Attached files
file | filename |
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EX-31.1 - North Shore Acquisition Corp. | v167115_ex31-1.htm |
EX-32.2 - North Shore Acquisition Corp. | v167115_ex32-2.htm |
EX-32.1 - North Shore Acquisition Corp. | v167115_ex32-1.htm |
EX-31.2 - North Shore Acquisition Corp. | v167115_ex31-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
x Quarterly
report under Section 13 or 15(d) of the Securities Exchange Act of
1934
For
the quarterly period ended September 30,
2009
¨ Transition
report under Section 13 or 15(d) of the Exchange Act
For the
transition period from _____________ to _____________
Commission
File Number 000-52875
North Shore Acquisition
Corp.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
|
26-0433980
|
(State
or other Jurisdiction of
Incorporation
or Organization)
|
(I.R.S.
Employer
Identification
No.)
|
545-7 Dogok-Dong, SoftForum B/D, 7th Floor,
Gangnam-Gu, Seoul, Korea 135-270
|
(Address
of Principal Executive
Office)
|
(82) (2)
526-8531
(Issuer’s
Telephone Number, Including Area Code)
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90
days.
Yes x No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes o No o
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act (Check one).
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company x
|
(Do
not check if smaller reporting company)
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).Yes x No ¨
As of
November 20, 2009, 7,941,250 shares of common stock, par value $.0001 per share,
were issued and outstanding.
Page
|
||
Part
I: Financial Information:
|
||
Item
1 –Financial Statements (unaudited):
|
||
Condensed
Balance Sheets
|
3
|
|
Condensed
Statements of Operations
|
4
|
|
Condensed
Statements of Stockholders’ Equity
|
5
|
|
Condensed
Statements of Cash Flows
|
6
|
|
Notes
to Unaudited Condensed Financial Statements
|
7
|
|
Item
2 – Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
21
|
|
Item
3 – Quantitative and Qualitative Disclosures about Market
Risk
|
22
|
|
Item
4 – Controls and Procedures
|
23
|
|
Part
II. Other Information
|
||
Item
2 – Unregistered Sales of Equity Securities and Use of
Proceeds
|
24
|
|
Item
6 – Exhibits
|
25
|
|
Signatures
|
26
|
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Condensed Balance
Sheets
|
September 30,
|
December 31,
|
||||||
|
2009
|
2008
|
||||||
(unaudited)
|
(audited)
|
|||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash
|
$
|
82,171
|
$
|
186,578
|
||||
Prepaid
expenses and other current assets
|
65,838
|
105,233
|
||||||
Total
Current Assets
|
148,009
|
291,811
|
||||||
Other
asset, Investments held in Trust Account (Note 1)
|
49,706,866
|
49,833,790
|
||||||
Total
Assets
|
$
|
49,854,875
|
$
|
50,125,601
|
||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Income
taxes payable
|
$
|
14,649
|
$
|
2,337
|
||||
Accounts
payable and accrued expenses
|
423,418
|
95,664
|
||||||
Total
Current Liabilities
|
438,067
|
98,001
|
||||||
Deferred
Underwriters' Fee
|
1,524,720
|
1,524,720
|
||||||
Total
Liabilities
|
1,962,787
|
1,622,721
|
||||||
Commons
stock, subject to possible redemption, 2,541,199 shares at
redemption value, approximately $7.82 per common
share
|
19,877,255
|
19,877,255
|
||||||
Commitments
|
||||||||
Stockholders’
equity
|
||||||||
Preferred
stock, $.0001 par value
|
—
|
—
|
||||||
Authorized
1,000,000 shares; none issued and outstanding
|
||||||||
Common
stock, $.0001 par value
|
||||||||
Authorized
20,000,000 shares
|
||||||||
Issued
and outstanding 7,941,250 shares at September 30, 2009 and
December
31, 2008, (which includes 2,541,199 subject to possible
redemptions)
|
794
|
794
|
||||||
Additional
Paid-in Capital
|
28,505,877
|
28,505,877
|
||||||
(Deficit)
earnings accumulated during the development stage
|
(491,838
|
)
|
118,954
|
|||||
Total
Stockholders' Equity
|
28,014,833
|
28,625,625
|
||||||
Total
Liabilities and Stockholders' Equity
|
$
|
49,854,875
|
$
|
50,125,601
|
See
notes to unaudited condensed financial statements.
3
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Unaudited
Condensed Statements of Operations
|
Period
from
|
Period
from
|
Period
from
|
Period
from
|
Period
from
|
|||||||||||||||
July
1, 2009
|
July
1, 2008
|
January
1, 2009
|
January
1, 2008
|
June
26, 2007
|
||||||||||||||||
to
|
to
|
to
|
to
|
(date
of inception) to
|
||||||||||||||||
September
30, 2009
|
September
30, 2008
|
September
30, 2009
|
September
30, 2008
|
September
30, 2009
|
||||||||||||||||
Revenue
|
$
|
$ | $ | $ | $ | |||||||||||||||
Formation
and operating expenses
|
396,814 | 60,726 | 687,916 | 210,123 | 1,165,310 | |||||||||||||||
Loss
from operations
|
(396,814 | ) | (60,726 | ) | (687,916 | ) | (210,123 | ) | (1,165,310 | ) | ||||||||||
Other
income, interest
|
26,461 | 199,337 | 128,374 | 733,161 | 1,025,774 | |||||||||||||||
Income
(Loss) before income tax expense
|
(370,353 | ) | 138,611 | (559,542 | ) | 523,038 | (139,536 | ) | ||||||||||||
Income
tax expense
|
10,987 | 81,651 | 51,250 | 280,021 | 352,302 | |||||||||||||||
Net
income (loss) applicable to common stockholders
|
$ | (381,340 | ) | $ | 56,960 | $ | (610,792 | ) | $ | 243,017 | $ | (491,838 | ) | |||||||
Weighted
average shares outstanding
|
- | - | ||||||||||||||||||
Basic
|
7,941,250 | 7,941,250 | 7,941,250 | 7,947,454 | 6,734,281 | |||||||||||||||
Diluted
|
7,941,250 | 10,371,333 | 7,941,250 | 10,336,546 | 6,734,281 | |||||||||||||||
- | - | |||||||||||||||||||
Net
income (loss) per share, basic
|
$ | (0.05 | ) | $ | 0.01 | $ | (0.08 | ) | $ | 0.03 | $ | (0.07 | ) | |||||||
Net
income (loss) per share, diluted
|
$ | (0.05 | ) | $ | 0.01 | $ | (0.08 | ) | $ | 0.02 | $ | (0.07 | ) | |||||||
Weighted
average shares outstanding subject to possible redemption
|
- | - | ||||||||||||||||||
Basic
|
2,541,199 | 2,541,199 | 2,541,199 | 2,541,199 | 2,013,181 | |||||||||||||||
Diluted
|
2,541,199 | 2,541,199 | 2,541,199 | 2,541,199 | 2,013,181 | |||||||||||||||
- | - | |||||||||||||||||||
Net
income (loss) per share, basic
|
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||||
Net
income (loss) per share, diluted
|
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 |
See
notes to unaudited condensed financial statements.
4
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Unaudited
Condensed Statements of Stockholders’ Equity
For the
period June 26, 2007 (date of inception) to September 30, 2009
Common Stock
|
Additional
Paid-In
Capital
|
(Deficit)
Earnings
Accumulated
During the
Development
Stage
|
Total
Stockholders’
Equity
|
|||||||||||||||||
Shares
|
Amount
|
|||||||||||||||||||
Sale
of 1,811,250 shares of common stock to initial stockholders on June 27,
2007 (date of inception) at approximately $0.01 per common
share
|
1,811,250 | $ | 181 | $ | 24,819 | $ | — | $ | 25,000 | |||||||||||
Sale
of 6,300,000 units, net of underwriters' discount and offering expenses
(includes 2,519,999 shares subject to possible redemption)
|
6,300,000 | 630 | 46,361,757 | — | 46,362,387 | |||||||||||||||
Proceeds
subject to possible redemption of 2,519,999 shares
|
— | (19,713,599 | ) | — | (19,713,599 | ) | ||||||||||||||
Proceeds
from sale of warrants to initial stockholders
|
— | — | 1,600,000 | — | 1,600,000 | |||||||||||||||
Proceeds
from issuance of option
|
— | — | 100 | — | 100 | |||||||||||||||
Net
income for the period
|
— | — | 24,866 | 24,866 | ||||||||||||||||
Balance,
December 31, 2007
|
8,111,250 | 811 | 28,273,077 | 24,866 | 28,298,754 | |||||||||||||||
Sale
of 53,000 units (includes 21,198 shares subject to possible
redemption)
|
53,000 | 5 | 396,435 | 396,440 | ||||||||||||||||
Proceeds
subject to possible redemption of 21,198 shares
|
— | — | (163,657 | ) | (163,657 | ) | ||||||||||||||
Forfeiture
of shares of common stock by initial stockholders
|
(223,000 | ) | (22 | ) | 22 | — | ||||||||||||||
Net
income for the period
|
— | — | 94,088 | 94,088 | ||||||||||||||||
Balance,
December 31, 2008
|
7,941,250 | 794 | 28,505,877 | 118,954 | 28,625,625 | |||||||||||||||
Net
(loss) for the period (unaudited)
|
— | — | (610,792 | ) | (610,792 | ) | ||||||||||||||
Balance,
September 30, 2009 (unaudited)
|
7,941,250 | $ | 794 | $ | 28,505,877 | $ | (491,838 | ) | $ | 28,014,833 |
See
notes to unaudited condensed financial statements.
5
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Unaudited
Condensed Statements of Cash Flows
For the period
|
For the period
|
For the period
|
||||||||||
|
from
|
from
|
from
|
|||||||||
|
January 1, 2009
|
January 1, 2008
|
June 26, 2007
|
|||||||||
|
To
September
|
To
September
|
(date of inception) to
|
|||||||||
|
30, 2009
|
30, 2008
|
September 30, 2009
|
|||||||||
Cash
Flows from Operating Activities
|
||||||||||||
Net
income (loss)
|
$
|
(610,792
|
)
|
$
|
243,017
|
$
|
(491,838
|
)
|
||||
Adjustments
to reconcile net income (loss) to net cash provided by (used in) operating
activities
|
||||||||||||
Change
in operating assets and liabilities:
|
||||||||||||
Prepaid
expenses and other current assets
|
39,395
|
13,753
|
(65,838
|
)
|
||||||||
Income
taxes payable
|
12,312
|
20,000
|
14,649
|
|||||||||
Accounts
payable and accrued expenses
|
327,754
|
(55,557
|
)
|
423,418
|
||||||||
Net
cash (used in) provided by operating activities
|
(231,331
|
)
|
221,213
|
(119,609
|
)
|
|||||||
Net
cash used in Investing Activities
|
||||||||||||
Change
in Investments held in Trust Account
|
126,924
|
(388,252
|
)
|
(49,706,866
|
)
|
|||||||
Cash
Flows from Financing Activities
|
||||||||||||
Borrowings
from note payable
|
—
|
424,000
|
—
|
|||||||||
Gross
proceeds of common stock public offering
|
—
|
—
|
50,824,000
|
|||||||||
Proceeds
from notes payable, stockholder
|
—
|
—
|
100,000
|
|||||||||
Payment
of notes payable, stockholder
|
—
|
—
|
(100,000
|
)
|
||||||||
Proceeds
from the issuance of common stock to initial stockholders
|
—
|
—
|
25,000
|
|||||||||
Proceeds
from sale of warrants to initial stockholders
|
—
|
—
|
1,600,000
|
|||||||||
Proceeds
from issuance of option
|
—
|
—
|
100
|
|||||||||
Payment
of costs of public offering
|
—
|
(14,840
|
)
|
(2,540,454
|
)
|
|||||||
Net
cash provided by financing activities
|
—
|
409,160
|
49,908,646
|
|||||||||
Net
(decrease) increase in cash
|
(104,407
|
)
|
242,121
|
82,171
|
||||||||
Cash
at the beginning of the period
|
186,578
|
107,863
|
—
|
|||||||||
Cash
at the end of the period
|
$
|
82,171
|
$
|
349,984
|
$
|
82,171
|
||||||
Supplemental
disclosure of cash flow information
|
||||||||||||
Cash
paid during the period for:
|
||||||||||||
Taxes
|
$
|
41,762
|
$
|
378,336
|
$
|
477,722
|
||||||
Non-cash
financing activity:
|
||||||||||||
Deferred
underwriters’ fee
|
$
|
—
|
$
|
12,720
|
$
|
1,524,720
|
||||||
Proceeds
from public offering reclassified to mezzanine debt for common stock
subject to possible redemption
|
$
|
—
|
$
|
163,657
|
$
|
19,877,825
|
See
notes to unaudited condensed financial statements.
6
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Notes
to Unaudited Condensed Financial Statements
1.
|
Organization
and
Business
Operations
|
North
Shore Acquisition Corp. (the “Company”) was incorporated in Delaware on
June 26, 2007 as a blank check company whose objective is to acquire an
operating business.
All
activity from June 26, 2007 (inception) through September 30, 2009 relates
to the Company’s formation and initial public offering described
below. The Company has selected December 31 as its fiscal
year-end.
|
||
The
registration statement for the Company’s initial public offering
(“Offering”) was declared effective November 30, 2007. The
Company consummated the offering on December 7, 2007 and received net
proceeds of approximately $47,883,000 (Note 3). On January 11,
2008, the Company received additional gross proceeds in the amount of
approximately $424,000 from the sale of additional units reflecting the
underwriters’ over-allotment. 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 an operating business (“Business
Combination”). Furthermore, there is no assurance that the
Company will be able to successfully effect a Business
Combination. An amount of $49,715,284 is being held in an
interest-bearing trust account (“Trust Account”) including a portion of
the underwriting discounts and commissions payable to the underwriters in
this offering and invested only in United States “government debt
securities” within the meaning of Section 2(a)(16) of the Investment
Company Act of 1940 having a maturity of 180 days or less, or in money
market funds meeting certain conditions under Rule 2(a)(7) promulgated
under the Investment Company Act of 1940, until the earlier of (i)
the consummation of a Business Combination or (ii) liquidation of the
Company. The placing of funds in the Trust Account
may not protect those funds from third party claims against the
Company. To date all of the assets have been invested in the
Dreyfus Treasury Cash Management – Institutional Shares. Although the
Company will seek to have all vendors, prospective target businesses or
other entities it engages, execute agreements with the Company waiving any
right, title, interest or claim of any kind in or to any monies held in
the Trust Account, there is no guarantee that they will execute such
agreements. The Company’s officers and directors have agreed that they
will be personally liable under certain circumstances to ensure that the
proceeds in the Trust Account are not reduced by the claims of target
businesses or vendors or other entities that are owed money by the Company
for services rendered contracted for or products sold to the Company.
However, there can be no assurance that they will be able to satisfy those
obligations. The remaining net proceeds (not held in the Trust Account)
may be used to pay for business, legal and accounting due diligence on
prospective acquisitions and continuing general and administrative
expenses. Additionally, up to an aggregate of $1,000,000 of
interest earned on the Trust Account balance may be released to the
Company to fund working capital requirements, as well as any amounts
necessary to pay the Company’s tax obligations. At September
30, 2009, the Company had earned $1,018,577 of interest on the Trust
Account since inception, which is included in the cash held in Trust Fund
less $1,900,699 which has been used for federal and state tax payments and
working capital.
|
7
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Notes
to Unaudited Condensed Financial Statements
|
The
Company, after signing a definitive agreement for the acquisition of a
target business, will submit such transaction for stockholder
approval. In the event that stockholders owning 40% or more of
the shares sold in the Offering vote against the Business Combination and
exercise their conversion 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 1,588,250 founding shares of common stock (“Founders’
Shares”) 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 a Business
Combination, these voting safeguards will no longer be
applicable.
|
||||
With
respect to a Business Combination which is approved and consummated, any
Public Stockholder who voted against the Business Combination may demand
that the Company convert his shares. The per share conversion
price will equal the amount in the Trust Account, calculated as of two
business days prior to the consummation of the proposed Business
Combination, divided by the number of shares of common stock held by
Public Stockholders at the consummation of the
Offering. Accordingly, Public Stockholders holding 39.99% of
the aggregate number of shares owned by all Public Stockholders may seek
conversion of their shares in the event of a Business
Combination. Such Public Stockholders are entitled to receive
their per share interest in the Trust Account computed without regard to
the shares held by Initial Stockholders. Accordingly, a portion
of the net proceeds from the offering (39.99% of the amount held in the
Trust Account) has been classified as common stock subject to possible
conversion in the accompanying September 30, 2009 and December 31, 2008
balance sheets.
|
8
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Notes
to Unaudited Condensed Financial Statements
The
Company’s Amended and Restated Certificate of Incorporation provides for
mandatory liquidation of the Company in the event that the Company does
not consummate a Business Combination by November 30,
2009. However, in November 2009, the Company’s Board of
Directors approved amendments to the Company’s Certificate of
Incorporation (collectively, the “Extension Amendments”). The
Extension Amendments, which will require the affirmative vote of a
majority of the Company’s outstanding common stock as of the close of
business on November 9, 2009 (the “record date”) would (i) extend the date
by which the company must complete a Business Combination from November
30, 2009 to January 31, 2010, to avoid being required to liquidate; and
(ii) allow public holders of less than 40% of the Company’s
outstanding common stock issued in the Offering who vote against the
Extension Amendments and elect conversion to convert their respective
shares into a portion of the funds available in the Trust
Account. The Company has filed a definitive proxy statement
with the SEC to solicit the approval of the Company’s stockholders of the
Extension Amendments at a special meeting of stockholders (the “Special
Meeting”), which is to be held on November 30, 2009. If the Extension
Amendments are approved by the Company’s stockholders, the trust agreement
that the Company entered into in connection with the Public Offering will
be amended to extend the date by which the Trust Account must be
liquidated from November 30, 2009 to January 31, 2010. However, the
Company cannot assure you that the Extension Amendments will be approved
or that, if approved, that the Company will complete a Business
Combination before January 31, 2010. All of the Company's
directors and officers have agreed to vote any common stock owned by them
in favor of the Extension Amendments.
If
the Company has not completed a Business Combination by November 30, 2009
(or January 31, 2010, if the Extension Amendments are approved by the
Company’s stockholders), its corporate existence will cease and it will
dissolve and liquidate for the purposes of winding up its affairs. In the
event of liquidation, it is possible that the per share value of the
residual assets remaining available for distribution (including Trust
Account assets) will be less than the initial public offering price per
share in the Offering due to costs related to the Offering and since no
value would be attributed to the Warrants contained in the Units sold
(Note 3).
The
accompanying unaudited condensed interim financial statements of the
Company as of September 30, 2009 and December 31, 2008 and for the three
month periods ended September 30, 2009 and 2008, nine months ended
September 30, 2009 and 2008, and for the period from inception (June 26,
2007) to September 30, 2009, reflect all adjustments of a normal and
recurring nature to present fairly the financial position, results of
operations and cash flows for the interim period. These
unaudited condensed consolidated interim financial statements have been
prepared by the Company pursuant to the instructions to Form 10-Q and
Article 8 of Regulation S-X. Pursuant to such
instructions, certain financial information and footnote disclosures
normally included in such financial statements have been condensed or
omitted.
These
unaudited condensed financial statements should be read in conjunction
with the audited financial statements of the Company and notes thereto,
together with management’s discussion and analysis or plan of operations,
contained in the Company’s annual report on Form 10-K for the year ended
December 31, 2008. The results of operations for the three
month period ended September 30, 2009 are not necessarily indicative of
the results that may occur for the year ended December 31,
2009.
In
the event that the Company does not consummate a Business Combination by
November 30, 2009 (or January 31, 2010, if the Extension Amendments are
approved by the Company’s stockholders), the proceeds held in the Trust
Account will be distributed to the Company’s stockholders, excluding the
Founders to the extent of their initial stock holdings. The
mandatory liquidation raises substantial doubt about the Company’s ability
to continue as a going concern.
|
2.
|
Summary
of Significant
Accounting
Policies
|
Basis
of Presentation
The
financial statements of the Company are presented in U.S. dollars in
conformity with accounting principles generally accepted in the United
States of America (U.S. GAAP) and pursuant to the accounting and
disclosure rules and regulations for interim financial statements of the
SEC.
|
9
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Notes
to Unaudited Condensed Financial Statements
|
Cash
and Cash Equivalents
The
Company considers money market funds to be cash equivalents.
Development
Stage Company
The
Company complies with the reporting requirements of FASB ASC 915,
“Development Stage Entities.”
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to a significant
concentration of credit risk consist primarily of cash. The Company may
maintain deposits in federally insured financial institutions in excess of
federally insured limits. However, management believes the Company is not
exposed to significant credit risk due to the financial position of the
depository institutions in which those deposits are held.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as
financial instruments under FASB ASC 820, “Fair Value Measurements and
Disclosures” approximates the carrying amounts represented in the balance
sheet.
Basic
and Diluted Earnings per Share
Earnings
per common share is based on the weighted average number of common shares
outstanding. The Company complies with accounting and
disclosure requirements of FASB ASC 260, “Earnings Per Share” which
requires dual presentation of basic and diluted earnings per share on the
face of the statement of operations. Basic income per share
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average common shares outstanding for the
period. Diluted income per share reflects the potential
dilution that could occur if warrants were to be exercised or otherwise
resulted in the issuance of common stock that then shared in the earnings
of the entity.
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 and disclosure of contingent 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.
|
10
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Notes
to Unaudited Condensed Financial Statements
|
Income
Taxes
The
Company complies with FASB ASC 740-10-25, which provides criteria for the
recognition, measurement, presentation and disclosure of uncertain tax
position. A tax benefit from an uncertain position may be recognized only
if it is "more likely than not" that the position is sustainable based on
its technical merits.
The
Company complies with FASB ASC 740, “Income Taxes,” which requires an
asset and liability approach to financial accounting and reporting for
income taxes. Deferred income taxes are provided for the
differences between the bases of assets and liabilities for financial
reporting and income tax purposes. A valuation allowance is established
when necessary to reduce deferred tax assets to the amount expected to be
realized.
The
Company has decided to fully reserve for its deferred tax asset, as it
is more likely than not that the Company will not be able utilize
these deferred tax assets against future
income.
|
11
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Notes
to Unaudited Condensed Financial Statements
|
New
Accounting Pronouncements
In
June 2009, the Financial Accounting Standards Board (“FASB”) issued its
final Statement of Financial Accounting Standards (“SFAS”) No. 168, “The
FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles—a replacement of FASB Statement No. 162”
(“SFAS No. 168”). SFAS No. 168 established the FASB Accounting Standards
Codification (“ASC”) as the single source of authoritative GAAP to be
applied by nongovernmental entities in the preparation of financial
statements. Rules and interpretive releases of the Securities and Exchange
Commission (“SEC”) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. All guidance in the ASC
carries an equal level of authority. The ASC supersedes all previously
existing non-SEC accounting and reporting standards. The ASC simplifies
user access to all authoritative GAAP by reorganizing previously issued
GAAP pronouncements into approximately 90 accounting topics within a
consistent structure, without creating new accounting and reporting
guidance. The ASC became effective for financial statements issued for
interim and annual periods ending after September 15, 2009; accordingly,
the Company adopted the ASC in the third quarter of fiscal 2009. Following
SFAS No. 168, the FASB will not issue new standards in the form of
Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts;
instead, it will issue Accounting Standards Updates. The FASB will not
consider Accounting Standards Updates as authoritative in their own right;
these updates will serve only to update the ASC, provide background
information about the guidance, and provide the bases for conclusions on
the change(s) in the ASC. In the discussion that follows, the Company will
refer to ASC citations that relate to ASC Topics and their descriptive
titles, as appropriate, and will no longer refer to citations that relate
to accounting pronouncements superseded by the ASC.
In
April 2009, the FASB issued three related staff positions to clarify the
application of FASB ASC 820 to fair value measurements in the current
economic environment, modify the recognition of other-than-temporary
impairments of debt securities, and require companies to disclose the fair
value of financial instruments in interim periods. The final staff
positions are effective for interim and annual periods ending after June
15, 2009.
· FASB ASC 820 (transitional
820-10-65-4)—which provides guidance on how to determine the fair value of
assets and liabilities under FASB ASC 820 in the current economic
environment and reemphasizes that the objective of a fair value
measurement remains the price that would be received to sell an asset or
paid to transfer a liability at the measurement
date.
· FASB ASC 320— which modifies the
requirements for recognizing other-than-temporarily impaired debt
securities and significantly changes the existing impairment model for
such securities. It also modifies the presentation of other-than-temporary
impairment losses and increases the frequency of and expands already
required disclosures about other-than-temporary impairment for debt and
equity securities.
· FASB ASC 820-10-50—which requires
disclosures of the fair value of financial instruments within the scope of
FASB ASC 820 in interim financial statements, adding to the current
requirement to make those disclosures in annual financial statements. The
staff position also requires that companies disclose the method or methods
and significant assumptions used to estimate the fair value of financial
instruments and a discussion of changes, if any, in the method or methods
and significant assumptions during the
period.
We
do not believe that the adoption of these new staff positions had a
material impact on our financial position and results of
operations.
|
12
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Notes
to Unaudited Condensed Financial Statements
In
June 2009, the FASB issued ASC 860, which eliminates the concept of a
qualifying special-purpose entity, creates more stringent conditions for
reporting a transfer of a portion of a financial asset as a sale,
clarifies other sale-accounting criteria, and changes the initial
measurement of a transferor’s interest in transferred financial assets.
FASB ASC 860 will be effective for transfers of financial assets in fiscal
years beginning after November 15, 2009 and in interim periods within
those fiscal years with earlier adoption prohibited. We will adopt FASB
ASC 860 on October 1,
2010.
|
13
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Notes
to Unaudited Condensed Financial Statements
|
The
Company does not believe that any other recently issued, but not yet
effective, accounting pronouncements if currently adopted would have a
material effect on the accompanying condensed financial
statements.
Redeemable
Common Stock
The
Company accounts for redeemable common stock in accordance with FASB ASC
480-10. Securities that are redeemable for cash or other assets
are classified outside of permanent equity if they are redeemable at the
option of the holder. In addition, if the redemption causes a redemption
event, the redeemable securities should not be classified outside of
permanent equity. As discussed in Note 1, the Business Combination will
only be consummated if a majority of the shares of common stock voted by
the Public Stockholders are voted in favor of the Business Combination and
Public Stockholders holding less than 40% (2,541,199) of common shares
sold in the Offering exercise their conversion rights. As further
discussed in Note 1, if a Business Combination is not consummated within
24 months, the Company will liquidate. Accordingly, 2,541,199 shares have
been classified outside of permanent equity at redemption value. The
Company recognized changes in the redemption value immediately as they
occur and adjusts the carrying value of the redeemable common stock to
equal its redemption value at the end of each reporting period. The per
share redemption price was approximately $7.82 at September 30,
2009.
|
14
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Notes
to Unaudited Condensed Financial Statements
|
|
Reclassification
Certain
2008 amounts were reclassified to conform to the 2009
presentation.
|
||
3.
|
Initial
Public Offering
|
On
December 7, 2007, the Company sold 6,300,000 units (“Units”) in the
Offering, and on January 11, 2008 the Company sold an additional 53,000
units. Each Unit consists of one share of the Company’s common
stock, $.0001 par value, and one Redeemable Common Stock Purchase
Warrant(s) (“Warrants”). Each Warrant entitles the holder to
purchase from the Company one share of common stock at an exercise price
of $5.00 commencing the later of six months after the completion of a
Business Combination or November
30, 2008 and expiring November 29, 2012.
The Warrants will be redeemable, at the Company’s option, with the prior
consent of EarlyBirdCapital, Inc., the representative of the underwriters
in the Offering (“Underwriters”), 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 $11.50 per share for
any 20 trading days within a 30 trading day period ending on the third day
prior to the date on which notice of redemption is given. If
the Company redeems the Warrants as described above, management will have
the option to require any holder that wishes to exercise his Warrant to do
so on a “cashless basis.” In such event, the holder would pay the exercise
price by surrendering his Warrants for that number of shares of Common
Stock equal to the quotient obtained by dividing (x) the product of the
number of shares of Common Stock underlying the Warrants, multiplied by
the difference between the exercise price of the Warrants and the “fair
market value” (defined below) by (y) the fair market value. The “fair
market value” shall mean the average reported last sale price of the
Common Stock for the 10 trading days ending on the third trading day prior
to the date on which the notice of redemption is sent to holders of
Warrants. In accordance with the warrant agreement relating to the
Warrants to be sold and issued in the Proposed Offering, the Company is
only required to use its best efforts to maintain the effectiveness of the
registration statement covering the Warrants. The Company will not be
obligated to deliver securities, and there are no contractual penalties
for failure to deliver securities, if a registration statement is not
effective at the time of exercise. Additionally, in the event that a
registration is not effective at the time of exercise, the holder of such
Warrant shall not be entitled to exercise such Warrant and in no event
(whether in the case of a registration statement not being effective or
otherwise) will the Company be required to net cash settle the warrant
exercise. Consequently, the Warrants may expire unexercised and
unredeemed.
|
15
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Notes
to Unaudited Condensed Financial Statements
The
Company agreed to pay the Underwriter in the Offering an underwriting
discount of 6.5% of the gross proceeds of the Offering and a
non-accountable expense allowance of 0.5% of the gross proceeds of the
Offering. However, the Underwriter has agreed that 3.0% of the
underwriting discount will not be payable unless and until the Company
completes a Business Combination and has waived their right to receive
such payment upon the Company's liquidation if it is unable to complete a
Business Combination. In connection with this Offering, the
Company also issued an option (“Option”), for $100, to the Underwriter to
purchase 420,000 Units at an exercise price of $8.80 per
Unit. The Units issuable upon exercise of the Option are
identical to the Units sold in the Offering. The Company
intends to account for the fair value of the Option, inclusive of the
receipt of the $100 cash payment, as an expense of the Offering resulting
in a charge directly to stockholders’ equity. The Company
estimates that the fair value of the Option is approximately $823,200
($1.96 per Unit) using a Black-Scholes option-pricing
model. The fair value of the Option granted to the Underwriter
is estimated as of the date of grant using the following assumptions: (1)
expected volatility of 20.43%, (2) risk-free interest rate of 4.82% and
(3) expected life of 5 years. The Option may be exercised for
cash or on a "cashless" basis, at the holder's option, such that the
holder may use the appreciated value of the Option (the difference between
the exercise prices of the Option and the underlying Warrants and the
market price of the Units and underlying securities) to exercise the
option without the payment of any cash. The Company will have
no obligation to net cash settle the exercise of the unit purchase option
or the Warrants underlying the unit purchase option. The holder of the
unit purchase option will not be entitled to exercise the unit purchase
option or the Warrants underlying the unit purchase option unless a
registration statement covering the securities underlying the unit
purchase option is effective or an exemption from registration is
available. If the holder is unable to exercise the Option or underlying
Warrants, the Option or Warrants, as applicable, will expire
worthless.
|
16
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Notes
to Unaudited Condensed Financial Statements
4.
|
Fair
Value Measurements
|
Effective
January 1, 2008, the Company adopted FASB ASC 820 for its financial assets
and liabilities that are re-measured and reported at fair value at each
reporting period, and non-financial assets and liabilities that are
re-measured and reported at fair value at least annually.
The
adoption of FASB ASC 820 to the Company’s financial assets and liabilities
and non-financial assets and liabilities that are re-measured and reported
at fair value at least annually did not have an impact on the Company’s
financial results.
The
following table presents information about the Company’s assets and
liabilities that are measured at fair value on a recurring basis as of
September 30, 2009, and indicates the fair value hierarchy of the
valuation techniques the Company utilized to determine such fair value. In
general, fair values determined by Level 1 inputs utilize quoted prices
(unadjusted) in active markets for identical assets or liabilities. Fair
values determined by Level 2 inputs utilize data points that are
observable such as quoted prices in markets that are not active, interest
rates and yield curves. Fair values determined by Level 3 inputs are
unobservable data points for the asset or liability, and includes
situations where there is little, if any, market activity for the asset or
liability:
Financial
Assets at Fair Value as of September 30,
2009
|
September
30,
|
Quoted Prices
in
Active
Markets
|
Significant
Other
Observable
Inputs
|
Significant
Unobservable
Inputs
|
|||||||||||||
Description
|
2009
|
(Level
1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Assets:
|
||||||||||||||||
Cash
and cash equivalents held in Trust Account
|
$
|
49,706,866
|
$
|
49,706,866
|
$
|
—
|
$
|
—
|
||||||||
Total
|
$
|
49,706,866
|
$
|
49,706,866
|
$
|
—
|
$
|
—
|
17
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Notes
to Unaudited Condensed Financial Statements
Financial Assets at Fair Value as of December 31, 2008
December
31,
|
Quoted Prices
in
Active
Markets
|
Significant
Other
Observable
Inputs
|
Significant
Unobservable
Inputs
|
|||||||||||||
Description
|
2008
|
(Level
1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Assets:
|
||||||||||||||||
Cash
and cash equivalents held in Trust Account
|
$
|
49,833,790
|
$
|
49,833,790
|
$
|
—
|
$
|
—
|
||||||||
Total
|
$
|
49,833,790
|
$
|
49,833,790
|
$
|
—
|
$
|
—
|
|
The
fair values of the Company’s cash and cash equivalents held in the Trust
Account are determined through market, observable and corroborated
sources.
The
carrying amounts reflected in the consolidated balance sheets for other
current assets and accrued expenses approximate fair value due to their
short-term maturities.
|
|||
5.
|
Commitments
|
From
the date of the Offering until August 17, 2009, the Company incurred a
monthly fee of $8,000 for general and administrative services from
American Fund Advisors, an affiliate of Barry J. Gordon, Marc H. Klee and
Alan J. Loewenstein. The Company terminated this agreement and stopped
paying this monthly fee beginning August 17, 2009.
Pursuant
to letter agreements with the Company and the Underwriter, the Initial
Stockholders have waived their right to receive distributions with respect
to their founding shares upon the Company's
liquidation.
|
18
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Notes
to Unaudited Condensed Financial Statements
|
All
of the Initial Stockholders purchased 1,600,000 Warrants (“Insider
Warrants”) at $1.00 per Warrant (for an aggregate purchase price of
$1,600,000) privately from the Company upon consummation of the Offering.
All of the proceeds received from these purchases were placed in the Trust
Account. The Insider Warrants are identical to the Warrants underlying the
Units being offered in the Proposed Offering except that if the Company
calls the Warrants for redemption, the Insider Warrants may be exercisable
on a “cashless basis,” at the holder’s option (except in the case of a
forced cashless exercise upon the Company’s redemption of the Warrants, as
described above), so long as such securities are held by such purchasers
or their affiliates. Furthermore, the purchasers have agreed that the
Insider Warrants will not be sold or transferred by them until after the
Company has completed a Business Combination.
The
Initial Stockholders and holders of the Insider Warrants (or underlying
securities) are entitled to registration rights with respect to their
founding shares or Insider Warrants (or underlying securities), as the
case may be, pursuant to an agreement dated November 30, 2007. The holders
of the majority of the founding shares are entitled to demand that the
Company register these shares at any time commencing three months prior to
the first anniversary of the consummation of a Business Combination. The
holders of the Insider Warrants (or underlying securities) are entitled to
demand that the Company register such securities at any time after the
Company consummates a Business Combination. In addition, the Initial
Stockholders and holders of the Insider Warrants (or underlying
securities) have certain “piggy-back” registration rights on registration
statements filed after the Company’s consummation of a Business
Combination.
|
19
North
Shore Acquisition Corp.
(a
corporation in the development stage)
Notes
to Unaudited Condensed Financial Statements
6.
|
Basic
and Diluted Earnings Per Share
|
The
following is a reconciliation of the denominator of the basic and diluted
earnings per share for the period from July 1, 2008 to September 30, 2008
and the period from January 1, 2008 to September 30,
2008.
|
July 1, 2008
to
September
30, 2008
|
January 1,
2008 to
September
30, 2008
|
|||||||
Weighted
average number of common shares outstanding:
|
7,941,250 | 7,947,454 | ||||||
Dilutive
potential common shares outstanding from warrants
|
2,430,083 | 2,389,092 | ||||||
Diluted
weighted average shares
|
10,371,333 | 10,336,546 |
|
Warrants
to purchase 7,953,000 shares of common stock for the three and nine months
ended September 30, 2009 as well as the period from June 26, 2007 (date of
inception) through September 30, 2009 were excluded from the calculation
of diluted earnings per share because they would have been
anti-dilutive.
|
|||
7.
|
Preferred
Stock
|
The
Company is authorized to issue 1,000,000 shares of preferred stock with
such designations, voting and other rights and preferences as may be
determined from time to time by the Board of Directors.
The
agreement with the Underwriter prohibits the Company, prior to a Business
Combination, from issuing preferred stock which participates in the
proceeds of the Trust Account or which votes as a class with the Common
Stock on a Business Combination.
|
8.
|
Common
Stock
|
At
September 30, 2009, 8,373,000 shares of common stock were reserved for
issuance upon exercise of the Warrants and the Option.
|
||
9.
|
Investment
Agreement with Initial Stockholders
|
On
August 17, 2009, the Company entered into an agreement (“Investment
Agreement”) with the Initial Stockholders and Mr. Sang-Chul Kim. In
connection with the transactions contemplated by the Investment Agreement,
Mr. Kim became Chairman of the Company, a position that he continues to
hold. Pursuant to the Investment Agreement, among other things, the
Initial Stockholders have the option to sell to Mr. Kim, and Mr. Kim has
the option to purchase from the Initial Stockholders, warrants to purchase
the 1,600,000 Insider Warrants upon the earliest of (i) the Company’s
consummation of a Business Combination, (ii) the liquidation of the
Company’s Trust Account and (iii) December 31, 2009. The purchase price
for the Insider Warrants is $1,000,000. The Initial Stockholders
originally paid $1,600,000 for the Insider Warrants, which they acquired
concurrently with the closing of the Offering. Mr. Kim will exercise the
option concurrently with the closing of the acquisition. Mr. Kim has
agreed to transfer 35% of such Insider Warrants to Broadband Capital
Management LLC (“Broadband”) as part of its fees for financial advisory
services.
Pursuant
to the Investment Agreement and as part of the same transaction, the
Initial Stockholders also agreed to transfer an aggregate of 1,488,250 of
the Founders’ Shares to Mr. Kim, for no additional consideration, upon
consummation of a Business Combination. The Initial Stockholders will
continue to hold an aggregate of 100,000 shares of the Company’s common
stock following the transfer. If transferred, such shares will remain in
escrow until one year after consummation of such Business Combination in
accordance with the terms of the escrow agreement that was entered into by
the Initial Stockholders in connection with the Company’s
Offering.
As
a result of above transactions, there are no accounting
implications. The acquisition will be accounted for as a
“reverse merger” and recapitalization since the stockholders of SDI will
own the largest portion of the voting rights in the combined entity, the
stockholders of SDI will have significant influence and the ability to
elect or appoint or to remove a majority of the members of the governing
body of the combined entity, and SDI’s senior management will dominate the
management of the combined entity immediately following the completion of
the transaction in accordance with the provisions of FASB ASC 805.
Accordingly, SDI will be deemed to be the accounting acquirer in the
transaction and, consequently, the transaction is treated as a
recapitalization of SDI. Accordingly, the assets and liabilities and the
historical operations that are reflected in the financial statements are
those of SDI and are recorded at the historical cost basis of SDI. The
Company’s assets, liabilities and results of operations will be
consolidated with the assets, liabilities and results of operations of SDI
after consummation of the acquisition.
|
||
10.
|
Proposed
Business Combination with Sungdong Industries Co. Ltd.
|
On
September 8, 2009, the Company entered into a Securities Purchase and
Share Exchange Agreement (the “Purchase Agreement”) by and among the
Company, Sungdong Industries Co., Ltd. (“SDI”), Hwi Young Jung (“HY
Jung”), a principal stockholder of SDI, and Hong Jun Jung (“HJ Jung”),
which, among other things, provides for the acquisition of up to 52.26%,
but not less than 50.96%, of the voting capital stock of SDI in exchange
for cash consideration to SDI and 7,341,102 shares of the common stock of
the Company to HY Jung. The Company’s proposed business
combination with SDI qualifies as a “business combination” under the
Company’s amended and restated certificate of incorporation.
Provided
that the Extension Amendments are approved by the Company’s stockholders,
the acquisition is expected to be consummated either during the end of the
fourth quarter or the beginning of the first quarter of 2010, after the
required approval by the Company’s stockholders and the fulfillment of
certain other conditions, as discussed in the Purchase
Agreement.
|
||
11.
|
Subsequent
Event
|
In
November, 2009, the Company’s Board of Directors approved the Extension
Amendments described above in Note 1. If the Extension
Amendments are approved by the Company’s stockholders at the Special
Meeting to be held on November 30, 2009, the trust agreement that the
Company entered into in connection with the Public Offering will be
amended to extend the date by which the Trust Account must be liquidated
from November 30, 2009 to January 31, 2010. However, the Company cannot
assure you that the Extension Amendments will be approved or that, if
approved, the Company will complete a Business Combination by January 31,
2010.
If
the Extension Amendments are approved by the Company’s stockholders and
the Company has not completed a Business Combination by January 31, 2010,
its corporate existence will cease and it will dissolve and liquidate for
the purposes of winding up its affairs. 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
offering price per share in the Offering (assuming no value is attributed
to the Warrants contained in the Units sold in the Offering as discussed
in Note 3).
The
Company evaluated subsequent events from October 1, 2009 to November 20,
2009, the date the Company issued its unaudited condensed financial
statements.
|
20
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
|
The
following discussion should be read in conjunction with the Company’s
Consolidated Financial Statements and footnotes thereto contained in this
report.
Forward-Looking
Statements
The
statements discussed in this Report include forward-looking statements that
involve risks and uncertainties detailed from time to time in the Company’s
reports filed with the Securities and Exchange Commission (“SEC”).
Overview
We were
formed on June 26, 2007 as a vehicle to effect a merger, capital stock exchange,
asset acquisition or other similar business combination with an operating
business. 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.
On
September 8, 2009, we entered into a Securities Purchase and Share Exchange
Agreement (the “Purchase Agreement”) by and among us, Sungdong Industries Co.,
Ltd. (“SDI”), Hwi Young Jung (“HY Jung”), a principal stockholder of SDI, and
Hong Jun Jung (“HJ Jung”), which, among other things, provides for the
acquisition of up to 52.26%, but not less than 50.96%, of the voting capital
stock of SDI in exchange for cash consideration to SDI and 7,341,102 shares of
our common stock to HY Jung. Our proposed business combination with
SDI qualifies as a “business combination” under our amended and restated
certificate of incorporation.
Provided
that the Extension Amendments (described below) are approved by our
stockholders, the acquisition is expected to be consummated either during the
end of the fourth quarter of 2009 or the beginning of the first quarter of 2010,
after the required approval by our stockholders and the fulfillment of certain
other conditions, as discussed in the Purchase Agreement.
Recent
Developments
In
November 2009, our Board of Directors approved amendments to our amended and
restated certificate of incorporation (collectively, the “Extension
Amendments”). The Extension Amendments, which will require the
affirmative vote of a majority of our outstanding common stock as of the close
of business on November 9, 2009 (the “record date”) would (i) extend the date by
which we must complete a business combination from November 30, 2009 to January
31, 2010, to avoid being required to liquidate; and (ii) allow public holders of
less than 40% of our outstanding common stock issued in our initial
public offering who vote against the Extension Amendments and elect conversion
to convert their respective shares into a portion of the funds available in the
Trust Account. We filed a definitive proxy statement with the SEC to
solicit the approval of our stockholders of the Extension Amendments at a
special meeting of stockholders (the “Special Meeting”), which is to be held on
November 30, 2009. If the Extension Amendments are approved by our stockholders,
the trust agreement that we entered into in connection with our initial public
offering will be amended to extend the date by which the trust account must be
liquidated from November 30, 2009 to January 31, 2010. However, we cannot assure
you that the Extension Amendments will be approved or that, if approved, that we
will complete a business combination before January 31, 2010. All of
our directors and officers have agreed to vote any common stock owned by them in
favor of the Extension Amendments.
If we
have not completed a business combination by November 30, 2009 (or January 31,
2010, if the Extension Amendments are approved by our stockholders), our
corporate existence will cease and we will dissolve and liquidate for the
purposes of winding up our affairs.
Results
of Operations
For the
three months ended September 30, 2009, we had a net loss of $381,340 derived
from interest income of $26,461 offset by $407,801 for expenses and
taxes.
For the
three months ended September 30, 2008, we had a net income of $56,960 derived
from interest income of $199,337 offset by $142,377 for expenses and
taxes.
For the
nine months ended September 30, 2009, we had a net loss of $610,792 derived from
interest income of $128,374 offset by $739,166 for expenses and
taxes.
For the
nine months ended September 30, 2008, we had a net income of $243,017 derived
from interest income of $733,161 offset by $490,144 for expenses and
taxes.
For the
period from June 26, 2007 (inception) to September 30, 2009, we had a net loss
of $491,838 derived from interest income of $1,025,774 offset by $1,517,612 for
expenses and taxes.
Financial
Condition and Liquidity
We
consummated our initial public offering on December 7, 2007. Gross proceeds from
our initial public offering (including from our private placement of warrants
and exercise of the underwriters’ over-allotment option) were $50,824,000. We
paid a total of $2,525,614 in underwriting discounts and commissions (after
deferring $1,512,000) and for costs and expenses related to the offering. After
deducting the underwriting discounts and commissions and the offering expenses,
the total net proceeds to us from the offering (including the over-allotment
option and the private sale) were $49,883,546, of which $49,693,160 was
deposited into the trust account and the remaining proceeds of $190,386 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 remaining proceeds are available to be used by us to provide for
business, legal and accounting due diligence on prospective acquisitions, tax
payments and continuing general and administrative expenses. There also may be
released to us from the trust account interest earned on the funds in the trust
account up to an aggregate of $1,000,000 to fund our working capital
requirements as well as any amounts we may need to pay our tax
obligations. At September 30, 2009, we had earned $1,018,577 of
interest on the trust account since inception, which is included in the cash
held in the trust account less $1,900,699 which has been used for federal and
state tax payments and working capital.
21
We intend
to use substantially all of the net proceeds of the offering to acquire a target
business, including identifying and evaluating prospective acquisition
candidates, selecting the target business, and structuring, negotiating and
consummating the business combination. To the extent that our capital stock is
used in whole or in part as consideration to effect a business combination, the
proceeds held in the trust fund as well as any other net proceeds not expended
will be used to finance the operations of the target business. We believe we
will have sufficient available funds outside of the trust fund to operate
through November 30, 2009 (or January 31, 2010 if the Extension Amendments
described below are approved by our stockholders), assuming that a business
combination is not consummated during that time.
Commencing
on November 30, 2007 and ending upon the acquisition of a target business or our
liquidation, we began incurring a fee from American Fund Advisors, an affiliate
of Barry J. Gordon, Marc H. Klee and Alan J. Loewenstein, a monthly fee of
$8,000 for general and administrative services. We terminated this
agreement and stopped paying this monthly fee beginning August 17,
2009.
On August 27, 2009, Capital Express
Co., Ltd., an entity controlled by Mr. Sang Chul Kim (“Capital
Express”), loaned $70,000 to us for general working capital purposes. In
addition, on September 3, 2009, Capital Express made an additional loan in the
amount of $225,000 to us for general working capital purposes related to the
proposed business combination with Sundong Industries Co., Ltd. These loans from
Capital Express will be reimbursed back to Capital Express at the closing of a
successful business combination. In the event that the business combination does
not close successfully, Capital Express may not be reimbursed for the loans made
to us.
ITEM 3.
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QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET
RISK.
|
As of
September 30, 2009, our efforts were limited to organizational activities,
activities relating to our initial public offering and the search for an
acquisition candidate; we had neither engaged in any operations nor generated
any revenues.
Market
risk is a broad term for the risk of economic loss due to adverse changes in the
fair value of a financial instrument. These changes may be the result of various
factors, including interest rates, foreign exchange rates, commodity prices
and/or equity prices. Net proceeds from our initial public offering have been
placed in a trust account with Continental Stock Transfer & Trust Company
acting as trustee. As of September 30, 2009, the balance of the trust
account was $49,706,866. The proceeds held in trust may be invested only in
United States “government securities” within the meaning of Section 2(a)(16) of
the Investment Company Act of 1940 having a maturity of 180 days or less, or in
money market funds meeting certain conditions under Rule 2a-7 promulgated under
the Investment Company Act of 1940. Thus, we are currently subject to market
risk primarily through the effect of changes in interest rates on short-term
government securities and other money-market instruments. As of September 30,
2009, the effective annualized interest rate payable on our investment was
approximately 0.28%. Assuming no other changes to our holdings as of September
30, 2009, a 1% decrease in the underlying interest rate payable on our
investment as of September 30, 2009 would result in a decrease of approximately
$124,267 in the interest earned on our investment for the following 90-day
period, and a corresponding decrease in our net increase in stockholders’ equity
resulting from operations, if any, for that period. We do not believe that the
effect of other changes, such as foreign exchange rates, commodity prices and/or
equity prices currently pose significant market risk for us.
22
We have
not engaged in any hedging activities since our inception. We do not currently
expect to engage in any hedging activities.
ITEM 4T.
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CONTROLS AND
PROCEDURES.
|
Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in company reports filed or
submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission’s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in company reports filed or
submitted under the Exchange Act is accumulated and communicated to management,
including our chief executive officer and chief operating officer, as
appropriate to allow timely decisions regarding required
disclosure.
As
required by Rules 13a-15 and 15d-15 under the Exchange Act, our chief
executive officer and chief operating officer carried out an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures as of September 30, 2009. Based upon their evaluation, they concluded
that our disclosure controls and procedures were effective.
Our
internal control over financial reporting is a process designed by, or under the
supervision of, our chief executive officer and chief operating officer and
effected by our board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of our financial reporting and
the preparation of our financial statements for external purposes in accordance
with generally accepted accounting principles. Internal control over financial
reporting includes policies and procedures that pertain to the maintenance of
records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of our assets; provide reasonable assurance that transactions
are recorded as necessary to permit preparation of our financial statements in
accordance with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with the authorization of our
board of directors and management; and provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material effect on our financial
statements.
During
the most recently completed fiscal quarter, there has been no change in our
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
23
PART
II.
OTHER
INFORMATION
ITEM
2: UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS
On
December 7, 2007, we closed our initial public offering (“IPO”) of 6,300,000
units with each unit consisting of one share of common stock and one warrant,
each to purchase one share of common stock at an exercise price of $5.00 per
share. On January 24, 2008, we consummated the closing of an additional 53,000
units which were subject to the over-allotment option. The units from the IPO
(including the over-allotment option) were sold at an offering price of $8.00
per unit, generating total gross proceeds of $50,824,000. EarlyBirdCapital, Inc.
acted as representative of the underwriters. The securities sold in the initial
public offering were registered under the Securities Act of 1933 on a
registration statement on Form S-1 (No. 333-145278). The Securities and Exchange
Commission declared the registration statement effective on November 30,
2007.
We paid a
total of $2,525,614 in underwriting discounts and commissions (after deferring
$1,512,000) and for costs and expenses related to the offering. After deducting
the underwriting discounts and commissions and the offering expenses, the total
net proceeds to us from the offering were $48,283,546, of which $48,093,160 was
deposited into the trust account and the remaining proceeds of $190,386 became
available to be used to provide for business, legal and accounting due diligence
on prospective business combinations and continuing general and administrative
expenses. In addition, all of the proceeds from the private sale of the units
and warrants were deposited into the trust fund, for a total of $49,693,160 held
in trust (or approximately $7.82 per share sold in the offering).
For a
description of the use of the proceeds generated in our initial public offering,
see Part I, Item 2 of this Form 10-Q.
24
ITEM
6: EXHIBITS
(a) Exhibits:
31.1 –
Section 302 Certification by CEO
31.2 –
Section 906 Certification by CFO
32.1 –
Section 302 Certification by CEO
32.2 –
Section 906 Certification by CFO
25
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NORTH
SHORE ACQUISITION CORP.
|
|
Dated: November
20, 2009
|
|
/s/
Byong-Yub Ahn
|
|
Chief
Executive Officer
|
|
(Principal
Executive Officer)
|
|
/s/
Yo-Shin Song
|
|
Chief
Financial Officer
|
|
(Principal
Financial and Accounting
Officer)
|
26