s common stock. The 9,732,669 Units sold in the Offering, including the 232,669 Units sold subject to the over-allotment option, were sold at an Offering price of $8.00 per Unit, generating total gross proceeds of $77,861,352. Of the gross proceeds of the offering and the private placement of warrants, $77,400,511 (or approximately $7.95 per share) was placed in the Trust Account.
On January 24, 2008, the Company's Initial Stockholders returned an aggregate of 298,082 shares of the Company's common stock to the Company for cancellation. The cancellation was due to the remainder of the underwriter's over-allotment option expiring unexercised. Upon receipt, such shares were then immediately cancelled by the Company.
12
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage)
Notes to Unaudited Condensed Financial Statement
NOTE 4 - Income and Franchise Taxes
The provision for income and franchise taxes consist of the following:
For the three months ended September 30, 2008 | For the nine months ended September 30, 2008 | For the period from July 3, 2007 (inception) to September 30, 2008 | ||||||||
$ | 79,000 | $ | 237,000 | $ | 262,000 | |||||
Delaware franchise taxes | 7,000 | 43,000 | 69,054 |
No provision for state and local income taxes has been made since the Company was formed as a vehicle to effect a Business Combination and, as a result does not conduct operations and is not engaged in a trade or business in any state. The Company is incorporated in Delaware and accordingly is subject to franchise taxes.
NOTE 5 - Commitments
The Company presently occupies office space provided by an affiliate of the Initial Stockholders. Such affiliate has agreed that, until the Company consummates 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, at $1,700 per month commencing in January 2008. The current arrangement is month to month. For the nine months ended September 30, 2008 an amount of $19,905 has been incurred for rent and office support services.
Pursuant to letter of agreements which the Initial Stockholders entered into with the Company and the underwriters, the Initial Stockholders will waive their right to receive distributions with respect to their founding shares upon the Company’s liquidation.
The Company’s Initial Stockholders purchased a total of 2,650,000 Warrants (“Insider Warrants”) at $1.00 per Warrant (for an aggregate purchase price of $2,650,000) privately from the Company. These purchases took place simultaneously with the consummation of the Offering. All of the proceeds received from this purchase were placed in the Trust Account. The Insider Warrants purchased are identical to the Warrants underlying the Units sold in the Offering except that the Warrants may not be called for redemption and the Insider Warrants may be exercisable on a “cashless basis,” at the holder’s option, so long as such securities are held by such purchaser or his affiliates. Furthermore, the purchasers have agreed that the Insider Warrants will not be sold or transferred by them, except for estate planning purposes, until after the Company has completed a Business Combination.
13
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage)
Notes to Unaudited Condensed Financial Statement
The Initial Stockholders and the holders of the Insider Warrants (or underlying securities) are entitled to registration rights with respect to their founding shares or Insider Warrants (or underlying securities) pursuant to an agreement signed on the effective date of the Offering. The holders of the majority of the founding shares are entitled to demand that the Company register these shares at any time commencing three months prior to the first anniversary of the consummation of a Business Combination. The holders of the Insider Warrants (or underlying securities) are entitled to demand that the Company register these securities at any time after the Company consummates a Business Combination. In addition, the Initial Stockholders and holders of the Insider Warrants (or underlying securities) have certain “piggy-back” registration rights on registration statements filed after the Company’s consummation of a Business Combination.
The Company has also agreed to pay the fees to the underwriters in the Offering as described in Note 3 above.
NOTE 6 - 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. There are no shares of preferred stock issued or outstanding.
The agreement with the underwriters will prohibit the Company, prior to a Business Combination, from issuing preferred stock which participates in the proceeds of the Trust Account or which votes as a class with the Common Stock on a Business Combination.
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ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION RESULTS OF OPERATIONS |
The following discussion should be read in conjunction with the Company’s Condensed Financial Statements and footnotes thereto contained in this report.
Forward Looking Statements
The statements discussed in this Report include forward looking statements that involve risks and uncertainties detailed from time to time in the Company’s reports filed with the Securities and Exchange Commission.
Overview
We were formed on July 3, 2007 as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business. We intend to utilize cash derived from the proceeds of our recently completed public offering, our capital stock, debt or a combination of cash, capital stock and debt, in effecting a business combination.
Results of Operations
For the three months ended September 30, 2008, we had net income of $174,971 which consisted of interest income on the trust account investment of $386,522, offset by general and administrative expenses of $132,551 which includes administrative consulting fees of $40,568, professional fees of $19,023, Delaware franchise tax of $7,000, insurance of $17,250, travel of $19,214, rent and office expenses of $28,927 and other operating costs of $569. The Company has a provision for Federal income taxes of $79,000.
For the nine months ended September 30, 2008, we had net income of $480,380 which consisted of interest income on the trust account investment of $1,211,481, offset by general and administrative expenses of $494,101, which includes administrative consulting fees of $102,836, dues and subscriptions of $28,100, professional fees of $106,626, Delaware franchise tax of $43,000, insurance of $51,750, travel of $113,759, rent and office expenses of $46,165 and other operating costs of $1,865. The Company has a provision for Federal income taxes of $237,000.
For the period from July 3, 2007 (inception) to September 30, 2008, we had net income of $557,000 which consisted of interest income on the trust account investment of $1,364,471, offset by general and administrative expenses of $545,471, which includes administrative consulting fees of $102,836, dues and subscriptions of $28,100, professional fees of $106,626, Delaware franchise tax of $69,054, insurance of $54,964, travel of $129,885, rent and office expenses of $46,165, formation costs of 5,650, and other operating costs of $2,191. The Company has a provision for Federal income taxes of $262,000.
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Financial Condition and Liquidity
We consummated our initial public offering of 9,500,000 units on December 12, 2007. Gross proceeds from our initial public offering were $76,000,000. We paid a total of $2,280,000 in underwriting discounts and commissions and incurred $602,705 for costs and expenses related to the offering. An additional $3,040,000 of underwriting discounts and commissions has been deferred by the underwriters and placed in our trust account and will be released to the underwriters only on completion of our initial business combination. After deducting the underwriting discounts and commissions and the offering expenses, the total net proceeds, including $2,650,000 from the private sale of warrants (the “Sponsor’s Warrants”) to Lawrence S. Coben, our chairman of the board and chief executive officer, Ronald D. Ormand, our president, chief financial officer and member of our board of directors, Jon Schotz and Charles A. Norris, each a member of our board of directors, and Bill Goldstein, Dean Vanech, Jerry Doren, Owen Coleman, Bill Armstrong, Trevor Wilson, Brian McInerny, Richard Kassar, David Levine, Jim Land, David A. Preiser, Gary Evans and Dr. John Jacobs, each a stockholder of ours, from the offering were $75,767,295, of which $75,595,000 was deposited into the trust account. On January 24, 2008, we consummated the closing of the sale of 232,669 additional units which were sold subject to the underwriters' over-allotment option. The 9,732,669 units sold in the initial public offering, including the 232,669 units sold subject to the over-allotment option, were sold at an offering price of $8.00 per unit, generating total gross proceeds of $77,861,352. Of the gross proceeds of the offering and the private placement of warrants, $77,400,511 (or approximately $7.95 per share) was placed in the trust account. The net proceeds deposited into the trust fund remain on deposit in the trust fund and earned $1,364,471 in interest through September 30, 2008. We intend to use substantially all of the net proceeds of this offering to effect a business combination. To the extent that our capital stock is used in whole or in part as consideration to effect a business combination, the proceeds held in the trust account as well as any other net proceeds not expended will be used to finance the operations of the target business. We believe we will have sufficient available funds outside of the trust fund to operate through December 6, 2009, assuming that a business combination is not consummated during that time.
We expect our primary liquidity requirements during this period to include approximately $200,000 for expenses for the due diligence and investigation of a target business or businesses; approximately $500,000 for legal, accounting and other expenses associated with structuring, negotiating and documenting an initial business combination; $150,000 for legal and accounting fees relating to our SEC reporting obligations; and approximately $500,000 for general working capital that will be used for miscellaneous expenses and reserves. We do not believe we will need to raise additional funds following this offering in order to meet the expenditures required for operating our business. However, we may need to raise additional funds through a private offering of debt or equity securities if such funds are required to consummate a business combination that is presented to us. We would only consummate such a financing simultaneously with the consummation of a business combination.
In addition, in July and August of 2007, Lawrence S. Coben and Ronald D. Ormand advanced an aggregate of $132,990 to us for payment on our behalf of offering expenses. These loans were repaid following our initial public offering from the proceeds of the offering.
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ITEM 4. CONTROLS AND PROCEDURES.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our chief executive officer and chief financial officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2008. Based upon their evaluation, they concluded that our disclosure controls and procedures were effective.
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. 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, 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.
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II.
OTHER INFORMATION
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On December 12, 2007, we closed our initial public offering of 9,500,000 units with each unit consisting of one share of our common stock and one warrant, each to purchase one share of our common stock at an exercise price of $5.00 per share. On January 24, 2008, we consummated the closing of an additional 232,669 units which were subject to the over-allotment option. The units from the initial public offering (including the over-allotment option) were sold at an offering price of $8.00 per unit, generating total gross proceeds of $77,861,352. Merrill Lynch, Pierce, Fenner & Smith Incorporated acted as representative of the underwriters. The securities sold in the offering were registered under the Securities Act of 1933 on a registration statement on Form S-1 (No. 333-145625). The Securities and Exchange Commission declared the registration statement effective on December 6, 2007.
We paid a total of $2,335,841 in underwriting discounts and commissions and incurred $602,705 for other costs and expenses related to the offering and the over-allotment option. After deducting the underwriting discounts and commissions and the offering expenses, the total net proceeds to us from the offering and the private sale of sponsors’ warrants were $77,572,806, of which $77,400,511 ($75,595,000 on December 12, 2007 and $1,805,511 on January 24, 2008) was deposited into the trust account. The remaining proceeds became available to be used to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses.
For a description of the use of the proceeds generated in our initial public offering, see Part I, Item 2 of this Form 10-Q.
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ITEM 6: EXHIBITS
(a) Exhibits:
31.1 – Section 302 Certification by CEO
31.2 – Section 906 Certification by CFO
32.1 – Section 302 Certification by CEO
32.2 – Section 906 Certification by CFO
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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.
TREMISIS ENERGY ACQUISITION CORPORATION II | |
Dated: November 13, 2008 | |
/s/ Lawrence S. Coben | |
Lawrence S. Coben | |
Chairman and Chief Executive Officer | |
(Principal Executive Officer) | |
/s/ Ronald D. Ormand | |
Ronald D. Ormand | |
President and Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
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