Attached files
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EX-23.1 - EX-23.1 - SINO MERCURY ACQUISITION CORP. | fs1a2ex23i_sinomercury.htm |
EX-3.2 - EX-3.2 - SINO MERCURY ACQUISITION CORP. | fs12014ex3ii_sinomercury.htm |
EX-1.1 - EX-1.1 - SINO MERCURY ACQUISITION CORP. | fs1a2ex1i_sinomercury.htm |
As filed with the U.S. Securities and Exchange Commission
on August 7, 2014
Registration No. 333-_____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
UNDER THE SECURITIES ACT OF 1933
SINO MERCURY ACQUISITION CORP.
(Exact name of registrant as specified in its
constitutional documents)
Delaware |
6770 |
46-5234036 |
||||||||
(State
or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
590 Madison Avenue, 21st Floor
New York, New York 10022
(646) 387-1287
(Address, including zip code, and telephone number,
including area code, of registrants principal executive offices)
New York, New York 10022
(646) 387-1287
(Address, including zip code, and telephone number,
including area code, of registrants principal executive offices)
Jianming Hao, Executive Chairman and Chief Executive Officer
590 Madison Avenue, 21st Floor
New York, New York 10022
(646) 387-1287
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
590 Madison Avenue, 21st Floor
New York, New York 10022
(646) 387-1287
(Name, address, including zip code, and telephone number,
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 |
Mitchell S. Nussbaum, Esq. Giovanni Caruso, Esq. Loeb & Loeb LLP 345 Park Avenue New York, New York 10154 (212) 407-4000 (212) 407-4990 Facsimile |
---|
Approximate date of
commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being
registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following
box. x
If this Form is filed to register
additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering. 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 |
|||||||||||||
Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company x |
CALCULATION OF REGISTRATION FEE
Title of each Class of Security being registered |
Proposed Maximum Aggregate Offering Price(1)(2) |
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
|
| | ||||||||
Common Stock
included as part of the Units |
| | ||||||||
Rights included
as part of the Units |
| | ||||||||
Common Stock
underlying Rights included as part of the Units |
| | ||||||||
Total
|
$ | 46,000,000 | $ | 5,924.80 |
(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 Underwriter 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, AUGUST 7, 2014 |
$40,000,000
Sino Mercury Acquisition Corp.
4,000,000 Units
Sino Mercury
Acquisition Corp. is a blank check company formed for the purpose of entering into a 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 although we initially intend to focus on target
businesses in the Peoples Republic of China that operate in the non-traditional financial industry, including but not limited to microcredit
companies, financial leasing companies and guarantors. 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.
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 underwriter, a 45-day option to purchase up to 600,000 units (over and above the 4,000,000 units referred to above) solely to cover
over-allotments, if any.
We have agreed to introduce the
underwriter in this offering to investors that are interested in purchasing at least $30,000,000 of the units being offered hereby. It is a condition
of this offering that at least $10,000,000 of the units being offered hereby are purchased by investors introduced by us who will agree to hold
their shares through the consummation of our initial business combination, vote in favor of such proposed business combination and not seek redemption
in connection therewith, as described in this prospectus. As a result, we will be assured to meet the $5,000,001 net tangible asset requirement in
order to complete an initial business combination, as described in this prospectus.
Our initial stockholders have also
committed to purchase from us an aggregate of 210,000 units, or private units, at $10.00 per unit (for a total purchase price of
$2,100,000). Our initial stockholders have also agreed that if investors introduced by us to the underwriter do not purchase at least
$30,000,000 of the units being offered hereby, they will purchase from us at a price of $10.00 per unit the number of private units, or private
commission units, that will equal the increased commissions we will pay the underwriter, as described below. These purchases will take place on a
private placement basis simultaneously with the consummation of this offering. All of the proceeds we receive from these purchases will be placed in
the trust account, except that the proceeds from the sale of the private commission units will be paid to the underwriter at the closing of this
offering.
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
SMACU 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 underwriter 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 SMAC and SMACR, 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 14 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)(2)(3) |
Proceeds, Before Expenses, to Us |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Per unit
|
$ | 10.00 | $ | 0.30 | $ | 9.70 | ||||||||
Total
|
$ | 40,000,000 | $ | 1,200,000 | $ | 38,800,000 |
(1) |
In the event that investors introduced by us to Cantor Fitzgerald & Co. do not purchase at least $30,000,000 of the units being offered hereby, there will be an additional underwriting commission paid to the underwriter in the amount of $0.15 per unit on the amount below $30,000,000 invested by investors introduced by us. |
(2) |
Excludes $0.10 per unit, or $400,000 (or approximately $640,000 if the underwriters over-allotment option is exercised in full), payable to Cantor Fitzgerald & Co. for a deferred underwriting fee to be placed in the trust account described below. These funds will be released to Cantor Fitzgerald only on completion of our initial business combination, as described in this prospectus. |
(3) |
Please see the section titled Underwriting for further information relating to the underwriting arrangements agreed to between us and the underwriter 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 Smith Barney, 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 liquidation of
the trust account 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. expects to deliver our securities to investors in the offering on or about ___________,
2014.
Cantor Fitzgerald & Co.
____________, 2014
TABLE OF CONTENTS
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F-1 |
i
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 Sino Mercury Acquisition 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 1,150,000 shares of common stock held by our initial stockholders prior to this offering (including up to an aggregate of 150,000 shares subject to forfeiture to the extent that the underwriters over-allotment option is not exercised in full or in part); |
|
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; |
|
private commission units refer to the units that may be purchased by our initial stockholders if investors introduced by us to the underwriter do not purchase at least $30,000,000 of the units being offered hereby in an amount equal the increased commissions we will pay the underwriter, as described herein; |
|
China or the PRC refers to the Peoples Republic of China as well as the Hong Kong Special Administrative Region and the Macau Special Administrative Region, but does not include Taiwan; |
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US Dollars and $ refer to the legal currency of the United States; |
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RMB refers to Renminbi, the legal currency of the PRC; |
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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; |
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the information in this prospectus assumes that investors introduced by us to the underwriter purchase at least $30,000,000 of the units being offered hereby and as a result, the commissions payable to the underwriter will not increase and the initial stockholders will not purchase any private commission units; and |
|
the information in this prospectus assumes that the underwriter will not exercise its 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 March 28, 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, or entering into contractual arrangements that give us control over such a target business. While our
efforts to identify a prospective target business will not necessarily be limited to a particular industry or geographic region of the world, we
initially intend to focus our search on target businesses located in China that operate in the non-traditional financial industry, including but not
limited to microcredit companies, financial leasing companies and guarantors.
1
We believe that companies that operate
in the non-traditional financial industry will perform favorably over the next decade due to the following reasons:
|
Chinese interest rates are significantly higher than those in the rest of the developed word. For instance, according to World Bank statistics, from 2009 to 2013, the average commercial bank lending rate in China was approximately 5.9% per annum, compared to 3.3% per annum in the United States. However, we do not believe these rates reflect the actual marketplace demand. We believe there is a significant lending market in China where interest rates can range from 20% to 30% per annum. We believe that target companies in the non-traditional financial industry have the capability of taking advantage of this interest rate differential between market demand and reported rates. Additionally, due to the interest rate differential between the US and China, we could use the relatively cheap cost of capital in the US to provide us with inexpensive sources to fund these non-traditional financial companies. |
|
Non-traditional financial companies are not regulated by the China Securities Regulation Committee (CSRC), the China Insurance Regulation Committee (CIRC) or the China Banking Regulatory Committee (CBRC), which impose strict standards for foreign investment and capital flows. Non-traditional financial companies should benefit from reduced governmental regulation imposed on these types of businesses. |
Although we believe the foregoing to be
true, 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. Accordingly, our beliefs may
be incorrect and we may not be able to locate a suitable or attractive target business to consummate an initial business combination
with.
We will have until 21 months from the
consummation of this offering (or 24 months from the consummation of this offering if we have entered into a definitive agreement with a target
business for a business combination within 21 months from the consummation of this offering and such business combination has not yet been consummated
within such 21-month period) 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 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 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 (whether
through outright ownership or through contractual arrangements) 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
2
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.
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 1,150,000 shares of common stock, which we refer to throughout this prospectus as the insider
shares, for an aggregate purchase price of $25,000 (the same amount typically paid for initial securities of similarly structured blank check
companies) , or approximately $0.02 per share. The insider shares held by our initial stockholders include an aggregate of up to 150,000 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 private commission units). None of
our initial stockholders has indicated any intention to purchase units in this offering.
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, pursuant to written agreements
with us, (A) to vote their insider shares and any public 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 $13.00 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.
3
In addition, our initial stockholders
have committed to purchase an aggregate of 210,000 private units at a price of $10.00 per unit ($2,100,000 in the aggregate). Our initial stockholders
have also agreed that if investors introduced by us to the underwriter do not purchase at least $30,000,000 of the units being offered hereby,
they will purchase from us at a price of $10.00 per unit an additional number of private commission units that will equal the increased commissions we
will pay the underwriter, as described in detail in the section titled Underwriting. These purchases will take place on a private placement
basis that will occur simultaneously with the closing of this offering. The proceeds from the private placement of the private units other than the
private commission units will be added to the proceeds of this offering and placed in an account in the United States at Smith Barney, 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 590 Madison Avenue, 21st Floor, New York, New York 10022 and our telephone number is (646) 387-1287. We also have offices located
in Beijing, China.
4
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 14 of this prospectus.
Securities
offered |
4,000,000 units, at $10.00 per unit, each unit consisting of one common share and one right, each right entitling the holder to automatically
receive one-tenth (1/10) of a common share upon consummation of our initial business combination. |
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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 SMACU,
SMAC and SMACR, respectively. |
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We
have agreed with Cantor Fitzgerald 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 underwriter of their
intention not to exercise all or any remaining portion of the over-allotment option. In no event will Cantor Fitzgerald 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. |
5
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 |
1,150,000 shares1 |
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Number to
be outstanding after this offering and sale of private units |
5,210,000 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 |
4,210,000 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 150,000 shares of common stock held by our initial stockholders that are subject to forfeiture if the over-allotment option is not exercised by the underwriter in full. |
2 |
Assumes (i) the over-allotment option has not been exercised and an aggregate of 150,000 shares of common stock held by our initial stockholders have been forfeited and (ii) the initial stockholders will not purchase any private commission units. |
6
Offering
proceeds to be held in trust |
$37,900,000 of the net proceeds of this offering (or $43,900,000 if the over-allotment option is exercised in full), plus the $2,100,000 we
will receive from the sale of the private units but not the private commission units, for an aggregate of $40,000,000 (or an aggregate of $46,000,000
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 Smith
Barney 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 $490,000 of net proceeds of this offering will not be held in the trust account. |
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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 $490,000); 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. Our
initial stockholders have approved the issuance of the |
7
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 $117,000 non-interest loan made by Jianming Hao, our executive chairman and chief
executive officer; and |
||||||
reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on our behalf, such as identifying
and investigating possible business targets and business combinations, traveling to and from the offices, plants or similar locations of prospective
target businesses to examine their operations, reviewing corporate documents and material agreements of prospective target businesses and structuring,
negotiating and consummating the business combination. To date, no such expenses have been incurred. |
||||||
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 |
8
account, less any taxes then due but not yet paid (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 of 1933, as amended, or the Securities Act. |
||||||
We have agreed to introduce the underwriter in this offering to investors that are interested in purchasing at least $30,000,000 of the
units being offered hereby. It is a condition of this offering that at least $10,000,000 of the units being offered hereby are purchased by investors
introduced by us who will agree to hold their shares through the consummation of our initial business combination, vote in favor of such proposed
business combination and not seek redemption in connection therewith, as described in this prospectus. Such investors will not be providing us with
a proxy to vote their shares, however. We refer to these investors throughout this prospectus as the non-tendering investors. As a
result, we expect to meet the $5,000,001 net tangible asset requirement in order to complete an initial business combination. |
||||||
Notwithstanding the foregoing, if we seek to consummate a 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 business combination, the
net tangible asset requirement may limit our ability to consummate such a business combination 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 business combination and we may not be able to
locate another suitable target within the applicable time period, if at all. |
||||||
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 |
9
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 insiders.
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. |
||||||
If
the business combination is not consummated, 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. |
||||||
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 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 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. |
10
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. |
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Liquidation if
no business combination |
If we
are unable to complete our initial business combination within 21 months from the consummation of this offering (or 24 months from the consummation of
this offering if we have entered into a definitive agreement with a target business for a business combination within 21 months from the consummation
of this offering and such business combination has not yet been consummated within such 21-month period), 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. |
|||||
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 |
11
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, Jianming Hao,
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. |
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 of 1933, as amended, or 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 14 of this prospectus.
12
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.
April 15, 2014 |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Actual |
As Adjusted(1) |
||||||||||
Balance
Sheet Data: |
|||||||||||
Working
capital (deficiency) |
$ | (10,449 | ) | $ | 40,114,551 | (2) | |||||
Total assets
|
142,000 | 40,114,551 | (2) | ||||||||
Total
liabilities |
117,449 | 400,000 | |||||||||
Value of
common stock subject to possible conversion |
| 35,114,540 | (3) | ||||||||
Stockholders equity |
24,551 | 5,000,011 |
(1) |
Includes the $2,100,000 we will receive from the sale of the private units. |
(2) |
The as adjusted working capital and total assets is derived by adding total stockholders equity and the value of the common stock subject to possible conversion. |
(3) |
The as adjusted value of common stock subject to possible conversion is derived by taking 3,511,454 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).
13
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.
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 21 months from the consummation
of this offering (or 24 months from the consummation of this offering if we have entered into a definitive agreement with a target business for a
business combination within 21 months from the consummation of this offering and such business combination has not yet been consummated within such
21-month period) 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 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 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.
14
We may issue common or preferred shares or debt securities
to complete a business combination, which would reduce the equity interest of our stockholders and likely cause a change in control of our
ownership.
Our certificate of incorporation
authorizes the issuance of up to 25,000,000 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 19,369,000 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. |
Similarly, if we issue debt securities,
it could result in:
|
default and foreclosure on our assets if our operating revenues after a business combination are insufficient to repay our debt obligations; |
|
acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
|
our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and |
|
our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding. |
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 $490,000 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 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 agreed 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.
15
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 and any such claims
could delay the timing of our distribution of the funds held in the trust account. If we liquidate the trust account before the completion of a
business combination, Jianming Hao 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 21 months from the consummation of this offering (or 24 months from the consummation of this offering if we have entered
into a definitive agreement with a target business for a business combination within 21 months from the consummation of this offering and such business
combination has not yet been consummated within such 21-month period), 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 21-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, 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.
16
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 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.
We have no obligation to net cash settle the
rights.
In no event will we have any obligation
to net cash settle the rights. Furthermore, there are no contractual penalties for failure to deliver securities to the holders of the rights upon
consummation of an initial business combination. Accordingly, the rights may expire 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.
While we intend to focus our search for
target businesses in the Peoples Republic of China that operate in the non-traditional financial industry, we are not limited in this respect and
may consummate a business combination with a company in any location or industry we choose. 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.
17
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 at the time of the execution of a definitive agreement for our initial business combination. This restriction may limit the type and
number of companies that 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.
While we intend to focus our search for
target businesses in the Peoples Republic of China that operate in the non-traditional financial industry, 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.
18
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 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 that are engaged in business activities similar 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, these securities 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
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
19
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 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; |
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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; |
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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:
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solely dependent upon the performance of a single business, or |
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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
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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 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 (or $10,000,000 from the non-tendering investors) 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 or the non-tendering investors) 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 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 holders of our insider shares or the non-tendering investors)
the right to have his, her, or its shares of common stock converted for cash. Notwithstanding the foregoing, a public stockholder,
21
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.
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 or the non-tendering
investors) 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
22
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
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, our
initial stockholders will collectively own approximately 23.2% of our issued and outstanding shares of common stock (assuming they do not purchase any
units in this offering and do not purchase any private commission units). 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. Additionally, the non-tendering investors have agreed to vote in favor
of a proposed business combination and not seek conversion of their shares.
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
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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 $0.02 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 $1.73 per share, 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 of
this offering, you and the other new investors will incur an immediate and substantial dilution of approximately 74.1% or $6.73 per share (the
difference between the pro forma net tangible book value per share $2.36, and the assumed initial offering price of $9.09 per unit). This is because
investors in this offering will be contributing approximately 95% of the total amount paid to us for our outstanding securities after this offering but
will only own approximately 78% 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 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.
24
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.
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 on the
judgment of our board of directors, whose collective experience in business evaluations for blank check companies like ours is not significant.
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 underwriter. 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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the per share amount of net proceeds being placed in the trust account; |
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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.
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Foreign currency fluctuations could adversely affect our
business and financial results.
A target business with which we may
combine may do business and generate sales within other countries. Foreign currency fluctuations may affect the costs that we incur in such
international operations. It is also possible that some or all of our operating expenses may be incurred in non-U.S. dollar currencies. The
appreciation of non-U.S. dollar currencies in those countries where we have operations against the U.S. dollar would increase our costs and could harm
our results of operations and financial condition.
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 although we initially intend to focus on target businesses located
in China. If we consummate a business combination with a target business in China, or another location 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; |
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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,
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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.
If we acquire control of a target business through
contractual arrangements with one or more operating businesses in the PRC, such contracts may not be as effective in providing operational
control as direct ownership of such business and may be difficult to enforce.
We will only acquire a business or
businesses that, upon the consummation of our initial business combination, will be our majority-owned subsidiaries and will be neither
investment companies nor companies excluded from the definition of an investment company by Section 3(c)(1) or 3(c)(7) of the Investment
Company Act. However, the PRC has restricted or limited foreign ownership of certain kinds of assets and companies operating in certain
industries. The industry groups that are restricted are wide ranging, including, for example, certain aspects of telecommunications, food
production, and heavy equipment manufacturers. In addition there can be restrictions on the foreign ownership of businesses that are determined
from time to time to be in important industries that may affect the national economic security or having famous brand
names or well-established brand names. Subject to the review and approval requirements of the relevant agencies for
acquisitions of assets and companies in the relevant jurisdictions and subject to the various percentage ownership limitations that exist from
time to time, acquisitions involving foreign investors and parties in the various restricted categories of assets and industries may nonetheless
sometimes be consummated using contractual arrangements with permitted local parties. To the extent that such agreements are employed,
they may be for control of specific assets such as intellectual property or control of blocks of the equity ownership interests of a company
which may provide exceptions to the merger and acquisition regulations mentioned above since these types of arrangements typically do not
involve a change of equity ownership in the operating company. The agreements would be designed to provide our company with the economic
benefits of and control over the subject assets or equity interests similar to the rights of full ownership, while leaving the technical
ownership in the hands of local parties who would be our nominees and, therefore, may exempt the transaction from certain regulations, including
the application process required thereunder.
However, since there has been
limited implementation guidance provided with respect to such regulations, the relevant government agency might apply them to a business
combination effected through contractual arrangements. If such an agency determines that such an application should have been made or
that our potential future target businesses are otherwise in violation of local laws or regulations, consequences may include confiscating
relevant income and levying fines and other penalties, revoking business and other licenses, requiring restructure of ownership or operations,
requiring discontinuation or restriction of the operations of any portion or all of the acquired business, restricting or prohibiting our use of
the proceeds of this offering to finance our businesses and operations and imposing conditions or requirements with which we or potential
future target businesses may not be able to comply. These agreements likely also would provide for increased ownership or full ownership and
control by us when and if permitted under local laws and regulations. If we choose to effect a business combination that employs the use of
these types of control arrangements, we may have difficulty in enforcing our rights. Therefore, these contractual arrangements may not be
as effective in providing us with the same economic benefits, accounting consolidation or control over a target business as would direct
ownership. For example, if the target business or any other entity fails to
27
perform its obligations under these contractual arrangements, we may have to incur substantial costs and expend substantial resources to enforce such arrangements, and rely on legal remedies under local law, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure will be sufficient to off-set the cost of enforcement and may adversely affect the benefits we expect to receive from the business combination.
Contractual arrangements we enter into with potential
future subsidiaries and affiliated entities or acquisitions of offshore entities that conduct operations through affiliates in the PRC may be
subject to a high level of scrutiny by the relevant tax authorities.
Under the laws of the PRC,
arrangements and transactions among related parties may be subject to audit or challenge by the relevant tax authorities. If any of the
transactions we enter into with potential future subsidiaries and affiliated entities are found not to be on an arms-length basis, or to
result in an unreasonable reduction in tax under local law, the relevant tax authorities may have the authority to disallow any tax
savings, adjust the profits and losses of such potential future local entities and assess late payment interest and penalties. A finding by
the relevant tax authorities that we are ineligible for any such tax savings, or that any of our possible future affiliated entities are not
eligible for tax exemptions, would substantially increase our possible future taxes and thus reduce our net income and the value of a
shareholders investment. In addition, in the event that in connection with an acquisition of an offshore entity that conducted its
operations through affiliates in the PRC, the sellers of such entities failed to pay any taxes required under local law, the relevant tax
authorities could require us to withhold and pay the tax, together with late-payment interest and penalties. The occurrence of any of the
foregoing could have a negative impact on our operating results and financial condition.
If we effect our initial business combination with a
business located in the PRC, the laws applicable to such business will likely govern all of our material agreements and we may not be able to
enforce our legal rights.
If we effect our initial business
combination with a business located in the PRC, the laws of the country in which such business operates will govern almost all of the material
agreements relating to its operations, including any contractual arrangements through which we acquire control of target business as
described above. We cannot assure you that we or 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. In addition, the judiciary in the PRC is relatively inexperienced in
enforcing corporate and commercial law, leading to a higher than usual degree of uncertainty as to the outcome of any litigation. In
addition, to the extent that our target business material agreements are with governmental agencies in the PRC, we may not be able to
enforce or obtain a remedy from such agencies due to sovereign immunity, in which the government is deemed to be immune from civil lawsuit or
criminal prosecution. 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.
If the government of the PRC finds that the agreements
we entered into to acquire control of a target business through contractual arrangements with one or more operating businesses do not comply
with local governmental restrictions on foreign investment, or if these regulations or the interpretation of existing regulations change in
the future, we could be subject to significant penalties or be forced to relinquish our interests in those
operations.
The PRC currently prohibits and/or
restricts foreign ownership in certain important industries, including telecommunications, food production and heavy equipment.
There are uncertainties under certain regulations whether obtaining a majority interest through contractual arrangements will comply with
regulations prohibiting or restricting foreign ownership in certain industries. For example, the PRC may apply restrictions in other
industries in the future. In addition, there can be restrictions on the foreign ownership of businesses
28
that are determined from time to time to be in important industries that may affect the national economic security or those having famous brand names or well-established brand names.
If we or any of our potential future
target businesses are found to be in violation of any existing or future local laws or regulations (for example, if we are deemed to be holding
equity interests in certain of our affiliated entities in which direct foreign ownership is prohibited), the relevant regulatory authorities
might have the discretion to:
|
revoke the business and operating licenses of the potential future target business; |
|
confiscate relevant income and impose fines and other penalties; |
|
discontinue or restrict the operations of the potential future target business; |
|
require us or potential future target business to restructure the relevant ownership structure or operations; |
|
restrict or prohibit our use of the proceeds of this offering to finance our businesses and operations in the relevant jurisdiction; or |
|
impose conditions or requirements with which we or potential future target business may not be able to comply. |
The requirement that we complete an initial business
combination within 21 (or 24) months from the consummation of this offering may give potential target businesses leverage over us in negotiating a
business transaction.
We have 21 months from the consummation
of this offering (or 24 months from the consummation of this offering if we have entered into a definitive agreement with a target business for a
business combination within 21 months from the consummation of this offering and such business combination has not yet been consummated within such
21-month period) 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.
Because we must furnish our stockholders with financial
statements of the target business prepared in accordance with U.S. GAAP or IFRS 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-
29
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 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.
An investment in this offering may involve adverse U.S.
federal income tax consequences.
There is a risk that an investors
entitlement to receive payments in excess of the investors initial tax basis in our shares of common stock upon exercise of the investors
conversion right or upon our liquidation of the trust account will result in constructive income to the investor, which could affect the timing and
character of income recognition and result in U.S. federal income tax liability to the investor without the investors receipt of cash from us.
Prospective investors are urged to consult their own tax advisors with respect to these and other tax consequences when purchasing, holding or
disposing of our securities.
We have also not sought a ruling from
the Internal Revenue Service, or IRS, as to any U.S. federal income tax consequences described in this prospectus. The IRS may disagree with the
descriptions of U.S. federal income tax consequences described herein, and its determination may be upheld by a court. Any such determination could
subject an investor or our company to adverse U.S. federal income tax consequences that would be different than those described in this prospectus.
Accordingly, each prospective investor is urged
30
to consult a tax advisor with respect to the specific tax consequences of the acquisition, ownership and disposition of our securities, including the applicability and effect of state, local, or foreign tax laws, as well as U.S. federal tax laws.
Target businesses in the non-traditional financial industry
are subject to special considerations and risks.
Business combinations with companies
with operations in the non-traditional financial industry in China entail special considerations and risks. If we are successful in completing a
business combination with a target business with operations in this location and these industries, we will be subject to, and possibly adversely
affected by, the following risks:
|
credit risk of the target business customers; |
|
competition and consolidation of the specific sector of the non-traditional financial industry within which the target business operates; |
|
changes in demands for non-traditional financial products; |
|
increased government regulations in the non-traditional financial industry and the costs of compliance with such regulations; |
|
the negative impacts of catastrophic events; and |
|
any changes in Chinas economic, political and social conditions. |
31
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:
|
ability to complete our initial business combination; |
|
limited operating history; |
|
success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; |
|
potential ability to obtain additional financing to complete a business combination; |
|
pool of prospective target businesses; |
|
the ability of our officers and directors to generate a number of potential investment opportunities; |
|
potential change in control if we acquire one or more target businesses for shares; |
|
our public securities potential liquidity and trading; |
|
regulatory or operational risks associated with acquiring a target business; |
|
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.
32
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
|
$ | 40,000,000 | $ | 46,000,000 | ||||||
From private
placement |
2,100,000 | 2,100,000 | ||||||||
Total gross
proceeds |
42,100,000 | 48,100,000 | ||||||||
Offering
expenses(1) |
||||||||||
Underwriting
discount (3.0% of gross proceeds from offering, excluding deferred fee of 1.0% of gross proceeds from offering) |
1,200,000 | (2) | 1,200,000 | (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 |
7,400 | 7,400 | ||||||||
SEC
registration fee |
6,000 | 6,000 | ||||||||
Miscellaneous
expenses |
11,600 | 11,600 | ||||||||
Total
offering expenses |
1,610,000 | 1,610,000 | ||||||||
Net
proceeds |
||||||||||
Held in trust
|
40,000,000 | 46,000,000 | ||||||||
Not held in
trust |
490,000 | 490,000 | ||||||||
Total net
proceeds |
$ | 40,490,000 | $ | 46,490,000 | ||||||
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 |
$ | 155,000 | (29.5 | )% | ||||||
Due diligence
of prospective target businesses by officers, directors and initial stockholders |
75,000 | (14.3 | )% | |||||||
Legal and
accounting fees relating to SEC reporting obligations |
100,000 | (19.0 | )% | |||||||
Working
capital to cover miscellaneous expenses, D&O insurance, general corporate purposes, liquidation obligations and reserves |
195,000 | (37.2 | )% | |||||||
Total
|
$ | 525,000 | (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 Jianming Hao described below. These funds will be repaid out of the proceeds of this offering available to us. |
(2) |
The underwriting discount of 3.0% is payable at the closing of the offering and the deferred underwriting fee of 1.0% (and 4.0% on gross proceeds received from the over-allotment option) payable to Cantor Fitzgerald is payable upon consummation of our initial business combination and will be held in the trust account until consummation of such business combination. Additionally, in the event that investors introduced by us to the underwriter do not purchase at least $30,000,000 of the units being offered hereby, there will be an additional underwriting commission paid to the underwriter in the amount of $0.15 per unit (1.5%) on the amount below $30,000,000 invested by investors introduced by us, which will not affect the amount in trust due to the obligation of our initial stockholders to purchase private |
33
commission units. 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 $490,000 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 $35,000 over a 21-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 an aggregate of 210,000 private units at a price of $10.00 per unit ($2,100,000 in the aggregate). Our initial
stockholders have also agreed that if investors introduced by us to the underwriter do not purchase at least $30,000,000 of the units being
offered hereby, they will purchase from us at a price of $10.00 per unit the number of private units that will equal the increased commissions we will
pay the underwriter, as described above. The purchases will take place on a private placement basis that will occur simultaneously with the closing of
this offering. All of the proceeds we receive from these purchases will be placed in the trust account described below, except that the proceeds from
the sale of the private commission units will be paid to the underwriter at the closing of this offering.
$40,000,000, or $46,000,000 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 Smith
Barney 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.
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 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 $490,000. 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
34
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, Jianming Hao 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 April 15, 2014, Jianming Hao
loaned to us an aggregate of $117,000 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) April 30, 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.
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. Our stockholders have approved the issuance of the units and underlying securities upon conversion of such
35
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.
36
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 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 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 and private commission 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.
37
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 4,400,000, 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 231,000. The below presentation assumes that no private commission units are issued.
At April 15, 2014, our net tangible
book value was $(10,449), or approximately $(0.01) per share. After giving effect to the sale of 4,000,000 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 421,000 shares for the outstanding rights, our pro forma net tangible book value at April 15, 2014 would have been
$5,000,011 or $2.36 per share, representing an immediate increase in net tangible book value of $2.35 per share to the initial stockholders and an
immediate dilution of 74.1% per share or $6.73 to new investors not exercising their conversion rights. For purposes of presentation, our pro forma net
tangible book value after this offering is $35,114,540 less than it otherwise would have been because if we effect a business combination, the ability
of public stockholders (but not our initial stockholders or the non-tendering investors) to exercise conversion rights may result in the conversion of
up to 3,511,454 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 | (1) | |||||||
Net tangible
book value before this offering |
$ | (0.01 | ) | |||||||
Increase
attributable to new investors and private sales |
2.35 | |||||||||
Pro forma net
tangible book value after this offering |
2.36 | |||||||||
Dilution to
new investors |
$ | 6.73 | ||||||||
Percentage of
dilution to new investors |
74.1 | % |
(1) |
Derived from $40,000,000 net proceeds from the public offering divided by 4,400,000 shares, which assumes that the over-allotment option has not been exercised and the issuance of an additional 400,000 public shares underlying the public rights. |
(2) |
If the over-allotment option is exercised in full, dilution to new investors increases to $6.97 per share. |
The following table sets forth
information with respect to our initial stockholders and the new investors:
Shares Purchased |
Total Consideration |
|||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Number |
Percentage |
Amount |
Percentage |
Average Price per Share |
||||||||||||||||||
Initial
stockholders Initial Shares |
1,000,000 | (1) | 17.8 | % | $ | 25,000 | 0.1 | % | $ | 0.02 | ||||||||||||
Initial
Stockholders Private Units |
231,000 | (2) | 4.1 | % | 2,100,000 | 4.9 | % | $ | 9.09 | |||||||||||||
New investors
(2) |
4,400,000 | (3) | 78.1 | % | 40,000,000 | 95.0 | % | $ | 9.09 | |||||||||||||
5,631,000 | 100.0 | % | $ | 42,125,000 | 100.0 | % |
(1) |
Assumes the over-allotment option has not been exercised and an aggregate of 150,000 shares of common stock held by our initial stockholders have been forfeited as a result thereof. |
(2) |
If the over-allotment is exercised in full, shares purchased by and total consideration from new investors increase to 5,060,000 and $46,000,000, respectively. |
(3) |
Assumes the issuance of an additional 400,000 public shares underlying the public rights. |
38
The pro forma net tangible book value
after the offering is calculated as follows:
Numerator: |
||||||
Net tangible
book value before the offering |
$ | (10,499 | ) | |||
Net proceeds
from this offering and private placement of private units |
40,490,000 | |||||
Plus:
Offering costs and paid in advance, excluded from tangible book value before this offering |
35,000 | |||||
Less:
deferred underwriting fee |
(400,000 | ) | ||||
Less:
Proceeds held in trust subject to possible conversion |
(35,114,540 | ) | ||||
$ | 5,000,011 | |||||
Denominator: |
||||||
Shares of
common stock outstanding prior to this offering |
1,000,000 | (1) | ||||
Shares of
common stock included in the units offered |
4,000,000 | |||||
Shares of
common stock to be sold in private placement |
210,000 | |||||
Shares of
common stock underlying the rights to be sold in this offering |
400,000 | |||||
Shares of
common stock underlying the rights to be sold in private placement |
21,000 | |||||
Less: Shares
subject to possible conversion |
(3,511,454 | ) | ||||
2,119,546 |
(1) |
Assumes the over-allotment option has not been exercised and an aggregate of 150,000 shares of common stock held by our initial stockholders have been forfeited as a result thereof. |
39
The following table sets forth our
capitalization at April 15, 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.
April 15, 2014 |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Actual |
As Adjusted(1) |
||||||||||
Note payable
to related party(2) |
$ | 117,000 | $ | | |||||||
Underwriter
fee payable |
400,000 | ||||||||||
Shares of
common stock, par value $0.0001 per share, -0- and 3,511,454 shares which are subject to possible conversion |
| 35,114,540 | (4) | ||||||||
Stockholders equity: |
|||||||||||
Preferred
shares, 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, 25,000,000 shares authorized; 1,150,000 shares issued and outstanding, actual; 2,119,546 shares issued and
outstanding(3) (excluding 3,511,454 shares subject to possible conversion), as adjusted |
115 | 212 | |||||||||
Additional
paid-in capital |
24,885 | 5,000,248 | |||||||||
Deficit
accumulated during the development stage |
(449 | ) | (449 | ) | |||||||
Total
stockholders equity: |
$ | 24,551 | $ | 5,000,011 | |||||||
Total
capitalization |
$ | 149,551 | $ | 40,514,551 | (5) |
(1) |
Includes the $2,100,000 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 $117,000 to Jianming Hao. The note is non-interest bearing and is payable on the earliest to occur of (i) April 30, 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 150,000 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 3,511,454 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. |
40
We were formed on March 28, 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 preferred shares:
|
may significantly reduce the equity interest of our stockholders; |
|
may subordinate the rights of holders of shares of common stock if we issue preferred shares 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 April 15, 2014, we had $107,000 in cash and cash equivalents and a working capital deficiency of $10,499. 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 Jianming Hao in an aggregate amount of $117,000 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 $410,000 and underwriting discounts and commissions of $1,200,000 and (2) the sale of the private units for a purchase price of
$2,100,000, will be $40,490,000 (or $46,490,000 if the over-allotment option is exercised in full). $40,000,000 (or $46,000,000 if the over-allotment
option is exercised in full), which includes the deferred underwriting fee of $400,000 (or $640,000 if the over-allotment option is exercised in full)
which will be payable to Cantor Fitzgerald only upon consummation of our initial business combination, will be held in the trust account. The remaining
$490,000 (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
41
our capital stock is used in whole or in part as consideration to effect our initial business combination, the remaining proceeds held in the trust account as well as any other net proceeds not expended will be used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuing or expanding the target business operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders fees 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 $490,000 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 $35,000 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:
|
$155,000 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; |
|
$75,000 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; and |
|
$195,000 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.
Related Party
Transactions
As of April 15, 2014, Jianming Hao
loaned an aggregate of $117,000 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) April 30, 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.
Jianming Hao has also agreed to make
available to us, at no cost to us, office space in Beijing, China.
Our initial stockholders have committed
to purchase an aggregate of 210,000 private units at a price of $10.00 per unit ($2,100,000 in the aggregate). Our initial stockholders have also
agreed that if investors introduced by us to the underwriter do not purchase at least $30,000,000 of the units being offered
hereby,
42
they will purchase from us at a price of $10.00 per unit the number of private units that will equal the increased commissions we will pay the underwriter, as described elsewhere in this prospectus. The purchases will take place on a private placement basis that will occur simultaneously with the closing of this offering.
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. 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:
|
staffing for financial, accounting and external reporting areas, including segregation of duties; |
|
reconciliation of accounts; |
|
proper recording of expenses and liabilities in the period to which they relate; |
|
evidence of internal review and approval of accounting transactions; |
|
documentation of processes, assumptions and conclusions underlying significant estimates; and |
|
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.
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.
43
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.
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
On June 30, 2014, KPMG LLP, or KPMG,
acquired certain assets of Rothstein Kass & Company, P.C. and certain of its affiliates, or Rothstein Kass, our independent registered public
accounting firm. As a result of this transaction, on June 30, 2014, Rothstein Kass resigned as our independent registered public accounting firm.
Concurrent with such resignation, we consented to the engagement of KPMG as our new independent registered public accounting firm. The
decision to change accountants was approved by our board of directors.
During the period from March 28, 2014
(inception) to April 15, 2014, Rothstein Kass audit report on our financial statements did not contain an adverse opinion or disclaimer of
opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles. During the period from March 28, 2014 (inception) to
April 15, 2014 and the subsequent period through the resignation of Rothstein Kass on June 30, 2014, there were no disagreements between us and
Rothstein Kass on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which
disagreements, if not resolved to Rothstein Kass satisfaction, would have caused Rothstein Kass to make reference in connection with Rothstein
Kass opinion to the subject matter of the disagreement; and there were no reportable events as the term is described in Item
304(a)(1)(v) of Regulation S-K.
During our most recent financial
statement for the period of March 28, 2014 (inception) to April 15, 2014 and through the period preceding KPMGs engagement, we did not consult
with KPMG on either (1) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion
that may be rendered on our financial statements, and KPMG did not provide either a written report or oral advise to us that KPMG concluded was an
important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue; or (2) any matter that was either
the subject of a disagreement, as defined in Item 304(a)(1)(iv) of Regulation S-K, or a reportable event, as defined in Item 304(a)(1)(v) of Regulation
S-K.
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.
44
Introduction
We are a Delaware blank check company
incorporated on March 28, 2014 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 target businesses, or entering into contractual arrangements that give us
control over such a target business.
Business Strategy
We intend to focus our search on
businesses in China that operate in the non-traditional financial industry, including but not limited to microcredit companies, financial leasing
companies and guarantors. However, we are not limited to this geographic region or to these types of companies. We have not established specific
criteria that would trigger our consideration of businesses outside of these areas. We have not determined a time frame, monetary amount or any other
factor that would trigger our search of a target business outside of these areas. We may focus on other areas or geographic regions if we believe that
those areas or regions are better able to provide attractive financial returns or if an opportunity outside of China was brought to our attention at
any time we are in search of a target business.
Our management team believes that
companies that operate in the non-traditional financial industry will perform favorably over the next decade due to the following
reasons:
|
Chinese interest rates are significantly higher than those in the rest of the developed word. For instance, according to World Bank statistics, from 2009 to 2013, the average commercial bank lending rate in China was approximately 5.9% per annum, compared to 3.3% per annum in the United States. However, we do not believe these rates reflect the actual marketplace demand. We believe there is a significant lending market in China where interest rates can range from 20% to 30% per annum. Our management team believes that target companies in the non-traditional financial industry have the capability of taking advantage of this interest rate differential between market demand and reported rates. Additionally, due to the interest rate differential between the US and China, we could use the relatively cheap cost of capital in the US to provide us with inexpensive sources to fund these non-traditional financial companies. |
|
Non-traditional financial companies are not regulated by the CSRC, the CIRC or the CBRC, which impose strict standards for foreign investment and capital flows. Non-traditional financial companies should benefit from reduced governmental regulation imposed on these types of businesses. |
The following is a summary of the
landscape in China that we believe makes these types of non-traditional financial companies attractive targets:
Chinas Lending Market
State-owned banks and local commercial
banks make the majority of loans in the PRC. These large banks tend to provide financing to state-owned enterprises and large private firms. While
large companies continue to obtain bank loans, small and medium sized enterprises (SMEs) must seek alternative sources of financing. While
state-owned enterprises still play a major role in the PRC economy, SMEs are becoming increasingly important in boosting Chinas economy. The
number of SMEs has grown from 100,000 in 1978 to approximately 4.3 million registered SMEs in 2010. According to data compiled by the Development and
Research Center of the State Council, SMEs account for nearly 60% of the PRCs GDP, 80% of overall employment and more than half of economic
output of China in 2012. As a result, SME financing demands are on the rise.
Concerned about potential dangers to
the PRC financial system caused by inflation, beginning in 2010, the Peoples Bank of China (PBOC) began withdrawing a significant
amount of liquidity from the market, making it even harder for SMEs to gain access to capital. Often unable to obtain bank loans, many SMEs were forced
to borrow from so-called underground lenders. Underground lenders, or shadow banks, took
45
on various forms and included informal neighborhood lenders, wealthy individual lenders, non-depository banks, other financial institutions and businesses that made loans from their own surplus cash. Such underground lending was unregulated. These lenders often charged interest rates many times higher than the PBOC Benchmark Rate.
As a result, the PRC government stated
that private, informal financing channels would be encouraged only within the boundaries of the law and began attempting to limit such activities. This
resulted in the creation and approval of microcredit companies in 2008 in order to assist SMEs find alternative funding sources. These
microcredit companies are subject to less governmental regulation than other lenders in China.
Chinas Asset Management Segment
According to a recent Deloitte report,
wealth management has become increasingly important to banks in China as a key point of differentiation. The total volume of asset management financial
products sold to retail investors increased 45% in 2012 to $4.05 trillion (RBM 24.71 trillion) compared to 2011. China recently expanded its fund
management market to allow securities firms, insurance companies and private fund managers to launch retail funds via asset management arms. The change
was part of Chinas evolution into a broader asset management market seen in other markets in Asia, such as Hong Kong and Singapore. As such,
management believes the demand for companies that provide new, innovative lending products in the asset management industry is
enormous.
Interest Rate Differential
We believe China keeps its interest
rates artificially low to ensure sufficient low-cost financing for the public sector, while avoiding large fiscal deficits and high inflation. But, in
the long run, such low interest rates may also discourage households from saving, lead to insufficient private-sector investment, and eventually result
in economy-wide underinvestment, as occurred in many Latin American countries in the past.
According to Mr. Pingfan Hong, the
Chief of the Global Economic Monitoring Unit of the United National Department of Economic and Social Affairs, who wrote in Chinas Interest-Rate
Challenge at May 21, 2013, the degree of financial repression in a country can be estimated by calculating the gap between the average nominal GDP
growth rate and the average long-term interest rate, with a larger gap indicating more severe repression. In the last 20 years, this gap has been eight
percentage points for China, compared to roughly four percentage points on average for emerging economies and nearly zero for most developed economies,
where interest rates are fully liberalized.
Chinas shadow banking
system takes advantage of this differential and can exploit the approximately 8% difference between the government-imposed market rate and the
commercial loan rate. In some cases, such as risky or illiquid customers, this rate differential is much higher.
Target business focus
With this landscape in mind, our
management believes the non-traditional financial industry has many attractive target businesses. As indicated above, we intend to focus our search for
companies in this industry, including but not limited to the following types of companies:
Microcredit Companies
The number of microcredit companies has
increased dramatically in China since the government initially permitted them to operate in 2008. According to the statistics provided by the PBOC, as
of the end of 2013, there were 7,839 microcredit companies in China as compared to 2,614 at the end of 2010. As of the end of 2013, the total loan
balance from microcredit companies stood at approximately $135.3 billion (RMB 819.1 billion) as compared to approximately $29.2 billion (RMB 197.5
billion) at the end of 2010. According to Xiaoling Wu, the vice chairman of the National Peoples Congress Financial and Economic Committee, who
spoke at the Microcredit Innovation Forum held on January 16, 2010, overall, microcredit companies return on capital was 7.76% per annum during
2009 with several generating returns on capital in excess of 10%.
46
Financial Leasing Companies
Financial leasing companies purchase
and lease back capital equipment or assets such as construction equipment, aviation equipment and real estate. According to a market research report,
in 2012, the financial leasing industry of China presented remarkably rapid development, with transactions in the industry reaching approximately $256
billion (RMB1.55 trillion), an increase of approximately $103 billion (RMB620 billion) (66.7%) from approximately $154 billion (RMB930 billion) at the
end of 2011.
Guarantors
We believe Chinas guarantors
provide guarantees on loans to risky borrowers, making it more palatable for traditional banks to lend to those who are less creditworthy than the
average client. Guarantors are needed due to the undeveloped credit scoring system in China.
Regulatory Environment
Companies that operate in the
non-traditional financial industry are not regulated by the China Securities Regulation Committee, the China Insurance Regulation Committee or the
China Banking Regulatory. These bureaus set the strictest standards for foreign investments and capital flows in China. Accordingly, non-traditional
financial companies should enjoy lighter regulation from the Chinese government. For example, the Chinese government allows financial leasing companies
to have up to ten times the amount of registered capital exempt from Chinese foreign exchange controls.
Currently, a consistent regulatory
framework does not exist in the non-traditional financial industry. The Chinese government has undertaken or begun to undertake various reform efforts
such as balance-sheet transparency requirements and improved risk management. However, these efforts are still in progress and are subject to
change.
Additionally, Chinas current
financial system is highly leveraged. Microcredit lenders make most of their money by borrowing from regular banks at low interest rates and lending
out at higher interest rates to riskier borrowers. No deposits at these institutions means they are highly leveraged and are able to generate superior
returns, as long as economic growth continues at a moderate pace. Since 2010, some microcredit companies, such as trust companies, have been subject to
restrictions on their leverage ratios and net capital requirements. However, restrictions on their operations are still much looser than those for
commercial banks. The ability to have higher leverage ratios provide a huge competitive advantage to microcredit lenders over traditional
banks.
Contractual Arrangements
The government of the PRC has
restricted or limited foreign ownership of certain kinds of assets and companies operating in a wide variety of industries, including certain
aspects of telecommunications, food production, and heavy equipment manufacturers. The PRC may apply these restrictions in other industries
in the future. In addition, there can be restrictions on the foreign ownership of businesses that are determined from time to time to be
in important industries that may affect the national economic security or having famous Chinese brand names or
well established Chinese brand names. Subject to the review requirements of the Ministry of Commerce and other relevant agencies as
discussed elsewhere for acquisitions of assets and companies in the PRC and subject to the various percentage ownership limitations that
exist from time to time, acquisitions involving foreign investors and parties in the various restricted categories of assets and
industries may nonetheless sometimes be consummated using contractual arrangements with permitted Chinese parties. To the extent that such
agreements are employed, they may be for control of specific assets such as intellectual property or control of blocks of the equity ownership
interests of a company. The agreements would be designed to provide our company with the economic benefits of and control over the
subject assets or equity interests similar to the rights of full ownership, while leaving the technical ownership in the hands of Chinese
parties who would likely be designated by our company.
47
For example, these contracts could
result in a structure where, in exchange for our payment of the acquisition consideration, (i) the target company would be majority owned by
Chinese residents whom we designate and the target company would continue to hold the requisite licenses for the target business, and (ii)
we would establish a new subsidiary in China which would provide technology, technical support, consulting and related services to the target
company in exchange for fees, which would transfer to us substantially all of the economic benefits of ownership of the target
company.
These contractual arrangements would
be designed to provide the following:
|
Our exercise of effective control over the target company; |
|
A substantial portion of the economic benefits of the target company would be transferred to us; and |
|
We, or our designee, would have an exclusive option to purchase all or part of the equity interests in the target company owned by the Chinese residents whom we designate, or all or part of the assets of the target company, in each case when and to the extent permitted by Chinese regulations. |
While we cannot predict the terms of
any such contract that we will be able to negotiate, at a minimum, any contractual arrangement would need to provide us with (i) effective
control over the targets operations and management either directly through board control or through affirmative and/or negative covenants
and veto rights with respect to matters such as entry into material agreements, management changes and issuance of debt or equity
securities, among other potential control provisions and (ii) a sufficient level of economic interest to ensure that we satisfy the 80% net
asset test required for our initial business combination. We have not, however, established specific provisions which must be in an agreement in
order to meet the definition of business combination. We would obtain an independent appraisal from an investment bank or industry expert
for the purpose of determining the fair value of any contractual arrangement.
These agreements likely also would
provide for increased ownership or full ownership and control by us when and if permitted under PRC law and regulation. If we choose to effect a
business combination that employs the use of these types of control arrangements, we may have difficulty in enforcing our rights.
Therefore these contractual arrangements may not be as effective in providing us with the same economic benefits, accounting consolidation or
control over a target business as would direct ownership through a merger or stock exchange. For example, if the target business or any other
entity fails to perform its obligations under these contractual arrangements, we may have to incur substantial costs and expend
substantial resources to enforce such arrangements, and rely on legal remedies under Chinese law, including seeking specific performance or
injunctive relief, and claiming damages, which we cannot assure will be sufficient to off-set the cost of enforcement and may adversely affect
the benefits we expect to receive from the business combination.
Moreover, we expect that the
contractual arrangements upon which we would be relying would be governed by Chinese law and would be the only basis of providing resolution of
disputes which may arise through either arbitration or litigation in China. Accordingly, these contracts would be interpreted in
accordance with Chinese law and any disputes would be resolved in accordance with Chinese legal procedures. Uncertainties in the Chinese
legal system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual
arrangements, we may not be able to exert the effective level of control over the target business.
We have not selected any target
business or target industry on which to concentrate our search for a business combination and we are, therefore, unable to determine at this
time what form an acquisition of a target business will take.
Competitive Strengths
We believe our competitive strengths to
be the following:
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Management
team
Our management team is comprised of
Jianming Hao, our Executive Chairman of the Board and Chief Executive Officer, Richard Xu, our President, and Amy He, our Chief Financial Officer.
Since 2012, Mr. Hao has served as a Partner of Beijing CAC Capital, a private equity firm with approximately $330 million (RMB 2 billion) under
management, and the Chief Executive Officer of Huafu Tiancheng Investment Management Company, a $15 million (RMB 100 million) Beijing government fund
with three completed investments. Since 2010, Mr. Xu has served as the President of CIFCO International Group, a financial advisory firm focused on
overseas investments in Chinese enterprises. Since 2012, Ms. He has served as Chief Financial Officer of Deyu Agriculture Corp., a vertically
integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains operating in Shanxi
Province in the Peoples Republic of China. We believe that the network of contacts, investment track record and relationships of our management
team will provide us with an important source of investment opportunities and deal-flow. However, our management team has not previously been
associated with any other similarly structured blank check company seeking to consummate a business combination and therefore there is no assurance
that we will be able to consummate such a transaction.
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 as a deterrent and may prefer to effect a business combination with a more established entity or with a private company.
Financial
position
With $40,000,000 (or $46,000,000 if the
over-allotment option is exercised in full) in our trust account available for our initial business combination, 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.
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.
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Offering
Structure
Unlike other blank check companies that
sell units comprised of shares and warrants in their initial public offerings, we are selling units comprised of shares and rights. 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.
Upon consummation of our initial business combination, each right included in our units shall automatically entitle the holder to receive one-tenth of
a share, leaving us with only one class of shares. 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 a full share as opposed to the one-tenth of a share the rights entitle a holder to receive) although 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
To date, we have not selected any
target business on which to concentrate our search for a business combination. None of our officers, directors, initial stockholders and other
affiliates has engaged in discussions on our behalf with representatives of other companies regarding the possibility of a potential merger, share
exchange, asset acquisition or other similar business combination with us, nor have we, nor any of our agents or affiliates, been approached by any
candidates (or representatives of any candidates) with respect to a possible business combination with our company. Additionally, we have not, nor has
anyone on our behalf, taken any measure, directly or indirectly, to identify or locate any suitable acquisition candidate, nor have we engaged or
retained any agent or other representative to identify or locate 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 cannot assure you that we will be able to locate a
target business or that we will be able to engage in a business combination with a target business on favorable terms or at all.
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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.
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
available. 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 which
will not commence until after the completion of this offering. These sources may also introduce us to target businesses they think we may be interested
in on an unsolicited basis, since many of these sources will have read this prospectus and know what types of businesses we are targeting. Our officers
and directors, as well as their respective affiliates, may also bring to our attention target business candidates that they become aware of through
their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions.
While we do not presently anticipate engaging the services of professional firms or other individuals that specialize in business acquisitions on any
formal basis, we may engage these firms or other individuals in the future, in which event we may pay a 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 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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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; |
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degree of current or potential market acceptance of the products, processes or services; |
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proprietary features and degree of intellectual property or other protection for its products, processes or services; |
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regulatory environment of the industry; and |
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costs associated with effecting the business combination. |
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 these
criteria and guidelines.
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 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 (whether through outright ownership or through contractual arrangements)
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 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
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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 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
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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 of 1933, as amended. We have agreed to introduce the underwriter in this offering to
investors that are interested in purchasing at least $30,000,000 of the units being offered hereby. It is a condition of this offering that at least
$10,000,000 of the units being offered hereby are purchased by investors introduced by us who will agree to hold their shares through the consummation
of our initial business combination, vote in favor of such proposed business combination and not seek conversion in connection therewith. Such
investors will not be providing us with a proxy to vote their shares, however. As a result, we expect to meet the $5,000,001
net tangible asset requirement in order to complete an initial business combination.
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, our net tangible asset
threshold 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.
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Conversion rights
At any meeting called to approve an
initial business combination, public stockholders (but not our initial stockholders or the non-tendering investors) 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. 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. Additionally, the non-tendering investors will not have conversion rights with respect to any
shares of common stock purchased by them in this offering.
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 21 months from the consummation of this offering (or 24 months from the consummation of this offering if we have entered into a
definitive agreement with a target business for a business combination within 21 months from the consummation of this offering and such business
combination has not yet been consummated within such 21-month period), 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
55
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 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 21st 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.
The
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underwriter in this offering has already executed such a waiver agreement. 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 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. Jianming Hao 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. Hao 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. Hao 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. Hao 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. 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, Jianming Hao 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.
57
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 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 21 (or 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; |
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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 21 months of the consummation of this offering (or 24 months from the consummation of this offering if we have entered into a definitive agreement with a target business for a business combination within 21 months from the consummation of this offering and such business combination has not yet been consummated within such 21-month period), 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. |
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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.
The following also may not be viewed
favorably by certain target businesses:
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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 or non-tendering investors) may reduce the resources available to us for a business combination; |
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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; |
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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 maintain our principal executive
offices at 590 Madison Avenue, 21st Floor, New York, New York 10022. This space is being provided to us by an unaffiliated third party for
approximately $2,000 per year, which fee was agreed upon based on an arms length negotiation. We also have offices in Beijing, China that
is being provided to us by Jianming Hao, our Executive Chairman and Chief Executive Officer, at no cost to us. We consider our current office space,
combined with the other office space otherwise available to our executive officers, adequate for our current operations.
Employees
We have three executive officers. These
individuals are not obligated to devote any specific number of hours to our matters and intend to devote only as much time as they deem necessary to
our affairs. The amount of time they will devote in any time period will vary based on whether a target business has been selected for the business
combination and the stage of the business combination process the company is in. Accordingly, once management locates a suitable target business to
acquire, they will spend more time investigating such target business and negotiating and processing the business combination (and consequently spend
more time to our affairs) than they would prior to locating a suitable target business. We presently expect each of our
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executive officers to devote an average of approximately 10 hours per week to our business. We do not intend to have any full time employees prior to the consummation of a business combination.
Periodic Reporting and Audited Financial
Statements
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 materials sent to stockholders to assist them in
assessing the target business. In all likelihood, the financial statements included in the proxy solicitation materials will need to be prepared in
accordance with U.S. GAAP and/or IFRS, 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.
Legal Proceedings
There is no material litigation,
arbitration or governmental proceeding currently pending against us or any of our officers or directors in their capacity as such, and we and our
officers and directors have not been subject to any such proceeding in the 12 months preceding the date of this prospectus.
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 underwriter 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 |
$40,000,000 of the net offering proceeds and proceeds from the sale of the private units will be deposited into a trust account at Smith
Barney in the United States, maintained by Continental Stock Transfer & Trust Company, acting as trustee |
$35,280,000 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. |
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Terms of the Offering |
Terms Under a Rule 419 Offering |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Investment of
net proceeds |
The
$40,000,000 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 underwriter 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. |
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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 |
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Terms of the Offering |
Terms Under a Rule 419 Offering |
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---|---|---|---|---|---|---|---|---|---|---|
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. |
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Business
combination deadline |
Pursuant to our amended and restated certificate of incorporation, if we do not complete an initial business combination within 21 months from
the consummation of this offering (or 24 months from the consummation of this offering if we have entered into a definitive agreement with a target
business for a business combination within 21 months from the consummation of this offering and such business combination has not yet been consummated
within such 21-month period), 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. |
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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. |
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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 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Jianming Hao
|
39 |
Executive Chairman of the Board and Chief Executive Officer |
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Richard Xu
|
37 |
President and Director |
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Amy He
|
34 |
Chief
Financial Officer |
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Aimin Song
|
51 |
Director |
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Bradley Reifler
|
54 |
Director |
||||||||
Qing Zhu
|
57 |
Director |
Jianming Hao has served
as our Executive Chairman of the Board and Chief Executive Officer since April 2014. Since March 2012, Mr. Hao has served as a Partner of Beijing CAC
Capital, a private equity firm, and the Chief Executive Officer of Huafu Tiancheng Investment Management Company, an RMB 100 million Beijing government
fund with three completed investments. From April 2010 to April 2013, Mr. Hao served as the Chief Executive Officer of Deyu Agriculture Corp.
(formerly, Eco Building International Inc.), a vertically integrated producer, processor, marketer and distributor of organic and other agricultural
products made from corn and grains operating in Shanxi Province in the Peoples Republic of China, where he helped complete three acquisitions of
agricultural companies. From September 2007 to April 2010, Mr. Hao served as the Chief Executive Officer of Detianyu Biotechnology (Beijing) Co., Ltd.,
which became a subsidiary of Deyu Agriculture Corp. in April 2010. From April 2004 to September 2007, Mr. Hao served as a Director and Vice President
of Shenzhen Leton Holdings, an investment firm founded in 2003. Under Mr. Haos leadership, Shenzhen Leton closed four investments including an
insurance assessment firm, a fashion chain, an insurance agency and a real estate firm. From January 2001 to April 2004, Mr. Hao served as the
Financial Controller of China Merchants Dichain (Asia), a portfolio company of China Merchants Group. During his tenure there, Mr. Hao led and
participated in the acquisition of Dransfield Group, and led two acquisitions in the high-tech and manufacturing industries.
Mr. Hao is a Certified Public
Accountant at the Chinese Institute of Certified Public Accountants. He received his Masters degree and Bachelors degree in Finance from
Nankai University.
We believe Mr. Hao is well-qualified to
serve as a member of the board due to his business leadership and operational experience, as well as his contacts in China.
Richard Xu has served as
our President and member of our board of directors since our inception. Mr. Xu has served as the President of CIFCO International Group, a financial
advisory firm focused on overseas investments in Chinese enterprises, since 2010. From May 2009 to 2010, Mr. Xu was a Director of the Investment
Banking Division of Maxim Group, an investment banking and securities broker-dealer based in New York City, where he was responsible for the
firms Chinese investments. From September 2005 to May 2009, Mr. Xu was the co-founder of Viking Investment Co., an investment banking firm with
responsibility for overseas restructuring, mergers and acquisitions, and financing of Chinese private companies. From 2004 to 2006, Mr. Xu served as a
trader at Suisse American Securities, a subsidiary of Credit Suisse Group. Prior to that, Mr. Xu served as a Vice President at Asiapower Investment PTE
Ltd., a public company in Singapore.
Mr. Xu obtained his Bachelor Degree
from Tsinghua University in Beijing, and a Masters Degree in Computer Science from the Courant Institute of New York University.
Amy He has served as our
Chief Financial Officer since April 2014. Since May 2012, Ms. He has served as Chief Financial Officer of Deyu Agriculture Corp. She also served as
Deyu Agriculture Corp.s Acting Chief Financial Officer from February 2012 to May 2012 and its Financial Controller from October 2011 to February
2012. Ms. He served as an audit manager for Deloitte Touche Tohmatsu CPA Ltd. in China from July 2005 through September 2011, where she served
multinational corporations and Chinese corporate clients, including private companies and public listed companies in the United States. Ms. He earned
a
63
Masters Degree in Management from the Chinese Academy of Sciences and a Bachelors Degree in Accounting from Tsinghua University in China. Ms. He is also a Certified Public Accountant of China and Certified General Accountant of Canada.
Aimin Song has served as
a member of our board of directors since April 2014. Since August 2013, Mr. Song has served as Chairman of Beijing Hantang Asset Management, an
investment company focusing on investments in the financial and hotel management industries, with approximately 500 million RMB under management in
China. From September 2008 to August 2013, Mr. Song served as Chairman of Zhongsheng International Insurance Brokers, a company founded by
Peoples Insurance Company of China, the biggest insurance company in China, and Tokio Marine Fire Insurance, an international insurance company.
From June 2007 to September 2008, Mr. Song served as General Manager at the Bank Insurance Division of the Chinese Peoples Health Insurance
Company, which was the first insurance company in China dedicated to health insurance. From May 2005 to June 2007, he worked as a Vice-General Manager
at the Bank Insurance Division of China Life Insurance, the top insurance company in China dedicated to life insurance, with total assets under
management of approximately 250 billion RMB. From May 2000 to May 2005, Mr. Song served as President of the Shanxi Branch of Peoples Bank of
China, the central bank of the Peoples Republic of China with the power to control monetary policy and regulate financial institutions in
mainland China. The Peoples Bank of China has the most financial assets of any single public finance institution in the world.
Mr. Song obtained his Masters of
Business Administration from Wuhan University, a Master Degree of Investment Management from Chinese Academy of Sciences and studied for Junior College
of Finance Management from Henan Finance Management College.
We believe Mr. Song is well-qualified
to serve as a member of the board due to his business leadership and operational experience, as well as his contacts in China.
Bradley Reifler has
served as a member of our board of directors since April 2014. Since May 2009, Mr. Reifler has served as the Chief Executive Officer of Forefront
Capital, a global financial services firm that he founded. Mr. Reifler was the founder and Chief Executive Officer of Pali Capital Inc., a registered
investment banking firm, from 1995 to October 2008. Pali was acquired by the Euram Group in 2001, but repurchased six years later at which time Mr.
Reifler was made Chairman. In 1982, Mr. Reifler founded Reifler Trading Corporation, a firm engaged in the execution of global derivatives, which was
sold to Refco, Inc. in 2000. In 1992, Mr. Reifler founded Reifler Capital Management, a commodity pool advisor focused on commodity-based and foreign
exchange trading strategies. From 1995 until 2000, he managed Refco, Inc.s Institutional Sales Desk, where he was responsible for sales and
execution of global derivatives, foreign exchange and creating custom investment programs for institutional and high-net-worth clients. Mr. Reifler is
a Trustee of the Millbrook School and Chairman of the Finance Committee.
Mr. Reifler received a bachelors
degree from Bowdoin College.
We believe Mr. Reifler is
well-qualified to serve as a member of the board due to his investing experience and contacts in China.
Dr. Qing Zhu has served
as a member of our board of directors since April 2014. Since July 1987, Dr. Zhu has served as a professor of finance and a doctoral supervisor at the
Financial and Monetary Institute of Renmin University in China. He is also a Director of The Chinese Tax Society. Dr. Zhu focuses on Chinas tax
laws, tax planning, international tax, taxation theory and policy, and social security. He has written two books including International
Taxation and Taxation Management that were awarded as National Planning Textbooks for the 11th Five Years Plan by the
Ministry of Education in China. From August 2005 to October 2005, Dr. Zhu was a senior visiting scholar in the economics department at the University
of California (Berkeley). Previously, he was a visiting scholar at the Management School of the State University of New York
(Buffalo).
Dr. Zhu obtained his Doctors
Degree and Masters Degree from Renmin University, and his Bachelors Degree from Beijing Economic Institute.
64
We believe Dr. Zhu is well-qualified to
serve as a member of the board due to his expertise in taxation and his contacts in China.
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 Dr. Qing Zhu, will expire at our first annual meeting of stockholders. The term of office of the second class of
directors, consisting of Bradley Reifler and Aimin Song, will expire at the second annual meeting. The term of office of the third class of directors,
consisting of Jianming Hao and Richard Xu, will expire at the third annual meeting.
Executive Compensation
No executive officer has received any
cash compensation for services rendered to us. No compensation of any kind, including finders, consulting or other similar fees, will be paid to any of
our existing stockholders, including our directors, or any of their respective affiliates, prior to, or for any services they render in order to
effectuate, the consummation of a business combination. However, such individuals will be reimbursed for any out-of-pocket expenses incurred in
connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business
combinations. There is no limit on the amount of these out-of-pocket expenses and there will be no review of the reasonableness of the expenses by
anyone other than our board of directors and audit committee, which includes persons who may seek reimbursement, or a court of competent jurisdiction
if such reimbursement is challenged.
Director Independence
Currently Aimin Song, Bradley Reifler
and Dr. Qing Zhu 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 upon the date of this
prospectus, we will establish an audit committee of the board of directors, which will consist of Aimin Song, Bradley Reifler and Dr. Qing Zhu, each of
whom is an independent director under Nasdaqs listing standards. The audit committees duties, which are specified in our Audit Committee
Charter, include, but are not limited to:
|
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; |
|
discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements; |
|
discussing with management major risk assessment and risk management policies; |
|
monitoring the independence of the independent auditor; |
|
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; |
|
Reviewing and approving all related-party transactions; |
65
|
inquiring and discussing with management our compliance with applicable laws and regulations; |
|
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; |
|
appointing or replacing the independent auditor; |
|
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; |
|
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 |
|
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 Dr. Qing Zhu qualifies as an audit committee financial expert, as defined under rules and
regulations of the SEC.
Nominating Committee
Effective upon the date of this
prospectus, we will establish a nominating committee of the board of directors, which will consist of Aimin Song, Bradley Reifler and Dr. Qing Zhu,
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.
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:
|
should have demonstrated notable or significant achievements in business, education or public service; |
|
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 |
|
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.
66
Compensation Committee
Effective upon the date of this
prospectus, we will establish a compensation committee of the board of directors, which will consist of Aimin Song, Bradley Reifler and Dr. Qing Zhu,
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:
|
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; |
|
reviewing and approving the compensation of all of our other executive officers; |
|
reviewing our executive compensation policies and plans; |
|
implementing and administering our incentive compensation equity-based remuneration plans; |
|
assisting management in complying with our proxy statement and annual report disclosure requirements; |
|
approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees; |
|
if required, producing a report on executive compensation to be included in our annual proxy statement; and |
|
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
Notwithstanding the foregoing, as
indicated above, 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.
Code of Ethics
Upon the date of this prospectus, 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:
|
None of our officers and directors is required to commit their full time to our affairs and, accordingly, they may have conflicts of interest in allocating their time among various business activities. |
|
In the course of their other business activities, our officers and directors may become aware of investment and business opportunities which may be appropriate for presentation to our company as well as the other entities with which they are affiliated. Our management 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. |
|
Our officers and directors may in the future become affiliated with entities, including other blank check companies, engaged in business activities similar to those intended to be conducted by our company. 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. |
67
|
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:
|
the corporation could financially undertake the opportunity; |
|
the opportunity is within the corporations line of business; and |
|
it would not be fair to the corporation and its stockholders for the opportunity not to be brought to the attention of the corporation. |
Accordingly, as a result of multiple
business affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting the
above-listed criteria to multiple entities. In addition, conflicts of interest may arise when our board evaluates a particular business opportunity
with respect to the above-listed criteria. 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.
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 |
Priority/Preference relative to Sino Mercury Acquisition Corp. |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Beijing CAC
Capital |
Jianming Hao |
Mr.
Hao will be required to present all business opportunities which are suitable for Beijing CAC Capital to Beijing CAC Capital prior to presenting them
to us. Beijing CAC Capital is a private equity firm. |
||||||||
Huafu Tiancheng
Investment Management Company |
Jianming Hao |
Mr.
Hao will be required to present all business opportunities which are suitable for Huafu Tiancheng Investment Management Company to Huafu Tiancheng
Investment Management Company prior to presenting them to us. Huafu Tiancheng Investment Management Company is a Beijing government fund with three
completed investments. |
68
Name of Affiliated Company |
Name of Individual |
Priority/Preference relative to Sino Mercury Acquisition Corp. |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
CIFCO
International Group |
Richard Xu |
Mr.
Xu will be required to present all business opportunities which are suitable for CIFCO International Group to CIFCO International Group prior to
presenting them to us. CIFCO International Group is a financial advisory firm focused on overseas investments in Chinese enterprises. |
||||||||
Deyu Agriculture
Corp. |
Amy
He |
Ms.
He will be required to present all business opportunities which are suitable for Deyu Agriculture Corp. to Deyu Agriculture Corp. prior to presenting
them to us. Deyu Agriculture Corp. is a vertically integrated producer, processor, marketer and distributor of organic and other agricultural products
made from corn and grains operating in Shanxi Province in China. |
||||||||
Beijing Hantang
Asset Management |
Aimin
Song |
Mr.
Song will be required to present all business opportunities which are suitable for Beijing Hantang Asset Management to Beijing Hantang Asset Management
prior to presenting them to us. Beijing Hantang Asset Management is an investment company focusing on investments in the financial and hotel management
industries. |
||||||||
Forefront
Capital |
Bradley Reifler |
Mr.
Reifler will be required to present all business opportunities which are suitable for Forefront Capital to Forefront Capital prior to presenting them
to us. Forefront Capital is a global financial services firm. |
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.
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.
69
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 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.
70
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:
|
each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock; |
|
each of our officers and directors; and |
|
all of our officers and directors as a group. |
Unless otherwise indicated, we believe
that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. 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 |
Approximate Percentage of Outstanding Shares of common stock |
|||||||||||||||
Jianming Hao
|
793,500 | (3) | 69 | % | 900,000 | (3) | 17.3 | % | |||||||||||
Richard Xu
|
230,000 | (4) | 20 | % | 200,000 | (4) | 3.8 | % | |||||||||||
Amy He
|
115,000 | (5) | 10 | % | 100,000 | (5) | 1.9 | % | |||||||||||
Aimin Song
|
5,750 | * | 5,000 | * | |||||||||||||||
Bradley
Reifler |
5,750 | * | 5,000 | * | |||||||||||||||
Qing Zhu
|
0 | 0 | % | 0 | 0 | % | |||||||||||||
Best Apex
Limited |
793,500 | 69 | % | 900,000 | 17.3 | % | |||||||||||||
Lodestar
Investment Holdings Corporation |
230,000 | 20 | % | 200,000 | 3.8 | % | |||||||||||||
True Precision
Investments Limited |
115,000 | 10 | % | 100,000 | 1.9 | % | |||||||||||||
All directors
and executive officers as a group (six individuals) |
1,150,000 | 100 | % | 1,210,000 | 23.2 | % |
* |
Less than 1%. |
(1) |
Unless otherwise indicated, the business address of each of the individuals is c/o Sino Mercury Acquisition Corp., at 590 Madison Avenue, 21st Floor, New York, New York 10022. |
(2) |
Assumes (i) no exercise of the over-allotment option and, therefore, the forfeiture of an aggregate of 150,000 shares of common stock held by our initial stockholders and (ii) that no private commission units were purchased. |
(3) |
Represents shares held by Best Apex Limited, of which Mr. Hao is the sole officer and director and as such, controls the voting and disposition of such shares. |
(4) |
Represent shares held by Lodestar Investment Holdings Corporation, of which Mr. Xu controls and therefore has voting and disposition power over such shares. |
(5) |
Represents shares held by True Precision Investments Limited, of which Ms. He controls and therefore has voting and disposition power over such shares. |
Immediately after this offering, our
initial stockholders will beneficially own approximately 23.2% 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
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,
71
including the election of directors and approval of significant corporate transactions other than approval of our initial business combination.
If the underwriter does not
exercise all or a portion of the over-allotment option, our initial stockholders will have up to an aggregate of 150,000 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 and any private commission 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 $13.00 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 150,000 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) for transfers to an entitys members upon its liquidation, (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 210,000 private units at a price of $10.00 per unit ($2,100,000 in the aggregate). Our initial stockholders have also
agreed that if investors introduced by us to the underwriter do not purchase at least $30,000,000 of the units being offered hereby, they will
purchase from us at a price of $10.00 per unit the number of private units that will equal the increased commissions we will pay the underwriter, as
described in detail in the section titled Underwriting. These purchases will take place on a private placement basis that will occur
simultaneously with the closing of this offering. 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.
72
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. 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.
Jianming Hao and Best Apex Limited are
our promoters, as that term is defined under the Federal securities laws.
73
In March 2014, we issued an aggregate
of 1,150,000 shares of common stock for a total of $25,000 in cash, at a purchase price of approximately $0.02 share.
Name |
Number of Shares |
Relationship to Us |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Best Apex Limited
|
1,150,000 |
Affiliate of CEO |
In June 2014, Best Apex Limited
transferred (i) 230,000 shares to Lodestar Investment Holdings Corporation, an entity controlled by Richard Xu, our President, (ii) 115,000 shares to
True Precision Investments Limited, an entity controlled by Amy He, our Chief Financial Officer, (iii) 5,750 shares to Aimin Song, a member of our
Board, and (iv) 5,750 shares to Bradley Reifler, another member of our Board, all for the same price originally paid by Best Apex Limited for such
shares.
If the underwriter does not
exercise all or a portion of their over-allotment option, our initial stockholders have agreed to forfeit up to an aggregate of 150,000 shares of
common stock in proportion to the portion of the over-allotment option that was not exercised.
If the underwriter determines
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 $___.
Our initial stockholders have committed
to purchase an aggregate of 210,000 private units at a price of $10.00 per unit ($2,100,000 in the aggregate). Our initial stockholders have also
agreed that if investors introduced by us to the underwriter do not purchase at least $30,000,000 of the units being offered hereby, they will
purchase from us at a price of $10.00 per unit the number of private units that will equal the increased commissions we will pay the underwriter, as
described in the section titled Underwriting. These purchases will take place on a private placement basis that will occur simultaneously
with the closing of this offering. The purchase price for the private units and the private commission units will be 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, at least 48
hours prior to the date of this prospectus to hold in a non-interest bearing account until we consummate this offering. Graubard Miller will deposit
the purchase price into the trust account simultaneously with the consummation of the offering. The private units and the private commission 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 the private commission 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 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 stockholders have approved the issuance of the units and underlying securities upon conversion
74
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 private commission 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 and private commission 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 April 15, 2014, Jianming Hao
loaned to us an aggregate of $117,000 to cover expenses related to this offering. The loan is payable without interest on the earlier of (i) April 30,
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.
Jianming Hao has also agreed to make
available to us, at no cost to us, office space in Beijing, China.
We will reimburse our officers and
directors for any reasonable out-of-pocket business expenses incurred by them in connection with certain activities on our behalf such as identifying
and investigating possible target businesses and business combinations. There is no limit on the amount of out-of-pocket expenses reimbursable by us;
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.
Other than reimbursable out-of-pocket
expenses payable to our officers and directors, no compensation or fees of any kind, including finders fees, consulting fees or other similar
compensation, will be paid to any of our initial stockholders, officers or directors who owned our shares of common stock prior to this offering, or to
any of their respective affiliates, prior to or with respect to the business combination (regardless of the type of transaction that it
is).
All ongoing and future transactions
between us and any of our officers and directors or their respective affiliates 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.
75
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 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.
76
General
We are authorized to issue 25,000,000
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, 1,150,000 shares of common stock are outstanding, held by five 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 underwriter 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.
Shares of 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 21 months from the consummation of this offering (or 24 months from the
consummation of this offering if we have entered into a definitive agreement with a target business for a business combination within 21 months from
the consummation of this offering and such business combination has not yet been consummated within such 21-month period), it will trigger our
automatic winding up, dissolution and liquidation. Our initial stockholders have agreed to waive their rights to share in any distribution from the
trust account with respect to their insider shares upon our winding up, dissolution and liquidation.
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.
77
Preferred Stock
Our amended and restated 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 an common share 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). 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.
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 SMACU, SMAC and SMACR, respectively. Although, after giving effect
to
78
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.
79
Immediately after this offering, we
will have 5,000,000 shares of common stock outstanding, or 5,750,000 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 4,000,000 shares sold in this offering, or 4,600,000 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 50,000 shares immediately after this offering (or 57,500 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.
80
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 private commission 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, private commission 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.
81
We intend to offer our securities
described in this prospectus through the underwriter named below. We have entered into an underwriting agreement with the underwriter. Subject
to the terms and conditions of the underwriting agreement, underwriter has agreed to purchase from us the number of units listed in the following
table:
Underwriter |
Number of Units |
|||||
---|---|---|---|---|---|---|
Cantor
Fitzgerald & Co. |
4,000,000 |
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 underwriter must purchase all of the units if it purchases any of them. However, the underwriter is 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 underwriter; and |
|
the underwriters right to reject orders in whole or in part. |
In connection with this offering, the
underwriter or securities dealers may distribute prospectuses electronically.
Upon the execution of the underwriting
agreement, the underwriter 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 underwriter an
option to buy up to 600,000 additional units. The underwriter may exercise this option solely for the purpose of covering over-allotments, if any, made
in connection with this offering. The underwriter has 45 days from the date of this prospectus to exercise this option.
Commissions and Discounts
Units sold by the underwriter to the
public will initially be offered at the offering price set forth on the cover of this prospectus. Any units sold by the underwriter 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 underwriter 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 underwriter may change the offering price and the other selling terms. Upon execution of the
underwriting agreement, the underwriter 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 underwriter assuming both no exercise and full exercise of the
underwriters over-allotment option to purchase up to an additional 600,000 units.
Per Unit |
Without Over-allotment |
With Over-allotment |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Public offering
price |
$ | 10.00 | $ | 40,000,000 | $ | 46,000,000 | ||||||||
Discount(1)(2) |
$ | 0.30 | $ | 1,200,000 | $ | 1,200,000 | ||||||||
Proceeds before
expenses(3) |
$ | 9.70 | $ | 38,800,000 | $ | 44,800,000 |
(1) |
In the event that investors introduced by us to the underwriter do not purchase at least $30,000,000 of the units being offered hereby, there will be an additional underwriting commission paid to the underwriter in |
82
the amount of $0.15 per unit (1.5%) on the amount below $30,000,000 invested by investors introduced by us. |
(2) |
Excludes $0.10 per unit, or $400,000 (approximately $640,000 if the underwriters over-allotment option is exercised in full, which includes $0.40 per unit sold pursuant to the over-allotment option), payable to Cantor Fitzgerald & Co. for a deferred underwriting fee to be placed in the trust account. These funds will be released to Cantor Fitzgerald only on completion of our initial business combination. |
(3) |
The offering expenses are estimated at $410,000. |
No discounts or commissions will be
paid on the sale of the private units.
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 SMACU, SMAC and SMACR, 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 underwriter
that it proposes 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
underwriter. 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 underwriter is unable to compare our financial results and prospects with those of public companies operating in the same
industry.
Regulatory Restrictions on Purchase of
Securities
Rules of the SEC may limit the ability
of the underwriter to bid for or purchase our units before the distribution of the units is completed. However, the underwriter may engage in the
following activities in accordance with the rules:
83
|
Stabilizing Transactions. The underwriter 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 underwriter complies with all other applicable rules. |
|
Over-Allotments and Syndicate Coverage Transactions. The underwriter 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 underwriter 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 underwriter creates a short position during the offering, the underwriter may engage in syndicate covering transactions by purchasing our units in the open market. The underwriter 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 underwriter in the aftermarket. However, the underwriter 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 underwriter 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 underwriter 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
We have agreed to reimburse the
underwriter 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 and certain other roadshow expenses, up to a maximum aggregate reimbursable amount of
$_____.
Except as set forth above, we are not
under any contractual obligation to engage the underwriter to provide any services for us after this offering, and have no present intent to do so.
However, the underwriter 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 the 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
underwriter against some liabilities, including civil liabilities under the Securities Act, or to contribute to payments the underwriter may be
required to make in this respect.
84
Notices to Chinese Investors
China. THIS PROSPECTUS HAS NOT
BEEN AND WILL NOT BE CIRCULATED OR DISTRIBUTED IN THE PRC, AND THE SECURITIES OFFERED HEREIN MAY NOT BE OFFERED OR SOLD, AND WILL NOT BE OFFERED OR
SOLD TO ANY PERSON FOR RE-OFFERING OR RESALE, DIRECTLY OR INDIRECTLY, TO ANY RESIDENT OF THE PRC EXCEPT PURSUANT TO APPLICABLE LAWS AND REGULATIONS OF
THE PRC.
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. Loeb & Loeb LLP, New York, New York, is acting as counsel for the underwriter in this offering.
The financial statements of Sino
Mercury Acquisition Corp. (a development stage company) as of April l5, 2014, and for the period from March 28, 2014 (inception) through April 15,
2014, have been included herein in reliance upon the report of Rothstein Kass, independent registered public accounting firm, appearing elsewhere
herein, and upon the authority of Rothstein Kass as experts in accounting and auditing.
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.
85
Page |
||||||
---|---|---|---|---|---|---|
F-2 |
||||||
F-3 |
||||||
F-4 |
||||||
F-5 |
||||||
F-6 |
||||||
F-7 F12 |
F-1
To the Board of Directors and Stockholder of
Sino Mercury Acquisition Corp.
Sino Mercury Acquisition Corp.
We have audited the accompanying
balance sheet of Sino Mercury Acquisition Corp. (a corporation in the development stage) (the Company) as of April 15, 2014, and the
related statements of operations, changes in stockholders equity and cash flows for the period from March 28, 2014 (inception) to April 15, 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 Sino Mercury Acquisition Corp. (a corporation in the
development stage) as of April 15, 2014, and the results of its operations and its cash flows for the period from March 28, 2014 (inception) to April
15, 2014, in conformity with accounting principles generally accepted in the United States of America.
/s/ Rothstein Kass
New York, New York
May 16, 2014
May 16, 2014
F-2
ASSETS |
||||||
Current asset
Cash |
$ | 107,000 | ||||
Deferred
offering costs |
35,000 | |||||
Total
assets |
$ | 142,000 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||
Current
liabilities |
||||||
Accounts
payable |
$ | 449 | ||||
Note payable
to stockholder |
117,000 | |||||
Total
liabilities |
117,449 | |||||
Commitments |
||||||
Stockholders equity |
||||||
Preferred
stock, $.0001 par value, Authorized 1,000,000 shares; none issued |
| |||||
Common stock,
$.0001 par value, Authorized 25,000,000 shares, 1,150,000 shares issued and outstanding |
115 | |||||
Additional
paid-in capital |
24,885 | |||||
Deficit
accumulated during the development stage |
(449 | ) | ||||
Total
stockholders equity |
24,551 | |||||
Total
liabilities and stockholders equity |
$ | 142,000 |
The Accompanying Notes are an Integral Part of these
Financial Statements.
F-3
Statement of Operations
For the period March 28, 2014 (Inception) to April 15, 2014
For the period March 28, 2014 (Inception) to April 15, 2014
Formation,
general and administrative expenses |
$ | 449 | ||||
Net loss
|
$ | (449 | ) | |||
Weighted
average common shares outstanding |
1,150,000 | |||||
Basic and
diluted net loss per common share |
$ | (0.00 | ) |
The Accompanying Notes are an Integral Part of these
Financial Statements.
F-4
Statement of Changes in Stockholders Equity
For the period March 28, 2014 (Inception) to April 15, 2014
For the period March 28, 2014 (Inception) to April 15, 2014
Common Stock |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares |
Amount |
Additional Paid-in Capital |
Deficit Accumulated During the Development Stage |
Total Stockholders Equity |
|||||||||||||||||||
Common shares
issued to initial stockholder on April 15, 2014, at approximately $0.02 per share |
1,150,000 | $ | 115 | $ | 24,885 | $ | | $ | 25,000 | ||||||||||||||
Net loss
|
| | | (449 | ) | (449 | ) | ||||||||||||||||
Balances at
April 15, 2014 |
1,150,000 | $ | 115 | $ | 24,885 | $ | (449 | ) | $ | 24,551 |
The Accompanying Notes are an Integral Part of these
Financial Statements.
F-5
Statement of Cash Flows
For the period Mar 28, 2014 (Inception) to Aprl 15, 2014
For the period Mar 28, 2014 (Inception) to Aprl 15, 2014
Cash flow
from operating activities |
||||||
Net loss
|
$ | (449 | ) | |||
Adjustments
to reconcile net loss to net cash used in operating activities: |
||||||
Change in
operating assets and liabilities: |
||||||
Increase in
accounts payable |
449 | |||||
Net cash
used in operating activities |
| |||||
Cash flows
from financing activities |
||||||
Advances from
stockholder |
35,000 | |||||
Proceeds from
sale of shares of common stock to founding stockholder |
25,000 | |||||
Proceeds from
note payable, stockholder |
82,000 | |||||
Payment of
deferred offering costs |
(35,000 | ) | ||||
Net cash
provided by financing activities |
107,000 | |||||
Net
increase in cash |
107,000 | |||||
Cash at
beginning of period |
| |||||
Cash at
end of period |
$ | 107,000 | ||||
Supplemental Disclosure of Non-cash Financing Activities |
||||||
Advances from
stockholder capitalized (reclassified) to note payable |
$ | 35,000 |
The Accompanying Notes are an Integral Part of these
Financial Statements.
F-6
Sino Mercury Acquisition Corp. (the
Company) was incorporated in Delaware on March 28, 2014 as a blank check company whose objective is to enter into a merger, stock exchange,
asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (a
Business Combination).
At April 15, 2014, the Company had not
yet commenced any operations. All activity through April 15, 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 Company is considered to be a
development stage company and, as such, the Companys financial statements are prepared in accordance with the Financial Accounting Standards
Boards (FASB) Accounting Standards Codification (ASC) topic 915 Development Stage Entities. The Company is
subject to all of the risks associated with development stage companies.
The Companys ability to commence
operations is contingent upon obtaining adequate financial resources through a proposed public offering of up to 4,000,000 units (or 4,600,000 units if
the underwriters over- allotment option is exercised in full) (Units) which is discussed in Note 3 (Proposed Public
Offering). The Companys initial shareholder has also committed to purchase from the Company an aggregate of 210,000 units (Private
Units) at $10.00 per unit (for a total purchase price of $2,100,000). These Private Units will be purchased in a private placement (Private
Placement) that will occur simultaneously with the consummation of the Proposed Public Offering. All of the proceeds the Company receives from
these purchases 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 the Proposed Public Offering and the Private Placement, 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 its securities 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 effectuate 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 from the sale 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 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 to pay the Companys tax obligations.
The Company, after signing a definitive
agreement for an initial Business Combination, is required to provide stockholders (Public Stockholders) who acquired common stock
(Public Shares) in the Proposed Public Offering with the opportunity to convert their Public Shares for a pro rata share of the Trust
Account. The Company will only consummate such Business Combination if it has at least $5,000,001 of net tangible assets upon close of such Business
Combination. However, it is a condition of the Proposed Public Offering that at least $10,000,000 of the Units being offered are purchased by investors
who will agree to hold their Public Shares through the consummation of an initial Business Combination, vote in favor of such proposed
F-7
initial Business Combination and not seek conversion in connection therewith. As a result, the Company expects to meet the $5,000,001 net tangible asset requirement in order to complete an initial Business Combination. The holder of the 1,150,000 shares of common stock purchased prior to the Companys Proposed Public Offering (Initial Stockholder) will vote any shares it then holds in favor of any proposed initial Business Combination and will waive any conversion rights with respect to these shares and the shares underlying the Private Units pursuant to a letter agreement 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
stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed 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 approximately $10.00 per share), including 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. Rights sold as part of the Units (Rights) will
not be entitled to vote on the Proposed Business Combination and will have no conversion or liquidation rights.
Notwithstanding the foregoing, the
Amended and Restated Certificate of Incorporation of the Company to be in effect upon consummation of the Proposed Public Offering 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 shares of common stock sold in the Proposed Public Offering (but only with respect to the amount over 20% of the
shares of common stock sold in the Proposed Public Offering). 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 21 months from the date of the Proposed Public Offering (or 24 months from the date of the Proposed Public Offering
if the Company has executed a definitive agreement for a Business Combination within 21 months from the date of the Proposed Public Offering but has
not completed such Business Combination within the 21- month period), 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, 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 the Company or
necessary to pay any of its taxes. Holders of Rights will receive no proceeds in connection with the liquidation with respect to such rights. 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 conclude
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 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
F-8
claims of the Companys common stockholders. Therefore, the actual per-share redemption price may be less than approximately $10.00.
Emerging Growth Company
Further, Section 102(b)(1) of the
Jumpstart Our Business Startups Act of 2012 (the JOBS Act) permits emerging growth companies to delay complying with new or revised
financial accounting standards that do not yet apply to 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). 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, can adopt the new or revised standard at the time
private companies 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.
Note 2 Significant Accounting
Policies
Basis of Presentation
The accompanying financial statements
of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America and pursuant
to the rules and regulations of the Securities and Exchange Commission (the SEC).
Development Stage Company
The Company complies with the reporting
requirements of FASB ASC Topic 915, Development Stage Entities. At April 15, 2014, the Company has not commenced any operations nor
generated revenue to date. All activity through April 15, 2014 relates to the Companys formation and the Proposed Public Offering. Following such
offering, the Company will not generate operating revenues until after completion of a Business Combination, at earliest. The Company will generate
non-operating income in the form of interest income on the designated Trust Account after the Proposed Public Offering.
Income Taxes
The Company accounts for income taxes
under ASC Topic 740 Income Taxes. ASC Topic 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 Topic 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 Topic 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 Topic 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
March 28, 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
F-9
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 March 28, 2014 (inception) through April 15, 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 Common Share
Basic loss per common share is computed
by dividing net loss by the weighted- average number of shares of common stock outstanding during the period. Diluted loss per common share is computed
by dividing net loss by the weighted average number of common shares outstanding, plus to the extent dilutive, the incremental number of shares of
common stock to settle warrants and other common stock equivalents (currently none outstanding), as calculated using the treasury stock method. Since
there are no common stock equivalents outstanding and also because of the Companys loss position, diluted loss per common share is the same as
basic loss per common share for the period.
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 May 16, 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 4,000,000 Units at a proposed offering price of $10.00 per Unit. In addition, the Company has granted Cantor
Fitzgerald & Co., the underwriter, a 45-day option to purchase up to 600,000 units solely to cover over-allotments, if any. Each Unit consists of
one share of common stock and one Right. Each Right will automatically entitle the holder to receive 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 issued in the Proposed Public Offering using the funds in the Trust Account as described in Note 1. There are no contractual penalties
for failure to deliver securities to the holders of the Rights upon consummation of the Companys initial Business Combination. Additionally, in
no event will the Company be required to net cash settle the Rights. In such events, the Rights will expire and will be worthless.
F-10
Note 4 Deferred Offering Costs
Deferred offering costs consist
principally of legal and accounting 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 offering costs, as well as additional costs to be incurred will be charged to operations.
Note 5 Note Payable to Stockholder
The Company issued a $117,000 principal
amount unsecured promissory note to Jianming Hao, the Companys Chief Executive Officer and an affiliate of the Initial Stockholder, on April 14,
2014. Capitalized as part of the promissory note was $35,000 advances made prior to the execution of the promissory note. The note is non-interest
bearing and payable on the earlier of (i) April 30, 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 Related Party Transactions
The Initial Stockholder of the Company
has committed to purchase 210,000 Private Units at $10.00 per unit (for an aggregate purchase price of $2,100,000) from the Company. The Initial
Stockholder has also agreed that if investors introduced by the Company to the underwriter do not purchase at least $30,000,000 of the units
being offered in the Proposed Public Offering, it will purchase from the Company at a price of $10.00 per unit the number of Private Units
(Private Commission Units) that will equal the increased commissions the Company will pay the underwriter (see Note 7). These purchases
will take place simultaneously with the consummation of the Proposed Public Offering. All of the proceeds received from the sale of the Private Units
will be placed in the Trust Account except that the proceeds from the sale of the Private Commission Units will be paid to the underwriter at the
closing of the Proposed Public Offering. The Private Units and Private Commission 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 propose, or vote in favor of, an amendment to the Companys amended and restated certificate of incorporation with
respect to pre-Business Combination activities prior to the consummation of such a Business Combination, (iii) 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 (iv) 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 Private Units, Private
Commission Units or underlying securities (except to certain permitted transferees) until the completion of the initial Business
Combination.
Note 7 Commitments
The Company will pay the underwriter in
the Proposed Public Offering an underwriting discount of 3% of the gross proceeds of the Proposed Public Offering. In addition, the underwriter will be
entitled to a deferred fee of one percent (1.0%) of the Proposed Public Offering (or 4.0% of the proceeds from the units sold in the over-allotment
option), payable in cash upon the closing of a Business Combination.
In the event that investors introduced
by the Company to the underwriter do not purchase at least $30,000,000 of the Units being offered in the Proposed Public Offering, there will be
an additional underwriting commission paid to the underwriter in the amount of $0.15 per unit (1.5%) on the amount below $30,000,000 invested by
investors introduced by the Company, which will not affect the amount in the Trust Account due to the obligation of the Initial Stockholder to
purchase the Private Commission Units.
The Initial Stockholder and the holder
of the Private Units and Private Commission Units (or underlying shares of common stock) will be entitled to registration rights with respect to the
initial shares and the Private Units (or underlying shares of common stock) pursuant to an agreement to be signed prior to or on the
F-11
effective date of the Proposed Public Offering. The holders of the majority of the initial 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 and Private Commission 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 Stockholder and holders of the Insider Units and Private Commission 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 8 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 April 15, 2014, there are no shares of preferred stock issued or outstanding.
Common Stock
The Company is authorized to issue
25,000,000 shares of common stock with a par value of $0.0001 per share. In connection with the organization of the Company, a total of 1,150,000
shares of the Companys common stock were sold to the Initial Stockholder at a price of approximately $0.02 per share for an aggregate of
$25,000.
As of April 15, 2014, 1,150,000 shares
of common stock were issued and outstanding, of which 150,000 shares are subject to forfeiture to the extent that the underwriters
over-allotment option is not exercised in full so that the Companys Initial Stockholder 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 Effective Date. 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 $13.00 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.
$40,000,000
Sino Mercury Acquisition Corp.
4,000,000 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 |
6,000 | |||||
FINRA filing
fee |
7,400 | |||||
Accounting
fees and expenses |
35,000 | |||||
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 |
10,600 | (3) | ||||
Total |
$ | 485,000 |
(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.
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:
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In March 2014, the Company issued an
aggregate of 1,150,000 shares of common stock to Best Apex Limited, an entity controlled by Jianming Hao, the Companys Chief Executive Officer,
for an aggregate purchase price of $25,000, or approximately $0.02 per share, in connection with our organization pursuant to the exemption from
registration contained in Section 4(2) of the Securities Act.
In addition, Best Apex Limited has
committed to purchase an aggregate of 210,000 private units from the Company on a private placement basis simultaneously with the consummation of 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 Jianming Hao.* |
|||||
10.5 | Form
of Registration Rights Agreement among the Registrant and the Initial Stockholders.* |
|||||
10.6 | Form
of Subscription Agreement among the Registrant, Graubard Miller and Best Apex Limited.* |
|||||
14 | Form
of Code of Ethics.* |
|||||
16 | Letter regarding change in certifying accountant.* |
|||||
23.1 | Consent of Rothstein Kass. |
|||||
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.* |
|||||
99.2 | Form
of Nominating Committee Charter.* |
|||||
99.3 | Form
of Compensation Committee Charter.* |
* |
Previously filed. |
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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.
(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
II-5
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.
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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 7 th day of August, 2014.
SINO
MERCURY ACQUISITION CORP. |
||||||||||
By:
/s/ Jianming Hao |
||||||||||
Name:
Jianming Hao |
||||||||||
Title:
Chief Executive Officer |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that
each person whose signature appears below constitutes and appoints Jianming Hao and Richard Xu 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/
Jianming Hao Jianming Hao |
Executive Chairman of the Board and Chief Executive Officer (Principal executive officer) |
August 7, 2014 |
||||||||
/s/ Amy
He Amy He |
Chief
Financial Officer (Principal financial and accounting officer) |
August 7, 2014 |
||||||||
/s/
Richard Xu Richard Xu |
President and Director |
August 7, 2014 |
||||||||
/s/ Aimin
Song Aimin Song |
Director |
August 7, 2014 |
||||||||
/s/
Bradley Reifler Bradley Reifler |
Director |
August 7, 2014 |
||||||||
/s/ Qing
Zhu Qing Zhu |
Director |
August 7, 2014 |
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