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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the quarterly period ended June 30, 2006
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ______________ to __________________.
Commission file number 333-129830
GENERAL FINANCE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 32-0163571
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
260 S. Los Robles, Suite 217
Pasadena, CA 91101
(Address of Principal Executive Offices)
(626) 584-9722
(Registrant's Telephone Number, Including Area Code)
Indicate by check whether the registrant: (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 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 is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |X|
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act):
Yes |X| No |_|
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 10,500,000 shares issued and
outstanding as of July 31, 2006.
GENERAL FINANCE CORPORATION
EXPLANATORY NOTE
General Finance Corporation (the "Company") is amending Part I, Item 1
(Financial Statements) and Item 2 (Management's Discussion and Analysis of
Financial Condition and Results of Operations of its Form 10-Q for the quarter
ended June 30, 2006.
The principal modification reflected in the amendment is to increase from
1,499,250 to 1,724,138 the number of shares of "Common stock subject to possible
conversion" in the balance sheet to include 19.99% of the shares issued upon
exercise of the over-allotment option by the underwriters in the Company's
initial public offering in April 2006, which shares were inadvertently omitted
from the number originally reported. This change also resulted in a reduction in
interest income to $553,737 for the three months ended June 30, 2006 instead of
$692,437 as originally reported, with corresponding adjustments to provisions
for income taxes, net income, net income per share and stockholders' equity.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION ........................................ 3
Item 1. Financial Statements .................................... 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ..................... 10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk ............................................. 11
Item 4. Controls and Procedures ................................. 11
PART II. OTHER INFORMATION ............................................ 11
Item 1. Legal Proceedings ....................................... 11
Item 2. Unregistered Sales of Equity Securities and Use
of Proceeds ............................................. 11
Item 3. Defaults Upon Senior Securities ......................... 11
Item 4. Submission of Matters to a Vote of Security Holders ..... 11
Item 5. Other Information ....................................... 11
Item 6. Exhibits ................................................ 11
2
PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements
GENERAL FINANCE CORPORATION
(A Development Stage Company)
BALANCE SHEET (UNAUDITED)
ASSETS
June 30, 2006
(unaudited)
-----------
Current assets:
Cash (Note 3) $ 77,169
Cash equivalents held in trust account 66,392,334
Prepaid insurance 57,375
-----------
Total current assets 66,526,878
Other assets 3,688
-----------
Total assets $66,530,566
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Income taxes payable (Note 1) $ 251,200
Deferred underwriting fees (Note 3) 1,380,000
-----------
Total current liabilities 1,631,200
Common stock subject to possible conversion,
1,724,138 shares at conversion value (Note 3) 12,941,000
-----------
Commitments (Note 7)
Stockholders' equity:
Preferred stock, $.0001 par value, 1,000,000 shares authorized;
no shares issued --
Common stock, $.0001 par value, 100,000,000 shares authorized;
10,500,000 shares issued and outstanding
(including 1,724,138 shares subject to possible conversion) 1,050
Additional paid-in capital 51,666,433
Earnings accumulated during the development stage 290,883
-----------
Total stockholders' equity 51,958,366
-----------
Total liabilities and stockholders' equity $66,530,566
===========
See notes to the financial statements.
3
GENERAL FINANCE CORPORATION
(A Development Stage Company)
STATEMENTS OF INCOME (UNAUDITED)
October 14, 2005
Three months ended Six months ended (inception)
June 30, 2006 June 30, 2006 to June 30, 2006
(unaudited) (unaudited) (unaudited)
------------------ ---------------- ----------------
General and administrative expenses $ 55,631 $ 63,699 $ 67,720
------------ ------------ ------------
Operating loss (55,631) (63,699) (67,720)
Other income:
Interest income 553,737 554,591 555,103
------------ ------------ ------------
Income before provision for income taxes 498,106 490,892 487,383
Provision for income taxes 195,700 196,500 196,500
------------ ------------ ------------
Net income $ 302,406 $ 294,392 $ 290,883
============ ============ ============
Net income per share:
Basic $ 0.03 $ 0.05 $ 0.06
Diluted $ 0.03 $ 0.05 $ 0.06
Weighted average shares outstanding:
Basic 9,609,890 5,763,812 4,582,212
============ ============ ============
Diluted 11,040,514 6,483,076 5,082,930
============ ============ ============
See notes to the financial statements.
4
GENERAL FINANCE CORPORATION
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
Earnings
Accumulated
Common Stock Additional During the Total
---------------------------- Paid-In Development Stockholders'
Shares Amount Capital Stage Equity
------------ ------------ ------------ ------------ ------------
Balance at October 14, 2005 (inception) -- $ -- $ -- $ -- $ --
Sale of common stock to initial 1,875,000 188 249,812 -- 250,000
stockholder
Sale of warrants -- -- 700,000 -- 700,000
Sale of 7,500,000 units and 7,500,000 750 55,254,754 -- 55,255,504
underwriters' purchase option, net
of underwriters' discount and
offering expenses
Sale of 1,125,000 units for 1,125,000 112 8,319,667 -- 8,319,779
over-allotment
Proceeds subject to possible conversion -- -- (12,857,800) -- (12,857,800)
of 1,724,138 shares
Net income -- -- -- 290,883 290,883
------------ ------------ ------------ ------------ ------------
Balance at March 31, 2006 10,500,000 $ 1,050 $ 51,666,433 $ 290,883 $ 51,958,366
============ ============ ============ ============ ============
See notes to the financial statements.
5
GENERAL FINANCE CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (UNAUDITED)
October 14, 2005
Six months ended (inception)
June 30, 2006 to June 30, 2006
(unaudited) (unaudited)
---------------- ----------------
Cash flows from operating activities:
Net income $ 294,392 $ 290,883
Changes in operating assets and liabilities:
Other assets -- (3,688)
Prepaid expenses (57,375) (57,375)
Income taxes payable 251,200 251,200
Interest deferred for common stock subject to possible
conversion, net of $55,500 income tax effect 83,200 83,200
------------ ------------
Net cash provided by operating activities 571,417 564,220
------------ ------------
Cash flows from investing activities:
Cash equivalents held in trust account (66,392,334) (66,392,334)
------------ ------------
Cash flows from financing activities:
Proceeds from sale of units, net 65,155,776 65,389,550
Proceeds from private placement 700,000 700,000
Proceeds from sale of common stock to initial stockholder -- 250,000
Payment of accrued offering costs (133,065) (434,267)
------------ ------------
Net cash provided by financing activities 65,722,711 65,905,283
------------ ------------
Net (decrease) increase in cash (98,206) 77,169
Cash at beginning of period 175,375 --
------------ ------------
Cash at end of period $ 77,169 $ 77,169
============ ============
Non-cash financing activity:
Accrued deferred underwriting fees $ 1,380,000 $ 1,380,000
============ ============
See notes to the financial statements.
6
NOTES TO FINANCIAL STATEMENTS (Unaudited)
Note 1. Organization and Business Operations
General Finance Corporation (the "Company') was incorporated in Delaware
on October 14, 2005 as a blank check company whose objective is to acquire one
or more operating businesses. The Company has selected December 31 as its fiscal
year-end.
As of June 30, 2006, the Company had not yet commenced any operations. All
activity through June 30, 2006 related to the Company's formation, its initial
public offering of the securities (the "IPO"), and activities to identify an
operating business to acquire. See yNote 3.
Note 2. Summary of Significant Accounting Policies
Basis of Accounting
The Company presents its financial statements on the accrual basis of
accounting in accordance with U.S. generally accepted accounting principles.
Cash Equivalents
The Company considers highly liquid investments with maturities of three
months or less, when purchased, to be cash equivalents. Cash equivalents held in
a trust account are to be held to maturity, and accordingly, are stated at
current market value. Funds held in trust are restricted, as described in yNote
3.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Deferred Underwriter Fees
Deferred underwriter fees of $1,380,000 accrued in connection with the
Company's IPO are payable if and when the Company effects a business combination
(see also yNote 3).
Common Stock Subject to Possible Conversion
Common stock subject to possible conversion amounts to approximately 20%
of the funds held in the trust account after subtracting deferred underwriter
fees and the estimated tax liability associated with interest income earned on
the funds held in trust (see also Note 3).
Reverse Stock Split
In March 2006, the Company effected a 3-for-4 reverse stock split of its
common stock. The accompanying financial statements include adjustments to the
common stock share amounts based on the reverse stock split for all periods
presented.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. Accordingly,
the Company uses the liability method of accounting for income taxes. Under the
liability method, deferred taxes are determined based on temporary differences
between financial reporting and income tax basis of assets and liabilities at
the balance sheet date multiplied by the applicable tax rates.
7
Recently Issued Accounting Pronouncements
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.
Note 3. Initial Public Offering
On April 10, 2006, the Company issued and sold 7,500,000 units ("Units")
in its IPO, and on April 13, 2006, the Company issued and sold an additional
1,125,000 Units that were subject to the underwriter's over-allotment option.
Each Unit consists of one share of common stock and one warrant. Each warrant
entitles the holder to purchase from the Company one share of common stock at an
exercise price of $6.00 commencing the later of the completion of a Business
Combination with a target business or one year from the effective date of the
IPO (April 5, 2007) and expiring April 5, 2010 ("Warrants"). 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 $11.50 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.
The public offering price of each Unit was $8.00, and the gross proceeds
of the IPO were $69,000,000 (including proceeds from the exercise of the
over-allotment option). Of the gross proceeds: (i) $65,000,000 was deposited
into a trust account (the "Trust Account"), which amount included $1,380,000 of
contingent underwriting discount; (ii) the underwriters received $3,450,000 as
the underwriting discount (excluding the contingent underwriting discount); and
(iii) the Company retained $550,000 for offering expenses. In addition, the
Company deposited into the Trust Account the $700,000 that it received from a
private placement of 583,333 warrants to two executive officers (one of whom is
also a director) for $1.20 per warrant immediately prior to the closing of the
IPO. These warrants were identical to the Warrants issued in the IPO.
In connection with the IPO, two executive officers (one of whom is a
director) entered into agreements with the representative of the underwriters
that during the 40 trading day period commencing at least 60 days after the IPO,
they will collectively purchase Warrants in the public market at prices not to
exceed $1.20 per Warrant up to an aggregate purchase price of $700,000. These
purchases have been completed.
In connection with the IPO, the Company sold to the representative of the
underwriter an option to purchase 750,000 units for $10.00 per Unit. These units
are identical to the Units issued in the IPO except that the warrants included
in the units have an exercise price of $7.20. This option may be exercised on a
cashless basis. This option expires April 5, 2011.
The funds in the Trust Account will be distributed to the Company (subject
to stockholder claims described below) upon consummation of a business
combination with one or more operating businesses (the "Business Combination")
whose collective market value is at least 80% of the Company's net assets at the
time of the acquisition. The Company may use the funds in the Trust Account to
complete the Business Combination or for such purposes as the Company determines
following the Business Combination. If the Company does not consummate a
Business Combination by October 5, 2007 (or April 5, 2008 if certain extension
criteria have been satisfied), the funds in the Trust Account will be
distributed to the stockholders then holding the shares issued in the IPO (the
"Public Stockholders"). Pending distribution to the Company or the Public
Stockholders, the funds in the Trust Account may be invested in government
securities and certain money market funds.
The Company has agreed to submit the Business Combination for approval of
its stockholders even if the nature of the transaction would not require
stockholder approval under applicable state law. The Company will not consummate
the Business Combination unless it is approved by a majority of the Public
Stockholders and Public Stockholders owning less than 20% of the shares issued
in the IPO vote against the Business Combination and exercise the conversion
rights described below. The Company's stockholders prior to the consummation of
the IPO (the "Pre-IPO Stockholders") have agreed to vote their shares of common
stock owned prior to the IPO in accordance with the vote of the majority in
interest of the Public Stockholders. These voting provisions will not be
applicable after the consummation of the first Business Combination.
8
With respect to a Business Combination that is approved and consummated,
any Public Stockholder who voted against the Business Combination may demand
that the Company convert his or her shares into cash. The per share conversion
price will equal the amount in the Trust Account, calculated as of two business
days prior to the consummation of the proposed Business Combination, divided by
the number of shares of common stock held by Public Stockholders at the
consummation of the IPO. Accordingly, a Business Combination may be consummated
with Public Stockholders holding 19.99% of the aggregate number of shares owned
by all Public Stockholders converting such shares into cash from the Trust
Account. Such Public Stockholders are entitled to receive their per-share
interest in the Trust Account computed without regard to the shares held by the
Pre-IPO Stockholders.
The Company's Certificate of Incorporation provides for mandatory
liquidation of the Company in the event that the Company does not consummate a
Business Combination within the dates set forth above.
Note 4. Concentrations of Credit Risk
The Company maintains its cash in bank deposit accounts that, at times,
may exceed federally insured limits. The Company has not experienced any losses
in such accounts. The Company believes it is not exposed to any significant
credit risk on its cash balances. The Company did not have cash on deposit
exceeding the insured limit as of March 31, 2006. Marketable securities held at
June 30, 2006 consist of United States Treasury Bills, which mature on July 13,
2006.
Note 5. Limited Recourse Revolving Line of Credit
The Company has an unsecured limited recourse revolving line of credit
from Ronald F. Valenta, a director and executive officer, pursuant to which the
Company may from time to time borrow up to $1,750,000 outstanding at one time.
The line of credit terminates upon the earliest to occur of: (i) the completion
of the Business Combination, (ii) the liquidation of the Company, and (iii)
April 5, 2008, except that advances may be made after two years from the date of
the prospectus solely to pay reasonable costs and expenses in connection with
the liquidation of the Company.
The line of credit bears interest at 8% per annum and will not be payable
from the funds in the Trust Account, which funds will be distributed to the
Public Stockholders if the Company does not consummate the initial Business
Combination within the required time periods. As of June 30, 2006, no amounts
had been borrowed under the line of credit.
Note 6. Related Party Transactions
For the period from October 14, 2005 (inception) to December 31, 2005,
Ronald F. Valenta paid for deferred offering costs and other assets on behalf of
the Company totaling $13,688. There were no specific repayment terms and the
amount was paid in full to Mr. Valenta in December 2005. In addition, the
Company has a limited recourse revolving line of credit agreement with Mr.
Valenta in the amount of $1,750,000 (see yNote 4).
The Company utilizes certain administrative, technology and secretarial
services, as well as certain limited office space provided by an affiliate of
Mr. Valenta. Until the acquisition of a target business by the Company, the
affiliate has agreed to make such services available to the Company free of
charge, as may be required by the Company from time to time.
Note 7. 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.
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Quarterly Report on Form 10-Q includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. We have based
these forward-looking statements on our current expectations and projections
about future events. These forward-looking statements are subject to known and
unknown risks, uncertainties and assumptions about us that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"should," "could," "would," "expect," "plan," "anticipate," "believe,"
"estimate," "continue," or the negative of such terms or other similar
expressions. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those described in our other Securities and
Exchange Commission filings.
We were formed on October 14, 2005 for the purpose of effecting a merger,
capital stock exchange, asset acquisition or other similar business combination
with one or more operating businesses. Our efforts in identifying a prospective
target business will not be limited to a particular industry, although we intend
to focus our efforts initially on acquiring an operating business in the
specialty finance industry. Our initial business combination must be with a
business or businesses whose collective fair market value is at least equal to
80% of our net assets at the time of the acquisition.
On April 10, 2006, we completed our initial public offering ("IPO") of
7,500,000 Units, and on April 13, 2006, we completed the closing of an
additional 1,125,000 Units that were subject to the underwriter's over-allotment
option. Each Unit consists of one share of our common stock, par value $0.0001
per share, (the "Common Stock") and one Warrant entitling the holder to purchase
one share of our Common Stock at a price of $6.00. The public offering price of
each Unit was $8.00, and we generated gross proceeds of $69,000,000 in the IPO
(including proceeds from the exercise of the over-allotment option). Of the
gross proceeds: (i) we deposited $65,000,000 into a trust account at JP Morgan
Chase NY Bank, maintained by Continental Stock Transfer & Trust Company as
trustee, which included $1,380,000 of contingent underwriting discount; (ii) the
underwriters received $3,450,000 as underwriting discount (excluding the
contingent underwriting discount); and (iii) we retained $550,000 for offering
expenses. In addition, we deposited into the trust account $700,000 that we
received from the issuance and sale of 583,333 warrants to Ronald F. Valenta, a
director and our Chief Executive Officer, and John O. Johnson, our Chief
Operating Officer, on April 7, 2006.
The proceeds deposited in the trust account will not be released from the
trust account until the earlier of the completion of a business combination or
the expiration of the time period during which we may complete a business
combination. The proceeds held in the trust account (other than the contingent
underwriting discount) may be used as consideration to pay the sellers of a
target business with which we complete 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 (other than the
contingent underwriting discount) will be used to finance the operations of the
target business. We may also use the proceeds held in the trust account (other
than the contingent underwriting discount) to pay a finder's fee to any
unaffiliated party that provides information regarding prospective targets to
us.
We had net income of $302,000, $294,000, and $291,000, respectively, for
the three and six months ended June 30, 2006, and for the period from inception
(October 14, 2005) to June 30, 2006. This net income was derived primarily from
interest income of over $550,000 earned on marketable securities held in a trust
account. Our operating expenses totaled $56,000, $64,000, and $68,000,
respectively, for the three and six months ended June 30, 2006, and for the
period from inception to June 30, 2006. We also incurred $434,000 of offering
costs in connection with the public offering, all of which has been applied
against paid in capital. State and federal income tax of approximately 40% of
pre-tax income has been provided for each of the respective periods.
We believe that the proceeds from the sale of 1,875,000 shares of our
Common Stock to our existing stockholders prior to the IPO and from the
$1,750,000 limited recourse line of credit provided by Mr. Valenta will be
sufficient to fund our operations until the earlier of 24 months from the
offering or the consummation of a business combination.
10
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the sensitivity of income to changes in interest rates,
foreign exchanges, commodity prices, equity prices, and other market-driven
rates or prices. We are not presently engaged in and, if a suitable business
target is not identified by us prior to the prescribed liquidation date of the
trust fund, we may not engage in, any substantive commercial business.
Accordingly, we are not and, until such time as we consummate a business
combination, we will not be, exposed to risks associated with foreign exchange
rates, commodity prices, equity prices or other market-driven rates or prices.
The net proceeds of our initial public offering held in the trust fund may be
invested by the trustee only 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.
Given our limited risk in our exposure to government securities and money market
funds, we do not view the interest rate risk to be significant.
Item 4. Controls and Procedures
Our management carried out an evaluation, with the participation of Ronald
F. Valenta (our principal executive officer), of the effectiveness of our
disclosure controls and procedures as of June 30, 2006. Based upon that
evaluation, Mr. Valenta concluded that our disclosure controls and procedures
were effective to ensure that information required to be disclosed by us in
reports that we file or submit under the Securities Exchange Act of 1934 (the
"Exchange Act") is recorded, processed, summarized and reported, within the time
periods specified un the rules and forms of the Securities and Exchange
Commission.
There has not been any change in our internal control over financial
reporting in connection with the evaluation required by Rule 13a-15(d) under the
Exchange Act that occurred during the quarter ended June 30, 2006 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 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits.
See Exhibit Index Attached.
11
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 thereunto duly authorized.
Date: September 27, 2006 GENERAL FINANCE CORPORATION
By: /s/ Ronald F. Valenta
------------------------------------
Ronald F. Valenta
Chief Executive Officer
By: /s/ Charles E. Barrantes
------------------------------------
Charles E. Barrantes
Chief Financial Officer
12
EXHIBIT INDEX
Exhibit
Number Exhibit Description
- ------- -------------------
31.1 Certification of Chief Executive Officer Pursuant to SEC Rule
13a-14(a)/15d-14(a)
31.2 Certification of Chief Financial Officer Pursuant to SEC Rule
13a-14(a)/15d-14(a)
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
ss.1350
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
ss.1350
13