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SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
______________
FORM
10-K
ANNUAL
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2004
Commission
file number: 0-50860
TRINITY
PARTNERS ACQUISITION COMPANY INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
(State
of incorporation)
|
|
20-1025065
(I.R.S.
Employer Identification No.)
|
245
Fifth Avenue, Suite 1600
New
York, New York 10016
(Address
of principal executive offices, including zip code)
(212)
696-4282
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
None
Securities
registered pursuant to Section 12(g) of the Act:
Series A
Units, each consisting of two shares of common stock, par
value
$.0001
per share, five Class W warrants and five Class Z
warrants
Series B
Units, each consisting of two shares of Class B common
stock,
par
value $.0001 per share, one Class W warrant and one Class Z
warrant
Common
Stock, par value $.0001 per share
Class B
Common Stock, par value $.0001 per share
Class W
Warrants
Class Z
Warrants
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 (or for such
shorter period that the registrant was required to file such reports), and
(2) had been subject to such filing requirements for the past 90 days. Yes
x
No o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
Indicate
by check mark whether the registrant is an accelerated filer (as defined in
Exchange Act Rule 12b-2). Yes o
No x
State
the aggregate market value of the voting and non-voting common equity held by
nonaffiliates computed by reference to the price at which the common equity was
last sold, or the average bid and ask price of such common equity, as of the
last business day of the registrant’s
most recently completed second fiscal quarter: N/A
Indicate
the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable
date.
|
Class |
|
Outstanding
at
March 15, 2005 |
|
Common
Stock, par value $0.0001 per share |
|
|
287,600 |
|
Class B
Common Stock, par value $0.0001 per share |
|
|
1,495,000 |
|
PART
I
Item
1. Business.
Introduction
We are a
blank check company formed to serve as a vehicle for the acquisition of a target
business which we believe has significant growth potential.
We are a
Delaware corporation organized in April 2004. Our executive offices are located
at 245 Fifth Avenue, Suite 1600, New York, New York 10016. Our telephone number
is (212) 696-4282. We do not currently have a website and consequently do
not make available materials we file with or furnish to the Securities and
Exchange Commission. We will provide electronic or paper copies of such
materials free of charge upon request.
Recent Development
On March
28, 2005, we announced that we had executed a definitive agreement for the
merger of Trinity Partners and Adventure Holdings, S.A. Adventure Holdings,
through wholly-owned subsidiaries, owns and operates two bulk carriers, the M/V
“Free Destiny” and the M/V “Free Envoy.”
Adventure
Holdings is a privately-held Marshall Islands corporation headquartered in
Piraeus, Greece which was organized in April 2004 and acquired the M/V “Free
Destiny” in August 2004 and the M/V “Free Envoy” in September 2004. These
Handysize drybulk vessels have cargo capacities of 25,240 and 26,318 deadweight
tons (dwt), respectively, and are deployed under Time Period Charter
arrangements. Drybulk carriers are employed for seaborne transportation of key
commodities and raw materials such as iron and steel, fertilizers, minerals,
forest/agricultural products (soybeans, wheat, corn), sugar, salt, ores,
bauxite, alumina, cement and other construction materials transported in bulk.
Strong raw materials demand in recent years from developing countries,
particularly China and India, has resulted in robust growth for drybulk shipping
as well as increased charter rates, attributable in part to industrywide
capacity constraints.
The
definitive merger agreement contemplates the merger of Trinity Partners with and
into Adventure Holdings, with our current stockholders receiving one share and
one warrant of Adventure Holdings for each share and warrant they presently own.
After giving effect to the merger, our stockholders would own approximately
29.4% of Adventure Holdings. In addition, the management of Adventure Holdings
would receive options and warrants to acquire an additional 950,000 shares of
Adventure Holding’s common stock, exercisable at $5.00 per share over terms
ranging from three to five years. The merger is subject to, among other
things, the filing of definitive proxy materials with the SEC and approval of
the transaction by our stockholders. There can be no assurance that the proposed
transaction will be consummated.
Our
investors and securityholders are advised to read our proxy materials
when they become available because they will contain important
information about the merger. Investors and securityholders may obtain a free
copy of these and other documents (when available) filed by us with
the SEC at its website at http://www.sec.gov. Free copies of the proxy
materials, once available, may also be obtained directly from us.
Effecting
a Business Combination
General
A
business combination may involve the acquisition of, or merger with, a company
which does not need substantial additional capital but which desires to
establish a public trading market for its shares, while avoiding what it may
deem to be adverse consequences of undertaking a public offering itself. These
include time delays, significant expense, loss of voting control and compliance
with various Federal and state securities laws. In the alternative, a business
combination may involve a company which may be financially unstable or in its
early stages of development or growth.
Selection
of a target business and structuring of a business combination
Subject
to the requirement that our initial business combination must be with a target
business with a fair market value that is at least 80% of our net assets at the
time of such acquisition, our management has virtually unrestricted flexibility
in identifying and selecting a prospective target business. In evaluating a
prospective target business, our management will consider, among other factors,
the following:
| · |
financial
condition and results of operation; |
| · |
experience
and skill of management and availability of additional
personnel; |
| · |
stage
of development of the products, processes or
services; |
| · |
degree
of current or potential market acceptance of the products, processes or
services; |
| · |
proprietary
features and degree of intellectual property or other protection of the
products, processes or services; |
| · |
regulatory
environment of the industry; and |
| · |
costs
associated with effecting the business
combination. |
These
criteria are not intended to be exhaustive. Any evaluation relating to the
merits of a particular business combination will be based, to the extent
relevant, on the above factors as well as other considerations deemed relevant
by our management in effecting a business combination consistent with our
business objective. In evaluating a prospective target business, we will conduct
an extensive due diligence review which will encompass, among other things,
meetings with incumbent management and inspection of facilities, as well as
review of financial and other information which will be made available to
us.
We will
endeavor to structure a business combination so as to achieve the most favorable
tax treatment to us, the target business and both companies’ stockholders. We
cannot assure you, however, that the Internal Revenue Service or appropriate
state tax authority will agree with our tax treatment of the business
combination.
The time
and costs required to select and evaluate a target business and to structure and
complete the business combination cannot presently be ascertained with any
degree of certainty. Any costs incurred with respect to the identification and
evaluation of a prospective target business with which a business combination is
not ultimately completed will result in a loss to us and reduce the amount of
capital available to otherwise complete a business combination.
Fair
Market Value of Target Business
The
initial target business that we acquire must have a fair market value equal to
at least 80% of our net assets at the time of such acquisition. The fair market
value of such business will be determined by our board of directors based upon
standards generally accepted by the financial community, such as actual and
potential sales, earnings and cash flow and book value. If our board is not able
to independently determine that the target business has a sufficient fair market
value, we will obtain an opinion from an unaffiliated, independent investment
banking firm which is a member of the National Association of Securities
Dealers, Inc. with respect to the satisfaction of such criteria. Since any
opinion, if obtained, would merely state that fair market value meets the 80% of
net assets threshold, it is not anticipated that copies of such opinion would be
distributed to our stockholders, although copies will be provided to
stockholders who request it. We will not be required to obtain an opinion from
an investment banking firm as to the fair market value if our board of directors
independently determines that the target business does have sufficient fair
market value.
Probable
lack of business diversification
While we
may seek to effect business combinations with more than one target business, our
initial business combination must be with a target business which satisfies the
minimum valuation standard at the time of such acquisition, as discussed above.
Consequently, it is probable that we will have the ability to effect only a
single business combination. Accordingly, the prospects for our success may be
entirely dependent upon the future performance of a single business. Unlike
other entities which may have the resources to complete several business
combinations of entities operating in multiple industries or multiple areas of a
single industry, it is probable that we will not have the resources to diversify
our operations or benefit from the possible spreading of risks or offsetting of
losses. By consummating a business combination with only a single entity, our
lack of diversification may:
| · |
subject
us to numerous economic, competitive and regulatory developments, any or
all of which may have a substantial adverse impact upon the particular
industry in which we may operate subsequent to a business combination,
and |
| · |
result
in our dependency upon the development or market acceptance of a single or
limited number of products, processes or
services. |
Limited
ability to evaluate the target business’ management
Although
we intend to closely scrutinize the management of a prospective target business
when evaluating the desirability of effecting a business combination, we cannot
assure you that our assessment of the target business’ management will prove to
be correct. In addition, we cannot assure you that the future management will
have the necessary skills, qualifications or abilities to manage a public
company intending to embark on a program of business development. Furthermore,
the future role of our directors, if any, in the target business cannot
presently be stated with any certainty. While it is possible that one or more of
our directors will remain associated in some capacity with us following a
business combination, it is unlikely that any of them will devote their full
efforts to our affairs subsequent to a business combination. Moreover, we cannot
assure you that our directors will have significant experience or knowledge
relating to the operations of the particular target business.
Following
a business combination, we may seek to recruit additional managers to supplement
the incumbent management of the target business. We cannot assure you that we
will have the ability to recruit additional managers, or that additional
managers will have the requisite skills, knowledge or experience necessary to
enhance the incumbent management.
Opportunity
for Class B stockholder approval of business
combination
Prior to
the completion of a business combination, we will submit the transaction to our
Class B stockholders for approval, even if the nature of the acquisition
would not ordinarily require stockholder approval under applicable state law. In
connection with seeking Class B stockholder approval of a business
combination, we will furnish our Class B stockholders with proxy
solicitation materials prepared in accordance with the Securities Exchange Act
of 1934, which, among other matters, will include a description of the
operations of the target business and audited historical financial statements of
the business. These materials will also be mailed to the holders of our common
stock although their vote will note be solicited.
In
connection with the vote required for any business combination, all of our
officers and directors who own Class B shares may vote their Class B
shares in any manner they determine, in their sole discretion. We will proceed
with the business combination only if the Class B stockholders, who own at
least a majority of the shares of Class B common stock present in person or
by proxy at a special meeting called to consider a proposed business
combination, vote in favor of the business combination and Class B
stockholders owning less than 20% of the Class B shares sold in our initial
public offering exercise their conversion rights.
Conversion
rights
At the
time we seek Class B stockholder approval of any business combination, we
will offer each Class B stockholder the right to have his or her shares of
Class B common stock converted to cash if he or she votes against the
business combination and the business combination is approved and completed. The
holders of our common stock will not be entitled to seek conversion of their
shares. The actual per-share conversion price will be equal to the amount in the
trust fund, inclusive of any interest, as of the record date for determination
of Class B stockholders entitled to vote on the business combination,
divided by the number of Class B shares sold in our initial public
offering. Including interest earned on the trust fund, the per-share conversion
price was $5.08 per share as of December 31, 2004. An eligible Class B
stockholder may request conversion at any time after the mailing to our
Class B stockholders of the proxy statement and prior to the vote taken
with respect to a proposed business combination at a meeting held for that
purpose, but the request will not be granted unless the Class B stockholder
votes against the business combination and the business combination is approved
and completed. Any request for conversion, once made, may be withdrawn at any
time up to the date of the meeting. It is anticipated that the funds to be
distributed to Class B stockholders entitled to convert their Class B
shares who elect conversion will be distributed promptly after completion of a
business combination. Any Class B stockholder who converts his or her stock
into his or her share of the trust fund still has the right to exercise the
Class W and Class Z warrants that he or she received as part of the
Series B units. We will not complete any business combination if
Class B stockholders, owning 20% or more of the Class B shares sold in
our initial public offering, exercise their conversion rights.
Distribution
of trust fund to Class B stockholders if no business
combination
If we do
not complete a business combination within 12 months after the completion of our
initial public offering in August 2004, or within 18 months if the extension
criteria described below have been satisfied, we will distribute to all of our
Class B stockholders, in proportion to their respective equity interests in
the Class B common stock, an aggregate sum equal to the amount in the trust
fund, inclusive of any interest, and all then outstanding Class B common
stock will be automatically cancelled. There will be no distribution from the
trust fund with respect to our common stock or our Class W and Class Z
warrants. However, any remaining net assets following the distribution of the
trust fund will be available for our use.
The
distribution per Class B share, including interest earned on the trust
fund, was $5.08 per share as of December 31, 2004. The proceeds deposited in the
trust fund could, however, become subject to the claims of our creditors which
could be prior to the claims of our Class B stockholders. We cannot assure
you that the actual distribution per Class B share will not be less than
$5.08 due to claims of creditors. If we are unable to complete a business
combination and are forced to distribute the proceeds held in trust to our
Class B stockholders, Lawrence Burstein, our president, and James Scibelli,
our chairman, will be personally liable under certain circumstances to ensure
that the proceeds in the trust fund are not reduced by the claims of various
vendors or other entities that are owed money by us for services rendered or
products sold to us. However, we cannot assure you that Messrs. Burstein and
Scibelli will be able to satisfy those obligations. If we enter into either a
letter of intent, an agreement in principle or a definitive agreement to
complete a business combination prior to the expiration of 12 months after the
completion of our August 2004 initial public offering, but are unable to
complete the business combination within the 12-month period, then we will have
an additional six months in which to complete the business combination
contemplated by the letter of intent, agreement in principle or definitive
agreement. If we are unable to do so by the expiration of the 18-month period
from the completion of our August 2004 initial public offering, we will then
notify the trustee of the trust fund to commence liquidating the investments
constituting the trust fund and will turn over the proceeds to our transfer
agent for distribution to our Class B stockholders. We anticipate that our
instruction to the trustee would be given promptly after the expiration of the
applicable 12-month or 18-month period.
Our
Class B stockholders shall be entitled to receive funds from the trust fund
only in the event we do not complete a business combination or if the
Class B stockholders seek to convert their respective shares into cash upon
a business combination which the Class B stockholder voted against and
which is actually completed by us. In no other circumstances shall a
Class B stockholder have any right or interest of any kind to or in the
trust fund. Holders of our common stock will not be entitled to receive any of
the proceeds held in the trust fund.
Competition
In
identifying, evaluating and selecting a target business, we expect to encounter
intense competition from other entities having a business objective similar to
ours. Many of these entities are well established and have extensive experience
identifying and effecting business combinations directly or through affiliates.
Many of these competitors possess greater technical, human and other resources
than us and our financial resources will be relatively limited when contrasted
with those of many of these competitors. While we believe there are numerous
potential target businesses that we could acquire, our ability to compete in
acquiring certain sizable target businesses will be limited by our available
financial resources. This inherent competitive limitation gives others an
advantage in pursuing the acquisition of a target business.
Further:
| · |
our
obligation to seek Class B stockholder approval of a business
combination may delay the completion of a
transaction; |
| · |
our
obligation to convert into cash shares of Class B common stock held
by our Class B stockholders in certain instances may reduce the
resources available to us for a business combination;
and |
| · |
our
outstanding warrants, and the future dilution they potentially represent,
may not be viewed favorably by certain target
businesses. |
Any of
these obligations may place us at a competitive disadvantage in successfully
negotiating a business combination. Our management believes, however, that our
status as a public entity and potential access to the United States public
equity markets may give us a competitive advantage over privately-held entities
having a similar business objective as us in acquiring a target business with
significant growth potential on favorable terms.
If we
succeed in effecting a business combination, there will be, in all likelihood,
intense competition from competitors of the target business. In particular,
certain industries which experience rapid growth frequently attract an
increasingly larger number of competitors, including competitors with
increasingly greater financial, marketing, technical and other resources than
the initial competitors in the industry. The degree of competition
characterizing the industry of any prospective target business cannot presently
be ascertained. We cannot assure you that, subsequent to a business combination,
we will have the resources to compete effectively, especially to the extent that
the target business is in a high-growth industry.
Employees
Lawrence
Burstein, our president and treasurer, and James Scibelli, our chairman and
secretary, are our only executive officers. These individuals are not obligated
to contribute any specific number of hours per week and intend to devote only as
much time as they deem necessary to our affairs. The amount of time they will
devote in any time period will vary based on the availability of suitable target
businesses to investigate, although we expect each of them to devote an average
of approximately ten hours each per week to our business. We do not intend to
have any full time employees prior to the consummation of a business
combination.
Item
2. Properties.
We
maintain our executive offices at 245 Fifth Avenue, Suite 1600, New York, New
York 10016. The cost for this space is included in the $4,000 per-month fee
Unity Venture Capital Associates charges us for general and administrative
services pursuant to a letter agreement between us and Unity Venture Capital
Associates. We believe, based on rents and fees for similar services in the New
York metropolitan area, that the fee charged by Unity Venture Capital Associates
is at least as favorable as we could have obtained from an unaffiliated person.
We consider our current office space adequate for our current
operations.
Item
3. Legal
Proceedings.
We are
not party to any litigation, and we are not aware of any threatened litigation
that would have a material adverse effect on us or our business.
Item
4. Submission
of Matters to a Vote of Security Holders.
No
matters were submitted to a vote of securityholders during the fourth quarter of
the fiscal period ended December 31, 2004.
PART
II
Item
5. Market
For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
Our
Series A units and Series B units have traded on the OTC Bulletin Board under
the symbols "TPQCU" and "TPQCZ," respectively, since August 4, 2004, the date of
the initial public offering of our securities. On September 2, 2004, the common
stock, Class B common stock, Class W warrants and Class Z warrants included in
the Series A units and Series B units commenced separate trading under the
symbols "TPQCA," "TPQCB," "TPQCW" and "TPQCL." The closing high and low
sales prices of our common stock, Class B common stock, Class W warrants
and Class Z warrants as reported by the OTC Bulletin Board, for the
quarters indicated are as follows:
| |
|
Common
Stock |
|
Class B
Common
Stock |
|
Class
W Warrants |
|
Class
Z Warrants |
|
| |
|
| |
|
High |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
|
2004: |
|
|
|
|
|
|
|
|
|
|
|
|
Third
Quarter |
|
$ |
3.50 |
|
$ |
2.75 |
|
$ |
4.75 |
|
$ |
4.55 |
|
$ |
1.00 |
|
$ |
0.55 |
|
$ |
1.00 |
|
$ |
0.55 |
|
|
Fourth
Quarter |
|
|
3.40 |
|
|
2.75 |
|
|
4.90 |
|
|
4.58 |
|
|
0.70 |
|
|
0.55 |
|
|
1.01 |
|
|
0.55 |
|
The
trading of our securities, especially our Class W warrants and Class Z warrants,
is limited, and therefore there may not be deemed to be an established public
trading market under guidelines set forth by the Securities and Exchange
Commission. As of March 15, 2005, there were 3 stockholders of record of our
common stock, 1 stockholder of record of our Class B common stock, 35
holders of record of our Class W warrants and 35 holders of record of our
Class Z warrants. Such numbers do not include beneficial owners holding shares
or warrants through nominee names.
We have
never declared or paid any dividends on our common stock or Class B common
stock, nor do we anticipate paying cash dividends in the foreseeable
future.
Item
6. Selected
Financial Data.
The
following tables should be read in conjunction with our financial statements and
the notes thereto appearing elsewhere in this Annual Report on Form 10-K.
The selected financial data has been derived from our financial statements,
which have been audited by J.H. Cohn LLP, independent registered public
accounting firm, as indicated in their report included elsewhere
herein.
|
Statement
of Operations Data: |
|
From
Inception
(April 14, 2004) to
December 31,
2004 |
|
|
Revenue |
|
$ |
— |
|
|
Operating
loss |
|
|
(139,491 |
) |
|
Interest
income |
|
|
53,014 |
|
|
Net
loss |
|
|
(86,477 |
) |
|
Earnings
per share data: |
|
|
|
|
|
Weighted
average basic and diluted shares outstanding |
|
|
1,020,615 |
|
|
Net
loss per share, basic and diluted |
|
$ |
(.08 |
) |
|
Other
Financial Data: |
|
|
|
|
|
Net
cash used in operating activities |
|
$ |
(87,851 |
) |
|
Cash
contributed to trust fund |
|
|
7,549,750 |
|
|
Net
proceeds from public offering allocable to stockholders’
equity |
|
|
6,576,455 |
|
|
Portion
of net proceeds from public offering allocable to common stock subject to
possible conversion to cash |
|
|
1,509,198 |
|
|
Selected
Balance Sheet Data: |
|
|
December
31, 2004 |
|
|
Cash
and cash equivalents |
|
$ |
484,402 |
|
|
Net
working capital |
|
|
8,037,076 |
|
|
Total
assets |
|
|
8,109,912 |
|
|
Common
stock, subject to possible conversion to cash |
|
|
1,519,490 |
|
|
Total
stockholders’ equity |
|
|
6,517,586 |
|
Item
7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
The
following discussion should be read in conjunction with our financial statements
and footnotes thereto contained in this report.
Recent
Events
On March
28, 2005, we announced that we have executed a definitive agreement for the
merger of Trinity Partners and Adventure Holdings, S.A., the owner and operator
of two bulk carriers, the M/V “Free Destiny” and the M/V “Free Envoy.”
The merger is subject to, among other things, approval of the transaction
by our stockholders. After giving effect to the merger, our
stockholders would own approximately 29.4% of Adventure Holdings. We
believe that we have sufficient available funds to complete our efforts to
effect a business combination with Adventure Holdings or another operating
business.
General
We were
incorporated in April 2004 to serve as a vehicle to effect a business
combination with an operating business. On August 4, 2004, we completed our
initial public offering of 143,750 Series A Units and 747,500 Series B
Units, including 18,750 Series A Units and 97,500 Series B Units
issued upon exercise of the underwriters’ over allotment option. Each
Series A Unit consists of two shares of our common stock, five Class W
Warrants and five Class Z Warrants and each Series B Unit consists of
two shares of our Class B Common Stock, one Class W Warrant and one
Class Z Warrant. Each Class W Warrant and Class Z Warrant
entitles the holder to purchase one share of our common stock at a price of
$5.00.
For a
description of the proceeds generated in the offering and a discussion of the
use of such proceeds, see "Liquidity and Capital Resources" below and
Notes 1 and 2 of the audited financial statements included elsewhere in
this Form 10-K.
Operations
Net loss
for the period from inception (April 14, 2004) to December 31, 2004 consisted of
interest income on the trust fund investment of $50,335 and interest on cash and
cash equivalents of $2,679, offset by operating expenses of $75,948 for
professional fees, $15,911 for organization costs and $47,632 for other
operating expenses, which includes $20,000 of expense paid to Unity Venture
Capital Associates pursuant to an administrative services
agreement.
Liquidity
and Capital Resources
We
consummated our initial public offering on August 4, 2004. Gross proceeds from
our initial public offering, including the full exercise of the underwriters’
over-allotment option, were $9,059,125. Net proceeds were $8,085,653, after
deducting offering expenses of $973,472, including $78,775 representing the
underwriters’ non-accountable expense allowance of 1% of the gross proceeds and
underwriting discounts of $634,139. Of this amount, $7,549,750 was placed in a
trust account and the remaining proceeds are available to be used to provide for
business, legal and accounting due diligence on prospective acquisitions and
continuing general and administrative expenses. We intend to use substantially
all of the net proceeds from the offering to acquire a target business,
including identifying and evaluating prospective acquisition candidates,
selecting the target business, and structuring, negotiating and consummating the
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 fund as well as any other net proceeds not expended will be used to
finance the operations of the target business. We believe that we have
sufficient available funds outside of the trust fund to operate through January
31, 2006, assuming that a business combination is not consummated during that
time. We do not believe we will need to raise additional funds in order to meet
the expenditures required for operations.
In April
2004, we issued an aggregate of $46,000 of non-interest bearing, unsecured notes
payable to Mr. Burstein, a stockholder, director and our President and Treasurer
and to James Scibelli, a stockholder and our Chairman and Secretary. Such notes
were repaid out of the proceeds of our initial public offering on August 4, 2004
and retired.
Off-Balance
Sheet Arrangements
As of
December 31, 2004 we did not have any off-balance sheet arrangements as defined
in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities
Act of 1934.
Contractual
Obligations and Commitments
Our
contractual obligations are set forth in the following table as of December 31,
2004.
| |
|
Payment
due by period |
|
|
Contractual
Obligations |
|
Total |
|
Less
than 1 year |
|
1-3
years |
|
3-5
years |
|
More
than 5 years |
|
|
Administrative
services agreement (1) |
|
$ |
52,000 |
|
$ |
48,000 |
|
$ |
4,000 |
|
$ |
— |
|
$ |
— |
|
|
Total |
|
$ |
52,000 |
|
$ |
48,000 |
|
$ |
4,000 |
|
$ |
— |
|
$ |
— |
|
|
(1) |
We
are obligated, having commenced July 29, 2004, to pay to Unity Venture
Capital Associates, Ltd., an affiliate of Lawrence Burstein, a
stockholder, director and our President and Treasurer, a monthly fee of
$4,000 for general and administrative
services. |
If we do
not complete a business combination within 12 months after the completion of our
initial public offering in August 2004, or within 18 months if certain extension
criteria have been satisfied, we will distribute to all of our Class B
stockholders, in proportion to their respective equity interests in the
Class B common stock, an aggregate sum equal to the amount in the trust
fund, inclusive of any interest, and all then outstanding Class B common
stock will be automatically cancelled. There will be no distribution from the
trust fund with respect to our common stock or our Class W and Class Z
warrants. However, any remaining net assets following the distribution of the
trust fund will be available for our use. The distribution per Class B
share, taking into account interest, earned on the trust fund, was approximately
$5.08 per share based on the value in the trust fund as of December 31,
2004.
Critical
Accounting Policies
Our
significant accounting policies are described in Note 3 to our financial
statements included elsewhere in this report. We believe the following critical
accounting polices involved the most significant judgments and estimates used in
the preparation of our financial statements.
Cash
and Cash Equivalents - We
consider all highly liquid investments with original maturities of three months
or less to be cash equivalents.
Investments
- - Restricted
investments consist of investments acquired, which are included in the trust
fund, with maturities exceeding three months but less than three years.
Consistent with Statement of Financial Accounting Standards (SFAS) No. 115,
“Accounting for Certain Investments in Debt and Equity Securities”, we classify
all debt securities and all investments in equity securities that have readily
determinable fair values as available-for-sale, as the sale of such securities
may be required prior to maturity to implement management
strategies.
Income
Taxes - We
follows Statement of Financial Accounting Standards No. 109 (“SFAS
No. 109”), “Accounting 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 and are 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 income tax assets
to the amount expected to be realized.
Net
Loss Per Share - Net loss
per share is computed on the basis of the weighted average number of common
stock and Class B common stock outstanding for the period, including common
stock equivalents (unless anti-dilutive), which would arise from the exercise of
warrants.
Use
of Estimates and Assumptions - The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect certain 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 revenue and expenses during
the reporting period. Actual results can, and in many cases will, differ from
those estimates.
New
Accounting Pronouncements - We do not
believe that any recently issued, but not yet effective, accounting standards if
currently adopted would have a material effect on our financial
statements.
Risk
Factors
We
are a company with no operating history and very limited
resources.
We are a
recently incorporated company with no operating results to date. Since we do not
have an operating history, you will have no basis upon which to evaluate our
ability to achieve our business objective, which is to acquire an operating
business. Although we have entered into a definitive merger
agreement with Adventure Holdings, S.A., there can be no assurance that the
proposed transaction will be consummated. We have no present revenue and will
not generate any revenues (other than interest income) until, at the earliest,
after the consummation of a business combination.
If
we are unable to complete a business combination, holders of our common stock
will be unable to convert their securities and participate in the distribution
of the trust fund.
The trust
fund is reserved for holders of our Class B common stock. Consequently, if
we are unable to complete the merger with Adventure Holdings or any other
business combination, the holders of our common stock will not be entitled to
participate in the distribution of the trust fund. Furthermore, there will be no
distribution from the trust fund with respect to our outstanding Class W
and Class Z warrants.
Shares
of common stock will not be entitled to vote on a proposed business
combination.
Holders
of our common stock will not be entitled to vote on a proposed business
combination with a target business. Only the Class B shareholders will have
an opportunity to approve a business combination. Consequently, holders of
common stock will be entirely dependent upon the judgment of Class B
shareholders in determining whether or not a proposed business combination is
approved.
If
we are unable to complete a business combination and the trust fund is
distributed to the Class B shareholders, the holders of common stock will
have limited opportunity to recover their initial investment and their shares
may be worthless.
If the
trust fund is distributed to the Class B stockholders, the remaining net
assets will be available for our use. However, the amount of net assets
remaining in the company will likely be minimal following the expenditures
incurred in connection with the attempt to complete a business
combination.
You
will not be entitled to protections normally afforded to investors of blank
check companies.
We may be
deemed to be a “blank check” company under the United States securities laws.
However, since we have net tangible assets in excess of $5,000,000, we are
exempt from rules promulgated by the SEC to protect investors of blank check
companies such as Rule 419. Accordingly, investors will not be afforded the
benefits or protections of those rules. Because we are not subject to
Rule 419, we have a longer period of time to complete a business
combination in certain circumstances.
If
third parties bring claims against us, the proceeds held in trust could be
reduced and the per-share distribution received by Class B stockholders
will be less than $5.08 per share.
Our
placing of funds in trust may not protect those funds from third party claims
against us. The proceeds held in trust could be subject to claims which could
take priority over the claims of our Class B stockholders. We cannot assure
you that the per-share distribution from the trust fund will not be less than
$5.08 due to claims of creditors. If we are unable to complete a business
combination and are forced to distribute the proceeds held in trust to our
Class B stockholders, Lawrence Burstein, our president, and James Scibelli,
our chairman, will be personally liable under certain circumstances to ensure
that the proceeds in the trust fund are not reduced by the claims of various
vendors or other entities that are owed money by us for services rendered or
products sold to us. However, we cannot assure you that Messrs. Burstein and
Scibelli will be able to satisfy those obligations.
It
is likely that our current officers and directors will resign upon consummation
of a business combination and we will have only limited ability to evaluate the
management of the target business.
Our
ability to successfully effect a business combination will be totally dependent
upon the efforts of our key personnel. The future role of our key personnel in
the target business, however, cannot presently be ascertained. Although it is
possible that some of our key personnel will remain associated in various
capacities with the target business following a business combination, it is
likely that the management of the target business at the time of the business
combination will remain in place. Although we intend to closely scrutinize the
management of a prospective target business in connection with evaluating the
desirability of effecting a business combination, we cannot assure you that our
assessment of management will prove to be correct.
Our
officers and directors may allocate their time to other businesses which could
cause a conflict of interest as to which business they present a viable
acquisition opportunity to.
Our
officers and directors are not required to commit their full time to our
affairs, which may result in a conflict of interest in allocating their time
between our operations and other businesses. Some of these persons may in the
future become affiliated with entities, including other “blank check” companies,
engaged in business activities similar to those intended to be conducted by us.
Our officers and directors may become aware of business opportunities which may
be appropriate for presentation to us as well as the other entities with which
they may be affiliated. Accordingly, they may have conflicts of interest in
determining to which entity a particular business opportunity should be
presented.
All
of our officers and directors own Class W and Class Z warrants which
will not participate in the distribution of the trust fund and therefore they
may have a conflict of interest in determining whether a particular target
business is appropriate for a business combination.
The
Class W and Class Z warrants owned by our directors and officers may
have limited value if we do not consummate a business combination. The personal
and financial interests of our directors and officers may influence their
motivation in identifying and selecting a target business and completing a
business combination. Consequently, our directors’ and officers’ discretion in
identifying and selecting a suitable target business may result in a conflict of
interest when determining whether the terms, conditions and timing of a
particular business combination are appropriate and in our stockholders’ best
interest.
If
our common stock becomes subject to the SEC’s penny stock rules, broker-dealers
may experience difficulty in completing customer transactions and trading
activity in our securities may be adversely affected.
If at any
time we have net tangible assets of $5,000,000 or less and our common stock and
Class B common stock has a market price per share of less than $5.00,
transactions in our common stock and Class B common stock may be subject to
the “penny stock” rules promulgated under the Securities Exchange Act of 1934.
Under these rules, broker-dealers who recommend such securities to persons other
than institutional accredited investors must:
| · |
make
a special written suitability determination for the
purchaser; |
| · |
receive
the purchaser’s written agreement to a transaction prior to
sale; |
| · |
provide
the purchaser with risk disclosure documents which identify certain risks
associated with investing in “penny stocks” and which describe the market
for these “penny stocks” as well as a purchaser’s legal remedies;
and |
| · |
obtain
a signed and dated acknowledgment from the purchaser demonstrating that
the purchaser has actually received the required risk disclosure document
before a transaction in a “penny stock” can be
completed. |
If our
common stock and Class B common stock becomes subject to these rules,
broker-dealers may find it difficult to effectuate customer transactions and
trading activity in our securities may be adversely affected. As a result, the
market price of our securities may be depressed, and you may find it more
difficult to sell our securities.
It
is probable that we will only be able to complete one business combination,
which will cause us to be solely dependent on a single business and a limited
number of products or services.
The net
proceeds from our initial public offering provided us with only $8,096,211 which
we may use to complete a business combination. Our initial business combination
must be with a business with a fair market value of at least 80% of our net
assets at the time of such acquisition. Consequently, it is probable that we
will have the ability to complete only a single business combination.
Accordingly, the prospects for our success may be:
| · |
solely
dependent upon the performance of a single business,
or |
| · |
dependent
upon the development or market acceptance of a single or limited number of
products, processes or services. |
In this
case, we will not be able to diversify our operations or benefit from the
possible spreading of risks or offsetting of losses, unlike other entities which
may have the resources to complete several business combinations in different
industries or different areas of a single industry.
Because
of our limited resources and the significant competition for business
combination opportunities, we may not be able to consummate a business
combination with growth potential.
We expect
to encounter intense competition from other entities having a business objective
similar to ours, including venture capital funds, leveraged buyout funds and
operating businesses competing for acquisitions. Many of these entities are well
established and have extensive experience in identifying and effecting business
combinations directly or through affiliates. Many of these competitors possess
greater technical, human and other resources than we do and our financial
resources will be relatively limited when contrasted with those of many of these
competitors. While we believe that there are numerous potential target
businesses that we could acquire, our ability to compete in acquiring certain
sizable target businesses will be limited by our available financial resources.
This inherent competitive limitation gives others an advantage in pursuing the
acquisition of certain target businesses. Further, the obligation we have to
seek Class B stockholder approval of a business combination may delay the
consummation of a transaction, and our obligation to convert into cash the
shares of Class B common stock in certain instances may reduce the
resources available for a business combination. Additionally, our outstanding
Class W and Class Z warrants, and the future dilution they potentially
represent, may not be viewed favorably by certain target businesses. Any of
these obligations may place us at a competitive disadvantage in successfully
negotiating a business combination.
We
may be unable to obtain additional financing, if required, to complete a
business combination or to fund the operations and growth of the target
business, which could compel us to restructure the transaction or abandon a
particular business combination.
Although
we believe that the funds in our trust fund will be sufficient to allow us to
consummate a business combination, such as the proposed business
combination with Adventure Holdings, in as much as we do not consummate the
business combination with Adventure Holdings and we have not yet identified
another prospective target business, we cannot ascertain the capital
requirements for any particular transaction. If the funds in our trust fund
prove to be insufficient, either because of the size of the business combination
or the depletion of the available net proceeds in search of a target business,
or because we become obligated to convert into cash a significant number of
shares of Class B common stock from dissenting stockholders, we will be
required to seek additional financing. We cannot assure you that such financing
would be available on acceptable terms, if at all. To the extent that additional
financing proves to be unavailable when needed to consummate a particular
business combination, we would be compelled to restructure the transaction or
abandon that particular business combination and seek an alternative target
business candidate. In addition, if we consummate a business combination, we may
require additional financing to fund the operations or growth of the target
business. The failure to secure additional financing could have a material
adverse effect on the continued development or growth of the target business.
None of our officers, directors or stockholders is required to provide any
financing to us in connection with or after a business combination.
Our
loss of the services of Lawrence Burstein and James Scibelli would make it more
difficult to find a suitable company for a business combination which makes it
more likely that we will be forced to distribute the proceeds of our trust fund
to our Class B stockholders.
Our
ability to successfully effect a business combination will be largely dependent
upon the efforts of Lawrence Burstein, our president and James Scibelli, our
chairman. We have not entered into an employment agreement with either Mr.
Burstein or Mr. Scibelli, nor have we obtained any “key man” life insurance on
either of their lives. The loss of Mr. Burstein’s and/or Mr. Scibelli’s services
could have a material adverse effect on our ability to successfully achieve our
business objectives, including successfully consummating a business combination
with Adventure Holdings or otherwise seeking a suitable target business to
effect a business combination.
Our
outstanding warrants may have an adverse effect on the market price of our
common stock and make it more difficult to effect a business
combination.
In
connection with our initial public offering, we issued warrants to purchase
2,550,000 shares of common stock. Our officers and directors and/or certain of
their affiliates have also purchased warrants to purchase 725,000 shares of
common stock at $5.00 per share. We also issued an option to purchase 12,500
Series A units and/or 65,000 Series B units to the representative of
the underwriters which, if exercised, will result in the issuance of an
additional 255,000 warrants. To the extent we issue shares of common stock to
effect a business combination, the potential for the issuance of substantial
numbers of additional shares upon exercise of these warrants could make us a
less attractive acquisition vehicle in the eyes of a target business as such
securities, when exercised, will increase the number of issued and outstanding
shares of our common stock and reduce the value of the shares issued to complete
the business combination. Accordingly, our warrants may make it more difficult
to effectuate a business combination or increase the cost of the target
business. Additionally, the sale, or even the possibility of sale, of the shares
underlying the warrants and options could have an adverse effect on the market
price for our securities or on our ability to obtain future public financing. If
and to the extent these warrants are exercised, you may experience dilution to
your holdings.
Our
securities are quoted on the OTC Bulletin Board, which may limit the liquidity
and price of our securities more than if our securities were quoted or listed on
the Nasdaq Stock Market or a national exchange.
Our
securities are quoted on the OTC Bulletin Board, an NASD-sponsored and operated
inter-dealer automated quotation system for equity securities not included in
the Nasdaq Stock Market. Quotation of our securities on the OTC Bulletin Board
will limit the liquidity and price of our securities more than if our securities
were quoted or listed on the Nasdaq Stock Market or a national
exchange.
If
we are deemed to be an investment company, we may be required to institute
burdensome compliance requirements and our activities may be restricted, which
may make it difficult for us to complete a business
combination.
If we are
deemed to be an investment company under the Investment Company Act of 1940, our
activities may be restricted, including:
| · |
restrictions
on the nature of our investments; and |
| · |
restrictions
on the issuance of securities, |
which may
make it difficult for us to complete a business combination.
In
addition, we may have imposed upon us burdensome requirements,
including:
| · |
registration
as an investment company; |
| · |
adoption
of a specific form of corporate structure;
and |
| · |
reporting,
record keeping, voting, proxy and disclosure requirements and other rules
and regulations. |
We do not
believe that our principal activities will subject us to the Investment Company
Act of 1940. To this end, the proceeds held in trust are only invested by the
trust agent in “government securities” with specific maturity dates. By
restricting the investment of the trust funds to these instruments, we believe
we meet the requirements for the exemption provided in Rule 3a-1
promulgated under the Investment Company Act of 1940. If we were deemed to be
subject to the act, compliance with these additional regulatory burdens would
require additional expense that we have not allotted for.
Because
we may be deemed to have no “independent” directors, actions taken and expenses
incurred by our officers and directors on our behalf will generally not be
subject to “independent” review.
Each of
our directors own certain of our securities. Additionally, while no compensation
will be paid to them for services rendered prior to or in connection with a
business combination, they may receive reimbursement for out-of-pocket expenses
incurred by them in connection with activities on our behalf such as identifying
potential target businesses and performing due diligence on suitable business
combinations. There is no limit on the amount of these out-of-pocket expenses
and there will be no review of the reasonableness of the expenses by anyone
other than our board of directors, which includes persons who may seek
reimbursement, or a court of competent jurisdiction if such reimbursement is
challenged. If none of our directors are deemed “independent,” we will generally
not have the benefit of independent directors examining the propriety of
expenses incurred on our behalf and subject to reimbursement. Although we
believe that all actions taken by our directors on our behalf will be in our
best interests, we cannot assure you that this will actually be the case. If
actions are taken, or expenses are incurred that are actually not in our best
interests, it could have a material adverse effect on our business and
operations.
Forward
Looking Statements
The
statements discussed in this report include forward looking statements that
involve risks and uncertainties. You can identify these statements by
forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,”
“estimate,” “plans,” and “continue” or similar words. You should read statements
that contain these words carefully because they discuss our future expectations,
contain projections of our future results of operations or of our financial
condition or state other “forward-looking” information.
We
believe it is important to communicate our expectations to our investors.
However, there may be events in the future that we are not able to accurately
predict or over which we have no control. The cautionary language in this annual
report provide examples of risks, uncertainties and events that may cause our
actual results to differ materially from the expectations we describe in our
forward-looking statements. You should be aware that the occurrence or
non-occurrence of events described in this annual report could have a material
adverse effect on our business, operating results and financial condition,
including our ability to successfully consummate a business combination, and the
other risks detailed from time to time in our filings with the Securities and
Exchange Commission.
Item 7A. Quantitative
and Qualitative Disclosures About Market Risk.
Market
risk is the exposure to loss resulting from changes in interest rates, foreign
currency exchange rates, commodity prices and equity prices. We do not believe
we are exposed to significant market risk.
Item
8. Financial
Statements and Supplementary Data.
Reference
is made to pages F-1 through F-12 comprising a portion of this annual
report on Form 10-K.
Item
9. Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure.
None.
Item 9A. Controls
and Procedures.
Our
management carried out an evaluation, with the participation of Lawrence
Burstein, our principal executive officer and principal financial officer, of
the effectiveness of our disclosure controls and procedures as of December 31,
2004. Based upon that evaluation, Mr. Burstein 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 is recorded, processed, summarized and reported, within the time
periods specified in 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 three months ended December 31, 2004 that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
Item 9B. Other
Information.
Not
applicable.
PART
III
Item
10. Directors
and Executive Officers of the Registrant.
Our
current directors and executive officers are as follows:
|
Name |
|
Age |
|
Position |
|
Lawrence
Burstein |
|
62 |
|
President,
Treasurer and Director |
|
James
Scibelli |
|
55 |
|
Chairman
and Secretary |
|
David
Buckel |
|
43 |
|
Director |
|
Theodore
Kesten |
|
48 |
|
Director |
Lawrence
Burstein has
served as our president, treasurer and a member of our board of directors since
our inception. Since March 1996, Mr. Burstein has been president and a principal
stockholder of Unity Venture Capital Associates Ltd., a private investment
company. For approximately ten years prior to 1996, Mr. Burstein was the
president, a director and principal stockholder of Trinity Capital Corporation,
a private investment company. Trinity ceased operations prior to the formation
of Unity Venture in 1996. Mr. Burstein is also a director of THQ, Inc., a Nasdaq
National Market-listed developer and publisher of interactive entertainment
software for the major hardware platforms in the home video industry; CAS
Medical Systems, Inc., an OTC Bulletin Board-listed company which manufactures
and markets blood pressure monitors and other disposable products principally
for the neonatal market; Medical Nutrition USA, Inc., an OTC Bulletin
Board-listed company which principally manufactures and distributes nutritional
products primarily for the elder care markets; I.D. Systems, Inc., a Nasdaq
National Market-listed company, which designs, develops and produces a wireless
monitoring and tracking system which uses radio frequency technology; and
Traffix, Inc., a Nasdaq National Market-listed marketing company that develops
and operates internet-based marketing programs as well as direct marketing
programs. Mr. Burstein received a B.A. from the University of Wisconsin and an
L.L.B. from Columbia Law School.
James
Scibelli has
served as our chairman of the board and secretary since our inception. Since
March 1986, Mr. Scibelli has served as president of Roberts & Green, Inc., a
New York financial consulting firm offering a variety of financial and
investment consulting services. Mr. Scibelli is also a member of RG Securities
LLC, a licensed broker-dealer in New York, and since August 1998, has served as
president of Luxury Limousine and Transportation. Since 1993 through August
2004, Mr. Scibelli had been a director of Acclaim Entertainment, Inc., a Nasdaq
SmallCap-listed company that develops and markets interactive entertainment
software. Acclaim Entertainment filed a voluntary petition under Chapter 7 of
the Federal Bankruptcy Code on September 1, 2004.
David
Buckel has
served as a member of our board of directors since our inception. From July 2003
until May 2004, Mr. Buckel served as financial vice president of Internap
Network Services Corporation, an American Stock Exchange-listed company that
provides managed internet connectivity solutions, and has served as its chief
financial officer since May 2004. Mr. Buckel was senior manager and president of
AJC Finance & Marketing Group, a management and financial consulting firm,
from November 2002 to June 2003; senior vice president and chief financial
officer of Interland, Inc., a Nasdaq National Market-listed company that
provides online solutions for small-and-medium-sized businesses, from March 2001
to November 2002; senior vice president and chief financial officer of
AppliedTheory Corporation, a provider of Internet business solutions, from 1995
to 2001; and corporate controller of Suit-Kote Corporation, a manufacturer of
road materials, from 1987 to 1995. AppliedTheory filed a voluntary petition
under Chapter 11 of the Federal Bankruptcy Code on April 17, 2002. Mr. Buckel
had no affiliation with AppliedTheory at the time of its Chapter 11 filing. Mr.
Buckel is also a director of Gigibeam Corporation,
an OTC
Bulletin Board-listed company that is a leading
supplier of high performance high availability fiber-speed wireless
communication solutions, since October 2004. A
Certified Management Accountant, Mr. Buckel received an M.B.A. from Syracuse
University and a B.S. in Accounting from Canisius College.
Theodore
Kesten has
served as a member of our board of directors since our inception. Since 1998, he
has been chairman and chief executive officer of Belmay, Inc., a global designer
and manufacturer of fragrances and flavors. He has been employed by Belmay since
1988 in positions of increasing responsibility including chief financial
officer, chief operating officer and president. Mr. Kesten received a B.A. from
Emory University and an MBA from New York University.
Our board
of directors is divided into three classes with only one class of directors
being elected in each year and each class serving a three-year term. The term of
office of the first class of directors, consisting of Theodore Kesten, will
expire at our first annual meeting of stockholders. The term of office of the
second class of directors, consisting of David Buckel, will expire at the second
annual meeting. The term of office of the third class of directors, consisting
of Lawrence Burstein and James Scibelli, will expire at the third annual
meeting.
These
individuals will play a key role in identifying and evaluating prospective
acquisition candidates, selecting the target business, and structuring,
negotiating and consummating its acquisition. We believe that the skills and
expertise of these individuals, their collective access to acquisition
opportunities and ideas, their contacts, and their transactional expertise
should enable them to successfully identify and effect an
acquisition.
We do not
have an audit committee of our Board of Directors nor do we have an audit
committee financial expert, because we do not believe the nature of our business
is such that an audit committee or audit committee financial expert would be
useful or necessary. Furthermore, our equity securities are not listed on an
exchange or automated quotation system that requires its listed companies to
appoint an audit committee.
We have
not adopted a Code of Ethics that applies to our principal executive officer or
principal financial officer, or persons performing similar functions, primarily
because we do not and will not have any operations until such time as we enter
into a business combination. We intend to adopt a Code of Ethics at or prior to
such time as we enter into a business combination.
Conflicts
of Interest
Investors
and security holders should be aware of the following potential conflicts of
interest:
| · |
None
of our officers and directors are required to commit their full time to
our affairs and, accordingly, they may have conflicts of interest in
allocating management time among various business
activities. |
| · |
In
the course of their other business activities, our officers and directors
may become aware of investment and business opportunities which may be
appropriate for presentation to us as well as the other entities with
which they are affiliated. They may have conflicts of interest in
determining to which entity a particular business opportunity should be
presented. |
| · |
Our
officers and directors may in the future become affiliated with entities,
including other blank check companies, engaged in business activities
similar to those intended to be conducted by
us. |
| · |
Since
our directors own warrants that are subject to lock-up agreements
restricting their sale until a business combination is successfully
completed or the trust fund is distributed to our Class B stockholders,
our board may have a conflict of interest in determining whether a
particular target business is appropriate to effect a business
combination. |
| · |
The
personal and financial interests of our directors and officers may
influence their motivation in identifying and selecting a target business,
and completing a business combination in a timely
manner. |
In
general, officers and directors of a corporation incorporated under the laws of
the State of Delaware are required to present business opportunities to a
corporation if:
| · |
the
corporation could financially undertake the
opportunity; |
| · |
the
opportunity is within the corporation's line of business;
and |
| · |
it
would not be fair to the corporation and its stockholders for the
opportunity not to be brought to the attention of the
corporation. |
Accordingly,
as a result of multiple business affiliations, our officers and directors may
have similar legal obligations relating to presenting business opportunities
meeting the above-listed criteria to multiple entities. In addition, conflicts
of interest may arise when our board evaluates a particular business opportunity
with respect to the above-listed criteria. We cannot assure you that any of the
above mentioned conflicts will be resolved in our favor.
In order
to minimize potential conflicts of interest which may arise from multiple
corporate affiliations, each of our officers and directors has agreed, until the
earlier of a business combination or the distribution of the trust fund to the
Class B stockholders, or such time as he ceases to be an officer or director, to
present to us for our consideration, prior to presentation to any other entity,
any suitable business opportunity which may reasonably be required to be
presented to us subject to any pre-existing fiduciary or contractual obligations
he might have.
In
connection with the vote required for any business combination, all of our
officers and directors who purchase Class B shares in this offering or following
this offering in the open market, may vote their Class B shares in any manner
they determine, in their sole discretion. To further minimize potential
conflicts of interest, we have agreed not to consummate a business combination
with an entity which is affiliated with any of our officers and directors unless
we obtain an opinion from an independent investment banking firm that the
business combination is fair to our stockholders from a financial point of
view.
Item
11. Executive
Compensation.
No
executive officer has received any cash compensation for services rendered. We
pay Unity Venture Capital Associates, an affiliate of Lawrence Burstein, a fee
of $4,000 per month for providing us with office space and certain office and
secretarial services. However, this arrangement is solely for our benefit and is
not intended to provide Mr. Burstein compensation in lieu of a salary. Other
than this $4,000 per-month fee, no compensation of any kind, including finder’s
and consulting fees, will be paid to any of our officers and directors, or any
of their respective affiliates, for services rendered prior to or in connection
with a business combination. However, our officers and directors will be
reimbursed for any out-of-pocket expenses incurred in connection with activities
on our behalf such as identifying potential target businesses and performing due
diligence on suitable business combinations. There is no limit on the amount of
these out-of-pocket expenses and there will be no review of the reasonableness
of the expenses by anyone other than our board of directors, which includes
persons who may seek reimbursement, or a court of competent jurisdiction if such
reimbursement is challenged. Because none of our directors will be deemed
“independent,” we will generally not have the benefit of independent directors
examining the propriety incurred on our behalf and subject to
reimbursement.
Item
12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The
following table sets forth information as of March 15, 2005, based on
information obtained from the persons named below, with respect to the
beneficial ownership of shares of our common stock or Class B common stock
by (i) each person known by us to be the owner of more than 5% of our
outstanding shares of common stock or Class B common stock, (ii) each
director and (iii) all officers and directors as a group. Except as
indicated in the footnotes to the table, the persons named in the table have
sole voting and investment power with respect to all shares of common stock and
Class B common stock shown as beneficially owned by them.
| |
|
Common
Stock (1) |
|
Class B
Common Stock (1) |
|
|
Name
and Address of Beneficial Owner |
|
Number
of Shares of Common Stock Beneficially Owned |
|
Ownership
Percentage |
|
Number
of Shares of Class B Common Stock Beneficially
Owned |
|
Ownership
Percentage |
|
| Edward S. Gutman(2) |
|
|
— |
|
|
— |
|
|
146,700 |
|
|
9.8 |
% |
| Jack
Silver(3) |
|
|
48,000 |
|
|
16.7 |
% |
|
100,000 |
|
|
6.7 |
% |
| Ramapo
Trust(4) |
|
|
— |
|
|
— |
|
|
90,000 |
|
|
6.0 |
% |
|
Lawrence
Burstein(5) |
|
|
12,050 |
|
|
|
|
|
— |
|
|
— |
|
|
James
Scibelli |
|
|
50 |
|
|
* |
|
|
— |
|
|
— |
|
|
David
Buckel |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Theodore
Kesten |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
All
directors and executive officers as a group (4 persons) |
|
|
9,100 |
|
|
3.2 |
|
|
— |
|
|
— |
|
* Represents beneficial ownership of less than 1%.
|
(1) |
Does
not include shares of common stock issuable upon exercise of Class W
warrants and Class Z warrants which are beneficially owned by each of
the persons named in the above table but which are not exercisable until
the later of (i) July 29, 2005 or (ii) the earlier of
(a) the consummation by us of a business combination or (b) the
distribution of our trust fund to our Class B
shareholders. |
|
(2) |
Based
on information contained in a Schedule 13G filed by Edward S. Gutman in
March 2005, Mr. Gutman has sole power to vote or to direct the vote, and
sole power to dispose or direct the disposition, of 146,700 shares of our
Class B common stock. Such Schedule 13G states that 21,000 of such shares
are held by the Gutman Family Foundation, of which Mr. Gutman is the
President. |
|
(3) |
Based
on information contained in two Schedule 13G's filed by Jack Silver in
February 2005, Mr. Silver has sole power to vote or to direct the vote,
and sole power to dispose or direct the disposition, of 48,000 shares of
common stock and 100,000 shares of our Class B common stock. Such Schedule
13G states that all of such shares are held by the Sherleigh Associates
Profit Sharing Plan, a trust of which Mr. Silver is the
trustee. |
|
(4) |
Based
on information contained in a Schedule 13G filed by Ramapo Trust in
October 2004, Ramapo Trust has sole power to vote or to direct the vote,
and sole power to dispose or direct the disposition, of 45,000 Series B
units, which consists of 90,000 shares of Class B common stock, Class W
warrants to purchase 45,000 shares of common stock and Class Z warrants to
purchase 45,000 shares of common stock. |
|
(5) |
Does
not include 3,000 shares of common stock owned by the wife of Mr. Burstein
and 1,000 shares of common stock owned by the daughter of Mr. Burstein, of
which Mr. Burstein disclaims beneficial
ownership. |
Item
13. Certain
Relationships and Related Transactions.
Prior to
our initial public offering on August 4, 2004, we issued 100 shares of common
stock for $500 in cash, or a purchase price of $5.00 per share. We also issued
362,500 Class W warrants and 362,500 Class Z warrants for $36,250 in
cash, at a purchase price of $0.05 per warrant. These securities were issued to
the individuals set forth below, as follows:
|
Name |
|
Number
of
Shares
of
Common
Stock |
|
Number
of
Class W
Warrants |
|
Number
of
Class Z
Warrants |
|
|
Lawrence
Burstein |
|
|
50 |
|
|
170,000(1 |
) |
|
170,000(1 |
) |
|
James
Scibelli |
|
|
50 |
|
|
170,000 |
|
|
170,000 |
|
|
David
Buckel |
|
|
— |
|
|
11,250 |
|
|
11,250 |
|
|
Theodore
Kesten |
|
|
— |
|
|
11,250 |
|
|
11,250 |
|
|
(1) |
Includes
90,000 Class W Warrants and 90,000 Class Z warrants held by Mr.
Burstein’s affiliate, Unity Venture Capital Associates. In October 2004,
Unity distributed an aggregate of 82,499 of such Class W Warrants and
82,499 of such Class Z Warrants to its stockholders (including 15,450
Class W Warrants and 15,450 Class Z Warrants to Mr. Burstein),
leaving Unity the beneficial owner of 7,501 Class W Warrants and
7,501 Class Z Warrants. |
Unity
Venture Capital Associates makes available to us a small amount of office space
and certain office and secretarial services, as we may require from time to
time. We pay Unity $4,000 per month for these services. Mr. Burstein is the
president and a principal stockholder of Unity and as a result, will benefit
from the transaction to the extent of his interest in Unity. However, this
arrangement is solely for our benefit and is not intended to provide Mr.
Burstein compensation in lieu of a salary. We believe, based on rents and fees
for similar services in the New York City metropolitan area, that the fee
charged by Unity is at least as favorable as we could have obtained from an
unaffiliated person. However, as our directors may not be deemed “independent,”
we did not have the benefit of disinterested directors approving this
transaction.
Lawrence
Burstein and James Scibelli advanced $46,000 to us as of July 29, 2004 to cover
expenses related to our initial public offering. The loans were repaid on August
4, 2004.
We
reimburse our officers and directors for any reasonable out-of-pocket business
expenses incurred by them in connection with certain activities on our behalf
such as identifying and investigating possible target businesses and business
combinations. There is no limit on the amount of accountable out-of-pocket
expenses reimbursable by us, which will be reviewed only by our board or a court
of competent jurisdiction if such reimbursement is challenged.
Other
than the $4,000 per-month administrative fee and reimbursable out-of-pocket
expenses payable to our officers and directors, no compensation or fees of any
kind, including finders and consulting fees, will be paid to any of our officers
or directors, or to any of their respective affiliates for services rendered to
us prior to or with respect to the business combination.
We have
engaged HCFP/Brenner Securities LLC, the representative of the underwriters in
our initial public offering, to act as our investment banker in connection with
our business combination. We expect to pay HCFP/Brenner a cash fee of $75,000,
and issue to HCFP/Brenner 7,500 shares of our common stock and five-year
warrants to purchase 15,000 shares of our common stock @ $5.00 per
share, at the closing of our business combination for assisting us in
structuring and negotiating the terms of the transaction.
Item
14. Principal
Accounting Fees and Services.
Fees
incurred by us for professional services provided by our independent registered
public accounting firm from our inception (April 14, 2004) to December 31, 2004,
in each of the following categories are approximately as follows:
| |
|
Inception
to
December
31, 2004 |
|
|
Audit
fees |
|
$ |
12,500 |
|
|
Audit-related
fees |
|
|
40,000 |
|
|
Tax
fees |
|
|
— |
|
|
All
other fees |
|
|
— |
|
|
Total |
|
$ |
52,500 |
|
Fees for
audit services include fees associated with the audit of our annual financial
statements, review of financial statements included in our quarterly reports on
Form 10-Q and services provided by our auditors in connection with
statutory and regulatory filings or engagements. Tax fees included tax
compliance and tax consultations.
PART
IV
Item
15. Exhibits
and Financial Statement Schedules
| (a) |
Financial
Statements. |
Our
financial statements as set forth in the Index to Financial Statements attached
hereto commencing on page F-1 are hereby incorporated by
reference.
The
following exhibits, which are numbered in accordance with Item 601 of
Regulation S-K, are filed herewith or, as noted, incorporated by reference
herein:
|
Exhibit
Number |
|
Exhibit
Description |
|
2.1 |
|
Agreement
and Plan of Merger dated as of March 24, 2005, by and among Adventure
Holdings, S.A., V. Capital S.A., G. Bros. S.A., George D. Gourdomichalis,
Stathis D. Gourdomichalis, Ion G. Varouxakis and Trinity Partners
Acquisition Company, Inc.
|
|
3(i) |
|
Certificate
of Incorporation (1)
|
|
3(ii) |
|
Bylaws
(1)
|
|
4.1 |
|
Specimen
Series A Unit Certificate (1)
|
|
4.2 |
|
Specimen
Series B Unit Certificate (1)
|
|
4.3 |
|
Specimen
Common Stock Certificate (1)
|
|
Exhibit
Number |
|
Exhibit
Description |
|
4.4 |
|
Specimen
Class B Common Stock Certificate (1)
|
|
4.5 |
|
Specimen
Class W Warrant Certificate (1)
|
|
4.6 |
|
Specimen
Class Z Warrant Certificate (1)
|
|
4.7 |
|
Unit
Purchase Option granted to HCFP/Brenner Securities LLC
Underwriter
|
|
4.8 |
|
Warrant
Agreement between American Stock Transfer & Trust Company and the
Registrant
|
|
10.1 |
|
Letter
Agreement among the Registrant, HCFP/Brenner Securities LLC and Lawrence
Burstein (1)
|
|
10.2 |
|
Letter
Agreement among the Registrant, HCFP/Brenner Securities LLC and James
Scibelli (1)
|
|
10.3 |
|
Letter
Agreement among the Registrant, HCFP/Brenner Securities LLC and David
Buckel (1)
|
|
10.4 |
|
Letter
Agreement among the Registrant, HCFP/Brenner Securities LLC and Theodore
Kesten (1)
|
|
10.5 |
|
Investment
Management Trust Agreement between American Stock Transfer & Trust
Company and the Registrant
|
|
31.1 |
|
Rule 13a-14(a)/15d-14(a)
Certification
|
|
31.2 |
|
Rule 13a-14(a)/15d-14(a)
Certification
|
|
32.1 |
|
Section 1350
Certification
|
| (1) |
Attached
as an Exhibit to Trinity’s Form S-1 (Registration No.: 333-115319)
and incorporated herein by reference. |
TRINITY
PARTNERS ACQUISITION COMPANY INC.
INDEX TO
FINANCIAL STATEMENTS
|
Report
of Independent Registered Public Accounting Firm |
|
|
F-2 |
|
| |
|
|
|
|
|
Financial
Statements: |
|
|
|
|
|
Balance
Sheet, December 31, 2004 |
|
|
F-3 |
|
| |
|
|
|
|
|
Statement
of Operations, for the period from |
|
|
|
|
|
inception
(April 14, 2004) to December 31, 2004 |
|
|
F-4 |
|
| |
|
|
|
|
|
Statement
of Stockholders’ Equity, for the |
|
|
|
|
|
period
from inception (April 14, 2004) to December 31, 2004 |
|
|
F-5 |
|
| |
|
|
|
|
|
Statement
of Cash Flows, for the period from |
|
|
|
|
|
inception
(April 14, 2004) through December 31, 2004 |
|
|
F-6 |
|
| |
|
|
|
|
|
Notes
to Financial Statements |
|
|
F-7
to F-12 |
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors and Stockholders
Trinity
Partners Acquisition Company Inc.
We have
audited the accompanying balance sheet of Trinity Partners Acquisition Company
Inc. as of December 31, 2004, and the related statements of operations,
stockholders’ equity and cash flows for the period from inception (April 14,
2004) to December 31, 2004. These financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free 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 audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Trinity Partners Acquisition
Company Inc. as of December 31, 2004, and its results of operations and cash
flows for the period from inception (April 14, 2004) to December 31, 2004, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ J. H.
Cohn LLP
Jericho,
New York
February
15, 2005
Trinity
Partners Acquisition Company Inc.
Balance
Sheet
December
31, 2004
|
ASSETS |
|
|
Current
Assets |
|
|
|
|
Cash
and cash equivalents |
|
$ |
484,802 |
|
|
Restricted
investment |
|
|
7,601,236 |
|
|
Other
assets |
|
|
23,874 |
|
|
Total
current assets |
|
|
8,109,912 |
|
|
Total
assets |
|
$ |
8,109,912 |
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY |
|
Current
Liabilities |
|
|
|
|
|
Accounts
payable and accrued expenses |
|
$ |
72,836 |
|
|
Total
current liabilities |
|
|
72,836 |
|
| |
|
|
|
|
|
Common
Stock, subject to possible conversion to cash, 298,851 shares at
conversion value |
|
|
1,519,490 |
|
|
Commitments
and contingencies |
|
|
|
|
|
Stockholders’
Equity |
|
|
|
|
|
Preferred
stock, par value $.0001 per share,
5,000 shares
authorized, no shares issued |
|
|
— |
|
|
Common
stock, par value $.0001 per share,
20,000,000 shares
authorized,
287,600 shares
issued and outstanding |
|
|
29 |
|
|
Common
stock, Class B, par value $.0001 per share,
2,000,000 shares
authorized,
1,196,149 shares
issued and outstanding
(including
298,851 shares subject to
possible
conversion to cash) |
|
|
120 |
|
|
Additional
paid-in capital |
|
|
6,602,764 |
|
|
Accumulated
deficit |
|
|
(86,477 |
) |
|
Accumulated
other comprehensive income |
|
|
1,150 |
|
|
Total
stockholders’ equity |
|
|
6,517,586 |
|
|
Total
liabilities and stockholders’ equity |
|
$ |
8,109,912 |
|
See notes
to financial statements.
Trinity
Partners Acquisition Company Inc.
Statement
of Operations
From
inception (April 14, 2004) to December 31, 2004
|
Revenue |
|
$ |
— |
|
|
Operating
expenses |
|
|
|
|
|
Professional
fees |
|
|
75,948 |
|
|
Organization
costs |
|
|
15,911 |
|
|
Other
operating costs |
|
|
47,632 |
|
|
Loss
from operations |
|
|
(139,491 |
) |
|
Interest
income |
|
|
53,014 |
|
|
Net
loss |
|
$ |
(86,477 |
) |
|
Weighted
average number of shares outstanding: |
|
|
|
|
|
Basic
and diluted |
|
|
1,020,615 |
|
|
Net
loss per share, basic and diluted |
|
$ |
(0.08 |
) |
See notes to financial statements.
Trinity
Partners Acquisition Company Inc.
Statement
of Stockholders’ Equity
From
inception (April 14, 2004) to December 31, 2004
|
|
|
Common
Stock |
|
Common
Stock, Class B |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Additional
Paid-In
Capital |
|
Accumulated
Deficit |
|
Accumulated
Other
Comprehensive Income |
|
Total |
|
|
Balance,
April 14, 2004 (inception) |
|
|
— |
|
$ |
— |
|
|
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
Issuance
of common stock for cash |
|
|
100 |
|
|
— |
|
|
— |
|
|
— |
|
|
500 |
|
|
— |
|
|
— |
|
|
500 |
|
|
Issuance
of warrants for cash |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
36,250 |
|
|
— |
|
|
— |
|
|
36,250 |
|
|
Sale
of 143,750 Series A units and 747,500 Series B units through
public offering, net of underwriter’s discount and offering expenses and
net proceeds allocable to 298,851, shares of Common Stock, Class B
subject to possible conversion to cash |
|
|
287,500 |
|
|
29 |
|
|
1,196,149 |
|
|
120 |
|
|
6,566,014 |
|
|
— |
|
|
— |
|
|
6,566,163 |
|
|
Net
loss for the period
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(86,477
|
)
|
|
|
|
|
(86,477
|
)
|
|
Change
in unrealized gain on available-for-sale securities |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,150 |
|
|
1,150 |
|
|
Comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(85,327 |
) |
|
Balance,
December 31, 2004 |
|
|
287,600 |
|
$ |
29 |
|
|
1,196,149 |
|
$ |
120 |
|
$ |
6,602,764 |
|
$ |
(86,477 |
) |
$ |
1,150 |
|
$ |
6,517,586 |
|
See notes to financial
statements.
Trinity
Partners Acquisition Company Inc.
Statement
of Cash Flows
From
inception (April 14, 2004) to December 31, 2004
|
CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
Net
loss |
|
$ |
(86,477 |
) |
|
Adjustments
to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
Amortization
of discount on restricted investment |
|
|
(50,336 |
) |
|
Changes
in operating assets and liabilities: |
|
|
|
|
|
Increase
in other asset |
|
|
(23,874 |
) |
|
Increase
in accounts payable and accrued expenses |
|
|
72,836 |
|
|
Net
cash used in operating activities |
|
|
(87,851 |
) |
|
CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
Cash
contributed to Trust Fund |
|
|
(7,549,750 |
) |
|
Net
cash used in investing activities |
|
|
(7,549,750 |
) |
|
CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
Proceeds
from sales of common stock and warrants |
|
|
36,750 |
|
|
Proceeds
from notes payable to stockholders |
|
|
46,000 |
|
|
Repayments
of notes payable to stockholders |
|
|
(46,000 |
) |
|
Portion
of net proceeds from sale of Series B Units through public offering
allocable to shares of Common Stock subject to possible conversion to
cash |
|
|
1,509,198 |
|
|
Net
proceeds from sale of units through public offering allocable to
stockholders’ equity |
|
|
6,576,455 |
|
|
Net
cash provided by financing activities |
|
|
8,122,403 |
|
|
Net
increase in cash and cash equivalents |
|
|
484,802 |
|
|
Cash
and cash equivalents at beginning of period |
|
|
— |
|
|
Cash
and cash equivalents at end of period |
|
$ |
484,802 |
|
See notes to financial statements.
Trinity
Partners Acquisition Company Inc.
Notes
to Financial Statements
NOTE
1
- - ORGANIZATION
AND ACTIVITIES
Trinity
Partners Acquisition Company Inc. (the “Company”) was incorporated in Delaware
on April 14, 2004 as a blank check company whose objective is to raise money and
acquire an operating business (a “Business Combination”)
(Note 7).
As
further discussed in Note 2, on July 29, 2004, the Company effected an
initial public offering of its securities (the “Offering”) which closed on
August 4, 2004.
Although
substantially all of the proceeds of the Offering are intended to be utilized to
effect a Business Combination, the proceeds are not specifically designated for
this purpose. The gross proceeds from the Offering and sale of the Series B
units of $7,549,750 is held in a trust fund (the “Trust Fund”) until the earlier
of the completion of a Business Combination or the distribution of proceeds to
Class B stockholders. If a Business Combination is consummated, the
conversion rights afforded to the Class B stockholders may result in the
conversion into cash of up to approximately 19.99% of the aggregate number of
Class B shares sold, as further described below. If a Business Combination
is not contracted in 12 months, or consummated in 18 months, subsequent to July
29, 2004, all of the proceeds of the Trust Fund will be returned to Class B
stockholders.
As a
result of its limited resources, the Company will, in all likelihood, have the
ability to effect only a single Business Combination. Accordingly, the prospects
for the Company’s success will be entirely dependent upon the future performance
of a single business.
The
Company will not effect a Business Combination unless the fair market value of
the target, as determined by the Board of Directors of the Company in its sole
discretion, based upon valuation standards generally accepted by the financial
community including, among others, book value, cash flow, and both actual and
potential earnings, is at least equal to 80% of the net assets of the Company at
the time of such acquisition.
Furthermore,
there is no assurance that the Company will be able to successfully effect a
Business Combination. As discussed previously, if the Company is unable to
effect a Business Combination within 18 months of the consummation of the
Offering, the Company’s Certificate of Incorporation provides for the Company’s
automatic liquidation. If the Company were to expend all of the net proceeds of
the Offering not held in the Trust Fund prior to liquidation, but recognizing
that such net proceeds could become subject to the claims of creditors of the
Company which could be prior to the claims of stockholders of the Company, it is
possible that the Company’s liquidation value may be less than the amount in the
Trust Fund, inclusive of any net interest income thereon. Moreover, all of the
Company’s initial stockholders have agreed to waive their respective rights to
participate in any such liquidation distribution on shares owned prior to the
Offering.
At the
time the Company seeks Class B stockholder approval of any Business
Combination, the Company will offer each Class B stockholder who acquired
Class B shares through the Offering or subsequently in the after-market the
right to have his or her shares of the Company’s Class B common stock
converted to cash if such Class B stockholder votes against the Business
Combination and the Business Combination is approved and completed. The holders
of the Company’s common stock are not entitled to seek conversion of their
shares. The actual per-share conversion price will be equal to the amount in the
Trust Fund (inclusive of any interest thereon) as of the record date for
determination of Class B stockholders entitled to vote on such Business
Combination, divided by the number of Class B shares sold in the Offering,
or approximately $5.08 per share based on the value in the Trust Fund as of
December 31, 2004. There will be no distribution from the Trust Fund with
respect to the warrants included in the Series A and Series B Units. A
Series B stockholder may request conversion of his or her shares at any
time prior to the vote taken with respect to a proposed Business Combination at
a meeting held for that purpose, but such request will not be granted unless
such Class B stockholder votes against the Business Combination and the
Business Combination is approved and consummated. It is anticipated that the
funds to be distributed to Class B stockholders who have their shares
converted will be distributed promptly after consummation of a Business
Combination. Any Class B stockholder who converts his or her stock into his
or her share of the Trust Fund still has the right to exercise the Class W
and Class Z warrants that was received as part of the Series B units.
The Company will not consummate any Business Combination if 20% or more in
interest of the Class B stockholders exercise their conversion rights.
Accordingly, the conversion value of $1,519,490 (298,851 shares, or 19.99% of
the Class B shares sold in the public offering) has been included in the
accompanying balance sheet at December 31, 2004 as temporary
capital.
NOTE
2
- - PUBLIC
OFFERING OF SECURITIES
In the
Offering, the Company sold to the public 143,750 Series A Units (the
“Series A Units” or a “Series A Unit”) and 747,500 Series B Units
(the “Series B Units” or a “Series B Unit”) at a price of $10.50 and
$10.10 per unit, respectively, inclusive of an option issued to the underwriters
to purchase additional Series A Units and Series B Units, which was
exercised in full. Proceeds from the Offering, including the exercise of the
over allotment option, totaled $8,085,653, which was net of $973,472 in
underwriting and other expenses. Each Series A Unit consists of two
shares of the Company’s common stock, five Class W Redeemable Warrants (a
“Class W Warrant”), and five Class Z Redeemable Warrants (a
“Class Z Warrant”). Each Series B unit consists of two shares of the
Company’s Class B common stock, one Class W Warrant, and one
Class Z Warrant.
Both the
Company’s common stock and Class B common stock have one vote per share.
However, the Class B stockholders may, and the common stockholders may not,
vote in connection with a Business Combination. Further, should a Business
Combination not be consummated during the target business acquisition period,
the Trust Fund would be distributed pro-rata to all of the Class B common
stockholders and their Class B common shares would be cancelled and
returned to the status of authorized but unissued shares.
Each
Class W Warrant entitles the holder to purchase from the Company one share
of common stock at an exercise price of $5.00, commencing on the later of
(a) July 29, 2005 or (b) the earlier of the completion of a Business
Combination with a target business, or the distribution of the Trust Fund to the
Class B stockholders. The Class W Warrants will expire on July 29,
2009 or earlier upon redemption. Each Class Z Warrant entitles the holder
to purchase from the Company one share of common stock at an exercise price of
$5.00, commencing on the later of (a) July 29, 2005 or (b) the earlier
of the completion of a Business Combination with a target business, or the
distribution of the Trust Fund to the Class B stockholders. The
Class Z Warrants will expire on July 29, 2011 or earlier upon redemption.
The Company may redeem the outstanding Class W Warrants and/or Class Z
Warrants with the prior consent of HCFP/Brenner Securities LLC (“HCFP”), the
representative of the underwriters of the Offering, in whole and not in part, at
a price of $.05 per warrant at any time after the warrants become exercisable,
upon a minimum of 30 days’ prior written notice of redemption, and if, and only
if, the last sale price of the Company’s common stock equals or exceeds $7.50
per share and $8.75 per share, for a Class W Warrant and Class Z
Warrant, respectively, for any 20 trading days within a 30 trading day period
ending three business days before the Company sent the notice of
redemption.
As part
of the Offering, the Company sold to HCFP, as representative for the
underwriters, for $100, an option (the “Underwriter’s Purchase Option” or “UPO”)
to purchase up to a total of 12,500 additional Series A Units and/or 65,000
additional Series B Units. The Series A Units and Series B Units
issuable upon exercise of this option are identical to those in the Offering,
except that the exercise price of the warrants included in the units are $5.50
per share (110% of the exercise price of the warrants included in the units sold
to the public) and the Class Z Warrants shall be exercisable by HCFP for a
period of only five years from the date of the Offering. The UPO is exercisable
at $17.325 per Series A Unit and $16.665 per Series B Unit commencing
on the later of (a) July 29, 2005 or (b) the earlier of the completion
of a Business Combination with a target business, or the distribution of the
Trust Fund to the Class B stockholders, and expires on July 29,
2009.
NOTE
3
- - SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Cash
and Cash Equivalents -
Included in cash and cash equivalents are deposits with financial institutions
as well as short-term money market instruments with maturities of three months
or less when purchased.
Investments
- - Restricted
investments consist of investments acquired, which were included in the Trust
Fund, with maturities exceeding three months but less than three years. While
the Company’s intent is to hold debt securities to maturity, consistent with
Statement of Financial Accounting Standards (SFAS) No. 115, “Accounting for
Certain Investments in Debt and Equity Securities”, the Company classifies all
debt securities and all investments in equity securities that have readily
determinable fair values as available-for-sale, as the sale of such securities
may be required prior to maturity to implement management strategies. Such
securities are reported at fair value, with unrealized gains or losses excluded
from earnings and included in other comprehensive income, net of applicable
taxes.
Net
Loss Per Share - Net
loss per share is computed based on the weighted average number of shares of
common and Class B common stock outstanding.
Basic
earnings (loss) per share excludes dilution and is computed by dividing income
(loss) available to common stockholders by the weighted average shares of common
stock and Class B common stock outstanding for the period. Diluted earnings
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 shared in the
earnings of the entity. Since the effect of 3,657,500 of outstanding warrants is
antidilutive, they have been excluded from the Company’s computation of net loss
per share. Therefore, basic and diluted loss per share were the same for the
period from inception (April 14, 2004) through December 31, 2004.
Fair
Value of Financial Instruments - The
fair values of the Company’s assets and liabilities that qualify as financial
instruments under Statement of Financial Accounting Standards No. 107
approximate their carrying amounts presented in the balance sheet at December
31, 2004.
Use
of Estimates and Assumptions - The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect certain 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 revenue and expenses during
the reporting period. Actual results can, and in many cases will, differ from
those estimates.
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 and are 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 income tax assets to the amount expected to be realized.
NOTE
4 - CAPITAL STOCK
Preferred
Stock
The
Company is authorized to issue up to 5,000 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.
Common
Stock and Class B Common Stock
The
Company is authorized to issue 20,000,000 shares of common stock and 2,000,000
shares of Class B common stock. As of December 31, 2004, there were 287,600
shares of the Company’s common stock issued and outstanding and 1,495,000 shares
of the Company’s Class B common stock issued and outstanding, including
298,851 Class B common shares subject to possible conversion to
cash.
With the
exercise of the over-allotment option (Note 2), subsequent to the Offering
there are, 15,774,900 and 375,000 authorized but unissued shares of the
Company’s common stock and the Company’s Class B common stock,
respectively, available for future issuance, after appropriate reserves for the
issuance of common stock in connection with the Class W Warrants and
Class Z Warrants, the Underwriters Purchase Option and the officers’ and
directors’ Class W Warrants and Class Z Warrants
(Note 6).
The
Company has no commitments to issue any shares of common stock other than as
described herein; however, the Company will, in all likelihood, issue a
substantial number of additional shares in connection with a Business
Combination (Note 7). To the extent that additional shares of common stock
are issued, dilution to the interests of the Company’s stockholders who
participated in the Offering will occur.
Warrants
The
Class W Warrants are callable, subject to adjustment in certain
circumstances, and entitle the holder to purchase shares at $5.00 per share for
a period commencing on the later of: (a) July 29, 2005 and (b) the
earlier of the completion of the Business Combination or distribution of the
Trust Fund to the Class B stockholders, and ending July 29, 2009. As of
December 31, 2004 there were 1,828,750 Class W Warrants
outstanding.
The
Class Z Warrants are callable, subject to adjustment in certain
circumstances, and entitle the holder to purchase shares at $5.00 per share for
a period commencing on the later of: (a) July 29, 2005 and (b) the
earlier of the completion of the Business Combination or distribution of the
Trust Fund to the Class B stockholders, and ending July 29, 2011. As of
December 31, 2004 there were 1,828,750 Class Z Warrants
outstanding.
NOTE
5 - INCOME TAXES
Significant
components of the Company’s deferred tax assets at December 31, 2004 are as
follows:
Net
operating loss carryforward |
|
$ |
29,100 |
|
Organization
and formation costs |
|
|
5,500 |
|
|
Less
valuation allowance |
|
|
(34,600 |
) |
|
Net
deferred tax asset |
|
$ |
— |
|
The
Company has a net operating loss carryforward of approximately $73,000 for
federal and state income tax purposes as of December 31, 2004. The Company has
recorded a full valuation allowance against its deferred tax assets as
management believes it is not more likely than not that sufficient taxable
income will be realized during the carryforward period to utilize the deferred
tax asset. Realization of the future tax benefits is dependent upon many
factors, including the Company’s ability to generate taxable income within the
loss carry-forward period, which runs through 2024 subject to certain
limitations.
NOTE
6 - RELATED PARTY TRANSACTIONS
The
President of the Company is a principal stockholder, officer and director of
Unity Venture Capital Associates, Ltd. (“Unity”), which purchased 90,000
Class W and 90,000 Class Z Warrants to acquire shares of common stock
of the Company. In October 2004, Unity distributed an aggregate of 82,499 of
such Class W Warrants and 82,499 of such Class Z Warrants to its
stockholders (including 15,450 Class W Warrants and 15,450 Class Z
Warrants to Mr. Burstein), leaving Unity the beneficial owner of 7,501
Class W Warrants and 7,501 Class Z Warrants. Beginning July 29, 2004,
commensurate with the increase in activities primarily related to the Offering,
the Company is obligated to pay Unity a monthly fee of $4,000 for general and
administrative services, including the use of office space in premises occupied
by Unity.
Prior to
the effective date of the Offering, the Company obtained advances totaling
approximately $46,000 in the form of non-interest bearing, unsecured notes
payable from its Chairman and President, for expenses related to the Offering.
As of December 31, 2004 such amounts have been fully repaid.
In April
2004, the Company issued to two stockholders and two members of the Board of
Directors Class W Warrants to purchase 362,500 shares of the Company’s
common stock, and Class Z Warrants to purchase 362,500 shares of the
Company’s common stock, for an aggregate purchase price of $36,250.
NOTE
7 - SUBSEQUENT EVENTS
On March
28, 2005, the Company announced that it had executed a definitive agreement for
the merger of the Company and Adventure Holdings, S.A. ("Adventure
Holdings"). Adventure Holdings, through wholly-owned subsidiaries, owns and
operates two bulk carriers, the M/V “Free Destiny” and the M/V “Free
Envoy.”
The
definitive merger agreement contemplates the merger of the Company with and into
Adventure Holdings, with the Company's current stockholders receiving one share
and one warrant of Adventure Holdings for each share and warrant they presently
own. After giving effect to the merger, the Company's stockholders will own
approximately 29.4% of Adventure Holdings. In addition, the management of
Adventure Holdings will receive options and warrants to acquire an additional
950,000 shares of Adventure Holding’s common stock, exercisable at $5.00 per
share over terms ranging from three to five years. The merger is subject
to, among other things, the filing of definitive proxy materials with the
Securities and Exchange Commission and approval of the transaction by the
Company's stockholders. There can be no assurance that the proposed transaction
will be consummated.
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.
| |
|
|
| |
TRINITY PARTNERS
ACQUISITION COMPANY INC. |
|
|
|
|
By: |
/s/ Lawrence
Burstein |
| |
Lawrence Burstein
President
and Treasurer
(Principal
Executive and Financial Officer) |
| Date:
March
31, 2005 |
|
____________________
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
Signature |
|
Title |
|
Date |
| |
|
|
|
|
| /s/ Lawrence
Burstein |
|
|
|
|
|
Lawrence
Burstein
|
|
President
and Treasurer (Principal Executive and Financial Officer)
|
|
March
31, 2005
|
| |
|
|
|
|
| /s/ James
Scibelli |
|
|
|
|
|
James
Scibelli
|
|
Chairman
and Secretary
|
|
March
29, 2005
|
| |
|
|
|
|
| /s/ David
Buckel |
|
|
|
|
|
David
Buckel
|
|
Director
|
|
March
28, 2005
|
| |
|
|
|
|
| /s/ Theodore
Kesten |
|
|
|
|
|
Theodore
Kesten
|
|
Director
|
|
March
31, 2005
|