UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 30, 2004
SAND HILL IT SECURITY ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
Delaware 0-50813 20-0996152
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
3000 Sand Hill Road
Building 1, Suite 240
Menlo Park, California 74025
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 234-7222
(Former name or former address, if changed since last report)
Item 5. Other Events and Regulation FD Disclosure
On July 30, 2004, Sand Hill IT Security Acquisition Corp. (the "Company")
consummated the initial public offering ("IPO") of 3,600,000 Units ("Units").
The IPO included granting an over-allotment option to the underwriters to
purchase up to 540,000 additional Units. Each Unit consists of one share of
Common Stock, $.01 par value per share ("Common Stock"), and two Warrants, each
to purchase one share of Common Stock. The Units were sold at an offering price
of $6.00 per Unit, generating gross proceeds of $21,600,000. Audited financial
statements as of July 30, 2004 reflecting receipt of the proceeds upon
consummation of the IPO have been issued by the Company and are included as
Exhibit 99.1 to this Current Report on Form 8-K.
On August 3, 2004, I-Bankers Securities and Newbridge Securities, the
representatives of the underwriters in the IPO, exercised a portion of the
over-allotment option and purchased an additional 430,000 Units resulting in
additional gross proceeds of $2,412,300 to the Company. A copy of the press
release announcing the consummation of the offering and the exercise of the
over-allotment option is included as Exhibit 99.2 to this Current Report on Form
8-K.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
The following exhibits are furnished in accordance with the
provisions of Item 601 of Regulation S-K:
Exhibit
Number Description of Exhibit
------ --------------------------------------
99.1 Audited Financial Statements
99.2 Press Release, dated August 3, 2004.
2
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SAND HILL IT SECURITY ACQUISITION CORP.
Date: August 3, 2004 By: /s/ Cary M. Grossman
Name: Cary M. Grossman
Title: Vice President and
Chief Financial Officer
3
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
- ------ -----------------------------------------------------
99.1 Audited Financial Statements
99.2 Press Release, dated August 3, 2004.
4
Exhibit 99.1
SAND HILL IT SECURITY ACQUISITION CORP.
(A Corporation in the Development Stage)
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm F-2
Financial Statements
Balance sheet F-3
Statement of operations F-4
Statement of stockholders' equity F-5
Statement of cash flows F-6
Notes to financial statements F-7
F-1
SAND HILL IT SECURITY ACQUISITION CORP.
(A Corporation in the Development Stage)
Report of Independent Registered Public Accounting Firm
To the Board of Directors
Sand Hill IT Security Acquisition Corp.
We have audited the accompanying balance sheet of Sand Hill IT Security
Acquisition Corp. ( a corporation in the development stage) as of July 30, 2004
and April 20, 2004 and the related statements of operations, stockholders'
equity and cash flows for the periods from April 15, 2004 (the inception date)
to July 30, 2004 and April 15, 2004 (the inception date) to April 20, 2004.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sand Hill IT Security
Acquisition Corp. as of July 30, 2004 and April 20, 2004 and the results of its
operations and changes in its stockholders' equity and cash flows for the
periods from April 15, 2004 (the inception date) to July 30, 2004 and April 15,
2004 (the inception date) to April 20, 2004 in conformity with accounting
principles generally accepted in the United States of America.
Hein & Associates LLP
Houston, Texas
August 2, 2004
F-2
SAND HILL IT SECURITY ACQUISITION CORP.
(A Corporation in the Development Stage)
BALANCE SHEETS
ASSETS July 30, 2004 April 20, 2004
------------- --------------
Current assets:.............................
Cash........................................ $978,497 $25,000
Cash held in Trust Fund..................... 18,360,000 --
Prepaid expenses ........................... 180,480 --
------- -------
Total current assets................... 19,518,977 25,000
---------- ------
Deferred offering costs..................... -- 9,203
-- -----
Total Assets............................... $19,518,977 $34,203
=========== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses... $290,512 $13,953
Note payable, stockholder............... 40,000 --
------ --
Total Liabilities........................... $330,512 $13,953
-------- -------
Stockholders' Equity:
Preferred stock, $0.01 par value
Authorized 5,000,000 shares; none issued - -
Common stock, $0.01 par value
Authorized 50,000,000 shares
Issued and outstanding, 4,600,000 shares
(including 719,640 shares subject to
possible redemption) and 1,000,000 shares,
respectively...................... 46,000 10,000
Additional paid-in capital............ 19,158,158 15,000
Deficit accumulated during
the development stage.............. (15,693) (4,750)
-------- -------
Total Stockholders' Equity............ 19,188,465 20,250
---------- ------
Total Liabilities and Stockholders' Equity $19,518,977 $34,203
=========== ======
See accompanying notes to financial statements.
F-3
SAND HILL IT SECURITY ACQUISITION CORP.
(A Corporation in the Development Stage)
STATEMENTS OF OPERATIONS
Period from April 15, Period from April 15,
2004 (inception) to 2004 (inception) to
July 30, 2004 April 20,2004
---------------------- ----------------------
Formation and operating costs............ $15,693 $4,750
------- ------
Net Loss................................. $15,693 $4,750
======= ======
Weighted Average Shares Outstanding...... 1,107,000 1,000,000
========= =========
Net Loss Per Share....................... $0.01 $0.00
===== =====
See accompanying notes to financial statements.
F-4
SAND HILL IT SECURITY ACQUISITION CORP.
(A Corporation in the Development Stage)
STATEMENTS OF STOCKHOLDERS' EQUITY
Deficit
Accumulated
Additional During
Common Stock Paid-In Development Stockholders'
Shares Amount Capital Stage Equity
------ ------ --------- ------------ ------------
Common shares issued April 20, 2004 at
$0.025 per share....................... 1,000,000 $10,000 $15,000 $ -- $ 25,000
Net loss............................... -- -- -- (4,750) (4,750)
--------- ------- ------- --------- ------------
Balance at April 20, 2004.............. 1,000,000 10,000 15,000 (4,750) 20,250
--------- ------- ------- -------- ------------
Sale of 3,600,000 units, net of
underwriters' discount and offering
expenses (includes 719,640 shares
subject to possible redemption)........ 3,600,000 36,000 19,143,158 19,179,158
Net loss............................... -- -- -- (10,943) (10,943)
--------- ------ ---------- -------- ------------
Balance at July 30, 2004 4,600,000 $46,000 $19,158,158 $(15,693) $19,188,465
========= ======= =========== ========= ============
See accopanying notes to financial statements.
F-5
SAND HILL IT SECURITY ACQUISITION CORP.
(A Corporation in the Development Stage)
STATEMENTS OF CASH FLOWS
Period from Period from
April 15, 2004 April 15, 2004
(inception) to (inception) to
July 30, 2004 April 20, 2004
--------------- --------------
CASH FLOW FROM OPERATING ACTIVITIES
Net loss................................................................ $(15,693) $(4,750)
Increase in prepaid expenses............................................ (180,480)
Increase in accounts payable and accrued expenses....................... 290,512 13,953
------- ------
Net Cash provided by Operating Activities................................. 94,339 9,203
------ -----
CASH FLOW FROM INVESTING ACTIVITIES
Cash held in Trust fund (18,360,000) ---
------------ ---
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from public offering of 3,600,000 units, net 19,179,158
Proceeds from sale of common stock to initial stockholders'............. 25,000 25,000
Proceeds from note payable, stockholder 40,000
Deferred costs of the proposed public offering.......................... --- (9,203)
---------- -------
Net Cash Provided by Financing Activities................................. 19,244,158 15,797
---------- ------
NET INCREASE IN CASH...................................................... 978,497 25,000
CASH AT BEGINNING OF PERIOD............................................... --- ---
------- ------
CASH AT END OF PERIOD..................................................... $978,497 $25,000
======== =======
See accompanying notes to financial statements.
F-6
SAND HILL IT SECURITY ACQUISITION CORP.
(A Corporation in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION, BUSINESS OPERATIONS
Sand Hill IT Security Acquisition Corp. (the "Company") was incorporated in
Delaware on April 15, 2004 as a blank check company whose objective is to merge
with or acquire an operating business that's primary business is in the IT
Security industry. The Company's initial stockholders' purchased 1,000,000
shares of common stock, $0.01 par value, for $25,000 on April 20, 2004.
The registration for the Company's initial public offering ("Offering") was
effective July 26, 2004. The Company consummated the Offering on July 30, 2004
and received proceeds, net of the underwriters' discount of $20,196,000. The
Company's management has broad discretion with respect to the specific
application of the net proceeds of this Offering, although substantially all of
the net proceeds of this Offering are intended to be generally applied toward
consummating a merger with or acquisition of an operating business whose
objective is to acquire or merge with an operating business that's primary
business is in the IT Security industry ("Business Combination"). There is no
assurance that the Company will be able to successfully effect a Business
Combination. An amount equal to $18,360,000 is being held in an interest bearing
trust account ("Trust Fund") until the earlier of (i) the consummation of its
first Business Combination or (ii) liquidation of the Company. Under the
agreement governing the Trust Fund, funds may only be invested in United States
government securities with a maturity of 180 days or less. The remaining
proceeds may be used to pay for business, legal and accounting due diligence on
prospective mergers or acquisitions and continuing general and administrative
expenses.
The Company, after signing a definitive agreement for the merger with or
acquisition of a target business, will submit such transaction for shareholder
approval. In the event that stockholders' owning 20% or more of the outstanding
stock excluding, for this purpose, those persons who were stockholders
immediately prior to the Offering, vote against the Business Combination, the
Business Combination will not be consummated. All of the Company's stockholders
prior to the Offering, including all of the officers and directors of the
Company ("Initial Stockholders"), have agreed to vote their founding shares of
common stock in accordance with the vote of the majority in interest of all
other stockholders of the Company ("Public Stockholders") with respect to a
Business Combination. After consummation of the Company's first Business
Combination, these voting safeguards no longer apply.
With respect to the first Business Combination which is approved and
consummated, any Public Stockholder who voted against the Business Combination
may demand that the Company redeem his or her shares. The per share redemption
price will equal the amount in the Trust Fund as of the record date for
determination of stockholders entitled to vote on the Business Combination
divided by the number of shares of common stock held by Public Stockholders at
the consummation of the Offering. Accordingly, Public Stockholders holding
19.99% of the aggregate number of shares owned by all Public Stockholders may
F-7
SAND HILL IT SECURITY ACQUISITION CORP.
(A Corporation in the Development Stage)
seek redemption of their shares in the event of a Business Combination. Such
Public Stockholders are entitled to receive their per share interest in the
Trust Fund computed without regard to the shares held by Initial Stockholders.
The Company's Certificate of Incorporation provides for the mandatory
liquidation of the Company, without stockholder approval, in the event that the
Company does not consummate a Business Combination within 18 months from the
date of the consummation of the Offering, or 24 months from the consummation of
the Offering if certain extension criteria have been satisfied. 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 to be offered in the
Offering as described in Note 3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements include the accounts of the Company. The Company
has not commenced operations effective July 30, 2004. All activity through July
30, 2004, is related to the Company's formation and preparation of the Offering.
The Company has selected December 31 as its fiscal year end.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingencies at the date of the financial statements and the
reported amounts of expenses during the reporting period. Actual amounts could
differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk
consist of cash and cash equivalents. The Company's policy is to limit the
amount of credit exposure to any one financial institution and place investments
with financial institutions evaluated as being creditworthy, or in short-term
money market funds which are exposed to minimal interest rate and credit risk.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement carrying amounts and the tax bases of assets and liabilities using
F-8
SAND HILL IT SECURITY ACQUISITION CORP.
(A Corporation in the Development Stage)
enacted tax rates in effect in the years in which the differences are expected
to reverse. At July 30, 2004 and April 20, 2004, a deferred income tax asset
relating to the Company's net operating loss is offset by a full valuation
allowance based upon a lack of earnings history for the Company.
Earnings per Common Share
Basic earnings per share ("EPS") is computed by dividing net income
applicable to common stock by the weighted average common shares outstanding
during the period. Diluted EPS reflects the additional dilution for all
potentially dilutive securities such as stock warrants.
Recently Issued Accounting Standards
In November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, including Indirect Guarantees of Indebtedness of Others"
(Interpretation No. 45"). Interpretation No. 45 elaborates on the existing
disclosure requirements for most guarantees, including loan guarantees such as
standby letters of credit. It also clarifies that at the time a company issues a
guarantee, the company must recognize an initial liability for the fair market
value of the obligations it assumes under that guarantee and must disclose that
information in its interim and annual financial statements. The initial
recognition and measurement provisions of Interpretation No. 45 apply on a
prospective basis to guarantees issued or modified after December 31, 2002.
Interpretation No. 45 did not have an effect on the financial statements.
In January 2003, the Financial Accounting Standard Boar ("FASB") issued
Interpretation No. 46 (FIN 46"), "Consolidation of Variable Interest Entities."
FIN 46 clarifies the application of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements," and addresses consolidation by business
enterprises of variable interest entities (more commonly known as Special
Purpose Entities or SPE's). In December 2003, FASB issued FIN No. 46R which
replaced FIN 46 and clarified ARB 51. This interpretation provides guidance on
how to identify a variable interest entity and determine when the assets,
liabilities, non-controlling interests and results of operations of a variable
interest entity should be consolidated by the primary beneficiary. The primary
beneficiary is the enterprise that will absorb a majority of the variable
interest entity's expected losses or receive a majority of the expected residual
returns as a result of holding variable interests. This FIN requires the
consolidation of results of variable interest entities in which the Company is
the primary beneficiary of the variable interest entity. As of July 31, 2004,
the Company did not own an interest in a variable interest entity that met the
consolidation requirements and as such the adoption of FIN No. 46R did not have
any effect on the financial condition, results of operations, or liquidity of
the Company. Interests in entities acquired or created after July 31, 2004 will
be evaluated based on FIN No. 46R criteria and consolidated, if required.
In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure", an amendment of FASB
Statement No. 123 ("SFAS 148"). SFAS 148 amends FASB Statement No. 123,
"Accounting for Stock-Based Compensation", to provide alternative methods of
F-9
SAND HILL IT SECURITY ACQUISITION CORP.
(A Corporation in the Development Stage)
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation. It also amends the
disclosure provisions of that Statement to require prominent disclosure about
the effects on reported net income of an entity's accounting policy decisions
with respect to stock-based employee compensation. Finally, this Statement
amends Accounting Principles Board ("APB") Opinion No. 28, "Interim No. 28,
"Interim Financial Reporting", to require disclosure about those effects in
interim financial information. SFAS 148 is effective for financial statements
for fiscal years ending after December 15, 2002. SFAS 148 did not have an effect
on the financial statements.
In May, 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity"
("SFAS 150"). SFAS 150 requires an issuer to classify certain financial
instruments, such as mandatorily redeemable shares and obligations to repurchase
the issuer's equity shares, as liabilities. The guidance is effective for
financial instruments entered into or modified subsequent to May 31, 2003, and
otherwise is effective at the beginning of the first interim period after June
15, 2003. SFAS 150 did not have a material impact on the financial condition or
results of operations.
3. PUBLIC OFFERING
On July 26, 2004, the Company sold 3,600,000 units ("Units") in a public
offering, which included granting the underwriters' an overallotment option to
purchase up to an additional 540,000 units. Each Unit consists of one share of
the Company's common stock, $0.01 par value, and two Redeemable Common Stock
Purchase Warrants ("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 on the later of the completion of a Business Combination or one year
from the effective date of the Offering and expiring five years from the date of
the prospectus. The Warrants will be redeemable by the Company a t a price of
$0.01 per Warrant upon 30 days' notice after the Warrants become exercisable,
only in the event that the last sale price of the common stock is at least $8.50
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 the redemption is given. In
connection with the Offering, the Company issued an option for $100 to the
underwriters' to purchase 270,000 Units at an exercise price of $7.50 per Unit.
The Units issuable upon exercise of this option are identical to those included
in the Offering except that exercise price of the Warrants included in the units
will be $6.65 per share.
F-10
SAND HILL IT SECURITY ACQUISITION CORP.
(A Corporation in the Development Stage)
4. COMMITMENT
The Company presently occupies office space provided by an Initial
Stockholder. Such affiliate has agreed that, until the acquisition of a target
business by the Company, it will make such office space, as well as certain
office and secretarial services, available to the Company, as may be required by
the Company from time to time. The Company has agreed to pay such affiliate
$7,500 per month for such services commencing on the effective date of the
Offering.
5. NOTE PAYABLE
Sand Hill Security, LLC, an Initial Stockholder and affiliate of the
officers and directors of the Company, has entered into a revolving credit
agreement with us in the amount of $60,000. Advances under the credit facility
amounted to $40,000 as of July 30, 2004. The loan will be repaid out of the net
proceeds of the Offering.
6. COMMON STOCK
At July 30, 2004, 9,630,000 shares of common stock were reserved for
issuance upon exercise of the underwriters' overallotment option, the
underwriters' unit purchase option, and the Warrant underlying the Units.
7. PREFERRED STOCK
The Company is authorized to issue 5,000,000 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 Director.
8. SUBSEQUENT EVENT
On August 3, 2004, the Representatives exercised a portion of their
over-allotment option by purchasing 430,000 units at a purchase price of $6.00
per share resulting in net proceeds to the Company of $2,412,300 of which
$2,193,000 was deposited into the trust account.
F-11
Exhibit 99.2
FOR: Sand Hill IT Security Acquistion Corp.
CONTACT: Cary Grossman
Chief Financial Officer
(713) 827-2104
cgrossman@houston.rr.com
FOR IMMEDIATE RELEASE
- ---------------------
SAND HILL IT SECURITY ACQUISITION CORP. ANNOUNCES COMPLETION
OF ITS INITIAL PUBLIC OFFERING
Menlo Park, California, August 3, 2004 - Sand Hill IT Security Acquisition
Corp. (OTC Bulletin Board: SHQCU), a Targeted Acquisition Company ("TAC") formed
to acquire an operating business in the information technology, or IT, security
industry, announced today that it has completed its initial public offering of
3,600,000 units. Each unit consists of one share of common stock and two
warrants. The units were sold at an offering price of $6.00 per unit, generating
gross proceeds of $21,600,000 to the Company. I-Bankers Securities, Inc. and
Newbridge Securities Corporation (the "Representatives") acted as the managing
underwriters for the initial public offering. The Representataives have an
over-allotment option for a period of 45 days to purchase up to an additional
540,000 units. On August 3, 2004, the Representatives exercised a portion of the
over-allotment option and purchased an additional 430,000 units resulting in
additional gross proceeds to the Company of $2,580,000. The initial public
offering and the exercise of a portion of the over-allotment option provided
combined gross proceeds of $24,180,000 to the Company. A copy of the prospectus
may be obtained from I-Bankers Securities, Inc., 3340 Indian Creek Ct., Fort
Worth, Texas 76180 or Newbridge Securities Corporation, 1451 West Cypress Creek
Road, Fort Lauderdale, Florida 33309.
The Company's audited financial statements as of July 30, 2004 reflecting
receipt of the initial public offering proceeds have been issued and are
included as Exhibit 99.1 to a Current Report on Form 8-K to be filed by the
Company with the Securities and Exchange Commission on August 3, 2004.
Other Information
Headquartered in Menlo Park, California, Sand Hill IT Security Acquisition
Corp. is a newly organized TAC (Targeted Acquisition Company). The Company has
$20,553,000 in a trust account to be used as all or part of the consideration to
complete a business combination. Visit the Company's web site at
www.sandhillsecurity.com.
###