Attached files
file | filename |
---|---|
EX-4.1 - Crumbs Bake Shop, Inc. | v182114_ex4-1.htm |
EX-4.2 - Crumbs Bake Shop, Inc. | v182114_ex4-2.htm |
EX-3.3 - Crumbs Bake Shop, Inc. | v182114_ex3-3.htm |
EX-4.3 - Crumbs Bake Shop, Inc. | v182114_ex4-3.htm |
EX-23.1 - Crumbs Bake Shop, Inc. | v182114_ex23-1.htm |
EX-10.11 - Crumbs Bake Shop, Inc. | v182114_ex10-11.htm |
As
filed with the Securities and Exchange Commission on April 27,
2010
File No:
333-163134
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Amendment
No. 2 to
Form
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
57th Street
General Acquisition Corp.
(Exact
name of registrant as specified in its charter)
Delaware
|
6770
|
27-1215274
|
||
(State
or other jurisdiction of
incorporation
or organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer
Identification
Number)
|
590
Madison Avenue, 35th Floor
New York,
New York 10022
(212)
409-2434
(Address,
including zip code, and telephone number, including
area
code, of registrant’s principal executive offices)
Mark
D. Klein
Chairman,
President and Chief Executive Officer
590
Madison Avenue, 35th Floor
New
York, New York 10022
(212)
409-2434
(Name,
address, including zip code, and telephone number, including
area
code, of agent for service)
Copies
to:
Douglas
S. Ellenoff, Esq.
Stuart
Neuhauser, Esq.
Ellenoff
Grossman & Schole LLP
150
East 42nd Street
New
York, New York 10017
(212)
370-1300
(212)
370-7889—Facsimile
|
Joel
L. Rubinstein, Esq.
Morgan
Fox Walbridge, Esq.
McDermott
Will & Emery LLP
340
Madison Avenue
New
York, New York 10173
(212)
547-5400
(212)
547-5444—Facsimile
|
Approximate
date of commencement of proposed sale to the public:
As soon
as practicable after the effective date of the registration
statement.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box : x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated filer ¨
|
Smaller
reporting company x
|
(Do
not check if a smaller
|
|||
reporting
company)
|
CALCULATION
OF REGISTRATION FEE
|
||||||||||||||||
Title of Each Class of
Securities to be Registered
|
Amount to be
Registered (1)
|
Proposed
Maximum
Offering
Price
per Unit (1)
|
Proposed
Maximum
Aggregate
Offering
Price (1)
|
Amount of
Registration
Fee
|
||||||||||||
Units,
each consisting of one share of Common Stock, $.0001 par value, and one
Warrant (2)
|
5,750,000 | $ | 10.00 | $ | 57,500,000 | $ | 3,208.50 | |||||||||
Shares
of Common Stock included as part of the Units (2)
|
5,750,000 | — | — | — | (3) | |||||||||||
Warrants
included as part of the Units (2)
|
5,750,000 | — | — | — | (3) | |||||||||||
Shares
of Common Stock underlying the Warrants included in the Units
(2)(4)
|
5,750,000 | $ | 11.50 | $ | 66,125,000 | $ | 3,689.78 | |||||||||
Total
|
$ | 123,625,000 | $ | 6,898.28 | (5) |
(1)
|
Estimated
solely for the purpose of calculating the registration
fee.
|
(2)
|
Includes
750,000 units, 750,000 shares of common stock and 750,000 warrants
underlying such units, which may be issued on exercise of a 45-day option
granted to the underwriters to cover over-allotments, if
any.
|
(3)
|
No
fee pursuant to Rule 457(g).
|
(4)
|
Pursuant
to Rule 416, there are also being registered an indeterminable number
of additional securities as may be issued to prevent dilution resulting
from stock splits, stock dividends or similar
transactions.
|
(5)
|
Previously
paid.
|
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
PRELIMINARY
PROSPECTUS
|
SUBJECT
TO COMPLETION, DATED APRIL 27,
2009
|
$50,000,000
57
TH
STREET GENERAL ACQUISITION CORP.
5,000,000
Units
57th
Street General Acquisition Corp. is a newly-organized blank check company formed
on October 29, 2009 for the purpose of acquiring, through a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization, exchangeable
share transaction or other similar business transaction, one or more operating
businesses or assets that we have not yet identified. We are not
limited to a particular industry, geographic region or minimum transaction value
for purposes of consummating an initial business transaction. We do
not have any specific merger, capital stock exchange, asset acquisition, stock
purchase, reorganization, exchangeable share transaction or other similar
business transaction under consideration and we have not, nor has anyone on our
behalf, contacted any prospective target business or had any discussions, formal
or otherwise, with respect to such a transaction. Our sponsor,
officers and directors have agreed that we will only have 15 months from the
date of this prospectus to consummate our initial business
transaction.
We
will provide our stockholders with the opportunity to redeem their shares of our
common stock for cash equal to their pro rata share of the aggregate amount then
on deposit in the trust account, less taxes, upon the consummation of our
initial business transaction, subject to the limitations described
herein. Unlike other blank check companies which hold a stockholder
vote and conduct proxy solicitations in conjunction with their redemptions or
conversions of public shares for cash upon consummation of their initial
business transactions, we may either hold a stockholder vote or conduct the
redemptions pursuant to the tender offer rules of the Securities and Exchange
Commission, or SEC, and file tender offer documents with the SEC which will
contain substantially the same financial and other information about the initial
business transaction and the redemption rights as is required under the SEC’s
proxy rules. If we hold a stockholder vote, we will conduct the
redemptions like other blank check companies in conjunction with a proxy
solicitation pursuant to the proxy rules and not pursuant to the tender offer
rules. We will consummate our initial business transaction only
if holders of no more than 88% of our public shares elect to redeem
their shares and, solely if we seek stockholder approval, a majority of the
outstanding shares of common stock voted are voted in favor of the business
transaction. Our sponsor, 57th Street GAC Holdings LLC, a limited
liability company wholly owned by our officers, directors and our
advisors, has agreed not to redeem any shares held by it in connection with the
consummation of a business transaction.
This
is an initial public offering of our units. Each unit is being sold at a
purchase price of $10.00 per unit and consists of (i) one share of our common
stock and (ii) one warrant to purchase one share of our common
stock.
Each
warrant entitles the holder to purchase one share of our common stock at a price
of $11.50. Each warrant will become exercisable on the later of 30 days after
our completion of a business transaction or
[ ], 2010 [one year from the date of this
prospectus], and will expire five years from the date of our initial business
transaction, or earlier upon redemption or liquidation. We may redeem the
warrants following the consummation of a business transaction on the terms set
forth in this prospectus.
Our
sponsor has agreed to purchase 3,000,000 warrants, which we refer to as the
insider warrants, from us at a price of $0.50 per warrant in a private placement
to be completed on or before the date of this prospectus. All of the proceeds
received from the sale of the insider warrants ($1,500,000) will be placed in
the trust account described below. The insider warrants will be identical to
those warrants sold in this offering except that if held by our sponsor or its
permitted assigns, they (i) may be exercised for cash or on a cashless basis and
(ii) are not subject to redemption. In addition, the insider warrants will be
held in escrow until 30 days following the consummation of our initial business
transaction.
There
is presently no public market for our units, common stock or warrants. It is
anticipated that our units, common stock and warrants will be quoted on the OTC
Bulletin Board under the symbol “[TICKER]”, “[TICKER]” and “[TICKER]”,
respectively. The shares of common stock and warrants comprising the units will
begin separate trading five business days following the earlier to occur of the
expiration of the underwriters’ over-allotment option, its exercise in full or
the announcement by the underwriters of their intention not to exercise all or
any remaining portion of the over-allotment option, subject to our filing of a
Current Report on Form 8-K with the SEC containing an audited balance sheet
reflecting our receipt of the gross proceeds of this offering and issuing a
press release announcing the trading date when such separate trading will
commence.
The
underwriters have a 45-day option to purchase up to 750,000 additional units
from us to cover over-allotments of units on the same terms set forth
below.
Investing
in our securities involves risks. See “Risk Factors” beginning on page 16.
Investors will not be entitled to protections normally afforded to investors in
Rule 419 blank check offerings.
Price to
Public
|
Underwriting
Discounts and
Commissions(1)
|
Proceeds,
Before
Expenses, to us
|
||||||||||
Per
Unit
|
$
|
10.00
|
$
|
0.70
|
$
|
9.30
|
||||||
Total
|
$
|
50,000,000
|
$
|
3,500,000
|
$
|
46,500,000
|
(1)
|
This
amount includes the following additional contingent fees that will become
payable to Morgan Joseph from the amounts held in the trust account solely
in the event we consummate our initial business transaction: (A) an
advisory fee equal to 1% of the gross proceeds from the sale of units
offered to the public (which fee shall be increased to 1.5% if we
consummate our initial business transaction with a business or asset
introduced to us by Morgan Joseph) and (B) a contingent fee equal to up to
2.5% of the aggregate amount of the funds released from the trust account
to us or to our target upon consummation of our initial business
transaction.
|
Of the
net proceeds we receive from this offering, $48,750,000 (approximately $9.75 per
share) or $56,025,000 (approximately $9.74 per share) if the underwriters’
over-allotment option is exercised in full will be deposited into a trust
account at [Deutsche Bank] maintained by Continental Stock Transfer & Trust
Company, acting as trustee. This amount includes the contingent fees described
in footnote (1) above. None of the funds held in trust will be released
from the trust account, other than to pay taxes, until the earlier of (i) the
consummation of a business transaction, (ii) our redemption of the public shares
sold in this offering if we are unable to consummate a business transaction
within 15 months from the date hereof (subject to the requirements of law)
or (iii) our liquidation (if no redemption occurs). The proceeds deposited in
the trust account could become subject to the claims of our creditors, if any,
which could have priority over the claims of our public
stockholders.
We are
offering the units for sale on a firm-commitment basis. Delivery of the units
will be made on or
about ,
2010. Morgan Joseph has agreed to make a market in our securities from the date
of this prospectus until the earlier of (i) the consummation of a business
transaction and (ii) 15 months from the date of this
prospectus.
Neither
the SEC nor any state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Morgan
Joseph
|
Ladenburg
Thalmann & Co. Inc.
|
Sole Book-Running
Manager
|
|
I-Bankers Securities, Inc. |
Rodman &
Renshaw, LLC
|
The date
of this prospectus
is ,
2010
2
TABLE
OF CONTENTS
Prospectus
Summary
|
4
|
The
Offering
|
8
|
Summary
Financial Data
|
15
|
Risk
Factors
|
16
|
Cautionary
Note Regarding Forward-Looking Statements
|
32
|
Use
of Proceeds
|
33
|
Dividend
Policy
|
36
|
Dilution
|
37
|
Capitalization
|
39
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
40
|
Proposed
Business
|
45
|
Management
|
60
|
Principal
Stockholders
|
65
|
Certain
Relationships and Related Party Transactions
|
67
|
Description
of Securities
|
69
|
Shares
Eligible for Future Sale
|
75
|
Material
U.S. Federal Income Tax Considerations
|
|
Underwriting
(Conflicts of Interest)
|
77
|
Notice
to Canadian Residents
|
|
Legal
Matters
|
81
|
Experts
|
81
|
Where
You Can Find Additional Information
|
81
|
Index
to Financial Statements
|
F-1
|
3
PROSPECTUS
SUMMARY
This
summary highlights certain information appearing elsewhere in this prospectus.
For a more complete understanding of this offering, you should read the entire
prospectus carefully, including the information under “Risk Factors” and our
financial statements and the related notes included elsewhere in this
prospectus. Unless otherwise stated in this prospectus:
|
·
|
references
to “we,” “us,” “our,” “company” or “our company” are to 57th Street
General Acquisition Corp., a Delaware
corporation;
|
·
|
references
to “Exchange Act” are to the Securities Exchange Act of 1934, as
amended;
|
·
|
references
to “initial business transaction” and to “business transaction” are to our
initial acquisition of one or more operating businesses or assets through
a merger, capital stock exchange, asset acquisition, stock purchase,
reorganization, exchangeable share transaction or other similar business
transaction;
|
|
·
|
references
to “initial shares” are to the 638,889 shares of our common stock issued
to our sponsor in a private placement prior to this offering, up to 83,333
of which are subject to forfeiture by our sponsor if the underwriters’
over-allotment option is not exercised in
full;
|
·
|
references
to “insider warrants” are to the warrants to purchase 3,000,000 shares of
our common stock for the purchase price of $1,500,000, in a private
placement that will occur on or before the date of this
prospectus;
|
·
|
references
to “public shares” are to shares of common stock sold as part of the units
in this offering (whether they are purchased in this offering or
thereafter in the open
market);
|
·
|
references
to “public stockholders” are to holders of public shares, including our
sponsor to the extent it purchases public
shares;
|
·
|
references
to our “sponsor” are to 57th Street GAC Holdings LLC, a Delaware limited
liability company, which is wholly-owned by our officers and
directors;
|
·
|
references
to a “target business” are to one or more operating businesses or assets
which, after completion of this offering, we may target for an initial
business transaction; and
|
·
|
the
information in this prospectus assumes that the underwriters will not
exercise their over-allotment
option.
|
Our
Business
We are a
newly-organized blank check company formed for the purpose of acquiring, through
a merger, capital stock exchange, asset acquisition, stock purchase,
reorganization, exchangeable share transaction or other similar business
transaction, one or more operating businesses or assets that we have not yet
identified. We are not limited to a particular industry, geographic region or
minimum transaction value for purposes of consummating an initial business
transaction. To date, our efforts have been limited to organizational
activities and activities relating to this offering.
We
will seek to capitalize on the significant strength of our management team. Each
of our executive officers, directors and members of our advisory board has over
20 years of experience advising, acquiring, financing and selling private and
public companies in a variety of industries and has prior experience with a
blank check company. We believe that our extensive contacts and sources, ranging
from private and public company contacts, private equity funds, and investment
bankers to attorneys, accountants and business brokers, will allow us to
generate acquisition opportunities. In addition, our executive officers and the
majority of our directors and members of our advisory board were officers or
directors of a blank check company, Alternative Asset Management Acquisition
Corp., which we refer to as AAMAC, which on August 7, 2007 conducted a
successful initial public offering and subsequently on July 31, 2009 consummated
a business combination with Great American Group, Inc.
(OTCBB:GAMR). With the exception of Leonard Potter and Andrew Fink,
who have not served as a director of a blank check company, all of the other
directors of our company were directors or officers of AAMAC. Our
executive officers and members of our advisory board played a key role
throughout the business combination transaction for AAMAC including assisting in
identifying numerous suitable acquisition candidates including the ultimate
target, and assisting in the proxy solicitation of stockholder approval for such
acquisition. Michael J. Levitt, the chairman of our advisory board,
and Mark D. Klein, our chairman, president and chief executive officer,
currently serve as directors of Great American Group, Inc. Following
is a summary of Great American Group Inc.'s results for the fiscal year ended
December 31, 2009:
·
|
Total
revenues increased to $83.4 million, an increase of 56.9% from the fiscal
year ended December 31,
2008
|
|
·
|
Income
from continuing operations was $17.1
million
|
|
·
|
Net
income was $17.0 million, compared to net income of $0.3 million in fiscal
year ended December 31, 2008
|
|
·
|
Diluted
earnings per share were $0.91, compared to earnings per share of $0.02 for
the fiscal year ended December 31,
2008
|
Investors
in AAMAC’s initial public offering realized total and annualized returns through
the merger date with Great American Group, Inc. on July 31, 2009 of -16.5% and
-8.7% respectively. Investors who purchased units of AAMAC in its initial
public offering realized total and annualized returns through April 23, 2010 of
-53.0% and -24.9% respectively. These returns assume investors
participated in a warrant redemption on August 3, 2009 and sold their warrants
at $0.50 per warrant. Returns through April 23, 2010 also reflect a 2
for 1 stock split effected on the closing date of the merger.
We do
not have any specific initial business transaction under consideration, and we
have not nor has anyone on our behalf, contacted any prospective target business
or had any discussions, formal or otherwise, with respect to such a transaction.
From the period prior to our formation through the date of this prospectus,
there have been no communications or discussions between any of our officers,
directors, members of our advisory board or our sponsor and any of their
potential contacts or relationships regarding a potential initial business
transaction. Additionally, we have not, nor has anyone on our behalf, taken any
measure, directly or indirectly, to contact any suitable acquisition candidate,
nor have we engaged or retained any agent or other representative to do the
same.
4
We have
identified the following criteria that we believe are important and that we
intend to use in evaluating business transaction opportunities. While we intend
to utilize these criteria in evaluating business transaction opportunities, we
expect that no individual criterion will entirely determine a decision to pursue
a particular opportunity. Further, any particular business transaction
opportunity which we ultimately determine to pursue may not meet one or more of
these criteria:
·
|
History of
profitability and free cash flow . We will seek to
acquire one or more businesses or assets that have a history of, or
potential for, strong, stable free cash flow generation. We will focus on
companies that have predictable and recurring revenue
streams.
|
·
|
Strong
management team . We will seek to acquire one or more
businesses or assets that have strong, experienced management teams or
those that provide a platform for us to assemble an effective and
experienced management team. We will focus on management teams with a
proven track record of driving revenue growth, enhancing profitability and
creating value for their
stockholders.
|
·
|
Opportunities
for add-on acquisitions . We will seek to acquire one or
more businesses or assets that we can grow both organically and through
acquisitions. In addition, our ability to source proprietary opportunities
and execute transactions will help the business we acquire grow through
acquisition, and thus serve as a platform for further add-on
acquisitions.
|
·
|
Spin-offs /
divestitures from larger companies . We will focus on
one or more businesses or assets that are part of larger companies where
the owners seek to divest or spin-off in order to monetize their
investment.
|
·
|
Defensible
business niche . We will focus on one or more businesses
or assets that have a leading or niche market position and that
demonstrate advantages when compared to their competitors, which may help
to protect their market position and profitability and deliver strong free
cash flow.
|
·
|
Diversified
customer and supplier base . We will pursue one or more
businesses or assets that have a diversified customer and supplier base.
Companies with a diversified customer and supplier base are generally
better able to endure economic downturns, industry consolidation, changing
business preferences and other factors that may negatively impact their
customers, suppliers and
competitors.
|
Effecting
a Business Transaction
Our
sponsor, officers and directors have agreed that we will only have 15 months
from the date of this prospectus to consummate our initial business transaction.
If
we do not consummate a business transaction within such 15 month period, we will
(i) cease all operations except for the purposes of winding up, (ii) redeem 100%
of our public shares of common stock for cash equal to their pro rata share of
the aggregate amount then on deposit in the trust account, less taxes, which
redemption will completely extinguish public stockholders’ rights as
stockholders (including the right to receive further liquidation distributions,
if any), subject to applicable law, and subject to the requirement that any
refund of income taxes that were paid from the trust account which is received
after the redemption shall be distributed to the former public stockholders, and
(iii) as promptly as possible following such redemption, dissolve and liquidate
the balance of our net assets to our remaining stockholders, as part of our plan
of dissolution and liquidation. Our sponsor has agreed not to redeem any shares
held by it in connection with the consummation of an initial business
transaction, but will be entitled to redeem their public shares in the event we
do not consummate a business transaction.
We
anticipate structuring a business transaction to acquire 100% of the equity
interests or assets of the target business or businesses. We may, however,
structure a business transaction to acquire less than 100% of such interests or
assets of the target business but will not acquire less than a controlling
interest. We will acquire a controlling interest either through the acquisition
of at least 50.1% of the voting equity interests in the target or through the
acquisition of a significant voting equity interest that enables us to exercise
a greater degree of control over the target than any other person or group. In
the event we acquire less than a majority of the voting equity interests in the
target, we may seek an even greater degree of control through contractual
arrangements with the target and/or other target equity holders, or through
special rights associated with the target equity security that we hold, which
arrangements or rights may grant us the ability, among other things, to appoint
certain members of the board (or equivalent governing body) or management of the
target or the ability to approve certain types of significant transactions that
the target may seek to enter into.
5
We
will provide our stockholders with the opportunity to redeem their shares of our
common stock for cash equal to their pro rata share of the aggregate amount then
on deposit in the trust account, less taxes, upon the consummation of our
initial business transaction, subject to the limitations described
herein. The amount in the trust account is initially anticipated to
be approximately $9.75 per share, or approximately $9.74 per share if the
underwriters’ over-allotment option is exercised in full, including $0.39 per
share being held in the trust account attributable to the contingent fees
payable to Morgan Joseph solely in the event of that our business transaction is
consummated. Unlike other blank check companies which hold a
stockholder vote and conduct proxy solicitations in conjunction with their
redemptions or conversions of public shares for cash upon consummation of their
initial business transactions, we may either hold a stockholder vote or conduct
the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act
which regulate issuer tender offers, and will file tender offer documents with
the SEC which will contain substantially the same financial and other
information about the initial business transaction and the redemption rights as
is required under Regulation 14A of the Exchange Act which regulates the
solicitation of proxies. If, however, we hold a stockholder vote, we
will conduct the redemptions like other blank check companies in conjunction
with a proxy solicitation pursuant to the proxy rules and not pursuant to the
tender offer rules. We will consummate our initial business transaction
only if holders of no more than 88% of our public shares elect to
redeem their shares and, solely if we seek stockholder approval, a majority of
the outstanding shares of common stock voted are voted in favor of the business
transaction. Our sponsor has agreed not to redeem any shares held by
it in connection with the consummation of a business
transaction.
While we
do not intend to pursue an initial business transaction with any company that is
affiliated with our sponsor, officers or directors, we are not prohibited from
pursuing such a transaction. In the event we seek to complete an
initial business transaction with such a company, we would obtain an opinion
from an independent investment banking firm which is a member of the Financial
Industry Regulatory Authority, which we refer to as FINRA, that such an initial
business transaction is fair to our stockholders from a financial point of
view.
Potential
Conflicts of Interest
Our
directors and officers may have legal obligations relating to presenting
business opportunities to multiple entities to the extent of a director’s and
officer’s multiple affiliations. In addition, conflicts of interest may arise
when our board of directors evaluates a particular business opportunity. These
conflicts of interest may not be resolved in our favor.
The
discretion of our officers and directors, some of whom may be officers and/or
directors of other companies, including our sponsor, 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
transaction are appropriate and in our stockholders’ best interest. Investors
should be aware of the following potential conflicts of interest:
·
|
None
of our officers and directors is required to commit his full time to our
affairs and, accordingly, each may have conflicts of interest in
allocating his time among various business
activities.
|
·
|
Our
officers and directors currently either are, or may in the future become,
affiliated with additional entities that are 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. Such officers and
directors may become subject to conflicts of interest regarding us and
other business ventures in which they may be involved, which conflicts may
have an adverse effect on our ability to consummate a business
transaction.
|
·
|
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.
|
·
|
Since
our sponsor owns shares of our common stock and warrants which will be
released from escrow if a business transaction is successfully completed
and since our sponsor may own securities which will become worthless if a
business transaction is not consummated, the members of our board of
directors that have an interest in our sponsor may have a conflict of
interest in determining whether a particular target business is
appropriate to effect a business
transaction.
|
·
|
If
our management negotiates to be retained post-business transaction as a
condition to any potential business transaction, their financial
interests, including compensation arrangements, could influence their
motivation in selecting, negotiating and structuring a transaction with a
target business, and such negotiations may result in a conflict of
interest.
|
In
order to minimize potential conflicts of interest which may arise from multiple
corporate affiliations, we have entered into a business opportunity right of
first review agreement with Mark D. Klein, our chairman, chief executive officer
and president and Paul D. Lapping, our chief financial officer, treasurer,
secretary and director, that provides that from the date of this prospectus
until the earlier of the consummation of our initial business transaction or our
liquidation in the event we do not consummate an initial business transaction,
we will have a right of first review with respect to business transaction
opportunities of Messrs. Klein and Lapping, and companies or other entities
which they manage or control. Messrs. Klein and Lapping will, and
will cause such companies or entities under their management or control to,
first offer any such business opportunity to us (subject to any fiduciary
obligations they may have) and they will not, and will cause each other company
or entity under their management or control not to, pursue such business
opportunity unless and until a majority of our disinterested directors have
determined for any reason that we will not pursue such
opportunity.
6
Conflict
of Interest Relating to Underwriting Activities
Mark
D. Klein, our chairman, chief executive officer and president, is an affiliate
of Ladenburg Thalmann & Co. Inc., a member of FINRA, and will economically
own in excess of 10% of our securities. Ladenburg Thalmann & Co. Inc.
is one the underwriters of this offering. Therefore, FINRA requires this
offering to be made in compliance with the applicable provisions of FINRA Rule
2720. Pursuant to that rule, the appointment of a “qualified independent
underwriter” (as such term is defined in Rule 2720) is not necessary in
connection with this offering because Morgan Joseph, the FINRA member primarily
responsible for managing this offering, does not have a conflict of interest, is
not an affiliate of any member that has a conflict of interest and meets the
requirements of paragraph (f)(12)(E) of Rule 2720.
Private
Placements
On
October 30, 2009, we issued in a private placement 638,889 shares of restricted
common stock (up to 83,333 of which are subject to forfeiture if the
underwriters’ over-allotment option is not exercised in full) to our sponsor for
an aggregate purchase price of $25,000. The initial shares will not be released
from escrow until one year following the consummation of our initial business
transaction except under limited circumstances as described in this prospectus.
The holders of initial shares will not have any right to any liquidation
distributions in the event we fail to consummate an initial business
transaction. On or before the date of this prospectus, our sponsor will purchase
3,000,000 insider warrants from us at a price of $0.50 per warrant in a private
placement pursuant to Section 4(2) or Regulation D of the Securities Act of
1933, as amended, or the Securities Act. The insider warrants will be identical
to those warrants sold in this offering except that if held by our sponsor or
its permitted assigns, they (i) may be exercised for cash or on a cashless basis
and (ii) are not subject to redemption. In addition, the insider warrants will
be held in escrow until 30 days following the consummation of our initial
business transaction. No placement fees will be payable in connection with these
private placements.
All of
the gross proceeds from the sale of the 3,000,000 insider warrants in a private
placement, or $1,500,000, will be deposited into the trust account.
Our
executive offices are located at 590 Madison Avenue, 35th Floor, New York, New
York 10022, and our telephone number at that location is (212)
409-2434.
7
THE
OFFERING
Securities
offered
|
5,000,000
units, at $10.00 per unit, each unit consisting of:
|
|
· one share of
common stock; and
|
||
·one
warrant.
|
||
Proposed
OTCBB symbols for our:
|
||
“[UNIT
SYMBOL]”
|
||
Common
Stock
|
“[COMMON
STOCK SYMBOL]”
|
|
Warrants
|
“[WARRANT
SYMBOL]”
|
|
Trading
commencement and separation of
common
stock and warrants
|
|
The
units will begin trading on or promptly after the date of this prospectus.
The shares of common stock and warrants comprising the units will trade
separately on the fifth business day following the earlier to occur of the
expiration of the underwriters’ over-allotment option (which is 45 days
from the date of this prospectus), its exercise in full or the
announcement by the underwriters of their intention not to exercise all or
any remaining portion of the over-allotment option.
In
no event will the shares of our common stock and warrants begin to trade
separately until we have filed a Current Report on Form 8-K with the SEC
containing an audited balance sheet reflecting our receipt of the gross
proceeds of this offering. We intend to file this Form 8-K promptly after
the consummation of this offering, which is anticipated to take place four
business days from the date of this prospectus. The audited balance sheet
will include proceeds we receive from the exercise of the underwriters’
over-allotment option if the over-allotment option is exercised prior to
the filing of the Form 8-K. If the over-allotment option is exercised
following the filing of such Form 8-K, a second or amended Form 8-K will
be filed to provide updated information reflecting the exercise of the
over-allotment option. For more information, see “Description of
Securities—Units.”
Following
the date that the shares of our common stock and warrants are eligible to
trade separately, the units will continue to be quoted for trading,
and any security holder may elect to separate a unit and trade the common
stock or warrants separately or as a unit. Even if the component parts of
the units are separated and traded separately, the units will continue to
be quoted as a separate security, and consequently, any subsequent
security holder owning shares of our common stock and warrants may elect
to combine them together and trade them as a unit. Security holders will
have the ability to trade our securities as units until such time as the
warrants expire or are redeemed. Although investors may trade
in partial warrants, partial warrants cannot be exercised for fractional
shares, but only for full shares of common
stock.
|
Number
of securities to be outstanding
|
||||||||
After the
Private Placements and
before this
Offering
|
After the
Private Placements and
this
Offering
|
|||||||
Units
|
0 | 5,000,000 | ||||||
Common
Stock
|
638,889 |
1
|
5,555,556 |
2
|
||||
Warrants
|
3,000,000 | 8,000,000 | ||||||
Warrants
offered
|
||||||||
Exercisability
|
Each
warrant is exercisable for one share of common stock.
|
|||||||
Exercise
price
|
$11.50,
subject to adjustment as described herein.
|
1 Includes
up to 83,333 shares of common stock subject to forfeiture if the underwriters’
over-allotment option is not exercised.
2 Assumes
no exercise of the underwriters’ over-allotment option, and the forfeiture of
83,333 shares of common stock.
8
The
warrants will become exercisable on the later of:
· 30 days after
the completion of our initial business transaction, or
·[ ],
2010 [one year from the
date of this prospectus]
However,
the warrants will be exercisable only if we have an effective and current
registration statement covering the shares of common stock issuable upon
exercise of the warrants and a current prospectus relating to such common
stock.
The
warrants will expire at 5:00 p.m., New York City time, on the five year
anniversary of the consummation of our business transaction, unless
earlier redeemed.
|
||
Registration
rights
|
We
have agreed to use our best efforts to have an effective registration
statement covering shares of common stock issuable upon exercise of the
warrants from the date the warrants become exercisable and to maintain a
current prospectus relating to that common stock until the warrants expire
or are redeemed.
Our
sponsor will be entitled to demand registration rights and
certain “piggy-back” registration rights with respect to the initial
shares and the insider warrants and the common stock underlying the
insider warrants, commencing, in the case of the initial shares, one year
after the consummation of our initial business transaction and commencing,
in the case of the insider warrants and the respective common stock
underlying the insider warrants, 30 days after the consummation of our
initial business transaction.
|
|
Redemption
of warrants
|
|
We
may redeem the outstanding warrants (excluding insider warrants held by
our sponsor or its permitted assigns) at any time after the warrants
become exercisable:
· in whole and
not in part;
· at a price of
$0.01 per warrant;
· upon not less
than 30 days prior written notice of redemption; and
· if, and only
if, the last sales price of our common stock equals or exceeds $17.50 per
share (subject to adjustment for splits, dividends, recapitalizations and
other similar events) for any 20 trading days within a 30 trading day
period ending three business days before we send the notice of
redemption;
provided
that on the date we give notice of redemption and during the entire period
thereafter until the time we redeem the warrants, we have an effective
registration statement covering shares of common stock issuable upon
exercise of the warrants and a current prospectus relating to such common
stock.
If
the foregoing conditions are satisfied and we call the warrants for
redemption, each warrant holder shall then be entitled to exercise its
warrants prior to the date scheduled for redemption. If we call the
warrants for redemption as described above, we will have the option to
require all holders that subsequently wish to exercise warrants to do so
on a “cashless basis.” In such event, each holder would pay the exercise
price by surrendering the warrants for that number of shares of common
stock equal to the quotient obtained by dividing (x) the product of the
number of shares of common stock underlying the warrants, multiplied by
the difference between the exercise price of the warrants and the fair
market value by (y) the fair market value. The “fair market value” shall
mean the average reported last sale price of the common stock for the 10
trading days ending on the third trading day prior to the date on which
the notice of redemption is sent to the holders of
warrants.
|
9
The
redemption provisions for our warrants have been established at a price
which is intended to provide such warrant holders a premium to the initial
warrant exercise price and to provide a sufficient differential between
the then-prevailing common stock price and the warrant exercise price to
absorb any negative market reaction to our redemption of the warrants.
There can be no assurance, however, that the price of the common stock
will exceed either $17.50 or the warrant exercise price of $11.50 after we
call the warrants for redemption and the price may in fact decline as a
result of the limited liquidity following any such call for
redemption.
|
||
Offering
proceeds to be held in trust
|
Of
the approximate net proceeds we receive from this offering, $48,750,000
(including $1,500,000 paid by our sponsor in a private placement for the
insider warrants) (approximately $9.75 per share) will be deposited into a
trust account at [Deutsche Bank] maintained by Continental Stock Transfer
& Trust Company, acting as trustee. This
amount includes the following additional contingent fees that will become
payable from the amounts held in the trust account solely in the event we
consummate our initial business transaction: (A) an advisory fee payable
to Morgan Joseph equal to 1% of the gross proceeds from the sale of units
to the public for advising us during the 15 month period following the
date hereof (which fee shall be increased to 1.5% if we consummate our
initial business transaction with a business or asset introduced to us by
Morgan Joseph) and (B) a contingent fee equal to 2.5% of the aggregate
amount of the funds released from the trust account to us and/or to our
target upon consummation of our initial business transaction payable to
Morgan Joseph and such other firms, if any, who are instrumental in
advising us in connection with the consummation of our business
transaction. None of the funds held in trust will be released from
the trust account, other than to pay taxes, until the earlier of (i) the
consummation of a business transaction within 15 months from the date
hereof and (ii) our redemption of 100% of the public shares sold in this
offering if we are unable to consummate a business transaction within 15
months from the date hereof. The proceeds deposited in the trust account
could become subject to the claims of our creditors, if any, which could
have priority over the claims of our public stockholders. In the event we
seek stockholder approval in connection with our initial business
transaction, public stockholders exercising their redemption rights and
voting (1) in favor of the business transaction will be entitled to
receive a pro-rata portion of the trust account including interest and (2)
against the business transaction will be entitled to receive a pro-rata
portion of the trust account excluding interest, in each case excluding
taxes.
None
of the warrants may be exercised until 30 days after the consummation of
our business transaction and, thus, after the funds in the trust account
have been disbursed. Accordingly, the warrant exercise price will be paid
directly to us and not placed in the trust account.
|
|
Anticipated
expenses and funding sources
|
Unless
and until our business transaction is consummated, the proceeds held in
the trust account (net of taxes) will not be available for our use for any
expenses related to this offering or expenses which we may incur related
to the investigation and selection of a target business and the
negotiation of an agreement to acquire a target business. Expenses
incurred while seeking a business transaction may be paid prior to a
business transaction only from $800,000 of the offering proceeds not held
in the trust account. In order to meet our working capital needs following
the consummation of this offering, certain of our officers and directors
may, but are not obligated to, loan us funds, from time to time, or at any
time, in whatever amount such officer or director deems reasonable in his
or her sole discretion.
We
believe that, upon the date of this prospectus, the $800,000 from the
proceeds of this offering not held in the trust account will be sufficient
to allow us to operate for the next 15 months, assuming that a business
transaction is not consummated during that time. Over this time period, we
will be using these funds for identifying and evaluating target
businesses, 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, and structuring, negotiating and consummating a
business transaction.
|
|
Limited
payments to insiders
|
There
will be no fees, reimbursements, cash payments or compensation of any
kind, including the issuance of any securities of our company, made to our
sponsor, officers, directors or their affiliates other than:
· repayment of
an aggregate of $12,349 in non-interest bearing loans and advances made by
our sponsor and one of our executive officers to pay a portion of our
offering expenses;
· reimbursement
for any out-of-pocket expenses incident to the offering and finding a
suitable initial business transaction; and
· payment to
our sponsor of $7,500 per month for office space and general and
administrative services, including but not limited to receptionist,
secretarial and general office services commencing upon the date of this
prospectus.
|
10
Conditions
to consummating our initial
business
transaction
|
There
is no limitation on our ability to raise funds privately or through loans
in connection with our initial business transaction. In no event will we
acquire less than a controlling interest in a target business. We will
acquire a controlling interest either through the acquisition of at least
50.1% of the voting equity interests in the target or through the
acquisition of a significant voting equity interest that enables us to
exercise a greater degree of control over the target than any other person
or group. In the event we acquire less than a majority of the voting
equity interests in the target, we may seek an even greater degree of
control through contractual arrangements with the target and/or other
target equity holders, or through special rights associated with the
target equity security that we hold, which arrangements or rights may
grant us the ability, among other things, to appoint certain members of
the board (or equivalent governing body) or management of the target or
the ability to approve certain types of significant transactions that the
target may seek to enter into.
While
we do not intend to pursue an initial business transaction with any
company that is affiliated with our sponsor, officers or directors, we are
not prohibited from pursuing such a transaction. In the event we seek to
complete an initial business transaction with such a company, we would
obtain an opinion from an independent investment banking firm which is a
member of FINRA that such an initial business transaction is fair to our
stockholders from a financial point of view.
|
|
Redemption
rights for public stockholders upon consummation of our initial business
transaction
|
We
will provide our stockholders with the opportunity to redeem their shares
of our common stock for cash equal to their pro rata share of the
aggregate amount then on deposit in the trust account, less taxes, upon
the consummation of our initial business transaction, subject to the
limitations described herein. The amount in the trust account is initially
anticipated to be approximately $9.75 per share, or approximately $9.74
per share if the underwriters’ over-allotment option is exercised in full,
including $0.39 per share being held in the trust account attributable to
the contingent fees payable to Morgan Joseph solely in the event of that
our business transaction is consummated. Unlike other blank check
companies which hold a stockholder vote and conduct proxy solicitations in
conjunction with their redemptions or conversions of public shares for
cash upon consummation of their initial business transactions, we may
either hold a stockholder vote or conduct the redemptions pursuant to Rule
13e-4 and Regulation 14E of the Exchange Act which regulate issuer tender
offers, and file tender offer documents with the SEC which will
contain substantially the same financial and other information about the
initial business transaction and the redemption rights as is required
under Regulation 14A of the Exchange Act which regulates the solicitation
of proxies. If, however, we hold a stockholder vote, we will conduct the
redemptions like other blank check companies in conjunction with a proxy
solicitation pursuant to the proxy rules and not pursuant to the tender
offer rules. We will consummate our initial business transaction only if
holders of no more than 88% of our public shares elect to redeem their
shares and, solely if we seek stockholder approval, a majority of the
outstanding shares of common stock voted are voted in favor of the
business transaction. Our sponsor has agreed not to redeem any shares held
by it in connection with the consummation of a business
transaction.
The
88% redemption threshold is different from the redemption or conversion
thresholds used by most blank check companies. Traditionally, blank check
companies would not be able to consummate a business transaction if the
holders of the company’s public shares voted against a proposed business
transaction and elected to redeem or convert more than a much smaller
percentage of the shares sold in such company’s initial public offering,
which percentage threshold is typically between 19.99% and 39.99%. As a
result, many blank check companies have been unable to complete business
transactions because the amount of shares voted by their public
stockholders electing conversion exceeded the maximum conversion threshold
pursuant to which such company could proceed with a business
transaction.
|
|
Redemption limitation if we
hold a stockholder vote
|
If
we hold a stockholder vote, public stockholders voting in favor of the
business transaction and electing to exercise their redemption rights
shall be entitled to receive cash equal to their pro rata share of the
aggregate amount then on deposit in the trust account, including any
amounts representing interest earned on the trust account, less taxes, but
our public stockholders voting against the business transaction and
electing to exercise their redemption rights shall be entitled to receive
cash equal to their pro rata share of the aggregate amount then on deposit
in the trust account excluding any amounts representing interest earned on
the trust account, less
taxes.
|
11
Private
transactions if we hold a stockholder vote
|
Solely
if we hold a stockholder vote to approve our initial business transaction,
and we do not conduct redemptions in connection with our business
transaction pursuant to the tender offer rules, we may enter into
privately negotiated transactions to purchase public shares from
stockholders who would otherwise elect to redeem their shares to ensure
that no more than 88% of our public shares elect to redeem their shares
for cash. Although we do not currently anticipate paying any
premium purchase price for such public shares, in the event we do, the
payment of a premium may not be fair to, or in the best interest of, those
stockholders not receiving any such additional
consideration. In addition, the payment of a premium may not be
in the best interest of the remaining stockholders, who will experience a
reduction in book value per share compared to the value received by
stockholders that successfully have their shares purchased by us at a
premium.
|
|
10% limitation on redemption
rights if we hold a stockholder vote
|
|
Notwithstanding
the foregoing redemption rights and solely if we hold a stockholder vote
to approve our initial business transaction, and we do not conduct
redemptions in connections with our business transaction pursuant to the
tender offer rules, our amended and restated certificate of incorporation
provides that a public stockholder, together with any affiliate of his or
any other person with whom he is acting in concert or as a ‘‘group’’ (as
defined under Section 13 of the Exchange Act), will be restricted from
redeeming their shares with respect to more than an aggregate of 10% of
the shares sold in this offering. We believe this restriction
will discourage stockholders from accumulating large blocks of shares, and
subsequent attempts by such holders to use their ability to redeem their
shares as a means to force us or our management to purchase their shares
at a significant premium to the then current market price or on other
undesirable terms. Absent this provision, a public stockholder
holding more than an aggregate of 10% of the shares sold in this offering
could threaten to seek to exercise their redemption rights if such
holder’s shares are not purchased by us or our management at a premium to
the then current market price or on other undesirable terms. By
limiting our stockholders’ ability to redeem no more than 10% of the
shares sold in this offering, we believe we will limit the ability of a
small group of stockholders to unreasonably attempt to block our ability
to consummate a business transaction. However, we would not be
restricting our stockholders’ ability to vote all of their shares for or
against a business
transaction.
|
12
Redemption
of common stock and
dissolution
and liquidation if no initial
business
transaction
|
|
Our
sponsor, officers and directors have agreed that we will only have 15
months from the date of this prospectus to consummate our initial business
transaction. If
we do not consummate a business transaction within such 15 month period,
we will (i) cease all operations except for the purposes of winding up,
(ii) redeem 100% of our public shares of common stock for cash equal to
their pro rata share of the aggregate amount then on deposit in the trust
account, less taxes, which redemption will completely extinguish public
stockholders’ rights as stockholders (including the right to receive
further liquidation distributions, if any), subject to applicable law, and
subject to the requirement that any refund of income taxes that were paid
from the trust account which is received after the redemption shall be
distributed to the former public stockholders, and (iii) as promptly as
possible following such redemption, dissolve and liquidate the balance of
our net assets to our remaining stockholders, as part of our plan of
dissolution and liquidation. Our sponsor has agreed not to redeem any
shares held by it in connection with the consummation of an initial
business transaction, but will be entitled to redeem their public shares
in the event we do not consummate a business
transaction.
The
distribution of our assets in contemplation of liquidation must provide
for all claims against us to be paid in full or for us to make provision
for payments to be made in full, as applicable, if there are sufficient
assets. These claims must be paid or provided for before we make any
distribution of our remaining assets to our stockholders. We cannot assure
you that we will have access to funds sufficient to pay or provide for all
creditors’ claims. Although we will seek to have all third parties such as
vendors and prospective target businesses enter into agreements with us
waiving any interest to any assets held in the trust account, there is no
guarantee that they will execute such agreements. Mark D. Klein, our
chairman, chief executive officer and president, and Paul D. Lapping, our
chief financial officer, treasurer, secretary and director, have agreed
that they will be liable to us if and to the extent any claims by a vendor
for services rendered or products sold to us, or a prospective target
business with which we have discussed entering into a transaction
agreement reduce the amounts in the trust account to below $9.75 per share
(or approximately $9.74 per share if the underwriter’s over-allotment
option is exercised in full), except as to any claims by a third party who
executed a waiver of any and all rights to seek access to the trust
account and except as to any claims under our indemnity of the
underwriters of this offering against certain liabilities, including
liabilities under the Securities Act. In the event that an executed waiver
is deemed to be unenforceable against a third party, Messrs. Klein and
Lapping will not be responsible to the extent of any liability for such
third party claims.
Our
sponsor has waived its rights to participate in any redemption with
respect to its initial shares if we fail to consummate an initial business
transaction. However, if our sponsor or any of our officers, directors or
affiliates acquire public shares in or after this offering they will be
entitled to a pro rata share of the trust account with respect to such
shares upon our redemption in the event we do not consummate a business
transaction within the required time period.
After
distributing the proceeds of our trust account pursuant to our redemption
of 100% of our public shares of common stock as described in this
prospectus, we will promptly distribute the balance of our net assets to
our remaining stockholders according to our plan of
dissolution. We will pay the costs of liquidation from our
remaining assets outside of the trust account. If such funds are
insufficient, our sponsor has agreed to advance us the funds necessary to
pay any and all costs involved or associated with the process of
liquidation and the return of the funds in the trust account to our public
stockholders (currently anticipated to be no more than approximately
$30,000) and has agreed not to seek repayment for such
expenses.
|
13
Escrow
of initial shares and insider
warrants
|
On
the date of this prospectus, our sponsor will place the initial shares and
the insider warrants into an escrow account maintained by Continental
Stock Transfer & Trust Company acting as escrow agent. Other than
transfers made to permitted transferees who agree in writing to be bound
to the transfer restrictions, agree to vote in favor of our initial
business transaction in the event we seek stockholder approval in
connection with our initial business transaction and waive any rights to
participate in any liquidation distribution if we fail to consummate an
initial business transaction. The initial shares will not be
released from escrow until one year following our business transaction,
unless we were to consummate a transaction after the consummation of the
initial business transaction that results in all of our stockholders
having the right to exchange their public shares for cash, securities or
other property. The insider warrants will not be released
from escrow until 30 days following the consummation of our initial
business transaction. Permitted transferees means: immediate
family members of the holder and trusts established by the holder for
estate planning purposes; and affiliates of the holder.
|
|
Determination
of offering amount
|
|
In
consultation with our underwriters, we determined the size of the
offering, in part, based upon our beliefs concerning the capital that
could be successfully raised given market conditions. In addition, our
management concluded, based on their collective experience, that an
offering of this size, and the sale of the additional insider warrants,
would provide us with sufficient equity capital to execute our business
plan. We believe that this amount of equity capital, plus our ability to
finance an acquisition using stock or debt, will give us substantial
flexibility in selecting an acquisition target and structuring our initial
business transaction. This belief is not based on any specific research,
analysis, evaluations, discussions or compilations of information with
respect to any particular investment or any such action undertaken in
connection with our organization. We cannot assure you that our belief is
correct, that we will be able to successfully identify target businesses
or that we will be able to obtain any necessary
financing.
|
Risks
We
are a newly-formed company that has conducted no operations and has generated no
revenues. Until we complete our initial business transaction, we will have no
operations and will generate no operating revenues. In making your decision as
to whether to invest in our securities, you should take into account not only
the background of our management team, but also the special risks we face as a
blank check company. This offering is not being conducted in compliance with
Rule 419 promulgated under the Securities Act. Accordingly, you will not be
entitled to protections normally afforded to investors in Rule 419 blank check
offerings. For additional information concerning how Rule 419 blank check
offerings differ from this offering, please see “Comparison to Offerings of
Blank Check Companies.” You should carefully consider these and the other risks
set forth in the section entitled “Risk Factors” within this
prospectus.
14
SUMMARY
FINANCIAL DATA
The
following table is derived from and summarizes the relevant financial data for
our business and should be read in conjunction with our audited financial
statements and the related notes, which are included elsewhere in this
prospectus. We have not had any significant operations to date; therefore, only
balance sheet data are presented.
As
of March 31, 2010
|
||||||||
Actual
|
As adjusted
|
|||||||
Working
capital (deficiency)
|
$
|
(55,311
|
)
|
$
|
48,934,207
|
|
||
Cash
held in trust
|
—
|
48,750,000
|
||||||
Total
assets
|
73,729
|
49,567,957
|
||||||
Total
liabilities
|
55,722
|
633,750
|
||||||
Value
of common stock which may be redeemed
|
—
|
42,900,000
|
||||||
Stockholders’
equity(1)
|
17,957
|
6,034,207
|
(1) Excludes
approximately 4,400,000 shares, at an initial per-share redemption price of
approximately $9.75, subject to possible redemption rights and assumes the
underwriters’ over-allotment has not been exercised.
The “as
adjusted” information gives effect to the sale of the units that we are offering
(other than pursuant to the underwriters’ over-allotment option), including the
application of the related gross proceeds.
The
“as adjusted” total assets amount includes the $48,750,000 held in the trust
account for our benefit, which amount, less contingent fees, will be available
to us only upon the consummation of a business transaction within 15 months of
the date of this prospectus. Our sponsor, officers and directors have agreed
that we will only have 15 months from the date of this prospectus to consummate
our initial business transaction. If we do not consummate a business
transaction within such 15 month period, we shall (i) cease all operations
except for the purposes of winding up, (ii) redeem 100% of our public shares of
common stock for a per share pro rata portion of the trust account (initially
approximately $9.75 per share, or approximately $9.74 per share if the
underwriters’ over-allotment option is exercised in full), plus the interest
earned on the trust account but net of any taxes and (iii) as promptly as
possible following such redemption, dissolve and liquidate the balance of our
net assets to our remaining stockholders, as part of our plan of dissolution and
liquidation, subject to our obligations under Delaware law to provide for claims
of creditors. Our sponsor has waived its rights to participate in any redemption
with respect to its initial shares upon our redemption of shares sold in this
offering if we fail to consummate an initial business transaction within 15
months.
15
RISK
FACTORS
Investing
in our securities involves a high degree of risk. You should carefully consider
the following risk factors and all other information contained in this
prospectus before making a decision to invest in our units. If any of the
following risks occur, our business, financial conditions or results of
operations may be materially and adversely affected. In that event, the trading
price of our securities could decline, and you could lose all or part of your
investment. This prospectus also contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially from
those anticipated in the forward-looking statements as a result of specific
factors, including the risks described below.
We
are a development stage company with no operating history and, accordingly, you
will not have any basis on which to evaluate our ability to achieve our business
objective.
We are a
recently incorporated development stage company with no operating results to
date. Therefore, our ability to begin operations is dependent upon obtaining
financing through the public offering of our securities. Since we do not have
any operations or an operating history, you will have no basis upon which to
evaluate our ability to achieve our business objective, the focus of which is to
acquire through a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization, exchangeable share transaction or other similar
business transaction, one or more operating businesses or assets that we have
not yet identified. We have not conducted any discussions and we have no plans,
arrangements or understandings with any prospective target business with respect
to a business transaction. We have no present revenue and will not generate any
revenues or income until, at the earliest, after the consummation of a business
transaction. We do not know when or if a business transaction will occur. The
report of our independent registered public accountants on our financial
statements includes an explanatory paragraph stating that our ability to
continue as a going concern is dependent on the consummation of this offering.
The financial statements do not include any adjustments that might result from
our inability to consummate this offering or our ability to continue as a going
concern.
Our
public stockholders may not be afforded an opportunity to vote on our
proposed business transaction, unless such vote is required by
law.
We may not hold a stockholder vote
before we consummate our initial business transaction unless the business
transaction would require stockholder approval under applicable state
law. Accordingly, we may consummate our initial business transaction
even if holders of a majority of our public shares do not approve of the
business transaction we consummate.
Your
only opportunity to affect the investment decision regarding a potential
business transaction will be limited to the exercise of your right to redeem
your shares from us for cash, unless we seek stockholder approval of the
business transaction.
At the
time of your investment in us, you will not be provided with an opportunity to
evaluate the specific merits or risks of one or more target businesses or
assets. Since our board of directors may consummate a business transaction
without seeking stockholder approval, public stockholders may not have the
right or opportunity to vote on the business transaction, unless we
seek such stockholder vote. Accordingly, your only opportunity
to affect the investment decision regarding a potential business
transaction may be limited to exercising your redemption rights within the
period of time set forth in our tender offer documents mailed to our public
stockholders in which we describe our business transaction. In
addition, your election to exercise your redemption rights could still be
rejected if holders of more than 88% of our public shares elect to exercise
their redemption rights, or if, as a condition of the consummation of the
business transaction, we are required to meet a certain minimum
valuation.
If
we are unable to consummate a business transaction, our public stockholders will
be forced to wait the full 15 months before receiving distributions from
our trust account.
We
have 15 months in which to complete a business transaction. If we do not
consummate a business transaction within 15 months from the date of this
prospectus, we shall (i) cease all operations except for the purposes of winding
up, (ii) redeem 100% of our public shares of common stock for a per share pro
rata portion of the trust account (including interest, but net of any taxes),
subject to the requirements of applicable law and (iii) as promptly as possible
following such redemption, dissolve and liquidate the balance of our net assets
to our remaining stockholders. If we redeem such shares, such
redemption must comply with the applicable provisions of the Delaware General
Corporation Law, including Section 160 thereof, governing rights of
redemption. Upon the termination of our corporate existence, the
balance of our net assets will be distributed to our remaining
stockholders. Accordingly, if our plan to redeem 100% of our shares
of common stock sold in this offering is not consummated for any reason,
compliance with Delaware law may require that we submit a plan of dissolution
and liquidation to our then existing stockholders for approval prior to the
distribution of the proceeds held in our trust account. In that case,
investors may be forced to wait beyond 15 months before the liquidation proceeds
of our trust account become available to them, and they receive the return of
their pro rata portion of the proceeds from our trust account. Except
for the above redemption, we have no obligation to return funds to investors
prior to the date of our liquidation unless we consummate a business transaction
prior thereto and only then in cases where investors have sought to redeem their
shares. Only upon our liquidation, if no such redemption occurs, will public
stockholders be entitled to liquidation distributions if we are unable to
complete a business transaction.
16
We
may not be able to consummate a business transaction within the required
timeframe, in which case we will be forced to redeem our public stockholders and
liquidate.
Our
sponsor, officers and directors have agreed that we will only have 15 months
from the date of this prospectus to consummate our initial business
transaction. If we do not consummate a business transaction within
such 15 month period, we shall (i) cease all operations except for the purposes
of winding up, (ii) redeem 100% of our public shares of common stock for a per
share pro rata portion of the trust account (including interest, but net of any
taxes), subject to the requirements of applicable law and (iii) as promptly
as possible following such redemption, dissolve and liquidate the balance of our
net assets to our remaining stockholders. We may not be able to find a suitable
target business within the required 15 month time frame. In addition, our
negotiating position and our ability to conduct adequate due diligence on any
prospective target may be reduced as we approach the deadline for the
consummation of a business transaction. We do not have any specific business
transaction under consideration, and neither we, nor any representative acting
on our behalf, has had any contacts with any target businesses regarding a
business transaction, nor taken any direct or indirect actions to locate or
search for a target business.
If
we are forced to redeem or liquidate before the completion of a business
transaction and distribute the trust account, our public stockholders will
receive less than $10.00 per share and our warrants will expire
worthless.
If we are
unable to complete a business transaction within the prescribed time frame and
are forced to cease operations and ultimately liquidate our assets, the amount
of either of the (i) per share redemption or (ii) per share liquidation
distribution will be less than $10.00 because of the expenses of this offering,
our general and administrative expenses and the anticipated costs of seeking a
business transaction. If we are unable to complete a business transaction and
have expended all of the net proceeds of this offering, other than the proceeds
deposited in the trust account (net of any taxes), the initial (i) per-share
redemption or (ii) per-share liquidation amounts would be $9.75. 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
transaction.
Public
stockholders may receive less than their pro rata share of the trust account
upon redemption due to claims of creditors.
Our
placing of funds in the trust account may not protect those funds from third
party claims against us. Although we will seek to have all vendors, service
providers (other than our independent accountants), prospective target
businesses or other entities we engage 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, such parties may not
execute such agreements, or even if they execute such agreements they may not be
prevented from bringing claims against the trust account, including, but not
limited to, fraudulent inducement, breach of fiduciary responsibility or other
similar claims, as well as claims challenging the enforceability of the waiver,
in each case in order to gain advantage with respect to a claim against our
assets, including the funds held in the trust account. If any third party
refused to execute an agreement waiving such claims to the monies held in the
trust account, we would perform an analysis of the alternatives available to us
if we chose not to engage such third party and evaluate if such engagement would
be in the best interest of our stockholders if such third party refused to waive
such claims.
Examples
of possible instances where we may engage a third party that refused to execute
a waiver include the engagement of a third party consultant whose particular
expertise or skills are believed by management to be significantly superior to
those of other consultants that would agree to execute a waiver or in cases
where management is unable to find a service provider willing to execute a
waiver. In addition, such entities may not agree to waive any claims they may
have in the future as a result of, or arising out of, any negotiations,
contracts or agreements with us and may seek recourse against the trust account
for any reason. Upon redemption of our public shares if we are unable to
complete a business transaction within the required timeframe or upon the
exercise of a redemption right in connection with a business transaction, we
will be required to provide for payment of claims of creditors which were not
waived that may be brought against us within the subsequent 10 years prior to
redemption. Accordingly, the (i) per share redemption
price or (ii) per share liquidation price could be less than the $9.75 per share
held in the trust account, plus interest (net of any taxes), due to claims of
such creditors. In addition, Mark D. Klein, our chairman, chief executive
officer and president, and Paul D. Lapping, our chief financial officer,
treasurer, secretary and director, have agreed that they will be liable to us if
and to the extent any claims by a vendor for services rendered or products sold
to us, or a prospective target business with which we have discussed entering
into a transaction agreement reduce the amounts in the trust account to below
$9.75 per share (or approximately $9.74 per share if the underwriter’s
over-allotment option is exercised in full), except as to any claims by a third
party who executed a waiver of any and all rights to seek access to the trust
account and except as to any claims under our indemnity of the underwriters of
this offering against certain liabilities, including liabilities under the
Securities Act. Moreover, in the event that an executed wavier is deemed to be
unenforceable against a third party, Messrs. Klein and Lapping will not be
responsible to the extent of any liability for such third party
claims. We have not, however, asked Messrs. Klein and Lapping to
reserve for such indemnification obligations. Messrs. Klein and Lapping may not
be able to satisfy those obligations.
17
Additionally,
if we are forced to file a bankruptcy case or an involuntary bankruptcy case is
filed against us which is not dismissed, the funds held in our trust account
could be subject to applicable bankruptcy law, and may be included as an asset
in our bankruptcy estate and subject to the claims of third parties with
priority over the claims of our stockholders. To the extent any bankruptcy
claims deplete the trust account, we may not be able to return $9.75 per share
to our public stockholders.
Our
directors may decide not to enforce Messrs. Klein’s and Lapping’s
indemnification obligations, resulting in a reduction in the amount of funds in
the trust account available for distribution to our public
stockholders.
In the
event that the proceeds in the trust account are reduced below $9.75 per share
(or approximately $9.74 per share if the underwriter’s over-allotment option is
exercised in full) and Messrs. Klein and Lapping assert that they are unable to
satisfy their obligations or that they have no indemnification obligations
related to a particular claim, our independent directors, if any, would
determine whether to take legal action against Messrs. Klein and Lapping to
enforce their indemnification obligations. While we currently expect that our
independent directors would take legal action on our behalf against Messrs.
Klein and Lapping to enforce their indemnification obligations to us, it is
possible that our independent directors in exercising their business judgment
may choose not to do so in any particular instance. If our directors choose not
to enforce these indemnification obligations, the amount of funds in the trust
account available for distribution to our public stockholders may be reduced
below $9.75 per share (or approximately $9.74 per share if the underwriters’
over-allotment is exercised in full).
If
we seek stockholder approval of our business transaction and holders
of more than 88% of our public shares indicate their intention to exercise their
redemption rights, our sponsor, directors, officers advisors and their
affiliates could affect the outcome of the consummation of our business
transaction if they elect to purchase shares from stockholders who would
otherwise choose to exercise their redemption rights.
Solely
in the event we seek stockholder approval of our business transaction, and we do
not conduct redemptions in connection with our business transaction pursuant to
the tender offer rules, any privately negotiated transaction to purchase shares
from a stockholder who would otherwise redeem their shares for a per share
pro-rata portion of the trust account would include a contractual
acknowledgement that such stockholder, although still the record holder of our
shares is no longer the beneficial owner thereof and therefore agrees not to
exercise their redemption rights. In the event that our sponsor, officers,
directors, advisors or their respective affiliates purchase shares in
privately negotiated transactions from public stockholders who have already
elected to exercise their redemption rights, such selling stockholders would be
required to revoke their prior elections to redeem their shares. This will have
the effect of reducing the number of shares redeemed and making it more likely
that we would be able to consummate our initial business
transaction.
None
of our sponsor, officers, directors, advisors or their respective
affiliates or any third parties has agreed to purchase any such shares, and the
failure to so agree at the applicable time could adversely impair our ability to
consummate a business transaction. Moreover, even if our sponsor, officers,
directors, advisors and their respective affiliates were to undertake such
purchases, such purchases could be subject to limitations under applicable
securities laws and regulations, including Regulation M and regulations
regarding tender offers. The inability of such persons to effect such purchases
could adversely impair our ability to consummate a business
transaction.
If we submit our business
transaction to our stockholders for approval, we may use funds in our trust
account to purchase, directly or indirectly, shares from holders thereof who
have indicated an intention to redeem their shares.
Solely
if we submit our business transaction to our stockholders for approval, and we
do not conduct redemptions in connection with our business transaction pursuant
to the tender offer rules, if holders of shares sold in this offering indicate
an intention to seek to redeem their shares, we may privately negotiate
arrangements to provide for the purchase of such shares at the closing of the
business transaction using funds held in the trust account. The purpose of such
arrangements would be to increase the likelihood of satisfaction of the
requirement that no more than 88% of our outstanding shares of common stock
demand to redeem their shares , or to satisfy a minimum valuation requirement,
where it appears that such requirements would otherwise not be met. This may
result in the consummation of a business transaction that may not otherwise have
been possible. Additionally, as a consequence of such
purchases,
·
|
the
funds in our trust account that are so used will not be available to us
after the business transaction;
and
|
18
·
|
the
public ‘‘float’’ of our common stock may be reduced and the number of
beneficial holders of our securities may be reduced, which may make it
difficult to obtain the quotation, listing or trading of our securities on
a national securities
exchange.
|
You
will not have any rights or interests 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 upon the earlier to occur of: (i) our redemption of 100% of our
public shares of common stock for a per share pro rata portion of the trust
account (including interest but net of any taxes), subject to the requirements
of applicable law, (ii) our consummation of a business transaction, and then
only in connection with those shares of our common stock that such stockholder
properly elected to redeem, subject to the restrictions described in this
prospectus or (iii) our liquidation (if redemption does not occur). 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 this offering are intended to be used to complete a business
transaction with an unidentified target business, we may be deemed to be a
“blank check” company under the United States securities laws. However, since
our securities will be quoted on the OTC Bulletin Board, we will have net
tangible assets in excess of $5,000,000 upon the successful consummation of this
offering and will file a Current Report on Form 8-K with the SEC upon
consummation of this offering, 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 of the Securities Act. Accordingly,
investors will not be afforded the benefits or protections of those rules, such
as a requirement that we consummate a business transaction with a target whose
fair market value is equal to 80% of the proceeds in our trust account. Because
we are not subject to these rules, including Rule 419, our units will be
immediately tradable, as set forth in this prospectus, prior to completion of a
business transaction. For a more complete discussion of the
differences between the terms of this offering and terms of an offerings subject
to Rule 419, please see “Proposed Business—Comparison of Offering to Blank Check
Companies” below.
If
the net proceeds of this offering not being placed in the trust account are
insufficient to allow us to operate for at least the next 15 months, we may not
be able to complete an initial business transaction.
Upon the
date of this prospectus, $800,000 of the net proceeds of this offering not held
in the trust account will be available to us for at least the next 15 months to
cover expenses incurred in connection with a business transaction or to cover
expenses in connection with our liquidation if we do not complete a business
transaction during that time. These amounts may prove to be insufficient
especially if a portion of the available proceeds is used to make a down payment
or pay exclusivity or similar fees in connection with a business transaction, or
if we expend a significant portion of the available proceeds in pursuit of a
business transaction that is not consummated.
We could
use a portion of the $800,000 not held in trust to pay due diligence costs in
connection with a potential business transaction or to pay fees to consultants
to assist us with our search for a target business. We could also use a portion
of these funds as a down payment, “reverse break-up fee” (a provision in
designed to compensate the target for any breach by the buyer which results in a
failure to close the transaction), or to fund a “no-shop” provision (a provision
designed to keep target businesses from “shopping” around for transactions with
others on terms more favorable to such target businesses) with respect to a
particular proposed business transaction, although we do not have any current
intention to do so. If we entered into such an agreement with a prospective
target 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) or if we agree to a reverse break-up fee and subsequently
were required to pay such fee as a result of our breach of a merger or other
agreement or if our costs are otherwise higher than expected, we might not have
sufficient funds to continue searching for, or conduct due diligence with
respect to, any other potential target businesses. If we do not have sufficient
proceeds available to fund our expenses, we may be forced to obtain additional
financing, either from our management or the sponsor or from third parties, to
continue operating. We may not be able to obtain additional financing and our
sponsor and management are not obligated to provide any additional financing. If
we do not have sufficient proceeds and cannot find additional financing, we may
be forced to dissolve and liquidate prior to consummating a business
transaction.
If
we are deemed to be an investment company under the Investment Company Act, 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 transaction.
If we are
deemed to be an investment company under the Investment Company Act of 1940, as
amended, our activities may be restricted, including:
19
·
|
restrictions
on the nature of our investments;
and
|
·
|
restrictions
on the issuance of securities, each of which may make it difficult for us
to complete a business
transaction.
|
In
addition, we may have imposed upon us burdensome requirements,
including:
·
|
registration
as an investment company;
|
·
|
adoption
of a specific form of corporate structure;
and
|
·
|
reporting,
record keeping, voting, proxy and disclosure requirements and other rules
and regulations.
|
In order
not to be regulated as an investment company under the Investment Company Act,
unless we can qualify for an exclusion, we must ensure that we are engaged
primarily in a business other than investing, reinvesting or trading of
securities and that our activities do not include investing, reinvesting,
owning, holding or trading "investment securities" constituting more than 40% of
our assets (exclusive of U.S. government securities and cash items) on an
unconsolidated basis. Our business will be to identify and consummate a business
transaction and thereafter to operate the acquired business or assets for the
long term. We do not plan to buy businesses or assets with a view to resale or
profit from their resale. We do not plan to buy unrelated businesses or assets
or to be a passive investor. We do not believe that our anticipated principal
activities will subject us to the Investment Company Act. To this end, the
proceeds held in the trust account may only be invested in United States
"government securities" within the meaning of Section 2(a)(16) of the Investment
Company Act 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. Pursuant to the trust agreement, the trustee is not permitted to
invest in other securities or assets. By restricting the investment of the
proceeds to these instruments, and by having a business plan targeted at
acquiring, growing and businesses for the long term (rather than on buying and
selling businesses in the manner of a merchant bank or private equity fund), we
intend to avoid being deemed an "investment company" within the meaning of the
Investment Company Act. This offering is not intended for persons who are
seeking a return on investments in government securities or investment
securities. The trust account is intended as a holding place for funds pending
the earlier to occur of either: (i) the consummation of our primary business
objective, which is a business transaction; or (ii) absent a business
transaction, our return of the funds held in the trust account to our public
stockholders as part of our redemption of public shares. If we do not invest the
proceeds as discussed above, we may be deemed to be subject to the Investment
Company Act. If we were deemed to be subject to the Investment Company Act,
compliance with these additional regulatory burdens would require additional
expense for which we have not accounted.
In
certain circumstances, our board of directors may be viewed as having breached
their fiduciary duties to our creditors, thereby exposing itself and us to
claims of punitive damages.
If we are
forced to file a bankruptcy case or an involuntary bankruptcy case is filed
against us which is not dismissed, any distributions received by stockholders
could be viewed under applicable debtor/creditor and/or bankruptcy laws as
either a “preferential transfer” or a “fraudulent conveyance.” As a result, a
bankruptcy court could seek to recover all amounts received by our stockholders.
Furthermore, because we intend to redeem 100% of our public shares of common
stock for a per share pro rata portion of the trust account, in the event we do
not consummate a business transaction within 15 months from the date of this
prospectus, this may be viewed or interpreted as giving preference to our
public stockholders over any potential creditors with respect to access to or
distributions from our assets. Furthermore, our board of directors may be viewed
as having breached its fiduciary duty to our creditors and/or may have acted in
bad faith, thereby exposing itself and us to claims of punitive damages, by
paying public stockholders from the trust account prior to addressing the claims
of creditors.
Our
stockholders may be held liable for claims by third parties against us to the
extent of distributions received by them upon redemption of their
shares.
If we do
not consummate a business transaction within 15 months from the date of this
prospectus, our sponsor, officers and directors have agreed that we will (i)
cease all operations except for the purposes of winding up, (ii) redeem 100% of
our public shares of common stock for a per share pro rata portion of the trust
account, plus a portion of the interest earned on the trust account but net of
any taxes, subject to the requirements of Delaware General Corporation Law
Section 160 and other applicable law and (iii) as promptly as possible following
such redemption, dissolve and liquidate the balance of our net assets to our
remaining stockholders. 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 pursuant to a
dissolution, and our redemption of 100% of the shares sold in this offering may
be deemed a liquidating distribution. If a corporation complies with
certain procedures set forth in Section 280 of the Delaware General Corporation
Law intended to ensure that it makes reasonable provision for all claims against
it, including a 60-day notice period during which any third-party claims can be
brought against the corporation, a 90-day period during which the corporation
may reject any claims brought, and an additional 150-day waiting period before
any liquidating distributions are made to stockholders, any liability of
stockholders with respect to a liquidating distribution is limited to the lesser
of such stockholder’s pro rata share of the claim or the amount distributed to
the stockholder, and any liability of the stockholder would be barred after the
third anniversary of the dissolution. Because we will not be
complying with certain procedures set forth in Section 280 of the Delaware
General Corporation Law, as set forth above, a stockholder who received
distributions in the redemption may be liable for the lesser of such
stockholder’s pro rata share of the claim or the amount distributed to the
stockholder until the third anniversary of the dissolution.
20
Although
we are required to use our best efforts to have an effective registration
statement covering the issuance of the shares of common stock underlying the
warrants at the time that our warrant holders exercise their warrants, a
registration statement may not be effective, in which case our warrant holders
may not be able to exercise their warrants and therefore the warrants could
expire worthless.
Holders
of our warrants will be able to exercise the warrants only if we have an
effective registration statement covering the shares of common stock issuable
upon exercise of the warrants and a current prospectus relating to such common
stock and such shares of common stock are qualified for sale or exempt from
qualification under the applicable securities laws of the states in which the
various holders of warrants reside. Although we have undertaken in the warrant
agreement, and therefore have a contractual obligation, to use our best efforts
to maintain an effective registration statement covering the shares of common
stock issuable upon exercise of the warrants following completion of this
offering, and we intend to comply with our undertaking, we may not be able to do
so. Factors such as an unexpected inability to remain current in our SEC
reporting obligations or other material developments concerning our business
could present difficulties in maintaining an effective registration statement
and a current prospectus. Holders of warrants will not be entitled to a cash
settlement for their warrants if we fail to have an effective registration
statement or a current prospectus available relating to the common stock
issuable upon exercise of the warrants. The expiration of warrants prior to
exercise would result in each unit holder paying the full unit purchase price
solely for the shares of common stock underlying the unit.
We
intend to consummate a business transaction with an operating company, but do
not have a particular focus on businesses or assets involved in any particular
industry. As we have not currently selected any target business with which to
complete a business transaction, investors in this offering are unable to
currently ascertain the merits or risks of the target business, may not be able
to vote in connection with such business transaction and will be relying on our
management’s ability to identify a target business or businesses and complete a
business transaction.
We
intend to focus on identifying a prospective target business, and have not
focused on any particular business or industry. As we have not yet identified a
prospective target business, investors in this offering have no current basis to
evaluate the possible merits or risks of the target business until we provide
our stockholders with a notice concerning the business
transaction. Currently, since we may consummate a business
transaction without seeking stockholder approval, stockholders will not be
afforded the opportunity to vote upon any proposed business transaction, unless
we seek stockholder approval by law. To the extent we complete a
business transaction we may be affected by numerous risks inherent in the
business operations of those entities which our management may not properly
ascertain. An investment in our units may ultimately prove to be less favorable
to investors in this offering than a direct investment, if an opportunity were
available, in a target business.
International
and political events could adversely affect our results of operations and
financial condition.
We may
enter into an initial business transaction with a non-U.S. entity and,
accordingly, a significant portion of our post business transaction revenue may
be derived from non-U.S. operations, which exposes us to risks inherent in doing
business in each of the countries in which we transact business. The occurrence
of any of the risks described below could have a material adverse effect on our
results of operations and financial condition.
Operations
in countries other than the U.S. are subject to various risks peculiar to each
country. With respect to any particular country, these risks may
include:
· expropriation
and nationalization of our assets in that country;
· political
and economic instability;
· civil
unrest, acts of terrorism, force majeure, war, or other armed
conflict;
· natural
disasters, including those related to earthquakes and flooding;
· inflation;
· currency
fluctuations, devaluations, and conversion restrictions;
· confiscatory
taxation or other adverse tax policies;
· governmental
activities that limit or disrupt markets, restrict payments, or limit the
movement of funds;
· governmental
activities that may result in the deprivation of contract rights;
and
· governmental
activities that may result in the inability to obtain or retain licenses
required for operation.
Due to
the unsettled political conditions in many countries in which we may operate,
our revenue and profits may be subject to the adverse consequences of war, the
effects of terrorism, civil unrest, strikes, currency controls, and governmental
actions. Our facilities and our employees could come under threat of attack in
some countries where we may operate. In addition, we may become subject to the
risk related to loss of life of our personnel and our subcontractors in these
areas. We are also subject to the risks that our employees, joint venture
partners, and agents outside of the U.S. may fail to comply with applicable
laws.
Unlike
most other blank check companies, we are not required to consider a target’s
valuation when entering into or consummating our business
transaction. Management’s unrestricted flexibility in identifying and
selecting a prospective acquisition candidate, along with management’s financial
interest in consummating an initial business transaction, may lead management to
enter into an acquisition agreement that is not in the best interest of the our
stockholders
Most
blank check companies are required to consummate their initial business
combination with a target whose value is equal to at least 80% of the amount of
money deposited in the trust account of the blank check company at the time of
entry into a materially definitive agreement. Because we do not have
the limitation that a target business have a minimum fair market enterprise
value of the net assets held in the trust account (net of taxes and exclusive of
any amounts subject to the exercise of redemption rights) at the time of our
signing a definitive agreement in connection with our initial business
transaction, we will have virtually unrestricted flexibility in identifying and
selecting a prospective acquisition candidate. Investors will be relying on our
management’s ability to identify business transactions, evaluate their merits,
conduct or monitor diligence and conduct negotiations. Management’s
unrestricted flexibility in identifying and selecting a prospective acquisition
candidate, along with management’s financial interest in consummating an initial
business transaction, may lead management to enter into an acquisition agreement
that is not in the best interest of our stockholders.
We
may not obtain an opinion from an independent investment banking firm as to the
fair market enterprise value of the target business or that the price we are
paying for the business is fair to our stockholders.
Unless we
consummate a business transaction with an affiliated entity, we are not required
to obtain an opinion from an independent investment banking firm that either the
target business we select has a certain fair market enterprise value at the time
of our signing a definitive agreement in connection with our initial business
transaction or that the price we are paying is fair to our stockholders unless
our board of directors is not able to independently determine that a target
business or businesses have a sufficient fair market enterprise value or there
is a conflict of interest with respect to the transaction. The fair market
enterprise value of such business will be determined by our board of directors
based upon standards generally accepted by the financial community, such as
actual and potential sales, earnings and cash flow and book value, and the price
for which comparable businesses have recently been sold. If no opinion is
obtained, our stockholders will be relying on the judgment or our board of
directors.
21
We
may issue shares of our capital stock to complete a business transaction, 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 100,000,000 shares of common stock, par value $0.0001 per share, and
1,000,000 shares of preferred stock, par value $0.0001 per share. Immediately
after this offering and the purchase of the insider warrants (assuming no
exercise of the underwriters’ over-allotment option), there will be 86,444,444
authorized but unissued shares of our common stock available for issuance (after
appropriate reservation for the issuance of shares of common stock upon full
exercise of our outstanding warrants) and of the 1,000,000 shares of preferred
stock a total of 1,000,000 will be available for issuance. Although we have no
commitment as of the date of this prospectus, 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 transaction. 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 in this
offering;
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may subordinate the rights of
holders of common stock if preferred stock is issued with rights senior to
those afforded to the holders of our common
stock;
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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
carry forwards, if any, and may 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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For a
more complete discussion of the possible structure of a business transaction,
see the section below entitled “Proposed Business—Effecting a Business
Transaction—We Have Not Identified a Target Business.”
Substantial
resources could be expended in researching initial business transactions that
are not consummated, which could materially adversely affect subsequent attempts
to locate and consummate an initial business transaction.
We
anticipate 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 other third party fees and
expenses. If we decide not to enter into an agreement with respect to a specific
proposed initial business transaction we have investigated, 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 transaction for any number of
reasons including those beyond our control. 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 consummate a business
transaction.
Our
ability to successfully effect a business transaction and to be successful
thereafter will be dependent in large part upon the efforts of our key
personnel, including our officers and directors.
Our
ability to successfully effect a business transaction is dependent upon the
efforts of our key personnel. Our key personnel will also be officers,
directors, key personnel and/or members of other entities, to whom we anticipate
we will have access on an as needed basis, although such personnel may not be
able to devote sufficient time, effort or attention to us when we need it. None
of our key personnel, including our executive officers, will have entered into
employment or consultant agreements with us.
Our
officers and directors may allocate their time to other businesses, thereby
causing conflicts of interest in their determination as to how much time to
devote to our affairs. These conflicts could impair our ability to consummate a
business transaction.
Our
officers and directors are not required to commit their full time to our
affairs, which may result in a conflict of interest in allocating their time
between our operations and other businesses. We do not intend to have any full
time employees prior to the consummation of a business transaction. Certain of
our executive officers are engaged in several other business endeavors and are
not obligated to contribute any specific number of hours per week to our
affairs. If our executive officers’ 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 impair our ability to consummate
a business transaction. These conflicts may not be resolved in our
favor.
22
Our
officers, directors and their affiliates currently are, and may in the future
become, affiliated with entities engaged in business activities that are 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.
Certain
of our officers, directors, advisors or their affiliates have been
principals of, or affiliated or associated with, other blank check companies,
and/or may in the future become, affiliated with additional entities engaged in
business activities similar to those intended to be conducted by us. Due to
these existing affiliations, our officers and directors may have fiduciary
obligations to present potential business opportunities to those entities prior
to presenting them to us, which could cause additional conflicts of interest.
Accordingly, they may have conflicts of interest in determining to which entity
a particular business opportunity should be presented. These conflicts may not
be resolved in our favor. For a complete discussion of our
management’s business affiliations and the potential conflicts of interest that
you should be aware of, see “Management—Conflicts of Interest.”
Our
management may negotiate employment or consulting agreements with a target
business in connection with a particular business transaction. These agreements
may provide for them to receive compensation following a business transaction
and, as a result, may cause them to have conflicts of interest in determining
whether a particular business transaction is in the best interest of our public
stockholders.
Our
management may not be able to remain with the company after the consummation of
a business transaction unless they are able to negotiate employment or
consulting agreements in connection with a business transaction. If, as a
condition to a potential initial business transaction, our existing officers
negotiate to be retained after the consummation of the business transaction,
such negotiations may result in a conflict of interest. Such negotiations would
take place simultaneously with the negotiation of the business transaction 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 us after the
consummation of the business transaction. While the personal and financial
interests of such individuals may influence their motivation in identifying and
selecting a target business, the ability of such individuals to remain with us
after the consummation of a business transaction will not be the determining
factor in our decision as to whether or not we will proceed with any potential
business transaction. In making the determination as to whether current
management should remain with us following the business transaction, we will
analyze the experience and skill set of the target business’s management and
negotiate as part of the business transaction that our existing officers and
directors remain if it is believed to be in the best interests of the combined
company after the consummation of the business transaction.
We
will only have a limited ability to evaluate the management of the target
business.
We intend
to closely scrutinize the management of the target business; however, our
assessment of these individuals may not 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 operational issues which may adversely affect our
operations.
We
may engage in a business transaction with one or more target businesses that
have relationships or are affiliated with our sponsor, directors or officers,
which may raise potential conflicts.
We may
engage in a business transaction with one or more target businesses that have
relationships or are affiliated (as defined in Rule 405 of the Securities Act)
with our sponsor, directors or officers, which may raise potential conflicts.
Also, the completion of a business transaction between us and an entity owned by
a business in which one of our directors or officers may have an interest could
enhance their prospects for future business from such client. To minimize
potential conflicts of interest, we have agreed not to consummate, and our
amended and restated certificate of incorporation provides that we may not
consummate, a business transaction with a target business that is affiliated
with our sponsor, our directors, advisors or officers or any of our or
their affiliates unless we obtain an opinion from an independent investment
banking firm that is a member of FINRA that the business transaction is fair to
our stockholders from a financial point of view.
Since
our sponsor will lose its entire investment in us if a business transaction is
not consummated and may be required to pay costs associated with our liquidation
and our officers and directors have significant financial interests in us, a
conflict of interest may arise in determining whether a particular acquisition
target is appropriate for our initial business transaction.
Our
sponsor owns 638,889 shares of our common stock, up to 83,333 of which will be
forfeited if the underwriters’ over-allotment is not exercised in full (which
were purchased for $25,000) that will be worthless if we do not consummate a
business transaction. In addition, our sponsor has agreed to purchase warrants
exercisable for our common stock (for $1,500,000), which will also be worthless
if we do not consummate a business transaction. In addition, in the event we are
forced to liquidate, our sponsor has agreed to advance us the entire amount of
the funds necessary to complete such liquidation (currently anticipated to be no
more than approximately $30,000) and has agreed not to seek repayment for such
expenses. The personal and financial interests of our officers, directors and
advisory board members may influence their motivation in identifying and
selecting a target business transaction and completing an initial business
transaction. Consequently, the discretion of our officers and directors, in
identifying and selecting a suitable target business transaction may result in a
conflict of interest when determining whether the terms, conditions and timing
of a particular initial business transaction are appropriate and in the best
interest of our public stockholders.
Since
our officers and directors will lose their entire investment if we are unable to
complete a business transaction, in the event we seek stockholder approval of
our business transaction, our intention to pay only holders of our common stock
voting in favor of such business transaction a pro rata portion of the interest
earned on our trust account may be viewed as a conflict of
interest.
Our
sponsor, which is wholly controlled by our officers, directors and members of
our advisory board, will lose its entire investment in us if we are unable to
consummate a business transaction within 15 months from the date of this
prospectus. The personal and financial interests of our officers,
directors and advisory board members may influence their motivation in
identifying and selecting a target business transaction and completing an
initial business transaction. As a result of this potential conflict, our
intention, solely in the event we seek stockholder approval of our business
transaction, to only pay holders of our common stock who vote in favor of such
transaction a pro rata portion of the interest earned on the trust account may
be viewed as a conflict of interest and may be challenged as not
enforceable.
23
The
requirement that we complete a business transaction
by ,
2011 [15 months from the date of this prospectus] may give potential target
businesses leverage over us in negotiating a business
transaction.
If we
have not consummated a business transaction within 15 months from the date of
this prospectus, we will redeem 100% of our public shares of common stock for a
per share pro rata portion of the trust account (initially approximately $9.75
per share, or approximately $9.74 per share if the underwriters’ over-allotment
option is exercised in full), plus a portion of the interest earned on the trust
account but net of any taxes, and then adopt a plan of dissolution pursuant to
which we will liquidate and promptly distribute the balance of our net assets to
our remaining stockholders (subject to our obligations under Delaware law for
claims of creditors). Any potential target business with which we enter into
negotiations concerning a business transaction will be aware of this
requirement. Consequently, such target businesses may obtain leverage over us in
negotiating a business transaction, knowing that if we do not complete a
business transaction with that particular target business, we may be unable to
complete a business transaction with any target business. This risk will
increase as we get closer to the time limits referenced above.
The
requirement that we complete a business transaction
by ,
2011 [15 months from the date of this prospectus]may motivate our officers and
directors to approve a business transaction that is not in the best interests of
stockholders.
Each
of our officers and directors may receive reimbursement for out-of-pocket
expenses incurred by him in connection with activities on our behalf, such as
identifying potential target businesses and performing due diligence on suitable
business transactions. 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
transaction
by ,
2011 [15 months from the date of this prospectus], then any expenses incurred by
such individuals in excess of the money being held outside of the trust account
will not be repaid and we will liquidate. On the other hand, if we complete a
business transaction within such time period, those expenses will be repaid by
the target business.
Consequently,
our officers and directors may have an incentive to complete a business
transaction other than just what is in the best interest of our
stockholders.
Our
officers, directors, security holders and their respective affiliates may have
competitive pecuniary interests that conflict with our interests.
We have
not adopted a policy that expressly prohibits our directors, officers, security
holders or affiliates from having a direct or indirect pecuniary interest in any
investment to be acquired or disposed of by us or in any transaction to which we
are a party or have an interest. Nor do we have a policy that expressly
prohibits any such persons from engaging for their own account in business
activities of the types conducted by us. Accordingly, such persons or entities
may have a conflict between their interests and ours.
Our
securities will be quoted on the OTC Bulletin Board, which will limit the
liquidity and price of our securities more than if our securities were quoted or
listed on the Nasdaq Stock Market or another national exchange.
Our
units, common stock and warrants will be traded in the over-the-counter market
and will be quoted on the OTC Bulletin Board, a FINRA-sponsored and operated
inter-dealer automated quotation system for equity securities not included in
the Nasdaq Stock Market. Quotation of our securities on the OTC Bulletin Board
will limit the liquidity and price of our securities more than if our securities
were quoted or listed on the Nasdaq Stock Market or a national exchange. Lack of
liquidity will limit the price at which you may be able to sell our securities
or your ability to sell our securities at all.
A
market for our securities may not develop, which would adversely affect the
liquidity and price of our securities.
Although
we have applied to have our securities quoted on the OTC Bulletin Board, as of
the date of this prospectus, there is currently no market for our securities.
Prospective stockholders therefore have no access to information about prior
trading history on which to base their investment decision. Following this
offering, the price of our securities may vary significantly due to our reports
of operating losses, one or more potential business transactions, the filing of
periodic reports with the SEC, and general market and economic conditions. Once
quoted on the OTC Bulletin Board, an active trading market for our securities
may never develop or, if developed, it may not be sustained. In addition, the
price of the securities after the offering can vary due to general economic
conditions and forecasts, our general business condition and the release of our
financial reports. You may be unable to sell your securities unless a
market can be established or sustained.
24
If
you are not an institutional investor, you may purchase securities in this
offering only if you reside within the states in which we will apply to have the
securities registered. Although the states are preempted from regulating the
resales of our securities, state securities regulators who view blank check
offerings unfavorably could use or threaten to use their investigative or
enforcement powers to hinder resales in their states.
We
have applied to register our securities, or have obtained or will seek to obtain
an exemption from registration, in Colorado, Delaware, the District of Columbia,
Florida, Georgia, Hawaii, Illinois, Louisiana, Maryland, New York and Rhode
Island. If you are not an “institutional investor,” you must be a resident of
these jurisdictions to purchase our securities in the offering. The definition
of an “institutional investor” varies from state to state but generally includes
financial institutions, broker-dealers, banks, insurance companies and other
qualified entities. Institutional investors in every state except in Idaho may
purchase the units in this offering pursuant to exemptions provided to such
entities under the Blue Sky laws of various states. Under the National
Securities Market Improvement Act of 1996, the states are pre-empted from
regulating transactions in covered securities. We will file periodic and annual
reports under the Exchange Act and our securities will be considered covered
securities. Therefore, the states will be pre-empted from regulating the resales
of the units, from and after the effective date, and the common stock and
warrants comprising the units, once they become separately transferable.
However, the states retain the jurisdiction to investigate and bring enforcement
actions with respect to fraud or deceit, or unlawful conduct by a broker or
dealer, in connection with the sale of securities. Although we are not aware of
a state other than Idaho, having used these powers to prohibit or restrict
resales of securities issued by blank check companies generally, certain state
securities commissioners view blank check companies unfavorably and might use
these powers, or threaten to use these powers, to hinder the resale of
securities of blank check companies in their states. For a more complete
discussion of the state securities laws and registrations affecting this
offering, please see “Underwriting — State Blue Sky Information”
below.
We
will probably complete only one business transaction with the proceeds of this
offering and the private placement of the insider warrants, meaning our
operations will depend on a single business and we will be exposed to higher
risk than other entities that have the resources to complete several
transactions.
The net
proceeds from this offering will provide us with approximately $48,750,000
(approximately $56,025,000 if the underwriters’ over-allotment option is
exercised in full) that we may use to complete a business transaction. We may
not be able to acquire more than one target business because of various factors,
including the existence of complex accounting issues and the requirement that we
prepare and file pro forma financial statements with the SEC that present
operating results and the financial condition of several target businesses as if
they had been operated on a combined basis. Additionally, we may encounter
numerous logistical issues if we pursue multiple target businesses, including
the difficulty of coordinating the timing of negotiations, notice disclosure and
closings. We may also be exposed to the risk that our inability to satisfy
conditions to closing with one or more target businesses would reduce the fair
market enterprise value of the remaining target businesses in the combination.
Due to these added risks, we are more likely to choose a single target business
with which to pursue a business transaction than multiple target businesses.
Unless we combine with a target business in a transaction in which the purchase
price consists substantially of common stock and/or preferred stock, it is
likely we will complete only one business transaction with the proceeds of this
offering. Accordingly, the prospects for our success may depend solely on the
performance of a single business. If this occurs, our operations will be highly
concentrated and we will be exposed to higher risk than other entities that have
the resources to complete several business transactions, or that operate in
diversified industries or industry segments.
We
may not be able to maintain control of a target business after our initial
business transaction.
We may
structure a business transaction to acquire less than 100% of the equity
interests or assets of a target business, but will not acquire less than a
controlling interest. We will acquire a controlling interest either through the
acquisition of at least 50.1% of the voting equity interests in the target or
through the acquisition of a significant voting equity interest that enables us
to exercise a greater degree of control over the target than any other person or
group. However, other minority stockholders may subsequently combine their
holdings resulting in a single person or group obtaining a larger share of the
company’s stock than we initially acquired. Accordingly, this may make it more
likely that we will not be able to maintain our control of the target
business.
25
Unlike
other blank check companies, we allow our public stockholders holding no more
than 88% of the shares sold in this offering to exercise their redemption
rights. This higher threshold will make it easier for us to consummate a
business transaction with which a substantial majority of our stockholders do
not agree.
We
will proceed with our initial business combination unless holders of more than
88% of our public shares redeem their shares. The 88% redemption
threshold is different from the redemption or conversion thresholds used by most
blank check companies. Traditionally, blank check companies would not
be able to consummate a business transaction if the holders of the company’s
public shares voted against a proposed business transaction and elected to
redeem or convert more than a much smaller percentage of the shares sold in such
company’s initial public offering, which percentage threshold is typically
between 19.99% and 39.99%. As a result, many blank check companies
have been unable to complete business transactions because the amount of shares
voted by their public stockholders electing conversion exceeded the maximum
conversion threshold pursuant to which such company could proceed with a
business transaction. As a result, we may be able to consummate a
business transaction even though a substantial majority of our public
stockholders do not agree with the transaction and have redeemed their shares
or, solely if we hold a stockholder vote to approve our initial business
transaction, and do not conduct redemptions in connection with our business
transaction pursuant to the tender offer rules, have entered into privately
negotiated agreements to sell their shares to us or our sponsor, officers,
directors, advisors or their affiliates.
The
exercise price for the public warrants is higher than in similar blank check
company offerings in the past, and, accordingly, the warrants are more likely to
expire worthless.
The exercise price of the warrants is
higher than is typical in similar blank check
companies. Historically, the exercise price of a warrant was
generally a fraction of the purchase price of the units in the
IPO. The exercise price for our public warrants is $11.50 per
share. As a result, the warrants are less likely to ever be in the
money and more likely to expire worthless.
The
ability of a larger number of our stockholders to exercise redemption rights may
not allow us to consummate the most desirable business transaction or optimize
our capital structure.
If our
business transaction 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
redemption rights, we may either need to reserve part of the trust account for
possible payment upon such redemption, or we may need to arrange third party
financing to help fund our business transaction in case a larger percentage of
stockholders exercise their redemption rights than we expect. In the event that
the acquisition involves the issuance of our stock as consideration, we may be
required to issue a higher percentage of our stock to make up for a shortfall in
funds. Raising additional funds to cover any shortfall may involve dilutive
equity financing or incurring indebtedness at higher than desirable levels. This
may limit our ability to effectuate the most attractive business transaction
available to us.
Even
if holders of no more than 88% of our public shares elect to exercise their
redemption rights, we may be unable to consummate a business
transaction.
Although
we permit holders of no more than 88% of our public shares to exercise their
redemption rights, a potential target may make it a closing condition to our
business transaction that we exceed a certain minimum net asset valuation at the
time of closing. If the number of our public stockholders electing to
exercise their redemption rights would have the effect of reducing the amount of
money available to us to consummate a business transaction below such minimum
net asset valuation, we would not be able to consummate our business
transaction.
In
order to effectuate a business combination, blank check companies have, in the
recent past, amended various provisions of their charters and modified governing
instruments. We cannot assure you that we will not seek to amend our
certificate of incorporation or governing instruments in order to effectuate our
initial business transaction.
In
order to effectuate a business combination, blank check companies have, in the
recent past, amended various provisions of their charters and modified governing
instruments. For example, blank check companies have amended the
definition of business combination, increased redemption thresholds and changed
industry focus. We cannot assure you that we will not seek to amend
our certificate of incorporation or governing instruments in order to effectuate
our initial business transaction.
Unlike
most other blank check companies, the provisions of our amended and restated
certificate of incorporation may be amended with the approval of at least 65% of
our stockholders.
Most blank check companies have a
provision in their charter which prohibits the amendment of certain of its
provisions, including those which relate to a company’s pre-business combination
activity, without approval by a certain percentage of the company’s
stockholders. Typically, amendment of these provisions requires
approval by between 90% and 100% of the company’s public
stockholders. Our amended and restated certificate of incorporation
provides that any of its provisions, including those related to pre-business
transaction activity, may be amended if approved by at least 65% of our
stockholders. As a result, we may be able to amend the provisions of
our amended and restated certificate of incorporation which govern our
pre-business transaction behavior more easily that other blank check companies,
and this may increase our ability to consummate a business transaction with
which you do not agree.
We
may issue notes or other debt securities, or otherwise incur substantial debt,
to complete a business transaction, which may adversely affect our leverage and
financial condition.
Although
we have no commitments as of the date of this prospectus to issue any notes or
other debt securities, or to otherwise incur outstanding debt, we may choose to
incur substantial debt to complete a business transaction. The incurrence of
debt could result in:
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default and foreclosure on our
assets if our operating cash flow after a business transaction is
insufficient to pay our debt
obligations;
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acceleration of our obligations
to repay the indebtedness even if we have made all principal and interest
payments when due if the debt security contains covenants that require the
maintenance of certain financial ratios or reserves and any such covenant
is breached 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;
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covenants that limit our ability
to acquire capital assets or make additional
acquisitions;
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our inability to obtain
additional financing, if necessary, if the debt security contains
covenants restricting our ability to obtain additional financing while
such security is
outstanding;
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our inability to pay dividends on
our common stock;
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using a substantial portion of
our cash flow to pay principal and interest on our debt, which will reduce
the funds available for dividends on our common stock if declared,
expenses, capital expenditures, acquisitions and other general corporate
purposes;
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26
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limitations on our flexibility in
planning for and reacting to changes in our business and in the industry
in which we operate;
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increased vulnerability to
adverse changes in general economic, industry and competitive conditions
and adverse changes in government regulation;
and
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limitations on our ability to
borrow additional amounts for expenses, capital expenditures,
acquisitions, debt service requirements, execution of our strategy and
other purposes and other disadvantages compared to our competitors who
have less debt.
|
Our
sponsor controls a substantial interest in us and thus may influence certain
actions requiring a stockholder vote.
Upon
consummation of our offering (including any exercise of the over-allotment
option, in whole or in part), and after giving effect to the private placement
of insider warrants, our sponsor will own 10% of our issued and outstanding
common stock (assuming it does not purchase units in this offering). This
ownership interest, together with any other acquisitions of our shares of common
stock (or warrants which are subsequently exercised), could allow our sponsor to
influence the outcome of matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions after
completion of our business transaction. Our board of directors is divided into
two classes, each of which will generally serve for a term of two years with
only one class of directors being elected in each year. It is unlikely that
there will be an annual meeting of stockholders to re-elect existing directors
or elect new directors prior to the consummation of a business transaction, in
which case all of the current directors will continue in office until at least
the consummation of the business transaction. If there is an annual meeting, as
a consequence of our “staggered” board of directors, only a minority of the
board of directors will be considered for election and our sponsor, because of
its ownership position, will have considerable influence regarding the outcome
of an election of directors. The interests of our sponsor and your interests may
not always align and taking actions which require approval of a majority of our
stockholders, such as selling the company, may be more difficult to
accomplish.
We
may be unable to obtain additional financing, if required, to complete a
business transaction or to fund the operations and growth of the target
business, which could compel us to restructure the transaction or abandon a
particular business transaction.
We
believe that the net proceeds of this offering will be sufficient to allow us to
consummate a business transaction. However, because we have not yet identified
any prospective target business, we cannot ascertain the capital requirements
for any particular transaction. If the net proceeds of this offering prove to be
insufficient, either because of the size of the business transaction, the
depletion of the available net proceeds in search of a target business, or the
obligation to pay cash for a significant number of shares redeemed,
we will be required to seek additional financing. Such financing may not be
available on acceptable terms, if at all. To the extent that additional
financing proves to be unavailable when needed to consummate a particular
business transaction, we would be compelled to either restructure the
transaction or abandon that particular business transaction and seek an
alternative target business candidate. None of our officers, directors or
stockholders are required to provide any financing to us in connection with or
after a business transaction.
We
may choose to redeem our outstanding warrants at a time that is disadvantageous
to our warrant holders.
We may
redeem the outstanding warrants (excluding any insider warrants held by our
sponsor or its permitted assigns) issued as a part of our units at any time
after the warrants become exercisable, in whole and not in part, at a price of
$0.01 per warrant, upon not less than 30 days prior written notice of
redemption, and if, and only if, the last sales price of our common stock equals
or exceeds $17.50 per share for any 20 trading days within a 30 trading day
period ending three business days before we send the notice of redemption. In
addition, we may not redeem the warrants unless on the date we give notice of
redemption and during the entire period thereafter until the time we redeem the
warrants we have an effective registration statement covering the shares of
common stock issuable upon the exercise of the warrants and a current prospectus
relating to such common stock is available.
We will
likely redeem the warrants if the market price of our common stock reaches
$17.50 per share for the necessary trading period, since doing so would allow us
to decrease the dilutive effect of the warrants. Redemption of the warrants
could force the warrant holders to exercise the warrants, whether by paying the
exercise price in cash or through a cashless exercise at a time when it may be
disadvantageous for the holders to do so, to sell the warrants at the then
current market price when they might otherwise wish to hold the warrants, or to
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. We expect most purchasers of our warrants will hold their securities
through one or more intermediaries and consequently you 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 to us.
27
Our
management’s ability to require holders of our warrants to exercise such
warrants on a cashless basis will cause holders to receive fewer shares of
common stock upon their exercise of the warrants than they would have received
had they been able to pay the exercise price of their warrants in
cash.
If we call our warrants for
redemption after the redemption criteria described elsewhere in this prospectus
have been satisfied, our management will have the option to require any holder
that wishes to exercise his warrant to do so on a “cashless
basis.” “Cashless exercise” means the warrant holder pays the
exercise price by giving up some of the shares for which the warrant is being
exercised, with those shares valued at the then current market
price. Accordingly, each holder would pay the exercise price by
surrendering the warrants for that number of shares of common stock equal to the
quotient obtained by dividing (x) the product of the number of shares of common
stock underlying the warrants, multiplied by the difference between the exercise
price of the warrants and the fair market value by (y) the fair market value.
The “fair market value” shall mean the average reported last sales price of our
common stock for the 10 trading days ending on the third trading day prior to
the date on which notice of redemption is sent to the holders of the
warrants. For example, if the holder is exercising 875 public
warrants at $11.50 per share through a cashless exercise when the common stock
has a fair market value per share of $17.50 per share, then upon the cashless
exercise, the holder will receive 300 shares of common stock. The
holder would have received 875 shares of common stock if the exercise price was
paid in cash. If our management chooses to require holders to
exercise their warrants on a cashless basis, the number of shares of common
stock received by a holder upon exercise will be fewer than it would have been
had such holder exercised his warrant for cash. This will have the effect of
reducing the potential “upside” of the holder’s investment in our company
because the warrantholder will hold a smaller number of shares of common stock
upon a cashless exercise of the warrants they hold.
Our
outstanding warrants may have an adverse effect on the market price of common
stock and make it more difficult to effect a business transaction.
In
connection with this offering, we will be issuing warrants to purchase up to
5,000,000 shares of common stock (5,750,000 if the underwriters’ over-allotment
option is exercised in full). In addition, we will sell to the sponsor insider
warrants to purchase up to 3,000,000 shares of common stock on or before the
date of this prospectus. To the extent we issue shares of common stock to effect
a business transaction, the potential for the issuance of a substantial number
of additional shares of common stock upon exercise of these warrants could make
us a less attractive acquisition vehicle to 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 of common stock issued to
complete the business transaction. Therefore, our warrants may make it more
difficult to effectuate a business transaction or increase the cost of acquiring
the target business.
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. Because the exemptions from
qualification in certain states for resales of warrants and for issuances of
common stock by the issuer upon exercise of a warrant may be different, a
warrant may be held by a holder in a state where an exemption is not available
for issuance of common stock upon an exercise and the holder will be precluded
from exercise of the warrant. 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.
We
may amend the terms of the warrants in a manner that may be adverse to holders
with the approval by the holders of a majority of the then outstanding
warrants.
Our
determination of the offering price of our units and of the aggregate amount of
proceeds we are raising in this offering is more arbitrary than would typically
be the case if we were an operating company rather than an acquisition
vehicle.
Prior to
this offering there has been no public market for our securities. The public
offering price of the units, the terms of the warrants, the aggregate proceeds
we are raising and the amount to be placed in trust were the result of a
negotiation between the underwriters and us. Factors that were considered in
making these determinations include:
|
·
|
the information presented in this
prospectus and otherwise available to the
underwriters;
|
|
·
|
the history and prospects of
companies whose principal business is the acquisition of other
companies;
|
28
|
·
|
the ability of our management and
their experience in identifying operating
companies;
|
|
·
|
prior offerings of those
companies;
|
|
·
|
our prospects for acquiring an
operating business at attractive
values;
|
|
·
|
the present state of our
development and our current financial condition and capital
structure;
|
|
·
|
the recent market prices of, and
the demand for, publicly traded common stock of generally comparable
companies;
|
|
·
|
the general conditions of the
securities markets at the time of the offering;
and
|
|
·
|
other factors as were deemed
relevant.
|
Although
these factors were considered, the determination of our per unit offering price
and aggregate proceeds is more arbitrary than would typically be the case if we
were an operating company. In addition, because we have not identified any
potential target businesses, our assessment of the financial requirements
necessary to complete a business transaction may prove inaccurate, in which case
we may not have sufficient funds to consummate a business transaction and we
would be forced to either find additional financing or liquidate.
You
will experience immediate and substantial dilution from the purchase of our
common stock.
The
difference between the public offering price per share of our common stock
(allocating all of the unit purchase price to the common stock and none to the
warrant included in the unit) and the pro forma net tangible book value per
share of our common stock after this offering constitutes the dilution to you
and other investors in this offering. The fact that our sponsor acquired its
shares of common stock at a nominal price significantly contributed to this
dilution. Assuming this offering is completed and no value is ascribed to the
warrants included in the units, you and the other new investors will incur an
immediate and substantial dilution of approximately 47.8% or $4.78 per
share (the difference between the pro forma net tangible book value per share
after this offering of $5.22 and the initial offering price of $10.00 per
unit).
Provisions
in our amended and restated certificate of incorporation and bylaws and Delaware
law may inhibit a takeover of us, which could limit the price investors might be
willing to pay in the future for our common stock and could entrench
management.
Our
amended and restated certificate of incorporation and bylaws contain provisions
that may discourage unsolicited takeover proposals that stockholders may
consider to be in their best interests. Our board of directors is divided into
two classes, each of which will generally serve for a term of two years with
only one class of directors being elected in each year. As a result, at a given
annual meeting only a minority of the board of directors may be considered for
election. Since our “staggered board” may prevent our stockholders from
replacing a majority of our board of directors at any given annual meeting, it
may entrench management and discourage unsolicited stockholder proposals that
may be in the best interests of stockholders. Moreover, our board of directors
has the ability to designate the terms of and issue new series of preferred
stock.
We are
also subject to anti-takeover provisions under Delaware law, which could delay
or prevent a change of control. Together these provisions may make more
difficult the removal of management and may discourage transactions that
otherwise could involve payment of a premium over prevailing market prices for
our securities.
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 our Annual Report on Form 10-K for the
year ending December 31, 2011. If we fail to maintain the adequacy of our
internal controls, we could be subject to regulatory scrutiny, civil or criminal
penalties and/or stockholder litigation. Any inability to provide reliable
financial reports could harm our business. Recent revisions to section 1-202 and
2-202 of Regulation S-X and Item 308 of Regulations S-B and S-K require the
expression of a single opinion directly on the effectiveness of our internal
control over financial reporting from our independent registered public
accounting firm. Section 404 of the Sarbanes-Oxley Act also requires that our
independent registered public accounting firm report on management’s evaluation
of our system of internal controls. 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 securities.
29
We
do not currently intend to hold an annual meeting of stockholders until after
our consummation of a business transaction.
We do not
currently intend to hold an annual meeting of stockholders until after we
consummate a business transaction, and thus may not be in compliance with
Section 211(b) of the Delaware General Corporation Law, which requires an annual
meeting of stockholders be held for the purposes of electing directors in
accordance with a company’s bylaws unless such election is made by written
consent in lieu of such a meeting. Therefore, if our stockholders want us to
hold an annual meeting prior to our consummation of a business transaction, they
may attempt to force us to hold one by submitting an application to the Delaware
Court of Chancery in accordance with Section 211(c) of the Delaware General
Corporation Law.
The
grant of registration rights to our sponsor may make it more difficult to
complete our initial business transaction, and the future exercise of such
rights may adversely affect the market price of our common stock.
Pursuant
to an agreement to be entered into concurrently with the issuance and sale of
the securities in this offering, our sponsor and its permitted transferees can
demand that we register the initial shares and the insider warrants, and the
shares of common stock issuable upon exercise of the insider warrants. The
registration rights will be exercisable with respect to the initial shares and
the insider warrants and the shares of common stock issuable upon exercise of
such insider warrants at any time commencing upon the date that such shares are
released from escrow. We will bear the cost of registering these securities. If
our sponsor exercises its registration rights in full, there will be an
additional 555,556 shares of common stock (assuming no exercise of the
underwriters’ over-allotment option) and up to 3,000,000 shares of common stock
issuable on exercise of the insider warrants eligible for trading in the public
market. The registration and availability of such a significant number of
securities for trading in the public market may have an adverse effect on the
market price of our common stock. In addition, the existence of the registration
rights may make our initial business transaction more costly or difficult to
conclude. This is because the stockholders of the target business may increase
the equity stake they seek in the combined entity or ask for more cash
consideration to offset the negative impact on the market price of our common
stock that is expected when the securities owned by our sponsor are
registered.
Because
we must furnish our stockholders with target business financial statements
prepared in accordance with U.S. generally accepted accounting principles, we
will not be able to complete a business transaction with prospective target
businesses unless their financial statements are prepared in accordance with
U.S. generally accepted accounting principles.
The
federal proxy rules require that a proxy statement with respect to a vote on a
business transaction meeting certain financial significance tests include
historical and/or pro forma financial statement disclosure in periodic reports.
We will include the same financial statement disclosure in connection with our
tender offer documents, whether or not they are required under the tender offer
rules. These financial statements must be prepared in accordance with, or be
reconciled to, U.S. generally accepted accounting principles, or GAAP, and the
historical financial statements must be audited in accordance with the standards
of the Public Company Accounting Oversight Board (United States), or PCAOB.
These financial statement requirements may limit the pool of potential target
businesses we may acquire.
Because
of our limited resources and the significant competition for business
transaction opportunities, it may be more difficult for us to complete a
business transaction.
Based
on publicly available information, approximately 162 similarly structured blank
check companies have completed initial public offerings since August 2003, and
numerous others have filed registration statements. Of these companies, 94
companies have consummated a business transaction, while 3 other companies have
announced that they have entered into definitive agreements or letters of intent
with respect to potential business transactions, but have not yet consummated
such business transactions and another 64 have already or will be liquidating.
Accordingly, there is 1 blank check company with approximately $36,000,000
in a trust account that is seeking to enter into a business
transaction. Because of this and other competition from entities that are
not blank check companies, we may not be able to effectuate a business
transaction within the required time period. Further, the fact that only 97 of
such companies have either consummated a business transaction or entered into a
definitive agreement for a business transaction may indicate that there are
fewer attractive target businesses available to such entities 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.
30
We
expect to encounter intense competition from other entities having a business
objective similar to ours, including private investors (which may be individuals
or investment partnerships), other blank check companies and other entities,
domestic and international, competing for the type of businesses we intend to
acquire. Many of these individuals and entities are well established and have
extensive experience in identifying and effecting, directly or indirectly,
acquisitions of companies operating in or providing services to various
industries. Many of these competitors possess greater technical, human and other
resources, or more local industry knowledge, than we do and our financial
resources will be relatively limited when contrasted with those of many of these
competitors. While we believe there are numerous target businesses we could
potentially acquire with the net proceeds of this offering, our ability to
compete with respect to the acquisition of certain target businesses that are
sizable 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 transaction may delay the consummation of a
transaction. Also, our obligation to pay cash for the shares of common stock
redeemed in certain instances may reduce the resources available for a business
transaction. Any of these obligations may place us at a competitive disadvantage
in successfully negotiating a business transaction.
31
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements. All statements other than
statements of historical fact are, or may be deemed to be, forward looking
statements. Such forward-looking statements include statements regarding, among
others, (a) our expectations about possible business transactions, (b) our
growth strategies, (c) our future financing plans, and (d) our anticipated needs
for expenses. Forward-looking statements, which involve assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of the words “may,” “will,” “should,” “expect,” “anticipate,” “approximate,”
“estimate,” “believe,” “intend,” “plan,” “budget,” “could,” “forecast,” “might,”
“predict,” “shall” or “project,” or the negative of these words or other
variations on these words or comparable terminology.
Forward-looking
statements are based on our current expectations and assumptions regarding our
business, potential target businesses, the economy and other future conditions.
Because forward-looking statements relate to the future, by their nature, they
are subject to inherent uncertainties, risks and changes in circumstances that
are difficult to predict. Our actual results may differ materially from those
contemplated by the forward-looking statements. You should not rely on any of
these forward-looking statements as statements of historical fact or as
guarantees or assurances of future performance. Important factors that could
cause actual results to differ materially from those in the forward-looking
statements include changes in local, regional, national or global political,
economic, business, competitive, market (supply and demand) and regulatory
conditions and the following:
|
·
|
our status as a development stage
company;
|
|
·
|
the reduction of the proceeds
held in the trust account due to third party
claims;
|
|
·
|
our selection of a prospective
target business or asset;
|
|
·
|
our issuance of our capital
shares or incurrence of debt to complete a business
transaction;
|
|
·
|
our ability to consummate an
attractive business transaction due to our limited resources and the
significant competition for business transaction
opportunities;
|
|
·
|
conflicts of interest of our
officers and directors;
|
|
·
|
potential current or future
affiliations of our officers and directors with competing
businesses;
|
|
·
|
our ability to obtain additional
financing if necessary;
|
|
·
|
our sponsor’s ability to control
or influence the outcome of matters requiring stockholder approval due to
its substantial interest in
us;
|
|
·
|
the adverse effect the
outstanding warrants may have on the market price of our common
stock;
|
|
·
|
the adverse effect on the market
price our common stock due to the existence of registration rights with
respect to the securities owned by our
sponsor;
|
|
·
|
the lack of a market for our
securities;
|
|
·
|
our dependence on our key
personnel;
|
|
·
|
business and market outlook;
and
|
|
·
|
costs of complying with
applicable laws.
|
These
risks and others described under “Risk Factors” are not exhaustive.
Any
forward-looking statement made by us in this prospectus speaks only as of the
date on which we make it, and is expressly qualified in its entirety by the
foregoing cautionary statements. Factors or events that could cause our actual
results to differ may emerge from time to time, and it is not possible for us to
predict all of them. We undertake no obligation to publicly update any
forward-looking statement, whether as a result of new information, future
developments or otherwise.
32
We
estimate that the net proceeds of this offering will be as set forth in the
following table:
Without
Over-
Allotment
Option |
Over-Allotment
Option Exercised
in Full
|
|||||||
Gross
proceeds
|
||||||||
Proceeds
from units offered to the public(1)
|
$
|
50,000,000
|
$
|
57,500,000
|
||||
Proceeds
from private placement
|
1,500,000
|
1,500,000
|
||||||
Total
gross proceeds
|
$
|
51,500,000
|
59,000,000
|
|||||
Estimated
offering expenses(2)
|
||||||||
Underwriting
discount(3)
|
$
|
1,500,000
|
$
|
1,725,000
|
||||
Contingent
Fees (4)
|
1,950,000
|
2,241,563
|
||||||
Legal
fees and expenses
|
$
|
250,000
|
$
|
250,000
|
||||
Printing
and engraving expenses
|
50,000
|
$
|
50,000
|
|||||
Accounting
fees and expenses
|
37,500
|
37,500
|
||||||
SEC
filing fee
|
6,898
|
6,898
|
||||||
FINRA
filing fee
|
12,862
|
12,862
|
||||||
Blue
Sky filing fees
|
35,000
|
35,000
|
||||||
Miscellaneous
expenses
|
57,739
|
57,739
|
||||||
Total
offering expenses
|
$
|
3,900,000
|
$
|
4,416,563
|
||||
Net
proceeds
|
$
|
47,600,000
|
$
|
54,583,437
|
||||
Net
offering proceeds not held in trust
|
800,000
|
800,000
|
||||||
Total
proceeds held in trust (including contingent fees)
|
$
|
48,750,000
|
56,025,000
|
|||||
Percentage
of public offering proceeds held in trust
|
97.5
|
%
|
97.4
|
%
|
Amount
|
Percentage
|
|||||||
Use
of net proceeds not held in trust (5)
|
||||||||
Due
diligence (excluding accounting and legal due diligence) of prospective
target(s)
|
$
|
100,000
|
12.5
|
%
|
||||
Legal
and accounting expenses attendant to the due diligence investigations,
structuring and negotiations of an initial business
transaction
|
300,000
|
37.5
|
%
|
|||||
Administrative
services and support payable to our sponsor ($7,500 per month for up to 15
months)
|
112,500
|
14
|
%
|
|||||
Reserve
for liquidation expenses
|
30,000
|
3.75
|
%
|
|||||
Other
miscellaneous expenses, D&O insurance, audit fees and
reserves
|
257,500
|
32.19
|
%
|
|||||
Total
|
$
|
800,000
|
100
|
%
|
(1) Includes
amounts payable to public stockholders holding up to 4,400,000 of the shares
sold in this offering (or 5,060,000 shares if the underwriters’ over allotment
option is exercised in full) who properly redeem their shares. Such amounts may
become payable to our public stockholders who properly redeem their shares in
connection with our successful consummation of our initial business transaction.
Assuming a per share redemption price of $9.75 per share (or approximately $9.74
per share stock if the underwriters’ over allotment option is exercised in
full), $42,900,000 of the proceeds of this offering (or approximately
$49,284,400 if underwriters’ over allotment option is exercised in full) would
be payable to such stockholders.
(2) A
portion of the offering expenses have been pre-funded with the proceeds of an
aggregate of $12,349 in loans and advances from our sponsor and one of our
executive officers. This loan and advance will be repaid out of the proceeds of
this offering upon the consummation of this offering.
33
(3) No
discounts or commissions will be paid with respect to the purchase of the
insider warrants. For purposes of presentation, the underwriting
discount is reflected as the amount payable to the underwriters upon
consummation of this offering.
(4) This
amount assumes
that (i) Morgan Joseph introduces the target of our initial business transaction
to us (ii) no exercise of the underwriters’ over-allotment option and (iii)
none of our public stockholders redeem their shares of common stock, such
that the contingent fees that will become payable from the amounts held
in the trust account solely in the event we consummate our initial business
transaction include (A) an
advisory fee payable to Morgan Joseph equal to 1.5% of the gross proceeds from
the sale of units to the public for advising us during the 15 month period
following the date hereof and (B) a contingent fee equal to 2.5% of the
aggregate amount of the funds released from the trust account to us and/or to
our target upon consummation of our initial business transaction payable to
Morgan Joseph and such other firms, if any, who are instrumental in advising us
in connection with the consummation of our business transaction. In the
event that we do not consummate an initial business transaction with a business
or asset introduced to us by Morgan Joseph, and 88% of our public stockholders
redeem their shares, we estimate the 1% advisory fee to equal $500,000 and a
2.5% contingent fee to equal $133,750.
(5) These
expenses are estimates only. Our actual expenditures for some or all of these
items may differ from the estimates set forth herein. For example, we may incur
greater legal and accounting expenses than our current estimates in connection
with negotiating and structuring a business transaction based upon the level of
complexity of such business transaction. In the event we identify an
acquisition target in a specific industry subject to specific regulations, we
may incur additional expenses associated with legal due diligence and the
engagement of special legal counsel. In addition, our staffing needs may vary
and as a result, we may engage a number of consultants to assist with legal and
financial due diligence. We do not anticipate any change in our intended use of
proceeds, other than fluctuations among the current categories of allocated
expenses, which fluctuations, to the extent they exceed current estimates for
any specific category of expenses, would not be available for our
expenses.
Of the
net proceeds of this offering, an aggregate of $48,750,000 (or $56,025,000 if
the underwriters’ over-allotment option is exercised in full) will be deposited
into the trust account at [Deutsche Bank], maintained by Continental Stock
Transfer & Trust Company, as trustee. None of the funds held in trust will
be released from the trust account, other than to pay taxes, until the earlier
of (i) the consummation of a business transaction within 15 months from the date
hereof and (ii) our redemption of the public shares sold in this offering if we
are unable to consummate a business transaction within 15 months from the date
hereof. The proceeds held in the trust account (net of taxes but exclusive of
any contingent fees payable to Morgan Joseph or used to pay public stockholders
who have exercised their redemption rights) may be used as consideration to pay
the sellers of a target business with which we ultimately complete a business
transaction or, if there are insufficient funds not held in trust, to pay other
expenses relating to such transaction such as reimbursement to insiders for
out-of-pocket expenses, third party due diligence expenses or potential finders
fees, in each case only upon the consummation of a business transaction. In the
event there are funds remaining in the trust account after satisfaction of all
of such obligations, such funds may be used to finance operations of the target
business or to effect other acquisitions, as determined by our board of
directors at that time. All amounts held in the trust account will be released
to us on the closing of our initial business transaction with a target business,
subject to any amounts payable upon the exercise of tender offer or redemption
rights, as applicable.
Our
sponsor and certain of its affiliates share office space and share the cost of
secretarial, reception, telecommunication, equipment, supplies, and such other
office-related items as they deem appropriate. In return for the $7,500 that is
customarily permitted to be paid between blank check companies and their
sponsors for administrative related and general office services expenses in
financings of this nature, our sponsor has agreed to permit us to use its office
space and services under its existing office lease. This agreement commences on
the date of this prospectus and shall continue until the earliest to occur of
the consummation of a business transaction and 15 months from the date of this
prospectus.
We intend
to use a portion of the $800,000 not held in trust for due diligence, legal,
accounting, fees and expenses of the acquisition including investment banking
fees, and other expenses, including structuring and negotiating a business
transaction, as well as a possible down payment, reverse break up fees (a
provision which requires a payment to the target company if the financing for an
acquisition is not obtained), lock-up or “no-shop” provision (a provision
designed to keep target businesses from “shopping” around for transactions with
other companies on terms more favorable to such target businesses), if
necessary. While we do not have any current intention to use these funds as a
down payment or to fund a “no-shop” provision with respect to a particular
proposed business transaction, if we were to enter into such a an agreement
where we paid for the right to receive exclusivity from a target business, the
amount that would be used as a down payment or to fund a “no-shop” provision
would be determined based on the terms of the specific business transaction and
the amount of our available funds at the time. Our forfeiture of such funds
(whether as a result of our breach or otherwise) could result in our not having
sufficient funds to continue searching for, or conducting due diligence with
respect to, potential target businesses. In addition to the use of funds
described above, we could also use a portion of these funds to pay fees to
consultants to assist us with our search for a target business.
We may
not use all of the proceeds in the trust account in connection with a business
transaction, either because the consideration for the business transaction is
less than the proceeds in the trust account or because we finance a portion of
the consideration with our capital stock or the issuance of our debt securities.
In such event, the proceeds held in the trust account as well as any other net
proceeds not expended will be used to finance our operations, which may include
the target business(es) that we acquire in the business transaction, to effect
other acquisitions, or for expenses, as determined by our board of directors at
that time. We may use these funds, among other things, for director and officer
compensation, change-in-control payments or payments to affiliates, to finance
the operations of the target business, to make other acquisitions and to pursue
our growth strategy.
34
To the
extent that our capital stock or the issuance of our debt securities are used in
whole or in part as consideration to effect a business transaction, or in the
event that indebtedness from third parties is used, in whole or in part, as
consideration to effect a business transaction, the proceeds held in the trust
account which are not used to consummate a business transaction will be
disbursed to the combined company and will, along with any other net proceeds
not expended, be used to finance our operations. In the event that third party
indebtedness is used as consideration, our officers and directors would not be
personally liable for the repayment of such indebtedness.
Our
sponsor and one of our executive officers have loaned and advanced to us an
aggregate of $12,349, which was used to pay a portion of the expenses of this
offering referenced in the line items above for SEC filing fees, FINRA filing
fees, and legal and audit fees and expenses. The loan will be payable without
interest upon the earlier of December 31, 2010 or on the closing of this
offering. The loan will be repaid out of the proceeds of this offering not held
in the trust account.
The
proceeds held in the trust account may be invested by the trust account agent
only in U.S. “government securities” within the meaning of Section 2(a)(16) of
the Investment Company Act of 1940 with a maturity of 180 days or less, or in
money market funds meeting certain conditions under Rule 2a-7 promulgated under
the Investment Company Act of 1940. By restricting the investment of the
proceeds to these instruments, we intend to avoid being deemed an investment
company within the meaning of the Investment Company Act of 1940.
Other
than the $7,500 per month general and administrative services fees described
above, no compensation of any kind (including finders, consulting or other
similar fees or the issuance of any of our securities) will be paid to any of
our sponsor, officers, directors or any of our or their affiliates, prior to, or
for any services that they render in order to effectuate, or in connection with
the consummation of, a business transaction. However, such persons will receive
reimbursement, subject to board approval, for any out-of-pocket expenses
incurred by them in connection with activities on our behalf, such as
identifying potential target businesses, performing business due diligence on
suitable target businesses and business transactions, as well as traveling to
and from the offices, plants or similar locations of prospective target
businesses to examine their operations. Reimbursement for such expenses will be
paid by us out of the funds not held in the trust account and currently
allocated in the above table to “Legal and accounting expenses attendant to the
due diligence investigations, structuring and negotiations of a business
transaction,” “Due diligence (excluding accounting and legal due diligence) of
prospective targets” and “Other miscellaneous expenses, D&O insurance and
reserves.” Since the role of present management after a business transaction is
uncertain, we have no ability to determine what remuneration, if any, will be
paid to those persons after a business transaction.
A
public stockholder will be entitled to receive funds from the trust account
(including interest earned on such public stockholder’s portion of the trust
account, but net of taxes) only in the event of our liquidation, if such public
stockholder properly exercises his redemption rights in accordance with the
conditions set forth in this prospectus or if we redeem 100% of our public
shares of common stock for a per share pro rata portion of the trust account,
including the interest earned thereon, but net of any taxes, if we do not
consummate a business transaction within 15 months from the date of this
prospectus. In no other circumstances will a public stockholder have any right
or interest of any kind to or in the trust account. Our sponsor has waived its
right to redeem any of its initial shares for a pro rata share of the trust
account. Additionally, our sponsor, directors and officers have agreed not to
exercise their redemption rights with respect to shares acquired during or
subsequent to this offering. Our sponsor has waived its rights to participate in
any redemption with respect to its initial shares upon our redemption of shares
sold in this offering if we fail to consummate an initial business transaction
within 15 months. However, if our sponsor or any of our officers, directors,
advisors or affiliates acquire shares in or after this offering, they will
be entitled to a pro rata share of the trust account with respect to such shares
upon our redemption in the event we do not consummate a business transaction
within the required time period.
35
DIVIDEND
POLICY
We have
not paid any cash dividends on our common stock to date and do not intend to pay
cash dividends prior to the completion of a business transaction. The payment of
cash dividends in the future will be dependent upon our revenues and earnings,
if any, capital requirements and general financial condition subsequent to
completion of a business transaction. The payment of any dividends subsequent to
a business transaction will be within the discretion of our board of directors
at such time. It is the present intention of our board of directors to retain
all earnings, if any, for use in our business operations and, accordingly, our
board of directors does not anticipate declaring any dividends in the
foreseeable future. In addition, our board of directors is not currently
contemplating and does not anticipate declaring any stock dividends in the
foreseeable future, except if we increase the size of the offering pursuant to
Rule 462(b) under the Securities Act, in which case we will effect a stock
dividend immediately prior to the consummation of the offering in such amount as
to maintain our sponsor’s ownership at 10% of our issued and outstanding shares
of our common stock upon the consummation of this offering. Further, if we incur
any indebtedness, our ability to declare dividends may be limited by restrictive
covenants we may agree to in connection therewith.
36
The
difference between the public offering price per share of common stock, assuming
no value is attributed to the warrants included in the units we are offering
pursuant to this prospectus, and the pro forma net tangible book value per share
of our common stock after this offering constitutes the dilution to investors in
this offering. Net tangible book value per share is determined by dividing our
net tangible book value, which is our total tangible assets less total
liabilities (including the value of common stock which may be redeemed for
cash), by the number of outstanding shares of our common stock.
At
March 31, 2010, our net tangible book value was ($55,311) or approximately
($0.10) per share of common stock. After giving effect to the sale of 5,000,000
shares of common stock included in the units we are offering by this prospectus,
the deduction of underwriting discounts and commissions and estimated expenses
of this offering, our pro forma net tangible book value at March 31, 2010 would
have been $6,034,207 or $5.22 per share, representing an immediate
increase in net tangible book value (as decreased by the value of the
approximately 4,400,000 shares of common stock that may be redeemed for cash,
assuming no exercise of the underwriters’ over-allotment option) of $5.32 per
share to our sponsor and an immediate dilution of $4.78 per share or 47.80%
to new investors not exercising their redemption rights.
The
following table illustrates the dilution to the new investors on a per share
basis, assuming no value is attributed to the warrants included in the
units:
Public
offering price
|
$
|
10.00
|
||||||
Net
tangible book value before this offering
|
$
|
(0.10)
|
||||||
Increase
attributable to new investors
|
5.32
|
|||||||
Pro
forma net tangible book value after this offering
|
5.22
|
|||||||
Dilution
to new investors
|
$
|
4.78
|
For
purposes of presentation, we have reduced our pro forma net tangible book value
after this offering (assuming no exercise of the underwriters’ over-allotment
option) by $48,750,000 because holders of 88% of our public shares
may redeem their shares for a pro rata share of the aggregate amount then
on deposit in the trust account at a per share redemption price equal to the
amount in the trust account as set forth in our tender offer or proxy materials
(initially anticipated to be the aggregate amount held in trust two days prior
to the commencement of our tender offer or stockholders meeting net of taxes,
divided by the number of shares of common stock sold in this
offering).
The
following table sets forth information with respect to our sponsor and the new
investors:
Total shares(1)
|
Total consideration
|
Average
price per
share (1)
|
||||||||||||||||||
Number
|
%
|
Amount
|
%
|
|||||||||||||||||
Sponsor
|
555,556
|
10
|
%
|
$
|
25,000
|
0.05
|
%
|
$
|
0.05
|
|||||||||||
New
investors
|
5,000,000
|
90
|
50,000,000
|
99.95
|
$
|
10.00
|
||||||||||||||
Total
|
5,555,556
|
100
|
%
|
$
|
50,025,000
|
100.00
|
%
|
(1) Assumes
no exercise of the underwriters’ over-allotment option and that 83,333 initial
shares of common stock have been forfeited by our sponsor as a result
thereof.
37
The pro
forma net tangible book value after the offering is calculated as
follows:
Numerator:
|
||||
Net
tangible book value before this offering
|
$ | (55,311 | ) | |
Net
proceeds from this offering and sale of insider
warrants
|
49,550,000 | |||
Offering
costs incurred in advance and excluded from net tangible book value before
this offering
|
73,268 | |||
Less:
Contingent Fees(1)
|
(633,750 | ) | ||
Less:
Proceeds held in the trust account which may be redeemed for cash ($9.75 x
4,400,000 shares)
|
(42,900,000 | ) | ||
$ | 6,034,207 | |||
Denominator:
|
||||
Shares
of common stock outstanding prior to this offering(2)
|
555,556 | |||
Shares
of common stock included in the units offered
|
5,000,000 | |||
Less:
Shares of common stock subject to redemption (4,400,000
× 100%)
|
(4,400,000 | ) | ||
1,155,556 |
(1) Assumes that we do not consummate an initial business transaction with a business or asset introduced to us by Morgan Joseph, and 88% of our public stockholders redeem their shares. Based on these assumptions we estimate the 1% advisory fee to equal $500,000 and the 2.5% contingent fee to equal $135,750.
(2) Assumes
no exercise of the underwriters’ over-allotment option and that 83,333 initial
shares of common stock have been forfeited by our sponsor as a result
thereof.
38
CAPITALIZATION
The
following table sets forth our capitalization as of March 31, 2010 and our
capitalization as adjusted to give effect to this offering and the sale of the
insider warrants and the application of the estimated net proceeds therefrom as
described in “Use of Proceeds” (excluding the expected interest income on the
proceeds held in trust):
Actual
|
As Adjusted
|
|||||||
Total
debt
|
$ | 12,349 | $ | — | ||||
Note
payable to shareholder (1)
|
12,349 | |||||||
Contingent
Fees ($0.39 per share) (2)
|
633,750 | |||||||
Common
Stock, 83,333 shares subject to forfeiture, actual; 4,400,000 shares
subject to possible redemption rights at $9.75 per share, as
adjusted
|
$ | — | $ | 42,900,000 | ||||
Stockholders’
equity:
|
||||||||
Preferred
Stock, $0.0001 par value, 1,000,000 shares authorized; 0 issued
and outstanding, actual and as adjusted
|
$ | — | $ | — | ||||
Common
Stock, $0.0001 par value, 100,000,000 shares authorized, 555,556 shares
issued and outstanding (assuming no exercise of the underwriters’
over-allotment option), actual; 100,000,000 shares authorized, 5,555,556
shares issued and outstanding (assuming no exercise of the underwriters’
over-allotment option), including 4,400,000 shares subject to possible
redemption rights, as adjusted(3)
|
64 | 556 | ||||||
Additional
paid-in capital
|
24,936 | 6,040,694 | ||||||
Deficit
accumulated during the development stage
|
(7,043 | ) | (7,043 | ) | ||||
Total
stockholders’ equity
|
$ | 17,957 | $ | 6,034,207 | ||||
Total
capitalization
|
$ | 30,306 | $ | 49,567,957 |
(1) Amounts
loaned pursuant to the promissory note issued to our sponsor are due on the
earlier of December 31, 2010 and the closing of this offering.
(2)
This amount includes the following additional contingent fees that will become
payable from the amounts held in the trust account solely in the event we
consummate our initial business transaction: (A) an advisory fee payable to
Morgan Joseph equal to 1% of the gross proceeds from the sale of units to the
public for advising us during the 15 month period following the date hereof
(which fee shall be increased to 1.5% if we consummate our initial business
transaction with a business or asset introduced to us by Morgan Joseph) and (B)
a contingent fee equal to 2.5% of the aggregate amount of the funds released
from the trust account to us and/or to our target upon consummation of our
initial business transaction payable to Morgan Joseph and such other firms, if
any, who are instrumental in advising us in connection with the consummation of
our business transaction.
(3) If
we consummate a business transaction, the redemption rights afforded to our
stockholders may result in the conversion into cash of no more than 88% of the
aggregate number of shares sold in this offering at a per-share redemption price
equal to the amount in the trust account, as of two business days prior to the
commencement of our tender offer or stockholders meeting divided by the number
of shares sold in this offering.
39
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
We are a
newly-organized blank check company formed on October 29, 2009, for the purpose
of acquiring one or more operating businesses or assets, through a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization,
exchangeable share transaction or other similar business
transaction. We are not limited to a particular industry, geographic
region or minimum transaction value for purposes of consummating an initial
business transaction. We do not have any specific merger,
capital stock exchange, asset acquisition, stock purchase, reorganization,
exchangeable share transaction or other similar business transaction under
consideration and we have not, nor has anyone on our behalf, contacted any
prospective target business or had any discussions, formal or otherwise, with
respect to such a transaction.
We intend
to use cash from the proceeds of this offering, our capital stock, incurred
debt, or a combination of cash, capital stock and debt, in effecting our initial
business transaction. The issuance of additional shares of our capital
stock:
|
·
|
may significantly reduce the
equity interest of investors in this
offering;
|
|
·
|
may subordinate the rights of
holders of common stock if preferred stock is issued with rights senior to
those afforded to the holders of our common
stock;
|
|
·
|
may likely cause a change in
control if a substantial number of our shares of common stock are issued,
which may affect, among other things, our ability to use our net operating
loss carry forwards, if any, and most likely will also result in the
resignation or removal of our present officers and directors;
and
|
|
·
|
may adversely affect prevailing
market prices for our common stock and/or
warrants.
|
Similarly,
if we incur substantial debt, it could result in:
|
·
|
default and foreclosure on our
assets if our operating cash flow after a business transaction is
insufficient to pay our debt
obligations;
|
|
·
|
acceleration of our obligations
to repay the indebtedness even if we have made all principal and interest
payments when due if the debt security contains covenants that require the
maintenance of certain financial ratios or reserves and any such covenant
is breached without a waiver or renegotiation of that
covenant;
|
|
·
|
our immediate payment of all
principal and accrued interest, if any, if the debt security is payable on
demand;
|
|
·
|
covenants that limit our ability
to acquire capital assets or make additional
acquisitions;
|
|
·
|
our inability to obtain
additional financing, if necessary, if the debt security contains
covenants restricting our ability to obtain additional financing while
such security is
outstanding;
|
|
·
|
our inability to pay dividends on
our common stock;
|
|
·
|
using a substantial portion of
our cash flow to pay principal and interest on our debt, which will reduce
the funds available for dividends on our common stock if declared,
expenses, capital expenditures, acquisitions and other general corporate
purposes;
|
|
·
|
limitations on our flexibility in
planning for and reacting to changes in our business and in the industry
in which we operate;
|
|
·
|
increased vulnerability to
adverse changes in general economic, industry and competitive conditions
and adverse changes in government regulation;
and
|
|
·
|
limitations on our ability to
borrow additional amounts for expenses, capital expenditures,
acquisitions, debt service requirements, execution of our strategy and
other purposes and other disadvantages compared to our competitors who
have less debt.
|
Results
of Operations and Known Trends or Future Events
We have
neither engaged in any operations nor generated any revenues to date. Our entire
activity since inception has been to prepare for our proposed fundraising
through an offering of our equity securities. Following this offering, we will
not generate any operating revenues until after completion of our initial
business transaction, at the earliest. We will generate non-operating income in
the form of interest income on cash and cash equivalents after this offering.
After this offering, we expect to incur increased expenses as a result of being
a public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses. We expect our expenses to
increase substantially after the closing of this offering and the private
placement of the insider warrants.
40
Related
Party Transactions
Our
sponsor and Mark D. Klein, one of our executive officers, have loaned and
advanced to us an aggregate of $12,349 as of the date of this prospectus to pay
a portion of our expenses related to this offering, such as SEC filing fees,
FINRA filing fees and legal and accounting fees and expenses. The loan will be
payable without interest on the earlier of December 31, 2010 or the closing of
this offering. We intend to repay this loan from the proceeds of this offering
not being placed in the trust account.
Our
sponsor and certain of its affiliates share office space and share the cost of
secretarial, reception, telecommunication, equipment, supplies, and such other
office-related items as they deem appropriate. In return for the $7,500 that is
customarily permitted to be paid between blank check companies and their
sponsors in financings of this nature for administrative related and general
office services expenses, our sponsor has agreed to permit us to use its office
space and services under its existing office lease. This agreement commences on
the date of this prospectus and shall continue until the earliest to occur of
the consummation of a business transaction and 15 months from the date of this
prospectus.
Mark
D. Klein, our chairman, chief executive officer and president, and Paul D.
Lapping, our chief financial officer, treasurer, secretary and director, have
agreed that they will be liable to us if and to the extent any claims by a
vendor for services rendered or products sold to us, or a prospective target
business with which we have discussed entering into a transaction agreement
reduce the amounts in the trust account to below $9.75 per share (or
approximately $9.74 per share if the underwriter’s over-allotment option is
exercised in full), except as to any claims by a third party who executed a
waiver of any and all rights to seek access to the trust account and except as
to any claims under our indemnity of the underwriters of this offering against
certain liabilities, including liabilities under the Securities Act. In the
event that an executed waiver is deemed to be unenforceable against a third
party, Messrs. Klein and Lapping will not be responsible to the extent of any
liability for such third party claims.
In
addition, in the event we are forced to liquidate and do not have sufficient
funds from our remaining assets outside of the trust account, our sponsor has
agreed to advance us the funds necessary to pay any and all costs involved or
associated with the process of liquidation and the return of the funds in the
trust account to our public stockholders (currently anticipated to be no more
than approximately $30,000) and has agreed not to seek repayment for such
expenses.
Liquidity
and Capital Resources
Our
liquidity needs have been satisfied to date by our sponsor through its payment
of $25,000 for the purchase of 638,889 shares of our common stock (up to 83,333
of which shares are subject to forfeiture if the underwriters’ over-allotment
option is not exercised in full), and an aggregate of $12,349 in loans and
advances to us from our sponsor and one of our executive
officers.
We
estimate that the net proceeds from the sale of the units in this offering will
be approximately $48,750,000 (or $56,025,000 if the underwriters’ over-allotment
option is exercised in full), after giving effect to $800,000 from the proceeds
of this offering not being held in trust.
We intend
to use substantially all of the funds held in the trust account (net of taxes),
to consummate our initial business transaction. To the extent that our capital
stock or debt is used, in whole or in part, as consideration to consummate our
initial business transaction, the remaining proceeds held in the trust account
will be used as working capital to finance the operations of the target business
or businesses, make other acquisitions and pursue our growth
strategies.
We
believe that, upon the date of this prospectus, the $800,000 not held in trust
will be sufficient to allow us to operate for at least the next 15 months. 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 property and asset
locations of prospective target businesses, reviewing corporate, title,
environmental, financial documents and material agreements regarding prospective
target businesses, audit fees and structuring, negotiating and consummating the
business transaction. In order to meet our working capital needs following the
consummation of this offering, certain of our officers and directors may, but
are not obligated to, loan us funds, from time to time, or at any time, in
whatever amount such officer or director deems reasonable in his or her sole
discretion, which may be convertible into warrants of the post business
transaction entity at a price of $0.50 per warrant at the option of the
lender. The warrants would be identical to the insider
warrants. The holders of a majority of such warrants (or underlying
shares) will be entitled to demand that we register these securities pursuant to
an agreement to be entered into at the time of the loan. The holders
of a majority of these securities would have certain “piggy-back” registration
rights with respect to registration statements filed subsequent to such
date. We will bear the expense incurred with the filing of any such
registration statements.
The terms
of such loans by our officers and directors, if any, have not been determined
and no written agreements exist. However, we expect that the terms of
such loans will not have any recourse against the trust account nor pay any
interest prior to the consummation of the business transaction and be no more
favorable than could be obtained by a third party.
41
We
estimate that we will incur approximately:
|
·
|
$100,000 of expenses for the due
diligence (excluding accounting and legal due diligence) of prospective
target businesses by our officers, directors and
sponsor;
|
|
·
|
$300,000 of legal and accounting
expenses attendant to the due diligence investigations, structuring and
negotiating of an initial business
transaction;
|
|
·
|
$112,500 for administrative
services and support payable to our sponsor ($7,500 per month for 15
months);
|
|
·
|
$30,000 reserve for liquidation
expenses; and
|
|
·
|
$257,500 that will be used for
other miscellaneous expenses and reserves, including for director and
officer liability insurance premium, audit fees, as well as stock transfer
agent expenses.
|
These
amounts are estimates and may differ materially from our actual expenses. In
addition, we could use a portion of the funds not being placed in trust to pay
commitment fees for financing, fees to consultants to assist us with our search
for a target business or as a down payment or to fund a “no-shop” provision (a
provision designed to keep target businesses from “shopping” around for
transactions with other companies on terms more favorable to such target
businesses) with respect to a particular proposed business transaction, although
we do not have any current intention to do so. If we entered into an agreement
where we paid for the right to receive exclusivity from a target business, the
amount that would be used as a down payment or to fund a “no-shop” provision
would be determined based on the terms of the specific business transaction and
the amount of our available funds at the time. Our forfeiture of such funds
(whether as a result of our breach or otherwise) could result in our not having
sufficient funds to continue searching for, or conducting due diligence with
respect to, prospective target businesses.
We do not
believe we will need to raise additional funds following the date of this
prospectus until the consummation of our initial business transaction 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 transaction that is
presented to us. Subject to compliance with applicable securities laws, we would
only consummate such financing simultaneously with the consummation of our
initial business transaction.
We have
evaluated the appropriate accounting treatment for the insider warrants and the
warrants attached to the public units. As we are not required to net-cash settle
such warrants under any circumstances, including when we are unable to maintain
sufficient registered shares to settle such warrants, the terms of the warrants
satisfy the applicable requirements of paragraph 11 of SFAS 133, which provides
guidance on identifying those contracts that should not be accounted for as
derivative instruments, and paragraphs 12-33 of EITF 00-19. Accordingly, we
intend to classify such instruments within permanent equity as additional
paid-in capital.
We
believe the purchase price of the insider warrants is greater than the fair
value of such warrants. Therefore, we will not be required to incur a
compensation expense in connection with the purchase by our sponsors of the
insider warrants.
Controls
and Procedures
We have
determined that our system of internal controls is appropriate for our business
as of the date of the prospectus, due to the number and nature of the
transactions included in our financial statements.
As of the
date of this prospectus, we have not completed an assessment, nor have our
auditors tested our system of internal control. We expect that we will be
required to comply with the internal control requirements of the Sarbanes-Oxley
Act for the fiscal year ending December 31, 2011.
We expect
to reassess our controls at the time of the offering, and, if necessary,
implement additional controls in order that our internal control system can
continue to be effective for the period prior to a business transaction.
Additionally, we expect to assess the internal controls of our target business
or businesses prior to the completion of our business transaction and, if
necessary, to implement and test additional controls as we may determine are
necessary in order to state that we continue to maintain an effective system of
internal controls. Our control structure after the acquisition of a target
business may not be in compliance with the provisions of the Sarbanes-Oxley Act
regarding the adequacy of internal controls. Many small and mid-sized target
businesses we may consider for a business transaction may have internal controls
that are deficient in areas such as:
42
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staffing for financial,
accounting and external reporting areas, including segregation of
duties;
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reconciliation of
accounts;
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proper recording of expenses and
liabilities in the period to which they
relate;
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evidence of internal review and
approval of accounting
transactions;
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documentation of processes,
assumptions and conclusions underlying significant estimates;
and
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documentation of accounting
policies and procedures.
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Because
it will take time, management involvement and perhaps outside resources to
determine what internal control improvements are necessary for us to meet
regulatory requirements and market expectations for our operation of a target
business, we may incur significant expense in meeting our public reporting
responsibilities, particularly in the areas of designing, enhancing or
remediating internal and disclosure controls. Doing so effectively may also take
longer than we expect, thus increasing our exposure to financial fraud or
erroneous financing reporting.
Once our
management’s assessment on internal controls is in process, we will retain our
independent registered public accounting firm to audit and render an opinion on
such assessment when required by Section 404. The independent registered public
accounting firm may identify additional issues concerning our internal controls
or a target business’s internal controls while performing their audit of
internal control over financial reporting. The results of management’s
assessment and/or the audit of management’s assessment by our independent
registered public accounting firm, may result in the identification of
additional deficiencies in internal controls and we may incur additional expense
in designing, enhancing and remediating internal and disclosure
controls.
Quantitative
And Qualitative Disclosures About Market Risk
The net
proceeds of this offering, including amounts in the trust account, will be
invested in U.S. government treasury bills with a maturity of 180 days or less
or in money market funds meeting certain conditions under Rule 2a-7 under the
Investment Company Act. Due to the short-term nature of these investments, we
believe there will be no associated material exposure to interest rate
risk.
Off-Balance
Sheet Arrangements; Commitments And Contractual Obligations; Quarterly
Results
As of
March 31, 2010, we did not have any off-balance sheet arrangements as defined in
Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or
contractual obligations. No unaudited quarterly operating data is included in
this prospectus as we have conducted no operations to date.
Recent
Accounting Pronouncements
In June
2006, the Financial Accounting Standards Board, or FASB, issued FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an
interpretation of FASB Statement No. 109”, or “FIN 48”. FIN 48 prescribes a
recognition threshold and measurement attribute for financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return, and also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure, and
transition. FIN 48 is effective for fiscal years beginning after December 15,
2006. We adopted the provisions of FIN 48 from our inception (October 29, 2009).
The adoption of FIN 48 had no effect on our financial position or results of
operations.
In
September 2006, the FASB issued FASB Statement No. 157, “Fair Value
Measurements,” or “SFAS 157”. The standard provides guidance for using fair
value to measure assets and liabilities. The standard also responds to
investors’ requests for expanded information about the extent to which companies
measure assets and liabilities at fair value, the information used to measure
fair value, and the effect of fair value measurements on earnings. The standard
applies whenever other standards require or permit assets or liabilities to be
measured at fair value. The standard does not expand the use of fair value in
any new circumstances. SFAS 157 must be adopted prospectively as of the
beginning of the year it is initially applied. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. We are still evaluating the
impact that this standard will have on our financial position and results of
operations.
43
In
February 2007, the FASB issued FASB Statement No. 159, “The Fair Value Option
for Financial Assets and Financial Liabilities—Including an amendment of FASB
Statement No. 115,” or SFAS 159. SFAS 159 creates a “fair value option” under
which an entity may elect to record certain financial assets or liabilities at
fair value upon their initial recognition. Subsequent changes in fair value
would be recognized in earnings as those changes occur. The election of the fair
value option would be made on a contract-by contract basis and would need to be
supported by concurrent documentation or a preexisting documented policy. SFAS
159 requires an entity to separately disclose the fair value of these items on
the balance sheet or in the footnotes to the financial statements and to provide
information that would allow the financial statement user to understand the
impact on earnings from changes in the fair value. SFAS 159 is effective for us
beginning with fiscal year 2009. We are currently evaluating the impact that the
adoption of SFAS 159 will have on our financial position and results of
operation.
44
PROPOSED
BUSINESS
Introduction
57th
Street General Acquisition Corp. is a newly-organized, blank check company
formed on October 29, 2009 for the purpose of acquiring, through a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization,
exchangeable share transaction or other similar business transaction an
unidentified operating business or assets. We are not limited to a
particular industry, geographic region or minimum transaction value for purposes
of consummating an initial business transaction. We do not have any
specific merger capital stock exchange, asset acquisition, stock purchase,
reorganization, exchangeable share transaction or other similar business
transaction under consideration and we have not, nor has anyone on our behalf,
contacted any prospective target business or had any discussions, formal or
otherwise, with respect to such a transaction.
We
will seek to capitalize on the significant strength of our management team. Each
of our executive officers, directors and members of our advisory board has over
20 years of experience advising, acquiring, financing and selling private and
public companies in a variety of industries and has prior experience with a
blank check company. We believe that our extensive contacts and sources, ranging
from private and public company contacts, private equity funds, and investment
bankers to attorneys, accountants and business brokers, will allow us to
generate acquisition opportunities. In addition, our executive officers and the
majority of our directors and members of our advisory board were officers or
directors of a blank check company, AAMAC, which on August 7, 2007 conducted a
successful initial public offering and subsequently on July 31, 2009 consummated
a business combination with Great American Group, Inc. (OTCBB:GAMR). With the
exception of Leonard Potter and Andrew Fink, who have not served as a director
of a blank check company, all of the other directors of our company were
directors or officers of AAMAC. Our executive officers and members of
our advisory board played a key role throughout the business combination
transaction for AAMAC including assisting in identifying numerous suitable
acquisition candidates including the ultimate target, and assisting in the proxy
solicitation of stockholder approval for such acquisition.
We do
not have any specific initial business transaction under consideration, and we
have not nor has anyone on our behalf, contacted any prospective target business
or had any discussions, formal or otherwise, with respect to such a transaction.
From the period prior to our formation through the date of this prospectus,
there have been no communications or discussions between any of our officers,
directors and members of our advisory board or our sponsor and any of their
potential contacts or relationships regarding a potential initial business
transaction. Additionally, we have not, nor has anyone on our behalf, taken any
measure, directly or indirectly, to contact any suitable acquisition candidate,
nor have we engaged or retained any agent or other representative to do the
same.
Business
Strategy
We will
use the same disciplined approach that our management team has used in the past
when acquiring target businesses. We have identified the
following criteria that we believe are important and that we intend to use in
evaluating business transaction opportunities. While we intend to utilize these
criteria in evaluating business transaction opportunities, we expect that no
individual criterion will entirely determine a decision to pursue a particular
opportunity. Further, any particular business transaction opportunity which we
ultimately determine to pursue may not meet one or more of these
criteria:
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History
of profitability and free cash flow. We will seek to
acquire one or more businesses or assets that have a history of, or
potential for, strong, stable free cash flow generation. We will focus on
companies that have predictable and recurring revenue
streams.
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Strong
management team.
We will seek to acquire one or more businesses or assets that
have strong, experienced management teams or those that provide a platform
for us to assemble an effective and experienced management team. We will
focus on management teams with a proven track record of driving revenue
growth, enhancing profitability and creating value for their
stockholders.
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Opportunities
for add-on acquisitions. We will seek to
acquire one or more businesses or assets that we can grow both organically
and through acquisitions. In addition, our ability to source proprietary
opportunities and execute transactions will help the business we acquire
grow through acquisition, and thus serve as a platform for further add-on
acquisitions.
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Spin-offs
/ divestitures from larger companies . We will focus on one
or more businesses or assets that are part of larger companies where the
owners seek to divest or spin-off in order to monetize their
investment.
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Defensible
business niche.
We will focus on one or more businesses or assets that have a
leading or niche market position and that demonstrate advantages when
compared to their competitors, which may help to protect their market
position and profitability and deliver strong free cash
flow.
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Diversified
customer and supplier base . We will pursue one
or more businesses or assets that have a diversified customer and supplier
base. Companies with a diversified customer and supplier base are
generally better able to endure economic downturns, industry
consolidation, changing business preferences and other factors that may
negatively impact their customers, suppliers and
competitors.
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45
We have
not established any other specific attributes or criteria (financial or
otherwise) for business transaction opportunities. In evaluating business
transaction opportunities, we may also consider a variety of factors, including
one or more of the following:
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financial condition and results
of operations;
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growth
potential;
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experience and skill of
management and availability of additional
personnel;
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capital
requirements;
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stage of development of the
business and its products or
services;
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existing distribution
arrangements and the potential for
expansion;
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degree of current or potential
market acceptance of the products or
services;
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proprietary aspects of products
and the extent of intellectual property or other protection for products
or formulas;
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impact of regulation on the
business;
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regulatory environment of the
industry;
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seasonal sales fluctuations and
the ability to offset these fluctuations through other business
transactions; and
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costs associated with effecting
the business transaction.
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Competitive
strengths
We
believe our specific competitive strengths to be the following:
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Prior
Blank Check Company Experience . Our management
team, including our executive officers and certain of our directors, as
well as the members of our advisory board, have already been involved in
the successful initial public offering and the subsequent consummation of
a business combination for a prior blank check company AAMAC, which on
August 7, 2007 conducted a successful initial public
offering. AAMAC’s initial public offering raisied gross proceeds of
$414 million at an offering price of $10.00 per unit. On July 31, 2009,
AAMAC consummated a business combination with Great American Group, Inc.
(OTCBB:GAMR), a leading provider of asset disposition solutions and
valuation and appraisal services to a wide range of retail, wholesale and
industrial clients, as well as lenders, capital providers, private equity
investors and professional service firms. Messrs. Klein
and Levitt, our Chairman of the Board and Chairman of our Advisory Board,
respectively, played a key role throughout the business combination
transaction, including assisting in identifying various suitable
acquisition candidates, including the ultimate target, structuring and
negotiating the transaction and assisting in the proxy solicitation of
stockholder approval for such acquisition. They continue to serve as
independent directors of Great American Group, Inc. We believe our
management’s and advisory board’s prior acquisition experience with a
blank check company represents a significant competitive
advantage.
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Extensive
Public, Private Equity and Mergers and Acquisitions Contacts . Our management
team has an extensive base of contacts in the public and private equity
markets and mergers and acquisitions industry that they have developed
through their collective experience. We believe that the members of our
management team have strong working relationships with principals as well
as intermediaries who constitute our most likely source of identifying
prospective business transactions. In addition, our management team,
through its present and historical membership on various boards of
directors, has developed a network of business relationships with members
on the board of directors of other businesses, which greatly extends our
access to privately held companies. We believe that these contacts will be
important in generating acquisition opportunities for
us.
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Management
Operating and Investing Experience . Each of our
executive officers, directors and members of our advisory board has over
20 years of experience advising, acquiring, financing and selling private
and public companies in various industries. Furthermore, our management
team has extensive experience working together closely. Our experience
with sourcing, due diligence, structuring, negotiating and closing
acquisition and growth financing transactions spans both the public and
private markets. Our management team has acquisition and
operating experience in a number of businesses in various industries (such
as industrial manufacturing, retail, real estate, financial services,
healthcare, business services and consumer products). We believe that this
breadth of experience provides us with a competitive advantage in
evaluating businesses and acquisition opportunities over managers who have
little or no direct operating
experience.
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Status
as a public company
We
believe our structure will make us an attractive business transaction partner to
prospective target businesses. As an existing public company, we will offer a
target business an alternative to the traditional initial public offering
through a merger or other business transaction. In this situation, the owners of
the target business would exchange their shares of stock in the target business
for shares of our stock. We believe target businesses will find this path to be
less expensive, and offer greater certainty of becoming a public company than
the typical initial public offering process. In an initial public offering,
there are typically expenses incurred in marketing, roadshow and public
reporting efforts that will likely not be present to the same extent in
connection with a business transaction with us. Furthermore, once a proposed
business transaction is approved by our stockholders and the transaction is
consummated, the target business will have effectively become public, whereas an
initial public offering is always subject to the underwriters’ ability to
complete the offering, as well as general market conditions that could prevent
the offering from occurring. Once public, we believe the target business would
have greater access to capital and additional means of creating management
incentives that are better aligned with stockholders’ interests than it would as
a private company. It can offer further benefits by augmenting a company’s
profile among potential new customers and vendors and aid in attracting talented
employees.
Strong
financial position and flexibility
With a
trust account initially in the amount of $48,750,000 and a public market for our
common stock, we offer a target business a variety of options to facilitate a
future business transaction and fund growth and expansion of business
operations. Because we are able to consummate a business transaction using our
capital stock, debt or a combination of the foregoing, we have the flexibility
to use an efficient structure allowing us to tailor the consideration to be paid
to the target business to address the needs of the parties. However, if our
business transaction requires us to use substantially all of our cash to pay the
purchase price, we may need to arrange third party financing to help fund our
business transaction. Since we have no specific business transaction under
consideration, we have not taken any steps to secure third party financing, and
would only do so simultaneously with the consummation of our initial business
transaction. Accordingly, our flexibility in structuring a business transaction
will be subject to these contingencies.
Effecting
A Business Transaction
General
We are
a newly-organized blank check company formed for the purpose of acquiring,
through a merger, capital stock exchange, asset acquisition, stock purchase,
reorganization, exchangeable share transaction or other similar business
transaction an unidentified operating business or assets. We are not
limited to a particular industry, geographic region or minimum transaction value
for purposes of consummating an initial business transaction. Our
sponsor, officers and directors have agreed that we will only have 15 months
from the date of this prospectus to consummate our initial business
transaction. If we do not consummate a business transaction within
such 15 month period, we shall (i) cease all operations except for the purposes
of winding up, (ii) redeem 100% of our public shares of common stock for a per
share pro rata portion of the trust account (initially approximately $9.75 per
share, or approximately $9.74 per share if the underwriters’ over-allotment
option is exercised in full), plus the interest earned on the trust account but
net of any taxes and (iii) as promptly as possible following such redemption,
dissolve and liquidate the balance of our net assets to our remaining
stockholders, as part of our plan of dissolution and liquidation. We
do not have any specific merger capital stock exchange, asset acquisition, stock
purchase, reorganization, exchangeable share transaction or other similar
business transaction under consideration and we have not, nor has anyone on our
behalf, contacted any prospective target business or had any discussions, formal
or otherwise, with respect to such a transaction.
We intend
to utilize cash derived from the proceeds of this offering, our capital stock,
debt or a combination of these in effecting a business transaction. Although
substantially all of the net proceeds of this offering are intended to be
applied generally toward effecting a business transaction as described in this
prospectus, the proceeds are not otherwise being designated for any more
specific purposes. Accordingly, investors in this offering are investing without
first having an opportunity to evaluate the specific merits or risks of any one
or more business transactions.
47
We
anticipate structuring a business transaction to acquire 100% of the equity
interests or assets of the target business or businesses. We may, however,
structure a business transaction to acquire less than 100% of such interests or
assets of the target business but will not acquire less than a controlling
interest. We will acquire a controlling interest either through the acquisition
of at least 50.1% of the voting equity interests in the target or through the
acquisition of a significant voting equity interest that enables us to exercise
a greater degree of control over the target than any other person or group. In
the event we acquire less than a majority of the voting equity interests in the
target, we may seek an even greater degree of control through contractual
arrangements with the target and/or other target equity holders, or through
special rights associated with the target equity security that we hold, which
arrangements or rights may grant us the ability, among other things, to appoint
certain members of the board (or equivalent governing body) or management of the
target or the ability to approve certain types of significant transactions that
the target may seek to enter into.
We
will provide our stockholders with the opportunity to redeem their shares of our
common stock for cash equal to their pro rata share of the aggregate amount then
on deposit in the trust account, less taxes, upon the consummation of our
initial business transaction, subject to the limitations described
herein. The amount in the trust account is initially anticipated to
be approximately $9.75 per share, or approximately $9.74 per share if the
underwriters’ over-allotment option is exercised in full, including $0.39 per
share being held in the trust account attributable to the contingent fees
payable to Morgan Joseph solely in the event of that our business transaction is
consummated. Unlike other blank check companies which hold a
stockholder vote and conduct proxy solicitations in conjunction with their
redemptions or conversions of public shares for cash upon consummation of their
initial business transactions, we may either hold a stockholder vote or conduct
the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act
which regulate issuer tender offers, and file tender offer documents with the
SEC which will contain substantially the same financial and other information
about the initial business transaction and the redemption rights as is required
under Regulation 14A of the Exchange Act which regulates the solicitation of
proxies. If, however, we hold a stockholder vote, we will conduct the
redemptions like other blank check companies in conjunction with a proxy
solicitation pursuant to the proxy rules and not pursuant to the tender offer
rules. We will consummate our initial business transaction only
if holders of no more than 88% of our public shares elect to redeem
their shares and, solely if we seek stockholder approval, a majority of the
outstanding shares of common stock voted are voted in favor of the business
transaction. Our sponsor has agreed not to redeem the shares held by
it prior to this offering.
We may
seek to raise additional funds through a private offering of debt or equity
securities in connection with the consummation of our initial business
transaction, and we may effect an initial business transaction using the
proceeds of such offering rather than using the amounts held in the trust
account. Subject to compliance with applicable securities laws, we would only
consummate such financing simultaneously with the consummation of our business
transaction. In the case of an initial business transaction funded with assets
other than the trust account assets, our notice disclosing the business
transaction would disclose the terms of the financing and, only if required by
law, regulation or a rule of the OTC Bulletin Board, we would seek stockholder
approval of such financing. In the absence of a requirement by law, regulation
or a rule of the OTC Bulletin Board, we would not seek separate stockholder
approval of such financing inasmuch as the financing portion of any initial
business transaction would be disclosed in our notice materials. There are no
prohibitions on our ability to raise funds privately or through loans in
connection with our initial business transaction. At this time, we are not a
party to any arrangement or understanding with any third party with respect to
raising any additional funds through the sale of securities or
otherwise.
We
have not identified a target business
To
date, we have not selected any target business on which to concentrate our
search for a business transaction. None of our officers, directors, advisors,
promoters and other affiliates has taken any action to identify or contact a
potential business transaction candidate or is currently engaged in discussions
on our behalf with representatives of other companies regarding the possibility
of a potential merger, capital stock exchange, asset or stock acquisition or
other similar business transaction with us, nor have we, nor any of our agents
advisors, or affiliates, been approached by any candidates (or representatives
of any candidates) with respect to a possible acquisition transaction with us.
Additionally, we have not, nor has anyone on our behalf, taken any measure,
directly or indirectly, to identify or locate any suitable target business, nor
have we engaged or retained any agent or other representative to identify or
locate an acquisition candidate. We have not established any specific attributes
or criteria (financial or otherwise) for prospective target businesses. We have
also not conducted any research with respect to identifying the number and
characteristics of the potential acquisition candidates. As a result, we cannot
assure you that we will be able to locate a target business or that we will be
able to engage in a business transaction on favorable
terms.
48
Because
we are not subject to a limitation that a target business have any specific fair
market enterprise value at the time of our signing a definitive agreement in
connection with our initial business transaction, we will have virtually
unrestricted flexibility in identifying and selecting a prospective transaction
candidate. However, in any proposed business transaction, we must initially
acquire a controlling interest in the target business. We will acquire a
controlling interest either through the acquisition of at least 50.1% of the
voting equity interests in the target or through the acquisition of a
significant voting equity interest that enables us to exercise a greater degree
of control over the target than any other person or group. In the event we
acquire less than a majority of the voting equity interests in the target, we
may seek an even greater degree of control through contractual arrangements with
the target and/or other target equity holders, or through special rights
associated with the target equity security that we hold, which arrangements or
rights may grant us the ability, among other things, to appoint certain members
of the board (or equivalent governing body) or management of the target or the
ability to approve certain types of significant transactions that the target may
seek to enter into. We intend to pursue a transaction in which our stockholders
would continue to own a controlling interest of our company. There is no basis
for investors in this offering to evaluate the possible merits or risks of any
target business with which we may ultimately complete a business transaction. To
the extent we effect a business transaction with a financially unstable asset or
property, including entities without established records of sales or earnings,
we may be affected by numerous risks inherent in the business and operations of
such financially unstable property or asset. Although our management will
endeavor to evaluate the risks inherent in a particular target business, we
cannot assure you that we will properly ascertain or assess all significant risk
factors.
Sources
of target businesses
While
we have not yet identified any candidates for a business transaction, we believe
that there are numerous acquisition candidates for us to target. Following the
consummation of the offering, we expect to generate a list of prospective target
opportunities from a host of different sources. We anticipate that target
business candidates will be brought to our attention from various unaffiliated
sources, including investment bankers, venture capital funds, private equity
funds, leveraged buyout funds, management buyout funds and other members of the
financial community who are aware that we are seeking a business transaction
partner via public relations and marketing efforts, direct contact by management
or other similar efforts. Target businesses may also be brought to our attention
by unaffiliated sources as a result of being solicited by us through calls,
mailings or advertisements. Any finder or broker would only be paid a fee upon
the consummation of a business transaction. We expect the fee to be paid to such
persons would be determined in an arm’s length negotiation between the finder or
broker and us based on market conditions at the time we enter into an agreement
with such finder or broker. While we do not presently anticipate engaging the
services of professional firms that specialize in acquisitions on any formal
basis, we may decide to engage such firms in the future or we may be approached
on an unsolicited basis, in which event their compensation may be
paid from the offering proceeds not held in trust. Target businesses also will
be brought to our attention by our officers, directors and members of our
advisory board, through their network of joint venture partners and other
industry relationships located in the United States and elsewhere that
regularly, in the course of their daily business activities, see numerous varied
opportunities. In no event will any of our sponsor, officers, advisors, or
directors, or any of our or their respective affiliates be paid any finder’s
fee, consulting fee or any other form of compensation, including the issuance of
any of our securities, prior to, or for any services they render, in order to
effectuate the consummation of a business transaction. Furthermore, we have
adopted a policy prohibiting our sponsor, officers, directors and members of our
advisory board or any of our or their affiliates from receiving any finder’s fee
or other compensation from a target company for services rendered in connection
with a business transaction.
While
we do not intend to pursue an initial business transaction with a target
business that is affiliated with our sponsor, officers, advisors, or directors,
or any of our or their affiliates, we are not prohibited from pursuing such a
transaction. In the event we seek to complete an initial business transaction
with such a target business, we would obtain an opinion from an independent
investment banking firm which is a member of FINRA that such an initial business
transaction is fair to our stockholders from a financial point of view.
Generally, such opinion is rendered to a company’s board of directors and
investment banking firms may take the view that stockholders may not rely on the
opinion. Such view will not impact our decision on which investment banking firm
to hire.
Selection
of a target business and structuring of a business transaction
In
evaluating a prospective target business, our management will consider, among
other factors, the following factors likely to affect the performance of the
investment. We have not conducted any specific research to date with respect to
our potential acquisition candidates nor have we conducted any research with
respect to identifying the number and characteristics of the potential
acquisition candidates or the likelihood or probability of success of any
proposed business transaction. Since we have not yet analyzed the businesses
available for acquisition nor have we identified a target business, we have not
established any other specific attributes or criteria (financial or otherwise)
for the evaluation of prospective target businesses. We intend to pursue a
transaction in which our stockholders would continue to own a controlling
interest of our company. However, we could pursue a transaction, such as a
reverse merger or other similar transaction, in which we issue a substantial
number of new shares and, as a result, our stockholders immediately prior to
such transaction could own less than a majority of our outstanding shares
subsequent to such transaction.
49
Investment
Criteria
The
criteria set forth in “Proposed Business—Business Strategy” are not intended to
be exhaustive. Any evaluation relating to the merits of a particular business
transaction 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 transaction consistent with our business objective. In evaluating a
prospective target business, we will conduct an extensive due diligence review
which will encompass, among other things, meetings with incumbent management,
inspection of facilities and assets, as well as a review of all relevant
financial and other information which is made available to us. This due
diligence review will be conducted either by our management or by unaffiliated
third parties we may engage, although we have no current intention to engage any
such third parties. We will also seek to have all owners of any prospective
target business 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 business or owner refused to execute such agreement, it is unlikely
we would continue negotiations with such business or owner, and in no event will
we enter into a definitive agreement for our initial business transaction
without such a waiver agreement.
At the
first meeting of the board of directors promptly following the closing of this
offering, we intend to establish policies and procedures for seeking and
evaluating appropriate business acquisition candidates. As part of our intended
processes, we may create a contact database indicating the materials received by
any prospective target candidates, when such materials were evaluated, the
parties primarily responsible for such evaluation and the reasons such candidate
was either rejected or the issues that, upon initial evaluation, require further
investigation. As the evaluation process progresses, numerous other factors,
which are expected to vary with each potential candidate we evaluate, are
expected to be relevant to a final determination of whether to move forward with
any particular acquisition candidate.
In the
case of all possible acquisitions, we will seek to determine whether the
transaction is advisable and in the best interests of us and our stockholders.
We believe it is possible that our attractiveness as a potential buyer of
businesses may increase after the consummation of an initial transaction and
there may or may not be additional business transaction opportunities as we grow
and integrate our acquisitions. We may or may not make future acquisitions.
Fundamentally, however, we believe that, following an initial transaction, we
could learn of, identify and analyze acquisition targets in the same way after
an initial transaction as we will before an initial transaction. To the extent
we are able to identify multiple acquisition targets and options as to which
business or assets to acquire as part of an initial transaction, we intend to
seek to consummate the acquisition which is most attractive and provides the
greatest opportunity for creating stockholder value. The determination of which
entity is the most attractive would be based on our analysis of a variety of
factors, including whether such acquisition would be in the best interests of
our securityholders, the purchase price, the terms of the sale, the perceived
quality of the assets and the likelihood that the transaction will
close.
The time
and costs required to select and evaluate a target business and to structure and
complete the business transaction 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 transaction is
not ultimately completed will result in a loss to us and reduce the amount of
capital available to otherwise complete a business transaction.
Possible
lack of business diversification
We may
seek to effect business transactions with more than one target business, and
there is no required minimum valuation standard for any target at the time of
such acquisition, as discussed above. We expect to complete only a single
business transaction, although this process may entail the simultaneous
acquisitions of several operating businesses. Therefore, at least initially, the
prospects for our success may be entirely dependent upon the future performance
of a single business operation. Unlike other entities that may have the
resources to complete several business transactions of entities or assets
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 transaction with only a single entity or asset, our lack
of diversification may:
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·
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subject us to numerous economic,
competitive and regulatory developments, any or all of which may have a
substantial adverse impact upon the particular industry in which we may
operate subsequent to a business transaction;
and
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·
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result in our dependency upon the
development or market acceptance of a single or limited number of
products, processes or
services.
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In the
event we ultimately determine to simultaneously acquire several businesses or
assets and such businesses or assets are owned by different sellers, we will
need for each of such sellers to agree that our purchase of its business or
assets 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 transaction. With multiple acquisitions, we could also face additional
risks, including additional burdens and costs with respect to possible multiple
negotiations and due diligence investigations (if there are multiple sellers)
and the additional risks associated with the subsequent assimilation of the
businesses or assets into a single operating business.
50
Limited
ability to evaluate the target business’s management
Although
we intend to closely scrutinize the incumbent management of a prospective target
business when evaluating the desirability of effecting a business transaction,
we cannot assure you that our assessment will prove to be correct. In addition,
we cannot assure you that new members that join our management following a
business transaction 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 transaction
cannot presently be stated with any certainty. While our current officers and
directors may remain associated in senior management or advisory positions with
us following a business transaction, they may not devote their full time and
efforts to our affairs subsequent to a business transaction. Moreover, they
would only be able to remain with us after the consummation of a business
transaction if they are able to negotiate employment or consulting agreements in
connection with such business transaction. Such negotiations would take place
simultaneously with the negotiation of the business transaction 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 us after the
consummation of the business transaction. While the personal and financial
interests of such individuals may influence their motivation in identifying and
selecting a target business, the ability of such individuals to remain with us
after the consummation of a business transaction will not be the determining
factor in our decision as to whether or not we will proceed with any potential
business transaction. 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 transaction, we may seek to recruit additional managers to supplement
or replace the incumbent management of the target business. We cannot assure you
that we will have the ability to recruit such managers, or that any such
managers we do recruit will have the requisite skills, knowledge or experience
necessary to enhance the incumbent management.
Stockholders
may not have the ability to approve a business transaction
We may
not seek stockholder approval before we effect our initial business transaction
and not all business transactions require stockholder approval under applicable
state law. Presented in the table below is a graphic explanation of
the types of initial business transactions we may consider and whether
stockholder approval would be required under Delaware law for each such
transaction.
Type of Transaction
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Whether Stockholder Approval is Required
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Purchase
of Assets
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No
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Purchase
of Stock of target not involving a merger with the company
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No
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Merger
of target into a subsidiary of the company
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No
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Merger
of the company with a target
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Yes
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Redemption
rights for public stockholders upon consummation of our initial business
transaction
We will provide our
stockholders with the opportunity to redeem their shares of our common stock for
cash equal to their pro rata share of the aggregate amount then on deposit in
the trust account, less taxes, upon the consummation of our initial business
transaction, subject to the limitations described herein. The amount
in the trust account is initially anticipated to be approximately $9.75 per
share, or approximately $9.74 per share if the underwriters’ over-allotment
option is exercised in full, including $0.39 per share being held in the trust
account attributable to the contingent fees payable to Morgan Joseph solely in
the event of that our business transaction is consummated. Unlike
other blank check companies which hold a stockholder vote and conduct proxy
solicitations in conjunction with their redemptions or conversions of public
shares for cash upon consummation of their initial business transactions even if
not required by law, we may either hold a stockholder vote or conduct the
redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act which
regulate issuer tender offers, and file tender offer documents with the SEC
which will contain substantially the same financial and other information about
the initial business transaction and the redemption rights as is required under
Regulation 14A of the Exchange Act which regulates the solicitation of
proxies. If, however, we hold a stockholder vote, we will conduct the
redemptions like other blank check companies in conjunction with a proxy
solicitation pursuant to the proxy rules and not pursuant to the tender offer
rules. We will consummate our initial business transaction only
if holders of no more than 88% of our public shares elect to redeem
their shares and, solely if we seek stockholder approval, a majority of the
outstanding shares of common stock voted are voted in favor of the business
transaction. Our sponsor has agreed not to redeem any
shares held by it in connection with the consummation of a business
combination.
The 88% redemption threshold is
different from the redemption or conversion thresholds used by most blank check
companies. Traditionally, blank check companies would not be able to
consummate a business transaction if the holders of the company’s public shares
voted against a proposed business transaction and elected to redeem or convert
more than a much smaller percentage of the shares sold in such company’s initial
public offering, which percentage threshold is typically between 19.99% and
39.99%. As a result, many blank check companies have been unable to
complete business transactions because the amount of shares voted by their
public stockholders electing conversion exceeded the maximum conversion
threshold pursuant to which such company could proceed with a business
transaction.
Conduct
of redemption pursuant to tender offer rules
When we conduct the redemptions upon
consummation of our initial business transaction in compliance with the tender
offer rules, the redemption offer will be made to all of our stockholders, not
just our public stockholders. Our sponsor, however, has agreed not to
redeem its initial shares in connection with this redemption
offer. In addition, the offer will be made for up to a maximum of 88%
of our public shares, subject to the condition that if more than 88% of our
public shares elect to redeem their shares, we will withdraw the offer and not
consummate the initial business combination.
51
Submission
of our initial business transaction to a stockholder vote
In the
event we seek stockholder approval of our business transaction, we will
distribute proxy materials and, in connection therewith, provide our public
stockholders with redemption rights upon consummation of the initial business
transaction. Public stockholders voting in favor of the business
transaction and electing to exercise their redemption rights shall be entitled
to receive cash equal to their pro rata share of the aggregate amount then on
deposit in the trust account, including any amounts representing interest earned
on the trust account, less taxes, but public stockholders voting against the
business transaction and electing to exercise their redemption rights shall be
entitled to receive cash equal to their pro rata share of the aggregate amount
then on deposit in the trust account excluding any amounts representing interest
earned on the trust account, less taxes.
Additionally,
if we submit our business transaction to our stockholders for approval, and we
do not conduct redemptions in connection with our business transaction pursuant
to the tender offer rules, it is possible that our sponsor, officers, directors
and their respective affiliates may acquire securities from public stockholders
who have elected to redeem their shares in order to obtain the requisite level
of shares we are required to maintain so that we can proceed with the
consummation of our business transaction. Although our sponsor, officers,
directors and their respective affiliates have no intention of entering into
stock purchase arrangements with our public stockholders subsequent to this
offering, they may do so in the future, both as an expression of confidence in
the value of our shares of common stock following our initial business
transaction and as a means of increasing the likelihood that we will be able to
proceed with our initial business transaction, as applicable. Such purchases,
should they occur at all, may be negotiated after the time when stockholders
elected to redeem their shares. Any shares purchased from stockholders by our
sponsor, officers, directors or their respective affiliates would be purchased
for cash or other consideration at a price to be negotiated between such
stockholders on the one hand and our sponsor, officers, directors or their
respective affiliates on the other hand. Such price would depend on a variety of
factors including, but not limited to, the size of the stockholder’s position in
our company and the method and timing of payment to such stockholder. The
proceeds of our trust account may be used to facilitate such
purchases
Any
privately negotiated transaction to purchase shares from a stockholder who would
otherwise choose to redeem their shares, would include a contractual
acknowledgement that such stockholder, although still the record holder of our
shares is no longer the beneficial owner thereof and therefore agrees to refrain
from redeeming their common stock as directed by the purchaser of such
securities. All such privately negotiated transactions (should they occur at
all) would be isolated transactions conducted in compliance with all applicable
securities laws, each to be privately negotiated with one or a discrete group of
stockholders who have elected, or otherwise indicated their intention, to
exercise their redemption rights.
Investors
are cautioned that neither our sponsor, officers, directors, advisors, and their
respective affiliates, nor any third parties, have agreed to purchase any such
shares, and their failure to so agree at the applicable time could adversely
impair our ability to consummate a business transaction. Moreover, even if our
sponsor, officers, directors, advisors, and their respective affiliates were to
undertake such purchases, such purchases could be subject to limitations under
applicable securities laws and regulations, including Regulation M and
regulations regarding tender offers. The inability of such persons to effect
such purchases could adversely impair our ability to consummate the business
transaction.
Our
sponsor, officers, directors and/or their affiliates anticipate that they will
identify the stockholders with whom the sponsor, officers, directors or their
affiliates may pursue privately negotiated purchases by either the stockholders
contacting us directly or by our receipt of redemption requests submitted by
stockholders following our mailing of a notice in connection with our initial
business transaction. To the extent that our sponsor, officers,
directors, advisors, or their affiliates enter into a private purchase, they
would identify and contact only potential selling stockholders who have
expressed their election to redeem their shares for a pro rata share of the
trust account. Pursuant to the terms of such arrangements, any shares so
purchased by our sponsor, officers, advisors, directors, and/or their
affiliates would then revoke their election to redeem such shares. The terms of
such purchases would operate to facilitate our ability to consummate a proposed
business transaction by potentially reducing the number of shares redeemed for
cash.
Limitation
on redemption rights upon consummation of a business transaction if we seek a
stockholder vote
Notwithstanding
the foregoing, and solely if we hold a stockholder vote to approve our initial
business transaction, and we do not conduct redemptions in connection with our
business transaction pursuant to the tender offer rules, our amended and
restated certificate of incorporation provides that a public stockholder,
together with any affiliate of his or any other person with whom he is acting in
concert or as a ‘‘group’’ (as defined under Section 13 of the Exchange Act),
will be restricted from seeking redemption rights with respect to more than
an aggregate of 10% of the shares sold in this offering. We believe
this restriction will discourage stockholders from accumulating large blocks of
shares, and subsequent attempts by such holders to use their ability to exercise
their redemption rights as a means to force us or our management to purchase
their shares at a significant premium to the then current market price or on
other undesirable terms. Absent this provision, a public stockholder
holding more than an aggregate of 10% of the shares sold in this offering could
threaten to seek exercise their redemption rights if such holder’s shares are
not purchased by us or our management at a premium to the then current market
price or on other undesirable terms. By limiting our stockholders’
ability to redeem no more than 10% of the shares sold in this
offering, we believe we will limit the ability of a small group of stockholders
to unreasonably attempt to block our ability to consummate a business
transaction. However, we would not be restricting our stockholders’
ability to vote all of their shares for or against a business
transaction.
Tendering
stock certificates in connection with a tender offer or redemption
rights
We may
require our public stockholders seeking to exercise their redemption rights,
whether they are record holders or hold their shares in “street name,” to either
tender their certificates to our transfer agent prior to the date set forth in
the tender offer documents or proxy materials mailed to such holders, or up to
two business days prior to the vote on the proposal to approve the business
transaction in the event we distribute proxy materials, or to deliver their
shares to the transfer agent electronically using Depository Trust Company’s
DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option. The
tender offer or proxy materials, as applicable, that we will furnish to holders
of our public shares in connection with our initial business transaction will
indicate whether we are requiring public stock holders to satisfy such delivery
requirements. Accordingly, a public stockholder would have from the time we send
out our tender offer materials until the close of the tender offer period, or up
to two days prior to the vote on the business transaction if we distribute proxy
materials, as applicable, to tender his shares if he wishes to seek to exercise
his redemption rights. Given the relatively short exercise period, it
is advisable for stockholders to use electronic delivery of the public
shares.
52
There
is a nominal cost associated with the above-referenced tendering process and the
act of certificating the shares or delivering them through the DWAC System. The
transfer agent will typically charge the tendering broker $35.00 and it would be
up to the broker whether or not to pass this cost on to the redeeming holder.
However, this fee would be incurred regardless of whether or not we require
holders seeking to exercise redemption rights to tender their shares prior to
the meeting. The need to deliver shares is a requirement of exercising
redemption rights regardless of the timing of when such delivery must be
effectuated. However, in the event we require stockholders seeking to exercise
redemption rights prior to the consummation of the proposed business transaction
and the proposed business transactions is not consummated (and therefore we
would not be obligated to pay cash in connection with the tendered shares) this
may result in an increased cost to stockholders.
The
foregoing is different from the procedures used by many blank check
companies. Traditionally, in order to perfect redemption rights in
connection with a blank check company’s business transaction, the company would
distribute proxy materials for the stockholders’ vote on an initial business
transaction, and a holder could simply vote against a proposed business
transaction and check a box on the proxy card indicating such holder was seeking
to exercise his redemption rights. After the business transaction 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 transaction during which
he could monitor the price of the company’s stock in the market. If the price
rose above the redemption price, he could sell his shares in the open market
before actually delivering his shares to the company for cancellation. As a
result, the redemption rights, to which stockholders were aware they needed to
commit before the stockholder meeting, would become a “redemption” right
surviving past the consummation of the business transaction until the redeeming
holder delivered its certificate. The requirement for physical or electronic
delivery prior to the meeting ensures that a redeeming holder’s election to
redeem is irrevocable once the business transaction is
approved.
Any
request to redeem such shares once made, may be withdrawn at any time up to the
date set forth in the tender offer materials or the date of the shareholder
meeting set forth in our proxy materials, as applicable. Furthermore, if a
holder of a public share of common stock delivered his certificate in connection
with an election of their redemption rights and subsequently decides prior to
the applicable date not to elect to exercise such rights, he may simply request
that the transfer agent return the certificate (physically or electronically).
It is anticipated that the funds to be distributed to holders of our public
shares of common stock electing to redeem their shares will be distributed
promptly after the completion of a business transaction.
If the
initial business transaction is not approved or completed for any reason, then
our public stockholders who elected to exercise their redemption rights would
not be entitled to redeem their shares for the applicable pro rata share of the
trust account. In such case, we will promptly return any shares delivered by
public holders who elected to redeem their shares.
If our
initial proposed business transaction is not consummated, we may continue to try
to consummate a business transaction with a different target until 15 months
from the date of this prospectus. If the initial business transaction
is not completed for any reason, then public stockholders who exercised their
redemption rights would not be entitled to redeem their shares for 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, we
will promptly return such certificates to the tendering public stockholder.
Public stockholders would be entitled to receive their pro rata share of the
aggregate amount on deposit in the trust account only in the event that the
initial business transaction is consummated. If the proposed business
transaction is not consummated then a stockholder’s election to exercise its
redemption rights will not be honored, and such redemption will not be entitled
to a cash payment, even if such redemption right was properly
exercised.
Investors
in this offering who do not sell, or who receive less than an aggregate of
approximately $.25 of net sales proceeds for the warrants included in the units,
and persons who purchase common stock in the aftermarket at a price in excess of
$9.75 per share, may have a disincentive to exercise their redemption rights
because the amount they would receive upon the exercise of their redemption
rights could be less than their original or adjusted purchase
price.
53
Redemption
of common stock and liquidation if no initial business transaction
Our
sponsor, officers and directors have agreed that we will only have 15 months
from the date of this prospectus to consummate our initial business transaction.
If we do not consummate a business transaction within such 15 month period, we
will (i) cease all operations except for the purposes of winding up, (ii) redeem
100% of our public shares of common stock for cash equal to their pro rata share
of the aggregate amount then on deposit in the trust account (initially
approximately $9.75 per share, or approximately $9.74 per share if the
underwriters’ over-allotment option is exercised in full) including interest,
less taxes, which redemption will completely extinguish public stockholders’
rights as stockholders (including the right to receive further liquidation
distributions, if any), subject to applicable law, and subject to the
requirement that any refund of income taxes that were paid from the trust
account which is received after the redemption shall be distributed to the
former public stockholders, and (iii) as promptly as possible following such
redemption, dissolve and liquidate the balance of our net assets to our
remaining stockholders, as part of our plan of dissolution and liquidation to be
adopted in accordance with Section 281(b) of the Delaware General Corporation
Law. Pursuant
to the terms of our certificate of incorporation, our powers following the
expiration of the permitted time period for consummating a business transaction
will automatically thereafter be limited to acts and activities relating to
dissolving and winding up our affairs, including liquidation.
Our
sponsor has waived its right to participate in any redemption with respect to
its initial shares and the common stock underlying the insider warrants upon our
redemption of shares sold in this offering if we fail to consummate a business
transaction within 15 months. However, if our sponsor or any of our officers,
directors, advisors, or affiliates acquires shares of common stock in or after
this offering, they will be entitled to a pro rata share of the trust account
upon our redemption in the event we do not consummate a business transaction
within the required time period. There will be no liquidating distribution with
respect to our warrants, which will expire worthless in the event we do not
consummate a business transaction. We expect that all costs associated with the
implementation and completion of our liquidation will be funded by any remaining
assets outside of the trust account although we cannot assure you that there
will be sufficient funds for such purpose. If such funds are insufficient, our
sponsor has agreed to advance us the funds necessary to complete such
liquidation (currently anticipated to be approximately
$30,000).
Upon
consummation of this offering, and assuming no exercise of the underwriter’s
over-allotment option, we expect to have approximately (i) $48,750,000 of the
offering proceeds deposited in the trust account for the benefit of our public
stockholders and (ii) $800,000 from the proceeds of this offering not held in
the trust account. In the event no business transaction is
consummated within 15 months from the date of this prospectus and we are unable
to redeem 100% of the shares sold in this offering, we intend to submit a plan
of dissolution to our public stockholders, requiring a majority of shares voted
for approval, in which (i) the proceeds held in our trust account, together with
interest, less taxes, would be distributed to only our public stockholders on a
per share pro rata basis and (ii) the remaining net assets of the company, if
any, would be distributed on a per share pro rata basis to our
stockholders.
If we
were to expend all of the net proceeds of this offering, other than the proceeds
deposited in the trust account, and without taking into account interest, if
any, earned on the trust account, the initial aggregate of the (i) per share
redemption price or (ii) per share liquidation price would be approximately
$9.75 (or approximately $9.74 if the underwriters’ over-allotment option is
exercised in full). The proceeds deposited in the trust account could, however,
become subject to the claims of our creditors which would have higher priority
than the claims of our public stockholders. We cannot assure you that the actual
aggregate of the (i) per share redemption price or (ii) per share liquidation
price will not be less than approximately $9.75, plus interest (net of any
taxes). Under Section 281(b) of the Delaware General Corporation Law, our plan
of distribution must provide for all claims against us to be paid in full or
make provision for payments to be made in full, as applicable, if there are
sufficient assets. These claims must be paid or provided for before we make any
distribution of our remaining assets to our stockholders. While we intend to pay
such amounts, if any, we cannot assure you that we will have funds sufficient to
pay or provide for all creditors’ claims.
Although
we will seek to have all vendors, service providers, prospective target
businesses or other entities we engage 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 or even if they execute such agreements
that they would be prevented from bringing claims against the trust account
including but not limited to fraudulent inducement, breach of fiduciary
responsibility or other similar claims, as well as claims challenging the
enforceability of the waiver, in each case in order to gain an advantage with
respect to a claim against our assets, including the funds held in the trust
account. If any third party refused to execute an agreement waiving such claims
to the monies held in the trust account, our management would perform an
analysis of the alternatives available to it and would only enter into an
agreement with a third party that did not execute a waiver if management
believed that such third party’s engagement would be significantly more
beneficial to us than any alternative. Examples of possible instances
where we may engage a third party that refused to execute a waiver include the
engagement of a third party consultant whose particular expertise or skills are
believed by management to be significantly superior to those of other
consultants that would agree to execute a waiver or in cases where management is
unable to find a provider of required services willing to provide the waiver. In
addition, there is no guarantee that such entities will agree to waive any
claims they may have in the future as a result of, or arising out of, any
negotiations, contracts or agreements with us and will not seek recourse against
the trust account for any reason. In order to protect the amounts held in the
trust account, Mark D. Klein, our chairman, chief executive officer and
president, and Paul D. Lapping, our chief financial officer, treasurer,
secretary and director, have agreed that they will be liable to us if and to the
extent any claims by a vendor for services rendered or products sold to us, or a
prospective target business with which we have discussed entering into a
transaction agreement reduce the amounts in the trust account to below $9.75 per
share (or approximately $9.74 per share if the underwriter’s over-allotment
option is exercised in full), except as to any claims by a third party who
executed a waiver of any and all rights to seek access to the trust account and
except as to any claims under our indemnity of the underwriters of this offering
against certain liabilities, including liabilities under the Securities Act. In
the event that an executed waiver is deemed to be unenforceable against a third
party, Messrs. Klein and Lapping will not be responsible to the extent of any
liability for such third party claims. We cannot assure you, however,
that Messrs. Klein and Lapping would be able to satisfy those
obligations.
54
In the
event that the proceeds in the trust account are reduced below $9.75 per share
(or approximately $9.74 per share if the underwriter’s over-allotment option is
exercised in full) in the event we redeem 100% of our public shares of common
stock for a per share pro rata portion of the trust account, or upon our
liquation and Messrs. Klein and Lapping assert that they are unable to satisfy
their obligations or that they have no indemnification obligations related to a
particular claim, our independent directors, if any, would determine whether to
take legal action against Messrs. Klein and Lapping to enforce their
indemnification obligations. While we currently expect that our independent
directors would take legal action on our behalf against Messrs. Klein and
Lapping to enforce their indemnification obligations to us, it is possible that
our independent directors in exercising their business judgment may choose not
to do so in any particular instance. Accordingly, we cannot assure you that due
to claims of creditors the actual value of the per share redemption price (or
per share liquidation distribution if we are unable to effect our redemption)
will not be less than $9.75 per share (or approximately $9.74 per share if the
underwriters’ overallotment option is exercised in full).
We will
seek to reduce the possibility that Messrs. Klein and Lapping will have to
indemnify the trust account due to claims of creditors by endeavoring to have
all vendors, service providers and prospective target businesses as well as
other entities execute agreements with us waiving any right, title, interest or
claim of any kind in or to monies held in the trust account. Messrs. Klein and
Lapping will also not be liable as to any claims under our indemnity of the
underwriters of this offering against certain liabilities, including liabilities
under the Securities Act. We will have access to up to $800,000 from the
proceeds of this offering, with which to pay any such potential claims
(including costs and expenses incurred in connection with our liquidation,
currently estimated to be no more than approximately $30,000). In the event that
we liquidate and it is subsequently determined that the reserve for claims and
liabilities is insufficient, stockholders who received a return of funds from
the liquidation of our trust account could be liable for claims made by
creditors.
Under
the Delaware General Corporation Law, stockholders may be held liable for claims
by third parties against a corporation to the extent of distributions received
by them in a dissolution. The pro rata portion of our trust account distributed
to our public stockholders upon our redemption of 100% of our public shares of
common stock in the event we do not consummate our initial business transaction
within 15 months from the date of this prospectus may be considered a
liquidation distribution under Delaware law. If the corporation
complies with certain procedures set forth in Section 280 of the Delaware
General Corporation Law intended to ensure that it makes reasonable provision
for all claims against it, including a 60-day notice period during which any
third-party claims can be brought against the corporation, a 90-day period
during which the corporation may reject any claims brought, and an additional
150-day waiting period before any liquidating distributions are made to
stockholders, any liability of stockholders with respect to a liquidating
distribution is limited to the lesser of such stockholder’s pro rata share of
the claim or the amount distributed to the stockholder, and any liability of the
stockholder would be barred after the third anniversary of the dissolution.
However, as stated above, if we do not effect a business transaction
by , 2011 [15 months from the date of this
prospectus] , we shall (i) cease all operations except for the purposes
of winding up, (ii) redeem 100% of our public shares of common stock for a per
share pro rata portion of the trust account, including the interest earned
thereon, but net of any taxes and (iii) as promptly as possible following such
redemption, dissolve and liquidate the balance of our net assets to our
remaining stockholders, as part of our plan of dissolution and liquidation.
Accordingly, it is our intention to make liquidating distributions to our
stockholders as soon as reasonably possible following our 15 th month
and, therefore, we do not intend to comply with those procedures. As such, our
stockholders could potentially be liable for any claims to the extent of
distributions received by them (but no more) and any liability of our
stockholders may extend well beyond the third anniversary of such date. Because
we will not be complying with Section 280, Section 281(b) of the Delaware
General Corporation Law requires us to adopt a plan, based on facts known to us
at such time, that will provide for our payment of all existing and pending
claims or claims that may be potentially brought against us within the
subsequent 10 years. However, because we are a blank check company, rather than
an operating company, and our operations will be limited to searching for
prospective target businesses to acquire, the only likely claims to arise would
be from our vendors (such as accountants, lawyers, investment bankers, etc.) or
prospective target businesses. As described above, pursuant to the obligation
contained in our underwriting agreement, we will seek to have all vendors,
service providers and prospective target businesses execute agreements with us
waiving any right, title, interest or claim of any kind in or to any monies held
in the trust account. As a result of this obligation, the claims that could be
made against us are significantly limited and the likelihood that any claim that
would result in any liability extending to the trust account is remote. We have
an obligation to pursue indemnification from Messrs. Klein and Lapping pursuant
to the terms of their agreement with us. Further, Messrs. Klein and Lapping may
be liable only to the extent necessary to ensure that the amounts in the trust
account are not reduced below $9.75 per share (or approximately $9.74 per share
if the underwriter’s over-allotment option is exercised in full) less any per
share amounts distributed from our trust account to our public stockholders in
the event we are unable to consummate a business transaction within 15 months
from the date of this prospectus, and will not be liable as to any
claims under our indemnity of the underwriters of this offering against certain
liabilities, including liabilities under the Securities Act. In the event that
an executed waiver is deemed to be unenforceable against a third party, Messrs.
Klein and Lapping will not be responsible to the extent of any liability for
such third party claims.
55
If we are
forced to file a bankruptcy case or an involuntary bankruptcy case is filed
against us which is not dismissed, the proceeds held in the trust account could
be subject to applicable bankruptcy law, and may be included in our bankruptcy
estate and subject to the claims of third parties with priority over the claims
of our stockholders. To the extent any bankruptcy claims deplete the trust
account, we cannot assure you we will be able to return to our public
stockholders an aggregate of at least $9.75 per share. Additionally, if we are
forced to file a bankruptcy case or an involuntary bankruptcy case is filed
against us which is not dismissed, any distributions received by stockholders
could be viewed under applicable debtor/creditor and/or bankruptcy laws as
either a “preferential transfer” or a “fraudulent conveyance.” As a result, a
bankruptcy court could seek to recover all amounts received by our stockholders.
Furthermore, because we intend to distribute the proceeds held in the trust
account to our public stockholders promptly after the termination of our
corporate existence, 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 its fiduciary duty to our creditors and/or may have acted in bad faith,
and thereby exposing itself and our company to claims of punitive damages, by
paying public stockholders from the trust account prior to addressing the claims
of creditors. We cannot assure you that claims will not be brought against us
for these reasons.
Our
public stockholders will be entitled to receive funds from the trust account
only in the event of our redemption of 100% of our public shares upon our
liquidation or if they redeem their respective shares for cash upon
the consummation of the initial business transaction. In no other circumstances
will a stockholder have any right or interest of any kind to or in the trust
account. In the event we seek stockholder approval in connection with our
initial business transaction, a stockholder’s voting in connection with the
business transaction alone will not result in a stockholder’s redeeming its
shares to us for an applicable pro rata share of the trust account. Such
stockholder must have also exercised its redemption rights described
above.
Competition
In
identifying, evaluating and selecting a target business for an initial business
transaction, we may encounter intense competition from other entities having a
business objective similar to ours including other blank check companies,
private equity groups and leveraged buyout funds, and operating businesses
seeking strategic acquisitions. Many of these entities are well established and
have extensive experience identifying and effecting business transactions
directly or through affiliates. Moreover, many of these competitors possess
greater financial, technical, human and other resources than us. Our ability to
acquire larger target businesses will be limited by our available financial
resources. This inherent limitation gives others an advantage in pursuing the
acquisition of a target business. Furthermore, our obligation to pay cash in
connection with 88% of our shares held by our public stockholders who exercise
their redemption rights may reduce the resources available to us for an initial
business transaction and our outstanding warrants, and the future dilution they
potentially represent, may not be viewed favorably by certain target businesses.
Either of these factors may place us at a competitive disadvantage in
successfully negotiating an initial business transaction.
Facilities
We
currently maintain our executive offices at 590 Madison Avenue, 35th Floor, New
York, New York 10022. The cost for this space is included in the $7,500
per-month fee described above that 57 th Street
GAC Holdings LLC charges us for general and administrative services. We believe,
based on rents and fees for similar services in the New York metropolitan area
that the fee charged by 57 th Street
GAC Holdings LLC 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.
Employees
and Directors
We
currently have 2 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 initial business transaction and the stage of the initial
business transaction process the company is in. Accordingly, once management
locates a suitable target business to acquire, they will spend more time
investigating such target business and negotiating and processing the initial
business transaction (and consequently spend more time on our affairs) than they
would prior to locating a suitable target business. We expect our executive
officers to devote a reasonable amount of time to our business. We do
not intend to have any full time employees prior to the consummation of an
initial business transaction.
56
Periodic
Reporting and Audited Financial Statements
We
will register our units, common stock and warrants under the Exchange Act and
will have reporting obligations, including the requirement that we file annual,
quarterly and current reports with the SEC. In accordance with the requirements
of the Exchange Act, our annual reports will contain financial statements
audited and reported on by our independent registered public
accountants.
We
will provide stockholders with audited financial statements of the prospective
target business to be acquired as part of the tender offer materials or proxy
solicitation materials sent to stockholders to assist them in assessing each
specific target business we seek to acquire. While the requirement of having
available financial information for the target business may limit the pool of
potential acquisition candidates, given the broad range of target businesses we
may consummate a business combination with, we do not believe that the narrowing
of the pool will be material.
We will
be required to have our internal control procedures audited for the fiscal year
ending December 31, 2011 as required by the Sarbanes-Oxley Act. A target
business 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.
Legal
proceedings
There is
no litigation currently pending or, to our knowledge, contemplated against us,
our sponsor or any of our officers or directors in their capacities as
such.
Comparison
to Offerings of Blank Check Companies
The
following table compares and contrasts the terms of our offering and the terms
of an offering of blank check companies under Rule 419 promulgated by the SEC
assuming that the gross proceeds, underwriting discounts and underwriting
expenses for the Rule 419 offering are the same as this offering and that the
underwriters will not exercise their over-allotment option. None of the terms of
a Rule 419 offering will apply to this offering.
Terms
of Our Offering
|
Terms
Under a Rule 419 Offering
|
|||
Escrow
of offering proceeds:
|
$48,750,000
of the net offering proceeds (including contingent fees) will be deposited
into the trust account at [Deutsche Bank], maintained by Continental Stock
Transfer & Trust Company, acting as trustee. A portion of
such offering proceeds consists of contingent fees payable by us to Morgan
Joseph in the event we consummate a business transaction.
|
$43,079,625
of the offering proceeds would be required to be deposited into either an
escrow account with an insured depositary institution or in a separate
bank account established by a broker-dealer in which the broker-dealer
acts as trustee for persons having the beneficial interests in the
account.
|
||
Investment
of net proceeds:
|
The
$48,750,000 of offering proceeds (including contingent fees) held in the
trust account will only be invested in United States “government
securities” within the meaning of Section 2(a)(16) of the Investment
Company Act of 1940 with a maturity of 180 days or less, or in money
market funds meeting certain conditions under Rule 2a-7 promulgated under
the Investment Company Act of 1940.
|
Proceeds
could be invested only in specified securities such as a money market fund
meeting conditions of the Investment Company Act of 1940 or in securities
that are direct obligations of, or obligations guaranteed as to principal
or interest by, the United States.
|
||
Limitation
on fair value or net assets of target business:
|
We
are not required to set a minimum valuation on either the fair market
value or net assets of a target business.
|
We
would be restricted from acquiring a target business unless the fair value
of such business or net assets to be acquired represent at least 80% of
the maximum offering
proceeds.
|
57
Trading
of securities issued:
|
The
units will begin trading on or promptly after the date of this prospectus.
Each of the shares of our common stock and warrants shall trade separately
on the fifth business day following the earlier to occur of: the
expiration of the underwriters’ over-allotment option; its exercise in
full; or the announcement by the underwriters of their intention not to
exercise all or any remaining portion of the over-allotment
option.
|
No
trading of the units or the underlying shares of our common stock and
warrants would be permitted until the completion of a business
transaction. During this period, the securities would be held in the
escrow or trust account.
|
||
In
no event will the shares of our common stock and warrants begin to trade
separately until we have filed a Current Report on Form 8-K with the SEC
containing an audited balance sheet reflecting our receipt of the gross
proceeds of this offering. We will file this Form 8-K promptly after the
consummation of this offering, which is anticipated to take place four
business days from the date of this prospectus. If the over-allotment
option is exercised following the initial filing of such Form 8-K, a
second or amended Form 8-K will be filed to provide information to reflect
the exercise of the underwriters’ over-allotment option.
|
||||
Exercise
of the warrants:
|
The
warrants cannot be exercised until the later of 30 days after completion
of our initial business transaction and one year from the date of this
prospectus and, accordingly, will be exercised only after the trust
account has been terminated and distributed.
|
The
warrants could be exercised prior to the completion of a business
transaction, but securities received and cash paid in connection with the
exercise would be deposited in the escrow or trust
account.
|
||
Election
to remain an investor:
|
We
will provide our public stockholders with the opportunity to redeem their
shares of our common stock for cash equal to their pro rata share of the
aggregate amount then on deposit in the trust account, less taxes, upon
the consummation of our initial business transaction, subject to the
limitations described herein. We may not hold a stockholder
vote. Instead, we may conduct the redemptions pursuant to
the tender offer rules of the SEC and file tender offer documents
with the SEC which will contain substantially the same financial and other
information about the initial business transaction and the redemption
rights as is required under the SEC’s proxy rules. If, however,
we hold a stockholder vote, we will conduct the redemptions in conjunction
with a proxy solicitation pursuant to the proxy rules and not pursuant to
the tender offer rules. We will consummate our initial business
transaction only if holders of no more than 88% of our public shares elect
to redeem their shares and, solely if we seek stockholder approval, a
majority of the outstanding shares of common stock voted are voted in
favor of the business transaction.
|
A
prospectus containing information required by the SEC would be sent to
each investor. Each investor would be given the opportunity to notify the
company, in writing, within a period of no less than 20 business days and
no more than 45 business days from the effective date of the
post-effective amendment, to decide whether he elects to remain a
stockholder of the company or requires the return of his investment. If
the company has not received the notification by the end of the 45th
business day, funds and interest or dividends, if any, held in the trust
account or escrow account would automatically be returned to the
stockholder. Unless a sufficient number of investors elect to remain
investors, all of the deposited funds in the trust account or escrow
account must be returned to all investors and none of the securities will
be issued.
|
Business
transaction deadline:
|
If
we are unable to complete a business transaction
by ,
2011 [15 months from the date of this prospectus], we shall (i) cease all
operations except for the purposes of winding up, (ii) redeem 100% of our
public shares of common stock for a per share pro rata portion of the
trust account, including the interest earned thereon, but net of any taxes
and (iii) as promptly as possible following such redemption, dissolve and
liquidate the balance of our net assets to our remaining stockholders, as
part of our plan of dissolution and liquidation.
|
If
an acquisition has not been consummated within 18 months after the
effective date of the registration statement, funds held in the trust
account or escrow account would be returned to
investors.
|
||
Release
of funds:
|
The
proceeds held in the trust account will not be released until the earlier
of the completion of a business transaction or our dissolution and
liquidation upon failure to effect a business transaction within the
allotted time, except that to the extent the trust account earns interest
or we are deemed to have earned income in connection therewith, we will be
permitted to seek disbursements from the trust account to pay taxes on
such interest.
|
The
proceeds held in the escrow account, would not be released until the
earlier of the completion of a business transaction or the failure to
effect a business transaction within the allotted time.
|
||
Interest
on proceeds held in the trust account:
|
Interest
earned may be disbursed to fund any taxes payable on interest earned on
this trust account.
|
Interest
earned on proceeds held in the trust account would be held in the trust
account for the sole benefit of the stockholders and would not be released
until the earlier of the completion of a business transaction or the
failure to effect a business transaction within the allotted time stated
above.
|
59
Directors
and Executive Officers
Our
directors and executive officers as of the date of this prospectus are as
follows:
Name
|
Age
|
Position
|
||
Mark
D. Klein
|
47
|
Chairman,
Chief Executive Officer, President and Director
|
||
Paul
D. Lapping
|
47
|
Chief
Financial Officer, Treasurer, Secretary and
Director
|
||
Frederick
G. Kraegel
|
62
|
Director
|
||
Leonard
A. Potter
|
48
|
Director
|
||
Andrew
A. Fink
|
40
|
Director
|
Mark D. Klein has been Chief
Executive Officer, President and a Director since inception, and our Chairman of
the Board since April 2010. Between March 2007 and July 2009, Mr. Klein was the
Chief Executive Officer, President and a Director of Alternative Asset
Management Corporation, a special purpose acquisition company he helped form in
2007 and which recently completed a merger with Great American Group
LLC. Mr. Klein is also a registered representative at Ladenburg
Thalmann & Co. Inc., a Managing Member of the LTAM Titan Fund, a fund of
funds hedge fund and was one of the principals of Aldebaran Investment, LLC, a
private fund investing in special purpose acquisition companies. From April 2007
until August 2008, Mr. Klein was the Chief Executive Officer of Hanover Group US
LLC, an indirect US subsidiary of the Hanover Group. Prior to joining Hanover in
2007, Mr. Klein was Chairman of Ladenburg Thalmann & Co. Inc., a leading
underwriter of blank check companies, which is engaged in retail and
institutional securities brokerage, investment banking and asset management
services. From March 2005 to September 2006, he was Chief Executive Officer and
President of Ladenburg Thalmann Financial Services, Inc., the parent of
Ladenburg Thalmann & Co. Inc., and Chief Executive Officer of Ladenburg
Thalmann Asset Management Inc., a subsidiary of Ladenburg Financial Services,
Inc. Prior to joining Ladenburg Thalmann, from June 2000 to March 2005, Mr.
Klein served as the Chief Executive Officer and President of NBGI Asset
Management, Inc. and NBGI Securities, which were the US subsidiaries of the
National Bank of Greece, the largest financial institution in Greece. Prior to
joining NBGI, Mr. Klein was President and Founder of Newbrook Capital
Management, Founder and Managing Member of Independence Holdings Partners, LLC,
a private equity fund of funds company, and Founder and General Partner of
Intrinsic Edge Partners, a long/short equity hedge fund. Prior to the formation
of Newbrook Capital Management and Independence Holdings Partners, LLC, Mr.
Klein was a Senior Portfolio Manager for PaineWebber and Smith Barney Shearson.
Mr. Klein also serves as a member of the board of directors of Great American
Group, Inc. Mr. Klein is a graduate of J.L. Kellogg Graduate School
of Management at Northwestern University, with a Masters of Management Degree
and also received a Bachelors of Business Administration Degree with high
distinction from Emory University.
60
Paul D. Lapping has been Chief
Financial Officer, Treasurer, Secretary and Director since inception. Between
March 2007 and July 2009, Mr. Lapping was the Chief Financial Officer, Treasurer
and Secretary of AAMAC, a special purpose acquisition company which recently
completed a merger with Great American Group LLC. From August 2003 to
June 2006, Mr. Lapping served as the president of Lapping Investments, LLC, a
personal investment fund targeting lower middle market leveraged buyouts. From
April 2007 until August 2008, Mr. Lapping served as a Managing Director of
Hanover Group US LLC. From April 2000 to November 2003, Mr. Lapping was a
general partner of Minotaur Partners II, L.P., a private investment partnership
Mr. Lapping formed to invest equity in small and middle-market marketing driven
companies with an emphasis on emerging technologies. From December 1995 to
January 2002, Mr. Lapping was a general partner of Merchant Partners, LP, a
private investment partnership focused on direct marketing, business and
consumer services companies. Prior to joining Merchant Partners, Mr. Lapping
served in various corporate development roles with Montgomery Ward Holding
Corp., a retail, catalog, direct marketing and home shopping company, and Farley
Industries, Inc., a management company providing services to Farley Inc., a
private investment fund holding company, and its related entities including
Fruit of the Loom, Inc., Farley Metals, Inc., Acme Boot Company and West
Point-Pepperell, Inc. Mr. Lapping also served in various positions with Golder,
Thoma and Cressey, a private equity firm, and with the merger and acquisition
group of Salomon Brothers Inc. Mr. Lapping received a Bachelor of Science from
the University of Illinois and a Masters of Management Degree from the Kellogg
School of Business at Northwestern University.
Frederick G. Kraegel has been
a Director since inception. Mr. Kraegel has extensive experience in evaluating
businesses and in working with companies with complex financial issues. He has
been with Bridge Associates LLC since February 2003, currently is a Senior
Director and in such capacity has served in a number of roles including as
financial advisor to the Chapter 7 Trustee of Refco, LLC. Mr. Kraegel was an
independent consultant from July 2002 to February 2003. From July 2001 to July
2002 Mr. Kraegel was Executive Vice President, Chief Administrative Officer and
Director of AMF Bowling Worldwide, Inc. where he was hired to provide direction
for the Chapter 11 process and financial, information technology and real estate
functions. Mr. Kraegel was President and Director of Acme Markets of Virginia,
Inc. from 2000 to 2001 and led the effort in which the retail operations of the
32-store chain were sold. In 1998, he was hired as Senior Vice President and
Chief Financial Officer of Factory Card Outlet Corp., a public company, to
direct the financial restructuring of the company including the filing a Chapter
11 proceeding in 1999; Mr. Kraegel left the company in 2000 prior to its
emergence from bankruptcy in 2002. Mr. Kraegel was a partner at Peat, Marwick
Mitchell & Co. (now KPMG LLP) and is a CPA. Mr. Kraegel graduated from
Valparaiso University in 1970 with a Bachelor of Science Degree in Business
Administration with a concentration in Accounting. Mr. Kraegel serves on the
boards of Concordia Plan Services, Inc., Thrivent Financial for Lutherans and
Valparaiso University.
Leonard A. Potter has been a
Director since inception. In August, 2009, Mr. Potter became the Chief
Investment Officer for Salt Creek Hospitality LLC, an acquirer of hotel and
lodging related assets. From
December 2002 through July 2009, Mr. Potter was a Managing Director of Private
Equity at Soros Fund Management LLC where, from May 2005 through July 2009, Mr.
Potter served as co-head of the Private Equity group and a member of the Private
Equity Investment Committee. From September 1998 until joining Soros Fund
Management LLC in 2002, Mr. Potter was a Managing Director of Alpine
Consolidated LLC, a private merchant bank, and from April 1996 through September
1998, Mr. Potter founded and served as a Managing Director of Capstone Partners
LLC, a private merchant bank. Prior to founding Capstone Partners, Mr. Potter
was an attorney specializing in mergers, acquisitions and corporate finance at
Morgan, Lewis & Bockius and Willkie Farr & Gallagher. Mr. Potter
is a currently a director of Solar Capital Ltd., a public business development
company, and has previously served as a director of several other public
companies. Mr. Potter also currently serves as a
director of a number of private companies. Mr. Potter has a Bachelors of Arts
Degree from Brandeis University and a Juris Doctor Degree. from the Fordham
University School of Law.
Andrew A. Fink has been a
Director since January, 2010. Andrew A. Fink is a Managing Director
of Trevi Health Ventures LP, which he co-founded in March 2005. From
2003 to 2005, Mr. Fink was the principal of Groton Partners LLC, a New
York-based merchant banking firm where he was responsible for principal
investments and advisory assignments in molecular diagnostics, medical devices,
biopharmaceuticals and healthcare services From 2000 to 2003,
Mr. Fink was a member of the Healthcare and Life Sciences Group at Dresdner
Kleinwort Wasserstein, Inc., the investment banking arm of Germany's Dresdner
Bank AG, where Mr. Fink led the firm’s medical technology effort, advising
corporate clients on mergers & acquisitions and capital markets
transactions. Mr. Fink began his career as a corporate lawyer at
Paul, Weiss, Rifkind, Wharton & Garrison in New York in 1996. Mr.
Fink has a Bachelors of Arts Degree, magna cum laude, from Columbia College
(where he was elected to Phi Beta Kappa) and a Juris Doctor from Columbia School
of Law. Mr. Fink is currently a member of the Board of Directors of
Ikonisys, Inc., Flynn Pharma Ltd., Small Bone Innovations, Inc., MedAvante, Inc.
and Manhattan Physicians Laboratories LLC. Mr. Fink is also a member
of the Board of Directors of the Alumni Association of Columbia College and the
StreetSquash Organization.
Advisory
Board
In addition to our board of
directors, we have established an advisory board. As of the date of
this offering, the members of our Advisory Board are:
Name
|
Age
|
|
Michael
J. Levitt
|
51
|
|
Jonathan
I. Berger
|
40
|
|
Michael
S. Gross
|
48
|
Our
Advisory Board is comprised of individuals who have the background and
experience to assist us in evaluating our business strategies and development.
Our special advisors will not participate in managing our operations. We have no
formal arrangement or agreement with these individuals to provide services to us
and accordingly, they have no contractual or fiduciary obligations to present
business opportunities to us. We expect that members of the Advisory Board will
provide advice, insights, contacts and other assistance to us based on their
extensive industry experience and involvement in areas of activity that are
strategic to us. In addition to individual meetings or phone conferences with
members of the Advisory Board, we intend to conduct [bi-annual] meetings with
the Advisory Board to discuss our strategy and industry trends.
The
following is a brief summary of the background of each member of our Advisory
Board. There are no family relationships among any of the advisors, executive
officers or directors.
Michael J. Levitt has been a
member of our Advisory Board since April 2010. Mr.
Levitt was the Chairman of our Board of Directors from October, 2009 through
April, 2010. In 2001, Mr. Levitt founded Stone Tower Capital LLC (“STC”),
an alternative investment firm focused on credit and credit-related assets, and
is responsible for the overall strategic direction of STC and the development of
the firm’s investment philosophies. At September 30, 2009, Stone Tower
managed, through its affiliates, approximately $40 billion in credit-related
assets across various investment vehicles. Previously, Mr. Levitt was a
partner in the New York office of Hicks, Muse, Tate & Furst Incorporated,
where he was involved in many of the firm's investments and managed the firm’s
relationships with banking firms. Prior thereto, Mr. Levitt served as
the Co-Head of the Investment Banking Division of Smith Barney Inc. with
responsibility for the advisory, private equity sponsor and leveraged finance
activities of the firm. Mr. Levitt began his investment banking
career at, and ultimately served as a Managing Director of, Morgan Stanley &
Co., Inc. Mr. Levitt oversaw the firm’s corporate finance and
advisory businesses related to private equity firms and non-investment grade
companies. Mr. Levitt also serves as a member of the board of
directors of Great American Group, Inc. Mr. Levitt has a Bachelors of Business
Administration degree from the University of Michigan and a Juris Doctor Degree
from the University of Michigan Law School. Mr. Levitt serves on the
University of Michigan investment advisory board.
Jonathan I. Berger has been a
member of our Advisory Board since April 2010. Mr.
Berger was one of our Directors from October, 2009 through April, 2010.
Mr. Berger is currently a Partner and Chief Investment Officer of Stone
Tower Capital LLC, where he oversees Stone Tower investment activities and
portfolios in corporate credit funds, as well as chairing all of the firm’s
investment committees. Mr. Berger has over 18 years of experience in
the private and public debt and equity markets, primarily as an investor
managing capital for institutions such as pension funds, endowments,
foundations, banks, fund of funds and large family offices. From 1997 to 2006,
Mr. Berger played a leading role at Pegasus Capital Advisors, LP (“Pegasus”) as
a co-founder and partner. Pegasus is a private equity firm managing over $1.1
billion that focuses on special situation investments in middle-market
businesses. Prior to Pegasus, Mr. Berger was a Vice President in the High Yield
and Distressed Securities Group at UBS Securities LLC (“UBS”). At UBS, he was
involved in investing in distressed and high yield securities and had additional
responsibilities in high yield financings, transaction opportunity creation and
structure negotiations. Prior to UBS, Mr. Berger was a principal at Rosecliff,
Inc., a private equity fund focused on buyouts of middle market companies.
Previously, Mr. Berger worked in the Leveraged Finance Group of Salomon Brothers
Inc. and at Nantucket Holding Company, a merchant banking group focused on
investing in financial and operational turnaround situations. Mr. Berger
graduated from the University of Pennsylvania’s Wharton School of Business in
1991 with a Bachelor of Science Degree in Economics with a Concentration in
Finance.
Michael S. Gross has been a
member of our Advisory Board since April 2010. Mr. Gross was the
managing member, the chairman of the board of directors and the chief executive
officer of Solar Capital LLC since its inception in February 2007, and has been
the chairman of the board of directors since December 2007, and chief executive
officer and president since November 2007, of Solar Capital Ltd. Mr. Gross
also currently serves as the managing member of Solar Capital’s investment
adviser, Solar Capital Partners. From July 2006 through approximately the first
quarter of 2009, Mr. Gross was a partner in Magnetar Capital Partners, LP.
Between February 2004 and February 2006, Mr. Gross was the president and
chief executive officer of Apollo Investment Corporation, a publicly traded
business development company that he founded and on whose board of
directors and investment committee he served as chairman from February 2004 to
July 2006, and was the managing partner of Apollo Investment Management, L.P.,
the investment adviser to Apollo Investment Corporation. Apollo Investment
Corporation invests primarily in middle-market companies in the form of senior
secured and mezzanine loans as well as by making direct equity investments in
such companies. Under his management, Apollo Investment Corporation raised
approximately $930 million in gross proceeds in an initial public offering in
April 2004 and invested approximately $2.3 billion in over 65 companies in
conjunction with 50 different private equity sponsors. From 1990 to February
2006, Mr. Gross was a senior partner at Apollo Management, L.P., a leading
private equity firm which he founded in 1990 with five other persons. Since its
inception, Apollo Management, L.P. has invested more than $13 billion in over
150 companies in the United States and Western Europe. During his tenure at
Apollo Management, L.P., Mr. Gross was a member of an investment committee
that was responsible for overseeing such investments. In addition, from 2003 to
February 2006, Mr. Gross was the managing partner of Apollo Distressed
Investment Fund, an investment fund he founded to invest principally in
non-control oriented distressed debt and other investment securities of
leveraged companies. Prior to his time at Apollo Management, L.P., Mr. Gross was
employed by Drexel Burnham Lambert Incorporated. From June 2006 to August 2008,
Mr. Gross served as the chief executive officer, chairman of the board of
directors and secretary of Marathon Acquisition Corp., a publicly traded special
purpose acquisition company. Mr. Gross currently serves on the boards of
directors of Saks, Inc., Global Ship Lease Inc. and Jarden Corporation, and in
the past has served on the boards of directors, including in certain cases, in
the capacity as a lead director, of more than 20 public and private companies.
He is a founding member, and serves on the executive committee, of the Youth
Renewal Fund, is the chairman of the board of Mt. Sinai Children’s Center
Foundation, and serves on the Board of Trustees of The Trinity School and the
Board of Directors of New York Road Runners. Mr. Gross holds a B.B.A. in
accounting from the University of Michigan and an M.M. from the J.L. Kellogg
Graduate School of Management at Northwestern University.
Number
and Terms of Office of Directors
Our
board of directors is divided into two classes with only one class of directors
being elected in each year and each class serving a three-year term. The term of
office of the first class of directors, consisting of Messrs. Kraegel, Potter
and Fink, will expire at our first annual meeting of stockholders. The term of
office of the second class of directors, consisting of Messrs. Klein and
Lapping, will expire at the second annual meeting of stockholders. These
individuals will play a key role in identifying and evaluating prospective
acquisition candidates, selecting the target business, and structuring,
negotiating and consummating our initial business transaction. Collectively,
through their positions described above, our directors have extensive experience
in the alternative asset management and private equity
businesses.
61
Compensation
for Officers and Directors
No
executive officer or director has received compensation of any kind for services
rendered. No compensation of any kind, including finder’s and consulting fees,
will be paid to any of our existing stockholders, including our officers,
directors and members of our advisory board, or any of their respective
affiliates, for services rendered prior to or in connection with a business
transaction. However, these individuals will be reimbursed for any out-of-pocket
expenses incurred in connection with activities on our behalf such as
identifying prospective target businesses and performing due diligence on
suitable business transactions. There is no limit on the amount of these
out-of-pocket expenses and there will be no review of the reasonableness of the
expenses by anyone other than our board of directors, which includes persons who
may seek reimbursement, or a court of competent jurisdiction if such
reimbursement is challenged. If all of our directors are not deemed
“independent,” we will not have the benefit of independent directors examining
the propriety of expenses incurred on our behalf and subject to
reimbursement.
After our
business transaction, 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 notice furnished to our stockholders. It is unlikely, however,
that the amount of such compensation will be known at the time of a stockholder
meeting held to consider a business transaction, as it will be up to the
directors of the post-combination business to determine executive officer and
director compensation. Any compensation to be paid to our chief executive
officer and other officers will be determined, or recommended to the board of
directors for determination, either by a compensation committee constituted
solely by independent directors or by a majority of the independent directors on
our board of directors, in accordance with the rules of the OTC Bulletin
Board.
Director
Independence.
Although
we anticipate that our securities will be quoted on the Over-the-Counter
Bulletin Board, we apply the NYSE Amex standard for independent
directors. The NYSE Amex 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, which, in the opinion of the company’s
board of directors would interfere with the director’s exercise of independent
judgment in carrying out the responsibilities of a director.
The
Company has determined that Frederick G. Kraegel, Leonard A. Potter and Andrew
A. Fink are
independent directors as defined under the NYSE Amex listing standards and
Rule 10A-3 promulgated under the Exchange Act, constituting a majority of
our board of directors.
Board
Committees
Our board
of directors intends to establish an audit committee and a compensation
committee upon consummation of a business transaction. At that time our board of
directors intends to adopt charters for these committees. Prior to such time we
do not intend to establish either one. Accordingly, there will not be a separate
committee comprised of some members of our board of directors with specialized
accounting and financial knowledge to meet, analyze and discuss solely financial
matters concerning prospective target businesses. We do not feel a compensation
committee is necessary prior to a business transaction as there will be no
salary, fees or other compensation being paid to our officers or directors prior
to a business transaction other than as disclosed in this
prospectus.
Code
of Conduct
We have
adopted a code of conduct and ethics applicable to our directors, officers and
employees in accordance with applicable federal securities laws.
Conflicts
of Interest
Potential
investors should also be aware of the following other potential conflicts of
interest:
|
·
|
None of our officers and
directors is required to commit their full time to our affairs and,
accordingly, they may have conflicts of interest in allocating their time
among various business
activities.
|
|
·
|
Our directors and members of
our management team may become aware of business opportunities that may be
appropriate for presentation to us as well as the other entities with
which they are or may be affiliated. Some of our officers and directors
are now and may in the future become affiliated with entities, including
other blank check companies, engaged in business activities similar to
those intended to be conducted by our company. We have entered into a
business opportunity right of first review agreement with Mark Klein and
Paul Lapping, which provides that from the date of this prospectus until
the earlier of the consummation of our initial business transaction or our
liquidation in the event we do not consummate an initial business
transaction, we will have a right of first review with respect to suitable
business transaction opportunities of which Messrs. Klein and Lapping
(subject to any fiduciary obligations they may have), and companies or
other entities which they manage or control become aware. Due to existing
and future affiliations, our other directors may have fiduciary
obligations to present potential business opportunities to other entities
with which they are affiliated prior to presenting them to us. Other than
Mr. Klein and Lapping, our directors have not entered into a similar right
of first review agreements. Mr. Lapping has no pre-existing
fiduciary duties that would present a conflict to
us.
|
62
|
·
|
The sponsor’s initial shares and
insider warrants are subject to transfer restrictions (and in the case of
the insider warrants, restrictions on exercise) and will not be released
from escrow until specified dates after consummation of our initial
business transaction. In addition, the insider warrants purchased by the
sponsors and any warrants which our initial stockholders, sponsor,
officers and directors may purchase in this offering or in the aftermarket
will expire worthless if an initial business transaction is not
consummated. Additionally, our initial stockholders, including our
directors, will not receive liquidation distributions with respect to any
of their founders’ common stock. For the foregoing reasons, our board may
have a conflict of interest in determining whether it is appropriate to
effect an initial business transaction with a particular target
business.
|
|
·
|
Our officers and directors may
have a conflict of interest with respect to evaluating a particular
business transaction if the retention or resignation of any such officers
and directors were included by a target business as a condition to any
agreement with respect to an initial business
transaction.
|
In
general, officers and directors of a corporation incorporated under the laws of
the State of Delaware are required to present business opportunities to a
corporation if:
|
·
|
the corporation could financially
undertake the opportunity;
|
|
·
|
the opportunity is within the
corporation’s line of business;
and
|
|
·
|
it would not be fair to the
corporation and its stockholders for the opportunity not to be brought to
the attention of the
corporation.
|
As a
result of multiple business affiliations, our officers and directors may have
similar legal obligations relating to presenting business opportunities meeting
the above-listed criteria to multiple entities. In addition, conflicts of
interest may arise when our board evaluates a particular business opportunity
with respect to the above-listed criteria. We cannot assure you that any of the
above mentioned conflicts will be resolved in our favor.
Our other
directors have not undertaken an obligation similar to the rights of first
review provided by Messrs. Klein and Lapping.
Below
is a table summarizing the companies to which our officers and directors owe
fiduciary obligations that would conflict with their fiduciary obligations to
us, all of which would have to (i) be presented appropriate potential
target businesses by our officers and directors, and (ii) reject the
opportunity to acquire such potential target business, prior to their
presentation of such target business to us:
Individual
|
Entity
|
Affiliation
|
||
Mark
D. Klein
|
Great
American Group, Inc.
|
Director
|
||
Leonard
A. Potter
|
Salt
Creek Hospitality, LLC
|
Chief
Investment Officer
|
||
Hilton
Worldwide, Inc.
|
Director
|
|||
Andrew
A. Fink
|
Trevi
Health Ventures, LP
|
Managing
Partner
|
Mr. Klein, our
chairman, chief executive officer, president and director, currently serves and
will continue to serve as a director of Great American Group, Inc.
As a director of Great American Group, Inc., Mr. Klein will be required to
present asset disposition and valuation and appraisal related investment
opportunities to Great American Group, Inc. for its consideration prior to
presenting such opportunities to us. Other than with respect to Great
American Group, Inc., Mr. Klein has no other pre-existing fiduciary duties that
would present a conflict of interest to us.
Mr.
Potter, a director, currently serves and will continue to serve as a director of
several companies. As the chief investment officer of Salt Creek Hospitality
LLC, Mr. Potter will be required to present hospitality and lodging related
investment opportunities to Salt Creek Hospitality for its consideration prior
to presenting such opportunities to us.
Mr.
Fink, a director, currently serves and will continue to serve as a director of
several companies. As the managing partner of Trevi Health Ventures,
LLC, Mr. Fink will be required to present appropriate opportunities to Trevi
Health Ventures, LLC.
As a
result of these affiliations, Messrs. Klein, Potter and Fink may have
preexisting fiduciary, contractual or other obligations to those entities that
may cause them to have conflicts in presenting to us specific business
opportunities that may be attractive to us. Because of these potential
preexisting obligations, we have agreed that none of Messrs. Potter or Fink will
have an obligation to present to us any specific business
opportunity.
In the
event we are required to submit our initial business transaction to our public
stockholders for a vote, all of the initial stockholders, have agreed to
vote any shares held by them in favor of our initial business transaction.
In addition, they have agreed to waive their respective rights to participate in
any liquidation distribution with respect to their initial shares of common
stock. If they purchase shares of common stock as part of this offering or in
the open market, however, they would be entitled to participate
in any liquidation distribution in respect of such shares but have agreed not to
redeem such shares in connection with the consumption of a business
transaction.
63
Although
we do not intend to enter into a business transaction with a target business
that is affiliated with our sponsor, our directors or officers, we are not
prohibited from doing so. In the event we enter into such a transaction, we will
obtain an opinion from an independent investment banking firm that is a member
of FINRA that such a business transaction is fair to our stockholders from a
financial point of view. Furthermore, in no event will any of our
initial stockholders, sponsors, officers or directors, or any of their
respective affiliates, be paid any finder’s fee, consulting fee or other
compensation prior to, or for any services they render in order to effectuate,
the consummation of an initial business transaction.
Conflict
of Interest Relating to Underwriting Activities
Mark
D. Klein, our chairman, chief executive officer and president, is an affiliate
of Ladenburg Thalmann & Co. Inc . a member of FINRA, and will
economically own in excess of 10% of our securities. Ladenburg
Thalmann & Co. Inc is one the underwriters of this
offering. Therefore, FINRA requires this offering to be made in
compliance with the applicable provisions of Rule 2720 of the FINRA Rules.
Pursuant to that rue, the appointment of a “qualified independent underwriter”
(as such term is defined in Rule 2720) is not necessary in connection with this
offering because Morgan Joseph, the FINRA member primarily responsible for
managing this offering does not have a conflict of interest, is not an affiliate
of any member that has a conflict of interest and meets the requirements of
paragraph (f)(12)(E) of Rule 2720.
64
The
following table sets forth information regarding the beneficial ownership of our
common stock as of the date of this prospectus and as adjusted to reflect the
sale of insider warrants and the sale of our common stock included in the units
offered by this prospectus (assuming none of the individuals listed purchase
units in this offering) by:
|
·
|
each person known by us to be the
beneficial owner of more than 5% of our outstanding shares of common
stock;
|
|
·
|
each of our officers and
directors; and
|
|
·
|
all our officers and directors as
a group.
|
Unless
otherwise indicated, we believe that all persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned by them.
Prior
to the Offering
|
After
the Offering(1)
|
|||||||||||||||
Name
and Address of Beneficial Owners(2)
|
Amount
and
nature
of
beneficial
ownership(3)
|
Percentage
of
outstanding
common
stock
|
Amount
and
nature
of
beneficial
ownership
|
Percentage
of
outstanding
common
stock
|
||||||||||||
57th
Street GAC Holdings LLC(3)
|
638,889 | 100 | % | 555,556 | 10 | % | ||||||||||
Michael
J. Levitt (3)
|
638,889 | 100 | % | 555,556 | 10 | % | ||||||||||
Mark
D. Klein (3)
|
638,889 | 100 | % | 555,556 | 10 | % | ||||||||||
Paul
D. Lapping (3)
|
638,889 | 100 | % | 555,556 | 10 | % | ||||||||||
Jonathan
I. Berger (3)
|
638,889 | 100 | % | 555,556 | 10 | % | ||||||||||
Frederick
G. Kraegel (3)
|
638,889 | 100 | % | 555,556 | 10 | % | ||||||||||
Leonard
A. Potter (3)
|
638,889 | 100 | % | 555,556 | 10 | % | ||||||||||
Andrew
A. Fink(3)
|
638,889 | 100 | % | 555,556 | 10 | % | ||||||||||
Michael S. Gross(3) | 638,889 | 100 | % | 555,556 | 10 | % | ||||||||||
All
directors and officers as a group (5 persons)
|
638,889 | 100 | % | 10 | % |
(1) Assumes
only the sale of 5,000,000 units in this offering and the sale of 3,000,000
insider warrants, but not the exercise of the 5,000,000 warrants included in
such units or the 3,000,000 warrants purchased by our sponsor. Assumes the
underwriters’ over-allotment option has not been exercised and, therefore,
83,333 shares of common stock have been forfeited by our sponsor as a
result.
(2) Unless
otherwise indicated, the business address of each of the stockholders is 590
Madison Avenue, 35th Floor, New York, New York 10022.
(3) The
members of 57th Street GAC Holdings LLC are Michael J. Levitt, Mark D. Klein,
Paul D. Lapping, Jonathan I. Berger, Frederick G. Kraegel, Leonard A. Potter,
Andrew A. Fink and Michael S. Gross. As a result, each of Messrs.
Levitt, Klein, Lapping, Berger, Kraegel, Potter, Fink and Gross may be
deemed to be beneficial owners of any shares deemed to be beneficially owned by
57th Street GAC Holdings LLC. Each of Messrs. Levitt, Klein, Lapping, Berger,
Kraegel, Potter and Gross disclaim beneficial ownership of any shares in
which he does not have a pecuniary interest.
Our
sponsor, 57th Street GAC Holdings LLC, has agreed to purchase 3,000,000 insider
warrants prior to the date of this prospectus at the price of $0.50 per warrant
for a purchase price of $1,500,000 in a private placement to occur on or before
the date of this prospectus. All of the proceeds received from the sale of the
insider warrants will be financed from sponsor funds and not from borrowed
funds. The purchase price of the insider warrants will be added to the proceeds
from this offering to be held in the trust account. The insider warrants will be
identical to those warrants sold in this offering except that if held by our
sponsor or its permitted assigns, they (i) may be exercised for cash or on a
cashless basis and (ii) are not subject to redemption. On the date of this
prospectus, our sponsor will place the insider warrants into an escrow account
maintained by Continental Stock Transfer & Trust Company acting as escrow
agent. The sponsors have agreed not to sell or otherwise transfer any of the
insider warrants until the date that is 30 days after the date we complete our
initial business transaction; provided however that the transfers can be made to
permitted transferees who agree in writing to be bound by such transfer
restrictions. For so long as the insider warrants are subject to such transfer
restrictions they will be held in an escrow account maintained by Continental
Stock Transfer & Trust Company. Permitted transferees means:
immediate family members of the holder and trusts established by the holder for
estate planning purposes; and affiliates of the holder.
65
If the
underwriters do not exercise all or a portion of the over-allotment option, our
sponsor will be required to forfeit up to 83,333 shares of common stock. Our
sponsor will be required to forfeit only a number of shares necessary to
maintain its 10% ownership interest in our common stock after giving effect to
the offering and the exercise, if any, of the underwriters’ over-allotment
option.
On the
date of this prospectus, our sponsor will place the initial shares into an
escrow account maintained by Continental Stock Transfer & Trust Company
acting as escrow agent. Other than transfers made to permitted transferees
(i.e., immediate family members of the holder and trusts established
by the holder for estate planning purposes; and affiliates of the holder) who
agree in writing to be bound to the transfer restrictions, agree to vote in
favor of our initial business transaction in the event we seek stockholder
approval in connection with our initial business transaction and waive any
rights to participate in any liquidation distribution if we fail to consummate
an initial business transaction, the initial shares will not be released from
escrow until one year following our business transaction, unless we were to
consummate a transaction after the consummation of the initial business
transaction that results in all of our stockholders having the right to exchange
their public shares for cash, securities or other property. However, the holders
of initial shares will retain all other rights as our stockholders, including,
without limitation, the right to vote such initial shares and the right to
receive cash dividends, if declared. If dividends are declared and payable in
shares of common stock, such dividends will also be placed in escrow. If we are
unable to effect a business transaction and liquidate, our sponsor will not
receive any portion of the liquidation proceeds with respect to common stock
owned by it prior to this offering, including the common stock underlying the
insider warrants.
57th
Street GAC Holdings LLC and each of Messrs. Klein and Lapping are deemed to
be our “parents” and “promoters,” as these terms are defined under the federal
securities laws.
66
On
October 30, 2009, we issued 638,889 shares of our common stock to Our sponsor,
57th Street GAC Holdings LLC, a limited liability company controlled by certain
of our officers, directors and advisors, for an aggregate amount of $25,000
in cash, at a purchase price of approximately $0.039 per share. Of these initial
shares, up to 83,333, are subject to forfeiture if the underwriters’
over-allotment option is not exercised in full. The initial shares will not be
released from escrow until one year following the consummation of our initial
business transaction.
Our
sponsor has agreed to purchase 3,000,000 warrants, or insider warrants, at the
price of $0.50 per warrant for a purchase price of $1,500,000 in a private
placement to be completed on or before the date of this prospectus. All of the
proceeds received from the sale of the insider warrants will be financed from
sponsor funds and not from borrowed funds. The purchase price of the insider
warrants will be added to the proceeds from this offering to be held in the
trust account pending our completion of an initial business transaction. The
insider warrants will be identical to those warrants sold in this offering
except that if held by our sponsor or its permitted assigns, they (i) may be
exercised for cash or on a cashless basis and (ii) are not subject to
redemption. In addition, the insider warrants (including the underlying shares
of common stock) will be held in escrow until 30 days following the consummation
of our initial business transaction. If we do not complete an initial business
transaction that meets the criteria described in this prospectus, the $1,500,000
purchase price of the insider warrants will be included as a part of the
liquidation amount payable to our public stockholders as such amounts will be
held in our trust account and the insider warrants will expire
worthless.
The
insider warrants will be sold in a private placement pursuant to Section 4(2) or
Regulation D of the Securities Act and will be exempt from registration
requirements under the federal securities laws. As such, the holders of these
insider warrants will be able to exercise them even if, at the time of exercise,
an effective registration statement and a current prospectus relating to the
common stock issuable upon exercise of such warrants is not available. Our
insider warrants will become freely tradable only after they are
registered.
In
order to protect the amounts held in the trust account, Mark D. Klein, our
chairman, chief executive officer and president, and Paul D. Lapping, our chief
financial officer, treasurer, secretary and director, have agreed to indemnify
us for all claims of creditors, to the extent that we fail to obtain waivers
from vendors, service providers and prospective target business to the extent
necessary to ensure that the amounts in the trust account available for
distribution to our stockholders below $9.75 per share (or approximately $9.74
per share if the underwriter’s over-allotment option is exercised in full),
except as to any claims by a third party who executed a waiver of any and all
rights to seek access to the trust account and except as to any claims under our
indemnity of the underwriters of this offering against certain liabilities,
including liabilities under the Securities Act. In the event that an executed
waiver is deemed to be unenforceable against a third party, Messrs. Klein and
Lapping will not be responsible to the extent of any liability for such third
party claims. In the event that the proceeds in the trust account are
reduced below $9.75 per share (or approximately $9.74 per share if the
underwriter’s over-allotment option is exercised in full) in the event we redeem
100% of our public shares of common stock for a per share pro rata portion of
the trust account, or upon our liquation and Messrs. Klein and Lapping
assert that they are unable to satisfy their obligations or that they have no
indemnification obligations related to a particular claim, our independent
directors, if any, would determine whether to take legal action against Messrs.
Klein and Lapping to enforce their indemnification obligations. While we
currently expect that our independent directors would take legal action on our
behalf against Messrs. Klein and Lapping to enforce their indemnification
obligations to us, it is possible that our independent directors in exercising
their business judgment may choose not to do so in any particular instance.
Accordingly, we cannot assure you that due to claims of creditors the actual
value of the (i) per share redemption price or (ii) per share liquidation price
will not be less than $9.75 per share (or approximately $9.74 per share if the
underwriters’ overallotment option is exercised in full).
In order
to meet our working capital needs following the consummation of this offering,
certain of our officers and directors may, but are not obligated to, loan us
funds, from time to time, or at any time, in whatever amount such officer or
director deems reasonable in his or her sole discretion, may be convertible into
warrants of the post business transaction entity at a price of $0.50 per warrant
at the option of the lender. The warrants would be identical to the
insider warrants. The holders of a majority of such warrants (or
underlying shares) will be entitled to demand that we register these securities
pursuant to an agreement to be entered into at the time of the
loan. The holders of a majority of these securities would have
certain “piggy-back” registration rights with respect to registration statements
filed subsequent to such date. We will bear the expense incurred with
the filing of any such registration statements. The terms of such
loans by our officers and directors, if any, have not been determined and no
written agreements exist. However, we expect that the terms of such
loans will not have any recourse against the trust account nor pay any interest
prior to the consummation of the business transaction and be no more favorable
than could be obtained by a third party.
Our
sponsor and one of our executive officers have loaned and advanced to us an
aggregate of $12,349 as of the effective date of the registration
statement to pay a portion of our expenses related to this offering, such as SEC
filing fees. FINRA filing fees and legal and accounting fees and expenses. The
loan will be payable without interest on the earlier of December 31, 2010 or the
closing of this offering. We will repay this loan from the proceeds of this
offering not being placed in trust.
We have
agreed to pay a monthly fee of $7,500, to our sponsor, for office space and
general and administrative services, including but not limited to receptionist,
secretarial and general office services. This agreement commences on the date of
this prospectus and shall continue until the earliest to occur of the
consummation of a business transaction and 15 months from the date of this
prospectus.
67
Other
than the reimbursable out-of-pocket expenses payable to our officers and
directors and the $7,500 per month payable to our sponsor for office space and
general and administrative services, no compensation, reimbursements, cash
payments or fees of any kind, including finders, consulting fees or other
similar compensation, including the issuance of any of our securities, will be
paid to our sponsor, officers or directors, or to any of our or their respective
affiliates prior to or with respect to a business transaction.
After the
consummation of a business transaction, if any, some of our officers and
directors may enter into employment agreements, the terms of which shall be
negotiated and which we expect to be comparable to employment agreements with
other similarly-situated companies. Further, after the consummation of a
business transaction, if any, to the extent our directors remain as directors of
the resulting business, we anticipate that they will receive compensation
comparable to directors at other similarly-situated companies.
68
General
Our
amended and restated certificate of incorporation authorizes the issuance of up
to 100,000,000 shares of common stock, par value $0.0001 per share, and
1,000,000 shares of preferred stock, par value $0.0001 per share. Prior to the
effective date of the registration statement, 638,889 shares of common stock
will be outstanding, held by our sponsor (up to 83,333 of which are subject
forfeiture if the underwriters’ over-allotment option is not exercised in
full). No shares of preferred stock are currently
outstanding.
Units
and shares of common stock
Each unit
consists of one share of our common stock and one warrant. Each warrant entitles
its holder to purchase one share of our common stock.
The units
will begin trading on or promptly after the date of this prospectus. The shares
of common stock and warrants comprising the units will begin separate trading on
the fifth business day following the earlier to occur of the expiration of the
underwriters’ over-allotment option, its exercise in full, or the announcement
by the underwriters of their intention not to exercise all or any remaining
portion of the over-allotment option, subject to our having filed the Form 8-K
described below and having issued a press release announcing when such separate
trading will begin.
In no
event will the shares of our common stock and warrants begin to trade separately
until we have filed a Current Report on Form 8-K with the SEC containing an
audited balance sheet reflecting our receipt of the gross proceeds of this
offering. We intend to file this Form 8-K promptly after the date of this
offering, which is anticipated to take place four business days from the date of
this prospectus. The audited balance sheet will include proceeds we receive from
the exercise of the underwriters’ over-allotment option if the over-allotment
option is exercised prior to the filing of the Form 8-K. If the over-allotment
option is exercised following the filing of such Form 8-K, a second or amended
Form 8-K will be filed to provide updated information reflecting the exercise of
the over-allotment option. Although we will not distribute copies of the Form
8-K to individual unit holders, the Form 8-K will be available on the SEC’s
website after filing. See the section appearing elsewhere in this prospectus
entitled “Where You Can Find Additional Information.”
Following
the date that the shares of our common stock and warrants are eligible to trade
separately, the units will continue to be quoted, and any security holder may
elect to separate a unit and trade the shares of common stock or warrants
separately or as a unit. Even if the component parts of the units are separated
and traded separately, the units will continue to be quoted as a separate
security, and consequently, any subsequent security holder owning shares of our
common stock and warrants may elect to combine them together and trade them as a
unit. Security holders will have the ability to trade our securities as units
until such time as the warrants expire or are redeemed.
Common
Stock
Common
stockholders of record are entitled to one vote for each share held on all
matters to be voted on by stockholders. In connection with a stockholder vote to
approve our initial business transaction, if any, our sponsor has agreed to vote
its initial shares in favor of our initial business transaction. In addition,
our sponsor, officers, directors and members of our advisory board have also
agreed to vote any shares of common stock acquired in this offering or in the
aftermarket in favor of our initial business transaction submitted to our
stockholders for approval, if any. Our sponsor, officers, directors and members
of our advisory board have agreed to waive redemption rights in connection with
any potential initial business transaction.
In the
event we seek stockholder approval in connection with a business transaction, we
shall, in accordance with Article Sixth of our amended and restated certificate
of incorporation, proceed with the business transaction only if a majority of
the outstanding shares of common stock voted are voted in favor of the business
transaction. However, our sponsor’s, officers’, directors’,
advisors’ or their affiliates’ participation in privately-negotiated
transactions (as described in this prospectus), if any, could result in the
approval of a business transaction even if a majority of our public stockholders
vote, or indicate their intention to vote against, such business transaction.
For purposes of seeking approval of the majority of our outstanding shares of
common stock, non-votes will have no effect on the approval of a business
transaction once a quorum is obtained. We intend to give approximately 30 (but
not less than 10 nor more than 60) days prior written notice of any such
meeting, if required, at which a vote shall be taken to approve a business
transaction. In addition, we will not proceed with a business transaction unless
the proposal to amend our amended and restated certificate of incorporation to
provide for our perpetual corporate existence, and any other proposal requiring
approval of a majority of our outstanding shares of stock in connection with an
initial business transaction is approved by a majority of our outstanding shares
of common stock.
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Pursuant
to our amended and restated certificate of incorporation, if we do
not consummate a business transaction within such 15 month period, we will (i)
cease all operations except for the purposes of winding up, (ii) redeem 100% of
our public shares of common stock for cash equal to their pro rata share of the
aggregate amount then on deposit in the trust account, less taxes, which
redemption will completely extinguish public stockholders’ rights as
stockholders (including the right to receive further liquidation distributions,
if any), subject to applicable law, and subject to the requirement that any
refund of income taxes that were paid from the trust account which is received
after the redemption shall be distributed to the former public stockholders, and
(iii) as promptly as possible following such redemption, dissolve and liquidate
the balance of our net assets to our remaining stockholders, as part of our plan
of dissolution and liquidation. Our sponsor has agreed not to redeem
any shares held by it in connection with the consummation of an initial business
transaction, but will be entitled to redeem their public shares in the event we
do not consummate a business transaction.
Our
stockholders are entitled to receive ratable dividends when, as and if declared
by the board of directors out of funds legally available therefor. In the event
of a liquidation, dissolution or winding up of the company after a business
transaction, our stockholders are entitled to share ratably in all assets
remaining available for distribution to them after payment of liabilities and
after provision is made for each class of stock, if any, having preference over
the common stock. Our stockholders have no preemptive or other subscription
rights. There are no sinking fund provisions applicable to the common stock,
except that we will
provide our stockholders with the opportunity to redeem their shares of our
common stock for cash equal to their pro rata share of the aggregate amount then
on deposit in the trust account, less taxes, upon the consummation of our
initial business transaction, subject to the limitations described
herein. Unlike other blank check companies which hold a stockholder
vote and conduct proxy solicitations in conjunction with their redemptions or
conversions of public shares for cash upon consummation of their initial
business transactions, we may either hold a stockholder vote or conduct the
redemptions pursuant to the tender offer rules of the SEC and file tender offer
documents with the SEC which will contain substantially the same financial and
other information about the initial business transaction and the redemption
rights as is required under the SEC’s proxy rules. If we hold a
stockholder vote, we will conduct the redemptions like other blank check
companies in conjunction with a proxy solicitation pursuant to the proxy rules
and not pursuant to the tender offer rules. We will consummate our initial
business transaction only if holders of no more than 88% of our public shares
elect to redeem their shares and, solely if we seek stockholder approval, a
majority of the outstanding shares of common stock voted are voted in favor of
the business transaction. Our
sponsor has agreed not to redeem any shares held by it in connection with the
consummation of an initial business transaction, but will be entitled to redeem
their public shares in the event we do not consummate a business
transaction.
Due to
the fact that our amended and restated certificate of incorporation authorizes
the issuance of up to 100,000,000 shares of common stock, if we were to enter
into a business transaction, we may (depending on the terms of such a business
transaction) be required to increase the number of shares of common stock which
we are authorized to issue at the same time as our stockholders vote on the
business transaction to the extent we seek stockholder approval in connection
with a business transaction.
We do not
currently intend to hold an annual meeting of stockholders until after we
consummate a business transaction, and thus may not be in compliance with
Section 211(b) of the Delaware General Corporation Law. Therefore, if our
stockholders want us to hold an annual meeting prior to our consummation of a
business transaction, they may attempt to force us to hold one by submitting an
application to the Delaware Court of Chancery in accordance with Section 211(c)
of the Delaware General Corporation Law.
Preferred
Stock
Our
amended and restated certificate of incorporation authorizes the issuance of
1,000,000 shares of blank check preferred stock with such designation, rights
and preferences as may be determined from time to time by our board of
directors. No shares of preferred stock are currently issued or
outstanding. Accordingly, our board of directors is empowered,
without stockholder approval, to issue preferred stock with dividend,
liquidation, redemption, voting or other rights which could adversely affect the
voting power or other rights of the holders of common stock. However, the
underwriting agreement prohibits us, prior to a business transaction, from
issuing preferred stock which participates in any manner in the proceeds of the
trust account, or which votes as a class with the common stock on a business
transaction. We may issue some or all of the preferred stock to effect a
business transaction. In addition, the preferred stock could be utilized as a
method of discouraging, delaying or preventing a change in control of us.
Although we do not currently intend to issue any shares of preferred stock, we
cannot assure you that we will not do so in the future.
Warrants
Public
Stockholder Warrants
Prior to
the date of this prospectus, there will be 3,000,000 warrants outstanding,
composed of 3,000,000 insider warrants.
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Each
warrant entitles the registered holder to purchase one share of our common stock
at a price of $11.50 per share, subject to adjustment as discussed below, at any
time commencing on the later of:
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the completion of a business
transaction; and
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one year from the date of this
prospectus.
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The
warrants will expire five years from the date of our business transaction at
5:00 p.m., New York City time, or earlier upon redemption or liquidation of the
trust account.
Holders
of our public warrants will be able to exercise the warrants only if we have an
effective registration statement covering the shares of common stock issuable
upon exercise of the warrants and a current prospectus relating to such common
stock and such shares of common stock are qualified for sale or exempt from
qualification under the applicable securities laws of the states in which the
various holders of warrants reside. Although we have undertaken in the warrant
agreement, and therefore have a contractual obligation, to use our best efforts
to maintain an effective registration statement covering the shares of common
stock issuable upon exercise of the warrants following completion of this
offering, and we intend to comply with our undertaking, we cannot assure you
that we will be able to do so. The expiration of warrants prior to exercise
would result in each unit holder paying the full unit purchase price solely for
the shares of common stock underlying the unit.
We may
redeem the outstanding warrants (excluding any insider warrants held by our
sponsor or its permitted assigns) without the consent of any third party or the
representatives of the underwriters:
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in whole and not in
part;
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at a price of $0.01 per warrant
at any time after the warrants become
exercisable;
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upon not less than 30 days prior
written notice of redemption;
and
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if, and only if, the last sales
price of our common stock equals or exceeds $17.50 per share (subject to
adjustment for splits, dividends, recapitalization and other similar
events) for any 20 trading days within a 30 trading day period ending
three business days before we send the notice of
redemption;
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provided
that on the date we give notice of redemption and during the entire period
thereafter until the time we redeem the warrants, we have an effective
registration statement covering shares of common stock issuable upon exercise of
the warrants and a current prospectus relating to such common
stock.
If we
call the warrants for redemption, we will have the option to require all holders
that subsequently wish to exercise warrants to do so on a “cashless basis.” In
such event, each holder would pay the exercise price by surrendering the
warrants for that number of shares of common stock equal to the quotient
obtained by dividing (x) the product of the number of shares of common stock
underlying the warrants, multiplied by the difference between the exercise price
of the warrants and the fair market value by (y) the fair market value. The
“fair market value” shall mean the average reported last sale price of the
common stock for the 10 trading days ending on the third trading day prior to
the date on which the notice of redemption is sent to the holders of
warrants.
The
warrants will be issued in registered form under a warrant agreement between
Continental Stock Transfer & Trust Company, as warrant agent, and
us. The warrant agreement provides that the terms of the warrants
maybe amended without the consent of any holder to cure any ambiguity or correct
any defective provision, but requires the approval by the holders of a majority
of the then outstanding warrants in order to make any change that adversely
affects the interests of the registered holders. The material provisions of the
warrants are set forth herein and a copy of the warrant agreement has been filed
as an exhibit to the registration statement of which this prospectus is a
part.
The
redemption provisions for our warrants have been established at a price which is
intended to provide a reasonable premium to the initial exercise price and
provide a sufficient differential between the then-prevailing common stock price
and the warrant exercise price to absorb any negative market reaction to our
redemption of the warrants. There can be no assurance, however, that the price
of the common stock will exceed either $17.50 or the warrant exercise price of
$11.50 after we call the warrants for redemption and the price may in fact
decline as a result of the limited liquidity following any such call for
redemption.
The
exercise price and number of shares of common stock issuable on exercise of the
warrants may be adjusted in certain circumstances, including in the event of a
stock dividend, extraordinary dividend or our recapitalization, reorganization,
merger or consolidation. However, the warrants will not be adjusted for
issuances of common stock at a price below their respective exercise
prices.
71
The
warrants may be exercised upon surrender of the warrant certificate on or before
the expiration date at the offices of the warrant agent, with the exercise form
on the reverse side of the warrant certificate completed and executed as
indicated, accompanied by full payment of the exercise price, by certified or
official bank check payable to us, for the number of warrants being exercised,
or through a net cashless exercise (when permitted). The warrant holders do not
have the rights or privileges of holders of common stock and any voting rights
until they exercise their warrants and receive shares of common stock. After the
issuance of shares of common stock upon exercise of the warrants, each holder
will be entitled to one vote for each share held of record on all matters to be
voted on by stockholders.
No
fractional shares of common stock will be issued upon exercise of the warrants.
If, upon exercise of the warrants, a holder would be entitled to receive a
fractional interest in a share, we will, upon exercise, round up to the nearest
whole number the number of shares of common stock to be issued to the warrant
holder.
Insider
Warrants
Our
sponsor has agreed to purchase 3,000,000 warrants, or insider warrants, from us
at a price of $0.50 per warrant in a private placement to be completed on or
before the date of this prospectus. All of the proceeds received from the sale
of the insider warrants ($1,500,000) will be placed in the trust account. The
insider warrants will be identical to those warrants sold in this offering
except that if held by our sponsor or its permitted assigns, they (i) may be
exercised for cash or on a cashless basis and (ii) are not subject to
redemption. In addition, the insider warrants will be held in escrow until 30
days following the consummation of a business transaction. The proceeds from the
sale of the insider warrants will be held in our trust account for the benefit
of our public stockholders. If we do not complete one or more
business transactions as described in this prospectus, the insider warrants will
become worthless.
The
insider warrants will be sold in a private placement pursuant to Regulation D of
the Securities Act and will be exempt from registration requirements under the
federal securities laws. As such, the holders of these insider warrants will be
able to exercise them even if, at the time of exercise, an effective
registration statement and a current prospectus relating to the common stock
issuable upon exercise of such warrants is not available.
The
insider warrants will become worthless if we do not consummate a business
transaction. The personal and financial interests of our affiliates may
influence their motivation in identifying and selecting a target business and
completing a business transaction in a timely manner. Consequently, our
officers’ and directors’ 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 transaction are
appropriate and in our stockholders’ best interest.
Our
Transfer Agent and Warrant Agent
The
transfer agent for our securities and warrant agent for our warrants is
Continental Stock Transfer & Trust Company, 17 Battery Place, New York, New
York 10004.
Amendments
to our Certificate of Incorporation
Our
amended and restated certificate of incorporation contains certain requirements
and restrictions relating to this offering that will apply to us until the
consummation of our business transaction. These provisions cannot be amended
without the approval of 65% of our stockholders. Specifically, our
amended and restated certificate of incorporation provides, among other things,
that:
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upon the date of this prospectus,
$48,750,000, or $56,025,000 if the underwriters’ over-allotment option is
exercised in full shall be placed into the trust
account;
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if a business transaction is
not consummated within 15 months of the date of this prospectus, we will
(i) cease all operations except for the purposes of winding up, (ii)
redeem 100% of our public shares of common stock for a per share pro rata
portion of the trust account, including the interest earned thereon, but
net of any taxes and (iii) as promptly as possible following such
redemption, dissolve and liquidate the balance of our net assets to our
remaining stockholders, as part of our plan of dissolution and
liquidation;
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prior to our initial business
transaction, we may not issue additional stock that participates in any
manner in the proceeds of the trust account, or that votes as a class with
the common stock sold in this offering on a business
transaction;
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we may not enter into any
transaction with affiliates without the prior approval by a majority of
our disinterested, independent directors or the members of our board of
directors 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, and unless our disinterested, independent directors determine
that the terms of such transaction are no less favorable to us than those
that would be available to us with respect to such a transaction from
unaffiliated third parties;
and
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although we do not intend to
enter into a business transaction with a target business that is
affiliated with our sponsor, our directors or officers, we are not
prohibited from doing so. In the event we enter into such a transaction,
we will obtain an opinion from an independent investment banking firm that
is a member of FINRA that such a business transaction is fair to our
stockholders from a financial point of
view.
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In the
event we seek stockholder approval in connection with our business transaction,
our amended and restated certificate of incorporation provides
that:
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we may consummate our initial
business transaction if approved by a majority of the shares of common
stock voted by our public stockholders at a duly held stockholders meeting
and holders of no more than 88% of our public shares elect to redeem their
shares for a pro rata share of the trust account;
and
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if a proposed business
transaction is approved and consummated, public
stockholders exercising their redemption rights and voting (1) in favor of
the business transaction will be entitled to receive a pro-rata portion of
the trust account including interest and (2) against the business
transaction will be entitled to receive a pro-rata portion of the trust
account excluding interest, in each case excluding
taxes.
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Quotation
of Securities
We have
applied to have our units, common stock and warrants quoted on the on the OTC
Bulletin Board under the symbols “[UNIT SYMBOL]”, “[COMMON STOCK SYMBOL]”,
“[WARRANT SYMBOL]”, respectively. We anticipate that our units will be quoted on
the OTC Bulletin Board on or promptly after the effective date of the
registration statement. Following the date the shares of our common stock and
warrants are eligible to trade separately, we anticipate that the shares of our
common stock and warrants will be quoted separately and as a unit on the on the
OTC Bulletin Board.
Delaware
Anti-Takeover Law
We will
be subject to the provisions of Section 203 of the Delaware General Corporation
Law regulating corporate takeovers upon consummation of this offering. This
statute prevents certain Delaware corporations, under certain circumstances,
from engaging in a “business transaction” with:
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a stockholder who owns 15% or
more of our outstanding voting stock (otherwise known as an “interested
stockholder”);
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an affiliate of an interested
stockholder; or
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an associate of an interested
stockholder, for three years following the date that the stockholder
became an interested
stockholder.
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A
“business transaction” includes a merger or sale of more than 10% of our assets.
However, the above provisions of Section 203 do not apply if:
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our board of directors approves
the transaction that made the stockholder an “interested stockholder,”
prior to the date of the
transaction;
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after the completion of the
transaction that resulted in the stockholder becoming an interested
stockholder, that stockholder owned at least 85% of our voting stock
outstanding at the time the transaction commenced, other than statutorily
excluded shares of common stock;
or
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on or subsequent to the date of
the transaction, the business transaction is approved by our board of
directors and authorized at a meeting of our stockholders, and not by
written consent, by an affirmative vote of at least two-thirds of the
outstanding voting stock not owned by the interested
stockholder.
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SHARES
ELIGIBLE FOR FUTURE SALE
Immediately
after this offering, we will have 5,555,556 shares of our common stock
outstanding, or 6,388,889 shares if the underwriters’ over-allotment option is
exercised in full. Of these shares, the 5,000,000 shares of common stock sold in
this offering, or 5,750,000 shares of common stock if the underwriters’
over-allotment option is exercised in full, will be freely tradable without
restriction or further registration under the Securities Act, except for any
shares of common stock purchased by one of our affiliates within the meaning of
Rule 144 under the Securities Act. All of the remaining 555,556 shares of common
stock (or 638,889 if the underwriters’ over-allotment option is exercised in
full) are restricted securities under Rule 144, in that they were issued in
private transactions not involving a public offering. Notwithstanding this
restriction, those shares of common stock have been placed in escrow until one
year following our initial business transaction and will only be released prior
to that date under limited exceptions. See “Principal Stockholders.”
Additionally, on or before the date of this prospectus, there will be 3,000,000
insider warrants outstanding that upon full exercise will result in the issuance
of 3,000,000 shares of common stock to the holders of the insider warrants. The
insider warrants (including the shares of common stock underlying such warrants)
will be placed in escrow until 30 days following the consummation of our initial
business transaction and will only be released prior to that date under limited
exceptions. See “Principal Stockholders.” Such initial shares of common stock,
insider warrants and the underlying shares of common stock are entitled to
registration rights as described below under “Registration Rights.”
Rule
144
The SEC
has recently adopted amendments to Rule 144 which became effective on February
15, 2008 and apply to securities acquired both before and after that date. Under
these amendments, a person who has beneficially owned restricted shares of our
common stock or warrants for at least six months would be entitled to sell their
securities provided that (i) such person is not deemed to have been one of our
affiliates at the time of, or at any time during the three months preceding, a
sale and (ii) we are subject to the Exchange Act periodic reporting requirements
for at least three months before the sale.
Persons
who have beneficially owned restricted shares of our common stock or warrants
for at least six months but who are our affiliates at the time of, or at any
time during the three months preceding, a sale, would be subject to additional
restrictions, by which such person would be entitled to sell within any
three-month period only a number of securities that does not exceed the greater
of either of the following:
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1% of the total number of shares
of our common stock then outstanding, which will equal 55,555 shares of
our common stock immediately after this offering or 63,888 shares of our
common stock if the underwriters’ over- allotment is exercised in full;
or
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the average weekly trading volume
of the shares of our common stock during the four calendar weeks preceding
the filing of a notice on Form 144 with respect to the
sale.
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Sales
under Rule 144 are also limited by manner of sale provisions, notice
requirements and the availability of current public information about
us.
Restrictions
on the Use of Rule 144 by Shell Companies or Former Shell Companies
Historically,
the SEC has taken the position that Rule 144 is not available for the resale of
securities initially issued by companies that are, or previously were, blank
check companies like us, to their promoters or affiliates despite technical
compliance with the requirements of Rule 144. The SEC has codified and expanded
this position in the amendments discussed above by prohibiting the use of Rule
144 for resale of securities issued by shell companies (other than business
transaction related shell companies) or issuers that have been at any time
previously a shell company. The SEC has provided an important exception to this
prohibition, however, if the following conditions are met:
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the issuer of the securities that
was formerly a shell company has ceased to be a shell
company;
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the issuer of the securities is
subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act;
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the issuer of the securities has
filed all Exchange Act reports and material required to be filed, as
applicable, during the preceding 12 months (or such shorter period that
the issuer was required to file such reports and materials), other than
Form 8-K reports; and
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at least one year has elapsed
from the time that the issuer filed current Form 10 type information with
the SEC reflecting its status as an entity that is not a shell
company.
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As a
result, our sponsor will be able to sell the initial shares and sponsor warrants
pursuant to Rule 144 without registration one year after we have completed our
initial business transaction.
Registration
Rights
Our
sponsor and its permitted transferees will be entitled to registration rights
pursuant to a registration rights agreement to be signed on or before the date
of this prospectus. Our sponsor will be entitled to demand registration rights
and certain “piggy-back” registration rights with respect to the initial shares
and the insider warrants and the common stock underlying the insider warrants,
commencing, in the case of the initial shares, one year after the consummation
of our initial business transaction and commencing, in the case of the insider
warrants and the respective common stock underlying the insider warrants, 30
days after the consummation of our initial business
transaction.
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UNDERWRITING
In
accordance with the terms and subject to the conditions contained in an
underwriting agreement, we have agreed to sell to the underwriters named below,
for which Morgan Joseph is acting as representative and sole book-running
manager, and the underwriters have severally, and not jointly, agreed to
purchase, on a firm commitment basis, the number of units offered in this
offering set forth opposite their respective names below:
Underwriters
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Number of
Units
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Morgan
Joseph & Co. Inc.
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Ladenburg
Thalmann & Co. Inc.
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I-Banker Securities, Inc. | ||||
Rodman & Renshaw, LLC | ||||
Total
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5,000,000 |
A copy of
the underwriting agreement has been filed as an exhibit to the registration
statement of which this prospectus forms a part.
The
underwriting agreement provides that the underwriters are obligated to purchase
all the units set forth opposite their name in the offering if any are
purchased, other than those units covered by the over-allotment option described
below.
We have
granted the representative of the underwriters a 45-day option to purchase up to
750,000 additional units at the initial public offering price less the
underwriting discounts and commissions. The option may be exercised only to
cover any over-allotments of units.
We
estimate that the total out of pocket expenses for this offering, excluding
underwriting discounts and commissions, will be approximately $450,000, all of
which will be payable by us. These expenses will be partially funded by an
aggregate of loans and advances equaling $12,349 made by our sponsor, 57th
Street GAC Holdings LLC, and one of our executive officers, which loan will be
repaid from the proceeds of this offering. We have been advised
by the representative of the underwriters that the underwriters do not expect
sales to accounts over which the underwriters have discretionary authority to
exceed 5% of the shares of common stock being offered.
The
underwriters may deliver prospectuses via e-mail both as a PDF document and by a
link to the Securities and Exchange Commission’s website and websites hosted by
the underwriters and other parties, and the prospectus may also be made
available on websites maintained by selected dealers and selling group members
participating in this offering. The underwriters may agree to allocate a number
of units to underwriters and selling group members for sale to their online
brokerage account holders. Internet distributions may be allocated by the
representative to underwriters and selling group members that may make Internet
distributions on the same basis as other allocations.
State
Blue Sky Information
We
will offer and sell the units to retail customers only in Colorado, Delaware,
the District of Columbia, Florida, Georgia, Hawaii, Illinois, Louisiana,
Maryland, New York and Rhode Island. We have applied to have the units
registered for sale, or we are relying on exemptions from registration in the
states mentioned above. In states that require registration, we will not sell
the units to retail customers in these states until such registration is
effective in each of these states (including in Colorado, pursuant to
11-51-302(6) of the Colorado Revised Statutes).
If you
are not an institutional investor, you may purchase our securities in this
offering only in the jurisdictions described directly above. Institutional
investors in every state except in Idaho may purchase the units in this offering
pursuant to exemptions provided to such entities under the Blue Sky laws of
various states. The definition of an “institutional investor” varies from state
to state but generally includes financial institutions, broker-dealers, banks,
insurance companies and other qualified entities.
The
National Securities Markets Improvement Act of 1996 (“NSMIA”), which is a
federal statute, prevents or preempts the states from regulating transactions in
certain securities, which are referred to as “covered securities”. This statute
allows the states to investigate companies if there is a suspicion of fraud or
deceit, or unlawful conduct by a broker or dealer, in connection with the sale
of securities. If there is a finding of fraudulent activity, the
states can regulate or bar the sale of covered securities in a particular
case.
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State
securities laws either require that a company’s securities be registered for
sale or that the securities themselves or the transaction under which they are
issued, are exempt from registration. When a state law provides an exemption
from registration, it is excusing an issuer from the general requirement to
register securities before they may be sold in that state. States, may by rule
or regulation, place conditions on the use of exemptions, so that certain
companies may not be allowed to rely on the exemption for the sale of their
securities. If an exemption is not available and the securities the company
wishes to sell are not covered securities under the federal statute, then the
company must register its securities for sale in the state in
question.
We
will file periodic and annual reports under the Exchange Act. Therefore, under
NSMIA, the states and territories of the United States are preempted from
regulating the resale by stockholders of the units, from and after the effective
date, and the common stock and warrants comprising the units, once they become
separately transferable, because our securities will be covered securities.
However, NSMIA does allow states and territories of the United States to require
notice filings and collect fees with regard to these transactions and a state
may suspend the offer and sale of securities within such state if any such
required filing is not made or fee is not paid. As of the date of this
prospectus, the following states and territories do not require any notice
filings or fee payments and stockholders may resell the units, and the common
stock and warrants comprising the units, once they become separately
transferable:
Alabama,
Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida,
Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine,
Massachusetts, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey,
New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode
Island, South Carolina, South Dakota, Utah, U.S. Virginia, Virgin Islands,
Washington, West Virginia, Wisconsin and Wyoming.
Additionally,
the stockholders may resell the units, and the common stock and warrants
comprising the units, once they become separately transferable, if the proper
notice filings have been made and fees paid in the following states and
territories:
District
of Columbia, Illinois, Maryland, Michigan, Montana, New Hampshire, North Dakota,
Oregon, Puerto Rico, Tennessee, Texas and Vermont.
As of the
date of this prospectus, we have not determined in which of these states, if
any, we will submit the required filings or pay the required fee. Additionally,
if any of the states that have not yet adopted a statute, rule or regulation
relating to the NSMIA adopts such a statute in the future requiring a filing or
fee or if any state amends its existing statutes, rules or regulations with
respect to its requirements, we would need to comply with those new requirements
in order for the securities to continue to be eligible for resale in those
jurisdictions.
In
addition, aside from the exemption from registration provided by the
NSMIA, we believe that the units, from and after the effective date,
and the common stock and warrants comprising the units, once they become
separately transferable, may be eligible for sale on a secondary market basis in
various states, without any notice filings or fee payments, based upon the
availability of an applicable exemption from the state’s registration
requirements, in certain instances subject to waiting periods, notice filings or
fee payments.
Despite
the exemption from state registration provided by the NSMIA described above, the
state of Idaho deems blank check offerings inherently fraudulent and such
offerings may not be registered or qualify for an exemption from registration in
that state. Although we are not aware of any other state having used these
powers to prohibit or restrict resales of securities issued by blank check
companies generally, certain state securities commissioners view blank check
companies unfavorably and might use these powers, or threaten to use these
powers, to hinder the resale of securities of blank check companies in their
states.
Pricing
of Securities
We
have been advised by the representative that the underwriters propose to offer
the units to the public at the initial offering price set forth on the cover
page of this prospectus. It may allow some dealers concessions not in excess of
$0.18 per unit.
Before
this offering, there has been no market for our securities. The initial public
offering price was determined by negotiation between us and the underwriters and
will not necessarily reflect the market price of our securities following the
offering. The principal factors that were considered in determining the initial
public offering price were:
•
|
the information presented in this
prospectus and otherwise available to the
underwriters;
|
•
|
the history of and prospects of
companies whose principal business is the acquisition of other
companies;
|
•
|
prior offerings of those
companies;
|
•
|
the ability of our management and
their experience in identifying operating
companies;
|
78
•
|
our prospects for acquiring an
operating business at attractive
values;
|
•
|
the present state of our
development and our current financial condition and capital
structure;
|
•
|
the recent market prices of, and
the demand for, publicly traded securities of generally comparable
companies;
|
•
|
general conditions of the
securities markets at the time of the offering;
and
|
•
|
other factors as were deemed
relevant.
|
The
factors described above were not assigned any particular weight. Rather, these
factors, were considered as a totality in our negotiation with the underwriters
over our initial public offering price. We offer no assurances that the initial
public offering price will correspond to the price at which our units will trade
in the public market subsequent to the offering or that an active trading market
for the units, common stock or warrants will develop and continue after the
offering.
Over-allotment
and Stabilizing Transactions
Rules of
the SEC may limit the ability of the underwriters to bid for or purchase our
securities before the distribution of the securities is completed. However, the
underwriters may engage in the following activities in accordance with the
rules:
|
·
|
Stabilizing
Transactions. The underwriters may
make bids or purchases for the purpose of pegging, fixing or maintaining
the price of our securities.
|
|
·
|
Over-Allotments
and Syndicate Coverage Transactions. The underwriters may
create a short position in our securities by selling more of our
securities than are set forth on the cover page of this prospectus. If the
underwriters create a short position during the offering, the
representative may engage in syndicate covering transactions by purchasing
our securities in the open market. The representative may also elect to
reduce any short position by exercising all or part of the over-allotment
option.
|
|
·
|
Penalty
Bids. The
representative may reclaim a selling concession from a syndicate member
when the units originally sold by the syndicate member are purchased in a
stabilizing or syndicate covering transaction to cover syndicate short
positions.
|
Stabilization
and syndicate covering transactions may cause the price of the securities to be
higher than they would be in the absence of these transactions. The imposition
of a penalty bid may also have an effect on the prices of the securities if it
discourages resales.
Neither
we nor the underwriters make any representation or prediction as to the effect
the transactions described above may have on the prices of our securities. These
transactions may occur on the OTC Bulletin Board, another the over-the-counter
market or on any trading market. If any of these transactions are commenced,
they may be discontinued without notice at any time.
The
distribution of our securities will end upon the underwriters’ cessation of
selling efforts and stabilization activities, provided, however, in the event
the underwriters were to exercise their over-allotment option to purchase
securities in excess of their actual syndicate short position, the distribution
will not be deemed to have been completed until all of the securities have been
sold.
79
Commissions
and Discounts
The
following table summarizes the compensation we will pay:
Per Unit
|
Total
|
|||||||||||||||
Without Over-
allotment
|
With Over-
allotment
|
Without
Over-
allotment
|
With Over-
allotment
|
|||||||||||||
Underwriting
discounts and commissions paid by us(1)
|
$
|
0.30
|
$
|
0.30
|
$
|
1,500,000
|
$
|
1,725,000
|
||||||||
Contingent
fees paid by us (2)
|
0.39
|
0.39
|
1,950,000
|
2,242,500
|
(1)
|
Based
on the underwriters’ discount equal to 3% of the gross proceeds from the
sale of units offered to the
public.
|
(2)
|
Based
on the following additional contingent fees that will become payable from
the amounts held in the trust account solely in the event we consummate
our initial business transaction: (A) an advisory fee payable to Morgan
Joseph equal to 1% of the gross proceeds from the sale of units to the
public for advising us during the 15 month period following the date
hereof (which fee shall be increased to 1.5% if we consummate our initial
business transaction with a business or asset introduced to us by Morgan
Joseph) and (B) a contingent fee equal to 2.5% of the aggregate amount of
the funds released from the trust account to us and/or to our target upon
consummation of our initial business transaction payable to Morgan Joseph
and such other firms, if any, who are instrumental in advising us in
connection with the consummation of our business
transaction.
|
Other
Services
We are
not under any contractual obligation to engage the underwriters to provide any
additional services for us after this offering other than those for which they
are entitled to fees as disclosed in this prospectus, and have no present intent
to do so. If we do so, we may pay the underwriters of this offering
or any entity with which they are affiliated a finder’s fee or other additional
compensation for services rendered to us in connection with the consummation of
a business transaction. In addition, the underwriters may assist us in raising
additional capital in the future for which they will be entitled to receive
customary fees.
The
underwriters and their respective affiliates may in the future perform, various
financial advisory, commercial banking and investment banking services for us or
certain of our affiliates in the ordinary course of business, for which they
will receive, customary fees and expenses.
Special
Conflict Relating to Underwriting Activities
Mark
D. Klein, our chairman, chief executive officer and president, is an affiliate
of Ladenburg Thalmann & Co. Inc., a member of FINRA, and will economically
own in excess of 10% of our securities. Ladenburg Thalmann & Co. Inc.
is one the underwriters of this offering. Therefore, FINRA requires this
offering to be made in compliance with the applicable provisions of FINRA Rule
2720. Pursuant to that rule, the appointment of a “qualified independent
underwriter” (as such term is defined in Rule 2720) is not necessary in
connection with this offering because Morgan Joseph, the FINRA member primarily
responsible for managing this offering, does not have a conflict of interest, is
not an affiliate of any member that has a conflict of interest and meets the
requirements of paragraph (f)(12)(E) of Rule 2720.
Indemnification
We have
agreed to indemnify the underwriters against liabilities under the Securities
Act, or contribute to payments that the underwriters may be required to make in
that respect.
Quotation
We have
applied to quote the units on the OTC Bulletin Board under the symbol “[UNIT
SYMBOL]”. Upon separate trading of the securities comprising the units, we
anticipate that the common stock and the warrants will be quoted on the OTC
Bulletin Board under the symbols “[COMMON STOCK SYMBOL]” and “[WARRANT SYMBOL]”,
respectively. Following the date that the shares of our common stock and
warrants are eligible to trade separately, the units will continue to be quoted
for trading, and any security holder may elect to separate a unit and trade the
common stock or warrants separately or as a unit.
80
LEGAL
MATTERS
Ellenoff
Grossman & Schole LLP, New York, New York, is passing on the validity of the
securities offered in this prospectus. McDermott Will & Emery LLP, New York,
New York, is acting as counsel for the underwriters in this
offering.
EXPERTS
The
financial statements of 57th Street General Acquisition Corp. as of March 31,
2010 and for the period from October 29, 2009 (inception) through March 31,
2010, appearing in this prospectus and the related registration statement have
been audited by Rothstein, Kass & Company, P.C., independent registered
public accounting firm, as set forth in their report thereon appearing elsewhere
herein and are included in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We have
filed with the SEC a registration statement on Form S-1, which includes
exhibits, schedules and amendments, under the Securities Act, with respect to
this offering of our securities. Although this prospectus, which forms a part of
the registration statement, contains all material information included in the
registration statement, parts of the registration statement have been omitted as
permitted by rules and regulations of the SEC. We refer you to the registration
statement and its exhibits for further information about us, our securities and
this offering. The registration statement and its exhibits, as well as our other
reports filed with the SEC, can be inspected and copied at the SEC’s public
reference room at 100 F Street, N.E., Washington, D.C. 20549. The public may
obtain information about the operation of the public reference room by calling
the SEC at 1-800-SEC-0330. In addition, the SEC maintains a web site at
http://www.sec.gov which contains the Form S-1 and other reports, proxy and
information statements and information regarding issuers that file
electronically with the SEC.
As a
result of this offering, we and our stockholders will become subject to the
proxy solicitation rules, annual and periodic reporting requirements,
restrictions of stock purchases and sales by affiliates and other requirements
of the Exchange Act, and we will file periodic reports and other information
with the SEC. These periodic reports and other information will be available for
inspection and copying at the SEC's Public Reference Room and the website of the
SEC referenced above. We may furnish our stockholders with annual reports
containing audited financial statements certified by independent auditors and
quarterly reports containing unaudited financial statements for the first three
quarters of each fiscal year.
81
57th
Street General Acquisition Corp.
(a
corporation in the development stage)
INDEX
TO FINANCIAL STATEMENTS
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Financial
Statements:
|
|
Balance
Sheet
|
F-3
|
Statement
of Operations
|
F-4
|
Statement
of Stockholders’ Equity
|
F-5
|
Statement
of Cash Flows
|
F-6
|
Notes
to Financial Statements
|
F-7
|
F-1
Report
of Independent Registered Public Accounting Firm
To the
Board of Directors and Stockholders of
57th Street
General Acquisition Corp.
We
have audited the accompanying balance sheet of 57th Street
General Acquisition Corp. (a development stage company) (the “Company”) as of
March 31, 2010 and the related statements of operations, changes in
stockholder’s equity and cash flows for the period from October 29, 2009 (date
of inception) to March 31, 2010. These financial statements are the
responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our
audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of March 31, 2010,
and the results of its operations and its cash flows for the period October 29,
2009 (date of inception) to March 31, 2010, in conformity with U.S. generally
accepted accounting principles.
/s/
Rothstein, Kass & Company, P.C.
Roseland,
New Jersey
April
9, 2010
F-2
57th
Street General Acquisition Corp.
|
(a
development stage company)
|
BALANCE
SHEET
|
March
31, 2010
|
ASSETS
|
||||
Current
assets
|
||||
Cash
|
$ | 461 | ||
Other
assets, deferred offering costs
|
73,268 | |||
Total
assets
|
$ | 73,729 | ||
LIABILITIES
AND STOCKHOLDER'S EQUITY
|
||||
Current
liabilities
|
||||
Accounts
payable and accrued expenses
|
$ | 43,423 | ||
Loan
from officer
|
2,349 | |||
Note
payable, stockholder
|
10,000 | |||
Total
liabilities
|
55,772 | |||
Stockholder's
equity
|
||||
Preferred
stock, $.0001 par value; 1,000,000 shares authorized; no shares issued and
outstanding
|
— | |||
Common
stock, $.0001 par value, 100,000,000 shares authorized; 638,889 shares
issued and outstanding
|
64 | |||
Additional
paid-in capital
|
24,936 | |||
Deficit
accumulated during development stage
|
(7,043 | ) | ||
Total
stockholder's equity
|
17,957 | |||
Total
liabilities and stockholder's equity
|
$ | 73,729 | ||
The
accompanying notes are an integral part of the financial
statements
|
F-3
57th
Street General Acquisition Corp.
|
(a
development stage company)
|
Statement
of Operations
|
For
the period from October 29, 2009 (date of inception) to
|
March
31, 2010
|
Revenue
|
$ | — | ||
General
and administrative expenses
|
7,043 | |||
Loss
from operations
|
(7,043 | ) | ||
Interest
and dividend income
|
— | |||
Net
loss attributable to common stockholder
|
$ | (7,043 | ) | |
Weighted
average number of common shares outstanding, basic and
diluted
|
618,924 | |||
Basic
and diluted net loss per share attributable to common
stockholders
|
$ | (0.01 | ) | |
The
accompanying notes are an integral part of the financial
statements
|
F-4
57th
Street General Acquisition Corp.
|
(a
development stage company)
|
STATEMENT
OF CHANGES IN STOCKHOLDER'S EQUITY
|
For
the period from October 29, 2009 (date of inception) to
|
March
31, 2010
|
|
Deficit
|
|||||||||||||||||||
accumulated
|
Total
|
|||||||||||||||||||
Common
Stock
|
Additional
|
during
|
||||||||||||||||||
Amount
|
paid-in
|
development
|
stockholder's
|
|||||||||||||||||
Shares
|
$.0001
par
|
capital
|
stage
|
equity
|
||||||||||||||||
Sale
of common stock issued to initial stockholder on October 30, 2009 at $.039
per share
|
638,889 | $ | 64 | $ | 24,936 | $ | — | $ | 25,000 | |||||||||||
Net
loss attributable to common stockholder
|
— | — | — | (7,043 | ) | (7,043 | ) | |||||||||||||
Balance
at
|
||||||||||||||||||||
March
31, 2010
|
638,889 | $ | 64 | $ | 24,936 | $ | (7,043 | ) | $ | 17,957 | ||||||||||
The
accompanying notes are an integral part of the financial
statements
|
F-5
57th
Street General Acquisition Corp.
|
(a
development stage company)
|
Statement
of Operations
|
For
the period from October 29, 2009 (date of inception) to
|
March
31, 2010
|
Cash
Flows from Operating Activities
|
||||
Net
loss
|
$ | (7,043 | ) | |
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||
Changes
in operating assets and liabilities:
|
||||
Increase
in accrued expenses
|
1,000 | |||
Net
cash used in operating activities
|
(6,043 | ) | ||
Cash
Flows from Financing Activities
|
||||
Proceeds
from note payable, stockholder
|
10,000 | |||
Proceeds
from issuance of stock to initial stockholder
|
25,000 | |||
Payment
of offering costs
|
(28,496 | ) | ||
Net
cash provided by financing activities
|
6,504 | |||
Net
increase in cash
|
461 | |||
Cash
at beginning of the period
|
— | |||
Cash
at end of the period
|
$ | 461 | ||
Supplemental Disclosure of cash
flow information:
|
||||
Cash
paid for taxes
|
$ | 837 | ||
Supplemental
Disclosure of Non-cash transactions:
|
||||
Accrual
for offering costs
|
$ | 42,423 | ||
Officer
loan for payment of offering costs
|
$ | 2,349 | ||
The
accompanying notes are an integral part of the financial
statements
|
F-6
57th
Street General Acquisition Corp.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
For
the period from October 29, 2009 (date of inception) to March 31,
2010
NOTE
A - DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
57th
Street General Acquisition Corp. (a corporation in the development stage) (the
“Company”) was incorporated in Delaware on October 29, 2009. The Company was
formed for the purpose of acquiring, through a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization, exchangeable share
transaction or other similar business transaction, one or more operating
businesses or assets that we have not yet identified (“Business Transaction”).
The Company has neither engaged in any operations nor generated any income to
date. The Company is considered to be in the development stage as defined in
FASB Accounting Standard Codification, or ASC 915, “Development Stage Entities,”
and is subject to the risks associated with activities of development stage
companies. At March 31, 2010 the Company had cash in bank of only $461 and has
limited financial resources. Until such time as the Company may complete the
proposed public offering and receive the proceeds thereof, it remains dependent
on loans from its initial stockholder and officers as well as favorable credit
terms from vendors providing services in connection with the proposed offering.
The Company has selected December 31 as its fiscal year end.
The
Company’s management has broad discretion with respect to the specific
application of the net proceeds of its proposed initial public offering of Units
(as defined in Note C below) (the “Proposed Offering”), although substantially
all of the net proceeds of the Proposed Offering are intended to be generally
applied toward consummating a Business Transaction. Furthermore, there is no
assurance that the Company will be able to successfully affect a Business
Transaction. An amount equal to 97.5% of the gross proceeds of the Proposed
Offering, will be held in a trust account (“Trust Account”) and invested in U.S.
“government securities,” within the meaning of Section 2(a)(16) of the
Investment Company Act of 1940 (the “1940 Act”) with a maturity of 180 days or
less, or in money market funds meeting certain conditions under Rule 2a-7
promulgated under the 1940 Act, until the earlier of (i) the consummation of a
Business Transaction or (ii) the distribution of the Trust Account as described
below.
The
Company, after signing a definitive agreement for the acquisition of one or more
target businesses or assets, may not submit the transaction for stockholder
approval. If no stockholder approval is sought, the Company will proceed with a
Business Transaction if it is approved by its board of directors and less than
88% of the public stockholders exercise their redeption rights. Only
in the event that the Company seeks stockholder approval in connection
with its initial business transaction, the Company will proceed
with a business transaction only if a majority of the outstanding shares of
common stock voted (calculated as of the close of business on the date set forth
in the relevant proxy materials as the last date on which stockholders may vote
their shares of common stock) are voted in favor of the Business Transaction.
However, the Company's sponsor’s, officers’, directors’ or their
affiliates’ participation in privately-negotiated transactions (as described in
this prospectus and solely in the event the Company seeks stockholder approval),
if any, could result in the approval of a business transaction even if a
majority of our public stockholders either vote against, or indicate their
intention to vote against, such business transaction. In connection with such a
vote, if a Business Transaction is approved and consummated, stockholders that
vote against the Business Transaction and elect to redeem their shares of common
stock for a pro-rata portion of the Trust Account as follows: (i)
public stockholders voting against the business transaction and electing to
redeem shares of common stock shall be entitled to receive a per share pro rata
portion of the Trust Account (excluding interest and net of taxes) and (ii)
public stockholders voting in favor of the business transaction and electing to
redeem shares of common stock shall be entitled to receive a per share pro rata
portion of the Trust Account (together with interest thereon but net of taxes).
These shares of common stock will be recorded at a fair value and classified as
temporary equity upon the completion of the Proposed Offering, in accordance
with FASB ASC 480-10.
57th Street GAC Holdings LLC (the “sponsor”) has agreed, in the event the
Company seeks stockholder approval of its business transaction, to vote its
initial shares in favor of approving a business transaction. The sponsor and the
Company’s officers and directors have also agreed to vote shares of common stock
acquired by them in this offering or in the aftermarket in favor of a business
transaction submitted to the Company’s stockholders for
approval.
F-7
57th
Street General Acquisition Corp.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
For
the period from October 29, 2009 (date of inception) to March 31,
2010
The
Company’s sponsor, officers and directors have agreed that the Company will only
have 15 months from the date of this prospectus to consummate its initial
business transaction. If the Company does not consummate a business
transaction within such 15 month period, it shall (i) cease all operations
except for the purposes of winding up; (ii) redeem 100% of our public shares of
common stock for a per share pro rata portion of the trust account, including a
portion of the interest earned thereon, but net of any taxes (which redemption
would completely extinguish such holders’ rights as stockholders, including the
right to receive further liquidation distributions, if any) and (iii) as
promptly as possible following such redemption, dissolve and liquidate the
balance of our net assets to our remaining stockholders, as part of our plan of
dissolution and liquidation. The sponsor has waived its right to participate in
any redemption with respect to its initial. However, if the sponsor or any of
the Company’s officers, directors or affiliates acquires shares of common stock
in or after the Proposed Offering, they will be entitled to a pro rata share of
the Trust Account upon the Company’s dissolution and liquidation in the event
the Company does not consummate a Business Transaction within the required time
period. In the event of such distribution, it is possible that the per share
value of the residual assets remaining available for distribution (including
Trust Account assets) will be less than the initial public offering price per
Unit in the Proposed Offering.
NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
The
accompanying financial statements are presented in U.S. dollars in conformity
with accounting principles generally accepted in the United States of America
and pursuant to the rules and regulations of the Securities and Exchange
Commission (“SEC”).
Development
stage company
The
Company complies with the reporting requirements of FASB ASC 915, “Development
Stage Entities.” At March 31, 2010, the Company had not commenced any operations
nor generated revenue to date. All activity through relates to the
Company’s formation and the Proposed Offering. Following such offering, the
Company will not generate any
operating revenues until after completion of a Business Transaction, at the
earliest. The Company will generate non-operating income in the form of interest
income on the designated Trust Account after the Proposed Offering.
F-8
57th
Street General Acquisition Corp.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
For
the period from October 29, 2009 (date of inception) to March 31,
2010
Net
loss per common share
The
Company complies with accounting and disclosure requirements of FASB ASC 260,
“Earnings Per Share.” Net loss per common share is computed by dividing net loss
applicable to common stockholders by the weighted average number of common
shares outstanding for the period. At March 31, 2010, the Company did not have
any dilutive securities and other contracts that could, potentially, be
exercised or converted into common stock and then share in the earnings of the
Company. As a result, diluted loss per common share is the same as basic loss
per common share for the period.
Concentration
of credit risk
Financial
instruments that potentially subject the Company to concentrations of credit
risk consist of cash accounts in a financial institution, which at times, may
exceed the Federal depository insurance coverage of $250,000. The Company has
not experienced losses on these accounts and management believes the Company is
not exposed to significant risks on such accounts.
Fair
value of financial instruments
The fair
value of the Company’s assets and liabilities, which qualify as financial
instruments under FASB ASC 820, “Fair Value Measurements and Disclosures”
approximates the carrying amounts represented in the balance sheet.
Use
of estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Deferred
offering costs
The
Company complies with the requirements of the SEC Staff Accounting Bulletin
(SAB) Topic 5A, ”Expenses of Offering.” Deferred offering costs consist
principally of $73,268 of legal, printing and regulatory costs incurred through
the balance sheet date that are related to the Proposed Offering and that will
be charged to stockholder’s equity upon the completion of the Proposed Offering
or charged to operations if the Proposed Offering is not completed.
F-9
57th
Street General Acquisition Corp.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
For
the period from October 29, 2009 (date of inception) to March 31,
2010
Income
tax
The
Company complies with FASB ASC 740, “Income Taxes,” which requires an asset and
liability approach to financial accounting and reporting for income taxes.
Deferred income tax assets and liabilities are computed for differences between
the financial statement and tax bases of assets and liabilities that will result
in future taxable or deductible amounts, based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. The Company did not
establish a valuation allowance as of March 31, 2010 as there were no deferred
tax assets at that date.
Effective
October 29, 2009, the Company adopted the provisions of Financial Accounting
Standards Board Accounting Standard
Codification or FASB ASC
740-10-25 which establishes recognition requirements for the accounting
for income taxes. There were no unrecognized tax benefits as of March 31, 2010.
The section prescribes a recognition threshold and a measurement attribute for
the financial statement recognition and measurement of tax positions taken or
expected to be taken in a tax return. For those benefits to be recognized, a tax
position must be more-likely-than-not to be sustained upon examination by taxing
authorities. The Company recognizes accrued interest and penalties related to
unrecognized tax benefits as income tax expense. No amounts were accrued for the
payment of interest and penalties at March 31, 2010. The Company is currently
not aware of any issues under review that could result in significant payments,
accruals or material deviation from its position. The adoption of the provisions
of FASB ASC 740-10-25
did not have a material impact on the Company’s financial position and results
of operation and cash flows as of and for the period ended March 31,
2010.
Recently
issued accounting standards
FASB ASC 810. In
December 2007, the Financial Accounting Standards Board, or FASB, issued
Accounting Standard Codification, or ASC, 810, or FASB ASC 810, which requires
companies to measure noncontrolling interests in subsidiaries at fair value and
to classify them as a separate component of equity. FASB ASC 810 is
effective as of each reporting fiscal year beginning after December 15,
2008, and applies only to transactions occurring after the effective
date. We do not believe that the adoption of FASB ASC 810 will have a
material effect on our financial position or results of operations.
FASB ASC 805. In
December 2007, FASB issued FASB ASC 805, which will require companies to
measure assets acquired and liabilities assumed in a business combination at
fair value. In addition, liabilities related to contingent
consideration are to be re-measured at fair value in each subsequent reporting
period. FASB ASC 805 will also require the acquirer in
pre-acquisition periods to expense all acquisition-related
costs. FASB ASC 805 is effective for fiscal years beginning after
December 15, 2008, and is applicable only to transactions occurring after
the effective date. We do not believe that the adoption of FASB ASC
805 will have a material effect on our financial position or results of
operations.
FASB ASC 350-30-35-1. In
April 2008, FASB issued FASB ASC 350-30-35-1. This ASC amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible
asset. FASB ASC 350-30-35-1 improves the consistency between the
useful life of a recognized intangible asset and the period of expected cash
flows used to measure the fair value of the asset under other applicable
accounting literature. We do not believe that the adoption of FASB ASC 350-30-35-1will have a
material effect on our financial position or results of operations.
F-10
57th
Street General Acquisition Corp.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
For
the period from October 29, 2009 (date of inception) to March 31,
2010
FASB ASC 820. In
April 2009, the FASB issued three related staff positions to clarify the
application of FASB ASC 820 to fair value measurements in the current economic
environment, modify the recognition of other-than-temporary impairments of debt
securities, and require companies to disclose the fair value of financial
instruments in interim periods. The final staff positions are effective for
interim and annual periods ending after June 15, 2009.
·
|
FASB
ASC 820 (transitional 820-10-65-4)—which provides guidance on how to
determine the fair value of assets and liabilities under FASB ASC 820 in
the current economic environment and reemphasizes that the objective of a
fair value measurement remains the price that would be received to sell an
asset or paid to transfer a liability at the measurement
date.
|
·
|
FASB
ASC 320— which modifies the requirements for recognizing
other-than-temporarily impaired debt securities and significantly changes
the existing impairment model for such securities. It also modifies the
presentation of other-than-temporary impairment losses and increases the
frequency of and expands already required disclosures about
other-than-temporary impairment for debt and equity
securities.
|
·
|
FASB
ASC 820-10-50—which requires disclosures of the fair value of financial
instruments within the scope of FASB ASC 820 in interim financial
statements, adding to the current requirement to make those disclosures in
annual financial statements. The staff position also requires that
companies disclose the method or methods and significant assumptions used
to estimate the fair value of financial instruments and a discussion of
changes, if any, in the method or methods and significant assumptions
during the period.
|
We do not
believe that the adoption of these new staff positions did not have a material
impact on our financial position and results of operations.
FASB ASC 860. In
June 2009, the FASB issued ASC 860, which eliminates the concept of a
qualifying special-purpose entity, creates more stringent conditions for
reporting a transfer of a portion of a financial asset as a sale, clarifies
other sale-accounting criteria, and changes the initial measurement of a
transferor’s interest in transferred financial assets. FASB ASC 860 will be
effective for transfers of financial assets in fiscal years beginning after
November 15, 2009 and in interim periods within those fiscal years with
earlier adoption prohibited. We will adopt FASB ASC 860 on January 1,
2010.
NOTE
C - PROPOSED OFFERING
Pursuant
to the Proposed Offering, the Company will offer for sale up to 5,000,000 units
at $10 per unit (“Units”). Each Unit consists of one share of the Company’s
common stock, $0.0001 par value, and one redeemable common stock purchase
warrant (“Warrant”). Each Warrant will entitle the holder to purchase from the
Company one share of common stock at an exercise price of $11.50 commencing on
the later of (a) one year from the date of the prospectus for the Proposed
Offering or (b) the completion of a Business Transaction, and will expire four
years from the date of the prospectus for the Proposed Offering. The Warrants
will be redeemable by the Company at a price of $0.01 per Warrant upon 30 days
prior notice after the Warrants become exercisable, only in the event that the
last sale price of the common stock is at least $17.50 per share for any 20
trading days within a 30 trading day period ending on the third business day
prior to the date on which notice of redemption is given.
F-11
57th
Street General Acquisition Corp.
(a
development stage company)
NOTES
TO FINANCIAL STATEMENTS
For
the period from October 29, 2009 (date of inception) to March 31,
2010
NOTE
D - RELATED PARTY TRANSACTIONS
The
Company issued a $10,000 unsecured promissory note to the sponsor on November
10, 2009. The note is non-interest bearing and is payable on the earlier of
December 31, 2010 or the consummation of the Proposed Offering. Due to the
short-term nature of the note, the fair value of the note approximates its
carrying amount of $10,000. After maturity, the promissory note bears
interest at 5% per annum until paid.
On
November 6, 2009, the Company issued to our sponsor (i) 638,889 shares of
restricted common stock (up to 83,333 of which are subject to forfeiture if the
underwriters’ over-allotment option is not exercised in full), for an aggregate
amount of $25,000 in cash. The purchase price for each share of
common stock was approximately $0.039 per share. The sponsor has
agreed that the shares of common stock purchased by it prior to consummation of
the Proposed Offering will not be sold or transferred until one year following
consummation of a Business Transaction, subject to certain limited
exceptions.
In
January 2010, an officer paid a vendor bill on behalf of the Company in the
amount of $2,349 and that amount is due to him as of March 31, 2010, payable on
demand without interest.
The
sponsor has agreed to purchase, in a private placement, 3,000,000 warrants prior
to the Proposed Offering at a price of $0.50 per warrant (a purchase price of
$1,500,000) from the Company. Based on the observable market prices, the Company
believes that the purchase price of $0.50 per warrant for such warrants will
exceed the fair value of such warrants on the date of the purchase. The
valuation is based on comparable initial public offerings by blank check
companies in 2009. The sponsor has agreed that the warrants purchased by it will
not be sold or transferred until 30 days following consummation of a Business
Transaction, subject to certain limited exceptions. If the Company does not
complete a Business Transaction, then the proceeds will be part of the
liquidating distribution to the public stockholders and the warrants issued to
the sponsor will expire worthless. The Company intends to classify the private
placement warrants within permanent equity as additional paid-in capital in
accordance with FASB
ASC. 815-40.
Commencing
on the date of the Proposed Offering, the Company plans to enter into an
Administrative Services Agreement with the sponsor for an estimated aggregate
monthly fee of $7,500 for office space, secretarial, and administrative
services. This agreement will expire upon the earlier of the successful
completion of the Company’s Business Transaction or 15 months from the date of
this prospectus.
The
sponsor will be entitled to registration rights pursuant to a registration
rights agreement to be signed on or before the date of the prospectus for the
Proposed Offering. The sponsor will be entitled to demand registration rights
and certain “piggy-back” registration rights with respect to its shares of
common stock, the warrants and the common stock underlying the warrants,
commencing on the date such common stock or warrants are released from escrow.
The Company will bear the expenses incurred in connection with the filing of any
such registration statements.
NOTE
E - COMMITMENTS
The
Company expects to grant the underwriters a 45-day option to purchase up to
750,000 additional Units to cover the over-allotment at the initial public
offering price less the underwriting discounts and commissions.
The
following additional contingent fees that will become payable to the underwriter
from the amounts held in the trust account solely in the event the Company
consummates our initial business transaction: (A) an advisory fee equal to 1% of
the gross proceeds from the sale of units offered to the public (which fee shall
be increased to 1.5% if the Company consummates the initial business transaction
with a business or asset introduced by the underwriter) and (B) a contingent fee
equal to up to 2.5% of the aggregate amount of the funds released from the trust
account to the Company or to the target upon consummation of the initial
business transaction.
NOTE
F - PREFERRED STOCK
The
Company is authorized to issue 1,000,000 shares of preferred stock with such
designations, voting and other rights and preferences as may be determined from
time to time by the Board of Directors. As of March 31, 2010, the Company has
not issued shares of preferred stock.
F-12
Dealer
Prospectus Delivery Obligation
Until ,
2010, all dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers’ obligation to deliver a prospectus when acting as
underwriters with respect to their unsold allotments or
subscriptions.
No
dealer, salesperson or any other person is authorized to give any information or
make any representations in connection with this offering other than those
contained in this prospectus and, if given or made, the information or
representations must not be relied upon as having been authorized by
us. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the securities offered
by this prospectus, or an offer to sell or a solicitation of an offer to buy any
securities by anyone in any jurisdiction in which the offer of solicitation is
not authorized or is unlawful.
57
TH
STREET GENERAL
ACQUISITION
CORP.
5,000,000
Units
PROSPECTUS
Morgan
Joseph
Sole
Book-Running Manager
Ladenburg
Thalmann & Co. Inc.
I-BANKERS SECURITIES,
INC.
RODMAN
& RENSHAW,
LLC
,
2010
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and
Distribution.
The
estimated expenses payable by us in connection with the offering described in
this registration statement (other than the underwriting discount and
commissions) will be as follows:
SEC
registration fee
|
6,898
|
|||
FINRA
filing fee
|
12,862
|
|||
Accounting
fees and expenses
|
37,500
|
|||
Printing
and engraving expenses
|
50,000
|
|||
Legal
fees and expenses
|
250,000
|
|||
Blue
Sky
|
35,000
|
|||
Miscellaneous(1)
|
57,739
|
|||
Total
|
$
|
450,000
|
(1) This
amount represents additional expenses that may be incurred by us in connection
with the offering over and above those specifically listed above, including
distribution and mailing costs.
Item
14. Indemnification of Directors and
Officers.
Our
amended and restated certificate of incorporation provides that all of our
directors, officers, employees and agents will be entitled to be indemnified by
us to the fullest extent permitted by Section 145 of the Delaware General
Corporation Law.
Section
145 of the Delaware General Corporation Law concerning indemnification of
officers, directors, employees and agents is set forth below.
Section
145. Indemnification of officers, directors, employees and agents;
insurance.
(a) A
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust account or other enterprise, against expenses (including
attorneys’ fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with such action, suit or
proceeding if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the person’s conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which the
person reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that the person’s conduct was unlawful.
(b) A
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust account or other enterprise against expenses (including
attorneys’ fees) actually and reasonably incurred by the person in connection
with the defense or settlement of such action or suit if the person acted in
good faith and in a manner the person reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem
proper.
II-1
(c) To
the extent that a present or former director or officer of a corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of this section, or in defense
of any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys’ fees) actually and reasonably incurred by such
person in connection therewith.
(d) Any
indemnification under subsections (a) and (b) of this section (unless ordered by
a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the present or former
director, officer, employee or agent is proper in the circumstances because the
person has met the applicable standard of conduct set forth in subsections (a)
and (b) of this section. Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e) Expenses
(including attorneys’ fees) incurred by an officer or director in defending any
civil, criminal, administrative or investigative action, suit or proceeding may
be paid by the corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that such person is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys’ fees) incurred
by former directors and officers or other employees and agents may be so paid
upon such terms and conditions, if any, as the corporation deems
appropriate.
(f) The
indemnification and advancement of expenses provided by, or granted pursuant to,
the other subsections of this section shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person’s official capacity and
as to action in another capacity while holding such office.
(g) A
corporation shall have power to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
account or other enterprise against any liability asserted against such person
and incurred by such person in any such capacity, or arising out of such
person’s status as such, whether or not the corporation would have the power to
indemnify such person against such liability under this section.
(h) For
purposes of this section, references to “the corporation” shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
trust or other enterprise, shall stand in the same position under this section
with respect to the resulting or surviving corporation as such person would have
with respect to such constituent corporation if its separate existence had
continued.
(i) For
purposes of this section, references to “other enterprises” shall include
employee benefit plans; references to “fines” shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
to “serving at the request of the corporation” shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner “not opposed to the best interests of the
corporation” as referred to in this section.
(j) The
indemnification and advancement of expenses provided by, or granted pursuant to,
this section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
(k) The
Court of Chancery is hereby vested with exclusive jurisdiction to hear and
determine all actions for advancement of expenses or indemnification brought
under this section or under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation’s obligation to advance expenses (including attorneys’
fees).
II-2
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers, and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment of expenses
incurred or paid by a director, officer or controlling person in a successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, we
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to the court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Paragraph
B of Article Eighth of our amended and restated certificate of incorporation
provides:
The
Corporation, to the full extent permitted by Section 145 of the DGCL, as amended
from time to time, shall indemnify all persons whom it may indemnify pursuant
thereto. Expenses (including attorneys’ fees) incurred by an officer or director
in defending any civil, criminal, administrative, or investigative action, suit
or proceeding for which such officer or director may be entitled to
indemnification hereunder shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized hereby.
Our
bylaws provide for the indemnification of our directors, officers or other
persons in accordance with our amended and restated certificate of
incorporation.
Pursuant
to the Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement, we have agreed to indemnify the underwriters, and the underwriters
have agreed to indemnify us, against certain civil liabilities that may be
incurred in connection with this offering, including certain liabilities under
the Securities Act.
Item
15. Recent Sales of Unregistered Securities.
During
the past three years, we sold the following shares of common stock without
registration under the Securities Act:
Stockholders
|
Number
of Shares
|
|||
57th
Street GAC Holdings LLC
|
638,889
|
|||
Total
|
638,889
|
Such
shares of common stock were issued to our sponsor on October 30, 2009 in
connection with our organization pursuant to the exemption from registration
contained in Section 4(2) of the Securities Act as they were sold to an
“accredited investor” as defined in Rule 501(a) of the Securities Act. The
shares of common stock issued to our sponsor were sold for an aggregate offering
price of $25,000 at a purchase price of $0.039 per share. No underwriting
discounts or commissions were paid with respect to such sales. Of these
securities, up to 83,333 shares of common stock are subject to forfeiture in the
event that the underwriters’ over-allotment option is not exercised, in
full.
On or
before the date of the prospectus accompanying this registration statement, our
sponsor will purchase 3,000,000 insider warrants from the registrant. These
warrants will be issued pursuant to the exemption from registration contained in
Section 4(2) of the Securities Act as they will be sold to an “accredited
investor” as defined in Rule 501(a) of the Securities Act. No underwriting
discounts or commissions will be paid with respect to such sales. A private
placement subscription agreement has been entered into between the Company and
our sponsor in connection with these insider warrants and is attached as an
exhibit.
In
addition, if we increase the size of the offering pursuant to Rule 462(b) under
the Securities Act, we may effect a stock dividend immediately prior to the
consummation of the offering in such amount as to maintain our sponsor’s
collective ownership at 10% of our issued and outstanding shares of common stock
upon consummation of the offering. If we decrease the size of the offering we
will effect a reverse split of our common stock immediately prior to the
consummation of the offering in such amount as to maintain our sponsor’s
collective ownership at 10% of our issued and outstanding shares of common stock
upon the date of this prospectus, in each case without giving effect to the sale
of warrants to our sponsor as described above. Any such increased number of
shares will be placed into escrow and will be subject to forfeiture in the event
that the underwriter’s over-allotment option is not exercised, in full. Any such
decreased number of shares will be forfeit from escrow, with the remainder
subject to forfeiture in the event that the underwriter’s over-allotment option
is not exercised in full.
II-3
Item
16. Exhibits and Financial Statement
Schedules.
See the
Exhibit Index, which follows the signature page and which is incorporated by
reference herein.
Item
17. Undertakings.
(a) The
undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
i. To
include any prospectus required by Section 10(a)(3) of the Securities
Act;
ii. To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the
effective registration statement.
iii. To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That,
for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) That,
for the purpose of determining liability of the registrant under the Securities
Act in a primary offering of securities of the undersigned registrant pursuant
to this registration statement, regardless of the underwriting method used to
sell the securities to the purchaser, if the securities are offered or sold to
such purchaser by means of any of the following communications, the undersigned
registrant will be a seller to the purchaser and will be considered to offer or
sell such securities to such purchaser:
i. Any
preliminary prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule 424;
ii. Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
iii. The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
iv. Any
other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
(b) The
undersigned hereby undertakes to provide to the underwriter at the closing
specified in the underwriting agreement, certificates in such denominations and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
(c) Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
II-4
(d) The
undersigned registrant hereby undertakes that:
(1) For
purposes of determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective.
(2) For
the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-5
SIGNATURE
Pursuant
to the requirements of the Securities Act, the registrant has duly caused this
Amendment No. 2 to the Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 27th day
of April, 2010.
57th
Street General Acquisition Corp.
|
||
By:
|
||
/s/ Mark
D. Klein
|
||
Name: Mark
D. Klein
|
||
Title: Chairman,
President and Chief Executive
|
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Name
|
Position
|
Date
|
||
/s/ Mark D. Klein
|
(Principal
Executive Officer)
|
April
27, 2010
|
||
Mark
D. Klein
|
||||
*
|
(Principal
Financial and Accounting
|
April
27, 2010
|
||
Paul
D. Lapping
|
Officer)
|
|||
*
|
Director
|
April
27, 2010
|
||
Frederick
G. Kraegel
|
||||
*
|
Director
|
April
27, 2010
|
||
Leonard
A. Potter
|
POWER
OF ATTORNEY
KNOW ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Mark D. Klein his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this registration statement (and to any
registration statement filed pursuant to Rule 462 under the Securities Act of
1933, as amended), and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorney-in-fact and agent or his
substitute, acting alone, may lawfully do or cause to be done by virtue
thereof.
/s/
Andrew A. Fink
|
Director
|
|
||||
|
April
27, 2010
|
|||||
Andrew
A. Fink
|
||||||
*By:
|
||||||
/s/ Mark
D. Klein
|
||||||
|
||||||
Mark
D. Klein
|
||||||
As
Attorney-in-Fact
|
S-1
EXHIBIT
INDEX
Exhibit No.
|
Description
|
|
1.1
|
Form
of Underwriting Agreement.*
|
|
3.1
|
Certificate
of Incorporation.**
|
|
3.2
|
Form
of Amended and Restated Certificate of
Incorporation.*
|
|
3.3
|
Form
of Amended and Restated Bylaws.
|
|
4.1
|
Specimen
Unit Certificate.
|
|
4.2
|
Specimen
Common Stock Certificate.
|
|
4.3
|
Specimen
Warrant Certificate.
|
|
4.4
|
Form
of Warrant Agreement between Continental Stock Transfer & Trust
Company and the Registrant. **
|
|
5.1
|
Opinion
of Ellenoff Grossman & Schole LLP. *
|
|
10.1
|
Form
of Investment Management Trust Account Agreement between Continental Stock
Transfer & Trust Company and the Registrant. **
|
|
10.2
|
Form
of Securities Escrow Agreement among the Registrant, Continental Stock
Transfer & Trust Company, and 57th Street GAC Holdings LLC.
**
|
|
10.3
|
Form
of Registration Rights Agreement among the Registrant and 57th Street GAC
Holdings LLC. **
|
|
10.4
|
Form
of Letter Agreement by and between the Registrant and each of the
directors and officers of the Registrant. *
|
|
10.5
|
Form
of Letter Agreement by and between the Registrant and Mark D. Klein.
*
|
|
10.6
|
Form
of Letter Agreement by and between the Registrant and Paul D. Lapping.
*
|
|
10.7
|
Form
of Letter Agreement by and between the Registrant and 57th Street GAC
Holdings LLC. *
|
|
10.8
|
Administrative
Services Agreement between the Registrant and 57th Street GAC Holdings
LLC. **
|
|
10.9
|
Securities
Purchase Agreement dated October 30, 2009 between the Registrant and
57th Street GAC Holdings LLC. **
|
|
10.10
|
Promissory
Note, dated November 10, issued to 57th Street GAC Holdings LLC in the
amount of $10,000. **
|
|
10.11
|
Insider
Warrants Subscription Agreement between the Registrant and 57th Street GAC
Holdings LLC.
|
|
14.1
|
Code
of Business and Ethics.*
|
|
23.1
|
Consent
of Rothstein Kass & Company
|
|
23.2
|
Consent
of Ellenoff Grossman & Schole LLP (included in Exhibit
5.1).*
|
*
To be
filed by amendment
**
Previously
filed