Attached files
file | filename |
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EX-3.2 - Formula Acquisition Corp. | v183119_ex3-2.htm |
EX-5.1 - Formula Acquisition Corp. | v183119_ex5-1.htm |
EX-4.1 - Formula Acquisition Corp. | v183119_ex4-1.htm |
EX-23.1 - Formula Acquisition Corp. | v183119_ex23-1.htm |
EX-10.1 - Formula Acquisition Corp. | v183119_ex10-1.htm |
EX-3.1(I) - Formula Acquisition Corp. | v183119_ex3-1i.htm |
EX-3.1(II) - Formula Acquisition Corp. | v183119_ex3-1ii.htm |
As
filed with the Securities and Exchange Commission on __________,
2010
File
No. 333-________
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
_____________________
FORMULA
ACQUISITION CORP.
(Exact
Name of Registrant as Specified in its Charter)
Delaware
|
6770
|
27-2320482
|
||
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer
Identification
Number)
|
15
Broad Street, Suite 2624
New
York, NY 10005
(Address,
Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s
Principal Executive Offices)
______________________________
Thomas
J. Clarke, Jr., Chairman of the Board and Chief Executive Officer
Formula
Acquisition Corp.
15
Broad Street, Suite 2624
New
York, NY 10005
(203)
512-2161
(Name,
Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent
for Service)
_______________________________
Copies
to:
Jay
M. Kaplowitz, Esq.
Arthur
S. Marcus, Esq.
Kristin
J. Angelino, Esq.
Gersten
Savage LLP
600
Lexington Avenue, 9th
floor
New
York, New York 10022
(212)
752-9700
(212)
980-5192 - Facsimile
|
[Underwriter’s
counsel]
|
Approximate date of commencement of
proposed sale to the public: As soon as practicable after the effective
date of this registration statement.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box. x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. ¨
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
CALCULATION
OF REGISTRATION FEE
Title of Each Class of Security Being Registered
|
Amount Being Registered
|
Proposed Maximum
Offering Price Per
Security(1)
|
Proposed Maximum
Aggregate Offering Price(1)
|
Amount of Registration
Fee
|
||||||||||
Units,
each consisting of one share of Common
Stock, $.0001 par value, and one
Warrant
|
1,875,000
Units
|
$
|
8.00
|
$
|
15,000,000
|
$
|
1,069.50
|
|||||||
Shares
of Common Stock included as part of the
Units
|
1,875,000
Shares
|
—
|
—
|
—
|
(2)
|
|||||||||
Warrants
included as part of the Units
|
1,875,000
Warrants
|
—
|
—
|
—
|
(2)
|
|||||||||
Shares
of Common Stock underlying the
Warrants
included in the Units(3)
|
1,875,000
Shares
|
$
|
8.00
|
$
|
15,000,000
|
$
|
1,069.50
|
|||||||
Total
|
$
|
30,000,000
|
$
|
2,139.00
|
(1)
|
Estimated
solely for the purpose of calculating the registration
fee.
|
(2)
|
No
fee pursuant to Rule 457(g).
|
(3)
|
Pursuant
to Rule 416, there are also being registered such additional securities as
may be issued to prevent dilution resulting from stock splits, stock
dividends or similar transactions as a result of the anti-dilution
provisions contained in the
Warrants.
|
The
information in this preliminary prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED [___________], 2010
PROSPECTUS
$15,000,000
FORMULA
ACQUISITION CORP.
1,875,000
units
Formula
Acquisition Corp. is a newly formed blank check company organized for the
purpose of effecting a merger, capital stock exchange, asset acquisition or
other similar business combination with an operating Internet business. Our
efforts in identifying a prospective target will not be limited to a particular
industry, although we intend to focus our efforts on acquiring one or more
operating Internet businesses in the fields of e-commerce, mobile internet,
social networking, financial information and digital media, online banking
and/or software development. We do not have any specific business
combination under consideration and we have not (nor has anyone on our behalf)
contacted any prospective target business or had any discussions, formal or
otherwise, with respect to such a transaction.
This is
an initial public offering of our securities. Each unit that we are offering has
a price of $8.00 and consists of one share of our common stock and one warrant.
Each warrant entitles the holder to purchase one share of our common stock at a
price of $8.00. Each warrant will become exercisable on the later of our
completion of a business combination and
[______],
2011 [one year from the date of
this prospectus], and will expire on
[______],
2014 [four years from the date
of this prospectus], or earlier upon redemption.
There is
presently no public market for our units, common stock or warrants. We
anticipate that the units will be quoted on the Over the Counter Bulletin Board.
Assuming that the units are quoted on the Over the Counter Bulletin Board,
the units will be quoted under the symbol [_____] on or promptly after the date
of this prospectus. Assuming that the units are quoted on the Over the Counter
Bulletin Board, once the securities comprising the units begin separate trading,
the common stock and warrants will be quoted on the Over the Counter Bulletin
Board under the symbols [_____] and [_____], respectively. We cannot assure you
that our securities will be quoted or will continue to be quoted on the Over the
Counter Bulletin Board.
Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning
on page [12] of this prospectus for a
discussion of information that should be considered in connection with an
investment in our securities.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
Public Offering Price
|
Proceeds, Before
Expenses, to Us
|
|||||||
Per
unit
|
$
|
8.00
|
$
|
8.00
|
||||
Total
|
$
|
15,000,000
|
$
|
15,000,000
|
$12,750,000
of the net proceeds of this offering, or $6.80 per unit [85%] sold to the
public in this offering, will be deposited into a trust account at [BANK],
maintained by [TRANSFER AGENT], acting as trustee. These funds will not be
released to us until the earlier of the completion of our initial business
combination and our liquidation (which may not occur until [_______] 2012 [24 months from the date of this
prospectus]).
We intend
to offer the units for sale on a firm-commitment basis. We currently are in the
process of retaining an underwriter. In the event that we are able to
retain an underwriter, the above table will be amended to reflect an amount for
the discount and commissions to be given to the underwriter, a portion of which
may be placed in escrow along with the proceeds of this offering.
[___________],
2010
FORMULA
ACQUISITION CORP.
TABLE
OF CONTENTS
Page
|
||||
Prospectus
Summary
|
1
|
|||
The
Offering
|
4
|
|||
Summary
Financial Data
|
11
|
|||
Risk
Factors
|
12
|
|||
Cautionary
Note Regarding Forward-Looking Statements
|
22
|
|||
Use
of Proceeds
|
23
|
|||
Dilution
|
26
|
|||
Capitalization
|
27
|
|||
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
28
|
|||
Proposed
Business
|
30
|
|||
Management
|
43
|
|||
Principal
Stockholders
|
46
|
|||
Certain
Transactions
|
48
|
|||
Description
of Securities
|
49
|
|||
Underwriting
|
53
|
|||
Legal
Matters
|
53
|
|||
Experts
|
53
|
|||
Where
You Can Find Additional Information
|
53
|
|||
Index
to Financial Statements
|
F-1
|
This
summary highlights certain information appearing elsewhere in this prospectus.
For a more complete understanding of this offering, you should read the entire
prospectus carefully, including the risk factors and the financial statements.
Unless otherwise stated in this prospectus:
|
•
|
references to “we,” “us” or
“our company” refer to Formula Acquisition
Corp.;
|
|
•
|
references to “initial
stockholders” or “existing stockholders” refer to all of our stockholders
prior to this
offering;
|
|
•
|
references to “initial shares”
refer to the 468,750 shares of common stock that
our initial stockholders originally purchased from us for $25,000 in March 2010;
and
|
|
•
|
references to the term “public
stockholders” refer to the holders of the shares of common stock that are
being sold as part of the units in the public offering (whether they are
purchased in the initial public offering or in the secondary market),
including any of our existing stockholders to the extent that they
purchase such shares.
|
You
should rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with different information. We are not making
an offer of these securities in any jurisdiction where the offer is not
permitted. You should not assume that the information contained in this
prospectus is accurate as of any date other than the date on the front of this
prospectus.
We are a
blank check company organized under the laws of the State of Delaware on March
23, 2010. We were formed with the purpose of effecting a merger,
capital stock exchange, asset acquisition or other similar business combination
with an operating Internet business. Our efforts in identifying a
prospective target will not be limited to a particular industry, although we
intend to focus our efforts on acquiring one or more operating Internet
businesses in the fields of e-commerce, mobile Internet, social networking,
financial information and digital media, online banking and/or software
development. To date, our efforts have been limited to organizational
activities. Accordingly, we cannot assure you that we will be able to locate a
target business or that we will be able to engage in a business combination with
a target business on favorable terms.
We intend
to look for Internet businesses that have one or several of the following
characteristics:
|
·
|
Several
years of revenue growth along with significant market
share;
|
|
·
|
Opportunities
for both organic and acquisition
growth;
|
|
·
|
Companies
that have a proprietary technology that has “built a moat” around their
business, making it difficult for competitors to encroach upon
it;
|
|
·
|
Proven
and experienced management with a strong track record;
and
|
|
·
|
Market
leadership positions within their
sector.
|
Despite
the ups and downs of the stock market, the growth of the Internet in terms of
both users and data has never experienced a down year1 and management believes that the growth will
be robust for years to come.
Our
management team has experience and contacts in the fields of e-commerce, mobile
Internet, social networking, financial information and digital media, online
banking and/or software development. We have either founded, managed or invested
in companies in each of these sectors and therefore we believe that we are
well-positioned to identify and consummate a business combination with an
Internet company in one of these sectors, particularly in the area of
financial information and digital media as well as social
networking.
Thomas J.
Clarke, Jr., our Chairman of the Board, Chief Executive Officer and President,
has been directly involved in over 15 acquisitions, joint ventures and
transactions involving companies he has owned or managed. From 1999 to 2009, he
was the CEO of a publicly traded financial information and digital media
company, TheStreet.com (NASDAQ: TSCM). While at TheStreet.com, Mr. Clarke
acquired and integrated various sites in the online banking sector (including
bankingmyway.com and geezeo.com) into TheStreet.com’s website. During
his tenure at TheStreet.com, the company went from a $50 million net loss to a
profit, with over $70 million in e-commerce sales, over $80 million in cash
assets and zero debt. In the course of Mr. Clarke’s 30 year career, most of the
companies Mr. Clarke has managed (including a number of Internet companies) have
been in the financial information and digital media sector, allowing Mr. Clarke
to develop a network of relationships in this sector spanning the venture
capital and entrepreneur communities. See the section titled
“Management – Directors and Executive Officers” for a further description of Mr.
Clarke’s background and experience.
1www.internetworldstats.com – January 2008
1
James
Altucher, our Chief Operating Officer, has been the founder and chief executive
of several Internet companies, including Stockpickr.com, a social networking
site in the financial information and digital media space. Mr.
Altucher is a well-known entrepreneur and author of four books on investing as
well as a columnist for Dow Jones Newswires, AOL, and several other
venues. Mr. Altucher has consummated numerous M&A transactions,
and has been involved in venture capital investments which he has helped source,
structure, and consummate. Over the past 20 years, he has developed a wide
network of relationships in the Internet space, particularly in the area of
social networking as well as financial information and digital
media. He co-founded Stockpickr.com with Mr. Kelly, which was sold to
TheStreet.com in 2007. He is also one of the founders of Vaultus
Mobile Technologies, Inc., which provides software solutions to companies to
improve mobile workers’ productivity. He is a board member of bitly.com, a
website that shortens URLs for use on Twitter and other social media sites, and
he is an advisor to Stocktwits.com, a website which serves as a tool for
aggregating financial information and digital media on Twitter. Mr.
Altucher is also an investor in BuddyMedia.com, a software-as-a-service platform
for companies that wish to develop a presence on Facebook, and Ticketfly, Inc.,
an online ticketing company which combines ticketing services with social media
applications. See the section titled “Management-Directors and
Executive Officers” for a further description of Mr. Altucher’s background and
experience.
Dan
Kelly, our Chief Financial Officer, is a former analyst at Credit Suisse
First Boston where he worked in the leveraged finance group. Mr.
Kelly also served as a principal at (212) Ventures, a technology and internet
fund founded by Mr. Altucher, focusing primarily on wireless services and
infrastructure software investments. In his banking and private
equity career, Mr. Kelly worked on over $6 billion worth of leveraged buyouts,
M&A and equity transactions, including Bresnan Communications, Vaultus, Ajax
Magnathermic, 4thpass, Big 5 Sporting Goods and H&E Equipment
Services. He has sourced and evaluated business plans for early-stage
venture capital investments as well as financing scenarios for mature private
equity investments. Additionally, Mr. Kelly has worked with both
early-stage and mature companies to develop strategic direction, implement
financial controls, evaluate acquisition opportunities and explore additional
financing opportunities to help capitalize on growth
opportunities. Mr. Kelly co-founded Stockpickr.com with Mr.
Altucher. Stockpickr.com was sold to TheStreet.com in
2007. Mr. Kelly currently has investments in several internet and
technology companies including bitly.com, a website that shortens URLs for use
on Twitter and other social media sites; Ticketfly, Inc., an online ticketing
company which combines ticketing services with social media applications;
Stocktwits.com, a website which serves as a tool for aggregating financial
information and digital media on Twitter; and BuddyMedia.com, a
software-as-a-service platform for companies that wish to develop a presence on
Facebook. See the section titled “Management-Directors and Executive Officers”
for a further description of Mr. Kelly’s background and experience.
We do not
have any specific business combination under consideration and we have not (nor
has anyone on our behalf) contacted any prospective target business or had any
discussions, formal or otherwise, with respect to such a transaction. We have
not (nor have any of our agents or affiliates) been approached by any candidates
(or representative of any candidates) with respect to a possible acquisition
transaction with our company. Additionally, we have not, nor has anyone on our
behalf, taken any measure, directly or indirectly, to identify or locate any
suitable acquisition candidate, nor have we engaged or retained any agent or
other representative to identify or locate any such acquisition
candidate.
We will
have until [_______], 2012 [24
months from the date of this prospectus] to consummate a business
combination. If we are unable to consummate a business combination by such date,
our corporate existence will cease by operation of corporate law (except for the
purposes of winding up our affairs and liquidating). Our initial business
combination must be with a target business whose fair market value is at least
equal to 80% of our net assets (all of our assets, including the funds then held
in the trust account, less our liabilities) at the time of such acquisition,
although this may entail simultaneous acquisitions of several operating
businesses. The fair market value of the target will be determined by our board
of directors based upon one or more standards generally accepted by the
financial community (which may include actual and potential sales, earnings,
cash flow and/or book value). If our board is not able to independently
determine that the target business has a sufficient fair market value, we will
obtain an opinion from an unaffiliated, independent investment banking firm with
respect to the satisfaction of such criteria. If we determine to simultaneously
acquire several businesses and such businesses are owned by different sellers,
we will need for each of such sellers to agree that our purchase of its business
is contingent on the simultaneous closings of the other acquisitions, which may
make it more difficult for us, and delay our ability, to complete our initial
business combination. With multiple acquisitions, we could also face additional
risks, including additional burdens and costs with respect to possible multiple
negotiations and due diligence investigations (if there are multiple sellers)
and the additional risks associated with the subsequent integration of the
operations and services or products of the acquired companies into a single
operating business.
The target business that we acquire may have a
fair market value substantially in excess of 80% of our net assets. In order to
consummate such a business combination, we may issue a significant amount of
debt or equity securities to the sellers of such business and/or seek to raise
additional funds through a private offering of debt or equity securities. There
are no limitations on our ability to incur debt or issue securities in order to
consummate a business combination. If we issue securities in order to consummate
a business combination, our stockholders could end up owning a minority of the
combined company, as there is no requirement that our stockholders own a certain
percentage of our company after our business combination. Since we have no
specific business combination under consideration, we have not entered into any
such arrangement to issue our debt or equity securities and have no current
intention of doing so.
2
Our
principal executive offices are located at 15 Broad Street, Suite 2624, New
York, NY 10005, and our telephone number is 203-512-2161.
3
THE
OFFERING
In making your decision on whether
to invest in our securities, you should take into account not only the
backgrounds of our management team, but also the special risks we face as a
blank check company. In addition, this offering is not being conducted in compliance with
Rule 419 promulgated under the Securities Act of 1933, as amended, and,
therefore, you will not be entitled to protections normally afforded to
investors in Rule 419 blank check offerings. You should carefully consider these
and the other risks set forth in the section entitled “Risk Factors” beginning
on page [12] of this
prospectus.
Securities
offered:
|
1,875,000
units, at $8.00 per unit, each unit consisting of:
|
|
•one
share of common stock; and
|
||
•one
warrant.
|
||
Trading
commencement and separation of common stock and warrants:
|
The
units will begin trading on or promptly after the date of this prospectus.
Each of the common stock and warrants may trade separately on the 90th day
after the date of this prospectus unless [UNDERWRITER] determines that an
earlier date is acceptable (based upon its assessment of the relative
strengths of the securities markets and small capitalization companies in
general, and the trading pattern of, and demand for, our securities in
particular). In no event will [UNDERWRITER] allow separate trading of the
common stock and warrants until we file an audited balance sheet
reflecting our receipt of the gross proceeds of this offering. We will
file our first Current Report on Form 8-K with the Securities and Exchange
Commission, including an audited balance sheet, promptly upon the
consummation of this offering, which is anticipated to take place three
business days from the date the units commence trading. The audited
balance sheet will reflect our receipt of the proceeds from the exercise
of the over-allotment option if the over-allotment option is exercised
prior to the filing of the Form 8-K. If the over-allotment option is
exercised after our initial filing of a Form 8-K, we will file an
amendment to the Form 8-K to provide updated financial information to
reflect the exercise and consummation of the over-allotment option. We
will also include in this Form 8-K, or amendment thereto, or in a
subsequent Form 8-K, information indicating if [UNDERWRITER] has allowed
separate trading of the common stock and warrants prior to the 90th day
after the date of this prospectus.
|
|
Securities
being purchased by insiders:
|
Prior
to the date of this prospectus, our initial stockholders purchased an
aggregate of 468,750 shares of common stock for
$25,000.
|
|
Common
Stock:
|
||
Number
outstanding before this offering
|
468,750
shares
|
|
Number
to be outstanding after this offering
|
2,
343,750 shares
|
|
Warrants:
|
||
Number
outstanding before this offering:
|
0
|
|
Number
to be outstanding after this offering:
|
1,875,000
warrants
|
4
Exercisability:
|
Each
warrant is exercisable for one share of common stock.
|
|
Exercise
price:
|
$8.00
|
|
Exercise
period:
|
The
warrants will become exercisable on the later of:
|
|
• the
completion of a business combination with a target business;
and
|
||
• [__________],
2011 [one year from the
date of this prospectus].
|
||
The
warrants will expire at 5:00 p.m., New York City time, on [__________],
2014 [four years from the
date of this prospectus] or earlier upon
redemption.
|
||
Redemption:
|
We
may redeem the outstanding warrants:
|
|
• in
whole and not in part;
|
||
• at
a price of $.01 per warrant at any time while the warrants are exercisable
(which will occur only if a registration statement relating to the common
stock issuable upon exercise of the warrants is effective and
current);
|
||
• upon
a minimum of 30 days’ prior written notice of redemption;
and
|
||
• if,
and only if, the last sales price of our common stock equals or exceeds
$15.50 per share for any 20 trading days within a 30 trading day period
ending three business days before we send the notice of
redemption.
|
||
If
the foregoing conditions are satisfied and we issue a notice of
redemption, each warrant holder can exercise his, her or its warrant prior
to the scheduled redemption date. However, the price of the common stock
may fall below the $15.50 trigger price as well as the $8.00 warrant
exercise price after the redemption notice is issued.
|
||
The
redemption criteria for our warrants have been established at a price that
is intended to provide warrant holders with a reasonable premium to the
initial exercise price and provide a sufficient differential between the
then-prevailing common stock price and the warrant exercise price so that
if the stock price declines as a result of our redemption call, the
redemption will not cause the stock price to drop below the exercise price
of the warrants.
|
||
Proposed
Over the Counter Bulletin Board symbols for our:
|
||
Units
|
[___].U
|
|
Common
Stock
|
[___]
|
|
Warrants
|
[___].WS
|
5
Offering
proceeds to be held in trust:
|
$12,750,000
of the net proceeds of this offering ($6.80 per unit [85%] sold
to the public in this offering) will be placed in a trust account at
[BANK], maintained by [TRANSFER AGENT], acting as trustee pursuant to an
agreement to be signed on the date of this prospectus. Except as set forth
below, these proceeds will not be released until the earlier of the
completion of a business combination and our liquidation. Therefore,
unless and until a business combination is consummated, the proceeds held
in the trust account will not be available for our use for any deferred
expenses related to this offering or expenses which we may incur related
to the investigation and selection of a target business and the
negotiation of an agreement to acquire a target business. Notwithstanding
the foregoing, there can be released to us from the trust account interest
earned on the funds in the trust account (i) up to an aggregate of
$[______] to fund expenses related to investigating and selecting a target
business and our other working capital requirements and (ii) any amounts
we may need to pay our income or other tax obligations. With these
exceptions, expenses incurred by us may be paid prior to a business
combination only from the net proceeds of this offering not held in the
trust account (initially $2,250,000).
|
|
None
of the warrants may be exercised until after the consummation of a
business combination and, thus, after the proceeds of the trust account
have been disbursed. Accordingly, the warrant exercise price will be paid
directly to us and not placed in the trust account.
|
||
Limited
payments and benefits to insiders:
|
There
will be no fees or other payments of any kind, whether in cash or our
securities, paid to our existing stockholders, officers, directors or
their affiliates prior to, or for any services they render in order
to effectuate the consummation of a business combination (regardless of
the type of transaction that it is) other than:
|
|
• payment
of [$7,500] per month to [__________] for office space and related
services; and
|
||
• reimbursement
of out-of-pocket expenses incurred by them in connection with certain
activities on our behalf, such as identifying and investigating possible
business targets and business combinations.
|
||
There
is no limit on the amount of out-of-pocket expenses reimbursable by us to
such individuals incurred in connection with their activities on our
behalf. Furthermore, the holders of our initial shares will be
entitled to registration rights requiring us to register the resale of
their securities commencing after we consummate our initial business
combination.
|
||
Amended
and Restated Certificate of Incorporation:
|
As
discussed below, there are specific provisions in our amended and restated
certificate of incorporation that may not be amended prior to our
consummation of a business combination, including our requirements to seek
stockholder approval of such a business combination and to allow our
stockholders to seek conversion of their shares if they do not approve of
such a business combination. While we have been advised that such
provisions limiting our ability to amend our certificate of incorporation
may not be enforceable under Delaware law, we view these provisions, which
are contained in Article Seventh of our amended and restated certificate
of incorporation, as obligations to our stockholders and will not take any
action to amend or waive these
provisions.
|
6
Our
amended and restated certificate of incorporation also provides that we
will continue in existence only until [____________], 2012 [24 months from the date of
this prospectus]. If we have not completed a business combination
by such date, our corporate existence will cease except for the purposes
of winding up our affairs and liquidating, pursuant to Section 278 of the
Delaware General Corporation Law. This has the same effect as if our board
of directors and stockholders had formally voted to approve our
dissolution pursuant to Section 275 of the Delaware General Corporation
Law. Our counsel has advised us, although we have not requested a formal
opinion from them, that, based on their analysis of the Delaware General
Corporation Law and relevant case law, limiting our corporate existence to
a specified date as permitted by Section 102(b)(5) of the Delaware General
Corporation Law removes the necessity to comply with the formal procedures
set forth in Section 275 (which would have required our board of directors
and stockholders to formally vote to approve our dissolution and
liquidation and to have filed a certificate of dissolution with the
Delaware Secretary of State). Asking our counsel to research this issue is
the only step we have taken to support this belief. In connection with any
proposed business combination we submit to our stockholders for approval,
we will also submit to stockholders a proposal to amend our amended and
restated certificate of incorporation to provide for our perpetual
existence, thereby removing this limitation on our corporate existence. We
will only consummate a business combination if stockholders vote both in
favor of such business combination and our amendment to provide for our
perpetual existence. The approval of the proposal to amend our amended and
restated certificate of incorporation to provide for our perpetual
existence would require the affirmative vote of a majority of our
outstanding shares of common stock. We view this provision terminating our
corporate existence by [___________], 2012 [24 months from the date of
this prospectus] as an obligation to our stockholders and will not
take any action to amend or waive this provision to allow us to exist for
a longer period of time except in connection with the consummation of a
business combination.
|
||
Stockholders
must approve business combination:
|
Pursuant
to our amended and restated certificate of incorporation, we will seek
stockholder approval before we effect any business combination, even if
the nature of the acquisition would not ordinarily require stockholder
approval under applicable state law. We view this requirement as an
obligation to our stockholders and will not take any action to amend or
waive this provision in our amended and restated certificate of
incorporation. In connection with the vote required for any business
combination, all of our existing stockholders, including all of our
officers and directors, have agreed to vote the shares of common stock
owned by them immediately before this offering in accordance with the
majority of the shares of common stock voted by the public stockholders.
We will proceed with a business combination only if (i) a majority of the
shares of common stock voted by the public stockholders are voted in favor
of the business combination (provided that a quorum is in attendance at
the meeting, in person or by proxy) and (ii) public stockholders owning
less than 30% of the shares sold in this offering exercise their
conversion rights described below. Accordingly, it is our understanding
and intention in every case to structure and consummate a business
combination in which public stockholders owning approximately 29.99% of
the shares sold in this offering may exercise their conversion rights and
the business combination will still go forward. If a significant number of
stockholders vote, or indicate their intention to vote, against a proposed
business combination, our founders, officers, directors or their
affiliates could seek to purchase units or shares of common stock in the
open market or in private transactions in order to influence the vote.
However, they have no present intention to do so, and as a result, have
not taken any steps or contemplated any other methods that would be
utilized in order to influence a vote on a proposed acquisition
transaction.
|
7
Conversion
rights for stockholders voting to reject a business
combination:
|
Pursuant
to our amended and restated certificate of incorporation, public
stockholders voting against a business combination will be entitled to
convert their stock into a pro rata share of the trust account (initially
$6.80 per share), plus any interest earned on their portion of the trust
account but less any interest that has been released to us as described
above to fund our working capital requirements and pay any of our tax
obligations, if the business combination is approved and
completed. In order to exercise this right, the public
stockholders must make an affirmative election. Voting against a business
combination does not automatically trigger the conversion right. Public
stockholders who convert their shares of stock into their share of the
trust account will continue to have the right to exercise any warrants
they may hold. Any request for conversion, once made, may be
withdrawn at any time up to the date of the meeting.
In
order for a business combination to be approved, a majority of the shares
of common stock voted by the public stockholders would need to vote in
favor of the combination and our existing shareholders, as described
above, would be required to vote their shares in accordance with the vote
of the majority to approve the business combination. Accordingly, since
they did not vote against the business combination, our existing
stockholders would not be entitled to exercise conversion rights with
respect to stock they own, whether included in their initial shares or
purchased by them in this offering or in the
aftermarket.
|
|
If
a vote on our initial business combination is held and the business
combination is not approved, we may continue to try to consummate a
business combination with an alternate target until [_________], 2012 [24 months from the date of
this prospectus]. If the initial business combination is not
approved or completed for any reason, then public stockholders voting
against our initial business combination who exercised their conversion
rights would not be entitled to convert their shares of common stock into
a pro rata share of the aggregate amount then on deposit in the trust
account. In such case, if we have required public stockholders to deliver
their certificates prior to the meeting, we will promptly return such
certificates to the public stockholder.
|
||
Liquidation
if no business combination:
|
As
described above, if we have not consummated a business combination by
[______], 2012 [24 months
from the date of this prospectus], our corporate existence will
cease by operation of law and we will promptly distribute only to our
public stockholders the amount in our trust account (including any accrued
interest then remaining in the trust account) plus any remaining net
assets.
|
|
We
cannot assure you that the per-share distribution from the trust account,
if we liquidate, will not be less than $6.80, plus interest then held in
the trust account for the following
reasons:
|
8
• Prior
to liquidation, pursuant to Section 281 of the Delaware General
Corporation Law, we will adopt a plan that will provide for our payment,
based on facts known to us at such time, of (i) all existing claims, (ii)
all pending claims and (iii) all claims that may be potentially brought
against us within the subsequent 10 years. Accordingly, we would be
required to provide for any creditors known to us at that time as well as
provide for any claims that we believe could potentially be brought
against us within the subsequent 10 years prior to distributing the funds
held in the trust to our public stockholders. We cannot assure you that we
will properly assess all claims that may be potentially brought against
us. As such, our stockholders could potentially be liable for any claims
of creditors to the extent of distributions received by them (but no
more).
|
||
• We
will seek to have all vendors and service providers (which would include
any third parties we engaged to assist us in any way in connection with
our search for a target business) and prospective target businesses
execute agreements with us waiving any right, title, interest or claim of
any kind they may have in or to any monies held in the trust account.
However, we have not received any such waivers yet and there is no
guarantee that they will execute such agreements. Nor is there any
guarantee that, even if such entities execute such agreements with us,
they will not seek recourse against the trust account or that a court
would not conclude that such agreements are not legally
enforceable.
|
||
We
anticipate the distribution of the funds in the trust account to our
public stockholders will occur by [_________], 2012 [10 business days from the
date our corporate existence ceases]. Our existing stockholders
have waived their rights to participate in any liquidation distribution
with respect to their initial shares. We will pay the costs of liquidation
from our remaining assets outside of the trust account.
|
||
Escrow
of initial shares:
|
On
the date of this prospectus, all of our existing stockholders, including
all of our officers and directors, will place their initial shares into an
escrow account maintained by [TRANSFER AGENT] acting as escrow agent.
Subject to certain limited exceptions (such as (i) transfers to an
entity’s members upon its liquidation, (ii) transfers to relatives and
trusts for estate planning purposes or (iii) transfers by private sales
made at or prior to the consummation of a business combination at prices
no greater than the price at which the shares were originally purchased,
in each case where the transferee agrees to the terms of the escrow
agreement), these shares will not be transferable during the escrow period
and will not be released from escrow until the earlier
of:
|
|
• one
year after the consummation of a business combination;
|
||
• the
last sales price of our common stock equals or exceeds $12.00 per share
for any 20 trading days within any 30-trading day period commencing after
the consummation of our business combination; or
|
||
• we
consummate a subsequent liquidation, merger, stock exchange or other
similar transaction that results in our stockholders having the right to
exchange their shares of common stock for cash, securities or other
property.
|
9
Right
of first review:
|
In
order to minimize potential conflicts of interest which may arise from
multiple corporate affiliations, each of our officers has agreed, until
the earliest of a business combination, our liquidation or such time as he
or she ceases to be an officer, to present to our company for our
consideration, prior to presentation to any other entity, any suitable
business opportunity which may reasonably be required to be presented to
us, subject to any pre-existing fiduciary or contractual obligations he
might have.
|
|
Determination
of offering size:
|
We
agreed to an offering size of $15 million based on the previous
transactional experience of our principals. We also considered the size of
the offering to be an amount we believe will be successfully received
given market conditions, our proposed industry focus and the size of
initial public offerings of other similarly structured blank check
companies.
|
10
SUMMARY
FINANCIAL DATA
The
following table summarizes the relevant financial data for our business and
should be read with our financial statements, which are included in this
prospectus. We have not had any significant operations to date, so only balance
sheet data is presented.
[__],
2010
|
||||||||
Actual
|
As
Adjusted(1)
|
|||||||
Balance
Sheet Data:
|
|
|
||||||
Working
capital
|
$ | 25,000 | $ |
[____]
|
||||
Total
assets
|
25,000 |
[____]
|
||||||
Total
liabilities
|
[____]
|
[____]
|
||||||
Value
of common stock which may be converted to cash
|
[____]
|
[____]
|
||||||
Stockholders’
equity
|
25,000 |
[____]
|
The “as
adjusted” information gives effect to the sale of the units we are offering,
including the application of the related gross proceeds and the payment of the
estimated remaining costs from such sale and the repayment of the accrued and
other liabilities required to be repaid.
The “as
adjusted” working capital includes $12,750,000 to be held in the trust account,
which will be available to us only upon the consummation of a business
combination within the time period described in this prospectus. If a business
combination is not so consummated, the trust account, and all accrued interest
earned thereon less (i) up to $[____] that may be released to us to fund our
expenses and other working capital requirements and (ii) any amounts released to
us to pay our income or other tax obligations, will be distributed solely to our
public stockholders (subject to our obligations under Delaware law to provide
for claims of creditors).
We will
not proceed with a business combination if public stockholders owning 30% or
more of the shares sold in this offering vote against the business combination
and exercise their conversion rights. Accordingly, we may effect a business
combination if public stockholders owning up to approximately 29.99% of the
shares sold in this offering exercise their conversion rights. If this occurred,
we would be required to convert to cash up to approximately 29.99% of the
1,875,000 shares sold in this offering, or 562,313 shares of common stock, at an
initial per-share conversion price of $6.80 (for a total of approximately
$3,823,728), without taking into account interest earned on the trust account.
The actual per-share conversion price will be equal to:
|
·
|
the
amount in the trust account, including all accrued interest (net of taxes
payable) after distribution of interest income on the trust account
balance to us as described above, as of two business days prior to the
proposed consummation of the business
combination,
|
|
·
|
divided
by the number of shares of common stock underlying the units sold in this
offering.
|
11
RISK
FACTORS
An
investment in our securities involves a high degree of risk. You should consider
carefully the material risks described below, which we believe represent all the
material risks related to the offering, together with the other information
contained in this prospectus, before making a decision to invest in our units.
If any of the following events occur, our business, financial condition and
operating results may be materially adversely affected. In that event, the
trading price of our securities could decline, and you could lose all or part of
your investment.
Risks
Associated With Our Business
We
are a development stage company with no operating history and, accordingly, you
will not have any basis on which to evaluate our ability to achieve our business
objective.
We are a
recently incorporated development stage company with no operating results to
date. Therefore, our ability to commence operations is dependent upon obtaining
financing through the public offering of our securities. Since we do not have an
operating history, you will have no basis upon which to evaluate our ability to
achieve our business objective, which is to acquire an operating business. We
have not conducted any discussions and we have no plans, arrangements or
understandings with any prospective acquisition candidates. We will not generate
any operating revenues until, at the earliest, after the consummation of a
business combination.
If
we are forced to liquidate before a business combination and distribute the
trust account, our public stockholders may receive less than $6.80 per share and
our warrants will expire worthless.
If we are
unable to complete a business combination within the prescribed time frames and
are forced to liquidate our assets, the per-share liquidation distribution may
be less than $6.80 because of the expenses of this offering, our general and
administrative expenses and the anticipated costs of seeking a business
combination. Furthermore, there will be no distribution with respect to our
outstanding warrants which will expire worthless if we liquidate before the
completion of a business combination.
If
we are unable to consummate a business combination, our public stockholders will
be forced to wait the full 24 months before receiving liquidation
distributions.
We have
24 months in which to complete a business combination. We have no obligation to
return funds to investors prior to such date unless we consummate a business
combination prior thereto and only then in cases where investors have sought
conversion of their shares. Only after the expiration of this full time period
will public stockholders be entitled to liquidation distributions if we are
unable to complete a business combination. Accordingly, investors’ funds may be
unavailable to them until such date.
If
the net proceeds of this offering not being held in trust are insufficient to
allow us to operate for at least the next 24 months, we may be unable to
complete a business combination.
We
believe that, upon consummation of this offering, the funds available to us
outside of the trust account, plus the interest earned on the funds held in the
trust account that may be available to us, will be sufficient to allow us to
operate for at least the next 24 months, assuming that a business combination is
not consummated during that time. However, we cannot assure you that our
estimates will be accurate. We could use a portion of the funds available to us
to pay fees to consultants to assist us with our search for a target business.
We could also use a portion of the funds as a down payment or to fund a
“no-shop” provision (a provision in a letter of intent designed to keep target
businesses from “shopping” around for transactions with other companies on terms
more favorable to such target businesses) with respect to a particular proposed
business combination, although we do not have any current intention to do so. If
we entered into a letter of intent where we paid for the right of exclusivity
from a target business and were subsequently required to forfeit such funds
(whether as a result of our breach or otherwise), we might not have sufficient
funds to continue searching for, or conduct due diligence with respect to, a
target business.
We
may proceed with a business combination even if public stockholders owning
approximately 29.99% of the shares sold in this offering exercise their
conversion rights.
We may
proceed with a business combination as long as public stockholders owning less
than 30% of the shares sold in this offering exercise their conversion rights.
Accordingly, approximately 29.99% of the public stockholders may exercise their
conversion rights and we could still consummate a proposed business
combination. Our business combination may require us to use substantially
all of our cash to pay the purchase price. In such a case, because we will not
know how many stockholders may exercise such conversion rights, we may need to
arrange third party financing to help fund our business combination in case a
larger percentage of stockholders exercise their conversion rights than we
expect. Additionally, even if our business combination does not require us to
use substantially all of our cash to pay the purchase price, if a significant
number of stockholders exercise their conversion rights, we will have less cash
available to use in furthering our business plans following a business
combination and may need to arrange third party financing. We have not taken any
steps to secure third party financing for either situation. We cannot assure you
that we will be able to obtain such third party financing on terms favorable to
us or at all.
12
You
will not be entitled to protections normally afforded to investors of blank
check companies.
Since the
net proceeds of this offering are intended to be used to complete a business
combination with a target business that has not been identified, we may be
deemed to be a “blank check” company under the United States securities laws.
However, since we will have net tangible assets in excess of $5,000,000 upon the
successful consummation of this offering and will file a Current Report on Form
8-K, including an audited balance sheet demonstrating this fact, we are exempt
from rules promulgated by the SEC to protect investors in blank check companies
such as Rule 419 under the Securities Act. Accordingly, investors will not be
afforded the benefits or protections of those rules. Because the SEC has taken
the position that we are not subject to Rule 419, our units will be immediately
tradable and we have a longer period of time to complete a business combination
than we would if we were subject to such rule.
If
third parties bring claims against us, the proceeds held in trust could be
reduced and the per-share liquidation price received by stockholders will be
less than $6.80 per share.
Our
placing of funds in trust may not protect those funds from third party claims
against us. Although we will seek to have all vendors and service providers we
engage and prospective target businesses we negotiate with, execute agreements
with us waiving any right, title, interest or claim of any kind in or to any
monies held in the trust account for the benefit of our public stockholders,
there is no guarantee that they will execute such agreements. Furthermore, there
is no guarantee that, even if such entities execute such agreements with us,
they will not seek recourse against the trust account. Nor is there any
guarantee that a court would uphold the validity of such agreements.
Accordingly, the proceeds held in trust could be subject to claims that could
take priority over those of our public stockholders.
Additionally,
if we are forced to file a bankruptcy case or an involuntary bankruptcy case is
filed against us which is not dismissed, the proceeds held in the trust account
could be subject to applicable bankruptcy law, and may be included in our
bankruptcy estate and subject to the claims of third parties with priority over
the claims of our stockholders. To the extent any bankruptcy claims deplete the
trust account, we cannot assure you we will be able to return to our public
stockholders at least $6.80 per share.
Our
stockholders may be held liable for claims by third parties against us to the
extent of distributions received by them.
Our
amended and restated certificate of incorporation provides that we will continue
in existence only until 24 months from the date of this prospectus. If we have
not completed a business combination by such date and amended this provision in
connection thereto, pursuant to the Delaware General Corporation Law, our
corporate existence will cease except for the purposes of winding up our affairs
and liquidating. Under Sections 280 through 282 of the Delaware General
Corporation Law, stockholders may be held liable for claims by third parties
against a corporation to the extent of distributions received by them in a
dissolution.
13
If the
corporation complies with certain procedures set forth in Section 280 of the
Delaware General Corporation Law intended to ensure that it makes reasonable
provision for all claims against it, including a 60-day notice period during
which any third-party claims can be brought against the corporation, a 90-day
period during which the corporation may reject any claims brought, and an
additional 150-day waiting period before any liquidating distributions are made
to stockholders, any liability of stockholders with respect to a liquidating
distribution is limited to the lesser of such stockholder’s pro rata share of
the claim or the amount distributed to the stockholder, and any liability of the
stockholder would be barred after the third anniversary of the dissolution.
However, it is our intention to make liquidating distributions to our
stockholders as soon as reasonably possible after the expiration of the 24 month
period and, therefore, we do not intend to comply with those procedures. Because
we will not be complying with those procedures, we are required, pursuant to
Section 281 of the Delaware General Corporation Law, to adopt a plan that will
provide for our payment, based on facts known to us at such time, of (i) all
existing claims, (ii) all pending claims and (iii) all claims that may be
potentially brought against us within the subsequent 10 years. Accordingly, we
would be required to provide for any creditors known to us at that time or those
that we believe could be potentially brought against us within the subsequent 10
years prior to distributing the funds held in the trust to stockholders. We
cannot assure you that we will properly assess all claims that may be
potentially brought against us. As such, our stockholders could potentially be
liable for any claims to the extent of distributions received by them (but no
more) and any liability of our stockholders may extend well beyond the third
anniversary of the date of distribution. Accordingly, we cannot assure you that
third parties will not seek to recover from our stockholders amounts owed to
them by us.
If we are
forced to file a bankruptcy case or an involuntary bankruptcy case is filed
against us which is not dismissed, any distributions received by stockholders
could be viewed under applicable debtor/creditor and/or bankruptcy laws as
either a “preferential transfer” or a “fraudulent conveyance.” As a result, a
bankruptcy court could seek to recover all amounts received by our stockholders.
Furthermore, because we intend to distribute the proceeds held in the trust
account to our public stockholders promptly after [_____], 2012 [24 months from the date of this
prospectus], this may be viewed or interpreted as giving preference to
our public stockholders over any potential creditors with respect to access to
or distributions from our assets. Furthermore, our board may be viewed as having
breached their fiduciary duties to our creditors and/or may have acted in bad
faith, and thereby exposing itself and our company to claims of punitive
damages, by paying public stockholders from the trust account prior to
addressing the claims of creditors. We cannot assure you that claims will not be
brought against us for these reasons.
An
effective registration statement may not be in place when an investor desires to
exercise warrants, thus precluding such investor from being able to exercise
his, her or its warrants and causing such warrants to be practically
worthless.
No
warrant held by public stockholders will be exercisable and we will not be
obligated to issue shares of common stock unless at the time a holder seeks to
exercise such warrant, a prospectus relating to the common stock issuable upon
exercise of the warrant is current. Under the terms of the warrant agreement, we
have agreed to use our best efforts to meet these conditions and to maintain a
current prospectus relating to the common stock issuable upon exercise of the
warrants until the expiration of the warrants. However, we cannot assure you
that we will be able to do so, and if we do not maintain a current prospectus
related to the common stock issuable upon exercise of the warrants, holders will
be unable to exercise their warrants and we will not be required to settle any
such warrant exercise, whether by net cash settlement or otherwise. If the
prospectus relating to the common stock issuable upon the exercise of the
warrants is not current, the warrants may have no value, the market for the
warrants may be limited and the warrants may expire worthless.
An
investor will only be able to exercise a warrant if the issuance of common stock
upon such exercise has been registered or qualified or is deemed exempt under
the securities laws of the state of residence of the holder of the
warrants.
No
warrants will be exercisable and we will not be obligated to issue shares of
common stock unless the common stock issuable upon such exercise has been
registered or qualified or deemed to be exempt under the securities laws of the
state of residence of the holder of the warrants. As a result, the warrants may
be deprived of any value, the market for the warrants may be limited and the
holders of warrants may not be able to exercise their warrants if the common
stock issuable upon such exercise is not qualified or exempt from qualification
in the jurisdictions in which the holders of the warrants reside.
If
you are not an institutional investor, you may purchase our securities in this
offering only if you reside within certain states and may engage in resale
transactions only in those states and a limited number of other
jurisdictions.
We have
applied to register our securities, or have obtained or will seek to obtain an
exemption from registration, in [list states]. If you are not an “institutional
investor,” you must be a resident of these jurisdictions in order to purchase
our securities in the offering. In order to prevent resale transactions in
violation of states’ securities laws, you may engage in resale transactions only
in these states and in a limited number of other jurisdictions in which an
applicable exemption is available or a Blue Sky application has been filed and
accepted. This restriction on resale may limit your ability to resell the
securities purchased in this offering and may impact the price of our
securities. For a more complete discussion of the Blue Sky state securities laws
and registrations affecting this offering, please see the section below entitled
“Underwriting — State Blue Sky Information” below. Even if you are an
institutional investor, you may purchase our securities in this offering only if
you are located in a jurisdiction permitting sales of the units to institutional
investors. You should consult with your own financial and legal advisors to
determine if you are eligible to participate in this offering.
14
Since
we have not currently selected any target business with which to complete a
business combination, we are unable to currently ascertain the merits or risks
of the operations of that business.
Since we
have not yet identified a prospective target business, investors in this
offering have no current basis to evaluate the possible merits or risks of the
operations of that business. To the extent we complete a business combination
with a financially unstable company or an entity in its early stages of
development or growth and/or an entity subject to unknown or unmanageable
liabilities, we may be affected by numerous risks inherent in the business
operations of those entities. We would consider a company to be financially
unstable if, for example, a substantial portion of its cash flow is dedicated to
its debt service obligations or its expected capital expenditure requirements
exceeds the ability of the target business to fund them. In addition, we would
consider a business to be in its early stages of development or growth if it is
newly formed and is in the process of developing its initial technologies,
processes, services, or products. Although our management will endeavor to
evaluate the risks inherent in a particular target business, we cannot assure
you that we will properly ascertain or assess all of the significant risk
factors. We also cannot assure you that an investment in our units will not
ultimately prove to be less favorable to investors in this offering than a
direct investment, if an opportunity is available, in a target
business.
We
may issue shares of our capital stock or debt securities to complete a business
combination, which would reduce the equity interest of our stockholders and
likely cause a change in control of our ownership.
Our
certificate of incorporation offering authorizes the issuance of up to
100,000,000 shares of common stock, par value $.0001 per share, and 1,000,000
shares of preferred stock, par value $.0001 per share. Immediately after this
offering [(assuming no exercise of the over-allotment option)], there will be
95,781,250 authorized but unissued shares of our common stock available for
issuance (after appropriate reservation for the issuance of the shares upon full
exercise of our outstanding warrants) and all of the 1,000,000 shares of
preferred stock available for issuance. Although we have no commitment as of the
date of this offering, we may issue a substantial number of additional shares of
our common or preferred stock, or a combination of common and preferred stock,
to complete a business combination. The issuance of additional shares of our
common stock or any number of shares of our preferred stock:
|
•
|
may
significantly reduce the equity interest of investors in this
offering;
|
|
•
|
may
subordinate the rights of holders of common stock if we issue preferred
stock with rights senior to those afforded to our common
stock;
|
|
•
|
will
likely cause a change in control if a substantial number of our shares of
common stock are issued, which may affect, among other things, our ability
to use our net operating loss carry forwards, if any, and could result in
the resignation or removal of our present officers and directors;
and
|
|
•
|
may
adversely affect prevailing market prices for our common
stock.
|
Similarly,
if we issue debt securities, it could result in:
|
•
|
default
and foreclosure on our assets if our operating revenues after a business
combination are insufficient to repay our debt
obligations;
|
|
•
|
acceleration
of our obligations to repay the indebtedness even if we make all principal
and interest payments when due if we breach certain covenants that require
the maintenance of certain financial ratios or reserves without a waiver
or renegotiation of that
covenant;
|
|
•
|
our
immediate payment of all principal and accrued interest, if any, if the
debt security is payable on demand;
and
|
|
•
|
our
inability to obtain necessary additional financing if the debt security
contains covenants restricting our ability to obtain such financing while
the debt security is
outstanding.
|
15
Our
ability to successfully effect a business combination and to be successful
thereafter will be totally dependent upon the efforts of our key personnel, some
of whom may join us following a business combination.
Our
ability to successfully effect a business combination is dependent upon the
efforts of our key personnel. The role of our key personnel in the target
business, however, cannot presently be ascertained. Although some of our key
personnel may remain with the target business in senior management or advisory
positions following a business combination, it is likely that some or all of the
management of the target business will remain in place. While we intend to
closely scrutinize any individuals we engage after a business combination, we
cannot assure you that our assessment of these individuals will prove to be
correct. These individuals may be unfamiliar with the requirements of operating
a public company, which could cause us to have to expend time and resources
helping them become familiar with such requirements. This could be expensive and
time-consuming and could lead to various regulatory issues that may adversely
affect our operations.
Our
key personnel may negotiate employment or consulting agreements with a target
business in connection with a particular business combination. These agreements
may provide for them to receive compensation following a business combination
and as a result, may cause them to have conflicts of interest in determining
whether a particular business combination is the most advantageous.
Our key
personnel will be able to remain with the company after the consummation of a
business combination only if they are able to negotiate employment or consulting
agreements in connection with the business combination. Such negotiations would
take place simultaneously with the negotiation of the business combination and
could provide for such individuals to receive compensation in the form of cash
payments and/or our securities for services they would render to the company
after the consummation of the business combination. The personal and financial
interests of such individuals may influence their motivation in identifying and
selecting a target business. However, we believe the ability of such individuals
to remain with the company after the consummation of a business combination will
not be the determining factor in our decision as to whether or not we will
proceed with any potential business combination.
Our
officers and directors will allocate a portion of their time to other businesses
thereby causing conflicts of interest in their determination as to how much time
to devote to our affairs. This conflict of interest could have a negative impact
on our ability to consummate a business combination.
Our
officers and directors are not required to commit their full time to our
affairs, which could create a conflict of interest when allocating their time
between our operations and their other commitments. We do not intend to have any
full time employees prior to the consummation of a business combination. All of
our executive officers are engaged in several other business endeavors and are
not obligated to devote any specific number of hours to our affairs. If our
officers’ and directors’ other business affairs require them to devote more
substantial amounts of time to such affairs, it could limit their ability to
devote time to our affairs and could have a negative impact on our ability to
consummate a business combination. We cannot assure you that these conflicts
will be resolved in our favor. As a result, a potential target business may be
presented to another entity prior to its presentation to us and we may miss out
on a potential transaction.
Our
officers and directors are now, and may in the future become, affiliated with
entities engaged in business activities similar to those intended to be
conducted by us and accordingly, may have conflicts of interest in determining
to which entity a particular business opportunity should be
presented.
None of
our officers or directors has been or currently is a principal of, or affiliated
with, a blank check company. However, our officers and directors are now, and
may in the future become, affiliated with entities, including other “blank
check” companies, engaged in business activities similar to those intended to be
conducted by us. For a complete description of our officers’ and directors’
current affiliations, see the section titled “Management — Conflicts
of Interest.” Additionally, our officers and directors may become aware of
business opportunities that may be appropriate for presentation to us and the
other entities to which they owe fiduciary duties. Accordingly, they may have
conflicts of interest in determining to which entity a particular business
opportunity should be presented. We cannot assure you that these conflicts will
be resolved in our favor. As a result, a potential target business may be
presented to another entity prior to its presentation to us and we may miss out
on a potential transaction.
All
of our officers and directors own shares of our common stock issued prior to the
offering and some of them will own warrants following this offering. These
shares and warrants will not participate in liquidation distributions and,
therefore, our officers and directors may have a conflict of interest in
determining whether a particular target business is appropriate for a business
combination.
All of
our officers and directors own shares of our common stock that were issued prior
to this offering. Such individuals have waived their right to receive
distributions with respect to their initial shares upon our liquidation if we
are unable to consummate a business combination. Accordingly, the shares
acquired prior to this offering, and any warrants purchased by our officers or
directors in this offering or in the aftermarket, will be worthless if we do not
consummate a business combination. The personal and financial interests of our
directors and officers may influence their motivation in timely identifying and
selecting a target business and completing a business combination. Consequently,
our directors’ and officers’ discretion in identifying and selecting a suitable
target business may result in a conflict of interest when determining whether
the terms, conditions and timing of a particular business combination are
appropriate and in our stockholders’ best interest.
16
We
intend to have our securities quoted on the OTC Bulletin Board, which will limit
the liquidity and price of our securities more than if our securities were
listed on a national exchange.
We expect
our securities to be traded in the over-the-counter market. It is anticipated
that they will be quoted on the OTC Bulletin Board, a FINRA-sponsored and
operated inter-dealer automated quotation system for equity securities not
included in the Nasdaq Stock Market or a national exchange. Quotation of our
securities on the OTC Bulletin Board will limit the liquidity and price of our
securities more than if our securities were quoted or listed on The Nasdaq Stock
Market or a national exchange. We cannot assure you, however, that such
securities will be approved for quotation or continue to be authorized for
quotation by the OTC Bulletin Board or any other market in the
future.
We
may only be able to complete one business combination with the proceeds of this
offering, which will cause us to be solely dependent on a single business that
may have a limited number of products or services.
Our
business combination must be with a business with a fair market value of at
least 80% of our net assets at the time of such acquisition, although this may
entail the simultaneous acquisitions of several operating businesses at the same
time. By consummating a business combination with only a single entity, our lack
of diversification may subject us to numerous economic, competitive and
regulatory developments. Further, we would not be able to diversify our
operations or benefit from the possible spreading of risks or offsetting of
losses, unlike other entities that may have the resources to complete several
business combinations in different industries or different areas of a single
industry. Accordingly, the prospects for our success may be:
|
•
|
solely
dependent upon the performance of a single business,
or
|
|
•
|
dependent
upon the development or market acceptance of a single or limited number of
products, processes or
services.
|
This lack
of diversification may subject us to numerous economic, competitive and
regulatory developments, any or all of which may have a substantial adverse
impact upon the particular industry in which we may operate subsequent to a
business combination.
Alternatively,
if we determine to simultaneously acquire several businesses and such businesses
are owned by different sellers, we will need for each of such sellers to agree
that our purchase of its business is contingent on the simultaneous closings of
the other business combinations, which may make it more difficult for us, and
delay our ability, to complete the business combination. With multiple business
combinations, we could also face additional risks, including additional burdens
and costs with respect to possible multiple negotiations and due diligence
investigations (if there are multiple sellers) and the additional risks
associated with the subsequent assimilation of the operations and services or
products of the acquired companies in a single operating business. If we are
unable to adequately address these risks, it could negatively impact our
profitability and results of operations.
The
ability of our stockholders to exercise their conversion rights may not allow us
to effectuate the most desirable business combination or optimize our capital
structure.
When we
seek stockholder approval of any business combination, we will offer each public
stockholder (but not our existing stockholders) the right to have his, her or
its shares of common stock converted to cash if the stockholder votes against
the business combination and the business combination is approved and completed.
Such holder must both vote against such business combination and then exercise
his, her or its conversion rights to receive a pro rata portion of the
trust account. Accordingly, if our business combination requires us to use
substantially all of our cash to pay the purchase price, because we will not
know how many stockholders may exercise such conversion rights, we may either
need to reserve part of the trust account for possible payment upon such
conversion, or we may need to arrange third party financing to help fund our
business combination in case a larger percentage of stockholders exercise their
conversion rights than we expect. Since we have no specific business combination
under consideration, we have not taken any steps to secure third party
financing. Therefore, we may not be able to consummate a business combination
that requires us to use all of the funds held in the trust account as part of
the purchase price, or we may end up having a leverage ratio that is not optimal
for our business combination. This may limit our ability to effectuate the most
attractive business combination available to us.
17
We
may require stockholders who wish to convert their shares in connection with a
proposed business combination to comply with specific requirements for
conversion that may make it more difficult for them to exercise their conversion
rights prior to the deadline for exercising their rights.
We may
require public stockholders who wish to convert their shares in connection with
a proposed business combination to either tender their certificates to our
transfer agent at any time prior to the vote taken at the stockholder meeting
relating to such business combination or to deliver their shares to the transfer
agent electronically using the Depository Trust Company’s DWAC
(Deposit/Withdrawal At Custodian) System. In order to obtain a physical stock
certificate, a stockholder’s broker and/or clearing broker, DTC and our transfer
agent will need to act to facilitate this request. It is our understanding that
stockholders should generally allot at least two weeks to obtain physical
certificates from the transfer agent. However, because we do not have any
control over this process or over the brokers or DTC, it may take significantly
longer than two weeks to obtain a physical stock certificate. While we have been
advised that it takes a short time to deliver shares through the DWAC System, we
cannot assure you of this fact. Accordingly, if it takes longer than we
anticipate for stockholders to deliver their shares, stockholders who wish to
convert may be unable to meet the deadline for exercising their conversion
rights and thus may be unable to convert their shares.
We
may proceed with a business combination even if public stockholders owning
approximately 29.99% of the shares sold in this offering exercise their
conversion rights. This may not allow us to consummate the most attractive
business combination to us.
We may
proceed with a business combination as long as public stockholders owning less
than 30% of the shares sold in this offering exercise their conversion rights.
Accordingly, approximately 29.99% of the public stockholders may exercise their
conversion rights and we could still consummate a proposed business
combination.
Our
business combination may require us to use substantially all of our cash to pay
the purchase price. In such a case, because we will not know how many
stockholders may exercise such conversion rights, we may need to arrange third
party financing to help fund our business combination in case a larger
percentage of stockholders exercise their conversion rights than we expect.
Additionally, even if our business combination does not require us to use
substantially all of our cash to pay the purchase price, if a significant number
of stockholders exercise their conversion rights, we will have less cash
available to use in furthering our business plans following a business
combination and may need to arrange third party financing. We have not taken any
steps to secure third party financing for either situation. We cannot assure you
that we will be able to obtain such third party financing on terms favorable to
us or at all.
Because
of our limited resources and structure, we may not be able to consummate an
attractive business combination.
We expect
to encounter intense competition from entities other than blank check companies
having a business objective similar to ours, including venture capital funds,
leveraged buyout funds and operating businesses competing for acquisitions. Many
of these entities are well established and have extensive experience in
identifying and effecting business combinations directly or through affiliates.
Many of these competitors possess greater technical, human and other
resources than we do and our financial resources will be relatively limited when
contrasted with those of many of these competitors. While we believe that there
are numerous potential target businesses that we could acquire with the net
proceeds of this offering, our ability to compete in acquiring certain sizable
target businesses will be limited by our available financial resources. This
inherent competitive limitation gives others an advantage in pursuing the
acquisition of certain target businesses. Furthermore, the obligation we have to
seek stockholder approval of a business combination may delay the consummation
of a transaction. Additionally, our outstanding warrants, and the future
dilution they potentially represent, may not be viewed favorably by certain
target businesses. Any of these obligations may place us at a competitive
disadvantage in successfully negotiating a business combination.
Because
only [________] of the [______] blank check companies that have gone public in
the United States since August 2003 have either consummated a business
combination or entered into a definitive agreement for a business combination,
it may indicate that there are fewer attractive target businesses available to
such entities like our company or that many privately held target businesses are
not inclined to enter into these types of transactions with publicly held blank
check companies like ours. If we are unable to consummate a business combination
with a target business within the prescribed time periods, we will be forced to
liquidate.
We
may be unable to obtain additional financing, if required, to complete a
business combination or to fund the operations and growth of the target
business, which could compel us to restructure or abandon a particular business
combination.
Although
we believe that the net proceeds of this offering will be sufficient to allow us
to consummate a business combination, because we have not yet identified any
prospective target business, we cannot ascertain the capital requirements for
any particular transaction. If the net proceeds of this offering prove to be
insufficient, either because of the size of the business combination, the
depletion of the available net proceeds in search of a target business, or the
obligation to convert into cash a significant number of shares from dissenting
stockholders, we will be required to seek additional financing. We cannot assure
you that such financing will be available on acceptable terms, if at all. To the
extent that additional financing proves to be unavailable when needed to
consummate a particular business combination, we would be compelled to either
restructure the transaction or abandon that particular business combination and
seek an alternative target business candidate. In addition, if we consummate a
business combination, we may require additional financing to fund the operations
or growth of the target business. The failure to secure additional financing
could have a material adverse effect on the continued development or growth of
the target business. None of our officers, directors or stockholders is required
to provide any financing to us in connection with or after a business
combination.
18
Our
existing stockholders, including our officers and directors, control a
substantial interest in us and thus may influence certain actions requiring a
stockholder vote.
Upon
consummation of our offering, our existing stockholders (including all of our
officers and directors) will collectively own 20% of our issued and outstanding
shares of common stock (assuming they do not purchase any units in this
offering). None of our initial stockholders, officers, directors or their
affiliates has indicated any intention to purchase additional units or shares of
common stock from persons in the open market or in private transactions.
However, if a significant number of stockholders vote, or indicate an intention
to vote, against a proposed business combination, our initial stockholders,
officers, directors or their affiliates could make such purchases in the open
market or in private transactions in order to influence the vote. These
individuals have not taken any steps or contemplated any other methods that
would be utilized in order to influence a vote on a proposed acquisition
transaction.
Our
existing stockholders paid an aggregate of $25,000, or approximately $0.05 per
share, for their initial shares and, accordingly, you will experience immediate
and substantial dilution from the purchase of our common stock.
The
difference between the public offering price per share and the pro forma net
tangible book value per share of our common stock after this offering
constitutes the dilution to the investors in this offering. Our existing
stockholders acquired their initial shares of common stock at a nominal price,
significantly contributing to this dilution. Assuming the offering is completed,
you and the other new investors will incur an immediate and substantial dilution
of approximately[____]% or $[______] per share (the difference between the pro
forma net tangible book value per share of $[______], and the initial offering
price of $8.00 per unit).
Our
outstanding warrants may have an adverse effect on the market price of our
common stock and make it more difficult to effect a business
combination.
We will
be issuing warrants to purchase 1,875,000 shares of common stock as part of the
units offered by this prospectus. To the extent we issue shares of common stock
to effect a business combination, the potential for the issuance of a
substantial number of additional shares upon exercise of these warrants could
make us a less attractive acquisition vehicle in the eyes of a target business.
Such securities, when exercised, will increase the number of issued and
outstanding shares of our common stock and reduce the value of the shares issued
to complete the business combination. Accordingly, our warrants may make it more
difficult to effectuate a business combination or increase the cost of acquiring
the target business. Additionally, the sale, or even the possibility of sale, of
the shares underlying the warrants could have an adverse effect on the market
price for our securities or on our ability to obtain future financing. If and to
the extent these warrants are exercised, you may experience dilution to your
holdings.
If
our existing stockholders exercise their registration rights with respect to
their initial shares, it may have an adverse effect on the market price of our
common stock and the existence of these rights may make it more difficult to
effect a business combination.
Our
existing stockholders are entitled to make a demand that we register the resale
of their initial shares at any time commencing three months prior to the date on
which their shares are released from escrow. Assuming the underwriters do not
exercise the over-allotment option, if such individuals exercise their
registration rights with respect to all of their securities, then there will be
an additional 468,750 shares of common stock eligible for trading in the public
market. The presence of these additional shares of common stock trading in the
public market may have an adverse effect on the market price of our common
stock. In addition, the existence of these rights may make it more difficult to
effectuate a business combination or increase the cost of acquiring the target
business, as the stockholders of the target business may be discouraged from
entering into a business combination with us or will request a higher price for
their securities because of the potential effect the exercise of such rights may
have on the trading market for our common stock.
19
We
may not seek an opinion from an unaffiliated third party as to the fair market
value of the target business we acquire or that the price we are paying for the
business is fair to our stockholders from a financial point of
view.
We are
not required to obtain an opinion from an unaffiliated third party that the
target business we select has a fair market value in excess of at least 80% of
our net assets unless our board of directors cannot make such determination on
its own. We are also not required to obtain an opinion from an unaffiliated
third party indicating that the price we are paying is fair to our stockholders
from a financial point of view unless the target is affiliated with our
officers, directors, special advisors, if any, existing shareholders or their
affiliates. If no opinions are obtained, our stockholders will be relying on the
judgment of our board of directors, whose collective experience in business
evaluations for blank check companies like ours is not significant.
If
we are deemed to be an investment company, we may be required to institute
burdensome compliance requirements and our activities may be restricted, which
may make it difficult for us to complete a business combination.
A company
that, among other things, is or holds itself out as being engaged primarily, or
proposes to engage primarily, in the business of investing, reinvesting, owning,
trading or holding certain types of securities would be deemed an investment
company under the Investment Company Act of 1940. Since we will invest the
proceeds held in the trust fund, it is possible that we could be deemed an
investment company. Notwithstanding the foregoing, we do not believe that our
anticipated principal activities will subject us to the Investment Company Act
of 1940. To this end, the proceeds held in trust may be invested by the trustee
only in United States “government securities” 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. By restricting the
investment of the proceeds to these instruments, we intend to meet the
requirements for the exemption provided in Rule 3a-1 promulgated under the
Investment Company Act of 1940.
If we are
nevertheless deemed to be an investment company under the Investment Company Act
of 1940, we may be subject to certain restrictions that may make it more
difficult for us to complete a business combination, including:
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•
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restrictions
on the nature of our investments;
and
|
|
•
|
restrictions
on the issuance of
securities.
|
In
addition, we may have imposed upon us certain burdensome requirements,
including:
|
•
|
registration
as an investment company;
|
|
•
|
adoption
of a specific form of corporate structure;
and
|
|
•
|
reporting,
record keeping, voting, proxy, compliance policies and procedures and
disclosure requirements and other rules and
regulations.
|
Compliance
with these additional regulatory burdens would require additional expense for
which we have not allotted.
The
determination for the offering price of our units is more arbitrary compared
with the pricing of securities for an operating company in a particular
industry.
Prior to
this offering there has been no public market for any of our securities. The
public offering price of the units and the terms of the warrants were negotiated
between the [UNDERWRITER] and us. Factors considered in determining the prices
and terms of the units, including the common stock and warrants underlying the
units, include:
|
•
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the
history and prospects of companies whose principal business is the
acquisition of other companies;
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•
|
prior
offerings of those companies;
|
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•
|
our
prospects for acquiring an operating business at attractive
values;
|
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•
|
our
capital structure;
|
|
•
|
an
assessment of our management and their experience in identifying operating
companies;
|
|
•
|
general
conditions of the securities markets at the time of the offering;
and
|
|
•
|
other
factors as were deemed
relevant.
|
However,
although these factors were considered, the determination of our offering price
is more arbitrary than the pricing of securities for an operating company in a
particular industry since we have no historical operations or financial results
to compare them to.
20
If
we effect a business combination with a company located outside of the United
States, we would be subject to a variety of additional risks that may negatively
impact our operations.
We may
effect a business combination with a company located outside of the United
States. If we did, we would be subject to any special considerations or risks
associated with companies operating in the target business’ home jurisdiction,
including any of the following:
|
•
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rules
and regulations or currency conversion or corporate withholding taxes on
individuals;
|
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•
|
tariffs
and trade barriers;
|
|
•
|
regulations
related to customs and import/export
matters;
|
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•
|
longer
payment cycles;
|
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•
|
tax
issues, such as tax law changes and variations in tax laws as compared to
the United States;
|
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•
|
currency
fluctuations;
|
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•
|
challenges
in collecting accounts
receivable;
|
|
•
|
cultural
and language differences; and
|
|
•
|
employment
regulations.
|
We cannot
assure you that we would be able to adequately address these additional risks.
If we were unable to do so, our operations might suffer.
If
we effect a business combination with a company located outside of the United
States, the laws applicable to such company will likely govern all of our
material agreements and we may not be able to enforce our legal
rights.
If we
effect a business combination with a company located outside of the United
States, the laws of the country in which such company operates will govern
almost all of the material agreements relating to its operations. We cannot
assure you that the target business will be able to enforce any of its material
agreements or that remedies will be available in this new jurisdiction. The
system of laws and the enforcement of existing laws in such jurisdiction may not
be as certain in implementation and interpretation as in the United States. The
inability to enforce or obtain a remedy under any of our future agreements could
result in a significant loss of business, business opportunities or capital.
Additionally, if we acquire a company located outside of the United States, it
is likely that substantially all of our assets would be located outside of the
United States and some of our officers and directors might reside outside of the
United States. As a result, it may not be possible for investors in the United
States to enforce their legal rights, to effect service of process upon our
directors or officers or to enforce judgments of United States courts predicated
upon civil liabilities and criminal penalties of our directors and officers
under Federal securities laws.
21
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
The
statements contained in this prospectus that are not purely historical are
forward-looking statements. Our forward-looking statements include, but are not
limited to, statements regarding our or our management’s expectations, hopes,
beliefs, intentions or strategies regarding the future. In addition, any
statements that refer to projections, forecasts or other characterizations of
future events or circumstances, including any underlying assumptions, are
forward-looking statements. The words “anticipates,” “believe,” “continue,”
“could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,”
“potential,” “predicts,” “project,” “should,” “would” and similar expressions
may identify forward-looking statements, but the absence of these words does not
mean that a statement is not forward-looking. Forward-looking statements in this
prospectus may include, for example, statements about our:
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·
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ability to complete our
initial business
combination;
|
|
·
|
success in retaining or
recruiting, or changes required in, our officers, key employees or
directors following our initial business
combination;
|
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·
|
officers and directors
allocating their time to other businesses and potentially having conflicts
of interest with our business or in approving our initial business
combination, as a result of which they would then receive expense
reimbursements;
|
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·
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potential ability to obtain
additional financing to complete an initial business
combination;
|
|
·
|
pool of prospective target
businesses;
|
|
·
|
the ability of our officers
and directors to generate a number of potential investment
opportunities;
|
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·
|
potential change in control if
we acquire one or more target businesses for
stock;
|
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·
|
our public securities’
potential liquidity and
trading;
|
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·
|
quoting or delisting of our
securities from the Over the Counter Bulletin Board or the ability to have
our securities quoted on the Over the Counter Bulletin Board following our
initial business
combination;
|
|
·
|
use of proceeds not held in
the trust account or available to us from interest income on the trust
account balance; or
|
|
·
|
financial performance
following this offering.
|
The forward-looking statements
contained in this prospectus are based on our current expectations and beliefs
concerning future developments and their potential effects on us. There can be
no assurance that future developments affecting us will be those that we have
anticipated. These forward-looking statements involve a number of risks,
uncertainties (some of which are beyond our control) or other assumptions that
may cause actual results or performance to be materially different from those
expressed or implied by these forward-looking statements. These risks and
uncertainties include, but are not limited to, those factors described under the
heading “Risk Factors.” Should one or more of these risks or uncertainties
materialize, or should any of our assumptions prove incorrect, actual results
may vary in material respects from those projected in these forward-looking
statements. We undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise,
except as may be required under applicable securities
laws.
22
USE
OF PROCEEDS
We
estimate that the net proceeds of this offering (all of which will be deposited
into the trust fund), will be as set forth in the following table:
Without
Over-Allotment
Option
|
[Over-Allotment
Option
Exercised]
|
||||||||
Gross
proceeds
|
|
|
|||||||
From
offering
|
$ | 15,000,000 | $ |
[____]
|
|||||
Total
gross proceeds
|
$ | 15,000,000 | $ |
[____]
|
|||||
Offering
expenses
|
|
||||||||
[Underwriting
discount]
|
[____]
|
[____]
|
|||||||
Legal
fees and expenses [(including blue sky fees and expenses)]
|
[125,000 | ] |
[____]
|
||||||
Miscellaneous
expenses
|
[____]
|
[____]
|
|||||||
Printing
and engraving expenses
|
[____]
|
[____]
|
|||||||
Accounting
fees and expenses
|
[____]
|
[____]
|
|||||||
SEC
registration fee
|
[____]
|
[____]
|
|||||||
FINRA
filing fee
|
[____]
|
[____]
|
|||||||
[____]
|
[____]
|
||||||||
Net
proceeds before payment of deferred underwriting fees
|
|
||||||||
Held
in trust
|
12,750,000 |
[____]
|
|||||||
Not
held in trust
|
2,250,000 | 2,250,000 | |||||||
Total
net proceeds
|
$ |
[____
|
$ |
[____]
|
|||||
Use
of net proceeds not held in trust
|
|||||||||
Legal,
accounting and other third-party expenses attendant to the due diligence
investigation, structuring and negotiation of a business
combination
|
$ |
[____]
|
([____]
|
)% | |||||
Due
diligence of prospective target businesses by our officers, directors or
existing stockholders
|
[____]
|
([____]
|
)% | ||||||
Legal
and accounting fees relating to SEC reporting obligations
|
[____]
|
([____]
|
)% | ||||||
Payment
of administrative fee to [____] ([$7,500] per month for 24
months)
|
[180,000 | ] |
([____]
|
)% | |||||
Working
capital to cover miscellaneous expenses, D&O insurance, general
corporate purposes, liquidation expenses, transfer agent, warrant agent,
escrow and trustee fees, and reserves
|
[____]
|
([____]
|
)% | ||||||
Total
|
$ |
[____]
|
(100.0 | )% |
$12,750,000,
or [$[____] if the over-allotment option is exercised in full], of the net
proceeds of this offering [before payment of deferred underwriting fees], will
be placed in a trust account at [BANK], maintained by [TRANSFER AGENT], as
trustee. [This amount includes a portion of the underwriting discounts and
commissions payable to the underwriters in this offering. The underwriters have
agreed that such amount will not be paid unless and until we consummate a
business combination and have waived their right to receive such payment upon
our liquidation if we are unable to complete a business combination.] The funds
held in trust will be invested only in United States “government securities”
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,
so that we are not deemed to be an investment company under the Investment
Company Act. [Except with respect to interest income that may be released to us
of (i) up to $[____] to fund expenses related to investigating and selecting a
target business and our other working capital requirements and (ii)] any
additional amounts we may need to pay our income or other tax obligations, the
proceeds held in trust will not be released from the trust account until the
earlier of the completion of a business combination or our liquidation. The
proceeds held in the trust account may be used as consideration to pay the
sellers of a target business with which we complete a business combination. Any
amounts not paid as consideration to the sellers of the target business may be
used to finance operations of the target business.
23
The
payment to [____], an affiliate of [____] of a monthly fee of [$7,500] is for
general and administrative services including office space, utilities and
secretarial support. Our management believes, based on our review of rents and
fees for similar services in the New York metropolitan area, that the fee
charged by [____] is at least as favorable as we could have obtained from an
unaffiliated person. This arrangement will terminate upon completion of a
business combination or the distribution of the trust account to our public
stockholders. Other than the [$7,500] per month administrative fee, no
compensation of any kind (including finder’s, consulting or other similar fees)
will be paid to any of our existing officers, directors, stockholders, or any of
their affiliates, prior to, or for any services they render in order to
effectuate, the consummation of the business combination (regardless of the type
of transaction that it is). However, such individuals will receive reimbursement
for any out-of-pocket expenses incurred by them in connection with activities on
our behalf, such as identifying potential target businesses, performing business
due diligence on suitable target businesses and business combinations as well as
traveling to and from the offices, plants or similar locations of prospective
target businesses to examine their operations. Reimbursement for such expenses
will be paid by us out of the funds not held in trust and currently allocated to
“Legal, accounting and other third-party expenses attendant to the due diligence
investigation, structuring and negotiation of a business combination,” “Due
diligence of prospective target businesses by our officers, directors or
existing stockholders” and “Working capital to cover miscellaneous expenses,
D&O insurance, general corporate purposes and reserves.” Since the role of
present management after a business combination is uncertain, we have no ability
to determine what remuneration, if any, will be paid to those persons after a
business combination.
Regardless
of whether the over-allotment option is exercised in full, the net proceeds from
this offering available to us out of trust for our search for a business
combination will be approximately $[____]. [In addition, interest
earned on the funds held in the trust account, up to $[____], may be released to
us to fund our working capital requirements.] These funds will be used by us for
director and officer liability insurance premiums, due diligence, legal,
accounting and other expenses of structuring and negotiating business
combinations, as well as for reimbursement of any out-of-pocket expenses
incurred by our existing stockholders in connection with activities on our
behalf as described above. We will also be entitled to have interest earned on
the funds held in the trust account released to us to pay any tax obligations
that we may owe. We believe these funds will be sufficient to cover the
foregoing expenses and reimbursement costs. We could also use a portion of these
funds to pay fees to consultants to assist us with our search for a target
business or to use as a down payment or to fund a “no-shop” provision (a
provision in letters of intent designed to keep target businesses from
“shopping” around for transactions with other companies on terms more favorable
to such target businesses) with respect to a particular proposed business
combination, although we do not have any current intention to do so. If we
entered into a letter of intent where we paid for the right of exclusivity from
a target business, the amount that would be used as a down payment or to fund a
“no-shop” provision would be determined based on the terms of the specific
business combination and the amount of our available funds at the time. Our
forfeiture of such funds (whether as a result of our breach or otherwise) could
result in our not having sufficient funds to continue searching for, or
conducting due diligence with respect to, potential target
businesses.
The
allocation of the net proceeds available to us outside of the trust account,
along with the available interest earned on the funds held in the trust account,
represents our best estimate of the intended uses of these funds. In the event
that our assumptions prove to be inaccurate, we may reallocate some of such
proceeds within the above described categories.
We will
likely use substantially all of the net proceeds of this offering, including the
funds held in the trust account, to acquire a target business and to pay our
expenses relating thereto. 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 which are not used to consummate a business combination
will be disbursed to the combined company and will, along with any other net
proceeds not expended, be used as working capital to finance the operations of
the target business. Such working capital funds could be used in a variety of
ways including continuing or expanding the target business’ operations, for
strategic acquisitions and for marketing, research and development of existing
or new products. Such funds could also be used to repay any operating expenses
or finders’ fees that we had incurred prior to the completion of our business
combination if the funds available to us outside of the trust fund were
insufficient to cover such expenses.
To the
extent we are unable to consummate our initial business combination, we will pay
the costs of liquidation from our remaining assets outside of the trust
account.
We
believe that, upon consummation of this offering, we will have sufficient
available funds (which includes amounts that may be released to us from the
trust account) to operate for the next 24 months, assuming that a business
combination is not consummated during that time.
24
A public
stockholder will be entitled to receive funds from the trust account (including
interest earned on his, her or its portion of the trust account) only in the
event of our liquidation or if that public stockholder converts such shares into
cash in connection with a business combination which the public stockholder
voted against and which we consummate. In no other circumstances will a public
stockholder have any right or interest of any kind to or in the trust
account.
25
DILUTION
The
difference between the public offering price per share of common stock, assuming
no value is attributed to the warrants included in the units we are offering by
this prospectus, and the pro forma net tangible book value per share of our
common stock after this offering constitutes the dilution to investors in this
offering. Such calculation does not reflect any dilution associated with the
sale and exercise of warrants, so as to provide investors with a presentation of
the worst dilution that could result from the offering. Net tangible book value
per share is determined by dividing our net tangible book value, which is our
total tangible assets less total liabilities (including the value of common
stock which may be converted into cash), by the number of outstanding shares of
our common stock.
The
following table illustrates the dilution to the new investors on a per-share
basis, assuming no value is attributed to the warrants included in the
units:
Public
offering price
|
|
$ | 10.00 | ||||
Net
tangible book value before this offering
|
([__] | ) | |||||
Increase
attributable to new investors and private sales
|
$ |
[___]
|
|||||
Pro
forma net tangible book value after this offering
|
|
$ |
[___]
|
||||
Dilution
to new investors
|
|
$ |
[___]
|
The
following table sets forth information with respect to our existing stockholders
and the new investors:
Shares Purchased
|
Total Consideration
|
Average Price
Per Share
|
||||||||||||||||||
|
Number
|
Percentage
|
Amount
|
Percentage
|
||||||||||||||||
Existing
stockholders
|
468,750
|
20.0
|
%
|
$
|
[25,000]
|
0.17
|
%
|
$
|
0.05
|
|||||||||||
New
investors
|
1,875,000
|
80.0
|
%
|
$
|
15,000,000
|
99.83
|
%
|
$
|
8.00
|
|||||||||||
|
2,343,750
|
100.0
|
%
|
$
|
15,025,000
|
100.0
|
%
|
The pro
forma net tangible book value after the offering is calculated as
follows:
Numerator:
|
|
|||
Net
tangible book value (deficit) before this offering
|
$ | ([_____] | ) | |
Proceeds
from this offering including subtraction of deferred costs
|
[_____]
|
|||
Offering
costs excluded from net tangible book value before this
offering
|
[_____]
|
|||
Less:
Proceeds held in trust subject to conversion to cash ($15,000,000 x
29.99%)
|
([_____] | ) | ||
|
$ |
[_____]
|
||
Denominator:
|
|
|||
Shares
of common stock outstanding prior to this offering
|
468,750 | |||
Shares
of common stock included in the units offered
|
1,875,000 | |||
Less:
Shares subject to conversion
|
([_____] | ) | ||
|
[_____]
|
26
CAPITALIZATION
The
following table sets forth our capitalization at [_________] and as adjusted to
give effect to the sale of our units and the application of the estimated net
proceeds derived from the sale of such securities:
[_______], 2010
|
||||||||
Actual
|
As Adjusted
|
|||||||
Note
payable to affiliate
|
$ |
[_____]
|
$ | — | ||||
Total
debt
|
$ |
[_____]
|
$ | — | ||||
Common
stock, $.0001 par value, -0- and 562,313 shares which are subject to
possible conversion, shares at conversion value
|
— | $ |
[_____]
|
|||||
Stockholders’
equity:
|
||||||||
Preferred
stock, $.0001 par value, 1,000,000 shares authorized, none issued or
outstanding, as adjusted
|
— | — | ||||||
Common
stock, $.0001 par value, 100,000,000 shares authorized; [_____] shares
issued and outstanding, actual; [_____] shares issued and
outstanding (excluding 562,313 shares subject to possible conversion), as
adjusted
|
[_____]
|
[_____]
|
||||||
Additional
paid-in capital
|
[_____]
|
[_____]
|
||||||
Deficit
accumulated during the development stage
|
([_____] | ) | ([_____] | ) | ||||
Total
stockholders’ equity
|
$ |
[_____]
|
$ |
[_____]
|
||||
Total
capitalization
|
$ |
[_____]
|
$ |
[_____]
|
If we
consummate a business combination, the conversion rights afforded to our public
stockholders (but not our existing stockholders) may result in the
conversion into cash of up to approximately 29.99% of the aggregate number of
shares sold in this offering at a per-share conversion price equal to the amount
in the trust account [(a portion of which is made up of $[_____] in deferred
underwriting discounts and commissions)], inclusive of any interest thereon (net
of taxes payable and net of any interest not previously released to us for
working capital requirements), as of two business days prior to the proposed
consummation of a business combination divided by the number of shares sold in
this offering.
27
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
We were
formed on March 23, 2010 to serve as a vehicle to effect a merger, capital stock
exchange, asset acquisition or other similar business combination with an
operating business. We intend to utilize cash derived from the proceeds of this
offering, our capital stock, debt or a combination of cash, capital stock and
debt, in effecting a business combination. The issuance of additional shares of
our capital stock:
|
•
|
may
significantly reduce the equity interest of our
stockholders;
|
|
•
|
may
subordinate the rights of holders of common stock if we issue preferred
stock with rights senior to those afforded to our common
stock;
|
|
•
|
will
likely cause a change in control if a substantial number of our shares of
common stock are issued, which may affect, among other things, our ability
to use our net operating loss carry forwards, if any, and most likely will
also result in the resignation or removal of our present officers and
directors; and
|
|
•
|
may
adversely affect prevailing market prices for our common
stock.
|
Similarly,
if we issue debt securities, it could result in:
|
•
|
default
and foreclosure on our assets if our operating revenues after a business
combination are insufficient to pay our debt
obligations;
|
|
•
|
acceleration
of our obligations to repay the indebtedness even if we have made all
principal and interest payments when due if the debt security contains
covenants that required the maintenance of certain financial ratios or
reserves and we breach any such covenant without a waiver or renegotiation
of that covenant;
|
|
•
|
our
immediate payment of all principal and accrued interest, if any, if the
debt security is payable on demand;
and
|
|
•
|
our
inability to obtain additional financing, if necessary, if the debt
security contains covenants restricting our ability to obtain additional
financing while such security is
outstanding.
|
We have
neither engaged in any operations nor generated any revenues to date. [Our
entire activity since inception has been to prepare for our proposed fundraising
through an offering of our equity securities.]
We
estimate that the net proceeds from the sale of the units, after deducting
offering expenses of approximately $[_____] and underwriting discounts of
approximately $[_____], [or $[_____] if the over-allotment option is exercised
in full], will be approximately $[_____], [or approximately $[_____]if the
over-allotment option is exercised in full]. [However, the underwriters have
agreed that ___% of the underwriting discounts and commissions will not be
payable unless and until we consummate a business combination. Accordingly,
$[_____], or $[_____] if the over-allotment option is exercised in full, of the
net proceeds of this offering will be held in trust. ] We intend to
use substantially all of the net proceeds of this offering, including the funds
held in the trust account [(excluding deferred underwriting discounts and
commissions)], to acquire a target business and to pay our expenses relating
thereto. To the extent that our capital stock is used in whole or in part as
consideration to effect a business combination, the remaining proceeds held in
the trust account as well as any other net proceeds not expended will be used as
working capital to finance the operations of the target business. Such working
capital funds could be used in a variety of ways including continuing or
expanding the target business’ operations, for strategic acquisitions and for
marketing, research and development of existing or new products. Such funds
could also be used to repay any operating expenses or finders’ fees that we had
incurred prior to the completion of our business combination if the funds
available to us outside of the trust fund were insufficient to cover such
expenses.
We
believe that, upon consummation of this offering, the $[_____]of net proceeds
not held in the trust account plus the up to $[_____]of interest earned on the
trust account balance that may be released to us will be sufficient to allow us
to operate for at least the next 24 months, assuming that a business
combination is not consummated during that time. Over this time period, we
will be using these funds for identifying and evaluating prospective acquisition
candidates, performing business due diligence on prospective target businesses,
traveling to and from the offices, plants or similar locations of prospective
target businesses, reviewing corporate documents and material agreements of
prospective target businesses, selecting the target business to acquire and
structuring, negotiating and consummating the business combination.
We
anticipate that we will incur approximately:
28
|
•
|
$[_____]of
expenses for legal, accounting and other third-party expenses attendant to
the due diligence investigations, structuring and negotiating of a
business combination;
|
|
•
|
$[_____]of
expenses in legal and accounting fees relating to our SEC reporting
obligations;
|
|
•
|
$[_____]of
expenses for the due diligence and investigation of a target business by
our officers, directors and existing
stockholders;
|
|
•
|
$180,000
for the administrative fee payable to [_____] ($7,500 per month
for 24 months); and
|
|
•
|
$[_____]
for general working capital that will be used for miscellaneous expenses,
liquidation expenses, transfer agent, warrant agent, escrow and trustee
fees and reserves, including approximately $[_____] for director and
officer liability insurance
premiums.
|
We are
obligated, commencing on the date of this prospectus, to pay to [_____], an
affiliate of [_____], a monthly fee of $[7,500] for general and administrative
services.
29
PROPOSED
BUSINESS
Introduction
We are a
recently organized Delaware blank check company incorporated on March 23, 2010
in order to serve as a vehicle for effecting a merger, capital stock exchange,
asset acquisition or other similar business combination of an operating Internet
business. Our efforts to identify a prospective target business will not be
limited to a particular industry, although we intend to focus our efforts on
acquiring one or more operating Internet businesses in the fields of e-commerce,
mobile Internet, social networking, financial information and digital media,
online banking and/or software development.
To date,
our efforts have been limited to organizational
activities. Accordingly, we cannot assure you that we will be able to
locate a target business or that we will be able to engage in a business
combination with a target business on favorable terms.
Industry
Trends
As the
chart below illustrates, despite the ups and downs of the stock market, the
growth of the Internet in terms of both users and data has never experienced a
down year2 and we expect that the growth will be
steady for years to come. The Internet has transformed many areas of
our lives - computing, the way we conduct commerce, the way we communicate, the
way we market our brands, the way we watch TV, the way we read our news – and it
is still evolving. The recent announcement by Cisco Systems, Inc. of
a new router that can increase the speed of the Internet more than twelve
times3 is a harbinger of the continual innovation
that we believe may occur over the next five years as more and more companies
develop products and services to take advantage of that increased
bandwidth.
2www.internetworldstats.com
– January 2008
3www.cnnmoney.com:
“Cisco Unveils Ultra-Fast
Internet Technology,” March 10, 2010
30
Management
believes that, because of the volatility of the US stock market over the past
five years, many venture capitalists and entrepreneurs involved in Internet
businesses have chosen to remain private rather than go public. Their
rationale is that they are increasing their earnings by a steady 40-100% a year
or more and hence their private valuations are growing by multiples of this
amount. There is a widespread belief by venture capitalists that they should not
forsake this steady growth for the daily whims of the investors and traders who
would be trading their publicly traded stock. Additionally, they do
not want to go through the distractions of a public IPO, which could involve up
to six months of road show meetings with analysts and bankers as well as
legal fees and other distractions from their core business. As a result,
management believes that this is the reason there have been no IPOs in the
Internet space in the past two years.
31
However,
management also believes, based on our experience and our conversations with our
contacts in the industry, that there are several reasons why Internet companies
will soon find it more desirable or necessary to go public. One reason is
because many of these private companies have increased their number of
shareholders as they’ve issued options and held later-stage rounds of financing
(rather than raising financing from the public markets). Therefore, we
believe that there are potentially dozens of very profitable companies that will
be required to enter the public markets, pursuant to SEC regulations, since they
will have exceeded the number of shareholders allowed for a private company with
their level of revenues. Also, many venture capital firms are at the tail ends
of their terms with their investors, requiring them to liquidate or distribute
their investments. Rather than do this, they will need to either sell their
companies (perhaps earlier than they’d like) or bring their companies into the
public markets to maximize their value. Because of the recent dearth of shares
of new Internet companies, management feels that there could be an enormous
increase in demand for those shares.
Competitive
Strengths
We
believe that the background, operating histories and experience of our
management team have equipped us not only to provide access to a broad spectrum
of investment opportunities but also to improve upon the operational and
financial performance of our target business. Our management team has experience
in the fields of e-commerce, mobile Internet, social networking, financial
information and digital media, online banking and/or software development. We
have either founded, managed or invested in companies in each of these sectors
and we believe that we are well-positioned to identify and consummate a business
combination with an Internet company in one of these sectors, particularly
in the area of financial information/digital media and social
networking. However, no guarantee can be given that our management
will be able to achieve results that are similar to the prior results described
below, and investors should not place undue reliance upon past performance as
indications of future performance.
Thomas J.
Clarke, Jr., our Chairman of the Board, Chief Executive Officer and President
has been directly involved in over 15 acquisitions, joint ventures and
transactions involving companies he has owned or managed. From 1999 to 2009, he
was the CEO of a publicly traded financial information and digital media
company, TheStreet.com (NASDAQ: TSCM). While at TheStreet.com, Mr. Clarke
acquired and integrated various sites in the online banking sector (including
bankingmyway.com and geezeo.com) into TheStreet.com’s website. During
his tenure at TheStreet.com, the company went from a $50 million net loss to a
profit, with over $70 million in e-commerce sales, over $80 million in cash
assets and zero debt. In the course of Mr. Clarke’s 30 year career, most of the
companies Mr. Clarke has managed (including a number of Internet companies) have
been in the financial information and digital media sector, allowing Mr. Clarke
to develop a network of relationships in this sector spanning the venture
capital and entrepreneur communities. See the section titled
“Management – Directors and Executive Officers” for a further description of Mr.
Clarke’s background and experience.
James
Altucher, our Chief Operating Officer, has been the founder and chief executive
of several Internet companies, including Stockpickr.com, a social networking
site in the financial information and digital media space. Mr.
Altucher is a well-known entrepreneur and author of four books on investing as
well as a columnist for Dow Jones Newswires, AOL, and several other
venues. Mr. Altucher has consummated numerous M&A transactions,
and has been involved in venture capital investments which he has helped source,
structure, and consummate. Over the past 20 years, he has developed a wide
network of relationships in the Internet space, particularly in the area of
social networking and financial information and digital media. He
co-founded Stockpickr.com with Mr. Kelly, which was sold to TheStreet.com in
2007. He is also one of the founders of Vaultus Mobile Technologies,
Inc., which provides software solutions to companies to improve mobile workers’
productivity. He is a board member of bitly.com, a website that shortens URLs
for use on Twitter and other social media sites, and he is an advisor to
Stocktwits.com, a website which serves as a tool for aggregating financial
information and digital media on Twitter. Mr. Altucher is also an
investor in BuddyMedia.com, a software-as-a-service platform for companies that
wish to develop a presence on Facebook, and Ticketfly, Inc., an online ticketing
company which combines ticketing services with social media
applications. See the section titled “Management-Directors and
Executive Officers” for a further description of Mr. Altucher’s background and
experience.
Dan
Kelly, our Chief Financial Officer, is a former analyst at Credit Suisse
First Boston where he worked in the leveraged finance group. Mr.
Kelly also served as a principal at (212) Ventures, a technology and internet
fund founded by Mr. Altucher, focusing primarily on wireless services and
infrastructure software investments. In his banking and private
equity career, Mr. Kelly worked on over $6 billion worth of leveraged buyouts,
M&A and equity transactions, including Bresnan Communications, Vaultus, Ajax
Magnathermic, 4thpass, Big 5 Sporting Goods and H&E Equipment
Services. He has sourced and evaluated business plans for early-stage
venture capital investments as well as financing scenarios for mature private
equity investments. Additionally, Mr. Kelly has worked with both
early-stage and mature companies to develop strategic direction, implement
financial controls, evaluate acquisition opportunities and explore additional
financing opportunities to help capitalize on growth
opportunities. Mr. Kelly co-founded Stockpickr.com with Mr.
Altucher. Stockpickr.com was sold to TheStreet.com in
2007. Mr. Kelly currently has investments in several internet and
technology companies including bitly.com, a website that shortens URLs for use
on Twitter and other social media sites; Ticketfly, Inc., an online ticketing
company which combines ticketing services with social media applications;
Stocktwits.com, a website which serves as a tool for aggregating financial
information and digital media on Twitter; and BuddyMedia.com, a
software-as-a-service platform for companies that wish to develop a presence on
Facebook. See the section titled “Management-Directors and Executive Officers”
for a further description of Mr. Kelly’s background and
experience.
32
The three
principals are active on a daily basis in the industry, through their current
businesses, relationships, and investments. Through their wide
network of investment professionals, entrepreneurs, bankers, analysts, and
venture capitalists, the principals believe that they will be able to identify
the most promising candidates for a business combination among the up and coming
Internet companies, particularly in the financial information and digital media
and social networking sectors. Based upon the foregoing, we believe
that as a well-financed public entity possessing a broad investment,
acquisition, and operating expertise, we are well qualified to identify target
businesses and complete a business combination.
Determinate
Factors for Acquisition Opportunities
We have
identified the following guidelines that we believe are important in evaluating
prospective target businesses.
|
·
|
Several
years of revenue growth along with significant market
share;
|
|
·
|
Opportunities
for both organic and acquisition
growth;
|
|
·
|
Companies
that have a proprietary technology that has “built a moat” around their
business, making it difficult for competitors to encroach upon
it;
|
|
·
|
Proven
and experienced management with a strong track record;
and
|
|
·
|
Market
leadership positions within their
sector.
|
We will
use these guidelines in evaluating business combination opportunities. However,
we may decide to enter into a business combination with a target business or
businesses that do not meet all of these guidelines. In addition, we
are not restricted from consummating a business combination that does not have
these characteristics if we believe it is in our stockholders’ best
interests.
Effecting
a Business Combination
We are
not presently engaged in, and we will not engage in, any substantive commercial
business for an indefinite period of time following this offering. We intend to
utilize cash derived from the proceeds of this offering, our capital stock, debt
or a combination of these in effecting a business combination. Although
substantially all of the net proceeds of this offering are intended to be
applied generally toward effecting a business combination as described in this
prospectus, the proceeds are not otherwise being designated for any more
specific purposes. Accordingly, investors in this offering are investing without
first having an opportunity to evaluate the specific merits or risks of any one
or more business combinations. A business combination may involve the
acquisition of, or merger with, a company which does not need substantial
additional capital but which desires to establish a public trading market for
its shares, while avoiding what it may deem to be adverse consequences of
undertaking a public offering itself. These include time delays, significant
expense, loss of voting control and compliance with various Federal and state
securities laws. In the alternative, we may seek to consummate a business
combination with a company that may be financially unstable or in its early
stages of development or growth.
We
have not identified a target business
To date,
we have not selected any target businesses. None of our officers, directors,
promoters and other affiliates has engaged in discussions on our behalf with
representatives of other companies regarding the possibility of a potential
merger, capital stock exchange, asset acquisition or other similar business
combination with us, nor have we, nor any of our agents or affiliates, been
approached by any candidates (or representatives of any candidates) with respect
to a possible acquisition transaction with us. Additionally, we have not, nor
has anyone on our behalf, taken any measure, directly or indirectly, to identify
or locate any suitable acquisition candidate, nor have we engaged or retained
any agent or other representative to identify or locate such an acquisition
candidate. Subject to the requirement that our initial business
combination must be with one or more operating businesses that, collectively,
have a fair market value of at least 80% of our net assets at the time of the
acquisition, we will have limited, if any, restrictions on our ability to
identify and select prospective acquisition candidates. Accordingly, there is no
basis for investors in this offering to evaluate the possible merits or risks of
the particular industry in which we may ultimately operate or the target
businesses with which we may ultimately complete a business combination. To the
extent we effect a business combination with a financially unstable company or
an entity in its early stage of development or growth, including entities
without established records of sales or earnings, we may be affected by numerous
risks inherent in the business and operations of financially unstable and early
stage or potential emerging growth companies. Although our management will
endeavor to evaluate the risks inherent in a particular target business, we
cannot assure you that we will properly ascertain or assess all significant risk
factors.
33
Sources
of target businesses
While we
have not yet identified any acquisition candidates, we believe based on our
management’s business knowledge and past experience that there are numerous
acquisition candidates. We anticipate that target business candidates will be
brought to our attention from various unaffiliated sources, including investment
bankers, venture capital funds, private equity funds and other members of the
financial community. Target businesses may be brought to our attention by such
unaffiliated sources as a result of being solicited by us through calls or
mailings. These sources may also introduce us to target businesses they think we
may be interested in on an unsolicited basis, since many of these sources will
have read this prospectus and know what types of businesses we are targeting.
Our officers and directors, as well as their affiliates, may also bring to our
attention target business candidates that they become aware of through their
business contacts as a result of formal or informal inquiries or discussions
they may have, as well as attending trade shows or conventions. While we do not
presently anticipate engaging the services of professional firms or other
individuals that specialize in business acquisitions on any formal basis, we may
engage these firms or other individuals in the future, in which event we may pay
a finder’s fee, consulting fee or other compensation to be determined in an
arm’s length negotiation based on the terms of the transaction. In no event,
however, will any of our existing officers, directors or stockholders, or any
entity with which they are affiliated, be paid any finder’s fee, consulting fee
or other compensation by us or a target business prior to, or for any services
they render in order to effectuate, the consummation of a business combination
(regardless of the type of transaction that it is). If we determine to enter
into a business combination with a target business that is affiliated with our
officers, directors, special advisors or stockholders, we would do so only if we
obtained an opinion from an independent investment banking firm that the
business combination is fair to our unaffiliated stockholders from a financial
point of view. However, as of the date of this prospectus, there are no
affiliated entities that we would consider as a business combination
target.
Selection
of a target business and structuring of a business combination
Our
management will have virtually unrestricted flexibility in identifying and
selecting a prospective target business. We have not established any other
specific attributes or criteria (financial or otherwise) for prospective target
businesses. In evaluating a prospective target business, our management may
consider a variety of factors, including one or more of the
following:
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·
|
financial
condition and results of operation;
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|
·
|
growth
potential;
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|
·
|
experience
and skill of management and availability of additional
personnel;
|
|
·
|
capital
requirements;
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|
·
|
competitive
position
|
|
·
|
regulatory
or technical barriers to entry;
|
|
·
|
stage
of development of the products, processes or
services;
|
|
·
|
degree
of current or potential market acceptance of the products, processes or
services;
|
|
·
|
proprietary
features and degree of intellectual property or other protection of the
products, processes or services;
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|
·
|
potential
for compliance with GAAP, SEC regulations, Sarbanes-Oxley requirements and
capital requirements;
|
|
·
|
regulatory
environment of the industry; and
|
|
·
|
costs
associated with effecting the business
combination.
|
These
criteria are not intended to be exhaustive. Any evaluation relating to the
merits of a particular business combination will be based, to the extent
relevant, on the above factors as well as other considerations deemed relevant
by our management in effecting a business combination consistent with our
business objective. In evaluating a prospective target business, we will conduct
an extensive due diligence review which will encompass, among other things,
meetings with incumbent management and inspection of facilities, as well as
review of financial and other information which is made available to us. This
due diligence review will be conducted either by our management or by
unaffiliated third parties we may engage, although we have no current intention
to engage any such third parties. We are also required to have all prospective
target businesses execute agreements with us waiving any right, title, interest
or claim of any kind in or to any monies held in the trust account. If any
prospective target business refused to execute such agreement, we would cease
negotiations with such target business.
We will
endeavor to structure a business combination so as to achieve the most favorable
tax treatment to the target businesses, their stockholders, as well as our own
stockholders and us. We cannot assure you, however, that the Internal Revenue
Service or appropriate state tax or foreign tax authority will agree with our
tax treatment of the business combination.
The time
and costs required to select and evaluate a target business and to structure and
complete the business combination cannot presently be ascertained with any
degree of certainty. Any costs incurred with respect to the identification and
evaluation of a prospective target business with which a business combination is
not ultimately completed will result in a loss to us and reduce the amount of
capital available to otherwise complete a business combination.
34
Fair
market value of target business
The
target business or businesses that we acquire must collectively have a fair
market value equal to at least 80% of our net assets at the time of such
acquisition, although we may acquire a target business whose fair market value
significantly exceeds 80% of our net assets. In order to consummate such an
acquisition, we may issue a significant amount of our debt or equity securities
to the sellers of such businesses and/or seek to raise additional funds through
a private offering of debt or equity securities. Since we have no specific
business combination under consideration, we have not entered into any such fund
raising arrangement and have no current intention of doing so. The fair market
value of the target will be determined by our board of directors based upon one
or more standards generally accepted by the financial community (such as actual
and potential sales, earnings and cash flow and/or book value). If our board is
not able to independently determine that the target business has a sufficient
fair market value, we will obtain an opinion from an unaffiliated, independent
investment banking firm with respect to the satisfaction of such criteria. As
the opinion will be addressed to our board of directors for their use in
evaluating the transaction, we do not anticipate that our stockholders will be
entitled to rely on such opinion. However, as the opinion will be attached to,
and thoroughly described in, our proxy soliciting materials, we believe
investors will be provided with sufficient information in order to allow them to
properly analyze the transaction, even if the proposed transaction involves a
target business that is affiliated with our existing stockholders, officers,
directors or their affiliates, because investors will still have the benefit of
reading a copy of the opinion and all the supporting facts surrounding the
conclusion set forth in the opinion. Accordingly, whether the independent
investment banking firm allows stockholders to rely on their opinion will not be
a factor in determining which firm to hire. We will not be required to obtain an
opinion from an investment banking firm as to the fair market value if our board
of directors independently determines that the target business complies with the
80% threshold.
Possible
lack of business diversification
Our
business combination must be with a target business or businesses that
collectively satisfy the minimum valuation standard at the time of such
acquisition, as discussed above, although this process may entail the
simultaneous acquisitions of several operating businesses at the same time.
Therefore, at least initially, the prospects for our success may be entirely
dependent upon the future performance of a single business. Unlike other
entities that may have the resources to complete several business combinations
of entities operating in multiple industries or multiple areas of a single
industry, it is probable that we will not have the resources to diversify our
operations or benefit from the possible spreading of risks or offsetting of
losses. By consummating a business combination with only a single entity, our
lack of diversification may:
|
·
|
subject
us to numerous economic, competitive and regulatory developments, any or
all of which may have a substantial adverse impact upon the particular
industry in which we may operate subsequent to a business combination,
and
|
|
·
|
result
in our dependency upon the performance of a single operating business or
the development or market acceptance of a single or limited number of
products, processes or services.
|
If we
determine to simultaneously acquire several businesses and such businesses are
owned by different sellers, we will need for each of such sellers to agree that
our purchase of its business is contingent on the simultaneous closings of the
other acquisitions, which may make it more difficult for us, and delay our
ability, to complete the business combination. With multiple acquisitions, we
could also face additional risks, including additional burdens and costs with
respect to possible multiple negotiations and due diligence investigations (if
there are multiple sellers) and the additional risks associated with the
subsequent assimilation of the operations and services or products of the
acquired companies in a single operating business.
Limited
ability to evaluate the target business’ management
Although
we intend to scrutinize the management of a prospective target business when
evaluating the desirability of effecting a business combination, we cannot
assure you that our assessment of the target business’ management will prove to
be correct. In addition, we cannot assure you that the future management will
have the necessary skills, qualifications or abilities to manage a public
company. Furthermore, the future role of our officers and directors, if any, in
the target business following a business combination cannot presently be stated
with any certainty. While it is possible that some of our key personnel, will
remain in a senior management or advisory position with us following a business
combination, it is unlikely that they will devote their full time efforts to our
affairs subsequent to a business combination. Moreover, they would only be able
to remain with the company after the consummation of a business combination if
they are able to negotiate employment or consulting agreements in connection
with the business combination. Such negotiations would take place simultaneously
with the negotiation of the business combination and could provide for them to
receive compensation in the form of cash payments and/or our securities for
services they would render to the company after the consummation of the business
combination. While the personal and financial interests of our key personnel may
influence their motivation in identifying and selecting a target business, their
ability to remain with the company after the consummation of a business
combination will not be the determining factor in our decision as to whether or
not we will proceed with any potential business combination. Additionally, we
cannot assure you that our officers and directors will have significant
experience or knowledge relating to the operations of the particular target
business.
35
Following
a business combination, we may seek to recruit additional managers to supplement
the incumbent management of the target business. We cannot assure you that we
will have the ability to recruit additional managers, or that any such
additional managers we do recruit will have the requisite skills, knowledge or
experience necessary to enhance the incumbent management.
Opportunity
for stockholder approval of business combination
Prior to
the completion of a business combination, we will submit the transaction to our
stockholders for approval, even if the nature of the acquisition is such as
would not ordinarily require stockholder approval under applicable state law. In
connection with any such transaction, we will also submit to our stockholders
for approval a proposal to amend our amended and restated certificate of
incorporation to provide for our corporate existence to continue perpetually
following the consummation of such business combination. Any vote to extend our
corporate life to continue perpetually following the consummation of a business
combination will be taken only if the business combination is approved. We will
only consummate a business combination if stockholders vote both in favor of
such business combination and our amendment to extend our corporate
existence.
In
connection with seeking stockholder approval of a business combination, we will
furnish our stockholders with proxy solicitation materials prepared in
accordance with the Securities Exchange Act of 1934, as amended, which, among
other matters, will include a description of the operations of the target
business and audited historical financial statements of the
business.
In
connection with the vote required for any business combination, all of our
existing stockholders, including all of our officers and directors, have agreed
to vote all of the shares of common stock owned by them in the same manner as
the majority of the shares of common stock voted by the public stockholders. We
will proceed with the business combination only if a majority of the shares of
common stock voted by the public stockholders are voted in favor of the business
combination and public stockholders owning less than 30% of the shares sold in
this offering both exercise their conversion rights and vote against the
business combination.
Conversion
rights
At the
time we seek stockholder approval of any business combination, we will offer
each public stockholder the right to have such stockholder’s shares of common
stock converted to cash if the stockholder votes against the business
combination and the business combination is approved and completed. Our existing
stockholders will not have such conversion rights with respect to any shares of
common stock owned by them, directly or indirectly, whether included in or
underlying their initial shares or purchased by them in this offering or in the
aftermarket. The actual per-share conversion price will be equal to the amount
in the trust account, inclusive of any interest (calculated as of two business
days prior to the consummation of the proposed business combination), net
of working capital up to $[______] and taxes payable (calculated as of the
record date for determination of stockholders entitled to vote on a proposed
business combination), divided by the number of shares sold in this offering.
Without taking into account any interest earned on the trust account, the
initial per-share conversion price would be $6.80.
An
eligible stockholder may request conversion at any time after the mailing to our
stockholders of the proxy statement and prior to the vote taken with respect to
a proposed business combination at a meeting held for that purpose, but the
request will not be granted unless the stockholder votes against the business
combination and the business combination is approved and completed.
Additionally, we may require public stockholders, whether they are a record
holder or hold their shares in “street name,” to either tender their
certificates to our transfer agent at any time through the vote on the business
combination or to deliver their shares to the transfer agent electronically
using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System,
at the holder’s option. The proxy solicitation materials that we will furnish to
stockholders in connection with the vote for any proposed business combination
will indicate whether we are requiring stockholders to satisfy such
certification and delivery requirements. Accordingly, a stockholder would have
from the time we send out our proxy statement through the vote on the business
combination to tender his shares if he wishes to seek to exercise his conversion
rights. This time period varies depending on the specific facts of each
transaction. However, as the delivery process can be accomplished by the
stockholder, whether or not he is a record holder or his shares are held in
“street name,” in a matter of hours by simply contacting the transfer agent or
his broker and requesting delivery of his shares through the DWAC System, we
believe this time period is sufficient for an average investor. However, because
we do not have any control over this process, it may take significantly longer
than we anticipated. Accordingly, we will only require stockholders to deliver
their certificate prior to the vote if we give stockholders at least two weeks
between the mailing of the proxy solicitation materials and the meeting
date.
36
Traditionally,
in order to perfect conversion rights in connection with a blank check company’s
business combination, a holder could simply vote against a proposed business
combination and check a box on the proxy card indicating such holder was seeking
to convert. After the business combination was approved, the company would
contact such stockholder to arrange for him to deliver his certificate to verify
ownership. As a result, the stockholder then had an “option window” after the
consummation of the business combination during which he could monitor the price
of the stock in the market. If the price rose above the conversion price, he
could sell his shares in the open market before actually delivering his shares
to the company for cancellation. Thus, the conversion right, to which
stockholders were aware they needed to commit before the stockholder meeting,
would become a continuing right surviving past the consummation of the business
combination until the converting holder delivered his certificate to us for
conversion at the conversion price. The requirement for physical or electronic
delivery prior to the meeting ensures that a converting holder’s election to
convert is irrevocable once the business combination is approved. There is a
nominal cost associated with the above-referenced tendering process and the act
of certificating the shares or delivering them through the DWAC system. The
transfer agent will typically charge the tendering broker $35 per transaction
and it would be up to the broker whether or not to pass this cost on to the
converting holder. However, this fee would be incurred regardless of whether or
not we require holders seeking to exercise conversion rights to tender their
shares prior to the meeting — the need to deliver shares is a
requirement of conversion regardless of the timing of when such delivery must be
effectuated. However, if a proposed business combination is ultimately rejected
and we are unable to complete another business combination, such fee would have
been incurred unnecessarily.
Any
request for conversion, once made, may be withdrawn at any time up to the vote
taken with respect to the proposed business combination. Furthermore, if a
stockholder delivered his certificate for conversion and subsequently decided
prior to the meeting not to elect conversion, he may simply request that the
transfer agent return the certificate (physically or electronically). It is
anticipated that the funds to be distributed to stockholders entitled to convert
their shares who elect conversion will be distributed promptly after completion
of a business combination. Public stockholders who convert their stock into
their share of the trust account still have the right to exercise any warrants
they still hold.
If a vote
on our initial business combination is held and the business combination is not
approved, we may continue to try to consummate a business combination with an
alternate target until [__________], 2012 [24 months from the date of this
prospectus]. If the initial business combination is not approved or
completed for any reason, then public stockholders voting against our initial
business combination who exercised their conversion rights would not be entitled
to convert their shares of common stock into a pro rata share of the aggregate
amount then on deposit in the trust account. In such case, if we have required
public stockholders to tender their certificates prior to the meeting, we will
promptly return such certificates to the tendering public stockholder. Public
stockholders would be entitled to receive their pro rata share of the aggregate
amount on deposit in the trust account only in the event that the initial
business combination they voted against was duly approved and subsequently
completed, or in connection with our liquidation.
We will
not complete any business combination if public stockholders owning 30% or more
of the shares sold in this offering both exercise their conversion rights and
vote against the business combination. Accordingly, it is our understanding and
intention in every case to structure and consummate a business combination in
which public stockholders owning up to approximately 29.99% of the shares sold
in this offering may exercise their conversion rights and the business
combination will still go forward.
Liquidation
if no business combination
Our
amended and restated certificate of incorporation provides that we will continue
in existence only until [__________], 2012 [24 months from the date of this
prospectus]. This provision may not be amended except in connection with
the consummation of a business combination. If we have not completed a business
combination by such date, our corporate existence will cease except for the
purposes of winding up our affairs and liquidating, pursuant to Section 278 of
the Delaware General Corporation Law. This has the same effect as if our board
of directors and stockholders had formally voted to approve our dissolution
pursuant to Section 275 of the Delaware General Corporation Law. Accordingly,
limiting our corporate existence to a specified date as permitted by Section
102(b)(5) of the Delaware General Corporation Law removes the necessity to
comply with the formal procedures set forth in Section 275 (which would have
required our board of directors and stockholders to formally vote to approve our
dissolution and liquidation and to have filed a certificate of dissolution with
the Delaware Secretary of State). We view this provision terminating our
corporate existence by [_________], 2012 [24 months from the date of this
prospectus] as an obligation to our stockholders and will not take any
action to amend or waive this provision to allow us to exist for a longer period
of time except in connection with the consummation of a business
combination.
If we are
unable to complete a business combination by [_________], 2012 [24 months from the date of this
prospectus], we will distribute to all of our public stockholders, in
proportion to their respective equity interests, an aggregate sum equal to the
amount in the trust account, inclusive of any interest, plus any remaining net
assets (subject to our obligations under Delaware law to provide for claims of
creditors as described below). We anticipate notifying the trustee of the trust
account to begin liquidating such assets promptly after such date and anticipate
it will take no more than 10 business days to effectuate such distribution. Our
initial stockholders have waived their rights to participate in any liquidation
distribution with respect to their initial shares. There will be no distribution
from the trust account with respect to our warrants, which will expire
worthless. We will pay the costs of liquidation from our remaining assets
outside of the trust fund.
37
If we
were to expend all of the net proceeds of this offering, other than the proceeds
deposited in the trust account, and without taking into account interest, if
any, earned on the trust account, the initial per-share liquidation price would
be $6.80. The proceeds deposited in the trust account could, however, become
subject to the claims of our creditors (which could include vendors and service
providers we have engaged to assist us in any way in connection with our search
for a target business and that are owed money by us, as well as target
businesses themselves) which could have higher priority than the claims of our
public stockholders. Accordingly, the actual per-share liquidation price
could be less than $6.80, plus interest, due to claims of creditors.
Additionally, if we are forced to file a bankruptcy case or an involuntary
bankruptcy case is filed against us which is not dismissed, the proceeds held in
the trust account could be subject to applicable bankruptcy law, and may be
included in our bankruptcy estate and subject to the claims of third parties
with priority over the claims of our stockholders. To the extent any bankruptcy
claims deplete the trust account, we cannot assure you we will be able to return
to our public stockholders at least $6.80 per share.
Our
public stockholders will be entitled to receive funds from the trust account
only in the event of the expiration of our corporate existence and our
liquidation or if they seek to convert their respective shares into cash upon a
business combination which the stockholder voted against and which is completed
by us. In no other circumstances will a stockholder have any right or interest
of any kind to or in the trust account.
Under the
Delaware General Corporation Law, stockholders may be held liable for claims by
third parties against a corporation to the extent of distributions received by
them in a dissolution. If the corporation complies with certain procedures set
forth in Section 280 of the Delaware General Corporation Law intended to ensure
that it makes reasonable provision for all claims against it, including a 60-day
notice period during which any third-party claims can be brought against the
corporation, a 90-day period during which the corporation may reject any claims
brought, and an additional 150-day waiting period before any liquidating
distributions are made to stockholders, any liability of stockholders with
respect to a liquidating distribution is limited to the lesser of such
stockholder’s pro rata share of the claim or the amount distributed to the
stockholder, and any liability of the stockholder would be barred after the
third anniversary of the dissolution. However, as stated above, it is our
intention to make liquidating distributions to our stockholders as soon as
reasonably possible after [__], 2012 [24 months from the date of this
prospectus] and, therefore, we do not intend to comply with those
procedures. As such, our stockholders could potentially be liable for any claims
to the extent of distributions received by them (but no more) and any liability
of our stockholders may extend well beyond the third anniversary of such date.
Because we will not be complying with Section 280, Section 281(b) of the
Delaware General Corporation Law requires us to adopt a plan that will provide
for our payment, based on facts known to us at such time, of (i) all existing
claims, (ii) all pending claims and (iii) all claims that may be potentially
brought against us within the subsequent 10 years. Accordingly, we would be
required to provide for any claims of creditors known to us at that time or
those that we believe could be potentially brought against us within the
subsequent 10 years prior to our distributing the funds in the trust account to
our public stockholders. However, because we are a blank check company, rather
than an operating company, and our operations will be limited to searching for
prospective target businesses to acquire, the only likely claims to arise would
be from our vendors and service providers (such as accountants, lawyers,
investment bankers, etc.) and potential target businesses. As described above,
pursuant to the obligation contained in our underwriting agreement, we will seek
to have all vendors, service providers and prospective target businesses execute
agreements with us waiving any right, title, interest or claim of any kind they
may have in or to any monies held in the trust account. As a result, the claims
that could be made against us will be limited, thereby lessening the likelihood
that any claim would result in any liability extending to the trust. We
therefore believe that any necessary provision for creditors will be reduced and
should not have a significant impact on our ability to distribute the funds in
the trust account to our public stockholders. Nevertheless, we cannot assure you
of this fact as there is no guarantee that vendors, service providers and
prospective target businesses will execute such agreements. Nor is there any
guarantee that, even if they execute such agreements with us, they will not seek
recourse against the trust account. A court could also conclude that such
agreements are not legally enforceable. As a result, if we liquidate, the
per-share distribution from the trust account could be less than $6.80 due to
claims or potential claims of creditors.
If we are
forced to file a bankruptcy case or an involuntary bankruptcy case is filed
against us which is not dismissed, any distributions received by stockholders
could be viewed under applicable debtor/creditor and/or bankruptcy laws as
either a “preferential transfer” or a “fraudulent conveyance.” As a result, a
bankruptcy court could seek to recover all amounts received by our stockholders.
Furthermore, because we intend to distribute the proceeds held in the trust
account to our public stockholders promptly after [__________], 2012 [24 months from the date of this
prospectus], this may be viewed or interpreted as giving preference to
our public stockholders over any potential creditors with respect to access to
or distributions from our assets. Furthermore, our board may be viewed as having
breached their fiduciary duties to our creditors and/or may have acted in bad
faith, and thereby exposing itself and our company to claims of punitive
damages, by paying public stockholders from the trust account prior to
addressing the claims of creditors. We cannot assure you that claims will not be
brought against us for these reasons
38
Competition
In
identifying, evaluating and selecting a target business, we may encounter
intense competition from other entities having a business objective similar to
ours. Many of these entities are well established and have extensive experience
identifying and effecting business combinations directly or through affiliates.
Many of these competitors possess greater technical, human and other resources
than us and our financial resources will be relatively limited when contrasted
with those of many of these competitors. While we believe there may be numerous
potential target businesses that we could acquire with the net proceeds of this
offering, our ability to compete in acquiring certain sizable target businesses
will be limited by our available financial resources. This inherent competitive
limitation gives others an advantage in pursuing the acquisition of a target
business. Further, the following may not be viewed favorably by certain target
businesses:
|
•
|
our
obligation to seek stockholder approval of a business combination may
delay the completion of a
transaction;
|
|
•
|
our
obligation to convert into cash shares of common stock held by our public
stockholders to such holders that both vote against the business
combination and exercise their conversion rights may reduce the resources
available to us for a business combination;
and
|
|
•
|
our
outstanding warrants, and the potential future dilution they
represent.
|
Any of
these factors may place us at a competitive disadvantage in successfully
negotiating a business combination. Our management believes, however, that our
status as a public entity and potential access to the United States public
equity markets may give us a competitive advantage over privately-held entities
having a similar business objective as ours in acquiring a target business with
significant growth potential on favorable terms.
If we
succeed in effecting a business combination, there will be, in all likelihood,
intense competition from competitors of the target business. We cannot assure
you that, subsequent to a business combination, we will have the resources or
ability to compete effectively.
Facilities
We
maintain our principal executive offices at 15 Broad Street, Suite 2624, New
York, New York 10005. The cost for this space is included in the
[$7,500] per-month fee [__________] will charge us for general and
administrative services commencing on the effective date of this prospectus
pursuant to a letter agreement between us and [_________]. We believe, based on
rents and fees for similar services in the New York metropolitan area, that the
fee charged by [___________] is at least as favorable as we could have obtained
from an unaffiliated person. We consider our current office space, combined with
the other office space otherwise available to our executive officers, adequate
for our current operations.
Employees
We have
three executive officers. These individuals are not obligated to devote any
specific number of hours to our matters and intend to devote only as much time
as they deem necessary to our affairs. The amount of time they will devote in
any time period will vary based on whether a target business has been selected
for the business combination and the stage of the business combination process
the company is in. Accordingly, once management locates a suitable target
business to acquire, they will spend more time investigating such target
business and negotiating and processing the business combination (and
consequently spend more time on our affairs) than they would prior to locating a
suitable target business. We do not intend to have any full time employees
prior to the consummation of a business combination.
Periodic
Reporting and Audited Financial Statements
On or
about the date on which the SEC declares effective the registration statement,
we will register our units, common stock and warrants under the Securities
Exchange Act of 1934, and thereafter will have reporting obligations thereunder,
including the requirement that we file annual and quarterly reports with the
SEC. In accordance with the requirements of the Securities Exchange Act of 1934,
our annual reports will contain financial statements audited and reported on by
our independent registered public accounting firm.
We will
not acquire a target business if audited financial statements based on United
States generally accepted accounting principles cannot be obtained for the
target business. Additionally, our management will provide stockholders with
audited financial statements, prepared in accordance with generally accepted
accounting principles, of the prospective businesses as part of the proxy
solicitation materials sent to stockholders to assist them in assessing a
business combination. Our management believes that the requirement of having
available audited financial statements for the target businesses will not
materially limit the pool of potential target businesses available for
acquisition.
39
Comparison
to Offerings of Blank Check Companies
The
following table compares and contrasts the terms of our offering and the terms
of an offering of blank check companies under Rule 419 promulgated by the SEC
assuming that the gross proceeds, underwriting discounts and underwriting
expenses for the Rule 419 offering are the same as this offering and that the
underwriters that we select will not exercise their over-allotment option. None
of the terms of a Rule 419 offering will apply to this offering.
Terms of Our Offering
|
Terms Under a Rule 419
Offering
|
|||
Escrow
of offering proceeds
|
$12,750,000
of the net offering proceeds will be deposited into a trust account at
[BANK], maintained by [TRANSFER AGENT], acting as trustee.
|
$[______]of
the offering proceeds would be required to be deposited into either an
escrow account with an insured depositary institution or in a separate
bank account established by a broker-dealer in which the broker-dealer
acts as trustee for persons having the beneficial interests in the
account.
|
||
Investment
of net proceeds
|
The
$12,750,000 of net offering proceeds held in trust will only be invested
in United States “government securities” within the meaning of Section
2(a)(16) of the Investment Company Act of 1940 with 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.
|
Proceeds
could be invested only in specified securities such as a money market fund
meeting conditions of the Investment Company Act of 1940 or in securities
that are direct obligations of, or obligations guaranteed as to principal
or interest by, the United States.
|
||
Limitation
on fair value or net assets of target business
|
The
initial target business that we acquire must have a fair market value
equal to at least 80% of our net assets at the time of such
acquisition.
|
We
would be restricted from acquiring a target business unless the fair value
of such business or net assets to be acquired represented at least 80% of
the maximum offering proceeds.
|
||
Trading
of securities issued
|
The
units may commence trading on or promptly after the date of this
prospectus. The common stock and warrants comprising the units will begin
to trade separately on the 90th day after the date of this prospectus
unless [UNDERWRITER] informs us of its decision to allow earlier separate
trading (based upon its assessment of the relative strengths of the
securities markets and small capitalization companies in general, and the
trading pattern of, and demand for, our securities in particular),
provided we have filed with the SEC a Current Report on Form 8-K, which
includes an audited balance sheet reflecting our receipt of the proceeds
of this offering, including any proceeds we receive from the exercise of
the over-allotment option, if such option is exercised prior to the filing
of the Current Report on Form 8-K. If the over-allotment option is
exercised after our initial filing of a Form 8-K, we will file an
amendment to the Form 8-K to provide updated financial information to
reflect the exercise of the over-allotment option. We will also include in
this Form 8-K, an amendment thereto, or in a subsequent Form 8-K,
information indicating if [UNDERWRITER] has allowed separate trading of
the common stock and warrants prior to the 90
th day after the date of this prospectus.
|
No
trading of the units or the underlying common stock and warrants would be
permitted until the completion of a business combination. During this
period, the securities would be held in the escrow or trust
account.
|
40
Exercise
of the warrants
|
The
warrants cannot be exercised until the later of the completion of a
business combination and one year from the date of this prospectus and,
accordingly, will be exercised only after the trust account has been
terminated and distributed.
|
The
warrants could be exercised prior to the completion of a business
combination, but securities received and cash paid in connection with the
exercise would be deposited in the escrow or trust
account.
|
||
Election
to remain an investor
|
We
will give our stockholders the opportunity to vote on the business
combination. In connection with seeking stockholder approval, we will send
each stockholder a proxy statement containing information required by the
SEC. A stockholder following the procedures described in this prospectus
is given the right to convert his or her shares into his or her pro rata
share of the trust account. However, a stockholder who does not follow
these procedures or a stockholder who does not take any action would not
be entitled to the return of any funds.
|
A
prospectus containing information required by the SEC would be sent to
each investor. Each investor would be given the opportunity to notify the
company, in writing, within a period of no less than 20 business days and
no more than 45 business days from the effective date of the
post-effective amendment, to decide whether he or she elects to remain a
stockholder of the company or require the return of his or her investment.
If the company has not received the notification by the end of the 45
th business day, funds and interest or dividends, if any, held
in the trust or escrow account would automatically be returned to the
stockholder. Unless a sufficient number of investors elect to remain
investors, all of the deposited funds in the escrow account must be
returned to all investors and none of the securities will be
issued.
|
||
Business
combination deadline
|
Pursuant
to our amended and restated certificate of incorporation, our corporate
existence will cease 24 months from the date of this prospectus except for
the purposes of winding up our affairs and we will liquidate. However, if
we complete a business combination within this time period, we will amend
this provision to allow for our perpetual existence following such
business combination.
|
If
an acquisition has not been consummated within 18 months after the
effective date of the initial registration statement, funds held in the
trust or escrow account would be returned to
investors.
|
41
Interest
earned on the funds in the trust account
|
There
can be released to us, from time to time, interest earned on the funds in
the trust account of up to an aggregate of $[________] to fund expenses
related to investigating and selecting a target business and our other
working capital requirements, as well as any amounts that we may need to
pay our tax obligations. The remaining interest earned on the funds in the
trust account will not be released until the earlier of the completion of
a business combination and our liquidation upon failure to effect a
business combination within the allotted time.
|
All
interest earned on the funds in the trust account will be held in trust
for the benefit of public stockholders until the earlier of the completion
of a business combination and our liquidation upon failure to effect a
business combination within the allotted time.
|
||
Release
of funds
|
Except
for (i) up to $[______] we may need to fund expenses related to
investigating and selecting a target business and our other working
capital requirements and (ii) any amounts that we may need to pay our tax
obligations that may be released to us from the interest earned on the
trust account balance, the proceeds held in the trust account will not be
released until the earlier of the completion of a business combination and
our liquidation upon failure to effect a business combination within the
allotted time.
|
The
proceeds held in the escrow account would not be released until the
earlier of the completion of a business combination or the failure to
effect a business combination within the allotted
time.
|
42
MANAGEMENT
Directors
and Executive Officers
Our
current directors and executive officers are as follows:
Name
|
Age
|
Position
|
||
Thomas
J. Clarke, Jr.
|
53
|
Chairman,
Chief Executive Officer, President and Director
|
||
James
Altucher
|
42
|
Chief
Operating Officer and Director
|
||
Daniel
Kelly
|
35
|
Chief
Financial Officer and
Director
|
Thomas J.
Clarke, Jr. has
served as our Chairman, Chief Executive Officer, President and a member of our
Board of Directors since our inception. Mr. Clarke is a senior
financial information and digital media executive with experience in both U.S.
and international markets. From October 1999 to March 2009, Mr.
Clarke was the CEO of TheStreet.com, Inc. (NasdaqGM: TSCM). He also
served as Chairman of TheStreet.com from 2000 to 2007. From 1998 to
1999, Mr. Clarke served as President of Thomson Financial Investor
Relations. From 1984 to 1998, he held various executive positions at
Technimetrics, Inc. a global information company. Mr. Clarke was the
principal who oversaw the 1998 sale of Technimetrics from Knight-Ridder, Inc. to
The Thomson Corporation. Mr. Clarke currently serves on the boards of
LiveDeal, Inc. (NasdaqCM: LIVE), a provider of Internet directory, classified
and audience acquisition services to small businesses, a position he has held
since November 2007, and Standing Stone, Inc., developers of disease state
management solutions, a position he has held since 1999. In addition,
he serves as a business information advisor to Plum Holdings L.P., an
institutional venture capital firm specializing in early stage investments in
media companies. Mr. Clarke also is a mentor to students at Columbia
University involved in the Executive Masters Program focusing on
technology. Mr. Clarke has an MBA from Hofstra University and a BS
from St. Johns University.
James Altucher
has served as our Chief Operating Officer and a member of our Board of
Directors since our inception. Since November 2004, Mr. Altucher has been a
managing director at Formula Capital, an alternative asset management
firm. In July 2001, he co-founded Stockpickr.com, a social networking
site for investors, which was sold to TheStreet.com, Inc., a financial
information and digital media company, in April 2007. From April 2007
until April 2009, Mr. Altucher was a Vice President of
TheStreet.com. He was also the founder of a web services firm, Reset,
Inc., which he sold in 1998, at which time he became a partner at (212)
Ventures, Inc., a New York-based venture capital firm funded by Investcorp. Mr.
Altucher also has served as Director, Chairman and President of Beauty Brands
Group, Inc. (OTCBB: “BBGR”) since May 2007.
Mr.
Altucher has written four books on investing: Trade Like a Hedge Fund: 20
Successful Uncorrelated Strategies & Techniques to Winning Profits
(2004), Trade Like
Warren Buffett (2005), SuperCa$h: The New Hedge Fund
Capitalism (2006), and The Forever Portfolio: How to Pick
Stocks that You Can Hold for the Long Run (2008) and is currently at work
on a fifth book, tentatively titled 25 Ways the World Could Be Destroyed
and How to Profit from It. He currently writes for The Wall Street Journal and
AOL Finance. He has written over 200 columns for The Financial Times and also
has written articles for TheStreet.com, Forbes, Yahoo Finance, and
Fidelity.com. Mr. Altucher regularly appears on CNBC, Fox News, Fox
Business, and CNN Radio, and is also in his spare time a US-ranked chess
master. Mr. Altucher graduated from Cornell University with a B.A. in
Computer Science and pursued graduate work in computer science at Carnegie
Mellon University.
Daniel
Kelly has served as our Chief Financial Officer and a member of our Board
of Directors since our inception. Since November 2004, Mr. Kelly has
been a managing director at Formula Capital, an alternative asset management
firm. In July 2001, Mr. Kelly co-founded Stockpickr.com, a social
networking site for investors, which was sold to TheStreet.com, Inc., an
Internet media company, in April 2007. From April 2007 until April
2009, Mr. Kelly was a Vice President of TheStreet.com. Previously,
Mr. Kelly was a Principal with (212) Ventures, Inc., a New York-based venture
capital firm funded by Investcorp, where he focused primarily on wireless
services and infrastructure software investments. Prior to (212)
Ventures, Mr. Kelly was an Associate with Bruckmann, Rosser, Sherrill & Co.,
L.L.C., $1.2 billion private equity firm specializing in management buyouts and
recapitalizations of high-quality, middle-market companies. Mr. Kelly began his
career as an Analyst with Credit Suisse First Boston in its Leveraged Finance
Group, where he primarily focused on analyzing and executing various financing
alternatives including debt, equity and hybrid securities for leveraged buyouts,
equity offerings and principal investments across several industries. Mr. Kelly
has served as Director and Chief Financial Officer of Beauty Brands Group, Inc.
(OTCBB: “BBGR”) since May 2007. Mr. Kelly graduated magna cum laude
from Georgetown University with a B.S. in Finance.
43
Executive
Compensation
No
executive officer has received any cash compensation for services rendered to
us. No compensation of any kind, including finders, consulting or other similar
fees, will be paid to any of our existing stockholders, including our directors,
or any of their respective affiliates, prior to, or for any services they render
in order to effectuate, the consummation of a business combination. However,
such individuals will be reimbursed for any out-of-pocket expenses incurred in
connection with activities on our behalf such as identifying potential target
businesses and performing due diligence on suitable business combinations. There
is no limit on the amount of these out-of-pocket expenses and there will be no
review of the reasonableness of the expenses by anyone other than our board of
directors, which includes persons who may seek reimbursement, or a court of
competent jurisdiction if such reimbursement is challenged. Because of the
foregoing, we will generally not have the benefit of independent directors
examining the propriety of expenses incurred on our behalf and subject to
reimbursement.
Conflicts
of Interest
Potential
investors should be aware of the following potential conflicts of
interest:
|
•
|
None
of our officers and directors is required to commit their full time to our
affairs and, accordingly, they may have conflicts of interest in
allocating their time among various business
activities.
|
|
•
|
In
the course of their other business activities, our officers and directors
may become aware of investment and business opportunities which may be
appropriate for presentation to our company as well as the other entities
with which they are affiliated. Our management may have conflicts of
interest in determining to which entity a particular business opportunity
should be presented.
|
|
•
|
Our
officers and directors are now, and may in the future become, affiliated
with entities, including other blank check companies, engaged in business
activities similar to those intended to be conducted by our
company.
|
|
•
|
The
initial shares owned by our officers and directors will be released from
escrow only if a business combination is successfully completed, and our
officers and directors may own warrants, which will expire worthless if a
business combination is not consummated. Additionally, our directors will
not receive liquidation distributions with respect to any of their initial
shares. For the foregoing reasons, our board may have a conflict of
interest in determining whether a particular target business is
appropriate to effect a business combination
with.
|
|
•
|
Our
directors and officers may purchase shares of common stock as part of this
offering or in the open market. If they did, they would be entitled to
vote such shares as they choose on a proposal to approve a business
combination.
|
In
general, officers and directors of a corporation incorporated under the laws of
the State of Delaware are required to present business opportunities to a
corporation if:
|
•
|
the
corporation could financially undertake the
opportunity;
|
|
•
|
the
opportunity is within the corporation’s line of business;
and
|
|
•
|
it
would not be fair to the corporation and its stockholders for the
opportunity not to be brought to the attention of the
corporation.
|
Accordingly,
as a result of multiple business affiliations, our officers and directors may
have similar legal obligations relating to presenting business opportunities
meeting the above-listed criteria to multiple entities. In addition, conflicts
of interest may arise when our board evaluates a particular business opportunity
with respect to the above-listed criteria. We cannot assure you that any of the
above mentioned conflicts will be resolved in our favor.
In order
to minimize potential conflicts of interest which may arise from multiple
corporate affiliations, each of our officers has agreed, until the earliest of a
business combination, our liquidation or such time as he or she ceases to be an
officer, to present to our company for our consideration, prior to presentation
to any other entity, any suitable business opportunity which may reasonably be
required to be presented to us, subject to any pre-existing fiduciary or
contractual obligations he might have.
In
connection with the vote required for any business combination, all of our
existing stockholders, including all of our officers and directors, have agreed
to vote their respective initial shares in accordance with the vote of the
public stockholders owning a majority of the shares of our common stock sold in
this offering. [In addition, they have agreed to waive their respective rights
to participate in any liquidation distribution with respect to their initial
shares. Any common stock acquired by existing stockholders in the offering or
aftermarket will be considered part of the holdings of the public stockholders.
Except with respect to the conversion rights afforded to public stockholders,
these existing stockholders will have the same rights as other public
stockholders with respect to such shares, including voting rights in connection
with a potential business combination. Accordingly, they may vote such shares on
a proposed business combination any way they choose.]
44
To
further minimize potential conflicts of interest, we have agreed not to
consummate a business combination with an entity that is affiliated with any of
our existing stockholders unless we obtain an opinion from an independent
investment banking firm that the business combination is fair to our
unaffiliated stockholders from a financial point of view. We currently do not
anticipate entering into a business combination with an entity affiliated with
any of our existing stockholders, officers or directors. Furthermore, in no
event will any of our existing officers, directors, stockholders or advisors, or
any entity with which they are affiliated, be paid any finder’s fee, consulting
fee or other compensation prior to, or for any services they render in order to
effectuate, the consummation of a business combination.
45
PRINCIPAL
STOCKHOLDERS
The
following table sets forth information regarding the beneficial ownership of our
common stock as of April 30, 2010 and as adjusted to reflect the sale of our
common stock included in the units offered by this prospectus (assuming none of
the individuals or entities listed below purchase units offered by this
prospectus), by:
|
·
|
each
person known by us to be the beneficial owner of more than 5% of our
outstanding shares of common stock;
|
|
·
|
each
of our officers and directors; and
|
|
·
|
all
of our officers and directors as a
group.
|
Unless
otherwise indicated, we believe that all persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned by them.
Prior to Offering
|
After Offering(2)
|
|||||||||||||||
Name and Address of Beneficial Owner(1)
|
Amount and Nature of
Beneficial Ownership
|
Approximate
Percentage of
Outstanding
Common Stock
|
Amount and Nature of
Beneficial Ownership
|
Approximate
Percentage of
Outstanding
Common Stock
|
||||||||||||
James
Altucher
|
156,250
|
33.33
|
%
|
156,250
|
6.66
|
%
|
||||||||||
Daniel
Kelly
|
156,250
|
33.33
|
%
|
156,250
|
6.66
|
%
|
||||||||||
Thomas
J. Clarke, Jr.
|
156,250
|
33.33
|
%
|
156,250
|
6.66
|
%
|
||||||||||
All
directors and executive officers as a group (three
individuals)
|
468,750
|
100
|
%
|
468,750
|
20
|
%
|
(1)
|
Unless
otherwise indicated, the business address of each of the individuals is 15
Broad Street, Suite 2624, New York, New
York 10005.
|
Immediately
after this offering, our existing stockholders, which include all of our
officers and directors, collectively, will beneficially own 20% of the then
issued and outstanding shares of our common stock (assuming none of them
purchase any units offered by this prospectus). None of our existing
stockholders, officers and directors has indicated to us any intent to purchase
our securities in the offering. Because of the ownership block held by our
existing stockholders, such individuals may be able to effectively exercise
control over all matters requiring approval by our stockholders, including the
election of directors and approval of significant corporate transactions other
than the approval of a business combination.
[If the
underwriters do not exercise all or a portion of the over-allotment option, our
initial stockholders will be required to forfeit up to an aggregate of [______]
shares of common stock. Our initial stockholders will be required to forfeit
only a number of shares necessary to maintain their collective 20% ownership
interest in our common stock after giving effect to the offering and the
exercise, if any, of the underwriters’ over-allotment option.]
All of
the initial shares outstanding prior to the date of this prospectus will be
placed in escrow with [ESCROW AGENT], as escrow agent, until the earliest
of:
|
•
|
one
year after our consummation of a business combination;
|
|
•
|
the
last sales price of our common stock equals or exceeds $12.00 per share
for any 20 trading days within any 30-trading day period commencing after
the consummation of our business combination; or
|
|
•
|
we
consummate a subsequent liquidation, merger, stock exchange or other
similar transaction that results in our stockholders having the right to
exchange their shares of common stock for cash, securities or other
property.
|
During
the escrow period, the holders of these securities will not be able to sell or
transfer their securities except (i) to an entity’s members upon its
liquidation, (ii) to relatives and trusts for estate planning purposes or (iii)
by private sales made at or prior to the consummation of a business combination
at prices no greater than the price at which the shares were originally
purchased, in each case where the transferee agrees to the terms of the escrow
agreement, but will retain all other rights as our stockholders, including,
without limitation, the right to vote their shares of common stock and the right
to receive cash dividends, if declared. If dividends are declared and payable in
shares of common stock, such dividends will also be placed in escrow. If we are
unable to effect a business combination and liquidate, none of our existing
stockholders will receive any portion of the liquidation proceeds with respect
to their initial shares.
46
James
Altucher and Daniel Kelly are our “promoters” as that term is defined under the
Federal securities laws.
47
CERTAIN
TRANSACTIONS
In March
2010, we issued 468,750 shares of our common stock to the individuals set
forth below for an aggregate of $25,000 in cash, for a purchase price of
approximately $0.05 per share, as follows:
Name
|
Number of
Shares
|
Relationship to Us
|
|||
James
Altucher
|
156,250 |
Director and executive officer
|
|||
Daniel
Kelly
|
156,250 |
Director and executive officer
|
|||
Thomas
J. Clarke
|
156,250 |
Director and executive
officer
|
[___], an
affiliate of Messrs. [___], has agreed that, commencing on the effective date of
this prospectus through the acquisition of a target business, it will make
available to us a small amount of office space and certain office and
secretarial services, as we may require from time to time. We have agreed to pay
[___] [$7,500] per month for these services. Messrs. [___] are the [___] of
[___], and, as a result, will benefit from the transaction to the extent of
their interest in [___]. However, this arrangement is solely for our
benefit and is not intended to provide Messrs. [___] compensation in lieu of a
salary. We believe, based on rents and fees for similar services in the New York
metropolitan area, that the fee charged by [___]is at least as
favorable as we could have obtained from an unaffiliated person.
We will
reimburse our officers and directors for any reasonable out-of-pocket business
expenses incurred by them in connection with certain activities on our behalf
such as identifying and investigating possible target businesses and business
combinations. There is no limit on the amount of out-of-pocket expenses
reimbursable by us, which will be reviewed only by our board or a court of
competent jurisdiction if such reimbursement is challenged.
Other
than the [$7,500] per-month administrative fee and any reimbursable
out-of-pocket expenses payable to our officers and directors, no compensation or
fees of any kind, including finder’s fees, consulting fees or other similar
compensation, will be paid to any of our existing stockholders, officers or
directors who owned our common stock prior to this offering, or to any of their
respective affiliates, prior to or with respect to the business combination
(regardless of the type of transaction that it is).
All
ongoing and future transactions between us and any of our officers and directors
or their respective affiliates, including loans by our officers and directors,
will be on terms believed by us to be no less favorable to us than are available
from unaffiliated third parties. Such transactions or loans, including any
forgiveness of loans, will require prior approval by a majority of our
uninterested “independent” directors or the members of our board who do not have
an interest in the transaction, in either case who had access, at our expense,
to our attorneys or independent legal counsel. We will not enter into any such
transaction unless our disinterested “independent” directors determine that the
terms of such transaction are no less favorable to us than those that would be
available to us with respect to such a transaction from unaffiliated third
parties.
48
DESCRIPTION
OF SECURITIES
General
We are
authorized to issue 100,000,000 shares of common stock, par value $.0001, and
1,000,000 shares of preferred stock, par value $.0001. As of the date of this
prospectus, 468,750 shares of common stock are outstanding, held by three
stockholders of record. No shares of preferred stock are currently outstanding.
The following description summarizes the material terms of our
securities.
Units
Each unit
consists of one share of common stock and one warrant. Each warrant entitles the
holder to purchase one share of common stock. The common stock and warrants will
begin to trade separately on the 90
th day after the date of this prospectus unless [UNDERWRITER]
informs us of its decision to allow earlier separate trading (based upon its
assessment of the relative strengths of the securities markets and small
capitalization companies in general and the trading pattern of, and demand for,
our securities in particular), provided that in no event may the common stock
and warrants be traded separately until we have filed with the SEC a Current
Report on Form 8-K which includes an audited balance sheet reflecting our
receipt of the gross proceeds of this offering. We will file a Current Report on
Form 8-K, which includes this audited balance sheet promptly upon the
consummation of this offering. The audited balance sheet will reflect proceeds
we receive from the exercise of the over-allotment option, if the over-allotment
option is exercised prior to the filing of the Form 8-K. If the over-allotment
option is exercised after our initial filing of a Form 8-K, we will file an
amendment to the Form 8-K to provide updated financial information to reflect
the exercise of the over-allotment option. We will also include in this Form
8-K, an amendment thereto, or in a subsequent Form 8-K information indicating if
[UNDERWRITER] has allowed separate trading of the common stock and warrants
prior to the 90th day
after the date of this prospectus.
Common
Stock
Our
stockholders of record are entitled to one vote for each share held on all
matters to be voted on by stockholders. In connection with the vote required for
any business combination, all of our existing stock-holders, including all of
our officers and directors, have agreed to vote their respective shares of
common stock owned by them immediately prior to this offering in accordance with
the majority of the shares of our common stock voted by our public stockholders.
This voting arrangement shall not apply to shares included in units purchased in
this offering or purchased following this offering in the open market by any of
our existing stockholders, officers and directors. Additionally, our existing
stockholders, officers and directors will vote all of their shares in any manner
they determine, in their sole discretion, with respect to any other items that
come before a vote of our stockholders.
We will
proceed with the business combination only if a majority of the shares of common
stock voted by the public stockholders are voted in favor of the business
combination and public stockholders owning less than 30% of the shares sold in
this offering both exercise their conversion rights discussed below and vote
against the business combination.
There is
no cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares eligible to vote for the
election of directors can elect all of the directors.
Pursuant
to our amended and restated certificate of incorporation, if we do not
consummate a business combination by [___], 2012 [24 months from the date of this
prospectus], our corporate existence will cease except for the purposes
of winding up our affairs and liquidating. If we are forced to liquidate prior
to a business combination, our public stockholders are entitled to share ratably
in the trust fund, including any interest other than that which was previously
released to us to fund working capital requirements, and any net assets
remaining available for distribution to them after payment of liabilities. Our
existing stockholders have waived their rights to participate in any liquidation
distribution with respect to their initial shares.
Our
stockholders have no conversion, preemptive or other subscription rights and
there are no sinking fund or redemption provisions applicable to the common
stock, except that public stockholders have the right to have their shares of
common stock converted to cash equal to their pro rata share of the trust
account if they vote against the business combination and the business
combination is approved and completed. Public stockholders who convert their
stock into their share of the trust account still have the right to exercise the
warrants that they received as part of the units.
49
Preferred
Stock
As of the
consummation of this offering, our amended and restated certificate of
incorporation will authorize the issuance of 1,000,000 shares of blank check
preferred stock with such designation, rights and preferences as may be
determined from time to time by our board of directors. No shares of preferred
stock are being issued or registered in this offering. Accordingly, our board of
directors is empowered, without stockholder approval, to issue preferred stock
with dividend, liquidation, conversion, voting or other rights, which could
adversely affect the voting power or other rights of the holders of common
stock. However, the underwriting agreement prohibits us, prior to a business
combination, from issuing preferred stock which participates in any manner in
the proceeds of the trust account, or which votes as a class with the common
stock on a business combination. We may issue some or all of the preferred stock
to effect a business combination. In addition, the preferred stock could be
utilized as a method of discouraging, delaying or preventing a change in control
of us. Although we do not currently intend to issue any shares of preferred
stock, we cannot assure you that we will not do so in the future.
Warrants
No
warrants are currently outstanding. Each warrant entitles the registered holder
to purchase one share of our common stock at a price of $8.00 per share, subject
to adjustment as discussed below, at any time commencing on the later
of:
|
•
|
the
completion of a business combination; and
|
|
•
|
one
year from the date of this
prospectus.
|
However,
the warrants will be exercisable only if a registration statement relating to
the common stock issuable upon exercise of the warrants is effective and
current. The warrants will expire four years from the date of this prospectus at
5:00 p.m., New York City time.
We may
call the warrants for redemption,
|
•
|
in
whole and not in part,
|
|
•
|
at
a price of $.01 per warrant at any time while the warrants are exercisable
(which will occur only if a registration statement relating to the common
stock issuable upon exercise of the warrants is effective and
current),
|
|
•
|
upon
not less than 30 days’ prior written notice of redemption to each warrant
holder, and
|
|
•
|
if,
and only if, the reported last sale price of the common stock equals or
exceeds $15.50 per share, for any 20 trading days within a 30 trading day
period ending on the third business day prior to the notice of redemption
to warrant holders.
|
The right
to exercise will be forfeited unless they are exercised prior to the date
specified in the notice of redemption. On and after the redemption date, a
record holder of a warrant will have no further rights except to receive the
redemption price for such holder’s warrant upon surrender of such
warrant.
The
redemption criteria for our warrants have been established at a price which is
intended to provide warrant holders a reasonable premium to the initial exercise
price and provide a sufficient differential between the then prevailing common
stock price and the warrant exercise price so that if the stock price declines
as a result of our redemption call, the redemption will not cause the stock
price to drop below the exercise price of the warrants.
The
warrants will be issued in registered form under a warrant agreement between
[WARRANT AGENT], as warrant agent, and us.
The
exercise price and number of shares of common stock issuable on exercise of the
warrants may be adjusted in certain circumstances including in the event of a
stock dividend, or our recapitalization, reorganization, merger or
consolidation. However, the warrants will not be adjusted for issuances of
common stock at a price below their respective exercise prices.
The
warrants may be exercised upon surrender of the warrant certificate on or prior
to the expiration date at the offices of the warrant agent, with the exercise
form on the reverse side of the warrant certificate completed and executed as
indicated, accompanied by full payment of the exercise price, by certified or
official bank check payable to us, for the number of warrants being exercised.
The warrant holders do not have the rights or privileges of holders of common
stock and any voting rights until they exercise their warrants and receive
shares of common stock. After the issuance of shares of common stock upon
exercise of the warrants, each holder will be entitled to one vote for each
share held of record on all matters to be voted on by
stockholders.
50
No
warrants will be exercisable and we will not be obligated to issue shares of
common stock unless at the time a holder seeks to exercise such warrant, a
prospectus relating to the common stock issuable upon exercise of the warrants
is current and the common stock has been registered or qualified or deemed to be
exempt under the securities laws of the state of residence of the holder of the
warrants. Under the terms of the warrant agreement, we have agreed to use our
best efforts to meet these conditions and to maintain a current prospectus
relating to the common stock issuable upon exercise of the warrants until the
expiration of the warrants. However, we cannot assure you that we will be able
to do so and, if we do not maintain a current prospectus relating to the common
stock issuable upon exercise of the warrants, holders will be unable to exercise
their warrants and we will not be required to settle any such warrant exercise.
If the prospectus relating to the common stock issuable upon the exercise of the
warrants is not current or if the common stock is not qualified or exempt from
qualification in the jurisdictions in which the holders of the warrants reside,
we will not be required to net cash settle or cash settle the warrant exercise,
the warrants may have no value, the market for the warrants may be limited and
the warrants may expire worthless.
No
fractional shares will be issued upon exercise of the warrants. If, upon
exercise of the warrants, a holder would be entitled to receive a fractional
interest in a share, we will, upon exercise, round up to the nearest whole
number the number of shares of common stock to be issued to the warrant
holder.
Dividends
We have
not paid any cash dividends on our common stock to date and do not intend to pay
cash dividends prior to the completion of a business combination. The payment of
cash dividends in the future will be dependent upon our revenues and
earnings, if any, capital requirements and general financial condition
subsequent to completion of a business combination. T he payment of any
dividends subsequent to a business combination will be within the discretion of
our then board of directors. It is the present intention of our board of
directors to retain all earnings, if any, for use in our business operations
and, accordingly, our board does not anticipate declaring any dividends in the
foreseeable future.
Our
Transfer Agent and Warrant Agent
The
transfer agent for our securities and warrant agent for our warrants is
[TRANSFER AGENT].
Quotation
on Over the Counter Bulletin Board
There is
presently no public market for our units, common stock or warrants. We
anticipate that the units will be quoted on the Over the Counter Bulletin Board
under the symbol [__].U on or promptly after the date of this prospectus. Once
the securities comprising the units begin separate trading, we anticipate that
the common stock and warrants will be quoted on the Over the Counter Bulletin
Board under the symbols [___] and [___].WS, respectively.
Shares
Eligible for Future Sale
Immediately
after this offering, we will have 2,343,750 shares of common stock outstanding,
or [___] shares if the over-allotment option is exercised in full. Of these
shares, the 1,875,000 shares sold in this offering, or [___] shares if the
over-allotment option is exercised in full, will be freely tradable without
restriction or further registration under the Securities Act, except for any
shares purchased by one of our affiliates within the meaning of Rule 144 under
the Securities Act. All of the remaining shares are restricted securities under
Rule 144, in that they were issued in private transactions not involving a
public offering. None of those shares would be eligible for sale under Rule 144
prior to [_______]. However, as described below, the Securities and Exchange
Commission has taken the position that these securities would not be eligible
for transfer under Rule 144. Furthermore, all of the initial shares have been
placed in escrow and will not be transferable for a period of one year following
our consummation of a business combination and will be released prior to that
date only upon a subsequent transaction resulting in our stockholders having the
right to exchange their shares for cash or other securities.
Rule
144
The SEC
adopted amendments to Rule 144 which became effective on February 15, 2008 and
apply to securities acquired both before and after that date. Under these
amendments, a person who has beneficially owned restricted shares of our common
stock or warrants for at least six months would be entitled to sell their
securities provided that (i) such person is not deemed to have been one of our
affiliates at the time of, or at any time during the three months preceding, a
sale and (ii) we are subject to the Exchange Act periodic reporting requirements
for at least three months before the sale.
Persons
who have beneficially owned restricted shares of our common stock or warrants
for at least six months but who are our affiliates at the time of, or at any
time during the three months preceding, a sale would be subject to additional
restrictions, by which such person would be entitled to sell within any
three-month period only a number of securities that does not exceed the greater
of either of the following:
|
·
|
1%
of the total number of shares of our common stock then outstanding, which
will equal 234,375 shares of our common stock immediately after this
offering [or [___] shares of our common stock if the underwriters’ over-
allotment is exercised in full];
or
|
51
|
·
|
the
average weekly trading volume of the shares of our common stock during the
four calendar weeks preceding the filing of a notice on Form 144 with
respect to the sale.
|
Sales
under Rule 144 are also limited by manner of sale provisions, notice
requirements and the availability of current public information about
us.
Restrictions
on the Use of Rule 144 by Shell Companies or Former Shell Companies
Historically,
the SEC has taken the position that Rule 144 is not available for the resale of
securities initially issued by companies that are, or previously were, blank
check companies like us, to their promoters or affiliates despite technical
compliance with the requirements of Rule 144. The SEC has codified and expanded
this position in the amendments discussed above by prohibiting the use of Rule
144 for resale of securities issued by shell companies (other than business
transaction related shell companies) or issuers that have been at any time
previously a shell company. The SEC has provided an important exception to this
prohibition, however, if the following conditions are met:
|
·
|
the
issuer of the securities that was formerly a shell company has ceased to
be a shell company;
|
|
·
|
the
issuer of the securities is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange
Act;
|
|
·
|
the
issuer of the securities has filed all Exchange Act reports and material
required to be filed, as applicable, during the preceding 12 months (or
such shorter period that the issuer was required to file such reports and
materials), other than Form 8-K reports;
and
|
|
·
|
at
least one year has elapsed from the time that the issuer filed current
Form 10-type information with the SEC reflecting its status as an entity
that is not a shell company.
|
As a
result, our sponsor will be able to sell the initial shares and sponsor warrants
pursuant to Rule 144 without registration one year after we have completed our
initial business transaction.
Registration
Rights
Our
sponsor and its permitted transferees will be entitled to registration rights
pursuant to a registration rights agreement to be signed on or before the date
of this prospectus. Our sponsor will be entitled to demand
registration rights and certain “piggy-back” registration rights with
respect to the initial shares commencing one year after the consummation of our
initial business transaction. We will bear the expenses incurred in connection
with the filing of any such registration statements.
52
UNDERWRITING
We are
currently searching for an underwriter who will purchase our units from us on a
firm-commitment basis.
LEGAL
MATTERS
The
validity of the securities offered in this prospectus is being passed upon for
us by Gersten Savage LLP, New York, New York.
EXPERTS
The
financial statements included in this prospectus and in the registration
statement have been audited by MaloneBailey, LLP, independent registered public
accounting firm, as of March 31, 2010 and for the period from inception through
March 31, 2010 as set forth in their report appearing elsewhere in this
prospectus and in the registration statement. The financial statements are
included in reliance upon their report given upon the authority of MaloneBailey,
LLP as experts in auditing and accounting.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We have
filed with the SEC a registration statement on Form S-1, which includes
exhibits, schedules and amendments, under the Securities Act, with respect to
this offering of our securities. Although this prospectus, which forms a part of
the registration statement, contains all material information included in the
registration statement, parts of the registration statement have been omitted as
permitted by rules and regulations of the SEC. We refer you to the registration
statement and its exhibits for further information about us, our securities and
this offering. The registration statement and its exhibits, as well as our other
reports filed with the SEC, can be inspected and copied at the SEC’s public
reference room at 100 F Street, N.E., Washington, D.C. 20549. The public may
obtain information about the operation of the public reference room by calling
the SEC at 1-800-SEC-0330. In addition, the SEC maintains a web site at
http://www.sec.gov, which contains the Form S-1 and other reports, proxy and
information statements and information regarding issuers that file
electronically with the SEC.
53
FORMULA
ACQUISITION CORP.
INDEX
TO FINANCIAL STATEMENTS
Page
|
||
Balance
Sheet as of March 31, 2010
|
F-3
|
|
Statement
of Expenses for the Period from Inception through March 31,
2010
|
F-4
|
|
Statement
of Stockholders’ Equity Period from Inception through March 31,
2010
|
F-5
|
|
Statement
of Cash Flows for the Period from Inception through March 31,
2010
|
F-6
|
|
Notes
to the Financial Statements
|
F-7
|
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The
Board of Directors
Formula
Acquisition Corp.
(a
Development Stage Company)
New York,
NY
We have
audited the accompanying balance sheet of Formula Acquisition Corp. (a
development stage company) as of March 31, 2010 and the related statements of
expenses, stockholders' equity, and cash flows for the period from inception
(March 23, 2010) through March 31, 2010. These financial statements are the
responsibility of Formula Acquisition Corp. Our responsibility is to express an
opinion on these financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform an audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Formula Acquisition Corp as of
March 31, 2010 and the results of its operations and its cash flows for the
period from inception through March 31, 2010 in conformity with accounting
principles generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that Formula
Acquisition Corp. will continue as a going concern. As discussed in Note 2 to
the financial statements, Formula Acquisition Corp. has a net loss, and no cash
which raises substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters also are described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
MALONEBAILEY,
LLP
www.malonebailey.com
Houston,
TX
May 3,
2010
F-2
FORMULA
ACQUISITION CORP.
(a
development stage company)
BALANCE
SHEET
March
31,
|
||||
2010
|
||||
ASSETS
|
||||
Deferred
offering costs
|
$ | 25,000 | ||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||
Total
current liabilities
|
$ | - | ||
Stockholders’
equity:
|
||||
Preferred
stock, $.0001 par value, 1,000,000 shares authorized; 0 shares issued and
outstanding
|
- | |||
Common
stock, $.0001 par value, 100,000,000 shares authorized;468,750 shares
issued and outstanding
|
47 | |||
Additional
paid in capital
|
27,953 | |||
Deficit
accumulated during the development stage
|
(3,000 | ) | ||
Total
stockholders’ equity
|
25,000 | |||
Total
liabilities and stockholders’ equity
|
$ | 25,000 |
See
accompanying notes to financial statements.
F-3
FORMULA
ACQUISITION CORP.
STATEMENT
OF EXPENSES
(a
development stage company)
From
inception of March 23, 2010 to March 31, 2010
.1
|
||||
.2
|
||||
Operating
expenses
|
||||
General
& administrative costs
|
$ | 3,000 | ||
Net
loss
|
$ | (3,000 | ) | |
Basic
and diluted net loss per common share
|
$ | (0.01 | ) | |
Weighted
Average Number Of Common Shares Outstanding
|
468,750 |
See
accompanying notes to financial statements.
F-4
FORMULA
ACQUISITION CORP.
STATEMENT
OF STOCKHOLERS’ EQUITY
(a
development stage company)
From
inception of March 23, 2010 to March 31, 2010
Common
Stock
|
Additional
|
Deficit
accumulated
during
the
|
||||||||||||||||||
Shares
|
Amount
|
Paid
in Capital
|
development
stage
|
Total
|
||||||||||||||||
Founders
Shares for cash
|
468,750 | $ | 47 | $ | 24,953 | $ | 25,000 | |||||||||||||
Contributed
capital
|
3,000 | 3,000 | ||||||||||||||||||
Net
Loss
|
(3,000 | ) | (3,000 | ) | ||||||||||||||||
Balance
at March 31, 2010
|
468,750 | $ | 47 | $ | 27,953 | $ | (3,000 | ) | $ | 25,000 |
See
accompanying notes to financial statements
F-5
FORMULA
ACQUISITION CORP.
STATEMENT
OF CASH FLOWS
(a
development stage company)
From
inception of March 23, 2010 to March 31, 2010
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||
Net
loss
|
$ | (3,000 | ) | |
Changes
in operating assets:
|
||||
Net
cash used in operating activities
|
(3,000 | ) | ||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||
Proceeds
from sale of stock
|
25,000 | |||
Deferred
offering costs
|
(25,000 | ) | ||
Capital
contribution
|
3,000 | |||
Net
cash provided by financing activities
|
3,000 | |||
Increase
in Cash
|
- | |||
Cash,
Beginning of Period
|
- | |||
Cash,
End of Period
|
$ | - | ||
Supplemental
Disclosure of Cash Flow Information:
|
||||
Interest
paid
|
$ | - | ||
Income
taxes paid
|
- |
See
accompanying notes to financial statements.
F-6
FORMULA
ACQUISITION CORP.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
From
inception of March 23, 2010 to March 31, 2010
NOTE
1 – DESCRIPTION OF BUSINESS & SIGNIFICANT ACCOUNTING POLICIES
Description
of Business
Formula
Acquisition Corp ("we", "us" or the "Company") is a Delaware Corporation and was
incorporated on March 23, 2010 for the purpose of acquiring an operating
business or merging with an operating business.
Development stage
company
As of
March 31, 2010, the Company had not yet commenced operations. All activity
through March 31, 2010 relates to the Company’s formation and proposed public
offering. The Company has selected December 31 as its fiscal year
end. The Company’s ability to commence operations is contingent upon
obtaining adequate financial resources through a proposed public
offering. There is no assurance that the Company will be able to
successfully effect a business combination.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amount of assets
and liabilities and disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. While it is believed that such
estimates are reasonable, actual results could differ significantly from those
estimates.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments and short-term debt instruments
with original maturities of three months or less to be cash
equivalents.
Loss
per Share
Basic and
diluted net loss per share calculations are presented in accordance with
Accounting Standards Codification 260 and are calculated on the basis of the
weighted average number of common shares outstanding during the year. They
include the dilutive effect of common stock equivalents in years with
net income. Basic and diluted loss per share is the same due to the absence
of common stock equivalents.
Income
Taxes
The
Company recognizes deferred tax assets and liabilities based on differences
between the financial reporting and tax bases of assets and liabilities
using the enacted tax rates and laws that are expected to be in effect
when the differences are expected to be recovered. The Company provides a
valuation allowance for deferred tax assets for which it does not consider
realization of such assets to be more likely than not.
Fair
Value of Financial Instruments
The
Company’s financial instruments consist mainly of cash and cash equivalents,
accrued expenses and notes payable. The carrying amounts of the Company’s
cash and cash equivalents, accrued expenses and notes payable approximate
fair value due to the short-term nature of these instruments.
Accounting
Pronouncements
The
Company does not believe the adoption of recently issued accounting
pronouncements will have an impact on The Company’s financial position,
results of operations or cash flows.
NOTE
2 – GOING CONCERN
The
Company has incurred a net loss and has no cash. These conditions raise
substantial doubt as to the Company’s ability to continue as a going concern.
The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.
Management
intends to seek additional capital from new equity securities offerings that
will provide funds needed to increase liquidity, fund internal growth and fully
implement its business plan.
F-7
NOTE
3 – STOCKHOLDERS’ EQUITY
During
the period from inception through March 31, 2010, the President, COO, and CFO,
contributed capital in the amount of $3,000 to pay current audit fees and
purchased stock for $25,000. These related individuals received an
aggregate of 468,750 shares of common stock for their cash
investment.
The
$25,000 was then paid to a law firm who is handling the proposed future offering
of the company.
NOTE
4 – INCOME TAX
The
Company incurred losses since its inception and, therefore, is not subject to
federal income taxes. As of March 31, 2010, the Company had net operating loss
of $450 which expires in 2030. The net deferred tax asset generated by the loss
carry-forward has been fully reserved.
NOTE
5 - SUBSEQUENT EVENTS
The
Company has evaluated all events subsequent to March 31, 2010 through the date
of filing and concluded that there are no significant or material transactions
to be reported.
F-8
Until
[____________, 2010], all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers’ obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
No
dealer, salesperson or any other person is authorized to give any information or
make any representations in connection with this offering other than those
contained in this prospectus and, if given or made, the information or
representations must not be relied upon as having been authorized by us. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the securities offered by this prospectus, or an
offer to sell or a solicitation of an offer to buy any securities by anyone in
any jurisdiction in which the offer or solicitation is not authorized or is
unlawful.
$15,000,000
Formula
Acquisition Corp.
1,875,000
Units
PROSPECTUS
________________________, 2010
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution.
The
estimated expenses payable by us in connection with the offering described in
this registration statement (other than the underwriting discount and
commissions) will be as follows:
Initial
Trustees’ fee
|
$ |
[_____]
|
(1)
|
SEC
Registration Fee
|
2,139.00 | ||
FINRA
filing fee
|
[_____]
|
||
Accounting
fees and expenses
|
[_____]
|
||
Printing
and engraving expenses
|
[_____]
|
||
Directors
& Officers liability insurance premiums
|
[_____]
|
(2)
|
|
Legal
fees and expenses
|
125,000.00 | ||
Miscellaneous
|
[_____]
|
(3)
|
|
Total
|
$ |
[_____]
|
|
1)
|
In
addition to the initial acceptance fee that is charged by [TRANSFER
AGENT], as trustee, the registrant will be required to pay to [TRANSFER
AGENT] annual fees of $[_____] for acting as trustee, $[_____] for acting
as transfer agent of the registrant’s common stock, $[_____]for acting as
warrant agent for the registrant’s warrants and $[_____]for acting as
escrow agent.
|
|
2)
|
This
amount represents the approximate amount of director and officer liability
insurance premiums the registrant anticipates paying following the
consummation of its initial public offering and until it consummates a
business combination.
|
|
3)
|
This
amount represents additional expenses that may be incurred by the Company
in connection with the offering over and above those specifically listed
above, including distribution and mailing
costs.
|
Item
14. Indemnification of Directors and Officers.
Our
certificate of incorporation provides that all directors, officers, employees
and agents of the registrant shall be entitled to be indemnified by us to the
fullest extent permitted by Section 145 of the Delaware General Corporation
Law.
Section
145 of the Delaware General Corporation Law concerning indemnification of
officers, directors, employees and agents is set forth below.
“Section
145. Indemnification of officers, directors, employees and agents;
insurance.
(a) A
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person’s conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which the person reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person’s conduct was unlawful.
II-1
(b) A
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys’
fees) actually and reasonably incurred by the person in connection with the
defense or settlement of such action or suit if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
(c) To
the extent that a present or former director or officer of a corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of this section, or in defense
of any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys’ fees) actually and reasonably incurred by such
person in connection therewith.
(d) Any
indemnification under subsections (a) and (b) of this section (unless ordered by
a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the present or former
director, officer, employee or agent is proper in the circumstances because the
person has met the applicable standard of conduct set forth in subsections (a)
and (b) of this section. Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e)
Expenses (including attorneys’ fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the corporation
as authorized in this section. Such expenses (including attorneys’ fees)
incurred by former directors and officers or other employees and agents may be
so paid upon such terms and conditions, if any, as the corporation deems
appropriate.
(f) The
indemnification and advancement of expenses provided by, or granted pursuant to,
the other subsections of this section shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person’s official capacity and
as to action in another capacity while holding such office. A right to
indemnification or to advancement of expenses arising under a provision of the
certificate of incorporation or a bylaw shall not be eliminated or impaired by
an amendment to such provision after the occurrence of the act or omission that
is the subject of the civil, criminal, administrative or investigative action,
suit or proceeding for which indemnification or advancement of expenses is
sought, unless the provision in effect at the time of such act or omission
explicitly authorizes such elimination or impairment after such action or
omission has occurred.
(g) A
corporation shall have power to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of such person’s status as
such, whether or not the corporation would have the power to indemnify such
person against such liability under this section.
(h) For
purposes of this section, references to “the corporation” shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued.
II-2
(i) For
purposes of this section, references to “other enterprises” shall include
employee benefit plans; references to “fines” shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
to “serving at the request of the corporation” shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner “not opposed to the best interests of the
corporation” as referred to in this section.
(j) The
indemnification and advancement of expenses provided by, or granted pursuant to,
this section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
(k) The
Court of Chancery is hereby vested with exclusive jurisdiction to hear and
determine all actions for advancement of expenses or indemnification brought
under this section or under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation’s obligation to advance expenses (including attorneys’
fees).”
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers, and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that, in the opinion of
the SEC, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment of expenses
incurred or paid by a director, officer or controlling person in a successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, we
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to the court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Paragraph
B of Article Ninth of
our amended and restated certificate of incorporation provides:
“The
Corporation, to the full extent permitted by Section 145 of the GCL, as amended
from time to time, shall indemnify all persons whom it may indemnify pursuant
thereto. Expenses (including attorneys’ fees) incurred by an officer or director
in defending any civil, criminal, administrative, or investigative action, suit
or proceeding for which such officer or director may be entitled to
indemnification hereunder shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized hereby.”
In
addition, in the event that we enter into an Underwriting Agreement we expect
that such agreement will contain provisions stating we have agreed to indemnify
the Underwriters and the Underwriters have agreed to indemnify us against
certain civil liabilities that may be incurred in connection with this offering,
including certain liabilities under the Securities Act.
Item
15. Recent Sales of Unregistered Securities.
(a)
During the past three years, we sold the following shares of common stock
without registration under the Securities Act, each of whom is accredited under
Rule 501 of the Securities Act:
Stockholders
|
Number of Shares
|
|||
James
Altucher
|
156,250 | |||
Daniel
Kelly
|
156,250 | |||
Thomas
J. Clarke
|
156,250 |
Such
shares were issued on March 23, 2010 in connection with our organization
pursuant to the exemption from registration contained in Section 4(2) of the
Securities Act as a transaction by an issuer not involving a public offering.
The shares issued to the individuals and entities above were sold for an
aggregate offering price of $25,000 at an average purchase price of
approximately $0.05 per share.
II-3
No
underwriting discounts or commissions were paid with respect to such
sales.
Item
16. Exhibits and Financial Statement Schedules.
(a)
The following exhibits are filed as part of this Registration
Statement:
Exhibit
No.
|
Description
|
|
1.1
|
Form
of Underwriting Agreement*
|
|
3.1(i)
|
Certificate
of Incorporation
|
|
3.1
(ii)
|
Form
of Amended and Restated Certificate of Incorporation
|
|
3.2
|
By-laws
|
|
4.1
|
Specimen
Unit Certificate*
|
|
4.2
|
Specimen
Common Stock Certificate
|
|
4.3
|
Specimen
Warrant Certificate*
|
|
4.4
|
Form
of Warrant Agreement between [TRANSFER AGENT] and the
Registrant*
|
|
5.1
|
Opinion
of Gersten Savage LLP
|
|
10.1
|
Form
of Subscription Agreement between the Registrant and each of the Initial
Stockholders
|
|
10.__
|
Form
of Investment Management Trust Agreement between [TRANSFER AGENT] and the
Registrant*
|
|
10.__
|
Form
of Stock Escrow Agreement between the Registrant, [TRANSFER AGENT] and the
Initial Stockholders*
|
|
10.__
|
Form
of Warrant Escrow Agreement between the Registrant, [TRANSFER AGENT] and
the Warrant Purchasers*
|
|
10.__
|
Form
of Registration Rights Agreement among the Registrant, the Initial
Stockholders and [UNDERWRITER]*
|
|
23.1
|
Consent
of MaloneBailey, LLP
|
|
23.2
|
Consent
of Gersten Savage LLP (included in Exhibit
5.1)
|
*To be filed by
amendment.
Item
17. Undertakings.
(a)
|
The
undersigned registrant hereby
undertakes:
|
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
i. To
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
ii. To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the
effective registration statement;
iii. To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
II-4
(2) That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) That
for the purpose of determining any liability under the Securities Act of 1933 in
a primary offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the undersigned
registrant will be a seller to the purchaser and will be considered to offer or
sell such securities to such purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule 424;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) Any
other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
(b)
|
The
undersigned hereby undertakes to provide to the underwriter at the closing
specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter
to permit prompt delivery to each
purchaser.
|
(c)
|
Insofar
as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
|
(d)
|
The
undersigned registrant hereby undertakes
that:
|
(1) For
purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For
the purpose of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide
offering thereof.
II-5
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 3rd day
of May, 2010.
FORMULA
ACQUISITION CORP.
|
||
By:
|
/s/ Thomas J. Clarke,
Jr.
|
|
Thomas
J. Clarke, Jr.
|
||
Chairman,
Chief Executive Officer, President and
Director
|
||
(Principal
Executive
Officer)
|
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
Name
|
Position
|
Date
|
||
/s/ Thomas J. Clarke, Jr.
|
Chairman,
Chief Executive Officer, President and Director
|
May
3, 2010
|
||
Thomas
J. Clarke, Jr.
|
(Principal
Executive Officer)
|
|||
/s/ James Altucher
|
Chief
Operating Officer and Director
|
May
3, 2010
|
||
James
Altucher
|
||||
/s/ Daniel Kelly
|
Chief
Financial Officer and Director
|
May
3, 2010
|
||
Daniel
Kelly
|
(Principal
Financial Officer)
|