UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x
|
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
FOR
THE QUARTER ENDED June 30, 2008
¨
|
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
COMMISSION
FILE NUMBER: 001-33279
NTR
ACQUISITION CO.
(Exact
name of registrant as specified in its charter)
Delaware
|
|
13-4335685
|
(State
or other jurisdiction of incorporation or organization)
|
|
(I.R.S.
Employer Identification No.)
|
100
Mill Plain Road, Suite 320
Danbury,
CT 06811
(Address
of principal executive office)
(203)
546-3437
(Registrant’s
telephone number, including area code)
_______________
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes
x
No
¨
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 definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer
o
|
Accelerated
filer
¨
|
|
|
Non-accelerated
filer
x
(Do
not check if a smaller reporting company)
|
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
August 8, 2008, the number of outstanding shares of the Registrant’s common
stock, $0.001 par value per share was [24,557,205 (excluding 6,000,000] shares
of common stock owned by our founding shareholders, as such shares do not have
liquidation rights).
TABLE
OF CONTENTS
Item 1. Financial
Statements.
NTR
ACQUISITION CO.
|
(A
Development Stage Enterprise)
|
Balance
Sheets
|
|
|
|
|
June
30,
|
|
|
December
31,
|
|
Assets
|
|
2008
|
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Cash
and cash equivalents
|
|
$
|
251,044
|
|
|
$
|
1,658,019
|
|
Cash
and cash equivalents held in trust
|
|
|
245,713,121
|
|
|
|
193,940,235
|
|
Marketable
securities held in trust
|
|
|
-
|
|
|
|
49,867,346
|
|
Prepaid
federal taxes
|
|
|
530,823
|
|
|
|
105,823
|
|
Other
current assets
|
|
|
93,396
|
|
|
|
1,844,705
|
|
Total
current assets
|
|
|
246,588,384
|
|
|
|
247,416,128
|
|
Deferred
tax asset
|
|
|
526,417
|
|
|
|
68,853
|
|
Furniture
and equipment, net
|
|
|
4,867
|
|
|
|
5,418
|
|
Other
assets
|
|
|
6,756
|
|
|
|
6,756
|
|
Total
assets
|
|
$
|
247,126,424
|
|
|
$
|
247,497,155
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Equity
|
|
|
|
|
|
|
|
|
Notes
payable current
|
|
$
|
2,226,260
|
|
|
$
|
1,521,000
|
|
Accrued
expenses
|
|
|
32,675
|
|
|
|
364,329
|
|
Accrued
state taxes
|
|
|
99,363
|
|
|
|
123,362
|
|
Deferred
underwriting discount
|
|
|
7,367,162
|
|
|
|
7,367,162
|
|
Total
current liabilities
|
|
|
9,725,460
|
|
|
|
9,375,853
|
|
|
|
|
|
|
|
|
|
|
Common
stock, subject to possible redemption; 4,911,439 shares
|
|
|
|
|
|
|
|
|
at
$9.78 per share
|
|
|
48,033,873
|
|
|
|
48,033,873
|
|
Deferred
interest attributable to common stock subject to possible
|
|
|
|
|
|
|
|
|
redemption
(net of taxes of $1,045,803 and $825,120, respectively)
|
|
|
1,639,186
|
|
|
|
1,293,289
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Series
A convertible preferred stock, $0.0001 par value,
|
|
|
|
|
|
|
|
|
1,000,000
shares authorized; none issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common
stock, $0.001 par value. Authorized 200,000,000 shares;
|
|
|
|
|
|
|
|
|
issued
and outstanding 30,557,205 and 30,557,205 shares at
|
|
|
|
|
|
|
|
|
June
30, 2008 and December 31, 2007, respectively.
|
|
|
30,557
|
|
|
|
30,557
|
|
Additional
paid-in capital
|
|
|
184,893,487
|
|
|
|
184,893,487
|
|
Earnings
accumulated during the development stage
|
|
|
2,803,861
|
|
|
|
3,870,096
|
|
Total
stockholders' equity
|
|
|
187,727,905
|
|
|
|
188,794,140
|
|
Total
liabilities and stockholders' equity
|
|
$
|
247,126,424
|
|
|
$
|
247,497,155
|
|
|
|
|
|
|
|
|
|
|
See
notes to financial statements.
|
|
|
|
NTR
ACQUISITION CO.
|
(A
Development Stage Enterprise)
|
Statements
of Operations (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
2, 2006
|
|
|
|
Three
|
|
|
Three
|
|
|
Six
|
|
|
Six
|
|
|
(Date
of
|
|
|
|
Months
|
|
|
Months
|
|
|
Months
|
|
|
Months
|
|
|
inception)
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
through
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
June
30,
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional
services
|
|
$
|
58,548
|
|
|
$
|
99,704
|
|
|
$
|
440,537
|
|
|
$
|
225,509
|
|
|
$
|
1,420,299
|
|
Rent
and facilities
|
|
|
9,869
|
|
|
|
11,951
|
|
|
|
25,198
|
|
|
|
22,726
|
|
|
|
91,439
|
|
Formation
and operating
|
|
|
217,011
|
|
|
|
240,073
|
|
|
|
447,949
|
|
|
|
407,592
|
|
|
|
1,431,340
|
|
|
|
|
285,428
|
|
|
|
351,728
|
|
|
|
913,684
|
|
|
|
655,827
|
|
|
|
2,943,078
|
|
Loss
from operations before other
income and income tax
expense
|
|
|
(285,428
|
)
|
|
|
(351,728
|
)
|
|
|
(913,684
|
)
|
|
|
(655,827
|
)
|
|
|
(2,943,078
|
)
|
Other
income and (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
1,184,223
|
|
|
|
2,972,138
|
|
|
|
2,852,356
|
|
|
|
4,869,059
|
|
|
|
13,553,828
|
|
Interest
expense
|
|
|
(45,998
|
)
|
|
|
-
|
|
|
|
(83,415
|
)
|
|
|
-
|
|
|
|
(104,415
|
)
|
Acquisition
expenses
|
|
|
(428,284
|
)
|
|
|
-
|
|
|
|
(2,502,983
|
)
|
|
|
-
|
|
|
|
(2,502,983
|
)
|
State
taxes other than income
|
|
|
(183,130
|
)
|
|
|
-
|
|
|
|
(530,176
|
)
|
|
|
(153,750
|
)
|
|
|
(712,993
|
)
|
Other
income (expense)
|
|
|
526,811
|
|
|
|
2,972,138
|
|
|
|
(264,218
|
)
|
|
|
4,715,309
|
|
|
|
10,233,437
|
|
Income
(loss) before income tax expense
|
|
|
241,383
|
|
|
|
2,620,410
|
|
|
|
(1,177,902
|
)
|
|
|
4,059,482
|
|
|
|
7,290,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense (benefit)
|
|
|
94,074
|
|
|
|
1,020,146
|
|
|
|
(457,564
|
)
|
|
|
1,442,958
|
|
|
|
2,847,312
|
|
Net
income (loss)
|
|
|
147,309
|
|
|
|
1,600,264
|
|
|
|
(720,338
|
)
|
|
|
2,616,524
|
|
|
|
4,443,047
|
|
Deferred
interest, net of taxes, attributable to
common stock subject to
possible redemption
|
|
|
(144,331
|
)
|
|
|
(362,475
|
)
|
|
|
(345,897
|
)
|
|
|
(591,885
|
)
|
|
|
(1,639,186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable
to common stock
|
|
$
|
2,978
|
|
|
$
|
1,237,789
|
|
|
$
|
(1,066,235
|
)
|
|
$
|
2,024,639
|
|
|
$
|
2,803,861
|
|
Earnings
(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.01
|
|
|
$
|
0.05
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.08
|
|
|
$
|
0.12
|
|
Diluted
|
|
|
0.01
|
|
|
|
0.03
|
|
|
|
(0.04
|
)
|
|
|
0.07
|
|
|
|
0.10
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
30,557,205
|
|
|
|
30,557,205
|
|
|
|
30,557,205
|
|
|
|
25,797,677
|
|
|
|
23,036,319
|
|
Diluted
|
|
|
37,221,921
|
|
|
|
36,421,525
|
|
|
|
30,557,205
|
|
|
|
30,729,291
|
|
|
|
27,648,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes
to financial statements.
NTR
ACQUISITION CO.
|
(A
Development Stage Enterprise)
|
Statements
of Changes in Stockholders' Equity (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(Deficit)
Accumulated
During the Development Stage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Paid-In Capital
|
|
|
|
|
|
|
Common
Stock
|
|
|
|
|
|
|
Shares
|
|
|
Values
|
|
|
Total
|
|
Balance
at June 2, 2006 (inception)
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Issuance
of common shares to initial founders
|
|
|
7,812,500
|
|
|
|
7,813
|
|
|
|
2,267,085
|
|
|
|
-
|
|
|
|
2,274,898
|
|
Issuance
of 4,250,000 warrants to initial founders
|
|
|
-
|
|
|
|
-
|
|
|
|
250,101
|
|
|
|
-
|
|
|
|
250,101
|
|
Cash
contribution made by initial founders
|
|
|
-
|
|
|
|
-
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
5,000
|
|
Common
stock repurchased and performance warrants from initial founders for
$1.00
|
|
|
(1,562,500
|
)
|
|
|
(1,563
|
)
|
|
|
1,562
|
|
|
|
-
|
|
|
|
(1
|
)
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(365,868
|
)
|
|
|
(365,868
|
)
|
Balances
at December 31, 2006
|
|
|
6,250,000
|
|
|
|
6,250
|
|
|
|
2,523,748
|
|
|
|
(365,868
|
)
|
|
|
2,164,130
|
|
Common
stock repurchased for $1.00
|
|
|
(250,000
|
)
|
|
|
(250
|
)
|
|
|
249
|
|
|
|
-
|
|
|
|
(1
|
)
|
Sale
of 24,557,205 units, net of underwriter’s discount and offering
costs
|
|
|
24,557,205
|
|
|
|
24,557
|
|
|
|
227,173,506
|
|
|
|
-
|
|
|
|
227,198,063
|
|
Net
proceeds subject to possible redemption of 4,911,439
shares
|
|
|
-
|
|
|
|
-
|
|
|
|
(48,033,873
|
)
|
|
|
-
|
|
|
|
(48,033,873
|
)
|
Proceeds
from sale of warrants to founders
|
|
|
-
|
|
|
|
-
|
|
|
|
3,350,000
|
|
|
|
-
|
|
|
|
3,350,000
|
|
Additional
offering costs
|
|
|
-
|
|
|
|
-
|
|
|
|
(120,143
|
)
|
|
|
-
|
|
|
|
(120,143
|
)
|
Net
income attributable to common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,235,964
|
|
|
|
4,235,964
|
|
Balances
at December 31, 2007
|
|
|
30,557,205
|
|
|
|
30,557
|
|
|
|
184,893,487
|
|
|
|
3,870,096
|
|
|
|
188,794,140
|
|
Net
loss attributable to common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,066,235
|
)
|
|
|
(1,066,235
|
)
|
Balances
at June 30, 2008
|
|
|
30,557,205
|
|
|
$
|
30,557
|
|
|
$
|
184,893,487
|
|
|
$
|
2,803,861
|
|
|
|
187,727,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to financial statements.
|
|
|
|
|
|
NTR
ACQUISITION CO.
|
(A
Development Stage Enterprise)
|
Statements
of Cash Flows (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months
Ended
June
30,
2008
|
|
|
Six
Months
Ended
June
30,
2007
|
|
|
June
2, 2006
(Date
of
inception)
through
June
30,
2008
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net
(loss) income
|
|
$
|
(1,066,235
|
)
|
|
$
|
2,024,639
|
|
|
$
|
2,803,861
|
|
Adjustments
to reconcile net (loss) income to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
551
|
|
|
|
-
|
|
|
|
643
|
|
Deferred
tax asset
|
|
|
(457,564
|
)
|
|
|
(70,960
|
)
|
|
|
(526,417
|
)
|
Deferred
interest attributable to common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
subject
to possible redemption
|
|
|
345,897
|
|
|
|
591,885
|
|
|
|
1,639,186
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
federal taxes
|
|
|
(425,000
|
)
|
|
|
-
|
|
|
|
(561,717
|
)
|
Other
assets
|
|
|
1,751,309
|
|
|
|
(135,796
|
)
|
|
|
(100,149
|
)
|
Accrued
federal and state taxes
|
|
|
(23,999
|
)
|
|
|
374,514
|
|
|
|
130,257
|
|
Accrued
expenses
|
|
|
(331,654
|
)
|
|
|
(55,298
|
)
|
|
|
75,474
|
|
Notes
payable to initial founders
|
|
|
-
|
|
|
|
(48,453
|
)
|
|
|
-
|
|
Net
cash (used in) provided by operating activities
|
|
|
(206,695
|
)
|
|
|
2,680,531
|
|
|
|
3,461,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents held in trust account
|
|
|
(51,772,886
|
)
|
|
|
(103,875,591
|
)
|
|
|
(245,713,121
|
)
|
Maturity
(purchase) of marketable securities held in trust
|
|
|
49,867,346
|
|
|
|
(139,069,433
|
)
|
|
|
-
|
|
Purchase
of fixed assets
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,510
|
)
|
Net
cash used in investing activities
|
|
|
(1,905,540
|
)
|
|
|
(242,945,024
|
)
|
|
|
(245,718,631
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sale of common stock to initial founders
|
|
|
-
|
|
|
|
-
|
|
|
|
2,279,899
|
|
Proceeds
from sale of warrants to initial founders
|
|
|
-
|
|
|
|
3,350,000
|
|
|
|
3,600,101
|
|
Repurchase
of common stock and performance warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
Proceeds
from initial public offering, net of underwriter’s discount and offering
costs
|
|
|
-
|
|
|
|
234,631,563
|
|
|
|
234,402,278
|
|
Proceeds
from notes payable
|
|
|
705,260
|
|
|
|
-
|
|
|
|
2,226,260
|
|
Net
cash provided by financing activities
|
|
|
705,260
|
|
|
|
237,981,563
|
|
|
|
242,508,537
|
|
Net
(decrease) increase in cash
|
|
|
(1,406,975
|
)
|
|
|
(2,282,930
|
)
|
|
|
251,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
1,658,019
|
|
|
|
2,423,747
|
|
|
|
-
|
|
Cash
and cash equivalents, end of period
|
|
$
|
251,044
|
|
|
$
|
140,817
|
|
|
$
|
251,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncash
financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual
of deferred offering costs
|
|
|
-
|
|
|
$
|
297,971
|
|
|
$
|
1,164,962
|
|
Accrual
of deferred underwriter fee
|
|
|
-
|
|
|
|
7,367,162
|
|
|
|
7,367,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary
Disclosures
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes
Paid
|
|
$
|
(979,175
|
)
|
|
$
|
(1,293,154
|
)
|
|
$
|
(4,457,267
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to financial statements.
|
|
|
|
|
NTR
ACQUISITION CO.
(A
Development Stage Enterprise)
Notes to
Financial Statements (Unaudited)
(1)
|
Organization
and Nature of Business Operations
|
NTR
Acquisition Co. (the “Company”) a blank check company, was incorporated under
the laws of the State of Delaware on June 2, 2006. The Company was formed
to acquire, through merger, capital stock exchange, asset acquisition or other
similar business combination (an “Initial Business Combination”), one or more
businesses or assets in the energy industry, with a particular focus on
businesses or assets involved in the refining, distribution and marketing of
petroleum products in North America. The Company’s Second Amended and Restated
Certificate of Incorporation provides for mandatory liquidation of the Company
in the event that the Company does not consummate an Initial Business
Combination by January 30, 2009, and there is no assurance that the Company will
be able to successfully effect an Initial Business Combination by that
date.
Primarily
all activity through June 30, 2008 relates to the Company’s formation,
organizational activities, the completion of its initial public offering
described below and activities relating to identifying and evaluating
prospective acquisition candidates. The Company has not yet commenced
any commercial operations. The Company is considered to be in the
development stage and is subject to the risks associated with activities of
development stage companies. The Company has selected December 31st
as its fiscal year end.
On
January 29, 2007, the registration statement of the Company’s initial public
offering (the “Offering”) was declared effective by the Securities and Exchange
Commission. The Company consummated the Offering on February 5, 2007
selling 24,000,000 units (each a “Unit”) at a price of $10.00 per Unit yielding
net proceeds of approximately $230.4 million. Thereafter, on February
20, 2007, the underwriters for the Company’s Offering exercised a portion of
their over-allotment option purchasing, as of February 22, 2007, an additional
557,205 Units at $10.00 per Unit providing the Company with net proceeds of
approximately $5.35 million. Each Unit consisted of one share of the
Company’s common stock, $0.001 par value per share (the “Common Stock”), and one
redeemable warrant (each a “Warrant”). See Note 4 - “Initial Public
Offering,” for a complete discussion. The net proceeds of the
Offering and underwriters’ over-allotment, the sale of the initial founders’
securities, the deferred underwriting discounts and commissions, and any
interest income (other than disbursements for operating expenses and taxes) is
held in a trust account at Morgan Stanley & Co., Inc. with American Stock
Transfer & Trust Company, as trustee (the “Trust Account”), and invested in
United States Treasury securities until the earlier of the consummation of our
Initial Business Combination or the distribution of the Trust Account as
described below. At June 30, 2008, the amount of $245,713,121 was
being held in the Trust Account, which represents approximately $10.00 per share
(excluding 6,000,000 shares of Common Stock owned by our founding stockholders,
as such shares do not have liquidation rights).
The
Company’s Initial Business Combination must be with a target business or
businesses whose collective fair market value would be at least equal to 80% of
the balance in the Trust Account (excluding deferred underwriting discounts and
commissions of $7.37 million) at the time of such transaction. Under
the terms of the Investment Management Trust Agreement, up to $3.25 million of
interest (net of taxes payable) may be released to the Company to be used to pay
for business, legal and accounting due diligence on prospective acquisitions and
continuing general and administrative expenses (“Working Capital
Requirements”). The Company, after identifying an Initial Business
Combination and entering into a definitive agreement for the acquisition of a
target business, will file a proxy statement with the Securities and Exchange
Commission and hold a stockholder vote. All of the Company’s
stockholders prior to the Offering, including all of the officers and directors
of the Company (collectively, the “Founding Stockholders”), have agreed to vote
their 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 an Initial Business Combination. After
consummation of an Initial Business Combination, these voting safeguards will no
longer be applicable.
An
Initial Business Combination will be consummated only if a majority of the
shares of Common Stock voted by the Public Stockholders are voted in favor of
the Initial Business Combination and holders representing less than 20% of the
shares sold in the Offering voted by the Public Stockholders are voted against
the transaction and validly exercise their conversion rights. Public
Stockholders voting against the Initial Business Combination will be entitled to
convert their shares of Common Stock into a pro rata share of the aggregate
amount then on deposit in the Trust Account. The per share conversion
price will equal the amount in the Trust Account (before payment of the deferred
underwriting discounts and commissions of $7.37 million and including interest
earned on their pro rata portion of the Trust Account, net of income taxes
payable on such interest and net of interest income of up to $3.25 million on
the Trust Account balance released to the Company to fund Working Capital
Requirements), calculated as of two business days prior to the consummation of
the proposed Initial Business Combination, divided by the number of shares of
Common Stock held by Public Stockholders at the consummation of the Offering and
without regard to the shares held by the Founding Stockholders. In
the event that Public Stockholders owning 20% or more of the shares sold in the
Offering vote against the Initial Business Combination, no conversions will be
effected and the Initial Business Combination will not be
consummated. If the Initial Business Combination is not approved or
consummated for any reason, then Public Stockholders voting against the Initial
Business Combination who exercised their conversion rights would not be entitled
to convert their shares of Common Stock into a pro rata share of the aggregate
amount then on deposit in the Trust Account, but will be entitled to whatever
distribution of proceeds is available to Public Stockholders at the time of
liquidation.
If the
Company is unable to complete an Initial Business Combination by January 30,
2009, it will automatically dissolve as promptly as practicable after a plan of
dissolution is adopted. Upon its receipt of notice from counsel that
the Company has been dissolved, the trustee will commence liquidating the
investments constituting the Trust Account and distribute the proceeds to the
Public Stockholders. The Company’s Founding Stockholders have waived
their rights to participate in any liquidation distribution with respect to any
initial Founding Stockholders’ shares. There will be no distribution
from the Trust Account with respect to any of the Warrants which will expire
worthless if the Company is liquidated as of January 30, 2009.
Separate
trading of the Common Stock and Warrants comprising the Units commenced on or
about February 23, 2007, and holders of the Company’s Units may elect to
separately trade the Common Stock and Warrants included in the Company’s
Units. Those Units not separated trade on the American Stock Exchange
under the symbol NTQ.U and each of the Common Stock and Warrants trade on the
American Stock Exchange under the symbols NTQ and NTQ.WS,
respectively.
(2)
|
Summary
of Significant Accounting
Principles
|
(a)
Basis
of Presentation
The
financial statements of the Company at June 30, 2008, for the three months and
six months ended June 30, 2008 and 2007, and for the period from June 2,
2006 (Inception) to June 30, 2008 (cumulative), are unaudited. In the
opinion of management, all adjustments (including normal recurring adjustments)
have been made that are necessary to present fairly the financial position of
the Company as of June 30, 2008 and the results of its operations for the three
months and six months ended June 30, 2008 and 2007, and for the period
from June 2, 2006 (Inception) to June 30, 2008
(cumulative). Operating results for the interim periods presented are
not necessarily indicative of the results to be expected for a full fiscal
year. Comparative financial statements for the periods ended June 30,
2008 reflect the results of operations and cash flows for the six month period
ended June 30, 2007, and the period from June 2, 2006 (Inception) to
June 30, 2008, respectively.
The
statements and related notes have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. As permitted
under those rules, certain footnotes or other financial information that are
normally required by generally accepted accounting principles in the United
States can be condensed or omitted. Therefore, these statements
should be read in conjunction with the audited financial statements, and notes
thereto, which are included in our Annual Report on Form 10-K for the year ended
December 31, 2007.
There is
no assurance that the Company will be able to successfully complete an Initial
Business Combination within the time frame discussed above. That
factor and the Company’s declining cash available outside of the Trust Account
raise doubts about the Company’s ability to continue as a going
concern. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty. To address
some of the Company’s liquidity needs, the Company (i) entered into the Series A
Purchase Agreement dated November 2, 2007 with Occidental, and (ii) issued a
promissory note to Occidental dated on November 2, 2007 that will cover advances
up to $3,000,000. The terms of the promissory note are described in
Note 7 to the unaudited interim financial statements included
herein. These financing arrangements are described more fully in
Note 6 to the financial statements included in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2007.
The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
(including the 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.
(b)
Cash
Equivalents and Concentrations
The Company considers all highly liquid
investments with an original maturity of three months or less when purchased to
be cash equivalents. Such cash and cash equivalents, at times, may
exceed federally insured limits.
(c)
Marketable
Securities Held In Trust
Investment
securities consist of United States Treasury securities. The Company
classifies its treasury securities as
held-to-maturity. Held-to-maturity securities are those securities
which the Company has the ability and intent to hold until
maturity. Held-to-maturity treasury securities are recorded at
amortized cost and adjusted for the amortization or accretion of premiums or
discounts.
A decline
in the market value of held-to-maturity securities below cost that is deemed to
be other than temporary, results in an impairment that reduces the carrying
costs to such securities’ fair value. The impairment is charged to
earnings and a new cost basis for the security is established. To
determine whether an impairment is other than temporary, the Company considers
whether it has the ability and intent to hold the investment until a market
price recovery and considers whether evidence indicating the cost of the
investment is recoverable outweighs evidence to the
contrary. Evidence considered in this assessment includes the reasons
for the impairment, the severity and the duration of the impairment, changes in
value subsequent to year-end, forecasted performance of the investee, and the
general market condition in the geographic area or industry the investee
operates in. Premiums and discounts are amortized or accreted over the life of
the related held-to-maturity security as an adjustment to yield using the
effective-interest method. Such amortization and accretion is
included in the "Interest Income" line item in the statements of
operations. Interest Income is recognized when earned.
(d)
Recent
Accounting Pronouncements
In
December 2007, the FASB issued FASB Statement 141R,
Business combinations
(Statement 141R) and FASB Statement No. 160,
Noncontrolling Interests in
Consolidated Financial Statements - an amendment to ARB No 51
(Statement
160). Statements 141R and 160 require most identifiable assets, liabilities.
Noncontrolling interests, and goodwill acquired in a business combination to be
recorded at "full fair value" and require noncontrolling interests (previously
referred to as minority interests) to be reported as a component of equity,
which changes the accounting for transactions with noncontrolling interest
holders. Both Statements are effective for periods beginning on or
after December 15, 2008, and earlier adoption is prohibited. Statement 141R will
be applied to business combinations occurring after the effective
date. Statement 160 will be applied prospectively to all
noncontrolling interests, including any that arose before the effective
date. The Company is currently evaluating the impact of adopting
Statement 141R and Statement 160 on its results of operations and financial
position.
(e)
Earnings
(Loss) Per Common Share
Basic
earnings (loss) per share is computed using the weighted average number of
common shares outstanding. Diluted earnings (loss) per share gives effect to the
potential dilution of earnings which could occur if securities or other
contracts to issue Common Stock were exercised or converted into Common Stock or
resulted in the issuance of Common Stock that then shared in earnings, if
dilutive.
The
30,407,205 warrants to purchase Common Stock were anti-dilutive and excluded
from the calculation of diluted loss per share for the six month period ended
June 30, 2008.
(f)
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.
(3)
|
Formation
of the Company
|
On June
20, 2006, NTR Partners LLC purchased 7,812,500 shares of Common Stock, Warrants
to purchase 2,500,000 shares of Common Stock, and performance warrants to
purchase 1,750,000 shares of Common Stock for an aggregate purchase price of
$2,525,000 in a private placement in connection with the formation of NTR
Acquisition Co. On December 15, 2006 and January 30, 2007, as part of
a recapitalization plan, the Company purchased for an aggregate nominal
consideration of $2.00, 1,562,500, and 250,000, respectively, shares of Common
Stock as well as all 1,750,000 of the performance warrants for
cancellation. These recapitalizations were effected to ensure that
the shares included in the Units sold in the Offering represented approximately
80% of the Company’s outstanding share capital. In addition,
immediately prior to the sale of the Units in the Offering, our director Mr.
Ortale, Sewanee Partners III, L.P. (an investment fund with which Mr. Ortale is
affiliated), Hendricks Family LLLP (affiliated with our director Mrs.
Hendricks), Gilliam Enterprises LLC (affiliated with our Chairman Mr. Gilliam)
and our director Mr. Quarles, all of whom had been members of NTR Partners LLC,
redeemed their membership interests in NTR Partners LLC in exchange for a
portion of the Founders’ securities that NTR Partners LLC held and cash
distributions which they applied to the purchase of, in the aggregate, founders’
warrants to purchase an additional 3,350,000 shares of Common Stock at a price
of $1.00 per warrant ($3.35 million in the aggregate) in a private placement on
behalf of themselves and certain of their permitted transferees (all such
parties, including NTR Partners LLC, are Founding Stockholders and all such
securities are referred to as “Founding Stockholders’ Shares” and “Founding
Stockholders’ Warrants” as applicable). After giving effect to the
recapitalizations, and immediately prior to the Offering, there were 6,000,000
shares of Common Stock held by our Founding Stockholders.
The
Founding Stockholders’ Shares are identical to the shares included in the Units
issued in connection with the Offering, except that each holder of the Founding
Stockholders’ Shares has agreed (i) in connection with the stockholder vote
required to approve an Initial Business Combination, to vote the Founding
Stockholders’ Shares in accordance with a majority of the shares of Common Stock
voted by the Public Stockholders, and (ii) to waive the right to participate in
any liquidation distribution with respect to the Founding Stockholders’ Shares
if we fail to consummate an Initial Business Combination by January 30,
2009. The Founding Stockholders have also agreed that they will not
sell or transfer the Founding Stockholders’ Shares for a period of one year from
the date the Company completes its Initial Business Combination, other than to
permitted transferees who agree to be subject to the transfer
restrictions.
The
Founding Stockholders’ Warrants are identical to those sold in the Offering,
except that they cannot be redeemed at the option of the Company so long as they
are held by any of the Founding Stockholders or their permitted
transferees. The Founding Stockholders have also agreed that they
will not sell or transfer the Founding Stockholders’ Warrants until the date the
Company completes its Initial Business Combination, other than to permitted
transferees who agree to be subject to the transfer restrictions.
Commencing on the date on which they
become exercisable, the Founding Stockholders’ Warrants and the shares of Common
Stock issuable upon exercise of the Warrants will be entitled to registration
rights under a Registration Rights Agreement, dated January 30,
2007.
(4)
|
Initial
Public Offering
|
On
February 5, 2007, the Company consummated its Offering of 24,000,000 Units at an
offering price of $10.00 per Unit yielding net proceeds of approximately $230.4
million. Each Unit consisted of one share of the Company’s Common
Stock, $0.001 par value per share, and one redeemable
Warrant. Thereafter, on February 20, 2007, the underwriters for the
Company’s Offering exercised a portion of their over-allotment option
purchasing, as of February 22, 2007, an additional 557,205 Units at $10.00 per
Unit providing the Company with net proceeds of approximately $5.35
million.
Each
Warrant entitles the holder to purchase from the Company one share of Common
Stock at an exercise price of $7.50 commencing on the later of the completion of
an Initial Business Combination with a target business or thirteen months after
the closing of the Offering (or, March 5, 2008), provided that the Company has a
registration statement in effect covering the shares of Common Stock issuable
upon the exercise of the Warrants. The Warrants expire on January 30,
2011 unless earlier exercised or redeemed. The Company may call the
Warrants for redemption, in whole and not in part, at a price of $0.01 per
Warrant, upon a minimum of thirty (30) days’ prior written notice, at any time
after the Warrants become exercisable, and only in the event that the last sale
price of the Common Stock equals or exceeds $14.25 per share for any twenty (20)
trading days within a thirty (30) trading day period ending on the third day
prior to the date on which notice of redemption is given, provided that on the
date that the notice of redemption is given and during the entire period
thereafter until all Warrants are redeemed, a registration statement covering
the shares of Common Stock issuable upon exercise of the Warrants is in effect
and a current prospectus relating to them is available.
Pursuant
to the Second Amended and Restated Warrant Agreement, the Company is only
required to use its best efforts to effect the registration of the shares of
Common Stock under 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
the exercise. Also, in the event that a registration statement is not
effective at the time of exercise, the holders of such Warrants shall not be
entitled to exercise such Warrants 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.
On
February 5, 2007, certain of the Company’s Founding Stockholders purchased in a
private placement additional warrants to purchase 3,350,000 shares of the
Company’s Common Stock generating gross proceeds of $3.35 million in the
aggregate. These warrants are identical to the Warrants contained in
the Units except that they are not redeemable while held by any of the Founding
Stockholders or their permitted transferees. The warrants issued in
connection with the private placement are subject to certain transfer
restrictions.
Other
current assets at June 30, 2008 consist of $93,396 for prepayments of insurance
and rent. As of December 31, 2007, other current assets
consisted of $23,457 for prepayments and $1,821,248 of legal and other fees
incurred through December 31, 2007 that were related to the proposed
acquisition. In late March 2008, the board of directors authorized
management to enter into a mutual release and termination agreement with Casey
Co. Management decided not to pursue the proposed business
combination with Kern and communicated this decision to Casey Co. prior to March
31, 2008. A Termination Agreement and Mutual Release to terminate the
Purchase Agreement was executed on April 3, 2008. Accordingly, these
costs were charged to the statement of operations and reported in the other
income and expense section of the statement of operations.
On
November 2, 2007, the Company entered into an agreement to obtain a $3,000,000
loan secured by a promissory note with an unrelated third party at an interest
rate of 9.0% per annum. This promissory note has a term that is the
earlier of (i) November 1, 2008 or (ii) such date the lender purchases approved
and authorized Series A Senior Convertible Preferred Stock, par value $0.0001,
of the Company. In connection with such note, the Company has an
outstanding balance of $2,226,260, which includes accrued interest of $104,415,
as of June 30, 2008.
The following table sets forth the
computation of basic and diluted earnings per common share from continuing
operations:
|
|
Quarter
Ended June 30, 2008
|
|
|
Quarter
Ended June 30, 2007
|
|
|
Six
Months Ended June 30, 2008
|
|
|
Six
Months Ended June 30, 2007
|
|
|
June
2, 2006 (Date of Inception) Through Quarter Ended June 30,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) to common stockholders
|
|
$
|
2,978
|
|
|
$
|
1,237,789
|
|
|
$
|
1,066,235
|
|
|
$
|
2,024,639
|
|
|
$
|
2,803,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
30,557,205
|
|
|
|
30,557,205
|
|
|
|
30,557,205
|
|
|
|
25,797,677
|
|
|
|
23,036,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per common share - basic
|
|
$
|
0.01
|
|
|
$
|
0.05
|
|
|
$
|
0.04
|
|
|
$
|
0.08
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
30,557,205
|
|
|
|
30,557,205
|
|
|
|
30,557,205
|
|
|
|
25,797,677
|
|
|
|
23,036,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
on dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
6,664,716
|
|
|
|
5,864,320
|
|
|
|
-
|
|
|
|
4,931,614
|
|
|
|
4,611,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average dilutive common shares outstanding
|
|
|
37,221,921
|
|
|
|
36,421,525
|
|
|
|
30,557,205
|
|
|
|
30,729,291
|
|
|
|
27,648,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per common share - diluted
|
|
$
|
0.01
|
|
|
$
|
0.03
|
|
|
$
|
0.04
|
|
|
$
|
0.07
|
|
|
$
|
0.1
|
|
This Quarterly Report on Form 10-Q
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These forward-looking statements deal with
management’s current expectations regarding its plans and objectives for future
operations. This information may involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from future results, performance or
achievements expressed or implied by any forward-looking
statements. Forward-looking statements, which involve assumptions and
describe our future plans, strategies and expectations, are generally
identifiable by use of the words “may,” “will,” “should,” “expect,”
“anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of
these words or other variations on these words or comparable
terminology. These forward-looking statements are based on
assumptions that may be incorrect, and we cannot assure you that these
projections included in these forward-looking statements will come to
pass. Our actual results could differ materially from those expressed
or implied by the forward-looking statements as a result of various
factors.
We have based the forward-looking
statements included in this Quarterly Report on Form 10-Q on information
available to us on the date of this Quarterly Report, and we assume no
obligation to update any such forward-looking statements. Although we
undertake no obligation to revise or update any forward-looking statements,
whether as a result of new information, future events or otherwise, you are
advised to consult any additional disclosures that we may make directly to you
or through reports that we, in the future, may file with the SEC, including
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K.
Overview
The following Management’s Discussion
and Analysis of Financial Condition and Results of Operations should be read in
conjunction with our financial statements and the related notes and schedules
thereto.
We are a blank check company
incorporated in Delaware on June 2, 2006. We were formed to acquire,
through a merger, capital stock exchange, asset acquisition or other similar
business combination, which we refer to as our “Initial Business Combination,”
one or more businesses or assets in the energy industry, with a particular focus
on businesses or assets involved in the refining, distribution and marketing of
petroleum products in North America. We intend to use cash derived
from the net proceeds of our Offering, and the exercise by the underwriters of
their over-allotment option, together with any additional financing arrangements
that we may undertake, to effect an Initial Business Combination. It
is not currently contemplated that we will hold an annual meeting of
stockholders to elect new directors prior to the consummation of an Initial
Business Combination, in which case all of the current directors will continue
in office until their successors are duly elected and have
qualified. Our Initial Business Combination must involve one or more
target businesses having a fair market value, individually or collectively,
equal to at least 80% of the balance in the Trust Account
(excluding deferred
underwriting discounts and commissions of $7.37 million) at the time of the
transaction. However, we may not use all of the proceeds held in the
Trust Account in connection with an Initial Business Combination, either because
the consideration for the Initial Business Combination is less than the proceeds
in trust or because we finance a portion of the consideration with capital stock
or debt securities that we can issue. In that event, the proceeds
held in the Trust Account as well as any other net proceeds not expended will be
used to finance the operations of the target business or
businesses.
Liquidity
and Capital Resources
On June 20, 2006, we consummated a
private placement of our Common Stock and performance warrants to NTR Partners
LLC, one of our Founding Stockholders, for an aggregate purchase price of
$2,525,000. On December 15, 2006, we reacquired, for nominal
consideration, 1,562,500 of those shares for retirement as well as all 1,750,000
of the performance warrants for cancellation. Immediately prior to
the sale of the Units in the Offering, our director Mr. Ortale, Sewanee Partners
III, L.P. (an investment fund with which Mr. Ortale is affiliated), Hendricks
Family LLLP (affiliated with our director Mrs. Hendricks), Gilliam Enterprises
LLC (affiliated with our Chairman Mr. Gilliam) and our director Mr. Quarles,
collectively purchased 3,350,000 warrants directly from us at a price of $1.00
per warrant, for an aggregate purchase price of $3.35 million in a private
placement.
On February 5, 2007, we closed our
Offering of 24,000,000 Units with each Unit consisting of one share of our
Common Stock and one Warrant to purchase one share of our Common Stock at an
exercise price of $7.50 per share, and received gross proceeds of $240.00
million, or net proceeds of approximately $230.4 million. All but
$500,000 of the net proceeds from our Offering were deposited in the Trust
Account. On February 22, 2007, we consummated the closing of an
additional 557,205 Units which were subject to the underwriters’ over-allotment
option, in which we received gross proceeds of approximately $5.57 million, or
net proceeds of approximately $5.35 million.
As of June 30, 2008, approximately
$245.7 million was held in the Trust Account. We also had $251,044 of
unrestricted cash available outside the Trust Account to us for our activities
in connection with identifying and conducting due diligence of a suitable
Initial Business Combination, and for general corporate matters. The
following table shows the total funds held in the Trust Account through June 30,
2008:
Net
proceeds from our initial public offering, the underwriters’
over-allotment, and private placement of common stock and warrants that
were placed in trust
|
|
$
|
232,757,003
|
|
Deferred
underwriting discounts and commissions
|
|
|
7,367,162
|
|
Total
interest earned inception to date through June 30, 2008
|
|
|
13,424,951
|
|
Less
total interest disbursed for working capital and payment of taxes
inception to date through June 30, 2008
|
|
|
7,835,995
|
|
Total
funds held in Trust Account through June 30, 2008
|
|
$
|
245,713,121
|
|
For the quarter ended June 30, 2008, we
paid an aggregate of approximately $686,000 in expenses for the following
purposes:
|
·
|
premiums
associated with our directors and officers liability
insurance;
|
|
·
|
payment
of estimated taxes incurred as a result of interest income earned on funds
currently held in the Trust
Account;
|
|
·
|
expenses
for due diligence and investigation of prospective target businesses,
including expenses associated with the proposed Acquisition (as defined
below) and the Termination and Release Agreement (as defined
below);
|
|
·
|
legal
and accounting fees relating to our SEC reporting obligations and general
corporate matters; and
|
|
·
|
miscellaneous
expenses.
|
There is
no assurance that the Company will be able to successfully complete an Initial
Business Combination within the time frame discussed above. That
factor and the Company’s declining cash available outside of the Trust Account
raise doubts about the Company’s ability to continue as a going
concern. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty. To address
some of the Company’s liquidity needs, the Company (i) entered into the Series A
Purchase Agreement dated November 2, 2007 with Occidental, and (ii) issued a
promissory note to Occidental dated on November 2, 2007 that will cover advances
up to $3,000,000. The terms of the promissory note are also described
in Note 7 to the unaudited interim financial statements included
herein. These financing arrangements are described more fully in Note
6 to the financial statements included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2007.
We believe that we will have sufficient
funds to allow us to operate through January 30, 2009, our mandatory liquidation
date, assuming that an Initial Business Combination is not consummated before
that date. Our three officers are our only employees and at this time
they are not paid a salary nor do they receive benefits.
In the event of the need for additional
funding, we may issue additional capital stock or debt securities to finance an
Initial Business Combination. The issuance of additional capital
stock, including any convertible debt securities we may issue, or the incurrence
of debt, could have material consequences on our business and financial
condition. The issuance of additional shares of our capital stock
(including upon conversion of convertible debt securities) may:
|
·
|
significantly
reduce the equity interest of our
stockholders;
|
|
·
|
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 operating loss carry forwards, if any, and may also result in the
resignation or removal of one or more of our current officers and
directors; and
|
|
·
|
adversely
affect prevailing market prices for our Common
Stock.
|
Similarly, if we issue debt securities,
it could result in:
|
·
|
default
and foreclosure on our assets if our operating revenues after an Initial
Business Combination were insufficient to pay our debt
obligations;
|
|
·
|
acceleration
of our obligations to repay the indebtedness even if we have made all
principal and interest payments when due if the debt security contained
covenants that require the maintenance of certain financial ratios or
reserves and any such covenant were breached without a waiver or
renegotiation of that covenant;
|
|
·
|
our
immediate payment of all principal and accrued interest, if any, if the
debt security were payable on demand;
and
|
|
·
|
our
inability to obtain additional financing, if necessary, if the debt
security contained covenants restricting our ability to do
so.
|
Recent
Accounting Pronouncements
Reference
is made to Note 2 of our Financial Statements for a discussion of recently
issued accounting pronouncements that could potentially impact us.
In
December 2007, the FASB issued FASB Statement 141R, Business combinations
(Statement 141R) and FASB Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment to ARB No 51 (Statement
160). Statements 141R and 160 require most identifiable assets,
liabilities. Noncontrolling interests, and goodwill acquired in a
business combination to be recorded at fair value and require noncontrolling
interests (previously referred to as minority interests) to be reported as a
component of equity, which changes the accounting for transactions with
noncontrolling interest holders. Both Statements are effective for
periods beginning on or after December 15, 2008, and earlier adoption is
prohibited. Statement 141R will be applied to business combinations
occurring after the effective date. Statement 160 will be applied
prospectively to all noncontrolling interests, including any that arose before
the effective date. The Company is currently evaluating the impact of
adopting Statement 141R and Statement 160 on its results of operation and
financial position.
Recent
Developments
In the second quarter of 2008, from
interest earned on the funds held in the Trust Account, we did not withdraw any
funds for operating expenses, paid taxes of $235,000 and paid Morgan Stanley
fees in the amount of $84,254. As of June 30, 2008, after giving
effect to such activity, approximately $245.7 million was held in the Trust
Account. We also had $251,044 of unrestricted cash available outside
of the Trust Account to us for our activities in connection with identifying and
conducting the due diligence of a suitable Initial Business Combination, and for
general corporate matters.
On November 2, 2007, the Company and
Occidental Petroleum Investment Co. (“Occidental”), a California corporation
wholly owned by Occidental Petroleum Corporation, entered into a Series A Senior
Convertible Preferred Stock Purchase Agreement (the “Convertible Stock Purchase
Agreement”), under which Occidental will purchase, upon closing of a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or
other similar business combination in the energy business acceptable to
Occidental (a “Replacement Transaction”), shares of new Series A Convertible
Preferred Stock, par value $0.0001 per share (the “Convertible Stock”), to be
issued to it by the Company for the aggregate consideration of $35 million, plus
the amount of any advances to the Company up to $3 million (an “Advance”)
together with any accrued interest thereon. Any Advances to the
Company will be made to fund operating expenses and expenses related to a
Replacement Transaction prior to closing. As of June 30, 2008,
Occidental has advanced $2,121,845 to the Company. We have issued a
promissory note to Occidental for the full amount of any Advances, plus interest
to accrue at an annual rate of 9%, payable quarterly. The note will
mature on the earlier of (i) November 1, 2008, and (ii) closing of the sale to
Occidental of the Convertible Stock. Occidental has waived any claims against
amounts in the Trust Account.
If we consummate a Replacement
Transaction, Occidental will have the option to purchase up to three percent of
the capital stock of the surviving entity of the Replacement Transaction in
consideration for any Advances.
Critical
Accounting Policies
The preparation of financial statements
and related disclosures in conformity with generally accepted accounting
principles in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and income and expenses during the periods
reported. Actual results could materially differ from those
estimates. We have identified the following as our critical
accounting policies:
Use of estimates
The preparation of financial statements
in conformity with generally accepted accounting principles in the United States
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
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Income taxes
Deferred income taxes are provided for
the differences between the bases of assets and liabilities for financial
reporting and income tax purposes. The Company recorded a deferred
income tax asset for the tax effect of temporary differences, aggregating
$526,417. The Company’s effective tax rate was approximately 38.97%
and 39.06% for the periods ended June 30, 2008 (quarter and from inception (June
2, 2006) through June 30, 2008). Such effective tax rates differ from
the Federal Statutory rate of 34% because of the impact of state income taxes
and the reversal of previously established valuation allowances on deferred tax
assets.
To date, our efforts have been
limited to formation and organizational activities, activities relating to our
Offering, activities relating to identifying and evaluating prospective
acquisition candidates, activities relating to general corporate matters and
activities related to consummating our Initial Business Acquisition, including
the Acquisition. We have neither engaged in any operations nor generated any
revenues. As the proceeds from our Offering held in trust have been invested in
short term investments, our only market risk exposure relates to fluctuations in
interest rates.
As of
June 30, 2008, approximately $245.7 million was held in the Trust Account. The
proceeds held in trust (including approximately $7.4 million of deferred
underwriting discounts and commissions) have been invested in treasury
securities or in a money market fund that invests principally in short-term
securities issued or guaranteed by the United States of America. As of
June 30, 2008, the effective annualized interest rate payable on our
investments was approximately 1.88%. Assuming no other changes to our holdings
as of June 30, 2008, a 1% decrease in the underlying interest rate payable on
our investments as of June 30, 2008 would result in a decrease of approximately
$628,761 in the interest earned on our investments 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 have
not engaged in any hedging activities since our inception on
June 2, 2006. However, following our Initial Business Combination, we
may engage in short sales and utilize derivative instruments such as options,
futures, forward contracts, interest rate swaps, caps and floors, to hedge
against exposure to fluctuations in the price of crude oil, refined petroleum
products and other energy portfolio positions, as well as foreign currency
exchange and interest rates. Hedging transactions may not be as
effective as we intend in reducing our exposure to these fluctuations and any
resulting volatility in our cash flows, and if we incorrectly assess market
trends and risks, may result in lower overall performance than if we had not
engaged in any such hedging transactions.
Item
4T. Controls and Procedures
The
certificates of the Company's chief executive officer and principal financial
officer attached as Exhibits 31.1 and 31.2 to this Quarterly Report on Form 10-Q
include, in paragraph 4 of such certifications, information concerning the
Company's disclosure controls and procedures, and internal control over
financial reporting. Such certifications should be read in conjunction with the
information contained in this Item 4T for a more complete understanding of the
matters covered by such certifications.
Disclosure
Controls and Procedures
The Company's management, with the
participation of the Company's chief executive officer and principal financial
officer, evaluated the effectiveness of the Company's disclosure controls and
procedures as of June 30, 2008. The term "disclosure controls and procedures",
as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), means controls and other procedures of a
company that are designed to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized, and reported, within the time periods specified
in the SEC's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by a company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the company's
management, including its chief executive officer and principal financial
officer, as appropriate, to allow timely decisions to be made regarding required
disclosure. It should be noted that any system of controls and procedures,
however well designed and operated, can provide only reasonable, and not
absolute, assurance that the objectives of the system are met and that
management necessarily applies its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Based on the evaluation of the
Company's disclosure controls and procedures as of June 30, 2008, the Company's
chief executive officer and principal financial officer concluded that, as of
such date, the Company's disclosure controls and procedures were effective at
the reasonable assurance level.
Management's
Annual Report on Internal Control Over Financial Reporting
The Company's management is responsible
for establishing and maintaining adequate internal control over financial
reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. A
company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Internal control over financial
reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the Company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of
the Company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
Company's assets that could have a material effect on the interim or annual
financial statements. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may
deteriorate.
The Company's management, with the
participation of its chief executive officer and principal financial officer,
conducted an evaluation of the effectiveness of the Company's internal control
over financial reporting as of June 30, 2008 based on the framework in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on this assessment, the Company's management
concluded that, as of June 30, 2008, the Company's internal control over
financial reporting was effective based on those criteria. This
Quarterly Report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this Quarterly Report.
Changes
in Internal Control Over Financial Reporting
There were no changes to the Company's
internal control over financial reporting during the second quarter ended June
30, 2008 that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.
PART
II – OTHER INFORMATION
We are not currently subject to any
material legal proceedings, nor, to our knowledge, is any material legal
proceeding threatened against us.
There have been no material changes to
the risk factors disclosed in the Company’s Annual Report on Form 10-K, except
that the proposed Acquisition was terminated on April 3, 2008, therefore the
risk factors associated with that business combination with Kern are no longer
applicable.
There were no unregistered sales of our
equity securities during the quarter ended June 30, 2008.
Not applicable.
Not applicable.
Not ap
plic
able.
31.1
|
Certification
of Chief Executive Officer Pursuant to SEC Rule
13a-14(a)/15d-14(a)
|
31.2
|
Certification
of Principal Financial Officer Pursuant to SEC Rule
13a-14(a)/15d-14(a)
|
32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section
1350
|
32.2
|
Certification
of Principal Financial Officer Pursuant to 18 U.S.C. Section
1350
|
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused the report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
NTR
Acquisition Co.
|
|
|
|
|
Dated:
August ___, 2008
|
By:
|
/s/
Mario E. Rodriguez
|
|
|
Mario
E. Rodriguez
Chief
Executive Officer
|
|
|
|
|
|
|
Dated:
August ___, 2008
|
By:
|
/s/
William E. Hantke
|
|
|
William
E. Hantke
Principal
Financial Officer
|
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