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EXCEL - IDEA: XBRL DOCUMENT - L&L Acquisition Corp. | Financial_Report.xls |
EX-31.1 - EXHIBIT 31.1 - L&L Acquisition Corp. | c24414exv31w1.htm |
EX-31.2 - EXHIBIT 31.2 - L&L Acquisition Corp. | c24414exv31w2.htm |
EX-32.1 - EXHIBIT 32.1 - L&L Acquisition Corp. | c24414exv32w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended: September 30, 2011
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
Commission file number 000-54206
L&L ACQUISITION CORP.
(Exact Name of Registrant as Specified in its Charter)
Delaware (State or Other Jurisdiction of Incorporation or Organization) |
27-3109518 (I.R.S. Employer Identification No.) |
265 Franklin Street, 20th Floor, Boston, MA 02110
(Address of Principal Executive Offices, Including Zip Code)
(Address of Principal Executive Offices, Including Zip Code)
(617) 330-7755
(Registrants Telephone Number, Including Area Code)
(Registrants Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes
þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
Large Accelerated Filer o | Accelerated Filer o | Non-Accelerated Filer o (Do not check if a smaller reporting company) |
Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes þ No o
As of November 11, 2011, the registrant had 5,000,000 shares of common stock, par value $0.0001 per
share, outstanding.
L&L Acquisition Corp. and Subsidiary
(a development stage company)
(a development stage company)
Form 10-Q
For the Quarterly Period Ended September 30, 2011
For the Quarterly Period Ended September 30, 2011
TABLE OF CONTENTS
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Exhibit 31.1 | ||||||||
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Exhibit 32.1 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
2
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. | Financial Statements. |
L&L Acquisition Corp. and Subsidiary
(a development stage company)
(a development stage company)
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 149,682 | $ | 815,026 | ||||
Investments held in Trust Account |
40,422,920 | 40,404,326 | ||||||
Prepaid expenses |
40,543 | 84,187 | ||||||
Total assets |
$ | 40,613,145 | $ | 41,303,539 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities |
||||||||
Accrued expenses |
$ | 69,137 | $ | 198,300 | ||||
Franchise taxes payable |
123,789 | 18,735 | ||||||
Total current liabilities |
192,926 | 217,035 | ||||||
Deferred underwriting compensation |
331,300 | 331,300 | ||||||
Deferred legal fees relating to the offering |
100,000 | 100,000 | ||||||
Due to Sponsor |
| 260,000 | ||||||
Total liabilities |
624,226 | 908,335 | ||||||
Commitments and contingencies |
||||||||
Common stock subject to possible redemption,
3,480,000 shares (at redemption value) |
35,148,000 | 35,148,000 | ||||||
Common stock, $.0001 par value, 100,000,000
shares authorized; 5,000,000 shares issued
and outstanding
at September 30, 2011 and 5,150,000 shares
issued and outstanding at December 31, 2010
(includes 3,480,000 shares subject to
possible redemption) |
500 | 515 | ||||||
Additional paid-in capital |
5,404,734 | 5,404,719 | ||||||
Deficit accumulated during development stage |
(564,315 | ) | (158,030 | ) | ||||
Total stockholders equity |
4,840,919 | 5,247,204 | ||||||
Total liabilities and stockholders equity |
$ | 40,613,145 | $ | 41,303,539 | ||||
See accompanying notes to condensed consolidated financial statements.
3
Table of Contents
L&L Acquisition Corp. and Subsidiary
(a development stage company)
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(unaudited)
Period from | Period from | |||||||||||||||
Three months | July 26, 2010 | Nine months | July 26, 2010 | |||||||||||||
ended | (inception) through | ended | (inception) through | |||||||||||||
September 30, 2011 | September 30, 2010 | September 30, 2011 | September 30, 2011 | |||||||||||||
Revenue |
$ | | $ | | $ | | $ | | ||||||||
General and administrative expenses |
149,122 | 10,066 | 425,254 | 587,665 | ||||||||||||
Loss from operations |
(149,122 | ) | (10,066 | ) | (425,254 | ) | (587,665 | ) | ||||||||
Interest and dividend income |
1,209 | 27 | 18,969 | 23,350 | ||||||||||||
Loss before provision for income taxes |
(147,913 | ) | (10,039 | ) | (406,285 | ) | (564,315 | ) | ||||||||
Provision for income taxes |
| | | | ||||||||||||
Net loss attributable to common shares outstanding |
$ | (147,913 | ) | $ | (10,039 | ) | $ | (406,285 | ) | $ | (564,315 | ) | ||||
Weighted average number of common shares outstanding basic and diluted |
5,000,000 | 1,437,500 | 5,003,846 | 3,981,948 | ||||||||||||
Net loss per share outstanding basic and diluted |
$ | (0.03 | ) | $ | (0.01 | ) | $ | (0.08 | ) | $ | (0.14 | ) | ||||
Two Class Method: |
||||||||||||||||
Weighted average number of common shares outstanding subject to
possible redemption |
3,480,000 | | 3,480,000 | 2,476,465 | ||||||||||||
Net loss per common share outstanding subject to possible redemption |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||
Weighted average number of common shares outstanding, excluding
shares subject to possible redemption basic and diluted |
1,520,000 | 1,437,500 | 1,523,846 | 1,505,483 | ||||||||||||
Net loss per common share outstanding subject to possible redemption -
basic and diluted |
$ | (0.10 | ) | $ | (0.01 | ) | $ | (0.27 | ) | $ | (0.37 | ) | ||||
See accompanying notes to condensed consolidated financial statements.
4
Table of Contents
L&L Acquisition Corp. and Subsidiary
(a development stage company)
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
Deficit | ||||||||||||||||||||
Accumulated | ||||||||||||||||||||
Common Stock | Additional | During | Total | |||||||||||||||||
Amount | Paid-in | Development | Stockholders | |||||||||||||||||
Shares | $.0001 par | Capital | Stage | Equity | ||||||||||||||||
Sale of common stock issued to initial stockholders
on July 28, 2010 at $.017 per share |
1,437,500 | $ | 144 | $ | 24,856 | $ | | $ | 25,000 | |||||||||||
Forfeiture of common stock issued to initial
stockholders on November 22, 2010 |
(287,500 | ) | (29 | ) | 29 | |||||||||||||||
Sale of 4,000,000 units, net of underwriters
discount and offering expenses (including
3,480,000 shares subject to possible redemption) |
4,000,000 | 400 | 38,247,834 | 38,248,234 | ||||||||||||||||
Net proceeds subject to possible redemption
of 3,480,000 shares |
(35,148,000 | ) | (35,148,000 | ) | ||||||||||||||||
Sale of private placement warrants |
2,280,000 | 2,280,000 | ||||||||||||||||||
Net loss attributable to common shares |
| | | (158,030 | ) | (158,030 | ) | |||||||||||||
Balance, December 31, 2010 (audited) |
5,150,000 | 515 | 5,404,719 | (158,030 | ) | 5,247,204 | ||||||||||||||
Forfeiture on January 8, 2011 of common stock
issued to initial stockholders |
(150,000 | ) | (15 | ) | 15 | |||||||||||||||
Net loss attributable to common shares |
| | | (406,285 | ) | (406,285 | ) | |||||||||||||
Balance, September 30, 2011 (unaudited) |
5,000,000 | $ | 500 | $ | 5,404,734 | $ | (564,315 | ) | $ | 4,840,919 | ||||||||||
See accompanying notes to condensed consolidated financial statements.
5
Table of Contents
L&L Acquisition Corp. and Subsidiary
(a development stage company)
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Period from | Period from | |||||||||||
Nine months | July 26, 2010 | July 26, 2010 | ||||||||||
ended | (inception) through | (inception) through | ||||||||||
September 30, 2011 | September 30, 2010 | September 30, 2011 | ||||||||||
Cash Flows from Operating Activities |
||||||||||||
Net loss |
$ | (406,285 | ) | $ | (10,039 | ) | $ | (564,315 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||
Dividend income earned on investments held in Trust Account |
(17,498 | ) | | (21,824 | ) | |||||||
Interest income earned on investments held in Trust Account |
(1,096 | ) | | (1,096 | ) | |||||||
Change in operating assets and liabilities |
||||||||||||
(Increase) decrease in prepaid expenses |
43,644 | | (40,543 | ) | ||||||||
(Increase) in deferred offering costs |
| (160,750 | ) | | ||||||||
Increase (decrease) in accrued expenses and other liabilities |
(129,163 | ) | 150,000 | (59,295 | ) | |||||||
Increase in franchise taxes payable |
105,054 | 123,789 | ||||||||||
Net cash used in operating activities |
(405,344 | ) | (20,789 | ) | (563,284 | ) | ||||||
Cash Flows from Investing Activities |
||||||||||||
Cash held in Trust Account |
| | (40,400,000 | ) | ||||||||
Cash Flows from Financing Activities |
||||||||||||
Proceeds from notes payable, stockholders |
| 75,000 | 75,000 | |||||||||
Payments of notes payable, stockholders |
| | (75,000 | ) | ||||||||
Proceeds from issuance of common stock to initial stockholders |
| 25,000 | 25,000 | |||||||||
Proceeds from public offering |
| | 40,000,000 | |||||||||
Proceeds from issuance of warrants |
| | 2,280,000 | |||||||||
Payment of offering costs |
| | (1,192,034 | ) | ||||||||
Advance from Sponsor |
| | 260,000 | |||||||||
Repayment of advance from Sponsor |
(260,000 | ) | | (260,000 | ) | |||||||
Net cash provided by (used in) financing activities |
(260,000 | ) | 100,000 | 41,112,966 | ||||||||
Net increase (decrease) in cash |
(665,344 | ) | 79,211 | 149,682 | ||||||||
Cash and cash equivalents at beginning of the period |
815,026 | | | |||||||||
Cash and cash equivalents at end of the period |
$ | 149,682 | $ | 79,211 | $ | 149,682 | ||||||
Supplemental schedule of non-cash financial activities: |
||||||||||||
Accrual for offering costs and other expenses |
$ | | $ | 150,000 | $ | 128,432 | ||||||
Deferred underwriters compensation |
$ | | $ | | $ | 331,300 | ||||||
Deferred legal fees related to the offering |
$ | | $ | | $ | 100,000 |
See accompanying notes to condensed consolidated financial statements.
6
Table of Contents
L&L Acquisition Corp. and Subsidiary
(a development stage company)
(a development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Unaudited)
1. Description of Organization and Business Operations
L&L Acquisition Corp. and Subsidiary (collectively, the Company), a corporation in the
development stage, was incorporated in the state of Delaware on July 26, 2010. The Company was
formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization, exchangeable share transaction or other similar business
transaction, one or more operating businesses or assets (a Business Combination). The Company has
neither engaged in any operations nor generated significant revenue to date with the exception of
interest and dividend income. The Company is considered to be in the development stage as defined
in the Financial Accounting Standards Boards (FASB) Accounting Standard Codification, or ASC
915, Development Stage Entities, and is subject to the risks associated with activities of
development stage companies. The Company has selected December 31 as its fiscal year end.
At September 30, 2011, the Company had not commenced any operations. All activity through September
30, 2011 relates to the Companys formation and initial public offering (the Offering) described
below and the identification of a suitable Business Combination candidate.
The registration statement for the Offering was declared effective on November 23, 2010. The
Company consummated the Offering on November 29, 2010 and received net proceeds of $38,248,234,
before deducting deferred underwriting compensation of $1,000,000 and includes $200,000 received
for the purchase of 266,667 warrants by the underwriters. The Companys management has broad
discretion with respect to the specific application of the net proceeds of the Offering, although
substantially all of the net proceeds of the Offering are intended to be generally applied toward
consummating a Business Combination. Furthermore, there is no assurance that the Company will be
able to successfully effect a Business Combination.
Upon the closing of the Offering and the private placement of warrants, $40,400,000 was placed in a
trust account (Trust Account) and invested in U.S. government securities, within the meaning of
Section 2(a)(16) of the Investment Company Act of 1940 (the 1940 Act) with a maturity of 180 days
or less, or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the
1940 Act, until the earlier of (i) the consummation of a Business Combination or (ii) the
distribution of the Trust Account as described below.
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Table of Contents
The Company, after signing a definitive agreement for the acquisition of one or more target
businesses or assets, will not submit the transaction for stockholder approval, unless otherwise
required by law. The Company will proceed with a Business Combination if it is approved by its
board of directors. In the event that the Company is required to seek stockholder approval in
connection with its initial Business Combination, it will proceed with a Business Combination if a
majority of the outstanding shares of common stock voted are voted in favor of a Business
Combination. In connection with such a vote, if a Business Combination is approved and completed, stockholders that vote against a Business Combination and elect to put their shares of
common stock back to the Company for cash will be entitled to receive their pro-rata portion of the
Trust Account as follows: (i) public stockholders voting against a Business Combination and
electing to put shares of common stock to the Company shall be entitled to receive a per share
pro-rata portion of the Trust Account excluding interest and net of franchise and income taxes
payable and (ii) public stockholders voting in favor of a Business Combination and electing to put
shares of common stock to the Company shall be entitled to receive a per share pro-rata portion of
the Trust Account together with interest thereon but net of franchise and income taxes payable.
These shares of common stock were recorded at a fair value and classified as temporary equity upon
the completion of the Offering, in accordance with FASB ASC 480, Distinguishing Liabilities from
Equity. John L. Shermyen, LLM Structured Equity Fund L.P., and LLM Investors L.P. (the Sponsors)
and John A. Svahn, E. David Hetz, Alan W. Pettis, William A. Landman, Diane M. Daych, Mitchell
Eisenberg, M.D. and Alan R. Hoops (collectively with the Sponsors, the initial stockholders) have
agreed, in the event the Company is required to seek stockholder approval of a Business
Combination, to vote their initial shares in accordance with the majority of the votes cast by the
public stockholders and to vote any public shares purchased during or after the offering in favor
of a Business Combination. The initial stockholders have also agreed to vote shares of common stock
acquired by them in the Offering or in the aftermarket in favor of a Business Combination submitted
to the Companys stockholders for approval.
The Companys Sponsors, officers and directors have agreed that the Company will only have 18
months from November 29, 2010, the date of the closing for the Offering, to consummate a Business
Combination. If the Company does not consummate a Business Combination within such 18 month period,
it shall (i) cease all operations except for the purposes of winding up, (ii) as promptly as
reasonably possible, but not more than two business days thereafter, redeem 100% of its public
shares for cash equal to their pro-rata share of the aggregate amount then on deposit in the Trust
Account (including interest), less franchise and income taxes payable, which redemption will
completely extinguish public stockholders rights as stockholders (including the right to receive
further liquidation distributions, if any), subject to applicable law, and subject to the
requirement that any refund of income taxes that were paid from the Trust Account which is received
after the redemption shall be distributed to the former public stockholders, and (iii) as promptly
as reasonably possible following such redemption, subject to the approval of the Companys
remaining stockholders and its board of directors, dissolve and liquidate the balance of the
Companys net assets to its remaining stockholders, subject in each case to its obligations under
Delaware law to provide for claims of creditors and the requirements of other applicable law. The
initial stockholders have waived their rights to participate in any redemption with respect to
their initial shares. However, the initial stockholders acquired shares of common stock in the
Offering, entitling them to a pro-rata share of the Trust Account upon the Companys redemption or
liquidation in the event the Company does not consummate a Business Combination within the required
time period. In the event of such distribution, it is possible that the per share value of the
residual assets remaining available for distribution (including Trust Account assets) will be less
than the Offering price per unit in the Offering.
The ability of the Company to continue as a going concern is dependent upon its ability to
successfully complete a Business Combination by May 29, 2012. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the
Company is unable to continue as a going concern and is required to liquidate.
8
Table of Contents
2. Significant Accounting Policies
Basis of presentation
The accompanying unaudited condensed consolidated financial statements as of September 30, 2011,
the results of operations and cash flows for the periods presented, have been prepared in
accordance with U.S. Generally Accepted Accounting Principles (GAAP) for interim financial
information and with the instructions to Form 10-Q and pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information
and notes required by GAAP for complete financial statements of the Company. In the opinion of
management, all adjustments necessary for a fair presentation have been included and are of a
normal recurring nature. Interim results are not necessarily indicative of the results that may be
expected for any other interim period or for the full year.
These unaudited condensed consolidated financial statements should be read in conjunction with the
audited financial statements and notes thereto for the period ended December 31, 2010 included in
the Companys Annual Report on Form 10-K filed with the SEC on March 30, 2011. The December 31,
2010 balance sheet and the changes in stockholders equity through December 31, 2010 have been
derived from those audited financial statements. The accounting policies used in preparing these
unaudited condensed consolidated financial statements are consistent with those derived in the
December 31, 2010 audited financial statements.
Principles of Consolidation
The Companys consolidated financial statements include the accounts of L&L Acquisition Corp. and
its wholly-owned subsidiary, L&L Acquisition Securities Corp. (Subsidiary). All significant
intercompany balances and transactions have been eliminated in consolidation.
Development Stage Company
The Company complies with the reporting requirements of FASB ASC 915. At September 30, 2011, the
Company has not commenced any operations nor generated revenue. All activity through September 30,
2011 relates to the Companys formation and the initial public offering and the identification of a
suitable Business Combination candidate. The Company will not generate any operating revenues until
after completion of a Business Combination, at the earliest. The Company has generated
non-operating income in the form of interest and dividend income on the designated Trust Account
since the Offering.
9
Table of Contents
Net Loss Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per
Share. Net loss per common share is computed by dividing net loss applicable to common
stockholders by the weighted average number of common shares outstanding for the period. As the
Company reported a net loss for the three and nine months ended September 30, 2011, the effect of the 7,040,000 warrants (which consists of 4,000,000 warrants sold in the
Offering and 3,040,000 warrants issued to the Companys Sponsors, directors and advisors and the
underwriters), have not been considered in the diluted loss per common share because their effect
would be anti-dilutive. As a result, diluted loss per common share is the same as basic loss per
common share for the period. The Companys statements of operations include a presentation of
income per share for common stock subject to possible redemption in a manner similar to the
two-class method of income per share. Net income per common share, basic and diluted amount for the
maximum number of shares subject to possible redemption is calculated by dividing the income, net
of applicable income taxes and franchise taxes, attributable to common shares subject to redemption
by the weighted average number of common shares subject to possible redemption.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist
of cash accounts in a financial institution which, at times may exceed the federal depository
insurance coverage of $250,000. The Company has not experienced losses on these accounts and
management believes the Company is not exposed to material risks on such accounts.
Investments held in the Trust Account
The amounts held in the Trust Account represent substantially all of the proceeds of the
Offering and are classified as restricted assets since such amounts can only be used by the Company
in connection with the consummation of a Business Combination.
As of September 30, 2011, investment securities in the Companys Trust Account consist of
$40,422,000 in U.S. government treasury bills with a maturity of 180 days or less and another $920
invested in a money market mutual fund that meets the conditions of Rule 2a-7 of the 1940 Act.
Fair Value of Financial Instruments
The fair value of the Companys assets and liabilities, which qualify as financial instruments
under FASB ASC 820, Fair Value Measurements and Disclosures, approximates the carrying amounts
represented in the balance sheet due to their short-term nature.
Redeemable common stock
The Company accounts for redeemable common stock that is redeemable for cash or other assets, by
classifying it outside of permanent equity if it is redeemable at the option of the holder. In
addition, the amount of common stock subject to redemption is classified outside of permanent
equity to the extent that such redemption does not cause a liquidation event.
Accordingly, 3,480,000 shares of common stock have been classified outside of permanent equity at
redemption value. The Company recognizes changes in the redemption value immediately as they occur
and adjusts the carrying value of common stock subject to redemption equal its redemption value at
the end of each reporting period.
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Cash and cash equivalents
The Company considers all highly-liquid instruments with original maturities of three months or
less to be cash equivalents.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Income Taxes
The Company complies with the accounting and reporting requirements of FASB ASC 740, Income
Taxes, which requires an asset and liability approach to financial accounting and reporting for
income taxes. Deferred income tax assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities that will result in future taxable or
deductible amounts, based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company has the following deferred tax assets and liabilities at September 30, 2011:
Noncurrent assets and liabilities: |
||||
Net operating loss carryforwards |
$ | 61,000 | ||
Amortizable start-up costs |
163,000 | |||
224,000 | ||||
Valuation allowance |
(224,000 | ) | ||
Net noncurrent deferred tax asset |
$ | | ||
The Company has net operating losses amounting to approximately $154,000 that expire in 2030. The
ultimate realization of the net operating losses is dependent upon future taxable income, if any,
of the Company and may be limited in any one period by alternative minimum tax rules. Although
management believes that the Company will have sufficient future taxable income to absorb the net
operating loss carryovers before the expiration of the carryover period, the current global
economic recession imposes additional profitability risks that are beyond the Companys control.
Accordingly, management has determined that a full valuation allowance of the deferred tax asset is
appropriate at this time.
Internal Revenue Code Section 382 imposes limitations on the use of net operating loss
carryovers when the stock ownership of one or more 5% stockholders (stockholders owning 5% or more of the Companys outstanding capital stock) has increased by more than 50 percentage
points. Management cannot control the ownership changes occurring as a result of public trading of
the Companys common stock. Accordingly, there is a risk of an ownership change beyond the control
of the Company that could trigger a limitation of the use of the loss carryover.
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The Company established a valuation allowance of $224,000 as of September 30, 2011, which fully
offset the deferred tax asset of $224,000. The deferred tax asset results from applying an
effective combined federal and state tax rate of 40% to start-up costs of approximately $411,000
and net operating losses of approximately $154,000. Effective tax rates differ from statutory rates
due to timing differences in the deductibility of expenses.
The statutory federal income tax rate and the effective rate are reconciled as follows:
Statutory federal income tax rate |
34 | % | ||
State and local taxes, net of federal tax benefit |
6 | % | ||
Valuation allowance |
(40 | )% | ||
0 | % | |||
There were no unrecognized tax benefits as of September 30, 2011. ASC 740 prescribes a recognition
threshold and a measurement attribute for the financial statement recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a
tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as
income tax expense. No amounts were accrued for the payment of interest and penalties at September
30, 2011. The Company is currently not aware of any issues under review that could result in
significant payments, accruals or material deviation from its position. The Company is subject to
income tax examinations by major taxing authorities for all years since its inception.
Recently Issued Accounting Standards
In January 2010, the FASB issued Fair Value Measurements and Disclosures (Topic 820): Improving
Disclosures about Fair Value Measurements, which provides guidance on how investment assets and
liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities
to disclose (i) the input and valuation techniques used to measure fair value for both recurring
and nonrecurring fair value measurements, for Level 2 or Level 3 positions, (ii) transfers between
all levels (including Level 1 and Level 2) will be required to be disclosed on a gross basis (i.e.,
transfers out must be disclosed separately from transfers in) as well as the reason(s) for the
transfers and (iii) purchases, sales, issuances and settlements must be shown on a gross basis in
the Level 3 rollforward rather than as one net number. The effective date of the amendment is for
interim and annual periods beginning after December 15, 2009. However, the requirement to provide
the Level 3 activity for purchases, sales, issuances and settlements on a gross basis is effective
for interim and annual periods beginning after December 15, 2010. The adoption of the amendment did not have a material impact on the Companys condensed
consolidated financial statements.
The Company does not believe that any other recently issued, but not yet effective, accounting
pronouncements, if currently adopted, would have a material effect on the Companys financial
statements.
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3. Initial Public Offering
On November 29, 2010, the Company sold to the public 4,000,000 units at $10.00 per unit (Units).
Each Unit consists of one share of the Companys common stock, $0.0001 par value, and one
redeemable common stock purchase warrant (Warrant). Each Warrant will entitle the holder to
purchase from the Company one share of common stock at an exercise price of $11.50 commencing on
the later of (a) 30 days after the completion of a Business Combination or (b) one year from
November 23, 2010, the date of the prospectus for the Offering, and will expire five years from the
consummation of a Business Combination. The Warrants will be redeemable by the Company at a price
of $0.01 per Warrant upon 30 days prior notice after the Warrants become exercisable, only in the
event that the last sale price of the common stock is at least $17.50 per share for any 20 trading
days within a 30-trading day period ending on the third business day prior to the date on which
notice of redemption is given.
4. Related Party Transactions
In July 2010, John L. Shermyen, LLM Structured Equity Fund L.P. and LLM Investors L.P. purchased an
aggregate of 1,437,500 shares of the Companys common stock, for an aggregate purchase price of
$25,000, or approximately $0.0174 per share. Subsequently, on November 22, 2010, John L. Shermyen,
LLM Structured Equity Fund L.P. and LLM Investors L.P. each returned to the Company an aggregate of
287,500 of such initial shares, which have been cancelled. These shares are referred to as the
initial shares and consist of (i) 511,111 shares (66,667 of which were forfeited as the
underwriters over-allotment option was not exercised in full) which will be held in escrow until
the first anniversary of a Business Combination and (ii) 638,889 shares (83,333 of which were
forfeited as the underwriters over-allotment option was not exercised in full) which will be held
in escrow and forfeited on the fifth anniversary of a Business Combination unless, prior to such
time, either (x) the last sales price of the Companys common stock equals or exceeds $18.00 per
share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the
like) for any 20 trading days within any 30-trading day period or (y) a transaction is consummated
following a Business Combination in which all stockholders have the right to exchange their common
stock for cash consideration which equals or exceeds $18.00 per share. Subsequent to the purchase
of these shares, (i) John L. Shermyen transferred at cost an aggregate of 58,219 of these shares to
William A. Landman and Mitchell Eisenberg, M.D., each of whom is a member of the Companys advisory
board, and Alan W. Pettis, E. David Hetz and Diane M. Daych, each of whom is a director, (ii) LLM
Investors L.P. transferred at cost an aggregate of 2,197 of these shares to E. David Hetz and Diane
M. Daych and (iii) LLM Structured Equity Fund L.P. transferred at cost an aggregate of 56,022 of
these shares to Alan R. Hoops, a member of the Companys advisory board, John A. Svahn, a director,
E. David Hetz and Diane M. Daych. The Companys initial stockholders have contractually agreed with
the Company that they will have no ability to vote any of the 638,889 shares being held in escrow
until such time, if ever, that such shares are released to them.
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The Sponsors, certain of the Companys directors and advisors and the underwriters purchased, in a
private placement, 3,040,000 Warrants (Sponsor Warrants) prior to the Offering at a price of
$0.75 per Warrant (a purchase price of $2,280,000) from the Company. Based on the observable market
prices, the Company believes that the purchase price of $0.75 per Warrant for such Sponsor Warrants
exceeds the fair value of such Sponsor Warrants on the date of the purchase. The valuation is based
on comparable initial public offerings by other blank check companies. The holders have agreed that
such Sponsor Warrants will not be sold or transferred until 30 days following consummation of a
Business Combination, subject to certain limited exceptions. If the Company does not complete a
Business Combination, then the proceeds will be part of the liquidating distribution to the public
stockholders and the Sponsor Warrants issued to such holders will expire worthless. The Company
classifies the Sponsor Warrants within permanent equity as additional paid-in capital in accordance
with FASB ASC 815, Derivatives and Hedging.
In connection with the Offering, the Sponsors purchased 586,400 Units at $10.00 per Unit on
November 29, 2010.
Also in connection with the Offering, LLM Structured Equity Fund L.P. advanced the Company $260,000
on November 29, 2010. This advance was repaid by the Company on January 7, 2011.
Commencing on November 29, 2010, the Company entered into an Administrative Services Agreement with
LLM Capital Partners LLC for an aggregate monthly fee of $7,500 for office space, general and
administrative services. This agreement will expire upon the earlier of: (a) the successful
completion of a Business Combination, (b) 18 months from November 23, 2010, the date of the
prospectus for the Offering, or (c) the date on which the Company is dissolved and liquidated.
The initial stockholders are entitled to registration rights pursuant to a registration rights
agreement entered into on November 23, 2010, the date of the prospectus for the Offering. The
initial stockholders are entitled to demand registration rights and certain piggy-back
registration rights with respect to their shares of common stock, the Warrants and the common stock
underlying the Warrants, commencing on the date such common stock or Warrants are released from
escrow. The Company will bear the expenses incurred in connection with the filing of any such
registration statements.
5. Commitments and Contingencies
The Company granted the underwriters a 45-day option to purchase up to 600,000 additional Units to
cover the over-allotment at the initial public offering price less the underwriting discounts and
commissions. This option was not exercised by the underwriters.
The
underwriters will be entitled to a deferred fee payable equal to 0.5%
of the gross proceeds from the sale of the Units and 2.5% of the funds released from the
Trust Account to the Company or the target upon closing of a Business Combination, which shall be
paid as a placement fee to Morgan Joseph LLC or such other firms, if any, who are instrumental in
advising the Company with respect to the completion of a Business Combination.
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6. Fair Value Measurement
The Company complies with fair value measurements for its financial assets and liabilities that are
re-measured and reported at fair value at each reporting period, and non-financial assets and
liabilities that are re-measured and reported at fair value at least annually.
The following table presents information about the Companys assets and liabilities that are
measured at fair value on a recurring basis as of September 30, 2011 and December 31, 2010, and
indicates the fair value hierarchy of the valuation techniques the Company utilized to determine
such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices
(unadjusted) in active markets for identical assets or liabilities. Fair value determined by Level
2 inputs utilize data points that are observable such as quoted prices in markets that are not
active, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable
data points for the asset or liability, and includes situations where there is little, if any,
market activity for the asset or liability.
Financial Assets at Fair Value as of September 30, 2011 (unaudited)
Significant | ||||||||||||||||
Quoted Prices | Other | |||||||||||||||
in | Observable | Unobservable | ||||||||||||||
Fair Value | Active Markets | Inputs | Inputs | |||||||||||||
Description | September 30, 2011 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Assets |
||||||||||||||||
United States Treasury Bills held in Trust Account |
$ | 40,422,000 | $ | 40,422,000 | $ | | $ | | ||||||||
Restricted cash held in Trust Account |
920 | 920 | | | ||||||||||||
Total |
$ | 40,422,920 | $ | 40,422,920 | $ | | $ | | ||||||||
Financial Assets at Fair Value as of December 31, 2010 (audited)
Significant | ||||||||||||||||
Quoted Prices | Other | |||||||||||||||
in | Observable | Unobservable | ||||||||||||||
Fair Value | Active Markets | Inputs | Inputs | |||||||||||||
Description | December 31, 2010 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Assets |
||||||||||||||||
Restricted cash held in Trust Account |
$ | 40,404,326 | $ | 40,404,326 | $ | | $ | | ||||||||
Total |
$ | 40,404,326 | $ | 40,404,326 | $ | | $ | | ||||||||
The fair values of the Companys cash and cash equivalents held in the Trust Account are
determined through market, observable and corroborated sources.
The carrying amounts reflected in the balance sheet for other current assets and accrued expenses
approximate fair value due to their short-term maturities.
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Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. |
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, or the Exchange Act. We have based these forward-looking statements on our
current expectations and projections about future events, and we assume no obligation to update any
such forward-looking statements. These forward-looking statements are subject to known and unknown
risks, uncertainties and assumptions about us that may cause our actual results to be materially
different from any future results expressed or implied by such forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as may, should, could,
would, expect, plan, anticipate, believe, estimate, continue, or the negative of such
terms or other similar expressions. Factors that might cause our future results to differ from
those statements include, but are not limited to, those described in the section entitled Risk
Factors of the prospectus filed with the SEC in connection with our initial public offering. The
following discussion should be read in conjunction with our condensed consolidated financial
statements and related notes thereto included elsewhere in this report and with the section
entitled Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2010.
Overview
L&L Acquisition Corp. is a newly-organized blank check company formed for the purpose of
acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase,
reorganization, exchangeable share transaction or other similar business combination, which we
refer to throughout this Quarterly Report on Form 10-Q as a business combination, with one or more
operating businesses or assets. We intend to focus on businesses in the healthcare industry or
healthcare-related assets, but we may pursue opportunities in other business sectors. Unlike many
other blank check companies, we are not required to consider a targets valuation when entering
into or consummating a business combination. We will have considerable flexibility in identifying
and selecting a prospective acquisition target, except that we will not acquire another blank check
company or a similar type of company. Our sponsors, officers and directors have agreed that we will
only have 18 months from the closing of the initial public offering to consummate a business
combination.
Results of Operations
For the nine months ended September, 30, 2011, we had a net loss of $406,285 consisting of interest
and dividend income of $18,969 less costs attributable to general and administrative expenses of
$425,254.
For the three months ended September, 30, 2011, we had a net loss of $147,913 consisting of
interest and dividend income of $1,209 less costs attributable to general and administrative
expenses of $149,122.
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For the period from July 26, 2010 (inception) through September 30, 2010, we had a net loss of
$10,039 consisting of interest and dividend income of $27 less costs attributable to general and
administrative expenses of $10,066.
For the period from July 26, 2010 (inception) through September 30, 2011, we had a net loss of
$564,315 consisting of interest and dividend income of $23,350 less costs attributable to general
and administrative expenses of $587,665.
From inception through September 30, 2011, we did not engage in any significant operations. Our
activities from inception through September 30, 2011 were our initial public offering and the
identification of a suitable business combination candidate.
We expect to generate small amounts of non-operating income in the form of interest and dividend
income on cash and cash equivalents. Interest income is not expected to be significant based on the
current low interest rates on risk-free investments (treasury securities). We expect our expenses
to increase substantially after this period if we consummate a business combination as a
result of our acquiring an operating company (for legal, financial reporting, accounting and
auditing compliance), as well as for due diligence expenses.
Liquidity and Capital Resources
In July 2010, John L. Shermyen, LLM Structured Equity Fund L.P. and LLM Investors L.P. purchased an
aggregate of 1,437,500 shares of our common stock, for an aggregate purchase price of $25,000, or
approximately $0.0174 per share. Subsequently, on November 22, 2010, each of Mr. Shermyen, LLM
Structured Equity Fund L.P. and LLM Investors L.P. returned to us an aggregate of 287,500 of such
initial shares, which we have cancelled. These shares are referred to as the initial shares and
consist of (i) 511,111 shares (66,667 of which were forfeited as the underwriters over-allotment
option was not exercised in full) which will be held in escrow until the first anniversary of our
initial business combination and (ii) 638,889 shares (83,333 of which were forfeited as the
underwriters over-allotment option was not exercised in full) which will be held in escrow and
forfeited on the fifth anniversary of our initial business combination unless, prior to such time,
either (x) the last sales price of our stock equals or exceeds $18.00 per share (as adjusted for
stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading
days within any 30-trading day period or (y) a transaction is consummated following our initial
business combination in which all stockholders have the right to exchange their common stock for
cash consideration which equals or exceeds $18.00 per share. Subsequent to the purchase of these
shares, (i) Mr. Shermyen transferred at cost an aggregate of 58,219 of these shares to William A.
Landman and Mitchell Eisenberg, M.D., each of whom is a member of our advisory board, and Alan W.
Pettis, E. David Hetz and Diane M. Daych, each of whom is a director, (ii) LLM Investors L.P.
transferred at cost an aggregate of 2,197 of these shares to Mr. Hetz and Ms. Daych and (iii) LLM
Structured Equity Fund L.P. transferred at cost an aggregate of 56,022 of these shares to Alan R.
Hoops, a member of our advisory board, John A. Svahn, a director, Mr. Hetz and Ms. Daych. Our
initial stockholders have contractually agreed with us that they will have no ability to vote any
of the 638,889 shares being held in escrow until such time, if ever, that such shares are released
to them.
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The sponsors, certain of our directors and advisors and the underwriters purchased, in a private
placement, 3,040,000 warrants prior to the initial public offering at a price of $0.75 per warrant
(a purchase price of $2,280,000) from us. Based on the observable market prices, we believe that
the purchase price of $0.75 per warrant for such warrants exceeds the fair value of such warrants
on the date of the purchase. The valuation is based on comparable initial public offerings by other
blank check companies. The holders have agreed that such warrants will not be sold or transferred
until 30 days following consummation of a business combination, subject to certain limited
exceptions. If we do not complete a business combination, then the proceeds will be part of the
liquidating distribution to the public stockholders and the warrants issued to such holders will
expire worthless.
We consummated our initial public offering of 4,000,000 units at a price of $10.00 per unit on
November 29, 2010. Gross proceeds from our initial public offering were $40,000,000. Total net
proceeds were $38,248,234, before deducting deferred underwriting compensation of $1,000,000 and
includes $200,000 received for the purchase of 266,667 warrants by the underwriters. Upon the
closing of the initial public offering and the private placement of warrants, $40,400,000 was
placed in a trust account. We intend to use substantially all of the net proceeds of the initial
public offering to acquire a target business, including identifying and evaluating prospective
acquisition candidates, selecting the target business, and structuring, negotiating and
consummating a business combination. To the extent that our capital stock is used in whole or in
part as consideration to effect a business combination, the proceeds held in the trust account as
well as any other net proceeds not expended will be used to finance the operations of the target
business.
We believe we will have sufficient available funds outside of the trust account to operate through
January 31, 2012. However, we cannot be certain that this will
be the case. We will need to raise additional funds by borrowing
from our sponsors or selling additional Sponsor Warrants in a private placement to our sponsors in
accordance with our prospectus in order to have sufficient funds outside of the trust account to
operate through May 29, 2012.
We expect our primary liquidity requirement during this period to include approximately
$380,000 for legal, accounting and other expenses associated with due diligence of a prospective
target business including structuring, negotiating and documenting a business combination; $150,000
of expenses for the due diligence (excluding accounting and legal due diligence) of prospective
target businesses by our officers, directors and sponsors; $125,000 of legal and accounting
expenses attendant to the due diligence investigations, structuring and negotiating of a business
combination; $30,000 reserve for liquidation expenses; and $75,000 that will be used for other
miscellaneous expenses and reserves, including for audit fees, as well as stock transfer agent
expenses. We may need to raise additional funds through a private offering of debt or equity
securities if such funds are required to consummate a business combination that is presented to us.
We would only consummate such a financing simultaneously with the consummation of a business
combination.
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Table of Contents
For the nine months ended September 30, 2011, we disbursed an aggregate of approximately $405,720
of funds outside of the trust account for expenses in legal, accounting and filing fees related to
our SEC reporting obligations, general corporate matters, and miscellaneous expenses.
As of September 30, 2011, we had $149,682 in a bank account which is available for use by
management to cover the costs associated with identifying a business combination candidate and
negotiating a related acquisition or merger. Out of the proceeds of our initial public offering
which remained available outside of the trust account, we obtained Directors and Officers insurance
covering an 18 month period from November 23, 2010 through
May 23, 2012 at a cost of $93,970 and
with a prepaid balance at September 30, 2011 of $40,543.
Our ability to continue as a going concern is dependent upon our ability to successfully complete a
business combination by May 29, 2012. The accompanying condensed consolidated financial statements
do not include any adjustments that might be necessary if we are unable to continue as a going
concern and we are required to liquidate.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities which would be considered off-balance sheet
arrangements. We do not participate in transactions that create relationships with unconsolidated
entities or financial partnerships, often referred to as variable interest entities, which would
have been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements, established any special
purpose entities, guaranteed any debt or commitments of other entities, or entered into any
non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations operating lease obligations or
long-term liabilities other than a monthly fee of $7,500 for office space and general and
administrative services payable to LLM Capital Partners LLC, an affiliate of LLM Structured Equity
Fund L.P., one of our Sponsors, Patrick J. Landers, our President, and Frederick S. Moseley IV, a
member of our advisory board and partial owner of LLM Capital Partners LLC. We began incurring this
fee on November 29, 2010, and will continue to incur this fee monthly until the completion of a
business combination.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
To date, our efforts have been limited to organizational activities, activities relating to our
initial public offering and the identification of a business combination candidate. We have neither
engaged in any operations nor generated any revenues.
As of September 30, 2011,
investment securities in the Companys trust account consist of
$40,422,000 in U.S. government treasury bills with a maturity of 180 days or less and another $920
invested in a money market mutual fund that meets the conditions of Rule 2a-7 of the 1940 Act. Due to the short-term nature of these investments, we believe there will be no associated
material exposure to interest rate risk.
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Table of Contents
Item 4. | Controls and Procedures. |
Disclosure Controls and Procedures
Our management with the participation of our chief executive officer and chief financial officer
(the Certifying Officers) evaluated the effectiveness of the Companys disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the
period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Certifying
Officers have concluded that, as of the end of such period, our disclosure controls and procedures
were adequate and effective.
Changes in Internal Control
During the most recently completed fiscal quarter, there has been no change in our internal control
over financial reporting in connection with the evaluation required by Rule 13a-15(d) under the
Exchange Act that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
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PART IIOTHER INFORMATION
Item 1. | Legal Proceedings. |
None.
Item 1A. | Risk Factors. |
There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K
for the period ended December 31, 2010.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
None.
Item 3. | Defaults Upon Senior Securities. |
None.
Item 5. | Other Information. |
None.
Item 6. | Exhibits. |
(a) List of exhibits
Exhibit | ||||
Number | Description | |||
31.1 | Rule 13a-14(a) / Rule 15d-14(a) Certification |
|||
31.2 | Rule 13a-14(a) / Rule 15d-14(a) Certification |
|||
32.1 | | Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 |
||
101 | | The following financial statements from L&L Acquisition
Corp.s Quarterly Report on Form 10-Q for the quarter
ended September 30, 2011, as filed with the SEC on
November 14, 2011, formatted in XBRL, as follows: |
||
(i) the Condensed Consolidated Balance Sheets |
||||
(ii) the Condensed Consolidated Statements of Operations |
||||
(iii) the Condensed Consolidated Statements of Cash Flows |
||||
(iv) the Notes to Condensed Consolidated Financial
Statements, tagged in summary and detail |
| Furnished herewith. | |
| As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
L&L ACQUISITION CORP. |
||||
Date: November 14, 2011 | /s/ Peter Schofield | |||
Peter Schofield | ||||
Secretary and Chief Financial Officer (Authorized Officer and Principal Financial Officer) |
22