UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

R
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended June 30, 2008
 
OR
   
£
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from __________ to __________          

Commission file number 001-33370

SANTA MONICA MEDIA CORPORATION
(Exact name of Registrant as specified in its charter)

Delaware
 
59-3810312
(State or other jurisdiction
 
(I.R.S. Employer
of incorporation or organization)
 
Identification No.)
     
12121 Wilshire Blvd., Suite 1001
   
Los Angeles, CA
 
90025
(Address of principal executive offices)
 
(Zip Code)
     
(310) 515-3222
(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 R No £

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
 
Large accelerated filer £     Accelerated filer £        Non-accelerated filer R

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12(b)-2 of the Exchange Act).
Yes R No £

Number of shares of Santa Monica Media Common Stock, $.001 par value, issued and outstanding as of August 14 , 2008: 16,038,125.


SANTA MONICA MEDIA CORPORATION
 
Form 10-Q
 
Table of Contents

   
    Page  
 
PART I. FINANCIAL INFORMATION
     
Item 1 Financial Statements:
   
3
 
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations
   
14
 
Item 3 Quantitative and Qualitative Disclosures About Market Risk
   
18
 
Item 4 Controls and Procedures
   
18
 
         
PART II. - OTHER INFORMATION
       
Item 1. Legal Proceedings
   
19
 
Item 1A Risk Factors
   
19
 
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
   
19
 
Item 3. Defaults upon Senior Securities
   
20
 
Item 4 Submission of Matters to a Vote of Security Holders
   
20
 
Item 5. Other Information
   
20
 
Item 6 Exhibits
   
20
 
SIGNATURES
   
21
 
INDEX TO EXHIBITS
   
22
 


PART I — FINANCIAL INFORMATION
 
Item 1. — Financial Statements
 
SANTA MONICA MEDIA CORPORATION
(a corporation in the development stage)
CONDENSED BALANCE SHEETS
As of June 30, 2008 and December 31, 2007
 
   
June 30,
2008
 
December 31,
2007
 
   
(Unaudited)
     
ASSETS
         
CURRENT ASSETS
         
Cash
 
$
217,398
 
$
41,589
 
Cash and cash equivalents held in trust
   
100,532,288
   
101,277,107
 
Prepaids and other current assets
   
60,882
   
50,500
 
               
Total current assets
   
100,810,568
   
101,369,196
 
               
TOTAL ASSETS
 
$
100,810,568
 
$
101,369,196
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
             
CURRENT LIABILITIES:
             
Accounts payable and accrued liabilities
 
$
269,952
 
$
69,675
 
Interest on funds held in trust subject to common stock conversion
   
281,000
   
—
 
Income taxes payable
   
—
   
790,500
 
Deferred tax liability
   
87,000
   
325,000
 
Deferred underwriting liability
   
4,000,000
   
4,000,000
 
Total current liabilities
   
4,637,952
   
5,185,175
 
               
NONCURRENT LIABILITIES:
             
Common stock subject to conversion, 2,499,999 shares at conversion value
   
19,720,992
   
19,720,992
 
               
TOTAL LIABILITIES
   
24,358,944
   
24,906,167
 
               
COMMITMENTS              
               
STOCKHOLDERS’ EQUITY:
             
Preferred Stock, $.001 par value, 25,000,000 shares authorized; none issued or outstanding
   
—
   
—
 
Common stock, $.001 par value, 200,000,000 shares authorized; 16,038,125 issued and outstanding (including 2,499,999 subject to conversion) and 3,125,000 at June 30, 2008 and December 31, 2007, respectively
   
16,038
   
16,038
 
Additional paid-in capital
   
74,769,944
   
74,769,944
 
Retained earnings
   
1,665,642
   
1,677,047
 
Total stockholders’ equity
   
76,451,624
   
76,463,029
 
               
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
100,810,568
 
$
101,369,196
 

See accompanying notes to financial statements.
 
3

SANTA MONICA MEDIA CORPORATION
(a corporation in the development stage)
CONDENSED STATEMENTS OF INCOME
For the three and six months ended June 30, 2008 and 2007 and
for the period from June 24, 2005 (inception) through June 30, 2008
(Unaudited)

   
Three Months Ended
 
Six Months Ended
 
For the period from June 24, 2005 (inception) through
 
   
  June 30, 2008
 
  June 30, 2007
 
  June 30, 2008
 
  June 30, 2007
 
  June 30, 2008
 
Operating expenses
                          
Professional fees
 
$
65,149
 
$
32,506
 
$
105,588
 
$
34,698
 
$
239,100
 
Rent and facilities
   
22,500
   
-
   
45,000
   
-
   
112,500
 
Formation and operating costs
   
180,943
   
86,780
   
509,443
   
91,853
   
906,543
 
Total operating expenses
   
268,592
   
119,286
   
660,031
   
126,551
   
1,258,143
 
                                 
Other income (expense)
                               
Interest income
   
314,711
   
1,224,172
   
1,112,741
   
1,224,172
   
4,536,876
 
Interest expense
   
(379
)
 
(6,231
)
 
(1,115
)
 
(10,230
)
 
(32,191
)
Total other income (expense)
   
314,332
   
1,217,941
   
1,111,626
   
1,213,942
   
4,504,685
 
                                 
Income before provision for income taxes
   
45,740
   
1,098,655
   
451,595
   
1,087,391
   
3,246,542
 
                                 
Provision for income taxes
                               
Current
   
224,000
   
390,505
   
420,000
   
391,505
   
1,212,900
 
Deferred
   
(205,000
)
 
-
   
(238,000
)
 
-
   
87,000
 
     
19,000
   
390,505
   
182,000
   
391,505
   
1,299,900
 
                                 
Income before allocation of trust fund interest
   
26,740
   
708,150
   
269,595
   
696,086
   
1,946,642
 
                                 
Allocation of trust fund interest relating to common stock subject to possible conversion
   
107,000
   
-
   
281,000
   
-
   
281,000
 
Net income (loss) available to common shareholders
 
$
(80,260
)
$
708,150
 
$
(11,405
)
$
696,086
 
$
1,665,642
 
                                 
Weighted average shares outstanding - basic
   
16,038,125
   
15,896,223
   
16,038,125
   
9,545,891
   
9,098,150
 
Weighted average shares outstanding - fully diluted
   
16,038,125
   
18,423,457
   
16,038,125
   
12,073,125
   
11,962,150
 
Net Income per share
                               
Basic
 
$
(0.01
)
$
0.04
 
$
(0.00
)
$
0.07
 
$
0.18
 
Fully diluted
 
$
(0.01
)
$
0.04
 
$
(0.00
)
$
0.06
 
$
0.14
 

See accompanying notes to financial statements.
 
4

SANTA MONICA MEDIA CORPORATION
(a corporation in the development stage)
STATEMENT OF STOCKHOLDERS’ EQUITY
For the period from June 24, 2005 (inception) through June 30, 2008
(Unaudited)
 
   
Common Shares
 
  Amount
 
  Additional Paid in Capital
 
  Retained Earnings (Accumulated Deficit)
 
Total
 
Common shares issued June 24, 2005
at $.0128 per share
   
4,687,500
 
$
4,688
 
$
55,312
 
$
-
 
$
60,000
 
                                 
Net loss
                     
(60,504
)
 
(60,504
)
                                 
Balance at December 31, 2005
   
4,687,500
   
4,688
   
55,312
   
(60,504
)
 
(504
)
                                 
Shares reacquired
   
(1,562,500
)
 
(1,563
)
 
1,563
         
-
 
                                 
Net loss
                     
(50,150
)
 
(50,150
)
                                 
Balance at December 31, 2006
   
3,125,000
   
3,125
   
56,875
   
(110,654
)
 
(50,654
)
                                 
Sale of units in private placement, including conversion of notes payable
   
413,125
   
413
   
3,304,587
         
3,305,000
 
                                 
Sale of units, net of underwriters’ discount and offering costs
   
12,500,000
   
12,500
   
91,107,482
         
91,119,982
 
                                 
Forgiveness of interest by a related party
               
21,992
         
21,992
 
                                 
Proceeds subject to possible conversion of 2,499,999 shares
               
(19,720,992
)
       
(19,720,992
)
                                 
Net income
                     
1,787,701
   
1,787,701
 
                                 
Balance at December 31, 2007
   
16,038,125
   
16,038
   
74,769,944
   
1,677,047
   
76,463,029
 
                                 
Net loss available to common stockholders (Unaudited)
                     
(11,405
)
 
(11,405
)
                                 
Balance at June 30, 2008 (Unaudited)
   
16,038,125
 
$
16,038
 
$
74,769,944
 
$
1,665,642
 
$
76,451,624
 
 
See accompanying notes to financial statements.
 
5

SANTA MONICA MEDIA CORPORATION
(a corporation in the development stage)
STATEMENTS OF CASH FLOWS
(Unaudited)
   
  Six Months Ended
June 30, 2008
 
  Six Months Ended
June 30, 2007
 
  For the period from June 24, 2005 (inception) through June 30, 2008
 
Cash flow from operating activities:
                
Net income (loss)
 
$
(11,405
)
$
696,086
 
$
1,665,642
 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
                   
(Increase) decrease in accretion in fair market value of Treasury Bills held in trust account
   
653,783
   
(1,187,384
)
 
(309,074
)
Amortization expense
   
18,750
   
25,000
   
78,125
 
Change in assets and liabilities:
                   
(Increase) in other current assets
   
(29,132
)
 
(17,301
)
 
(43,383
)
Increase in interest on funds held in trust subject to common stock conversion
   
281,000
   
-
   
281,000
 
Increase (decrease) in income taxes payable
   
(790,500
)
 
390,505
   
-
 
Increase (decrease) in deferred income tax
   
(238,000
)
 
-
   
87,000
 
Increase (decrease) in accounts payable and accrued expenses
   
200,276
   
(489,773
)
 
196,320
 
Net cash provided by (used in) operating activities
   
84,772
   
(582,867
)
 
1,955,630
 
                     
Cash flows from investing activities:
                   
Payment to trust account
   
-
   
(98,605,000
)
 
(98,605,000
)
Withdrawals from trust account
   
1,857,560
   
250,676
   
2,609,588
 
Proceeds into trust account
   
(1,766,523
)
 
(36,768
)
 
(4,227,802
)
Net cash provided by (used in) investing activities:
   
91,037
   
(98,391,092
)
 
(100,223,214
)
                     
Cash flows from financing activities:
                   
Proceeds from notes payable, related party
   
-
   
30,000
   
335,000
 
Payment on notes payable, related party
   
-
   
(30,000
)
 
(30,000
)
Proceeds from sale of shares of common stock
   
-
   
-
   
60,000
 
Proceeds from private placement
   
-
   
3,000,000
   
3,000,000
 
Proceeds from sale of units, net of offering costs
   
-
   
96,011,044
   
95,119,982
 
Net cash provided by financing activities
   
-
   
99,011,044
   
98,484,982
 
                     
Net increase in cash and cash equivalents at end of period
   
175,809
   
37,085
   
217,398
 
                     
Cash and cash equivalents at beginning of period
   
41,589
   
6,732
   
-
 
                     
Cash and cash equivalents at end of period
 
$
217,398
 
$
43,817
 
$
217,398
 
                     
Supplemental disclosure of cash flow information
                   
Cash paid for -
                   
Income taxes
 
$
1,257,500
 
$
-
 
$
1,259,100
 
Interest
 
$
1,115
 
$
-
 
$
13,898
 
                     
Supplemental disclosure of non-cash financing activity:
                   
For the period from inception (June 24, 2005) through June 30, 2008
                   
Accrued deferred underwriting fees
       
$
4,000,000
 
$
4,000,000
 

In connection with the public offering, $305,000 of related party debt was converted to units and interest in the amount of $21,992 was forgiven.
 
Shares subject to conversion in the amount of $19,720,992 were recorded as a liability and reduced the additional paid in capital associated with the public offering.
 
Directors’ and officers’ liability insurance was financed in the amount of $95,625.
 
There was a reduction of the accrual for offering cost in the amount of $150,635.
 
Deferred offering costs in the amount of $1,380,018 were charged against additional paid in capital at the time of the offering.
 
See accompanying notes to financial statements.
 
6

SANTA MONICA MEDIA CORPORATION
(a corporation in its development stage)
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008
 
1.   Organization, Business Operations and Significant Accounting Policies
 
Organization and Business Operations
 
Santa Monica Media Corporation (the “Company”) was incorporated in Delaware on June 24, 2005. The Company is a blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition or other similar business combination with an unidentified operating business.
 
As of June 30, 2008, the Company had not commenced any business operations. All activity through April 2, 2007 relates to the Company’s formation and a public offering (“Public Offering”) described below and in Note 2. Subsequent to that date, the Company commenced its research and investigation of suitable business combination opportunities. The Company is considered to be in its development stage and is subject to the risks associated with development stage companies. The Company may not have sufficient funds to allow it to operate through the date of consummation of a business combination or date of liquidation. In such event, it will need to obtain additional funds from its stockholders or another source. If the Company is unable to obtain additional financing, the Company may be forced to limit its activities or liquidate. None of the Company’s officers, directors or stockholders is required to provide any financing to the Company. Only in the event the assets held outside the trust account are insufficient to pay the costs associated with dissolution and liquidation of the Company will its three principal executive officers provide additional funds required to pay the costs associated with the dissolution and liquidation.
 
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating a business combination with an operating business (“Business Combination”). Furthermore, there is no assurance that the Company will be able to successfully effect a Business Combination.
 
On April 2, 2007, the Company completed: (i) a private placement of 413,125 units at $8.00 per unit (the “Private Placement”) for $3,000,000 cash and cancellation of a $305,000 loan made to the Company by Santa Monica Capital Partners, LLC, and (ii) the Public Offering of 12,500,000 units for net proceeds of $95,119,982 pursuant to a registration statement declared effective by the Securities and Exchange Commission on March 27, 2007. The proceeds of the Private Placement and a portion of the proceeds of the Public Offering, together totaling $98,605,000, were placed in a trust account (the “Trust Account”). The amount in the Trust Account includes a $4,000,000 contingent underwriting compensation payable to the underwriter if a Business Combination is consummated. The Underwriting Agreement calls for the proceeds to be held in the Trust Account until the earlier of (i) the consummation of a Business Combination or (ii) liquidation of the Company. The remaining net proceeds (not held in the Trust Account) of $100,000 and up to $1,600,000 of interest earned on the Trust Account (net of taxes payable) 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 Public Offering vote against the Business Combination and exercise their conversion rights described below, the Business Combination will not be consummated. The Company had one stockholder as of July 31, 2005, Santa Monica Capital Partners LLC (“Initial Stockholder”). During August 2005 and April 2006, Santa Monica Capital Partners, LLC transferred an aggregate of 458,232 units to various parties including the outside directors and advisory board members (“Transferee Stockholders”). See Note 6. The Initial Stockholder and the Transferee Stockholders have agreed to vote all shares of common stock held by them in accordance with the vote cast by 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 provisions will no longer be applicable.
 
7
 
In evaluating a prospective target business, the Company will consider, among other factors, the financial condition and results of operations; growth potential; experience and skill of management and availability of additional personnel; capital requirements; competitive position; barriers to entry into other industries; stage of development of the products, processes or services; degree of current or potential market acceptance of the products, processes or services; proprietary features and degree of intellectual property or other protection of the products, processes or services; regulatory environment of the industry; and costs associated with effecting the business combination. These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular business combination will be based, to the extent relevant, on the above factors, as well as other considerations deemed relevant by the Company in effecting a Business Combination consistent with its business objective.
 
If a Business Combination is approved, 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 be equal to the amount held in the Trust Account as of two business days prior to the consummation of the proposed Business Combination net of taxes payable, divided by the number of shares of common stock held by Public Stockholders at the consummation of the Public Offering. Accordingly, Public Stockholders holding up to 2,499,999 shares may seek conversion of their shares in the event of a Business Combination. Such Public Stockholders are entitled to receive their pro rata interest, as defined, in the Trust Account computed without regard to the shares held by the Initial Stockholder and Transferee Stockholders immediately prior to the consummation of the Public Offering.
 
The Company’s Certificate of Incorporation, as amended, provides for mandatory liquidation of the Company if the Company does not consummate a Business Combination within 18 months from the date of the consummation of the Public Offering, or 24 months from the consummation of the Public Offering if certain extension criteria have been satisfied. In the event of liquidation, it is likely that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per share in the Public Offering (assuming no value is attributed to the Warrants contained in the Units offered in the Public Offering discussed in Note 2).
 
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. The Company maintains its accounts with financial institutions with high credit ratings.
 
Income Taxes
 
The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, or SFAS No. 109 “Accounting for Income Taxes.” As such, deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial report amounts at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period, if any, and the change during the period in deferred tax assets and liabilities.
 
In July 2006, the Financial Accounting Standards Board (“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 merit. The Company has adopted FIN 48 as of January 1, 2007.
 
8
 
Earnings (loss) per Share
 
The Company utilizes SFAS No. 128, “Earnings per Share.” Basic earnings (loss) per share are computed by dividing earnings (loss) available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed similarly to basic earnings (loss) per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods of operating loss for which no common share equivalents are included because their effect would be anti-dilutive. For the three and six months ended June 30, 2007 and for the period from June 24, 2005 (inception) through June 30, 2008, there were no anti-dilutive securities excluded from the computation. For the three and six months ended June 30, 2008, 12,913,125 securities were excluded from the calculation because they were anti-dilutive.

           
For the period from
June 24, 2005
 
   
Three months ended
 June 30,
 
Six months ended
June 30,
 
(inception)
 through
June 30, 2008
 
   
2008
 
2007
 
2008
 
2007
 
Numerator:
                     
Net income (loss) attributable to common stockholders
 
$
(80,260
)
$
708,150
 
$
(11,405
)
$
696,086
  $
1,665,642
 
Denominator:
                               
Denominator for basic net income per share—weighted average shares
   
16,038,125
   
15,896,223
   
16,038,125
   
9,545,891
   
9,098,150
 
Effect of dilutive securities:
                               
Warrants
   
-
   
2,527,234
   
-
   
2,527,234
   
2,864,000
 
                                 
Denominator for diluted income per share—adjusted weighted average shares
   
16,038,125
   
18,423,457
   
16,038,125
   
12,073,125
   
11,962,150
 
Basic earnings (loss) per share
 
$
(0.01
)
$
0.04
 
$
(0.00
)
$
0.07
  $
0.18
 
Diluted earnings (loss) per share
 
$
(0.01
)
$
0.04
 
$
(0.00
)
$
0.06
  $
0.14
 

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.
 
Fair Value of Financial Instruments
 
The carrying amounts of cash, cash equivalents, money market funds held in trust, prepaid expenses, accounts payable and accrued expenses, deferred underwriting fees payable, and income tax payable approximate their respective fair values, due to the short-term nature of these items.
 
Share-Based Payments
 
The Company accounts for share-based payments pursuant to Statement of Financial Accounting Standards No. 123R, “Share-Based Payments” (“SFAS No. 123R”). SFAS No. 123R requires all share-based payments, including grants of employee stock options to employees, to be recognized in the financial statements based on their fair values. The Company adopted SFAS No. 123R on January 1, 2006 and expects that it could have a material impact on the Company’s financial statements to the extent that the Company grants stock-based compensation in future periods.
 
Interest on Funds Held In Trust Subject to Common Stock Conversion
 
Deferred interest on funds held in trust consists of the 20% less one share portion of the interest earned on the funds held in trust, which is the maximum amount, net of permitted withdrawals by the Company and related income taxes, that the Company would be obligated to pay to stockholders who elect to have their stock redeemed by the Company without resulting in a rejection of a business combination.
 
9
 
Recent Accounting Pronouncements
 
In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS No. 141(R)”), which requires an acquirer to recognize in its financial statements as of the acquisition date (i) the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, measured at their fair values on the acquisition date, and (ii) goodwill as the excess of the consideration transferred plus the fair value of any non-controlling interest in the acquiree at the acquisition date over the fair values of the identifiable net assets acquired. SFAS No. 141(R) makes significant amendments to other FASB Statements and other authoritative guidance to provide additional guidance or to conform the guidance in that literature to that provided in SFAS No. 141(R). SFAS No. 141(R) also provides guidance as to what information is to be disclosed to enable users of financial statements to evaluate the nature and financial effects of a business combination. SFAS No. 141(R) is effective for financial statements issued for fiscal years beginning on or after December 15, 2008. Early adoption is prohibited. The adoption of SFAS No. 141(R) will affect how the Company accounts for the acquisition of a business after December 31, 2008.
 
Except for the aforementioned accounting standard, 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 Company’s financial statements.
 
2.   Public Offering
 
In the Public Offering, the Company issued and sold 12,500,000 units (“Units”) at $8.00 per Unit. The underwriters were paid fees equal to 3.5% of the gross proceeds of the Public Offering, or $3,500,000, at the closing of the Public Offering and have agreed to defer an additional $4,000,000 of their underwriting fees until the consummation of a Business Combination. Upon the consummation of a Business Combination, the Company will pay such fees out of the proceeds of the Public Offering held in the Trust Account.
 
Each Unit consists of one share of the Company’s common stock, and one Redeemable Common Stock Purchase Warrant (“Warrant”). Each Warrant will entitle the holder to purchase from the Company one share of common stock at an exercise price of $6.00 commencing the later of the completion of a business combination with a target business or one year from the effective date of the Public Offering, and expiring four years from the effective date of the Public Offering. 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 $11.50 per share (subject to proportionate adjustment of the warrant price pursuant to the warrant agreement) 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 addition, the Company granted the underwriters an option to purchase up to an additional 1,875,000 Units at the public offering price less the underwriters’ discount and commission to cover any over-allotments for public sale. The underwriters did not exercise any portion of this option.
 
3.   Note Payable - Related Party
 
The Company issued an amended and restated $305,000 unsecured promissory note to its Initial Stockholder on February 1, 2007. This note was cancelled and converted into units on April 2, 2007 in connection with the Public Offering. The note was originally issued on June 24, 2005 for the amount of $240,000, and in December 2006, the Initial Stockholder loaned an additional $65,000 to the Company. The note (as amended) bore interest at 5%. In connection with the Public Offering on April 2, 2007, accrued interest in the amount of $21,992 was forgiven and shown as an increase to additional paid-in capital.
 
10
 
4.   Commitments - Related Party
 
The Company utilizes certain administrative, technology and secretarial services, as well as certain limited office space provided by Santa Monica Capital Corp, and subsequently, Santa Monica Capital Partners II, LLC an affiliate of Santa Monica Capital Corp. Such affiliate has agreed that it will make such services available to the Company, as may be required by the Company from time to time. The Company agreed to pay such affiliate $7,500 per month for such services commencing as of July 1, 2005 through January 5, 2006. Under the agreement as amended, the Company did not pay or accrue additional fees until October 2, 2007, six months after consummation of the Public Offering of the Company’s securities, upon which the Company began to pay $7,500 per month. The Company will continue to pay such fees until the Company has paid aggregate fees of $180,000, or, if earlier, upon the completion of a Business Combination. As of June 30, 2008 and December 31, 2007, the Company had incurred and paid an aggregate of $112,500 and $67,500, respectively, for such services.
 
5.   Preferred Stock
 
The Company is authorized to issue 25,000,000 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.
 
6.   Common Stock and Warrants
 
In July 2005, the Company issued 4,687,500 Units to Santa Monica Capital Partners, LLC for $60,000 in cash, at a purchase price of approximately $0.01 per unit. Mr. Marshall, the Company’s Chairman of the Board and Chief Executive Officer, Mr. Brendlinger, the Company’s Chief Financial Officer and Director, Mr. Pulier, the Company’s Secretary and Director, and Mr. Baradaran, the Company’s Director, are the beneficial owners of Santa Monica Capital Partners, LLC. Each unit consisted of one share of the Company’s common stock and one warrant to purchase one share of the Company’s common stock at an exercise price of $6.00 per share, exercisable on the later of the consummation of a Business Combination or one year from the date of the Public Offering and expiring four years from the consummation of the Public Offering.
 
During August 2005 and April 2006, Santa Monica Capital Partners, LLC transferred an aggregate of 458,232 units to the Transferee Stockholders, including 217,848 units to persons who are not directors or members of the Company’s advisory board for an aggregate price of $6,625, or $0.03 per unit, and 240,384 units to members of the Company’s board of directors and advisory board for an aggregate price of $4,500, or $0.02 per unit.
 
These units were not transferred to settle any obligations of the Company or in exchange for services for the Company. Future services provided by any of the transferees will be compensated pursuant to separate agreements.
 
All units transferred by Santa Monica Capital Partners, LLC were paid for pursuant to the delivery of one-year promissory notes issued to Santa Monica Capital Partners, LLC with interest of 8% per annum payable upon maturity thereof.
 
In September 2006, in conjunction with the Company’s public offering, the Company’s Board of Directors authorized the Company to enter into an agreement with its shareholders, other than Santa Monica Capital Partners, LLC, to exchange their units for an equal number of shares of the Company’s common stock, and this exchange subsequently was completed in September 2006. Additionally, Santa Monica Capital Partners, LLC exchanged its 4,229,268 units for 2,666,768 shares of the Company’s common stock. As a result, there are no outstanding warrants relating to the originally issued shares. See Note 7.
 
In April 2006 and March 2007, the Company and Santa Monica Capital Partners, LLC agreed to a private placement of units in connection with the Public Offering. In connection with this agreement Santa Monica Capital Partners, LLC purchased 413,125 units at $8.00 per unit for $3,305,000, which included the cancellation of the $305,000 loan made to the Company by Santa Monica Capital Partners, LLC, prior to the Public Offering. The proceeds of this Private Placement are held in the Trust Account established for the Public Offering (Note 1).
 
11
 
In connection with the Public Offering described in Note 2 and the private placement of Units described above, the Company issued warrants to purchase an aggregate 12,913,125 shares of its common stock, all of which were outstanding as of June 30, 2008. The warrants have a weighted average exercise price of $6.00 per share, and a weighted average term of 36 months.
 
7.   Registration Rights
 
The holders of the Company’s 3,538,125 issued and outstanding shares immediately prior to the completion of the offering, including the Initial Shareholder, are entitled to registration rights covering the resale of their shares and the resale of their warrants and shares acquired upon exercise of their warrants. The holders of the majority of these shares are entitled to make up to two demands that the Company register their shares, warrants and shares underlying the warrants any time after the consummation of the initial business combination, subject to transfer restrictions imposed by the lock up agreements. The holders of the majority of these shares can elect to exercise these registration rights at any time after the consummation of the Company’s initial business combination, subject to the transfer restrictions imposed by the lock-up agreements. In addition, these stockholders have certain “piggy-back” registration rights on registration statements filed subsequent to the date on which these securities are released from the restrictions imposed by the lock-up agreements. The Company will bear the expenses incurred in connection with the filing of any such registration statements. Pursuant to the registration rights agreement, these stockholders waive any claims to monetary damages for any failure by the Company to comply with the requirements of the registration rights agreement, provided the Company has used its best efforts to do so.
 
In accordance with the Warrant Agreement related to 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 exercise. Additionally, in the event that a registration statement is not effective at the time of exercise, the holder of such warrant shall not be entitled to exercise such warrant and in no event will the Company be required to net cash settle the warrant exercise. Consequently, the warrants may expire unexercised.
 
12
 
8.   Income Taxes
 
The following table presents the current and deferred income tax provision for federal and state income taxes:
 
   
 
 
 
 
For the period from June 24, 2005 (inception) through June 30, 2008
 
   
Three months ended
June 30,
 
Six months ended
June 30,
 
   
2008
 
2007
 
2008
 
2007
 
Current tax provision:
                     
Federal
 
$
178,000
 
$
390,505
 
$
322,000
 
$
390,505
 
$
949,500
 
State
   
46,000
   
-
   
98,000
   
800
   
263,400
 
   
$
224,000
 
$
390,505
 
$
420,000
 
$
391,305
 
$
1,212,900
 
                                 
Deferred tax provision:
                               
Federal
   
(163,000
)
 
-
   
(188,000
)
 
-
   
61,000
 
State
   
(42,000
)
 
-
   
(58,000
)
 
-
   
26,000
 
     
(205,000
)
 
-
   
(238,000
)
 
-
   
87,000
 
Total provision for income tax
 
$
19,000
 
$
390,505
 
$
182,000
 
$
391,305
 
$
1,299,900
 
 
Current income taxes are based upon the year’s income taxable for federal and state tax reporting purposes. Deferred income taxes (benefits) are provided for certain income and expenses, which are recognized in different periods for tax and financial reporting purposes.
 
Deferred tax assets and liabilities are computed for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the period in which the differences are expected to affect taxable income.
 
Significant components of the Company’s net deferred tax liability at June 30, 2008 and December 31, 2007 are as follows:

 
   
June 30,
2008
   
December 31,
2007
 
Expenses deductible in future periods
 
$
42,000
 
$
85,000
 
Accretion of interest on U.S. Treasury Bills
   
(129,000
)
 
(410,000
)
Total deferred tax assets (liabilities)
   
(87,000
)
 
(325,000
)
Valuation allowance
   
—
   
—
 
Net deferred tax liability
 
$
(87,000
)
$
(325,000
)

In assessing the realizability of deferred tax assets of $42,000 and $85,000 at June 30, 2008 and December 31, 2007, respectively, management considered whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which these assets become deductible. Management considers the scheduled reversal of deferred tax liabilities, the projected future taxable income and tax planning strategies in making this assessment. Management's analysis of the deferred tax asset at June 30, 2008 concluded that the asset can be utilized in future periods. Therefore, there is no valuation allowance against this asset as of June 30, 2008.
 
13
 
A reconciliation of the expected tax computed at the U.S. statutory federal income tax rate to the total benefit for income taxes for the three and six months ended June 30, 2008 and 2007, and the period from June 24, 2005 (inception) through June 30, 2008 as follows:

   
Three months ended
June 30,
 
Six months ended
June 30,
 
For the period
from June 24,
2005 (inception)through
 
     
2008
   
2007
   
2008
   
2007
   
 June 30, 2008
 
Expected tax at 34%
 
$
16,000
  $
373,000
 
$
154,000
  $
369,000
 
$
1,104,000
 
Change in valuation allowance
   
-
   
(49,000
)
 
-
   
(43,000
)
 
-
 
State income tax, net of federal tax benefit
   
2,000
   
64,000
   
26,000
   
63,000
   
189,000
 
Other
   
1,000
   
300
 
 
2,000
   
2,000
   
6,900
 
Provision for income taxes
 
$
19,000
  $
391,000
 
$
182,000
  $
391,000
 
$
1,299,900
 
 
On July 13, 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109 (“FIN 48”), which clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under FIN 48, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. FIN 48 is effective for fiscal years beginning after December 15, 2006.
 
The Company adopted FIN 48, Accounting for Uncertainty in Income Taxes on January 1, 2007. The Company recognized no cumulative effect adjustment as a result of adopting FIN 48. At June 30, 2008 and December 31, 2007, we have no unrecognized tax benefits.
 
The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of June 30, 2008, we have no accrued interest and penalties related to uncertain tax positions.
 
The Company is subject to taxation in the U.S. and California. The tax years 2005 to 2007 remain open to examination by the major taxing jurisdictions to which the Company is subject. The Company currently is not under examination by any tax authority.
 
Item 2. Management’s Discussion and Analysis of Financial Condition And Results of Operations
 
Forward Looking Statements
 
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in such statements. All of the statements contained in this Report that are not identified as historical should be considered forward-looking. In connection with certain forward-looking statements contained in this Report and those that may be made in the future by or on behalf of the Company which are identified as forward-looking, the Company notes that there are various factors that could cause actual results to differ materially from those set forth in any such forward-looking statements. Accordingly, there can be no assurance that the forward-looking statements contained in this Report will be realized or that actual results will not be significantly higher or lower. Statements regarding policies and procedures are not intended, and should not be interpreted, to mean that such policies and procedures will not be amended, modified or repealed at any time in the future. The forward-looking statements have not been audited by, examined by or subjected to agreed-upon procedures by independent accountants, and no third party has independently verified or reviewed such statements. Readers of this Report should consider these facts in evaluating the information contained herein. The inclusion of the forward-looking statements contained in this Report should not be regarded as a representation by the Company or any other person that the forward-looking statements contained in this Report will be achieved. In light of the foregoing, readers of this Report are cautioned not to place undue reliance on the forward-looking statements contained herein.
 
14
 
Overview
 
We were formed on June 24, 2005 for the purpose of effecting a merger, capital stock exchange, asset acquisition or other similar business combination with one or more operating businesses. Our efforts in identifying a prospective target business have been focused on acquiring an operating business in the communications, media, gaming and/or entertainment industry. Our initial business combination must be with a business or businesses whose collective fair market value is at least equal to 80% of our net assets at the time of the acquisition. Although we are currently in discussions with prospective target businesses, there is no guarantee that we will be able to complete a business combination by October 2, 2008 or enter into a letter of intent by that date, which will extend the period to complete the business combination until April 2, 2009 .
 
On April 2, 2007, we completed: (i) a private placement of 413,125 units at $8.00 per unit (the “Private Placement”) for $3,000,000 cash and cancellation of the $305,000 loan made to the Company by Santa Monica Capital Partners, LLC, and (ii) a public offering of 12,500,000 units for net proceeds of $95,119,982 pursuant to a registration statement on Form S-1, which was declared effective by the Securities and Exchange Commission on March 27, 2007 (the “Public Offering”). The proceeds of the Private Placement and a portion of the proceeds of the Public Offering, together totaling $98,605,000, were placed in a trust account (the “Trust Account”). The amount in the Trust Account includes $4,000,000 of contingent underwriting compensation that will be paid to the underwriter if a Business Combination is consummated. The Underwriting Agreement calls for the proceeds to be held in the Trust Account until the earlier of (i) the consummation of a Business Combination or (ii) liquidation of the Company. The remaining net proceeds (not held in the Trust Account) of $100,000 and up to $1,600,000 of interest earned on the Trust Account (net of taxes payable) may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses.
 
Each Unit consists of one share of the Company’s common stock, and one warrant to purchase one share of common stock at an exercise price of $6.00 commencing the later of the completion of a business combination with a target business or one year from the effective date of the Public Offering and expiring four years from the effective date of the Public Offering (the “Warrant”). In the event that the last sale price of the common stock is at least $11.50 per share (subject to proportionate adjustment of the warrant price pursuant to the warrant agreement) 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 the Warrants will be redeemable at a price of $.01 per Warrant upon 30 days’ notice after the Warrants become exercisable.
 
In addition, we granted the underwriters an option to purchase up to an additional 1,875,000 Units at the public offering price less the underwriters’ discount and commission, within 30 days of the date of the prospectus, to cover any over-allotments for public sale. The underwriters did not exercise any portion of this option.
 
The proceeds deposited in the trust account will not be released from the trust account until the earlier of the completion of a business combination or the expiration of the time period during which we may complete a business combination. The proceeds held in the trust account (other than the contingent underwriting discount) may be used as consideration to pay the sellers of a target business with which we complete a 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 account (other than the contingent underwriting discount) will be used to finance the operations of the target business. We may also use the proceeds held in the trust account (other than the contingent underwriting discount) to pay a finder’s fee to any unaffiliated party that provides information regarding prospective targets to us.
 
As of June 30, 2008, approximately $100,532,000 (including approximately $309,000 in accreted treasury bill interest) was held in trust and we had approximately $217,000 of unrestricted cash. The trust account balance includes approximately $248,000 of interest earned on the funds held in the trust account, available to us for our activities in connection with identifying and conducting due diligence of a suitable business combination, and for general corporate matters.
 
15
 
The initial target business or businesses with which we combine must have a collective fair market value equal to at least 80% of the balance in the trust account (excluding deferred underwriters’ discounts and commissions). However, we may not use all of the proceeds held in the trust account in connection with a business combination, either because the consideration for the 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 such event, the remaining proceeds held in the trust account, including any other net proceeds not expended, will be used to finance the operations of the target business or businesses.
 
We may issue additional capital stock or debt securities to finance a business combination. The issuance of additional capital stock, including stock issuable upon conversion of 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;
 
 
·
will likely cause a change in control if a substantial number of our shares of common stock or voting preferred 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 present officers and directors; and
 
 
·
may 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 a business combination are insufficient to pay our debt obligations;
 
 
·
acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach the covenants contained in any debt securities, such as covenants that require the satisfaction or maintenance of certain financial ratios or reserves, without a waiver or renegotiation of such covenants;
 
 
·
an obligation to immediately repay all principal and accrued interest, if any, upon demand to the extent any debt securities are payable on demand; and
 
 
·
our inability to obtain additional financing, if necessary, to the extent any debt securities contain covenants restricting our ability to obtain additional financing while such security is outstanding, or to the extent our existing leverage discourages other potential investors.
 
Through June 30, 2008, our efforts have been limited to organizational activities, activities relating to our initial public offering, activities relating to identifying and evaluating prospective acquisition candidates, and activities relating to general corporate matters; we have neither engaged in any operations nor generated any revenues, other than interest income earned on the proceeds of our private placement and initial public offering. For the six months ended June 30, 2008, we earned $1,112,741 in interest income .
 
16
 
The following table shows the total funds held in the trust account through June 30, 2008:
 
Net proceeds from our initial public offering and private placement of units placed in trust
 
$
94,605,000
 
Deferred underwriters’ discounts and compensation
   
4,000,000
 
Total interest received to date
   
4,227,802
 
Less total interest disbursed to us for working capital
   
(1,352,088
)
Less total taxes paid
   
(1,257,500
)
 
   
100,223,214
 
Treasury Bill interest accreted
   
309,074
 
Total funds held in trust account through June 30, 2008
 
$
100,532,288
 

For the six months ended June 30, 2008, we paid or incurred an aggregate of $660,031 in expenses for the following purposes:
 
 
·
Premiums associated with our directors and officers liability insurance;
 
 
·
expenses for due diligence and investigation of prospective target businesses;
 
 
·
legal and accounting fees relating to our SEC reporting obligations and general corporate matters; and
 
 
·
miscellaneous operations related expenses including administrative fees and franchise taxes.
 
For the period following June 30, 2008 through the date of Business Combination, if any, we expect to incur expenses for the following purposes:
 
 
·
payment of premiums associated with our director’s and officer’s insurance;
 
 
·
payment of estimated income taxes incurred as a result of interest income earned on funds currently held in the trust account;
 
 
·
due diligence and investigation of prospective target businesses;
 
 
·
legal and accounting fees relating to our SEC reporting obligations and general corporate matters;
 
 
·
structuring and negotiating a business combination, including the making of a down payment or the payment of exclusivity or similar fees and expenses; and
 
 
·
other miscellaneous operations related expenses including administrative fees and franchise taxes.
 
We may not have sufficient funds to allow us to operate through the date of consummation of a business combination or date of liquidation. In such event, we will need to obtain additional funds from our stockholders or another source. If we are unable to obtain additional financing, the Company may be forced to limit its activities or liquidate. None of our officers, directors or stockholders is required to provide any financing to us. Only in the event the assets held outside the trust account are insufficient to pay the costs associated with our dissolution and liquidation will our three executive officers - David Marshall, Kurt Brendlinger and Eric Pulier - provide additional funds required to pay the costs associated with the dissolution and liquidation.
 
17
 

Item 3. Quantitative and Qualitative Disclosures about Market Risk
 
Market risk is the sensitivity of income to changes in interest rates, foreign exchanges, commodity prices, equity prices, and other market driven rates or prices. We are not presently engaged in any substantive commercial business. To date, our efforts have been limited to organizational activities and activities relating to our initial public offering and the identification of a target business; we have neither engaged in any operations nor generated any revenues. Accordingly, the risks associated with foreign exchange rates, commodity prices, and equity prices are not significant. The net proceeds of our IPO held in the trust fund have been invested only in United States "government securities," defined as any Treasury Bill issued by the United States having a maturity of one hundred and eighty days or less, or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940. Given our limited risk in our exposure to U.S. Treasury Bills and such money market funds, we do not view the interest rate risk to be significant. We do not enter into derivatives or other financial instruments for trading or speculative purposes.
 
Item 4. Controls and Procedures.  
 
An evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2008 was made under the supervision and with the participation of our management, including our principal executive officer and principal financial officer. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not 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. We currently have no employees and all of our accounting and financial reporting activities are performed by a consultant and a bookkeeping service. Accordingly, we have been unable to segregate the accounting procedures over financial activities to provide adequate internal controls over financial reporting. As a result, our principal executive officer and principal financial officer have concluded that our internal control over financial reporting are not effective. 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.

18

PART II— OTHER INFORMATION
 
Item 1.   Legal Proceedings
 
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings incidental to the normal course of our business. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.
 
Item 1A. Risk Factors
 
We may not be able to effect a business combination by October 2, 2008 , or by April 2, 2009 if a letter of intent has been entered into by or before October 2, 2008 . In the event that we are not successful in will terminate business operations, dissolve and liquidate if we do not consummate a business combination within a specified period after the consummation of this offering.  
 
We do not have any specific merger, asset acquisition or other business combination under consideration. Although we have had discussions with prospective targets, we may not be able to complete a business combination by October 2, 2008, or by April 2, 2009 if the extension criteria described below in this risk factor have been satisfied, in which case our purpose and powers will be limited to dissolving, liquidating and winding up.
 
If we enter into either a letter of intent, an agreement in principle or a definitive agreement to complete a business combination prior to October 2, 2008, but are unable to complete the business combination by then, then we will have an additional six months in which to complete the business combination contemplated by the letter of intent, agreement in principle or definitive agreement. If we are unable to consummate that transaction within the permitted time period, our purpose and powers will be limited to dissolving, liquidating and winding up.

Promptly after the approval by our stockholders of our plan of dissolution and liquidation, we will liquidate our assets (including the amount in the trust account and accrued interest on such amount net of income taxes payable on such interest) and, after paying or reserving for payment our liabilities (from assets outside the trust account and, if necessary, within the trust account) and the costs of dissolution and liquidation (to be paid from assets outside the trust account), we will distribute the remaining assets solely to our public stockholders, who, for this purpose, include our existing stockholders with respect to any shares purchased by them in this offering or in the aftermarket.
 
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds
 
As of June 30, 2008, we paid or incurred offering expenses of approximately $1,380,018, which have been charged to additional paid in capital.
 
As of June 30, 2008, we have paid or incurred an aggregate of approximately $2,590,234 in expenses, which have been or will be paid out of the proceeds of our initial public offering held in trust and our withdrawal of interest earned on the funds held in the trust account, for the following purposes:
 
 
·
payment of estimated taxes incurred as a result of interest income earned on funds currently held in the trust account;
 
 
·
payment of other state and local taxes and fees;
 
 
·
expenses for due diligence and investigation of prospective target businesses;
 
19
 
 
·
legal and accounting fees relating to our SEC reporting obligations and general corporate matters; and
 
 
·
miscellaneous expenses, including directors and officers liability insurance.
 
As of June 30, 2008, after giving effect to our initial public offering and our operations subsequent thereto, including our withdrawal of $2,609,588 of the interest earned on the funds held in the trust account through June 30, 2008, $100,532,288 was held in trust and we had an aggregate of approximately $465,000 of cash available to us, $217,000 in unrestricted cash and $248,000 available for withdrawal from the trust, for our activities in connection with identifying and conducting due diligence of a suitable business combination, and for general corporate matters.
 
Item 3.   Defaults upon Senior Securities.
 
Not applicable.
 
Item 4. Submission of Matters to a Vote of Security Holders.
 
None.
 
Item 5.   Other Information.
 
None.
 
Item 6.   Exhibits
 
The exhibits listed in the accompanying Index to Exhibits are filed as part of this Quarterly Report on Form 10-Q and incorporated herein by reference.
 
20
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
     
 
SANTA MONICA MEDIA CORPORATION
(Registrant)
 
  		 
  		 
 
Date: August 14, 2008 By:   /s/ KURT BRENDLINGER
 
Kurt Brendlinger
Chief Financial Officer
(Principal Financial Officer)
 
21
 
INDEX TO EXHIBITS
 
Exhibit Number
 
Description
31.1
 
Certification of Chief Executive Officer Pursuant to 17 CFR 240.13a-14(a)
     
31.2
 
Certification of Chief Financial Officer Pursuant to 17 CFR 240.13a-14(a)
     
32.1
 
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
32.2
 
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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