UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 2004
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[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _____________ to _____________
Commission File Number 000-50781
Arpeggio Acquisition Corporation
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 20-0953973
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(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10 East 53rd Street, 36th Floor, New York, New York 10022
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(Address of Principal Executive Office)
(212) 319-7676
(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 [ ]
No [X]
As of August 11, 2004, 8,300,000 shares of common stock, par value $.0001
per share, were issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
Page
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Part I: Financial Information:
Item 1 -Financial Statements 3
Item 2 - Management's Discussion and Analysis or Plan of Operation 3
Item 3 - Controls and Procedures 4
Part II. Other Information
Item 2 - Changes in Securities and Small Business Issuer Purchases
of Equity Securities 5
Item 5 - Other Information 5
Item 6 - Exhibits and Reports on Form 8-K 5
Signatures
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Our financial statements included as Exhibit 99.1 to our Current Report
on Form 8-K filed with the Securities and Exchange Commission on June 30, 2004
are incorporated herein by reference and included as an exhibit to this report.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the
financial statements and footnotes thereto incorporated by reference 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
our reports filed with the Securities and Exchange Commission.
PLAN OF OPERATIONS
We were formed on April 2, 2004 to serve as a vehicle to effect a
merger, capital stock exchange, asset acquisition or other similar business
combination with a company in the United States or Canada. We intend to utilize
cash derived from the proceeds of our recently completed public offering, our
capital stock, debt or a combination of cash, capital stock and debt, in
effecting a business combination.
On June 30, 2004, we closed our initial public offering of 6,800,000
Units, including 800,000 Units issued upon exercise of the underwriters'
over-allotment option, with each Unit consisting of one share of our common
stock and two warrants, each to purchase one share of our common stock at an
exercise price of $5.00 per share. The Units were sold at an offering price of
$6.00 per Unit, generating gross proceeds of $40,800,000. The representative of
the underwriters in the offering was EarlyBirdCapital, Inc. The securities sold
in the offering were registered under the Securities Act of 1933 on a
registration statement on Form S-1 (No. 333-114816). The Securities and Exchange
Commission declared the registration statement effective on June 24, 2004.
We paid a total of $2,448,000 in underwriting discounts and
commissions, and approximately $1,580,000 has been paid for costs and expenses
related to the offering, including $1,080,000 for the underwriters'
non-accountable expense allowance of 3% of the gross proceeds.
After deducting the underwriting discounts and commissions and the
offering expenses, the total net proceeds to us from the offering were
$36,772,000, of which $35,352,000 was deposited into a trust fund and the
remaining proceeds are available to be used to provide for business, legal and
accounting due diligence on prospective business combinations and continuing
general and administrative expenses. Net loss of approximately $3,500 reported
for the period consists solely of costs associated with our formation.
We will use substantially all of the net proceeds of our offering to
acquire a target business, including identifying and evaluating prospective
acquisition candidates, selecting the target business, and structuring,
negotiating and consummating the business combination. To the extent that our
capital stock is used in whole or in part as consideration to effect a business
combination, the proceeds held in the trust fund as well as any other net
proceeds not expended will be used to finance the operations of the target
business. We believe that we have sufficient available funds outside of the
trust fund to operate through June 30,
3
2006, assuming that a business combination is not consummated during that time.
Over this time period, we anticipate approximately $180,000 of expenses for
legal, accounting and other expenses related to the due diligence
investigations, structuring and negotiating of a business combination, $180,000
for the administrative fee payable to Crescendo Advisors II LLC ($7,500 per
month for two years), $150,000 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 $870,000 for general working
capital that will be used for miscellaneous expenses and reserves, including
approximately $115,000 for director and officer liability insurance premiums. We
do not believe we will need to raise additional funds following this offering in
order to meet the expenditures required for operating our business. However, we
may need to raise additional funds through a private offering of debt or equity
securities if such funds are required to consummate a business combination that
is presented to us. We would only consummate such a fund raising simultaneously
with the consummation of a business combination.
We are obligated, commencing June 24, 2004, to pay to Crescendo
Advisors II LLC, an affiliate of Eric S. Rosenfeld, our chairman of the board,
chief executive officer and president, a monthly fee of $7,500 for general and
administrative services. In addition, in April and May 2004, Mr. Rosenfeld
advanced an aggregate of $77,500 to us, on a non-interest bearing basis, for
payment of offering expenses on our behalf. These amounts were repaid in July
2004 out of the proceeds of our initial public offering.
ITEM 3. CONTROLS AND PROCEDURES.
An evaluation of the effectiveness of our disclosure controls and
procedures as of June 30, 2004 was made under the supervision and with the
participation of our management, including our chief executive officer and chief
financial officer. Based on that evaluation, they concluded that our disclosure
controls and procedures are effective as of the end of the period covered by
this report to ensure that information required to be disclosed by us in reports
that we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. During the most recently
completed fiscal quarter, there has been no significant change in our internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
4
PART II.
OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
SECURITIES
On June 30, 2004, we closed our initial public offering of 6,800,000
Units, including 800,000 Units issued upon exercise of the underwriters'
over-allotment option, with each Unit consisting of one share of our common
stock and two warrants, each to purchase one share of our common stock at an
exercise price of $5.00 per share. The Units were sold at an offering price of
$6.00 per Unit, generating gross proceeds of $40,800,000. The representative of
the underwriters in the offering was EarlyBirdCapital, Inc. The securities sold
in the offering were registered under the Securities Act of 1933 on a
registration statement on Form S-1 (No. 333-114816). The Securities and Exchange
Commission declared the registration statement effective on June 24, 2004.
We paid a total of $2,448,000 in underwriting discounts and
commissions, and approximately $1,580,000 has been paid for costs and expenses
related to the offering, including $1,080,000 for the underwriters'
non-accountable expense allowance of 3% of the gross proceeds.
After deducting the underwriting discounts and commissions and the
offering expenses, the total net proceeds to us from the offering were
$36,772,000, of which $35,352,000 was deposited into a trust fund and the
remaining proceeds are available to be used to provide for business, legal and
accounting due diligence on prospective business combinations and continuing
general and administrative expenses.
ITEM 5: OTHER INFORMATION
In July 2004, our board of directors adopted a code of ethics that
applies to our directors, officers and employees as well as those of our
subsidiaries. A copy of our code of ethics has been filed as an exhibit to this
Quarterly Report on Form 10-QSB.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
14 - Code of Ethics
31.1 - Section 302 Certification by CEO
31.2 - Section 302 Certification by CFO
32.1 - Section 906 Certification by CEO
32.2 - Section 906 Certification by CFO
99.1 - Audited Financial Statements for the periods from April
2, 2004 (inception) to June 30, 2004 and April 2, 2004
(Inception) to April 21, 2004
(b) Reports on Form 8-K:
5
Date Items Financial Statements
June 30, 2004 5, 7 Audited Financial Statements for
the periods from April 2, 2004
(inception) to June 30, 2004 and
April 2, 2004 (Inception) to
April 21, 2004
6
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ARPEGGIO ACQUISITION CORPORATION
Dated: August 11, 2004
/s/ Eric S. Rosenfeld
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Eric S. Rosenfeld
Chairman of the Board, Chief Executive Officer
and President
/s/ Arnaud Ajdler
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Arnaud Ajdler
Chief Financial Office and Secretary