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 June 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
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(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
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(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 August 13, 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
Statements of Stockholders' Equity 5
Statements 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 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 13
Signatures and Certifications 15
2
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Balance Sheet (Unaudited)
================================================================================
June 30,
2004
--------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 1,006,059
U.S. Government Securities held in Trust Fund (Note 2) 33,143,000
Accrued interest receivable, Trust Fund 50,777
Prepaid expenses 51,625
------------
Total current assets 34,251,461
Furniture & equipment (net of accumulated depreciation of $203) 7,773
------------
Total assets $ 34,259,234
============
Liabilities and Stockholders' Equity
Current liabilities:
Accrued expenses $ 80,585
Note payable, stockholder (Note 4) --
------------
Total current liabilities 80,585
------------
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) and 1,375,000, respectively 770
Additional paid-in capital 27,738,953
Deficit accumulated during development stage (9,351)
------------
Total stockholders' equity 27,730,372
------------
Total liabilities and stockholders' equity $ 34,259,234
============
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)
================================================================================
Period from
Three months February 5, 2004
ended (inception) to
June 30, 2004 June 30, 2004
--------------------------------------------------------------------------------
Expenses:
General and administrative expenses $ (61,167) $(62,017)
----------- --------
Operating loss $ (61,167) $(62,017)
Other income:
Interest income $ 52,666 $ 52,666
----------- --------
Net loss $ (8,501) $ (9,351)
----------- --------
Basic and fully diluted net loss per share $ (0.00)
-----------
Weighted average common shares outstanding 4,363,776
-----------
See accompanying summary of significant accounting policies and notes to
unaudited financial statements.
4
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Statements of Stockholders' Equity (Unaudited)
================================================================================
Preferred Stock Common Stock
Shares Amount Shares Amount
---------------------------------------------------------------------------------------------------------
Balance, February 5, 2004 (inception) -- $ -- -- $ --
Issuance of common stock to
initial stockholders -- -- 1,375,000 137
Sale of 6,325,000 units, net of underwriters'
discount and offering expenses (includes
1,264,368 shares subject to possible
redemption) -- -- 6,325,000 633
Net loss for the period -- -- -- --
---------------------------------------------------------------------------------------------------------
Balance, March 31, 2004 -- -- 7,700,000 770
Net loss for the period (unaudited) -- -- -- --
---------------------------------------------------------------------------------------------------------
Balance, June 30, 2004 (unaudited) -- -- 7,700,000 $770
--- ---- --------- ----
---------------------------------------------------------------------------------------------------------
Additional Deficit accumulated
Paid-In during the
Capital development stage Total
----------------------------------------------------------------------------------------------------------------
Balance, February 5, 2004 (inception) $ -- $ -- $ --
Issuance of common stock to
initial stockholders 24,863 -- 25,000
Sale of 6,325,000 units, net of underwriters'
discount and offering expenses (includes
1,264,368 shares subject to possible
redemption) 27,714,090 -- 27,714,723
Net loss for the period -- (850) (850)
----------------------------------------------------------------------------------------------------------------
Balance, March 31, 2004 27,738,953 (850) 27,738,873
Net loss for the period (unaudited) -- (8,501) (8,501)
----------------------------------------------------------------------------------------------------------------
Balance, June 30, 2004 (unaudited) $27,738,953 $(9,351) $ 27,730,372
--- ---- ----------- ------- ------------
----------------------------------------------------------------------------------------------------------------
See accompanying summary of significant accounting policies and notes to
unaudited financial statements.
5
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Statements of Cash Flows (Unaudited)
================================================================================
Three months February 5, 2004
ended (inception) to
June 30, 2004 June 30, 2004
-------------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net loss $ (8,501) $ (9,351)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 203 203
Increase in accrued interest receivable (50,777) (50,777)
Increase in prepaid expenses (51,625) (51,625)
Increase in accrued expenses 80,585 80,585
------------ ------------
Net cash used in operating activities (30,115) (30,965)
------------ ------------
Cash Flows from Investing Activities
U.S. Government securities held in Trust Fund (33,143,000) (33,143,000)
Purchase of furniture and equipment (7,976) (7,976)
------------ ------------
Net cash used in investing activities (33,150,976) (33,150,976)
------------ ------------
Cash Flows from Financing Activities
Proceeds from public offering of 6,325,000 units net 34,163,000 34,163,000
Decrease in deferred registration costs 89,885 (--)
Proceeds from issuance of common
stock to initial stockholders -- 25,000
Proceeds from note payable, stockholder 7,500 77,500
Repayment of note payable, stockholder (77,500) (77,500)
------------ ------------
Net cash provided by financing activities 34,182,885 34,188,000
------------ ------------
Net increase in cash and cash equivalents 1,006,059
Cash and cash equivalents at beginning of the period 4,265 --
------------ ------------
Cash and cash equivalents at end of the period $ 1,006,059 $ 1,006,059
------------ ------------
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 a net operating loss
carryforward of approximately $$9,300 available
to reduce any future income taxes. The tax
benefit of this loss, approximately $1,400 has
been fully offset by a valuation allowance due to
the uncertainty of its realization.
Net Loss Per Share Net loss 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 of normal accruals) have been made
that are necessary to present fairly the
financial position of the Company as of June 30,
2004 and the results of its operations and its
cash flows for the periods ended June 30, 2004.
Operating results for the interim period
presented are not necessarily indicative of the
results to be expected for a full year.
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,
2003.
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 $33,143,000 of
the net proceeds is being held in an interest
bearing trust account ("Trust Fund") until the
earlier of (i) the consummation of its first
Business Combination or (ii) liquidation of the
Company. Under the agreement governing the Trust
Fund, funds will only be invested in United
Stated government securities (treasury bills)
with a maturity of 180 days or less. The
remaining proceeds 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 outstanding stock excluding, for this
purpose, those persons who were stockholders
prior to the Offering, vote against the Business
Combination, the Business Combination will not be
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 the first Business Combination
which is approved and consummated, any Public
Stockholder who voted against the Business
Combination may demand that the Company redeem
his shares. The per share redemption price will
equal the amount in the Trust Fund as of the
record date for determination of stockholders
entitled to vote on the Business Combination
divided by the number of shares of common stock
held by Public Stockholders at the consummation
of the 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, without stockholder approval, in the
event that the Company does not consummate a
Business Combination within 18 months from the
date of the consummation of the Offering, or 24
months from the consummation of the Offering if
certain extension criteria have been satisfied.
In the event of liquidation, it is likely that
the per share value of the residual assets
remaining available for distribution (including
Trust Fund assets) will be less than the initial
public Offering price per share in the Offering
due to costs related to the Offering (assuming no
value is attributed to the warrants contained in
the Units in the Offering discussed in Note 3).
3. Offering On May 18, 2004, 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 Redeemable
9
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Notes to Unaudited Financial Statements
================================================================================
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 is
obligated to pay 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 11428571 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 June 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.
We consummated our initial public offering on May 18, 2004. Net loss of
$8,501 reported for the quarter consists of $7,000 expense for a monthly
administrative services agreement, $2,250 for professional fees, $7,375 expense
for officer liability insurance, $8,900 for travel expenses, and $35,642 for
other expenses. Interest income on the Trust Fund investment was $52,666.
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,
$33,143,000 is 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 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.
We are obligated, commencing May 12, 2004, to pay to First Americas
Management LLC, an
11
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 June 30, 2004 was made under the supervision and with the
participation of our management, including our chairman and chief executive
officer (who is also our principal financial officer). 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 June 30, 2004, we have used
approximately $22,000 of cash for operating expenses and $77,500 to repay
advances made to us by one of our initial stockholders.
ITEM 5: OTHER INFORMATION
In June 2004, our board of directors adopted a code of ethics that applies
to our directors, officers and employees as well as those of our subsidiaries. A
copy of our code of ethics has been filed as an exhibit to this Quarterly Report
on Form 10-QSB.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
14 - Code of Ethics
31.1 - Section 302 Certification by CEO (and principal financial
officer)
32.1 - Section 906 Certification by CEO (and principal financial
officer)
(b) Reports on Form 8-K:
Date Items Financial Statements
---- ----- --------------------
May 18, 2004 5, 7 Audited Financial Statements for the
periods from February 5, 2004 (inception)
to May 18, 2004 and February 5, 2004
(Inception) to March 10, 2004
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: August 13, 2004
/s/ Lawrence S. Coben
---------------------------------
Lawrence S. Coben
Chairman of the Board and Chief
Executive Officer
(and principal financial officer)