UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
ý | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2009
¨ | 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.) |
545-7 Dogok-Dong SoftForum B/D, 7th Floor Gangnam-Gu, Seoul, South Korea 135-270 |
(Address of Principal Executive Office) |
(82)(2) 575-0466
(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 x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
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 ¨ | Smaller reporting company x |
(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 x No ¨
As of November 16, 2009, 12,165,837 shares of common stock, par value $.0001 per share, were issued and outstanding.
Tremisis Energy Acquisition Corporation II
Index
Page | |
Part I: FINANCIAL INFORMATION | |
Item 1 – Financial Statements: | |
Condensed Balance Sheets | 3 |
Condensed Statements of Operations | 4 |
Condensed Statements of Cash Flows | 5 |
Notes to Unaudited Condensed Financial Statements | 6 |
Item 2 – Management’s Discussion and Analysis or Results of Operations | 12 |
Item 3 – Quantitative and Qualitative Disclosures About Market Risk | 13 |
Item 4 – Controls and Procedures | 13 |
Part II. OTHER INFORMATION | |
Item 1 – Legal Proceedings | 13 |
Item 1A – Risk Factors | 13 |
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds | 13 |
Item 3 – Defaults Upon Senior Securities | 14 |
Item 4 – Submission of Matters to a Vote of Security Holders | 14 |
Item 5 – Other Information | 14 |
Item 6 – Exhibits | 14 |
Signatures | 15 |
2
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage)
Condensed Balance Sheets
September 30, 2009 (Unaudited) | December 31, 2008 | |||||||
ASSETS | ||||||||
Cash | $ | 177,812 | $ | 20,139 | ||||
Cash equivalents held in trust | 77,458,160 | 77,652,972 | ||||||
Interest receivable on cash equivalents held in trust | - | 15,099 | ||||||
Income tax receivable | - | 157,500 | ||||||
Prepaid expenses | 11,199 | 62,949 | ||||||
Total current assets | 77,647,171 | 77,908,659 | ||||||
Equipment, net | 3,555 | 3,555 | ||||||
Total assets | $ | 77,650,726 | $ | 77,912,214 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Accrued expenses | $ | 246,044 | $ | 108,648 | ||||
Franchise taxes payable | 55,500 | - | ||||||
Deferred underwriting fee | 3,114,454 | 3,114,454 | ||||||
Total current liabilities | 3,415,998 | 3,223,102 | ||||||
Common stock subject to possible conversion (2,918,827 and 2,918,827 shares at conversion value, respectively) | 23,705,649 | 23,628,780 | ||||||
Commitments | ||||||||
Stockholders’ equity | ||||||||
Common stock, $.0001 par value per share, authorized 35,000,000 shares, issued and outstanding 9,247,010 and 9,247,010 (excluding 2,918,827 and 2,918,827 shares subject to conversion, respectively) | 925 | 925 | ||||||
Additional paid-in capital | 50,776,800 | 50,853,670 | ||||||
Retained earnings (accumulated deficit) | (248,646 | ) | 205,737 | |||||
Total stockholders’ equity | 50,529,079 | 51,060,332 | ||||||
Total liabilities and stockholders’ equity | $ | 77,650,726 | $ | 77,912,214 |
See notes to unaudited condensed financial statements.
3
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage)
Unaudited Condensed Statements of Operations
(Unaudited) Three Months Ended September 30, | (Unaudited) Nine Months Ended September 30, | Period From July 3, 2007 (Inception) to September 30, 2009 | ||||||||||||||||||
2009 | 2008 | 2009 | 2008 | (Unaudited) | ||||||||||||||||
Interest income | $ | 41,213 | $ | 386,522 | $ | 304,742 | $ | 1,211,481 | $ | 1,693,067 | ||||||||||
General and administrative expenses | 231,758 | 132,551 | 759,125 | 494,101 | 1,863,214 | |||||||||||||||
Income before provision for income taxes | (190,545 | ) | 253,971 | (454,383 | ) | 717,380 | (170,147 | ) | ||||||||||||
Provision for income taxes | - | 79,000 | - | 237,000 | 78,500 | |||||||||||||||
Net income (loss) for the period | (190,545 | ) | 174,971 | (454,383 | ) | 480,380 | (248,647 | ) | ||||||||||||
Accretion of trust accounting relating to common stock subject to possible conversion | (12,358 | ) | (115,918 | ) | (76,869 | ) | (363,323 | ) | (493,229 | ) | ||||||||||
Net income (loss) attributable to common stockholders | $ | (202,903 | ) | $ | 59,053 | $ | (531,252 | ) | $ | 117,057 | $ | (741,876 | ) | |||||||
Weighted average number of shares outstanding | ||||||||||||||||||||
Basic and diluted | 9,247,010 | 9,247,010 | 9,247,010 | 9,233,337 | ||||||||||||||||
Net income (loss) per share – basic and diluted | $ | (0.02 | ) | $ | 0.01 | $ | (0.06 | ) | $ | 0.01 | ||||||||||
Number of shares outstanding subject to possible conversion – basic and diluted | 2,918,827 | 2,918,827 | 2,918,827 | 2,918,827 | ||||||||||||||||
Net income (loss) per share subject to possible conversion – basic and diluted | $ | (0.06 | ) | $ | 0.04 | $ | (0.18 | ) | $ | 0.12 |
See notes to unaudited condensed financial statements.
4
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage)
Unaudited Condensed Statements of Cash Flows
Nine Months Ended September 30, 2009 | Nine Months Ended September 30, 2008 | Period From July 3, 2007 (Inception) to September 30, 2009 | ||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net income (loss) | $ | (454,383 | ) | $ | 480,380 | $ | (248,647 | ) | ||||
Depreciation | - | - | 470 | |||||||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||||||
Interest receivable | 15,099 | 62,402 | - | |||||||||
Income tax receivable | 157,500 | - | - | |||||||||
Prepaid expenses | 51,750 | 76,749 | (11,199 | ) | ||||||||
Accrued expenses | 137,395 | 38,752 | 246,044 | |||||||||
Income and franchise taxes payable | 55,500 | 2,233 | 55,500 | |||||||||
Net cash provided by (used in) operating activities | (37,139 | ) | 660,516 | 42,168 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Cash equivalents held in trust | 194,812 | (2,120,416 | ) | (77,458,160 | ) | |||||||
Purchase of equipment | - | (250,663 | ) | (4,025 | ) | |||||||
Net cash provided by (used in) investing activities | 194,812 | (2,371,079 | ) | (77,462,185 | ) | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Proceeds from issuance of shares of common stock to initial stockholders | - | - | 25,000 | |||||||||
Net proceeds from issuance of common stock through public offering | - | 1,264,054 | 51,723,289 | |||||||||
Proceeds from issuance of insider warrants to initial stockholders | - | - | 2,650,000 | |||||||||
Portion of proceeds from sale of units through public offerings allocable to shares of common stock subject to possible conversion | - | 541,480 | 23,212,420 | |||||||||
Registration costs paid | - | (12,880 | ) | (12,880 | ) | |||||||
Proceeds from notes payable, stockholders | - | - | 157,990 | |||||||||
Repayment of notes payable, stockholders | - | - | (157,990 | ) | ||||||||
Net cash provided by financing activities | - | 1,792,654 | 77,597,829 | |||||||||
Net increase (decrease) in cash | 157,673 | 82,091 | 177,812 | |||||||||
Cash at beginning of period | 20,139 | 101,836 | - | |||||||||
Cash at end of period | $ | 177,812 | 183,927 | $ | 177,812 | |||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Interest paid | $ | - | - | $ | - | |||||||
Income taxes paid | $ | - | 236,000 | $ | 236,000 | |||||||
Supplemental disclosures of non-cash financing activities: | ||||||||||||
Deferred underwriting fee | $ | - | 74,454 | $ | 3,114,454 | |||||||
Accrued registration fee | $ | - | 12,880 | $ | 12,880 | |||||||
Accretion of trust accounting - common stock subject to possible conversion | $ | 76,869 | 363,323 | $ | 480,871 | |||||||
Accrued acquisition fee | $ | - | 222,005 | $ | 157,977 |
See notes to unaudited condensed financial statements.
5
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage )
Notes to Unaudited Condensed Financial Statements
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, 2009, the Company had not yet commenced any operations. All activity from July 3, 2007 (date of inception) to September 30, 2009 relates to the Company’s formation, the public offering described below and searching for a target business with which to complete a Business Combination.
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.
The Company's Chairman of the Board and one of his affiliates 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. Furthermore, they will not have any liability as to any claimed amounts owed to a third party who executed a waiver (including a prospective target business). 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 additional amounts may be released as necessary to satisfy tax obligations.
6
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage )
Notes to Unaudited Condensed Financial Statements
NOTE 1 - Organization and Business Operations (continued)
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 $493,229 (representing 29.99% of interest earned on the trust account) aggregating $23,705,649 has been classified as common stock, subject to possible conversion on the accompanying balance sheet as of September 30, 2009. The Company’s stockholders prior to the Offering (“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.
The Company’s Amended and Restated Certificate of Incorporation provides that the Company will continue in existence until December 6, 2009 (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, 2008 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, 2009 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.
7
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage )
Notes to Unaudited Condensed Financial Statements
NOTE 2 - Summary of Significant Accounting Policies (continued)
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.
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, 2009, 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 - The carrying value of cash, cash equivalents held in trust, interest receivable, prepaid expenses, deferred underwriting fee, and accrued expenses approximate the fair values of these instruments due to their short-term nature.
Effective January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurement, 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 No. 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 adoption of FSP No. FAS 157-2 had no material impact on the financial statements of the Company. The adoption of SFAS No. 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 September 30, 2009, 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 in markets that are not active, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability:
Financial Assets at Fair Value as of September 30, 2009:
September 30, 2009 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Cash equivalents held in trust | $ | 77,458,160 | $ | 77,458,160 | $ | - | $ | - | ||||||||
Total | $ | 77,458,160 | $ | 77,458,160 | $ | - | $ | - |
Financial Assets at Fair Value as of December 31, 2008:
December 31, 2008 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Cash equivalents held in trust | $ | 77,652,972 | $ | 77,652,972 | $ | - | $ | - | ||||||||
Total | $ | 77,652,972 | $ | 77,652,972 | $ | - | $ | - |
The fair values of the Company’s cash equivalents held in the trust are determined through market, observable and corroborated sources. The carrying amounts reflected in the consolidated balance sheets for other current assets and accrued expenses approximate fair value due to their short-term maturities.
8
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage )
Notes to Unaudited Condensed Financial Statements
NOTE 2 - Summary of Significant Accounting Policies (continued)
New Accounting Pronouncements - In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP in the United States. SFAS No. 162 became effective November 15, 2008. The adoption of SFAS No. 162 did not have a material impact on the Company’s interim unaudited condensed financial statements.
In May 2009, the FASB issued Statement of Financial Accounting Standards No. 165, ‘‘Subsequent Events’’ (‘‘FAS 165’’). FAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The standard, which includes a new required disclosure of the date through which an entity has evaluated subsequent events, is effective for interim or annual periods ending after June 15, 2009. The Company’s management evaluated all events or transactions that occurred after December 31, 2008 up through March 30, 2009, the date the Company issued the financial statements included in this 10-Q for the year ended December 31, 2008. The Company’s management has also evaluated all events or transactions from March 31, 2009 through November 16, 2009, and has updated Note 7 for any additional transactions that have occurred, which are unaudited. During these periods, the Company did not have any material recognizable subsequent events other those disclosed in Note 7 to the financial statements for the year ended December 31, 2008 included elsewhere in this 10-Q statement. In addition, the Company’s management evaluated all events and transactions that occurred after September 30, 2009 up through November 16, 2009 and has updated Note 7 of the September 30, 2009 unaudited financial statements included in this 10-Q.
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.
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 entitles the holder to purchase from the Company one share of common stock at an exercise price of $5.00 commencing six months after the completion of a Business Combination and expiring December 5, 2012. 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. 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.
9
Tremisis Energy Acquisition Corporation II
(a corporation in the development stage )
Notes to Unaudited Condensed Financial Statements
NOTE 4 - Income Taxes
The provision for income taxes consists of the following:
Three Months Ended September 30, | Nine Months Ended September 30, | Period From July 3, 2007 (Inception) to | ||||||||||||||||||
2009 | 2008 | 2009 | 2008 | September 30, 2009 | ||||||||||||||||
Federal income tax – current | $ | - | $ | 79,000 | $ | - | $ | 237,000 | $ | 78,500 | ||||||||||
Delaware franchise taxes | $ | 18,500 | $ | 7,000 | $ | 55,500 | $ | 43,000 | $ | 139,054 |
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 Company’s Chairman of the Board. 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 $5,500 per month commencing in March 2009. For the three months and nine months ended September 30, 2009, an amount of $16,500 and $39,342, respectively, 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 have waived 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 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.
On March 13, 2009, the Company entered into an agreement (“Agreement”) with the Initial Stockholders and SoftForum Co., Ltd. and Sang-Chul Kim (collectively, the “Investors”). Pursuant to the Agreement, the Initial Stockholders have the option to sell to the Investors, and the Investors have the option to purchase from the Initial Stockholders, the Insider Warrants upon the earliest of (i) the Company's consummation of a Business Combination, (ii) the Company's liquidation of its trust account and (iii) December 31, 2009. The purchase price for the Insider Warrants is $2,100,000.
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Tremisis Energy Acquisition Corporation II
(a corporation in the development stage )
Notes to Unaudited Condensed Financial Statements
NOTE 5 – Commitments (continued)
Pursuant to the Agreement and as part of the same transaction, the Initial Stockholders also agreed to transfer an aggregate of 2,333,168 shares of the Company’s common stock to the Investors, for no additional consideration, upon consummation of a Business Combination. The Initial Stockholders will continue to hold an aggregate of 100,000 shares of the Company’s common stock following the transfer. If transferred, such shares will remain in escrow until one year after consummation of such Business Combination in accordance with the terms of the escrow agreement that was entered into by the Initial Stockholders in connection with the Offering. Additionally, the Investors will be granted the same registration rights that the Initial Stockholders were granted described in the following paragraph with respect to the Insider Warrants and shares they may receive as a result of the transactions.
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 prohibits 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.
NOTE 7 – Subsequent Events (Entry into a Material Definitive Agreement)
On July 30, 2009, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with Asiana IDT Inc. (“Asiana IDT”) and Asiana Airlines, Inc. (“Asiana Airlines”) providing for the purchase by the Company from Asiana Airlines of all of the outstanding capital stock of Asiana IDT. Pursuant to the Purchase Agreement, at the closing, the Company will pay Asiana Airlines US$63,076,925 and issue to it 9,832,670 shares of the Company’s common stock. Upon completion of the transaction, the Company will be the sole owner of Asiana IDT and will be renamed Asiana IDT Holdings, Inc. Asiana IDT, Inc, a leading information technology (IT) service provider which offers total IT solutions and services in consulting, system integration (SI), network integration (NI), IT outsourcing and legacy migration (LM).
The acquisition is expected to be consummated in the last quarter of 2009, after the required approval by the Company’s stockholders and the fulfillment of certain other conditions, as discussed in the Purchase Agreement
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the Company’s Consolidated 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.
Recent Developments
On July 30, 2009, we entered into a Securities Purchase Agreement (“Purchase Agreement”) with Asiana IDT Inc. (“Asiana IDT”) and Asiana Airlines, Inc. (“Asiana Airlines”) providing for the purchase by us from Asiana Airlines of all of the outstanding capital stock of Asiana IDT. Pursuant to the Purchase Agreement, at the closing, we will pay Asiana Airlines US$63,076,925 and issue to it 9,832,670 shares of common stock. Upon completion of the transaction, we will be the sole owner of Asiana IDT and we will be renamed Asiana IDT Holdings, Inc. Asiana IDT, Inc, a leading information technology (IT) service provider which offers total IT solutions and services in consulting, system integration (SI), network integration (NI), IT outsourcing and legacy migration (LM).
The acquisition is expected to be consummated in the last quarter of 2009, after the required approval by our stockholders and the fulfillment of certain other conditions, as discussed in the Purchase Agreement.
Results of Operations
For the three months ended September 30, 2009, we had net loss of $190,545 derived from $41,213 of interest income from trust account investment, offset by general and administrative expenses of $231,758. For the three months ended September 30, 2008, we had net income of $174,971 derived from $386,522 of interest income from trust account investment, offset by general administrative of $132,551 and income tax provision of $79,000.
For the nine months ended September 30, 2009, we had net loss of $454,383 derived from $304,742 of interest income from trust account investment, offset by general and administrative expenses of $759,125. For the nine months ended September 30, 2008, we had net income of $480,380 derived from $1,211,481 of interest income from trust account investment, offset by general and administrative expenses of $494,101 and income tax provision of $237,000.
For the period from July 3, 2007 (inception) to September 30, 2009, we had net loss of $248,647 derived from $1,693,067 of interest income from trust account investment, offset by general and administrative expenses of $1,863,214 and income tax provision of $78,500.
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”), 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 $1,693,067 in interest through September 30, 2009. 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 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 March 2009, we entered into a lease agreement with SoftForum Co., Ltd., an affiliate of our Chairman of the Board, for office use. The lease term is two years and the monthly rent is $5,500 per month.
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ITEM 3. QUANTIATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures – Our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 240.13a-15(e) or 15d-15(e)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls are effective in providing him with timely material information relating to us required to be disclosed in reports we file or submit under the Exchange Act.
Changes in Internal Control over Financial Reporting – There has been no change in our internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors previously disclosed under Item 1A of the Company ’ s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 30, 2009 .
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-allot m ent 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 register e d 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 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
(a) | Exhibits: |
31.1 – Section 302 Certification by CEO
31.2 – Section 302 Certification by CFO
32.1 – Section 906 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 16, 2009 | ||
/s/ Sang-Chul Kim | ||
Sang-Chul Kim | ||
Chairman and Chief Executive Officer | ||
(Principal Executive Officer) | ||
/s/ Yeon-su Kim | ||
Yeon-su Kim | ||
Chief Financial Officer and Secretary | ||
(Principal Financial and Accounting Officer) |
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