UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 10-Q/A

 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2006
 
or
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission file number: 000-51456
 
AD.VENTURE PARTNERS, INC.
(Exact name of registrant as specified in its charter)

Delaware
 
20-2650200
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
360 Madison Avenue, 21st Floor
New York, New York
 
10017
(Address of principal executive offices)
 
(Zip Code)

(212) 682-5357
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 Exchange Act during the past 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 ý   No o
 
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes o   No ý
 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes ý   No o
 
As of August 21, 2006, 11,249,997 shares of the registrant’s common stock, par value $0.001 per share, were outstanding.
 
 
 
 
AD.VENTURE PARTNERS, INC.
 
Table of Contents
 
PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements
4
Balance Sheets
4
Statements of Operations
5
Statement of Cash Flows
6
Notes to Consolidated Financial Statements
7
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
  20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
20
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
 
2
 

Explanatory Note
 
On August 21, 2006, Ad.Venture Partners, Inc. (the “Company”), filed a Form 8-K (the “August 2006 Form 8-K”) to notify investors that it 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 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” (“EITF No. 00-19”), the fair value of the warrants issued as part of the units sold in the Company’s initial public offering (the “public warrants”) and the warrants issuable upon the exercise of the unit purchase option issued to the underwriters in the initial public offering (the “embedded warrants”) should be reported as a derivative liability rather than as equity as had been the Company’s 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 the Company’s 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, the Company filed Amendment No. 1 to the September 2005 Form 8-K and Amendment No. 1 to the Form 10-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 the Company filed the Prior Amended Filings, as a result of comments received from and discussions with the staff of the Securities and Exchange Commission (the “SEC”), the Company 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, the Company filed an amendment to the August 2006 Form 8-K disclosing (i) the date on which the Company 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, the Company determined to further restate its financial statements to record the unit purchase option issued to the underwriters in the Company’s initial public offering as a liability; (iii) that, as a result of such determination, the Company 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 the Company’s 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 the Company would amend the Forms 10-Q to restate the financial statements contained therein.
 
We are filing this Amendment No. 1 to the Quarterly Report on Form 10-Q to restate our financial statements to record the unit purchase option as a derivative liability. For information concerning the background of the restatements, the specific adjustments made, and management’s discussion and analysis of our results of operations giving effect to the restated information, see “Restatement of Financial Statements” at Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes B and C to our Financial Statements.
 
This Form 10-Q/A amends and restates only certain information in the following sections as a result of the current restatements described above:
 
Part I — Item 1. Financial Statements
 
Part I — Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations;
 
Part I — Item 4. Controls and Procedures; and
 
Part II — Item 6. Exhibits and Financial Statement Schedules.
 
In addition, we are also including currently dated Sarbanes Oxley Act Section 302 and Section 906 certifications of the Chief Executive Officer and Chief Financial Officer that are attached to this Form 10-Q/A as Exhibits 31.1, 31.2, 32.1 and 32.2.

3
 

PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements.
 
AD.VENTURE PARTNERS, INC.
(a corporation in the development stage)
 
BALANCE SHEETS
 
(UNAUDITED)
 
(As Restated)
 
   
June 30,
2006
  
March 31,
2006
 
           
(Restated)
  
ASSETS
              
Current Assets:
              
Cash and cash equivalents
  
$
352,189
  
$
579,029
  
Prepaid expenses
    
52,873
    
72,488
  
Total current assets
  
$
405,062
  
$
651,517
  
               
Investments held in Trust Account
    
51,496,984
    
51,108,343
  
Fixed assets, net of accumulated depreciation
    
3,808
    
4,062
  
               
Total assets
  
$
51,905,854
  
$
51,763,922
  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
              
Current liabilities
              
Accrued expenses
  
$
57,268
  
$
90,310
  
Taxes payable
    
64,000
    
116,000
  
Derivative liabilities
    
8,616,602
    
13,393,035
  
Total current liabilities
  
$
8,737,870
  
$
13,599,345
  
               
Common stock, and changes in Trust Account value attributable to shares subject to possible redemption, 1,799,100 shares at $5.60 per share
    
10,298,245
    
10,193,318
  
               
STOCKHOLDERS’ EQUITY
              
Preferred stock — $.0001 par value, 1,000,000 shares authorized; 0 shares issued and outstanding
    
—
    
—
  
Common stock — $.0001 par value, 50,000,000 shares authorized; 11,249,997 shares issued and outstanding (which includes 1,799,100 shares subject to possible redemption)
    
1,125
    
1,125
  
Additional paid-in capital
    
32,343,046
    
32,343,046
  
Retained earnings (deficit)
    
525,568
    
(4,372,912
)
Total stockholders’ equity
    
32,869,739
    
27,971,259
  
Total liabilities and stockholders’ equity
  
$
51,905,854
  
$
51,763,922
  
 
4
 
 
AD.VENTURE PARTNERS, INC.
(a corporation in the development stage)
 
STATEMENTS OF OPERATIONS
 
(UNAUDITED)
 
(As Restated)
 
   
Three Months
Ended
June 30, 2006
  
April 7, 2005
(Date of Inception) Through
June 30, 2005
  
April 7, 2005
(Date of Inception) Through
June 30, 2006
 
               
Operating costs
  
$
(101,567
)
$
(1,119
)
$
(317,660
)
Loss from operations
    
(101,567
)
  
(1,119
)
  
(317,660
)
Gain (loss) from derivative liabilities
    
4,776,433
    
—
    
113,870
  
Other income—interest
    
392,541
    
310
    
1,132,643
  
Income (loss) before provision for income taxes
    
5,067,407
    
(809
)
  
928,853
  
Provision for income taxes
    
(64,000
)
  
—
    
(180,000
)
Net income (loss)
  
$
5,003,407
  
$
(809
)
$
748,853
  
Weighted average number of shares outstanding—basic
    
11,249,997
    
2,249,997
    
—
  
Net income per share—basic
  
$
0.44
  
$
0.00
    
—
  
Weighted average number of shares outstanding—diluted
    
12,935,798
    
2,249,997
    
—
  
Net income per share—diluted
  
$
0.04
  
$
0.00
    
—
  
                   
Pro Forma Adjustment:
          
 
        
Interest income attributable to common stock subject to possible redemption (net of taxes of $0)
  
$
(104,927
)
  
—
  
$
(223,285
)
Pro forma net income attributable to common stockholders not subject to possible redemption
  
$
4,898,480
    
—
  
$
525,568
  
Pro forma weighted average number of shares outstanding, excluding shares subject to possible redemption—basic
    
9,450,897
    
—
    
—
  
Pro forma net income per share, excluding shares subject to possible redemption—basic
  
$
0.52
    
—
    
—
  
Pro forma weighted average number of shares outstanding, excluding shares subject to possible redemption—diluted
    
11,136,698
    
—
    
—
  
Pro forma net income per share, excluding shares subject to possible redemption—diluted
  
$
0.04
    
—
    
—
  
 
5
 

AD.VENTURE PARTNERS, INC.
(a corporation in the development stage)
 
STATEMENT OF CASH FLOWS
 
(unaudited)
 
(As Restated)
 
   
Three Months
Ended
June 30, 2006
  
April 7, 2005
(Date of Inception) Through
June 30, 2005
  
April 7, 2005
(Date of Inception) Through
June 30, 2006
 
             (Restated)  
Cash flows from operating activities:
                    
Net income (loss)
  
$
5,003,407
  
$
(809
)
$
748,853
  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
                   
Depreciation
   
254
    
—
    
1,269
  
Derivative liabilities
    
(4,776,433
)
  
—
    
(113,870
)
Changes in operating assets and liabilities
                   
Prepaid expenses
   
19,615
    
70,000
    
(52,873
)
Accrued expenses
   
(33,042
)
  
—
    
57,268
  
Accrued interest payable
    
—
    
(70,000
)
  
—
  
Taxes payable
    
(52,000
)
        
64,000
  
Notes payable to stockholder
    
—
    
87,018
    
—
  
Net cash provided by operating activities
   
161,801
    
86,209
    
704,647
  
Cash flows from investing activities:
                   
Investments held in Trust Account
   
(388,641
)
  
—
    
(51,496,984
)
Purchase of property and equipment
    
—
    
—
    
(5,077
)
Net cash used in investing activities
   
(388,641
)
  
—
    
(51,502,061
)
Cash flows from financing activities:
                   
Issuance of stock
   
—
    
—
    
51,148,503
  
Proceeds from notes payable to stockholder
   
—
    
—
    
150,000
  
Repayment of note payable to stockholder
   
—
    
—
    
(150,000
)
Proceeds from sale of common stock to founders
   
—
    
(9,375
)
  
1,000
  
Proceeds from issuance of representative’s option
   
—
    
—
    
100
  
Net cash provided by (used in) financing activities
   
—
    
(9,375
)
  
51,149,603
  
Net increase (decrease) in cash and cash equivalents
   
(226,840
)
  
76,834
    
352,189
  
Cash and cash equivalents—beginning of period
   
579,029
    
—
    
—
  
Cash and cash equivalents—end of period
 
$
352,189
  
$
76,834
  
$
352,189
  
 
6
 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE A—ORGANIZATION AND BUSINESS OPERATIONS
 
Ad.Venture Partners, Inc. (the “Company”) was incorporated in Delaware on April 7, 2005. The Company was formed to serve as a vehicle for the acquisition through a merger, capital stock exchange, asset acquisition or other similar business combination (the “Business Combination”) of one or more operating business in the technology, media or telecommunications industries. The Company has not generated revenue. The Company is considered to be in the development stage and is subject to the risks associated with activities of development stage companies. The Company has selected March 31 as its fiscal year end.
 
The financial information in this report has not been audited, but in the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary to present fairly such information have been included. Operating results for the interim period are not necessarily indicative of the results to be expected for the full year.
 
The registration statement for the Company’s initial public offering (the “Offering”) (as described in Note C) was declared effective on August 25, 2005. The Company consummated the Offering on August 31, 2005 and received net proceeds of approximately $51,190,000. The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Offering, although substantially all of the net proceeds of the Offering are intended to be generally applied toward a Business Combination. Furthermore, there is no assurance that the Company will be able to successfully effect a Business Combination. Of the net proceeds, $50,380,000 was placed in a trust account (“Trust Account”) and invested in municipal money market funds until the earlier of (i) the consummation of the first Business Combination or (ii) the distribution of the Trust Account as described below. The remaining proceeds 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 holders of 20% or more of the shares issued in the Offering vote against the Business Combination, the Business Combination will not be consummated. However, the persons who were stockholders prior to the Offering (the “Initial Stockholders”) will participate in any liquidation distribution only with respect to any shares of the common stock acquired in connection with or following the Offering.
 
In the event that the Company does not consummate a Business Combination within 18 months from the date of the consummation of the Offering, or 24 months from the consummation of the Offering if certain extension criteria have been satisfied (the “Acquisition Period”), the Company will be required to commence proceedings to dissolve, liquidate and distribute the proceeds held in the Trust Account to its public stockholders, excluding the Initial Stockholders to the extent of their initial stock holdings. In the event of such distribution, 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 Offering (assuming no value is attributed to the Warrants contained in the Units in the Offering discussed in Note D)).
 
NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
[1]  Cash and cash equivalents:
 
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
 
[2]  Investments held in Trust Account:
 
At June 30, 2006, the investments held in the Trust Account consist of tax-exempt municipal money market funds, and are treated as trading securities and recorded at their market value. The excess of market over cost is included in interest income in the accompanying statement of operations.

7
 
 
[3]  Accounting for Warrants and Derivative Instruments
 
Emerging Issues Task Force issue EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock,” (“EITF No. 00-19”) requires freestanding contracts that are settled in a company's own stock to be designated as an equity instrument, asset or a liability. In accordance with EITF No. 00-19, the Company determined that the warrants issued in connection with the Offering (the “public warrants”) and the unit purchase option issued to the underwriters in connection with the Offering (further described in Note D below) should be classified as a derivative liability.
 
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 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.
 
Similarly, the reclassification of the unit purchase option as a derivative liability (as described in Note C below) 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 the Company's 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 the Company’s balance sheet and the unrealized changes in the values of these derivatives are shown in the Company’s consolidated statement of operations as “Gain (loss) from derivative liabilities.” The Company determined the initial valuation of the warrants based upon the difference between the per-unit offering price of the units in the Offering 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, the Company’s derivative liability will also increase or decrease, impacting the Company’s consolidated statement of operations. As of June 30, 2006, the closing sale price for the warrants was $0.39, resulting in a total warrant liability of $7,020,000.
 
The Company has determined the fair values of the unit purchase option at June 30, 2006 using a Black Scholes pricing model adjusted to include a separate valuation of the embedded warrants. The following assumptions were used for the Black Scholes pricing model: an expected life of 4.16 years, volatility of 76.5% and a risk-free rate of 5.1%. 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 June 30, 2006 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.

8
 
 
[4] Earnings per common share:
 
Basic earnings-per-share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period, increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued, by application of the treasury stock method. During the three months ended March 31, 2006, the dilutive potential common shares were not included in the computation of diluted loss per share, because the inclusion of convertible warrants would be anti-dilutive or because the exercise prices were greater than the average market prices of the common shares.
 
[5]  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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
[6]  Income taxes:
 
Deferred income taxes are provided for the differences between the bases of assets and liabilities for financial reporting and income tax purposes. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.
 
The Company recorded a deferred income tax asset for the tax effect of start-up costs and temporary differences, aggregating approximately $135,000. In recognition of the uncertainty regarding the ultimate amount of income tax benefits to be derived, the Company has recorded a full valuation allowance at June 30, 2006.
 
The effective tax rate differs from the statutory rate of 34% due to the increase in the valuation allowance.
 
NOTE C — RESTATEMENT AND RECLASSIFICATION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS AND DERIVATIVE LIABILITIES
 
On August 21, 2006, the Company filed a Form 8-K (the “August 2006 Form 8-K”) to notify investors that it determined, after consulting with its independent registered accounting firm, Eisner LLP, that, based on recent interpretations of the accounting for warrants under EITF No. 00-19, the fair value of the public warrants and the warrants issuable upon the exercise of the unit purchase option (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, the Company 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.

9
 
 
After the Company filed the Prior Amended Filings, as a result of comments received from and discussions with the staff of the SEC, the Company 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, the Company filed an amendment to the August 2006 Form 8-K disclosing (i) the date on which it 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, the Company determined to further restate its financial statements to record the unit purchase option issued to the underwriters in our initial public offering as a liability; (iii) that, as a result of such determination, the Company 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 the Company’s 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 the Company would amend the Forms 10-Q to restate the financial statements contained therein.
 
The accompanying financial statements for the quarterly period ended June 30, 2006 have been restated to record the unit purchase option as a derivative liability. The impact of the adjustments to the financial statements relating to the classification of and accounting for the unit purchase option for the quarterly period ended June 30, 2006 are summarized below:
 
Statement of Operations Impact
 
   
Quarterly Period Ended
June 30, 2006
  
April 7, 2005 (Date of Inception) Through
June 30, 2006
  
   
(unaudited)
  
(unaudited)
  
   
As Previously Reported
  
 
Adjustments
  
 
As Restated
  
As Previously Reported
  
 
Adjustments
  
As Restated
  
                           
Operating costs
  
$
(101,567
)
  
—
  
$
(101,567
)
$
(317,660
)
  
—
  
$
(317,660
)
Loss from operations
    
(101,567
)
  
—
    
(101,567
)
  
(317,660
)
  
—
    
(317,660
)
Gain (loss) from derivative liabilities
    
4,657,111
    
119,322
    
4,776,433
   
(94,748
)
  
208,618
    
113,870
  
Other income - interest
   
392,541
    
—
    
392,541
    
1,132,643
          
1,132,643
  
Income before provision for income taxes
    
4,948,085
    
119,322
    
5,067,407
    
720,235
          
928,853
  
Provision for income taxes
    
(64,000
)
  
—
    
(64,000
)
  
(180,000
)
  
—
    
(180,000
)
Net income
  
$
4,884,085
    
119,322
  
$
5,003,407
  
$
540,235
    
208,618
  
$
748,853
  
Weighted average number of shares outstanding--basic
   
11,249,997
    
—
    
11,249,997
    
—
    
—
    
—
  
Net Income per share--basic
  
$
0.43
    
—
  
$
0.44
    
—
    
—
    
—
  
Weighted average number of shares outstanding--diluted
    
12,945,649
    
(9,851
)
  
12,935,798
    
—
    
—
    
—
  
Net income per share--diluted
  
$
0.03
    
—
  
$
0.04
    
—
    
—
    
—
  
                                       
Pro Forma Adjustment:
                                      
Interest income attributable to common stock subject to possible redemption (net of taxes of $0)
    
(104,927
)
  
—
    
(104,927
)
  
(223,285
)
  
—
    
(223,285
)
Pro forma net income attributable to common stockholders not subject to possible redemption
  
$
4,779,158
    
119,322
  
$
4,898,480
  
$
316,950
    
208,616
  
$
525,568
  
Pro forma weighted average number of shares outstanding, excluding shares subject to possible redemption--basic
    
9,450,897
    
—
    
9,450,897
    
—
    
—
    
—
  
Pro forma net income per share, excluding shares subject to possible redemption--basic
  
$
0.51
    
—
  
$
0.52
    
—
    
—
    
—
  
Pro forma weighted average number of shares outstanding, excluding shares subject to possible redemption--diluted
    
11,146,549
    
(9,851
)
  
11,136,698
    
—
    
—
    
—
  
Pro forma weighted average number of shares outstanding, excluding shares subject to possible redemption--diluted
  
$
0.03
    
—
  
$
0.04
    
—
    
—
    
—
  
 
10
 

Balance Sheet Impact

   
June 30, 2006
  
   
(unaudited)
  
   
As Previously Reported
  
 
Adjustments
  
 
As Restated
  
ASSETS
                    
Current assets
                    
Cash and cash equivalents
  
$
352,189
    
—
  
$
352,189
  
Prepaid expenses
    
52,873
    
—
    
52,873
  
Total current assets
    
405,062
    
—
    
405,062
  
                     
Investments held in Trust Account
    
51,496,984
    
—
    
51,496,984
  
Fixed assets, net of accumulated depreciation
    
3,808
    
—
    
3,808
  
Total assets
  
$
51,905,854
    
—
  
$
51,905,854
  
                     
LIABILITIES AND STOCKHOLDERS’ EQUITY
                    
Current liabilities
                    
Accrued expenses
  
$
57,268
    
—
  
$
57,268
  
Taxes payable
    
64,000
    
—
    
64,000
  
Derivative liabilities
    
7,221,032
    
1,395,570
   
8,616,602
  
Total current liabilities
    
7,342,300
    
1,395,570
    
8,737,870
  
                     
Common stock, subject to possible redemption, 1,799,100 shares at $5.60 per share
    
10,298,245
    
—
    
10,298,245
  
                     
Preferred stock, $.0001 par value, authorized 1,000,000 shares; none issued and outstanding
    
—
    
—
    
—
  
Common stock, $.0001 par value, authorized 50,000,000 shares; issued and outstanding 11,249,997 shares (which includes 1,799,100 shares subject to possible redemption)
    
1,125
    
—
    
1,125
  
Additional paid-in capital
    
33,947,234
    
(1,604,188
)
  
32,343,046
  
Retained earnings
    
316,950
    
208,618
    
525,568
  
Total stockholders’ equity
    
34,265,309
    
(1,395,570
)
  
32,869,739
  
Total liabilities and stockholders’ equity
  
$
51,905,854
    
—
  
$
51,905,854
  
 
11
 

NOTE D—PUBLIC OFFERING
 
On August 31, 2005, the Company consummated an initial public offering of 9,000,000 units (“Units”). Each Unit consists of one share of the Company’s common stock, $.0001 par value, and two warrants (“Warrants”). Each Warrant entitles the holder to purchase from the Company one share of common stock at an exercise price of $5.00. Each warrant is exercisable on the later of (a) the completion of a Business Combination or (b) August 25, 2006 and expires on August 25, 2010. The Warrants are redeemable at a price of $0.01 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 $8.50 per share for any 20 trading days within a 30 trading day period ending on the third day prior to the date on which notice of redemption is given.
 
In connection with the Offering, the Company paid the underwriters an underwriting discount of 4% of the gross proceeds of the Offering. In addition, the Company agreed to pay the underwriters additional underwriting fees and expenses of $1,620,000 upon the consummation of the initial business combination. The Company expects that such additional fees and expenses will be paid out of the proceeds in the trust account. Of such additional fees and expenses $1,080,000 constitute additional underwriting fees and $540,000 constitutes an additional non-accountable expense allowance.
 
The Company also sold to the representative of the underwriters for a purchase price of $100 an option to purchase up to a total of 450,000 units at a price of $7.50 per unit (the “unit purchase option”). The units issuable upon the exercise of the unit purchase option are identical to those offered in the prospectus, except that the exercise price of the warrants underlying the unit purchase option is $6.65. The unit purchase option is exercisable commencing on the later of the consummation of a business combination and one year from the date of the prospectus and expiring five years from the date of the prospectus and may be exercised on a cashless basis. The unit purchase option may not be sold, transferred, assigned, pledged or hypothecated for a one-year period following the date of the prospectus. However, the unit purchase option may be transferred to any underwriter and selected dealer participating in the offering and their bona fide officers or partners.
 
The holders of the unit purchase option have demand and piggy-back registration rights under the Securities Act for periods of five and seven years, respectively, from the date of the prospectus with respect to registration of the securities directly and indirectly issuable upon exercise of the unit purchase option. The exercise price and number of units issuable upon exercise of the unit purchase option may be adjusted in certain circumstances, including in the event of a stock dividend, recapitalization, reorganization, merger or consolidation. However, the unit purchase option will not be adjusted for issuances at a price below its exercise price.

12
 
 
As part of the Offering, the Company and the managing underwriters agreed that, within the first 45 calendar days after separate trading of the warrants commenced, the managing underwriters or certain of their principals, affiliates or designees would place bids for and, if their bids were accepted, spend up to $400,000 to purchase warrants in the public marketplace at prices not to exceed $0.70 per warrant. The managing underwriters agreed that any warrants purchased by them or their affiliates or designees would not be sold or transferred until completion of a Business Combination by the Company. Additionally, the chief executive officer and the president agreed with the representative of the underwriters, that within the first 45 calendar days after separate trading of the warrants commenced, they or certain of their affiliates or designees would collectively place bids for, and if their bids were accepted, spend up to $1,600,000 to purchase warrants in the public marketplace at prices not to exceed $0.70 per warrant. The chief executive officer and president further agreed that any warrants purchased by them or their affiliates or designees will not be sold or transferred until the completion of a Business Combination. The units separated on October 10, 2005 and, within the time specified, management purchased 3,794,403 warrants at an average price of $0.4216, and the underwriter purchased 948,000 warrants at an average price of $0.4216.
 
NOTE E—NOTES PAYABLE TO STOCKHOLDER
 
The Company issued an aggregate of $150,000 in promissory notes to Messrs. Balter and Slasky in April 2005. The notes bear interest at a rate of 4% per year. The notes were paid upon consummation of the Offering from the net proceeds of the Offering.
 
NOTE F—RELATED PARTY TRANSACTION
 
Following the consummation of its initial public offering, the Company cancelled its office agreement with Innovation Interactive, LLC, a company where certain of the Initial Stockholders served in executive capacities, under which the Company agreed to pay an administrative fee of $7,500 per month for office space and general and administrative services. Following cancellation of that arrangement, the Company relocated its offices under an informal agreement with an unrelated third party whereby the Company has agreed to pay a base rent of $2,058 per month, on a month-to-month basis, in exchange for office space and certain administrative services.
 
NOTE G—COMMON STOCK RESERVED FOR ISSUANCE
 
At June 30, 2006, 18,900,000 shares of stock were reserved for issuance upon exercise of redeemable warrants.

13
 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of  activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.  In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,”  “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions.  Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission  filings. The following discussion should be read in conjunction with our financial statements and related notes thereto included elsewhere in this report.
 
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 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” (“EITF No. 00-19”), 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 issued to the underwriters in our initial public offering (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 and Amendment No. 1 to the Form 10-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 initial public offering 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.
 
The accompanying financial statements for the quarterly period ended June 30, 2006 have been restated to record the unit purchase option as a derivative liability. The impact of the adjustments to the financial statements relating to the classification of and accounting for the unit purchase option for the quarterly period ended June 30, 2006 are summarized below:
 
14
 
 
Statement of Operations Impact
 
   
Quarterly Period Ended
June 30, 2006
  
April 7, 2005 (Date of Inception) Through
June 30, 2006
  
   
(unaudited)
  
(unaudited)
  
   
As Previously Reported
  
 
Adjustments
  
 
As Restated
  
As Previously Reported
  
 
Adjustments
  
As Restated
  
                           
Operating costs
  
$
(101,567
)
  
—
  
$
(101,567
)
$
(317,660
)
  
—
  
$
(317,660
)
Loss from operations
    
(101,567
)
  
—
    
(101,567
)
  
(317,660
)
  
—
    
(317,660
)
Gain (loss) from derivative liabilities
    
4,657,111
    
119,322
    
4,776,433
   
(94,748
)
  
208,618
    
113,870
  
Other income - interest
   
392,541
    
—
    
392,541
    
1,132,643
    
—
    
1,132,643
  
Income before provision for income taxes
    
4,948,085
    
119,322
    
5,067,407
    
720,235
    
—
    
928,853
  
Provision for income taxes
    
(64,000
)
  
—
    
(64,000
)
  
(180,000
)
  
—
    
(180,000
)
Net income
  
$
4,884,085
    
119,322
  
$
5,003,407
  
$
540,235
    
208,618
  
$
748,853
  
Weighted average number of shares outstanding--basic
   
11,249,997
    
—
    
11,249,997
    
—
    
—
    
—
  
Net Income per share--basic
  
$
0.43
    
—
  
$
0.44
    
—
    
—
    
—
  
Weighted average number of shares outstanding--diluted
    
12,945,649
    
(9,851
)
  
12,935,798
    
—
    
—
    
—
  
Net income per share--diluted
  
$
0.03
    
—
  
$
0.04
    
—
    
—
    
—
  
                                       
Pro Forma Adjustment:
                                      
Interest income attributable to common stock subject to possible redemption (net of taxes of $0)
    
(104,927
)
  
—
    
(104,927
)
  
(223,285
)
  
—
    
(223,285
)
Pro forma net income attributable to common stockholders not subject to possible redemption
  
$
4,779,158
    
119,322
  
$
4,898,480
  
$
316,950
    
208,616
  
$
525,568
  
Pro forma weighted average number of shares outstanding, excluding shares subject to possible redemption--basic
    
9,450,897
    
—
    
9,450,897
    
—
    
—
    
—
  
Pro forma net income per share, excluding shares subject to possible redemption--basic
  
$
0.51
    
—
  
$
0.52
    
—
    
—
    
—
  
Pro forma weighted average number of shares outstanding, excluding shares subject to possible redemption--diluted
    
11,146,549
    
(9,851
)
  
11,136,698
    
—
    
—
    
—
  
Pro forma weighted average number of shares outstanding, excluding shares subject to possible redemption--diluted
  
$
0.03
    
—
  
$
0.04
    
—
    
—
    
—
  
 
15
 

Balance Sheet Impact

   
June 30, 2006
  
   
(unaudited)
  
   
As Previously Reported
  
 
Adjustments
  
 
As Restated
  
ASSETS
                    
Current assets
                    
Cash and cash equivalents
  
$
352,189
    
—
  
$
352,189
  
Prepaid expenses
    
52,873
    
—
    
52,873
  
Total current assets
    
405,062
    
—
    
405,062
  
                     
Investments held in Trust Account
    
51,496,984
    
—
    
51,496,984
  
Fixed assets, net of accumulated depreciation
    
3,808
    
—
    
3,808
  
Total assets
  
$
51,905,854
    
—
  
$
51,905,854
  
                     
LIABILITIES AND STOCKHOLDERS’ EQUITY
                    
Current liabilities
                    
Accrued expenses
  
$
57,268
    
—
  
$
57,268
  
Taxes payable
    
64,000
    
—
    
64,000
  
Derivative liabilities
    
7,221,032
    
1,395,570
   
8,616,602
  
Total current liabilities
    
7,342,300
    
1,395,570
    
8,737,870
  
                     
Common stock, subject to possible redemption, 1,799,100 shares at $5.60 per share
    
10,298,245
    
—
    
10,298,245
  
Stockholders’ equity
                    
Preferred stock, $.0001 par value, authorized 1,000,000 shares; none issued and outstanding
    
—
    
—
    
—
  
Common stock, $.0001 par value, authorized 50,000,000 shares; issued and outstanding 11,249,997 shares (which includes 1,799,100 shares subject to possible redemption)
    
1,125
    
—
    
1,125
  
Additional paid-in capital
    
33,947,234
    
(1,604,188
)
  
32,343,046
  
Retained earnings
    
316,950
    
208,618
    
525,568
  
Total stockholders’ equity
    
34,265,309
    
(1,395,570
)
  
32,869,739
  
Total liabilities and stockholders’ equity
  
$
51,905,854
    
—
  
$
51,905,854
  

Except as otherwise clearly stated, all financial information contained in this Quarterly Report on Form 10-Q/A gives effect to the restatements.
 
Overview
 
We were formed on April 7, 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.  Our initial business combination must be with a target business or businesses whose fair market value is at least equal to 80% of net assets at the time of such acquisition.  We intend to utilize cash derived from the proceeds of our recently completed public offering, our capital stock, debt or a combination of cash, capital stock and debt, in effecting a business combination.
 
16
 
 
Since our initial public offering, we have been actively engaged in sourcing a suitable business combination candidate. We have met with target companies, service professionals and other intermediaries to discuss our company, the background of our management and our combination preferences. In the course of these discussions, we have also spent time explaining the capital structure of the initial public offering, the combination approval process and the timeline under which we are operating before the proceeds of the offering are returned to investors.
 
Consistent with the disclosures in our prospectus, we have focused our search on companies in the technology, media or telecommunications industries. Overall, we would gauge the environment for target companies to be competitive and we believe that private equity firms and strategic buyers represent our biggest competition. Our management believes that many of the fundamental drivers of alternative investment vehicles like our company are becoming more accepted by investors and potential business combination targets; these include a difficult environment for initial public offerings, a cash-rich investment community looking for differentiated opportunities for incremental yield and business owners seeking new ways to maximize their shareholder value while remaining invested in the business. However, there can be no assurance that we will find a suitable business combination in the allotted time.
 
Results of Operations
 
Net Income
 
For the three months ended June 30, 2006, we had net income of approximately $5,003,400, consisting primarily of interest income of $392,541 related to the cash held in our trust account and gain on derivative liabilities of $4,776,433.
 
For the period from April 7, 2005 (inception) through June 30, 2006, we had net income of approximately $748,900, primarily as a result of interest income of $1,132,643 related to the cash held in our trust account and gain on derivative liabilities of $113,870.
 
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. As of June 30, 2006, we had approximately $51,497,000 of proceeds available for such uses. In addition, at June 30, 2006, we had $352,189 in cash available to fund the expenses of consummating a merger. We expect we may need to either defer expenses until the consummation of a business combination or obtain additional funds to fund such expenses.
 
We expect to use substantially all of the net proceeds of this offering to acquire a target business, including identifying and evaluating prospective acquisition candidates, selecting the target business and structuring, negotiating and consummating the 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 as well as any other net proceeds not expended will be used to finance the operations of the target business. We may not have sufficient funds remaining outside of the trust account to fund legal, accounting and due diligence expenses in connection with a business combination. While we believe the cash available outside of the trust account is sufficient to fund our ordinary course expenses through August 31, 2007, it is likely insufficient to fund the fees and expenses we expect to incur in connection with the negotiation and completion of a business combination. As a result, we may need to defer the payment of expenses until the consummation of a business combination or raise additional funds to pay for such expenses. In addition, if we expend significant funds in an effort to consummate a business combination, we may need to raise additional funds to fund our operations through August 31, 2007. Until we enter into a business combination, the company expects to use its available resources for general working capital as well as legal, accounting and due diligence expenses for structuring and negotiating a business combination and legal and accounting fees relating to our SEC reporting obligations.

17
 
 
Following the consummation of the 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 pay base rent of $2,058 per month, on a month-to-month basis, in exchange for office space and certain administrative services.
 
As of June 30, 2006, the proceeds in the trust account were invested in money market funds composed of either primarily short-term securities issued or guaranteed by the U.S. government or tax-exempt municipal bonds.
 
Off-Balance Sheet Arrangements
 
Other than contractual obligations 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. We do not have any majority-owned subsidiaries.
 
Contractual Obligations
 
In connection with the initial public offering, we agreed to pay the underwriters additional underwriting fees and expenses of $1,620,000 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. Of such fees and expenses, $1,080,000 constitute additional underwriting fees and $540,000 constitutes an additional non-accountable expense allowance.
 
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 and, if a suitable business target is not identified by us prior to the prescribed liquidation date of the trust account, we may not engage in, any substantive commercial business. Accordingly, we are not and, until such time as we consummate a business combination, we will not be, exposed to risks associated with foreign exchange rates, commodity prices, equity prices or other market-driven rates or prices. The net proceeds of our initial public offering held in the trust account have been invested only in money market funds meeting conditions of the Investment Company Act of 1940. Given our limited risk in our exposure to money market funds, we do not view the interest rate risk to be significant.
 
Item 4. Controls and Procedures.
 
Our management carried out an evaluation, with the participation of our chief executive officer (principal executive officer) and our president (principal financial and accounting officer), of the effectiveness of our disclosure controls and procedures as of June 30, 2006. Based upon that evaluation, our chief executive officer and president concluded that our disclosure controls and procedures were effective. However, based on a review of relevant accounting literature and comments received from and discussions with the staff of the SEC and in consultation with Eisner, we determined that we needed to reclassify certain amounts in our financial statements to report the warrants and the unit purchase option as derivative liabilities. As a result of this determination, we are restating our financial statements for the period April 7, 2005 (inception) to August 31, 2005, the quarterly periods ended September 30, 2005, December 31, 2005 and June 30, 2006, and the period from April 7, 2005 (inception) to March 31, 2006. Management has determined that the failure to properly classify such derivative liabilities was not due to a deficiency in disclosure controls and procedures but rather the result of an interpretation of the requirements imposed by EITF No. 00-19.
 
18
 
 
There has not been any change in our internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the quarter ended June 30, 2006, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our management reached this conclusion despite its finding that our financial statements should be restated because the determination concerning the classification of the warrants and the unit purchase option involves complex area of accounting literature that is continuously evolving.
 

19
 

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 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
We did not engage in any unregistered sales of equity securities during the three months ended June 30, 2006.
 
Item 3. Defaults Upon Senior Securities.
 
Not applicable.
 
Item 4. Submission of Matters to a Vote of Security Holders.
 
Not applicable.
 
Item 5. Other information.
 
Not applicable.
 
Item 6. Exhibits.
 
31.1
Section 302 Certification of Chief Executive Officer
31.2
Section 302 Certification of Chief Financial Officer
32.1
Section 906 Certification

20
 

SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) 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.
     
 
AD.VENTURE PARTNERS, INC.
 
 		  
 		  
 
Date: January 12, 2007
 By:   /s/ Howard S. Balter 
 
Howard S. Balter
Chairman and Chief Executive
Officer (Principal Executive Officer)
     
  By:   /s/ Ilan M. Slasky 
 
Ilan M. Slasky
President and Secretary (Principal Financial and Accounting Officer)

21