UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2008
Commission File Number 001-33927
ATLAS ACQUISITION HOLDINGS CORP.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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26-0852483
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(State or Other Jurisdiction of Incorporation
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(I.R.S. Employer Identification No.)
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or Organization)
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c/o Hauslein & Company, Inc.
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11450 SE Dixie Highway, Ste 106
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Hobe Sound, Florida
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33455
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(Address of Principal Executive Offices)
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(Zip Code)
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(772) 545-9042
Registrants Telephone Number, Including Area Code
Securities registered pursuant to section 12(b) of the Act:
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Title Of Each Class
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Name Of Each Exchange On Which Registered
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Units, each consisting of one
share of Common Stock, par value
$.001 per share, and one Warrant
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NYSE Alternext U.S.
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Common Stock included in the Units
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NYSE Alternext U.S.
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Warrants included in the Units
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NYSE Alternext U.S.
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Securities Registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
Yes
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No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act.
Yes
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No
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
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No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filed, a non-accelerated filer, or a smaller reporting company. See the definition of large
accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large Accelerated Filer
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Accelerated Filer
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Non-Accelerated Filer
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(Do not check if a smaller reporting company)
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Smaller Reporting Company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes
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No
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The aggregate market value of the voting common stock held by non-affiliates of the registrant
(14,998,800 shares) based on the closing sales price for the registrants common stock on June 30,
2008, as reported on the NYSE Alternext U.S., was approximately $137,688,684. For purposes of this
computation, all officers, directors, and 10% beneficial owners of the registrant are deemed to be
affiliates. Such determination should not be deemed to be an admission that such officers,
directors, or 10% beneficial owners are, in fact, affiliates of the registrant.
As of February 27, 2009, the registrant had outstanding 25,000,000 shares of common stock.
ATLAS ACQUISITION HOLDINGS CORP.
ANNUAL REPORT ON FORM 10-K
Fiscal-Year Ended December 31, 2008
TABLE OF CONTENTS
Statement Regarding Forward-Looking Statements
This report includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, or the Exchange Act. Forward-looking statements include, but are not limited to,
statements regarding our 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, intend, may, might, plan, possible, potential, predict, project, should
and would, as well as 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 report may include, for example, statements about our:
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ability to complete a combination with one or more target businesses;
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success in retaining or recruiting, or changes required in, our officers or
directors following a business combination;
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potential inability to obtain additional financing to complete a business combination;
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limited pool of prospective target businesses;
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potential change in control if we acquire one or more target businesses for stock;
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public securities limited liquidity and trading;
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inability to have our securities listed on the NYSE Alternext U.S. following a
business combination or the delisting of our securities from the NYSE Alternext U.S.;
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use of proceeds not in trust or available to us from interest income on the trust account
balance; or
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our ongoing financial performance.
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The forward-looking statements contained or incorporated by reference in this report 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, or
assumptions, many of which are beyond our control, 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 in Item 1A, Risk
Factors. 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.
References in this report to we, us, or our company refer to Atlas Acquisition Holdings
Corp. References to our founders refer, collectively, to our officers, our independent directors
and our special advisors who acquired our securities before our initial public offering.
References to public stockholders refer to purchasers of our securities in our initial public
offering and subsequent purchasers in the secondary market. To the extent our founders purchased
common stock in our initial public offering or thereafter in the open market they would be public
stockholders for liquidation and dissolution purposes, but will vote all such shares in favor of
our initial business combination and therefore would not be eligible to seek redemption in
connection with a vote on a business combination.
PART I
Item 1. Business.
Introduction
We are a Delaware blank check company formed on September 6, 2007 to complete a business
combination with one or more operating businesses. Our efforts in identifying a prospective target
business are not limited to a particular industry or geography.
On January 30, 2008, we completed our initial public offering of 20,000,000 units for an
offering price of $10.00 or an aggregate of $200,000,000. Each unit consists of one share of our
common stock, par value $.001, and one warrant. Each warrant entitles the holder to purchase one
share of our common stock at a price of $7.00 commencing on our consummation of a business
combination, provided that there is an effective registration statement covering the shares of
common stock underlying the warrants in effect. The warrants expire on January 23, 2012, unless
earlier redeemed.
We received gross proceeds of $200,000,000 from our initial public offering. Of those
proceeds, (i) we deposited $194,200,000 into a trust account at Bank of America, maintained by
American Stock Transfer & Trust Company, as trustee, which included $8,955,000 of deferred
underwriting fees; (ii) the underwriters of our initial public offering, Lazard Capital Markets LLC
and Morgan Stanley & Co. Incorporated, received $5,045,000 in underwriting fees (excluding the
deferred underwriting fees); and (iii) we retained $755,000 for offering expenses and to fund our
initial working capital. In addition, we deposited into the trust account gross proceeds of
$5,800,000 received from the sale of insider warrants to James N. Hauslein, Gaurav V. Burman, Sir
Peter Burt, Michael T. Biddulph, Michael W. Burt, and Promethean plc, which sale was consummated
concurrently with the closing of our initial public offering. Each insider warrant was purchased
at a price of $1.00 per warrant and has an exercise price of $7.00.
The aggregate of $200,000,000 deposited into the trust account will be part of the funds
distributed to our public stockholders in the event we are unable to complete a business
combination. Unless and until a business combination is consummated, the proceeds held in the
trust account will not be available to us.
Since our initial public offering in January 2008, we have been actively engaged in sourcing a
suitable business combination candidate. We do not have any specific merger, stock exchange, asset
acquisition, reorganization, or other business combination under consideration or contemplation but
we have met with prospective acquisition targets, service professionals, and other intermediaries
to discuss our company, the background of our management and our business combination preferences.
As of the date of filing of this report we have not consummated any business combination or entered
into any definitive business combination agreement. Except for interest income generated on the
trust account in which the majority of the proceeds of our initial public offering is held, we have
not generated any revenue to date. We are considered to be in the development stage and are
subject to the risks associated with activities of development stage companies.
Business Strategy
We have identified the following criteria and guidelines that we believe are important in
evaluating prospective target businesses. We use these criteria and guidelines in evaluating
acquisition opportunities. However, we may decide to enter into a business combination with a
target business that does not meet these criteria and guidelines.
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Established Companies with Proven Track Records
. We seek to acquire established
companies with sound historical operating performance, including those whose existing
capital structure or capital needs may present financial challenges. For instance, we
believe that target companies exist that have a strong operating history but that may
require additional equity in order to deleverage their existing capital structure or
otherwise expand their business. These companies may be unable to obtain capital on
satisfactory terms in the current marketplace and may therefore view a combination with our
company, and
the resultant access to our capital resources, to be attractive. We typically focus on
companies with a history of strong operating and financial results and we do not intend to
acquire start-up companies.
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Companies with Sound Business Models
. We target acquisition candidates with sound
business models that offer opportunities for growth.
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Strong Competitive Industry Position
. We seek to acquire businesses that operate within
industries that have strong fundamentals. The factors we consider include competitive
dynamics, level of consolidation, need for capital investment, and barriers to entry. We
examine the ability of these target businesses to defend and improve their advantages in
areas that may include product or service quality, customer loyalty, investment needs, and
brand positioning.
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Experienced Management Team
. We seek to acquire businesses that have successful
management teams. We focus on management teams with a proven track record of driving
revenue growth and enhancing the profitability of the acquisition candidate.
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Competitive Advantages
We believe that we have the following competitive advantages over other entities with business
objectives similar to ours:
Management Expertise
James N. Hauslein, our chairman and chief executive officer, served as chairman of Sunglass
Hut International from 1991 to 2001 and served as chief executive officer from May 1997 to January
1998 and January 2001 to April 2001. Mr. Hauslein has significant experience operating a complex,
vertically integrated, international consumer products business conducting transactions in multiple
currencies, products, languages, and geographies. During Mr. Hausleins tenure at Sunglass Hut
International, he led the growth of its revenues from approximately $37 million in 1987 to
approximately $680 million for fiscal 2000 prior to its acquisition by Luxottica Group SpA (Milan
and NYSE: LUX) in April 2001. At the time of Luxottica Groups acquisition, Sunglass Hut
International operated approximately 2,000 company-owned Sunglass Hut International, Watch Station,
Watch World, and combination stores in the United States, Canada, the Caribbean, Europe, Asia,
Australia, and New Zealand.
Gaurav V. Burman, our president and secretary and a member of our board of directors, was a
director in the business development group at Dabur India Ltd. (Mumbai: DABUR), a $2.5 billion
market cap consumer goods business controlled by Mr. Burmans family. Mr. Burman was involved in
negotiating joint ventures with leading UK, European, and U.S. companies seeking to access the
Indian market. Furthermore, Mr. Burman and Mohit Burman, one of our special advisors and Mr.
Burmans brother, formed joint ventures with prominent global financial services companies, such as
Fidelity International, Aviva plc, and ABN AMRO, to enable them to access the Indian market.
Assistance of Promethean and Elephant Capital
Promethean Investments and Elephant Capital, plc have strong track records of identifying small and mid-cap businesses
with temporary challenges or structural problems and helping management effect change to create
value. Since their formation in 2005 and 2007, respectively, Promethean Investments and Elephant Capital have made an aggregate of 12 acquisitions of, or
significant investments in, private companies across a wide variety of sectors and have also made a
number of equity investments in public companies. Prometheans and Elephant Capitals founding partners help us identify
and evaluate target companies and assist us with the due diligence of the target company. Other
than Mr. Burman, none of these individuals is required to commit any specified amount of time to
our affairs. Sir Peter Burt, one of our special advisors, is currently the chairman of Elephant
Capital and of Promethean plc. Sir Peter Burt has over 25 years of investment experience
combined with significant acquisition and integration experience and proven operating and
management skills. Sir Peter Burt spent most of his career with Bank of Scotland, where he became
Chief General Manager and Chairman of the Management Board in 1988, and later became Group CEO.
Sir Peter Burt was Deputy Chairman of HBOS plc from 2001 to 2003 after Bank of Scotlands £28
billion merger with Halifax. Sir Peter Burt served on the board of directors for Royal Dutch
Shell, served as chairman of ITV, the UKs largest terrestrial broadcaster, and was a special
advisor to Apax, a position he left when he founded Promethean plc. Mohit Burman, one of our
special advisors, is the leader of the India investment team for Elephant Capital plc and is a
director of Elephant India
Advisors Ltd. Mohit Burman is a director of Dabur, ABN AMRO Securities India, Mahindra
Forging, and Dabur Pharmaceuticals and has successfully identified and executed six private equity
transactions in India. Michael W. Burt, one of our special advisors, is a partner of Promethean
Investments and is a director of a number of privately held UK companies. Mr. Burt has over 10
years of private equity experience. Michael T. Biddulph, one of our special advisors, is a partner
of Promethean Investments and is a director of a number of privately held UK companies. Mr.
Biddulph has 10 years of investment experience in a broad range of sectors including the
healthcare, manufacturing, and support services sectors.
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Elephant
Capital and Promethean Investments have agreed to make investment professionals located in their offices in
London, New Delhi, and Mumbai available, at no cost to us, to actively source, evaluate, and assist
us in the due diligence of a target company. In addition, Elephant
Capital and Promethean have agreed that they will
provide us a right of first refusal with respect to any potential investment opportunity except (i)
any investment in an entity incorporated or formed in the United Kingdom which does not exceed $100
million of equity by Promethean or (ii) any investment in an entity incorporated or formed in India
which does not exceed $50 million of equity by Elephant Capital.
Merger and Acquisition Expertise
Our executive officers, directors, and special advisors have extensive experience in both
private equity investing and public company mergers and acquisitions, both domestically and
internationally. We believe that this experience allows us to critically evaluate the potential
benefits as well as the risks involved in any proposed business combination. The experience of our
executive officers is critical to our successfully identifying and completing an initial business
combination.
Mr. Hauslein has over 20 years of private equity investing experience and is currently a
director of Elephant Capital plc. Mr. Hauslein, along with his other partners at Kidd, Kamm &
Company and Desai Capital, acquired a controlling interest in Sunglass Hut International in June
1987 for a total transaction value of approximately $36 million. In 1991, Mr. Hauslein led the
buyout of Sunglass Hut International from the other Kidd, Kamm shareholders and the founders for an
enterprise value of approximately $78 million. Mr. Hauslein led the sale of Sunglass Hut
International to Luxottica Group SpA in April 2001 for an enterprise value of approximately $681
million. While at Sunglass Hut International, Mr. Hauslein presided over numerous add-on
acquisitions in the United States and Australia. In connection with the sale of Sunglass Hut
International, Mr. Hauslein entered into a noncompetition agreement that lasted until April 2006.
During that time, Mr. Hauslein identified and invested in several private companies. Prior to his
tenure at Sunglass Hut, Mr. Hauslein was a partner at private equity firm Kidd, Kamm & Company,
where he was responsible for identifying, consummating, and overseeing a number of middle-market
acquisitions. Mr. Hauslein is an independent director of GLG Partners, Inc. (NYSE: GLG) and was
previously an independent director of Freedom Acquisition Holdings, Inc. (formerly AMEX: FRH), a
$528 million general purpose blank check company that completed a business combination with GLG
Partners, Inc. in a transaction valued at approximately $3.4 billion. Mr. Hauslein is also an
independent director of Liberty Acquisition Holdings Corp. (NYSE Alternext: LIA), a general purpose
blank check company that raised approximately $1 billion in its December 2007 initial public
offering.
Mr. Burman has over 10 years of experience in private equity, in which he has invested in
companies in India, the United Kingdom, Europe, and the United States. Prior to helping found
Elephant Capital, a private equity fund focused on India, and Promethean, Mr. Burman was a
director at Dresdner Kleinwort Capital, where he was instrumental in forming Dresdners US$125
million media and technology fund in which he was a founding partner. While a member of the U.S.
media and technology team, Mr. Burman originated, structured, and executed a number of direct
equity investments in India, the United Kingdom, Europe, and the United States. Mr. Burman also
sat on the Investment Committee of Dresdners Fund of Funds business and was part of a team that
allocated over $1 billion to private equity funds globally.
Since
2005, Promethean Investments and Elephant Capital have made a total
of 12 acquisitions of, or significant investments
in, private companies across a wide variety of sectors and have also made a number of equity
investments in public companies.
Established Deal Sourcing Network
We believe that the extensive contacts and relationships of our executive officers, directors,
and special advisors and their experience in finding and executing business, investment, and
acquisition transactions enable us
to successfully source, evaluate, and execute an initial business combination opportunity.
Additionally, our executive officers, directors, and special advisors have extensive contacts with
consultants, investment bankers, attorneys, and accountants, among others. While the past
successes of our executive officers, directors, and special advisors do not guarantee that we will
successfully identify and consummate an initial business combination, they will play an important
role in assisting us in finding potential targets and negotiating an agreement for our initial
business combination.
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Geographically Diverse Transaction Teams
Our executive officers, directors, and special advisors are located in the United States, the
United Kingdom, and India. We believe this geographic coverage provides us with a much greater
selection of candidates for an initial business combination. The presence of our executive
officers, directors, and special advisors in those locales allows us to quickly evaluate and
capitalize on potential opportunities. Finally, since those people live in these locales, we
believe that we are better able to evaluate the relative merits of a proposed business combination
candidate. However, we are not limited to any specific geography for our initial business
combination.
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. We intend to utilize cash derived from the proceeds of
our initial public offering, our capital stock, debt, or a combination of these in effecting a
business combination. Although substantially all of the net proceeds of our initial public
offering are intended to be applied generally toward effecting a business combination, the proceeds
are not otherwise being designated for any more specific purposes. Accordingly, there is no
current basis for stockholders 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
that does not need substantial additional capital but that 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. While some such candidates will
view a business combination with our company favorably in light of such considerations, other
candidates may view a potential combination unfavorably because of certain disadvantages inherent
in a business combination with us. See Item 1, Business Competition for a discussion of these
disadvantages. 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.
While we have not selected any target business or target industry on which to concentrate our
search for a business combination, we are currently in the process of identifying and evaluating
targets for an initial transaction. We do not have any specific merger, stock exchange, asset
acquisition, reorganization, or other business combination under consideration or contemplation but
we have met with prospective acquisition targets, service professionals and other intermediaries to
discuss our company, the background of our management and our business combination preferences. As
of the date of filing of this report we have not consummated any business combination or entered
into any definitive business combination agreement. 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.
Subject to the limitations that a target business have a fair market value of at least 80% of
the sum of the balance in the trust account (excluding deferred underwriting discounts and
commissions), as described below in more detail, we have virtually unrestricted flexibility in
identifying and selecting a prospective acquisition candidate. We will not enter into a business
combination with any business with which Promethean or Elephant Capital has previously had acquisition or investment
discussions prior to the consummation of our initial public offering. We have not established any
other specific attributes or criteria (financial or otherwise) for prospective target businesses.
Accordingly, there is no current basis for stockholders to evaluate the possible merits or risks of
the target business with which we may ultimately complete a business combination. Although we
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.
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We currently, and prior to consummation of a business combination will continue to, seek to
have all vendors and service providers (which would include any third parties we engage to assist
us in any way in connection with our search for a target business) and prospective target
businesses execute agreements with us waiving any right, title, interest, or claim of any kind they
may have in or to any monies held in the trust account. There is no guarantee that they will
execute such agreements. Furthermore, there is no guarantee that, even if such entities execute
such agreements with us, they will not seek recourse against the trust account or that a court
would not conclude that such agreements are not legally enforceable. James N. Hauslein and Gaurav
V. Burman have agreed that they 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. We
believe that our board of directors may be obligated to pursue a potential claim for reimbursement
from Messrs. Hauslein and Burman pursuant to the terms of their agreements with us if it would be
in the best interests of our stockholders to pursue such a claim. Such a decision would be made by
a majority of our disinterested directors based on the facts and circumstances at the time.
However, we cannot assure you that they will be able to satisfy those obligations, if they are
required to do so. Furthermore, Messrs. Hauslein and Burman will not have any personal liability
(1) as to any claimed amounts owed to a third party who executed a waiver (including a prospective
target business), even if such waiver is subsequently found to be invalid or unenforceable, and (2)
as to any claims under our indemnity of the underwriters of our initial public offering against
certain liabilities, including liabilities under the Securities Act.
Sources of target businesses
Target business candidates are 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, mailings, or advertisements. 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
the prospectus relating to our initial public offering. We have and may continue to engage the
services of professional firms or other individuals that specialize in business acquisitions if we
believe that such firm or individual could add significant value by identifying a unique
acquisition opportunity or otherwise assisting in structuring a transaction. In connection with
such engagements, 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. Our officers and board of
directors take into consideration similar fees paid by other companies for acquisitions of a
similar size and use their business judgment when determining the size of any finders fee.
Our officers and directors, as well as their affiliates, may also bring to our attention
target business candidates that they become aware of through their business contacts as a result of
formal or informal inquiries or discussions they may have, as well as attending trade shows or
conventions. Our management has experience in evaluating transactions but will retain advisors as
they deem necessary to assist them in their due diligence efforts.
In no event, however, will any of our existing officers, directors, stockholders, or special
advisors, or any entity with which they are affiliated, be paid, from us or a target business, 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 determine to enter into a business combination with a target business that is
affiliated with our officers, directors, special advisors, or stockholders, we would do so only if
we obtained an opinion from an independent investment banking firm, that is a member of the
Financial Industry Regulatory Authority, Inc., or FINRA, that the business combination is fair to
our unaffiliated stockholders from a financial point of view. However, as of the date of this
report, there are no affiliated entities that we would consider as a business combination target.
We also do not anticipate acquiring an entity with which our officers or directors, through their
other business activities, had acquisition or investment discussions, nor do we anticipate
acquiring an entity that is either a portfolio company of, or has otherwise received a financial
investment from, Promethean, Elephant Capital, or another private equity or investment banking firm (or an affiliate
thereof) that is affiliated with our management. However, if we determine to acquire an entity
affiliated with our officers, directors, special advisors, initial stockholders, or their
affiliates, we are required to obtain an opinion from an independent investment banking firm, which
is a member of FINRA, that the business combination is fair to our unaffiliated stockholders from a
financial point of view. Firms providing fairness opinions typically place limitations on the
purposes for which the opinion may be used, and there can be no assurances that, as a result of
such limitations or applicable law, stockholders, in
addition to our board of directors, will be entitled to rely on the opinion. We expect that
any firm selected by us to provide a fairness opinion will adhere to general industry practice in
stating the purposes for which its opinion may be used. When deciding to select a particular
investment banking firm, one of the factors we will consider is that firms view on whether or not
our stockholders may rely on its opinion.
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Selection of a target business and structuring of a business combination
Subject to the requirement that our initial business combination must be with a target
business with a fair market value that is at least 80% of the sum of the balance in the trust
account (excluding deferred underwriting discounts and commissions), we 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, we 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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experience and skill of management and availability of additional personnel;
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stage of development of products or services;
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degree of current or potential market acceptance of products or services;
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proprietary features and degree of intellectual property or other protection of products
or services;
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regulatory environment of the industry; and
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time and costs associated with effecting the business combination.
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These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a
particular business combination will be based, to the extent relevant, on the above factors as well
as other considerations deemed relevant by our management in effecting a business combination
consistent with our business objective. In evaluating a prospective target business, we will
conduct an extensive due diligence review that will encompass, among other things, meetings with
incumbent management and inspection of facilities, as well as review of financial and other
information that is made available to us. This due diligence review will be conducted either by
our management or by unaffiliated third parties we may engage, although we have no current
intention to engage any such third parties. We intend to have all prospective target businesses
execute agreements with us waiving any right, title, interest, or claim of any kind in or to any
monies held in the trust account. If any prospective target business refused to execute such
agreement, it is unlikely we would continue negotiations with such target business.
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
The target business or businesses that we acquire must collectively have a fair market value
equal to at least 80% of the sum of the balance in the trust account (excluding deferred
underwriting discounts and commissions), although we may acquire a target business whose fair
market value significantly exceeds 80% of the sum of the balance in the trust account (excluding
deferred underwriting discounts and commissions). We anticipate structuring a business combination
to acquire 100% of the equity interests or assets of the target business. We may, however,
structure a business combination to acquire less than 100% of such interests or assets of the
target business
but will not acquire less than a controlling interest (which would be greater than 50% of the
voting securities of the target business). We will not become a holding company for a minority
interest in a target business. In all instances, we would acquire an entity which we would control
for accounting purposes, meaning we would either consolidate the business of our target into our
financial statements or such targets financial statements would become our financial statements
going forward. In order to consummate such an acquisition, we may issue a significant amount of
our debt or equity securities to the sellers of such businesses and seek to raise additional funds
through a private offering of debt or equity securities. As a result, our stockholders may become
minority stockholders subsequent to a business combination. Since we have no specific business
combination under consideration, we have not entered into any such fundraising arrangement and have
no current intention of doing so.
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The fair market value of the target will be determined by our board of directors based upon
one or more standards generally accepted by the financial community (such as actual and potential
sales, earnings and cash flow, and book value). If our board is not able to independently
determine that the target business has a sufficient fair market value to meet the threshold
criterion or the target business is affiliated with our officers, directors, special advisors, or
existing stockholders, we will obtain an opinion from an unaffiliated, independent investment
banking firm, that is a member of FINRA, with respect to the satisfaction of such criteria. Firms
providing fairness opinions typically place limitations on the purposes for which the opinion may
be used, and there can be no assurances that, as a result of such limitations or applicable law,
stockholders, in addition to our board of directors, will be entitled to rely on the opinion. We
expect that any firm selected by us to provide a fairness opinion will adhere to general industry
practice in stating the purposes for which its opinion may be used. When deciding to select a
particular investment banking firm, one of the factors we will consider is that firms view on
whether or not our stockholders may rely on its opinion.
Issuance of additional debt or equity
We may need to raise additional equity or incur additional debt financing in order to
consummate an acquisition. As the valuation of the proposed target business increases, a greater
amount of such additional equity or debt would be required. The mix of debt or equity would depend
on the nature of the potential target business, including its historical and projected cash flow
and its projected capital needs. It would also depend on general market conditions at the time,
including prevailing interest rates and debt to equity coverage ratios. For example, capital
intensive businesses usually require more equity and mature businesses with steady historical cash
flow may sustain higher debt levels than growth companies.
We believe that it is typical for private equity firms and other financial buyers to use
leverage to acquire operating businesses. Such debt is often in the form of both senior secured
debt and subordinated debt, which may be available from a variety of sources. Banks and other
financial institutions may provide senior or senior secured debt based on the target companys cash
flow. Mezzanine debt funds or similar investment vehicles may provide additional funding on a
basis that is subordinate to the senior or secured lenders. Such instruments typically carry
higher interest rates and are often accompanied by equity coverage such as warrants. We cannot
assure you that such financing would be available on acceptable terms or at all. The proposed
funding for any such business combination would be disclosed in the proxy statement relating to the
required stockholder approval for the business combination.
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 depend entirely
upon the future performance of a single business. Unlike other entities that may have the
resources to complete several business combinations of entities operating in multiple industries or
multiple areas of a single industry, it is probable that we will not have the resources to
diversify our operations or benefit from the possible spreading of risks or offsetting of losses.
By consummating a business combination with only a single entity, our lack of diversification may:
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subject us to numerous economic, competitive, and regulatory risks, 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 or services.
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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 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 team 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 with us in
senior management or advisory positions 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 arrangements in connection with the business
combination. Such negotiations would take place simultaneously with the negotiation of the
business combination and could provide for them to receive compensation in the form of cash
payments and/or our securities for services they would render to the company after the consummation
of the business combination. While the personal and financial interests of our key personnel may
influence their motivation in identifying and selecting a target business, their ability to remain
with the company after the consummation of a business combination will not be the determining
factor in our decision as to whether or not we will proceed with any potential business
combination. Additionally, we cannot assure you that our officers and directors will have
significant experience or knowledge relating to the operations of the particular target business.
Following a business combination, we may seek to recruit additional managers to supplement the
incumbent management of the target business. We cannot assure you that we will have the ability to
recruit additional managers, or that any such additional managers we do recruit will have the
requisite skills, knowledge, or experience necessary to enhance the incumbent management.
Opportunity for stockholder approval of business combination
Prior to the completion of our initial business combination, we will submit the transaction to
our stockholders for approval, even if the nature of the acquisition is such as would not
ordinarily require stockholder approval under applicable state law. In connection with any such
transaction, we will also submit to our stockholders for approval a proposal to amend our amended
and restated certificate of incorporation to provide for our corporate life to continue perpetually
following the consummation of such business combination. Any vote to extend our corporate life to
continue perpetually following the consummation of a business combination will be taken only if the
business combination is approved. We will only consummate a business combination if stockholders
vote both in favor of such business combination and the amendment to extend our corporate life.
In connection with seeking stockholder approval of a business combination, we will furnish our
stockholders with proxy solicitation materials prepared in accordance with the Exchange Act, which,
among other matters, will include a description of the operations of the target business and
audited historical financial statements of the business.
In connection with the vote required for any business combination, all of our founders,
including all of our officers and directors, have agreed to vote their respective initial shares in
accordance with the majority of the shares of common stock voted by the public stockholders. This
voting arrangement will not apply to shares included in units purchased in our initial public
offering or purchased following our initial public offering in the open market by
any of our founders. Accordingly, they may vote those shares on a proposed business
combination in any way they choose. We will proceed with the business combination only if a
majority of the shares of common stock voted by the public stockholders is voted in favor of the
business combination and public stockholders owning less than 30% of the shares sold in our initial
public offering both exercise their conversion rights and vote against the business combination.
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Conversion rights
At the time we seek stockholder approval of any business combination, we will offer each
public stockholder the right to have such stockholders shares of common stock converted to cash if
the stockholder votes against the business combination and the business combination is approved and
completed. Our founders will not have such conversion rights with respect to any shares of common
stock owned by them, directly or indirectly, whether included in or underlying their initial shares
or purchased by them in our initial public offering or in the aftermarket. The actual per-share
conversion price will be equal to the amount then on deposit in the trust account, before payment
of deferred underwriting discounts and commissions and including any accrued interest, net of any
income taxes on such interest, which shall be paid from the trust account, and net of interest
income of up to $3.5 million previously released to us to fund our working capital requirements
(calculated as of two business days prior to the consummation of the proposed business
combination), divided by the number of shares sold our initial public offering. Without taking
into account any interest earned on the trust account, the initial per-share conversion price would
be $10.00.
An eligible stockholder may request conversion at any time after the mailing to our
stockholders of the proxy statement, which will occur at least 10 days prior to the stockholders
meeting, and prior to the vote taken with respect to a proposed business combination at a meeting
held for that purpose, but the request will not be granted unless the stockholder votes against the
business combination and the business combination is approved and completed. Additionally, we may
require public stockholders, whether they are a record holder or hold their shares in street
name, to either tender their certificates to our transfer agent at any time through the vote on
the business combination or to deliver their shares to the transfer agent electronically using the
Depository Trust Companys DWAC (Deposit/Withdrawal At Custodian) System, at the holders option.
The proxy solicitation materials that we will furnish to stockholders in connection with the vote
for any proposed business combination will indicate whether we are requiring stockholders to
satisfy such certification and delivery requirements. Accordingly, a stockholder would have from
the time we send out our proxy statement through the vote on the business combination to tender his
shares if he wishes to seek to exercise his conversion rights. This time period varies depending
on the specific facts of each transaction. As the delivery process can be accomplished by the
stockholder, whether or not he is a record holder or his shares are held in street name, in a
matter of hours by simply contacting the transfer agent or his broker and requesting delivery of
his shares through the DWAC System, we believe this time period is sufficient for an average
investor. However, because we do not have any control over this process, it may take significantly
longer than we anticipate. Traditionally, in order to perfect conversion rights in connection with
a blank check companys business combination, a holder could simply vote against a proposed
business combination and check a box on the proxy card indicating such holder was seeking to
convert. After the business combination was approved, the company would contact such stockholder
to arrange for him to deliver his certificate to verify ownership. As a result, the stockholder
then had an option window after the consummation of the business combination during which he
could monitor the price of the stock in the market. If the price rose above the conversion price,
he could sell his shares in the open market before actually delivering his shares to the company
for cancellation. Conversely, if the market price fell below the conversion price, he could
deliver his shares to the company and receive the conversion price. The requirement for physical
or electronic delivery prior to the meeting ensures that a converting holders election to convert
is irrevocable once the business combination is approved. There is a nominal cost associated with
the above-referenced tendering process and the act of certificating the shares or delivering them
through the DWAC system. The transfer agent will typically charge the tendering broker $25 and it
would be up to the broker whether or not to pass this cost on to the converting holder. However,
this fee would be incurred regardless of whether or not we require holders seeking to exercise
conversion rights to tender their shares prior to the meeting because the need to deliver shares is
a requirement of conversion regardless of the timing of when such delivery must be effectuated.
Accordingly, this would not result in any increased cost to stockholders when compared to the
traditional process unless the stockholders elect conversion but the transaction is not approved,
which may result in a stockholder incurring a $25 fee.
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Any request for conversion, once made, may be withdrawn at any time up to the vote taken with
respect to the proposed business combination. Furthermore, if a stockholder delivered his
certificate for conversion and subsequently decided prior to the meeting not to elect conversion,
he may simply request that the transfer agent return the certificate (physically or
electronically). It is anticipated that the funds to be distributed to stockholders entitled to
convert their shares who elect conversion will be distributed promptly after completion of a
business combination. Public stockholders who convert their stock into their share of the trust
account still have the right to exercise any warrants they hold.
If a vote on our initial business combination is held and the business combination is not
approved, we may continue to try to consummate a business combination with a different target until
January 23, 2010. If the initial business combination is not approved or completed for any reason,
then public stockholders voting against our initial business combination who exercised their
conversion rights would not be entitled to convert their shares of common stock into a pro rata
share of the aggregate amount then on deposit in the trust account. In such case, if we have
required public stockholders to tender their certificates prior to the meeting, we will promptly
return such certificates to the tendering public stockholders. Public stockholders would be
entitled to receive their pro rata share of the aggregate amount on deposit in the trust account
only in the event that the initial business combination they voted against was duly approved and
subsequently completed, or in connection with our liquidation.
We will not complete any business combination if public stockholders owning 30% or more of the
shares sold in our initial public offering both exercise their conversion rights and vote against
the business combination. Accordingly, it is our understanding and intention in every case to
structure and consummate a business combination in which public stockholders owning up to one share
less than 30% of the shares sold in our initial public offering may exercise their conversion
rights and the business combination will still go forward. We have set the conversion percentage
at 30% in order to reduce the likelihood that a small group of investors holding a block of our
stock will be able to stop us from completing a business combination that is otherwise approved by
a large majority of our public stockholders.
Investors in our initial public offering who do not sell the warrants included in the units,
or persons who purchase common stock in the aftermarket at a price in excess of $10.00 per share,
may have a disincentive to exercise their conversion rights because the amount they would receive
upon conversion could be less than their original or adjusted purchase price.
Liquidation if no business combination
Our amended and restated certificate of incorporation provides that we will continue in
existence only until January 23, 2010. This provision may not be amended except by the affirmative
vote of a majority of our common stock in connection with the consummation of a business
combination or, in all other cases, by at least 95% of the common stock issued in our initial
public offering. If we have not completed a business combination by such date, our corporate
existence will cease except for the purposes of winding up our affairs and liquidating, pursuant to
Section 278 of the Delaware General Corporation Law. This has the same effect as if our board of
directors and stockholders had formally voted to approve our dissolution pursuant to Section 275 of
the Delaware General Corporation Law. Accordingly, limiting our corporate existence to a specified
date as permitted by Section 102(b)(5) of the Delaware General Corporation Law removes the
necessity to comply with the formal procedures set forth in Section 275 (which would require our
board of directors and stockholders to formally vote to approve our dissolution and liquidation and
to file a certificate of dissolution with the Delaware Secretary of State). We view this provision
terminating our corporate life by January 23, 2010 as an obligation to our stockholders and will
not take any action to amend or waive this provision to allow us to survive for a longer period of
time except in connection with the consummation of a business combination. In addition, we will
not support, directly or indirectly, or in any way endorse or recommend, that stockholders approve
an amendment or modification to this provision and are contractually obligated not to amend or
waive this provision pursuant to the underwriting agreement that we entered into with the
underwriters of our initial public offering.
If we are unable to complete a business combination by January 23, 2010, we will distribute to
all of our public stockholders, in proportion to their respective equity interests, an aggregate
sum equal to the amount in the trust account, inclusive of any interest, plus any remaining net
assets (subject to our obligations under Delaware law to provide for claims of creditors as
described below). We anticipate notifying the trustee of the trust account to begin liquidating
such assets promptly after such date and anticipate it will take no more than 10 business days to
effectuate such distribution. Our founders have waived their rights to participate in any
liquidating distribution with respect to their initial shares. There will be no distribution from
the trust account with respect to our warrants, which will expire worthless. We will pay the costs
of liquidation from our remaining assets outside of the trust account. If such funds are
insufficient, James N. Hauslein and Gaurav V. Burman have agreed to advance us the funds necessary
to complete such liquidation (currently anticipated to be no more than approximately $15,000) and
have agreed not to seek repayment of such expenses.
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If we were to expend all of the net proceeds of our initial public offering, other than the
proceeds deposited in the trust account, and without taking into account interest, if any, earned
on the trust account, the initial per-share liquidation price would be $10.00. The proceeds
deposited in the trust account could, however, become subject to the claims of our creditors, which
could include vendors and service providers we have engaged to assist us in any way in connection
with our search for a target business and that are owed money by us, as well as target businesses
themselves, which claims could have higher priority than the claims of our public stockholders.
Messrs. Hauslein and Burman have personally agreed, pursuant to agreements with us, Lazard Capital
Markets, and Morgan Stanley that, if we liquidate prior to the consummation of a business
combination, they will be personally 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 in excess of the net proceeds of our initial public offering not held in the
trust account, but only if, and to the extent, the claims reduce the amount in the trust account.
We believe that our board of directors may be obligated to pursue a potential claim for
reimbursement from Messrs. Hauslein and Burman pursuant to the terms of their agreements with us if
it would be in the best interests of our stockholders to pursue such a claim. Such a decision
would be made by a majority of our disinterested directors based on the facts and circumstances at
the time. We cannot assure you, however, that Messrs. Hauslein and Burman would be able to satisfy
those obligations. Furthermore, Messrs. Hauslein and Burman will not have any personal liability
(1) as to any claimed amounts owed to a third party who executed a waiver (including a prospective
target business), even if such waiver is subsequently found to be invalid or unenforceable, and (2)
as to any claims under our indemnity of the underwriters of our initial public offering against
certain liabilities, including liabilities under the Securities Act. Accordingly, the actual
per-share liquidation price could be less than $10.00, plus interest, due to claims of creditors.
Furthermore, 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. To the extent any bankruptcy
claims deplete the trust account, we cannot assure you we will be able to return to our public
stockholders at least $10.00 per share.
Our public stockholders will be entitled to receive funds from the trust account only in the
event of the expiration of our corporate existence and our liquidation or if they seek to convert
their respective shares into cash upon a business combination that the stockholder voted against
and that is completed by us. In no other circumstances will a stockholder have any right or
interest of any kind in or to the trust account.
Under the Delaware General Corporation Law, stockholders may be held liable for claims by
third parties against a corporation to the extent of distributions received by them in a
dissolution. If the corporation complies with certain procedures set forth in Section 280 of the
Delaware General Corporation Law intended to ensure that it makes reasonable provision for all
claims against it, including a 60-day notice period during which any third-party claims can be
brought against the corporation, a 90-day period during which the corporation may reject any claims
brought, and an additional 150-day waiting period before any liquidating distributions are made to
stockholders, any liability of stockholders with respect to a liquidating distribution is limited
to the lesser of such 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. However, as stated above, it is our intention to make liquidating distributions
to our stockholders as soon as reasonably possible after January 23, 2010 and, therefore, we do not
intend to comply with those procedures. As such, our stockholders could potentially be liable for
any claims to the extent of distributions received by them (but no more) and any liability of our
stockholders may extend well beyond the third anniversary of such date. Because we will not be
complying with Section 280, Section 281(b) of the Delaware General Corporation Law requires us to
adopt a plan that will provide for our payment, based on facts known to us at such time, of (i) all
existing claims, (ii) all pending claims, and (iii) all claims that may potentially be brought
against us within the subsequent 10 years. Accordingly, we would be required to provide for any
claims of creditors known to us at that time or those that we believe could potentially be brought
against us within the subsequent 10 years prior to our distributing the funds in the trust account
to our
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public
stockholders. However, because we are a blank check company, rather than an operating company, and our operations
will be limited to searching for prospective target businesses to acquire, the only likely claims
to arise would be from our vendors and service providers (such as accountants, lawyers, and
investment bankers) and potential target businesses. As described above, pursuant to the
obligation contained in our underwriting agreement, we seek to have all vendors, service providers,
and prospective target businesses execute agreements with us waiving any right, title, interest, or
claim of any kind they may have in or to any monies held in the trust account. As a result, the
claims that could be made against us will be limited, thereby lessening the likelihood that any
claim would result in any liability extending to the trust. We therefore believe that any
necessary provision for creditors will be reduced and should not have a significant impact on our
ability to distribute the funds in the trust account to our public stockholders. Nevertheless, we
cannot assure you of this fact, as there is no guarantee that vendors, service providers, and
prospective target businesses will execute such agreements. Nor is there any guarantee that, even
if they execute such agreements with us, they will not seek recourse against the trust account. A
court could also conclude that such agreements are not legally enforceable. As a result, if we
liquidate, the per-share distribution from the trust account could be less than $10.00 due to
claims or potential claims of creditors.
If we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against
us that is not dismissed, any distributions received by our stockholders could be viewed under
applicable debtor/creditor 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 January 23, 2010, 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 or as having acted in bad faith, and thereby expose itself and
our company to claims of punitive damages, by paying public stockholders from the trust account
prior to addressing the claims of creditors. We cannot assure you that claims will not be brought
against us for these reasons.
Conflicts of Interest
Stockholders and potential investors should be aware of the following potential conflicts of
interest:
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None of our officers and directors is required to commit their full time to our
affairs and, accordingly, they may have conflicts of interest in allocating their time
among various business activities.
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In the course of their other business activities, our officers and directors may
become aware of investment and business opportunities that may be appropriate for
presentation to our company as well as the other entities with which they are
affiliated. Our officers and directors may have conflicts of interest in determining
to which entity a particular business opportunity should be presented. Accordingly, we
do not expect our independent directors to present investment and business
opportunities to us.
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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.
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The initial shares owned by our officers and directors will be released from escrow
only if a business combination is successfully completed, and the insider warrants
purchased by our officers and directors and any warrants that they may have purchased
in our initial public offering or in the aftermarket will expire worthless if a
business combination is not consummated. Additionally, our officers and directors will
not receive liquidating distributions with respect to any of their initial shares.
Furthermore, the purchasers of the insider warrants have agreed that such warrants will
not be sold or transferred by them until after we have completed a business
combination. For the foregoing reasons, our board may have a conflict of interest in
determining whether a particular target business is appropriate to effect a business
combination with.
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Our directors and officers may have purchased shares of common stock as part of our
initial public offering or in the open market. If they did, they would be entitled to
vote such shares as they choose on a proposal to approve a business combination.
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Our special advisors owe no fiduciary obligations to us. Therefore, they have no
obligation to present business opportunities to us at all and will only do so if they
believe it will not violate their fiduciary obligations to others.
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In general, officers and directors of a corporation incorporated under the laws of the state
of Delaware are required to present business opportunities to a corporation if:
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the corporation could financially undertake the opportunity;
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the opportunity is within the corporations line of business;
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the corporation has an interest or expectancy in the opportunity; and
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by taking the opportunity, the fiduciary will be placed in a position that conflicts
with his duties to the corporation.
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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 and we do not expect our independent directors to
present investment and business opportunities to us. In addition, conflicts of interest may arise
when our board evaluates a particular business opportunity with respect to the above-listed
criteria. We cannot assure you that any of the above-mentioned conflicts will be resolved in our
favor.
In order to minimize potential conflicts of interest that may arise from multiple corporate
affiliations, each of our officers has agreed, until the earliest of a business combination, our
liquidation, or such time as he ceases to be an officer, to present to our company for our
consideration, prior to presentation to any other entity, any business opportunities to acquire an
operating business he reasonably believes are suitable opportunities for our company, subject to
any pre-existing fiduciary or contractual obligations he might have. We have not established any
procedures to ensure that our officers observe these requirements.
James N. Hauslein is an independent director of Liberty Acquisition Holdings Corp. (NYSE
Alternext: LIA), a general purpose blank check company that raised approximately $1 billion in its
December 2007 initial public offering. Liberty Acquisition Holdings Corp. has specifically stated
that it does not expect its independent directors to present investment and business opportunities
to it. Mr. Hauslein is also an independent director of GLG Partners, Inc. (NYSE: GLG), the largest
alternative asset manager in Europe, which completed a business combination with Freedom
Acquisition Holdings, Inc., a $528 million general purpose blank check company. Although we do not
have an industry focus, we may compete with GLG Partners, Inc. for acquisition opportunities in the
alternative asset management sector. We do not believe that this potential conflict of interest
with GLG Partners, Inc. will cause undue difficulty in finding acquisition opportunities for us
given the specialized nature of GLG Partners, Inc.s business.
In addition, James N. Hauslein has a pre-existing fiduciary obligation to Elephant Capital, as he is a director of such entity. Additionally, Gaurav V. Burman has a pre-existing
fiduciary obligation to Elephant Capital, as he is a partner of such entity. Accordingly,
due to these affiliations, each may have a fiduciary obligation to present potential business
opportunities to such entities in addition to presenting them to us, which could cause additional
conflicts of interest. Messrs. Hauslein and Burman, as well as certain of our other directors and
officers, also serve on the board of directors of several small, privately held business that we do
not believe will create conflicts of interest with respect to finding acquisition opportunities for
us.
To further minimize potential conflicts of interest, we have agreed not to consummate a
business combination with an entity that is affiliated with any of our existing stockholders,
including an entity that is either a portfolio company of, or has otherwise received a financial
investment from, Promethean, Elephant Capital, or another private equity or investment banking firm (or an affiliate
thereof) that is affiliated with our management, unless we obtain an opinion from an independent
investment banking firm that the business combination is fair to our unaffiliated stockholders from
a financial point of view. We currently do not anticipate entering into a business combination
with an entity affiliated with any of our existing stockholders. We will also not acquire an
entity with which our management or Promethean or Elephant Capital, through their other business activities, had
acquisition or investment discussions prior to the consummation of our initial public offering.
Furthermore, in no event will any of our existing officers, directors, stockholders, or special
advisors, or any entity with which they are affiliated (including Promethean and Elephant Capital), be
paid, from us or a target business, 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).
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Elephant
Capital and Promethean have agreed that they will provide us a right of first refusal with respect to any
potential investment opportunity except (i) any investment in an entity incorporated or formed in
the United Kingdom which does not exceed $100 million of equity by Promethean or (ii) any
investment in an entity incorporated or formed in India which does not exceed $50 million of equity
by Elephant Capital. However, we may have an interest in a transaction below these thresholds,
and neither Elephant Capital nor Promethean would be obligated to present us with that transaction. This right of first
refusal will continue until we have made an initial investment that has been approved by our
stockholders or until our liquidation, whichever is earlier.
Elephant Capital and Promethean have agreed to make investment professionals located in their offices in London, New
Delhi, and Mumbai available, at no cost to us, to actively source, evaluate, and assist us in the
due diligence of a target company. None of the investment professionals that are being made
available to us by Promethean or Elephant Capital owe any fiduciary duty to us, and none of them is required to commit
any specified amount of time to our affairs. These individuals will only help identify target
companies and assist with the due diligence of the target company. We will not engage in a
business combination with a company with which any such individual has had any discussions, formal
or otherwise, with respect to such a transaction prior to the consummation of our initial public
offering. In no event will Promethean or Elephant Capital be paid, from us or a target business, any finders fee,
consulting fee, or other compensation prior to, or for any services they render in order to
effectuate, the consummation of our initial business combination (regardless of the type of
transaction).
As indicated above, we do not expect our independent directors to present us with any
investment or business opportunities, as those directors may have pre-existing fiduciary
obligations to other entities. Our independent directors are Rohit M. Desai, Robert A. Knox, and
Raj Mishra.
Mr. Desai is the Chairman, President, and Chief Executive Officer of Desai Capital Management
Incorporated (DCMI), a New York-based private equity investment firm. We have been advised that
DCMI is no longer participating in new investment opportunities, but we have no assurance that this
situation will not change in the future or that Mr. Desai will not become involved with other
private equity investments. Mr. Desai also serves on the board of directors of Finlay Enterprises,
Inc., a retailer of fine jewelry, and on the advisory board of Burgundy Asset Management Ltd., a
Canadian investment advisory firm providing discretionary investment management to private
individuals, charitable foundations, and select institutional investors. Mr. Desai does not owe
any fiduciary duties to Burgundy Asset Management and is under no obligation to present any
investment or acquisition opportunities to Burgundy Asset Management.
Mr. Knox is a senior managing director of Cornerstone Equity Investors, a New York-based
private equity firm that he co-founded. Cornerstone Equity focuses on middle market leveraged
buyouts of corporate divisions, closely held private companies, and small capitalization public
companies in the business services, healthcare, and specialty manufacturing industries. While
Cornerstone Equitys announced transaction range is $50 $350 million in enterprise value, its
average transaction size is approximately $100 million. As a result, we do not believe that
Cornerstone Equity generally invests in transactions on a scale that will be permitted by our
initial public offering. However, there can be no assurance that Cornerstone will not pursue such
a transaction in the future. Mr. Knox also serves on the board of directors of Health Management
Associates (NYSE:HMA), a $1.6 billion market capitalization company that operates general acute
care hospitals in the southeastern and southwestern United States.
Mr. Mishra is the founder and Chief Investment Officer of Indea Capital, a $750 million
India-dedicated investment management firm. We have been informed that Indea Capital does not
intend to acquire majority or greater equity positions in a company and has only made minority
investments to date. While Indea Capitals investment strategy does not appear to conflict with
the business combination goals of our company, there can be no assurance that Indea Capital will
not change its investment strategy in the future.
In connection with the vote required for any business combination, all of our founders,
including all of our officers, directors, and special advisors, have agreed to vote their
respective initial shares in accordance with the vote of the majority of the public stockholders
voting with respect to the business combination. In addition, they have agreed to waive their
respective rights to participate in any liquidating distribution with respect to those shares
of common stock acquired by them prior to our initial public offering. Any common stock
acquired by our founders in our initial public offering or in the aftermarket will be considered
part of the holdings of the public stockholders. Except with respect to the conversion rights
afforded to public stockholders, these existing stockholders will have the same rights as other
public stockholders with respect to such shares, including voting rights in connection with a
potential business combination. Accordingly, they may vote such shares on a proposed business
combination in any way they choose.
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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. There are numerous
blank check companies that have completed initial public offerings in the United States since
August 2003 that are seeking to carry out a business plan similar to our business plan.
Furthermore, there are a number of additional offerings for blank check companies that are still in
the registration process but have not completed initial public offerings and there are likely to be
more blank check companies completing initial public offerings prior to our completion of a
business combination. Additionally, we may be subject to competition from entities other than
blank check companies having a business objective similar to ours, including venture capital firms,
leveraged buyout firms, and operating businesses looking to expand their operations through the
acquisition of a target business. 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 we possess and our
financial resources will be relatively limited when compared 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 our initial public offering, our ability to compete in acquiring
certain sizable target businesses will be limited by our available financial resources. This
inherent competitive limitation gives others an advantage in pursuing the acquisition of a target
business. Further, the following may not be viewed favorably by certain target businesses:
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our obligation to seek stockholder approval of a business combination may delay the
completion of a transaction;
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our obligation to convert into cash shares of common stock held by our public
stockholders that both vote against the business combination and exercise their conversion
rights may reduce the resources available to us for a business combination;
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the requirement to acquire assets or an operating business that has a fair market value
equal to at least 80% of the sum of the balance in the trust account (excluding deferred
underwriting discounts and commissions) could require us to acquire several assets or
closely related operating businesses at the same time, all of which sales would be
contingent on the closings of the other sales, which could make it more difficult to
consummate the business combination; and
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our outstanding warrants, and the potential future dilution they represent.
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Any of these factors may place us at a competitive disadvantage in successfully negotiating a
business combination. We believe, however, that our status as a public entity and potential access
to the 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 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.
Employees
We currently have only two 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. Accordingly, once we locate a suitable target business to acquire,
our management will spend more time investigating such target business and negotiating and
processing the business combination (and consequently devote more time to our affairs) than they
would prior to locating a suitable target business. We do not intend to have any full time
employees prior to the consummation of a business combination.
18
Available Information
We file with or submit to the SEC annual, quarterly and current periodic reports, proxy
statements and other information meeting the informational requirements of the Exchange Act. While
we do not have a website with available filings, we will provide, at no additional charge, copies
of these reports, proxy, and information statements and other information upon request to our
address at c/o Hauslein & Company, 11450 SE Dixie Highway, Suite 106, Hobe Sound, Florida 33455,
Attention: James N. Hauslein, or by telephone to (772) 545-9042. You may also inspect and copy
these reports, proxy statements and other information, and related exhibits and schedules, at the
Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In
addition, the SEC maintains an Internet site that contains reports, proxy and information
statements and other information filed electronically by us with the SEC which are available on the
SECs Internet site at http://www.sec.gov.
Item 1A. Risk Factors.
An investment in our securities involves a high degree of risk. You should consider carefully
all of the material risks described below, together with the other information contained in this
report, before making a decision to invest in our securities. If any of the following events
occur, our business, financial condition, and operating results may be materially adversely
affected. In that event, the trading price of our securities could decline, and you could lose all
or part of your investment.
We are a development stage company with no operating history or revenues and, accordingly, you have
no basis on which to evaluate our ability to achieve our business objective.
We are a development stage company with no operating results to date. Because we lack an
operating history, you have no basis on which to evaluate our ability to achieve our business
objective of completing a business combination with one or more target businesses as described in
this report. We are currently in the process of evaluating and identifying prospective target
businesses concerning a business combination but may be unable to complete a business combination.
We will not generate any revenues until, at the earliest, after the consummation of a business
combination.
If we are forced to liquidate before a business combination and distribute the trust account, our
public stockholders may receive less than $10.00 per share and our warrants will expire worthless.
If we are unable to complete a business combination within the prescribed time frames and are
forced to liquidate our assets, the per share liquidating distribution may be less than $10.00
because of the expenses of our initial public offering, our general and administrative expenses,
and the anticipated costs of seeking a business combination. If we were unable to conclude an
initial business combination and expended all of the net proceeds of our initial public offering,
other than the proceeds deposited in the trust account, and without taking into account interest,
if any, earned on the trust account, net of income taxes and other tax obligations payable on such
interest and net of up to $3.5 million in interest income on the trust account balance previously
released to us to fund working capital requirements, the initial per share liquidation price would
be $10.00. Furthermore, there will be no distribution with respect to our outstanding warrants,
which will expire worthless if we liquidate before the completion of a business combination.
If we are unable to consummate a business combination, our public stockholders will be forced to
wait until January 23, 2010 or later before receiving liquidating distributions.
We have until January 23, 2010 to complete a business combination. We have no obligation to
return funds to public stockholders prior to such date unless we consummate a business combination
prior thereto and only then in cases where public stockholders have sought conversion of their
shares. Only after the expiration of this full time period will public stockholders be entitled to
liquidating distributions if we are unable to complete a business combination. Accordingly, public
stockholders funds may be unavailable to them until such date.
19
If we do not consummate a business combination prior to January 23, 2010 and dissolve, payments
from the trust account to our public stockholders may be delayed.
We currently believe that any dissolution and plan of distribution in connection with the
expiration of the January 23, 2010 deadline would proceed in approximately the following manner:
Prior to such deadline, our board of directors will, consistent with its obligations
described in our amended and restated certificate of incorporation and Delaware law, consider a
resolution for us to dissolve and consider a plan of distribution which it may then vote to
recommend to our stockholders; at such time it will also cause to be prepared a preliminary proxy
statement setting out such plan of distribution as well as the boards recommendation of such plan;
Upon such deadline, we would file our preliminary proxy statement with the SEC;
If the SEC does not review the preliminary proxy statement, then, 10 days following
the passing of such deadline, we will mail the proxy statements to our stockholders, and 30 days
following the passing of such deadline we will convene a meeting of our stockholders, at which they
will either approve or reject our dissolution and plan of distribution; and
If the SEC does review the preliminary proxy statement, we currently estimate that we
will receive their comments 30 days following the passing of such deadline. We will mail the proxy
statements to our stockholders following the conclusion of the comment and review process (the
length of which we cannot predict with any certainty, and which may be substantial) and we will
convene a meeting of our stockholders at which they will either approve or reject our dissolution
and plan of dissolution; and
If the SEC does review the preliminary proxy statement, we currently estimate that we
will receive their comments 30 days following the passing of such deadline. We will mail the proxy
statements to our stockholders following the conclusion of the comment and review process (the
length of which we cannot predict with any certainty, and which may be substantial) and we will
convene a meeting of our stockholders at which they will either approve or reject our dissolution
and plan of distribution
In the event we seek stockholder approval for our dissolution and plan of distribution and do
not obtain such approval, we will nonetheless continue to pursue stockholder approval for our
dissolution. Pursuant to the terms of our amended and restated certificate of incorporation, it is
intended that our powers following the expiration of the permitted time periods for consummating a
business combination will automatically thereafter be limited to acts and activities relating to
dissolving and winding up our affairs, including liquidation. Pursuant to the trust agreement
governing the funds in our trust account, the funds held in our trust account may not be
distributed except upon our dissolution and, unless and until such approval is obtained from our
stockholders, the funds held in the trust account will not be released (other than in connection
with the funding of working capital, a redemption, or a business combination as described elsewhere
in this report). Consequently, holders of a majority of our outstanding stock must approve our
dissolution in order to receive the funds held in our trust account and the funds will not be
available for any other corporate purpose.
We may proceed with a business combination even if public stockholders owning up to one share less
than 30% of the shares sold in our initial public offering exercise their conversion rights.
We may proceed with a business combination as long as public stockholders owning less than 30%
of the shares sold in our initial public offering exercise their conversion rights. Accordingly,
the public stockholders owning up to one share less than 30% of the shares sold in our initial
public offering may exercise their conversion rights and we could still consummate a proposed
business combination. We have set the conversion percentage at 30% in order to reduce the
likelihood that a small group of investors holding a block of our stock will be able to stop us
from completing a business combination that is otherwise approved by a large majority of our public
stockholders. While there are several other offerings similar to ours that include conversion
provisions greater than 20%, a 20% threshold is customary and standard for offerings similar to
ours. Thus, because we permit a larger number of stockholders to exercise their conversion rights,
it will be easier for us to gain approval for an initial
business combination with a target business that you may believe is not suitable for us, and
you may not receive the full amount of your original investment upon exercise of your conversion
rights.
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Our business combination may require us to use substantially all of our cash to pay the
purchase price. In such a case, because we will not know how many stockholders may exercise their
conversion rights, we may need to arrange third-party financing to help fund our business
combination in case a larger percentage of stockholders exercise their conversion rights than we
expect. Additionally, even if our business combination does not require us to use substantially
all of our cash to pay the purchase price, if a significant number of stockholders exercise their
conversion rights, we will have less cash available to use in furthering our business plans
following a business combination and may need to arrange third-party financing. We have not taken
any steps to secure third-party financing for either situation. We cannot assure you that we will
be able to obtain such third-party financing on terms favorable to us or at all.
You will not have any rights or interest in funds from the trust account, except under certain
limited circumstances.
Our public stockholders will be entitled to receive funds from the trust account only in the
event of our liquidation or if they seek to convert their respective shares of common stock into
cash upon a business combination which the stockholder voted against and which is completed by us.
In no other circumstances will a stockholder have any right or interest of any kind in the trust
account.
You will not be entitled to protections normally afforded to investors of blank check companies.
Since the net proceeds of our initial public 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 U.S. securities laws. However, since our securities are listed on
the NYSE Alternext U.S. (formerly the American Stock Exchange), a national securities exchange, and
we have net tangible assets in excess of $5,000,000, and since we filed 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 such as
completely restricting the transferability of our securities, requiring us to complete a business
combination within 18 months of the effective date of the initial registration statement, and
restricting the use of interest earned on the funds held in the trust account. Because we are not
subject to Rule 419, we will be entitled to withdraw a certain amount of interest earned on the
funds held in the trust account prior to the completion of a business combination, and we have a
longer period of time to complete such a business combination than we would if we were subject to
such rule.
Because there are numerous companies with a business plan similar to ours seeking to effectuate a
business combination, it may be more difficult for us to do so.
There are numerous blank check companies that are seeking to carry out a business plan similar
to our business plan. Furthermore, there are offerings for blank check companies that are still in
the registration process but have not completed initial public offerings, and there are likely to
be more blank check companies filing registration statements for initial public offerings prior to
our completion of a business combination. While some of those companies must complete a business
combination in specific industries, a number of them may consummate a business combination in any
industry they choose. Therefore, we may be subject to competition from these and other companies
seeking to execute a business plan similar to ours. Because of this competition, we cannot assure
you that we will be able to effectuate a business combination within the required time period.
If the net proceeds of our initial public offering not being held in trust are insufficient to
allow us to operate for at least until January 23, 2010, we may be unable to complete a business
combination.
We believe that the funds available to us outside of the trust account, plus the interest
earned on the funds held in the trust account that may be available to us, will be sufficient to
allow us to operate for at least until January 23, 2010, assuming that a business combination is
not consummated during that time. However, we cannot assure you that our estimates will be
accurate. We could use a portion of the funds available to us to pay commitment fees for financing
and fees to consultants to assist us with our search for a target business. We have not taken any
steps toward selecting or hiring any consultants to assist us in our search for a target business.
We could
also use a portion of the funds as a down payment or to fund a no-shop provision (a
provision in letters of intent designed to keep target businesses from shopping for transactions
with other companies on terms more favorable to such target businesses) with respect to a
particular proposed business combination, although we do not have any current intention to do so.
If we entered into a letter of intent where we paid for the right to receive exclusivity from a
target business and were subsequently required to forfeit such funds, whether as a result of our
breach or otherwise, we might not have sufficient funds to continue searching for, or conduct due
diligence with respect to, a target business.
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A decline in interest rates could limit the amount available to fund our search for a target
business or businesses and complete a business combination since we will depend on interest earned
on the trust account to fund our search, to pay our tax obligations, and to complete our initial
business combination.
Of the net proceeds of our initial public offering, only approximately $100,000 was made
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. While we are entitled to have released to us for such purposes certain interest earned on the
funds in the trust account, a substantial decline in interest rates may result in our having
insufficient funds available with which to structure, negotiate, or close an initial business
combination. In such event, we would need to borrow funds from our founders to operate or we may
be forced to liquidate. Our founders are under no obligation to advance funds in such
circumstances.
If third parties bring claims against us, the proceeds held in trust could be reduced and the
per-share liquidation price received by stockholders will be less than $10.00 per share.
Our placing of funds in trust may not protect those funds from third-party claims against us.
Although we seek to have all vendors and service providers we engage, and prospective target
businesses we negotiate with, execute agreements with us waiving any right, title, interest, or
claim of any kind in or to any monies held in the trust account for the benefit of our public
stockholders, there is no guarantee that they will execute such agreements. Furthermore, there is
no guarantee that, even if such entities execute such agreements with us, they will not seek
recourse against the trust account. Nor is there any guarantee that a court would uphold the
validity of such agreements. Accordingly, the proceeds held in trust could be subject to claims
that could take priority over those of our public stockholders. If we liquidate before the
completion of a business combination and distribute the proceeds held in trust to our public
stockholders, James N. Hauslein and Gaurav V. Burman have agreed that they will be personally
liable to ensure that the proceeds in the trust account are not reduced by the claims of target
businesses or vendors or other entities that are owed money by us for services rendered or
contracted for or products sold to us. We believe that our board of directors may be obligated to
pursue a potential claim for reimbursement from Messrs. Hauslein and Burman pursuant to the terms
of their agreements with us if it would be in the best interests of our stockholders to pursue such
a claim. Such a decision would be made by a majority of our disinterested directors based on the
facts and circumstances at the time. Based on representations made to us by Messrs. Hauslein and
Burman, we currently believe that they are capable of funding a shortfall in our trust account to
satisfy their foreseeable indemnification obligations. However, we have not asked them to reserve
for such an eventuality. Furthermore, our belief is based on our expectation that their
indemnification obligations will be minimal. Accordingly, if that expectation turns out to be
incorrect, we cannot assure you that such individuals will be able to satisfy those obligations or
that the proceeds in the trust account will not be reduced by such claims. Furthermore, Messrs.
Hauslein and Burman will not have any personal liability (1) as to any claimed amounts owed to a
third party who executed a waiver (including a prospective target business), even if such waiver is
subsequently found to be invalid or unenforceable, and (2) as to any claims under our indemnity of
the underwriters of our initial public offering against certain liabilities, including liabilities
under the Securities Act.
Additionally, 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. To the extent any bankruptcy
claims deplete the trust account, we cannot assure you we will be able to return to our public
stockholders at least $10.00 per share.
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Our stockholders may be held liable for claims by third parties against us to the extent of
distributions received by them.
Our amended and restated certificate of incorporation provides that we will continue in
existence only until January 23, 2010. If we have not completed a business combination by such
date and amended that provision in connection therewith, pursuant to the Delaware General
Corporation Law, our corporate existence will cease except for the purposes of winding up our
affairs and liquidating. Under Sections 280 through 282 of the Delaware General Corporation Law,
stockholders may be held liable for claims by third parties against a corporation to the extent of
distributions received by them in a dissolution. 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. However, it is our intention to make liquidating
distributions to our stockholders as soon as reasonably possible after January 23, 2010 and,
therefore, we do not intend to comply with those procedures. Because we will not be complying with
those procedures, we are required, pursuant to Section 281 of the Delaware General Corporation Law,
to adopt a plan that will provide for our payment, based on facts known to us at such time, of (i)
all existing claims, (ii) all pending claims, and (iii) all claims that may potentially be brought
against us within the subsequent 10 years. Accordingly, we would be required to provide for any
creditors known to us at that time or those that we believe could potentially be brought against us
within the subsequent 10 years prior to distributing the funds held in the trust to stockholders.
We cannot assure you that we will properly assess all claims that may be potentially brought
against us. As such, our stockholders could potentially be liable for any claims to the extent of
distributions received by them (but no more) and any liability of our stockholders may extend well
beyond the third anniversary of the date of distribution. Accordingly, we cannot assure you that
third parties will not seek to recover from our stockholders amounts owed to those third parties by
us.
If we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against
us that 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 January 23, 2010, 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 exposed itself and our company to claims for punitive damages, by paying public
stockholders from the trust account prior to addressing the claims of creditors. We cannot assure
you that claims will not be brought against us for these reasons.
We may choose to redeem our outstanding warrants at a time that is disadvantageous to our warrant
holders.
Subject to there being a current prospectus under the Securities Act with respect to the
common stock issuable upon exercise of the warrants, we may redeem the warrants issued as a part of
the units at any time after the warrants become exercisable in whole and not in part, at a price of
$0.01 per warrant, upon a minimum of 30 days prior written notice of redemption, if and only if the
last sales price of our common stock equals or exceeds $14.25 per share for any 20 trading days
within a 30-trading-day period ending three business days before we send the notice of redemption.
In addition, we may not redeem the warrants unless the warrants issued as part of the units sold in
our initial public offering and the shares of common stock underlying those warrants are covered by
an effective registration statement from the beginning of the measurement period through the date
fixed for the redemption. Redemption of the warrants could force the warrant holders to (i)
exercise the warrants and pay the exercise price at a time when it may be disadvantageous for the
holders to do so, (ii) sell the warrants at the then current market price when they might otherwise
wish to hold the warrants, or (iii) accept the nominal redemption price which, at the time the
warrants are called for redemption, is likely to be substantially less than the market value of the
warrants.
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Certain warrant holders are unlikely to receive direct notice of redemption of our warrants.
We expect most purchasers of our warrants will hold their securities through one or more
intermediaries and consequently those holders are unlikely to receive notice directly from us that
the warrants are being redeemed. If you fail to receive notice of redemption from a third party
and your warrants are redeemed for nominal value, you will not have recourse against us.
An effective registration statement may not be in place when an investor desires to exercise
warrants, thus precluding such investor from being able to exercise his, her, or its warrants and
causing such warrants to be practically worthless.
No warrant held by public stockholders will be exercisable and we will not be obligated to
issue shares of common stock unless at the time such holder seeks to exercise such warrant, a
registration statement relating to the common stock issuable upon exercise of the warrant is
effective and current. Under the terms of the warrant agreement, we have agreed to use our
reasonable best efforts to meet these conditions and to maintain a current prospectus relating to
the common stock issuable upon exercise of the warrants until the expiration of the warrants.
However, we cannot assure you that we will be able to do so, and if we do not maintain a current
prospectus related to the common stock issuable upon exercise of the warrants, holders will be
unable to exercise their warrants and we will not be required to settle any such warrant exercise.
If the prospectus relating to the common stock issuable upon the exercise of the warrants is not
current, the warrants held by public stockholders may have no value, the market for such warrants
may be limited, and such warrants may expire worthless. Such expiration would result in each
holder paying the full unit purchase price solely for the share of common stock underlying the
unit. Notwithstanding the foregoing, the insider warrants may be exercisable for unregistered
shares of common stock even if no registration statement relating to the common stock issuable upon
exercise of the insider warrants is effective and current.
An investor will only be able to exercise a warrant if the issuance of common stock upon such
exercise has been registered or qualified or is deemed exempt under the securities laws of the
state of residence of the holder of the warrants.
No warrants will be exercisable and we will not be obligated to issue shares of common stock
unless the common stock issuable upon such exercise has been registered or qualified or deemed to
be exempt under the securities laws of the state of residence of the holder of the warrants. At
the time that the warrants become exercisable (following our completion of a business combination),
we expect to continue to be listed on a national securities exchange, which would provide an
exemption from registration in every state. Accordingly, we believe holders in every state will be
able to exercise their warrants as long as our prospectus relating to the common stock issuable
upon exercise of the warrants is current. However, we cannot assure you of this fact. As a
result, the warrants may be deprived of any value, the market for the warrants may be limited, and
the holders of warrants may not be able to exercise their warrants if the common stock issuable
upon such exercise is not qualified or exempt from qualification in the jurisdictions in which the
holders of the warrants reside.
Since we have not yet selected a particular industry, geography, or target business with which to
complete a business combination, we are unable to currently ascertain the merits or risks of the
industry or business in which we may ultimately operate.
We may consummate a business combination with a company in any industry we choose and are not
limited to any particular industry, geography, or type of business. Accordingly, there is no
current basis for you to evaluate the possible merits or risks of the particular industry in which
we may ultimately operate or the target business that we may ultimately acquire. Your only
opportunity to evaluate and affect the investment decision regarding a potential business
combination will be limited to voting for or against the business combination submitted to our
stockholders for approval. 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 endeavor to evaluate the risks
inherent in a particular industry, geography, 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 securities will not ultimately prove to be less
favorable to investors than a direct investment, if an opportunity were available, in a target
business.
24
If we do not conduct an adequate due diligence investigation of a target business with which we
combine, we may be required to subsequently take write-downs or write-offs, restructuring, and
impairment or other charges that could have a significant negative effect on our financial
condition, results of operations and our stock price.
In order to meet our disclosure and financial reporting obligations under the federal
securities laws, and in order to develop and seek to execute strategic plans for how we can
increase the revenues and/or profitability of a target business, realize operating synergies or
capitalize on market opportunities, we must conduct a due diligence investigation of one or more
target businesses. Intensive due diligence is time consuming and expensive due to the operations,
accounting, finance and legal professionals who must be involved in the due diligence process.
Even if we conduct extensive due diligence on a target business with which we combine, we cannot
assure you that this diligence will surface all material issues that may be present inside a
particular target business, or that factors outside of the target business and outside of our
control will not later arise. If our diligence fails to identify issues specific to a target
business, industry or the environment in which the target business operates, we may be forced to
later write-down or write-off assets, restructure our operations, or incur impairment or other
charges that could result in our reporting losses. Even though these charges may be non-cash items
and not have an immediate impact on our liquidity, the fact that we report charges of this nature
could contribute to negative market perceptions about us or our common stock. In addition, charges
of this nature may cause us to violate net worth or other covenants to which we may be subject as a
result of assuming pre-existing debt held by a target business or by virtue of our obtaining
post-combination debt financing.
We will not be required to obtain a fairness opinion from an independent investment banking firm as
to the fair market value of the target business unless the target business is affiliated with our
officers, directors, special advisors, or existing stockholders.
If we determine to enter into a business combination with a target business that is affiliated
with our founders, we are required to obtain an opinion from an independent investment banking
firm, that is a member of FINRA, that the business combination is fair to our unaffiliated
stockholders from a financial point of view. The fair market value of a target business or
businesses will be determined by our board of directors based upon standards generally accepted by
the financial community, such as actual and potential sales, the values of comparable businesses,
earnings and cash flow, and book value. If our board is not able to independently determine that
the target business has a sufficient fair market value to meet the threshold criterion, we will
obtain an opinion from an unaffiliated, independent investment banking firm, that is a member of
FINRA, with respect to the satisfaction of such criterion. In all other instances, we will have no
obligation to obtain or provide you with a fairness opinion.
We may issue shares of our capital stock or debt securities to complete a business combination,
which would reduce the equity interest of our stockholders and likely cause a change in control of
our ownership.
Our amended and restated certificate of incorporation authorizes the issuance of up to
300,000,000 shares of common stock, par value $.001 per share, and 100,000,000 shares of preferred
stock, par value $.001 per share. There are currently 249,200,000 authorized but unissued shares
of our common stock available for issuance (after reservation for the issuance of the 25,800,000
shares upon full exercise of our outstanding warrants) and all of the 100,000,000 shares of
preferred stock available for issuance. Although we have no commitment as of the date of this
report, we may issue a substantial number of additional shares of our common or preferred stock, or
a combination of common and preferred stock, to complete a business combination. The issuance of
additional shares of our common stock or any number of shares of our preferred stock:
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may significantly reduce the equity interest of investors;
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may subordinate the rights of holders of common stock if we issue preferred stock with
rights senior to those afforded to our common stock;
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25
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may 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
carryforwards, if any, and could result in the resignation or removal of our present
officers and directors; and
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may adversely affect prevailing market prices for our common stock.
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Similarly, if we issue debt securities, such debt could result in:
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default and foreclosure on our assets if our operating revenues after a business
combination are insufficient to repay our debt obligations;
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acceleration of our obligations to repay the indebtedness even if we make all principal
and interest payments when due if we breach any covenants that require the maintenance of
certain financial ratios or reserves without a waiver or renegotiation of that covenant;
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our immediate payment of all principal and accrued interest, if any, if the debt
security is payable on demand; and
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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.
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Our ability to successfully effect a business combination and to be successful thereafter will
completely depend upon the efforts of our key personnel, some of whom may join us following a
business combination.
Our ability to successfully effect a business combination depends upon the efforts of our key
personnel. The role of our key personnel in the target business, however, cannot presently be
ascertained. Although some of our key personnel may remain with the target business in senior
management or advisory positions following a business combination, it is likely that some or all of
the management of the target business will remain in place. While we intend to closely scrutinize
any individuals we engage after a business combination, we cannot assure you that our assessment of
these individuals will prove to be correct. These individuals may be unfamiliar with the
requirements of operating a public company, which could cause us to have to expend time and
resources helping them become familiar with such requirements. This could be expensive and
time-consuming and could lead to various regulatory issues that could adversely affect our
operations.
Our key personnel may negotiate employment or consulting arrangements with a target business in
connection with a particular business combination. These agreements may provide for those persons
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 for our stockholders.
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 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. As a result, those individuals may have conflicts of interest in determining whether a
particular business combination is the most advantageous for our stockholders.
Our officers and directors will allocate their time to other businesses, which could cause
conflicts of interest in their determination as to how much time to devote to our affairs and could
have a negative impact on our ability to consummate a business combination.
Our officers and directors are not required to commit their full time to our affairs, which
could create a conflict of interest when allocating their time between our operations and their
other commitments. We do not intend to have any full time employees prior to the consummation of a
business combination. All of our executive officers are engaged in several other business
endeavors and are not obligated to devote any specific number of hours to our affairs. If our
officers and directors other business affairs require them to devote more substantial
amounts of time to such affairs, it could limit their ability to devote time to our affairs
and could have a negative impact on our ability to consummate a business combination. We cannot
assure you that these conflicts will be resolved in our favor.
26
Our officers and directors and their affiliates may in the future become affiliated with entities
engaged in business activities similar to those intended to be conducted by us and, accordingly,
may have conflicts of interest in determining to which entity a particular business opportunity
should be presented.
Our officers and directors may in the future become, and James N. Hauslein and Gaurav V.
Burman are now, affiliated with entities, including other blank check companies, engaged in
business activities similar to those intended to be conducted by us. James N. Hauslein is an
independent director of GLG Partners, Inc. and Liberty Acquisition Holdings Corp., each of which
has the size and wherewithal to compete with us to acquire an entity. Additionally, our officers
and directors may become aware of business opportunities that may be appropriate for presentation
to us and the other entities to which they owe fiduciary duties. Accordingly, they may have
conflicts of interest in determining to which entity a particular business opportunity should be
presented. In addition, Elephant Capital and Promethean may encounter investment opportunities of interest to us.
Elephant Capital and Promethean have agreed that they will provide us a right of first refusal with respect to any
potential investment opportunity except (i) any investment in an entity incorporated or formed in
the United Kingdom which does not exceed $100 million of equity by Promethean or (ii) any
investment in an entity incorporated or formed in India which does not exceed $50 million of equity
by Elephant Capital. However, we may have an interest in a transaction below these thresholds,
and neither Elephant Capital nor Promethean would be obligated to present us with that transaction. We cannot assure you
that any of the foregoing conflicts will be resolved in our favor. As a result, a potential target
business may be presented to another entity prior to its presentation to us and we may miss out on
a potential transaction.
All of our officers and directors own shares of our common stock issued prior to our initial public
offering and some of them own insider warrants purchased in a private placement consummated
concurrently with our initial public offering. These shares and warrants will not participate in
liquidating distributions and, therefore, our officers and directors may have a conflict of
interest in determining whether a particular target business is appropriate for a business
combination.
All of our officers and directors own shares of our common stock that were issued prior to our
January 2008 initial public offering. Additionally, certain of our officers and directors and
their affiliates purchased insider warrants upon consummation of our initial public offering. Such
individuals have waived their right to receive distributions with respect to their initial shares
upon our liquidation if we are unable to consummate a business combination. Accordingly, the
shares acquired prior to our initial public offering, as well as the insider warrants, and any
warrants purchased by our officers or directors in our initial public offering or in the
aftermarket will be worthless if we do not consummate a business combination. The personal and
financial interests of our directors and officers may influence their motivation in timely
identifying and selecting a target business and completing a business combination. Consequently,
our directors and officers discretion in identifying and selecting a suitable target business may
result in a conflict of interest when determining whether the terms, conditions, and timing of a
particular business combination are appropriate and in our stockholders best interest.
The requirement that we complete a business combination by January 23, 2010 may motivate our
officers and directors to approve a business combination during that time period so that they may
get their out-of-pocket expenses reimbursed.
Each of our founders may receive reimbursement for out-of-pocket expenses incurred by such
individual in connection with activities on our behalf such as identifying potential target
businesses and performing due diligence on suitable business combinations, as well as traveling to
and from the offices, service centers, or similar locations of prospective target acquisitions to
examine their operations. The funds for such reimbursement will be provided from the money not
held in trust. In the event that we do not effect a business combination by January 23, 2010, then
any expenses incurred by such individuals in excess of the money being held outside of the trust
will not be repaid as we will liquidate at such time. On the other hand, if we complete a business
combination within such time period, those expenses will be repaid by the target business.
Consequently, our officers, who are also our directors, may have an incentive to approve and
complete a business combination other than just what is in the best interest of our stockholders.
27
The NYSE Alternext U.S. (formerly the American Stock Exchange) 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.
Our securities are listed on the NYSE Alternext U.S., a national securities exchange. We
cannot assure you that our securities will continue to be listed on the NYSE Alternext U.S. in the
future prior to a business combination. Additionally, in connection with our business combination,
it is likely that the NYSE Alternext U.S. 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 the NYSE Alternext U.S. 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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a determination that our common stock is a penny stock, which will require brokers
trading in our common stock to adhere to more stringent rules, possibly resulting in a
reduced level of trading activity in the secondary trading market for our 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.
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We may only be able to complete one business combination with the proceeds of our initial public
offering, which will cause us to depend solely upon a single business.
Our business combination must be with a business with a fair market value of at least 80% of
the sum of the balance in the trust account (excluding deferred underwriting discounts and
commissions), although this may entail the simultaneous acquisitions of several operating
businesses at the same time. By consummating a business combination with only a single entity, our
lack of diversification may subject us to numerous economic, competitive, and regulatory risks.
Further, we would not be able to diversify our operations or benefit from the possible spreading of
risks or offsetting of losses, unlike other entities that may have the resources to complete
several business combinations in different industries or different areas of a single industry.
Accordingly, the prospects for our success may be:
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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 or services.
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This lack of diversification may subject us to numerous economic, competitive, and regulatory
risks, any or all of which may have a substantial adverse impact upon the particular industry in
which we may operate subsequent to a business combination.
Alternatively, if we determine to simultaneously acquire several businesses and such
businesses are owned by different sellers, we will need for each of such sellers to agree that our
purchase of its business is contingent on the simultaneous closings of the other business
combinations, which may make it more difficult for us, and delay our ability, to complete the
business combination. With multiple business combinations, we could also face additional risks,
including additional burdens and costs with respect to possible multiple negotiations and due
diligence investigations (if there are multiple sellers) and the additional risks associated with
the subsequent assimilation of the operations and services or products of the acquired companies in
a single operating business. If we are unable to adequately address these risks, our profitability
and results of operations could be harmed.
28
The ability of our stockholders to exercise their conversion rights may not allow us to effectuate
the most desirable business combination or optimize our capital structure.
When we seek stockholder approval of any business combination, we will offer each public
stockholder (but not our founders) the right to have his, her, or its shares of common stock
converted to cash if the stockholder
votes against the business combination and the business combination is approved and completed.
Such holder must both vote against such business combination and then exercise his, her, or its
conversion rights to receive a pro rata portion of the trust account. Accordingly, if our business
combination requires us to use substantially all of our cash to pay the purchase price, because we
will not know how many stockholders may exercise such conversion rights, we may either need to
reserve part of the trust account for possible payment upon such conversion, or we may need to
arrange third-party financing to help fund our business combination in case a larger percentage of
stockholders exercise their conversion rights than we expect. Since we have no specific business
combination under consideration, we have not taken any steps to secure third-party financing.
Therefore, we may not be able to consummate a business combination that requires us to use all of
the funds held in the trust account as part of the purchase price, or we may end up having a
leverage ratio that is not optimal for our business combination. This may limit our ability to
effectuate the most attractive business combination available to us.
We may require stockholders who wish to convert their shares in connection with a proposed business
combination to comply with specific requirements for conversion that may make it more difficult for
them to exercise their conversion rights prior to the deadline for exercising their rights.
We may require public stockholders who wish to convert their shares in connection with a
proposed business combination to either tender their certificates to our transfer agent at any time
prior to the vote taken at the stockholder meeting relating to such business combination or to
deliver their shares to the transfer agent electronically using the Depository Trust Companys DWAC
(Deposit/Withdrawal At Custodian) System. In order to obtain a physical stock 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 stock certificate. While we have been advised that it takes a short
time to deliver shares through the DWAC System, we cannot assure you of this fact. Accordingly, if
it takes longer than we anticipate for stockholders to deliver their shares, stockholders who wish
to convert may be unable to meet the deadline for exercising their conversion rights and thus may
be unable to convert their shares.
Resources could be wasted in researching acquisitions that are not consummated, which could
materially adversely affect subsequent attempts to locate and acquire or merge with another
business.
It is anticipated that the investigation of each specific target business and the negotiation,
drafting, and execution of relevant agreements, disclosure documents, and other instruments will
require substantial management time and attention and substantial costs for accountants, attorneys,
and others. If a decision is made not to complete a specific business combination, the costs
incurred up to that point for the proposed transaction likely would not be recoverable.
Furthermore, even if an agreement is reached relating to a specific target business, we may fail to
consummate the business combination for any number of reasons, including those beyond our control
such as that public stockholders representing at least 30% of our shares issued in our initial
public offering vote against the business combination and opt to have us redeem their stock even if
a majority of our stockholders approve the business combination. Any such event will result in a
loss to us of the related costs incurred, which could materially adversely affect subsequent
attempts to locate and acquire or merge with another business.
We depend on the limited funds available outside of the trust account and a portion of the interest
earned on the trust account balance to fund our search for a target business or businesses and to
complete our initial business combination.
Of the net proceeds of our initial public offering, approximately $100,000 was available to us
initially outside the trust account to fund our working capital requirements. We depend on
sufficient interest being earned on the proceeds held in the trust account to provide us with the
additional working capital we will need to identify one or more target businesses and to complete
our initial business combination. While we are entitled to have released to us for such purposes
interest income of up to a maximum of $3.5 million, and amounts necessary to pay our income taxes,
a substantial decline in interest rates may result in our having insufficient funds available with
which to structure, negotiate, or close an initial business combination. In such event, we would
need to borrow additional funds, which funds may not be available on attractive terms or at all.
None of our officers or directors or any other person is obligated to lend us such funds.
29
Because any target business with which we attempt to complete a business combination will be
required to provide our stockholders with financial statements prepared in accordance with and
reconciled to United States generally accepted accounting principles, the pool of prospective
target businesses may be limited.
In accordance with the requirements of United States federal securities laws, in order to seek
stockholder approval of a business combination, a proposed target business will be required to have
certain financial statements that are prepared in accordance with, or that can be reconciled to,
U.S. generally accepted accounting principles and audited in accordance with U.S. generally
accepted auditing standards. To the extent that a proposed target business does not have financial
statements that have been prepared with, or which can be reconciled to, U.S. generally accepted
accounting principles, and audited in accordance with U.S. generally accepted auditing standards,
we will not be able to acquire that proposed target business. These financial statement
requirements may limit the pool of potential target businesses.
The requirement that we complete a business combination by January 23, 2010 may give potential
target businesses leverage over us in negotiating a business combination.
We will liquidate and promptly distribute only to our public stockholders on a pro rata basis
the amount in our trust account (subject to our obligations under Delaware law for claims of
creditors) plus any remaining net assets if we do not effect a business combination by January 23,
2010. 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 target business. This risk will increase as we get closer to the time limit
referenced above.
Because of our limited resources and structure, we may not be able to consummate an attractive
business combination.
We expect to encounter intense competition from entities other than blank check companies
having a business objective similar to ours, including venture capital funds, leveraged buyout
funds, and operating businesses competing for acquisitions. Many of these entities are well
established and have extensive experience in identifying and effecting business combinations
directly or through affiliates. Many of these competitors possess greater technical, human, and
other resources than we do and our financial resources will be relatively limited when contrasted
with those of many of these competitors. While we believe that there are numerous potential target
businesses that we could acquire with the net proceeds of our initial public offering, our ability
to compete in acquiring certain sizable target businesses will be limited by our available
financial resources. This inherent competitive limitation gives others an advantage in pursuing
the acquisition of certain target businesses. Furthermore, the obligation we have to seek
stockholder approval of a business combination may delay the consummation of a transaction.
Additionally, our outstanding warrants, and the future dilution they potentially represent, may not
be viewed favorably by certain target businesses. The fact that only approximately one-half of the
blank check companies that have gone public in the United States since August 2003 have either
consummated a business combination or entered into a definitive agreement for a business
combination may indicate that there are fewer attractive target businesses available to such
entities like our company or that many privately held target businesses are not inclined to enter
into these types of transactions with publicly held blank check companies like ours. If we are
unable to consummate a business combination with a target business within the prescribed time
periods, we will be forced to liquidate.
We may be unable to obtain additional financing, if required, to complete a business combination or
to fund the operations and growth of the target business, which could compel us to restructure or
abandon a particular business combination.
Although we believe that the net proceeds of our initial public 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 our initial public offering prove to be insufficient, either because of the
size of the business combination, the depletion of the available net proceeds in search of a target
business, or the obligation to convert into cash a significant number of shares from dissenting
stockholders, we will be required to seek additional financing. We have not taken any steps toward
securing third-party financing. We cannot assure you that such financing will be available on
acceptable terms, or at
all. Recent turmoil in the credit markets has greatly reduced the availability of debt
financing. 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.
30
Companies with similar business plans to ours have had limited success in completing a business
transaction and there can be no assurance that we will successfully identify or complete a business
combination.
Based upon publicly available information, as of February 12, 2009
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we have identified 160
similarly structured companies that have gone public since August 2003, of which 81 have actually
consummated a business combination, or announced that they have entered into a definitive agreement
for a business combination. The remaining companies have more than $10.0 billion of proceeds and
are seeking to consummate business combinations. The fact that only approximately one-half of such
companies that have gone public since August 2003 have either completed a business combination or
have entered into a definitive agreement for a business combination may be an indication that there
are only a limited number of attractive target businesses available to such entities or that many
privately held target businesses may not be inclined to enter into business combinations with
publicly held blank check companies like us. We cannot assure you that we will be able to
successfully compete for an attractive business combination. Additionally, because of this
competition, we cannot assure you that we will be able to effectuate a business combination within
the required time periods. If we are unable to find a suitable target business within such time
periods, we will be forced to liquidate.
We are dependent upon Mr. Hauslein and Mr. Burman and the loss of either of them could adversely
affect our ability to operate.
Our operations are dependent upon a relatively small group of individuals and, in particular,
upon Mr. Hauslein and Mr. Burman. We believe that our success depends on the continued service of
Mr. Hauslein and Mr. Burman, at least until we have consummated a business combination. We cannot
assure you that such individuals will remain with us for the immediate or foreseeable future. In
addition, neither Mr. Hauslein nor Mr. Burman 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, either of these individuals. The unexpected loss of the services of
either of these individuals could have a detrimental effect on us.
Our founders, including our officers and directors, control a substantial interest in us and thus
may influence certain actions requiring a stockholder vote.
As of February 27, 2009, our founders, including all of our officers and directors,
beneficially owned an aggregate of 20% of our issued and outstanding shares of common stock. It is
unlikely that there will be an annual meeting of stockholders to elect new directors prior to the
consummation of a business combination, in which case all of the current directors will continue in
office until at least the consummation of the business combination. Accordingly, our founders will
likely continue to exert control at least until the consummation of a business combination. To our
knowledge, none of our founders, including any of our officers or directors, has any present
intention to purchase additional units or shares of common stock from us in private placements or
from persons in the open market or private transactions. In the event that any founders acquire
additional shares of our common stock, we anticipate that they would vote such shares in favor of
our initial business combination. Thus, additional purchases of shares of our common stock by our
officers or directors would likely allow them to exert additional influence over the approval of
our initial business combination. Factors they would consider in making such additional purchases
would include consideration of the current trading price of our common stock and that any such
additional purchases would likely increase the chances that our initial business combination would
be approved.
31
Our outstanding warrants may have an adverse effect on the market price of our common stock and
make it more difficult to effect a business combination.
We issued warrants to purchase 20,000,000 shares of common stock as part of the units sold in
our initial public offering and also issued the insider warrants to purchase 5,800,000 shares of
common stock. To the extent we issue shares of common stock to effect a business combination, the
potential for the issuance of a substantial number of additional shares upon exercise of these
warrants could make us a less attractive acquisition vehicle in the eyes of a target business.
Such warrants, when exercised, will increase the number of issued and outstanding shares of our
common stock and reduce the value of the shares issued to complete the business combination.
Accordingly, our warrants may make it more difficult to effectuate a business combination or
increase the cost of acquiring the target business. Additionally, the sale, or even the
possibility of sale, of the shares underlying the warrants could have an adverse effect on the
market price for our securities or on our ability to obtain future financing. If and to the extent
these warrants are exercised, you may experience dilution to your holdings.
If our founders exercise their registration rights with respect to their initial shares or insider
warrants and underlying securities, it may have an adverse effect on the market price of our common
stock and the existence of these rights may make it more difficult to effect a business
combination.
Our founders are entitled to make a demand that we register the resale of their initial shares
at any time commencing three months prior to the date on which their shares are released from
escrow. Additionally, the purchasers of the insider warrants are entitled to demand that we
register the resale of their insider warrants and underlying shares of common stock at any time
after we consummate a business combination. If such individuals exercise their registration rights
with respect to all of their securities, then there will be an additional 5,000,000 shares of
common stock and 5,800,000 warrants (as well as 5,800,000 shares of common stock underlying the
warrants) eligible for trading in the public market. The presence of these additional shares of
common stock trading in the public market may have an adverse effect on the market price of our
common stock. In addition, the existence of these rights may make it more difficult to effectuate
a business combination or increase the cost of acquiring a target business, as the stockholders of
the target business may be discouraged from entering into a business combination with us or may
request a higher price for their securities because of the potential effect the exercise of such
rights may have on the trading market for our common stock.
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 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 current or anticipated principal activities will subject us to the Investment Company Act of
1940. To this end, the proceeds held in trust may be invested by the trustee only in United States
government securities within the meaning of Section 2(a)(16) of the Investment Company Act of
1940 having a maturity of 180 days or less or in money market funds meeting certain conditions
under Rule 2a-7 promulgated under the Investment Company Act of 1940. By restricting the
investment of the proceeds to these instruments, we intend to meet the requirements for the
exemption provided in Rule 3a-1 promulgated under the Investment Company Act of 1940.
If we are nevertheless deemed to be an investment company under the Investment Company Act of
1940, we may be subject to certain restrictions that may make it more difficult for us to complete
a business combination, including:
|
|
|
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, disclosure
requirements, and other rules and regulations.
|
Compliance with these additional regulatory burdens would require additional expense for which
we have not allotted funds.
32
If we effect a business combination with a company located outside of the United States, we would
be subject to a variety of additional risks that may negatively impact our operations.
We may effect a business combination with a company located outside of the United States. If
we did, we would be subject to any special considerations or risks associated with companies
operating in the target business home jurisdiction, including any of the following:
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|
rules and regulations on currency conversion;
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|
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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|
tax issues, such as tax law changes, variations in tax laws as compared to the United
States, and any specific U.S. federal income tax considerations and consequences relating
to cross-border transactions;
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|
difficulties in staffing, managing, and operating an international operations;
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|
transportation delays or interruptions and other effects of less developed
infrastructures;
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|
employment and severance issues, including possible employee turnover or labor unrest;
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|
challenges in collecting accounts receivable;
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|
cultural and language differences; and
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|
political unrest, war, terrorism, or actual or perceived health risks.
|
We cannot assure you that we would be able to adequately address these additional risks. If
we were unable to do so, our operations would 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 the 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. Two of our five current directors, Gaurav V. Burman and Raj Mishra, currently
reside outside of the United States. As a result, it may not be possible for investors in the
United States to enforce their legal rights, to effect service of process upon our directors or
officers, or to enforce judgments of United States courts predicated upon civil liabilities and
criminal penalties against our directors and officers under Federal securities laws.
33
Provisions in our charter documents and Delaware law may discourage a takeover of us, which could
limit the price investors might be willing to pay in the future for our common stock and could
entrench management.
Our charter and bylaws contain provisions that may discourage unsolicited takeover proposals
that stockholders may consider to be in their best interests. Moreover, our board of directors has
the ability to designate the terms of and issue new series of preferred stock. These provisions
may make more difficult the removal of management and may discourage transactions that otherwise
could involve payment of a premium over prevailing market prices for our securities.
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 requires that we have such system of internal controls audited
beginning with this report. If we fail to maintain the adequacy of our internal controls, we could
be subject to regulatory scrutiny, civil or criminal penalties, and stockholder litigation. Any
inability to provide reliable financial reports could harm our business.
Section 404 of the Sarbanes-Oxley Act also requires that our independent registered public
accounting firm issue an attestation report on its evaluation of our system of internal controls
beginning with our Annual Report on Form 10-K for the year ending December 31, 2009. 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. 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
stock.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
We do not own any real estate or other physical properties. We maintain our executive offices
at c/o Hauslein & Company, 11450 SE Dixie Highway, Suite 106, Hobe Sound, Florida 33455. Hauslein
& Company has agreed to provide us with certain administrative, technology, and secretarial
services, as well as the use of certain limited office space, including a conference room, at this
location pursuant to a letter agreement between us and Hauslein & Company. The cost for the
foregoing services to be provided to us by Hauslein & Company is $10,000 per month. We believe,
based on rents and fees for similar services, that the fee charged by Hauslein & Company is at
least as favorable as we could have obtained from an unaffiliated person. We consider our current
office space adequate for our current operations.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
34
PART II
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|
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Item 5.
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|
Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
|
Market Information on Common Stock
Our units, each of which consists of one share of our common stock, par value $0.001 per
share, and one warrant to purchase one share of our common stock, trade on the NYSE Alternext U.S.
under the symbol AXG.U. On February 14, 2008, the warrants and common stock underlying our units
began to trade separately on the NYSE Alternext U.S. under the symbols AXG.WS and AXG,
respectively. Each warrant entitles the holder to purchase from us one share of our common stock
at an exercise price of $7.00 commencing on our consummation of an initial business combination,
provided that there is an effective registration statement in effect covering the shares of common
stock underlying the warrants. Our warrants will expire at 5:00 p.m., New York City time, on
January 23, 2012, unless earlier redeemed.
The following table sets forth, for the calendar quarter indicated, the high and low sales
prices per unit, share of common stock, and warrant as reported on the NYSE Alternext U.S.
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Units(1)
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Common Stock(2)
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Warrants(2)
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Quarter Ended
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High
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Low
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High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
March 31, 2008
|
|
$
|
11.00
|
|
|
$
|
9.35
|
|
|
$
|
9.15
|
|
|
$
|
8.96
|
|
|
$
|
0.75
|
|
|
$
|
0.35
|
|
|
June 30, 2008
|
|
$
|
9.80
|
|
|
$
|
9.00
|
|
|
$
|
9.31
|
|
|
$
|
9.00
|
|
|
$
|
0.68
|
|
|
$
|
0.30
|
|
|
September 30, 2008
|
|
$
|
10.58
|
|
|
$
|
8.50
|
|
|
$
|
9.49
|
|
|
$
|
8.85
|
|
|
$
|
0.54
|
|
|
$
|
0.15
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|
|
December 31, 2008
|
|
$
|
9.30
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|
|
$
|
7.00
|
|
|
$
|
9.24
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|
|
$
|
8.23
|
|
|
$
|
0.25
|
|
|
$
|
0.03
|
|
|
|
|
(1)
|
|
Information for the quarter ended March 31, 2008 represents the high and low sales price only
on and following January 24, 2008, which was the first day on which our units began trading.
|
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(2)
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|
Information for the quarter ended March 31, 2008 represents the high and low sales price only
on and following February 14, 2008, the date that our warrants and common stock first became
separately tradable.
|
Holders
As of February 27, 2009, there was one holder of record of our units, 13 holders of record of
our common stock, and there were five holders of record of our warrants. Such numbers do not
include beneficial owners holding shares, warrants, or units through nominee names.
Dividends
We have not paid any cash dividends on our common stock to date and we do not currently intend
to pay cash dividends prior to the consummation of a business combination. The payment of
dividends in the future will depend on our revenues and earnings, if any, capital requirements, and
general financial condition. The payment of any dividends subsequent to a business combination
will be within the discretion of our board of directors. It is the present intention of our board
of directors to retain any earnings for use in our business operations and, accordingly, our board
does not currently anticipate declaring any dividends in the foreseeable future.
35
Securities Authorized for Issuance Under Equity Compensation Plans.
We do not currently have an equity compensation plan and we do not intend to have an equity
compensation plan prior to the completion of a business combination.
Recent Sales of Unregistered Securities
On January 30, 2008, each of James N. Hauslein, Gaurav V. Burman, Sir Peter Burt, Michael T.
Biddulph, Michael W. Burt, and Promethean plc purchased, pursuant to subscription agreements
between each purchaser and us, 2,900,000, 287,500, 1,750,000, 287,500, 287,500, and 287,500,
insider warrants respectively, at a purchase price of $1.00 per warrant. Each insider warrant
allows the holder thereof to purchase one share of our common stock at $7.00 per share. The
warrants are identical to the warrants included in the units sold in our initial public offering,
except that they (i) may be exercised whether or not a registration statement relating to the
common stock issuable upon exercise of the warrants is effective, and (ii) are not redeemable by us
so long as they are held by their original purchasers or their permitted transferees.
The issuance of the warrants in the private placement transaction were made without
registration under the Securities Act in reliance on the exemption contained in Section 4(2) of the
Securities Act as transactions not involving a public offering. In each such transaction, the
purchaser represented its intention to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate legends were
affixed to the instruments representing such securities issued in such transactions.
Use of Proceeds from our Initial Public Offering
On January 30, 2008, we consummated our initial public offering of 20,000,000 units. Each
unit was sold at an offering price of $10.00 per unit and consists of one share of our common
stock, $0.001 par value per share, and one warrant to purchase one share of our common stock at an
exercise price of $7.00 per share. The units sold in our initial public offering were registered
under the Securities Act on a registration statement on Form S-1 (No. 333-146368), which was
declared effective by the SEC on January 23, 2008. Lazard Capital Markets LLC and Morgan Stanley &
Co. Incorporated acted as joint book runners for our initial public offering.
We received net proceeds of approximately $194.3 million from our initial public offering.
Net proceeds of $194.2 million were deposited into a trust account, which included $8,955,000 of
deferred underwriting fees, and will be part of the funds distributed to our public stockholders in
the event we are unable to complete a business combination. In addition, we deposited into the
trust account gross proceeds of $5.8 million received from the sale of insider warrants, which sale
was consummated concurrently with the closing of our initial public offering. Unless and until a
business combination is consummated, the proceeds held in the trust account will not be available
to us. The approximately $100,000 of remaining proceeds not deposited into the trust account,
together with certain interest income from the trust account, will be used to provide for business,
legal, and accounting due diligence on prospective transactions and continuing general and
administrative expenses.
Excluding $8,955,000 of the deferred underwriters fee held in trust and payable upon the
consummation of a business combination, we intend to use substantially all of the net proceeds of
the initial public offering deposited in the trust account to acquire a target business, including
identifying and evaluating prospective acquisition candidates, selecting the target business, and
structuring, negotiating and consummating the business combination. To the extent that our capital
stock is used in whole or in part as consideration to effect a business combination, the proceeds
held in the trust fund as well as any other net proceeds not expended will be used to finance the
operations of the target business.
As of February 27, 2009 there was approximately $200,100,000 in the trust account.
Item 6. Selected Financial Data.
The following tables set forth selected historical financial information derived from our
audited financial statements included elsewhere in this report. The following data should be read
in conjunction with Item 7, Managements Discussion and Analysis of Financial Condition and
Results of Operations and our audited financial statements including the notes thereto, included
elsewhere in this report.
36
Statement of Operations Information:
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From inception
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(September 6, 2007)
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Year ended
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to
|
|
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|
December 31, 2008
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|
|
December 31, 2007
|
|
|
December 31, 2008
|
|
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|
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|
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Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(830,653
|
)
|
|
$
|
(10,000
|
)
|
|
$
|
(840,653
|
)
|
Interest income
|
|
|
2,470,053
|
|
|
|
|
|
|
|
2,470,053
|
|
Net income (loss)
|
|
|
1,085,745
|
|
|
|
(12,137
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)
|
|
|
1,073,608
|
|
Earnings per share Data:
|
|
|
|
|
|
|
|
|
|
|
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|
Shares outstanding subject to possible redemption
|
|
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5,539,725
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|
|
|
|
|
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4,186,335
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|
Net income per share subject to possible
redemption, basic and diluted
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Weighted average number of shares outstanding
|
|
|
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|
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Basic
|
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|
18,076,028
|
|
|
|
5,750,000
|
|
|
|
15,064,700
|
|
Diluted
|
|
|
23,467,283
|
|
|
|
5,750,000
|
|
|
|
19,138,837
|
|
Net income (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.06
|
|
|
$
|
(0.00
|
)
|
|
$
|
0.07
|
|
Diluted
|
|
$
|
0.05
|
|
|
$
|
(0.00
|
)
|
|
$
|
0.06
|
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
1,023,468
|
|
|
$
|
(10,000
|
)
|
|
$
|
1,013,468
|
|
Net cash used in investing activities; cash
contributed to trust fund
|
|
$
|
(200,219,661
|
)
|
|
$
|
|
|
|
$
|
(200,219,661
|
)
|
Net cash provided by financing activities,
primarily proceeds from public offering in fiscal
2008
|
|
$
|
200,050,401
|
|
|
$
|
75,567
|
|
|
$
|
200,125,968
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
Selected Balance Sheet Data:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,070,021
|
|
Investments held in Trust
|
|
|
200,069,415
|
|
Net working capital
|
|
|
895,161
|
|
Total assets
|
|
|
201,381,132
|
|
Common stock, subject to possible conversion
|
|
|
59,999,990
|
|
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements and Factors That May Affect Results
You should read the following discussion and analysis in conjunction with our audited
financial statements and related notes contained elsewhere in this report and in conjunction with
Item 6, Selected Financial Data. This discussion contains forward-looking statements that
involve risks, uncertainties, and assumptions. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of a variety of factors, including
those set forth under Item 1A, Risk Factors.
Overview
We were formed on September 6, 2007, to effect a merger, stock exchange, asset acquisition,
reorganization or similar business combination with an operating business or businesses. We
consummated our initial public offering on January 30, 2008. We received net proceeds of
approximately $194.3 million from our initial public offering. Net proceeds of $194.2 million were
deposited into a trust account at Bank of America, maintained by American Stock Transfer & Trust
Company, as trustee, which included $8,955,000 of deferred underwriting fees, and will be part of
the funds distributed to our public stockholders in the event we are unable to complete a business
combination. In addition, we deposited into the trust account gross proceeds of $5.8 million
received from the sale of insider warrants, which sale was consummated concurrently with the
closing of our initial public offering. Unless and until a business combination is consummated, the
proceeds held in the trust account will
not be available to us. The approximately $100,000 of remaining proceeds have been used for
business, legal, and accounting due diligence on prospective transactions and continuing general
and administrative expenses.
37
As of December 31, 2008, we had no contractual obligations other than standard non-disclosure
agreements in connection with our due diligence of business combination targets.
We are currently in the process of evaluating and identifying targets for a business
combination. We intend to use cash from the proceeds of our initial public offering, our capital
stock, debt or a combination of cash, stock and debt. The issuance of additional shares of our
stock in a business combination:
|
|
|
may significantly reduce the equity interest of our stockholders;
|
|
|
|
may cause a change in control if a substantial number of shares of our stock are
issued, which may affect, among other things, our ability to use our net operating loss
carry-forwards, if any, and may also result in the resignation or removal of Mr. James
N. Hauslein, our Chairman of the Board and Chief Executive Officer, or one or more of
our other present directors; and
|
|
|
|
may adversely affect prevailing market prices for our common stock.
|
Similarly, debt securities issued by us in a business combination may result in:
|
|
|
default and foreclosure on our assets if our operating revenues after a business
combination were 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 contained covenants
requiring the maintenance of certain financial ratios or reserves and any such covenant
was breached without a waiver or renegotiation of that covenant;
|
|
|
|
our immediate payment of all principal and accrued interest, if any, if the debt
security was payable on demand; and
|
|
|
|
our inability to obtain additional financing, if necessary, if the debt security
contained covenants restricting our ability to obtain additional financing while such
debt security was outstanding.
|
Results of Operations
All of our activities since inception have been to prepare for and consummate our initial
public offering and to identify and investigate targets for a business combination. We will not
generate any operating revenues until the consummation of a business combination. We have generated
non-operating income in the form of interest income.
Net income for the year ended December 31, 2008 was $1,085,745, which consisted of $2,470,053
of interest income offset by $830,653 of general and administrative costs, $553,000 provision for
income taxes and $655 of interest expense.
Net income (loss) for the period from September 6, 2007 (date of inception) to December 31,
2007 was ($12,137), which consisted of $10,000 of general and administrative costs and $2,137 of
interest expense.
Net income for the period from September 6, 2007 (date of inception) to December 31, 2008 was
$1,073,608, which consisted of $2,470,053 of interest income offset by $840,653 of general and
administrative costs, $533,000 provision for income taxes and $2,792 of interest expense.
38
Off-Balance Sheet Arrangements
We have never entered into any off-balance sheet financing arrangements and have never
established any special purpose entities. We have not guaranteed any debt or commitments of other
entities or entered into any options on non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations,
purchase obligations, or other long term liabilities.
Our contractual obligations are set forth in the following table as of December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
1-3
|
|
|
3-5
|
|
|
More than
|
|
|
|
Total
|
|
|
1 year
|
|
|
years
|
|
|
years
|
|
|
5 years
|
|
Contractual Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative services agreement (1)
|
|
$
|
127,562
|
|
|
$
|
120,000
|
|
|
$
|
7,562
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
127,562
|
|
|
$
|
120,000
|
|
|
$
|
7,562
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
We pay an affiliate of our Chairman of the Board and Chief Executive Officer a monthly fee
of $10,000 for office space, administrative services, and secretarial support. This arrangement is
for our benefit and is not intended to provide compensation in lieu of a salary. An amount of
approximately $120,000 is included in general and administrative expenses on the accompanying
statement of operations for the year ended December 31, 2009 reflecting this arrangement.
|
Liquidity and Capital Resources
The net proceeds from our initial public offering, after deducting offering expenses of
approximately $650,000 and underwriting discounts of $14.0 million, was approximately $185.4
million. However, the underwriters agreed that approximately $0.45 per unit of the underwriting
discounts and commissions will be deferred and will not be payable unless and until we consummate a
business combination. Net proceeds of $194.2 million, plus $5.8 million we received from the sale
of the insider warrants, were deposited into the trust account.
We intend to use substantially all of the net proceeds of our initial public offering,
including the funds held in the trust account (excluding deferred underwriting discounts and
commissions), to acquire a target business and to pay our expenses relating thereto. To the extent
that our capital stock is used in whole or in part as consideration to effect a business
combination, the remaining proceeds held in the trust account as well as any other net proceeds not
expended will be used as working capital to finance the operations of the target business. Such
working capital funds could be used in a variety of ways including continuing or expanding the
target business operations, for strategic acquisitions, and for marketing, research, and
development of existing or new products. Such funds could also be used to repay any operating
expenses or finders fees that we incur prior to the completion of our business combination if the
funds available to us outside of the trust account are insufficient to cover such expenses.
We believe that approximately $100,000 of net proceeds from our initial public offering not
deposited in the trust account, plus (i) interest earned on the funds in the trust account up to
$3.5 million that may be released to us, as well as (ii) interest earned on the funds in the trust
account for any amounts necessary for our tax obligations, will be sufficient to allow us to
operate at least until January 23, 2010, 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 or their representatives or owners, 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:
|
|
|
$1,750,000 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;
|
39
|
|
|
$750,000 of expenses for the due diligence and investigation of a target business by
our officers, directors, and special advisors;
|
|
|
|
$200,000 of expenses in legal and accounting fees relating to our SEC reporting
obligations;
|
|
|
|
$240,000 for the administrative fee payable to Hauslein & Company ($10,000 per month
for 24 months following our initial public offering); and
|
|
|
|
$660,000 for general working capital that will be used for miscellaneous expenses
and reserves, including approximately $200,000 for director and officer liability
insurance premiums.
|
We do not believe we will need to raise additional funds beyond those raised from our initial
public offering in order to meet the expenditures required for operating our business. However, we
may need to raise additional funds through a private offering of debt or equity securities if such
funds are required to consummate a business combination that is presented to us, although we have
not entered into any such arrangement and have no current intention of doing so.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Market risk is a broad term for the risk of economic loss due to adverse changes in the fair
value of a financial instrument. These changes may be the result of various factors, including
interest rates, foreign exchange rates, commodity prices and/or equity prices. $194.2 million of
the net offering proceeds (which includes $8,955,000 of the proceeds attributable to the
underwriters discount), plus $5.8 million we received from the sale of insider warrants
simultaneously with the consummation of our initial public offering, has been placed into a trust
account at Bank of America, maintained by American Stock Transfer & Trust Company, as trustee. As
of December 31, 2008, the balance of the trust account was $200.1 million. The proceeds held in
trust will only be invested in U.S. government securities within the meaning of Section 2(a)(16)
of the Investment Company Act of 1940 having a maturity of 180 days or less or in money market
funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of
1940. Thus, we are subject to market risk primarily through the effect of changes in interest rates
on government securities. The effect of other changes, such as foreign exchange rates, commodity
prices and/or equity prices, does not pose significant market risk to us.
At December 31, 2008, the proceeds held in trust were invested in two treasury funds that
include only U.S. Treasury bills, notes, and other short-term obligations guaranteed by the U.S.
Treasury. Both funds are rated AAA by Standard & Poors, and neither fund invests in repurchase
agreements. However, we may in the future invest the proceeds held in trust in different U.S.
government securities within the meaning of Section 2(a)(16) of the Investment Company Act of
1940 having a maturity of 180 days or less or in money market funds meeting certain conditions
under Rule 2a-7 promulgated under the Investment Company Act of 1940.
The U.S. and world financial markets have been experiencing extreme and unprecedented
volatility. In light of these difficult conditions and the on-going developments in the regulatory
environment surrounding the financial markets, there can be no certainty as to the effect these
events will have on U.S. Treasury bills, notes, and other short-term obligations.
During December 2008, the effective annualized interest rate payable on the trust account was
approximately 0.38%. A .25% decrease in the yield on the trust account would result in a decrease
of approximately $125,000 in the interest earned on the trust account during each fiscal quarter.
40
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements:
41
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Atlas Acquisition Holdings Corp.
We have
audited the accompanying balance sheets of Atlas Acquisition Holdings Corp. (the Company)
as of December 31, 2008 and December 31, 2007, and the related statements of operations and cash
flows for the year ended December 31, 2008 and for the periods from September 6, 2007 (date of
inception) to December 31, 2008 and 2007, and the statement of stockholders equity from September
6, 2007 (date of inception) to December 31, 2008. These financial statements are the responsibility
of the Companys management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audits 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 audits provide 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 Atlas Acquisition Holdings Corp. (a corporation in the
development stage) as of December 31, 2008 and December 31, 2007, and the results of its operations
and its cash flows for year ended December 31, 2008 and for the periods from September 6, 2007
(date of inception) to December 31, 2008 and 2007 in conformity with U.S. generally accepted
accounting principles.
/s/ Rothstein, Kass & Company, P.C.
Roseland, New Jersey
February 25, 2009
42
ATLAS ACQUISITION HOLDINGS CORP.
(a corporation in the development stage)
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,070,021
|
|
|
$
|
65,567
|
|
Prepaid expenses
|
|
|
6,696
|
|
|
|
|
|
Deferred registration Costs
|
|
|
|
|
|
|
242,199
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,076,717
|
|
|
|
307,766
|
|
|
|
|
|
|
|
|
|
|
Investments held in Trust
|
|
|
200,069,415
|
|
|
|
|
|
Deferred tax asset
|
|
|
235,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
201,381,132
|
|
|
$
|
307,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accrued registration costs
|
|
$
|
|
|
|
$
|
144,766
|
|
Accrued expenses
|
|
|
181,556
|
|
|
|
|
|
Notes payable to initial stockholders including related interest
|
|
|
|
|
|
|
152,137
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
181,556
|
|
|
|
296,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities:
|
|
|
|
|
|
|
|
|
Deferred underwriting fee
|
|
|
8,955,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to possible redemption (5,999,999 shares at redemption
value, $10.00 per share)
|
|
|
59,999,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
|
|
|
|
|
|
Preferred stock, $.001 par value; 100,000,000 shares authorized; none issued
|
|
|
|
|
|
|
|
|
Common Stock, $.001 par value; 300,000,000 shares authorized, 25,000,000
shares issued and outstanding (including 5,999,999 shares subject to
redemption) at December 31, 2008 and 5,750,000 shares issued and outstanding
at
December 31, 2007
|
|
|
25,000
|
|
|
|
5,750
|
|
Additional paid-in capital
|
|
|
131,145,978
|
|
|
|
17,250
|
|
Retained earnings (deficit accumulated in the development stage)
|
|
|
1,073,608
|
|
|
|
(12,137
|
)
|
|
|
|
|
|
|
|
Total Stockholders Equity
|
|
|
132,244,586
|
|
|
|
10,863
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity
|
|
$
|
201,381,132
|
|
|
$
|
307,766
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
43
ATLAS ACQUISITION HOLDINGS CORP.
(a corporation in the development stage)
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period September 6, 2007
|
|
|
|
For the year
|
|
|
(date of inception)
|
|
|
|
ended
|
|
|
to
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative costs
|
|
$
|
830,653
|
|
|
$
|
10,000
|
|
|
$
|
840,653
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(830,653
|
)
|
|
|
(10,000
|
)
|
|
|
(840,653
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
2,470,053
|
|
|
|
|
|
|
|
2,470,053
|
|
Interest expense
|
|
|
(655
|
)
|
|
|
(2,137
|
)
|
|
|
(2,792
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income taxes
|
|
|
1,638,745
|
|
|
|
(12,137
|
)
|
|
|
1,626,608
|
|
Provision for income taxes
|
|
|
553,000
|
|
|
|
|
|
|
|
553,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the period
|
|
$
|
1,085,745
|
|
|
$
|
(12,137
|
)
|
|
$
|
1,073,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding (not
subject to possible redemption):
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
18,076,028
|
|
|
|
5,750,000
|
|
|
|
15,064,700
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
23,467,283
|
|
|
|
5,750,000
|
|
|
|
19,138,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share not subject to possible redemption:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.06
|
|
|
$
|
(0.00)
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.05
|
|
|
$
|
(0.00)
|
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum number of shares subject to possible redemption:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
|
|
|
5,539,725
|
|
|
|
|
|
|
|
4,186,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share subject to possible redemption:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
44
ATLAS ACQUISITION HOLDINGS CORP.
(a corporation in the development stage)
STATEMENTS OF STOCKHOLDERS EQUITY
For the period September 6, 2007 (date of inception) to December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
(deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in
|
|
|
accumulated in the
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
development stage)
|
|
|
Equity
|
|
Balances, September 6, 2007
(date of inception)
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Issuance of common stock at
$0.004 per share to initial
stockholders
|
|
|
5,750,000
|
|
|
|
5,750
|
|
|
|
17,250
|
|
|
|
|
|
|
|
23,000
|
|
Net loss for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,137
|
)
|
|
|
(12,137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2007
|
|
|
5,750,000
|
|
|
|
5,750
|
|
|
|
17,250
|
|
|
|
(12,137
|
)
|
|
|
10,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of
5,800,000 insider warrants
at $1.00 per warrant in
private placement
|
|
|
|
|
|
|
|
|
|
|
5,800,000
|
|
|
|
|
|
|
|
5,800,000
|
|
Sale of 20,000,000 units
through public offering at
$10.00 per unit net of
underwriters discount and
offering costs (including
5,999,999 shares of common
stock subject to possible
redemption)
|
|
|
20,000,000
|
|
|
|
20,000
|
|
|
|
185,327,968
|
|
|
|
|
|
|
|
185,347,968
|
|
Proceeds from public
offering subject to possible
redemption, 5,999,999 shares
|
|
|
|
|
|
|
|
|
|
|
(59,999,990
|
)
|
|
|
|
|
|
|
(59,999,990
|
)
|
Forfeiture of founders shares
|
|
|
(750,000
|
)
|
|
|
(750
|
)
|
|
|
750
|
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,085,745
|
|
|
|
1,085,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2008
|
|
|
25,000,000
|
|
|
$
|
25,000
|
|
|
$
|
131,145,978
|
|
|
$
|
1,073,608
|
|
|
$
|
132,244,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
45
ATLAS ACQUISITION HOLDINGS CORP.
(a corporation in the development stage)
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period September 6, 2007
|
|
|
|
For the year
|
|
|
(date of inception)
|
|
|
|
ended
|
|
|
to
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the period
|
|
$
|
1,085,745
|
|
|
$
|
(12,137
|
)
|
|
$
|
1,073,608
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income (loss) for the period to net
cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax benefit
|
|
|
(235,000
|
)
|
|
|
|
|
|
|
(235,000
|
)
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(6,696
|
)
|
|
|
|
|
|
|
(6,696
|
)
|
Accrued expenses
|
|
|
181,556
|
|
|
|
|
|
|
|
181,556
|
|
Accrued interest on notes payable to initial stockholders
|
|
|
(2,137
|
)
|
|
|
2,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
1,023,468
|
|
|
|
(10,000
|
)
|
|
|
1,013,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest earned on trust account
|
|
|
(69,415
|
)
|
|
|
|
|
|
|
(69,415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in trust account
|
|
|
(200,000,000
|
)
|
|
|
|
|
|
|
(200,000,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(200,069,415
|
)
|
|
|
|
|
|
|
(200,069,415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock to initial stockholders
|
|
|
|
|
|
|
23,000
|
|
|
|
23,000
|
|
Proceeds from notes payable to initial stockholders
|
|
|
|
|
|
|
150,000
|
|
|
|
150,000
|
|
Payments on notes payable to initial stockholders
|
|
|
(150,000
|
)
|
|
|
|
|
|
|
(150,000
|
)
|
Proceeds from issuance of warrants in private placement
|
|
|
5,800,000
|
|
|
|
|
|
|
|
5,800,000
|
|
Proceeds from public offering
|
|
|
200,000,000
|
|
|
|
|
|
|
|
200,000,000
|
|
Payment of underwriters discount and registration costs
|
|
|
(5,599,599
|
)
|
|
|
(97,433
|
)
|
|
|
(5,697,032
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
200,050,401
|
|
|
|
75,567
|
|
|
|
200,125,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
1,004,454
|
|
|
|
65,567
|
|
|
|
1,070,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
65,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
1,070,021
|
|
|
$
|
65,567
|
|
|
$
|
1,070,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual of deferred underwriting fees
|
|
$
|
8,955,000
|
|
|
$
|
|
|
|
$
|
8,955,000
|
|
|
|
|
|
|
|
|
|
|
|
Accrued registration costs
|
|
$
|
|
|
|
$
|
144,766
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from public offering reclassified to mezzanine debt
for common stock subject to possible redemption
|
|
$
|
59,999,990
|
|
|
$
|
|
|
|
$
|
59,999,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclass from common stock to additional paid-in capital for
the forfeiture of founders shares
|
|
$
|
750
|
|
|
$
|
|
|
|
$
|
750
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
46
ATLAS ACQUISITION HOLDINGS CORP.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
Note 1 Discussion of the Companys Organization and Business Operations.
Atlas Acquisition Holdings Corp. (a corporation in the development stage) (the Company) was
incorporated on September 6, 2007 for the purpose of acquiring, through a merger, capital stock
exchange, asset acquisition, stock purchase or other similar business combination, an unidentified
operating business (Business Combination). The Companys efforts in identifying a prospective
target business (a Target Business) will not be limited to a particular industry segment. All
activities from September 6, 2007 (date of inception) through December 31, 2008 were related to the
Companys formation, capital raising activities and identifying prospective target businesses. The
Company has selected December 31st as its fiscal year end.
The Company is considered to be a development stage company and, as such the financial statements
presented herein are presented in accordance with Statement of Financial Accounting Standards
(SFAS) No. 7, Accounting and Reporting by Development Stage Enterprises. The Company is subject
to the risks associated with the activities of development stage companies.
The registration statement for the Companys initial public offering (Offering) was declared
effective on January 23, 2008. The Company consummated the offering on January 30, 2008 for gross
proceeds of $200 million and contemporaneous with the consummation of the Offering, the Companys
Founding Stockholders purchased 5,800,000 warrants in the aggregate at $1.00 per warrant (the
Insider Warrants) in a private placement (the Private Placement). The Companys management
intends to apply substantially all of the net proceeds of the Offering and Private Placement toward
consummating a Business Combination. The initial Target Business must have a fair market value
equal to at least 80% of our net assets (excluding the amount held in the trust account (Trust
Account) representing the deferred portion of the underwriters discount (Note 8)), at the time of
such acquisition. However, there is no assurance that the Company will be able to successfully
effect a Business Combination.
Management has agreed that $200 million or $10.00 per Unit sold in the Offering, which includes the
$5.8 million received from the Private Placement of Insider Warrants will be held in the Trust
Account and maintained by American Stock Transfer and Trust Company acting as trustee. The money
will be invested in permitted United States government securities, within the meaning of Section
2(a) (16) of the Investment Company Act of 1940 having a maturity of 180 days or less or in money
market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company
Act of 1940, of which $8,955,000 or $0.45 per Unit will be paid to the underwriters only upon the
consummation of a Business Combination. The placing of 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, prospective acquisition targets or other entities it engages, execute agreements with the
Company 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. Up to an aggregate of
$3.5 million earned on the monies held in the Trust Account and $100,000 of net proceeds not held
in trust at the close of the Offering may be used to pay for due diligence of prospective Target
Businesses, legal and accounting fees relating to Securities and Exchange Commission (SEC)
reporting obligations and working capital to cover miscellaneous expenses, director and officer
insurance and reserves.
The Company, after signing a definitive agreement for a Business Combination, is obliged to submit
such transaction for approval by a majority of the public stockholders of the Company. Stockholders
that vote against such proposed Business Combination and exercise their redemption rights are,
under certain conditions described below, entitled to convert their shares into a $10.00 per share
distribution from the Trust Account (the Redemption Right). The actual per share redemption price
will be equal to the amount in the Trust Account (inclusive of any interest thereon, net of tax),
calculated as of two business days prior to the proposed Business Combination, divided by the
number of shares sold in the Offering, or approximately $10.00 per share based on the value of the
Trust Account as of December 31, 2008.
47
ATLAS ACQUISITION HOLDINGS CORP.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
Note 1 Discussion of the Companys Organization and Business Operations (continued)
The Companys stockholders prior to the Offering (the Initial Stockholders), have agreed to vote
their 5,000,000 founding shares of common stock in accordance with the manner in which the majority
of the shares of common stock offered in the Offering are voted by the Companys public
stockholders (the Public Stockholders) with respect to a Business Combination. In the event that
a majority of the outstanding shares of common stock voted by the Companys Public Stockholders
vote for the approval of the Business Combination and holders owning 30% or more of the outstanding
common stock do not vote against the Business Combination and do not exercise their Redemption
Rights, the Business Combination may then be consummated.
If the Company has not completed a Business Combination within 24 months from the date of the
Offering, (the Target Business Combination Period), the Company will dissolve and distribute to
its Public Stockholders, in proportion to their respective equity interests, the amount held in the
Trust Account, and any remaining net assets, after the distribution of the Trust Account. In the
event of liquidation, the per share value of the residual assets remaining available for
distribution (including Trust Account assets) may be less than the initial public offering price
per share in the Proposed Offering.
With respect to a Business Combination which is approved and consummated, any Public Stockholders
who vote against the Business Combination and exercise their Redemption Right will have their
common shares cancelled and returned to the status of authorized but unissued shares. The share
price will be $10.00 per share cash payment (which includes $0.45 attributable to the deferred
underwriting compensation) if the Business Combination is completed, plus any interest earned on
their portion of the Trust Account but less any interest that has been released to us to fund our
working capital requirements and to pay any of our tax obligations. Accordingly, Public
Stockholders holding less than 30% of the aggregate number of shares owned by all Public
Stockholders may seek redemption of their shares in the event of a Business Combination.
Note 2 Initial Public Offering.
In its initial public offering, effective January 23, 2008 (closed on January 30, 2008), the
Company sold to the public 20,000,000 units (the Units or a Unit) at a price of $10.00 per
Unit. Net proceeds from the initial public offering totaled approximately $185.3 million, which was
net of approximately $5.7 million in underwriting fees and other expenses paid at closing and
approximately $9.0 million of deferred underwriting fees. Each Unit consists of one share of the
Companys common stock and one warrant (a Warrant).
$194.2 million of the net proceeds from the initial public offering (which includes $8,955,000 of
the proceeds attributable to the underwriters discount), plus $5.8 million the Company received
from the sale of the Insider Warrants simultaneously with the consummation of the initial public
offering, has been placed into the Trust Account at Bank of America, which is maintained by
American Stock Transfer & Trust Company, as trustee. The proceeds held in trust will only be
invested in U.S. government securities within the meaning of Section 2(a)(16) of the Investment
Company Act of 1940, as amended, having a maturity of 180 days or less or in money market funds
meeting certain conditions under Rule 2a-7 promulgated thereunder.
Proceeds held in the Trust Account will not be available for the Companys use for any purpose,
except to pay any taxes and up to $3.5 million can be taken from the interest earned on the Trust
Account to fund the Companys working capital.
48
ATLAS ACQUISITION HOLDINGS CORP.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
Note 3 Summary of Significant Accounting Policies.
Development Stage
The Company is in the development stage as defined in SFAS No. 7. To date, the
Company has not generated any revenues and has devoted its efforts to various start-up activities
including development and capital raising.
Cash and Cash Equivalents
Included in cash and cash equivalents are deposits with financial
institutions as well as short-term money market instruments with original maturities of three
months or less when purchased.
Investments Held in Trust Account
The Companys restricted investments held in the Trust Account
at December 31, 2008 are currently invested in two treasury funds that include only U.S. Treasury
bills, notes, and other short-term obligations guaranteed by the U.S. Treasury. Both funds are
rated AAA by Standard & Poors, and neither fund invests in repurchase agreements. However, the
Company may in the future invest the proceeds held in trust in different U.S. government
securities within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 having a
maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7
promulgated under the Investment Company Act of 1940. The Company recognized interest income of
$2,453,872 on investments held in trust for both the year ended December 31, 2008 and for the
period from inception (September 6, 2007) to December 31, 2008, which are included on the
accompanying statements of operations.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a
significant concentration of credit risk consist primarily of cash and investments held in trust.
The Company may maintain deposits in federally insured financial institutions in excess of
federally insured limits. However, management believes the Company is not exposed to significant
credit risk due to the financial position of the depository institutions in which those deposits
are held.
Earnings Per Share
The Company complies with SFAS No. 128, Earnings Per Share, which requires
dual presentation of basic and diluted earnings per share on the face of the statement of
operations. Basic net income per share is computed by dividing net income by the weighted average
common shares outstanding for the period. Diluted net income per share reflects the potential
dilution that could occur if warrants were to be exercised or converted or otherwise resulted in
the issuance of common stock that then shared in the earnings of the entity.
The Companys statement of operations includes a presentation of net income per share for common
stock subject to possible redemption in a manner similar to the two-class method of net income per
share in accordance with FASBs Emerging Issue Task Force, Topic No. D-98 Classification and
Measurement of Redeemable Securities (EITF D-98). Basic and diluted income per common share
amounts for the maximum number of shares subject to possible redemption are calculated by dividing
the net interest income attributable to common shares subject to redemption by the weighted average
number of common shares subject to possible redemption. Basic and diluted net income per share
amounts for the shares outstanding not subject to redemption is calculated by dividing the net
income by the weighted average number of shares not subject to possible redemption. The Company
has dilutive securities in the form of 25,800,000 warrants, including 5,800,000 warrants issued as
part of the Private Placement, which resulted in approximately 5,391,000 and 4,074,000 incremental
common shares for the year ended December 31, 2008 and from September 6, 2007 (date of inception)
to December 31, 2008, respectively, using the treasury stock method, based on the assumed exercise
of the warrants. There were no incremental shares for the period September 6, 2007 (date of
inception) to December 31, 2007. The incremental shares are added to the basic weighted average
number of common shares outstanding (not subject to possible redemption), used in the calculation
of diluted net income per share.
49
ATLAS ACQUISITION HOLDINGS CORP.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
Note 3 Summary of Significant Accounting Policies (continued)
Fair Value of Financial Instruments
The fair value of the Companys assets and liabilities that
qualify as financial instruments under SFAS No. 107, Disclosures about Fair Value of Financial
Instrument, approximate their carrying amounts presented in the accompanying condensed balance
sheets, due to their short-term maturities.
Use of Estimates
The preparation of the financial statements in accordance with accounting
principles generally accepted in the United States of America requires the Companys management to
make estimates and assumptions that affect certain reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Income Taxes
The Company complies with the provisions of SFAS No. 109, Accounting for Income
Taxes. Deferred income tax assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities that will result in future taxable or
deductible amounts and are based on enacted tax laws and rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred income tax assets to the amount expected to be realized.
The Company also complies with Financial Accounting Standards Board (FASB) Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN
48), which provides criteria for the recognition, measurement, presentation, and disclosure of
uncertain tax positions. A tax benefit from an uncertain position may be recognized only if it is
more likely than not that the position is sustainable based on its technical merits. The Company
adopted FIN 48 effective January 1, 2008. The Company did not recognize any adjustment for
uncertain tax positions during the year ended December 31, 2008 and 2007, respectively.
Common Stock Subject to Possible Redemption
The Company accounts for common stock subject to possible redemption in accordance with EITF D-98.
Securities that are convertible into cash or other assets are classified outside of permanent
equity if they are convertible at the option of the holder. In addition, if the redemption causes a
liquidation event, the convertible securities should not be classified outside of permanent equity.
As discussed in Note 1, a Business Combination will only be consummated if a majority of the shares
of common stock voted by the Public Stockholders are voted in favor of a Business Combination and
Public Stockholders holding less than 30% (6,000,000) of common shares sold in the Offering
exercise their redemption rights. As further discussed in Note 1, if a Business Combination is not
consummated by January 23, 2010, the Company will liquidate. Accordingly, 5,999,999 shares of
common stock have been classified outside of permanent equity at redemption value. The Company
recognizes changes in the redemption value immediately as they occur and adjusts the carrying value
of the convertible common stock to equal its redemption value at the end of each reporting period.
Recently Issued Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS 141R). SFAS
141R replaces SFAS 141 and establishes principles and requirements for how an acquirer recognizes
and measures in its financial statements the identifiable assets acquired, the liabilities assumed,
any non-controlling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes
disclosure requirements which will enable users to evaluate the nature and financial effects of the
business combination. Acquisition costs associated with the business combination will generally be
expensed as incurred. SFAS 141R is effective for business combinations occurring in the fiscal
years beginning after December 15, 2008, which will require the Company to adopt these provisions
for business combinations occurring in fiscal 2009 and thereafter.
50
ATLAS ACQUISITION HOLDINGS CORP.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
Note 3 Summary of Significant Accounting Policies (continued)
In December 2007, the FASB issued SFAS 160, Non-controlling Interests in Consolidated Financial
Statements an amendment of ARB No. 51. SFAS 160 requires that ownership interests in
subsidiaries held by parties other than the parent, and the amount of consolidated net income, be
clearly identified, labeled and presented in the consolidated financial statements. It also
requires once a subsidiary is deconsolidated, any retained non-controlling equity investment in the
former subsidiary be initially measured at fair value. Sufficient disclosures are required to
clearly identify and distinguish between the interests of the parent and the interests of the
non-controlling owners. It is effective for fiscal years beginning after December 15, 2008, and
requires retroactive adoption of the presentation and disclosure requirements for existing minority
interests. All other requirements are applied prospectively. Upon the successful completion of a
Business Combination, the Company anticipates applying the provisions of SFAS 141R and potentially
SFAS 160.
On March 19, 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities (SFAS 161), to improve financial reporting of derivative instruments and
hedging activities by requiring enhanced disclosures to enable investors to better understand their
effects on an entitys financial position, financial performance, and cash flows. SFAS 161 is
effective for financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, which will require the Company to adopt these provisions beginning in fiscal
2009 and thereafter. Management is currently evaluating the effect that SFAS 161 may have on the
Companys financial statement disclosures.
The Company does not believe that any other recently issued, but not yet effective, accounting
standards if currently adopted would have a material effect on the accompanying condensed interim
financial statements.
Note 4
Taxes.
The Companys effective tax rate approximates the federal statutory rate. The Company is
incorporated in Delaware and accordingly is subject to Delaware franchise taxes. The Company
recognized approximately $151,000 of Delaware franchise tax expense, included as part of general
and administrative costs, in the accompanying statement of operations for the year ended December
31, 2008. There was no Delaware franchise tax expense recognized for the period from inception to
December 31, 2007.
The deferred tax asset recorded at December 31, 2008 is attributable to the Companys operating
expenses incurred from inception to December 31, 2008, which are not currently deductible (except
for the Delaware Franchise taxes) as the company is in the development stage.
Provision for income taxes consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period September 6, 2007
|
|
|
|
|
|
|
|
(date of inception)
|
|
|
|
For the year ended
|
|
|
to
|
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
December 31, 2008
|
|
Current expense
|
|
$
|
788,000
|
|
|
$
|
|
|
|
$
|
788,000
|
|
Deferred benefit
|
|
|
(235,000
|
)
|
|
|
|
|
|
|
(235,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
553,000
|
|
|
$
|
|
|
|
$
|
553,000
|
|
|
|
|
|
|
|
|
|
|
|
51
ATLAS ACQUISITION HOLDINGS CORP.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
Note 5
Deferred Registration Cost.
The Company complied with the requirements of SEC Staff Accounting Bulletin (SAB) Topic 5A
Expenses of Offering. Deferred registration costs consisted principally of legal and accounting
fees incurred related to the Offering and were charged to additional paid-in capital upon the
completion of the Offering.
Note 6 Notes Payable to Initial Stockholders.
The Company issued an aggregate of $150,000 in unsecured promissory notes to two of its initial
stockholders or their affiliates on September 19, 2007 (the Notes). The Notes bore interest at a
rate of 5% per annum and were payable in full, within 60 days following the consummation of the
Offering. The Notes, along with accrued interest, were repaid in full on January 31, 2008 in
connection with the consummation of the Offering.
Note 7 Fair Value Measurements.
Effective January 1, 2008, the Company implemented SFAS No. 157, Fair Value Measurement (SFAS
157), for its financial assets and liabilities that are re-measured and reported at fair value at
each reporting period, and non-financial assets and liabilities that are re-measured and reported
at fair value at least annually. In accordance with the provisions of FSP No. FAS 157-2, Effective
Date of FASB Statement No. 157, the Company has elected to defer implementation of SFAS 157 as it
relates to its non-financial assets and non-financial liabilities that are recognized and disclosed
at fair value in the financial statements on a non-recurring basis until January 1, 2009. The
Company is evaluating the impact, if any, this standard will have on its non-financial assets and
liabilities.
The adoption of SFAS 157 to the Companys financial assets and liabilities and non-financial assets
and liabilities that are re-measured and reported at fair value at least annually did not have an
impact on the Companys financial results.
The following table presents information about the Companys assets and liabilities that are
measured at fair value on a recurring basis as of December 31, 2008, and indicates the fair value
hierarchy of the valuation techniques the Company utilized to determine such fair value. In
general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active
markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data
points that are observable such as quoted prices, interest rates and yield curves. Fair values
determined by Level 3 inputs are unobservable data points for the asset or liability, and includes
situations where there is little, if any, market activity for the asset or liability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant Other
|
|
|
Observable
|
|
|
|
|
|
|
|
Active Markets
|
|
|
Observable Input
|
|
|
Inputs
|
|
Description
|
|
December 31, 2008
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,070,021
|
|
|
$
|
1,070,021
|
|
|
$
|
|
|
|
$
|
|
|
|
Intestments held in Trust
|
|
|
200,069,415
|
|
|
|
200,069,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
201,139,436
|
|
|
$
|
201,139,436
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair values of the Companys cash and cash equivalents and investments held in the Trust
Account are determined through market, observable and corroborated sources.
The carrying amounts reflected in the balance sheets for other current assets and accrued expenses
approximate fair value due to their short-term maturities.
52
ATLAS ACQUISITION HOLDINGS CORP.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
Note 8
Commitments.
Administrative Fees
Commencing on January 23, 2008, the Company has agreed to pay an affiliate of one of its sponsors
$10,000 per month for office, administrative, technology, and secretarial services. The Company
recognized $112,903 of such expense during the year ended December 31, 2008 and for the period from
inception (September 6, 2007) to December 31, 2008, which is included in general and administrative
costs on the accompanying statements of operations. There was no such expense during the period
from inception to December 31, 2007.
Underwriting Agreement
In connection with the Offering, the Company has entered into an underwriting agreement (the
Underwriting Agreement) with the underwriters in the Offering. The Company paid an underwriting
discount of 2.5225% of the Offering proceeds ($5,045,000) to the underwriters at the closing of the
Offering. The Company will pay the underwriters an additional fee of 4.4775% of the Offering
proceeds ($8,955,000) upon the consummation of a Business Combination.
Note 9 Capital Stock.
Preferred Stock
The Company is authorized to issue 100,000,000 shares of $.001 par value preferred stock with such
designations, voting and other rights and preferences as may be determined from time-to-time by the
Board of Directors.
Common Stock
The Company is authorized to issue an aggregate of 300,000,000 shares of $.001 par value common
stock.
Public Warrants
Each warrant included in the Units sold in the Offering (Public Warrant) will be exercisable for
one share of common stock. Except as set forth below, the Public Warrants entitle the holder to
purchase shares of common stock at $7.00 per share, subject to adjustment in the event of stock
dividends and splits, reclassifications, combinations and similar events, for a period commencing
on the completion of the Business Combination and ending four years from the date of the Offering.
The Company has the ability to redeem the Public Warrants, in whole or in part, at a price of $.01
per Public Warrant, at any time after the Public Warrants become exercisable, upon a minimum of 30
days prior written notice of redemption, and if, and only if, the last sale price of the Companys
common stock equals or exceeds $14.25 per share, for any 20 trading days within a 30-trading-day
period ending three business days before the Company sent the notice of redemption. If the Company
dissolves before the consummation of a Business Combination, there will be no distribution from the
Trust Account with respect to such Public Warrants, which will expire worthless. In addition, under
no circumstances will the Company be required to net cash settle the exercise of the warrants.
Insider Warrants
The Insider Warrants, sold concurrently with the Offering, are substantially identical to the
Public Warrants and may not be sold or transferred, except in limited circumstances, until after
the consummation of a Business Combination. If the Company dissolves before the consummation of a
Business Combination, there will be no distribution from the Trust Account with respect to such
Insider Warrants, which will expire worthless.
53
ATLAS ACQUISITION HOLDINGS CORP.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
Note 9 Capital Stock (continued)
As the proceeds from the exercise of the Public Warrants and Insider Warrants will not be received
until after the completion of a Business Combination, the expected proceeds from exercise will not
have any effect on the Companys financial condition or results of operations prior to a Business
Combination.
The sale of the Insider Warrants did not result in any stock-based compensation expense as the
warrants were sold at or above fair value.
Registration Rights Warrants
In accordance with the Warrant Agreement related to the Public Warrants and the registration rights
agreement associated with the Insider Warrants (collectively, the Public Warrants and Insider
Warrants are the Warrants), the Company is only required to use its reasonable best efforts to
register the Warrants and the shares of Common Stock issuable upon exercise of the Warrants and
once effective to use its reasonable best efforts to maintain the effectiveness of such
registration statement. The Company is not obligated to deliver securities, and there are no
contractual penalties for failure to deliver securities, if a registration statement is not
effective at the time of exercise. However, with regards to the Insider Warrants, the Company may
satisfy its obligation by delivering unregistered shares of common stock. In the event that a
registration statement is not effective at the time of exercise, the holder of the Public Warrants
shall not be entitled to exercise. Consequently, the Warrants may expire unexercised and
unredeemed. The holders of Warrants do not have the rights or privileges of holders of the
Companys common stock or any voting rights until such holders exercise their respective warrants
and receive shares of the Companys common stock.
54
ATLAS ACQUISITION HOLDINGS CORP.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
Note 10 Summarized Quarterly Financial Information (Unaudited).
The Companys unaudited condensed quarterly financial information is as follows for the year ended
December 31, 2008 and for period September 6, 2007 (date of inception) to December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2008
|
|
|
2008
|
|
|
2008
|
|
Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
$
|
(239,304
|
)
|
|
$
|
(177,795
|
)
|
|
$
|
(214,012
|
)
|
|
$
|
(199,542
|
)
|
Interest income
|
|
|
316,264
|
|
|
|
741,753
|
|
|
|
677,946
|
|
|
|
734,090
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(655
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for taxes
|
|
|
76,960
|
|
|
|
563,958
|
|
|
|
463,934
|
|
|
|
533,893
|
|
Provision for taxes
|
|
|
27,000
|
|
|
|
192,000
|
|
|
|
157,000
|
|
|
|
177,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the period
|
|
$
|
49,960
|
|
|
$
|
371,958
|
|
|
$
|
306,934
|
|
|
$
|
356,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding not
subject to possible redemption,
basic
|
|
|
19,000,001
|
|
|
|
19,000,001
|
|
|
|
19,000,001
|
|
|
|
15,148,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding not
subject to possible redemption,
diluted
|
|
|
24,289,292
|
|
|
|
25,212,156
|
|
|
|
24,929,282
|
|
|
|
19,117,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share not
subject to possible redemption,
basic
|
|
$
|
0.00
|
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share not
subject to possible redemption,
diluted
|
|
$
|
0.00
|
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
September 6, 2007
|
|
|
|
(date of inception)
|
|
|
|
to December 31,
|
|
|
|
2007
|
|
From Inception to December 31, 2007
|
|
|
|
|
Operating expenses
|
|
$
|
(10,000
|
)
|
Interest expense
|
|
|
(2,137
|
)
|
|
|
|
|
|
Loss before provision for taxes
|
|
|
(12,137
|
)
|
|
|
|
|
|
Net loss for the period
|
|
$
|
(12,137
|
)
|
|
|
|
|
|
Weighted average number of
common shares outstanding
|
|
|
5,750,000
|
|
Net loss per common share, basic
and diluted
|
|
$
|
0.00
|
|
55
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A(T). Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
We evaluated the effectiveness of our disclosure controls and procedures, as defined in the
Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K under the
supervision and with the participation of our management, including Mr. Hauslein, our Chief
Executive Officer and Principal Financial Officer. Based upon that evaluation, Mr. Hauslein
concluded that our disclosure controls and procedures were effective as of the end of the period
covered by this report.
Managements Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. In
connection with the preparation of this annual report, our management, with the participation of
our Chief Executive Officer and Chief Financial Officer, has assessed the effectiveness of our
internal control over financial reporting based on the framework in
Internal Control Integrated
Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our
management has concluded that our internal control over financial reporting is effective as of
December 31, 2008.
This annual report does not include an attestation report of our independent registered public
accounting firm regarding internal control over financial reporting. Managements report was not
subject to attestation by our independent registered public accounting firm pursuant to temporary
rules of the Commission that permit us to provide only managements report in this annual report.
(b) Changes in Internal Control Over Financial Reporting
During our fiscal quarter ended December 31, 2008, there was no change in our internal control
over financial reporting that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
Item 9B. Other Information.
Not applicable.
56
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Our current directors and executive officers are as follows:
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|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
|
|
James N. Hauslein
|
|
|
49
|
|
|
Chairman of the Board, Chief Executive Officer,
and Treasurer
|
Gaurav V. Burman
|
|
|
37
|
|
|
President, Secretary, and Director
|
Rohit M. Desai
|
|
|
70
|
|
|
Director
|
Robert A. Knox
|
|
|
56
|
|
|
Director
|
Raj Mishra
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|
|
39
|
|
|
Director
|
James N. Hauslein
has been our chairman, chief executive officer, and treasurer since our
inception in September 2007. Since May 2001, Mr. Hauslein has managed his personal private equity
and other investments. Mr. Hauslein was involved in the acquisition of a controlling interest in
Sunglass Hut International (previously NASDAQ: RAYS) in June 1987. In 1991, Mr. Hauslein led the
buyout of Sunglass Hut International. Mr. Hauslein served as chairman of Sunglass Hut
International from 1991 to 2001 and served as chief executive officer from May 1997 to January 1998
and January 2001 to April 2001. During Mr. Hausleins involvement with Sunglass Hut International,
the company increased its revenue through organic growth and acquisitions from approximately $37
million in 1987 to approximately $680 million in fiscal 2000 prior to its sale to Luxottica Group
SpA (Milan and NYSE: LUX). While at Sunglass Hut International, Mr. Hauslein presided over
numerous add-on acquisitions in the United States and Australia as well as organic growth in North
America, the Caribbean, and Europe and a joint venture in Singapore. At the time of Luxottica
Groups acquisition, Sunglass Hut International operated approximately 2,000 company-owned Sunglass
Hut International, Watch Station, Watch World, and combination stores in the United States, Canada,
the Caribbean, Europe, Asia, Australia, and New Zealand. In connection with the April 2001 sale of
Sunglass Hut International, Mr. Hauslein entered into a noncompetition agreement that lasted until
April 2006. From 1986 to 1991, Mr. Hauslein was a partner at private equity firm Kidd, Kamm &
Company, where he was responsible for identifying, consummating, and overseeing a number of
middle-market acquisitions. Mr. Hauslein is an independent director of GLG Partners, Inc. (NYSE:
GLG) and was previously an independent director, from July 2006 to November 2007, of Freedom
Acquisition Holdings, Inc. (formerly AMEX: FRH), a $528 million general purpose blank check company
that completed a business combination with GLG Partners, Inc. in a transaction valued at
approximately $3.4 billion. Mr. Hauslein is also an independent director of Liberty Acquisition
Holdings Corp. (NYSE Alternext: LIA), a general purpose blank check company that raised
approximately $1 billion in its December 2007 initial public offering. Mr. Hauslein is currently a
director of Elephant Capital plc (AIM: ECAP), a listed private equity and investment management
business. Mr. Hauslein received his M.B.A., with distinction, from Cornell Universitys Johnson
Graduate School of Management and his B.S. in chemical engineering from Cornell University.
Gaurav V. Burman
has served as our president, secretary, and a member of our board of
directors since our inception in September 2007. Mr. Burman is a founding partner of Elephant
Capital plc, an India-focused private equity fund that he founded in May 2007. From May 2005 to
May 2007, Mr. Burman was a founding partner of Prometian Investments plc, a UK private equity fund.
From April 1998 to March 2005, Mr. Burman worked in a variety of capacities for Dresdner Kleinwort
Capital, a global private equity firm with over US$1.5 billion under management. Mr. Burman was
initially based in London where he was a member of the European mezzanine team. In 1998 after
Dresdner acquired Kleinwort Benson, Mr. Burman re-located to New York and reported directly to the
head of Dresdners Global Private Equity Group. From January 1995 to April 1998, Mr. Burman served
as a director in the business development group at Dabur India Ltd. (Mumbai: DABUR), a $2.5 billion
market cap consumer goods business in India, which is majority owned and controlled by the Burman
family. Mr. Burman is a member of the Young Presidents Organization (YPO) and is currently a
member of the board of directors of a number of private UK companies. Mr. Burman holds a BA with a
dual degree in Economics and History from Tufts University and has remained involved with Tufts,
where he is a member of the board of the international overseers. Mr. Burman is the brother of
Mohit Burman, one of our special advisors.
57
Rohit M. Desai
has served as a member of our board of directors since our inception in
September 2007. Mr. Desai is also the Chairman, President, and Chief Investment Officer of Desai
Capital Management Incorporated (DCMI), positions he has held since founding DCMI in 1984. DCMI
is a New York-based private equity investment firm that, since inception, has sponsored four
institutional investment partnerships, each with committed capital between $325 million and $410
million. The investment programs for these partnerships have ended and they are no longer active.
Prior to the formation of DCMI, Mr. Desai had a 20-year affiliation with JPMorgan from 1964 to
1984, where he was a Senior Vice President, Head of Special Investments, which included private
equity investments, real estate investments, venture capital, and oil and gas investments. Mr.
Desai has served on the board of directors of the following public companies: The Rouse Company
from January 1989 to November 2004, Sitel Corporation from April 2000 to January 2007, TeleCorp PCS
from December 1997 to November 2001, SunCom Wireless from May 2002 to October 2006, Independence
Community Bank from April 1992 to June 2006, and Sunglass Hut International from June 1987 to July
1991 and March 1993 to April 2001. During his service as a director of The Rouse Company, Mr.
Desai served as chairman of various board committees, including the audit committee and the
compensation committee. Mr. Desai also served on the executive compensation, audit, nominating,
and governance committees of many of the boards on which he sat. From May 1993 to present, Mr.
Desai has served on the board of Finlay Enterprises, Inc., a retailer of fine jewelry, and on the
advisory board of Burgundy Asset Management Ltd., a Canadian investment advisory firm providing
discretionary investment management to private individuals, charitable foundations, and select
institutional investors. Mr. Desai also serves on the audit and nominating committees of Finlay
Enterprises, Inc. From January 2008 to present, Mr. Desai has served on the board of Alphatec
Holdings, Inc., a publicly traded designer, developer, manufacturer, and marketer of products for
the surgical treatment of spine disorders. Mr. Desai graduated from the University of Bombay in
1958 with a Bachelor of Science Degree, the University of North Carolina in 1960 with a Master of
Science Degree, and the Harvard Business School in 1964 with an MBA.
Robert A. Knox
has served as a member of our board of directors since our inception in
September 2007. Since December 1996, Mr. Knox has been a senior managing director of Cornerstone
Equity Investors, a New York-based private equity firm that he co-founded. The investment
principals of Cornerstone have raised committed capital in excess of $1.2 billion and have funded
over 100 companies through middle market buyouts and expansion financings since 1984. Prior to the
formation of Cornerstone Equity Investors, from 1994 to December 1996 Mr. Knox was Chairman and
Chief Executive Officer, and from 1984 to 1994 he was president of, Prudential Equity Investors,
Inc., the private equity affiliate of the Prudential Insurance Company. Mr. Knox currently serves
on the Board of Directors and is the lead Director of Health Management Associates (NYSE: HMA) and
several private corporations and investment firms. Mr. Knox graduated from Boston University in
1974 with a Bachelor of Arts Degree in Economics and earned an MBA from Boston University in 1975.
Mr. Knox is Chairman of the Board of Trustees of Boston University.
Raj Mishra
has served as a member of our board of directors since our inception in September
2007. Since July 2003, Mr. Mishra has also been the Founder and Chief Investment Officer of Indea
Capital, a $300 million India-dedicated investment management firm. Indea Capital invests in both
private and public opportunities, and manages capital for large institutions, pension funds, and
many of the worlds prominent families. Indea has offices in Singapore and Mumbai (India) and is
regulated by the MAS in Singapore. From October 2001 to July 2003, Mr. Mishra engaged in various
activities related to the formation of Indea Capital. Prior to the formation of Indea Capital,
from January 1999 to October 2001 Mr. Mishra was Managing Director and Head of Equities of Dresdner
Kleinwort Wasserstein, the international investment banking arm of Dresdner Bank. Prior to joining
Dresdner, from March 1998 to September 1998 Mr. Mishra was a director with Banco Santander in Hong
Kong. From October 1994 to January 1998, Mr. Mishra was a director with Peregrine Securities,
where he headed Indian equities and was based in Hong Kong and Mumbai. From December 1993 to
October 1994, Mr. Mishra worked as an equity analyst in New York and Mumbai for Smith New Court, an
independent British securities house. From July 1991 to January 1993, Mr. Mishra worked as a
business analyst in New Delhi for Ranbaxy Labs, Indias largest pharmaceutical company. Mr. Mishra
graduated from Xavier Institute of Management in India with a degree in Economics and earned an MBA
in 1991.
There are no family relationships among any of our directors or executive officers. Directors
hold office until the next annual meeting of stockholders or until their successors have been
elected and qualified. Officers serve at the pleasure of the board of directors.
58
Corporate Governance
Audit Committee
Our audit committee of the board of directors currently consists of Rohit M. Desai, chairman,
Robert A. Knox, and Raj Mishra, each of whom is an independent director under NYSE Alternext U.S.
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 quarterly
financial statements and annual audited financial statements, and recommending to the board
whether the quarterly financial statements should be included in our Forms 10-Q and 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;
|
|
|
|
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; and
|
|
|
|
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.
|
Financial Experts on Audit Committee
The audit committee has been, and at all times will be, composed exclusively of independent
directors who are financially literate, as defined under NYSE Alternext U.S. listing standards.
NYSE Alternext U.S. 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 NYSE Alternext U.S. that the audit 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 Rohit M. Desai satisfies the NYSE Alternext U.S. definition of financial sophistication and
also qualifies as an audit committee financial expert, as defined under the rules and regulations
of the SEC.
59
Code of Ethics and Committee Charters
Effective upon consummation of our initial public offering, we adopted 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 in accordance with
applicable federal securities laws and the rules of the
NYSE Alternext U.S. We have filed copies of our code of ethics as an exhibit to this report.
You may review these documents by accessing our public filings at the SECs web site at
www.sec.gov. In addition, a copy of the code of ethics will be provided, without charge, upon
request to us in writing addressed to our Chief Executive Officer at our address listed herein. We
intend to disclose any amendments to or waivers of certain provisions of our code of ethics in a
Current Report on Form 8-K.
Compliance with Section 16(a)
Section 16(a) of the Exchange Act requires our directors and executive officers and persons
who own more than 10% of a registered class of our equity securities to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in beneficial ownership
of Common Stock and other equity securities of us. Directors, officers, and greater than 10%
stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file.
To our knowledge, based solely upon our review of the copies of such reports furnished to us,
we believe that all of our directors, officers, and greater than 10% stockholders have complied
with the applicable Section 16(a) reporting requirements in a timely fashion.
Guidance for Selecting Director Nominees
Since the filing of our prospectus relating to our initial public offering on January 25,
2008, there have been no material changes to our guidelines for selecting director nominees.
Item 11. Executive Compensation
Neither of our executive officers nor any of our other directors have received any cash
compensation for services rendered. In September 2007, each of our independent directors purchased
25,000 shares of our Common Stock for a purchase price of $100.00. However, none of them serve as
officers of ours nor receive any compensation for serving in such role, other than reimbursement of
actual out-of-pocket expenses. As the price paid was fair market value at the time, we do not
consider the sale of the common stock to be compensation. Rather, we believe that because they own
such shares, no compensation (other than reimbursement of out-of-pocket expenses) is necessary and
such persons agreed to serve in such role without compensation.
We have agreed to pay Hauslein & Company, Inc., an affiliate of Mr. Hauslein, a total of
$10,000 per month for office space, administrative services, and secretarial support until the
earlier of our consummation of a business combination or our liquidation. This arrangement was
agreed to by Hauslein & Company, Inc. for our benefit and is not intended to provide Mr. Hauslein
compensation in lieu of a salary. We believe that such fees are at least as favorable as we could
have obtained from an unaffiliated third party.
Other than this $10,000 per-month fee, no compensation of any kind, including finders and
consulting fees, will be paid to our executive officers, our directors, or any of their respective
affiliates, for services rendered prior to or in connection with a business combination. However,
these individuals and the sponsors 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. After a business combination, any of
our executive officers and directors who remain with us may be paid consulting, management, or
other fees from the combined company with any and all amounts being fully disclosed to
stockholders, to the extent then known, in the proxy solicitation materials furnished to our
stockholders. It is unlikely the amount of such compensation will be known at the time of a
stockholder meeting held to consider a business combination, as it will be up to the directors of
the post-combination business to determine executive and director compensation.
60
|
|
Item 12.
|
Security Ownership of Certain and Beneficial Owners and Management and Related
Stockholder Matters.
|
The following table sets forth information regarding the beneficial ownership of our common
stock as of February 27, 2009 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 executive officers and directors; and
|
|
|
|
|
all of our executive officers and directors as a group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Number of Shares
|
|
|
Outstanding
|
|
Name and Address of
|
|
of Common Stock
|
|
|
Common Stock
|
|
Beneficial Owner
|
|
Beneficially Owned(1)
|
|
|
Beneficially Owned(2)
|
|
|
|
|
|
|
|
|
|
|
Officers and Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James N. Hauslein(3)
|
|
|
2,373,914
|
|
|
|
9.5
|
%
|
|
|
|
|
|
|
|
|
|
Gaurav V. Burman(4)
|
|
|
515,353
|
|
|
|
2.1
|
%
|
|
|
|
|
|
|
|
|
|
Rohit M. Desai(5)
|
|
|
25,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Robert A. Knox
|
|
|
25,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Raj Mishra
|
|
|
25,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
All officers and directors as a group (5 individuals)
|
|
|
3,464,267
|
|
|
|
11.9
|
%
|
|
|
|
|
|
|
|
|
|
5% Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integrated Core Strategies (US) LLC(6)
|
|
|
2,218,669
|
|
|
|
8.9
|
%
|
|
|
|
|
|
|
|
|
|
Federated Investors, Inc.(7)
|
|
|
5,001,200
|
|
|
|
20
|
%
|
|
|
|
|
|
|
|
|
|
Basso Funds(8)
|
|
|
1,300,000
|
|
|
|
5.2
|
%
|
|
|
|
*
|
|
Less than 1%.
|
|
(1)
|
|
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.
Except as otherwise stated, the business address of each of the beneficial owners is c/o
Hauslein & Company, Inc., 11450 SE Dixie Highway, Suite 106, Hobe Sound, Florida 33455.
|
|
(2)
|
|
The percentages shown are calculated based on 25,000,000 shares of common stock outstanding
on February 27, 2009.
|
|
(3)
|
|
Includes 17,391 shares held by the Diane G. Hauslein Trust, of which Mr. Hauslein is the
trustee. Excludes the 2,900,000 insider warrants held by Mr. Hauslein, which are not
exercisable until our consummation of a business combination.
|
|
(4)
|
|
Represents 515,353 shares held by Elephant North America Limited, a holding company beneficially owned by
Mr. Burman. Excludes the 287,500 insider warrants held by Elephant North America Limited,
which are not exercisable until our consummation of a business combination.
|
|
(5)
|
|
All such shares are held by the Irrevocable Trust #1 for Descendants of Rohit Desai, of which
Mr. Desais wife is the trustee. Mr. Desai disclaims beneficial ownership of all of such
shares.
|
61
|
|
|
(6)
|
|
Based on a Schedule 13G/A filed on November 3, 2008 with the SEC jointly by Integrated Core
Strategies (US) LLC, Millennium Management LLC, and Israel A. Englander. Represents shares of
our common stock held by Integrated Core Strategies (US) LLC. Millennium Management LLC is
the manager of Integrated Core Strategies (US) LLC, and Israel A. Englander is the managing
member of Millennium Management LLC. Integrated Core Strategies (US) LLC, Millennium
Management LLC, and Israel A. Englander each exercise shared voting and dispositive power over
all such shares. The address of Integrated Core Strategies (US) LLC is 666 Fifth Avenue, New
York, New York 10103.
|
|
(7)
|
|
Based on a Schedule 13G filed on February 11, 2008 with the SEC jointly by Federated
Investors, Inc., Voting Shares Irrevocable Trust, John F. Donahue, Rhodora J. Donahue, and J.
Christopher Donahue. Represents shares of common stock held by Federated Investors, Inc.
Voting Shares Irrevocable Trust, John F. Donahue, Rhodora J. Donahue, and J. Christopher
Donahue are the holders of all the outstanding voting stock of Federated Investors, Inc.
Federated Investors, Inc. and Voting Shares Irrevocable Trust each exercise sole voting and
dispositive power over all such shares. John F. Donahue, Rhodora J. Donahue, and J.
Christopher Donahue each exercise shared voting and dispositive power over all such shares.
The address of Federated Investors, Inc. is Federated Investors Tower, Pittsburg, Pennsylvania
15222.
|
|
(8)
|
|
Based on a Schedule 13G filed on March 27, 2008 with the SEC jointly by Basso Fund Ltd.,
Basso Multi-Strategy Holding Fund Ltd., Basso Capital Management, L.P., Basso GP, LLC, Howard
Fischer, Philip Platek, John Lepose, and Dwight Nelson. Represents 103,711 shares of our
common stock held by Basso Fund Ltd. and 1,196,289 shares of our common stock held by Basso
Multi-Strategy Holding Fund Ltd. (together referred to in this report as the Basso Funds).
Basso Capital Management, L.P. is the investment manager of the Basso Funds and Basso GP, LLC
is the general partner of Basso Capital Management, L.P. Howard Fischer, Philip Platek, John
Lepose, and Dwight Nelson are controlling persons of Basso GP, LLC. The Basso Funds, Basso
Capital Management, L.P., Basso GP, LLC, Howard Fischer, Philip Platek, John Lepose, and
Dwight Nelson each exercise shared voting and dispositive power over all such shares. The
address of the Basso Funds is 1266 East Main Street, Fourth Floor, Stamford Connecticut
06902.
|
All of the 5,750,000 shares of common stock acquired by our founders and outstanding prior to
the date of our initial public offering (750,000 of which were forfeited in March 2008 due to the
expiration of the underwriters over-allotment option) were placed in escrow with American Stock
Transfer & Trust Company, as escrow agent, until one year after the consummation of our initial
business combination. The 5,000,000 remaining shares may be released from escrow earlier than such
date if, within the first year after we consummate a business combination:
|
|
|
the last sales price of our common stock equals or exceeds $18.00 per share (as adjusted
for any stock splits) for any 20 trading days within any 30-trading-day period; or
|
|
|
|
we consummate a subsequent liquidation, merger, stock exchange, or other similar
transaction that results in all of our stockholders having the right to exchange their
shares of common stock for cash, securities, or other property.
|
During the escrow period, the holders of these shares will not be able to sell or transfer
their securities except (i) by an entity holding initial shares to persons controlling, controlled
by, or under common control with such entity, or to any stockholder, member, partner, or limited
partner of such entity, (ii) to relatives and trusts for estate planning purposes, or (iii) by
private sales made at or prior to the consummation of a business combination at prices no greater
than the price at which the shares were originally purchased, in each case where the transferee
agrees to the terms of the escrow agreement, but will retain all other rights as our stockholders,
including, without limitation, the right to vote their shares of common stock and the right to
receive cash dividends, if declared. A transferee of the initial shares outstanding prior to the
date of our initial public offering would not receive any portion of the liquidation proceeds in
the event of a liquidation. Transferees will be required to execute and will be bound by the same
agreements as the initial stockholders. If dividends are declared and payable in shares of common
stock, such dividends will also be placed in escrow. If we are unable to effect a business
combination and liquidate, none of our existing stockholders will receive any portion of the
liquidating proceeds with respect to their initial shares.
62
Item 13. Certain Relationships and Related Transactions, and Director Independence.
In September 2007, we sold 3,408,907 shares of our common stock to the individuals set forth
below for approximately $13,636 in cash, or $0.004 per share, and in January 2008, we sold
3,187,500 insider warrants to the individuals set forth below for $3,187,500 in cash, or $1.00 per
warrant, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
|
Name
|
|
Shares(1)
|
|
Warrants(2)
|
|
Relationship to Us
|
James N. Hauslein
|
|
|
2,730,001
|
(3)
|
|
|
2,900,000
|
|
|
Chairman of the Board, Chief
Executive Officer, and Treasurer
|
Gaurav V. Burman
|
|
|
592,656
|
(4)
|
|
|
287,500
|
(5)
|
|
President, Secretary, and Director
|
Rohit M. Desai
|
|
|
28,750
|
(6)
|
|
|
|
|
|
Director
|
Robert A. Knox
|
|
|
28,750
|
|
|
|
|
|
|
Director
|
Raj Mishra
|
|
|
28,750
|
|
|
|
|
|
|
Director
|
|
|
|
(1)
|
|
In March 2008, James N. Hauslein, Guarav V. Burman, Rohit M. Desai, Robert A. Knox, and Raj
Mishra forfeited 356,087, 77,303, 3,750, 3,750, and 3,750 of such shares of our common stock,
respectively, due to the expiration of the underwriters over-allotment option.
|
|
(2)
|
|
Messrs. Hauslein and Burman, using their own funds personally or through wholly owned
entities, purchased the insider warrants from us. These purchases took place on a private
placement basis simultaneously with the consummation of our initial offering. The purchase
price for the insider warrants was delivered to American Stock Transfer & Trust Company, who
is acting solely as escrow agent in connection with the private sale of insider warrants.
American Stock Transfer & Trust Company deposited the purchase price into the trust account
simultaneously with the consummation of our initial public offering. The insider warrants are
identical to the warrants underlying the units sold in our initial public offering except that
the insider warrants (i) may be exercised whether or not a registration statement relating to
the common stock issuable upon exercise of the warrants is effective and current, and (ii)
will not be redeemable by us so long as they are still held by the purchasers or their
affiliates. The purchasers have agreed that the insider warrants will not be sold or
transferred by them (except to employees of Promethean Investments LLP or to our directors or
special advisors at the same cost per warrant originally paid by them and upon execution of an
agreement to be bound by the 90-day lock-up) until 90 days after the consummation of our
business combination. Certain holders of these insider warrants (or underlying shares) will
be entitled to demand that we register these securities pursuant to a registration rights
agreement. These holders may elect to exercise these registration rights with respect to such
securities at any time after we consummate a business combination. In addition, these holders
have certain piggyback registration rights with respect to registration statements filed
subsequent to such date. We will bear the expenses incurred in connection with the filing of
any such registration statements.
|
|
(3)
|
|
Includes 20,000 shares held by the Diane G. Hauslein Trust, of which Mr. Hauslein is the
trustee.
|
|
(4)
|
|
All such shares are held by Elephant North America Limited, a holding company beneficially
owned by Mr. Burman.
|
|
(5)
|
|
All such insider warrants are held by Elephant North America Limited, a holding company
beneficially owned by Mr. Burman.
|
|
(6)
|
|
All such shares are held by the Irrevocable Trust #1 for Descendants of Rohit Desai, of which
Mr. Desais wife is the trustee. Mr. Desai disclaims beneficial ownership of all of such
shares.
|
Certain of our founders will be entitled to make up to a total of two demands that we register
their shares pursuant to a registration rights agreement. These founders may elect to exercise
these registration rights at any time commencing three months prior to the date on which these
shares of common stock are released from escrow. In addition, our founders have certain
piggyback registration rights with respect to registration statements filed subsequent to the
date on which these shares of common stock are released from escrow. We will bear the expenses
incurred in connection with the filing of any such registration statements.
63
Hauslein & Company, an affiliate of James N. Hauslein, has agreed that it will make available
to us certain administrative, technology, and secretarial services, as well as the use of certain
limited office space, as we may require from time to time. We have agreed to pay Hauslein &
Company $10,000 per month for these services. Accordingly, James N. Hauslein will benefit from the
transaction. However, this arrangement is solely for our benefit and is not intended to provide
Mr. Hauslein compensation in lieu of a salary. We believe, based on rents and fees for similar
services, that the fee charged by Hauslein & Company is at least as favorable as we could have
obtained from an unaffiliated person. However, as our directors may not be deemed independent,
we did not have the benefit of disinterested directors approving this transaction.
In 2007, James N. Hauslein and Promethean Investments LLP had advanced to us an aggregate of
$75,000 to cover expenses related to our initial offering. The loans were payable, at 5% interest
per year, within 60 days of the consummation of our initial public offering. We repaid these loans
along with accrued interest in January 2008 from the proceeds of our initial public offering not
placed in trust available to us.
We will reimburse our officers and directors for any actual out-of-pocket business expenses
incurred by them in connection with activities on our behalf such as identifying potential target
businesses, performing due diligence on potential business combinations, and travel expenses,
meals, and lodging incurred in visiting potential target businesses. There is no limit on the
amount of actual out-of-pocket expenses that could be incurred.
Other than the $10,000 per month administrative fee and 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 existing
stockholders, officers, directors, or special advisors, or to any of their respective affiliates,
prior to, or with respect to the consummation of, a business combination (regardless of the type of
transaction that it is).
All ongoing and future transactions between us and any of our officers and directors or their
respective affiliates, including loans by our officers and directors, will be on terms believed by
us to be no less favorable to us than are available from unaffiliated third parties. Such
transactions or loans, including any forgiveness of loans, will require prior approval by a
majority of our uninterested independent directors (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.
Director Independence
NYSE Alternext U.S. requires that a majority of our board must be composed of independent
directors, 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 that, 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.
We have determined that Messrs. Robert A. Knox, Raj Mishra, and Rohit M. Desai, which together
constitute a majority of our board, are independent directors as defined under the listing
standards of the NYSE Alternext U.S. Our independent directors hold regularly scheduled meetings
at which only independent directors are present.
64
Item 14. Principal Accountant Fees and Services.
The firm of Rothstein, Kass & Company, P.C. or, Rothstein Kass, acts as our principal
accountant. Rothstein Kass manages and supervises the audit of our financial statements, and is
exclusively responsible for the opinion rendered in connection with its examination. The following
is a summary of fees paid to Rothstein Kass for services rendered:
Audit Fees
The aggregate fees billed to our company for professional services rendered by Rothstein Kass
for the years ended December 31, 2007 and 2008 were $27,500 and $65,500, respectively. Such
amounts represent payment for (a) the annual audit of our financial statements for such years and
(b) the audit of our financial statements dated September 24, 2007 and January 30, 2008 filed with
our registration statement on Form S-1 and our Current Report on Form 8-K, respectively.
Audit-Related Fees
We did not receive audit-related services that are not reported as Audit Fees for the years
ended December 31, 2007 or 2008.
Tax Fees
We did not receive professional services for tax compliance, tax advice and tax planning for
the years ended December 31, 2007 or 2008.
All other Fees
We did not receive products and services provided by Rothstein Kass, other than those
discussed above, for the years ended December 31, 2007 or 2008.
Pre-Approval Policy
Since our audit committee was not formed until January 2008, the audit committee did not
pre-approve all of the services provided in 2007, although any services rendered prior to the
formation of our audit committee were approved by our board of directors. Since the formation of
our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all
auditing services and permitted non-audit services to be performed for us by Rothstein Kass,
including the fees and terms thereof (subject to the
de minimus
exceptions for non-audit services
described in the Exchange Act which are approved by the audit committee prior to the completion of
the audit). The audit committee may form and delegate authority to subcommittees of the audit
committee consisting of one or more members when appropriate, including the authority grant
pre-approvals of audit and permitted non-audit services, provided that decisions of such
subcommittee to grant pre-approvals shall be presented to the full audit committee at its next
scheduled meeting.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a)
|
|
Financial Statements and Financial Statement Schedules
|
|
(1)
|
|
See Item 8, Financial Statements and Supplementary Data.
|
|
|
(2)
|
|
All supplemental schedules have been omitted since the information is included
in the financial statements or the notes thereto or that they are not require or are
not applicable.
|
|
|
(3)
|
|
See attached Exhibit Index of this Annual Report on Form 10-K.
|
65
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
|
|
|
|
3.1
|
|
|
Amended and Restated Certificate of Incorporation of Atlas Acquisition Holdings Corp.*
|
|
|
|
|
|
|
3.2
|
|
|
Bylaws of Atlas Acquisition Holdings Corp.*
|
|
|
|
|
|
|
4.1
|
|
|
Specimen Unit Certificate*
|
|
|
|
|
|
|
4.2
|
|
|
Specimen Common Stock Certificate*
|
|
|
|
|
|
|
4.3
|
|
|
Specimen Warrant Certificate*
|
|
|
|
|
|
|
4.4
|
|
|
Warrant Agreement, dated as of January 24, 2008, by and between Atlas Acquisition Holdings
Corp. and American Stock Transfer & Trust Company*
|
|
|
|
|
|
|
10.1
|
|
|
Letter Agreement, dated as of January 24, 2008, among Atlas Acquisition Holdings Corp.,
Lazard Capital Markets LLC, Morgan Stanley & Co. Incorporated, and the stockholders named
therein*
|
|
|
|
|
|
|
10.2
|
|
|
Investment Management Trust Agreement, dated as of January 24, 2008, by and between Atlas
Acquisition Holdings Corp. and American Stock Transfer & Trust Company*
|
|
|
|
|
|
|
10.3
|
|
|
Stock Escrow Agreement, dated as of January 24, 2008, by and among Atlas Acquisition Holdings
Corp., American Stock Transfer & Trust Company, and the stockholders named therein*
|
|
10.4
|
|
|
Letter Agreement between Hauslein & Company, Inc. and Atlas Acquisition Holdings Corp.*
|
|
|
|
|
|
|
10.6
|
|
|
Registration Rights Agreement, dated as of January 30, 2008, by and among Atlas Acquisition
Holdings Corp. and the stockholders named therein*
|
|
|
|
|
|
|
10.8
|
|
|
Indemnification Agreement, dated as of January 23, 2008, by and between Atlas Acquisition
Holdings Corp. and each officer, director, and special advisor*
|
|
|
|
|
|
|
14
|
|
|
Code of Conduct and Ethics*
|
|
|
|
|
|
|
31
|
|
|
Certification of Chief Executive Officer and Principal Financial Officer
|
|
|
|
|
|
|
32
|
|
|
Certification of Chief Executive Officer and Principal Financial Officer
|
|
|
|
*
|
|
Incorporated by reference to the corresponding exhibit filed with the Registrants Current
Report on Form 8-K filed with the Securities and Exchange Commission on January 31, 2008.
|
66
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
|
|
ATLAS ACQUISITION HOLDINGS CORP.
|
|
Date February 27, 2009
|
By:
|
/s/ James N. Hauslein
|
|
|
|
James N. Hauslein
|
|
|
|
Chairman of the Board and Chief Executive Officer
|
|
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints each of James N. Hauslein and George L. Pita as true and lawful attorney-in-fact and
agent with full power of substitution and resubstitution, for him, her, or it and in his, her, or
its name, place, and stead, in any and all capacities to sign any and all amendments to this Annual
Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the SEC granting unto said attorney-in-fact and agent the full power and
authority to do and perform each and every act and thing requisite and necessary to be done in and
about the foregoing, as to all intents and purposes as either of them might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent, or their substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
Signature
|
|
Position
|
|
Date
|
|
|
|
|
|
/s/ James N. Hauslein
James N. Hauslein
|
|
Chairman of the Board, Chief
Executive Officer,
and Treasurer
(Principal Executive Officer,
Principal Financial Officer,
and
Principal
Accounting Officer)
|
|
February 27, 2009
|
|
|
|
|
|
/s/ Gaurav V. Burman
Gaurav V. Burman
|
|
President, Secretary, and Director
|
|
February 27, 2009
|
|
|
|
|
|
/s/ Rohit M. Desai
Rohit M. Desai
|
|
Director
|
|
February 27, 2009
|
|
|
|
|
|
/s/ Robert A. Knox
Robert A. Knox
|
|
Director
|
|
February 27, 2009
|
|
|
|
|
|
/s/ Raj Mishra
Raj Mishra
|
|
Director
|
|
February 27, 2009
|
67
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
|
|
|
|
3.1
|
|
|
Amended and Restated Certificate of Incorporation of Atlas Acquisition Holdings Corp.*
|
|
|
|
|
|
|
3.2
|
|
|
Bylaws of Atlas Acquisition Holdings Corp.*
|
|
|
|
|
|
|
4.1
|
|
|
Specimen Unit Certificate*
|
|
|
|
|
|
|
4.2
|
|
|
Specimen Common Stock Certificate*
|
|
|
|
|
|
|
4.3
|
|
|
Specimen Warrant Certificate*
|
|
|
|
|
|
|
4.4
|
|
|
Warrant Agreement, dated as of January 24, 2008, by and between Atlas Acquisition Holdings
Corp. and American Stock Transfer & Trust Company*
|
|
|
|
|
|
|
10.1
|
|
|
Letter Agreement, dated as of January 24, 2008, among Atlas Acquisition Holdings Corp.,
Lazard Capital Markets LLC, Morgan Stanley & Co. Incorporated, and the stockholders named
therein*
|
|
|
|
|
|
|
10.2
|
|
|
Investment Management Trust Agreement, dated as of January 24, 2008, by and between Atlas
Acquisition Holdings Corp. and American Stock Transfer & Trust Company*
|
|
|
|
|
|
|
10.3
|
|
|
Stock Escrow Agreement, dated as of January 24, 2008, by and among Atlas Acquisition Holdings
Corp., American Stock Transfer & Trust Company, and the stockholders named therein*
|
|
|
|
|
|
|
10.4
|
|
|
Letter Agreement between Hauslein & Company, Inc. and Atlas Acquisition Holdings Corp.*
|
|
|
|
|
|
|
10.6
|
|
|
Registration Rights Agreement, dated as of January 30, 2008, by and among Atlas Acquisition
Holdings Corp. and the stockholders named therein*
|
|
|
|
|
|
|
10.8
|
|
|
Indemnification Agreement, dated as of January 23, 2008, by and between Atlas Acquisition
Holdings Corp. and each officer, director, and special advisor*
|
|
|
|
|
|
|
14
|
|
|
Code of Conduct and Ethics*
|
|
|
|
|
|
|
31
|
|
|
Certification of Chief Executive Officer and Principal Financial Officer
|
|
|
|
|
|
|
32
|
|
|
Certification of Chief Executive Officer and Principal Financial Officer
|
|
|
|
*
|
|
Incorporated by reference to the corresponding exhibit filed with the Registrants Current
Report on Form 8-K filed with the Securities and Exchange Commission on January 31, 2008.
|
68
Grafico Azioni Atlas Acquistion Hldg Corp (AMEX:AXG)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni Atlas Acquistion Hldg Corp (AMEX:AXG)
Storico
Da Giu 2023 a Giu 2024