UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2007
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 333-127755
ASIA AUTOMOTIVE ACQUISITION CORPORATION
Delaware 20 -3022522
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
199 Pierce Street, Suite 202 Birmingham, Michigan
(Address of principal executive offices)
48009
(Zip Code)
(248) 593-8330
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months, 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
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes No
As of August 14, 2007, 6,031,250 shares of the registrant's common stock,
par value $0.001 per share, were outstanding.
ASIA AUTOMOTIVE ACQUSITION CORPORATION
Table of Contents
PART I-FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Balance Sheet
Condensed Statements of Operations
Condensed Statements of Cash Flows
Notes to Condensed Financial Statements
Item 2 Management 's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Item 4. Controls and Procedures
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
SIGNATURES
Item 1. Financial Statements.
Asia Automotive Acquisition Corporation
(a corporation in the development stage)
CONDENSED BALANCE SHEET
June 30, 2007
(unaudited)
$
--------------
<s>
ASSETS
Current assets
Cash and cash equivalents 120,490
Other assets
Deferred income taxes 328,787
Cash held in trust account 38,817,794
Total assets 39,267,071
______________
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Accrued expenses 365,462
Accrued taxes payable
Warrant liability 11,858,027
Deferred underwriter's fee 966,121
Total current liabilities 13,189,610
______________
Common stock, subject to possible
redemption, 1,005,746 shares at
redemption value plus interest
income(net of taxes) of
$113,377 7,763,305
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par
value, authorized 1,000,000
shares; none issued and
outstanding
Common stock, $.001 par 6,380
value, authorized 39,000,000
shares; issued and outstanding
6,380,250 shares (of which
1,005,746 shares subject to
possible redemption)
Additional paid-in capital 22,327,433
Deficit accumulated during the (4,019,657)
development stage
Total stockholders' equity 18,314,156
______________
Total liabilities and 39,267,071
stockholders' equity ______________
The accompanying notes are an intergral part of these
condensed consolidated financial statements.
Asia Automotive Acquisition Corporation
(a corporation in the development stage)
CONDENSED STATEMENTS OF OPERATIONS
Three months Six months June 20, 2005
ednded June 30 ended June 30 (date of inception)
$ $ $ $ $
2007 2006 2007 2006 to June 30, 2007
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
----------- ----------- ----------- ----------- -----------------
Interest 402,008 345,431 872,567 345,431 2,181,450
income, net
loss on (1,381,542) (276,063) (691,464) (276,063) (4,475,214)
warrant
Liability
Formation and (142,423) (103,733) (501,950) (103,911) (974,143)
operating costs __________ ___________ ___________ ___________ ________________
Loss before taxes (1,121,957) (34,365) (320,847) (34,543) (3,267,907)
Income taxes (124,098) (120,901) (10,194) (120,901) (468,303)
__________ ___________ ___________ ___________ ________________
Net loss (1,246,055) (155,266) (331,041) (155,444) (3,736,210)
Interest
income
attributable
to common stock
subject to
possible
conversion
(net of
taxes) 52,235 113,377 283,447
Net loss
allocable to
common
stockholders
not subject
to possible
conversion
(net of
taxes) (1,298,290) (444,418) (4,019,657)
Weighted
average shares
outstanding
(basic and diluted) 6,380,250 5,44,346 6,380,250 3,405,975 4,326,956
__________ ___________ ___________ ____________ _______________
Net loss per share
(basic and diluted) (.20) (.03) (.05) (.05) (.86)
The accompanying notes are an integral part of these
condensed consolidate financial statements.
Asia Automotive Acquisition Corporation
(a corporation in the development stage)
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Six Months June 20, 2005
Ended Ended (Date of Inception)
to
June 30, 2007 June 30, 2006 June 30, 2007
(unaudited) (unaudited) (unaudited)
$ $ $
------------- -------------- -------------------
Cash flows from
operating activities:
Net loss (331,041) (155,444) (3,736,210)
Adjustments to
reconcile net
loss to net cash
provided by (used in)
operations:
Changes in operating
assets and liabilities:
Deferred tax benefit (328,787) (328,787)
Prepaid expenses 10,000
Warrant liability 691,464 120,901 4,475,214
Income taxes (458,109) 25,250 365,462
Payable
Accrued expenses 253,712 365,462
____________ ______________ __________________
Net cash provided (172,761) 276,770 775,679
by (used in)
operating activities ____________ ______________ __________________
Net cash provided
by (used in)
investing
activities:
Cash held in (90,911) (37,763,431) (38,817,794)
trust account ____________ _______________ __________________
Cash flows from
financing activities:
Proceeds from 20,250 45,250
note payable
Proceeds from 25,000
issuance of common
stock to existing
stockholders'
Proceeds from sale 100
of option to the
Underwriter
Gross proceeds of 40,250,000 40,250,000
public offering
Repayment of notes (45,250) (45,250)
payable to
Stockholders
Payments of (2,057,980) (2,112,495)
deferred offering
costs _____________ ________________ _________________
Net cash provided (38,167,120) 38,162,605
by (used in) financing
Activities _____________ ________________ _________________
Net increase (263,672) (680,459) 120,490
(decrease)
in cash and cash
Equivalents
Cash and cash 384,162 14,743
equivalents,
beginning of
Period
Cash and cash 120,490 695,202 120,490
equivalents,
end of period _____________ ________________ _______________
Supplemental
disclosure of
non-cash
financing
activity:
Deferred 1,207,500 1,207,500 1,207,500
underwriter's
fees ______________ _______________ _______________
Supplemental cash
flow disclosure:
Cash paid for taxes 787,000 787,000
The accompanying notes are an intergral part of these
condensed consolidated financial statements.
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial
statements have been prepared by the Company and reflect
all adjustments, consisting only of normal recurring
adjustments, which are, in the opinion of management,
necessary for a fair presentation of the financial position
as of June 30, 2007 and the financial results for the three
and six months ended June 30, 2007 and 2006 and the period
June 20, 2005 (date of inception) to June 30, 2007, in
accordance with accounting principles generally accepted in
the United States of America for interim financial
statements and pursuant to Form 10-QSB and Securities and
Exchange ("SEC") Regulation SB.
Certain financial information and footnote
disclosure normally included in financial statements
prepared in accordance with accounting principles generally
accepted in the United States of America have been
condensed or omitted pursuant to such rules and
regulations. The results of operations for the three and
six months ended June 30, 2007 are not necessarily
indicative of the results of operations to be expected for
a full fiscal year. These interim condensed financial
statements should be read in conjunction with the financial
statements for the fiscal year end December 31, 2006, which
are included in the Company's annual report on form 10-KSB
as filed with the SEC.
2. ORGANIZATION AND BUSINESS OPERATIONS
Asia Automotive Acquisition Corporation (the
"Company") was incorporated in Delaware on June 20, 2005 as
a blank check company formed to acquire, through merger,
capital stock exchange, asset acquisition or other similar
business combination, a business in the automotive supplier
industry. The Company has neither engaged in any operations
nor generated revenues to date. The Company is considered
to be in the development stage as defined in Statement of
Financial Accounting Standards ("SFAS") No. 7, "Accounting
and Reporting by Development Stage Enterprises," and is
subject to the risks associated with activities of
development stage companies. The Company has elected
December 31st as its fiscal year end.
The registration statement for the Company's initial
public offering (the "Public Offering") was declared
effective on April 11, 2006. The Company consummated the
Public Offering on April 18, 2006 and received net proceeds
of approximately $ 37,171,000. The Company's management has
broad discretion with respect to the specific application
of the net proceeds of the Public Offering (the "Offering")
(as described in Note 4), although substantially all of the
net proceeds of the Offering are intended to be generally
applied toward consummating a business combination with a
target company. As used herein, a "target business" shall
include an operating business in the security industry and
a "business combination" shall mean the acquisition by the
Company of a target business.
Of the proceeds of the Offering, $37,418,000 (plus
interest income) is being held in a trust account ("Trust
Account") and invested until the earlier of (i) the
consummation of the first business combination or (ii) the
distribution of the Trust Account as described below. The
amount in the Trust Account include $ 1,207,500 of
contingent underwriting compensation, which will be paid to
the underwriters if a business combination is consummated,
but which will be forfeited in part if public stockholders
elect to have their shares redeemed for cash if a business
combination is not consummated. Deferred underwriter's fee
is reflected on the balance sheet at $966,121, an
additional $241,379 is included in common stock, subject to
possible conversion, for a total of $1,207,500. The
remaining proceeds may be used to pay for business, legal
and accounting due diligence on prospective acquisitions
and continuing general and administrative expenses.
2. ORGANIZATION AND BUSINESS OPERATIONS (CONTINUED)
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
public stockholders owning a majority of the outstanding
stock sold in the Offerings vote against the business
combination and elect to have the Company redeem their
shares for cash, including all of the officers and
directors of the Company ("Initial Stockholders"), have
agreed to vote their 1,349,000 founding shares of common
stock in accordance with the vote of the majority in
interest of all other stockholders of the Company with
respect to any business combination and to vote any shares
they acquire in the aftermarket in favor of the 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 holder of shares sold in
the Public Offering, other than the Initial Stockholders
and their nominees (the "Public Stockholders") who voted
against the business combination may demand that the
Company redeem his or her shares. The per share redemption
price will equal $7.44 per share plus interest earned
thereon in the Trust Account. Accordingly, Public
Stockholders holding 19.99% of the aggregate number of
shares sold in this offering and the private placement may
seek redemption of their shares in the event of a business
combination.
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 consummation of the Public Offering, or 24
months from the consummation of the Public Offering if
certain extension criteria have been satisfied. The Initial
Stockholders have waived their right to liquidation
distributions with respect to the shares of common stock
included in such units. Accordingly, in the event of such
liquidation, the amount in the Trust Account will be
distributed to the holders of the shares sold in the Public
Offering.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Common stock:
On January 23, 2006, the Company effected a stock
split in the form of a dividend of .233 shares of common
stock for each outstanding share of common stock. All
references in the accompanying financial statements to the
number of shares of common stock and loss per share have
been retroactively restated to reflect these transactions.
Warrant liability:
The Company has outstanding warrants, which provides
for the Company to register the shares underlying the
warrants and is silent as to the penalty to be incurred in
the absence of the Company's ability
to deliver registered shares to the warrant holders upon
warrant exercise. Under EITF No. 00-19 "Accounting for
Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock" ("EITF No.
00-19"), registration of the common stock underlying the
Company's warrants is not within the Company's control. As
a result, the company must assume that it could be required
to settle the warrants on a net-cash basis, thereby
necessitating the treatment of the potential settlement
obligation as a liability. Further EITF No. 00-19,
requires the Company to record the potential settlement
liability at each reporting date using the current
estimated fair value of the warrants, with any changes
being recorded through the Company's statement of
operations. The potential settlement obligation related to
the warrants will continue to be reported as a liability
until such time that the warrants are exercised, expire, or
the Company is otherwise able to modify the registration
requirements in the warrant agreement to remove the
provisions which require this treatment. The fair value of
the warrant liability is determined using the trading value
of the warrants.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loss per common share:
Loss per common share is based on the weighted
average number of common shares outstanding. The Company
complies with SFAS No. 128, "Earnings Per Share." SFAS No.
128 requires dual presentation of basic and diluted income
per share for all periods presented. Basic loss per share
excludes dilution and is computed by dividing income
available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted
loss 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 share in
the income of the Company.
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 contingent assets and contingent 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.
Income taxes:
The Company complies with the Financial Accounting
Standards Board ("FASB") SFAS 109, "Accounting for Income
Taxes," which requires an asset and liability approach to
financial accounting and reporting for income taxes.
Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax bases
of assets and liabilities that will result in future
taxable or deductible amounts, based on enacted tax laws
and rates applicable to the periods in which the
differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to
reduce deferred tax assets to the amount expected to be
realized.
Effective January 1, 2007, the Company adopted the
provisions of the Financial Accounting Standards Board
("FASB") Interpretation No. 48, "Accounting for Uncertainty
in Income Taxes-an interpretation of FASB Statement
No. 109" ("FIN 48"). There were no unrecognized tax
benefits as of January 1, 2007 and as of June 30, 2007.
FIN 48 prescribes a recognition threshold and a measurement
attribute for the financial statement recognition and
measurement of tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a
tax position must be more-likely-than-not to be sustained
upon examination by taxing authorities. The Company
recognizes accrued interest and penalties related to
unrecognized tax benefits as income tax expense. No
amounts were accrued for the payment of interest and
penalties at January 1, 2007. There was no change to this
balance at June 30, 2007. Management is currently unaware
of any issues under review that could result in significant
payments, accruals or material deviations from its
position. The adoption of the provisions of FIN 48 did not
have a material impact on the Company's financial position,
results of operations and cash flows.
Cash and cash equivalents:
The Company considers all highly liquid investments
purchased with an original maturity of three months or less
to be cash equivalents.
Recently issued accounting standards:
In September 2006, the Statement of Financial
Accounting Standard No. 157, Fair Value Measurements ("SFAS
157"), was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair
value, establishes a framework for measuring fair value and
expands disclosures about fair value measurements.
Management is currently evaluating the impact the adoption
of
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SFAS 157 will have on the Company's financial statements
and their disclosures and its impact has not yet been
determined.
4. THE OFFERING
On April 18, 2006, the Company sold 5,031,250 units
(including the underwriters full exercise of an over
allotment option with respect to 656,250 units) to the
public at a price of $8.00 per unit. Each unit consists of
one share of the Company's common stock, $0.001 par value,
and one redeemable common stock purchase warrant
("warrant"). Each warrant entitles 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 April 10,
2007 and expiring April 11, 2012. The warrants are
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 $10.00 per share for any 20 trading days within a 30
trading day period ending three business days before we
send the notice of redemption.
5. INCOME TAXES
Income tax expense for the three and six months
ended June 30, 2007 and the period from June 20, 2005 (date
of inception) to June 30, 2007 was approximately $124,000,
$10,000, and $468,000, respectively, which is net of the
expense for current federal income taxes and the deferred
tax benefit recorded for the three and six months ended
June 30, 2007 and the period from June 20, 2005 (date of
inception) to June 30, 2007.
Deferred income taxes are provided for the
differences between the bases of assets and liabilities for
financial reporting and income tax purposes. As of June
30, 2007, the Company has a deferred tax asset of
approximately $329,000. The Company had established a
valuation allowance equal to the deferred income tax asset
of approximately $161,000 at December 31, 2006. Management
has changed its position at year end and feels that the
deferred tax asset will be fully utilized.
6. COMMITMENTS AND RELATED PARTY TRANSACTIONS
The Company presently occupies office space provided
by Asia Development Capital LLC ("ADC"), an affiliate and
stockholder of the Company. ADC 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. The Company has
agreed to pay such affiliate $7,500 per month for such
services commencing on the effective date of the Offering,
April 18, 2006.
The Company has engaged Rodman & Renshaw LLC, ("the
representative of the underwriters"), on a non-exclusive
basis, as the Company's agent for the solicitation of the
exercise of the warrants. To the extent not inconsistent
with the guidelines of the NASD and the rules and
regulations of the SEC, the Company has agreed to pay the
representative for bona fide services rendered a commission
equal to 2.5% of the exercise price for each warrant
exercised more than one year after the date of the
prospectus if the exercise was solicited by the
underwriters. In addition to soliciting, either orally or
in writing, the exercise of the warrants, the
representative's services may also include disseminating
information, either orally or in writing, to warrant
holders about the Company or the market for our securities,
and assisting in the processing of the exercise of the
warrants. No compensation will be paid to the
representative upon the exercise of the warrants if:
* the market price of the underlying shares of common stock
is lower than the exercise price;
* the holder of the warrants has not confirmed in writing
that the underwriters solicited the exercise;
* the warrants are held in a discretionary account;
6. COMMITMENTS AND RELATED PARTY TRANSACTIONS (CONTINUED)
* the warrants are exercised in an unsolicited transaction;
or
* the arrangement to pay the commission is not disclosed in
the prospectus provided to warrant holders at the time
of exercise.
The Company has sold to the representative of the
underwriters, for $100, as additional compensation, an
option to purchase up to a total of 350,000 units at a per-
unit price of $10.00. The units issuable upon
exercise of this option are also identical to those offered
by the Offering except that the warrants included in the
option have an exercise price of $6.65 (133% of the
exercise price of the warrants included in the units sold
in the offering.) The Company will pay the underwriters in
the Offering an underwriting discount of 7% of the gross
proceeds of this Offering (of which 3% is deferred until
the consummation of a business combination).
The sale of the option will be accounted for as an
equity transaction. Accordingly, there will be no net
impact on the Company's financial position or results of
operations, except for the recording of the $100 proceeds
from the sale. The Company has determined, based upon a
Black-Scholes model, that the fair value of the option on
the date of sale would be approximately $3.10 per unit, or
$1,086,001 total, using an expected life of five years,
volatility of 45.47% and a risk-free interest rate of
4.39%.
The volatility calculation of 45.47% is based on the
365-day average volatility of a representative sample of
ten (10) companies with market capitalizations under $500
million that management believes to be engaged in the
business of auto component parts (the "Sample Companies").
Because the Company does not have a trading history, the
Company needed to estimate the potential volatility of its
common stock price, which will depend on a number of
factors which cannot be ascertained at this time. The
Company referred to the 365-day average volatility of the
Sample Companies because management believes that the
average volatility of such companies is a reasonable
benchmark to use in estimating the expected volatility of
the Company's common stock post-business combination.
Although an expected life of five years was taken into
account for purposes of assigning a fair value to the
option, if the Company does not consummate a business
combination within the prescribed time period and
liquidates, the option would becomeworthless.
Pursuant to letter agreements with the Company and
the Representative of the underwriters, the Initial
Stockholders have waived their right to receive
distributions with respect to their founding shares upon
the Company's liquidation.
Certain of the Company's officers, directors, or
their designees have agreed with the Representative that
upon consummation of the Offering and during the 45 trading
day period commencing on the later of the date that the
securities comprising the units begin separate trading or
60 days following the consummation of the Offering, that
they will purchase up to 320,000 warrants in the public
marketplace at prices not to exceed $1.40 per warrant. As
of June 30, 2007, William R Herren, Mr. Rudy Wilson, Chun
Hao and Asia Development Capital held 290,000 warrants to
purchase the Company's securities.
The Initial Stockholders will be entitled to
registration rights with respect to their founding shares
pursuant to an agreement to be signed prior to or on the
effective date of the Offering. The holders of the
majority of these shares are entitled to make up to two
demands that the Company register these shares at any time
commencing three months prior to the third anniversary of
the effective date of the Offering. In addition, the
Initial Stockholders have certain "piggy-back" registration
rights on registration statements filed subsequent to the
third anniversary of the effective date of the Offering.
Rodman & Renshaw has entered into a letter
agreement with us pursuant to which it agreed to purchase
up to 125,000 warrants in the public marketplace at prices
not to exceed $1.40 per warrant during the 45 trading day
period commencing on the later of the date separate trading
of the warrants has commenced or 60 days following the
consummation of this offering.
6. COMMITMENTS AND RELATED PARTY TRANSACTIONS (CONTINUED)
Chardan Capital Markets has entered into a letter
agreement with us pursuant to which it agreed to purchase
up to 125,000 warrants in the public marketplace at prices
not to exceed $1.40 per warrant during the 45 trading day
period commencing on the later of the date separate trading
of the warrants has commenced or 60 days following the
consummation of this offering.
On February 8, 2006, five stockholders entered
into five separate letter agreements with the
Representatives of the underwriters pursuant to which they
agreed to purchase in aggregate up to $2,000,000 in
warrants at prices not to exceed $1.40 per warrant during
the 45 day trading period commencing on the later of the
date separate trading of the warrants has commenced or 60
calendar days following the consummation of the Offering.
These entities have agreed that any warrants purchased by
them pursuant to this agreement will not be sold or
transferred until after a completed business combination.
As of June 30, 2007, these five stockholders held 20,000
warrants to purchase the Company's securities.
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.
8. SUBSEQUENT EVENT
On July 25, 2007, at a meeting of the Board of
Directors of the Company, at which a quorum was present,
legal counsel for Hunan TX Enterprise Co Ltd. ("TX")
informed the Board that registration of TX has been
completed with the local Chinese government authorities,
permitting the execution of the Equity Acquisition
Agreement.
The Company, which shall be renamed TX International ("TI")
and redomesticated as a British Virgin Islands Company,
entered into an Equity Acquisition Agreement with Hunan TX
Enterprise Co Ltd., TX pursuant to which TX would merge
with TI resulting in TX becoming a wholly owned subsidiary
of the Company. At the closing of the merger, the
stockholders of TX will receive $13.0 million in cash.
Additionally, the Company and TX anticipate executing a Key
Employee Employment Agreement and Performance Earn-Out
Agreement which will provide for certain retention and
incentive bonuses.
The closing of the merger is subject to certain conditions,
including the approval of the transaction by the majority
of the Company's stockholders and that fewer than 20% of
the Company's stockholders exercise their right to redeem
their shares of common stock for cash.
On August 10, 2007, Asia Automotive Acquisition Corporation
(the" Company") was informed by legal counsel for Hunan TX
Enterprise Co Ltd. ("TX") that the Changsha Ministry of
Commerce has approved the Equity Acquisition Agreement
("Agreement") previously executed among and between the
Company and TX on July 25, 2007.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
This Quarterly Report on Form 10-QSB 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. The following discussion
should be read in conjunction with our Financial Statements
and related Notes thereto included elsewhere in this
report.
We were formed on June 20, 2005, to serve as a
vehicle to effect a merger, capital stock exchange, asset
acquisition or other similar business combination with an
operating business. Our initial business combination must
be with a target business or businesses whose fair market
value is at least equal to 80% of net assets at the time of
such acquisition. 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.
Since our initial public offering, we have been
actively engaged in sourcing a suitable business
combination candidate. We have met with target companies,
service professionals and other intermediaries to discuss
with them our company, the background of our management and
our combination preferences. In the course of these
discussions, we have also spent time explaining the capital
structure of the initial public offering, the combination
approval process, and the timeline under which we are
operating before the proceeds of the offering are returned
to investors.
Most of the activity from June 20, 2005 (inception) to June
30, 2007 relates to the Company's formation and public
offering described below.
Six Months Ended June 30, 2007
For the six months ended June 30, 2007, we had a
net loss of approximately $331,000 consisting of interest
income of approximately $873,000, a loss on warrant
liability of approximately $691,000 and formational
operating costs of approximately $502,000. Interest income
is derived primarily from investment of our cash balances
held in trust, which aggregated approximately $38,818,000
at June 30, 2007. The cash balance held in trust is
invested primarily in treasury bills.
Three Months Ended June 30, 2007
For the three months ended June 30, 2007, we had a
net loss of approximately $1,246,000 consisting of interest
income of approximately $402,000, a loss on warrant
liability of approximately $1,382,000 and formational
operating costs of approximately $142,000. Interest income
is derived primarily from investment of our cash balances
held in trust, which aggregated approximately $38,818,000
at June 30, 2007. The cash balance held in trust is
invested primarily in treasury bills.
Six Months Ended June 30, 2006
For the six months ended June 30, 2006, we had a net
loss of approximately $155,000 consisting of interest
income of approximately $345,000 offset by a loss on
warrant liability of $276,000 and formation operating costs
of approximately $104,000. Interest income is derived
primarily from investment of our cash balances held in
trust, which aggregated approximately $37,763,000 at June
30, 2006. The cash balance held in trust is invested
primarily in treasury bills.
Three Months Ended June 30, 2006
For the three months ended June 30, 2006, we had a net
loss of approximately $155,000, consisting of interest
income of approximately $345,000 offset by a loss on
warrant liability of approximately $276,000 and operating
costs of approximately $104,000. Interest income is derived
primarily from investment of our cash balances held in
trust, which aggregated approximately $37,763,000 at June
30, 2006. The cash balance held in trust is invested
primarily in treasury bills.
LIQUIDITY AND CAPITAL RESOURCES
On April 19, 2006, we consummated our initial public
offering of 5,031,250 units including an additional 656,250
units that were subject to the underwriters' over-allotment
option. Each unit consists of one share of common stock and
one redeemable common stock purchase warrant. Each warrant
entitles the holder to purchase from us one share of our
common stock at an exercise price of $5.00.
Of the proceeds of the Offering, $37,418,000 (plus
interest expense) is being held in a trust account ("Trust
Account") and invested until the earlier of (i) the
consummation of the first business combination or (ii) the
distribution of the Trust Account as described below. The
amount in the Trust Account includes $1,207,500 of
contingent underwriting compensation, which will be paid to
the underwriters if a business combination is consummated,
but which will be forfeited in part if public stockholders
elect to have their shares redeemed for cash if a business
combination is not consummated. Deferred underwriter's fee
is reflected on the balance sheet at $966,121, an
additional $241,379 is included in common stock, subject to
possible conversion, for a total of $1,207,500. The
remaining proceeds may be used to pay for business, legal
and accounting due diligence on prospective acquisitions
and continuing general and administrative expenses.
We pay Asia Development Capital LLC., an affiliate,
an aggregate fee of $7,500 per month which includes the
cost of the office space and the cost of other general and
administrative services provided to us by such affiliate.
Item 3. CONTROLS AND PROCEDURES
Under the supervision and with the participation of
management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the
Company's effectiveness of disclosure controls and
procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) as of the end of the period covered by this
Quarterly Report on Form 10-QSB. Based on that evaluation,
the Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures have
not been operating effectively as of the end of the period
covered by this report.
In connection with the preparation of our Report of
Form 10-QSB, management identified a material weakness, due
to an insufficient number of resources in the accounting
and finance department, resulting in (i) an ineffective
review, monitoring and analysis of schedules,
reconciliations and financial statement disclosures and
(ii) the misapplication of U.S. GAAP and SEC reporting
requirements. Due to the pervasive effect of the lack of
resources, including a lack of resources that are
appropriately qualified in the areas of U.S. GAAP and SEC
reporting, and the potential impact on the financial
statements and disclosures and the importance of the annual
and interim financial closing and reporting process, in the
aggregate, there is more than a remote likelihood that a
material misstatement of the annual financial statements
would not have been prevented or detected.
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, 2007, 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
There are no material legal proceedings pending against us.
Item 2 DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 3. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
Item 5. OTHER INFORMATION
Not Applicable.
Item 6. EXHIBITS
Exhibit No. Description of Exhibits
31.1 Section 302 Certification of Principal
Executive Officer
32.1 Section 906 Certification
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: August 20, 2007
By: /s/William R. Herren
William R. Herren
Chairman
(Principal Executive Officer)
By: /s/Rudy Wilson
Rudy Wilson
Chief Executive Officer
(Principal Executive Officer)
By: /s/David J. Brophy
David J. Brophy
Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 31.1 CERTIFICATION BY PRINCIPAL EXECUTIVE OFFICER
I, William R. Herren, certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of
Asia Automotive Acquisition Corporation;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, mot
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the
registrant as of, the periods presented in this report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and we have:
a) designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others
within those entities,particularly during the period
in which this report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end
of the period covered by this report based on such
evaluation; and
c) disclosed in this report any change in the
registrant's internal control over financial reporting
that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect,
the registrant's internal
control over
financial reporting; and
5. The registrant's other certifying officers and I have
disclosed,based on our most recent evaluation of internal
control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's
board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies and material
weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal control over financial reporting.
Dated: August 20, 2007
/s/ William R. Herren
William R. Herren
Chairman of the Board
Exhibit 32.1 CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of
Title 18, United States Code)
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002
(subsections (a) and (b) of section 1350, chapter 63 of
title 18, United States Code), each of the undersigned
officers of Asia Automotive Acquisition Corporation, a
Delaware corporation (the "Company"), does hereby certify,
to such officer's knowledge, that:
The Quarterly Report on Form 10-QSB for the quarter ended
June 30, 2007 (the "Form 10-QSB") of the Company fully
complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934, and information
contained in the Form 10-QSB fairly presents, in all
material aspects, the financial condition and results
of operations of the Company.
Dated: August 20, 2007
/s/William R. Herren
William R. Herren
Chairman of the Board
/s/Rudy Wilson
Rudy Wilson
Chief Executive Officer
/s/David J. Brophy
David J. Brophy
Chief Financial Officer
A signed original of this written statement required by
Section 906 has been provided to the Company and will be
retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request.
Exhibit No. Description of Exhibits
31.1 Section 302 Certification of Principal
Executive Officer
32.1 Section 906 Certification
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