SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended: December 31, 2004
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______________to ______________
Commission File Number 000-50682
TREMISIS ENERGY ACQUISITION CORPORATION
(Name of Small Business Issuer in Its Charter)
Delaware 20-0700684
(State of Incorporation) (Small Business Issuer
I.R.S. Employer I.D. Number)
1775 Broadway, Suite 604 10019
New York, New York (zip code)
(Address of principal executive offices)
212-397-1464
(Issuer'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:
Units consisting of one share of Common Stock, par value $.0001 per share,
and two Warrants
Common Stock, $.0001 par value per share
Warrants to purchase shares of Common Stock
Check whether the Issuer (1) has 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 requirement for the past 90 days. Yes X No ___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |X |
Issuer's revenues for the fiscal year ended December 31, 2004 were $0.
As of March 25, 2005, the aggregate market value of the common stock held by
non-affiliates of the Registrant was approximately $34,344,750.
As of March 28, 2005, there were 7,700,000 shares of Common Stock, $.0001 par
value per share, outstanding.
Transitional Small Business Disclosure Format (check one): Yes ___ No X
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Tremisis Energy Acquisition Corporation is a blank check company formed on
February 5, 2004 to effect a merger, capital stock exchange, asset acquisition
or other similar business combination with an operating business in either the
energy or the environmental industry and their related infrastructures.
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. After deducting the underwriting
discounts and commissions and the offering expenses, the total net proceeds to
us from the offering were approximately $34,163,000, of which $33,143,000 was
deposited into a trust fund and the remaining proceeds ($1,020,000) 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 December 31, 2004, we have used $185,906 of the net proceeds
that were not deposited into the trust fund to pay general and administrative
expenses. The net proceeds deposited into the trust fund remain on deposit in
the trust fund earning interest. As of December 31, 2004, there was $33,442,528
held in the trust fund.
We are not presently engaged in, and we will not engage in, any
substantive commercial business until we consummate a business combination. We
intend to utilize our cash, including the funds held in the trust fund, capital
stock, debt or a combination of the foregoing in effecting a business
combination. 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,
we may seek to consummate a business combination with a company that may be
financially unstable or in its early stages of development or growth.
Energy industry and its related infrastructure
The energy industry and its related infrastructure generally includes the
production, generation, transmission and distribution of electricity, heat, fuel
and other consumable forms of energy and the infrastructure needed to maintain
and operate the facilities, services and installations used in the foregoing
areas. The shortage of natural gas, rising oil prices and blackouts that have
occurred as a result of over-usage in current energy forms have brought renewed
focus on a variety of energy forms and the infrastructure related to the
transmission of such energy.
Although we may consider a target business in any segment of the energy
industry, we are concentrating our search for an acquisition candidate on
companies in the following segments:
o Electricity generation, distribution and transmission;
o Natural gas production, distribution and transmission;
o Energy related services including conservation, metering, operations
and maintenance;
o Steam generation and distribution;
o Alternative and renewable energy technologies; and
o The infrastructure necessary to operate in the energy industry
including but not limited to areas such as the production,
transportation or distribution of towers, power lines, scaffolding
products and other equipment or supplies incidental to the energy
industry.
Environmental industry and its related infrastructure
The environmental industry and its related infrastructure generally
includes the technologies and services that protect the natural and human
environment from destruction and pollution, and the infrastructure needed to
maintain and operate the facilities, services and installations used in the
foregoing areas. The environmental industry also seeks to ameliorate the
negative effects of industrial production and unhealthy practices and materials
on our population as a whole.
Landfill closures and the difficulty of positioning new facilities in
certain parts of the country have required that waste be transported long
distances for environmentally sound disposal. New landfills require additional
remediation measures to ensure that waste does not contaminate the surrounding
ground or nearby water supplies. New technologies and expenditures are
increasingly required with respect to air emissions and water cleanup, as
pollution from power and industrial plants merit increasing examination and
concern. Searches for new energy and water sources must meet stringent
environmental standards, while existing and alternative forms of energy that are
being used, developed and tested must adhere to an expanding body of practices
and procedures to ensure that our environment is protected.
Although we may consider a target business in any segment of the
environmental industry, we are concentrating our search for an acquisition
candidate on companies in the following segments:
o Waste management and disposal, including wastewater treatment and
management and sewage control;
o Air treatment and ionization, pollution and emission control;
o Medical waste disposal;
o Radon and site cleanup services;
o Other energy/environmental related technologies; and
The infrastructure necessary to operate in the environmental industry
including but not limited to areas such as the operation of water supply
facilities, waste and wastewater treatment facilities, pollution control
facilities and transportation facilities and the production, transportation or
distribution of the equipment and products incidental to such operations.
Selection of a target business and structuring of a business combination
We anticipate that target business candidates will be brought to our
attention from various unaffiliated sources, including investment bankers,
venture capital funds, private equity funds, leveraged buyout funds, management
buyout funds and other members of the financial community, who may present
solicited or unsolicited proposals. Our officers and directors, as well as their
affiliates, may also bring to our attention target business candidates. While we
do not currently have any agreements or plans to engage professional firms that
specialize in business acquisitions to assist us in our search for a target
business, we may do so in the future. If we do, we may be required to pay such
firm a finder's fee or other compensation. In no event, however, will we pay any
of our initial officers, directors or stockholders (collectively, our
"Founders") or any entity with which they are affiliated any finder's fee or
other compensation for services rendered to us prior to or in connection with
the consummation of a business combination.
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Subject to the requirement that the target business must be in either the
energy or the environmental industry and their related infrastructures, our
management has virtually unrestricted flexibility in identifying and selecting a
prospective target business. In evaluating a prospective target business, our
management considers, among other factors, the following:
o financial condition and results of operation;
o growth potential;
o experience and skill of management and availability of additional
personnel;
o capital requirements;
o competitive position;
o stage of development of the products, processes or services;
o degree of current or potential market acceptance of the products,
processes or services;
o proprietary features and degree of intellectual property or other
protection of the products, processes or services;
o regulatory environment of the energy and environmental industries;
and
o 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 conduct
extensive due diligence reviews which 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.
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 with respect to the satisfaction of such criteria. 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 has sufficient fair market value.
Opportunity for stockholder approval of business combination
Prior to the completion of a business combination, we will submit the
transaction to our stockholders for approval, even if the nature of the
acquisition is such as would not ordinarily require stockholder approval under
applicable state law. In connection with seeking stockholder approval of a
business combination, we will furnish our 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.
In connection with the vote required for any business combination, our
Founders have agreed to vote
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their respective shares of common stock owned by them immediately prior to our
initial public offering ("Founder Shares") in accordance with the vote of the
majority of the shares of our common stock sold in such offering ("IPO Shares").
This voting arrangement shall not apply to any shares included in units
purchased by our Founders in our initial public offering or purchased by them
after such offering in the open market. We will proceed with the business
combination only if a majority of the IPO Shares are voted in favor of the
business combination and stockholders holding less than 20% of the IPO Shares
exercise their conversion rights.
Conversion rights
At the time we seek stockholder approval of any business combination, we
will offer the holders of IPO Shares the right to have such shares converted to
cash if the stockholder votes against the business combination and the business
combination is approved and completed. 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 stockholders entitled to vote on the
business combination, divided by the total number of IPO Shares. As of December
31, 2004, the per-share conversion price would have been $ 5.29. An eligible
stockholder may request conversion at any time after the mailing to our
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 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 stockholders
entitled to convert their shares who elect conversion will be distributed
promptly after completion of a business combination. We will not complete any
business combination if stockholders owning 20% or more of the IPO Shares
exercise their conversion rights. Holders of IPO Shares who convert their stock
into their share of the trust fund still have the right to exercise any warrants
they continue to hold that they purchased as part of the units.
Liquidation if no business combination
If we do not complete a business combination by November 18, 2005, or by
May 18, 2006 if the extension criteria described below have been satisfied, we
will be dissolved and will distribute to all holders of IPO Shares, in
proportion to the number of IPO Shares held by them, an aggregate sum equal to
the amount in the trust fund, inclusive of any interest, plus any remaining net
assets. The Founders have waived their rights to participate in any liquidation
distribution with respect to their Founder Shares. There will be no distribution
from the trust fund with respect to our warrants.
If we enter into either a letter of intent, an agreement in principle or a
definitive agreement to complete a business combination prior to November 18,
2005, but are unable to complete the business combination prior to this date,
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 May 18, 2006, we will then
liquidate. Upon notice from us, the trustee of the trust fund will commence
liquidating the investments constituting the trust fund and will turn over the
proceeds to our transfer agent for distribution to our stockholders. We
anticipate that our instruction to the trustee would be given promptly after the
expiration of the applicable time periods.
If we were to expend all of the net proceeds of our initial public
offering, other than the proceeds deposited in the trust fund, the per-share
liquidation price as of December 31, 2004 would have been $5.29. However, the
proceeds deposited in the trust fund could become subject to the claims of our
creditors which could be prior to the claims of our public stockholders.
Lawrence S. Coben, our chairman of the board and chief executive officer, has
each agreed that, if we liquidate prior to the consummation of a business
combination, he will be personally liable to pay debts and obligations to
vendors or other entities that are owed money by us for services rendered or
products sold to us, or to any target business, in excess of the net proceeds of
our initial public offering not held in the trust account.
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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:
o our obligation to seek stockholder approval of a business
combination may delay the completion of a transaction;
o our obligation to convert into cash shares of common stock held by
our public stockholders in certain instances may reduce the
resources available to us for a business combination; and
o our outstanding warrants and options, and the future dilution they
potentially represent, may not be viewed favorably by certain target
businesses.
Any of these factors 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 the
energy and environmental industries. Such a business combination may also be
subject to regulatory approval. There is substantial competition in all aspects
and segments of the energy and environmental industries. Numerous companies,
most of which have substantially greater financial resources available to them
than we do, are already engaged in the industry segments we intend to focus on.
We cannot assure you that, subsequent to a business combination, we will have
the resources or ability to compete effectively.
Government regulation
The energy and environmental industries in general are subject to
extensive controls and regulations imposed by various levels of the federal and
state governments in the United States. Laws and regulations are generally
intended to promote the safe use and disposal of various energy sources. Failure
to comply with these laws and regulations may result in the assessment of
administrative, civil and criminal fines and penalties or the imposition of
injunctive relief. Governmental regulations may be changed from time to time in
response to economic, political or other conditions. Any laws enacted or other
governmental action taken which prohibit or restrict our operations following a
business combination could have a material adverse effect on our business,
financial condition and results of operations.
Employees
We have two executive officers, each of whom is a member of our board of
directors. These individuals are not obligated to contribute any specific number
of hours to our matters and intend to devote only as much time as they deem
necessary to our affairs. The amount of time they devote in any time period will
vary based on the availability of suitable target businesses to investigate. We
do not intend to have any full time employees prior to the consummation of a
business combination.
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Risks associated with our business
In addition to other information included in this report, the following
factors should be considered in evaluating our business and future prospects.
We are a development stage company with no operating history and very limited
resources.
We are a recently incorporated development stage 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 in either of the energy or
environmental industries and their related infrastructures. We will not generate
any revenues until, at the earliest, after the consummation of a business
combination.
If third parties bring claims against us, the proceeds held in trust could be
reduced and the per-share liquidation price received by stockholders will be
less than $ 5.29 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 public stockholders. We cannot assure
you that the per-share liquidation price will not be less than the $ 5.29 per
share held in trust as of December 31, 2004 due to claims of creditors. If we
liquidate before the completion of a business combination, Lawrence S. Coben,
our chairman of the board and chief executive officer, 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 Mr. Coben will be able to satisfy those obligations.
Since we have not currently selected any target business with which to complete
a business combination, we are unable to currently ascertain the merits or risks
of the business' operations.
Since we have not yet identified a prospective target business, there is
basis for investors to evaluate the possible merits or risks of the target
business' operations. To the extent we complete a business combination with a
financially unstable company or an entity in its development stage, we may be
affected by numerous risks inherent in the business operations of those
entities. Although our management will endeavor to evaluate the risks inherent
in a particular target business, we cannot assure you that we will properly
ascertain or assess all of the significant risk factors. We also cannot assure
you that an investment in our securities will not ultimately prove to be less
favorable than a direct investment, if an opportunity were available, in a
target business.
We may issue shares of our common stock and preferred stock to complete a
business combination, which would reduce the equity interest of our stockholders
and likely cause a change in control of our ownership.
Our certificate of incorporation authorizes the issuance of up to
30,000,000 shares of common stock, par value $.0001 per share, and 1,000,000
shares of preferred stock, par value $.0001 per share. We currently have
8,825,000 authorized but unissued shares of our common stock available for
issuance (after appropriate reservation for the issuance of shares upon full
exercise of our outstanding warrants and options) and all of the 1,000,000
shares of preferred stock available for issuance. Although we currently have no
commitments to issue our securities, we will, in all likelihood, issue a
substantial number of additional shares of our common stock or preferred stock,
or a combination of common and preferred stock, to complete a business
combination. The issuance of additional shares of our common stock or any number
of shares of our preferred stock:
o may significantly reduce the equity interest of stockholders;
o will likely cause a change in control if a substantial number of our
shares of common stock are issued, which may affect, among other
things, our ability to use our net
6
operating loss carry forwards, if any, and most likely also result
in the resignation or removal of our present officers and directors;
and
o may adversely affect prevailing market prices for our common stock.
Similarly, if we issue debt securities, it could result in:
o default and foreclosure on our assets if our operating revenues
after a business combination were insufficient to pay our debt
obligations;
o acceleration of our obligations to repay the indebtedness even if we
have made all principal and interest payments when due if the debt
security contains covenants that require the maintenance of certain
financial ratios or reserves and any such covenant is breached
without a waiver or renegotiation of that covenant;
o our immediate payment of all principal and accrued interest, if any,
if the debt security is payable on demand; and
o our inability to obtain additional financing, if necessary, if the
debt security contains covenants restricting our ability to obtain
additional financing while such security is outstanding.
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 thereby
causing conflicts of interest in their determination as to how much time to
devote to our affairs. This could have a negative impact on our ability to
consummate a business combination.
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. We do not intend to have any full
time employees prior to the consummation of a business combination. All of our
executive officers are engaged in several other business endeavors and are not
obligated to contribute any specific number of hours to our affairs. If our
executive officers' other business affairs require them to devote more
substantial amounts of time to such affairs, it could limit their ability to
devote time to our affairs and could have a negative impact on our ability to
consummate a business combination.
Some of our officers and directors may in the future become affiliated with
entities engaged in business activities similar to those intended to be
conducted by us and, accordingly, may have conflicts of interest in determining
which entity a particular business opportunity should be presented to.
Some of 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. Additionally, 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
have fiduciary obligations to. Accordingly, they may have conflicts of interest
in determining to which entity a
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particular business opportunity should be presented. We cannot assure you that
these conflicts will be resolved in our favor.
All of our officers and directors own shares of our common stock which will not
participate in liquidation distributions and
therefore they may have a conflict of interest in determining whether a
particular target business is appropriate for a business combination.
All of our officers and directors own stock in our company, but have
waived their right to receive distributions upon our liquidation. The shares and
warrants owned by our directors and officers will be worthless 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 timely.
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.
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.
As of December 31, 2004, we had $ 33,442,528 on deposit in a trust fund
that 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 consummate a business combination with a single operating business.
Accordingly, the prospects for our success may be:
o solely dependent upon the performance of a single business, or
o 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 in the energy
or environmental industry. 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 stockholder
approval of a business combination may delay the consummation of a transaction,
and our obligation to convert into cash the shares of common stock held by
public stockholders in certain instances may reduce the resources available for
a business combination. Additionally, 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.
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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 our current assets will be sufficient to allow us to
consummate a business combination, in as much as we have not yet identified any
prospective target business, we cannot ascertain the capital requirements for
any particular transaction. If we require further funds, either because of the
size of the business combination or the depletion of our available cash in
search of a target business, or because we become obligated to convert into cash
a significant number of shares 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 existing stockholders, including our officers and directors, control a
substantial interest in us and thus may influence certain actions requiring
stockholder vote.
Our board of directors is divided into three classes, each of which will
generally serve for a term of two years with only one class of directors being
elected in each year. It is unlikely that there will be an annual meeting of
stockholders to elect new directors prior to the consummation of a business
combination, in which case all of the current directors will continue in office
at least until the consummation of the business combination. If there is an
annual meeting, as a consequence of our "staggered" board of directors, only a
minority of the board of directors will be considered for election and our
existing stockholders, because of their ownership position, will have
considerable influence regarding the outcome. Accordingly, our existing
stockholders will continue to exert control at least until the consummation of a
business combination.
Our outstanding warrants may have an adverse effect on the market price of
common stock and make it more difficult to effect a business combination.
We currently have outstanding warrants to purchase 12,650,000 shares of
common stock and an option to purchase 275,000 shares of common stock and
warrants to purchase an additional 550,000 shares of common stock. 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 and options 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 and options 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 and options are exercised, you may experience dilution to your
holdings.
If we are unable to effect a business combination and are forced to liquidate,
our warrants will expire worthless.
If we do not complete a business combination by November 18, 2005, or by
May 18, 2006 if certain criteria have been satisfied, we will be dissolved and
will distribute to all holders of IPO Shares, in proportion to the number of IPO
Shares held by them, an aggregate sum equal to the amount in the trust fund,
inclusive of any interest, plus any remaining net assets. In such event, there
will be no distribution
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with respect to our outstanding warrants. Accordingly, the warrants will expire
worthless.
If our Founders exercise their registration rights, it may have an adverse
effect on the market price our common stock and the existence of these rights
may make it more difficult to effect a business combination.
Our Founders are entitled to demand that we register the resale of their
shares of common stock at any time after the date on which their shares are
released from escrow. If our Founders exercise their registration rights with
respect to all of their shares of common stock, then there will be an additional
1,375,000 shares of common stock eligible for trading in the public market. The
presence of this additional number of shares of common stock eligible for
trading in the public market may have an adverse effect on the market price of
our common stock. In addition, the existence of these rights may make it more
difficult to effectuate a business combination or increase the cost of the
target business, as the stockholders of the target business may be discouraged
from entering into a business combination with us or will request a higher price
for their securities as a result of these registration rights and the potential
future effect their exercise may have on the trading market for our common
stock.
Our securities are quoted on the OTC Bulletin Board, which limits the liquidity
and price of our securities.
Our securities are traded on the OTC Bulletin Board, an NASD-sponsored and
operated inter-dealer automated quotation system for equity securities not
included on The Nasdaq Stock Market. Quotation of our securities on the OTC
Bulletin Board limits 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:
o restrictions on the nature of our investments; and
o 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:
o registration as an investment company;'
o adoption of a specific form of corporate structure; and
o reporting, record keeping, voting, proxy and disclosure requirements
and other rules and regulations.
We do not believe that our anticipated principal activities will subject
us to the Investment Company Act of 1940. To this end, the proceeds held in
trust may only be invested by the trust agent in "government securities" with
specific maturity dates. By restricting the investment of the proceeds to these
instruments, we intend to 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.
10
Risks associated with the energy and environmental industries
and their related infrastructures
Fluctuations in energy prices may cause a reduction in the demand or
profitability of the products or services we may ultimately produce or offer.
Prices for energy sources such as oil and natural gas tend to fluctuate
widely based on a variety of political and economic factors. These price
fluctuations heavily influence both the energy and environmental industries and
their related infrastructures. Lower energy prices for existing products tend to
limit the demand for alternate forms of energy services and related products and
infrastructure. Factors that impact price fluctuations include the actions of
the members of the Organization of Petroleum Exporting Countries (OPEC), the
level of production by non-OPEC countries, worldwide demand for oil and natural
gas, political tensions involving OPEC and non-OPEC countries and other varying
factors. If we complete a business combination with a target business that is
involved with an energy source that is affected by these or other factors, there
may be a decrease in the demand for the products or services we may ultimately
produce or offer and our profitability could be adversely affected.
Changes in technology may render our products or services obsolete following a
business combination.
Both the energy and environmental industries and their related
infrastructures are substantially affected by rapid and significant changes in
technology. These changes may render certain existing services and technologies
currently used obsolete. We cannot assure you that the technologies used by or
relied upon by a target business with which we effect a business combination
will not be subject to such obsolescence. While we may attempt to adapt and
apply the services provided by the target business to newer technologies, we
cannot assure you that we will have sufficient resources to fund these changes
or that these changes will ultimately prove successful.
Failure to comply with governmental regulations could result in the imposition
of penalties, fines or restrictions on operations and remedial liabilities.
Both the energy and environmental industries are subject to extensive
federal, state and local laws and regulations related to our population's health
and safety and those associated with compliance and permitting obligations
(including those related to the use, storage, handling, discharge, emission and
disposal of municipal solid waste and other waste, pollutants or hazardous
substances or wastes, or discharges and air and other emissions) as well as land
use and development. Existing laws also impose obligations to clean up
contaminated properties or to pay for the cost of such remediation, often upon
parties that did not actually cause the contamination. Compliance with these
laws, regulations and obligations could require substantial capital
expenditures. Failure to comply could result in the imposition of penalties,
fines or restrictions on operations and remedial liabilities. These costs and
liabilities could adversely affect our operations following a business
combination. These laws, regulations and obligations could change with the
promulgation of new laws and regulations or a change in the interpretation of
existing laws and regulations, which could result in substantially similar
risks. We cannot assure you that we will be able to comply with existing or new
regulations.
If we are unable to acquire or renew permits and approvals required for our
operations following a business combination, we may be forced to suspend or
cease our operations altogether.
The construction and operation of energy projects require numerous permits
and approvals from governmental agencies. We cannot assure you that we will be
able to obtain all necessary permits and approvals following a business
combination. If we are unable to obtain or renew permits or approvals necessary
for the operation of our business following a business combination, our
operations would be adversely affected. In addition, obtaining all necessary
permits and approvals may necessitate substantial expenditures and may create a
significant risk of expensive delays or loss of value if a project is unable to
function as planned due to changing requirements or local opposition.
11
Regulation within the energy industry could reduce our profitability following a
business combination.
Essentially all of the energy sectors including electric generation,
transmission and distribution, natural gas transmission and distribution, and
oil transportation are subject to highly technical Federal and state regulatory
regimes. Rates, terms of service, facility sites, financing, dividend payments,
wages, divestitures, changes in control and business dealings with affiliates
are all subject to ongoing regulatory disclosure and approval on the merits. The
failure or refusal of any jurisdictional regulator to grant approval as to any
particular rate, service or transaction could prove harmful to us, as could the
occurrence of any dispute with a regulator.
ITEM 2. DESCRIPTION OF PROPERTY
We maintain our executive offices at 1775 Broadway, Suite 604, New York,
New York pursuant to an agreement with First Americas Management LLC, an
affiliate of Isaac Kier, our secretary and treasurer and a member of our board
of directors. We pay First Americas Management a monthly fee of $3,500 which is
for general and administrative services including office space, utilities and
secretarial support. We believe, based on rents and fees for similar services in
the New York City metropolitan area, that the fee charged by First Americas
Management 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
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Our units, common stock and warrants are traded on the Over-the-Counter
Bulletin Board under the symbols TEGYU, TEGY and TEGYW, respectively. The
following table sets forth the range of high and low closing bid prices for the
units, common stock and warrants for the periods indicated since the units
commenced public trading on May 13, 2004 and since the common stock and warrants
commenced public trading on May 24, 2004. The over-the-counter market quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not necessarily reflect actual transactions.
Units Common Stock Warrants
----- ------------ --------
High Low High Low High Low
---- --- ---- --- ---- ---
2005:
First Quarter*......... 7.35 6.65 5.50 5.01 0.94 0.75
2004:
Fourth Quarter......... 6.65 5.70 5.15 4.80 0.83 0.46
Third Quarter.......... 6.35 5.97 5.00 4.80 0.72 0.52
Second Quarter......... 6.40 6.00 5.00 4.70 0.85 0.65
* Through March 24, 2005
12
Holders
As of March 28, 2005, there was 1 holder of record of our units, 5 holders
of record of our common stock and 1 holder of record of our warrants.
Dividends
We have not paid any dividends on our common stock to date and do not
intend to pay dividends prior to the completion of a business combination. The
payment of dividends in the future will be contingent upon our revenues and
earnings, if any, capital requirements and general financial condition
subsequent to completion of a business combination. The payment of any dividends
subsequent to a business combination will be within the discretion of our then
board of directors. It is the present intention of our board of directors to
retain all earnings, if any, for use in our business operations and,
accordingly, our board does not anticipate declaring any dividends in the
foreseeable future.
Recent Sales of Unregistered Securities and Use of Proceeds
In February 2004, we sold the following shares of common stock without
registration under the Securities Act of 1933, as amended:
Stockholders Number of Shares
------------ ----------------
Lawrence S. Coben 550,000
Isaac Kier 100,000
David A. Preiser 50,000
Jon Schotz 50,000
Such shares were issued in connection with our organization pursuant to the
exemption from registration contained in Section 4(2) of the Securities Act as
they were sold to sophisticated, wealthy individuals or entities. The shares
issued to the individuals and entity above were sold at a purchase price of
approximately $0.033 per share. On March 10, 2004, April 16, 2004 and April 23,
2004, our board of directors authorized a 1.1666666-to-one forward stock split,
a 1.1428571-to-one forward stock split and a 1.375-to-one forward stock split,
respectively, of our common stock, effectively lowering the purchase price to
$0.018 per share.
Initial Public Offering
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 managing underwriter 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 for other costs and expenses related to the
offering, including $990,000 for the underwriters'
13
non-accountable expense allowance of 3% of the gross proceeds. After deducting
the underwriting discounts and commissions and the other offering expenses, the
total net proceeds to us from the offering were approximately $34,163,000, of
which $33,143,000 was deposited into a trust fund and the remaining proceeds
($1,020,000) became available to be used to provide for business, legal and
accounting due diligence on prospective business combinations and continuing
general and administrative expenses. The net proceeds deposited into the trust
fund remain on deposit in the trust fund and have earned $299,775 in interest
through December 31, 2004.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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 an operating company in 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. All activity
from February 5, 2004 through May 18, 2004 related to our formation and our
initial public offering.
Net income of $64,525 for the fiscal year ended December 31, 2004
consisted of $28,000 expense for a monthly administrative services agreement,
$19,486 for professional fees, $36,875 expense for officer liability insurance,
$23,000 for franchise fees, $ 5,429 for travel expenses and $51,602 for other
expenses. Interest income for the fiscal year ended December 31, 2004 was
$308,032.
$33,143,000 of the net proceeds of our initial public offering are in
trust, with the remaining net proceeds of $1,020,000 available to pay 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 our initial public offering not held in trust to identify
and evaluate prospective acquisition candidates, select the target business, and
structure, negotiate and consummate the business combination. We intend to
utilize our cash, including the funds held in the trust fund, capital stock,
debt or a combination of the foregoing to effect a business combination. To the
extent that our capital stock or debt securities are 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 available cash will be used to finance the operations
of the target business. At December 31, 2004, we had cash outside of the trust
fund of $834,094, prepaid expenses of $22,125 and total liabilities of $ 52,680.
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. 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 financing simultaneously with the consummation of a
business combination.
We are obligated to pay to First Americas Management 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 June 2004 out of proceeds of our initial public offering.
ITEM 7. FINANCIAL STATEMENTS
This information appears following Item 14 of this Report and is
incorporated herein by reference.
14
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 8A. CONTROL AND PROCEDURES
An evaluation of the effectiveness of our disclosure controls and
procedures as of December 31, 2004 was made under the supervision and with the
participation of our management, including our chief executive officer and our
treasurer. Based on that evaluation, they 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. Since our inception through December 31,
2004, there were no significant changes in our internal controls over financial
reporting that has materially affected, or is reasonably likely to materially
affect our internal controls over financial reporting.
ITEM 8B. OTHER INFORMATION
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors and Executive Officers
Our current directors and executive officers are as follows:
Name Age Position
Lawrence S. Coben Chairman of the Board of Directors and
46 Chief Executive Officer
Isaac Kier 52 Secretary, Treasurer and Director
David A. Preiser 47 Director
Jon Schotz 49 Director
Lawrence S. Coben has been our chairman of the board and chief executive
officer since our inception. From January 2001 until December 2003, Mr. Coben
served as senior principal of Sunrise Capital Partners L.P., a private equity
firm established by Houlihan Lokey Howard & Zukin, an international investment
banking firm that invests capital in middle market companies. From January 1997
to December 2000, Mr. Coben was an independent consultant. From October 1994 to
December 1996, Mr. Coben was chief executive officer of Bolivian Power Company,
Ltd., a New York Stock Exchange-listed company that was one of Bolivia's largest
private electric generator and distributor until its sale to an American-Swedish
utility consortium. He was also a managing director of Liberty Power Latin
America, L.P., a private developer and owner of power facilities, from January
1993 to December 1996. He has served as a director of Prisma Energy, one of the
successor Enron companies, since September 2003. Mr. Coben has also been a
director of NRG Energy, Inc. since December 2003, when
15
he was appointed in connection with its plan of reorganization following its
emergence from Chapter 11 bankruptcy. Mr. Coben is a member of the board of
directors of the Bolivian-American Chamber of Commerce and was the co-chairman
of the Lieberman 2004 National Energy Policy Committee which has devised a plan
(the Declaration of Energy Independence) to reduce American dependence on
politically unstable sources of energy. Mr. Coben is also an archaeologist
affiliated with the University of Pennsylvania and is completing a doctorate in
Anthropology. Mr. Coben received a B.A. in economics from Yale University, an
M.A. in Anthropology (Archaeology) from the University of Pennsylvania and a
J.D. from Harvard School of Law.
Isaac Kier has been a member of our board of directors and our secretary
and treasurer since our inception. Since February 2000, Mr. Kier has served as a
general partner of Coqui Capital Patners L.P., a venture capital firm, which
invests primarily in early stage companies. Since October 1997, he has been a
principal and managing partner of First Americas Partners, LLC, an investment
partnership focusing on investments in North and South America. From 1987 to
1997, he served as the managing partner of the Alabama 8 Market, a non-wireline
cellular licensee. From 1982 until its sale in 1995, Mr. Kier served as the
chairman of the board and chief executive officer of Lida, Inc., a Nasdaq-listed
company engaged in textile production and printing. Since October 2004, Mr. Kier
has served as a member of the board of directors of Hana Biosciences Inc., an
Over The Counter Bulletin Board listed biopharmaceutical company that aims to
acquire, develop and commercialize innovative products for the treatment of
important unmet medical needs in cancer and immunological diseases, and Rand
Acquisition Corporation, an Over The Counter Bulletin Board listed company
formed for the purpose of effecting a merger, capital stock exchange, asset
acquisition or other similar business combination with an unidentified operating
business. Mr. Kier also serves on the board of directors of several private
companies including Caribbean Storage, Inc. and Montebello Brand Liquors, Inc.
Mr. Kier received a B.A. in Economics from Cornell University and a J.D. from
George Washington University Law School.
David A. Preiser has been a director of ours since our inception. Since
January 1991, Mr. Preiser has served as an officer of Houlihan Lokey and is
currently a senior managing director and a member of the board of directors of
Houlihan Lokey and has served as managing partner of Sunrise Capital Partners
since December 1998. Mr. Preiser has been a director of NVR, Inc., an American
Stock Exchange-listed home building and mortgage banking company, since
September 1993. Mr. Preiser is also a director of Jos. A Bank Clothiers, Inc., a
Nasdaq-listed company, and Akrion, LLC. Mr. Preiser received a B.A. (magna cum
laude) in Economics from the University of Virginia and a J.D. (with honors)
from Columbia University.
Jon Schotz has been a director of ours since our inception. Mr. Schotz has
been a partner of Saybrook Capital, LLC, a private investment bank engaged in
capital management and financial advisory services, since he co-founded it in
February 1990 and has managed the Saybrook Tax-Exempt Opportunity Funds since
May 1999. Mr. Schotz also helps manage the investments of Saybrook's proprietary
capital as well as the investments of the Saybrook Fund. Prior to co-founding
Saybrook, Mr. Schotz was involved in opening the Los Angeles office of Ehrlich
Bober & Co., Inc., a public finance investment bank, in 1983. Mr. Schotz is also
a director of Saybrook Capital Corp. Mr. Schotz received a B.A. and a Master of
Public and Private Management degree from Yale 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 Jon
Schotz, will expire at our first annual meeting of stockholders. The term of
office of the second class of directors, consisting of David A. Preiser, will
expire at the second annual meeting. The term of office of the third class of
directors, consisting of Lawrence S. Coben and Isaac Kier, will expire at the
third annual meeting.
16
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our
officers, directors and persons who own more than ten percent of a registered
class of our equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
ten percent stockholders are required by regulation to furnish us with copies of
all Section 16(a) forms they file. Based solely on copies of such forms received
or written representations from certain reporting persons that no Form 5s were
required for those persons, we believe that, during the fiscal year ended
December 31, 2004, all filing requirements applicable to our officers, directors
and greater than ten percent beneficial owners were complied with.
Code of Ethics
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.
Requests for copies of our code of ethics should be sent in writing to Tremisis
Energy Acquisition Corporation, 1775 Broadway, Suite 604, New York, New York
10019.
ITEM 10. EXECUTIVE COMPENSATION
Commencing May 12, 2004 and ending upon the acquisition of a target
business, we will pay First Americas Management, an affiliate of Isaac Kier, our
secretary and treasurer and a member of our board of directors, a fee of $3,500
per month for providing us with office space and certain office and secretarial
services. Other than this $3,500 per-month fee, no compensation of any kind,
including finders and consulting fees, will be paid to any of our Founders or
any of their respective affiliates, for services rendered prior to or in
connection with a business combination. However, our Founders 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.
Since our formation, we have not granted any stock options or stock
appreciation rights or any awards under long-term incentive plans.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of our common stock as of March 28, 2005 by:
o each person known by us to be the beneficial owner of more
than 5% of our outstanding shares of common stock;
o each of our officers and directors; and o all our officers and
directors as a group.
Unless otherwise indicated, we believe that all persons named in the table have
sole voting and investment power with respect to all shares of common stock
beneficially owned by them.
17
Amount and
Nature of
Beneficial Percent of
Name and Address of Beneficial Owner(1) Ownership Class
--------------------------------------- --------- -----
Lawrence S. Coben 1,008,334 13.1%
Sapling, LLC(2) 393,100(3) 5.1%
Isaac Kier 183,334(4) 2.4%
David A. Preiser(5) 91,666 1.2%
Jon Schotz(6) 91,666(7) 1.2%
All directors and executive officers as a group 1,375,000(8) 17.9%
(4 individuals)
----------
(1) Unless otherwise noted, the business address of each of the following is
1775 Broadway, Suite 604, New York, New York 10019.
(2) The business address of Sapling, LLC is 535 Fifth Avenue, 31st Floor, New
York, New York 10017.
(3) Does not include 430,000 shares of common stock issuable upon exercise of
warrants that are not exercisable and will not become exercisable within
60 days. The foregoing information was derived from a Schedule 13G filed
with the Securities and Exchange Commission on January 28, 2005.
(4) Mr. Preiser's business address is c/o Houlihan Lokey Howard & Zukin, 685
Third Avenue, New York, New York 10016.
(5) Mr. Schotz's business address is c/o Saybrook Capital, LLC, 401 Wilshire
Boulevard, Suite 850, Santa Monica, California 90401.
(6) Does not include 150,000 shares of common stock issuable upon exercise of
warrants that are not exercisable and will not become exercisable within
60 days
(7) Does not include 580,000 shares of common stock issuable upon exercise of
warrants held by our officers and directors that are not currently
exercisable and will not become exercisable within 60 days.
All of the shares of our outstanding common stock owned by our Founders
prior to our initial public offering have been placed in escrow with Continental
Stock Transfer & Trust Company, as escrow agent, pursuant to an escrow agreement
described below.
Lawrence S. Coben and Isaac Kier may be deemed to be our "parents" and
"promoters," as these terms are defined under the Federal securities laws.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 2004, we issued 750,000 shares of our common stock to the
individuals set forth below for $25,000 in cash, at an average purchase price of
approximately $0.033 per share, as follows:
Name Number of Shares Relationship to Us
---- ---------------- ------------------
Lawrence S. Coben 550,000 Chairman of the Board and
Chief Executive Officer
Isaac Kier 100,000 Secretary, Treasurer and
Director
18
Name Number of Shares Relationship to Us
---- ---------------- ------------------
David A. Preiser 50,000 Director
Jon Schotz 50,000 Director
On March 10, 2004, our board of directors authorized a 1.1666666-to-one forward
stock split of our common stock, on April 16, 2004, our board of directors
authorized a 1.1428571-to-one forward stock split of our common stock and on
April 23, 2004, our board of directors authorized a 1.375-to-one forward stock
split of our common stock, effectively lowering the purchase price to $0.018 per
share.
Pursuant to an escrow agreement between us, the Founders and Continental
Stock Transfer & Trust Company, all of the Founders Shares were placed in
escrow, with Continental acting as escrow agent, pursuant to an escrow
agreement, until the earliest of:
o May 12, 2007;
o our liquidation; or
o the consummation of a liquidation, merger, stock exchange or other
similar transaction which results in all of our stockholders having
the right to exchange their shares of common stock for cash,
securities or other property subsequent to our consummating a
business combination with a target business.
During the escrow period, these shares cannot be sold, but the Founders
will retain all other rights as stockholders, including, without limitation, the
right to vote their shares of common stock and the right to receive cash
dividends, if declared. If dividends are declared and payable in shares of
common stock, such dividends will also be placed in escrow. If we are unable to
effect a business combination and liquidate, none of our Founders will receive
any portion of the liquidation proceeds with respect to common stock owned by
them prior to our initial public offering.
We also entered into a registration rights agreement with the Founders
pursuant to which the holders of the majority of the Founders Shares will be
entitled to make up to two demands that we register these shares pursuant to an
agreement to be signed prior to or on the date of this prospectus. The holders
of the majority of these shares may elect to exercise these registration rights
at any time after the date on which these shares of common stock are released
from escrow. In addition, these stockholders have certain "piggy-back"
registration rights on registration statements filed subsequent to the date on
which these shares of common stock are released from escrow. We will bear the
expenses incurred in connection with the filing of any such registration
statements.
Each of our Founders also entered into a letter agreement with us and
EarlyBirdCapital pursuant to which, among other things:
o each agreed to vote all Founder Shares owned by him in accordance
with the majority of the IPO Shares if we solicit approval of our
stockholders for a business combination;
o if we fail to consummate a business combination by November 18, 2005
(or by May 18, 2006 under certain limited circumstances), each
agreed to take all reasonable actions within his power to cause us
to liquidate as soon as reasonably practicable;
o each waived any and all rights he may have to receive any
distribution of cash, property or other assets as a result of such
liquidation with respect to his Founder Shares;
19
o each agreed to present to us for our consideration, prior to
presentation to any other person or entity, any suitable opportunity
to acquire an operating business, until the earlier of our
consummation of a business combination, our liquidation or until
such time as he ceases to be an officer or director of ours, subject
to any pre-existing fiduciary obligations he might have;
o each agreed that we could not consummate any business combination
which involves a company which is affiliated with any of the
Founders unless we obtain an opinion from an independent investment
banking firm reasonably acceptable to EarlyBirdCapital that the
business combination is fair to our stockholders from a financial
perspective;
o each agreed that he and his affiliates will not be entitled to
receive and will not accept any compensation for services rendered
to us prior to the consummation of our business combination; and
o each agreed that he and his affiliates will not be entitled to
receive or accept a finder's fee or any other compensation in the
event he or his affiliates originate a business combination.
First Americas Management, an affiliate of Isaac Kier, our secretary and
treasurer and a member of our board of directors, has agreed that, through the
acquisition of a target business, it will make available to us a small amount of
office space and certain office and secretarial services, as we may require from
time to time. We have agreed to pay First Americas Management $3,500 per month
for these services.
During 2004, Lawrence S. Coben advanced $77,500 to us to cover expenses
related to our initial public offering. The loan was payable without interest on
the earlier of February 17, 2005 or the consummation of our initial public
offering. This loan was repaid in June 2004.
We will 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.
Other than the $3,500 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 Founders or to any of their respective affiliates for services rendered to
us prior to or with respect to the business combination.
All ongoing and future transactions between us and any of our officers and
directors or their respective affiliates, will be on terms believed by us to be
no less favorable than are available from unaffiliated third parties and will
require prior approval in each instance by a majority of the members of our
board who do not have an interest in the transaction.
ITEM 13. EXHIBITS AND LISTS
(a) The following Exhibits are filed as part of this report.
Exhibit No. Description
----------- -----------
3.1 Certificate of Incorporation. (1)
3.2 By-laws. (1)
20
Exhibit No. Description
----------- -----------
4.1 Specimen Unit Certificate. (1)
4.2 Specimen Common Stock Certificate. (1)
4.3 Specimen Warrant Certificate. (1)
4.4 Form of Unit Purchase Option granted to EarlyBirdCapital, Inc.
(1)
4.5 Form of Warrant Agreement between Continental Stock Transfer &
Trust Company and the Registrant. (1)
10.1 Letter Agreement among the Registrant, EarlyBirdCapital, Inc.
and Lawrence S. Coben (1)
10.2 Letter Agreement among the Registrant, EarlyBirdCapital, Inc.
and Isaac Kier (1)
10.3 Letter Agreement among the Registrant, EarlyBirdCapital, Inc.
and David A. Preiser (1)
10.4 Letter Agreement among the Registrant, EarlyBirdCapital, Inc.
and Jon Schotz (1)
10.5 Form of Investment Management Trust Agreement between
Continental Stock Transfer & Trust Company and the Registrant.
(1)
10.6 Form of Stock Escrow Agreement between the Registrant,
Continental Stock Transfer & Trust Company and the Founders.
(1)
10.7 Form of Letter Agreement between First Americas Management LLC
and Registrant regarding administrative support. (1)
10.8 Promissory Note, dated February 17, 2004, in the principal
amount of $70,000 issued to Lawrence S. Coben. (1)
10.9 Registration Rights Agreement among the Registrant and the
Founders. (1)
10.10 Warrant Purchase Agreement among Lawrence S. Coben and
EarlyBirdCapital, Inc. (1)
14 Code of Ethics (2)
31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Treasurer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Treasurer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (SEC File No. 333-113583).
21
(2) Incorporated by reference to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended June 30, 2004.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The firm of BDO Seidman, LLP acts as our principal accountant. The
following is a summary of fees paid to our principal accountant for services
rendered.
Audit Fees
During the fiscal year ended December 31, 2004, the fees for our principal
accountant are $39,000 in connection with our initial public offering (financial
statements included in the Form S-1 and Current Report on Form 8-K filed with
the Securities and Exchange Commission on May 18, 2004), the review of our June
30 and September 30 Quarterly Reports on Form 10-QSB and the audit of our
December 31, 2004 Annual Report on Form 10-KSB.
Audit-Related Fees
During 2004, our principal accountant did not render assurance and related
services reasonably related to the performance of the audit or review of
financial statements.
Tax Fees
During 2004, our principal accountant did not render services to us for
tax compliance, tax advice and tax planning.
All Other Fees
During 2004, there were no fees billed for products and services provided
by the principal accountant other than those set forth above.
22
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
================================================================================
Page
----
Financial Statements:
Report of Independent Registered Public Accounting Firm F-2
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Summary of Significant Accounting Policies F-7
Notes to Financial Statements F-8 - F-10
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
================================================================================
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Tremisis Energy Acquisition Corporation
New York, NY
We have audited the accompanying balance sheet of Tremisis Energy Acquisition
Corporation (a corporation in the development stage) as of December 31, 2004 and
the related statements of operations, stockholders' equity and cash flows for
the period from February 5, 2004 (inception) 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. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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.
As discussed in Note 1, 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 its initial public offering ("Offering")(such date would be
November 18, 2005) or 24 months from the consummation of the Offering if certain
extension criteria have been satisfied.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tremisis Energy Acquisition
Corporation as of December 31, 2004 and the results of its operations and cash
flows for the period from February 5, 2004 (inception) to December 31, 2004 in
conformity with accounting principles generally accepted in the United States of
America.
BDO Seidman, LLP
New York, NY
March 16, 2005
F-2
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Balance Sheet
================================================================================
December 31,
2004
------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 834,094
U.S. Government Securities held in Trust Fund (Note 1) 33,351,358
Accrued interest receivable held in Trust Fund (Note 1) 91,170
Prepaid expenses 22,125
-----------
Total current assets 34,298,747
Furniture and equipment (net of accumulated depreciation of $1,418) 6,558
-----------
Total assets $34,305,305
===========
Liabilities and Stockholders' Equity
Current liabilities:
Accrued expenses $ 26,680
Income tax payable 26,000
-----------
Total current liabilities 52,680
-----------
Common stock, subject to possible redemption,
1,264,368 shares at redemption value (Note 1) 6,448,277
-----------
Commitment (Note 4)
Stockholders' equity (Notes 1, 2, 5, and 6)
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 27,739,053
Earnings accumulated during development stage 64,525
-----------
Total stockholders' equity 27,804,348
-----------
Total liabilities and stockholders' equity $34,305,305
===========
See accompanying summary of significant accounting policies and
notes to financial statements.
F-3
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Statement of Operations
================================================================================
Period from
February 5, 2004
(inception) to
December 31, 2004
--------------------------------------------------------------------------------
Expenses:
General and administrative expenses (Note 4) $ (164,392)
-----------
Operating loss (164,392)
Interest income 308,032
-----------
Income before provision for taxes 143,640
Provision for taxes (Note 7) (79,115)
-----------
Net income $ 64,525
-----------
Basic and diluted net income per share $ 0.01
-----------
Weighted average common shares outstanding 5,739,057
-----------
See accompanying summary of significant accounting policies and
notes to financial statements.
F-4
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Statement of Stockholders' Equity
================================================================================
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 and underwriters'
option, net of underwriters' discount and
offering expenses (includes 1,264,368
shares subject to possible redemption -- -- 6,325,000 633 27,714,190 -- 27,714,823
Net income for the period -- -- -- -- -- 64,525 64,525
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2004 -- -- 7,700,000 $ 770 $27,739,053 $ 64,525 $27,804,348
========= ===== =========== ======== ===========
------------------------------------------------------------------------------------------------------------------------------------
See accompanying summary of significant accounting policies and
notes to financial statements.
F-5
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Statement of Cash Flows
================================================================================
Period from
February 5, 2004
(inception) to
December 31, 2004
-------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net income for the period $ 64,525
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation 1,418
Gain on maturity of U.S. Government Securities held in
Trust Fund (208,605)
Change in operating assets and liabilities:
Increase in prepaid expenses (22,125)
Increase in accrued interest receivable (91,170)
Increase in accrued expenses 26,680
Increase in income tax payable 26,000
------------
Net cash used in operating activities (203,277)
------------
Cash Flows from Investing Activities
Purchases of U.S. Government securities held in Trust Fund (66,493,753)
Maturity of U.S. Government Securities held in Trust Fund 33,351,000
Purchase of furniture and equipment (7,976)
------------
Net cash used in investing activities (33,150,729)
------------
Cash Flows from Financing Activities
Proceeds from public offering of 6,325,000 units
and underwriter option, net 34,163,100
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 34,188,100
------------
Net increase in cash and cash equivalents 834,094
Cash and cash equivalents at beginning of the period
--
------------
Cash and cash equivalents at end of the period $ 834,094
------------
Supplemental disclosure of cash flow information:
Cash paid during the year for income taxes $ 53,115
------------
See accompanying summary of significant accounting policies and
notes to financial statements
F-6
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Summary of Significant Accounting Policies
================================================================================
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
commencing upon the date the asset is placed in
service.
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. At December
31, 2004, there were no deferred taxes.
Net Income Per Share Basic and diluted net income per share is
calculated by dividing net income by the weighted
average number of common shares outstanding during
the period. No effect has been given to potential
issuances of common stock from warrants or the
underwriter option in the diluted computation as
the effect would be antidilutive.
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.
F-7
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Notes to Financial Statements
================================================================================
1. 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 2. 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 $33,442,528
(which includes accrued interest of $91,170) 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 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.
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
F-8
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Notes to Financial Statements
================================================================================
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 2).
2. 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
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.
F-9
Tremisis Energy Acquisition Corporation
(a corporation in the development stage)
Notes to Financial Statements
================================================================================
3. 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 May 2004. The note and advances were paid
in full in June 2004 from the net proceeds of the
Offering.
4. 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 and $28,000 is included in general
and administrative expenses for such services.
5. 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.
6. 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 these transactions. At December 31,
2004, there were 13,475,000 shares of common stock
reserved for issuance upon exercise of redeemable
warrants and underwriters' unit purchase option.
7. Provision for Taxes Provision for taxes consists of:
For the Period from February 5,2004
(inception) to December 31, 2004
--------------------------------
Current
-------
Federal $33,000
State and local 46,115
-------
$79,115
-------
The effective tax rate exceeds statutory rates
primarily due to state and local taxes which are
calculated as a percentage of capital.
F-10
SIGNATURES
Pursuant to the requirements of the Section 13 or 15 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 on the
30th day of March 2005.
TREMISIS ENERGY
ACQUISITION CORPORATION
By: /s/ Lawrence S. Coben
------------------------------------
Lawrence S. Coben
Chairman and Chief Executive Officer
In accordance with 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.
Name Title Date
---- ----- ----
/s/ Lawrence S. Coben Chairman of the Board and Chief March 30, 2005
--------------------- Executive Officer (Principal
Lawrence S. Coben Executive Officer)
/s/ Isaac Kier Secretary, Treasurer and Director
-------------- (Principal Accounting and Financial
Isaac Kier Officer) March 30, 2005
/s/ David A. Preiser
--------------------
David A. Preiser Director March 30, 2005
/s/ Jon Schotz Director March 30, 2005
--------------
Jon Schotz