UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended September 30, 2004
|_| Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _____________ to _____________
Commission File Number 000-50682
Tremisis Energy Acquisition Corporation
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 20-0700684
-------- ----------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1775 Broadway, Suite 604, New York, New York 10019
--------------------------------------------------
(Address of Principal Executive Office)
(212) 397-1464
--------------
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes |X| No
|_|
As of November 12, 2004, 7,700,000 shares of common stock, par value
$.0001 per share, were issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
Page
----
Part I: Financial Information:
Item 1 -Financial Statements (Unaudited):
Balance Sheet 3
Statements of Operations 4
Statement of Stockholders' Equity 5
Statement of Cash Flows 6
Summary of Significant Accounting Policies 7
Notes to Financial Statements 8
Item 2 - Management's Discussion and Analysis or
Plan of Operation 11
Item 3 - Controls and Procedures 12
Part II. Other Information
Item 2 - Changes in Securities and Small Business Issuer
Purchases of Equity Securities 13
Item 6 - Exhibits and Reports on Form 8-K 13
Signatures 15
2
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Balance Sheet (Unaudited)
================================================================================
September 30,
2004
--------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 912,671
U.S. Government Securities held in Trust Fund (Note 2) 33,143,000
Accrued interest receivable, Trust Fund (Note 2) 157,953
Prepaid expenses 36,875
-----------
Total current assets 34,250,499
Furniture and equipment (net of accumulated depreciation of $811) 7,165
-----------
Total assets $34,257,664
===========
Liabilities and Stockholders' Equity
Current liabilities:
Accrued expenses $ 9,096
Income tax payable 21,200
-----------
Total current liabilities 30,296
-----------
Common stock, subject to possible redemption,
1,264,368 shares at redemption value (Note 2) 6,448,277
-----------
Commitment (Note 5)
Stockholders' equity (Notes 2, 3, 6 and 7)
Preferred stock, $.0001 par value, Authorized
1,000,000 shares; none issued
Common stock, $.0001 par value
Authorized 30,000,000 shares; Issued and outstanding
7,700,000 shares (which includes 1,264,368 subject
to possible redemption) 770
Additional paid-in capital 27,738,953
Retained earnings accumulated during development stage 39,368
-----------
Total stockholders' equity 27,779,091
-----------
Total liabilities and stockholders' equity $34,257,664
===========
See accompanying summary of significant accounting policies and
notes to unaudited financial statements.
3
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Statements of Operations (Unaudited)
================================================================================
Three months
Period from
ended February 5, 2004
September 30, 2004 (inception) to
September 30, 2004
--------------------------------------------------------------------------------------------
Expenses:
General and administrative expenses $ (40,657) $ (102,674)
----------- -----------
Operating loss $ (40,657) $ (102,674)
Other income:
Interest income $ 110,576 $ 163,242
----------- -----------
Income before provision for income taxes 69,919 60,568
Provision for income taxes $ (21,200) (21,200)
----------- -----------
Net income $ 48,719 $ 39,368
----------- -----------
Basic and fully diluted net income per share $ 0.01 $ 0.01
----------- -----------
Weighted average common shares outstanding 7,700,000 4,977,848
----------- -----------
See accompanying summary of significant accounting policies and
notes to unaudited financial statements.
4
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Statement of Stockholders' Equity (Unaudited)
================================================================================
Retained earnings
Additional accumulated
Preferred Stock Common Stock Paid-In during the
Shares Amount Shares Amount Capital development stage Total
---------------------------------------------------------------------------------------------------------------------------------
Balance, February 5, 2004 (inception) -- $ -- -- $ -- $ -- $ -- $ --
Issuance of common stock to
initial stockholders -- -- 1,375,000 137 24,863 -- 25,000
Sale of 6,325,000 units, net of
underwriters' discount and
offering expenses (includes
1,264,368 shares subject to -- -- 6,325,000 633 27,714,090 -- 27,714,723
possible redemption)
Net income for the period -- -- -- -- -- 39,368 39,368
---------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 2004 -- -- 7,700,000 $ 770 $27,738,953 $ 39,368 $27,779,091
---------------------------------------------------------------------------------------------------------------------------------
See accompanying summary of significant accounting policies and
notes to unaudited financial statements.
5
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Statement of Cash Flows (Unaudited)
================================================================================
February 5, 2004
(inception) to
September 30, 2004
--------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net income $ 39,368
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 811
Increase in prepaid expenses (36,875)
Increase in accrued expenses 9,096
Increase in income tax payable 21,200
------------
Net cash provided by operating activities 33,600
------------
Cash Flows from Investing Activities
Purchase of U.S. Government securities held in Trust Fund (33,143,000)
Increase in accrued interest receivable (157,953)
Purchase of furniture and equipment (7,976)
------------
Net cash used in investing activities (33,308,929)
------------
Cash Flows from Financing Activities
Proceeds from public offering of 6,325,000 units, net 34,163,000
Proceeds from issuance of common
stock to initial stockholders 25,000
Proceeds from note payable, stockholder 77,500
Repayment of note payable, stockholder (77,500)
------------
Net cash provided by financing activities 34,188,000
Net increase in cash and cash equivalents 912,671
Cash and cash equivalents at beginning of the period --
------------
Cash and cash equivalents at end of the period $ 912,671
------------
See accompanying summary of significant accounting policies and
notes to unaudited financial statements
6
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Summary of Significant Accounting Policies
================================================================================
Cash and Cash Equivalents The Company considers all highly liquid
investments with original maturities of three
months or less to be cash equivalents.
Income Taxes The Company follows Statement of Financial
Accounting Standards No. 109 ("SFAS No. 109"),
"Accounting for Income Taxes" which is an asset
and liability approach that requires the
recognition of deferred tax assets and liabilities
for the expected future tax consequences of events
that have been recognized in the Company's
financial statements or tax returns. The Company
has an income tax payable of approximately
$21,200.
Net Income Per Share Net income per share is computed on the basis of
the weighted average number of common shares
outstanding during the period, including common
stock equivalents (unless anti-dilutive) which
would arise from the exercise of stock warrants.
Use of Estimates The preparation of financial statements in
conformity with accounting principles generally
accepted in the United States of America requires
management to make estimates and assumptions that
affect the reported amounts of assets and
liabilities at the date of the financial
statements and the reported amounts of expenses
during the reporting period. Actual results could
differ from those estimates.
Furniture and Equipment Furniture and equipment is stated at cost, net of
accumulated depreciation. Depreciation is computed
on a straight line basis over the estimated lives
of 5 to 7 years commencing upon the date the asset
is placed in service.
7
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Notes to Unaudited Financial Statements
================================================================================
1. Basis of Presentation The financial statements are unaudited and include
the accounts of Tremisis Energy Acquisition
Corporation (a corporation in the development
stage) ("Company").
In the opinion of management, all adjustments
(consisting primarily of normal accruals) have
been made that are necessary to present fairly the
financial position of the Company as of September
30, 2004 and the results of its operations and its
cash flows for the periods ended September 30,
2004. Operating results for the interim period
presented are not necessarily indicative of the
results to be expected for a full year. The
Company has selected December 31st as its fiscal
year end.
The statements and related notes have been
prepared pursuant to the rules and regulations of
the U.S. Securities and Exchange Commission.
Accordingly, certain information and footnote
disclosures normally included in financial
statements prepared in accordance with generally
accepted accounting principles have been omitted
pursuant to such rules and regulations. These
financial statements should be read in conjunction
with the financial statements that were included
in the Company's Current Report on Form 8-K filed
on May 18, 2004.
2. Organization and
Business Operations The Company was incorporated in Delaware on
February 5, 2004 as a blank check company, the
objective of which is to acquire an operating
business in either the energy or the environmental
industry and their related infrastructures. The
Company's initial stockholders purchased 1,375,000
common shares, $.0001 par value, for $25,000 on
February 5, 2004.
On May 18, 2004, the Company consummated an
Initial Public Offering ("Offering") and raised
net proceeds of $34,163,000 which is discussed in
Note 3. The Company's management has broad
discretion with respect to the specific
application of the net proceeds of this Offering,
although substantially all of the net proceeds of
this Offering are intended to be generally applied
toward consummating a business combination with a
operating business in either the energy or
environmental industry and their related
infrastructures ("Business Combination").
Furthermore, there is no assurance that the
Company will be able to successfully effect a
Business Combination. An amount of $33,300,953
(which includes accrued interest of $157,953) is
being held in an interest bearing trust account
("Trust Fund") until the earlier of (i) the
consummation of its first Business Combination or
(ii) liquidation of the Company. Under the
agreement governing the Trust Fund, funds will
only be invested in United Stated government
securities (treasury bills) with a maturity of 180
days or less. The remaining net proceeds (not held
in trust) may be used to pay for business, legal
and accounting due diligence on prospective
acquisitions and continuing general and
administrative expenses.
8
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Notes to Unaudited Financial Statements
================================================================================
The Company, after signing a definitive agreement
for the acquisition of a target business, will
submit such transaction for stockholder approval.
In the event that stockholders owning 20% or more
of the stock sold in the Offering, vote against
the Business Combination and exercise their
redemption rights described below, the Business
Combination will not be consummated. All of the
Company's stockholders prior to the Offering,
including all of the officers and directors of the
Company ("Initial Stockholders"), have agreed to
vote their 1,375,000 founding shares of common
stock in accordance with the vote of the majority
in interest of all other stockholders of the
Company ("Public Stockholders") with respect to
any Business Combination. After consummation of
the Company's first Business Combination, all of
these voting safeguards will no longer be
applicable.
With respect to a Business Combination which is
approved and consummated, any Public Stockholder
who voted against the Business Combination may
demand that the Company convert his shares. The
per share redemption price will equal the amount
in the Trust Fund as of the record date for
determination of stockholders entitled to vote on
the Business Combination divided by the number of
shares of common stock held by Public Stockholders
at the consummation of the Proposed Offering.
Accordingly, Public Stockholders holding 19.99% of
the aggregate number of shares owned by all Public
Stockholders may seek redemption of their shares
in the event of a Business Combination. Such
Public Stockholders are entitled to receive their
per share interest in the Trust Fund computed
without regard to the shares held by Initial
Stockholders. In this respect, $6,448,277 has been
classified as common stock subject to possible
redemption.
The Company's Certificate of Incorporation
provides for mandatory liquidation of the Company
in the event that the Company does not consummate
a Business Combination within 18 months from the
date of the consummation of the Offering, or 24
months from the consummation of the Offering if
certain extension criteria have been satisfied. In
the event of liquidation, it is likely that the
per share value of the residual assets remaining
available for distribution (including Trust Fund
assets) will be less than the initial public
Offering price per share in the Offering due to
costs related to the Offering (assuming no value
is attributed to the warrants contained in the
Units in the Offering discussed in Note 3).
3. Offering The Company sold 6,325,000 units ("Units") in the
Offering, which includes all of the 825,000 Units
subject to the underwriters' over allotment
option. Each Unit consists of one share of the
Company's common stock, $.0001 par value, and two
9
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Notes to Unaudited Financial Statements
================================================================================
Redeemable Common Stock Purchase Warrants
("Warrants"). Each Warrant will entitle the holder
to purchase from the Company one share of common
stock at an exercise price of $5.00 commencing the
later of the completion of a business combination
with a target business or one year from the
effective date of the Offering and expiring four
years from the date of the prospectus. The
Warrants will be redeemable at a price of $.01 per
Warrant upon 30 days notice after the Warrants
become exercisable, only in the event that the
last sale price of the common stock is at least
$8.50 per share for any 20 trading days within a
30 trading day period ending on the third day
prior to date on which notice of redemption is
given. In connection with this Offering, the
Company issued an option for $100 to the
representative of the underwriters to purchase
275,000 units at an exercise price of $9.90 per
Unit. In addition, the warrants underlying such
Units are exercisable at $6.25 per share.
4. Note Payable,
Stockholder The Company issued a $70,000 unsecured
non-interest bearing promissory note to a
stockholder on February 17, 2004. The stockholder
advanced additional amounts aggregating $7,500
through June 30, 2004. The notes were paid in full
on June 1, 2004 from the net proceeds of the
Offering.
5. Commitment The Company presently occupies office space
provided by an affiliate of an Initial
Stockholder. Such affiliate has agreed that, until
the acquisition of a target business by the
Company, it will make such office space, as well
as certain office and secretarial services,
available to the Company, as may be required by
the Company from time to time. The Company pays
such affiliate $3,500 per month for such services
commencing on May 18, 2004, the effective date of
the Offering.
6. Preferred Stock The Company is authorized to issue 1,000,000
shares of preferred stock with such designations,
voting and other rights and preferences as may be
determined from time to time by the Board of
Directors.
7. Common Stock The Company's Board of Directors authorized a
1.666666 to one forward stock split of its common
stock on March 10, 2004, a 1.1428571 to one
forward stock split of its common stock on April
16, 2004 and a 1.375 to one forward stock split of
its common stock on April 23, 2004. All references
in the accompanying financial statements to the
numbers of shares have been retroactively restated
to reflect the transaction.
At September 30, 2004, there were 13,475,000
shares of common stock reserved for issuance upon
exercise of redeemable warrants and underwriters'
unit purchase option.
10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and footnotes thereto contained in this
report.
Forward Looking Statements
The statements discussed in this Report include forward looking statements
that involve risks and uncertainties, including the timely delivery and
acceptance of the Company's products and the other risks detailed from time to
time in the Company's reports filed with the Securities and Exchange Commission.
Plan of Operations
We were formed on February 5, 2004 to serve as a vehicle to effect a
merger, capital stock exchange, asset acquisition or other similar business
combination with a company in the either of the energy or environmental
industries and their related infrastructures. We intend to utilize cash derived
from the proceeds of our recently completed public offering, our capital stock,
debt or a combination of cash, capital stock and debt, in effecting a business
combination.
Net income for the three months ended September 30, 2004 consisted of
interest income on the Trust Fund investment of $107,176, interest on cash and
cash equivalents of $3,400 offset by general and administration expenses of
$10,500 expense for a monthly administrative services agreement, $5,183 for
professional fees, $14,750 expense for officer liability insurance, $1,729 for
travel expenses, $21,200 in income tax payable and $8,495 for other expenses
Net income for the period from February 5, 2004 (inception) to September
30, 2004 consisted of interest income on the Trust Fund investment of $157,953,
interest on cash and cash equivalents of $5,289 offset by general and
administration expenses of $17,500 expense for a monthly administrative services
agreement, $7,443 for professional fees, $22,125 expense for officer liability
insurance, $4,518 for travel expenses, $21,200 in income tax payable and $51,088
for other expenses.
We consummated our initial public offering on May 18, 2004. Gross proceeds
from our initial public offering, including the full exercise of the
underwriters' over-allotment option, were $37,950,000. After deducting offering
expenses of $1,510,000 including $990,000 evidencing the underwriters'
non-accountable expense allowance of 3% of the gross proceeds, and underwriting
discounts of $2,277,000, net proceeds were $34,163,000. Of this amount,
$33,300,953 (which includes accrued interest of $157,953) is being held in trust
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 will use substantially all of the net
proceeds of this 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 May 18, 2006, assuming that a
business combination is not consummated during that time. Over this time period,
we anticipate approximately $180,000 of expenses for legal, accounting and other
expenses related to the due diligence investigations, structuring and
negotiating of a business combination, $84,000 for the administrative fee
payable to First Americas Management LLC ($3,500 per month for two years),
$50,000 of expenses for the due diligence and investigation of a target
business, $40,000 of expenses in legal and accounting fees relating to our SEC
reporting obligations and $666,000 for general working capital that will be used
for miscellaneous expenses and reserves, including approximately $60,000 for
director and officer liability insurance premiums. We do not believe we will
need to raise additional funds following this
11
offering in order to meet the expenditures required for operating our business.
However, we may need to raise additional funds through a private offering of
debt or equity securities if such funds are required to consummate a business
combination that is presented to us. We would only consummate such a fund
raising simultaneously with the consummation of a business combination.
Commencing May 12, 2004, we pay to First Americas Management LLC, an
affiliate of Isaac Kier, our secretary, treasurer and a member of our board of
directors, a monthly fee of $3,500 for general and administrative services. In
addition, in February and April 2004, Lawrence S. Coben advanced an aggregate of
$77,500 to us, on a non-interest bearing basis, for payment of offering expenses
on our behalf. This amount was repaid in May 2004 out of proceeds of our initial
public offering.
ITEM 3. CONTROLS AND PROCEDURES.
An evaluation of the effectiveness of our disclosure controls and
procedures as of September 30, 2004 was made under the supervision and with the
participation of our management, including chief executive officer and
treasurer. Based on that evaluation, he concluded that our disclosure controls
and procedures are effective as of the end of the period covered by this report
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 Securities and
Exchange Commission rules and forms. During the most recently completed fiscal
quarter, there has been no significant change in our internal control over
financial reporting that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
12
PART II.
OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
SECURITIES
On May 18, 2004, we closed our initial public offering of 6,325,000 Units,
including 825,000 Units issued upon exercise of the underwriters' over-allotment
option, with each unit consisting of one share of our common stock and two
warrants, each to purchase one share of our common stock at an exercise price of
$5.00 per share. The Units were sold at an offering price of $6.00 per Unit,
generating gross proceeds of 37,950,000. The representative of the underwriters
in the offering was EarlyBirdCapital, Inc. The securities sold in the offering
were registered under the Securities Act of 1933 on a registration statement on
Form S-1 (No. 333-113583). The Securities and Exchange Commission declared the
registration statement effective on May 12, 2004.
We paid a total of $2,277,000 in underwriting discounts and commissions,
and approximately $1,510,000 has been paid for costs and expenses related to the
offering, including $990,000 for the underwriters' non-accountable expense
allowance of 3% of the gross proceeds.
After deducting the underwriting discounts and commissions and the
offering expenses, the total net proceeds to us from the offering were
$34,163,000, of which $33,143,000 was deposited into a trust fund and the
remaining proceeds are available to be used to provide for business, legal and
accounting due diligence on prospective business combinations and continuing
general and administrative expenses. Through September 30, 2004, we have used
approximately $ 137,000 of cash for operating expenses and $77,500 to repay
advances made to us by one of our initial stockholders.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
31.1 - Section 302 Certification by CEO
31.2 - Section 302 Certification by Treasurer
32.1 - Section 906 Certification by CEO
32.2 - Section 906 Certification by Treasurer
(b) Reports on Form 8-K:
None
13
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TREMISIS ENERGY
ACQUISITION CORPORATION
Dated: November 12, 2004
/s/ Lawrence S. Coben
---------------------------
Lawrence S. Coben and Chief
Executive Officer
Chairman of the Board