UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
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For the quarterly period ended March 31, 2008
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
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For the transition period from
to
Commission file number 1-33396
MBF Healthcare Acquisition Corp.
(Exact name of registrant as specified in its charter)
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Delaware
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22-3934207
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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121 Alhambra Plaza, Suite 1100
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Coral Gables, Florida
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33134
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(Address of principal
executive offices)
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(Zip code)
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(305) 461-1162
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer or a smaller reporting company. See definition of larger accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
þ
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes
þ
No
o
At May 14, 2008, 26,593,750 shares of the registrants common stock were issued and outstanding.
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
MBF HEALTHCARE ACQUISITION CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
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March 31,
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2008
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December 31,
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(unaudited)
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2007
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ASSETS
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Current Assets:
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Cash and cash equivalents
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$
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283,947
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$
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957,753
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Restricted cash held in Trust Fund
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177,275,651
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175,501,579
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Prepaid expenses
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4,770
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47,826
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Total current assets
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177,564,368
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176,507,158
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Deferred acquisition costs
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2,485,550
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22,379
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Deferred tax asset
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22,270
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47,110
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Total Assets
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$
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180,072,188
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$
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176,576,647
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities
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Income taxes payable
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$
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884,354
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$
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312,505
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Accrued expenses
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2,100,671
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165,965
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Deferred underwriters fee
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6,037,500
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6,037,500
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Total current liabilities
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9,022,525
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6,515,970
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Common stock, subject to possible redemption, 6,468,749 shares at redemption value
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51,491,242
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51,491,242
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Interest income attributable to common stock subject to possible
redemption (net of taxes)
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1,480,629
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1,148,636
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Total common stock, subject to possible redemption
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52,971,871
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52,639,878
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Stockholders Equity
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Preferred stock, $.0001 par value, Authorized 1,000,000 shares; no shares
issued and outstanding
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Common stock, $.0001 par value, Authorized 50,000,000 shares, issued and
outstanding 26,593,750 shares (which includes 6,468,749 shares subject to
possible redemption)
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2,659
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2,659
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Additional paid-in capital
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115,030,029
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115,030,029
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Retained earnings
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3,045,104
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2,388,111
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Total stockholders equity
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118,077,792
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117,420,799
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Total liabilities and stockholders equity
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$
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180,072,188
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$
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176,576,647
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See notes to unaudited financial statements
3
MBF HEALTHCARE ACQUISITION CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
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June 2, 2006
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Three months
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Three months
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(date of inception)
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ended
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ended
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through
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March 31, 2008
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March 31, 2007
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March 31, 2008
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Revenues
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$
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$
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$
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Expenses:
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Formation and operating costs
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(194,154
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)
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(27,511
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)
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(713,519
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)
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Net loss before interest income (expense)
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(194,154
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)
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(27,511
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)
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(713,519
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)
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Interest income (expense)
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1,779,828
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(3,160
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)
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7,961,335
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Income (loss) before income tax provision
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1,585,674
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(30,671
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)
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7,247,816
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Provision for income taxes
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(596,689
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)
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(2,722,084
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)
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Net income (loss)
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$
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988,985
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$
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(30,671
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)
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$
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4,525,732
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Weighted average shares outstanding
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Basic
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26,593,750
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4,687,500
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15,893,778
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Diluted
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32,442,481
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4,687,500
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18,902,450
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Net earnings (loss) per share:
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Basic
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$
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0.04
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$
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(0.01
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)
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$
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0.28
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Diluted
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$
|
0.03
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$
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(0.01
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)
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$
|
0.24
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See notes to unaudited financial statements
4
MBF HEALTHCARE ACQUISITION CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(UNAUDITED)
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Retained
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earnings/
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(deficit)
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accumulated
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Common Stock
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|
Additional
|
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during the
|
|
|
|
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Paid-In
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development
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Shares
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Amount
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Capital
|
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stage
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Total
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Balance, June 2, 2006
(date of inception)
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|
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$
|
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$
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|
|
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$
|
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|
|
$
|
|
|
Initial capitalization
from founding stockholder
|
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|
4,687,500
|
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|
469
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|
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19,531
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|
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|
|
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20,000
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57,392
|
)
|
|
|
(57,392
|
)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2006
|
|
|
4,687,500
|
|
|
|
469
|
|
|
|
19,531
|
|
|
|
(57,392
|
)
|
|
|
(37,392
|
)
|
|
|
|
|
|
|
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|
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|
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|
|
|
|
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Sale of 343,750 units in
a private placement
|
|
|
343,750
|
|
|
|
34
|
|
|
|
2,749,966
|
|
|
|
|
|
|
|
2,750,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Sale of 4,250,000
warrants to initial
stockholders
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|
|
|
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|
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|
4,250,000
|
|
|
|
|
|
|
|
4,250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Sale of 21,562,500 units,
net of underwriters
discount and offering
expenses of $12,996,070
(6,468,749 shares subject
to possible redemption)
|
|
|
21,562,500
|
|
|
|
2,156
|
|
|
|
159,501,774
|
|
|
|
|
|
|
|
159,503,930
|
|
Proceeds subject to
possible redemption of
6,468,749 shares
|
|
|
|
|
|
|
|
|
|
|
(51,491,242
|
)
|
|
|
|
|
|
|
(51,491,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of trust fund
relating to common stock
subject to possible
redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,148,636
|
)
|
|
|
(1,148,636
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,594,139
|
|
|
|
3,594,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
26,593,750
|
|
|
|
2,659
|
|
|
|
115,030,029
|
|
|
|
2,388,111
|
|
|
|
117,420,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of trust fund
relating to common stock
subject to possible
redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(331,992
|
)
|
|
|
(331,992
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
988,985
|
|
|
|
988,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2008
|
|
|
26,593,750
|
|
|
$
|
2,659
|
|
|
$
|
115,030,029
|
|
|
$
|
3,045,104
|
|
|
$
|
118,077,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited financial statements
5
MBF HEALTHCARE ACQUISITION CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 2, 2006
|
|
|
|
Three months
|
|
|
Three months
|
|
|
(date of inception)
|
|
|
|
ended
|
|
|
ended
|
|
|
through
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2008
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
988,985
|
|
|
$
|
(30,671
|
)
|
|
$
|
4,525,732
|
|
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
43,056
|
|
|
|
|
|
|
|
(4,770
|
)
|
Income taxes payable
|
|
|
596,689
|
|
|
|
|
|
|
|
862,084
|
|
Accrued expenses
|
|
|
(87,321
|
)
|
|
|
3,160
|
|
|
|
78,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
1,541,409
|
|
|
|
(27,511
|
)
|
|
|
5,461,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash held in trust fund
|
|
|
(1,774,072
|
)
|
|
|
|
|
|
|
(177,275,651
|
)
|
Deferred acquisition costs
|
|
|
(441,143
|
)
|
|
|
|
|
|
|
(463,522
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(2,215,215
|
)
|
|
|
|
|
|
|
(177,739,173
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross proceeds from initial public offering
|
|
|
|
|
|
|
|
|
|
|
172,500,000
|
|
Payment of costs of public offering
|
|
|
|
|
|
|
(12,341
|
)
|
|
|
(6,958,569
|
)
|
Proceeds from sale of units in a private placement
|
|
|
|
|
|
|
|
|
|
|
2,750,000
|
|
Proceeds from notes payable to a related party
|
|
|
|
|
|
|
35,000
|
|
|
|
275,000
|
|
Payments of notes payable to a related party
|
|
|
|
|
|
|
|
|
|
|
(275,000
|
)
|
Proceeds from issuance of common stock to founding
stockholders
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
Proceeds from issuance of warrants
|
|
|
|
|
|
|
|
|
|
|
4,250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
|
|
22,659
|
|
|
|
172,561,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
|
(673,806
|
)
|
|
|
(4,852
|
)
|
|
|
283,947
|
|
Cash and cash equivalents, beginning of period
|
|
|
957,753
|
|
|
|
12,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
283,947
|
|
|
$
|
7,552
|
|
|
$
|
283,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of non-cash financing activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual of offering costs
|
|
$
|
|
|
|
$
|
|
|
|
$
|
251,419
|
|
Common stock subject to possible redemption
|
|
|
|
|
|
|
|
|
|
|
51,491,242
|
|
Interest income on common stock subject to
possible redemption
|
|
|
331,992
|
|
|
|
|
|
|
|
1,480,628
|
|
Accrual of deferred acquisition costs
|
|
|
2,022,028
|
|
|
|
|
|
|
|
2,022,028
|
|
Deferred underwriters fees
|
|
|
|
|
|
|
|
|
|
|
6,037,500
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,354,020
|
|
|
$
|
|
|
|
$
|
61,282,817
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,312
|
|
Cash paid for taxes
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,860,000
|
|
See notes to unaudited financial statements
6
MBF HEALTHCARE ACQUISITION CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
Note A Organization and Business Operations
MBF Healthcare Acquisition Corp. (the Company) was incorporated in Delaware on June 2, 2006.
The Company was formed to serve as a vehicle for the acquisition of an operating business through
a merger, capital stock exchange, stock purchase, asset acquisition, or other similar business
combination (the Business Combination). The Company has neither engaged in any operations nor
generated any revenue to date. The Company is considered to be in the development stage and is
subject to the risks associated with activities of development stage companies.
The Companys management has broad discretion with respect to the specific application of the
net proceeds of the initial public offering of Units (as defined in Note C below) and the private
placement of 343,750 units and 4,250,000 warrants that occurred prior to the initial public
offering (the Private Placement), although substantially all of the net proceeds of the initial
public offering and Private Placement are intended to be generally applied toward consummating a
Business Combination with (or acquisition of) one or more operating businesses in the healthcare
industry. Furthermore, there is no assurance that the Company will be able to successfully effect
a Business Combination. Upon the closing of the initial public offering, at least ninety-nine and
a half (99.5%) percent of the gross proceeds of the initial public offering, after payment of
certain amounts to the underwriters, were deposited in a trust account (the Trust Account), and
were invested in money market funds meeting conditions of the Investment Company Act of 1940 or
securities principally issued or guaranteed by the U.S. government until the earlier of (i) the
consummation of its first Business Combination or (ii) the distribution of the Trust Account as
described below. The remaining proceeds may be used to pay for business, legal and accounting due
diligence on prospective acquisitions and continuing general and administrative expenses. The
Company, after signing a definitive agreement for the acquisition of a target business, will submit
such transaction for stockholder approval. The Company will proceed with the Business Combination
only if:
|
|
|
a majority of the shares of common stock voted by the public stockholders are voted
in favor of the Business Combination; and
|
|
|
|
|
public stockholders owning less than 30% of the shares sold in the initial public
offering both vote against the Business Combination and exercise their conversion rights
as described below.
|
Public stockholders voting against the Business Combination will be entitled to convert their
stock into a pro rata share of the amount held in the Trust Account (including the amount held in
the Trust Account representing the deferred portion of the underwriters discounts and
commissions), including any interest earned on their pro rata share (net of taxes payable), if the
Business Combination is approved and consummated.
In the event that the Company does not complete a Business Combination within 24 months from
the consummation of the initial public offering, the Company will dissolve and distribute the
proceeds held in the Trust Account to public stockholders, excluding the existing stockholder to
the extent of its initial stockholdings and the shares purchased by it in the Private Placement.
In the event of such distribution, 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 share in the initial public offering.
On February 6, 2008, the Company entered into a Stock Purchase Agreement (the Stock Purchase
Agreement) with Critical Homecare Solutions Holdings, Inc. (CHS), a Delaware corporation,
Kohlberg Investors V, L.P. (the Sellers Representative) and the other stockholders of CHS (each,
together with the Sellers Representative, a Seller and collectively the Sellers).
Pursuant to the terms of the Stock Purchase Agreement, the Company will acquire all of the
outstanding capital stock of CHS for $420.0 million, subject to a working capital and certain other
customary adjustments as set forth in the Stock Purchase Agreement. The Company intends to fund
the purchase price and the acquisition costs and provide additional capital to CHS for growth and
expansion through a combination of approximately $180.0 million of cash in its trust account,
approximately $180.0 million of debt, a $35.0 million equity
issuance of MBH common stock to certain Sellers and a commitment from MBF Healthcare Partners,
L.P. to acquire up to an additional $50 million in shares of MBH common stock. The shares of MBH
common stock to be issued to certain Sellers and the shares that are subject to the commitment from
MBF Healthcare Partners, L.P. will be priced at the closing per share price of MBH common stock on
February 6, 2008, which was $7.65.
7
Note B Summary of Significant Accounting Policies
The accompanying unaudited financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and notes required by accounting
principles generally accepted in the United States of America for complete financial statements, or
those normally made in an Annual Report on Form 10-K. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 2008 are not necessarily
indicative of the results that may be reported for the remainder of the year ending December 31,
2008 or future periods.
For further information, refer to the audited financial statements and notes thereto included
in the Companys Annual Report on Form 10-K for the year ended December 31, 2007. The accompanying
December 31, 2007 balance sheet has been derived from these audited financial statements. These
interim condensed financial statements should be read in conjunction with the audited financial
statements and notes to financial statements included in that report.
[1] Cash and cash equivalents:
The Company considers all highly liquid investments with original maturities of three months
or less to be cash equivalents.
[2] Earnings (loss) per common share:
Income (loss) per share is computed by dividing net income (loss) applicable to common
stockholders by the weighted average number of common shares outstanding for the period. The
dilutive effect of common stock equivalents have been excluded from the diluted income (loss) per
share calculation for the 2007 period presented as the effect is antidilutive. Included in the
weighted average shares calculation for Diluted EPS purposes are 5,848,731 and 3,008,672 shares
related to the dilutive effect of outstanding stock warrants for the three months ended March 31,
2008 and the period from June 2, 2006 through March 31, 2008, respectively.
[3] Use of estimates:
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the reporting period. Actual results could
differ from those estimates.
[4] Income taxes:
Deferred income taxes are provided for the differences between the basis of assets and
liabilities for financial reporting and income tax purposes. A valuation allowance is established
when necessary to reduce deferred tax assets to the amount expected to be realized.
The temporary differences as of as of March 31, 2008 and December 31, 2007 represent prepaid
expenses and accrued liabilities. The Company recorded deferred income tax assets of $22,270 and
$47,110 as of March 31, 2008 and December 31, 2007, respectively.
The Company recorded income tax expense of $596,689 for the three months ended March 31, 2008.
For the three months ended March 31, 2008, the effective tax rate of 38% differs from the statutory
rate of 35% due to the provision for state income taxes. For the three months ended March 31, 2007,
the effective tax rate of 0% differs from the statutory rate of 35% due to the valuation allowance
against the deferred tax assets.
[5] Fair value of financial instruments
Financial instruments consist primarily of cash in which the fair market value approximates
the carrying value due to its short term nature.
The Company adopted SFAS No. 157,
Fair Value Measurements
, for financial assets and financial
liabilities in the first quarter of fiscal 2008, which did not have a material impact on the
Companys financial statements.
In accordance with FASB Staff Position (FSP FAS) 157-2,
Effective Date of FASB Statement No.
157
, the Company has deferred application of SFAS No. 157
until January 1, 2009, the beginning of
the next fiscal year, in relation to nonrecurring nonfinancial assets and nonfinancial liabilities
including goodwill impairment testing, asset retirement obligations, long-lived asset impairments
and exit and disposal activities.
8
[6] Recent accounting pronouncements:
In September 2006, FASB issued SFAS No. 157,
Fair Value Measurements
(SFAS No. 157)
.
SFAS
No. 157 defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 does not impose fair value measurements on
items not already accounted for at fair value; rather it applies, with certain exceptions, to other
accounting pronouncements that either require or permit fair value measurements. Under SFAS No.
157, fair value refers to the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants in the principal or most
advantageous market. The standard clarifies that fair value should be based on the assumptions
market participants would use when pricing the asset or liability. In February 2008, the FASB
issued FASB Staff Position No. 157-2,
Effective Date of FASB Statement No. 157
(FSP FAS 157-2),
which delays the effective date of SFAS No. 157 for all non-financial assets and liabilities,
except those that are recognized or disclosed at fair value in the consolidated financial
statements on a recurring basis, until fiscal years beginning after November 15, 2008. These
non-financial items include assets and liabilities such as non-financial assets and liabilities
assumed in a business combination, reporting units measured at fair value in a goodwill impairment
test and asset retirement obligations initially measured at fair value. The Company adopted the
provisions of SFAS No. 157 for assets and liabilities recognized at fair value on a recurring basis
effective January 1, 2008. The partial adoption of SFAS No. 157 did not have a material impact on
the Companys financial statements. The Company does not expect the adoption of the remaining provisions of SFAS No. 157 to have a material
effect on the Companys financial statements.
This standard requires that a Company measure its financial assets and liabilities using
inputs from the three levels of the fair value hierarchy. A financial asset or liability
classification within the hierarchy is determined based on the lowest level input that is
significant to the fair value measurement. The three levels are as follows:
|
|
|
Level 1 Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to
access at the measurement date.
|
|
|
|
Level 2 Inputs include quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs other
than quoted prices that are observable for the asset or liability and
inputs that are derived principally from or corroborated by observable
market data by correlation or other means (market corroborated
inputs).
|
|
|
|
Level 3 Unobservable inputs reflect the Companys judgments about
the assumptions market participants would use in pricing the asset or
liability since limited market data exists. The Company develops these
inputs based on the best information available, including the
Companys own data.
|
As of the January 1, 2008 and March 31, 2008, the Company has no financial assets or liabilities
that are measured at fair value.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159 (SFAS
No. 159) The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159
permits entities to choose to measure many financial instruments and certain other items at fair
value. The provisions of SFAS No. 159 will be effective for the Company beginning January 1, 2008.
The Company is in the process of determining the effect, if any, the adoption of SFAS No. 159 will
have on its financial statements.
On December 4, 2007, the FASB issued SFAS No. 141R (revised 2007)
Business Combinations
, which
will change the accounting for business combinations. Under SFAS No. 141R, an acquiring entity will
be required to recognize all the assets acquired and liabilities assumed in a transaction at the
acquisition-date fair value with limited exceptions. SFAS No. 141R retains the purchase method of
accounting for acquisitions, but requires a number of changes, including expensing acquisition
costs as incurred, capitalization of in-process research and development at fair value, recording
noncontrolling interests at fair value and recording acquired contingent liabilities at fair value.
SFAS No. 141R will apply prospectively to business combinations with an acquisition date on or
after the beginning of the first annual reporting period beginning after December 15, 2008. Both
early adoption and retrospective application are prohibited. SFAS No. 141R will have an impact on
the accounting for the Companys business combinations once adopted, but the effect depends on the
terms of the Companys business combinations subsequent to January 1, 2009, if any.
A variety of proposed or otherwise potential accounting standards are currently under study by
standard-setting organizations and various regulatory agencies. Because of the tentative and
preliminary nature of these proposed standards, management has not determined whether
implementation of such proposed standards would be material to the Companys financial statements.
Note C Public Offering
On April 23, 2007, the Company completed its initial public offering (IPO) of 18,750,000
units (Units), consisting of one share of common stock and one warrant, and on May 8, 2007, the
Company completed the closing of an additional 2,812,500 Units that were subject to the
underwriters over-allotment option. The 21,562,500 Units sold in the IPO, including the 2,812,500
Units subject to the over-allotment option, were sold at an offering price of $8.00 per Unit,
generating total gross proceeds of $172,500,000. Of the net proceeds after offering expenses of
the IPO and the Private Placement, $170,962,500 was placed in a Trust Account. Except for payment
of taxes, the proceeds will not be released from the Trust Account until the earlier of (i) the
completion of a Business Combination or (ii) liquidation of the Company. Public stockholders
voting against the Companys initial business combination will be entitled to convert their common
stock into a pro rata
share of the amount held in the Trust Account (including the amount held in the Trust Account
representing the deferred portion of the underwriters discounts and commissions), including any
interest earned on their pro rata share (net of taxes payable), if the business combination is
approved and consummated. Public stockholders who convert their stock into a pro rata share of the
Trust Account will continue to have the right to exercise any warrants they may hold.
9
Note D Related Party Transactions
The Company presently occupies office space provided by MBF Healthcare Partners, LP, an affiliate of several of the
officers of the Company. Such affiliate has agreed that it will make such office space, as well as
certain office and secretarial services, available to the Company, as may be required by the
Company from time to time. The Company has agreed to pay such affiliate $7,500 per month for such
services which commenced on the effective date of the Registration Statement, April 17, 2007 and
continues until the earlier of the acquisition of a target business by the Company or the Companys
liquidation. For the three months ended March 31, 2008, the expense for such services was $22,500.
The Company has also agreed to reimburse MBF Healthcare Management, an entity owned by a related
party, up to $750 per person per flight for the use of its corporate jet by the Companys
officers and directors in connection with activities on the Companys behalf, such as identifying
and investigating targets for the Companys initial Business Combination. For the three months
ended March 31, 2008 and March 31, 2007, the costs for the use of the corporate jet were $19,500 and $20,300, respectively, of which $9,000 and $20,300 were
accrued as of March 31, 2008 and March 31, 2007, respectively.
Note E Commitments
In connection with the Public Offering, the Company has committed to pay a fee of 3.5% of the
gross offering proceeds, including the over-allotment option, to the underwriters at the closing of
the Public Offering (or the over-allotment option, as the case may be). In addition, the Company
has committed to pay a deferred fee of 3.5% of the gross proceeds to the underwriters on the
completion of an initial business combination by the Company (subject to a pro rata reduction of
$0.28 per share for public stockholders who exercise their conversion right). The Company paid the
underwriters $6,037,500 upon the closing of the Public Offering and the underwriters
over-allotment option. The remaining $5,250,000 from the Public Offering and an additional
$787,500 from the exercise of the Units that were subject to the underwriters over-allotment
option, for a total of $6,037,500, has been accrued by the Company as of March 31, 2008.
Note F Common Stock Subject to Possible Redemption
Public stockholders voting against the Companys initial business combination will be entitled
to convert their common stock into a pro rata share of the amount held in the Trust Account
(including the amount held in the Trust Account representing the deferred portion of the
underwriters discounts and commissions), including any interest earned on their pro rata share
(net of taxes payable), if the business combination is approved and consummated. Public
stockholders who convert their stock into a pro rata share of the Trust Account will continue to
have the right to exercise any warrants they may hold. As a result of the potential redemption,
the Company has recorded a long term liability of $52,971,871 as of March 31, 2008.
10
|
|
|
ITEM 2.
|
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The following Managements Discussion and Analysis (MD&A) is intended to help the reader
understand the results of operations, financial condition, and cash flows of the Company. MD&A is
provided as a supplement to, and should be read in conjunction with, our financial statements and
the accompanying notes to the financial statements.
Special Note About Forward-Looking Statements
Certain statements in MD&A that are not historical information, including estimates,
projections, statements relating to our business plans, objectives and expected operating results,
and the assumptions upon which those statements are based, are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are
based on current expectations and assumptions that are subject to risks and uncertainties which may
cause actual results to differ materially from the forward-looking statements. A detailed
discussion of risks and uncertainties that could cause actual results and events to differ
materially from such forward-looking statements is included in the section entitled Risk Factors
in our Annual Report on Form 10-K for the year ended December 31, 2007. We undertake no obligation
to update or revise publicly any forward-looking statements, whether as a result of new
information, future events, or otherwise.
Trends That May Affect Our Business
Our ability to consummate a business combination may depend on our access to the debt capital
markets. Our ability to access the capital markets for future offerings may be limited by adverse
market conditions resulting from, among other things, general economic conditions and contingencies
and uncertainties that are beyond our control. If there is a deterioration or disruption in the
debt capital markets, and public or private financing is not available when needed or is not
available on terms acceptable to us, our ability to consummate a business combination may be
materially impaired.
Plan of Operation
We were incorporated in Delaware on June 2, 2006. We were formed to serve as a vehicle for the
acquisition of an operating business through a merger, capital stock exchange, stock purchase,
asset acquisition, or other similar business combination (the Business Combination). We have
neither engaged in any operations nor generated any revenue to date. We are considered to be in the
development stage and are subject to the risks associated with activities of development stage
companies. We have selected December 31st as its fiscal year end.
Net income of $988,985 reported for the quarter ended March 31, 2008 consisted primarily of
interest income. Formation and operating costs were $194,154 for the quarter ended March 31, 2008.
Formation and operating costs consist primarily of legal, accounting and printing fees and
expenses. We expect to use substantially all of the net proceeds from our initial public offering
to acquire a target business, including identifying and evaluating prospective acquisition
candidates, selecting the target business and structuring, negotiating and consummating the
business combination. To the extent that our capital stock is used in whole or in part as
consideration to effect a business combination, the proceeds held in the trust account as well as
any other net proceeds not expended will be used to finance the operations of the target business.
We believe we will have sufficient available funds outside of the trust account to operate through
April 23, 2009, assuming that a business combination is not consummated during that time. Until we
enter into a business combination, we expect to use our available resources for general working
capital as well as legal, accounting and due diligence expenses for structuring and negotiating a
business combination and legal and accounting fees relating to our Securities and Exchange
Commission reporting obligations.
We do not believe we will need to raise additional funds in order to meet the expenditures
required for operating our business through April 23, 2009. However, we may need to raise
additional funds through a private offering of debt or equity securities if such funds are required
to consummate a business combination that is presented to us.
If we are unable to find a suitable target business by April 23, 2009 we will be forced to
liquidate. If we are forced to liquidate, the per-share liquidation may be less than the price at
which public stockholders purchased their shares because of the expenses related to our initial
public offering, our general and administrative expenses and the anticipated costs of seeking a
business combination. Additionally, if third parties make claims against us, the offering proceeds
held in the trust account could be subject to those claims, resulting in a further reduction to the
per-share liquidation price. Under Delaware law, our stockholders who have received distributions
from us may be held liable for claims by third parties to the extent such claims have not been paid
by us. Furthermore, our warrants will expire worthless if we liquidate before the completion of a
business combination.
Since the IPO, we have been actively engaged in sourcing a suitable business combination
candidate. We have met with target companies, service professionals and other intermediaries to
discuss our Company, the background of our management and our combination preferences. In the
course of these discussions, we have also spent time explaining the capital structure of the IPO,
the combination approval process and the timeline under which we are operating before the proceeds
of the offering are returned to investors.
Consistent with the disclosures in our prospectus dated April 17, 2007, we have focused our
search on companies in the healthcare industry. Overall, we would gauge the environment for target
companies to be competitive and we believe that private equity firms and strategic buyers represent
our biggest competition. Our management believes that many of the fundamental drivers of
alternative investment vehicles like our company are becoming more accepted by investors and
potential business combination targets; these include a difficult environment for initial public
offerings, a cash-rich investment community looking for differentiated opportunities for
incremental yield and business owners seeking new ways to maximize their shareholder value while
remaining invested in the business. However, there can be no assurance that we will find a suitable
business combination in the allotted time.
11
Public stockholders voting against our initial business combination will be entitled to
convert their common stock into a pro rata share of the amount held in the Trust Account (including
the amount held in the Trust Account representing the deferred portion of the underwriters
discounts and commissions), including any interest earned on their pro rata share (net of taxes
payable), if the business combination is approved and consummated. Public stockholders who convert
their stock into a pro rata share of the Trust Account will continue to have the right to exercise
any warrants they may hold.
In connection with the IPO, we agreed to pay the underwriters additional underwriting fees of
$6,037,500, including units exercised with the over-allotment option which, the underwriters have
agreed to defer until the consummation of our initial business combination. We expect that such
fees will be paid out of the proceeds held in the trust account.
On February 6, 2008, we entered into a Stock Purchase Agreement (the Stock Purchase
Agreement) with Critical Homecare Solutions Holdings, Inc. (CHS), a Delaware corporation,
Kohlberg Investors V, L.P. (the Sellers Representative) and the other stockholders of CHS (each,
together with the Sellers Representative, the Seller and collectively the Sellers).
Pursuant to the terms of the Stock Purchase Agreement, we will acquire all of the outstanding
capital stock of CHS for $420.0 million, subject to working capital and certain other customary
adjustments as set forth in the Stock Purchase Agreement. We intend to fund the purchase price and
the acquisition costs and provide additional capital to CHS for growth and expansion through a
combination of approximately $180.0 million of cash in our trust account, approximately $180.0
million of debt, a $35.0 million equity issuance of our common stock to certain Sellers and a
commitment from MBFHP to acquire up to an additional $50 million in shares of our common stock.
The shares of our common stock to be issued to certain Sellers and the shares that are subject to
the commitment from MBFHP will be priced at the closing per share price of our common stock on
February 6, 2008, which was $7.65.
The closing of the acquisition and the issuance of equity to MBFHP pursuant to its commitment
are subject to stockholder approval. The closing of the acquisition is also subject to customary
regulatory approvals, including approval under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, and other customary closing conditions.
Recent Accounting Pronouncements
In September 2006, FASB issued SFAS No. 157,
Fair Value Measurements
(SFAS No. 157)
.
SFAS
No. 157 defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 does not impose fair value measurements on
items not already accounted for at fair value; rather it applies, with certain exceptions, to other
accounting pronouncements that either require or permit fair value measurements. Under SFAS No.
157, fair value refers to the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants in the principal or most
advantageous market. The standard clarifies that fair value should be based on the assumptions
market participants would use when pricing the asset or liability. In February 2008, the FASB
issued FASB Staff Position No. 157-2,
Effective Date of FASB Statement No. 157
(FSP FAS 157-2),
which delays the effective date of SFAS No. 157 for all non-financial assets and liabilities,
except those that are recognized or disclosed at fair value in the consolidated financial
statements on a recurring basis, until fiscal years beginning after November 15, 2008. These
non-financial items include assets and liabilities such as non-financial assets and liabilities
assumed in a business combination, reporting units measured at fair value in a goodwill impairment
test and asset retirement obligations initially measured at fair value. We adopted the provisions
of SFAS No. 157 for assets and liabilities recognized at fair value on a recurring basis effective
January 1, 2008. The partial adoption of SFAS No. 157 did not have a material impact on our
financial statements. We do not expect the adoption of the remaining provisions of SFAS 157 to have a material effect on our financial statements.
This standard requires that a Company measure its financial assets and liabilities using
inputs from the three levels of the fair value hierarchy. A financial asset or liability
classification within the hierarchy is determined based on the lowest level input that is
significant to the fair value measurement. The three levels are as follows:
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Level 1 Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to
access at the measurement date.
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Level 2 Inputs include quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs other
than quoted prices that are observable for the asset or liability and
inputs that are derived principally from or corroborated by observable
market data by correlation or other means (market corroborated
inputs).
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Level 3 Unobservable inputs reflect the Companys judgments about
the assumptions market participants would use in pricing the asset or
liability since limited market data exists. The Company develops these
inputs based on the best information available, including the
Companys own data.
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As of the January 1, 2008 and March 31, 2008, we have no financial assets or liabilities that are
measured at fair value.
12
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159 (SFAS
No. 159) The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159
permits entities to choose to measure many financial instruments and certain other items at fair
value. The provisions of SFAS No. 159 will be effective for us beginning January 1, 2008. We are
in the process of determining the effect, if any, the adoption of SFAS No. 159 will have on our
financial statements.
On December 4, 2007, the FASB issued SFAS No. 141R (revised 2007)
Business Combinations
, which
will change the accounting for business combinations. Under SFAS No. 141R, an acquiring entity will
be required to recognize all the assets acquired and liabilities assumed in a transaction at the
acquisition-date fair value with limited exceptions. SFAS No. 141R retains the purchase method of
accounting for acquisitions, but requires a number of changes, including expensing acquisition
costs as incurred, capitalization of in-process research and development at fair value, recording
noncontrolling interests at fair value and recording acquired contingent liabilities at fair value.
SFAS No. 141R will apply prospectively to business combinations with an acquisition date on or
after the beginning of the first annual reporting period beginning after December 15, 2008. Both
early adoption and retrospective application are prohibited. SFAS No. 141R will have an impact on
the accounting for our business combinations once adopted, but the effect depends on the terms of
our business combinations subsequent to January 1, 2009, if any.
A variety of proposed or otherwise potential accounting standards are currently under study by
standard-setting organizations and various regulatory agencies. Because of the tentative and
preliminary nature of these proposed standards, we have not determined whether implementation of
such proposed standards would be material to our financial statements.
Critical Accounting Policies
A description of our critical accounting policies is contained in our Annual Report on Form 10-K
for the year ended December 31, 2007.
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ITEM 3.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Market risk is the sensitivity of income to changes in interest rates, foreign exchanges,
commodity prices, equity prices, and other market-driven rates or prices. We are not presently
engaged in and, if a suitable business target is not identified by us prior to the prescribed
liquidation date of the trust fund, we may not engage in, any substantive commercial business.
Accordingly, we are not and, until such time as we consummate a Business Combination, we will not
be, exposed to risks associated with foreign exchange rates, commodity prices, equity prices or
other market-driven rates or prices. The net proceeds of our initial public offering held in the
trust fund have been invested only in money market funds meeting certain conditions under Rule 2a-7
promulgated under the Investment Company Act of 1940. Given our limited risk in our exposure to
money market funds, we do not view the interest rate risk to be significant.
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ITEM 4.
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CONTROLS AND PROCEDURES
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The Companys Chief Executive Officer and Chief Financial Officer have evaluated the
effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules
13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the Exchange Act)
as of March 31, 2008 (the Evaluation Date). Based on such evaluation, such officers have
concluded that, as of the Evaluation Date, the Companys disclosure controls and procedures are
effective in alerting them on a timely basis to material information relating to the Company
required to be included in the Companys periodic filings under the Exchange Act.
Since the Evaluation Date, there have not been any significant changes in the Companys
internal control over financial reporting that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting.
13
PART II OTHER INFORMATION
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ITEM 1.
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LEGAL PROCEEDINGS
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We are not currently subject to any material legal proceedings, nor, to our knowledge, is any
material legal proceeding threatened against us. From time to time, we may be a party to certain
legal proceedings incidental to the normal course of our business. While the outcome of these
legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will
have a material effect upon our financial condition or results of operations.
An investment in our securities involves a high degree of risk. There have been no material
changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year
ended December 31, 2007 that was filed with the Securities and Exchange Commission on March 28,
2008.
Exhibits
2.1
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Stock Purchase Agreement, dated February 6, 2008, by and among the Company, Critical Homecare Solutions
Holdings, Inc. and the stockholders named therein*
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2.2
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Amendment No. 1 to the Stock Purchase Agreement, dated April 22, 2008, by and among the Company, Critical
Homecare Solutions Holdings, Inc. and the stockholders named therein**
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10.1
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Subscription Agreement, dated February 6, 2008, by and among the Company and the Purchasers named therein*
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31.1
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Section 302 CEO Certification.***
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31.2
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Section 302 CFO Certification.***
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32.1
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Section 906 CEO Certification.***
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32.2
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Section 906 CFO Certification.***
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*
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Incorporated by reference to the exhibit of the same number filed with the Registrants Form 8-K, as
filed with the SEC on February 7, 2008
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**
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Incorporated by reference to Ex. 2.1 to the Registrants Form 8-K, as filed with the SEC on April 28, 2008
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***
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Filed herewith
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14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
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MBF HEALTHCARE ACQUISITION CORP.
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Date: May 14, 2008
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/s/ Miguel B. Fernandez
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Miguel B. Fernandez
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Chief Executive Officer
(Principal Executive Officer)
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Date: May 14, 2008
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/s/ Marcio C. Cabrera
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Marcio C. Cabrera
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Chief Financial Officer
(Principal Financial Officer)
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15
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