Unassociated Document

10-Q 1 v060140_10q.htm Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended October 31, 2006

o	Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____________ to _____________

Commission File Number: 000-51869

Global Services Partners Acquisition Corp.

(Exact Name of Small Business Issuer as Specified in Its Charter)

Delaware

(State or other Jurisdiction of

Incorporation or Organization)

20-3290391

(I.R.S. Employer

Identification No.)

3130 Fairview Park Drive, Suite 500, Falls Church, VA 22042

(Address of Principal Executive Office) (Zip Code)

(703) 373-3143

(Issuer's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 o No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated filer o Accelerated Filer o Non-Accelerated Filer x

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

As of December 14, 2006 920,100 shares of common stock, par value $.0001 per share, and 5,980,000 shares of Class B common stock, par value $.0001 per share, were issued and outstanding.

Transitional Small Business Disclosure Format (check one): Yes o No x

Part I: Financial Information

Item 1. Financial Statements (Unaudited):

Condensed Balance Sheet	3

Condensed Statements of Operations	4

Condensed Statements of Stockholder's Equity	5

Condensed Statement of Cash Flows	6

Notes to Unaudited Condensed Financial Statements	7

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	14

Part II. Other Information.

Item 1A. Risk Factors	15

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	15

Item 6. Exhibits	15

Signatures	16

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements.

Global Services Partners Acquisition Corp.

(a corporation in the development stage)

Condensed Balance Sheets

	October 31, 2006		July 31, 2006
ASSETS		(Unaudited)
Current Assets:
Cash and cash equivalents	$	1,345,727	$	1,583,911
Investment held in trust, including interest receivable of $80,701 and $80,929 (Note 1)		30,687,704		30,449,626
Prepaid insurance and other expenses		85,250		4,125
Total assets	$	32,118,681	$	32,037,662
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accrued registration costs	$	—	$	89,909
Accounts payable and accrued expenses		89,748		42,225
Total current liabilities		89,748		132,134
Common stock, Class B subject to possible conversion (1,195,402 shares at conversion value) (Note 1)		6,134,472		6,086,880
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, 24,000,000 shares authorized, 920,100 shares issued and outstanding		92		92
Common stock, par value $.0001 per share, 7,000,000 shares authorized, 4,784,598 shares issued and outstanding (excluding 1,195,402 shares subject to possible conversion)		478		478
Additional paid-in-capital		25,617,029		25,664,621
Retained earnings accumulated in the development stage		276,862		153,457
Total stockholders’ equity		25,894,461		25,818,648
Total liabilities and stockholders’ equity	$	32,118,681	$	32,037,662

See Notes to Unaudited Condensed Financial Statements

Global Services Partners Acquisition Corp.

(a corporation in the development stage)

Condensed Statements of Operations

(Unaudited)

	For the three months ended October 31, 2006			For the period from inception (August 10, 2005) to October 31, 2005			For the period from inception (August 10, 2005) to October 31, 2006
Operating expenses:
Professional fees	$	57,873		$	9,647		$	122,297
General and administrative expenses (Notes 4 and 5)		67,538			177			108,573
Loss from operations		(125,411	)		(9,824	)		(230,870	)
Interest income		248,816			—			507,732
Income (loss) before provision for income taxes		123,405			(9,824	)		276,862
Provision for income taxes (Note 4)		—			—			—
Net income (loss) for the period		123,405			(9,824	)		276,862
Accretion of Trust Fund relating to Class B common stock subject to possible conversion		(47,592	)		—			(97,692	)
Net income (loss) attributable to other Class B stockholders and common stockholders	$	75,813		$	(9,824	)	$	179,170
Weighted average Class B common shares outstanding subject to possible conversion		1,195,402			—
Net income per Class B common share subject to possible conversion, basic and diluted	$	0.04		$	—
Weighted average number of shares outstanding, basic and diluted		5,704,698			100
Net income (loss) per share, basic and diluted	$	0.01		$	(98.24	)

See Notes to Unaudited Condensed Financial Statements

Global Services Partners Acquisition Corp.

(a corporation in the development stage)

Condensed Statement of Stockholders’ Equity

	Common Stock				Common Stock, Class B				Additional Paid-In			Retained earnings accumulated in the development
	Shares		Amount		Shares		Amount		Capital			stage		Total
Balance, August 10, 2005 (inception)		—	$	—		—	$	—	$	—		$	—	$	—
Issuance of Common Stock to initial stockholder		100		—		—		—		500			—		500
Issuance of 3,075,000 Warrants at $0.05 Per Warrant		—		—		—		—		153,750			—		153,750
Sale of 460,000 Series A Units and 2,990,000 Series B Units through public offering net of underwriters’ discount and offering expenses and net of proceeds of $6,036,780 allocable to 1,195,402 shares of common stock, Class B subject to possible conversion		920,000		92		4,784,598		478		25,560,371			—		25,560,941
Proceeds from sale of underwriters’ purchase option		—		—		—		—		100			—		100
Accretion relating to Class B common stock subject to possible conversion										(50,100	)				(50,100	)
Net income for the period		—		—		—		—		—			153,457		153,457
Balance, July 31, 2006		920,100	$	92		4,784,598	$	478	$	25,664,621		$	153,457	$	25,818,648
Accretion relating to Class B common stock subject to possible conversion (Unaudited)										(47,592	)				(47,592	)
Net income for the period (Unaudited)		—		—		—		—		—			123,405		123,405
Balance, October 31, 2006 (Unaudited)		920,100	$	92		4,784,598	$	478	$	25,617,029		$	276,862	$	25,894,461

See Notes to Unaudited Condensed Financial Statements

Global Services Partners Acquisition Corp.

(a corporation in the development stage)

Condensed Statements of Cash Flows

(Unaudited)

	For the three months ended October 31, 2006			For the period from inception (August 10, 2005) to October 31, 2005			For the period from inception (August 10, 2005) to October 31, 2006
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss) for the period	$	123,405		$	(9,824	)	$	276,862
Adjustments to reconcile net income to net cash used in operating activities:
Gain on maturity of securities held in trust fund		(157,377	)		—			(408,003	)
Change in operating assets and liability:
Interest receivable on investment held in Trust Fund		(80,701	)		—			(80,701	)
Increase in prepaid insurance and other expenses		(81,125	)		—			(85,250	)
Increase in accounts payable and accrued expenses		47,523			6,647			89,748
Net cash used in operating activities		(148,275	)		(3,177	)		(207,344	)
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of securities held in trust fund		(91,585,830	)		—			(212,658,710	)
Maturities of securities held in trust fund		91,585,830			—			182,459,710
Net cash used in investing activities		—			—			(30,199,000	)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock to initial stockholder		—			500			500
Proceeds from issuance of warrants		—			153,750			153,750
Proceeds from notes payable to initial securityholders		—			52,500			52,500
Registration costs paid		(89,909	)		—			—
Deferred registration costs		—			(153,003	)		—
Repayment of notes payable to initial securityholders		—			—			(52,500	)
Proceeds from sale of underwriters’ purchase option		—			—			100
Portion of net proceeds from sale of Series B units through public offering allocable to shares of common stock, Class B subject to possible conversion		—			—			6,036,780
Net proceeds from sale of units through public offering allocable to stockholders' equity		—			—			25,560,941
Net cash provided by (used in) financing activities		(89,909	)		53,747			31,752,071
Net increase in cash and cash equivalents		(238,184	)		50,570			1,345,727
Cash and cash equivalents
Beginning of period		1,583,911			—			—
End of period	$	1,345,727		$	50,570		$	1,345,727
Supplemental disclosure of non-cash financing activities:
Accrued registration costs	$	—		$	4,247		$	—
Fair value of underwriters' purchase option included in offering costs	$	—		$	—		$	360,000
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	—		$	—		$	—
Cash paid for interest	$	—		$	—		$	—

See Notes to Unaudited Condensed Financial Statements

Global Services Partners Acquisition Corp.

(a corporation in the development stage)

Notes to Financial Statements

NOTE 1 - ORGANIZATION AND ACTIVITIES

Global Services Partners Acquisition Corp. (the “Company”) was incorporated in Delaware on August 10, 2005 to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with a currently unidentified operating business (a “Target Business”).

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 April 18, 2006. The Company consummated the Offering on April 25, 2006 for net proceeds of approximately $31.6 million. The Company's management has broad authority with respect to the application of the proceeds of the Offering although substantially all of the proceeds of the Offering are intended to be applied generally toward consummating a merger, capital stock exchange, asset acquisition or other similar transaction with a Target Business (a "Business Combination"). An amount of $30,687,704 (which includes accrued interest of $80,701 as of October 31, 2006) is being held in an interest-bearing trust account (“Trust Fund”) to be returned to the holders of Class B common stock if a Business Combination is not contracted in 18 months (October 24, 2007), or consummated in 24 months, subsequent to the Offering (the "Target Business Acquisition Period"). In the event there is no Business Combination, the Company will dissolve and any remaining net assets, after the distribution of the Trust Fund to Class B stockholders, will be distributed to the holders of common stock sold in the Offering.

Both the Company's common stock and Class B common stock have one vote per share. However, the Class B common stockholders may, and the common stockholders may not, vote in connection with a Business Combination. Further, should a Business Combination not be consummated during the Target Business Acquisition Period, the Trust Fund would be distributed pro-rata to all of the Class B common stockholders and their Class B common shares would be cancelled and returned to the status of authorized but unissued shares. Common stockholders will receive none of the proceeds from the Trust Fund should a Business Combination not be consummated.

The Company, after signing a definitive agreement for a Business Combination, is obliged to submit such transaction for approval by a majority of the Class B common stockholders of the Company. Class B common stockholders that vote against such proposed Business Combination are, under certain conditions, entitled to convert their shares into a pro-rata distribution from the Trust Fund (the "Conversion Right"). The actual per-share conversion price will be equal to the amount in the Trust Fund (inclusive of any interest thereon) as of two business days prior to the proposed Business Combination, divided by the number of Class B shares sold in the Offering, or approximately $5.13 per share based on the value of the Trust Fund as of October 31, 2006. As a result of the Conversion Right, $6,134,472 (including accretion of $97,692 through October 31, 2006) has been classified in Common Stock, Class B subject to possible conversion on the accompanying balance sheet as of October 31, 2006. In the event that holders of a majority of the outstanding shares of Class B common stock vote for the approval of the Business Combination and that holders owning 20% or more of the outstanding Class B common stock do not exercise their Conversion Rights, the Business Combination may then be consummated. Upon completion of such Business Combination and the payment of any Conversion Rights (and related cancellation of Class B common stock), the remaining shares of Class B common stock would be converted to common stock.

Global Services Partners Acquisition Corp.

(a corporation in the development stage)

Notes to Financial Statements

NOTE 2 - OFFERING

In the Offering, effective April 18, 2006 (closed on April 25, 2006), the Company sold to the public an aggregate of 460,000 Series A Units (the “Series A Units” or a “Series A Unit”) and 2,990,000 Series B Units (the “Series B Units” or a “Series B Unit”) at a price of $8.50 and $10.10 per unit, respectively inclusive of an over-allotment option issued to the underwriters to purchase additional Series A Units and Series B Units, which was exercised in full. Proceeds from the Offering, totaled approximately $31.6 million, which was net of approximately $2.5 million in underwriting and other expenses incurred through April 25, 2006. Each Series A Unit consists of two shares of the Company's common stock, and ten Class Z Warrants (each a "Class Z Warrant"). Each Series B Unit consists of two shares of the Company's Class B common stock, and two Class W Warrants (each a “Class W Warrant”).

The Company has also sold to certain of the underwriters for an aggregate of $100, an option (the “Underwriter’s Purchase Option” or “UPO”) to purchase up to a total of 20,000 additional Series A Units and/or 130,000 additional Series B Units (see Note 6).

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements - The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the Company’s audited financial statements and footnotes thereto for the period from inception (August 10, 2005) to July 31, 2006 included in the Company’s Form 10-K filed on October 30, 2006. 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 primarily of normal recurring adjustments) that are, in the opinion of management necessary for a fair presentation of the Company’s financial position and results of operations. The operating results for the quarter ended October 31, 2006, for the period from inception (August 10, 2005) to October 31, 2005 and for the period from inception (August 10, 2005) to October 31, 2006 are not necessarily indicative of the results to be expected for any other interim period of any future year.

Cash and Cash Equivalents - Included in 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.

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 maintains 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.

Investments Held in Trust - The Company’s restricted investment held in the Trust Fund at October 31, 2006 is comprised of Commonwealth of Virginia securities with maturities of up to 30 days. Such securities generate current income which is exempt from federal income tax and the income tax imposed by the Commonwealth of Virginia and therefore no provision for income taxes is required for the period ended October 31, 2006.

Net Income Per Share - Net income per share is computed based on the weighted average number of shares of common stock and Class B common stock outstanding.

Basic earnings (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted average common shares outstanding for the period. Basic net income per share is calculated by dividing net income attributable to (1) common and Class B stockholders and (2) Class B common stockholders subject to possible conversion by their weighted average number of common shares outstanding during the period. Calculation of the weighted average common shares outstanding during the period is comprised of 920,100 common shares, 4,784,598 Class B shares and 1,195,402 Class B shares subject to possible conversion outstanding after the effective date of the offering in April 2006. 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 the UPO are antidilutive, they have been excluded from the Company’s computation of net income per share. Therefore, basic and diluted income (loss) per share were the same for the quarter ended October 31, 2006 and for the period from inception (August 10, 2005) through October 31, 2005.

Global Services Partners Acquisition Corp.

(a corporation in the development stage)

Notes to Financial Statements

Fair Value of Financial Instruments and Derivatives - The fair values of the Company’s assets and liabilities that qualify as financial instruments under SFAS No. 107 approximate their carrying amounts presented in the balance sheet at October 31, 2006.

The Company accounts for derivative instruments in accordance with SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities,” as amended, (“SFAS 133”) which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments imbedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value. Accounting for the changes in the fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of the relationships designated are based on the exposures hedged. Changes in the fair value of derivative instruments which are not designated as hedges are recognized in earnings as other income (loss).

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 bases 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.

New Accounting Pronouncements - The Company does not believe that any 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

Income Taxes

No provisions for federal income taxes has been made since the Company’s interest income is earned from investments in Commonwealth of Virginia and Commonwealth of Maryland securities which are exempt from federal taxation.

Other

The Company is incorporated in Delaware and accordingly is subject to franchise taxes. Amounts of $9,000 and $19,056 for Delaware franchise taxes are included as part of general and administrative expenses in the accompanying statements of operations for the quarter ended October 31, 2006 and for the period from inception (August 10, 2006) to October 31, 2006, respectively.

NOTE 5 - COMMITMENTS

Administrative Services

Commencing on April 18, 2006, the effective date of the offering, the Company is obligated to pay an affiliate of the Company’s chief executive officer, $7,500 per month for office, secretarial and administrative services. Amounts of $22,500 and $48,225 for such services for the quarter ended October 31, 2006 and for the period from inception (August 10, 2005) to October 31, 2006, respectively, are included in general and administrative expenses on the accompanying statements of operations.

Financial Advisory Services

HCFP has been engaged by the Company to act as the Company’s non-exclusive investment banker in connection with a proposed Business Combination. For assisting the Company in structuring and negotiating the terms of a Business Combination, the Company will pay HCFP a cash transaction fee of $900,000.

Solicitation Services

The Company has engaged HCFP, on a non-exclusive basis, to act as its agent for the solicitation of the exercise of the Company’s Class W Warrants and Class Z Warrants. In consideration for solicitation services, the Company will pay HCFP a commission equal to 5% of the exercise price for each Class W Warrant and Class Z Warrant exercised after April 18, 2007 if the exercise is solicited by HCFP.

Global Services Partners Acquisition Corp.

(a corporation in the development stage)

Notes to Financial Statements

NOTE 6 - CAPITAL STOCK

Preferred Stock

The Company is authorized to issue up to 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 and Class B Common Stock

The Company is authorized to issue 24,000,000 shares of common stock and 7,000,000 shares of Class B common stock. As of October 31, 2006, there are 920,100 shares of the Company’s common stock issued and outstanding and 5,980,000 shares of the Company’s Class B stock issued and outstanding, including 1,195,402 Class B common shares subject to possible conversion.

As of October 31, 2006, there are 2,684,900 and 1,020,000 authorized but unissued shares of the Company’s common stock and the Company’s Class B common stock, respectively, available for future issuance, after appropriate reserves for the issuance of common stock in connection with the Class W Warrants and Class Z Warrants, the Underwriters Purchase Option and the officer’s and director’s Class W Warrants and Class Z Warrants.

The Company currently has no commitments to issue any shares of common stock other than as described herein; however, the Company will, in all likelihood, issue a substantial number of additional shares in connection with a Business Combination. To the extent that additional shares of common stock are issued, dilution to the interests of the Company’s stockholders who participated in the Offering will occur.

NOTE 7 - WARRANTS AND OPTION TO PURCHASE COMMON STOCK

Warrants

In August, 2005, the Company sold and issued Class W Warrants to purchase 1,537,500 shares of the Company’s common stock, and Class Z Warrants to purchase 1,537,500 shares of the Company’s common stock to its initial securityholders, for an aggregate purchase price of $153,750, or $0.05 per warrant.

The Class W and Class Z Warrants held by the initial securityholders are also subject to a registration rights agreement. The Class W Warrants and Class Z Warrants outstanding prior to the Offering may be exercised with cash on or prior to their respective expiration dates. Although the Company’s initial securityholders may make a written demand that the Company file a registration statement, the Company is only required to use its best efforts to cause the registration statement to be declared effective and, once effective, only to use its best efforts to maintain its effectiveness. Accordingly, the Company’s obligation is merely to use its best efforts in connection with the registration rights agreement and upon exercise of the warrants, the Company can satisfy its obligation by delivering unregistered shares of common stock.

Each Class W Warrant issued in the Offering and to the initial securityholders is exercisable for one share of common stock. Except as set forth below, the Class W Warrants entitle the holder to purchase shares at $5.00, 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) April 18, 2007 and ending April 17, 2011. As of October 31, 2006, there were 7,517,500 Class W Warrants outstanding.

Each Class Z Warrant issued in the Offering and to the initial securityholders is exercisable for one share of common stock. Except as set forth below, the Class Z Warrants entitle the holder to purchase shares at $5.00, 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) April 18, 2007 and ending April 17, 2013. As of October 31, 2006, there were 6,137,500 Class Z Warrants outstanding.

Global Services Partners Acquisition Corp.

(a corporation in the development stage)

Notes to Financial Statements

The Class W Warrants and Class Z Warrants outstanding prior to the Offering, all of which are held by the Company’s initial securityholders or their affiliates, shall not be redeemable by the Company as long as such warrants continue to be held by such securityholders or their affiliates. Except as set forth in the preceding sentence, the Company may redeem the Class W Warrants and/or Class Z Warrants with the prior consent of HCFP, the representative of the underwriters in the Offering, in whole or in part, at a price of $.05 per warrant at any time after the warrants become exercisable, upon a minimum of 30 days’ prior written notice of redemption, and if, and only if, the last sale price of the Company’s common stock equals or exceeds $7.50 per share and $8.75 per share, for a Class W Warrant and Class Z Warrant, respectively, for any 20 trading days within a 30 trading day period ending three business days before the Company sent the notice of redemption (the “Measurement Period”). In addition, the Company may not redeem the Class W Warrants and/or the Class Z Warrants unless the shares of common stock underlying such warrants are covered by an effective registration

The Class W Warrants and Class Z Warrants issued may be exercised with cash on or prior to their respective expiration dates. However, the Class W Warrants and Class Z Warrants issued will not be exercisable unless at the time of exercise the Company has a current prospectus relating to the Company’s common stock issuable upon exercise of the warrants and the common stock has been registered, qualified or deemed to be exempt under the applicable securities laws. Accordingly if the warrants are not able to be exercised such warrants may expire worthless. The Company has no obligation to net cash settle the exercise of the warrants.

The holders of Class W Warrants and Class Z 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. As the proceeds from the exercise of the Class W Warrants and Class Z 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.

Underwriter Purchase Option

In connection with the Offering, the Company was issued to certain of the underwriters an option (the “UPO”) for an aggregate of $100 to purchase up to 20,000 Series A Units at an exercise price of $14.025 per unit and/or up to 130,000 Series B Units at an exercise price of $16.665 per unit on the later of (a) completion of a Business Combination and (b) April 18, 2007 and ending April 17, 2011. The fair value of the UPO, inclusive of the receipt of the $100 cash payment, was accounted for as an expense of the Offering resulting in a charge directly to stockholders’ equity with a corresponding credit to additional paid-in-capital. The Company determined the fair value of the UPO of approximately $360,000 using a Black-Scholes option-pricing model. The fair value of the UPO granted was estimated as of the date of issuance using the following assumptions: (1) expected volatility of 37.566%, (2) risk-free interest rate of 4.92% and (3) contractual life of 5 years. The UPO 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 UPO (the difference between the exercise prices of the UPO and the underlying warrants and the market price of the units and underlying securities) to exercise the UPO without the payment of any cash. Each of the Series A Units and Series B Units included in the UPO are identical to the Series A Units and Series B Units sold in the Offering, except that the exercise price of the Class W Warrants underlying the Series B Units and the Class Z Warrants underlying the Series A Units will be $5.50 per share and the Class Z Warrants underlying the Series A Units shall only be exercisable until the fifth anniversary of the Offering.

The Company has no obligation to net cash settle the exercise of the UPO or the warrants underlying the UPO. The holder of the UPO will not be entitled to exercise the UPO or the warrants 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 warrants, the UPO or warrants, as applicable, will expire worthless.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

The statements discussed in this Report include forward looking statements that involve risks and uncertainties, including the timely delivery and acceptance of the Company's products and the other risks detailed from time to time in the Company's reports filed with the Securities and Exchange Commission.

The following discussion should be read in conjunction with the Company’s unaudited condensed financial statements and footnotes thereto contained in this Quarterly Report filed on Form 10-Q and the Company’s audited financial statements and footnotes thereto for the period from inception (August 10, 2005) to July 31, 2006 included in the Company’s Form 10-K filed on October 30, 2006.

We were formed on August 10, 2005 to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an entity that has an operating business in the security industry. We completed our initial public offering (“IPO”) on April 25, 2006. Our entire activity from inception through the consummation of our IPO on April 25, 2006 was to prepare for and complete our IPO. Since the consummation of our IPO on April 25, 2006, our activity has been limited.

We are currently in the process of evaluating and identifying targets for a business combination. We are not presently engaged in, and will not engage in, any substantive commercial business until we consummate a business combination. We intend to utilize cash derived from the proceeds of our IPO, our capital stock, debt or a combination of cash, capital stock and debt, in effecting a business combination.

Results of Operations

Net income for the quarter ended October 31, 2006 was $123,405, which consisted interest income of the trust fund of $238,078, and interest on cash and cash equivalents of $10,738 offset by $57,873 of professional fees and $67,538 of general and administrative fees consisting of $22,500 for a monthly administrative services agreement with an affiliate, $12,500 of D&O insurance, $9,000 of Delaware franchise tax and $23,538 of other expenses.

Net loss for the period from inception (August 10, 2005) to October 31, 2005 was $9,824, which consisted of $9,647 of professional fees and $177 of other general and administrative services.

Net income for the period from inception (August 10, 2005) to October 31, 2006 was $276,862, which consisted interest income of the trust fund of $488,704, and interest on cash and cash equivalents of $19,028 offset by $122,297 of professional fees and $108,573 of general and administrative fees consisting of $48,225 for a monthly administrative services agreement with an affiliate, $12,500 of D&O insurance, $19,056 of Delaware franchise tax and $28,792 of other expenses.

Beginning April 18, 2006, we became obligated to pay Everest Telecom LLC, an affiliate of Mr. Rahul Prakash, our Chairman of the Board and Chief Executive Officer and a member of our board of directors, a monthly fee of $7,500 for office and administrative services. This arrangement is for our benefit and is not intended to provide compensation in lieu of a salary. As discussed above, an amount of $22,500 is included in general and administrative expenses on the accompanying condensed statements of operations for the fiscal quarter ended October 31, 2006 and $48,225 for the period from inception (August 10, 2005) to October 31, 2006, pursuant to this arrangement.

Liquidity and Capital Resources

Our net proceeds from the IPO, after deducting offering expenses of approximately $434,000 and underwriting discounts of approximately $2,047,000, was approximately $31,600,000 of which $30,199,000 was placed in a trust account and the remaining proceeds of approximately $1,430,000 became available to be used to provide for business, legal and accounting due diligence on prospective transactions and continuing general and administrative expenses. We expect to use substantially all of the net proceeds of this offering to acquire a target business, including identifying and evaluating prospective acquisition candidates, selecting the target business, and structuring, negotiating and consummating the business combination. To the extent that our capital stock is used in whole or in part as consideration to effect a business combination, the proceeds held in the trust account, as well as any other net proceeds not expended, will be used to finance the operations of the target. At October 31, 2006, we had cash outside of the trust account of $1,345,727, cash held inside the trust account of $30,687,704, prepaid insurance and other expenses of $85,250 and total liabilities of $89,748.

We believe that the funds available to us outside of the trust account will be sufficient to allow us to operate until April 18, 2008, assuming that a business combination is not consummated during that time. Of the funds held outside of the trust account totaling $1,345,727 as of October 31, 2006, we anticipate using these funds to cover legal and accounting fees, other expenses attendant to the due diligence investigations, structuring, and negotiating of a business combination, and administrative expenses incurred prior to completing a business combination. We do not believe we will need to raise additional funds in order 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 combination that is presented to us. We would only consummate such a fund raising simultaneously with the consummation of a business combination.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices and/or equity prices. $30,199,000 of the net offering proceeds has been placed into a trust account at Lehman Brothers maintained by American Stock Transfer & Trust Company, acting as trustee. The proceeds held in trust will only be invested in United States “government securities,” defined as any Treasury Bill issued within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 having a maturity of 180 days or less, or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940. As of October 31, 2006, $1,345,726 of the proceeds not held in trust were being held in a business checking account with Provident Bank National Association. Thus, we are subject to market risk primarily through the effect of changes in interest rates. The effect of other changes, such as foreign exchange rates, commodity prices and/or equity prices, does not pose significant market risk to us.

ITEM 4. Controls and Procedures.

An evaluation of the effectiveness of our disclosure controls and procedures as of October 31, 2006 was made under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer. Based on that evaluation, they concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. During the most recently completed fiscal quarter, there has been no significant change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 1A. Risk Factors.

Please see the information disclosed in the “Risk Factors” section of our Registration Statement on Form S-1, as amended (File No. 333-128350), as filed with the SEC on March 14, 2006 together with our prospectus filed in accordance with Rule 424(b)(4) on April 20, 2006.

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

On April 25, 2006, we consummated our initial public offering of 460,000 Series A units, with each Series A unit consisting of two shares of our common stock and ten Class Z warrants, each to purchase one share of our common stock at an exercise price of $5.00 per share, and 2,990,000 Series B units, with each Series B unit consisting of two shares of our Class B common stock and two Class W warrants, each to purchase one share of common stock. These units include units that were subject to the over-allotment option. The Series A Units were sold at an offering price of $8.50 per Series A Unit and the Series B Units were sold at an offering price of $10.10 per Series B Unit, generating total gross proceeds of $34,109,000. HCFP/Brenner Securities LLC acted as representative of the underwriters for the initial public offering. The securities sold in the offering were registered under the Securities Act of 1933 on a registration statement on Form S-1 (No. 333-128350). The Securities and Exchange Commission declared the registration statement effective on April 18, 2006.

We paid a total of $2,046,540 in underwriting discounts and commissions, and approximately $485,000 has been paid for costs and expenses related to the offering.

After deducting the underwriting discounts and commissions and the offering expenses, the total net proceeds to us from the offering were approximately $31,600,000, of which $30,199,000 was deposited into the trust account and the remaining proceeds are available to be used to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses.

For a description of the use of the proceeds generated in our initial public offering, see Part I, Item 2 of this Form 10-Q.

ITEM 6. Exhibits.

The Company hereby files as part of this quarterly report on Form 10-Q the Exhibits listed in the attached Exhibit Index.

31.1 - Section 302 Certification by CEO

31.2 - Section 302 Certification by CFO

32.1 - Section 906 Certification by CEO

32.2 - Section 906 Certification by CFO

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	GLOBAL SERVICES PARTNERS ACQUISITION CORP.
Dated: December 15, 2006
	By:	/s/ Rahul Prakash
		Rahul Prakash Chairman of the Board and Chief Executive Officer (Principal Executive Officer)


Dated: December 15, 2006
	By:	/s/ Avinash Vashistha
		Avinash Vashistha Chief Financial Officer and Executive Vice President (Principal Financial and Accounting Officer)