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| IDI > SEC Filings for IDI > Form 10-Q on 10-Nov-2008 | All Recent SEC Filings |
10-Nov-2008
Quarterly Report
The following discussion is intended to help the reader understand the
results of operations, financial condition, and cash flows of the Company. This
discussion is provided as a supplement to, and should be read in conjunction
with, our financial statements and the accompanying notes to the financial
statements.
Special Note About Forward-Looking Statements
Certain statements under Management's Discussion and Analysis of "Financial
Conditions and Results of Operations," other than purely historical information,
including estimates, projections, statements relating to our business plans,
objectives and expected operating results, and the assumptions upon which those
statements are based, are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements generally are identified
by the words "believe," "project," "expect," "anticipate," "estimate," "intend,"
"strategy," "plan," "may," "should," "will," "would," "will be," "will
continue," "will likely result," and similar expressions. Forward-looking
statements are based on current expectations and assumptions that are subject to
risks and uncertainties which may cause actual results to differ materially from
the forward-looking statements. A detailed discussion of risks and uncertainties
that could cause actual results and events to differ materially from such
forward-looking statements is included in our filings with the Securities and
Exchange Commission. We undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events, or otherwise.
Overview
References to "we," "us" or the "Company" are to Ideation Acquisition Corp.
We are a blank check company organized under the laws of the State of
Delaware on June 1, 2007. We were formed for the purpose of acquiring, through a
merger, capital stock exchange, asset acquisition or other similar business
combination, one or more businesses. While our efforts in identifying
prospective target businesses will not be limited to a particular industry, we
expect to focus on businesses in the digital media sector, which encompasses
companies that emphasize the use of digital technology to create, distribute or
service others that create or distribute content for various platforms including
online, mobile, satellite, television, cable, radio, print, film, video games
and software. Digital technology refers to the use of digitally-enabled means,
as opposed to analog means, to process, transmit, store or display content. We
may also focus on traditional media businesses, including motion picture
exhibition companies, television and radio broadcast companies, print media
publishing companies and traditional content libraries, if we believe that the
incorporation of digital technology will enhance and accelerate the growth of
those businesses. We have not established specific criteria that would trigger
our consideration of businesses outside of the digital media sector. In
addition, we intend to direct our search toward digital media businesses in the
United States, but we would also consider businesses outside of the United
States.
On November 26, 2007, we completed our initial public offering of 10,000,000
units ("IPO"), each unit consisting of one share of common stock, par value
$0.0001 per share, and one warrant exercisable for an additional share of common
stock (a "Warrant") at a price of $8.00 per unit.
Each Warrant entitles the holder to purchase one share of our common stock at
a price of $6.00 exercisable on the later of our consummation of a business
combination or November 19, 2008, provided in each case that there is an
effective registration statement covering the shares of common stock underlying
the warrants in effect. The Warrants expire on November 19, 2011, unless earlier
redeemed. Additionally, our initial stockholders purchased an aggregate of
2,400,000 warrants at a price of $1.00 per warrant ($2.4 million in the
aggregate) in a private placement transaction (the "Private Placement") that
occurred immediately prior to our IPO. Upon the closing of our IPO, on
November 26, 2007, we sold and issued an option for $100 to purchase up to
500,000 units, at an exercise price of $7.00 per unit, to the representatives of
the underwriters in our IPO.
We received net proceeds of approximately $79.1 million from the IPO and the
Private Placement. Of those net proceeds, approximately $2.73 million is
attributable to the portion of the underwriters' discount which has been
deferred until our consummation of a business combination. Of these net
proceeds, $78.8 million was deposited into a trust account (the "Trust Account")
maintained at Continental Stock Transfer & Trust Company (the "Trustee") and
will be held in trust and not released until the earlier to occur of (i) the
completion of a business combination or (ii) our liquidation, in which case such
proceeds will be distributed to our public stockholders.
Results of Operation
We have not generated any revenues from operations to date. Our entire
activity since inception has been to prepare for and consummate our initial
public offering and to identify and investigate targets for a business
combination. We will not generate any operating revenue until consummation of a
business combination. We will generate non-operating income in the form of
interest income on cash and cash equivalent.
Net income attributable to common stockholders' for the period from June 1,
2007 (inception) to September 30, 2008, was approximately $735,000, which
consisted of $1,861,000 in interest income partially offset by $747,000 in
formation and operating expenses and $379,000 in income taxes.
Net income attributable to common stockholders' for the three months ended
September 30, 2008 was approximately $87,000 which consisted of approximately
$396,000 in interest income partially offset by $360,000 in formation and
operating expenses and a credit of $51,000 in income taxes due to a receivable
from the estimated payments made to a state for which taxes will not be due. Net
income attributable to common stockholders' for the nine months ended
September 30, 2008 was approximately $591,000 which consisted of $1,520,000 in
interest income partially offset by $646,000 in formation and operating expenses
and $283,000 in income taxes. We will pay any taxes resulting from interest
accrued on the funds held in the Trust Account out of the funds held in the
Trust Account.
Liquidity and Capital Resources
Approximately $78.8 million of the net proceeds of our IPO and Private
Placement, and a portion of the underwriters' discounts and expense allowance
were deposited in the Trust Account, 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 $1.7 million) 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
assets held in the Trust Account is returned to them.
We intend to utilize our cash, including the funds held in the Trust Account,
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 Account as well as any other available cash will be used for
general corporate purposes, including for maintenance or expansion of operations
of the acquired business or businesses, the payment of principal or interest due
on indebtedness incurred in consummating our initial business combination, to
find the purchase of other companies, or for working capital.
At September 30, 2008, we had cash outside of the Trust Account of
approximately $483,000, cash held in the Trust Account of approximately
$78,815,000, accrued interest income and other current assets of approximately
$400,000 and total current liabilities of $225,000. We believe that the funds
available to us outside of the Trust Account will be sufficient to allow us to
operate for the next twelve months (beginning October 1, 2008).
At our instructions, on February 13, 2008, April 8, 2008, June 6, 2008,
September 3, 2008 and October 22, 1008, the Trustee transferred $300,000,
$400,000, $400,000, $400,000 and $350,000 respectively, of interest earned on
the Trust Account into our operating cash account for the purposes of paying
taxes on the aggregate amount of interest earned on the funds held in the Trust
Account and to cover our operating expenses.
We do not believe we will need to raise additional funds 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 and/or equity securities if
such funds were required to consummate a business combination. Subject to
compliance with applicable securities laws, we would only consummate such
financing simultaneously with the consummation of a business combination.
Recent Accounting Pronouncements
In December 2007, the FASB issued SFAS 141(R), "Business Combinations". SFAS
141(R) provides companies with principles and requirements on how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, liabilities assumed, and any non-controlling interest in the acquiree
as well as the recognition and measurement of goodwill acquired in a business
combination. SFAS 141(R) also requires certain disclosures to enable users of
the financial statements to evaluate the
nature and financial effects of the business combination. Acquisition costs
associated with the business combination will generally be expensed as incurred.
SFAS 141(R) is effective for business combinations occurring in fiscal years
beginning after December 15, 2008, which will require us to adopt these
provisions for business combinations occurring in fiscal 2009 and thereafter.
Early adoption of SFAS 141(R) is not permitted.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements - An Amendment of ARB No. 51". SFAS No. 160
requires reporting entities to present noncontrolling (minority) interests as
equity as opposed to as a liability or mezzanine equity and provides guidance on
the accounting for transactions between an entity and noncontrolling interests.
SFAS No. 160 is effective the first fiscal year beginning after December 15,
2008, and interim periods within that fiscal year. SFAS No. 160 applies
prospectively as of the beginning of the fiscal year SFAS No. 160 is initially
applied, except for the presentation and disclosure requirements which are
applied retrospectively for all periods presented subsequent to adoption. The
adoption of SFAS No. 160 will not have a material impact on the financial
statements; however, it could impact future transactions entered into by the
Company.
In December 2007, the SEC issued SAB No. 110, "Share-Based Payment" ("SAB
110"). SAB 110 establishes the continued use of the simplified method for
estimating the expected term of equity based compensation. The simplified method
was intended to be eliminated for any equity based compensation arrangements
granted after December 31, 2007. SAB 110 is being published to help companies
that may not have adequate exercise history to estimate expected terms for
future grants. The adoption of SAB 110 has not had a material effect on the
Company's consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities - An Amendment to FASB Statement No. 133".
SFAS No. 161 is intended to improve financial standards for derivative
instruments and hedging activities by requiring enhanced disclosures to enable
investors to better understand their effects on an entity's financial position,
financial performance, and cash flows. 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. It is effective for financial statements
issued for fiscal years beginning after November 15, 2008, with early adoption
encouraged. The adoption of this statement is not expected to have a material
effect on the Company's financial statements.
Redeemable common stock
We account for redeemable common stock in accordance with Emerging Issue Task
Force D-98 "Classification and Measurement of Redeemable Securities". Securities
that are redeemable for cash or other assets are classified outside of permanent
equity if they are redeemable at the option of the holder. In addition, if the
redemption causes a redemption event, the redeemable securities should not be
classified outside of permanent equity. As further described in our filings with
the Securities and Exchange Commission, we will only consummate a business
combination if a majority of the shares of common stock voted by the public
stockholders owning shares sold in our IPO vote in favor of the business
combination and public stockholders holding less than 30% (2,999,999) of common
shares sold in our IPO exercise their conversion rights. If a business
combination is not consummated by November 19, 2009, we will liquidate.
Accordingly, 2,999,999 shares have been classified outside of permanent equity
at redemption value. The Company recognizes changes in the redemption value
immediately as they occur and adjusts the carrying value of the redeemable
common stock to equal its redemption value at the end of each reporting period.
Critical Accounting Policies
Basis of presentation
Our financial statements are presented in U.S. dollars in conformity with
accounting principles generally accepted in the United States of America (U.S.
GAAP).
Concentration of Credit Risk
Financial instruments that potentially subject us to a significant
concentration of credit risk consist primarily of cash. We maintain deposits in
federally insured financial institutions in excess of federally insured limits.
However, management believes we are not exposed to significant credit risk due
to the financial position of the depository institutions in which those deposits
are held.
Cash and cash equivalents
Cash and cash equivalents are defined as cash and investments that have a
maturity at date of purchase of three months or less.
Preferred Stock
We are authorized to issue 1,000,000 shares of preferred stock with such
designations, voting and other rights and preferences as may be determined from
time to time by the Board of Directors. There were no preferred shares issued as
of September 30, 2008.
Net Income per Common Share
We comply with SFAS No. 128, "Earnings Per Share," which requires dual
presentation of basic and diluted earnings per share on the face of the
statement of operations. Basic net income per share is computed by dividing net
income by the weighted average common shares outstanding for the period. Diluted
net income per share reflects the potential dilution that could occur if
warrants were to be exercised or converted or otherwise resulted in the issuance
of common stock that then shared in the earnings of the entity.
The Company's statement of operations includes a presentation of earnings per
share for common stock subject to possible redemption in a manner similar to the
two-class method of earnings per share. Basic and diluted net income per share
amount for the maximum number of shares subject to possible redemption is
calculated by dividing the net interest attributable to common shares subject to
possible redemption by the weighted average number of shares subject to possible
redemption. Basic and diluted net income per share amount for the shares
outstanding not subject to possible redemption is calculated by dividing the net
income exclusive of the net interest income attributable to common shares
subject to redemption by the weighted average number of shares not subject to
possible redemption.
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