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Article by DailyStocks_admin    (02-29-08 08:20 AM)

Creative Vistas (CVAS) sent a letter of intent to 180 Connect proposing to acquire all of its outstanding stock at $3 a share in cash and common stock. Creative Vistas currently owns 3,124,407 shares (13.6%).

BUSINESS OVERVIEW

General

We were organized as a Delaware blank check company in April 2005 for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition or other similar business combination, one or more operating businesses in the technology, media or telecommunications industries.

Initial Public Offering

In August 2005, we consummated our initial public offering (the “IPO”), resulting in net proceeds of approximately $51.2 million after payment of underwriters’ commission and offering costs, of which $50.4 million was placed in the trust account and invested mutual funds and municipal money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended. Our amended and restated certificate of incorporation provides that such funds, with the interest earned thereon, will be released to us upon consummation of our initial business combination, less any amount payable to our stockholders that vote against the initial business combination and elect to exercise their conversion rights. In connection with the IPO, we agreed to pay the underwriters approximately $1.6 million upon consummation of our initial business combination. The proceeds of the offering not held in the trust account have been used by us to pay offering expenses and operating expenses, including expenses incurred in connection with our pursuit of potential business combinations. Except for amounts released to pay taxes on interest earned on the trust account, the funds in the trust account will not be released until the earlier of the completion of the initial business combination or our dissolution and liquidation. As of March 31, 2007, there was approximately $52.3 million in the trust account, including accrued interest on the funds in the trust account.

Proposed Arrangement with 180 Connect Inc.

We are proposing to engage in a business combination with 180 Connect Inc., a corporation organized under the laws of Canada (“180 Connect”), pursuant to which we will indirectly acquire all of 180 Connect’s outstanding shares and 180 Connect will thereby become our indirect subsidiary. The business combination will be carried out pursuant to an arrangement under a plan of arrangement pursuant to the Canada Business Corporations Act (the “CBCA”), as set forth in the arrangement agreement dated March 13, 2007 among us, 6732097 Canada Inc., a corporation incorporated under the laws of Canada and our indirect wholly-owned subsidiary (“Purchaser”), and 180 Connect, whereby Purchaser will acquire all the outstanding 180 Connect common shares in exchange for either shares of our common stock, exchangeable shares of Purchaser or a combination of shares of our common stock and exchangeable shares of Purchaser. The exchangeable shares will entitled the holders to dividends and other rights that are substantially economically equivalent to those of holders of our common stock, and holders of exchangeable shares will have the right, through the voting and exchange trust agreement, to vote at meetings of our stockholders.

In addition, as part of the arrangement, all outstanding options to purchase 180 Connect common shares will be exchanged for options to purchase our common stock. We will also assume all of 180 Connect’s obligations pursuant to 180 Connect’s outstanding warrants, stock appreciation rights and convertible debentures. The arrangement will be accounted for under the reverse acquisition application of the equity recapitalization method of accounting in accordance with U.S. GAAP for accounting and financial reporting purposes.

Upon completion of the arrangement, each 180 Connect common share will be exchanged for 0.6272 shares of our common stock or 0.6272 exchangeable shares of Purchaser. Each exchangeable share will be exchangeable for one share of our common stock at any time after issuance at the option of the holders and will be redeemable or purchasable at the option of Purchaser or the parent of Purchaser after two years or upon the earlier occurrence of certain specified events. Only 180 Connect shareholders that are eligible Canadian residents may elect to receive exchangeable shares. The exchangeable shares will entitle their holders to dividends and other rights that are substantially economically equivalent to those of holders of shares of our common stock. Holders of exchangeable shares will also have the right, through a voting and exchange trust arrangement, to vote at meetings of our stockholders. The exchangeable share structure is designed to provide an opportunity for shareholders of 180 Connect that are eligible Canadian residents and who validly make the required tax election to achieve a deferral of Canadian tax on any accrued capital gain on their 180 Connect common shares in certain circumstances until redemption or purchase of such shares pursuant to its terms.

The arrangement is expected to be completed during the third calendar quarter of 2007. The completion of the arrangement is subject to the approval of the arrangement proposal by Ad.Venture’s stockholders, compliance with the court ordered approval process pursuant to the CBCA and the satisfaction of certain other conditions.

For additional information about the proposed arrangement, including copies of the arrangement agreement, the plan of arrangement and other ancillary agreements related to the arrangement, please refer to the Registration Statement on Form S-4 that we filed with the Securities and Exchange Commission (the “SEC”) on April 24, 2007.

Operating Funds and Loans

Since our IPO we have expended all of the funds held outside of our trust account. In addition to amounts spent on legal and accounting due diligence on prospective acquisitions, we have spent significant amounts on legal and accounting fees related to our SEC reporting obligations as well as on continuing general and administrative expenses. On January 29, 2007, we entered into notes with each of Messrs. Balter and Slasky pursuant to which Messrs. Balter and Slasky may loan such amounts as are necessary to fund our operating expenses and expenses in connection with the arrangement. The loans bear no interest and are payable upon demand or upon the consummation of a business combination. We have agreed to reimburse Messrs. Balter and Slasky for any tax liabilities they may incur as a result of any imputed interest income related to the notes. We currently believe Messrs. Balter and Slasky will continue to loans funds to us to cover our expenses. However, in the event that Messrs. Balter and Slasky are unable or unwilling to continue to loan funds to us, we may not be able to consummate the arrangement, in which case we will be required to commence proceedings to dissolve and liquidate.

Plan of Dissolution and Distribution of Assets if No Arrangement

If the arrangement is not completed on or prior to August 31, 2007, we are required to adopt a plan of dissolution and distribution of our assets and initiate procedures for our dissolution. Upon our dissolution, we will distribute our assets, including the trust account, and after reserving amounts sufficient to cover our liabilities and obligations and the costs of dissolution, solely to our public stockholders.

We currently believe that our dissolution and any plan of distribution subsequent to August 31, 2007 would proceed in approximately the following manner:


•

our Board of Directors, referred to hereinafter as the Board, will, consistent with our obligation in our amended and restated certificate of incorporation to dissolve, convene and adopt a specific plan of distribution, which it will then vote to recommend to our stockholders, at such time it will also cause to be prepared a preliminary proxy statement setting out the plan of distribution as well as the board’s recommendation of our dissolution and the plan;


•

as soon as practicable after the adoption of the plan of distribution, we would file our preliminary proxy statement with the SEC;


•

if the SEC does not review the preliminary proxy statement, then, 10 days following the passing of such deadline, we would mail the proxy statements to our stockholders, and 30 days following the passing of such deadline we would convene a meeting of our stockholders, at which they will either approve or reject our dissolution and plan of distribution; and


•

if the SEC does review the preliminary proxy statement, we currently estimate that we would receive such comments within approximately 30 days following the passing of such deadline. We would mail the proxy statements to our stockholders following the conclusion of the comment and review process (the length of which we cannot predict with any certainty, and which may be substantial) and we would convene a meeting of our stockholders at which they will either approve or reject our dissolutions and plan of distribution.

In the event we seek stockholder approval for our dissolution and plan of distribution and do not obtain such approval, we would nonetheless continue to pursue stockholder approval for our dissolution. These procedures, or a vote to reject our dissolution and any plan of distribution by our stockholders, may result in substantial delays in the liquidation of our trust account to our public stockholders as part of our dissolution and plan of distribution.

We cannot assure you that third parties will not seek to recover from the assets distributed to our public stockholders any amounts owed to them by us. Creditors may seek to interfere with the distribution of the trust account pursuant to federal or state creditor and bankruptcy laws, which could delay the actual distribution of such funds or reduce the amount ultimately available for distribution to our public stockholders. If we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the funds held in our trust account will be subject to applicable bankruptcy law and may be included in our bankruptcy estate and senior to claims of our public stockholders. To the extent bankruptcy claims deplete the trust account, we cannot assure you we will be able to return to our public stockholders the liquidation amounts due to them. Any claims by creditors could cause additional delays in the distribution of trust funds to the public stockholders beyond the time periods required to comply with Delaware General Corporation Law (“DGCL”) procedures and federal securities laws and regulations.

Under the DGCL, our stockholders could be liable for any claims against the corporation to the extent of the distribution received by them after dissolution. Ad.Venture’s initial stockholders, including all of our officers and directors, have waived their rights to participate in any distributions occurring upon our failure to consummate a business combination with respect to shares of common stock acquired by them prior to the IPO. We estimate that, in the event we liquidate the trust account and distribute those assets to our public stockholders, based on the funds in the trust account as of March 31, 2007, including accrued interest on such funds but without taking into account any taxes payable on interest earned on such funds, each public stockholder would receive approximately $5.82 per share. However, we have incurred significant expenses in connection with the arrangement and we expect to incur signficant additional expenses in connection with the arrangement. Further, if we cannot complete the arrangement and are required to dissolve, we estimate that our total costs and expenses for implementing and completing our dissolution and plan of distribution will be in the range of $50,000 to $75,000. This amount includes all costs of our certificate of dissolution in the State of Delaware, the winding up of our company and the cost of a proxy statement and meeting relating to the approval by our stockholders of our plan of dissolution.

If we dissolve and liquidate prior to the consummation of a business combination, our two officers, Messrs. Balter and Slasky, pursuant to the certain written agreement executed in connection with the IPO, will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of various vendors that are owed money by us for services rendered or products sold to us and target businesses who have entered into written agreements, such as a letter of intent or confidentiality agreement, with us and who have not waived all of their rights to make claims against the proceeds in the trust account. We currently believe a significant portion of the accounts payable and accrued offering costs and acquisition costs reflected on our balance sheet would be considered vendor claims for purposes of the indemnification provided by our officers. We expect that the indemnification provided by our officers would cover these costs to the extent the dissolution and liquidation expenses relate to vendor claims. We cannot assure you that they will be able to satisfy their indemnification obligations. As a result, the indemnification described above may not effectively mitigate the risk of creditors’ claims reducing the amounts in the trust account. As a result, the amounts distributed to our public stockholders may be less than $5.82 per share.

CEO BACKGROUND

Howard S. Balter is our chairman and chief executive officer. In addition, Mr. Balter has been chairman and a managing member of Innovation Interactive, LLC, a diversified Internet advertising company, from May 2002 when it was acquired in a management buy-out from Net2Phone, Inc. until its sale in November 2005. Prior to that he was chief executive officer and a director of Net2Phone, Inc., a leading Internet telephony company. Mr. Balter was a director at Net2Phone, Inc. from October 1997 to October 2001, its chief executive officer from January 1999 to October 2001 and its vice chairman of the board of directors from May 1999 to October 2001. Mr. Balter also served as Net2Phone, Inc.’s treasurer from October 1997 to July 1999. Prior to his employment with Net2Phone, Inc., Mr. Balter was employed by IDT Corp., a diversified international telecommunications company, where he was chief operating officer from 1993 to 1998 and chief financial officer from 1993 to 1995. Mr. Balter was a director of IDT Corp. from December 1995 to January 1999 and vice chairman of IDT Corp.’s board of directors from October 1996 to January 1999 .

Ilan M. Slasky is our president, secretary and one of our directors. In addition, Mr. Slasky has been vice chairman and a managing member of Innovation Interactive, LLC since May 2002 until its sale in November 2005. Prior to that he was chief financial officer at Net2phone, Inc. from January 1999 to January 2002. Prior to his employment with Net2Phone, Inc., Mr. Slasky was employed by IDT Corp., where he was its executive vice president of finance from December 1997 to January 1999, its director of carrier services from November 1996 to July 1997 and its director of finance from May 1996 to November 1996. Mr. Slasky worked for Merrill Lynch as a supervisor in the Risk Management group from 1992 to 1993, as an assistant fixed income trader from 1993 to 1994 and as a collateral management specialist in the Global Equity Derivatives group from 1994 to 1995 .

Lawrence J. Askowitz is one of our directors. In addition, Mr. Askowitz is a founder and partner at Z Communications Capital, which advises and acquires communication and media technology companies. Before founding Z Communications Capital, from April 2004 to April 2005, Mr. Askowitz was the telecommunication and media technology partner at ZelnickMedia Corporation, a private equity firm that acquires and operates media businesses. Mr. Askowitz was employed by Deutsche Bank in the Telecommunications Corporate Finance Group, where he served as a director from September 2000 through December 2001 and as a managing director and head of the U.S. Wireless Banking practice from January 2002 to September 2003. From April 1998 to December 1999, Mr. Askowitz was a vice president at Credit Suisse First Boston in the Media & Telecommunications Corporate Finance Group and the Mergers & Acquisitions Group and served as a director of those groups from January 2000 to September 2000. From 1987 to 1998, Mr. Askowitz was employed by Lazard where he worked as an analyst, associate and vice president in the Banking and Public Finance Departments. Mr. Askowitz served as a director of Horizon PCS, Inc., a provider of personal communications services under the Sprint brand from October 2004 until July 2005 when it merged into iPCS Inc., another Sprint affiliate . Since November 1, 2005, Mr. Askowitz has served on the Advisory Board of Infogate Online, an IPTV middleware provider.

Dr. Shlomo Kalish is one of our directors. Dr. Kalish has been the chairman and chief executive officer of Jerusalem Global Ventures Ltd., a venture capital firm that manages funds focusing on early stage investments in software, communications, homeland security and life sciences since 2000. Dr. Kalish was general partner of Concord Ventures, a venture capital firm, from 1997 to 1999. He founded Jerusalem Global Ltd., and served as chairman and chief executive officer from 1994 to 1997. From 1985 to 1994, Dr. Kalish was a member of the faculty at Tel Aviv University School of Management. Dr. Kalish has served as a director of: Valor Computerized Systems, Ltd., an engineering software company, since November 1999; Camero, Inc., a developer of through-wall imaging micro-power radar, since June 2004; Certagon Ltd., an integrated application environment software provider, since March 2003; Chiasma Inc., a biotechnology company that develops non-invasive alternatives to macromolecule therapies, since May 2001; LocatioNet Systems Ltd., a developer of a comprehensive location-based service system for the wireless market, since October 2000; Notal Vision Ltd., a developer of solutions for the opthalmic industry, since April 2001; Saifun Semiconductors Ltd., a non-volatile memory solutions provider, since April 1998; and VideoCodes, a digital video broadcasting software provider, since March 2004. Dr. Kalish is also a member of the board of governors of Bar Ilan University, the Technion and The Jerusalem College of Technology.


MANAGEMENT DISCUSSION FROM LATEST 10K
Overview

We were formed on April 7, 2005 as a blank check company for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition or other similar business combination, one or more operating businesses in the technology, media or telecommunications industries. We intend to use cash derived from the net proceeds of our IPO, which closed on August 31, 2005, together with any additional financing arrangements that we undertake, to effect a business combination.

The net proceeds from our IPO on August 31, 2005 were approximately $51.2 million, after deducting offering expenses of approximately $0.7 million and underwriting discounts of $2.2 million. Of this amount, $50.4 million was placed in a trust account, with approximately $810,000 remaining for our use to cover business, legal and accounting due diligence expenses on prospective acquisitions and continuing general and administrative expenses.

Results of Operations

Net Income

For the fiscal year ended March 31, 2007, we had net income of approximately $5.4 million, of which approximately $5.4 million was derived from income on derivative liabilities resulting from a decrease in the fair market value of our warrants outstanding and of approximately $1.6 million in interest income, less operating expenses and taxes. For the fiscal year ended March 31, 2006, we had a net loss of approximately $4.3 million derived primarily from a loss on derivative liabilities.

Liquidity and Capital Resources

On August 31, 2005, we consummated our IPO of 9,000,000 units. Each unit consists of one share of common stock and two warrants. Each warrant entitles the holder to purchase from us one share of our common stock at an exercise price of $5.00. Our common stock and warrants started trading separately as of October 10, 2005. The net proceeds from the sale of our units, after deducting certain offering expenses of approximately $0.7 million, and an underwriting discount of approximately $2.2 million, were approximately $51.2 million. Of this amount, $50.4 million was placed into a trust account and the remaining proceeds are available to be used by us to provide for business, legal and accounting due diligence on prospective acquisitions and to pay for continuing general and administrative expenses. In December 2006 and April 2007, we withdrew $58,500 and $75,000, respectively, from the trust account for the payment of income taxes on the interest income of the trust account.

Since our IPO we have expended all of the funds held outside of our trust account. In addition to amounts spent on legal and accounting due diligence on prospective acquisitions, we have spent significant amounts on legal and accounting fees related to our SEC reporting obligations as well as on continuing general and administrative expenses. We expect to incur significant additional expenses in connection with the arrangement. On January 29, 2007, we entered into notes with each of Messrs. Balter and Slasky pursuant to which Messrs. Balter and Slasky may loan such amounts as are necessary to fund our operating expenses and expenses in connection with the arrangement. The loans bear no interest and are payable upon demand or upon the consummation of a business combination. We have agreed to reimburse Messrs. Balter and Slasky for any tax liabilities they may incur as a result of any imputed interest income related to the notes. We currently believe Messrs. Balter and Slasky will continue to loans funds to us to cover our expenses. However, in the event that Messrs. Balter and Slasky are unable or unwilling to continue to loan funds to us, we may not be able to consummate the arrangement, in which case we would be required to diss olve and liquidate.

If we dissolve and liquidate prior to the consummation of a business combination, Messrs. Balter and Slasky, pursuant to the certain written agreement executed in connection with the IPO, will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of various vendors that are owed money by us for services rendered or products sold to us and target businesses who have entered into written agreements, such as a letter of intent or confidentiality agreement, with us and who have not waived all of their rights to make claims against the proceeds in the trust account. We currently believe a significant portion of the accounts payable and accrued offering costs and acquisition costs reflected on our balance sheet would be considered vendor claims for purposes of the indemnification provided by our officers. We expect that the indemnification provided by our officers would cover these costs and expenses and the costs and expenses of the dissolution and liquidation to the extent these costs and expenses relate to vendor claims. We cannot assure you that Messrs. Balter and Slasky will be able to satisfy those indemnification obligations. As a result, the indemnification described above may not effectively mitigate the risk of creditors’ claims reducing the amounts in the trust account. In addition, the trust account could be subject to claims of third parties and our stockholders who have received distributions from us may be held liable for claims by third parties to the extent such claims are not been paid by us. Furthermore, our warrants will expire worthless if we liquidate before the completion of a business combination.

Off-Balance Sheet Arrangements

Other than contractual obligation incurred in the normal course of business, we do not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets or any obligation arising out of a material variable interest in an unconsolidated entity.

Contractual Obligations

We had no long-term liabilities as of March 31, 2007.

In connection with our IPO, we agreed to pay the underwriters additional underwriting fees and expenses of $1.6 million upon the consummation of our initial business combination. We expect that such fees and expenses will be paid out of the proceeds in the trust account upon consummation of the arrangement. Of such fees and expenses, $1.1 million constitute additional underwriting fees and $0.5 million constitutes an additional non-accountable expense allowance.

Following the consummation of our IPO, we cancelled the office service agreement with Innovation Interactive, LLC, which was an affiliate of Howard S. Balter, our chairman of the board and chief executive officer, Ilan M. Slasky, our president, secretary and director. Following cancellation of that arrangement, we relocated our office and entered into an informal agreement with an unrelated third party whereby we pay base rent of $2,058 per month, on a month-to-month basis, in exchange for office space and certain administrative services.

On March 13, 2007, we entered into the arrangement agreement with 180 Connect pursuant to which we intend to issue approximately 17.2 million shares of our common stock and/or exchangeable shares to the shareholders of 180 Connect. We have also agreed to exchange all outstanding options to purchase 180 Connect common shares for options to purchase our common stock and to assume all outstanding stock appreciation rights of 180 Connect and outstanding warrants to purchase common shares of 180 Connect in connection with the arrangement.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported consolidated amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates.

We have identified our accounting for warrants and derivative instruments (as described below) as critical because of the significant non-cash impact on our balance sheet and results of operations and because the application and interpretation of these policies requires both judgment and estimates of matters that are inherently uncertain and unknown.

Accounting for Warrants and Derivative Instruments

Emerging Issues Task Force No. 00-19 , “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” requires freestanding contracts that are settled in a company’s own stock to be designated as an equity instrument, asset or a liability. Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” establishes reporting standards for derivative instruments, including derivative instruments embedded in other contracts. In accordance with EITF No. 00-19, we have determined that the public warrants and the option to purchase 450,000 units, each of which consists of one share of common stock and two warrants that are identical to our public warrants except for the exercise price, issued to the underwriters in connection with our IPO should be classified as derivative liabilities.

The reclassification of the warrants as a derivative liability is required under EITF No. 00-19 due to the absence in the warrant agreement of provisions addressing the exercise of the warrants in the absence of an effective registration statement. Under interpretations of applicable federal securities laws, the issuance of shares upon exercise of the warrants in the absence of an effective registration statement could be deemed a violation of Section 5 of the Securities Act of 1933, as amended (the “Securities Act”). To address this issue, the warrant agreement requires that we file, and use best efforts to cause to be declared and keep effective, a registration statement covering the issuance of the shares underlying the warrants. However, the warrant agreement fails to specify the remedies, if any, that would be available to warrantholders in the event there is no effective registration statement covering the issuance of shares underlying the warrants. Under EITF No. 00-19, the registration of the common stock underlying the warrants is not within our control. In addition, under EITF No. 00-19, in the absence of explicit provisions to the contrary in the warrant agreement, we must assume that we could be required to settle the warrants on a net-cash basis, thereby necessitating the treatment of the potential settlement obligation as a liability.

Similarly, the reclassification of the unit purchase option as a derivative liability is required under EITF No. 00-19 due to the absence in the unit purchase option of provisions addressing the exercise of the unit purchase option in the absence of an effective registration statement. Under interpretations of applicable federal securities laws, the issuance of units upon exercise of the unit purchase option in the absence of an effective registration statement could be deemed a violation of Section 5 of the Securities Act. The reclassification of the unit purchase option as a derivative liability is required under EITF No. 00-19 because the registration of the units underlying the unit purchase option is not within our control.

Under the provisions of EITF No. 00-19, a contract designated as an asset or a liability must be carried at fair value on a company’s balance sheet, with any changes in fair value recorded in the company’s results of operations. The fair value of these warrants and the unit purchase option are shown on our balance sheet and the unrealized changes in the values of these derivatives are shown in our consolidated statement of operations as “Gain (loss) from derivative liabilities.” We determined the initial valuation of the warrants based upon the difference between the per-unit offering price of the units in the IPO and the discounted per-share amount placed into the Trust Account and the valuation of the warrants at September 30, 2005 based upon the difference between the market price of the units and the discounted per-share amount placed into the Trust Account. Thereafter, since the warrants are quoted on the Over-the-Counter Bulletin Board, the fair value of the warrants was determined based on the market price of the warrants at the end of each period. To the extent that the market price increases or decreases, our derivative liability will also increase or decrease, impacting our consolidated statement of operations. As of March 30, 2007 and March 31, 2006, the closing sale prices for the warrants were $0.37 and $0.64, respectively, resulting in a total warrant liabilities of $6.6 million and $11.5 million, respectively.

We determined the fair values of the unit purchase option at March 31, 2007 and March 31, 2006 using a Black Scholes pricing model adjusted to include a separate valuation of the embedded warrants. For the March 31, 2007 valuation, the following assumptions were used for the Black Scholes pricing model: an expected life of 3.41 years, volatility of 64.9% and a risk-free rate of 4.54%. For the March 31, 2006 valuation, the following assumptions were used for the Black Scholes pricing model: an expected life of 4.41 years, volatility of 79.8% and a risk-free rate of 4.81%. Valuations derived from this model are subject to ongoing internal and external verification and review. Selection of these inputs involves management’s judgment and may impact net income. The Company continues to base its volatility assumption on the five-year average historical stock prices of the same representative sample of 20 technology, media and telecommunications companies as used in its initial valuation. The volatility factor used in Black Scholes model has a significant effect on the resulting valuation of the derivative liabilities on the Company’s balance sheet. For the embedded warrants, we based the valuation on the closing sale price for the public warrants as of March 31, 2007 or March 31, 2006, as applicable, adjusted by the percentage difference between the valuations obtained, using a Black Scholes pricing model (with the same assumptions) for the public warrants and the embedded warrants. We did not use the Black Scholes pricing model for the embedded warrants because the valuation obtained using that model did not correlate to the value of the public warrants.

Restatement of Financial Statements

On August 21, 2006, we filed a Form 8-K (the “August 2006 Form 8-K”) to notify investors that we determined, after consulting with its independent registered accounting firm, Eisner LLP, that, based on recent interpretations of the accounting for warrants under Emerging Issues Task Force No. 00-19, the fair value of the warrants issued as part of the units sold in our IPO (the “public warrants”) and the warrants issuable upon the exercise of the unit purchase option issued to the underwriters in our IPO (the “embedded warrants”) should be reported as a derivative liability rather than as equity as had been our practice. The August 2006 Form 8-K disclosed that the financial statements contained within the Company’s Form 8-K filed September 6, 2005 (the “September 2005 Form 8-K”) and the Form 10-K for the period from inception through March 31, 2006 (the “Form 10-K”) should no longer be relied upon and stated our intention to amend such Form 8-K and the Form 10-K to record the warrants as derivative liabilities and make additional non-operating gains and losses related to the classification of and accounting for the public warrants and the embedded warrants.

On August 29, 2006, we filed Amendment No. 1 to the September 2005 Form 8-K (the “Prior Amended Form 8-K”) and Amendment No. 1 to the Form 10-K (the “Prior Amended Form 10-K”, and together with the Prior Amended Form 8-K, collectively, the “Prior Amended Filings”) with restated financial statements that classified that the fair value of the public warrants and the embedded warrants as derivative liabilities rather than as equity.

After we filed the Prior Amended Filings, as a result of comments received from and discussions with the staff of the SEC, we determined that the interpretation of EITF No. 00-19 would also require the unit purchase option to be classified as a derivative liability to be adjusted to fair value at each balance sheet date. As a result, on September 25, 2006, we filed an amendment to the August 2006 Form 8-K disclosing (i) the date on which we first concluded that the financial statements contained within the September 2005 Form 8-K and Form 10-K should no longer be relied upon; (ii) that, on September 19, 2006, we determined to further restate its financial statements to record the unit purchase option issued to the underwriters in our IPO as a liability; (iii) that, as a result of such determination, we would file further amendments to the September 2005 8-K and the Form 10-K, which amendments would restate the previously restated financial statements included in the Prior Amended Filings, (iv) that the previously restated financial statements contained in the Prior Amended Filings should no longer be relied upon, (v) that the financial statements contained within our Forms 10-Q for the quarterly periods ended September 30, 2005, December 31, 2005 and June 30, 2006 (the “Forms 10-Q”) should no longer be relied upon; and (vi) that we would amend the Forms 10-Q to restate the financial statements contained therein. On January 12, 2007, we filed Amendment No. 2 to the September 2005 Form 8-K, Amendment No. 2 to the Form 10-K and Amendment No. 1 to the Forms 10-Q to classify the unit purchase option as a derivative liability.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Net Income (Loss)

For the three months ended June 30, 2007, we had a net loss of approximately $3,191,000 derived primarily from a loss on derivative liabilities of $2,886,803 resulting from an increase in the fair market value of our warrants outstanding , as compared to net income of approximately $5.0 million derived from interest income of approximately $393,000 and a gain on derivative liabilities of approximately $4.8 million for the same period in the previous year.

For the period from April 7, 2005 (inception) through June 30, 2007, we had net loss of approximately $2,067,000, derived from the loss on derivative liabilities resulting from an increase in the fair market value of our warrants outstanding, net of interest income less operating expenses and taxes, as compared to income of $748,853 for the period from April 7, 2005 (inception) through June 30, 2006.

LIQUIDITY AND CAPITAL RESOURCES

On August 31, 2005, we consummated our initial public offering of 9,000,000 units. Each unit consists of one share of common stock and two warrants. Each warrant entitles the holder to purchase from us one share of our common stock at an exercise price of $5.00. Our common stock and warrants started trading separately as of October 10, 2005. The net proceeds from the sale of our units, after deducting certain offering expenses of approximately $650,000, and an underwriting discount of approximately $2,160,000, were approximately $51,190,000. Of this amount, $50,380,000 was placed into a trust account and the remaining proceeds are available to be used by us to provide for business, legal and accounting due diligence on prospective acquisitions and to pay for continuing general and administrative expenses. In December 2006 and April 2007, we withdrew $58,500 and $75,000, respectively, from the trust account for the payment of income taxes on the interest income of the trust account.

Since our initial public offering we have expended all of the funds held outside of our trust account. In addition to amounts spent on legal and accounting due diligence on prospective acquisitions, we have spent significant amounts on legal and accounting fees related to our SEC reporting obligations as well as on continuing general and administrative expenses. We expect to incur significant additional expenses in connection with the arrangement. On January 29, 2007, we entered into notes with each of Messrs. Balter and Slasky pursuant to which Messrs. Balter and Slasky may loan such amounts as are necessary to fund our operating expenses and expenses in connection with the arrangement. The loans bear no interest and are payable upon demand or upon the consummation of a business combination. We have agreed to reimburse Messrs. Balter and Slasky for any tax liabilities they may incur as a result of any imputed interest income related to the notes. We currently believe Messrs. Balter and Slasky will continue to loans funds to us to cover our expenses. However, in the event that Messrs. Balter and Slasky are unable or unwilling to continue to loan funds to us, we may not be able to consummate the arrangement, in which case we would be required to dissolve and liquidate.

If we dissolve and liquidate prior to the consummation of a business combination, Messrs. Balter and Slasky, pursuant to the certain written agreement executed in connection with our initial public offering, will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of various vendors that are owed money by us for services rendered or products sold to us and target businesses who have entered into written agreements, such as a letter of intent or confidentiality agreement, with us and who have not waived all of their rights to make claims against the proceeds in the trust account. We currently believe a significant portion of the accounts payable and accrued offering costs and acquisition costs reflected on our balance sheet would be considered vendor claims for purposes of the indemnification provided by our officers. We expect that the indemnification provided by our officers would cover these costs and expenses and the costs and expenses of the dissolution and liquidation to the extent these costs and expenses relate to vendor claims. We cannot assure you that Messrs. Balter and Slasky will be able to satisfy those indemnification obligations. As a result, the indemnification described above may not effectively mitigate the risk of creditors’ claims reducing the amounts in the trust account. In addition, the trust account could be subject to claims of third parties and our stockholders who have received distributions from us may be held liable for claims by third parties to the extent such claims are not been paid by us. Furthermore, our warrants will expire worthless if we liquidate before the completion of a business combination.

Off-Balance Sheet Arrangements

Other than contractual obligation incurred in the normal course of business, we do not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets or any obligation arising out of a material variable interest in an unconsolidated entity.

Contractual Obligations

We had no long-term liabilities as of June 30, 2007.

In connection with our initial public offering, we agreed to pay the underwriters additional underwriting fees and expenses of $1.6 million upon the consummation of our initial business combination. We expect that such fees and expenses will be paid out of the proceeds in the trust account upon consummation of the arrangement. Of such fees and expenses, $1.1 million constitute additional underwriting fees and $0.5 million constitutes an additional non-accountable expense allowance.

On January 29, 2007, we entered into notes with each of Messrs. Balter and Slasky pursuant to which Messrs. Balter and Slasky may loan such amounts as are necessary to fund the obligations incurred by us in connection with our business. As of August 10, 2007, Messrs. Balter and Slasky have loaned us an aggregate of $900,000. The loans are payable on demand or upon consummation of a business combination, and we will reimburse Messrs. Balter and Slasky for any tax liabilities they may incur as a result of any imputed interest income related to the notes.

On March 13, 2007, we entered into the arrangement agreement with 180 Connect, which was subsequently amended by amendment no. 1 thereto dated July 2, 2007 and amendment no. 2 thereto effective August 6, 2007, pursuant to which we intend to issue approximately 20.1 million shares of our common stock and/or exchangeable shares to the shareholders of 180 Connect. We have also agreed to exchange all outstanding options to purchase 180 Connect common shares for options to purchase our common stock and to assume all outstanding stock appreciation rights of 180 Connect and outstanding warrants to purchase common shares of 180 Connect in connection with the arrangement.

Following the consummation of our initial public offering, we cancelled the office service agreement with Innovation Interactive, LLC, which was an affiliate of Howard S. Balter, our chairman of the board and chief executive officer, Ilan M. Slasky, our president, secretary and director. Following cancellation of that arrangement, we relocated our office and entered into an informal agreement with an unrelated third party whereby we paid base rent of $2,058 per month, on a month-to-month basis, in exchange for office space and certain administrative services. On July 31, 2007, we cancelled our informal agreement for rental of office space and certain administrative services and do not anticipate making alternate office space arrangements until the arrangement has been consummated.

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