Attached files
file | filename |
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EX-3.3 - EX-3.3 - NextDecade Corp. | d31490_ex3-3.htm |
EX-3.1 - EX-3.1 - NextDecade Corp. | d31490_ex3-1.htm |
EX-10.4 - EX-10.4 - NextDecade Corp. | d31490_ex10-4.htm |
EX-23.1 - EX-23.1 - NextDecade Corp. | d31490_ex23-1.htm |
As filed with the U.S. Securities and Exchange Commission on July 9, 2014.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
UNDER THE SECURITIES ACT OF 1933
HARMONY MERGER CORP.
(Exact name of registrant as specified in its
constitutional documents)
Delaware |
6770 |
46-5723951 |
||||||||
(State
or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
777 Third Avenue, 37th Floor
New York, New York 10017
(212) 319-7676
New York, New York 10017
(212) 319-7676
(Address, including zip code, and telephone
number,
including area code, of registrants principal executive offices)
including area code, of registrants principal executive offices)
Eric S. Rosenfeld, Chairman and Chief Executive Officer
777 Third Avenue, 37th Floor
New York, New York 10017
(212) 319-7676
777 Third Avenue, 37th Floor
New York, New York 10017
(212) 319-7676
(Name, address, including zip code, and telephone
number,
including area code, of agent for service)
including area code, of agent for service)
Copies to:
David Alan Miller, Esq. Jeffrey M. Gallant, Esq. Graubard Miller The Chrysler Building 405 Lexington Avenue New York, New York 10174 (212) 818-8800 (212) 818-8881 Facsimile |
Douglas S. Ellenoff, Esq. Stuart Neuhauser, Esq. Ellenoff Grossman & Schole LLP 1345 Avenue of the Americas New York, NY 10105 (212) 370-1300 (212) 370-7889 Facsimile |
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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. þ
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. o
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. o
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. o
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer o |
Accelerated filer o |
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Non-accelerated filer þ (Do not check if a smaller reporting company) |
Smaller reporting company o |
CALCULATION OF REGISTRATION FEE
Title of each Class of Security being registered |
Proposed Maximum Aggregate Offering Price(1) |
Amount of Registration Fee |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Units, each
consisting of one share of common stock, par value $0.0001, and one Right entitling the holder to receive one-tenth (1/10) of a share of common
stock(2) |
$ | 115,000,000 | $ | 14,812 | ||||||
Common Stock
included as part of the Units(2) |
| | ||||||||
Rights included
as part of the Units(2) |
| | ||||||||
Common Stock
underlying Rights included as part of the Units |
| | ||||||||
Total
|
$ | 115,000,000 | $ | 14,812 |
(1) |
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o). |
(2) |
Includes Units and shares of Common Stock and Rights underlying such Units which may be issued on exercise of a 45-day option granted to the Underwriters to cover over-allotments, if any. |
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.
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.
PRELIMINARY
PROSPECTUS |
SUBJECT TO COMPLETION, JULY 9, 2014 |
$100,000,000
Harmony Merger Corp.
10,000,000 Units
Harmony Merger Corp.
is a blank check company formed for the purpose of entering into a merger, stock exchange, asset acquisition, stock purchase, recapitalization,
reorganization or other similar business combination with one or more businesses or entities. Our efforts to identify a prospective target business
will not be limited to a particular industry or geographic region of the world.
We have 24 months from the consummation
of this offering to consummate an initial business combination. If we are unable to consummate a business combination within such time period, we will
distribute the aggregate amount then on deposit in the trust account (described below), pro rata to our public stockholders by way of redemption and
cease all operations except for the purposes of winding up of our affairs, as further described herein.
This is an initial public offering of
our units. Each unit that we are offering has a price of $10.00 and consists of one share of common stock and one right to receive one-tenth (1/10) of
a share of common stock automatically on the consummation of an initial business combination. We refer to these rights as the rights or the
public rights.
We have granted Cantor Fitzgerald &
Co., the representative of the underwriters, a 45-day option to purchase up to 1,500,000 units (over and above the 10,000,000 units referred to above)
solely to cover over-allotments, if any.
Our initial stockholders have committed
to purchase from us an aggregate of 375,000 units, or private units, at $10.00 per unit (for a total purchase price of $3,750,000). These
purchases will take place on a private placement basis simultaneously with the consummation of this offering. Our initial stockholders have also agreed
that if the over-allotment option is exercised by the underwriters in full or in part, they will purchase from us at a price of $10.00 per unit the
number of private units (up to a maximum of 37,500 private units) that is necessary to maintain in the trust account an amount equal to $10.00 per
share of common stock sold to the public in this offering. These additional private units will be purchased in a private placement that will occur
simultaneously with the purchase of the units resulting from the exercise of the over-allotment option. All of the proceeds we receive from these
purchases will be placed in the trust account.
There is presently no public market for
our units, shares of common stock or rights. We intend to apply to have our units listed on the Nasdaq Capital Market, or Nasdaq, under the symbol
_____ on or promptly after the date of this prospectus. We cannot guarantee that our securities will be approved for listing on Nasdaq. The
common stock and rights comprising the units will begin separate trading ten business days following the earlier to occur of the expiration of the
underwriters over-allotment option, its exercise in full or the announcement by the underwriters of its intention not to exercise all or any
remaining portion of the over-allotment option, subject to our filing a Current Report on Form 8-K with the Securities and Exchange Commission, or SEC,
containing an audited balance sheet reflecting our receipt of the gross proceeds of this offering and issuing a press release announcing when such
separate trading will begin. Once the securities comprising the units begin separate trading, the common stock and rights will be traded on Nasdaq
under the symbols _____ and _____, respectively. We cannot assure you that our securities will continue to be listed on Nasdaq
after this offering.
We are an emerging growth
company as defined in the Jumpstart Our Business Startups Act of 2012 and have elected to comply with certain reduced public company reporting
requirements.
Investing in our securities involves
a high degree of risk. See Risk Factors beginning on page 13 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 |
Underwriting Discount and Commissions(1) |
Proceeds, Before Expenses, to Us |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Per unit
|
$ | 10.00 | $ | 0.55 | $ | 9.45 | ||||||||
Total
|
$ | 100,000,000 | $ | 5,500,000 | $ | 94,500,000 |
(1) |
Includes up to $0.30 per unit, or up to $3,000,000, as a deferred underwriting fee to be placed in the trust account described below. These funds will be released only on completion of our initial business combination, as described in this prospectus. Please see the section titled Underwriting for further information relating to the underwriting arrangements agreed to between us and the underwriters in this offering. |
Upon consummation of the offering,
$10.00 per unit sold to the public in this offering (regardless of whether the over-allotment option has been exercised) will be deposited into a
United States-based account at UBS Financial Services Inc., maintained by Continental Stock Transfer & Trust Company, acting as trustee. Except as
described in this prospectus, these funds will not be released to us until the earlier of the completion of our initial business combination and our
redemption of the shares of common stock sold in this offering upon our failure to consummate a business combination within the required time
period.
We are offering the units for sale on a
firm-commitment basis. Cantor Fitzgerald & Co., acting as representative of the underwriters, expects to deliver our securities to investors in the
offering on or about __________, 2014.
Cantor Fitzgerald & Co.
_______________, 2014
Harmony Merger Corp.
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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:
|
we, us or our company refers to Harmony Merger Corp.; |
|
initial stockholders refer to all of our stockholders immediately prior to the date of this prospectus, including all of our officers and directors to the extent they hold such shares; |
|
insider shares refer to the 2,875,000 shares of common stock held by our initial stockholders prior to this offering (including up to an aggregate of 375,000 shares subject to forfeiture to the extent that the underwriters over-allotment option is not exercised in full or in part); |
|
management team or our management refer to our officers and directors; |
|
private units refer to the units we are selling privately to our initial stockholders upon consummation of this offering and references to private shares and private rights refers to the shares of common stock and rights included within the private units; |
|
the term public stockholders means the holders of the shares of common stock which are being sold as part of the units in this public offering (whether they are purchased in the public offering or in the aftermarket), including any of our initial stockholders to the extent that they purchase such shares; and |
|
the information in this prospectus assumes that the underwriters will not exercise their over-allotment option. |
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.
We are a blank check company formed
under the laws of the State of Delaware on May 21, 2014. We were formed for the purpose of entering into a merger, stock exchange, asset acquisition,
stock purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities, which we refer to as a target
business. To date, our efforts have been limited to organizational activities as well as activities related to this offering. We have not selected any
target business on which to concentrate our search for our initial business combination. Our efforts to identify a prospective target business will not
be limited to any particular industry or geographic region. We do not have any specific business combination under consideration and we have not (nor
has anyone on our behalf), directly or indirectly, contacted any prospective target business or had any discussions, formal or otherwise, with respect
to such a transaction.
We will have until 24 months from the
consummation of this offering to consummate our initial business combination. If we are unable to consummate our initial business combination within
such time period, we will distribute the aggregate amount then on deposit in the trust account, pro rata to our public stockholders by way of
redemption and cease all operations except for the purposes of winding up of our affairs.
Pursuant to the Nasdaq listing rules,
our initial business combination must be with a target business or businesses whose collective fair market value is at least equal to 80% of the
balance in the trust account (excluding any deferred underwriters fees and taxes payable on the income earned in the trust account) at the time
of the execution of a definitive agreement for such business combination, although this may entail simultaneous acquisitions of several target
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 (such as actual and potential sales, earnings, cash flow and/or book value). The target business or businesses that we acquire may
have a collective fair market value substantially in excess of 80% of the trust account balance.
We currently anticipate structuring our
initial business combination to acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our
initial business
1
combination where we merge directly with the target business or where we acquire less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital shares of a target. In this case, we would acquire a 100% controlling interest in the target; however, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, only the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test.
As more fully discussed in
Management Conflicts of Interest, if any of our officers or directors becomes aware of a business combination opportunity
that falls within the line of business of any entity to which he has pre-existing fiduciary or contractual obligations, he may be required to present
such business combination opportunity to such entity prior to presenting such business combination opportunity to us. All of our officers and directors
currently have certain pre-existing fiduciary duties or contractual obligations. Additionally, each of Eric S. Rosenfeld, our Chairman and Chief
Executive Officer, David D. Sgro, our Chief Operating Officer, and John P. Schauerman, a director of ours, is also an officer and/or director of
Quartet Merger Corp., or Quartet, a blank check company formed in April 2013 in order to effect a merger, capital stock exchange, asset acquisition or
other similar business combination with one or more businesses or entities. Quartet consummated its initial public offering in November 2013 and raised
gross proceeds of $96.6 million at an offering price of $10.00 per unit. On April 30, 2014, Quartet entered into an Agreement and Plan of
Reorganization with Pangaea Logistics Solutions Ltd., or Pangaea, a Newport, Rhode Island-headquartered growth oriented global logistics company
focused on providing seaborne drybulk transportation services. Until Quartet consummates the business combination with Pangaea or another target
business or is required to be liquidated, each of Messrs. Rosenfeld, Sgro and Schauerman may be required to present all business opportunities which
are suitable for Quartet to Quartet prior to presenting them to us.
We are an emerging growth company as
defined in the Jumpstart Our Business Startups Act of 2012 (which we refer to herein as the JOBS Act) and will remain such for up to five years.
However, if our non-convertible debt issued within a three-year period or our total revenues exceed $1 billion or the market value of our shares of
common stock that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, we would cease
to be an emerging growth company as of the following fiscal year. As an emerging growth company, we have elected, under Section 107(b) of the JOBS Act,
to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act,
for complying with new or revised accounting standards.
Private Placements
Prior to this offering, our initial
stockholders purchased an aggregate of 2,875,000 shares of common stock, which we refer to throughout this prospectus as the insider
shares, for an aggregate purchase price of $25,000, or approximately $0.01 per share. The insider shares held by our initial stockholders include
an aggregate of up to 375,000 shares subject to forfeiture to the extent that the underwriters over-allotment option is not exercised in full or
in part, so that the insider shares will comprise 20.0% of our issued and outstanding shares after this offering (excluding the private units and any
shares purchased by our initial stockholders in this offering). None of our initial stockholders has indicated any intention to purchase units in this
offering.
2
The insider shares are identical to the
shares of common stock included in the units being sold in this offering. However, our initial stockholders have agreed (A) to vote their insider
shares (as well as any other shares acquired in or after this offering) in favor of any proposed business combination, (B) not to propose, or vote in
favor of, an amendment to our amended and restated certificate of incorporation with respect to our pre-business combination activities prior to the
consummation of such a business combination, (C) not to convert any shares (including the insider shares) for cash from the trust account in connection
with a stockholder vote to approve our proposed initial business combination or a vote to amend the provisions of our amended and restated certificate
of incorporation relating to stockholders rights or pre-business combination activity and (D) that the insider shares shall not participate in
any liquidating distribution upon winding up if a business combination is not consummated. Additionally, our initial stockholders have agreed not to
transfer, assign or sell any of the insider shares (except to certain permitted transferees) until (1) with respect to 50% of the insider shares, the
earlier of one year after the date of the consummation of our initial business combination and the date on which the closing price of our common stock
equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days
within any 30-trading day period commencing after our initial business combination and (2) with respect to the remaining 50% of the insider shares, one
year after the date of the consummation of our initial business combination, or earlier, in either case, if, subsequent to our initial business
combination, we consummate a liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right
to exchange their shares of common stock for cash, securities or other property.
In addition, our initial stockholders
have committed to purchase an aggregate of 375,000 private units at a price of $10.00 per unit ($3,750,000 in the aggregate) in a private placement
that will occur simultaneously with the closing of this offering. Our initial stockholders have also agreed that if the over-allotment option is
exercised by the underwriters, they will purchase from us at a price of $10.00 per unit an additional number of private units (up to a maximum of
37,500 private units) pro rata with the amount of the over-allotment option exercised so that at least $10.00 per share sold to the public in this
offering is held in trust regardless of whether the over-allotment option is exercised in full or part. These additional private units will be
purchased in a private placement that will occur simultaneously with the purchase of units resulting from the exercise of the over-allotment option.
The proceeds from the private placement of the private units will be added to the proceeds of this offering and placed in an account in the United
States at UBS Financial Services Inc., maintained by Continental Stock Transfer & Trust Company, as trustee.
The private units are identical to the
units sold in this offering. However, the holders have agreed (A) to vote their private shares in favor of any proposed business combination, (B) not
to propose, or vote in favor of, an amendment to our amended and restated certificate of incorporation with respect to our pre-business combination
activities prior to the consummation of such a business combination, (C) not to convert any private shares for cash from the trust account in
connection with a stockholder vote to approve our proposed initial business combination or a vote to amend the provisions of our amended and restated
certificate of incorporation relating to stockholders rights or pre-business combination activity and (D) that the private shares shall not
participate in any liquidating distribution upon winding up if a business combination is not consummated. The purchasers have also agreed not to
transfer, assign or sell any of the private units or underlying securities (except to the same permitted transferees as the insider shares and provided
the transferees agree to the same terms and restrictions as the permitted transferees of the insider shares must agree to, each as described above)
until the completion of our initial business combination.
Our principal executive offices are
located at 777 Third Avenue, 37th Floor, New York, New York 10017 and our telephone number is (212) 319-7676.
3
The Offering
In making your decision on whether
to invest in our securities, you should take into account not only the backgrounds of the members of our management team, but also the special risks we
face as a blank check company and the fact that this offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act.
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 below entitled Risk Factors beginning on page 13 of this prospectus.
Securities
offered |
10,000,000 units, at $10.00 per unit, each unit consisting of one share of common stock and one right, each right entitling the holder to
automatically receive one-tenth (1/10) of a share of common stock upon consummation of our initial business combination. |
|||||
This
is different from other offerings similar to ours whose units include one share and one warrant. Our management believes that investors in similarly
structured blank check offerings, and those likely to invest in this offering, have come to expect the units of such companies to include one share and
another security which would allow the holders to acquire additional shares. Without the ability to acquire such additional shares, our management
believes that the investors would not be willing to purchase units in such companies initial public offerings. In this offering, by offering
rights as part of the units that automatically entitle the holder to receive only one-tenth of a share, as opposed to warrants included in units of
similarly structured blank check offerings that most often entitle the holder to receive a full share, our management believes we have significantly
(although not entirely) reduced the number of shares that we would be obligated to issue after the offering. Our management also believes this will
make us a more attractive merger partner for target businesses as our capitalization structure will be simpler without the warrants present. However,
our management may be incorrect in this belief. This unit structure may also cause our units to be worth less than if they included a
warrant. |
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Listing of our
securities and proposed symbols |
We
anticipate the units, and the common stock and rights once they begin separate trading, will be listed on Nasdaq under the symbols ____,
____ and ____, respectively. |
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We
have agreed with Cantor Fitzgerald & Co. that each of the shares of common stock and rights may trade separately ten business days following the
earlier to occur of the expiration of the underwriters over-allotment option, its exercise in full or the announcement by the underwriters of
their intention not to exercise all or any remaining portion of the over-allotment option. In no event will Cantor Fitzgerald & Co. allow separate
trading of the common stock and rights until we file an audited balance sheet reflecting our receipt of the gross proceeds of this
offering. |
4
Once
the common stock and rights commence separate trading, holders will have the option to continue to hold units or separate their units into the
component pieces. Holders will need to have their brokers contact our transfer agent in order to separate the units into separately trading common
stock and rights. |
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We
will file a Current Report on Form 8-K with the SEC, including an audited balance sheet, promptly after 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 on the date of this prospectus. If the over-allotment
option is exercised after the date of this prospectus, we will file an amendment to the Form 8-K or a new Form 8-K to provide updated financial
information to reflect the exercise of the over-allotment option. We will also include in the Form 8-K, or amendment thereto, or in a subsequent Form
8-K, information relating to the separate trading of the common stock and rights. |
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Common
Stock: |
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Number
outstanding before this offering |
2,875,000 shares1 |
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Number to be
outstanding after this offering and sale of private units |
12,875,000 shares2 |
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Rights: |
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Number
outstanding before this offering |
0
rights |
|||||
Number to be
outstanding after this offering and sale of private units |
10,375,000 rights |
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Terms of the
Rights |
Each
holder of a right will automatically receive one-tenth (1/10) of a share upon consummation of our initial business combination. If we are unable to
complete an initial business combination within the required time period and we liquidate the funds held in the trust account, holders of rights will
not receive any of such funds for their rights and the rights will expire worthless. |
1 |
This number includes an aggregate of up to 375,000 shares of common stock held by our initial stockholders that are subject to forfeiture if the over-allotment option is not exercised by the underwriters in full. |
2 |
Assumes the over-allotment option has not been exercised and an aggregate of 375,000 shares of common stock held by our initial stockholders have been forfeited. |
5
Offering
proceeds to be held in trust |
$96,250,000 of the net proceeds of this offering (or $110,875,000 if the over-allotment option is exercised in full), plus the $3,750,000 (or
$4,125,000 if the over-allotment option is exercised in full) we will receive from the sale of the private units, for an aggregate of $100,000,000 (or
an aggregate of $115,000,000 if the over-allotment option is exercised in full), or $10.00 per unit sold to the public in this offering will be placed
in a trust account at UBS Financial Services Inc. in the United States, maintained by Continental Stock Transfer & Trust Company, acting as trustee
pursuant to an agreement to be signed on the date of this prospectus. The remaining $750,000 of net proceeds of this offering will not be held in the
trust account. |
|||||
Except as set forth below, the proceeds in the trust account will not be released until the earlier of the completion of an initial business
combination within the required time period or our entry into liquidation if we have not completed a business combination in the required time period.
Therefore, unless and until an initial business combination is consummated, the proceeds held in the trust account will not be available for our use
for any 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 (i) any interest earned on the funds in the trust account
that we need to pay our income or other tax obligations and (ii) any remaining interest earned on the funds in the trust account that we need for our
working capital requirements. 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 (estimated to initially be $750,000); provided, however, that in order to meet our working capital needs
following the consummation of this offering if the funds not held in the trust account and interest earned on the funds held in the trust account
available to us are insufficient, our initial stockholders, officers and directors or their affiliates may, but are not obligated to, loan us funds,
from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a promissory note.
The notes would either be paid upon consummation of our initial business combination, without interest, or, at the lenders discretion, up to
$500,000 of the notes may be converted upon consummation of our business combination into additional private units at a price of $10.00 per unit
(which, for example, would result in the holders being issued 55,000 |
6
shares of common stock if $500,000 of notes were so converted since the 50,000 rights included in the private units would result in the
issuance of 5,000 shares of common stock upon the closing of our business combination). Our initial stockholders have approved the issuance of the
units (and underlying securities) upon conversion of such notes, to the extent the holder wishes to so convert them at the time of the consummation of
our initial business combination. If we do not complete a business combination, the loans would not be repaid. |
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Limited
payments to insiders |
Prior
to the consummation of a business combination, there will be no fees, reimbursements or other cash payments paid to our initial 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: |
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repayment at the closing of this offering of a $50,000 non-interest loan made by Eric S. Rosenfeld, our chairman and chief
executive officer; |
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payment of $12,500 per month to Crescendo Advisors II, LLC, an entity controlled by Mr. Rosenfeld, for office space and
related services; and |
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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; provided, however, that to the extent such expenses exceed the available
proceeds not deposited in the trust account and the interest income earned on the amounts held in the trust account available to us, such expenses
would not be reimbursed by us unless we consummate an initial business combination. Our audit committee will review and approve all reimbursements and
payments made to any initial stockholder or member of our management team, or our or their respective affiliates, and any reimbursements and payments
made to members of our audit committee will be reviewed and approved by our Board of Directors, with any interested director abstaining from such
review and approval. |
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Stockholder
approval of initial business combination |
In
connection with any proposed initial business combination, we will seek stockholder approval of such initial business combination at a meeting called
for such purpose at which stockholders may seek to have their shares converted, regardless of whether they vote for or against the proposed business
combination, for a pro rata share of the aggregate amount then on deposit in the trust |
7
account less any taxes then due but not yet paid (such conversion amount initially anticipated to be $10.00 per share). |
||||||
We
will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation and a majority of
the outstanding shares of common stock voted are voted in favor of the business combination. We have determined not to consummate any business
combination unless we have net tangible assets of at least $5,000,001 upon such consummation in order to avoid being subject to Rule 419 promulgated
under the Securities Act. |
||||||
Our
initial stockholders have agreed (i) to vote their insider shares, private shares and any public shares purchased in or after this offering in favor of
any proposed business combination and (ii) not to convert any shares (including the insider shares) in connection with a stockholder vote to approve a
proposed initial business combination. None of our officers, directors, initial stockholders or their affiliates has indicated any intention to
purchase units in this offering or any units or shares of common stock 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 officers, directors, initial stockholders or their
affiliates could make such purchases in the open market or in private transactions in order to influence the vote. There is no limit on the amount of
shares that may be purchased by the initial stockholders. Any purchases would be made in compliance with federal securities laws, including the fact
that all material information will be made public prior to such purchase, and no purchases would be made if such purchases would violate Section
9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules designed to stop potential manipulation of a companys stock. |
||||||
Conversion
rights |
In
connection with any stockholder meeting called to approve a proposed initial business combination, each public stockholder will have the right,
regardless of whether he is voting for or against such proposed business combination, to have his shares converted into a pro rata share of the trust
account upon consummation of the business combination. |
|||||
Notwithstanding the foregoing, a public stockholder, together with any affiliate of his or any other person with whom he is acting in concert
or as a group (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking conversion rights with respect to 20% or
more of the shares of common stock sold in this offering. Accordingly, all shares purchased by a holder in |
8
excess of 20% of the shares sold in this offering will not be converted for cash. We believe this restriction will prevent an individual
stockholder or group from accumulating large blocks of shares before the vote held to approve a proposed business combination and attempt
to use the redemption right as a means to force us or our management to purchase its shares at a significant premium to the then current market price.
By restricting a stockholders ability to convert more than 20% of the shares of common stock sold in this offering, we believe we have limited
the ability of a small group of stockholders to unreasonably attempt to block a transaction which is favored by our other public
stockholders. |
||||||
We
may also 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 Companys DWAC (Deposit/Withdrawal At Custodian) System, at the holders option. There is a nominal
cost associated with this 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 $45 and it would be up to the broker whether or not to pass this cost on to the converting
holder. |
||||||
If
the business combination is not consummated for any reason, public stockholders will not be entitled to have their shares converted. Public
stockholders who convert their shares will continue to have the right to receive shares upon automatic conversion of the rights they may hold if the
business combination is consummated. |
||||||
Liquidation if
no business combination |
If we
are unable to complete our initial business combination within 24 months from the consummation of this offering, we will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the
outstanding public shares, 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 (iii) as promptly as reasonably possible following such redemption, subject
to the approval of our remaining holders of common stock and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii)
above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. |
9
In
connection with our redemption of 100% of our outstanding public shares for a portion of the funds held in the trust account, each holder will receive
a full pro rata portion of the amount then in the trust account, plus any pro rata interest earned on the funds held in the trust account and not
previously released to us for our working capital requirements or necessary to pay our taxes payable on such funds (subject in each case to our
obligations under Delaware law to provide for claims of creditors). Holders of rights will receive no proceeds in connection with the liquidation with
respect to such rights, which will expire worthless. |
||||||
We
may not have funds sufficient to pay or provide for all creditors claims. Although we will seek to have all third parties (including any vendors
or other entities we engage after this offering) and any prospective target businesses enter into valid and enforceable agreements with us waiving any
right, title, interest or claim of any kind in or to any monies held in the trust account, there is no guarantee that they will execute such
agreements. There is also no guarantee that the third parties would not challenge the enforceability of these waivers and bring claims against the
trust account for monies owed them. |
||||||
The
holders of the insider shares and private units will not participate in any redemption distribution with respect to their insider shares, private
shares or private rights. |
||||||
If we
are unable to conclude our initial business combination and we expend all of the net proceeds of this offering not deposited in the trust account,
without taking into account any interest earned on the trust account, we expect that the initial per-share redemption price will be approximately
$10.00. The proceeds deposited in the trust account could, however, become subject to claims of our creditors that are in preference to the claims of
our stockholders. In addition, if we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us that 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. Therefore, the actual per-share redemption price may be less than
$10.00. |
||||||
We
will pay the costs of any subsequent liquidation from our remaining assets outside of the trust account. If such funds are insufficient, Eric S.
Rosenfeld, our Chairman and Chief Executive Officer, has agreed to pay the funds necessary to complete such liquidation (currently anticipated to be no
more than approximately $15,000) and has agreed not to seek repayment for such expenses. |
10
Risks
In making your decision on whether to
invest in our securities, you should take into account the special risks we face as a blank check company, as well as the fact that this offering is
not being conducted in compliance with Rule 419 promulgated under the Securities Act and, therefore, you will not be entitled to protections normally
afforded to investors in Rule 419 blank check offerings. For additional information concerning how Rule 419 blank check offerings differ from this
offering, please see Proposed Business Comparison to offerings of blank check companies subject to Rule 419. You should
carefully consider these and the other risks set forth in the section entitled Risk Factors beginning on page 13 of this
prospectus.
11
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.
May 31, 2014 |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Actual |
As Adjusted(1) |
||||||||||
Balance
Sheet Data: |
|||||||||||
Working
capital |
$ | 2,007 | $ | 97,774,507 | (2) | ||||||
Total assets
|
97,485 | 100,774,507 | (3) | ||||||||
Total
liabilities |
72,978 | 3,000,000 | (4) | ||||||||
Value of
common stock subject to possible conversion |
0 | 91,999,990 | (5) | ||||||||
Stockholders equity |
24,507 | 5,774,517 |
(1) |
Includes the $3,750,000 we will receive from the sale of the private units. |
(2) |
The as adjusted working capital is derived by adding total stockholders equity and the value of the common stock subject to possible conversion less up to $3,000,000 of deferred underwriting commissions. |
(3) |
The as adjusted total assets is derived by adding total stockholders equity and the value of common stock subject to possible conversion. |
(4) |
The as adjusted liabilities represents up to $3,000,000 of deferred underwriting commissions. |
(5) |
The as adjusted value of common stock subject to possible conversion is derived by taking 9,199,999 shares of common stock which may be converted, representing the maximum number of shares that may be converted while maintaining at least $5,000,001 in net tangible assets after the offering, multiplied by a conversion price of $10.00. |
If a business combination is not so
consummated, the trust account, less amounts we are permitted to withdraw as described in this prospectus, will be distributed solely to our public
stockholders (subject to our obligations under Delaware law to provide for claims of creditors).
12
An investment in our securities
involves a high degree of risk. You should consider carefully the material risks described below, which we believe represent 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. This prospectus
also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the
forward-looking statements as a result of specific factors, including the risks described below.
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 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 revenues until, at the earliest, after the consummation of a business
combination.
Our independent registered public accounting firms
report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a going
concern.
As of May 31, 2014, we had $24,507 in
cash and cash equivalents and working capital of $2,007. Further, we have incurred and expect to continue to incur significant costs in pursuit of our
acquisition plans. Managements plans to address this need for capital through this offering are discussed in the section of this prospectus
titled Managements Discussion and Analysis of Financial Condition and Results of Operations. Our plans to raise capital and to
consummate our initial business combination may not be successful. These factors, among others, raise substantial doubt about our ability to continue
as a going concern. The financial statements contained elsewhere in this prospectus do not include any adjustments that might result from our inability
to consummate this offering or our inability to continue as a going concern.
If we are unable to consummate a business combination, our
public stockholders may be forced to wait more than 24 months before receiving liquidation distributions.
We have 24 months from the consummation
of this offering 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 to have their shares converted. 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 after such date and in order to liquidate your investment, you may be
forced to sell your securities potentially at a loss.
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 of blank check companies such as Rule 419. Accordingly, investors will not be afforded
the benefits or protections of those rules which would, for example, completely restrict the transferability of our securities, require us to complete
a business combination within 18 months of the effective date of the initial registration statement and restrict the use of interest earned on the
funds held in the trust account. Because we are not
13
subject to Rule 419, our units will be immediately tradable, we will be entitled to withdraw amounts from the funds held in the trust account prior to the completion of a business combination and we will have a longer period of time to complete such a business combination than we would if we were subject to such rule.
We may issue shares of our capital stock 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
authorizes the issuance of up to 16,000,000 shares of common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value
$0.0001 per share. Immediately after this offering and the purchase of the private units (assuming no exercise of the underwriters over-allotment
option), there will be 2,087,500 authorized but unissued shares of common stock available for issuance (after appropriate reservation for the issuance
of the shares underlying the rights issuable upon consummation of our initial business combination). Although we have no commitment to do so as of the
date of this offering, we may issue a substantial number of additional shares of common stock or shares of preferred stock, or a combination of common
stock and preferred stock, to complete our initial business combination. The issuance of additional shares of common stock or 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; |
|
may cause a change in control if a substantial number of 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 shares of common stock. |
We may incur significant indebtedness in order to
consummate our initial business combination.
If we find it necessary to incur
significant indebtedness in connection with our initial business combination, it could result in:
|
default and foreclosure on our assets if our profits 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. |
The funds held in the trust account may not earn
significant interest and, as a result, we may be limited to the funds held outside of the trust account to fund our search for target businesses, to
pay our tax obligations and to complete our initial business combination.
Of the net proceeds of this offering,
approximately $750,000 will be available to us initially outside the trust account to fund our working capital requirements. We will depend on
sufficient interest being earned on the proceeds held in the trust account to provide us with additional working capital we will need to identify one
or more target businesses and to complete our initial business combination, as well as to pay any tax obligations that we may owe. Interest rates on
permissible investments for us have been less than 1% over the last several years. Accordingly, if we do not earn a sufficient amount of interest on
the funds held in the trust account and use all of the funds held outside of the trust account, we may not have sufficient funds available with which
to structure, negotiate or close an initial business combination. In such event, we would need to
14
borrow funds from our initial stockholders or their affiliates to operate or may be forced to cease searching for a target business. If our initial stockholders or their affiliates agree to loan us funds, such loan would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial business combination, without interest, or, at the lenders discretion, up to $500,000 of the notes may be converted upon consummation of our business combination into additional private units at a price of $10.00 per unit. Our initial stockholders are under no obligation to loan us any funds.
If third parties bring claims against us, the proceeds held
in trust could be reduced and the per-share liquidation price received by stockholders may be less than $10.00.
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, they may not execute such agreements. Furthermore, even if such entities execute such
agreements with us, they may seek recourse against the monies held in the trust account. A court may not uphold the validity of such agreements.
Accordingly, the proceeds held in trust could be subject to claims which could take priority over those of our public stockholders. If we liquidate the
trust account before the completion of a business combination, Eric S. Rosenfeld has agreed that he will be personally liable to ensure that the
proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by us for
services rendered or contracted for or products sold to us and which have not executed a waiver agreement. However, he may not be able to meet such
obligation. Therefore, the per-share distribution from the trust account in such a situation may be less than $10.00, plus interest, due to such
claims.
Additionally, if we are forced to file
a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, or if we otherwise enter compulsory or court supervised
liquidation, 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 may not be able to return to our public stockholders at least $10.00.
Our stockholders may be held liable for claims by third
parties against us to the extent of distributions received by them.
If we have not completed our initial
business combination within 24 months from the consummation of this offering, we will (i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares 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 (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to
provide for claims of creditors and the requirements of other applicable law. We may not 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, third parties may 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 expiration of the 24-month deadline, 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,
15
and thereby exposing itself and our company to claims of punitive damages, by paying public holders of common stock from the trust account prior to addressing the claims of creditors. Claims may be brought against us for these reasons.
Unlike other blank check companies, our units are comprised
of shares of common stock and rights rather than units comprised of shares of common stock and warrants and therefore investors will not be issued
warrants as part of their investment.
Unlike other blank check companies that
sell units comprised of shares of common stock and warrants in their initial public offerings, we are selling units comprised of shares of common stock
and rights. The rights will not have any voting rights, will automatically entitle the holder to receive one-tenth of a share of common stock upon
consummation of our initial business combination and will expire and be worthless if we do not consummate an initial business combination. Accordingly,
investors in this offering will not be issued any warrants as part of their investment which may have the effect of limiting the potential upside value
of your investment in our company. Additionally, no additional consideration will be required to be paid by holders of the rights to receive the
additional shares upon consummation of our business combination and, as a result, the rights may result in greater dilution than would result from the
issuance of warrants (which would require the payment of additional consideration to receive the shares underlying such warrants).
Holders of rights will not participate in liquidating
distributions if we are unable to complete an initial business combination within the required time period.
If we are unable to complete an initial
business combination within the required time period and we liquidate the funds held in the trust account, the rights will expire and holders will not
receive any of such proceeds with respect to the rights. The foregoing may provide a financial incentive to public stockholders to vote in favor of any
proposed initial business combination as their rights would automatically entitle the holder to receive one-tenth of a share upon consummation of such
business combination, resulting in an increase in their overall economic stake in our company. If a business combination is not approved, the rights
will expire and will be worthless.
Since we have not yet selected a particular industry or
target business with which to complete a business combination, we are unable to currently ascertain the merits or risks of the industry or business in
which we may ultimately operate.
We may consummate a business
combination with a company in any industry we choose and are not limited to any particular industry or type of business. Accordingly, there is no
current basis for you to evaluate the possible merits or risks of the particular industry in which we may ultimately operate or the target business
which we may ultimately acquire. To the extent we complete a business combination with a financially unstable company or an entity in its development
stage, we may be affected by numerous risks inherent in the business operations of those entities. If we complete a business combination with an entity
in an industry characterized by a high level of risk, we may be affected by the currently unascertainable risks of that industry. Although our
management will endeavor to evaluate the risks inherent in a particular industry or 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 were available, in a target business.
The requirement that the target business or businesses that
we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds in the trust account at the time of the
execution of a definitive agreement for our initial business combination may limit the type and number of companies that we may complete such a
business combination with.
Pursuant to the Nasdaq listing rules,
the target business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds in the
trust account (excluding any deferred underwriters fees and taxes payable on the income earned in the trust account) at the time of
the
16
execution of a definitive agreement for our initial business combination. This restriction may limit the type and number of companies with which may complete a business combination. If we are unable to locate a target business or businesses that satisfy this fair market value test, we may be forced to liquidate and you will only be entitled to receive your pro rata portion of the funds in the trust account.
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. 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.
Our ability to successfully effect a
business combination is dependent upon the efforts of our key personnel. We believe that our success depends on the continued service of our key
personnel, at least until we have consummated our initial business combination. We cannot assure you that any of our key personnel will remain with us
for the immediate or foreseeable future. In addition, none of our officers are required to commit any specified amount of time to our affairs and,
accordingly, they will have conflicts of interest in allocating management time among various business activities, including identifying potential
business combinations and monitoring the related due diligence. We do not have employment agreements with, or key-man insurance on the life of, any of
our officers. The unexpected loss of the services of our key personnel could have a detrimental effect on us.
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 which may adversely affect our operations.
Our officers and directors may not have significant
experience or knowledge regarding the jurisdiction or industry of the target business we may seek to acquire.
We may consummate a business
combination with a target business in any geographic location or industry we choose. We cannot assure you that our officers and directors will have
enough experience or have sufficient knowledge relating to the jurisdiction of the target or its industry to make an informed decision regarding a
business combination. If we become aware of a potential business combination outside of the geographic location or industry where our officers and
directors have their most experience, our management may determine to retain consultants and advisors with experience in such industries to assist in
the evaluation of such business combination and in our determination of whether or not to proceed with such a business combination. However, our
management is not required to engage such consultants and advisors in any situation. If they do not engage any consultants or advisors to assist them
in the evaluation of a particular target business or business combination, our management may not properly analyze the risks attendant with such target
business or business combination. As a result, we may enter into a business combination that is not in our stockholders best
interests.
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 or
other appropriate arrangements 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
17
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.
Our officers and directors will allocate their time to
other businesses thereby potentially limiting the amount of time they devote to our affairs. This conflict of interest could have a negative impact on
our ability to consummate our initial 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 presently expect each of our employees to devote such amount of time as they reasonably believe is necessary to our
business. We do not intend to have any full time employees prior to the consummation of our initial business combination. All of our officers and
directors 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 our initial business combination. We cannot assure
you these conflicts will be resolved in our favor.
Our officers and directors have pre-existing fiduciary and
contractual obligations and accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be
presented.
Our officers and directors have
pre-existing fiduciary and contractual obligations to other companies, including companies, such as Quartet, that are engaged in business activities
identical to those intended to be conducted by us. Accordingly, they may participate in transactions and have obligations that may be in conflict or
competition with our consummation of our initial business combination. As a result, a potential target business may be presented by our management team
to another entity prior to its presentation to us and we may not be afforded the opportunity to engage in a transaction with such target business. For
a more detailed description of the pre-existing fiduciary and contractual obligations of our management team, and the potential conflicts of interest
that such obligations may present, see the section titled Management Conflicts of Interest.
Our officers and directors personal and
financial interests may influence their motivation in determining whether a particular target business is appropriate for a business
combination.
Our officers and directors have waived
their right to have their insider shares, private shares or any other shares of common stock acquired in this offering or thereafter converted, or to
receive distributions with respect to their insider shares or private shares upon our liquidation if we are unable to consummate our initial business
combination. Accordingly, the insider shares and private shares will be worthless if we do not consummate our initial business combination. Any rights
they hold, like those held by the public, will also be worthless if we do not consummate an initial business combination. In addition, our officers and
directors may loan funds to us after this offering and may be owed reimbursement for expenses incurred in connection with certain activities on our
behalf which would likely only be repaid if we complete an initial 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.
Nasdaq may delist our securities from quotation on its
exchange which could limit investors ability to make transactions in our securities and subject us to additional trading
restrictions.
We anticipate that our securities will
be listed on Nasdaq, a national securities exchange, upon consummation of this offering. Although, after giving effect to this offering, we meet on a
pro forma basis the minimum initial listing standards of Nasdaq, which generally only requires that we meet certain requirements
18
relating to stockholders equity, market capitalization, aggregate market value of publicly held shares and distribution requirements, we cannot assure you that our securities will continue to be listed on Nasdaq in the future prior to an initial business combination. Additionally, in connection with our initial business combination, it is likely that Nasdaq will require us to file a new initial listing application and meet its initial listing requirements as opposed to its more lenient continued listing requirements. We cannot assure you that we will be able to meet those initial listing requirements at that time.
If Nasdaq delists our securities from
trading on its exchange, we could face significant material adverse consequences, including:
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a limited availability of market quotations for our securities; |
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reduced liquidity with respect to our securities; |
|
a determination that our shares of common stock are penny stock which will require brokers trading in our shares of common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our shares of common stock; |
|
a limited amount of news and analyst coverage for our company; and |
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a decreased ability to issue additional securities or obtain additional financing 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 which may have a limited number of products or
services.
We may only be able to complete one
business combination with the proceeds of this offering. 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 which 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.
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 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 transaction. In the event that the business combination involves the
19
issuance of our shares as consideration, we may be required to issue a higher percentage of our shares to make up for a shortfall in funds. Raising additional funds to cover any shortfall may involve dilutive equity financing or incurring indebtedness at higher than desirable levels. This may limit our ability to effectuate the most attractive business combination available to us.
We may be unable to consummate a business combination if a
target business requires that we have cash in excess of the minimum amount we are required to have at closing and public stockholders may have to
remain stockholders of our company and wait until our liquidation to receive a pro rata share of the trust account or attempt to sell their shares in
the open market.
A potential target may make it a
closing condition to our business combination that we have a certain amount of cash in excess of the $5,000,001 of net tangible assets we are required
to have pursuant to our organizational documents available at the time of closing. If the number of our stockholders electing to exercise their
conversion rights has the effect of reducing the amount of money available to us to consummate a business combination below such minimum amount
required by the target business and we are not able to locate an alternative source of funding, we will not be able to consummate such business
combination and we may not be able to locate another suitable target within the applicable time period, if at all. In that case, public stockholders
may have to remain stockholders of our company and wait the full 24 months in order to be able to receive a pro rata portion of the trust account, or
attempt to sell their shares in the open market prior to such time, in which case they may receive less than a pro rata share of the trust account for
their shares.
We will offer each public stockholder the option to vote in
favor of a proposed business combination and still seek conversion of his, her or its shares, which may make it more likely that we will consummate a
business combination.
In connection with any meeting held to
approve an initial business combination, we will offer each public stockholder (but not our initial stockholders) the right to have his, her or its
shares of common stock converted for cash (subject to the limitations described elsewhere in this prospectus) regardless of whether such stockholder
votes for or against such proposed business combination. This is different than other similarly structured blank check companies where stockholders are
offered the right to have their shares converted only when they vote against a proposed business combination. Accordingly, public stockholders owning a
majority of the shares sold in this offering may exercise their conversion rights and we could still consummate a proposed business combination so long
as a majority of shares voted at the meeting are voted in favor of the proposed business combination. The ability to seek conversion while voting in
favor of a proposed business combination may make it more likely that we will consummate our initial business combination.
Public stockholders, together with any affiliates of theirs
or any other person with whom they are acting in concert or as a group, will be restricted from seeking conversion rights with respect to
more than 20% of the shares sold in this offering.
In connection with any meeting held to
approve an initial business combination, we will offer each public stockholder (but not our initial stockholders) the right to have his, her, or its
shares of common stock converted for cash. Notwithstanding the foregoing, a public stockholder, together with any of its affiliates or any other person
with whom it is acting in concert or as a group will be restricted from seeking conversion rights with respect to more than 20% of the
shares sold in this offering. Accordingly, if you hold more than 20% of the shares sold in this offering and a proposed business combination is
approved, you will not be able to seek conversion rights with respect to the full amount of your shares and may be forced to hold such shares following
the business combination over 20% or sell them in the open market. We cannot assure you that the value of such shares will appreciate over time
following a business combination or that the market price of our shares of common stock will exceed the per-share conversion price.
20
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.
In connection with any stockholder
meeting called to approve a proposed initial business combination, each public stockholder (but not our initial stockholders) will have the right,
regardless of whether it is voting for or against such proposed business combination, to demand that we convert its shares for a share of the trust
account. We may require public stockholders who wish to have their shares converted 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 Companys DWAC (Deposit/Withdrawal At Custodian) System. In
order to obtain a physical share certificate, a stockholders 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 share certificate. While we have been advised that it takes a short time to deliver shares through the DWAC System, this may
not be the case. 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.
If we require public stockholders who wish to convert their
shares of common stock to comply with the delivery requirements for conversion, such converting stockholders may be unable to sell their securities
when they wish to in the event that the proposed business combination is not approved.
If we require public stockholders who
wish to convert their shares of common stock to comply with specific delivery requirements for conversion described above and such proposed business
combination is not consummated, we will promptly return such certificates to the tendering public stockholders. Accordingly, investors who attempted to
convert their shares in such a circumstance will be unable to sell their securities after the failed acquisition until we have returned their
securities to them. The market price for our shares may decline during this time and you may not be able to sell your securities when you wish to, even
while other stockholders that did not seek conversion may be able to sell their securities.
Because of our limited resources and structure, other
companies may have a competitive advantage and 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, seeking stockholder approval of a business combination may delay the
consummation of a transaction. Additionally, our outstanding rights, and the future dilution they potentially represent, may not be viewed favorably by
certain target businesses. Any of the foregoing may place us at a competitive disadvantage in successfully negotiating a business
combination.
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
21
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 for cash a significant number of shares from dissenting stockholders, we will be required to seek additional financing. Such financing may not 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.
Our initial stockholders control a substantial interest in
us and thus may influence certain actions requiring a stockholder vote.
Upon consummation of our offering and
simultaneous private placement, our initial stockholders will collectively own approximately 22.3% of our issued and outstanding shares of common stock
(assuming they do not purchase any units in this offering). None of our officers, directors, initial stockholders or their affiliates has indicated any
intention to purchase units in this offering or any units or shares of common stock from persons in the open market or in private transactions.
However, our officers, directors, initial stockholders or their affiliates could determine in the future to make such purchases in the open market or
in private transactions, to the extent permitted by law, in order to assist us in consummating our initial business combination. In connection with any
vote for a proposed business combination, all of our initial stockholders, as well as all of our officers and directors, have agreed to vote the shares
of common stock owned by them immediately before this offering as well as any shares of common stock acquired in this offering or in the aftermarket in
favor of such proposed business combination.
Our board of directors is and will be
divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year.
As a consequence of our staggered board of directors, only a minority of the board of directors will be considered for election in any
annual meeting and our initial stockholders, because of their ownership position, will have considerable influence regarding the outcome. Accordingly,
our initial stockholders may continue to exert control at least until the consummation of a business combination.
If we do not hold an annual meeting of stockholders until
after the consummation of our initial business combination, stockholders will not be afforded an opportunity to elect directors and to discuss company
affairs with management until such time.
In accordance with Nasdaq corporate
governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing on Nasdaq.
Under Section 211(b) of the Delaware General Corporation Law, we are, however, required to hold an annual meeting of stockholders for the purposes of
electing directors in accordance with our bylaws unless such election is made by written consent in lieu of such a meeting. It is unlikely that there
will be an annual meeting of stockholders to elect new directors prior to the consummation of our initial business combination, and thus we may not be
in compliance with Section 211(b) of the Delaware General Corporation Law, which requires an annual meeting. Therefore, if our stockholders want us to
hold an annual meeting prior to the consummation of our initial business combination, they may attempt to force us to hold one by submitting an
application to the Delaware Court of Chancery in accordance with Section 211(c) of the Delaware General Corporation Law.
Our initial stockholders paid an aggregate of $25,000, or
approximately $0.01 per share, for the insider shares and our initial stockholders will pay $10.00 per unit for the private units, resulting in an
aggregate average price of approximately $1.30 per share (assuming the rights are converted to one-tenth of a share of common stock), and, accordingly,
you will experience immediate and substantial dilution from the purchase of our shares of common stock.
The difference between the public
offering price per share and the pro forma net tangible book value per share after this offering constitutes the dilution to the investors in this
offering. Our initial stockholders acquired their insider shares at a nominal price, significantly contributing to this dilution. Upon
consummation
22
of this offering, you and the other new investors will incur an immediate and substantial dilution of approximately 86.5% or $7.87 per share (the difference between the pro forma net tangible book value per share of $1.22, and the assumed initial offering price of $9.09 per unit). This is because investors in this offering will be contributing approximately 96.4% of the total amount paid to us for our outstanding securities after this offering but will only own approximately 79.1% of our outstanding securities. Accordingly, the per-share purchase price you will be paying substantially exceeds our per share net tangible book value.
If our stockholders exercise their registration rights with
respect to their securities, it may have an adverse effect on the market price of our shares of common stock and the existence of these rights may make
it more difficult to effect a business combination.
Our initial stockholders are entitled
to make a demand that we register the resale of their insider shares at any time commencing three months prior to the date on which their shares may be
released from escrow. Additionally, the purchasers of the private units and our initial stockholders, officers and directors are entitled to demand
that we register the resale of the private units (and the underlying shares of common stock and shares of common stock underlying the rights) and any
securities our initial stockholders, officers, directors or their affiliates may be issued in payment of working capital loans made to us at any time
after we consummate a business combination. The presence of these additional securities trading in the public market may have an adverse effect on the
market price of our securities. 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 shares of common stock.
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 account, 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 treasury bills, notes or bonds having a maturity of 180 days or less or in money market funds meeting the applicable
conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940 and that invest solely in United States treasuries. 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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restrictions on the nature of our investments; and |
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restrictions on the issuance of securities. |
In addition, we may have imposed upon
us certain burdensome requirements, including:
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registration as an investment company; |
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adoption of a specific form of corporate structure; and |
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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.
23
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 the balance of the
trust account 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, initial stockholders or their affiliates. If no opinions are obtained, our stockholders will be relying solely
on the judgment of our board of directors. Furthermore, our directors may have a conflict of interest in analyzing the transaction due to their
personal and financial interests.
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 was negotiated between us and the representative of the
underwriters. Factors considered in determining the prices and terms of the units, including the shares of common stock and rights 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; |
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an assessment of our management and their experience in identifying operating companies; and |
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general conditions of the securities markets at the time of the offering. |
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.
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 business operations and financial
results.
Our efforts to identify a prospective
target business will not be limited to a particular geographic region of the world. If we consummate a business combination with a target business
located outside of the United States, we would be subject to any special considerations or risks associated with companies operating in the target
business governing jurisdiction, including any of the following:
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rules and regulations or currency redemption or corporate withholding taxes on individuals; |
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tariffs and trade barriers; |
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regulations related to customs and import/export matters; |
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longer payment cycles; |
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inflation; |
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economic policies and market conditions; |
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unexpected changes in regulatory requirements; |
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challenges in managing and staffing international operations; |
24
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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; |
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cultural and language differences; |
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protection of intellectual property; and |
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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.
If we effect a business combination with a company located
outside of the United States, it could result in adverse tax consequences to us.
If we effect a business combination
with a company located outside of the United States, we may determine it is necessary to change our jurisdictional domicile from Delaware to a foreign
jurisdiction such as the Cayman Islands or the British Virgin Islands. Changing our domicile could result in adverse tax consequences to us at that
time. Alternatively, we could determine to remain a Delaware company and subject our operations to United States taxation even though our operations
might be wholly foreign. Either of the foregoing could have a negative impact on our results of operations.
The requirement that we complete an initial business
combination within 24 months from the consummation of this offering may give potential target businesses leverage over us in negotiating a business
transaction.
We have 24 months from the consummation
of this offering to complete an initial business combination. Any potential target business with which we enter into negotiations concerning a business
combination will be aware of this requirement. Consequently, such target business may obtain leverage over us in negotiating a business combination,
knowing that if we do not complete a business combination with that particular target business, we may be unable to complete a business combination
with any other target business. This risk will increase as we get closer to the time limits referenced above.
Provisions in our amended and restated certificate of
incorporation and bylaws and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for
our common stock and could entrench management.
Our amended and restated certificate of
incorporation and bylaws contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best
interests. Our board of directors is divided into three classes, each of which will generally serve for a term of three years with
only
25
one class of directors being elected in each year. As a result, at a given annual meeting only one-third of the board of directors may be considered for election. Since our staggered board may prevent our stockholders from replacing a majority of our board of directors at any given annual meeting, it may entrench management and discourage unsolicited stockholder proposals that may be in the best interests of stockholders. Moreover, our board of directors has the ability to designate the terms of and issue new series of preferred stock.
We are also subject to anti-takeover
provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make more difficult the removal of
management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our
securities.
Because we must furnish our stockholders with financial
statements of the target business prepared in accordance with U.S. GAAP or IFRS as issued by the IASB or reconciled to U.S. GAAP, we may not be able to
complete an initial business combination with some prospective target businesses.
The federal proxy rules require that a
proxy statement with respect to a vote on a business combination meeting certain financial significance tests include historical and/or pro forma
financial statement disclosure in periodic reports. These financial statements may be required to be prepared in accordance with, or be reconciled to,
accounting principles generally accepted in the United States of America, or GAAP, or international financial reporting standards, or IFRS, depending
on the circumstances, and the historical financial statements may be required to be audited in accordance with the standards of the Public Company
Accounting Oversight Board (United States), or PCAOB. These financial statement requirements may limit the pool of potential target businesses we may
acquire.
Compliance with the Sarbanes-Oxley Act of 2002 will require
substantial financial and management resources and may increase the time and costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley Act
of 2002 requires that we evaluate and report on our system of internal controls and may require us to have such system audited by an independent
registered public accounting firm. If we fail to maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or
criminal penalties and/or stockholder litigation. Any inability to provide reliable financial reports could harm our business. A target may also not be
in compliance with the provisions of the Sarbanes-Oxley Act regarding the adequacy of internal controls. The development of the internal controls of
any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
Furthermore, any failure to implement required new or improved controls, or difficulties encountered in the implementation of adequate controls over
our financial processes and reporting in the future, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior
internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the
trading price of our securities.
We are an emerging growth company and we cannot
be certain if the reduced disclosure requirements applicable to emerging growth companies will make our securities less attractive to
investors.
We are an emerging growth
company, as defined in the JOBS Act. We will remain an emerging growth company for up to five years. However, if our non-convertible
debt issued within a three-year period or revenues exceeds $1 billion, or the market value of our shares of common stock that are held by
non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, we would cease to be an emerging growth
company as of the following fiscal year. As an emerging growth company, we are not being required to comply with the auditor attestation requirements
of section 404 of the Sarbanes-Oxley Act, we have reduced disclosure obligations regarding executive compensation in our periodic reports and proxy
statements, and we are exempt from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any
golden parachute payments not previously approved. Additionally, as an emerging growth company, we have elected to delay the adoption of new or revised
accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As such,
our financial statements may not be comparable to companies that
26
comply with public company effective dates. We cannot predict if investors will find our shares less attractive because we may rely on these provisions. If some investors find our shares less attractive as a result, there may be a less active trading market for our shares and our share price may be more volatile.
Further, Section 102(b)(1) of the JOBS
Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that
is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the
Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out
of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is
irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has
different application dates for public or private companies, we, as an emerging growth company, will not adopt the new or revised standard until the
time private companies are required to adopt the new or revised standard. This may make comparison of our financial statements with another public
company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period
difficult or impossible because of the potential differences in accountant standards used.
27
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 managements 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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ability to complete our initial business combination; |
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limited operating history; |
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success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; |
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potential ability to obtain additional financing to complete a business combination; |
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pool of prospective target businesses; |
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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 shares; |
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our public securities potential liquidity and trading; |
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regulatory or operational risks associated with acquiring a target business; |
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use of proceeds not held in the trust account or available to us from interest income on the trust account balance; |
|
financial performance following this offering; or |
|
listing or delisting of our securities from Nasdaq or the ability to have our securities listed on Nasdaq following our initial business combination. |
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.
28
We estimate that the net proceeds of
this offering, in addition to the funds we will receive from the sale of the private units (all of which will be deposited into the trust account),
will be as set forth in the following table:
Without Over-Allotment Option |
Over-Allotment Option Exercised |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Gross
proceeds |
||||||||||
From offering
|
$ | 100,000,000 | $ | 115,000,000 | ||||||
From private
placement |
3,750,000 | 4,125,000 | ||||||||
Total gross
proceeds |
103,750,000 | 119,125,000 | ||||||||
Offering
expenses(1) |
||||||||||
Underwriting
discount (2.5% of gross proceeds from offering, excluding deferred fee of up to 3.0% of gross proceeds from offering) |
2,500,000 | (2) | 2,875,000 | (2) | ||||||
Legal fees
and expenses |
250,000 | 250,000 | ||||||||
Nasdaq
listing fee |
50,000 | 50,000 | ||||||||
Printing and
engraving expenses |
45,000 | 45,000 | ||||||||
Accounting
fees and expenses |
40,000 | 40,000 | ||||||||
FINRA filing
fee |
18,000 | 18,000 | ||||||||
SEC
registration fee |
15,000 | 15,000 | ||||||||
Miscellaneous
expenses |
82,000 | 82,000 | ||||||||
Total
offering expenses |
3,000,000 | 3,375,000 | ||||||||
Net
proceeds |
||||||||||
Held in trust
|
100,000,000 | 115,000,000 | ||||||||
Not held in
trust |
750,000 | 750,000 | ||||||||
Total net
proceeds |
$ | 100,750,000 | $ | 115,750,000 | ||||||
Use of net
proceeds not held in trust and amounts available from interest income earned on the trust account(3)(4) |
||||||||||
Legal,
accounting and other third party expenses attendant to the search for target businesses and to the due diligence investigation, structuring and
negotiation of a business combination |
$ | 200,000 | (23.5%) | |||||||
Due diligence
of prospective target businesses by officers, directors and initial stockholders |
50,000 | (3.5%) | ||||||||
Legal and
accounting fees relating to SEC reporting obligations |
100,000 | (11.8%) | ||||||||
Payment of
administrative fee to Crescendo Advisors II, LLC ($12,500 per month for up to 24 months) |
300,000 | (35.3%) | ||||||||
Corporate and
franchise taxes |
100,000 | (11.8%) | ||||||||
Working
capital to cover miscellaneous expenses, D&O insurance, general corporate purposes, liquidation obligations and reserves |
100,000 | (11.8%) | ||||||||
Total
|
$ | 850,000 | (100.0%) |
(1) |
A portion of the offering expenses, including the SEC registration fee, the FINRA filing fee, the non-refundable portion of the Nasdaq listing fee and a portion of the legal and audit fees, have been paid from the funds we received from Eric S. Rosenfeld described below. These funds will be repaid out of the proceeds of this offering available to us. |
29
(2) |
The underwriting discount of 2.5% is payable at the closing of the offering. Additionally, a deferred underwriting fee of up to 3.0% is payable upon consummation of our initial business combination and will be held in the trust account until consummation of such business combination. No discounts or commissions will be paid with respect to the purchase of the private units. |
(3) |
The amount of proceeds not held in trust will remain constant at $750,000 even if the over-allotment is exercised. In addition, interest income earned on the amounts held in the trust account (after payment of taxes owed on such interest income) will be available to us to pay for our working capital requirements. We estimate the interest earned on the trust account will be approximately $100,000 over a 24-month period assuming an interest rate of approximately 0.05% per year. |
(4) |
These are estimates only. Our actual expenditures for some or all of these items may differ from the estimates set forth herein. For example, we may incur greater legal and accounting expenses than our current estimates in connection with negotiating and structuring our initial business combination based upon the level of complexity of that business combination. We do not anticipate any change in our intended use of proceeds, other than fluctuations among the current categories of allocated expenses, which fluctuations, to the extent they exceed current estimates for any specific category of expenses, would be deducted from our excess working capital. |
Our initial stockholders have committed
to purchase from us an aggregate of 375,000 private units at $10.00 per unit (for a total purchase price of $3,750,000). These purchases will take
place on a private placement basis simultaneously with the consummation of this offering. Our initial stockholders have also agreed that if the
over-allotment option is exercised by the underwriters in full or in part, they will purchase from us at a price of $10.00 per unit the number of
private units (up to a maximum of 37,500 private units) that is necessary to maintain in the trust account an amount equal to $10.00 per share of
common stock sold to the public in this offering. All of the proceeds we receive from these purchases will be placed in the trust
account.
$100,000,000, or $115,000,000 if the
over-allotment option is exercised in full, of net proceeds of this offering and the sale of the private units will be placed in an account at UBS
Financial Services Inc. in the United States, maintained by Continental Stock Transfer & Trust Company, New York, New York, as trustee. The funds
held in trust will be invested only in United States government treasury bills, bonds or notes having a maturity of 180 days or less, or in money
market funds meeting the applicable conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940 and that invest solely in United
States government treasuries, so that we are not deemed to be an investment company under the Investment Company Act. Except with respect to (i)
interest earned on the funds held in the trust account that may be released to us to pay our income or other tax obligations and (ii) any remaining
interest earned on the funds held in the trust account that may be released to us for our working capital requirements, the proceeds 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.
The payment to Crescendo Advisors II,
LLC, an entity controlled by Mr. Rosenfeld, of a monthly fee of $12,500 is for general and administrative services including office space, utilities
and administrative support. This arrangement is being agreed to by Crescendo Advisors II, LLC for our benefit and is not intended to provide Mr.
Rosenfeld or our other executive officers with compensation in lieu of salaries. We believe, based on rents and fees for similar services in New York
City, that the fee charged by Crescendo Advisors II, LLC is at least as favorable as we could have obtained from an unaffiliated person. This
arrangement will terminate upon completion of our initial business combination or the distribution of the trust account to our public stockholders.
Other than the $12,500 per month fee, no compensation of any kind (including finders, 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
30
and business combinations as well as traveling to and from the offices, plants or similar locations of prospective target businesses to examine their operations. 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 working capital requirements in
searching for a business combination will be approximately $750,000. In addition, interest earned on the funds held in the trust account (after payment
of taxes owed on such interest income) may be released to us to fund our working capital requirements in searching for a business combination. We
intend to use the excess working capital available for miscellaneous expenses such as paying fees to consultants to assist us with our search for a
target business and for director and officer liability insurance premiums, with the balance being held in reserve in the event due diligence, legal,
accounting and other expenses of structuring and negotiating business combinations exceed our estimates, as well as for reimbursement of any
out-of-pocket expenses incurred by our initial stockholders, officers and directors 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
intend to use the after-tax interest earned for miscellaneous expenses such as paying fees to consultants to assist us with our search for a target
business and for director and officer liability insurance premiums, with the balance being held in reserve in the event due diligence, legal,
accounting and other expenses of structuring and negotiating business combinations exceed our estimates, as well as for reimbursement of any
out-of-pocket expenses incurred by our initial stockholders, officers and directors in connection with activities on our behalf as described
below.
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. If our estimate of the costs of undertaking in-depth due diligence and negotiating our initial business combination is
less than the actual amount necessary to do so, or the amount of interest available from the trust account is insufficient as a result of the current
low interest rate environment, we may be required to raise additional capital, the amount, availability and cost of which is currently unascertainable.
In this event, we could seek such additional capital through loans or additional investments from members of our management team, but such members of
our management team are not under any obligation to advance funds to, or invest in, us.
We will likely use a substantial
portion 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 share capital 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.
To the extent we are unable to
consummate a business combination, we will pay the costs of liquidating our trust account from our remaining assets outside of the trust account. If
such funds are insufficient, Eric S. Rosenfeld has agreed to advance us the funds necessary to complete such liquidation (currently anticipated to be
no more than $15,000) and has agreed not to seek repayment of such expenses.
As of May 31, 2014, Eric S. Rosenfeld
loaned to us an aggregate of $50,000 to be used to pay a portion of the expenses of this offering referenced in the line items above for SEC
registration fee, FINRA filing fee, the non-refundable portion of the Nasdaq listing fee and a portion of the legal and audit fees and expenses. The
loan is payable without interest on the earlier of (i) May 31, 2015, (ii) the date on which we consummate our initial public offering or (iii) the date
on which we determine to not proceed with our initial public offering. The loan will be repaid out of the proceeds of this offering available to us for
payment of offering expenses.
31
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. However, if necessary, in order to meet our working capital
needs following the consummation of this offering, our initial stockholders, officers and directors or their affiliates may, but are not obligated to,
loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a
promissory note. The notes would either be paid upon consummation of our initial business combination, without interest, or, at the lenders
discretion, up to $500,000 of the notes may be converted upon consummation of our business combination into additional private units at a price of
$10.00 per unit (which, for example, would result in the holders being issued 55,000 shares of common stock if $500,000 of notes were so converted
since the 50,000 rights included in the private units would result in the issuance of 5,000 shares of common stock upon the closing of our business
combination). Our stockholders have approved the issuance of the units and underlying securities upon conversion of such notes, to the extent the
holder wishes to so convert them at the time of the consummation of our initial business combination. If we do not complete our initial business
combination, the loans would not be repaid.
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 to the extent not previously
released to us) only in the event of (i) our liquidation if we have not completed a business combination within the required time period or (ii) if
that public stockholder converts such shares in connection with a business combination 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.
32
We have not paid any cash dividends on
our shares of common stock to date and do not intend to pay cash dividends prior to the completion of an initial business combination. The payment of
cash dividends subsequent to the consummation of our initial business combination will be dependent upon our revenues and earnings, if any, capital
requirements and general financial condition subsequent to completion of a business combination. The payment of any dividends subsequent to a business
combination will be within the discretion of our board of directors at such time. 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 of directors does not anticipate declaring any dividends in the
foreseeable future. In addition, our board of directors is not currently contemplating and does not anticipate declaring any share dividends in the
foreseeable future, except if we increase the size of the offering pursuant to Rule 462(b) under the Securities Act, in which case we will effect a
share dividend immediately prior to the consummation of the offering in such amount as to maintain our initial stockholders ownership at 20% of
our issued and outstanding shares of common stock upon the consummation of this offering (excluding ownership of the private units). Further, if we
incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection
therewith.
33
The difference between the public
offering price per share and the pro forma net tangible book value per share after this offering constitutes the dilution to investors in this
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 shares of common stock which may be converted for cash), by the number of outstanding shares of common stock. For
the purposes of the dilution calculation, in order to present the maximum estimated dilution as a result of this offering, we have assumed the issuance
of 0.1 of a share for each right outstanding, as such issuance will occur automatically upon a business combination without the payment of additional
consideration. Accordingly, for the purposes of the dilution calculation, the number of shares included in the units offered hereby will be deemed to
be 11,000,000, the price per share in this offering will be deemed to be $9.09 and the number of shares included in the private units will be deemed to
be 412,500.
At May 31, 2014, our net tangible book
value was $2,007, or approximately $0.00 per share. After giving effect to the sale of 10,000,000 shares of common stock included in the units we are
offering by this prospectus, and the deduction of underwriting discounts and estimated expenses of this offering, and the sale of the private units,
and assuming the issuance of 1,037,500 shares for the outstanding rights, our pro forma net tangible book value at May 31, 2014 would have been
$5,774,517 or $1.22 per share, representing an immediate increase in net tangible book value of $1.22 per share to the initial stockholders and an
immediate dilution of 86.5% per share or $7.87 to new investors not exercising their conversion rights. For purposes of presentation, our pro forma net
tangible book value after this offering is $91,999,990 less than it otherwise would have been because if we effect a business combination, the ability
of public stockholders (but not our initial stockholders) to exercise conversion rights may result in the conversion of up to 9,199,999 shares sold in
this offering.
The following table illustrates the
dilution to the new investors on a per-share basis:
Public
offering price |
$ | 9.09 | ||||||||
Net tangible
book value before this offering |
$ | 0.00 | ||||||||
Increase
attributable to new investors and private sales |
1.22 | |||||||||
Pro forma net
tangible book value after this offering |
1.22 | |||||||||
Dilution to
new investors |
$ | 7.87 | ||||||||
Percentage of
dilution to new investors |
86.5 | % |
The following table sets forth
information with respect to our initial stockholders and the new investors:
Shares Purchased |
Total Consideration |
Average Price per Share |
|||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Number |
Percentage |
Amount |
Percentage |
||||||||||||||||||||
Initial
stockholders |
2,912,500 | (1) | 20.9 | % | $ | 3,775,000 | 3.6 | % | $ | 1.30 | |||||||||||||
New investors
|
11,000,000 | (2) | 79.1 | % | 100,000,000 | 96.4 | % | $ | 9.09 | ||||||||||||||
13,912,500 | 100.0 | % | $ | 103,775,000 | 100.0 | % |
(1) |
Assumes the over-allotment option has not been exercised and an aggregate of 375,000 shares of common stock held by our initial stockholders have been forfeited as a result thereof. Includes 375,000 private shares issued simultaneously with the consummation of this offering. Assumes the issuance of an additional 37,500 shares underlying the private rights. |
(2) |
Assumes the issuance of an additional 1,000,000 public shares underlying the public rights. |
34
The pro forma net tangible book value
after the offering is calculated as follows:
Numerator: |
||||||
Net tangible
book value before the offering |
$ | 24,507 | ||||
Net proceeds
from this offering and private placement of private units |
100,750,000 | |||||
Less:
Deferred underwriters commission |
(3,000,000 | ) | ||||
Less:
Proceeds held in trust subject to possible conversion |
(91,999,990 | ) | ||||
$ | 5,774,517 | |||||
Denominator: |
||||||
Shares of
common stock outstanding prior to this offering |
2,500,000 | (1) | ||||
Shares of
common stock included in the units offered |
10,000,000 | |||||
Shares of
common stock to be sold in private placement |
375,000 | |||||
Shares of
common stock underlying the rights to be sold in this offering |
1,000,000 | |||||
Shares of
common stock underlying the rights to be sold in private placement |
37,500 | |||||
Less: Shares
subject to possible conversion |
(9,199,999 | ) | ||||
4,712,501 |
(1) |
Assumes the over-allotment option has not been exercised and an aggregate of 375,000 shares of common stock held by our initial stockholders have been forfeited as a result thereof. |
35
The following table sets forth our
capitalization at May 31, 2014 and as adjusted to give effect to the sale of our units and the private units and the application of the estimated net
proceeds derived from the sale of such securities.
May 31, 2014 |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Actual |
As Adjusted(1) |
||||||||||
Note payable
to related party(2) |
$ | 50,000 | $ | | |||||||
Deferred
underwriting commissions |
| 3,000,000 | |||||||||
Shares of
common stock, par value $0.0001 per share, -0- and 9,199,999 shares which are subject to possible conversion |
| 91,999,990 | (4) | ||||||||
Stockholders equity: |
|||||||||||
Shares of
preferred stock, par value $0.0001 per share, 1,000,000 shares authorized; none issued or outstanding |
| | |||||||||
Shares of
common stock, par value $0.0001 per share, 16,000,000 shares authorized; 2,875,000 shares issued and outstanding, actual; 3,675,001 shares issued and
outstanding(3) (excluding 9,199,999 shares subject to possible conversion), as adjusted |
288 | 368 | |||||||||
Additional
paid-in capital |
24,712 | 5,774,642 | |||||||||
Deficit
accumulated during the development stage |
(493 | ) | (493 | ) | |||||||
Total
stockholders equity: |
$ | 24,507 | $ | 5,774,517 | |||||||
Total
capitalization |
$ | 74,507 | $ | 100,774,507 | (5) |
(1) |
Includes the $3,750,000 we will receive from the sale of the private units. |
(2) |
Note payable to related party is a promissory note issued in the aggregate amount of $50,000 to Eric S. Rosenfeld. The note is non-interest bearing and is payable on the earliest to occur of (i) May 31, 2015, (ii) the consummation of this offering or (iii) the date on which we determine not to proceed with this offering. |
(3) |
Assumes the over-allotment option has not been exercised and an aggregate of 375,000 shares of common stock held by our initial stockholders have been forfeited as a result thereof. Assumes shares underlying the rights to be sold in this offering as issued and outstanding. |
(4) |
Derived by taking 9,199,999 shares of common stock which may be converted, representing the maximum number of shares that may be converted while maintaining at least $5,000,001 in net tangible assets after the offering, multiplied by a conversion price of approximately $10.00. |
(5) |
Derived by adding total stockholders equity and the value of the common stock subject to possible conversion. |
36
We were formed on May 21, 2014 for the
purpose of completing an initial business combination with one or more target businesses. We have not identified a target business and we have not, nor
has anyone on our behalf, initiated any discussions, directly or indirectly, with respect to identifying any target business. We intend to effectuate
our initial business combination using cash from the proceeds of this offering and the private placement of the private units, our shares, debt or a
combination of cash, shares and debt. The issuance of additional shares of common stock or shares of preferred stock:
|
may significantly reduce the equity interest of our stockholders; |
|
may subordinate the rights of holders of shares of common stock if we issue shares of preferred stock with rights senior to those afforded to our shares of 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 securities. |
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.
Liquidity and Capital Resources
As indicated in the accompanying
financial statements, at May 31, 2014, we had $74,985 in cash and cash equivalents and working capital of $2,007. Further, we have incurred and expect
to continue to incur significant costs in pursuit of our financing and acquisition plans.
Our liquidity needs have been satisfied
to date through receipt of $25,000 from the sale of the insider shares and a loan from Eric S. Rosenfeld in an aggregate amount of $50,000 that is more
fully described below. We estimate that the net proceeds from (1) the sale of the units in this offering, after deducting offering expenses of
approximately $500,000 and underwriting discounts and commissions of $2,500,000 and (2) the sale of the private units for a purchase price of
$3,750,000, will be $100,750,000 (or $115,750,000 if the over-allotment option is exercised in full). $100,000,000 (or $115,000,000 if the
over-allotment option is exercised in full), which includes the deferred underwriting fee of up to $3,000,000 (or $3,450,000 if the over-allotment
option is exercised in full) which will be payable only upon consummation of our initial business combination, will be held in the trust account. The
remaining $750,000 (whether or not the over-allotment option is exercised in full) will not be held in the trust account.
We intend to use substantially all of
the net proceeds of this offering, including the funds held in the trust account, to acquire a target business or businesses 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 our initial business combination,
the
37
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 which we had incurred prior to the completion of our initial business combination if the funds available to us outside of the trust account were insufficient to cover such expenses.
We believe that, upon consummation of
this offering, the $750,000 of net proceeds not held in the trust account plus the interest earned on the trust account balance that may be released to
us to fund our working capital requirements (which we anticipate will be approximately $100,000 assuming an interest rate of approximately 0.05% per
year) 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:
|
$200,000 of expenses for the search for target businesses and for the legal, accounting and other third-party expenses attendant to the due diligence investigations, structuring and negotiating of a business combination; |
|
$50,000 of expenses for the due diligence and investigation of a target business by our officers, directors and initial stockholders; |
|
$100,000 of expenses in legal and accounting fees relating to our SEC reporting obligations; |
|
$300,000 for the payment of the administrative fee to Crescendo Advisors II, LLC (of $12,500 per month for up to 24 months); |
|
$100,000 for corporate and franchise taxes; and |
|
$100,000 for general working capital that will be used for miscellaneous expenses, liquidation obligations and reserves, including director and officer liability insurance premiums. |
If our estimates of the costs of
undertaking in-depth due diligence and negotiating our initial business combination is less than the actual amount necessary to do so, or the amount of
interest available to us from the trust account is less than we expect as a result of the current interest rate environment, we may have insufficient
funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to
consummate our initial business combination or because we become obligated to convert a significant number of our public shares upon consummation of
our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. Subject
to compliance with applicable securities laws, we would only consummate such financing simultaneously with the consummation of our initial business
combination. Following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet
our obligations. These conditions raise substantial doubt about our ability to continue as a going concern.
Related Party Transactions
As of May 31, 2014, Eric S. Rosenfeld
loaned an aggregate of $50,000 to us, on a non-interest bearing basis, for payment of offering expenses on our behalf. The loan is payable without
interest on the earlier of (i) May 31, 2015, (ii) the date on which we consummate our initial public offering or (iii) the date on which we determine
to not proceed with our initial public offering. The loan will be repaid out of the proceeds of this offering not being placed in the trust
account.
We are obligated, commencing on the
date of this prospectus, to pay Crescendo Advisors II, LLC, an entity controlled by Mr. Rosenfeld, a monthly fee of $12,500 for general and
administrative services.
38
Our initial stockholders have committed
to purchase an aggregate of 375,000 private units at a price of $10.00 per unit ($3,750,000 in the aggregate) in a private placement that will occur
simultaneously with the closing of this offering. Our initial stockholders have also agreed that if the over-allotment option is exercised by the
underwriters, they will purchase from us at a price of $10.00 per unit an additional number of private units (up to a maximum of 37,500 private units)
pro rata with the amount of the over-allotment option exercised so that at least $10.00 per share sold to the public in this offering is held in trust
regardless of whether the over-allotment option is exercised in full or part. These additional private units will be purchased in a private placement
that will occur simultaneously with the purchase of units resulting from the exercise of the over-allotment option.
We do not believe we will need to raise
additional funds following this offering in order to meet the expenditures required for operating our business. However, in order to finance
transaction costs in connection with an intended initial business combination, our initial stockholders, officers, directors or their affiliates may,
but are not obligated to, loan us funds as may be required. In the event that the initial business combination does not close, we may use a portion of
the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such
repayment. Such loans would be evidenced by promissory notes. The notes would either be paid upon consummation of our initial business combination,
without interest, or, at the lenders discretion, up to $500,000 of the notes may be converted upon consummation of our business combination into
additional private units at a price of $10.00 per unit (which, for example, would result in the holders being issued 55,000 shares of common stock if
$500,000 of notes were so converted since the 50,000 rights included in the private units would result in the issuance of 5,000 shares of common stock
upon the closing of our business combination). We believe the purchase price of these units will approximate the fair value of such units when issued.
However, if it is determined, at the time of issuance, that the fair value of such units exceeds the purchase price, we would record compensation
expense for the excess of the fair value of the units on the day of issuance over the purchase price in accordance with ASC 718 Compensation
Stock Compensation.
Controls and Procedures
We are not currently required to
maintain an effective system of internal controls as defined by Section 404 of the Sarbanes-Oxley Act. We will be required to comply with the internal
control requirements of the Sarbanes-Oxley Act for the fiscal year ending December 31, 2015. As of the date of this prospectus, we have not completed
an assessment, nor have our auditors tested our systems, of internal controls. We expect to assess the internal controls of our target business or
businesses prior to the completion of our initial business combination and, if necessary, to implement and test additional controls as we may determine
are necessary in order to state that we maintain an effective system of internal controls. A target business may not be in compliance with the
provisions of the Sarbanes-Oxley Act regarding the adequacy of internal controls. Target businesses we may consider for our initial business
combination may have internal controls that need improvement in areas such as:
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staffing for financial, accounting and external reporting areas, including segregation of duties; |
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reconciliation of accounts; |
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proper recording of expenses and liabilities in the period to which they relate; |
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evidence of internal review and approval of accounting transactions; |
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documentation of processes, assumptions and conclusions underlying significant estimates; and |
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documentation of accounting policies and procedures. |
Because it will take time, management
involvement and perhaps outside resources to determine what internal control improvements are necessary for us to meet regulatory requirements and
market expectations for our operation of a target business, we may incur significant expense in meeting our public reporting responsibilities,
particularly in the areas of designing, enhancing, or remediating internal and disclosure controls. Doing so effectively may also take longer than we
expect, thus increasing our exposure to financial fraud or erroneous financing reporting.
39
Once our managements report on
internal controls is complete, we will retain our independent auditors to audit and render an opinion on such report when required by Section 404. The
independent auditors may identify additional issues concerning a target businesss internal controls while performing their audit of internal
control over financial reporting.
Quantitative and Qualitative Disclosures about Market
Risk
The net proceeds of this offering,
including amounts in the trust account, will be invested in United States government treasury bills, bonds or notes having a maturity of 180 days or
less, or in money market funds meeting the applicable conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940 and that invest
solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate
risk.
Off-Balance Sheet Arrangements; Commitments and Contractual
Obligations; Quarterly Results
As of the date of this prospectus, we
did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual
obligations. No unaudited quarterly operating data is included in this prospectus as we have conducted no operations to date.
JOBS Act
On April 5, 2012, the JOBS Act was
signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We
will qualify as an emerging growth company and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements
based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards,
and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for
non-emerging growth companies. As such, our financial statements may not be comparable to companies that comply with public company effective
dates.
40
Introduction
We are a Delaware blank check company
incorporated on May 21, 2014 formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization,
reorganization or other similar business combination with one or more target businesses. Our efforts to identify a prospective target business will not
be limited to a particular industry or geographic region.
Eric S. Rosenfeld, our Chairman and
Chief Executive Officer, has also served as Chairman and Chief Executive Officer of four prior publicly-held blank check companies: (i) Arpeggio
Acquisition Corporation, or Arpeggio, which raised $36 million in June 2004 and consummated a business combination with Hill International, Inc., or
Hill International, in June 2006, (ii) Rhapsody Acquisition Corp., or Rhapsody, which raised $36 million in October 2006 and consummated a business
combination with Primoris Corporation, or Primoris, in July 2008, (iii) Trio Merger Corp., or Trio, which raised $69 million in June 2011 and
consummated a business combination with SAExploration Holdings Inc., or SAE, in June 2013 and (iv) Quartet, which raised $96.6 million in November 2013
and has entered into a definitive agreement for a business combination with Pangea Logistics Solutions Ltd., or Pangaea. David D. Sgro, our Chief
Operating Officer, has also served as Chief Financial Officer of Rhapsody, Trio and Quartet. Additionally, Leonard B. Schelmm, a member of our Board,
served as a member of the Board of Arpeggio and Rhapsody, and John P. Schauerman has served as a member of the Board of Quartet. We believe that
potential sellers of target businesses will view the fact that our management team has successfully closed three business combinations (and entered
into a definitive agreement for a fourth) with vehicles similar to our company as a positive factor in considering whether or not to enter into a
business combination with us. However, there is no assurance that we will complete a business combination.
In June 2004, Arpeggio, a blank check
company founded by Eric S. Rosenfeld, consummated its initial public offering, raising $36 million (at $6.00 per unit each consisting of one share of
common stock and two warrants, each to purchase one share of common stock). In June 2006, Arpeggio completed a merger with Hill International. Hill
International provides fee-based project management and construction claims services worldwide primarily serving the United States and other national
governments, state and local governments, and the private sector. It was founded in 1976 and is headquartered in Marlton, New Jersey. Hill
International has grown substantially since its business combination with Arpeggio. For example, its revenues have grown from $112 million in 2005 to
approximately $577 million in 2013. In the merger, Arpeggio issued approximately 14.5 million shares of its common stock to Hill Internationals
stockholders and provided for an additional 6.6 million contingent shares issuable if certain earnings targets were achieved from 20062009. All
of such contingent shares were issued as Hill International was successful in achieving its earnings targets. Immediately following the merger,
Arpeggios former stockholders owned approximately 36% of Hill International and the remaining 64% was owned by Hill Internationals former
stockholders. The warrants issued in Arpeggios initial public offering were subsequently redeemed by Hill International in accordance with their
terms, the result of which was Hill International receiving approximately $68 million from the exercise of such warrants. Hill Internationals
common stock currently trades on the New York Stock Exchange under the symbol HIL and its price has ranged from $2.35 to $19.30 following the
completion of its business combination with Arpeggio, with a closing price of $ on , 2014. Eric S. Rosenfeld served as a director of Hill International
from June 2006 to June 2010.
In October 2006, Rhapsody, a blank
check company founded by Mr. Rosenfeld and David Sgro, our Chief Financial Officer, consummated its initial public offering, raising $36 million (at
$8.00 per unit each consisting of one share of common stock and one warrant to purchase one share of common stock). In July 2008, Rhapsody completed a
merger with Primoris and, shortly thereafter, the company changed its name to Primoris Services Corporation. Primoris provides
construction, fabrication, maintenance, replacement, and engineering services to public utilities, petrochemical companies, energy companies, and
municipalities primarily in the United States and Canada. Primoris is headquartered in Dallas, Texas. Its revenues have grown from $543 million in
2007, the year before the merger with Rhapsody, to approximately $1.9 billion in 2013. In the merger, Rhapsody issued approximately 24.1 million shares
of its common stock to Primoriss
41
stockholders and provided for an additional 5.0 million contingent shares issuable if certain earnings targets were achieved for 2008 and 2009. All of such contingent shares were issued as Primoris was successful in achieving its earnings targets. The warrants issued in Rhapsodys initial public offering expired by their terms in October 2010. Primoriss common stock currently trades on the Nasdaq Capital Market under the symbol PRIM and its price has ranged from $3.25 to $33.35 following the completion of its business combination with Rhapsody, with a closing price of $ on , 2014. Eric S. Rosenfeld served as a director of Primoris from the completion of its business combination in 2008 until May 2014. David D. Sgro served as a director of Primoris from 2008 to 2011.
In March 2008, Mr. Rosenfeld became the
chairman of the board, chief executive and president, and Mr. Sgro became the chief financial officer, secretary and a director, of Symphony
Acquisition Corp. and Staccato Acquisition Corp., two blank check companies, each formed to complete a business combination with one or more businesses
or entities. Due to market conditions, neither Symphony Acquisition Corp. nor Staccato Acquisition Corp. completed its initial public offering and
neither engaged in any substantive operations.
In June 2011, Trio, a blank check
company founded by Messrs. Rosenfeld and Sgro, consummated its initial public offering, raising $69 million (at $10.00 per unit each consisting of one
share of common stock and one warrant to purchase one share of common stock). In June 2013, Trio completed a merger with SAE and in connection
therewith the company changed its name to SAExploration Holdings, Inc. SAE is a holding company of various subsidiaries which collectively
form a geophysical services company offering seismic data acquisition services to the oil and gas industry in North America, South America, and
Southeast Asia. SAE provides a full range of services related to the acquisition of 2D, 3D and time-lapse 4D seismic data on land, in transition zones
between land and water and in shallow water, as well as seismic data field processing. In the merger, the SAE common stockholders, on a fully-diluted
basis, received: (i) an aggregate of 6,448,413 shares of Trio common stock at the closing; (ii) an aggregate of $7,500,000 in cash at the closing;
(iii) an aggregate of $17,500,000 represented by a promissory note issued by Trio at the closing; and (iv) the right to receive up to 992,064
additional shares of Trio common stock after the closing based on the achievement of specified earnings targets by the combined company for the 2013
and/or the 2014 fiscal years. Additionally, Trio paid the holder of SAEs outstanding Series A preferred stock an aggregate of $5,000,000 in cash
for all of such securities. SAEs common stock and warrants currently trade on the Nasdaq Capital Market and OTC Bulletin Board, respectively,
under the symbol SAEX and SAEXW, respectively, and the price of the common stock has ranged from $6.60 to $10.55 following completion of its business
combination with Trio, with a closing price of $ on , 2014. Eric S. Rosenfeld and David D. Sgro currently serve as directors of SAE.
In November 2013, Quartet, a blank
check company founded by Messrs. Rosenfeld and Sgro, consummated its initial public offering, raising $96.6 million (at $10.00 per unit each consisting
of one share of common stock and one right). On April 30, 2014, Quartet entered into an Agreement and Plan of Reorganization with Pangaea Logistics
Solutions Ltd., a growth oriented global logistics company focused on providing seaborne drybulk transportation services. It is headquartered in
Newport, Rhode Island and conducts all operations through its direct and indirect subsidiaries. In the merger, the former securityholders of Pangaea
will receive (i) 28,431,372 shares, (ii) up to $10,000,000 in cash or alternatively, at the option of the holders, up to an additional 980,392 shares,
(iii) an additional number of shares upon Pangaea achieving certain financial results following the merger and (iv) an additional number of shares to
be issued based on the number of Quartet public stockholders that seek conversion of their public shares into a pro rata portion of Quartets
trust account (with a corresponding contribution to capital, for no consideration, from the Quartet initial stockholders of the same number of shares
to be issued to the former Pangaea securityholders). Quartets units, common stock and rights currently trade on the Nasdaq Capital Market under
the symbols QTETU, QTET and QTETR, respectively, and the price of the common stock has ranged from $9.60 to $10.73 following completion of its initial
public offering, with a closing price of $ on , 2014.
42
Competitive Strengths
We believe our competitive strengths to
be the following:
Status as a public
company
We believe our structure will make us
an attractive business combination partner to target businesses. As an existing public company, we offer a target business an alternative to the
traditional initial public offering through a merger or other business combination. In this situation, the owners of the target business would exchange
their shares of stock in the target business for shares of our stock or for a combination of shares of our stock and cash, allowing us to tailor the
consideration to the specific needs of the sellers. We believe target businesses might find this method a more certain and cost effective method to
becoming a public company than the typical initial public offering. In a typical initial public offering, there are additional expenses incurred in
marketing, roadshow and public reporting efforts that will likely not be present to the same extent in connection with a business combination with us.
Furthermore, once the business combination is consummated, the target business will have effectively become public, whereas an initial public offering
is always subject to the underwriters ability to complete the offering, as well as general market conditions, that could prevent the offering
from occurring. Once public, we believe the target business would then have greater access to capital and an additional means of providing management
incentives consistent with stockholders interests than it would have as a privately-held company. It can offer further benefits by augmenting a
companys profile among potential new customers and vendors and aid in attracting talented employees.
While we believe that our status as a
public company will make us an attractive business partner, some potential target businesses may view the inherent limitations in our status as a blank
check company, such as our lack of an operating history and our requirements to seek stockholder approval of any proposed initial business combination
and provide holders of public shares the opportunity to convert their shares into cash from the trust account, as a deterrent and may prefer to effect
a business combination with a more established entity or with a private company.
Transaction
flexibility
We offer a target business a variety of
options such as providing the owners of a target business with shares in a public company and a public means to sell such shares, providing capital for
the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt ratio. Because we are able to consummate
our initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most
efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. In addition, we
have the ability to offer stock- or cash-based contingency (or earnout) payments which may not be available in other types of transactions. However,
since we have no specific business combination under consideration, we have not taken any steps to secure third party financing and it may not be
available to us.
Offering
Structure
Unlike other blank check companies that
sell units comprised of shares and warrants to purchase at least a half of a share of common stock in their initial public offerings, we are selling
units comprised of shares and rights automatically entitling the holder to receive one-tenth of a share of common stock upon consummation of our
initial business combination. Our management believes that investors in similarly structured blank check offerings, and those likely to invest in this
offering, have come to expect the units of such companies to include one share and another security which would allow the holders to acquire additional
shares. Without the ability to acquire such additional shares, our management believes the investors would not be willing to purchase units in such
companies initial public offerings. Accordingly, because the number of shares ordinarily issuable upon exercise of the warrants found in the
typical structure of other blank check initial public offerings is lessened in our case (since such warrants most often entitle the holder to receive
at least a half of a share as opposed to the one-tenth of a share the rights entitle a holder to receive) although
43
not completely eliminated, our management believes we will be viewed more favorably by potential target companies when determining which company to engage in a business combination with. Our management also believes this will make us a more attractive merger partner for target businesses as our capitalization structure will be simpler without the warrants present. However, our management may be incorrect in these beliefs.
Effecting a Business Combination
General
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 and the private placement of private units, our share capital, debt or a combination of these in effecting a
business combination. Although substantially all of the net proceeds of this offering and the private placement of private units 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. While we may seek to effect simultaneous business combinations with more than one target
business, we will probably have the ability, as a result of our limited resources, to effect only a single business combination.
We Have Not Identified a Target
Business
We do not have any specific business
combination under consideration and we have not (nor has anyone on our behalf), directly or indirectly, contacted any prospective target business or
had any discussions, formal or otherwise, with respect to such a transaction. Additionally, we have not contacted any of the prospective target
businesses that Arpeggio, Rhapsody, Trio or Quartet, the only other blank check companies that our principals have been involved with, had considered
and rejected while such entities were blank check companies searching for target businesses to acquire. We do not currently intend to contact any of
such targets; however, we may do so in the future if we become aware that the valuations, operations, profits or prospects of such target business, or
the benefits of any potential transaction with such target business, would be attractive. 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. We have also not conducted any research with respect to identifying the number and
characteristics of the potential acquisition candidates. As a result, we may not be able to locate a target business, and we may not be able to engage
in a business combination with a target business on favorable terms or at all.
Subject to the limitations that a
target business have a fair market value of at least 80% of the balance in the trust account at the time of the execution of a definitive agreement for
our initial business combination, as described below in more detail, we will have virtually unrestricted flexibility in identifying and selecting a
prospective acquisition candidate. We have not established any other specific attributes or criteria (financial or otherwise) for prospective target
businesses. Accordingly, there is no basis for investors in this offering to evaluate the possible merits or risks of the target business 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.
44
Sources of Target Businesses
While we have not yet identified any
acquisition candidates, we believe based on our managements 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, leveraged buyout funds, management buyout 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 in which they think we may be interested on an unsolicited basis, since many of these sources will
have read this prospectus and know what types of businesses we are targeting. For instance, the transaction between Primoris and Rhapsody was made
possible because an industry professional that was aware of Rhapsodys management team and their prior deal with Hill International encouraged
Primoris to contact Rhapsody. 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. For instance, the Hill International transaction was brought to Eric Rosenfeld as a result of his prior work experience
with a member of an investment banking firm that was representing Hill International as it explored strategic alternatives. 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 finders fee, consulting fee or other compensation to be determined in
an arms length negotiation based on the terms of the transaction. In no event, however, will any of our existing officers, directors, special
advisor or initial stockholders, or any entity with which they are affiliated, be paid any finders fee, consulting fee or other compensation
prior to, or for any services they render in order to effectuate, the consummation of a business combination (regardless of the type of transaction).
If we decide to enter into a business combination with a target business that is affiliated with our officers, directors or initial stockholders, we
will do so only if we have obtained an opinion from an independent investment banking firm reasonably acceptable to Cantor Fitzgerald & Co. 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 is
no affiliated entity that we consider a business combination target.
Selection of a Target Business and Structuring of a
Business Combination
Subject to the limitations that a
target business have a fair market value of at least 80% of the balance in the trust account at the time of the execution of a definitive agreement for
our initial 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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brand recognition and potential; |
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return on equity or invested capital; |
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market capitalization or enterprise value; |
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experience and skill of management and availability of additional personnel; |
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capital requirements; |
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competitive position; |
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barriers to entry; |
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stage of development of its products, processes or services; |
45
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existing distribution and potential for expansion; |
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degree of current or potential market acceptance of the products, processes or services; |
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proprietary aspects of products and the extent of intellectual property or other protection for its products, processes, formulas or services; |
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impact of regulation on the business; |
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regulatory environment of the industry; |
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costs associated with effecting the business combination; |
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industry leadership, sustainability of market share and attractiveness of market industries in which a target business participates; and |
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macro competitive dynamics in the industry within which the company competes. |
We believe such factors will be
important in evaluating prospective target businesses, regardless of the location or industry in which such target business operates. However, this
list is not intended to be exhaustive. Furthermore, we may decide to enter into a business combination with a target business that does not meet any of
these criteria.
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.
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.
Fair Market Value of Target
Business
Pursuant to Nasdaq listing rules, the
target business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds in the trust
account (excluding any deferred underwriters fees and taxes payable on the income earned in the trust account) at the time of the execution of a
definitive agreement for our initial business combination, although we may acquire a target business whose fair market value significantly exceeds 80%
of the trust account balance. We currently anticipate structuring a business combination to acquire 100% of the equity interests or assets of the
target business or businesses. We may, however, structure a business combination where we merge directly with the target business or where we acquire
less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders or
for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding
voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an
investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the
target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on
valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a
substantial number of new shares in exchange for all of the outstanding capital of a target. In this case, we would acquire a 100% controlling interest
in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders
46
immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, only the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test. 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, 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, or another independent entity that commonly renders valuation opinions on the type of target business we are seeking to acquire, with respect to the satisfaction of such criteria. We will not be required to obtain an opinion from an independent investment banking firm, or another independent entity that commonly renders valuation opinions on the type of target business we are seeking to acquire, as to the fair market value if our board of directors independently determines that the target business complies with the 80% threshold.
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 which 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:
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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 |
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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 associated in senior management or advisory positions 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
47
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, our officers and directors may not have significant experience or knowledge relating to the operations of the particular target business.
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.
Stockholder Approval of Business
Combination
In connection with any proposed
business combination, we will seek stockholder approval of an initial business combination at a meeting called for such purpose at which stockholders
may seek to convert their shares, regardless of whether they vote for or against the proposed business combination, for a pro rata share of the
aggregate amount then on deposit in the trust account, less any taxes then due but not yet paid. The amount in the trust account is initially
anticipated to be $10.00 per share.
We will consummate our initial business
combination only if we have net tangible assets of at least $5,000,001 upon such consummation and a majority of the outstanding shares of common stock
voted are voted in favor of the business combination. We chose our net tangible asset threshold of $5,000,001 to ensure that we would avoid being
subject to Rule 419 promulgated under the Securities Act.
Notwithstanding the foregoing, if we
seek to consummate an initial business combination with a target business that imposes any type of working capital closing condition or requires us to
have a minimum amount of funds available from the trust account upon consummation of such initial business combination, such condition may limit our
ability to consummate such initial business combination (as we may be required to have a lesser number of shares converted) and may force us to seek
third party financing which may not be available on terms acceptable to us or at all. As a result, we may not be able to consummate such initial
business combination and we may not be able to locate another suitable target within the applicable time period, if at all. Public stockholders may
therefore have to wait 24 months from the consummation of this offering in order to be able to receive a pro rata share of the trust
account.
Our initial stockholders and our
officers and directors have agreed (1) to vote any shares of common stock owned by them in favor of any proposed business combination and (2) not to
convert any shares of common stock in connection with a stockholder vote to approve a proposed initial business combination or a vote to amend the
provisions of our amended and restated certificate of incorporation relating to stockholders rights or pre-business combination
activity.
None of our officers, directors,
initial stockholders or their affiliates has indicated any intention to purchase units or shares of common stock in this offering or from persons in
the open market or in private transactions. However, if we hold a meeting to approve a proposed business combination and a significant number of
stockholders vote, or indicate an intention to vote, against such proposed business combination, our officers, directors, initial stockholders or their
affiliates could make such purchases in the open market or in private transactions in order to influence the vote. Notwithstanding the foregoing, our
officers, directors, initial stockholders and their affiliates will not make purchases of shares of common stock if the purchases would violate Section
9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules designed to stop potential manipulation of a companys stock.
Conversion rights
At any meeting called to approve an
initial business combination, public stockholders (but not our initial stockholders) may seek to convert their shares, regardless of whether they vote
for or against the proposed business combination, for a pro rata share of the aggregate amount then on deposit in the trust account,
less
48
any taxes then due but not yet paid. A holder will always have the ability to vote against a proposed business combination and not seek conversion of his shares.
Notwithstanding the foregoing, a public
stockholder, together with any affiliate of his or any other person with whom he is acting in concert or as a group (as defined in Section
13(d)(3) of the Exchange Act) will be restricted from seeking conversion rights with respect to 20% or more of the shares of common stock sold in this
offering. Accordingly, all shares in excess of 20% of the shares sold in this offering held by a holder will not be converted for cash. We believe this
restriction will prevent stockholders from accumulating large blocks of shares before the vote held to approve a proposed business combination and
attempt to use the conversion right as a means to force us or our management to purchase their shares at a significant premium to the then current
market price. By limiting a stockholders ability to convert no more than 20% of the shares of common stock sold in this offering, we believe we
have limited the ability of a small group of stockholders to unreasonably attempt to block a transaction which is favored by our other public
stockholders.
Our initial stockholders will not have
conversion rights with respect to any shares of common stock owned by them, directly or indirectly, whether acquired prior to this offering or
purchased by them in this offering or in the aftermarket.
We may also 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
Companys DWAC (Deposit/Withdrawal At Custodian) System, at the holders option.
There is a nominal cost associated with
this 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 $45 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. The need to deliver shares is a requirement of exercising
conversion rights regardless of the timing of when such delivery must be effectuated. However, in the event we require stockholders seeking to exercise
conversion rights prior to the consummation of the proposed business combination and the proposed business combination is not consummated this may
result in an increased cost to stockholders.
Any request to convert such shares once
made, may be withdrawn at any time up to the vote on the proposed business combination. Furthermore, if a holder of a public share delivered his
certificate in connection with an election of their conversion and subsequently decides prior to the applicable date not to elect to exercise such
rights, he may simply request that the transfer agent return the certificate (physically or electronically).
If the initial business combination is
not approved or completed for any reason, then our public stockholders who elected to exercise their conversion rights would not be entitled to convert
their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any shares delivered by public
holders.
Liquidation if No Business
Combination
If we do not complete a business
combination within 24 months from the consummation of this offering, we will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and
liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements
of other applicable law. In connection with our redemption of 100% of our outstanding public shares for a portion of the funds held in the trust
account, any holder that voted against the last proposed business combination prior to such redemption will only receive $10.00 per share, while any
holder that voted in favor of the last proposed business combination prior to such redemption will receive a full pro rata portion of the amount then
in the trust account, plus any pro rata interest earned on the funds held in the trust account and not previously
49
released to us for our working capital requirements or necessary to pay our taxes payable on such funds (subject in each case to our obligations under Delaware law to provide for claims of creditors). At such time, the rights will expire, holder of rights will receive nothing upon a liquidation with respect to such rights and the rights will be worthless.
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. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our outstanding public
shares in the event we do not complete our initial business combination within the required time period may be considered a liquidation distribution
under Delaware law. 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 stockholders 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.
Furthermore, if the pro rata portion of
our trust account distributed to our public stockholders upon the redemption of 100% of our public shares in the event we do not complete our initial
business combination within the required time period is not considered a liquidation distribution under Delaware law and such redemption distribution
is deemed to be unlawful, then pursuant to Section 174 of the Delaware General Corporation Law, the statute of limitations for claims of creditors
could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidation distribution. If we are
unable to complete a business combination within the prescribed time frame, we will (i) cease all operations except for the purpose of winding up, (ii)
as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares 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 (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to
provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as
reasonably possible following our 24th month 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 of the Delaware General Corporation Law, Section 281(b) of the Delaware General Corporation Law requires us to adopt a plan, based on facts
known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us
within the subsequent 10 years. 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 (such as lawyers, investment bankers,
etc.) or prospective target businesses.
We will seek to have all third parties
(including any vendors or other entities we engage after this offering) and any prospective target businesses enter into valid and enforceable
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, there is no guarantee that vendors, service providers and
prospective target businesses will execute such agreements. In the event that a potential contracted party was to refuse to execute such a waiver, we
will execute an agreement with that entity only if our management first determines that we would be unable to obtain, on a reasonable basis,
substantially similar services or
50
opportunities from another entity willing to execute such a waiver. Examples of instances where we may engage a third party that refused to execute a waiver would be the engagement of a third party consultant who cannot sign such an agreement due to regulatory restrictions, such as our auditors who are unable to sign due to independence requirements, or whose particular expertise or skills are believed by management to be superior to those of other consultants that would agree to execute a waiver or a situation in which management does not believe it would be able to find a provider of required services willing to provide the waiver. There is also no guarantee that, even if they execute such agreements with us, they will not seek recourse against the trust account. Eric S. Rosenfeld has agreed that he will be liable to pay debts and obligations to target businesses or vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us. Our board of directors has questioned Mr. Rosenfeld on his financial net worth and believes he will be able to satisfy any indemnification obligations that may arise. However, he may not be able to satisfy his indemnification obligations if he is required to so as we have not required Mr. Rosenfeld to retain any assets to provide for his indemnification obligations, nor have we taken any further steps to ensure that he will be able to satisfy any indemnification obligations that arise. Additionally the agreement entered into by Mr. Rosenfeld specifically provides that he will have no personal liability as to any claimed amounts owed to a target business or vendor or other entity who has executed a valid and enforceable agreement 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. Moreover, he will not be personally liable to our public stockholders and instead will only have liability to us. As a result, if we liquidate, the per-share distribution from the trust account could be less than approximately $10.00 due to claims or potential claims of creditors. We will distribute to all of our public stockholders, in proportion to their respective equity interests, an aggregate sum equal to the amount then held in the trust account, inclusive of any interest not previously released to us, 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 insider
shares and private shares. We will pay the costs of any subsequent liquidation from our remaining assets outside of the trust account and from the
interest income on the balance of the trust account (net income and other tax obligations) that may be released to us to fund our working capital
requirements. If such funds are insufficient, Mr. Rosenfeld has agreed to pay the funds necessary to complete such liquidation (currently anticipated
to be no more than approximately $15,000) and has agreed not to seek repayment of such expenses.
If we are unable to consummate an
initial business combination and are forced to redeem 100% of our outstanding public shares for a portion of the funds held in the trust account, each
holder will receive a full pro rata portion of the amount then in the trust account, plus any pro rata interest earned on the funds held in the trust
account and not previously released to us or necessary to pay our taxes. The proceeds deposited in the trust account could, however, become subject to
claims of our creditors that are in preference to the claims of public stockholders.
Our public stockholders shall be
entitled to receive funds from the trust account only in the event of our failure to complete our initial business combination in the required time
period or if the stockholders seek to have us convert their respective shares of common stock upon a business combination which is actually completed
by us. In no other circumstances shall a stockholder have any right or interest of any kind to or in the trust account.
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 may not be able to return to our public stockholders at least
approximately $10.00 per share.
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
51
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 24 months from the closing of this offering, 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. Claims may be brought against us for these reasons.
Amended and Restated Certificate of
Incorporation
Our amended and restated certificate of
incorporation contains certain requirements and restrictions relating to this offering that will apply to us until the consummation of our initial
business combination. If we seek to amend any provisions of our amended and restated certificate of incorporation relating to stockholders rights
or pre-business combination activity (including the time within which we have to complete a business combination), we will provide dissenting public
stockholders with the opportunity to convert their public shares in connection with any such vote. Our initial stockholders have agreed to waive any
conversion rights with respect to any insider shares, private units and any public shares they may hold in connection with any vote to amend our
amended and restated certificate of incorporation. Specifically, our amended and restated certificate of incorporation provides, among other things,
that:
|
prior to the consummation of our initial business combination, we shall seek stockholder approval of our initial business combination at a meeting called for such purpose at which public stockholders may seek to convert their shares of common stock, regardless of whether they vote for or against the proposed business combination, into a portion of the aggregate amount then on deposit in the trust account, subject to the limitations described herein; |
|
we will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation and a majority of the outstanding shares of common stock voted are voted in favor of the business combination; |
|
if our initial business combination is not consummated within 24 months of the consummation of this offering, then our existence will terminate and we will distribute all amounts in the trust account and any net assets remaining outside the trust account to all of our public holders of shares of common stock; |
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we may not consummate any other business combination, merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar transaction prior to our initial business combination; and |
|
prior to our initial business combination, we may not issue (i) any shares of common stock or any securities convertible into common stock, or (ii) any securities that participate in any manner in the proceeds of the trust account, or that vote as a class with the common stock sold in this offering on our initial business combination. |
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 may be limited by our available financial
resources.
52
The following also 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 shares of common stock held by our public stockholders (but not our initial stockholders) may reduce the resources available to us for a business combination; |
|
Nasdaq may require us to file a new listing application and meet its initial listing requirements to maintain the listing of our securities following a business combination; |
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our outstanding rights, and the potential future dilution they represent; |
|
our obligation to either repay or issue private units upon conversion of up to $500,000 of working capital loans that may be made to us by our initial stockholders, officers, directors or their affiliates; |
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our obligation to register the resale of the insider shares, as well as the private units (and underlying securities) and any securities issued to our initial stockholders, officers, directors or their affiliates upon conversion of working capital loans; and |
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the impact on the target business assets as a result of unknown liabilities under the securities laws or otherwise depending on developments involving us prior to the consummation of a business combination. |
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 currently maintain our principal
executive offices at 777 Third Avenue, 37th floor, New York, NY 10017. The cost for this space is included in the $12,500 per-month fee Crescendo
Advisors II, LLC, an entity controlled by Mr. Rosenfeld, will charge us for general and administrative services commencing upon the date of this
prospectus pursuant to a letter agreement between us and Crescendo Advisors II, LLC. We believe, based on rents and fees for similar services in New
York, that the fee charged by Crescendo Advisors II, LLC 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
allocate more time to our affairs) than they would prior to locating a suitable target business. We presently expect each of our executive officers to
devote such amount of time as they reasonably believe is necessary to our business. We do not intend to have any full time employees prior to the
consummation of a business combination.
53
Periodic Reporting and Audited Financial
Statements
We have registered our units, shares of
common stock and rights under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current
reports with the SEC. In accordance with the requirements of the Exchange Act, our annual report will contain financial statements audited and reported
on by our independent registered public accountants.
We will provide stockholders with
audited financial statements of the prospective target business as part of any proxy solicitation or tender offer materials sent to stockholders to
assist them in assessing the target business. In all likelihood, the financial statements included in the proxy solicitation or tender offer materials
will need to be prepared in accordance with U.S. GAAP and/or IFRS as issued by the IASB, or reconciled to U.S. GAAP. We cannot assure you that any
particular target business identified by us as a potential acquisition candidate will have the necessary financial statements. To the extent that this
requirement cannot be met, we may not be able to acquire the proposed target business.
We may be required to have our internal
control procedures audited for the fiscal year ending December 31, 2015 as required by the Sarbanes-Oxley Act. A target company may not be in
compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any
such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such
acquisition.
We are an emerging growth company as
defined in the JOBS Act and will remain such for up to five years. However, if our non-convertible debt issued within a three-year period or our total
revenues exceed $1 billion or the market value of our shares of common stock that are held by non-affiliates exceeds $700 million on the last day of
the second fiscal quarter of any given fiscal year, we would cease to be an emerging growth company as of the following fiscal year. As an emerging
growth company, we have elected, under Section 107(b) of the JOBS Act, to take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
Comparison to Offerings of Blank Check Companies Subject to
Rule 419
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 will not
exercise their over-allotment option. None of the terms of a Rule 419 offering will apply to this offering because we will be listed on a national
securities exchange, we will have net tangible assets in excess of $5,000,001 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.
Terms of the Offering |
Terms Under a Rule 419 Offering |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Escrow of
offering proceeds |
$100,000,000 of the net offering proceeds and proceeds from the sale of the private units will be deposited into an account at UBS Financial
Services Inc. in the United States, maintained by Continental Stock Transfer & Trust Company, acting as trustee |
$87,750,000 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. |
54
Terms of the Offering |
Terms Under a Rule 419 Offering | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Investment
of net proceeds |
The
$100,000,000 of the net offering proceeds and proceeds from the sale of the private units held in trust will only be invested in United States
government treasury bills, bonds or notes with a maturity of 180 days or less or in money market funds meeting the applicable conditions under Rule
2a-7 promulgated under the Investment Company Act of 1940 and that invest solely in United States government treasuries. |
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 the balance in our trust account at the time of the
execution of a definitive agreement for our initial business combination. |
We
would be restricted from acquiring a target business unless the fair value of such business or net assets to be acquired represent 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 shares of common stock and rights comprising the units will begin to
trade separately ten business days following the earlier to occur of the expiration of the underwriters over-allotment option, its exercise in
full or the announcement by the underwriters of its intention not to exercise all or any remaining portion of the over-allotment option, 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. |
No
trading of the units or the underlying securities would be permitted until the completion of a business combination. During this period, the securities
would be held in the escrow or trust account. |
||||||||
Election to
remain an investor |
We
will give our stockholders the opportunity to vote on the business combination. We will send each stockholder a proxy statement containing information
required by the SEC. |
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 45th 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. |
55
Terms of the Offering |
Terms Under a Rule 419 Offering | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Business
combination deadline |
Pursuant to our amended and restated certificate of incorporation, if we do not complete an initial business combination within 24 months from
the consummation of this offering, it will trigger our automatic winding up, dissolution and liquidation. |
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. |
||||||||
Interest
earned on the funds in the trust account |
There
can be released to us, from time to time, (i) any interest earned on the funds in the trust account that we may need to pay our tax obligations and
(ii) any remaining interest earned on the funds in the trust account that we need for our working capital requirements. 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 entry into 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) any amounts that we may need to pay our tax obligations and (ii) any remaining interest that we may need for our working
capital requirements that may be released to us from the interest earned on the trust account balance described above, the proceeds held in the trust
account will not be released until the earlier of the completion of a business combination and the liquidation of our trust account 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. |
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Directors and Executive Officers
Our current directors and executive
officers are as follows:
Name |
Age |
Position |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Eric S.
Rosenfeld |
56 | Chairman of the Board and Chief Executive Officer |
||||||||
David D. Sgro
|
37 | Chief Operating Officer and Director |
||||||||
Thomas
Kobylarz |
37 | Chief Financial Officer |
||||||||
John P.
Schauerman |
57 | Director |
||||||||
Adam J. Semler
|
50 | Director |
||||||||
Leonard B.
Schlemm |
61 | Director |
Eric S. Rosenfeld has
served as our chairman of the board and chief executive officer since our inception. Mr. Rosenfeld has served as Quartets chairman of the board
and chief executive officer since its inception in April 2013. Mr. Rosenfeld was chairman of the board and chief executive officer of Trio from its
inception in June 2011 until its merger with SAE in June 2013 and has served as a director of SAE since such time. Mr. Rosenfeld has been the president
and chief executive officer of Crescendo Partners, L.P., a New York-based investment firm, since its formation in November 1998. He has also been the
senior managing member of Crescendo Advisors II LLC, the entity providing the Company with general and administrative services, since its formation in
August 2000. From April 2006 until July 2008, Mr. Rosenfeld served as the chairman of the board, chief executive officer and president of Rhapsody, an
OTCBB-listed blank check company. Rhapsody completed its business combination in July 2008 with Primoris and changed its name to Primoris Services
Corporation and is now listed on the NASDAQ Stock Market. Mr. Rosenfeld served as a director of that company from the completion of its business
combination in July 2008 until May 2014. From its inception in April 2004 until June 2006, he was the chairman of the board, chief executive officer
and president of Arpeggio, an OTCBB-listed blank check company. Arpeggio completed its business combination in June 2006 with Hill International, now
listed on the NYSE. Mr. Rosenfeld served as a director of Hill International from the time of the business combination until June 2010. Mr. Rosenfeld
is currently chairman of the board of CPI Aerostructures, Inc. a NYSE MKT-listed company engaged in the contract production of structural aircraft
parts principally for the U.S. Air Force and other branches of the U.S. armed forces. He became a director in April 2003 and chairman in January 2005.
Mr. Rosenfeld has also served on the board of Cott Corporation, a NYSE-listed beverage company, since June 2008. Since December 2012, Mr. Rosenfeld has
been a board member of Absolute Software Corporation, a Toronto Stock Exchange listed provider of security and management for computers and
ultra-portable devices.
Prior to forming Crescendo Partners,
Mr. Rosenfeld had been managing director at CIBC Oppenheimer and its predecessor company Oppenheimer & Co., Inc. since 1985. He was also chairman
of the board of Spar Aerospace Limited, a company that provides repair and overhaul services for aircraft and helicopters used by governments and
commercial airlines, from May 1999 through November 2001, until its sale to L-3 Communications. He served as a director of Hip Interactive, a Toronto
Stock Exchange-listed company that distributed and developed electronic entertainment products, from November 2004 until July 2005. Mr. Rosenfeld also
served as a director of AD OPT Technologies Inc., which was a Toronto Stock Exchange-listed company from April 2003 to November 2004, when it was
acquired by Kronos Inc. Mr. Rosenfeld also served as a director and head of the special committee of Pivotal Corporation, a Canadian-based customer
relations management software company that was sold to Chinadotcom in February 2004. He was a director of Sierra Systems Group, Inc., a Toronto Stock
Exchange-listed information technology, management consulting and systems integration firm based in Canada from October 2003 until its sale in January
2007. From October 2005 through March 2006, Mr. Rosenfeld was a director of Geac Computer Corporation Limited, a Toronto Stock Exchange and
NASDAQ-listed software company, which was acquired by Golden Gate Capital. He was also a director of Emergis Inc., a Toronto Stock Exchange-listed
company that enables the electronic processing of transactions in the finance and healthcare industries, from July 2004 until its sale to Telus
Corporation in January 2008. Mr. Rosenfeld also served on the board of Matrikon Inc. a Toronto Stock Exchange-listed provider of solutions for
industrial intelligence, from July 2007 until its sale to
57
Honeywell International, Inc. in June 2010. He was also a member of the board of Dalsa Corporation, a Toronto Stock Exchange-listed company that designs and manufactures digital imaging products, from February 2008 until its sale to Teledyne in February 2011. From October 2005 until its final liquidation in December 2012, he was the chairman of the board of Computer Horizons Corp., quoted on the OTCBB, that, before the sale of the last of its operating businesses in February 2007 (at which time it was NASDAQ-listed), provided information technology professional services with a concentration in sourcing and managed services.
Mr. Rosenfeld is a regular guest
lecturer at Columbia Business School and has served on numerous panels at Queens University Business Law School Symposia, McGill Law School, the
World Presidents Organization and the Value Investing Congress. He is a senior faculty member at the Directors College. He has also been a
regular guest host on CNBC. Mr. Rosenfeld received an A.B. in economics from Brown University and an M.B.A. from the Harvard Business
School.
We believe Mr. Rosenfeld is
well-qualified to serve as a member of the board due to his public company experience, operational experience, experience in prior blank check
offerings, such as Arpeggio, Rhapsody, Trio and Quartet, and his business contacts.
David D. Sgro, CFA, has
served as our chief operating officer and a director since our inception. Mr. Sgro has also served as Quartets chief financial officer, secretary
and a member of its board of directors since its inception. Mr. Sgro served as Trios chief financial officer and secretary from its inception in
June 2011, and a member of its board of directors from March 2011, until its merger with SAE in June 2013 and has served as a director of SAE since
such time. From April 2006 to July 2008, Mr. Sgro served as the chief financial officer of Rhapsody and from July 2008 to May 2011, Mr. Sgro served as
a director of Primoris. Mr. Sgro has been a Managing Director of Crescendo Partners, L.P. since December 2008, a Senior Vice President from December
2007 to December 2008, a Vice President from December 2005 to December 2007, and an investment analyst from May 2005 to December 2005. Mr. Sgro served
on the board of Bridgewater Systems, Inc., a TSX listed telecommunications software company, from June 2008 until its sale to Amdocs in August 2011.
From August 2003 to May 2005, Mr. Sgro attended Columbia Business School. From June 1998 to May 2003, he worked as an analyst and then senior analyst
at Management Planning, Inc., a firm engaged in the valuation of privately held companies. Simultaneously, Mr. Sgro worked as an associate with MPI
Securities, Management Planning, Inc.s boutique investment banking affiliate. From June 2004 to August 2004, Mr. Sgro worked as an analyst at
Brandes Investment Partners. Mr. Sgro currently serves on the board of directors of COM DEV International Ltd., a global designer and manufacturer of
space hardware. Mr. Sgro received a B.S. in Finance from The College of New Jersey and an M.B.A. from Columbia Business School. In 2001, he became a
Chartered Financial Analyst (CFA) Charterholder. Mr. Sgro is a regular guest lecturer at the College of New Jersey and Columbia Business
School.
We believe Mr. Sgro is well-qualified
to serve as a member of our board due to his public company experience, operational experience and experience in prior blank check offerings, such as
Rhapsody, Trio and Quartet.
Thomas Kobylarz has
served as our Chief Financial Officer since our inception. Since March 2014, Mr. Kobylarz has served as the Chief Financial Officer and Chief
Compliance Officer of Crescendo Partners, L.P. From January 2009 to September 2013, Mr. Kobylarz served as the Chief Financial Officer and also served
as the Chief Operating Officer from January 2009 through December 2011 of Saiers Capital, LLC (formerly Alphabet Management, LLC), a multi-strategy
derivatives and volatility-focused manager. From July 2004 to January 2009, Mr. Kobylarz was at Merrill Lynch & Co. where he held various positions
in the Prime Brokerage division of Global Capital Markets and Investment Banking and most recently served as a Vice President. From October 2002 to
June 2004, Mr. Kobylarz was at Bear, Stearns, & Co. where he served as a relationship manager in their Prime Brokerage division. From September
1999 to September 2002, Mr. Kobylarz was employed at Rothstein, Kass & Co. where he served as a senior accountant, managing the tax and audit work
for hedge fund clients. Mr. Kobylarz earned a B.A. in Accounting from Lehigh University in 1999.
58
John P. Schauerman has
served as a director since July 2014. Mr. Schauerman served as executive vice president, corporate development of Primoris from February 2009 to May
2013, and served as a Director of Primoris from July 2008 to May 2013. He served as the chief financial officer of Primoris from February 2008 to
February 2009. He also served as a director of Primoris and its predecessor entity from 1993 to July 2008. He joined Primoris wholly-owned
subsidiary, ARB, Inc., in 1993, as senior vice president. In his current role, he is responsible for developing and integrating Primoris overall
strategic plan, including the evaluation and structuring of new business opportunities and acquisitions. Prior to joining ARB, Inc., he was senior vice
president of Wedbush Morgan Securities. Mr. Schauerman received a B.S. in Electrical Engineering from UCLA and an M.B.A. from Columbia Business
School.
We believe Mr. Schauerman is
well-qualified to serve as a member of our board due to his public company experience, operational experience and contacts and experience in prior
blank check offerings, such as Quartet.
Adam J. Semler has served
as a director since July 2014. Mr. Semler joined York Capital Management, LLC, an investment management fund, in 1995 and held several positions with
the firm, most recently holding the position of chief operating officer and member of its managing partner until he retired in December 2011. While at
York Capital Management, he was responsible for all financial operations of the firm. During this time, he also served as chief financial officer and
secretary of York Enhanced Strategies Fund, LLC, a closed ended equity mutual fund. Previously, he was at Granite Capital International Group, an
investment management firm, where Mr. Semler was responsible for the accounting and operations function for its equity products. He also previously
worked as a senior accountant at Goldstein, Golub, Kessler & Co., where Mr. Semler specialized in the financial services industry, as well as a
senior accountant at Berenson, Berenson, Adler. He is a C.P.A. charter holder. Mr. Semler received a B.B.A. from Emory University.
We believe Mr. Semler is well-qualified
to serve as a member of our board due to his financial and accounting expertise.
Leonard B. Schlemm has
served as a director since July 2014. Mr. Schlemm has served as the chairman of Myca Health Inc., a medical software company focused on primary care
practices across the United States, since May 2013 and a member of its board since 2008. Mr. Schlemm is also the co-founder and a board member in a
number of fitness center companies across Canada and Europe, including The Atwater Club (since February 2002) and The Mansfield Clubs (since 2005). He
also served as chairman of the board of AD OPT Technologies from November 2002 until April 2004. From November 1999 until its merger with Netpulse
Communications and E-Zone Networks in November 2000, he served as chairman of the board of Xystos Media Networks, an interactive media company with
three million users under long-term contract. Mr. Schlemm was a co-founder of 24 Hour Fitness, one of the worlds largest privately owned and
operated fitness center chains, sold to private equity investors in June 2014 for $1.9 billion, and was its chairman from September 1986 until July
1997. From June 1996 to January 1999, Mr. Schlemm served as a member of the board of directors of Forza Limited, a European fitness equipment
distribution company. Mr. Schlemm was a member of the board of directors of Arpeggio from its inception in April 2004 until its merger in June 2006 and
was a member of the board of directors of Rhapsody from its inception in April 2006 until its merger in July 2008. Mr. Schlemm received a Bachelor of
Commerce degree from McGill University (great distinction) and an M.B.A. from Harvard University (with distinction). He also received his Chartered
Accountant designation in Canada in 1975.
We believe Mr. Schlemm is
well-qualified to serve as a member of our board due to his operational experience and contacts and experience in prior blank check offerings, such as
Arpeggio and Rhapsody.
Our board of directors is divided into
three classes with only one class of directors being elected in each year and each class serving a three-year term. The term of office of the first
class of directors, consisting of Leonard B. Schlemm, will expire at our first annual meeting of stockholders. The term of office of the second class
of directors, consisting of Adam J. Semler and John P. Schauerman, will expire at the second annual meeting. The term of office of the third class of
directors, consisting of Eric S. Rosenfeld and David D. Sgro, will expire at the third annual meeting.
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Special Advisor
We may seek guidance and advice from
the following special advisor. We have no formal arrangement or agreement with this advisor to provide services to us and he has no fiduciary
obligation to present business opportunities to us. This special advisor will simply provide advice, introductions to potential targets, and assistance
to us, at our request, only if he is able to do so. Nevertheless, we believe with his business background and extensive contacts, he will be helpful to
our search for a target business and our consummation of a business combination.
Joel Greenblatt will
serve as our special advisor who will advise us concerning our acquisition of a target business. Mr. Greenblatt is the managing partner of Gotham
Capital III, L.P., an investment partnership he founded in April 1985, a managing member of Gotham Capital V LLC and managing principal and Co-Chief
Investment officer of Gotham Asset Management. He was also a special advisor to Rhapsody, Arpeggio, Trio and Quartet. He is the former chairman of the
board and a former board member of Alliant Techsystems, a New York Stock Exchange-listed aerospace and defense contractor. Since 1996, he has been on
the adjunct faculty of Columbia Business School where he teaches Security Analysis. Mr. Greenblatt is the author of You Can Be A
Stock Market Genius (Simon & Schuster, 1997), The Little Book That Beats the Market (John Wiley & Sons, 2005), The
Little Book That Still Beats the Market (John Wiley & Sons, 2010) and The Big Secret for the Small Investor (Crown Business,
2011). He received a B.S. (summa cum laude) and an MBA from the Wharton School of the University of Pennsylvania.
Executive Compensation
No executive officer has received any
cash compensation for services rendered to us. Commencing on the date of this prospectus through the acquisition of a target business, we will pay
Crescendo Advisors II, LLC, an entity controlled by Mr. Rosenfeld, a fee of $12,500 per month for providing us with office space and certain office and
administrative services. However, this arrangement is solely for our benefit and is not intended to provide Eric S. Rosenfeld compensation in lieu of a
salary. Other than the $12,500 per month administrative fee, 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 and audit committee, which includes persons who may seek reimbursement, or a court of competent jurisdiction
if such reimbursement is challenged.
Director Independence
Currently John P. Schauerman, Adam J.
Semler and Leonard B. Schlemm would each be considered an independent director under the Nasdaq listing rules, which is defined generally
as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion
of the companys board of directors would interfere with the directors exercise of independent judgment in carrying out the responsibilities
of a director. Our independent directors will have regularly scheduled meetings at which only independent directors are present.
We will only enter into a business
combination if it is approved by a majority of our independent directors. Additionally, we will only enter into transactions with our officers and
directors and their respective affiliates that are on terms no less favorable to us than could be obtained from independent parties. Any related-party
transactions must be approved by our audit committee and a majority of independent disinterested directors.
Audit Committee
Effective as of the date of this
prospectus, we will establish an audit committee of the board of directors, which will consist of John P. Schauerman, Adam J. Semler and Leonard B.
Schlemm, each of whom is an
60
independent director under Nasdaqs listing standards. The audit committees duties, which are specified in our Audit Committee Charter, include, but are not limited to:
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reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our Form 10-K; |
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discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements; |
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discussing with management major risk assessment and risk management policies; |
monitoring the
independence of the independent auditor;
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verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law; |
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reviewing and approving all related-party transactions; |
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inquiring and discussing with management our compliance with applicable laws and regulations; |
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pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed; |
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appointing or replacing the independent auditor; |
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determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; |
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establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and |
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approving reimbursement of expenses incurred by our management team in identifying potential target businesses. |
Financial Experts on Audit Committee
The audit committee will at all times
be composed exclusively of independent directors who are financially literate as defined under Nasdaq listing standards. Nasdaq
listing standards define financially literate as being able to read and understand fundamental financial statements, including a
companys balance sheet, income statement and cash flow statement.
In addition, we must certify to Nasdaq
that the committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite
professional certification in accounting, or other comparable experience or background that results in the individuals financial sophistication.
The board of directors has determined that Adam J. Semler qualifies as an audit committee financial expert, as defined under rules and
regulations of the SEC.
Nominating Committee
Effective as of the date of this
prospectus, we will establish a nominating committee of the board of directors, which will consist of John P. Schauerman, Adam J. Semler and Leonard B.
Schlemm, each of whom is an independent director under Nasdaqs listing standards. The nominating committee is responsible for overseeing the
selection of persons to be nominated to serve on our board of directors. The nominating committee considers persons identified by its members,
management, stockholders, investment bankers and others.
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Guidelines for Selecting Director
Nominees
The guidelines for selecting nominees,
which are specified in the Nominating Committee Charter, generally provide that persons to be nominated:
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should have demonstrated notable or significant achievements in business, education or public service; |
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should possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and |
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should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the stockholders. |
The Nominating Committee will consider
a number of qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a persons
candidacy for membership on the board of directors. The nominating committee may require certain skills or attributes, such as financial or accounting
experience, to meet specific board needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain
a broad and diverse mix of board members. The nominating committee does not distinguish among nominees recommended by stockholders and other
persons.
Compensation Committee
Effective as of the date of this
prospectus, we will establish a compensation committee of the board of directors, which will consist of John P. Schauerman, Adam J. Semler and Leonard
B. Schlemm, each of whom is an independent director under Nasdaqs listing standards. The compensation committees duties, which are
specified in our Compensation Committee Charter, include, but are not limited to:
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reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officers compensation, evaluating our Chief Executive Officers performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officers based on such evaluation; |
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reviewing and approving the compensation of all of our other executive officers; |
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reviewing our executive compensation policies and plans; |
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implementing and administering our incentive compensation equity-based remuneration plans; |
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assisting management in complying with our proxy statement and annual report disclosure requirements; |
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approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees; |
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if required, producing a report on executive compensation to be included in our annual proxy statement; and |
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reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
Notwithstanding the foregoing, as
indicated above, other than the $12,500 per month administrative fee, 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. Accordingly, it is likely that prior to the consummation of an initial
business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be
entered into in connection with such initial business combination.
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Code of Ethics
Upon consummation of this offering, we
will adopt a code of ethics that applies to all of our executive officers, directors and employees. The code of ethics codifies the business and
ethical principles that govern all aspects of our business.
Conflicts of Interest
Potential investors should be aware of
the following potential conflicts of interest:
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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. |
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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 has pre-existing fiduciary duties and contractual obligations and may have conflicts of interest in determining to which entity a particular business opportunity should be presented. |
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Our officers and directors are now, and may in the future become, affiliated with entities, including other blank check companies, engaged in business activities identical to those intended to be conducted by our company. |
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The insider shares owned by our officers and directors will be released from escrow only if a business combination is successfully completed and subject to certain other limitations. Additionally, our officers and directors will not receive distributions from the trust account with respect to any of their insider shares if we do not complete a business combination. Furthermore, the initial stockholders have agreed that the private units (and underlying securities) will not be sold or transferred by them until after we have completed our initial business combination. In addition, our officers and directors may loan funds to us after this offering and may be owed reimbursement for expenses incurred in connection with certain activities on our behalf which would only be repaid if we complete an initial business combination. For the foregoing reasons, the personal and financial interests of our directors and executive officers may influence their motivation in identifying and selecting a target business, completing a business combination in a timely manner and securing the release of their shares. |
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:
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the corporation could financially undertake the opportunity; |
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the opportunity is within the corporations line of business; and |
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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. The above mentioned conflicts may not be resolved in our favor.
In order to minimize potential
conflicts of interest which may arise from multiple corporate affiliations, each of our officers and directors has contractually agreed, pursuant to a
written agreement with us, until the earliest of a business combination, our liquidation or such time as he ceases to be an officer or director, 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.
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The following table summarizes the
other relevant pre-existing fiduciary or contractual obligations of our officers and directors:
Name of Affiliated Company |
Name of Individual(s) |
Priority/Preference relative to Harmony Merger Corp. |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
CPI
Aerostructures, Inc. |
Eric S. Rosenfeld |
Mr.
Rosenfeld will be required to present all business opportunities which are suitable for CPI Aerostructures to CPI Aerostructures prior to presenting
them to us. CPI Aerostructures is engaged in the contract production of structural aircraft parts principally for the United States Air Force and other
branches of the U.S. armed forces. |
||||||||
Absolute
Software |
Eric S. Rosenfeld |
Mr.
Rosenfeld will be required to present all business opportunities which are suitable for Absolute Software to Absolute Software provides persistent
endpoint security and management for computers, laptops, tablets and smartphone devices. |
||||||||
COM DEV
International |
David D. Sgro |
Mr.
Sgro will be required to present all business opportunities which are suitable for COM DEV International to COM DEV International prior to presenting
them to us. COM DEV International is a global designer and manufacturer of space hardware. |
||||||||
Cott
Corporation |
Eric S. Rosenfeld |
Mr.
Rosenfeld will be required to present all business opportunities which are suitable for the Cott Corporation to the Cott Corporation prior to
presenting them to us. Cott Corporation is a private label beverage company. |
||||||||
SAExploration
Holdings Inc. |
Eric S. Rosenfeld David D. Sgro |
Each
of Messrs. Rosenfeld and Sgro will be required to present all business opportunities which are suitable for SAExploration Holdings Inc. to
SAExploration Holdings Inc. prior to presenting them to us. SAE is a holding company of various subsidiaries which collectively form a geophysical
services company offering seismic data acquisition services to the oil and gas industry in North America, South America, and Southeast
Asia. |
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Name of Affiliated Company |
Name of Individual(s) |
Priority/Preference relative to Harmony Merger Corp. | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Quartet Merger
Corp. |
Eric S. Rosenfeld David D. Sgro John P. Schauerman |
Quartet Merger Corp. is a blank check company formed in April 2013 in order to effect a merger, capital stock exchange, asset acquisition or
other similar business combination with one or more businesses or entities. Quartet has entered into a definitive agreement for an initial business
combination with Pangaea and is prohibited from reviewing alternative transactions. Accordingly, at this time, Messrs. Rosenfeld, Sgro and Schauerman
have no obligation to present business opportunities to Quartet prior to presenting them to us. If the business combination between Quartet and Pangaea
is not completed for any reason, then Quartet will have until May 1, 2015 (or November 1, 2015 if certain conditions are met) to complete another
business combination. Each of Messrs. Rosenfeld, Sgro and Schauerman would then be required to present all business opportunities which are suitable
for Quartet to Quartet prior to presenting them to us. Since Quartet can acquire a target business in any industry, the business opportunities required
to be presented to Quartet will overlap with those that we would be interested in. |
||||||||
Pangaea
Logistics Solutions Ltd. |
Eric S. Rosenfeld David D. Sgro |
Assuming the business combination between Quartet and Pangaea is consummated, each of Messrs. Rosenfeld and Sgro will become directors of
Pangaea. Accordingly, each of Messrs. Rosenfeld and Sgro will be required to present all business opportunities which are suitable for Pangaea to
Pangaea prior to presenting them to us. Pangaea is a Newport, Rhode Island-headquartered growth oriented global logistics company focused on providing
seaborne drybulk transportation services. If the business combination between Quartet and Pangaea is not consummated, Messrs. Rosenfeld and Sgro will
have no obligations to present business opportunities to Pangaea. |
||||||||
The Mansfield
Clubs |
Leonard B. Schlemm |
Mr.
Schlemm will be required to present all business opportunities which are suitable for The Mansfield Clubs to The Mansfield Clubs prior to presenting
them to us. The Mansfield Clubs are three high-end fitness centers in the Montreal area. |
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Name of Affiliated Company |
Name of Individual(s) |
Priority/Preference relative to Harmony Merger Corp. | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Myca Health
Inc. |
Leonard B. Schlemm |
Mr.
Schlemm will be required to present all business opportunities which are suitable for Myca Health Inc. to Myca Health Inc. prior to presenting them to
us. Myca Health Inc. is a medical software company focused on primary care practices across the United States. |
||||||||
The Atwater
Club |
Leonard B. Schlemm |
Mr.
Schlemm will be required to present all business opportunities which are suitable for The Atwater Club to The Atwater Club prior to presenting them to
us. The Atwater Club is a private racquet club in Montreal. |
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
insider shares and private shares in favor of any proposed business combination. In addition, they have agreed to waive their respective rights to
participate in any liquidation distribution with respect to those shares of common stock acquired by them prior to this offering. If they purchase
shares of common stock in this offering or in the open market, however, they would be entitled to participate in any liquidation distribution in
respect of such shares but have agreed not to convert such shares in connection with the consummation of our initial business combination or an
amendment to our amended and restated certificate of incorporation relating to pre-business combination activity.
All ongoing and future transactions
between us and any of our officers and directors or their respective affiliates will be on terms believed by us to be no less favorable to us than are
available from unaffiliated third parties. Such transactions will require prior approval by our audit committee and a majority of our disinterested
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 audit committee and a majority of 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.
To further minimize conflicts of
interest, we have agreed not to consummate our initial business combination with an entity that is affiliated with any of our officers, directors or
initial stockholders, unless we have obtained (i) an opinion from an independent investment banking firm reasonably acceptable to Cantor Fitzgerald
& Co. that the business combination is fair to our unaffiliated stockholders from a financial point of view and (ii) the approval of a majority of
our disinterested and independent directors (if we have any at that time). Furthermore, in no event will any of our initial stockholders, officers,
directors, special advisor or their respective affiliates be paid any finders fee, consulting fee or other similar compensation prior to, or for
any services they render in order to effectuate, the consummation of our initial business combination.
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The following table sets forth
information regarding the beneficial ownership of our shares of common stock as of the date of this prospectus and as adjusted to reflect the sale of
our shares of common stock included in the units offered by this prospectus (assuming none of the individuals listed purchase units in this offering),
by:
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each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock; |
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each of our officers and directors; and |
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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. The
following table does not reflect record of beneficial ownership of any shares of common stock issuable upon exercise of rights as these rights are not
exercisable within 60 days of the date of this prospectus.
Prior to Offering |
After Offering(2) |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name and Address of Beneficial Owner(1) |
Amount and Nature of Beneficial Ownership |
Approximate Percentage of Outstanding Shares of common stock |
Amount and Nature of Beneficial Ownership(3) |
Approximate Percentage of Outstanding Shares of common stock |
|||||||||||||||
Eric S.
Rosenfeld |
2,182,000 | 76.0 | % | 1,929,001 | 14.9 | % | |||||||||||||
David D. Sgro
|
0 | 0 | % | 0 | 0 | % | |||||||||||||
Thomas
Kobylarz |
0 | 0 | % | 0 | 0 | % | |||||||||||||
John P.
Schauerman |
0 | 0 | % | 0 | 0 | % | |||||||||||||
Adam J.
Semler |
0 | 0 | % | 0 | 0 | % | |||||||||||||
Leonard B.
Schlemm |
0 | 0 | % | 0 | 0 | % | |||||||||||||
Polar
Securities Inc.(4) |
231,000 | 8.0 | % | 315,333 | 2.4 | % | |||||||||||||
DKU 2013
LLC(5) |
231,000 | 8.0 | % | 315,333 | 2.4 | % | |||||||||||||
The K2
Principal Fund L.P.(6) |
231,000 | 8.0 | % | 315,333 | 2.4 | % | |||||||||||||
All directors
and executive officers as a group (six individuals) |
2,182,000 | 76.0 | % | 1,929,001 | 14.9 | % |
* |
Less than 1%. |
(1) |
Unless otherwise indicated, the business address of each of the individuals is c/o Harmony Merger Corp., 777 Third Avenue, 37th Floor, New York, New York 10017 |
(2) |
Assumes no exercise of the over-allotment option and, therefore, the forfeiture of an aggregate of 375,000 shares of common stock held by our initial stockholders. |
(3) |
Does not include beneficial ownership of any shares of common stock issuable to holders of outstanding rights as such shares are not issuable within 60 days of the date of this prospectus. |
(4) |
The business address of Polar Securities Inc. is 401 Bay Street, Suite 1900 P.O. Box 19 ¦ Toronto, Ontario M5H 2Y4. Represents shares held by NPIC Limited, a fund for which Polar Securities, Inc. serves as investment manager. |
(5) |
The business address of DKU 2013, LLC is 405 Park Avenue, 6th Floor, New York, NY 10022. Jeff Keswin has ultimate voting and dispositive power over the shares held by DKU 2013, LLC. |
(6) |
The business address of The K2 Principal Fund L.P. is 2 Bloor Street West, Suite 801, Toronto, Ontario, Canada M4W 3E2. Shawn Kimel has ultimate voting and dispositive power over the shares held by The K2 Principal Fund L.P. as he is President of K2 Genpar 2009 Inc., the General Partner of K2 Genpar L.P., the General Partner of The K2 Principal Fund L.P. |
Immediately after this offering, our
initial stockholders will beneficially own approximately 22.3% of the then issued and outstanding shares of common stock (assuming none of them
purchase any units offered by this prospectus). None of our initial stockholders, officers and directors has indicated to us that he intends
to
67
purchase our securities in the offering. Because of the ownership block held by our initial 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 approval of our initial business combination.
If the underwriters do not exercise all
or a portion of the over-allotment option, our initial stockholders will have up to an aggregate of 375,000 shares of common stock forfeited to us. Our
initial stockholders will be required to have forfeited only a number of shares necessary to maintain their collective 20% ownership interest in our
shares of common stock (excluding the private units) after giving effect to the offering and the exercise, if any, of the underwriters
over-allotment option.
All of the insider shares outstanding
prior to the date of this prospectus will be placed in escrow with Continental Stock Transfer & Trust Company, as escrow agent, until (1) with
respect to 50% of the insider shares, the earlier of one year after the date of the consummation of our initial business combination and the date on
which the closing price of our shares of common stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends,
reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after our initial business combination and
(2) with respect to the remaining 50% of the insider shares, one year after the date of the consummation of our initial business combination, or
earlier, in either case, if, subsequent to our initial business combination, we consummate a liquidation, merger, share exchange or other similar
transaction which results in all of our stockholders having the right to exchange their shares for cash, securities or other property. Up to 375,000 of
the insider shares may also be released from escrow earlier than this date for cancellation if the over-allotment option is not exercised in full as
described above.
During the escrow period, the holders
of these shares will not be able to sell or transfer their securities except (i) amongst themselves or to our officers, directors and employees, (ii)
to relatives and trusts for estate planning purposes, (iii) by virtue of the laws of descent and distribution upon death, (iv) pursuant to a qualified
domestic relations order, (v) by certain pledges to secure obligations incurred in connection with purchases of our securities, (vi) 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 or
(vii) to us for no value for cancellation in connection with the consummation of our initial business combination, in each case (except for clause
(vii)) 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 the trust
account, none of our initial stockholders will receive any portion of the liquidation proceeds with respect to their insider shares.
Our initial stockholders have committed
to purchase an aggregate of 375,000 private units at a price of $10.00 per unit ($3,750,000 in the aggregate) in a private placement that will occur
simultaneously with the closing of this offering. Our initial stockholders have also agreed that if the over-allotment option is exercised by the
underwriters, they will purchase from us at a price of $10.00 per unit an additional number of private units (up to a maximum of 37,500 private units)
pro rata with the amount of the over-allotment option exercised so that at least $10.00 per share sold to the public in this offering is held in trust
regardless of whether the over-allotment option is exercised in full or part. These additional private units will be purchased in a private placement
that will occur simultaneously with the purchase of units resulting from the exercise of the over-allotment option. The private units are identical to
the units sold in this offering. However, the holders have agreed (A) to vote their private shares in favor of any proposed business combination, (B)
not to propose, or vote in favor of, an amendment to our amended and restated certificate of incorporation with respect to our pre-business combination
activities prior to the consummation of such a business combination, (C) not to convert any private shares into the right to receive cash from the
trust account in connection with a stockholder vote to approve our proposed initial business combination or a vote to amend the provisions of our
amended and restated certificate of incorporation relating to stockholders rights or pre-business combination activity and (D) that the private
shares shall not participate in any liquidating distribution upon winding up if a business combination is not consummated. The purchasers have also
agreed not to transfer,
68
assign or sell any of the private units or underlying securities (except to the same permitted transferees as the insider shares and provided the transferees agree to the same terms and restrictions as the permitted transferees of the insider shares must agree to, each as described above) until the completion of our initial business combination.
In order to meet our working capital
needs following the consummation of this offering, our initial stockholders, officers and directors or their affiliates may, but are not obligated to,
loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a
promissory note. The notes would either be paid upon consummation of our initial business combination, without interest, or, at the lenders
discretion, up to $500,000 of the notes may be converted upon consummation of our business combination into additional private units at a price of
$10.00 per unit (which, for example, would result in the holders being issued 55,000 shares of common stock if $500,000 of notes were so converted
since the 50,000 rights included in the private units would result in the issuance of 5,000 shares of common stock upon the closing of our business
combination). Our stockholders have approved the issuance of the units and underlying securities upon conversion of such notes, to the extent the
holder wishes to so convert them at the time of the consummation of our initial business combination. If we do not complete a business combination, the
loans will not be repaid.
Eric S. Rosenfeld is our
promoter, as that term is defined under the Federal securities laws.
69
In May 2014, we issued an aggregate of
2,875,000 shares of common stock for a total of $25,000 in cash, at a purchase price of approximately $0.01 share, to Eric S.
Rosenfeld.
In June 2014, Mr. Rosenfeld transferred
an aggregate of 693,000 shares of common stock to the following entities and in the following amounts:
Name |
Number of Shares |
Relationship to Us |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Polar
Securities Inc. |
231,000 | Initial Stockholder |
||||||||
DKU
2013 LLC |
231,000 | Initial Stockholder |
||||||||
The K2
Principal Fund L.P. |
231,000 | Initial Stockholder |
If the underwriters do not exercise all
or a portion of their over-allotment option, our initial stockholders have agreed to forfeit up to an aggregate of 375,000 shares of common stock in
proportion to the portion of the over-allotment option that was not exercised.
If the underwriters determine the size
of the offering should be increased (including pursuant to Rule 462(b) under the Securities Act) or decreased, a share dividend or a contribution back
to capital, as applicable, would be effectuated in order to maintain our initial stockholders ownership at a percentage of the number of shares
to be sold in this offering (not including the private shares). An increase in offering size of up to 20% could result in the per-share conversion or
liquidation price decreasing by as much as approximately $0.04. Alternatively, our initial stockholders may purchase from us an additional number of
private units at a price of $10.00 per unit so that at least $10.00 per share sold to the public in this offering is held in trust.
Our initial stockholders have committed
to purchase an aggregate of 375,000 private units at a price of $10.00 per unit ($3,750,000 in the aggregate) in a private placement that will occur
simultaneously with the closing of this offering. Our initial stockholders have also agreed that if the over-allotment option is exercised by the
underwriters, they will purchase from us at a price of $10.00 per unit an additional number of private units (up to a maximum of 37,500 private units)
pro rata with the amount of the over-allotment option exercised so that at least $10.00 per share sold to the public in this offering is held in trust
regardless of whether the over-allotment option is exercised in full or part. These additional private units will be purchased in a private placement
that will occur simultaneously with the purchase of units resulting from the exercise of the over-allotment option. The purchase price for the private
units has been delivered to Graubard Miller, our counsel in connection with this offering, who will also be acting solely as escrow agent in connection
with the private sale of such units, prior to the date of this prospectus. Graubard Miller will deposit the purchase price into the trust account
simultaneously with the consummation of the offering or the over-allotment option, as the case may be. The private units are identical to the units
sold in this offering. However, the holders have agreed (A) to vote their private shares in favor of any proposed business combination, (B) not to
propose, or vote in favor of, an amendment to our amended and restated certificate of incorporation with respect to our pre-business combination
activities prior to the consummation of such a business combination, (C) not to convert any private shares into the right to receive cash from the
trust account in connection with a stockholder vote to approve our proposed initial business combination or a vote to amend the provisions of our
amended and restated certificate of incorporation relating to stockholders rights or pre-business combination activity and (D) that the private
shares shall not participate in any liquidating distribution upon winding up if a business combination is not consummated. The purchasers have also
agreed not to transfer, assign or sell any of the private units or underlying securities (except to the same permitted transferees as the insider
shares and provided the transferees agree to the same terms and restrictions as the permitted transferees of the insider shares must agree to, each as
described above) until the completion of our initial business combination.
In order to meet our working capital
needs following the consummation of this offering, our initial stockholders, officers and directors and their respective affiliates may, but are not
obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be
evidenced by a promissory note. The notes would either be paid upon consummation of our initial
70
business combination, without interest, or, at the lenders discretion, up to $500,000 of the notes may be converted upon consummation of our business combination into additional private units at a price of $10.00 per unit (which, for example, would result in the holders being issued 55,000 shares of common stock if $500,000 of notes were so converted since the 50,000 rights included in the private units would result in the issuance of 5,000 shares of common stock upon the closing of our business combination). Our stockholders have approved the issuance of the units and underlying securities upon conversion of such notes, to the extent the holder wishes to so convert them at the time of the consummation of our initial business combination. If we do not complete a business combination, the loans would not be repaid.
The holders of our insider shares
issued and outstanding on the date of this prospectus, as well as the holders of the private units (and all underlying securities) and any securities
our initial stockholders, officers, directors or their affiliates may be issued in payment of working capital loans made to us, will be entitled to
registration rights pursuant to an agreement to be signed prior to or on the effective date of this offering. The holders of a majority of these
securities are entitled to make up to two demands that we register such securities. The holders of the majority of the insider shares can elect to
exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from
escrow. The holders of a majority of the private units or securities issued in payment of working capital loans made to us can elect to exercise these
registration rights at any time after we consummate a business combination. In addition, the holders have certain piggy-back registration
rights with respect to registration statements filed subsequent to our consummation of a business combination. We will bear the expenses incurred in
connection with the filing of any such registration statements.
As of May 31, 2014, Eric S. Rosenfeld
loaned to us an aggregate of $50,000 to cover expenses related to this offering. The loan is payable without interest on the earlier of (i) May 31,
2015, (ii) the date on which we consummate our initial public offering or (iii) the date on which we determine to not proceed with our initial public
offering. We intend to repay this loan from the proceeds of this offering not being placed in the trust account.
Crescendo Advisors II, LLC, an entity
controlled by Mr. Rosenfeld, has agreed that, commencing on the date of this prospectus through the earlier of our consummation of our initial business
combination or our liquidation, it will make available to us certain general and administrative services, including office space, utilities and
administrative support, as we may require from time to time. We have agreed to pay Crescendo Advisors II, LLC $12,500 per month for these services.
Eric S. Rosenfeld is the majority holder of Crescendo Advisors II, LLC. Accordingly, he will benefit from the transaction to the extent of his interest
in Crescendo Advisors II, LLC. However, this arrangement is solely for our benefit and is not intended to provide Mr. Rosenfeld or our other executive
officers compensation in lieu of salaries. We believe, based on rents and fees for similar services in the New York City metropolitan area, that the
fee charged by Crescendo Advisors II, LLC is at least as favorable as we could have obtained from an unaffiliated person.
Other than the fees described above, no
compensation or fees of any kind, including finders fees, consulting fees or other similar compensation, will be paid to any of our sponsors,
officers, directors or their respective affiliates, for services rendered to us prior to, or in connection with the consummation of our initial
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. There is no limit on the amount of out-of-pocket expenses reimbursable by us; provided,
however, that to the extent such expenses exceed the available proceeds not deposited in the trust account and the interest income earned on the
amounts held in the trust account, such expenses would not be reimbursed by us unless we consummate an initial business combination. Our audit
committee will review and approve all reimbursements and payments made to any initial stockholder or member of our management team, or our or their
respective affiliates, and any reimbursements and payments made to members of our audit committee will be reviewed and approved by our Board of
Directors, with any interested director abstaining from such review and approval.
After our initial business combination,
members of our management team who remain with us may be paid consulting, board, management or other fees from the combined company with any and all
amounts
71
being fully disclosed to stockholders, to the extent then known, in the proxy solicitation materials furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time of a stockholder meeting held to consider our initial business combination, as it will be up to the directors of the post-combination business to determine executive and director compensation. In this event, such compensation will be publicly disclosed at the time of its determination in a Current Report on Form 8-K, as required by the SEC.
All ongoing and future transactions
between us and any of our officers and directors or their respective affiliates will be on terms believed by us to be no less favorable to us than are
available from unaffiliated third parties. Such transactions, including the payment of any compensation, will require prior approval by a majority of
our uninterested independent directors (to the extent we have any) 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 (or, if there are no independent directors, our disinterested 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.
Related Party Policy
Our Code of Ethics, which we will adopt
upon consummation of this offering, will require us to avoid, wherever possible, all related party transactions that could result in actual or
potential conflicts of interests, except under guidelines approved by the board of directors (or the audit committee). Related-party transactions are
defined as transactions in which (1) the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, (2) we or any of
our subsidiaries is a participant, and (3) any (a) executive officer, director or nominee for election as a director, (b) greater than 5% beneficial
owner of our shares of common stock, or (c) immediate family member, of the persons referred to in clauses (a) and (b), has or will have a direct or
indirect material interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). A conflict of
interest situation can arise when a person takes actions or has interests that may make it difficult to perform his or her work objectively and
effectively. Conflicts of interest may also arise if a person, or a member of his or her family, receives improper personal benefits as a result of his
or her position.
We also require each of our directors
and executive officers to annually complete a directors and officers questionnaire that elicits information about related party
transactions.
Our audit committee, pursuant to its
written charter, will be responsible for reviewing and approving related-party transactions to the extent we enter into such transactions. The audit
committee will consider all relevant factors when determining whether to approve a related party transaction, including whether the related party
transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the
extent of the related partys interest in the transaction. No director may participate in the approval of any transaction in which he is a related
party, but that director is required to provide the audit committee with all material information concerning the transaction. Additionally, we require
each of our directors and executive officers to complete a directors and officers questionnaire that elicits information about related
party transactions.
These procedures are intended to
determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a
director, employee or officer.
To further minimize potential conflicts
of interest, we have agreed not to consummate a business combination with an entity which is affiliated with any of our initial stockholders unless we
obtain an opinion from an independent investment banking firm reasonably acceptable to Cantor Fitzgerald & Co. that the business combination is
fair to our unaffiliated stockholders from a financial point of view. Furthermore, in no event will any of our existing officers, directors, special
advisor or initial stockholders, or any entity with which they are affiliated, be paid any finders fee, consulting fee or other compensation
prior to, or for any services they render in order to effectuate, the consummation of a business combination.
72
General
We are authorized to issue 16,000,000
shares of common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. As of the date of this
prospectus, 2,875,000 shares of common stock are outstanding, held by four stockholders of record. No shares of preferred stock are currently
outstanding.
Units
Each unit consists of one common share
and one right. The shares of common stock and rights will begin to trade separately ten business days following the earlier to occur of the expiration
of the underwriters over-allotment option, its exercise in full or the announcement by the underwriters of its intention not to exercise all or
any remaining portion of the over-allotment option. In no event will separate trading of the shares of common stock and rights commence until we file
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 an 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 on the date of this prospectus. If the over-allotment option
is exercised after the date of this prospectus, we will file an amendment to the Form 8-K, or a new 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 when separate trading of the shares of common stock and rights has commenced.
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 any vote held to approve our initial business
combination, all of our initial stockholders, as well as all of our officers and directors, have agreed to vote their respective shares of common stock
owned by them immediately prior to this offering and any shares purchased in this offering or following this offering in the open market in favor of
the proposed business combination.
We will proceed with the business
combination only if we have net tangible assets of at least $5,000,001 upon consummation of such business combination and a majority of the shares of
common stock voted are voted in favor of the business combination.
Our board of directors is divided into
three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. 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 24 months from the consummation of this offering, we will (i) cease all
operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of
the outstanding public shares, 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 (iii) as promptly as reasonably possible following such redemption,
subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above)
to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Our initial stockholders have
agreed to waive their rights to share in any distribution with respect to their insider shares and private shares.
Our stockholders have no conversion,
preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to the shares of 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 on the proposed business combination and the business combination is completed.
73
Preferred Stock
Our certificate of incorporation
authorizes the issuance of 1,000,000 shares of 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 shares of preferred stock with dividend, liquidation, redemption, voting or other rights which could adversely
affect the voting power or other rights of the holders of shares of common stock. However, the underwriting agreement prohibits us, prior to a business
combination, from issuing shares of preferred stock which participate in any manner in the proceeds of the trust account, or which votes as a class
with the shares of common stock on a business combination. We may issue some or all of the shares of preferred stock to effect a business combination.
In addition, the shares of 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.
Rights
Each holder of a right will
automatically receive one-tenth (1/10) of a share of common stock upon consummation of our initial business combination, even if the holder of such
right converted all shares of common stock held by him, her or it in connection with the initial business combination or an amendment to our amended
and restated certificate of incorporation with respect to our pre-business combination activities. No additional consideration will be required to be
paid by a holder of rights in order to receive his, her or its additional shares upon consummation of an initial business combination as the
consideration related thereto has been included in the unit purchase price paid for by investors in this offering. The shares issuable upon exchange of
the rights will be freely tradable (except to the extent held by affiliates of ours). We will not issue fractional shares upon exchange of the rights.
If, upon exchange of the rights, a holder would be entitled to receive a fractional interest in a share, we will, upon exchange, either round up to the
nearest whole number the number of shares to be issued to the right holder or otherwise comply with Section 155 of the Delaware General Corporation Law
(which addresses the handling of fractional shares for Delaware companies). We will make the determination of how we are treating fractional shares at
the time of our initial business combination and include such determination in the proxy materials we send to stockholders for their consideration of
such initial business combination.
If we enter into a definitive agreement
for a business combination in which we will not be the surviving entity, the definitive agreement will provide for the holders of rights to receive the
same per share consideration the holders of the shares of common stock will receive in the transaction on an as-converted into common share
basis.
If we are unable to complete an initial
business combination within the required time period and we liquidate the funds held in the trust account, holders of rights will not receive any of
such funds with respect to their rights, nor will they receive any distribution from our assets held outside of the trust account with respect to such
rights, and the rights will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the holders of the
rights upon consummation of an initial business combination. Additionally, in no event will we be required to net cash settle the rights. Accordingly,
the rights may expire worthless.
Dividends
We have not paid any cash dividends on
our shares of 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. The 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.
74
Our Transfer Agent
The transfer agent for our securities
is Continental Stock Transfer & Trust Company, 17 Battery Place, New York, New York 10004.
Listing of our Securities
There is presently no public market for
our units, shares of common stock or rights. We intend to apply to have the units, and the shares of common stock and rights once they begin separate
trading, listed on Nasdaq under the symbols _____, _____ and _____, respectively. Although, after giving effect to
this offering, we meet on a pro forma basis the minimum initial listing standards of Nasdaq, which generally only requires that we meet certain
requirements relating to stockholders equity, market capitalization, aggregate market value of publicly held shares and distribution
requirements, we cannot assure you that our securities will continue to be listed on Nasdaq as we might not meet certain continued listing
standards.
75
Immediately after this offering, we
will have 12,875,000 shares of common stock outstanding, or 14,787,500 shares if the over-allotment option is exercised in full excluding shares
underlying rights to be sold in the offering and without consideration to the reclassification of shares subject to possible conversion. Of these
shares, the 10,000,000 shares sold in this offering, or 11,500,000 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. All of those shares have been placed in escrow and will not be transferable until they are released
except in limited circumstances described elsewhere in this prospectus.
Rule 144
A person who has beneficially owned
restricted shares of common stock or rights 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 common
stock for at least six months but who are our affiliates at the time of, or 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 a number of shares that does not exceed the
greater of either of the following:
|
1% of the number of shares of common stock then outstanding, which will equal 128,750 shares immediately after this offering (or 147,875 if the over-allotment option is exercised in full); and |
|
the average weekly trading volume of the shares of 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 and notice requirements and to 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 staff had 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. 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 any shell companies (other than business combination related shell companies) or any issuer that has 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, it is likely that pursuant
to Rule 144, our initial stockholders will be able to sell their insider shares freely without registration one year after we have completed our
initial business combination assuming they are not an affiliate of ours at that time.
76
Registration Rights
The holders of our insider shares
issued and outstanding on the date of this prospectus, as well as the holders of the private units (and all underlying securities) and any securities
issued to our initial stockholders, officers, directors or their affiliates in payment of working capital loans made to us, will be entitled to
registration rights pursuant to an agreement to be signed prior to or on the effective date of this offering. The holders of a majority of these
securities are entitled to make up to two demands that we register such securities. The holders of the majority of the insider shares can elect to
exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from
escrow. The holders of a majority of the private units and securities issued in payment of working capital loans (or underlying securities) can elect
to exercise these registration rights at any time after we consummate a business combination. In addition, the holders have certain
piggy-back registration rights with respect to registration statements filed subsequent to our consummation of a business combination. We
will bear the expenses incurred in connection with the filing of any such registration statements.
77
We intend to offer our securities
described in this prospectus through the underwriters named below. Cantor Fitzgerald & Co. is the representative for the underwriters. We have
entered into an underwriting agreement with the representative. Subject to the terms and conditions of the underwriting agreement, each of the
underwriters has severally agreed to purchase from us the number of units listed next to its name in the following table:
Underwriters |
Number of Units |
|||||
---|---|---|---|---|---|---|
Cantor
Fitzgerald & Co. |
||||||
Total
|
10,000,000 |
A copy of the underwriting agreement
has been filed as an exhibit to the registration statement of which this prospectus forms a part.
The underwriting agreement provides
that the underwriters must purchase all of the units if they purchase any of them. However, the underwriters are not required to take or pay for the
units covered by the over-allotment option described below.
Our units are offered subject to a
number of conditions, including:
|
receipt and acceptance of the units by the underwriters; and |
|
the underwriters right to reject orders in whole or in part. |
In connection with this offering,
certain of the underwriters or securities dealers may distribute prospectuses electronically.
Upon the execution of the underwriting
agreement, the underwriters will be obligated to purchase the units at the prices and upon the terms stated therein, and, as a result, will thereafter
bear any risk associated with changing the offering price to the public or other selling terms.
Over-allotment Option
We have granted the underwriters an
option to buy up to 1,500,000 additional units. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any,
made in connection with this offering. The underwriters have 45 days from the date of this prospectus to exercise this option. If the underwriters
exercise this option, they will each purchase additional units approximately in proportion to the amounts specified in the table
above.
Commissions and Discounts
Units sold by the underwriters to the
public will initially be offered at the offering price set forth on the cover of this prospectus. Any units sold by the underwriters to securities
dealers may be sold at a discount of up to $ per unit from the public offering price. Any of these securities dealers may resell any
units purchased from the underwriters to other brokers or dealers at a discount of up to $ per unit from the public offering price. If all
of the units are not sold at the initial public offering price, the representative may change the offering price and the other selling terms. Upon
execution of the underwriting agreement, the underwriters will be obligated to purchase the units at the prices and upon the terms stated therein, and,
as a result, will thereafter bear any risk associated with changing the offering price to the public or other selling terms. No offer or invitation to
subscribe for units may be made to the public in the Cayman Islands.
The following table shows the per unit
and total underwriting discounts and commissions we will pay to the underwriters assuming both no exercise and full exercise of the underwriters
over-allotment option to purchase up to an additional 1,500,000 units.
78
Per Unit |
Without Over-allotment |
With Over-allotment |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Public
offering price |
$ | 10.00 | $ | 100,000,000 | $ | 115,000,000 | ||||||||
Discount(1) |
$ | 0.55 | $ | 5,500,000 | $ | 6,325,000 | ||||||||
Proceeds
before expenses(2) |
$ | 9.45 | $ | 94,500,000 | $ | 108,675,000 |
(1) |
The underwriting discount of 2.5% is payable at the closing of the offering. Additionally, pursuant to the underwriting agreement, a deferred underwriting fee of up to 3.0% is payable upon consummation of our initial business combination and will be held in the trust account until consummation of such business combination. |
(2) |
The offering expenses are estimated at $500,000. |
No discounts or commissions will be
paid on the sale of the private units.
We have also agreed to reimburse the
underwriters for certain out-of-pocket actual expenses related to the offering, including legal fees incurred to clear the offering with FINRA,
background searches of our officers and directors, net roadshow expenses, and lucite cube mementos, up to a maximum aggregate reimbursable amount of
$_____.
Listing of our Securities
There is presently no public market for
our units, shares of common stock or rights. We intend to apply to have the units, and the shares of common stock and rights once they begin separate
trading, listed on Nasdaq under the symbols _____, _____ and _____, respectively. Although, after giving effect to
this offering, we meet on a pro forma basis the minimum initial listing standards of Nasdaq, which generally only requires that we meet certain
requirements relating to stockholders equity, market capitalization, aggregate market value of publicly held shares and distribution
requirements, we cannot assure you that our securities will continue to be listed on Nasdaq as we might not meet certain continued listing
standards.
Pricing of Securities
We have been advised by the
representative that the underwriters propose to offer the units to the public at the offering price set forth on the cover page of this prospectus.
They may allow some dealers concessions not in excess of $___ per unit and the dealers may reallow a concession not in excess of $___ per unit to other
dealers.
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 rights were negotiated between us and the
representative. Factors considered in determining the prices and terms of the units, including the shares of common stock and rights underlying the
units, include:
|
the history and prospects of companies whose principal business is the acquisition of other companies; |
|
prior offerings of those companies; |
|
our prospects for acquiring an operating business at attractive values; |
|
our capital structure; |
|
the per share amount of net proceeds being placed into the trust account; |
|
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 the underwriters are unable to compare our financial results and prospects with those of public companies operating in the same
industry.
79
Regulatory Restrictions on Purchase of
Securities
Rules of the SEC may limit the ability
of the underwriters to bid for or purchase our units before the distribution of the units is completed. However, the underwriters may engage in the
following activities in accordance with the rules:
|
Stabilizing Transactions. The underwriters may make bids or purchases for the purpose of preventing or retarding a decline in the price of our units, as long as stabilizing bids do not exceed the offering price of $10.00 and the underwriters comply with all other applicable rules. |
|
Over-Allotments and Syndicate Coverage Transactions. The underwriters may create a short position in our units by selling more of our units than are set forth on the cover page of this prospectus up to the amount of the over-allotment option. This is known as a covered short position. The underwriters may also create a short position in our units by selling more of our units than are set forth on the cover page of this prospectus and the units allowed by the over-allotment option. This is known as a naked short position. If the underwriters create a short position during the offering, the representative may engage in syndicate covering transactions by purchasing our units in the open market. The representative may also elect to reduce any short position by exercising all or part of the over-allotment option. Determining what method to use in reducing the short position depends on how the units trade in the aftermarket following the offering. If the unit price drops following the offering, the short position is usually covered with shares purchased by the underwriters in the aftermarket. However, the underwriters may cover a short position by exercising the over-allotment option even if the unit price drops following the offering. If the unit price rises after the offering, then the over-allotment option is used to cover the short position. If the short position is more than the over-allotment option, the naked short must be covered by purchases in the aftermarket, which could be at prices above the offering price. |
|
Penalty Bids. The representative may reclaim a selling concession from a syndicate member when the units originally sold by the syndicate member are purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. |
Stabilization and syndicate covering
transactions may cause the price of our securities to be higher than they would be in the absence of these transactions. The imposition of a penalty
bid might also have an effect on the prices of our securities if it discourages resales of our securities.
Neither we nor the underwriters make
any representation or prediction as to the effect that the transactions described above may have on the price of our securities. These transactions may
occur on Nasdaq, in the over-the-counter market or on any trading market. If any of these transactions are commenced, they may be discontinued without
notice at any time.
Other Terms
Except as set forth above, we are not
under any contractual obligation to engage any of the underwriters to provide any services for us after this offering, and have no present intent to do
so. However, any of the underwriters may, among other things, introduce us to potential target businesses or assist us in raising additional capital,
as needs may arise in the future. If any underwriter provides services to us after this offering, we may pay the underwriter fair and reasonable fees
that would be determined at that time in an arms length negotiation; provided that no agreement will be entered into with the underwriter and no
fees for such services will be paid to the underwriter prior to the date which is 90 days after the date of this prospectus, unless FINRA determines
that such payment would not be deemed underwriters compensation in connection with this offering.
Indemnification
We have agreed to indemnify the
underwriters against some liabilities, including civil liabilities under the Securities Act, or to contribute to payments the underwriters may be
required to make in this respect.
80
Graubard Miller, New York, New York, is
acting as counsel in connection with the registration of our securities under the Securities Act and will pass on the validity of the rights offered in
the prospectus. Ellenoff Grossman & Schole LLP, New York, New York, is acting as counsel for the underwriters in this offering.
The financial statements of Harmony
Merger Corp. as of May 31, 2014 and for the period from May 21, 2014 (inception) through May 31, 2014 appearing in this prospectus have been audited by
Marcum LLP, independent registered public accounting firm, as set forth in their report, thereon (which contains an explanatory paragraph relating to
substantial doubt about the ability of Harmony Merger Corp. to continue as a going concern as described in Note 1 to the financial statements),
appearing elsewhere in this prospectus, and are included in reliance on such report given on the authority of such firm as an experts in auditing and
accounting.
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 SECs 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.
81
Harmony Merger Corp.
F-2 |
||||||
F-3 |
||||||
F-4 |
||||||
F-5 |
||||||
F-6 |
||||||
F-7 F-12 |
F-1
To the Board of Directors and Shareholders of Harmony Merger
Corp.
We have audited the accompanying
balance sheet of Harmony Merger Corp. (the Company) as of May 31, 2014, and the related statements of operations, changes in
stockholders equity and cash flows for the period from May 21, 2014 (inception) through May 31, 2014. These financial statements are the
responsibility of the Companys management. 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 the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 Companys 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 Harmony Merger Corp., as of May 31, 2014, and the
results of its operations and its cash flows for the period from May 21, 2014 (inception) through May 31, 2014 in conformity with generally accepted
accounting principles (United States).
The accompanying financial statements
have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has no
present revenue, its business plan is dependent on the completion of a financing and the Companys cash and working capital as of May 31, 2014 are
not sufficient to complete its planned activities for the upcoming year. These conditions raise substantial doubt about the Companys ability to
continue as a going concern. Managements plans regarding these matters are also described in Notes 1 and 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Marcum LLP
Marcum LLP
New York, NY
July 9, 2014
New York, NY
July 9, 2014
F-2
ASSETS |
||||||
Current
assets Cash and cash equivalents |
$ | 74,985 | ||||
Deferred
offering costs associated with initial public offering |
22,500 | |||||
Total
assets |
$ | 97,485 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||
Current
liabilities: |
||||||
Accounts
payable |
$ | 478 | ||||
Deferred
offering costs payable |
22,500 | |||||
Note payable
to stockholder |
50,000 | |||||
Total
current liabilities |
72,978 | |||||
Commitments |
||||||
Stockholders equity |
||||||
Preferred
stock, $.0001 par value |
| |||||
Authorized
1,000,000 shares; none issued |
| |||||
Common stock,
$.0001 par value |
| |||||
Authorized
16,000,000 shares, 2,875,000 shares issued and outstanding(1) |
288 | |||||
Additional
paid-in capital |
24,712 | |||||
Accumulated
deficit |
(493 | ) | ||||
Total
stockholders equity |
24,507 | |||||
Total
liabilities and stockholders equity |
$ | 97,485 |
(1) |
Includes an aggregate of 375,000 shares subject to forfeiture by the initial stockholders to the extent that the underwriters over-allotment option is not exercised in full. (Note 7) |
The accompanying notes are an integral part of these
financial statements.
F-3
Statement of Operations
For the period May 21, 2014 (Inception) through May 31, 2014
For the period May 21, 2014 (Inception) through May 31, 2014
Formation and
operational costs |
$ | 493 | ||||
Net
loss |
$ | (493 | ) | |||
Weighted
average shares outstanding(1) |
2,500,000 | |||||
Basic and
diluted net loss per share |
$ | (0.00 | ) |
(1) |
Excludes an aggregate of 375,000 shares subject to forfeiture by the initial stockholders to the extent that the underwriters over-allotment option is not exercised in full. (Note 7) |
The accompanying notes are an integral part of these
financial statements.
F-4
Statement of Changes in Stockholders Equity
For the period May 21, 2014 (Inception) through May 31, 2014
For the period May 21, 2014 (Inception) through May 31, 2014
Common Stock |
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares(1) |
Amount |
Additional Paid-In Capital |
Accumulated deficit |
Shareholders Equity |
||||||||||||||||||
Common shares
issued to initial stockholders |
2,875,000 | $ | 288 | $ | 24,712 | $ | | $ | 25,000 | |||||||||||||
Net Loss
|
| | | (493 | ) | (493 | ) | |||||||||||||||
Balance at
May 31, 2014 |
2,875,000 | $ | 288 | $ | 24,712 | $ | (493 | ) | $ | 24,507 |
(1) |
Includes an aggregate of 375,000 shares subject to forfeiture by the initial stockholders to the extent that the underwriters over-allotment option is not exercised in full. (Note 7) |
The accompanying notes are an integral part of these
financial statements.
F-5
Statement of Cash Flows
For the period May 21, 2014 (Inception) through May 31, 2014
For the period May 21, 2014 (Inception) through May 31, 2014
Cash flow
from operating activities |
||||||
Net loss
|
$ | (493 | ) | |||
Adjustments
to reconcile net loss to net cash used in operating activities: |
||||||
Change in
operating assets and liabilities: |
||||||
Increase in
accounts payable |
478 | |||||
Net cash
used in operating activities |
(15 | ) | ||||
Cash flows
from financing activities |
||||||
Proceeds from
sale of shares of common stock to initial stockholders |
25,000 | |||||
Proceeds from
note payable, stockholder |
50,000 | |||||
Net cash
provided by financing activities |
75,000 | |||||
Net
increase in cash and cash equivalents |
74,985 | |||||
Cash and cash
equivalents at beginning of period |
| |||||
Cash and
cash equivalents at end of period |
$ | 74,985 | ||||
Non-cash
Financial Activities |
||||||
Accrual of
deferred offering costs |
$ | 22,500 |
The accompanying notes are an integral part of these
financial statements.
F-6
Harmony Merger Corp. (the
Company) was incorporated in Delaware on May 21, 2014 as a blank check company whose objective is to acquire, through a merger, share
exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, one or more businesses or entities
(a Business Combination).
At May 31, 2014, the Company had not
yet commenced any operations. All activity through May 31, 2014 relates to the Companys formation and the proposed public offering described
below. The Company has selected December 31 as its fiscal year-end.
The Companys ability to commence
operations is contingent upon obtaining adequate financial resources through a proposed public offering of up to 10,000,000 units (or 11,500,000 units
if the underwriters over-allotment option is exercised in full) (Units) which is discussed in Note 3 (Proposed Public
Offering). Simultaneously with the consummation of the Proposed Public Offering, the Companys initial stockholders (Initial
Stockholders) and/or their designees have committed to purchase an aggregate of 375,000 units (Private Units) at $10.00 per unit (for
a total purchase price of $ 3,750,000). In addition, the Companys Initial Stockholders have agreed that if the over-allotment option is exercised
by the underwriters in full or in part, they will purchase, at a price of $10.00 per unit, the number of Private Units (up to a maximum of 37,500
Private Units) that is necessary to maintain in the trust account an amount equal to $10.00 per share of common stock sold to the public in the
Proposed Public Offering (Public Shares). These additional Private Units will be purchased in a private placement that will occur
simultaneously with the purchase of Units resulting from the exercise of the over-allotment option. All of the proceeds the Company receives from the
purchase of Private Units will be placed in the trust account described below. The Companys management has broad discretion with respect to the
specific application of the net proceeds of this Proposed Public Offering and the sale of Private Units, although substantially all of the net proceeds
are intended to be applied generally toward consummating a Business Combination.
The Company intends to apply to have
the Units listed on the Nasdaq Capital Market (NASDAQ). Pursuant to the NASDAQ listing rules, the Companys initial Business
Combination must be with a target business or businesses whose collective fair market value is at least equal to 80% of the balance in the trust
account at the time of the execution of a definitive agreement for such Business Combination, although this may entail simultaneous acquisitions of
several target businesses. There is no assurance that the Company will be able to effect a Business Combination successfully.
Upon the closing of the Proposed Public
Offering, management has agreed that $10.00 per Unit sold in the Proposed Public Offering, including the proceeds of the private placements of the
Private Units, will be held in a United States-based trust account (Trust Account) and invested in United States government treasury bills,
bonds or notes, 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 until the earlier of (i) the consummation of the Companys initial Business Combination and (ii) the Companys failure
to consummate a Business Combination within the prescribed time. Placing funds in the Trust Account may not protect those funds from third party claims
against the Company. Although the Company will seek to have all vendors, service providers, prospective target businesses or other entities it engages,
execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there is no guarantee that such
persons will execute such agreements. The Companys Chief Executive Officer has agreed that he will be liable under certain circumstances to
ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities that are owed money by
the Company for services rendered, contracted for or products sold to the Company. There can be no assurance that he will be able to satisfy those
obligations should they arise. The remaining net proceeds (not held in the Trust Account) may be used to pay for business, legal and accounting due
diligence on prospective acquisitions and continuing general and administrative expenses. Additionally, the interest earned on the Trust Account
balance may be released to the Company to fund working capital requirements as well as for any amounts that are necessary to pay the Companys tax
obligations.
The Company, after signing a definitive
agreement for the acquisition of a target business, is required to provide stockholders who acquired Public Shares in the Proposed Public Offering
(Public Stockholders)
F-7
with the opportunity to convert their Public Shares for a pro rata share of the Trust Account. In the event that stockholders owning approximately 92% (or approximately 92.65% if the overallotment option is exercised in full) or more of the Public Shares exercise their conversion rights described below, the Business Combination will not be consummated. The actual percentages, however, will only be able to be determined once a target business is located and the Company can assess all of the assets and liabilities of the combined company upon consummation of the proposed Business Combination, subject to the requirement that the Company must have at least $5,000,001 of net tangible assets upon close of such Business Combination. As a result, the actual percentages of shares that can be converted may be significantly lower than the above estimates. The Initial Stockholders will agree to vote any shares they then hold in favor of any proposed Business Combination and will waive any conversion rights with respect to these shares and the shares included in the Private Units pursuant to letter agreements to be executed prior to the Proposed Public Offering.
In connection with any proposed
Business Combination, the Company will seek stockholder approval of an initial Business Combination at a meeting called for such purpose at which
Public Stockholders may seek to convert their Public Shares, regardless of whether they vote for or against the proposed Business Combination. If the
Company seeks stockholder approval of an initial Business Combination, any Public Stockholder voting either for or against such proposed Business
Combination will be entitled to demand that his Public Shares be converted into a full pro rata portion of the amount then in the Trust Account
(initially $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company or
necessary to pay its taxes). Holders of rights sold as part of the Units will not be entitled to vote on the Proposed Business Combination and will
have no conversion or liquidation rights with respect to their shares of common stock underlying such rights.
The Company will consummate a Business
Combination only if holders of less than approximately 92% (or approximately 92.65% if the overallotment option is exercised in full) of the Public
Shares, subject to adjustment as described above, elect to convert their shares to a full or pro-rata portion of the amount held in the Trust Account
and a majority of the outstanding shares of common stock voted, are voted in favor of the Business Combination. Notwithstanding the foregoing, the
Amended and Restated Certificate of Incorporation of the Company will provide that a Public Stockholder, together with any affiliate or other person
with whom such Public Stockholder is acting in concert or as a group (within the meaning of Section 13 of the Securities Act of 1934, as
amended), will be restricted from seeking conversion rights with respect to an aggregate of more than 20% of the Public Shares (but only with respect
to the amount over 20% of the Public Shares). A group will be deemed to exist if Public Stockholders (i) file a Schedule 13D or 13G
indicated the presence of a group or (ii) acknowledge to the Company that they are acting, or intend to act, as a group.
Pursuant to the Companys Amended
and Restated Certificate of Incorporation to be in effect upon consummation of the Proposed Public Offering, if the Company is unable to complete its
initial Business Combination within 24 months from the date of the Proposed Public Offering, the Company will (i) cease all operations except for the
purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public
shares and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining holders of common stock and the
Companys board of directors, dissolve and liquidate. If the Company is unable to consummate an initial Business Combination and is forced to
redeem 100% of the outstanding public shares for a pro rata portion of the funds held in the Trust Account, any holder that voted against the last
proposed Business Combination prior to such redemption will only receive $10.00 per share, while any holder that voted in favor of the last proposed
Business Combination prior to such redemption will receive a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest
earned on the funds held in the Trust Account and not previously released to the Company or necessary to pay any of its taxes. Holders of rights will
receive no proceeds in connection with the liquidation. The Initial Stockholders and the holders of Private Units will not participate in any
redemption distribution with respect to their initial shares and Private Units, including the common stock included in the Private
Units.
If the Company is unable to complete
its initial Business Combination and expends all of the net proceeds of the Proposed Public Offering not deposited in the Trust Account, without taking
into account any
F-8
interest earned on the Trust Account, the Company expects that the initial per-share redemption price for common stock will be $10.00. The proceeds deposited in the Trust Account could, however, become subject to claims of the Companys creditors that are in preference to the claims of the Companys stockholders. In addition, if the Company is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in its bankruptcy estate and subject to the claims of third parties with priority over the claims of the Companys common stockholders. Therefore, the actual per-share redemption price may be less than approximately $10.00.
Going Concern Consideration
At May 31, 2014, the Company had
$74,985 in cash and working capital of $2,007. Further, the Company has incurred and expects to continue to incur significant costs in pursuit of its
financing and acquisition plans. These conditions raise substantial doubt about the Companys ability to continue as a going concern. Management
plans to address this uncertainty through the Proposed Public Offering as discussed in Note 3. There is no assurance that the Companys plans to
raise capital or to consummate a Business Combination will be successful. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Note 2 Significant Accounting
Policies
Cash and Cash
Equivalents
The Company considers all short-term
investments with a maturity of three months or less when purchased to be cash equivalents.
Income
Taxes
The Company accounts for income taxes
under ASC 740 Income Taxes (ASC 740). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact
of differences between the financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax
loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a
portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting
for uncertainty in income taxes recognized in an enterprises financial statements and prescribes a recognition threshold and measurement process
for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company is required to file income
tax returns in the United States (federal) and in various state and local jurisdictions. Based on the Companys evaluation, it has been concluded
that there are no significant uncertain tax positions requiring recognition in the Companys financial statements. Since the Company was
incorporated on May 21, 2014, the evaluation was performed for the upcoming 2014 tax year, which will be the only period subject to examination. The
Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in
a material change to its financial position.
The Companys policy for recording
interest and penalties associated with audits is to record such expense as a component of income tax expense. There were no amounts accrued for
penalties or interest as of or during the period from May 21, 2014 (inception) through May 31, 2014. Management is currently unaware of any issues
under review that could result in significant payments, accruals or material deviations from its position.
Loss Per
Share
Loss per share is computed by dividing
net loss by the weighted-average number of shares of common stock outstanding during the period, excluding shares of common stock subject to forfeiture
(Note 7).
F-9
Note 2 Significant Accounting Policies
(Continued)
Use of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting
Pronouncements
Management does not believe that any
recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial
statements.
Subsequent
Events
Management has evaluated subsequent
events to determine if events or transactions occurring through July 9, 2014, the date these financial statements were available to be issued, require
potential adjustment to or disclosure in the financial statements and has concluded that no subsequent events have occurred that would require
recognition in the financial statements or disclosure in the notes to the financial statements.
Note 3 Proposed Public Offering
The Proposed Public Offering calls for
the Company to offer for public sale up to 10,000,000 Units at a proposed offering price of $10.00 per Unit. In addition, the Company has granted the
Representative a 45-day option to purchase up to an additional 1,500,000 Units at a price of $10.00 per Unit, solely to cover over-allotments, if any.
Each Unit consists of one share of common stock and one right. Each right will automatically convert into one-tenth (1/10) of a share of common stock
on the consummation of an initial Business Combination. If the Company is unable to consummate a Business Combination, the Company will redeem 100% of
the Public Shares using the funds in the Trust Account as described in Note 1. In such event, the rights will be worthless.
There is presently no public market for
the Companys Units, common stock or rights. The Company intends to apply to have its Units, common stock and rights listed on NASDAQ. The common
stock and rights comprising the Units will begin separate trading on the 90th day after the date of the Proposed Public Offering unless the
Representative determines that an earlier date is acceptable. Upon consummation of an initial Business Combination, the Units will cease trading and
only the common stock will trade.
Note 4 Deferred Offering Costs
Deferred offering costs consist
principally of legal, accounting and underwriting costs incurred through the balance sheet date that are directly related to the Proposed Public
Offering and that will be charged to stockholders equity upon the receipt of the capital raised. Should the Proposed Public Offering prove to be
unsuccessful, these deferred costs as well as additional costs to be incurred will be charged to operations.
Note 5 Note Payable to Stockholder
The Company issued a $50,000 principal
amount unsecured promissory note to Eric S. Rosenfeld, the Companys Chief Executive Officer and an Initial Stockholder, on May 30, 2014. The note
is non-interest bearing and payable on the earlier of (i) May 31, 2015, (ii) the consummation of the Proposed Public Offering or (iii) the date on
which the Company determines not to proceed with the Proposed Public Offering. Due to the short-term nature of the note, the fair value of the note
approximates the carrying amount.
Note 6 Commitments
The Company will enter into an
agreement with the underwriters of the Proposed Public Offering (Underwriting Agreement). The anticipated terms of the Proposed Public
Offering are set forth in a non-binding letter of intent that is merely a statement of intent and is subject to change and further
negotiation
F-10
Note 6 Commitments (Continued)
between the parties and may be adjusted prior to the execution of the Underwriting Agreement. It is anticipated that the Underwriting Agreement will require the Company to pay an underwriting discount of 2.5% of the gross proceeds of the Proposed Public Offering as an underwriting discount and a deferred underwriting discount of up to 3.0% of the gross proceeds of the Proposed Public Offering, in each case as to be set forth in the Underwriting Agreement. The Underwriting Agreement will provide that the deferred underwriting discount would only be payable if the Company successfully completes its initial Business Combination.
The Company presently occupies office
space provided by an entity controlled by the Companys Chairman and Chief Executive Officer. Such entity has agreed that until the Company
consummates a Business Combination, it will make such office space, as well as general and administrative services including utilities and
administrative support, available to the Company as may be required by the Company from time to time. The Company has agreed to pay an aggregate of
$12,500 per month for such services commencing on the effective date of the Proposed Public Offering.
The Initial Stockholders of the Company
have committed to purchase 375,000 Private Units at $10.00 per unit (for an aggregate purchase price of $3,750,000) from the Company. These purchases
will take place simultaneously with the consummation of the Proposed Public Offering. In addition, the Initial Stockholders have also agreed that if
the over-allotment option is exercised by the underwriters in full or in part, they will purchase from the Company at a price of $10.00 per unit the
number of Private Units (up to a maximum of 37,500 Private Units) that is necessary to maintain in the Trust Account an amount equal to $10.00 per
share sold to the public in the Proposed Public Offering. All of the proceeds received from the sale of the Private Units will be placed in the Trust
Account. The Private Units will be identical to the Units being offered in the Proposed Public Offering, except that the holders have agreed (i) to
vote the shares of common stock included therein in favor of any proposed Business Combination, (ii) not to convert any shares of common stock included
therein into the right to receive cash for the Trust Account in connection with a stockholder vote to approve the proposed initial Business Combination
and (iii) that the shares of common stock included therein shall not participate in any liquidating distribution upon winding up if a Business
Combination is not consummated. Additionally, the holders have agreed not to transfer, assign or sell any of the units or underlying securities (except
to certain permitted transferees) until the completion of the initial Business Combination.
The Initial Stockholders and the
holders of the Private Units (or underlying shares of common stock) will be entitled to registration rights with respect to the founding shares and the
Private Units (or underlying shares of common stock) pursuant to an agreement to be signed prior to or on the effective date of the Proposed Public
Offering. The holders of the majority of the founding shares are entitled to demand that the Company register these shares at any time commencing three
months prior to the first anniversary of the consummation of a Business Combination. The holders of the Private Units (or underlying shares of common
stock) are entitled to demand that the Company register these securities at any time after the Company consummates a Business Combination. In addition,
the Initial Stockholders and holders of the Private Units (or underlying shares of common stock) have certain piggy-back registration
rights on registration statements filed after the Companys consummation of a Business Combination.
Note 7 Stockholder Equity
Preferred
Stock
The Company is authorized to issue
1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time
to time by the Companys board of directors. As of May 31, 2014, there are no shares of preferred stock issued or outstanding.
Common
Stock
The Company is authorized to issue
16,000,000 shares of common stock with a par value of $0.0001 per share. In connection with the organization of the Company, a total of 2,875,000
shares of the Companys shares of common stock were sold to the Initial Stockholders at a price of approximately $0.01 per share for an aggregate
of $25,000.
F-11
Note 7 Stockholder Equity
(Continued)
As of May 31, 2014, 2,875,000 shares of
common stock were issued and outstanding, of which 375,000 shares are subject to forfeiture to the extent that the underwriters over-allotment
option is not exercised in full so that the Companys Initial Stockholders will own 20% of the issued and outstanding common shares after the
Proposed Public Offering, excluding shares of common stock included in the Private Units. All of these shares will be placed into an escrow account on
the closing of the Proposed Public Offering. Subject to certain limited exceptions, these shares will not be released from escrow until with respect to
50% of the shares, the earlier of one year after the date of the consummation of an initial Business Combination and the date on which the closing
price of the common stock exceeds $12.50 per share for any 20 trading days within a 30-trading day period following the consummation of an initial
Business Combination and, with respect to the remaining 50% of the shares, one year after the date of the consummation of an initial Business
Combination, or earlier if, subsequent to the Companys initial Business Combination, the Company consummates a subsequent liquidation, merger,
share exchange or other similar transaction which results in all of the Companys stockholders having the right to exchange their shares of common
stock for cash, securities or other property.
F-12
Until
,
2014, 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.
$100,000,000
Harmony Merger Corp.
10,000,000 Units
PROSPECTUS
Cantor Fitzgerald & Co.
__________, 2014
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 |
$ | 1,000 | (1) | |||
SEC
Registration Fee |
15,000 | |||||
FINRA filing
fee |
18,000 | |||||
Accounting
fees and expenses |
40,000 | |||||
Nasdaq listing
fees |
50,000 | |||||
Printing and
engraving expenses |
45,000 | |||||
Directors
& Officers liability insurance premiums |
75,000 | (2) | ||||
Legal fees and
expenses |
250,000 | |||||
Miscellaneous
|
81,000 | (3) | ||||
Total
|
$ | 575,000 |
(1) |
In addition to the initial acceptance fee that is charged by Continental Stock Transfer & Trust Company, as trustee, the registrant will be required to pay to Continental Stock Transfer & Trust Company $16,100 for acting as trustee, as transfer agent of the registrants shares of common stock, as right agent for the registrants rights and 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 amended and restated 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 persons 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
persons 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 of the corporation 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 of the corporation 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 of the corporation or by persons serving at the request of the corporation as directors, officers, employees or agents of
another corporation, partnership, joint venture, trust or other enterprise 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 persons 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
II-2
capacity, or arising out of such persons 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.
(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
corporations 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 Eighth 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.
II-3
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:
In May 2014, the Company issued an
aggregate of 2,875,000 shares of common stock to a stockholder for an aggregate purchase price of $25,000, or approximately $0.01 per share, in
connection with our organization pursuant to the exemption from registration contained in Section 4(2) of the Securities Act.
In addition, the Companys initial
stockholders have committed to purchase from the Company an aggregate of 375,000 units at $10.00 per unit (for a total purchase price of $3,750,000).
These purchases will take place on a private placement basis simultaneously with the consummation of this offering. The Companys initial
stockholders have also agreed that if the over-allotment option is exercised by the underwriters in full or in part, they will purchase at a price of
$10.00 per unit the number of private units (up to a maximum of 37,500 private units) that is necessary to maintain in the trust account an amount
equal to $10.00 per share of common stock sold to the public in this offering. These issuances will be made pursuant to the exemption from registration
contained in Section 4(2) of the Securities Act.
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 | Certificate of incorporation. |
|||||
3.2 | Amended and Restated Certificate of incorporation.* |
|||||
3.3 | Bylaws. |
|||||
4.1 | Specimen Unit Certificate.* |
|||||
4.2 | Specimen Common Share Certificate.* |
|||||
4.3 | Specimen Right Certificate.* |
|||||
4.4 | Form
of Rights Agreement between Continental Stock Transfer & Trust Company and the Registrant.* |
|||||
5.1 | Opinion of Graubard Miller.* |
|||||
10.1 | Form
of Letter Agreement among the Registrant, Cantor Fitzgerald & Co. and the Companys officers, directors and stockholders.* |
|||||
10.2 | Form
of Investment Management Trust Agreement between Continental Stock Transfer & Trust Company and the Registrant.* |
|||||
10.3 | Form
of Escrow Agreement between the Registrant, Continental Stock Transfer & Trust Company and the Initial Stockholders.* |
|||||
10.4 | Form
of Promissory Note issued to Eric S. Rosenfeld. |
|||||
10.5 | Form
of Registration Rights Agreement among the Registrant and the Initial Stockholders.* |
|||||
10.6 | Form
of Subscription Agreements among the Registrant, Graubard Miller and the Initial Stockholders.* |
|||||
14 | Form
of Code of Ethics.* |
|||||
23.1 | Consent of Marcum LLP. |
|||||
23.2 | Consent of Graubard Miller (included in Exhibit 5.1).* |
|||||
24 | Power
of Attorney (included on signature page of this Registration Statement). |
|||||
99.1 | Form
of Audit Committee Charter.* |
II-4
Exhibit No. |
Description | |||||
---|---|---|---|---|---|---|
99.2 | Form
of Nominating Committee Charter.* |
|||||
99.3 | Form
of Compensation Committee Charter.* |
* |
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.
(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.
II-5
(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-6
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 9th day of July, 2014.
HARMONY MERGER CORP. |
||||||||||
By: |
/s/ Eric S. Rosenfeld |
|||||||||
Name: |
Eric
S. Rosenfeld |
|||||||||
Title: |
Chief
Executive Officer |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that
each person whose signature appears below constitutes and appoints Eric S. Rosenfeld and David D. Sgro his true and lawful attorney-in-fact, with full
power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments including
post-effective amendments to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his substitute, each acting alone, may
lawfully do or cause to be done by virtue thereof.
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/ Eric
S. Rosenfeld Eric S. Rosenfeld |
Chairman of the Board and Chief Executive Officer (Principal executive officer) |
July 9, 2014 |
||||||||
/s/ Thomas
Kobylarz Thomas Kobylarz |
Chief
Financial Officer (Principal financial and accounting officer) |
July 9, 2014 |
||||||||
/s/ David
D. Sgro David D. Sgro |
Chief
Operating Officer and Director |
July 9, 2014 |
||||||||
/s/ John
P. Schauerman John P. Schauerman |
Director |
July 9, 2014 |
||||||||
/s/ Adam
J. Semler Adam J. Semler |
Director |
July 9, 2014 |
||||||||
/s/
Leonard B. Schlemm Leonard B. Schlemm |
Director |
July 9, 2014 |
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