0001499573-12-000002.txt : 20120620 0001499573-12-000002.hdr.sgml : 20120620 20120619191834 ACCESSION NUMBER: 0001499573-12-000002 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20120619 FILED AS OF DATE: 20120620 DATE AS OF CHANGE: 20120619 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FlatWorld Acquisition Corp. CENTRAL INDEX KEY: 0001499573 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 980666872 STATE OF INCORPORATION: D8 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-34946 FILM NUMBER: 12916214 BUSINESS ADDRESS: STREET 1: PALM GROVE HOUSE, PALM GROVE PARK STREET 2: ROAD TOWN CITY: TORTOLA STATE: D8 ZIP: VG1110 BUSINESS PHONE: 12848521894 MAIL ADDRESS: STREET 1: PALM GROVE HOUSE, PALM GROVE PARK STREET 2: ROAD TOWN CITY: TORTOLA STATE: D8 ZIP: VG1110 6-K 1 v1499573_6k.htm 6-K  (00148548.DOC;1)




UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO SECTION 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of June, 2012


Commission File Number: 000-54173

        

FLATWORLD ACQUISITION CORP.


Palm Grove House

 Road Town

Tortola VG1110

British Virgin Islands

Tel: +1 (284) 545 6127

 (Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.


Form 20-F  Q                                     Form 40-F  £

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):   ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):   ¨

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.      Yes ¨ No x 

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):   N/A.




 





EXPLANATORY NOTE

The Company is currently subjected to the foreign private issuer rules and, as such, the Company is not required to file Quarterly Reports on Form 10-Q with the Securities and Exchange Commission (the “SEC”).  However, the Company has elected to furnish to the SEC, under cover of this Form 6-K, the unaudited financial statements and other information that would have been included by the Company in a Form 10-Q for its quarter ended March 31, 2012 had it been required to file a report on Form 10-Q for that period.


Financial Statements

Unaudited financial statements for the quarter ended March 31, 2012, for the three months ended March 31, 2012 and for the period from June 25, 2010 (date of inception) to March 31, 2012 are included as Exhibit 99.1 to this Report of Foreign Private Issuer on Form 6-K.


Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report on Form 6-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “believe,” “expect,” “anticipate,” “project,” “target,” “optimistic,” “intend,” “aim,” “will” or similar expressions are intended to identify forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. These statements are based on the beliefs of, as well as assumptions made by, our management and information currently available to us and reflect our current view concerning future events. As such, they are subject to risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, among many others: our ability to consummate a successful business transaction; uncertainty of capital resources; the speculative nature of our business; our ability to successfully implement new strategies; present and possible future governmental regulations; competition; the loss of key personnel; any of the factors in the “Risk Factors” section of our Annual Report on Form 20-F for the year ended December 31, 2011; other risks identified in this Report and any statements of assumptions underlying any of the foregoing. You should also carefully review other reports that we file with the SEC. We assume no obligation, and do not intend, to update these forward-looking statements, except as required by law.

Overview

We are a blank check company formed as a British Virgin Islands business company with limited liability for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation or contractual control arrangement with, purchasing all or substantially all of the assets of, or engaging in any other similar business transaction with one or more operating businesses or assets that we have yet to identify. While our efforts in identifying a prospective target business for our initial business transaction is not limited to a particular industry, geographic region or minimum transaction value, we have focused our search on identifying a prospective target business in either (i) the global business services sector or (ii) emerging Asian markets. We are actively searching for a target business.

We intend to utilize cash derived from the proceeds of our initial public offering, the private placement of warrants, our share capital, debt or a combination of these in effecting a business transaction. Although substantially all of the net proceeds of our initial public offering and private placement are intended to be applied generally toward effecting a business transaction, the proceeds are not otherwise designated for any more specific purposes. The issuance of additional ordinary shares in a business transaction:

·

may significantly dilute the equity interests of our existing shareholders;

·

may subordinate the rights of holders of ordinary shares if we issue preferred stock with rights senior to those afforded to our ordinary shares;

·

may cause a change in control if a substantial number of our ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and most likely will also result in the resignation or removal of our present officers and directors; and

·

may adversely affect prevailing market prices for our ordinary shares.

 


 

Similarly, any issuance of debt securities could result in:

·

default and foreclosure on our assets if our operating cash flow after a business transaction is insufficient to pay our debt obligations;

·

acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contains covenants that require the maintenance of certain financial ratios or reserves and any such covenant is breached without a waiver or renegotiation of that covenant;

·

our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; covenants that limit our ability to acquire capital assets or make additional acquisitions;

·

our inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding;

·

our inability to pay dividends on our ordinary shares;

·

using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;

·

limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;

·

increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and

·

limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.

Results of Operations and Known Trends or Future Events

We have neither engaged in any operations nor generated any revenues to date. Our entire activity since inception to the closing of our initial public offering was limited to preparations for that event. Since the consummation of our initial public offering, our activity has been limited to evaluating business transaction candidates. We have not generated any operating revenues and will not until after completion of our initial business transaction, at the earliest. We have generated non-operating income in the form of interest income on cash and cash equivalents. We have incurred substantially increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence for potential targets.

For the three months ended March 31, 2012, we had a net loss of $51,886 consisting of expenses of $63,305 and interest income of $11,419. For the period from June 25, 2010 (date of inception) to March 31, 2012, we had a net loss of $274,785 consisting of expenses of $324,833 and interest income of $50,048.

 Liquidity and Capital Resources

As of March 31, 2012, we had $164,509 (including interest accrued on the proceeds placed in trust which we may withdraw for working capital purposes) in bank accounts available for use by management to cover the costs associated with identifying a target business and negotiating an acquisition or merger.

 Our initial public offering and private placement of warrants to our sponsor provided us with $354,090 of working capital after transferring $22,440,000 into the trust account. For the three months ended March 31, 2012, we experienced a net decrease in cash and cash used in operating activities of approximately $1,000.   The net decrease in operating cash flows was a result of the loss from operations of approximately $63,000, offset by interest income of approximately $11,000 earned on the proceeds held in the trust account which are available to us for working capital needs, and advances from our affiliate in the aggregate amount of approximately $60,000.  The remaining net change in operating cash flows of approximately $9,000 was primarily related to a decrease in accounts payable during the period.  We started with cash of $165,870 as of December 31, 2011. We ended the period at March 31, 2012 with a cash balance of $164,509.

We intend to use substantially all of the funds held in the trust account (net of taxes) to consummate our initial business transaction. To the extent that our capital stock or debt is used, in whole or in part, as consideration to consummate our initial business transaction, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

 


 

 We believe that the $164,509 in funds available to us, as of March 31, 2012, outside of the trust account, together with interest earned on the trust account balance, net of taxes payable on such interest, that may be released to us to fund our expenses relating to investigating and selecting a target business and other working capital requirements, will be sufficient to allow us to operate until September 9, 2012, assuming that a business transaction is not consummated during that period.  Over this time period, we anticipate that we will incur expenses for (i) due diligence (excluding accounting and legal due diligence) of prospective target(s), (ii) legal and accounting fees for due diligence investigations, structuring and negotiations of an initial business transaction, (iii) administrative services and support payable to our sponsor ($7,500 per month), and (iv) other miscellaneous expenses, D&O insurance, legal and accounting fees, reserves and for liquidation expenses. In order to meet our working capital needs, certain of our officers and directors may, but are not obligated to, loan us funds, from time to time, or at any time, in whatever amount such officer or director deems reasonable in his sole discretion. The unpaid principal amount of any such loans may be converted, at the option of the lender, into warrants to acquire shares of the post transaction business on the basis of one warrant for each $0.75 of principal amount so converted.  The warrants would be identical to the insider warrants.  The holders of a majority of any such warrants that may be issued (or the underlying shares) will be entitled to demand that we register these securities pursuant to an agreement to be entered into at the time of the loan.  The holders of a majority of these securities would have certain “piggy-back” registration rights with respect to registration statements filed by us subsequent to such date.  We will bear the expense incurred with the filing of any such registration statements.  The terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist.  However, such loans would not have any recourse against the trust account and would be on terms believed by us to be no less favorable to us than would be available from unaffiliated third parties.

We could use a portion of the funds not being placed in trust to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed business transaction, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business transaction and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.

 We do not believe we will need to raise additional funds until the consummation of our initial business transaction to meet the expenditures required for operating our business. However, we may need to raise additional funds through a private offering of debt or equity securities if such funds are required to consummate a business transaction that is presented to us. Subject to compliance with applicable securities laws, we would only consummate such financing simultaneously with the consummation of our initial business transaction.

 We have evaluated the appropriate accounting treatment for the insider warrants and the warrants attached to the public units. As we are not required to net-cash settle such warrants under any circumstances, including when we are unable to maintain sufficient registered shares to settle such warrants, the terms of the warrants satisfy the applicable requirements of FASB ASC 815, which provides guidance on identifying those contracts that should not be accounted for as derivative instruments. Accordingly, we intend to classify such instruments within permanent equity as additional paid-in capital.

 We believe the purchase price of the insider warrants is greater than the fair value of such warrants. Therefore, we will not be required to incur a compensation expense in connection with the purchase by our management team of the insider warrants.


Recent Accounting Pronouncements

 We do not believe that the adoption of any recently issued accounting standards will have a material impact on our financial position and results of operations.

Quantitative and Qualitative Disclosures about Market Risk

The net proceeds of our initial public offering, including amounts in the trust account, have been invested in U.S. “government securities,” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 (the “1940 Act”) with a maturity of 180 days or less, or in money market funds meeting certain conditions under Rule 2a-7 promulgated. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.










PART II. OTHER INFORMATION


LEGAL PROCEEDINGS.

None


RISK FACTORS.

Factors that could cause our actual results to differ materially from those in this report are any of the risks described in our Annual Report on Form 20-F for the year ended December 31, 2011. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

As of the date of this Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 20-F for the year ended December 31, 2011, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.


UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None


DEFAULTS UPON SENIOR SECURITIES

None


OTHER INFORMATION

None      


EXHIBITS.

(a)   Exhibits.

99.1 Financial Statements for the quarter ending March 31, 2012 and for the period from June 25, 2010 (date of inception) to March 31, 2012.









SIGNATURES


        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 6-K to be signed on its behalf by the undersigned, hereunto duly authorized.


 

FLATWORLD ACQUISITION CORP.

 

 

 

June 19, 2012

By:

 

 

 

/s/ Jeffrey A. Valenty

 

 

Jeffrey A. Valenty

 

 

President


 



 










EX-99.1 2 v1499573_ex99-1.htm SEC Amendment No. 1 to FlatWorld F-1  (00138911.DOC;5)

FlatWorld Acquisition Corp.

(a corporation in the development stage)


BALANCE SHEETS






ASSETS

 

March 31, 2012

(Unaudited)

 

December 31, 2011

Current assets

 

 

 

 

Cash

$

 164,509

$

 165,870

Prepaid expense and other current assets

 

9,642

 

12,602

Total current assets

 

174,151

 

178,472

Restricted  cash equivalents held in Trust Account

 

23,374,786

 

23,374,786

Total assets

$

 23,548,937

$

 23,553,258

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

   Current liabilities

 

 

 

 

Accounts payable and accrued expenses

$

27,800

$

40,000

Due to affiliate

 

59,765

 

Deferred legal fee

 

 

50,000

 

50,000

Deferred underwriting fee

 

 

182,638

 

182,638

Total current liabilities

 

320,203

 

272,638

 

 

 

 

 

Ordinary shares subject to possible redemption (1,775,987 ordinary shares, at a per-share    redemption price of approximately $10.18 at March 31, 2012 and December 31, 2011)  

 

18,084,646

 

18,084,646

   Commitments

 

 

 

 

   Shareholders’ equity

 

 

 

 

Preferred shares, no par value; 5,000,000 shares authorized; no shares issued and outstanding

 

 —

 

 —

 

 

 

 

 

Ordinary shares, no par value, unlimited shares authorized; 2,869,375 shares issued and outstanding (including 1,775,987 ordinary shares subject to possible redemption at March 31, 2012 and December 31, 2011)   

 

3,918,873

 

3,918,873

 

 

 

 

 

Additional paid-in capital

 

1,500,000

 

1,500,000

 

 

 

 

 

Deficit accumulated during development stage

 

(274,785)

 

(222,899)

Total shareholders’ equity

 

5,144,088

 

5,195,974

Total liabilities and shareholders’ equity

$

 23,548,937

$

 23,553,258





The accompanying notes are an integral part of the financial statements


F-1




FlatWorld Acquisition Corp.

(a corporation in the development stage)


STATEMENTS OF OPERATIONS

(Unaudited)





 

 

 Three Months
Ended
March 31, 2012

 



Three Months
Ended
March 31, 2011

 

June 25, 2010
(date of inception)
to
March 31, 2012

 

 

 

 

 

 

 

 

 

 

Revenue

  

$

$

$

 

General and administrative expenses

  

 

63,305

 

57,440

 

324,833

 

Loss from operations

  

 

(63,305)

 

(57,440)

 

(324,833)

 

Interest and dividend income

  

 

11,419

 

9,306

 

50,048

 

Net loss attributable to ordinary shareholders

  

$

 (51,886)

$

(48,134)

$

(274,785)

 

Weighted average number of ordinary shares
  outstanding, basic and diluted

  

 

2,869,375

 

2,859,431

 

2,302,431

 

Net loss per ordinary share attributable to
  ordinary shareholders, basic and diluted

  

$

 (0.02)

$

(0.02)

$

(0. 12)

 






The accompanying notes are an integral part of the financial statements


F-2




FlatWorld Acquisition Corp.

(a corporation in the development stage)


STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the period from June 25, 2010 (date of inception) to March 31, 2012





 

 

Ordinary Shares

 

 Additional paid-in

capital

 

 Deficit

accumulated

during

development stage

 

 Total shareholders’ equity

 

  

Shares

 

Amount

no par

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Sale of ordinary shares issued to initial shareholder on July 9, 2010 at approximately $0.040 per share, as adjusted

  

 632,500

  

 $

       25,000

 

 $

 —

 

 $

 —

 

 $

                25,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Sale of 2,200,000 units on December 15, 2010 (including 1,683,000 ordinary shares subject to possible redemption)

 

2,200,000

 

 

        21,049,118

 

 

 

 

 

 

 

 

 21,049,118

   Net proceeds subject to possible redemption 1,683,000 ordinary shares, at redemption price

 

 

 

 

 

(17,166,600)

 

 

 

 

 

 

 

 

(17,166,600)

   Sale of 2,000,000 private placement warrants on December 12, 2010

 

 

 

 

 

 

 

 

1,500,000

 

 

 

 

 

1,500,000

   Net loss attributable to ordinary shareholders

  

 —

  

 

 

 

 —

 

 

(14,756)

  

 

 (14,756)

   Balance, December 31, 2010

 

2,832,500

 

 

3,907,518        

 

 

1,500,000

 

 

(14,756)

 

 

5,392,762

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Sale of 95,500 units on January 25, 2011 (including 92,987 ordinary shares subject to possible redemption) pursuant to the exercise of the underwriters' over-allotment option, net of underwriters’ discount and offering expenses  

 

95,500

 

 

        929,401

 

 

 

 

 

 

 

 

 929,401

   Forfeiture of sponsor shares on January 25, 2011 in connection with the underwriters’ election to not exercise its over-allotment option in full   

 

(58,625)

 

 

        

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Net proceeds subject to possible redemption 92,987 ordinary shares, at redemption price

 

 

 

 

 

(918, 046)

 

 

 

 

 

 

 

 

(918,046)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Net loss attributable to ordinary shareholders

  

 —

  

 

 

 

 —

 

 

(208,143)

  

 

 (208,143)

Balances, December 31, 2011

 

2,869,375

 

$

3,918,873

 

$

1,500,000

 

$

(222,899)

 

$

5,195,974

   Net loss attributable to ordinary shareholders (unaudited)

  

 —

  

 

 

 

 —

 

 

(51,886)

  

 

 (51,886)

Balances, March 31, 2012 (unaudited)

 

2,869,375

 

$

3,918,873

 

$

1,500,000

 

$

(274,785)

 

$

5,144,088



The accompanying notes are an integral part of the financial statements


F-3




FlatWorld Acquisition Corp.

(a corporation in the development stage)


STATEMENTS OF CASH FLOWS

(Unaudited)



 


 

 Three Months
Ended
March 31, 2012

 

 

Three Months
Ended
March 31, 2011

 

 June 25, 2010
(date of inception)
to
March 31, 2012

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

 

Net loss attributable to ordinary shareholders

 

$

(51,886)

 

$

(48,134)

 

 $

(274,785)

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Increase) decrease in prepaid expense and other current assets

 

 

2,961

 

 

3,128

 

 

(9,642)

Decrease in due from affiliate

 

 

 

 

53,084

 

 

Increase (Decrease) in accounts payable and accrued expenses

 

 

(12,200)

 

 

(12,500)

 

 

27,800

Increase in due to affiliate

 

 

59,765

 

 

19,332

 

 

59,765

Net cash used in operating activities

 

 

(1,361)

 

 

14,910

 

 

(196,862)

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

 

Restricted cash equivalents held in Trust Account

 

 

 

 

(934,785)

 

 

(23,374,786)

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

 

Proceeds from note payable, shareholder

 

 

 

 

 

 

125,000

Proceeds from issuance of ordinary shares to initial shareholder

 

 

 

 

 

 

25,000

Proceeds from public offering

 

 

 

 

 

 

22,000,000

Proceeds from over-allotment

 

 

 

 

955,000

 

 

955,000

Proceeds from issuance of warrants

 

 

 

 

 

 

1,500,000

Payment of note payable, shareholder

 

 

 

 

 

 

(125,000)

Payment of offering costs

 

 

                —

 

 

(59,246)

 

 

                (743,843)

Net cash provided by financing activities

 

 

 

 

895,754

 

 

23,736,157

Net increase / (decrease) in cash

 

 

(1,361)

 

 

(24,121)

 

 

164,509

Cash at beginning of the period

 

 

 165,870

 

 

345,518

 

 

 —

Cash at end of the period

 

$

164,509

 

$

321,396

 

 $

164,509

Supplemental disclosure of non-cash financing activities:

 

 

 

 

 

 

 

 

 

Deferred underwriting fee

 

$

 

$

 

 $

182,638

Deferred legal fee

 

$

 

$

 

 $

50,000




The accompanying notes are an integral part of the financial statements


F-4






FlatWorld Acquisition Corp.

(a corporation in the development stage)

NOTES TO FINANCIAL STATEMENTS



NOTE A — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

FlatWorld Acquisition Corp. (a corporation in the development stage) (the “Company”) was formed on June 25, 2010 as a British Virgin Islands business company with limited liability. The Company was formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation or contractual control arrangement with, purchasing all or substantially all of the assets of, or engaging in any other similar business transaction with an unidentified operating business or assets (“Business Transaction”). The Company’s efforts in identifying a prospective target business for its Business Transaction is not limited to a particular industry, geographic region or minimum transaction value, but has focused its search on identifying a prospective target business in either (i) the global business services sector or (ii) emerging Asian markets. The Company is considered to be in the development stage as defined in Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”), or FASB ASC 915, “Development Stage Entities,” and is subject to the risks associated with activities of development stage companies. On June 29, 2011, the Company changed its fiscal year solely for financial accounting purposes such that the Company’s fiscal year now ends on December 31st of each calendar year.  

The Company is currently evaluating Business Transaction candidates. All activity through March 31, 2012 relates to the Company’s formation, initial public offering (“Offering”) described below and identifying and investigating prospective target businesses with which to consummate a Business Transaction. The registration statement for the Offering was declared effective on December 9, 2010. The Company consummated the Offering on December 15, 2010 and received net proceeds of approximately   $21,000,000. On January 25, 2011, the Company consummated the closing of an additional 95,500 units pursuant to the exercise of the underwriters' over-allotment option and received additional net proceeds of approximately $929,000.

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 consummating a Business Transaction. Furthermore, there is no assurance that the Company will be able to successfully affect a Business Transaction. Upon the closing of the Offering, the private placement of warrants and partial exercise of over-allotment, $23,374,786 was placed in a trust account (“Trust Account”) which may only be invested in U.S. “government securities,” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 (the “1940 Act”) with a maturity of 180 days or less, or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the 1940 Act. The funds in the Trust Account will not be released until the earlier of (i) the consummation of a Business Transaction or (ii) the distribution of the Trust Account as described below.

The Company, after signing a definitive agreement for the acquisition of one or more target businesses or assets will provide its shareholders with the opportunity to redeem their ordinary shares for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, less taxes and up to 100% of the interest earned on the proceeds placed in the Trust Account which the Company may withdraw for working capital purposes, upon the consummation of its Business Transaction.  The Company is not required to submit the transaction for shareholder approval prior to consummating the Business Transaction. If no shareholder approval is sought, the Company will proceed with a Business Transaction if it is approved by its board of directors and less than 77.37% of the public shareholders exercise their redemption rights.  Only in the event that the Company seeks shareholder approval in connection with its initial Business Transaction, the Company will proceed with a Business Transaction only if a majority of the outstanding ordinary shares voted are voted in favor of the Business Transaction. However, the Company's sponsor’s, officers’, directors’ or their affiliates’ participation in privately-negotiated transactions (solely in the event the Company seeks shareholder approval and is not subject to foreign private issuer rules), if any, could result in the approval of a Business Transaction even if a majority of the Company’s public shareholders either vote against, or indicate their intention to vote against, such Business Transaction. If the Company is subject to the U.S. domestic issuer rules at the time of Business Transaction, the Company's public shareholders voting in favor of initial Business Transaction may elect to exercise their redemption rights and shall be entitled to receive cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, including any amounts representing interest earned on the Trust Account, less taxes and any interest earned on the proceeds placed in the Trust Account actually withdrawn for working capital purposes, but the Company's public shareholders voting against the Business Transaction and electing to exercise their redemption rights shall only be entitled to receive cash equal to their pro rata share of the aggregate amount in the Trust Account less taxes and interest earned on the proceeds placed in the Trust Account. These ordinary shares are recorded at redemption value and classified as temporary equity, in accordance with FASB ASC 480-10. FWAC Holdings Limited (the “sponsor”) has agreed, in the event the Company seeks shareholder approval of its Business Transaction, to vote its initial shares in favor of approving a Business Transaction. The sponsor and the Company’s officers and directors have also agreed to vote ordinary shares acquired by them in the Offering or in the aftermarket in favor of a Business Transaction submitted to the Company’s shareholders for approval.

The Company’s sponsor, officers and directors have agreed that the Company will only have 21 months from December 9, 2010, the date of the prospectus for the Offering, to consummate its initial Business Transaction.  If the Company does not consummate a business transaction within such 21 month period, it i) will distribute the Trust Account to the public shareholders, pro rata, less taxes and up to 100% of the interest earned on the proceeds placed in the Trust Account which it may withdraw for working capital purposes by way of redemption and (ii) intends to cease all operations except for the purpose of any winding up of its affairs.

In the event that the Company does not consummate a Business Combination by September 9, 2012, the proceeds held in the Trust Account will be distributed to the Company's shareholders, excluding the sponsor.  After distributing the proceeds of the Trust Account, the Company will promptly distribute the balance of its net assets to its remaining shareholders according to the Company's plan of dissolution. This mandatory liquidation and subsequent dissolution raises substantial doubt about the Company's ability to continue as a going concern.




F-5








FlatWorld Acquisition Corp.

(a corporation in the development stage)

NOTES TO FINANCIAL STATEMENTS



NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited interim financial statements as of March 31, 2012 and the results of operations and cash flows for the periods presented are in U.S. dollars, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and notes required by GAAP for complete financial statements of the Company. In the opinion of management, all adjustments necessary for a fair presentation have been included and are of normal recurring nature. Interim results are not necessarily indicative of the results that may be expected for any other interim period or for full year.

These unaudited interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the period ended December 31, 2011 included in the Company’s Annual Report on Form 20-F filed with SEC on April 30, 2012. The December 31, 2011 balance sheet included herein has been derived from those audited financial statements. The accounting policies used in preparing these unaudited interim financial statements are consistent with those used in preparing the December 31, 2011 audited financial statements.

Development stage company

The Company complies with the reporting requirements of Financial Accounting Standards Board (“FASB”) Accounting Standards Certification (“ASC”) 915, “Development Stage Entities.” At March 31, 2012, the Company had not commenced any operations nor generated revenue to date. All activity through March 31, 2012 relates to the Company’s formation, the Offering and identifying and investigating prospective target businesses with which to consummate a Business Transaction. The Company will not generate any operating revenues until after completion of a Business Transaction, at the earliest. The Company has generated non-operating income in the form of interest income on the designated Trust Account subsequent to the Offering.

Net loss per share

The Company complies with accounting and disclosure requirements of FASB ASC 260, “Earnings Per Share.” Net loss per ordinary share is computed by dividing net loss applicable to ordinary shareholders by the weighted average number of ordinary shares outstanding for the period. At March 31, 2012, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As the Company reported a net loss for all periods presented, the effect of the 4,295,500 warrants (including 2,000,000 warrants issued to the members of the Sponsor in connection with the private placement) as of March 31, 2012 and 4,200,000 warrants (including 2,000,000 warrants issued to the members of the Sponsor in connection with the private placement) as of December 31, 2011, have not been considered in the diluted loss per ordinary share because their effect would be anti-dilutive. As a result, dilutive loss per ordinary share is equal to basic loss per ordinary share for all periods presented.

Ordinary Shares subject to possible redemption

The Company accounts for redeemable ordinary shares that are redeemable for cash or other assets, by classifying them outside of permanent equity if they are redeemable at the option of the holder. In addition, the amount of ordinary shares subject to redemption is classified outside of permanent equity to the extent that such redemption does not cause a liquidation event. As discussed in Note A, in no event will the Company redeem its public shares in an amount that would exceed 77.37% of the shares sold in the Offering.

Accordingly, 1,775,987 of ordinary shares have been classified outside of permanent equity at redemption value, which is equal to the per share amount held in the Trust Account. The Company recognizes changes in the redemption value immediately as they occur and adjusts the carrying value of ordinary shares subject to redemption to equal its redemption value at the end of each reporting period.

Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in financial institutions, which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

Restricted cash equivalents held in the Trust Account

The amounts held in the Trust Account represent substantially all the proceeds of the Offering and are classified as restricted assets since such amounts can only be used by the Company in connection with the consummation of a business transaction. As of March 31, 2012, the funds held in the Trust Account were invested in a combination of cash and money market funds meeting certain conditions under Rule 2a-7 promulgated under the 1940 Act.

 

Fair value of financial instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures” approximates the carrying amounts represented in the balance sheet.

In accordance with GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

 

F-6






FlatWorld Acquisition Corp.

(a corporation in the development stage)

NOTES TO FINANCIAL STATEMENTS


In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.  Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company.  Unobservable inputs reflect the Company's assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.  The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.  Valuation adjustments and block discounts are not applied to Level 1 securities.  Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.

Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including, the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction.  To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.  Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined.  Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed.  Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for securities categorized in Level 3.  In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety is determined based on the lowest level input that is significant to the fair value measurement.

  Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure.  Therefore, even when market assumptions are not readily available, the Company's own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date.  The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation.

Investments

 

The Company carries its investments in money market funds at fair value. The Company’s investments are classified as level 1 under the fair value hierarchy. Security transactions are recorded on a trade date basis. Unrealized gains and losses are included in the statements of operations.


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.


 


F-7







FlatWorld Acquisition Corp.

(a corporation in the development stage)

NOTES TO FINANCIAL STATEMENTS

For the period from June 25, 2010 (date of inception) to March 31, 2012


Income tax

The Government of British Virgin Islands does not, under existing legislation, impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax upon the Company or its security holders. The British Virgin Islands is not party to any double taxation treaties.

Notwithstanding the above, the Company complies with FASB ASC 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company did not establish a valuation allowance as of March 31, 2012 as there were no deferred tax assets at that date.

The Company complies with the provisions of FASB ASC 740-10-25 which establishes recognition requirements for the accounting for income taxes. There were no unrecognized tax benefits as of March 31, 2012. The section prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at March 31, 2012. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.  The Company is subject to income tax examinations by major taxing authorities since inception.

Recently issued accounting standards

The Company does not believe that the adoption of any new recently issued accounting standards will have a material impact on its financial position and results of operations.


NOTE C — INITIAL PUBLIC OFFERING

Between December 15, 2010 and January 25, 2011, the Company sold to the public 2,295,500 units (including 95,500 units sold pursuant to the over-allotment option) at $10.00 per unit (“Units”). Each Unit consists of one ordinary share of the Company, no par value, and one warrant to purchase one ordinary share (“Warrant”). Each warrant entitles the holder to purchase one ordinary share at a price of $11.00. Each warrant will become exercisable on the later of (i) 30 days after the Company’s completion of a Business Transaction or (ii) one year from December 9, 2010, the date of the prospectus for the Offering, and will expire five years from the date of the Company’s initial Business Transaction, or earlier upon redemption or liquidation.  If the Company is unable to deliver registered ordinary shares to the holder upon exercise of Warrants during the exercise period, there will be no cash settlement of the Warrants and the Warrants will expire worthless.

The Warrants will be redeemable by the Company at a price of $0.01 per Warrant upon 30 days prior notice after the Warrants become exercisable, only in the event that the volume weighted average price of the ordinary shares is at least $16.50 per share for any 20 trading days within a 30 trading day period ending on the third business day prior to the date on which notice of redemption is given.


 


F-8








FlatWorld Acquisition Corp.

(a corporation in the development stage)

NOTES TO FINANCIAL STATEMENTS

For the period from June 25, 2010 (date of inception) to March 31, 2012


NOTE D — RELATED PARTY TRANSACTIONS

On July 9, 2010, the Company issued to its sponsor 1,078,125 ordinary shares for an aggregate amount of $25,000 in cash.  On October 8, 2010, the Company effected a share combination (reverse stock split) of its issued and outstanding ordinary shares, with each ordinary share being combined into 0.933333 ordinary shares.  On November 9, 2010, the Company effected another share combination (reverse stock split) of its issued and outstanding ordinary shares, with each ordinary share being combined into 0.5714286 ordinary shares. On December 9, 2010, the Company effected a 1.1 for 1 share split (forward) of its issued and outstanding ordinary shares. As a result, the Company’s sponsor (and sole shareholder) was left with 632,500 ordinary shares (up to 82,500 of which were subjected to forfeiture if the underwriters’ over-allotment option was not exercised in full). On January 25, 2011, the Company redeemed from its sponsor, at nominal cost, an aggregate of 58,625 ordinary shares. The Company redeemed these ordinary shares in order to maintain the sponsor’s 20% ownership interest in the Company after giving effect to partial exercise of the underwriters’ over-allotment option. All share information in the Company’s financial statements have been retroactively restated for the effect of the share splits. The sponsor has agreed that the ordinary shares purchased by it prior to consummation of the Offering will not be sold or transferred until one year following consummation of a Business Transaction, subject to certain limited exceptions.

The Company entered into an unsecured promissory note with the Company’s sponsor in an aggregate principal amount of $125,000 on July 9, 2010. The note did not bear interest. The note was payable on the earlier of (i) July 9, 2011 or (ii) the date of the consummation of the Offering. This promissory note was repaid on December 15, 2010.

During the three months ending March 31, 2012, an affiliate of the Company paid certain vendor bills on behalf of the Company. As of March 31, 2012, the Company had a net balance due to its affiliate of $59,765 for payments to certain third party vendors and is recorded on the balance sheet as “Due to affiliate”.  

The sponsor purchased on December 12, 2010, in a private placement, 2,000,000 warrants prior to the Offering at a price of $0.75 per warrant (a purchase price of $1,500,000) from the Company. Based on the observable market prices, the Company believes that the purchase price of $0.75 per warrant for such warrants exceeded the fair value of such warrants on the date of the purchase. The valuation was based on comparable initial public offerings by blank check companies in 2009 and 2010. The sponsor has agreed that the warrants purchased by it will not be sold or transferred until 30 days following consummation of a Business Transaction, subject to certain limited exceptions. If the Company does not complete a Business Transaction, then the proceeds will be part of the liquidating distribution to the public shareholders and the warrants issued to the sponsor will expire worthless. The Company classifies the private placement warrants within permanent equity as additional paid-in capital in accordance with FASB ASC 815 derivatives and hedging.

On December 9, 2010, the Company entered into an Administrative Services Agreement with FWC Management Services Ltd, an entity controlled by two officers of the Company, for an estimated aggregate monthly fee of $7,500 for office space, secretarial, and administrative services. This agreement expires upon the earlier of the successful completion of the Business Transaction or September 9, 2012. Through March 31, 2012, $112,500 has been incurred under this agreement.

The sponsor will be entitled to registration rights pursuant to a registration rights agreement signed on December 9, 2010, the date of the prospectus for the Offering. The sponsor will be entitled to demand registration rights and certain “piggy-back” registration rights with respect to its ordinary shares, the warrants and the ordinary shares underlying the warrants, commencing on the date such ordinary shares or warrants are released from lockup. The Company will bear the expenses incurred in connection with the filing of any such registration statements.




F-9








FlatWorld Acquisition Corp.

(a corporation in the development stage)

NOTES TO FINANCIAL STATEMENTS

For the period from June 25, 2010 (date of inception) to March 31, 2012


NOTE E — COMMITMENTS

The Company granted the underwriters a 45-day option to purchase up to 330,000 additional Units to cover the over-allotment at the initial public offering price less the underwriting discounts and commissions. On January 25, 2011, the Company consummated the closing of an additional 95,500 Units pursuant to the exercise of the underwriters' over-allotment option.

The Offering proceeds include a contingent fee equal to 3.75% of the sum of: (i) the gross proceeds of the Offering (less any amounts redeemed by investors pursuant to any redemption, cash conversion right or privately negotiated transaction) and (ii) the gross proceeds from any new equity raised, payable to Rodman & Renshaw (“Rodman”) and/or such other firms, if any, who are instrumental in advising us in connection with the consummation of the Business Transaction. If no amount is redeemed by investors pursuant to any redemption, cash conversion right or privately negotiated transaction, the deferred underwriting fee is $860,813 as of March 31, 2012. If the maximum number of shares subject to possible redemptions is redeemed, the deferred underwriting fee is $182,638 and is included in the balance sheet as of March 31, 2012.

The Company has deferred a portion of legal fee incurred in connection with the Offering. The total deferred fee of $50,000 is included in the balance sheet as of March 31, 2012 and is payable upon the consummation of a Business Transaction.

The Company also issued a unit purchase option, for $100, to Rodman, the representative of the underwriters in the Offering, to purchase 88,000 Units (4% of the total number of units sold in the Offering) at an exercise price of $12.50 per Unit. The Units issuable upon exercise of this option are identical to the Units offered in the Offering. This option is exercisable commencing on the later of the consummation of a Business Transaction and one year from the date of the Offering and expiring five years from the date of the Offering. The Company accounted for the fair value of the unit purchase option, net of the receipt of the $100 cash payment, as an expense of the Offering resulting in a charge directly to shareholders' equity. The Company estimated the fair value of this unit purchase option at approximately $2.59 per unit using a Black-Scholes option-pricing model. The fair value of the unit purchase option granted to the underwriter was estimated as of the date of grant using the following assumptions: (1) expected volatility of 35%, (2) risk-free interest rate of 1.78% and (3) expected life of 5 years. The unit purchase option may be exercised for cash or on a “cashless” basis, at the holder’s option, such that the holder may use the appreciated value of the unit purchase option (the difference between the exercise prices of the unit purchase option and the underlying Warrants and the market price of the Units and underlying ordinary shares) to exercise the unit purchase option without the payment of cash.


NOTE F — PREFERRED SHARES

The Company is authorized to issue 5,000,000 preferred shares divided into five classes, Class A through Class E, each comprising 1,000,000 preferred shares with such designation, rights and preferences as may be determined by the Company's board of directors. The Company has five classes of preferred shares to give it flexibility as to the terms on which each Class is issued. No preferred shares are currently issued or outstanding at March 31, 2012.


NOTE G —RESTRICTED CASH EQUIVALENTS HELD IN TRUST ACCOUNT


Subsequent to the Offering, an amount of $23,374,786 (including $860,813 of deferred underwriting fee), including the net proceeds of the Offering was deposited in an interest-bearing trust account and invested in combination of cash and money market funds meeting certain conditions under Rule 2a-7 promulgated under the 1940 Act. The Fair Value of the trust account at March 31, 2012 was $23,374,786. The interest earned on the proceeds placed in the trust account is available to the Company for working capital purposes.

NOTE H —FAIR VALUE MEASUREMENTS


The Company adopted FASB ASC 820, “Fair Value Measurements” for its financial assets that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.


The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2012, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general, fair values determined by Level 1 utilize quoted prices in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability:




F-10












FlatWorld Acquisition Corp.

(a corporation in the development stage)

NOTES TO FINANCIAL STATEMENTS

For the period from June 25, 2010 (date of inception) to March 31, 2012



Description

Balance as of

March 31, 2012

Quoted Prices in Active Markets for Identical Assets

(Level 1)

Significant Other Observable Inputs

(Level 2)

Significant Unobservable Inputs

(Level 3)

Assets:

 

 

 

 

Restricted cash held in Trust Account

$23,374,786

$23,374,786

$         -

$         -



 

F-11