TAQ Transforma Acquisition Grp.

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from       to       .

Commission file number: 001-33210

TRANSFORMA ACQUISITION GROUP INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)		20-5389307 (I.R.S. Employer Identification No.)

747 Third Avenue, 38th Floor New York, NY (Address of Principal Executive Offices)		10017 (Zip Code)

(646) 521-7805
(Registrant’s Telephone Number, Including Area Code)

350 Park Avenue, 10th Floor
New York, NY 10022
(Former Address of Principal Executive Offices)

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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes þ No o

As of July 15, 2008, 15,624,997 shares of the registrant’s common stock, par value $0.0001 per share, were issued and outstanding.

 

 

TRANSFORMA ACQUISITION GROUP INC.
Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets			1
As of June 30, 2008 (unaudited)
As of December 31, 2007
Statements of Operations (unaudited)			2
For the three months ended June 30, 2008
For the three months ended June 30, 2007
For the six months ended June 30, 2008
For the six months ended June 30, 2007
From inception (July 19, 2006) to June 30, 2008
Statements of Stockholders’ Equity (unaudited)			3
From inception (July 19, 2006) to June 30, 2008
Statements of Cash Flows (unaudited)			4
For the six months ended June 30, 2008
For the six months ended June 30, 2007
From inception (July 19, 2006) to June 30, 2008
Notes to Financial Statements (unaudited)			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			12
Item 3. Quantitative and Qualitative Disclosures about Market Risk			13
Item 4. Controls and Procedures			13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			14
Item 1A. Risk Factors			14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			14
Item 3. Defaults Upon Senior Securities			14
Item 4. Submission of Matters to a Vote of Security Holders			14
Item 5. Other Information			14
Item 6. Exhibits			14
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

PART I.

FINANCIAL INFORMATION

Item 1. Financial Statements.

TRANSFORMA ACQUISITION GROUP INC.
(a corporation in the development stage)

BALANCE SHEETS

		June 30, 2008				December 31, 2007
		(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	1,135,676			$	917,710
Cash and cash equivalents held in Trust Account (Note 1)			101,243,386				101,299,853
Prepaid expenses and income taxes			272,130				73,290
Deferred acquisition costs			599,604				248,973
TOTAL ASSETS		$	103,250,796			$	102,539,826
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Deferred underwriting fee (Note 5)		$	3,720,000			$	3,720,000
Accrued registration costs			50,000				50,000
Accrued acquisition costs			379,565				135,343
Accrued expenses			328,004				403,349
Income taxes payable			—				287,423
Total current liabilities			4,477,569				4,596,115
COMMON STOCK SUBJECT TO POSSIBLE CONVERSION
(4,999,999 shares at conversion value) (Note 1)			40,313,454				40,088,182
COMMITMENTS (Note 5)
STOCKHOLDERS’ EQUITY (Notes 2, 6 and 7):
Preferred stock, par value $.0001 per share, 5,000 shares authorized, 0 shares issued			—				—
Common stock, par value $.0001 per share, 32,500,000 shares authorized, 10,624,998 shares issued and outstanding (excluding 4,999,999 shares subject to possible conversion)			1,062				1,062
Additional paid-in capital			54,947,702				55,172,974
Earnings accumulated in the development stage			3,511,009				2,681,493
TOTAL STOCKHOLDERS’ EQUITY			58,459,773				57,855,529
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	103,250,796			$	102,539,826

See Notes to Financial Statements

TRANSFORMA ACQUISITION GROUP INC.
(a corporation in the development stage)

STATEMENTS OF OPERATIONS

																		From inception
		For the three				For the three				For the six				For the six				(July 19, 2006)
		months ended				months ended				months ended				months ended				to
		June 30, 2008				June 30, 2007				June 30, 2008				June 30, 2007				June 30, 2008
		(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)
Interest income		$	701,408			$	1,282,652			$	1,724,470			$	2,524,844			$	6,933,778
General and administrative expenses (Notes 4 and 5)			259,023				280,162				425,844				504,789				1,581,986
Income before provision for income taxes			442,385				1,002,490				1,298,626				2,020,055				5,351,792
Provision for income taxes (Note 4)			150,411				340,847				469,110				686,819				1,840,783
Net income for the period		$	291,974			$	661,643			$	829,516			$	1,333,236			$	3,511,009
Accretion of Trust Account relating to common stock subject to possible conversion			(91,492	)			(168,494	)			(225,272	)			(332,172	)			(913,462	)
Net income attributable to common stockholders		$	200,482			$	493,149			$	604,244			$	1,001,064			$	2,597,547
Weighted average number of shares outstanding , basic and diluted			10,624,998				10,624,998				10,624,998				10,624,998
Net income per share , basic and diluted		$	0.02			$	0.05			$	0.06			$	0.09
Number of shares outstanding subject to possible conversion , basic and diluted			4,999,999				4,999,999				4,999,999				4,999,999
Net income per share subject to possible conversion , basic and diluted		$	0.02			$	0.03			$	0.05			$	0.07

See Notes to Financial Statements

TRANSFORMA ACQUISITION GROUP INC.
(a corporation in the development stage)

STATEMENTS OF STOCKHOLDERS’ EQUITY

FROM INCEPTION (JULY 19, 2006) TO JUNE 30, 2008

		Common stock								Additional								Earnings
										paid-in								accumulated in the
		Shares				Amount				capital				Treasury stock				development stage				Total
Balance, July 19, 2006 (inception)			—			$	—			$	—				—			$	—			$	—
Issuance of common stock to initial stockholders			3,593,747				359				24,641				—				—				25,000
Proceeds from sale of underwriter’s unit purchase option			—				—				100				—				—				100
Proceeds from issuance of Warrants			—				—				3,000,000				—				—				3,000,000
Sale of 12,500,000 units through public offering net of underwriter’s discount and public offering expenses and net of $39,399,992 of proceeds from stockholders allocable to 4,999,999 shares of common stock subject to possible conversion			7,500,001				750				52,886,376				—				—				52,887,126
Net income for the period			—				—				—				—				28,645				28,645
Accretion of Trust Account relating to common stock subject to possible conversion			—				—				(18,767	)			—				—				(18,767	)
Balance, December 31, 2006			11,093,748			$	1,109			$	55,892,350				—			$	28,645			$	55,922,104
Forfeiture of common stock issued to initial stockholders (Note 6)			—				—				3,501,562				(3,501,562	)			—				—
Cancellation of common stock received from initial stockholders			(468,750	)			(47	)			(3,501,515	)			3,501,562				—				—
Public offering expenses accrued related to the sale of 12,500,000 units through public offering			—				—				(50,000	)			—				—				(50,000	)
Net income for the period			—				—				—				—				2,652,848				2,652,848
Accretion of Trust Account relating to common stock subject to possible conversion			—				—				(669,423	)			—				—				(669,423	)
Balance, December 31, 2007			10,624,998			$	1,062			$	55,172,974				—			$	2,681,493			$	57,855,529
Net income for the period (unaudited)			—				—				—				—				829,516				829,516
Accretion of Trust Account relating to common stock subject to possible conversion (unaudited)			—				—				(225,272	)			—				—				(225,272	)
Balance, June 30, 2008 (unaudited)			10,624,998			$	1,062			$	54,947,702				—			$	3,511,009			$	58,459,773

See Notes to Financial Statements

TRANSFORMA ACQUISITION GROUP INC.
(a corporation in the development stage)

STATEMENTS OF CASH FLOWS

										From inception
		For the six				For the six				(July 19, 2006)
		months ended				months ended				to
		June 30, 2008				June 30, 2007				June 30, 2008
		(unaudited)				(unaudited)				(unaudited)
OPERATING ACTIVITIES
Net income for the period		$	829,516			$	1,333,236			$	3,511,009
Changes in operating assets and liabilities:
Prepaid expenses and income taxes			(198,840	)			(141,341	)			(272,130	)
Accrued expenses			(75,345	)			186,870				328,004
Income taxes payable			(287,423	)			325,569				—
NET CASH PROVIDED BY OPERATING ACTIVITIES			267,908				1,704,334				3,566,883
INVESTING ACTIVITIES
Cash and cash equivalents held in Trust Account			56,467				(1,586,025	)			(101,243,386	)
Deferred acquisition costs paid			(106,409	)			—				(220,039	)
NET CASH USED IN INVESTING ACTIVITIES			(49,942	)			(1,586,025	)			(101,463,425	)
FINANCING ACTIVITIES
Proceeds from issuances of common stock to initial stockholders			—				—				25,000
Proceeds from notes payable to initial stockholders			—				—				200,000
Payments of notes payable to initial stockholders			—				—				(200,000	)
Proceeds from issuance of warrants			—				—				3,000,000
Proceeds from sale of underwriter’s unit purchase option			—				—				100
Portion of net proceeds from sale of units through public offering allocable to shares of common stock subject to possible conversion			—				—				39,399,992
Net proceeds from sale of units through public offering allocable to:
Stockholders’ equity			—				—				53,044,897
Deferred underwriting fees			—				—				3,720,000
Registration costs paid			—				(157,771	)			(157,771	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES			—				(157,771	)			99,032,218
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			217,966				(39,462	)			1,135,676
CASH AND CASH EQUIVALENTS
Beginning of period			917,710				665,016				—
End of period		$	1,135,676			$	625,554			$	1,135,676
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes		$	1,013,500			$	361,250			$	2,097,750
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITY:
Accrued registration costs		$	—			$	50,000			$	50,000
Accrued acquisition costs		$	244,222			$	219,635			$	379,565
Accretion of Trust Account relating to common stock subject to possible conversion		$	225,272			$	332,172			$	913,462
Fair value of underwriter’s unit purchase option included in public offering costs		$	—			$	—			$	1,218,750

See Notes to Financial Statements

TRANSFORMA ACQUISITION GROUP INC.
(a corporation in the development stage)

NOTES TO FINANCIAL STATEMENTS

(unaudited)

NOTE 1 — DISCUSSION OF THE COMPANY’S ACTIVITIES

      Organization and activities — Transforma Acquisition Group Inc. (“Company”) was incorporated in Delaware on July 19, 2006 for the purpose of acquiring one or more assets or control of one or more operating businesses in the technology, media or telecommunications industries (“Target Business”) through a merger, capital stock exchange, stock purchase, asset acquisition or other similar business combination (“Business Combination”). The Company has selected December 31 as its fiscal year end.

     The Company is considered to be a development stage company and as such the financial statements presented herein are presented in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 7.

     The registration statement for the Company’s initial public offering (“Offering”) was declared effective on December 19, 2006. The Company consummated the Offering on December 26, 2006 for net proceeds of approximately $96 million (including approximately $3.7 million payable to the Company’s underwriters upon the successful closing of a Business Combination). The Company’s management intends to apply substantially all of the net proceeds of the Offering toward consummating a Business Combination. The initial Target Business must have a fair market value equal to at least 80% of our net assets (excluding the amount held in the trust account representing a portion of the underwriters’ deferred discount) (Note 5) at the time of such acquisition. However, there is no assurance that the Company will be able to successfully effect a Business Combination.

     Management has agreed that $98.5 million or $7.88 per Unit sold in the Offering will be held in a trust account (“Trust Account”) and invested in permitted money market instruments, of which $0.2976 per Unit will be paid to the underwriter upon the consummation of a Business Combination. The placing of funds in the Trust Account may not protect those funds from third party claims against the Company. Although the Company will seek to have all vendors, prospective acquisition targets or other entities it engages, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account, there is no guarantee that they will execute such agreements. Fifty percent of after tax interest up to an aggregate amount of $2,000,000 in interest earned on the monies held in the Trust Account may be used to pay for due diligence of prospective Target Businesses, legal and accounting fees relating to Securities and Exchange Commission (“SEC”) reporting obligations and working capital to cover miscellaneous expenses, director and officer insurance and reserves (Note 5).

     The Company, after signing a definitive agreement for a Business Combination, is obliged to submit such transaction for approval by a majority (more than 50%) of the public stockholders of the Company. The Company’s stockholders prior to the Offering (“Initial Stockholders”), have agreed to vote their 3,124,997 founding shares of common stock (approximately 20% of the shares outstanding) in accordance with the manner in which the majority of the shares of common stock offered in the Offering are voted by the Company’s public stockholders (“Public Stockholders”) with respect to a Business Combination. In the event that a majority of the outstanding shares of common stock voted by the Company’s Public Stockholders vote for the approval of the Business Combination and holders owning 40% or more of the outstanding common stock do not vote against the Business Combination, the Business Combination may then be consummated. Accordingly, Public Stockholders holding approximately 39.99% of the aggregate number of shares owned by all Public Stockholders may vote against such proposed Business Combination and exercise their conversion rights, and would be entitled to convert their shares into a pro-rata distribution from the Trust Account (the “Conversion Right”). If Public Stockholders holding 39.99% of the aggregate number of shares owned by all Public Stockholders exercised the Conversion Right, the actual per-share conversion price would be equal to the amount in the Trust Account, inclusive of any interest thereon, net of income taxes payable on the interest income on the Trust Account and net of any amounts distributed to the Company for working capital or other expenses, as of two business days prior to the proposed Business Combination, multiplied by 39.99%, and then divided by the number of shares converting, 4,999,999, or approximately $8.06 per share based on the value of the Trust Account as of June 30, 2008. As a result of the Conversion Right, $39,399,992 plus accretion of $913,462, aggregating $40,313,454, has been classified in common stock subject to possible conversion on the accompanying balance sheet as of June 30, 2008.

TRANSFORMA ACQUISITION GROUP INC.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
(unaudited)

     On June 26, 2008 the Company announced that it had satisfied the criteria under its certificate of incorporation that allows for an extension of time to complete its initial Business Combination. If the Company fails to complete a Business Combination by December 26, 2008, the Company’s board will convene, adopt and recommend to their stockholders a plan of dissolution and distribution and file a proxy statement with the SEC seeking stockholder approval for such plan. In the event such plan is approved, the Company will dissolve and distribute to its Public Stockholders, in proportion to their respective equity interests, the amount held in the Trust Account, and any remaining net assets, after the distribution of the Trust Account. In the event of liquidation, it is possible 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. Based on the value of the Trust Account as of June 30, 2008 the per share value of assets remaining available for distribution was approximately $8.10 per share.

NOTE 2 — OFFERING

     In the Offering, the Company sold to the public 12,500,000 Units (collectively the “Units” and each a “Unit”) at a price of $8.00 per Unit. Proceeds from the Offering totaled approximately $96 million, which was net of approximately $3.9 million in underwriting fees and other expenses paid at closing. Each Unit consists of one share of the Company’s common stock and one warrant to purchase a share of the Company’s common stock for $5.50 per share.

     The Company also sold to one of the underwriters, CRT Capital Group LLC, a Unit Purchase Option (“UPO”) to purchase up to a total of 375,000 additional Units (Note 7).

     The Company had granted to the underwriters a 45-day option to purchase up to 1,875,000 Units solely to cover over-allotments, if any. As discussed in Note 6, the 45-day option expired in January 2007, and the option was never exercised.

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      INTERIM FINANCIAL STATEMENTS — The accompanying unaudited financial statements have been prepared pursuant to the rules and regulations of the SEC and should be read in conjunction with the Company’s audited financial statements and footnotes thereto for the period from inception (July 19, 2006) to December 31, 2007 included in the Company’s Annual Report on Form 10-K (File No. 001-33210). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. The financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management necessary for a fair presentation of the Company’s financial position, results of operations and cash flows. The operating results for the period ended June 30, 2008 are not necessarily indicative of the results to be expected for any other interim period of any future year.

      CASH AND CASH EQUIVALENTS — Cash and cash equivalents are deposits with financial institutions as well as short-term money market instruments with maturities of three months or less when purchased.

      DEFERRED ACQUISITION COSTS — Costs related to proposed acquisitions are capitalized and in the event the acquisition does not occur, the costs are expensed.

TRANSFORMA ACQUISITION GROUP INC.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
(unaudited)

      TRUST ACCOUNT — The Company has earned interest in cash and cash equivalents held in the Trust Account in the amount of $1,707,033 for the six months ended June 30, 2008. The Trust Account decreased by $56,467 between December 31, 2007 and June 30, 2008 as a result of transferring $750,000 to its operating account for working capital requirements and paying $1,013,500 for income taxes. The Company’s restricted cash and cash equivalents held in the Trust Account at June 30, 2008 is invested in a money market fund. The Company recognized interest income of $6,890,112 from inception (July 19, 2006) to June 30, 2008 on such money market fund in addition to $43,666 recognized for the same period on its cash and cash equivalents, aggregating $6,933,778, which is included in interest income on the accompanying statements of operations.

      CONCENTRATION OF CREDIT RISK — Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents. The Company may maintain deposits in federally insured financial institutions in excess of federally insured limits. However, management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

      NET INCOME PER SHARE — Basic earnings per share is computed by dividing income available to common stockholders by the weighted average common shares outstanding for the period. Calculation of the weighted average common shares outstanding during the period is based on 3,124,997 initial shares outstanding throughout the period from July 19, 2006 (inception) to June 30, 2008, 468,750 initial shares cancelled by the Company on January 25, 2007 (retroactively restated to August 2006 for this calculation) and 7,500,001 common shares outstanding after the completion of the Offering on December 26, 2006. Basic net income per share subject to possible conversion is calculated by dividing accretion of Trust Account relating to common stock subject to possible conversion by 4,999,999 common shares subject to possible conversion. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Since the effect of outstanding warrants to purchase common stock and outstanding Unit Purchase Option are antidilutive, they have been excluded from the Company’s computation of net income per share.

      USE OF ESTIMATES — The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

      INCOME TAXES — Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in future taxable or deductible amounts and are 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 income tax assets to the amount expected to be realized.

     In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 establishes new evaluation and measurement processes for all income tax positions taken. The adoption of this standard has had no effect on the Company’s financial statements.

      FAIR VALUE MEASUREMENTS — In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability. SFAS No. 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS No. 157 applies whenever other standards require assets or liabilities to be measured at fair value.

     Effective January 1, 2008, the Company implemented SFAS Statement No. 157, which did not have impact on Company’s financial results

     The following table presents certain of the Company’s assets that are measured at fair value as of June 30, 2008. In general, fair values determined by Level 1 inputs utilize quoted prices in active markets and the fair values described below were determined through market, observable and corroborated sources.

TRANSFORMA ACQUISITION GROUP INC.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
(unaudited)

						Quoted Prices in
						Active Markets
Description		June 30, 2008				(Level 1)
Cash and cash equivalents			1,135,676			$	1,135,676
Cash and cash equivalents held in Trust Account			101,243,386				101,243,386
Total		$	102,379,062			$	102,379,062

     In accordance with the provisions of FSP No. FAS 157-2, Effective Date of FASB Statement No. 157, the Company has elected to defer implementation of SFAS 157 as it relates to its non-financial assets and non-financial liabilities until January 1, 2009 and is evaluating the impact, if any, this standard will have on its financial statements.

      NEW ACCOUNTING PRONOUNCEMENTS — In December 2007, the FASB issued SFAS No. 141R., “Business Combinations” (“SFAS 141R”). SFAS 141R replaces SFAS 141 and established principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed and any non controlling interest in the acquirer and the goodwill acquired. SFAS 141R also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. This standard is effective for fiscal years beginning after December 15, 2008.

     The Company does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

NOTE 4 — INCOME TAXES

Provision for income taxes consists of:

For the three

For the three

For the six

For the six

From inception

months ended

months ended

months ended

months ended

(July 19, 2006) to

June 30, 2008

June 30, 2007

June 30, 2008

June 30, 2007

June 30, 2008

Current-Federal

$

150,411

$

340,847

$

469,110

$

686,819

$

1,840,783

     The Company’s effective tax rate approximates the federal statutory rate. No provision for state and local income taxes has been made since the Company was formed as a vehicle to effect a Business Combination and, as a result does not conduct operations and is not engaged in a trade or business in any state. The Company is incorporated in Delaware and accordingly is subject to franchise taxes. Delaware franchise tax expense of $13,339 and $26,677 for the three and six months ended June 30, 2008, $16,254 and $30,352 for the three and six months ended June 30, 2007 and $173,685 for the period from inception (July 19, 2006) to June 30, 2008, respectively, are included as part of general and administrative expenses in the accompanying statements of operations.

NOTE 5 — COMMITMENTS

     The Company is permitted to utilize fifty percent of after tax interest up to an aggregate amount of $2,000,000 of the interest earned upon monies in the Trust Account (of which (i) an aggregate amount of up to $1,250,000 may be released to the Company upon its demand within 12 months after the completion of the Offering, and (ii) an aggregate amount of up to $750,000 plus any remaining portion of the $1,250,000 not previously released to the Company during the initial 12-month period may be released to the Company upon its demand during the period that is between 12 months and 24 months after the completion of the Offering) in addition to approximately $627,000 which was transferred to the Company upon consummation of the Offering for working capital purposes. The working capital will be used to pay for director and officer liability insurance premiums and general and administrative services, including office space, utilities and secretarial support, with the balance being held in

TRANSFORMA ACQUISITION GROUP INC.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
(unaudited)

reserve for other expenses, such as due diligence, legal, accounting, and other fees and expenses for structuring and negotiating business combinations, and deposits, down payments and/or funding of “no shop” provisions in connection with business combinations as well as for reimbursement of any out-of-pocket expenses incurred by the Initial Stockholders in connection with activities undertaken on the Company’s behalf.

Administrative Fees

     The Company has agreed to pay an affiliate of two directors $7,500 per month commencing on effectiveness of the Offering for office, secretarial and administrative services. Secretarial and administrative service of $22,500, and $45,000 for the three and six months ended June 30, 2008, $22,500 and $45,000 for the three and six months ended June 30, 2007 and $138,145 for the period from inception (July 19, 2006) to June 30, 2008, respectively, are included as part of general and administrative expenses in the accompanying statements of operations.

Underwriting Agreement

     In connection with the Offering, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with the underwriters in the Offering.

     Pursuant to the Underwriting Agreement, the Company was obligated to the underwriters for certain fees and expenses related to the Offering, including underwriting discounts of $7,000,000. The Company paid $3,280,000 of the underwriting discount upon closing of the Offering. The Company and the underwriters have agreed that payment of the balance of the underwriting discount of $3,720,000 will be deferred until consummation of the Business Combination. Accordingly, a deferred underwriting fee comprised of the deferred portion of the underwriting discount is included on the accompanying balance sheets.

NOTE 6 — CAPITAL STOCK

     During September 2006, the Company amended and restated its Certificate of Incorporation to authorize the issuance of an additional 90,000,000 shares of common stock for an aggregate authorization of 100,000,000 shares of common stock.

     On December 14, 2006, the Company effected a 2 for 3 reverse stock split of its outstanding shares of common stock. All of the references in the accompanying financial statements to the number of shares have been retroactively restated to reflect the reverse stock split.

     During May 2007, the Company amended and restated its Certificate of Incorporation to authorize the reduction of 67,500,000 shares of common stock for an aggregate remaining authorization of 32,500,000 shares of common stock.

Preferred Stock

     The Company is authorized to issue 5,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors.

Common Stock

     In August 2006, the Company’s Initial Stockholders purchased 3,593,747 post reverse stock split shares of the Company’s common stock for an aggregate $25,000.

     On January 25, 2007, the Initial Stockholders returned an aggregate of 468,750 shares of the Company’s common stock to the Company for cancellation. At the date of return and cancellation, management determined the fair value to be $7.47 per share based on the common stock closing price on January 25, 2007. Accordingly, on January 25, 2007, the Company recorded the $3,501,562 value of the shares contributed to treasury stock and a $3,501,562 corresponding credit to additional paid-in capital. Upon receipt, such shares were then immediately

TRANSFORMA ACQUISITION GROUP INC.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
(unaudited)

cancelled by the Company, which resulted in the retirement of the treasury stock and a corresponding charge to additional paid-in capital and common stock.

     Pursuant to letter agreements with the Company and the underwriters in the Offering and the private placement offering, the Initial Stockholders have waived their right to receive distributions with respect to their founding shares (but not shares purchased in the Offering or in the secondary market) in the event of the Company’s liquidation.

NOTE 7 — WARRANTS AND OPTIONS TO PURCHASE COMMON STOCK

Public Warrants

     Each warrant sold in the Offering (a “Public Warrant”) is exercisable for one share of common stock. Except as set forth below, the Public Warrants entitle the holder to purchase shares at $5.50 per share, subject to adjustment in the event of stock dividends and splits, reclassifications, combinations and similar events for a period commencing on the later of: (a) completion of the Business Combination and (b) December 19, 2007, and ending on December 19, 2010. The Company has the ability to redeem the Public Warrants, in whole or in part, at a price of $.01 per Public Warrant, at any time after the Public Warrants become exercisable, upon a minimum of 30 days’ prior written notice of redemption, if, and only if, the last sale price of the Company’s common stock equals or exceeds $11.50 per share for any 20 trading days within a 30 trading day period ending three business days before the Company sent the notice of redemption.

Private Warrants

     On December 26, 2006, in conjunction with the Offering the Company sold to certain of the Initial Stockholders 3,000,000 warrants (“Private Warrants”), for an aggregate purchase price of $3,000,000. All of the proceeds received from these purchases were placed in the Trust Account. The Private Warrants are identical to the Public Warrants, including entitling the holder to purchase shares at $5.50 per share, except that they may be exercised on a cashless basis so long as they are held by the original purchasers, members of their immediate families or their controlled entities, and may not be sold or transferred, except in limited circumstances, until after the consummation of a Business Combination. If the Company dissolves before the consummation of a Business Combination, there will be no distribution from the Trust Account with respect to such Private Warrants, which will expire worthless.

     As the proceeds from the exercise of the Public Warrants and Private Warrants will not be received until after the completion of a Business Combination, the expected proceeds from exercise will not have any effect on the Company’s financial condition or results of operations prior to a Business Combination.

Purchase Option

     Upon closing of the Offering, the Company sold and issued to CRT Capital Group LLC an option to purchase up to 375,000 Units at an exercise price of $10.00 per Unit (“Unit Purchase Option” or “UPO”). The Units underlying the UPO will be exercisable in whole or in part, solely at CRT Capital Group LLC’s discretion, commencing on the consummation of a Business Combination and expiring on the four-year anniversary of the Offering. The Company accounted for the fair value of the UPO, as an expense of the public offering resulting in a charge directly to stockholders’ equity with an equivalent increase in additional paid-in capital.

     The fair value of the 375,000 Units underlying the UPO was approximately $1.2 million ($3.25 per Unit) at the date of sale and issuance, which was determined using a Black-Scholes option-pricing model. The fair value of the UPO was calculated using the following assumptions: (1) expected volatility of 55.172%, (2) risk-free interest rate of 4.77% and (3) contractual life of 4 years. The expected volatility of approximately 55% was estimated by management based on an evaluation of the historical daily volatilities of similar public entities which had completed a transaction with an operating company. The UPO may only be exercised for cash. Each of the Units included in the UPO are identical to the Units to be sold in the Offering, except that (i) the exercise price of the Units will be $10.00 per Unit, (ii) CRT Capital Group LLC will be entitled to receive certain “piggy-back” registration rights with respect to the Units issuable upon exercise of the UPO, and (iii) the exercise price of the warrants issued in respect

TRANSFORMA ACQUISITION GROUP INC.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
(unaudited)

of the Units issuable upon exercise of the UPO will not be subject to reduction in the event that we determine to reduce the exercise price of our other Warrants.

Registration Rights — Warrants and UPO

     In accordance with the Warrant Agreement related to the Public Warrants and the Registration Rights Agreement associated with the Private Warrants, the Public Warrants and Private Warrants are collectively referred to as the “Warrants.” The Company will only be required to use its best efforts to register the Warrants and the shares of common stock issuable upon exercise of the Warrants and, once the registration statement is effective, to use its best efforts to maintain the effectiveness of such registration statement. The Company will not be obligated to deliver securities, and there are no contractual penalties for failure to deliver securities, if a registration statement is not effective at the time of exercise. Additionally, in the event that a registration statement is not effective at the time of exercise, the holder of such Warrants shall not be entitled to exercise. In no event (whether in the case of a registration statement not being effective or otherwise) will the Company be required to net cash settle a Public Warrant exercise. Consequently, the Warrants may expire unexercised and unredeemed. The holders of Warrants do not have the rights or privileges of holders of the Company’s common stock or any voting rights until such holders exercise their respective Warrants and receive shares of the Company’s common stock.

     The Company is not required to register the Units underlying the UPO; however if the Company does file certain kinds of registration statements at any time during the seven year period following December 19, 2006 the holders of securities underlying the UPO shall have the right to join in such registration statement, subject to certain limitations. The Company has no obligation to net cash settle the exercise of the UPO or the Units underlying the UPO. The holder of the UPO is not entitled to exercise the UPO or the Units underlying the UPO unless a registration statement covering the securities underlying the UPO is effective or an exemption from registration is available. If the holder is unable to exercise the UPO or underlying Units, the UPO or underlying units, as applicable, will expire worthless.

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.

     We were formed on July 19, 2006 for the purpose of acquiring one or more assets or control of one or more operating businesses in the technology, media or telecommunications industries through a merger, capital stock exchange, asset acquisition, stock purchase or other similar business combination. Our initial business combination must be with an acquisition target or targets whose collective fair market value is at least equal to 80% of our net assets (excluding the amount held in the trust account representing a portion of the underwriters’ discount) at the time of the acquisition.

     On December 26, 2006, we consummated our initial public offering (“Offering”) of 12,500,000 Units. Each Unit consists of one share of our common stock, par value $0.0001 per share, and one warrant entitling the holder to purchase one share of common stock at a price of $5.50. The public offering price of each Unit was $8.00, and we generated gross proceeds of $100,000,000 in the Offering. Of the gross proceeds: (i) we deposited $98,500,000 into a trust account at Smith Barney, a division of Citigroup Global Markets Inc., maintained by Continental Stock Transfer & Trust Company, as trustee, which amount included $3,720,000 of contingent underwriting discount and $3,000,000 that we received from the sale of warrants to our founders in a private placement on December 26, 2006; (ii) the underwriters received $3,280,000 as underwriting discount (excluding the contingent underwriting discount); (iii) we retained $640,000 that will not be held in the trust account; and (iv) we used $580,000 for offering expenses.

     On December 26, 2006, we consummated the sale to CRT Capital Group LLC, one of our underwriters, for $100, of an option to purchase up to a total of 375,000 Units at a price equal to $10.00 per unit (i.e., 125% of the price of the units sold in our initial public offering). The Units issuable upon exercise of this option are otherwise identical to those sold in the Offering except that (i) CRT Capital Group LLC is entitled to certain “piggy-back” registration rights with respect to the Units issuable upon exercise of its purchase option, and (ii) the exercise price of the warrants issued in respect of the Units issuable upon exercise of the purchase option will not be subject to reduction in the event that we determine to reduce the exercise price of our other warrants. This option is exercisable commencing on the later of the consummation of a business combination and December 19, 2007, and expiring on December 19, 2010. The purchase option was registered under the Securities Act on a registration statement on Form S-1 (File No. 333-137263) that was declared effective on December 19, 2006.

     The proceeds deposited in the trust account will not be released from the trust account until the earlier of the consummation of a business combination or the expiration of the time period during which we may consummate a business combination. The proceeds held in the trust account (other than the contingent underwriting discount) may be used as consideration to pay the sellers of an acquisition target with which we complete a business combination. To the extent that our capital stock is used in whole or in part as consideration to effect a business combination, the proceeds held in the trust account (other than the contingent underwriting discount) will be used to finance the operations of the acquisition target. We may also use the proceeds held in the trust account (other than the contingent underwriting discount) to pay a finder’s fee to any unaffiliated party that provides information regarding prospective targets to us.

     We believe that the working capital available to us, in addition to the funds available to us outside of the trust account, will be sufficient to allow us to operate through December 26, 2008, assuming that a business combination is not consummated during that time. Over this time, we have estimated that up to $2,640,000 of working capital and reserves will be allocated as follows: $1,500,000 of expenses for legal, accounting and other expenses attendant to the due diligence investigations, structuring and negotiating of a business combination; up to $180,000 for the administrative fee payable to S&B Investment Management Group, LLC ($7,500 per month for 24 months), an affiliated third party; $100,000 of expenses in legal and accounting fees relating to our SEC reporting obligations; and $860,000 for general working capital that can be used for fairness opinions in connection with our acquisition

plans, director and officer liability insurance premiums, and other miscellaneous expenses and reserves. As of June 30, 2008 we have used $1,097,261 for such working capital expenditures.

     On June 26, 2008 the Company announced that it had satisfied the criteria under its certificate of incorporation that allows for an extension of time to complete its initial Business Combination. If the Company fails to complete a Business Combination by December 26, 2008, the Company’s board will convene, adopt and recommend to their stockholders a plan of dissolution and distribution and file a proxy statement with the SEC seeking stockholder approval for such plan. As of June 30, 2008 we have capitalized $599,604 of legal and consulting costs related to proposed acquisitions.

Results of Operations

     For the three months ended June 30, 2008 and June 30, 2007, we had net income of $291,974 and $661,643 respectively, which consisted of interest income on the trust account investment of $693,293 and $1,276,790 and interest on cash of $8,115 and $5,862, respectively. Income before provision for income taxes was offset by general and administrative expenses of $259,023 and $280,162, which includes professional fees of $122,415 and $165,346. Delaware franchise tax of $13,339 and $16,254, insurance expense of $35,772 and $35,772, travel and entertainment expenses of $56,576 and $35,846, administrative fees of $22,500 and $22,500 and other operating expenses of $8,421 and $4,444, respectively. The Company incurred a provision for Federal income taxes of $150,411 and $340,847, respectively.

     For the six months ended June 30, 2008 and June 30, 2007, we had net income of $829,516 and $1,333,236, respectively, which consisted of interest income on the trust account investment of $1,707,033 and $2,517,083 and interest on cash of $17,437 and $7,761, respectively. Income before provision for income taxes was offset by general and administrative expenses of $425,844 and $504,789, which includes professional fees of $151,753 and $250,115, Delaware franchise tax of $26,677 and $30,352, insurance expense of $71,544 and $71,542, travel and entertainment expenses of $85,455 and $70,255, administrative fees of $45,000 and $45,000, filing fees of $27,500 and $24,500, and other operating expenses of $17,915 and $13,025, respectively. The Company incurred a provision for Federal income taxes of $469,110 and $686,819, respectively.

     From inception (July 19, 2006) to June 30, 2008, we had net income of $3,511,009 which consisted of interest income on the trust account investment of $6,890,112 and interest on cash of $43,666, offset by general and administrative expenses of $1,581,986, which includes professional fees of $691,233, Delaware franchise tax of $173,685, insurance expense of $219,750, travel and entertainment expenses of $245,142, filing fees of $52,171, administrative fees of $138,145 and other operating expenses of $61,860. The Company has a provision for Federal income taxes of $1,840,783.

     Our financial statements as of and for the period ending December 31, 2007 were audited, and we filed these audited financial statements in our 2007 Annual Report on Form 10-K dated March 24, 2008.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

     There has been no material change in our exposure to market risk from that discussed in our 2007 Annual Report on Form 10-K.

Item 4. Controls and Procedures.

     Our management carried out an evaluation, with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures as of June 30, 2008, the end of the fiscal quarter covered in this report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

     As of June 30, 2008 there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

     None.

Item 1A. Risk Factors.

     There have been no material changes from the risk factors disclosed in Part 1, Item 1A, of our 2007 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

	(a)		None.
	(b)		None.
	(c)		None.

Item 3. Defaults Upon Senior Securities.

     Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders.

     None.

Item 5. Other Information.

     None.

Item 6. Exhibits.

Exhibit		Exhibit
Number		Description
31.1		Certificate Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 of the Principal Executive Officer
31.2		Certificate Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 of the Principal Financial Officer
32.1		Certification by Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification by Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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.

		TRANSFORMA ACQUISITION GROUP INC.
Date: August 1, 2008		By:		/s/ Larry J. Lenhart
		Name: Larry J. Lenhart
		Title: President and Chief Executive Officer

Exhibit Index.

Exhibit		Exhibit
Number		Description
31.1		Certificate Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 of the Principal Executive Officer
31.2		Certificate Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 of the Principal Financial Officer
32.1		Certification by Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification by Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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