Great Wall Acquisition Corporation
(a corporation in the development stage)
For the Periods from August 20, 2003 (inception) to March 23, 2004,
January 1, 2004 to March 23, 2004 and
August 20, 2003 (inception) to December 31, 2003
Great Wall Acquisition Corporation
(a corporation in the development stage)
Independent Auditor's Report 3
Financial Statements
Balance Sheets 4
Statements of Operations 5
Statements of Stockholders' Equity 6
Statements of Cash Flows 7
Notes to Financial Statements 8-11
Independent Auditor's Report
To the Board of Directors
Great Wall Acquisition Corporation
We have audited the accompanying balance sheets of Great Wall Acquisition
Corporation (a corporation in the development stage) as of March 23, 2004 and
December 31, 2003, and the related statements of operations, stockholders'
equity and cash flows for the periods from August 20, 2003 (inception) to March
23, 2004, January 1, 2004 to March 23, 2004 and August 20, 2003 (inception) to
December 31, 2003. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit 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 Great Wall Acquisition
Corporation as of March 23, 2004 and December 31, 2003, and the results of its
operations and cash flows for the periods from August 20, 2003 (inception) to
March 23, 2004, January 1, 2004 to March 23, 2004 and August 20, 2003
(inception) to December 31, 2003 in conformity with accounting principles
generally accepted in the United States of America.
/s/ Goldstein Golub Kessler LLP
Goldstein Golub Kessler LLP
New York, New York
March 23, 2004
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Great Wall Acquisition Corporation
(a corporation in the development stage)
Balance Sheets
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March 23, December 31,
2004 2003
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Assets
Current assets:
Cash $ 969,360 $ 18,340
Cash held in Trust Fund (Note 1) 20,400,000 -
Prepaid expenses 11,470 -
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Total current assets 21,380,830 18,340
Deferred registration costs - 51,362
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Total assets $ 21,380,830 $ 69,702
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accrued expenses $ 21,200 $ 10,915
Notes payable, stockholders (Note 3) 35,000 35,000
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Total current liabilities 56,200 45,915
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Common stock, subject to possible redemption,
799,600 shares at redemption value (Note 1) 4,077,960 -
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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 20,000,000 shares
Issued and outstanding 5,000,000 shares
(which includes 799,600 subject to
possible redemption) and
1,000,000, respectively 500 100
Additional paid-in capital 17,248,718 24,900
Deficit accumulated during development stage (2,548) (1,213)
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Total stockholders' equity 17,246,670 23,787
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Total liabilities and stockholders' equity $ 21,380,830 $ 69,702
============= =============
See accompanying notes to financial statements.
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Great Wall Acquisition Corporation
(a corporation in the development stage)
Statements of Operations
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Period from Period from Period from
August 20, 2003 January 1, 2004 August 20, 2003
(inception) to to (inception) to
March 23, 2004 March 23, 2004 December 31, 2003
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Expenses:
Formation and operating costs $ 1,900 $ 1,017 $ 883
Interest expense 648 318 330
------------- ---------- --------------
Net loss for the period $ (2,548) $ (1,335) $ (1,213)
============= ========== ==============
Net loss per share $ (.00) $ (.00)
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Weighted average shares outstanding 1,048,193 1,000,000
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See accompanying notes to financial statements.
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Great Wall Acquisition Corporation
(a corporation in the development stage)
Statements of Stockholders' Equity
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Common Stock Additional Deficit accumulated
------------------- Paid-In during the
Shares Amount Capital development stage Total
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Balance, August 20, 2003 (inception) --- $ --- $ --- $ --- $ ---
Sale of 1,000,000 shares of common stock to
initial stockholders 1,000,000 100 24,900 --- 25,000
Net loss for the period --- --- --- (1,213) (1,213)
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Balance, December 31, 2003 1,000,000 100 $ 24,900 $ (1,213) $ 23,787
Sale of 4,000,000 units, net of underwriters'
discount and offering expenses (includes
799,600 shares subject to possible redemption) 4,000,000 400 21,301,778 --- 21,302,178
Proceeds subject to possible redemption of
799,600 shares --- --- (4,077,960) --- (4,077,960)
Net loss for the period --- --- --- (1,335) (1,335)
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Balance, March 23, 2004 5,000,000 $ 500 $17,248,718 $ (2,548) $17,246,670
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See accompanying notes to financial statements.
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Great Wall Acquisition Corporation
(a corporation in the development stage)
Statements of Stockholders' Equity
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August 20, 2003 January 1, 2003 August 20, 2003
(inception) to to (inception) to
March 23, 2004 March 23, 2004 December 31, 2003
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Cash Flows from Operating Activities
Net loss $ (2,548) $ (1,335) $ (1,213)
Increase in prepaid expense (11,470) (11,470) --
Increase (decrease) in accrued expenses 1,200 (13) 1,213
----------------- --------------- -------------
Net cash used in operating activities (12,818) (12,818) 0
----------------- --------------- -------------
Cash Flows from Investing Activities
Cash held in Trust Fund (20,400,000) (20,400,000) --
----------------- --------------- -------------
Net cash used in investing activities (20,400,000) (20,400,000) --
----------------- --------------- -------------
Cash Flows from Financing Activities
Gross proceeds of public offering 24,000,000 24,000,000 --
Proceeds from notes payable, stockholders 35,000 -- 35,000
Proceeds from sale of shares of common stock 25,000 -- 25,000
Payment of costs of public offering (2,677,822) (2,636,162) (41,660)
----------------- --------------- -------------
Net cash provided by financing activities 21,382,178 21,363,838 18,340
----------------- --------------- -------------
Net increase in cash 969,360 951,020 18,340
Cash at beginning of the period -- 18,340 --
----------------- --------------- -------------
Cash at end of the period $ 969,360 $ 969,360 $ 18,340
================= =============== =============
Supplemental schedule of non-cash financing activity:
Accrual of offering costs $ 20,000 $ 10,298 $ 9,702
================= =============== =============
See accompanying notes to financial statements.
-7-
Great Wall Acquisition Corporation
(a corporation in the development stage)
Notes to Financial Statements
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1. Organization Great Wall Acquisition Corp. ("Company") was incorporated in
and August 20, 2003 as a blank check company whose objective is
Business to acquire an operating business having its primary
Operations operations in the People's Republic of China.
All activity from August 20, 2003 (inception) through March
23, 2004 relates to the Company's formation and initial
public offering described below. The Company has selected
December 31 as its fiscal year-end.
The registration statement for the Company's initial public
offering ("Offering") was declared effective March 17, 2004.
The Company consummated the offering on March 23, 2004 and
received net proceeds of approximately $21,302,000 (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 entertainment, media and communications
industry ("Business Combination"). Furthermore, there is no
assurance that the Company will be able to successfully
effect a Business Combination. An amount of $20,400,000 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 net 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
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Great Wall Acquisition Corporation
(a corporation in the development stage)
Notes to Financial Statements
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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
1,000,000 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.
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, a portion of the net
proceeds from the offering (19.99% of the amount held in the
Trust Fund) has been classified as common stock subject to
possible redemption in the accompanying March 23, 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).
Deferred income taxes are provided for the differences
between the bases of assets and liabilities for financial
reporting and income tax purposes. A valuation allowance is
established when necessary to reduce deferred tax assets to
the amount expected to be realized.
The Company recorded a deferred income tax asset for the tax
effect of net operating loss carryforwards and temporary
differences, aggregating approximately $900 and $400 at
March 23, 2004 and December 31, 2003, respectively. In
recognition of the uncertainty regarding the ultimate amount
of income tax benefits to be derived, the Company has
recorded a full valuation allowance at March 23, 2004 and
December 31, 2003.
-9-
Great Wall Acquisition Corporation
(a corporation in the development stage)
Notes to Financial Statements
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The effective tax rate differs from the statutory rate of
34% due to the increase in the valuation allowance.
Loss per share is computed by dividing net loss by the
weighted-average number of shares of common stock
outstanding during the period.
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.
Management does not believe that any recently issued, but
not yet effective, accounting standards if currently adopted
would have a material effect on the accompanying financial
statements.
2. Initial Public On March 23, 2004, the Company sold 4,000,000 units
Offering ("Units") in the Offering. 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 five years from
the date of the prospectus. The Warrants will be redeemable
at a price of $.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
redemption is given. In connection with this Offering, the
Company issued an option to the representative of the
underwriters to purchase 400,000 Units at an exercise price
of $9.90 per Unit. In addition, the warrants underlying such
Units are exercisable at $6.95 per share.
3. Notes Payable, The Company issued an aggregate of $35,000 unsecured
Stockholders promissory notes to two stockholders on October 6, 2003. The
notes bear interest at a rate of 4% per year and will be
paid following consummation of the Offering from the net
proceeds of such Offering. Interest expense accrued through
March 23, 2004 and December 31, 2003 amounted to $648 and
$330, respectively. Due to the short-term nature of the
notes, the fair value of the notes approximates their
carrying amount.
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Great Wall Acquisition Corporation
(a corporation in the development stage)
Notes to Financial Statements
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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 $500 per
month for such services commencing on the effective date of
the Offering. The statements of operations for the periods
ended March 23, 2004 include $97 related to this agreement.
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.
6. Common Stock On January 7, 2004, the Company's Board of Directors
authorized a two for one forward stock split of its common
stock. All references in the accompanying financial
statements to the numbers of shares have been retroactively
restated to reflect the stock split.
At March 23, 2004, 9,200,000 shares of common stock were
reserved for issuance upon exercise of redeemable warrants
and underwriters' unit purchase option.
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