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| TVH > SEC Filings for TVH > Form 10-K on 16-Jun-2008 | All Recent SEC Filings |
16-Jun-2008
Annual Report
Overview
We were formed under the laws of the State of Delaware on July 8, 2005 to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an
operating business in the entertainment, media and communications industries. We intend to utilize cash derived from the proceeds of our initial public offering, our capital stock, debt or a combination of cash, capital stock and debt, in effecting a business combination.
On March 14, 2007, we completed our initial public offering of 10,800,000 units at $8.00 per unit. Simultaneously with the consummation of the initial public offering we sold an aggregate of 2,700,000 warrants to certain existing shareholders (Messrs. Granath, Seslowsky, Maggin and Clauser and The Hearst Corporation) and one of their affiliates, Transmedia Corporation, at a price of $1.00 per warrant, for an aggregate price of $2,700,000. On March 23, 2007, we sold an additional aggregate 1,620,000 units pursuant to the underwriters' over-allotment option of the initial public offering. The total gross proceeds from the initial public offering, excluding the warrants sold on a private placement basis but including the over-allotment, amounted to $99,360,000. After the payment of offering expenses, the net proceeds to us amounted to $93,797,247. Each unit consists of one share of the Company's common stock, $.0001 par value, and one redeemable common stock purchase warrant. Each warrant entitles the holder to purchase from us one share of common stock at an exercise price of $5.00 commencing the later of the completion of an initial business combination or one year from the effective date of the initial public offering (March 9, 2008) and expiring four years from the effective date of the initial public offering (March 9, 2011). The warrants will be redeemable by us, at a price of $.01 per warrant upon 30 days' notice after the warrants become exercisable, only in the event that the last sale price of the common stock is at least $11.50 per share for any 20 trading days within a 30 trading day period ending on the third day prior to the date on which notice of redemption is given.
In connection with our initial public offering, we issued an option, for $100, to the representatives of the underwriters in our initial public offering, to purchase 540,000 units. The units issuable upon exercise of this option are identical to those offered in our initial public offering, except that each of the warrants underlying this option entitles the holder to purchase one share of common stock at a price of $7.50. This option is exercisable at $10.00 per unit commencing on the later of the consummation of a business combination and March 9, 2008 which is one year from the date of the prospectus and expiring on March 9, 2012 which is five years from the date of the prospectus. The option may only be exercised or converted by the option holder. In no event will we be required to net cash settle this option or the underlying warrants. We have accounted for the fair value of the option, inclusive of the receipt of the $100 cash payment, as an expense of the public offering resulting in a charge directly to stockholders' equity. We estimate that the fair value of this option is approximately $1,869,815 ($3.46 per unit) using a Black-Scholes option-pricing model. The fair value of the option granted to the representatives is estimated as of the date of grant using the following assumptions: (1) expected volatility of 50.3%, (2) risk-free interest rate of 5.00% and (3) expected life of five years and a dividend rate of zero. The option may be exercised for cash or on a "cashless" basis at the holder's option, such that the holder may use the appreciated value of the option (the difference between the exercise prices of the option and the underlying warrants and the market price of the units and underlying securities) to exercise the option without the payment of any cash.
The volatility calculation of 50.3% is based on the five-year average volatility of a representative sample of five (5) companies that our management believes are representative of the media and entertainment industry (the "sample companies"). Because we do not have a trading history, we needed to estimate the potential volatility of its common stock price, which will depend on a number of factors which cannot be ascertained at this time. We referred to the five-year average volatility of the sample companies because management believes that the average volatility of such companies is a reasonable benchmark to use in estimating the expected volatility of our common stock post-business combination. Although an expected life of five years was taken into account for purposes of assigning a fair value to the option, if the Company does not consummate a business combination within the prescribed time period and liquidates, the option would become worthless.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date, other than in connection with our initial public offering. Our entire activity since inception has been to prepare for and consummate our initial public offering and to identify and investigate targets for a potential business combination. We will not generate any operating revenues until consummation of a business combination. We will generate non-operating income in the form of interest income on cash and cash equivalents from the funds held in our trust account which we invested mainly in U.S. Treasury Bills.
For the period from July 8, 2005 (inception) to March 31, 2006, we had a net loss of $56,249 consisting of $56,249 of general, selling and administrative expense. The main components of the $56,249 of general, selling and administrative expenses included approximately $32,000 of stock compensation expense relating to the stock options granted to our independent directors, approximately $16,000 of travel expense, approximately $5,000 of accounting fees, and approximately $2,000 of printing and reproduction expense.
For the year ended March 31, 2007, we had a net loss of $26,249 consisting of approximately $184,000 of interest income on the trust fund offset by approximately $200,000 of general, selling and administrative expense. The main components of the $200,000 of general, selling and administrative expenses included approximately $100,000 of stock compensation expense relating to the stock options granted to our independent directors, approximately $85,000 for professional fees, approximately $11,000 of travel expenses, and approximately $3,000 of directors and officers' liability insurance.
For the year ended March 31, 2008, we had net income (loss) of $1,973,560 consisting of approximately $3,865,426 of interest income on the trust fund offset by approximately $803,517 of general, selling and administrative expense. The main components of the $803,517 of general, selling and administrative expenses included approximately $83,000 of stock compensation expense relating to the stock options granted to our independent directors, approximately $400,000 for professional fees, approximately $50,000 of travel expenses, and approximately $50,000 of directors and officers' liability insurance.
Interest income in fiscal 2007 was earned on the net proceeds from our initial public offering which was placed in a trust account.
Interest income in fiscal 2008 was earned on the net proceeds from our initial public offering which was placed in a trust account.
General, selling and administrative expense incurred in fiscal 2007 was approximately $143,000 higher than general, selling and administrative expenses during fiscal 2006. This increase was partially attributable to a full 12 month period of operations during 2007, as compared to approximately only 9 months during 2006. The Company incurred stock compensation expense relating to the stock options granted to our independent directors of approximately $67,000 more in fiscal 2007 as well as approximately $80,000 more in professional fees associated with the various SEC filings necessary due to our initial public offering.
General, selling and administrative expense incurred in fiscal 2008 was approximately $600,000 higher than general, selling and administrative expenses during fiscal 2007. This increase was partially
attributable to large increases in travel, insurance, professional fees, and Delaware franchise tax. The Company incurred stock compensation expense relating to the stock options granted to our independent directors of approximately $16,000 less in fiscal 2008 as well as approximately $310,000 more in professional fees associated with the various SEC filings necessary following our initial public offering.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet financing arrangements and have never established any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations, purchase obligations or other long-term liabilities.
Liquidity and Capital Resources
$96,618,800 of the net proceeds of our initial public offering, over-allotment exercise, private sale of warrants, and a portion of the underwriters' discounts and expense allowance were deposited in trust, with the remaining net proceeds being placed in our operating account. We plan to use the interest income earned on the trust proceeds (up to a maximum of $1,800,000) to identify, evaluate and negotiate with prospective acquisition candidates as well as cover our ongoing operating expenses until a transaction is approved by our shareholders or the trust funds are returned to them.
We intend to utilize our cash, including the funds held in the trust fund, capital stock, debt or a combination of the foregoing to effect a business combination. To the extent that our capital stock or debt securities are used in whole or in part as consideration to effect a business combination, the proceeds held in the trust fund as well as any other available cash will be used to finance the operations of the target business. At March 31, 2008, we had cash outside of the trust fund of $1,107,519 and other current assets of $1,125,782 and total liabilities of $1,204,753. Our working capital amounted to $1,028,548.
Our certificate of incorporation requires that we take all actions necessary to liquidate in the event that we do not consummate a business combination within 18 months from the date of the consummation of our initial public offering (September 14, 2008), or 24 months from the consummation of our initial public offering (March 14, 2009) if certain criteria have been satisfied. In the event of a liquidation, it is likely that the per share value of the residual assets remaining available for distribution (including assets deposited in the trust fund) will be less than the offering price per unit in our initial public offering due to costs related to the initial public offering and since no value would be attributed to the warrants contained in the units sold.
Recently Issued Accounting Pronouncements and Their Effect on the Company's Financial Statements
In September 2006, the Financial Accounting Standards Board (''FASB'') issued SFAS No. 157 (''SFAS 157''), ''Fair Value Measurements.'' Among other requirements, SFAS 157 defines fair value and establishes a framework for measuring fair value and also expands disclosure about the use of fair value to measure asset and liabilities. SFAS 157 is effective beginning the first fiscal year that begins
after November 15, 2007. The Company is currently evaluating the potential effect that the adoption of SFAS 157 will have on its financial statements.
In December 2007, the FASB issued FASB Staff Position (FSP) 157-2, "Effective Date of FASB Statement No. 157," that would permit a one-year deferral in applying the measurement provisions of Statement No. 157 to non-financial assets and non-financial liabilities (non-financial items) that are not recognized or disclosed at fair value in an entity's financial statements on a recurring basis (at least annually). Therefore, if the change in fair value of a non-financial item is not required to be recognized or disclosed in the financial statements on an annual basis or more frequently, the effective date of application of Statement 157 to that item is deferred until fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. The Company is currently evaluating the potential effect that the adoption of FSP 157-2 will have on its financial statements.
In February 2007, the FASB issued SFAS No. 159 ("SFAS 159") ''The Fair Value Opinion for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115'' which permits entities to choose to measure many financial instruments and certain other items at fair value. The fair value option established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. Adoption is required for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS 159. The Company is currently evaluating the potential effect that the adoption of SFAS 159 will have on its financial statements.
In December 2007, the Financial Accounting Standards Board (''FASB'') issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations (''SFAS 141(R)''). SFAS 141(R) changes accounting for acquisitions that close beginning in 2009 in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, IPR&D and restructuring costs. More transactions and events will qualify as business combinations and will be accounted for at fair value under the new standard. SFAS 141(R) promotes greater use of fair values in financial reporting. In addition, under SFAS 141(R), changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will impact income tax expense. Some of the changes will introduce more volatility into earnings. SFAS 141(R) is effective for fiscal years beginning on or after December 15, 2008. SFAS 141(R) will have an impact on accounting for any business acquired after the effective date of this pronouncement.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (''SFAS 160''). SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests (NCI) and classified as a component of equity. This new consolidation method will significantly change the accounting for transactions with minority interest holders. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the potential effect that the adoption of SFAS 160 will have on its financial statements.
In December 2007, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 110 ("SAB 110"). SAB 110 amends and replaces Question 6 of Section D.2 of Topic 14, Share-Based Payment of the Staff Accounting Bulletin series. Question 6 of Section D.2 of Topic 14 expresses the views of the staff regarding the use of the "simplified" method in developing an estimate of the expected term of "plain vanilla" share options and allows usage of that method for option grants prior to December 31, 2007. SAB 110 allows public companies which do not have sufficient historical experience
to provide a reasonable estimate to continue the use of this method for estimating the expected term of "plain vanilla" share option grants after December 31, 2007. The adoption of this pronouncement by the Company in fiscal 2008 has not had an effect on its financial statements.
In February 2008, the FASB issued Staff Position No. FAS 140-3, "Accounting for Transfers of Financial Assets and Repurchase Financing Transactions," which provides guidance on accounting for a transfer of a financial asset and a repurchase financing. This accounting guidance presumes that an initial transfer of a financial asset and a repurchase financing are considered part of the same arrangement (linked transaction) under SFAS No. 140. However, if certain criteria are met, the initial transfer and repurchase financing shall be evaluated separately under SFAS No. 140. Staff Position No. FAS 140-3 will be effective for financial statements issued for fiscal years beginning after November 15, 2008, and for interim periods within those fiscal years. Early adoption is prohibited. The Company is currently evaluating the potential effect that the adoption of FAS 140-3 will have on its financial statements.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133," ("SFAS 161") as amended and interpreted, which requires enhanced disclosures about an entity's derivative and hedging activities and thereby improves the transparency of financial reporting. Disclosing the fair values of derivative instruments and their gains and losses in a tabular format provides a more complete picture of the location in an entity's financial statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early adoption is permitted, but not expected. The company is currently evaluating the potential effect that the adoption of SFAS 161 will have on its financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
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