ARPEGGIO ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM APRIL 2, 2004 (INCEPTION) TO JUNE 30, 2004
AND APRIL 2, 2004 (INCEPTION) TO APRIL 21, 2004
ARPEGGIO ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 3
FINANCIAL STATEMENTS
Balance Sheets 4
Statements of Operations 5
Statements of Stockholders' Equity 6
Statements of Cash Flows 7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 8
NOTES TO FINANCIAL STATEMENTS 9-12
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Arpeggio Acquisition Corporation
New York, New York
We have audited the accompanying balance sheets of Arpeggio Acquisition
Corporation (a corporation in the development stage) as of June 30, 2004 and
April 21, 2004, and the related statements of operations, stockholders' equity
and cash flows for the periods from April 2, 2004 (inception) to June 30, 2004
and April 2, 2004 (inception) to April 21, 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 audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. 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
audits provide 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 Arpeggio Acquisition
Corporation as of June 30, 2004 and April 21, 2004, and the results of its
operations and its cash flows for the periods from April 2, 2004 (inception) to
June 30, 2004 and April 2, 2004 (inception) to April 21, 2004 in conformity with
accounting principles generally accepted in the United States of America.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
June 30, 2004
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ARPEGGIO ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
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June 30, April 21,
2004 2004
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ASSETS
Current assets:
Cash $ 1,593,502 $ 152
Cash held in Trust Fund (Note 1) 35,352,000 --
------------ ------------
Total current assets 36,945,502 152
Deferred registration costs -- 94,148
------------ ------------
Total assets $ 36,945,502 $ 94,300
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $ 74,491 $ -
Note payable, stockholder (Note 3) 77,500 70,000
------------ ------------
Total current liabilities 151,991 70,000
------------ ------------
Common stock, subject to possible redemption,
1,359,320 shares at redemption value (Note 1) 6,932,532 --
------------ ------------
Commitment (Note 4)
Stockholders' equity (Notes 1, 2, 5 and 6) Preferred stock, $.0001 par value,
Authorized
1,000,000 shares; none issued
Common stock, $.0001 par value
Authorized 30,000,000 shares
Issued and outstanding 8,300,000 shares
(which includes 1,359,320 subject to
possible redemption) and 1,500,000,
respectively 830 150
Additional paid-in capital 29,863,638 24,850
Deficit accumulated during development stage (3,489) (700)
------------ ------------
Total stockholders' equity 29,860,979 24,300
------------ ------------
Total liabilities and stockholders' equity $ 36,945,502 $ 94,300
============ ============
See accompanying summary of significant accounting policies
and notes to financial statements.
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ARPEGGIO ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
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Period from Period from
April 2, 2004 April 2, 2004
(inception) to (inception) to
June 30, 2004 April 21, 2004
- --------------------------------------------------------------------------------------
Expenses:
General and administrative expenses $ 3,489 $ 700
----------- -----------
Net loss for the period $ (3,489) $ (700)
----------- -----------
Basic and fully diluted net loss per share $ (.00) $ (.00)
----------- -----------
Weighted average common shares outstanding $ 1,576,404 1,500,000
----------- -----------
See accompanying summary of significant accounting policies
and notes to financial statements.
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ARPEGGIO ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF STOCKHOLDERS' EQUITY
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Deficit
accumulated
Preferred Stock Common Stock Additional during the
--------------- ------------------- Paid-In development
Shares Amount Shares Amount Capital stage Total
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, April 2, 2004 (inception) -- $ -- -- $ -- $ -- $ -- $ --
Issuance of common stock to initial
stockholders -- -- 1,500,000 150 24,850 -- 25,000
Net loss for the period -- -- -- -- -- (700) (700)
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Balance, April 21, 2004 -- -- 1,500,000 150 24,850 (700) 24,300
Sale of 6,800,000 units, net of underwriters'
discount and offering expenses (includes
1,359,320 shares subject to possible -- -- 6,800,000 680 29,838,788 29,839,468
redemption)
Net loss for the period -- -- -- -- -- (2,789) (2,789)
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Balance, June 30, 2004 -- $ -- 8,300,000 $ 830 $29,863,638 $ (3,489) $29,860,979
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See accompanying summary of significant accounting policies
and notes to financial statements.
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ARPEGGIO ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
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April 2, 2004 April 2, 2004
inception) to (inception) to
June 30, 2004 April 21, 2004
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (3,489) $ (700)
------------ ------------
Net cash used in operating activities (3,489) (700)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash held in Trust Fund (35,352,000) --
------------ ------------
Net cash used in investing activities (35,352,000) --
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in accrued expenses 74,491 --
Proceeds from public offering of 6,800,000 units, net 36,772,000
Deferred registration costs (94,148)
Proceeds issuance of common stock to initial stockholders 25,000 25,000
Proceeds from note payable, stockholder 77,500 70,000
------------ ------------
Net cash provided by financing activities 36,948,991 852
------------ ------------
Net increase in cash 1,593,502 152
Cash at beginning of the period -- --
------------ ------------
Cash at end of the period $ 1,593,502 $ 152
------------ ------------
See accompanying summary significant accounting policies
and notes to financial statements.
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ARPEGGIO ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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INCOME TAXES The Company follows Statement of Financial
Accounting Standards No. 109 ("SFAS No. 109),
"Accounting for Income Taxes" which is an asset and
liability approach that requires the recognition of
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. The Company has a net
operating loss carryforward of approximately $3,500
available to reduce any future income taxes. The
tax benefit of this loss, approximately $1,420 has
been fully offset by a valuation allowance due to
the uncertainty of its realization.
NET LOSS PER SHARE Net loss per share is computed on the basis of the
weighted average number of common shares
outstanding during the period, including common
stock equivalents (unless anti-dilutive) which
would arise from the exercise of stock warrants.
USE OF ESTIMATES The preparation of financial statements in
conformity with accounting principles generally
accepted in the United State 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.
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ARPEGGIO ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
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1. ORGANIZATION Arpeggio Acquisition Corporation ("Company") was
AND incorporated in Delaware on April 2, 2004 as a
BUSINESS OPERATIONS blank check company, the objective of which is to
acquire an operating business in the United States
or Canada. The Company's initial stockholders
purchased 1,500,000 common shares, $.0001 par
value, for $25,000 on April 2, 2004. All activity
from April 2, 2004 (inception) through June 30,
2004 relates to the Company's formation and initial
public offering. The Company has selected December
31, as its fiscal year-end.
The registration statement for the Company's
initial public offering ("Offering") was effective
June 24, 2004. The Company consummated the offering
on June 30, 2004 and received net proceeds of
36,772,000 (Note 2). 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 business combination with a
operating business in the United States or Canada
("Business Combination"). Furthermore, there is no
assurance that the Company will be able to
successfully effect a Business Combination. An
amount of $35,352,000 of the net proceeds 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 will only be invested in United
States government securities (treasury bills) 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
acquisitions and continuing general and
administrative expenses.
The Company, after signing a definitive agreement
for the acquisition of a target business, will
submit such transaction for stockholder approval.
In the event that stockholders owning 20% or more
of the outstanding stock excluding, for this
purpose, those persons who were stockholders 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 1,500,000
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 any Business Combination. After
consummation of the Company's first Business
Combination, all of these voting safeguards will no
longer be applicable.
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ARPEGGIO ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
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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
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 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.
Accordingly, $6,932,532 of the net proceeds from
the Offering has been classified as common stock
subject to possible redemption in the accompanying
June 30, 2004 balance sheet.
The Company's Certificate of Incorporation provides
for 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 due to costs related to the Offering and
since no value would be attributed to the Warrants
contained in the Units sold (Note 2).
2. OFFERING On June 25, 2004, the Company sold 6,800,000 units
("Units") in the Offering, which included 800,000
Units subject to the underwriters' overallotment
option. Each Unit consists of one share of the
Company's common stock, $.0001 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 $5.00 commencing the
later of the completion of a business combination
with a target business or one year from the
effective date of the Offering and expiring four
years from the date of the prospectus. The Warrants
will be redeemable at a price of
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ARPEGGIO ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
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$.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
date on which notice of redemption is given. In
connection with this Offering, the Company issued
an option for $100 to the representative of the
underwriters to purchase 300,000 Units at an
exercise price of $9.90 per Unit. In addition, the
warrants underlying such Units are exercisable at
$6.25 per share.
3. NOTE PAYABLE, STOCKHOLDER The Company issued a $70,000 unsecured promissory
note to a stockholder on April 14, 2004. The
stockholder advanced additional amounts totaling
$7,500 through June 30, 2004. The notes are non-
interest bearing and are payable on the earlier of
April 14, 2005 or the consummation of the Company's
initial public offering
4. COMMITMENT The Company presently occupies office space
provided by an affiliate of 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. 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.
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ARPEGGIO ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
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The Company's Board of Directors authorized a 1.2
to one forward stock split of its common stock on
May 25, 2004. All references in the accompanying
financial statements to the numbers of shares have
been retroactively restated to reflect these
transactions.
At June 30, 2004, 13,900,000 shares of common stock
were reserved for issuance upon exercise of
redeemable warrants and underwriters' unit purchase
option
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