UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of the Securities Exchange Act of
1934
Date
of
Report (Date of earliest event reported): August
18, 2006
Ad.Venture
Partners, Inc.
(Exact
name of registrant as specified in its charter)
Delaware
(State
or
other jurisdiction of incorporation)
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000-51456
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20-2650200
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(Commission
File No.)
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(IRS
Employer Identification No.)
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360
Madison Avenue, 21st
Floor
New
York, NY 10017
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code (212)
703-7241
N/A
(Former
name or former address, if changed since last report.)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
¨
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
TABLE
OF CONTENTS
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| Item 4.02. |
Non-Reliance
on Previously Issued Financial Statements or a Related Audit Report
or
Completed Interim Review.
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3
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SIGNATURE
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5
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Item
4.02. Non-Reliance
on Previously Issued Financial Statements or a Related Audit Report or Completed
Interim Review.
In
connection with the preparation of its Current Report on Form 10-Q for the
quarter ended June 30, 2006, and after consulting with our independent
registered accounting firm, Eisner LLP (“Eisner”), Ad.Venture Partners, Inc.
(the “Company”) determined, based on recent interpretations of the accounting
for warrants under Emerging Issues Task Force No. 00-19 “Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company’s Own Stock” (“EITF 00-19”), that the fair value of the warrants issued
as part of the units sold in our initial public offering (the “public warrants”)
and the warrants issuable upon the exercise of the unit purchase option (the
“embedded warrants”) issued to the underwriters in our initial public offering
should be reported as a derivative liability rather than as equity as has been
our practice.
The
Company believes that the reclassification of the warrants as a derivative
liability is required under EITF 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. To address this issue,
the warrant agreement requires that the Company 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 the Company's control. In
addition, under EITF No. 00-19, in the absence of explicit provisions to the
contrary in the warrant agreement, the Company must assume that it could be
required to settle the warrants on a net-cash basis, thereby necessitating
the
treatment of the potential settlement obligation as a liability. Further, EITF
No. 00-19 requires that the Company record the potential settlement obligation
at each reporting date using the current estimated fair value of the warrants,
with any changes being recorded in the statement of operations. The potential
settlement obligation will continue to be reported as a derivative liability
until such time as the warrants are exercised, expire, or the Company is
otherwise able to modify the warrant agreement. The values assigned to the
derivative liability at August 31, 2005 (the date of issuance), March 31, 2006
and June 30, 2006 were $7,126,284, $11,878,143 and $7,221,032, respectively.
The
fair value of the warrants at August 31, 2005 was arrived at by taking the
difference between the price of a unit and the per-share liquidation value
of
the common stock held in the trust account discounted to present value,
resulting in a valuation of approximately $0.383 per warrant or a total
valuation of $6,887,355. The fair value of the unit purchase option at August
31, 2005 was based upon a Black Scholes pricing model, using an expected life
of
five years, volatility of 92.5%, and a risk-free rate of 3.87%. The fair value
of the embedded warrants was based upon a valuation of the unit purchase option
at August 31, 2005 of $1,873,367 which was based on Black Scholes
pricing model of the unit purchase option using the same assumptions. The
Company then allocated $1,634,438 to the purchase option, which it determined
was properly classified as an equity instrument, and $238,929 to the embedded
warrants.
The
fair
value of the public warrants at March 31, 2006 and June 30, 2006 was determined
by the trading value of the securities closest to the balance sheet date of
each
period. The fair value of the embedded warrants at March 31, 2006 and June
30,
2006 was determined based on the Black Scholes pricing model using assumptions
that are consistent with the assumptions used in the initial valuation of the
unit purchase option.
Amounts
reported as a gain (loss) on derivative liability in the Company's statements
of
operations resulting from the change in valuation of the warrant liability
were
$(4,751,859) and $4,657,111 for the period from inception through March 31,
2006
and the period from April 1, 2006 through June 30, 2006, respectively. The
Company had previously issued financial statements which did not classify the
fair value of the warrants as a derivative liability. Accordingly, the financial
statements contained within the Company's Form 8-K dated September 6, 2005
for
the period of April 1, 2005 (date of inception) to August 31, 2005, and Form
10-K for the period from inception through March 31, 2006 should no longer
be
relied upon.
After
discussions with management and members of the Board of Directors of the
Company, the Company has determined to restate its financial statements for
such
periods. The restated financial statements will be included in the Company's
Form 10-K/A for the period from inception through March 31, 2006, and Form
8-K/A
for the period from inception through August 31, 2005 and will record the
warrants as derivative liabilities and make additional non-operating gains
and
losses related to the classification of and accounting for the warrants
described above. The Company's filings for all periods after March 31, 2006
will
reflect this accounting treatment.
Company
management has discussed the matters disclosed in this Current Report on Form
8-K with Eisner.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
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AD.VENTURE
PARTNERS, INC. |
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| Dated:
August 21, 2006 |
By: |
/s/ Ilan
M.
Slasky |
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Ilan
M. Slasky
President
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