UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
| x | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2006
| ¨ | Transition report under Section 13 or 15(d) of the Exchange Act |
For the transition period from to
Commission File Number 000-51115
Ardent Acquisition Corporation
(Exact Name of Small Business Issuer as Specified in Its Charter)
| Delaware | 20-1635240 | |
| (State or other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
1415 Kellum Place, Suite 205, Garden City, New York 11530
(Address of Principal Executive Office)
(516) 739-1017
(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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
As of November 14, 2006, 8,400,000 shares of common stock, par value $.0001 per share, were issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes ¨ No x
| Page | ||
| Part I: Financial Information: |
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| Item 1 –Financial Statements (Unaudited): |
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| 3 | ||
| 4 | ||
| 5 | ||
| 6 | ||
| 7 | ||
| Item 2 – Management’s Discussion and Analysis or Plan of Operation |
12 | |
| 14 | ||
| 16 | ||
| Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds |
16 | |
| 17 | ||
| 18 | ||
2
Ardent Acquisition Corporation
(a corporation in the development stage)
Condensed Balance Sheets
| September 30, 2006 |
December 31, 2005 | |||||
| ASSETS |
||||||
| Current assets: |
||||||
| Cash |
$ | 119,028 | $ | 541,355 | ||
| Assets held in Trust Fund (Note 1) |
38,236,986 | 37,214,871 | ||||
| Prepaid Expenses |
55,775 | 19,828 | ||||
| Taxes receivable |
51,780 | |||||
| Total current assets |
38,463,569 | 37,776,054 | ||||
| Deferred Tax Asset |
208,521 | 110,570 | ||||
| Total assets |
$ | 38,672,090 | $ | 37,886,624 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||
| Current liabilities: |
||||||
| Accounts Payable |
$ | 88,632 | $ | 2,011 | ||
| Accrued expenses |
21,275 | 133,772 | ||||
| Deferred Interest |
402,796 | 198,475 | ||||
| Taxes payable |
37,522 | — | ||||
| Notes payable to shareholders |
150,000 | — | ||||
| Total current liabilities |
700,225 | 334,258 | ||||
| Common stock, subject to possible conversion, 1,379,310 shares at conversion value (Note 2) |
7,240,778 | 7,240,778 | ||||
| Commitment (Note 4) |
||||||
| Stockholders’ equity (Notes 1, 2, 3 and 4) |
||||||
| Preferred stock, $.0001 par value, Authorized |
— | — | ||||
| 1,000,000 shares; none issued |
||||||
| Common stock, $.0001 par value |
||||||
| Authorized 30,000,000 shares |
||||||
| Issued and outstanding 8,400,000 shares |
840 | 840 | ||||
| Additional paid-in capital |
30,010,555 | 30,010,555 | ||||
| Income accumulated during the development stage |
719,692 | 300,193 | ||||
| Total stockholders’ equity |
30,731,087 | 30,311,588 | ||||
| Total liabilities and stockholders’ equity |
$ | 38,672,090 | $ | 37,886,624 | ||
See Notes to Unaudited Condensed Financial Statements.
3
Ardent Acquisition Corporation
(a corporation in the development stage)
Unaudited Condensed Statements of Operations
| For the Three Months Ended September 30, 2006 |
For the Three Months Ending September 30, 2005 |
For the Nine Months 2006 |
For the Nine Months Ending September 30, 2005 |
For the Period from September 14, 2004 | |||||||||
| Income: |
|||||||||||||
| Interest Income |
$ | 1,349 | 5,539 | 8,897 | 12,137 | 26,554 | |||||||
| Interest Income on Trust Assets |
254,030 | 242,909 | 817,794 | 520,686 | 1,612,191 | ||||||||
| Total Income |
$ | 255,379 | 248,448 | 826,691 | 532,823 | 1,638,745 | |||||||
| Expenses: |
|||||||||||||
| Professional fees |
$ | 168,117 | 38,172 | 229,299 | 52,483 | 295,247 | |||||||
| Rent and office |
22,500 | 22,500 | 67,500 | 54,375 | 144,375 | ||||||||
| State Franchise and Capital Taxes |
12,104 | 34,723 | 24,549 | 59,026 | 59,299 | ||||||||
| Insurance |
26,250 | 26,250 | 78,750 | 61,250 | 166,250 | ||||||||
| Other formation and operating costs |
14,883 | 17,650 | 65,017 | 36,278 | 110,913 | ||||||||
| Total Expenses |
$ | 243,854 | 139,295 | 465,115 | 263,412 | 776,084 | |||||||
| Income before provision for income taxes |
11,525 | 109,153 | 361,576 | 269,411 | 862,661 | ||||||||
| Provision for income taxes |
$ | (196,978 | ) | 66,315 | (57,923 | ) | 111,683 | 142,969 | |||||
| Net income/(loss) for the period |
208,503 | 42,838 | 419,499 | 157,728 | 719,692 | ||||||||
| Net income per share basic and diluted |
$ | 0.02 | 0.01 | 0.05 | 0.02 | 0.11 | |||||||
| Weighted average shares outstanding basic and diluted |
8,400,000 | 8,400,000 | 8,400,000 | 6,876,923 | 6,836,546 | ||||||||
See Notes to Unaudited Condensed Financial Statements
4
Ardent Acquisition Corporation
(a corporation in the development stage)
Statement of Stockholders’ Equity
| Common Stock | Addition paid-in capital |
(Deficit)/Income Accumulated During the Development Stage |
Total | ||||||||||||||
| Shares | Amount | ||||||||||||||||
| Sale of 1,500,000 shares of common stock to initial stockholders on September 14, 2005 at $.0167 per share |
1,500,000 | $ | 150 | $ | 24,850 | — | $ | 25,000 | |||||||||
| Net Loss for the period |
— | — | — | $ | (1,651 | ) | (1,651 | ) | |||||||||
| Balance at December 31, 2004 |
1,500,000 | $ | 150 | $ | 24,850 | $ | (1,651 | ) | $ | 23,349 | |||||||
| Sale of 6,900,000 units, net of underwriters’ discount and offering expenses (includes 1,379,310 shares subject to possible conversion) |
6,900,000 | 690 | 37,226,383 | 37,227,073 | |||||||||||||
| Proceeds subject to possible conversion of 1,379,310 shares |
— | — | (7,240,778 | ) | — | (7,240,778 | ) | ||||||||||
| Proceeds from issuance of option |
100 | 100 | |||||||||||||||
| Net income for the period |
— | — | — | 301,844 | 301,844 | ||||||||||||
| Balance, December 31, 2005 |
8,400,000 | $ | 840 | $ | 30,010,555 | $ | 300,193 | $ | 30,311,588 | ||||||||
| Unaudited: |
|||||||||||||||||
| Net income for the period |
— | — | — | 419,499 | 419,499 | ||||||||||||
| Balance, September 30, 2006 |
8,400,000 | $ | 840 | $ | 30,010,555 | $ | 719,692 | $ | 30,731,087 | ||||||||
See Notes to Unaudited Condensed Financial Statements.
5
Ardent Acquisition Corporation
(a corporation in the development stage)
Unaudited Condensed Statements of Cash Flows
| For the nine months ending September 30, 2006 |
For the nine months ending September 30, 2005 |
For the period from September 14, 2004 (inception) to September 30, 2006 |
||||||||||
| Cash flow from operating activities |
||||||||||||
| Net income |
$ | 419,499 | $ | 157,728 | $ | 719,692 | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: |
||||||||||||
| Deferred Tax Asset |
(97,951 | ) | — | (208,521 | ) | |||||||
| Accrued interest on Treasury Bills |
(1,022,115 | ) | (650,776 | ) | (2,014,986 | ) | ||||||
| (Increase) in prepaid expenses |
(35,947 | ) | (46,078 | ) | (55,775 | ) | ||||||
| (Increase) in Taxes Receivables |
(51,780 | ) | — | (51,780 | ) | |||||||
| Increase (Decrease) in accrued expenses |
(112,497 | ) | 44,415 | 21,275 | ||||||||
| Increase in deferred interest |
204,321 | 130,090 | 402,796 | |||||||||
| Increase in accounts payable |
86,621 | 11,477 | 88,632 | |||||||||
| Increase in income taxes payable |
37,522 | — | 37,522 | |||||||||
| Net cash used in operating activities |
(572,327 | ) | (353,144 | ) | (1,061,145 | ) | ||||||
| Cash Flow from Investing Activities |
||||||||||||
| Assets Placed in Trust |
— | 36,222,000 | 36,222,000 | |||||||||
| Redemption of Treasury Bill Held in Trust |
37,673,751 | — | 37,673,751 | |||||||||
| Purchase of Municipal Securities Held in Trust |
(37,673,751 | ) | — | (37,673,751 | ) | |||||||
| Net Cash Used in Investing Activities |
— | (36,222,000 | ) | (36,222,000 | ) | |||||||
| Cash flows from financing activities |
||||||||||||
| Gross Proceeds |
— | 41,400,000 | 41,400,000 | |||||||||
| Proceeds from notes, stockholders |
150,000 | — | 220,000 | |||||||||
| Payment of notes, stockholder |
— | (70,000 | ) | (70,000 | ) | |||||||
| Proceeds from sale of shares of common stock |
— | — | 25,000 | |||||||||
| Proceeds from issuance of option |
— | 100 | 100 | |||||||||
| Payment of costs of public offering |
— | (4,084,117 | ) | (4,172,927 | ) | |||||||
| Net cash provided by financing activities |
150,000 | 37,245,983 | 37,402,173 | |||||||||
| Net increase in cash |
(422,327 | ) | 670,839 | 119,029 | ||||||||
| Cash at beginning of the period |
541,355 | 6,314 | 0 | |||||||||
| Cash at the end of the period |
$ | 119,028 | $ | 677,153 | $ | 119,028 | ||||||
See Notes to Unaudited Condensed Financial Statements.
6
Ardent Acquisition Corporation
(a corporation in the development stage)
Notes to Unaudited Condensed Financial Statements
| 1. | Basis of Presentation | The financial statements at September 30, 2006 and for the periods ended September 30, 2006 and 2005 are unaudited. In the opinion of management, all adjustments (consisting of normal accruals) have been made that are necessary to present fairly the financial position of Ardent Acquisition Corporation (the “Company”) as of September 30, 2006 and 2005 and the results of its operations and its cash flow for the periods ended September 30, 2006 and 2005. Operating results for the interim period presented are not necessarily indicative of the results to be expected for a full year.
The statements and related notes have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the financial statements that were included in the Company’s Annual Report on Form 10-KSB for the period ended December 31, 2005. The December 31, 2005 balance sheet was derived from the audited financial statements.
In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” an interpretation of FASB Statement No. 109 (“FIN 48”), which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. 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 provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. The Company is currently in the process of evaluating the effect FIN 48 will have on its condensed financial condition or results of operations. | ||
| 2. | Organization and Business Operations | The Company was incorporated in September 14, 2004 as a blank check company whose objective is to acquire an operating business.
The registration statement for the Company’s initial public offering (“Offering”) was declared effective February 24, 2005. The Company consummated the offering on March 2, 2005 and received net proceeds of approximately $32,205,000 (Note 3). On March 3, 2005, the Company consummated the closing of the over-allotment option and the Company received net proceeds of approximately $5,022,000 (Note 3). The Company’s management has broad discretion with | ||
7
Ardent Acquisition Corporation
(a corporation in the development stage)
Notes to Unaudited Condensed Financial Statements
| 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”). An amount of approximately $36,222,000 of the net proceeds is being held in an interest-bearing trust account (“Trust Fund”) until the earlier of (i) the consummation of a Business Combination or (ii) liquidation of the Company. Under the agreement governing the Trust Account, funds will only be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 with 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. At September 30, 2006, the value of the Trust Account amounted to approximately $38,236,986. The excess of market value over cost, exclusive of the deferred interest described further below, is included in interest income in the accompanying statements of operations. The remaining net proceeds (not held in the Trust Fund) may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses.
The Company, after signing a definitive agreement for the acquisition of a target business, will submit such transaction for stockholder approval. In the event that stockholders owning 20% or more of the 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 1,500,000 founding shares of common stock in accordance with the vote of the majority in interest of all other stockholders of the Company (“Public Stockholders”) with respect to any Business Combination. After consummation of 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 or her shares. The per share conversion price will equal the amount in the Trust Fund as of two 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 19.99% of the aggregate | ||||
8
Ardent Acquisition Corporation
(a corporation in the development stage)
Notes to Unaudited Condensed Financial Statements
| 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 Fund computed without regard to the shares held by Initial Stockholders. Accordingly, a portion of the net proceeds from the offering (19.99% of the amount originally held in the Trust Fund) has been classified as common stock subject to possible conversion in the accompanying September 30, 2006 and December 31, 2005 balance sheets and 19.99% of the related interest earned on the Treasury Bills and Municipal Bonds has been recorded as deferred interest.
The Company’s Certificate of Incorporation provides for mandatory liquidation of the Company in the event that the Company does not consummate a Business Combination within 18 months from the date of the consummation of the Offering, or 24 months from the consummation of the Offering if certain extension criteria have been satisfied. There is no assurance that the Company will be able to successfully effect a Business Combination during this period. This factor raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements are prepared assuming the Company will continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. In the event of liquidation, it is likely that the per share value of the residual assets remaining available for distribution (including Trust Fund assets) will be less than the initial public offering price per share in the Offering (assuming no value is attributed to the Warrants contained in the Units sold in the Offering discussed in Note 3). | ||||
| 3. | Initial Public Offering | On March 2, 2005, the Company sold 6,000,000 units (“Units”) in the Offering. On March 3, 2005, the Company sold an additional 900,000 Units pursuant to the underwriters’ over-allotment option. Each Unit consists of one share of the Company’s common stock, $.0001 par value, and two Redeemable Common Stock Purchase Warrants (“Warrants”). Each Warrant will entitle the holder to purchase from the Company one share of common stock at an exercise price of $5.00 commencing the later of the completion of a Business Combination with a target business or one year from the effective date of the Offering and expiring five years from the date of the prospectus. The Warrants will be redeemable at a price of $.01 per Warrant upon 30 days’ notice after the Warrants become exercisable, only in the event that the last sale price of the common stock is at least $8.50 per share | ||
9
Ardent Acquisition Corporation
(a corporation in the development stage)
Notes to Unaudited Condensed Financial Statements
| 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. In connection with this Offering, the Company issued, for $100, an option to the representative of the underwriters to purchase 300,000 Units at an exercise price of $9.90 per Unit. In addition, the warrants underlying such Units are exercisable at $6.25 per share. | ||||
| 4. | Common Stock | On January 4, 2005, the Company’s Board of Directors authorized a stock dividend of 0.666666 shares of common stock for each outstanding share of common stock and on January 24, 2005, the Company’s Board of Directors authorized a further stock dividend of 0.2 shares of common stock for each outstanding share of common stock. All references in the accompanying financial statements to the numbers of shares have been retroactively restated to reflect these transactions.
As of September 30, 2006, 14,700,000 shares of common stock were reserved for issuance upon exercise of redeemable warrants and underwriters’ unit purchase option. | ||
| 5. | Proposed Acquisition | On October 2, 2006, the Company entered into a Stock Purchase Agreement and Letter Agreements with all of the current stockholders of Avantair, Inc. Under these agreements, the Company will acquire all of Avantair’s issued and outstanding capital stock and will change its name to “Avantair, Inc.” Avantair, a Nevada corporation, is engaged in the sale and management of fractional ownerships of professionally piloted aircraft for personal and business use. Avantair operates fixed based operations, aircraft maintenance and concierge services to customers from hangars and office locations in Clearwater, Florida and Caldwell, New Jersey. Avantair is the fifth largest company in the North American fractional aircraft industry. | ||
| Pursuant to the Stock Purchase Agreement and Letter Agreements, Avantair’s stockholders, in exchange for all of the securities of Avantair outstanding immediately prior to the closing of the acquisition, will receive from the Company 7,000,000 shares of its common stock. Immediately following the closing of the acquisition, the stockholders of Avantair will own approximately 44.8% of the Company’s total issued and outstanding common stock. 25% of the shares of the Company’s common stock being issued at the closing of the acquisition will be placed into escrow to secure its indemnity rights under the Stock Purchase Agreement and will be governed by the | ||||
10
Ardent Acquisition Corporation
(a corporation in the development stage)
Notes to Unaudited Condensed Financial Statements
| terms of an escrow agreement. The Stock Purchase Agreement also provides that Avantair’s stockholders may receive up to an additional 11,000,000 shares of the Company’s common stock, contingent upon the combined companies achieving certain financial performance criteria and stock price targets | ||||
| The Stock Purchase Agreement and Letter Agreement have been approved and adopted by the Company’s Board of Directors, but are subject to customary closing conditions, including the approval of the Company’s stockholders. In addition, the closing of the acquisition is conditioned on the holders of less than 20% of the Company’s common stock issued in its initial public offering voting against the transactions contemplated by the Stock Purchase Agreement and Letter Agreement and exercising their right to convert their shares of the Company’s common stock into cash in connection with such vote, as permitted by its Amended and Restated Certificate of Incorporation. | ||||
| Upon closing of the acquisition, the Company’s board of directors will be increased to seven members and will be comprised of four persons designated by the stockholders of Avantair and three persons designated by certain of the Company’s stockholders. Barry J. Gordon, Ardent’s Chairman, will become non-executive Chairman of the combined company. | ||||
11
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the Company’s Consolidated Financial Statements and footnotes thereto contained in this report.
Forward Looking Statements
The statements discussed in this Report include forward looking statements that involve risks and uncertainties detailed from time to time in the Company’s reports filed with the Securities and Exchange Commission.
We were formed on September 14, 2004, to serve 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.
For the three months ended September 30, 2006, we had a net profit of $208,503, attributable to interest income and unrealized gains on Trust assets offset primarily by routine operational expenses such as rent, insurance, and professional fees.
For the three months ended September 30, 2005, we had a net profit of $42,838, attributable to interest income and unrealized gains on Trust assets offset primarily by routine operational expenses such as rent, insurance, and professional fees.
For the nine months ended September 30, 2006, we had a net profit of $419,499, attributable to interest income and unrealized gains on Trust assets offset primarily by routine operational expenses such as rent, insurance, and professional fees.
For the nine months ended September 30, 2005, we had a net profit of $157,728, attributable to interest income and unrealized gains on Trust assets offset primarily by routine operational expenses such as rent, insurance, and professional fees.
For the period from September 14, 2004 (inception) through September 30, 2006, we had a net profit of $719,692, attributable to interest income and unrealized gains on Trust assets offset primarily by routine operational expenses such as rent, insurance, and professional fees.
We consummated our initial public offering on March 2, 2005. On March 4, 2005, we closed on an additional 900,000 units that were subject to the underwriters’ over-allotment option. Gross proceeds from our initial public offering were $41,400,000. We paid a total of $2,898,000 in underwriting discounts and commissions, and approximately $1,277,000 was or will be paid for costs and expenses related to the offering, including $720,000 for the underwriters’ non-accountable expense allowance of 2% of the gross proceeds. After deducting the underwriting discounts and commissions and the offering expenses, the total net proceeds to us from the offering were approximately $37,227,000, of which $36,222,000 was deposited into the trust account (or $5.25 per share sold in the offering). The remaining proceeds are available to be used by us to provide for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. We will use substantially all of the net proceeds of this offering to acquire a target business, including identifying and evaluating prospective acquisition candidates, selecting the target business, and structuring, negotiating and consummating the business combination. To the extent that our capital stock is used in whole or in part as consideration to effect a business combination, the proceeds held in the trust fund as well as any other net proceeds not expended will be used to finance the operations of the target business. We believe we will have sufficient available funds outside of the trust fund
12
to operate through March 2, 2007, assuming that a business combination is not consummated during that time. From March 2, 2005 through March 2, 2007, we anticipate approximately $180,000 for the administrative fee payable to American Fund Advisors ($7,500 per month for two years), $150,000 of expenses for legal, accounting and other expenses attendant to the due diligence investigations, structuring and negotiating of a business combination, $50,000 of expenses for the due diligence and investigation of a target business, $40,000 of expenses in legal and accounting fees relating to our SEC reporting obligations and $585,000 for general working capital that will be used for miscellaneous expenses and reserves, including approximately $210,000 for director and officer liability insurance premiums. We do not believe we will need to raise additional funds following this offering in order to meet the expenditures required for operating our business. However, we may need to raise additional funds through a private offering of debt or equity securities if such funds are required to consummate a business combination that is presented to us. We would only consummate such a financing simultaneously with the consummation of a business combination.
On October 2, 2006, we entered into a Stock Purchase Agreement and Letter Agreements with all of the current stockholders of Avantair, Inc. Under these agreements, we will acquire all of Avantair’s issued and outstanding capital stock and will change our name to “Avantair, Inc.” Avantair, a Nevada corporation, is engaged in the sale and management of fractional ownerships of professionally piloted aircraft for personal and business use. Avantair operates fixed based operations, aircraft maintenance and concierge services to customers from hangars and office locations in Clearwater, Florida and Caldwell, New Jersey. Avantair is the fifth largest company in the North American fractional aircraft industry.
Pursuant to the Stock Purchase Agreement and Letter Agreements, Avantair’s stockholders, in exchange for all of the securities of Avantair outstanding immediately prior to the closing of the acquisition, will receive from us 7,000,000 shares of our common stock. Immediately following the closing of the acquisition, the stockholders of Avantair will own approximately 44.8% of our total issued and outstanding common stock. 25% of the shares of our common stock being issued at the closing of the acquisition will be placed into escrow to secure our indemnity rights under the Stock Purchase Agreement and will be governed by the terms of an escrow agreement. The Stock Purchase Agreement also provides that Avantair’s stockholders may receive up to an additional 11,000,000 shares of our common stock, contingent upon the combined companies achieving certain financial performance criteria and stock price targets
The Stock Purchase Agreement and Letter Agreement have been approved and adopted by our Board of Directors, but are subject to customary closing conditions, including the approval of our stockholders. In addition, the closing of the acquisition is conditioned on the holders of less than 20% of our common stock issued in our initial public offering voting against the transactions contemplated by the Stock Purchase Agreement and Letter Agreement and exercising their right to convert their shares of our common stock into cash in connection with such vote, as permitted by our Amended and Restated Certificate of Incorporation.
Upon closing of the acquisition, our board of directors will be increased to seven members and will be comprised of four persons designated by the stockholders of Avantair and three persons designated by certain of our stockholders. Barry J. Gordon, our Chairman, will become non-executive Chairman of the combined company.
In connection with a separate (but related) transaction, Avantair entered into an Investors Rights Agreement (to which we are not a party) under which Avantair agreed with certain of its stockholders to cause us to file a “shelf” registration statement within 60 days following the closing of the acquisition with respect to approximately 46% of the shares of our common stock issued to certain of Avantair’s stockholders at the closing of the acquisition, and to file additional “shelf” registration statements within 60 days following the issuance of the contingent purchase price payments described above.
13
In addition, we entered into a Loan Agreement by and among Avantair, CNM, Inc. and us. Under the Loan Agreement, CNM loaned to Avantair an additional $7,600,000 under the terms of a Revolving Credit Agreement, dated May 31, 2005 between Avantair and CNM. Pursuant to the Loan Agreement, within 7 days following the closing of the acquisition, Avantair (or we) will repay to CNM no less than $15,000,000, which amount shall repay the loan (plus all accrued and unpaid interest) and a portion of the outstanding balance owed to CNM under the Revolving Credit Agreement such that the aggregate outstanding amount owed to CNM shall not exceed $10,000,000. Following this payment, the remaining outstanding balance owed to CNM under the Revolving Credit Agreement will be converted into a term loan, repayable by us in 12 equal quarterly installments and accruing interest at the rate of 10% per annum. Our obligations under the Loan Agreement are conditioned upon the occurrence of the Closing.
For a more complete discussion of Avantair and our proposed business combination, including the risks that are applicable to us with respect to our acquisition of Avantair, see our Current Report on Form 8-K dated October 3, 2006 and filed with the SEC on the same date, and our Preliminary Proxy Statement for our Special Meeting of Stockholders filed with the SEC on November 6, 2006.
We expect that the transaction will be consummated in the first quarter of 2007, after the required approval by our stockholders. However, if we do not complete the business combination by March 2, 2007, we will be forced to dissolve and liquidate.
Commencing on February 24, 2005 and ending upon the acquisition of a target business, we incur a fee from American Fund Advisors, an affiliate of Barry J. Gordon, our chairman of the board and chief executive officer, Marc H. Klee, our president, chief financial officer and secretary, and Alan J. Loewenstein, our vice president, of $7,500 per month for providing us with office space and certain office and secretarial services. In addition, in September 2004 and January 2005, Barry J. Gordon advanced an aggregate of $77,500 to us for payment on our behalf of offering expenses. These loans were repaid following our initial public offering from the proceeds of the offering.
In August and September 2006, our initial stockholders lent us a total of $150,000 to be used to cover some of the expenses which we have incurred to date. It is anticipated that additional loans will be necessary prior to the closing of the acquisition, at which time those loans would come due. The loans do not carry any associated interest charge.
ITEM 3. 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 treasurer, 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 financial officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2006. 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,
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our chief executive officer and chief financial 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.
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OTHER INFORMATION
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Risk Associated With Our Business” in our Annual Report on Form 10-KSB for the year ended December 31, 2005, filed with the Securities and Exchange Commission on April 11, 2006, which could materially affect our business, financial condition or future results. Other than as indicated below, there have been no material changes to the risk factors described in our Form 10-KSB:
An effective registration statement may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise his, her or its warrants and causing such warrants to be practically worthless.
No warrant will be exercisable and we will not be obligated to issue shares of our common stock unless at the time a holder seeks to exercise such warrant, a prospectus relating to the common stock issuable upon exercise of the warrant is current and the common stock has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. Under the terms of the warrant agreement, we have agreed to use our best efforts to meet these conditions and to maintain a current prospectus relating to the common stock issuable upon exercise of the warrants until the expiration of the warrants. However, we cannot assure you that we will be able to do so, and if we do not maintain a current prospectus related to the common stock issuable upon exercise of the warrants, holders will be unable to exercise their warrants and we will not be required to settle any such warrant exercise. If the prospectus relating to the common stock issuable upon the exercise of the warrants is not current or if the common stock is not qualified or exempt from qualification in the jurisdictions in which the holders of the warrants reside, the warrants may have no value, the market for the warrants may be limited and the warrants may expire worthless.
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On March 2, 2005, we consummated our initial public offering of 6,000,000 Units, with each unit consisting of one share of our common stock and two warrants, each to purchase one share of our common stock at an exercise price of $5.00 per share. On March 4, 2005, we closed on an additional 900,000 units that were subject to the underwriters’ over-allotment option. The units were sold at an offering price of $6.00 per unit, generating total gross proceeds of $41,400,000. The managing underwriter in the offering was EarlyBirdCapital, Inc. The securities sold in the offering were registered under the Securities Act of 1933 on a registration statement on Form S-1 (No. 333-121028). The Securities and Exchange Commission declared the registration statement effective on February 24, 2005.
We paid a total of $2,898,000 in underwriting discounts and commissions, and approximately $1,275,000 has been or will be paid for costs and expenses related to the offering, including $720,000 for the underwriters’ non-accountable expense allowance of 2% of the gross proceeds (excluding the over-allotment option).
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After deducting the underwriting discounts and commissions and the offering expenses, the total net proceeds to us from the offering were approximately $37,227,000, of which $36,222,000 was deposited into a trust fund (or $5.25 per share sold in the offering) and the remaining proceeds are available to be used to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses.
For a description of the use of the proceeds generated in our initial public offering, see Part I, Item 2 of this Form 10-QSB.
| (a) | Exhibits: |
31.1 – Section 302 Certification by CEO
31.2 – Section 302 Certification by CFO
32.1 – Section 906 Certification by CEO
32.2 – Section 906 Certification by CFO
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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.
| ARDENT ACQUISITION CORPORATION | ||
| Dated: November 14, 2006 | ||
| /s/ Barry J. Gordon | ||
| Barry J. Gordon | ||
| Chairman of the Board and Chief Executive Officer | ||
| /s/ Marc H. Klee | ||
| Marc H. Klee | ||
| President and Chief Financial Officer | ||
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